Better short Bank Nifty than Nifty: Angel Broking

Below is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying video.

Q: It has been a quiet expiry session for the market. Are you expecting to see a lot of related moves in the last one hour?

A: This quietness won't be there in the next half an hour and that is what is happening in 4900 call and puts. Around 34,000, 38,000 contracts build up happening in this space. Lot of participants expects that there will be no volatility and they have sold both call and put. We are observing this trend very closely since morning.

Premium is still between Rs 17-Rs 18 to Rs 20. A lot of people are getting trapped by doing this trade because those who have sold in morning are not making money and those who are selling now are still making more or less the same premium. There is a possibility of 30-40 points upside or downside move from current levels considering the behavior of European markets and the shocker from GDP. I don’t think this calmness would remain for long.

Q:  Are you seeing a lot of short positions getting rolled over in the banking space and if yes, which stocks would you point out now?

A: Yesterday we come out with the report that the Bank Nifty has been shorted by FIIs right from April end and throughout May series. On one hand in percentage terms Nifty rollovers are less and open interest wise is in line. The absolute open interest has significantly increased.

Now, throughout May series, whenever FIIs have shorted index futures and their open interest has gone up. We have observed that the Bank Nifty open interest has significantly increased on the short side and now we are seeing a good rollover in Bank Nifty which clearly indicates that FIIs are rolling over their Bank Nifty short futures positions into June series.

So, we see that this bounced back, which came in Bank Nifty from 9,000 to 9,800 odd levels was more because of short covering and even at higher levels we have seen shorting happening in Bank Nifty. The same observation was seen in ICICI, Axis and SBI.

Axis and ICICI are giving away. SBI is not reacting too much because of its good result and it being light in terms of open interest. As of now is not reacting too much on the downside, but it would go in short time.

A lot of people would argue if there are so many short positions in Bank Nifty then there is a likelihood of short covering rally, but we are not seeing any major trigger, which would lead to short covering.

Purely from a currency perspective it is clearly on the charts of Euro versus Dollar that Euro would further depreciate to 1.20 odd levels, which would reflect again in our currency, so, where is the chance of short covering? And today's GDP number again confirms that short covering may not come. So that’s the reason we are very bearish on Bank Nifty from intermediate terms and Axis Bank, ICICI Bank and SBI would see a lot of pressure.

Q: What's your call for the market for the Nifty in the first week of June series now?

A: We are more comfortable with Bank Nifty shorting rather than Nifty shorting because more positions are happening in Bank Nifty from the stronger hands. Weaker hands are not active in bank Nifty and Nifty absolute open interest is also very low so we are going to start at very low base. 4800 is support but I am not sure how long it would hold because most of the strike price built up of options is in 4500.

May series was a stronger support; I don't think same strength in June series for 4800. It is matter of time. If you are expecting Bank Nifty to touch new lows and which has 25% weightage in Nifty, I don’t think we should be justifying that Nifty would hold 4800. One can shorting Nifty on rise but we are more comfortable shorting Bank Nifty rather than Nifty at this point of time.