F&O: Angel Broking expects May series to expire around 5000

"If you have gone long in index or banking stocks or capital goods stocks then 5,020 to 5,050 would be a good point to move out of long positions," he suggested.

The F&O May series will expire on Thursday; Bhamre expects the series to end near 5,000 levels.

Below is the edited transcript of Bhamre’s interview with CNBC-TV18. Also watch the accompanying video.

Q: How much more do you see in this pullback on the index and where do you see expiry happening?

A: We continue to maintain our stance that this is a bounce back which is lead by short covering. We have not generated any index specific trades, but we are stock specific net long on market. We saw around 4,800 that there was lot of short positions in names like capital goods majors and banking majors and last week we have been concentrating on this space. I think that has panned out well.

Now we are seeing that some of the other largecaps there is formation of short covering rallies. So there would be a change of guard for bounce back from current levels. There would be other frontline stocks which would be taking the front seat or driver seat rather than banking and capital goods. In this bounce back of 200 plus points, FIIs have shorted index futures around 1,800 crore, their selling in cash market is approximately 1,000 crore.

5,100-5,150 is a strong resistance; we are not expecting a bounce back till those levels, but 5,000 to 5050 was a second point of a bounce back. Last time you had asked when one should book profit. First level we had mentioned at around 4,920 and the other was around 5,020-5,050.

If you have gone long in index or banking stocks or capital goods stocks then probably that point that is 5,020 to 5,050 would be a good point to move out of long positions. We are not saying initiate shorts there, just move out of those long positions, but there would be other names which would be doing well.

At the same time if I see the options data of June series, there is quite a scattered trend in options where 5,000-5,200 is a band where market would find resistance, but the put activity has incrementally increased in 4,500 put which emphasizes on that don’t go aggressive long in index.

As far as expiry is concerned for this month, I am finding it difficult because you usually tend to gauge expiry when there is lot of options selling which happens and then you try to figure out that where people will try to give support or resistance to the market.

But this time in this bounce back and before implied volatility has increased, options build-up has happened on the buying side whether its call option or put option. So, it becomes very difficult to identify where exactly the expiry would happen but near 5,000 would be a guesstimate call for the expiry.

Q: You are trading high beta faces like DLF ?

A: As I was pointing out that there is long formation visible in some of the largecaps and real estate major DLF is one of them. Around Rs 185 to Rs 190 zone the stock has taken decent support and we are seeing fresh formation of long positions. Unlike banking, unlike capital goods this space doesn’t have lot of short positions in it. So the assumption of buying it and expecting a rally is not on short covering.

We are expecting that these long positions formed in distressed market scenario where it has taken good support around Rs 185 is done by strong hands and we are anticipating well upside move. Right now we are restricting targets to Rs 201. One can fix stop loss around Rs 183 and go long. Last week we had mentioned HDIL around Rs 61-62 levels. Even that stock is looking very good from buying perspective. There also we are seeing formation of long positions rather than short covering.

Q: What about the infrastructure names. What have you been observing on names like Voltas , Crompton Greaves even BHEL which have been in the news?

A: We are tracking BHEL closely and Rs 195 to Rs 200 was strong support. Even when the stock was correcting from Rs 240-250 odd levels we were Rs 210-205, one should cover short positions and when it reached that support zone of Rs 195-200 we have initiated some long. Most of the rally in BHEL is because of short covering. We are not seeing any reason why large hands in market should start going long in BHEL and form fresh long positions above Rs 225-230 levels in a capital goods major.

I do not see any reason why BHEL should continue to outperform and go levels of Rs 245-250 and if it reaches there then we would short. Whatever long positions we had formed we have moved out of BHEL. The other midcap segment though I am not tracking closely in such kind of market, but there also we are seeing speculative longs now getting formed. We won’t be much keen to do any trades in midcap at this point of time.