Buy on declines if Nifty hovers around 5400-5450: ICICI Dir

According to Gupta, if the market holds around 5400-5450, it is advisable to buy on declines.

Gupta is positive about Dena Bank from the public sector banking space and chooses media stocks like Sun TV and Zee . He also bets on the cement space and believes ACC and Jaiprakash Associates will have a good run.

Here is the edited transcript of the interview on CNBC-TV18.

Q: Would you continue to hold your long bias on the index and we do have expiry next week as well, what would your approach be until then?

A: If you look at the last one year movement, since we had a breakdown in the month of August 2011 and moved below 5400, we have not been able to sustain above 5400 more than a week. We have already spent one week above 5400. This is going to be a very crucial week.

We are already seeing a lot of unwanted news coming out. If the market is holding around 5400 or 5450 levels, definitely I will keep it as buy on declines. If not in Nifty I will trade long more in stock specifics.

If you look at what the options data suggests, 5600 Put base has increased very significantly in the last 2-3 sessions. It is almost neck to neck with 5600 call options. Now 5600 call was the highest at the start of the series and one can imagine how the Put base increased at this level. So the total premium of 5600 Call and Put is around 110 levels and both are more on the return side.

If I assume this range comes to 5490-5710, on declines I will keep my stop loss around 5490, and I will utilise the declines towards 5420-5430 to go long for a target of 5710.

Q: What are you noticing on the Bank Nifty, it closed above 11,000; do you see any kind of trade there?

A: Nifty had critical resistance around 5400 which finally was taken out. Bank Nifty also had a 10,500 resistance. We saw that when it was under performing in the last two series, it was finding a lot of resistance around these levels. If you look at the call open interest since the starting of the series in the last two months, we saw very hefty quantity started with 10,500 call options.

This time it has taken it out and has moved up to 11,000 levels. I think this is going to be a major support and till it is not coming below this we should not be very negative in the bank pack. We should keep on looking more into laggard stocks like PSU banking.

We like Dena Bank in this sector because it has not fallen as much as the other PSU banking stocks and if you look at the liquidity inflow, it seems it is more into this. I think the banking space can be utilised to buy at declines till we are above 10,500.

Q: In which of this non index names have you seen significant long build ups over the last few days?

A: I think it is definitely the media pack which has seen some good open interest build up coming up. For example if you look at Sun TV and the kinds of Zee Limited, after 4-5 weeks of consolidation that stock has come up to above Rs 172 levels. Both the stocks are looking good.

Along with this the cement space has also done well because when the market was moving, this space was not moving to that extent. But now, I am seeing that some stocks are coming out from the index also. It could be ACC. If ACC is going to perform, the midcap cement pack which is not there in the index can also perform a bit.

We need to pick up some stocks now from this space if the market remains in a range like this where it is possible that the shorts may start covering up.

Q: How would you approach some of the high beta names like Jaiprakash Associates because that stock has moved above its four month trading range? Do you see profit taking there or higher levels?

A: The feeds that we are getting from the institutional side have been really positive for this stock and they believe that there are a good number of upsides in the coming sessions. But, looking at this current development I think we need to look at those sectors like cement where this particular stock lies.

It was not moving before and now after a lot of consolidation, we are seeing some signs of fresh build up coming up in those sectors. Jaiprakash Associates is likely to perform from here on. So utilise the decline in the stock to go long. I think Rs 85-88 kind of levels can be hit.