Book profits around 5180-5200, Buy Nifty 5000 Put: Thukral

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The market has some reason to cheer eventually after the end of January expiry. The Nifty has rallied close to 10% in the January series, best expiry since March, 2011. FIIs alias hot money have invested close to USD 2 billion in the month of January. The current series will expire today on account of holiday tomorrow.

Hemant Thukral of Aditya Birla Money expects some correction to happen in the February series. He advises traders to book profits around 5220 levels which is Nifty's 200 DMA (200 Day Moving Average). The strategy is to buy Nifty 5000 Puts around 5180-5200 levels.

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

Q: How are you approaching the expiry? Would you cut positions in the Nifty or hold it for more gains?

A: The rollover cost especially in the individual stock futures is the highest in last 6 months which clearly reflects the sentiment in the market is high right now. The majority of the positions rolled over are on the long side. The surprises have come from banking and capital goods where lots of short positions were squeezed out. So one can expect this rally to continue until afternoon today on back of short positions getting squeezed out of the system. If you look at the February series, we will have majority of long positions in the next expiry which was not visible in the last 3-4 series.

The real struggle for the Nifty will start now because we need a complete support of this liquidity to continue around 5220 levels, which is Nifty's 200 DMA. I don't think it will just surpass the 200 DMA in the same fashion it has rallied in last one month. Now we don't have that luxury of covering of short positions. Traders still holding long positions should actually start booking profits around 5180-5200. Buy Nifty 5000 Put of February series since India VIX and 5000 Put premium are at very low levels. In case, Nifty approaches 5180 today which I feel it will happen in the afternoon, then one should start buying 5000 puts and wait for next 3-4 sessions. I am expecting a correction as we enter the February series.

Q: Are you buying Union Bank today?

A: I am buying Union Bank today and there are two reasons behind it. Yesterday lot of shorts that were still pending got covered and some of the short positions are still open in sub midcap PSU banks like a Dena Bank, Syndicate Bank and Union Bank. Now if Union Bank manages to hold today above Rs 206-207 levels, I see some short covering happening in the stock. So short term trading opportunity exists in Union Bank. Traders can go long with a target of Rs 220-222 with stop loss of Rs 207.