Sep 10, 2013, 12.44 PM IST
One should not expect the market to come immediately down because there would be some kind of profit booking, says Siddharth Bhamre of Angel Broking.
In an interview with CNBC-TV18 Siddharth Bhamre of Angel Broking shared his reading on the F&O segment and various stocks.
Below is the edited transcript of Siddharth Bhamre's interview with CNBC-TV18
Q: It looks like it is going to be a tearing move on the upside today but at what point would you start to get cautious?
A: End of last week we were mentioning that we are not in a hurry to short this market and we gave certain reasons. First, we were waiting for foreign institutional investors (FIIs) data to come and we have seen that they have formed long position; it not short covering, it is formation of long positions now around 1000 crore of index futures buy positions with 3 percent rise in open interest. So, short covering is done and some formation of long has taken place.
The second important point which we are highlighting for this market to continue its upside move is the implied volatility of 32-33 percent for Put options. After bouncing so much from lower level still implied volatilities (IVs) are above 34 Puts. This suggests that people do not believe in this rally, they feel this is short covering bounce and market will correct again. So, long as these guys who are large in numbers think this way, this market may not correct.
The third point is that the Nifty Futures open interest is more on the short side. So, even after today gap up opening, do not expect the market to come immediately down because there would be some kind of profit booking. There are not many people who would be making profit in this gap up move, so there is no question of people booking profit to market to come down. After that, we might see some short covering rally today or tomorrow, I am not sure about that, but do not short Nifty as of now and that is my advice.
Q: How much legs does this rally have today and tomorrow put together?
A: In some of the banking sector names despite strong run up from lower levels though short positions are still standing. It is quite possible that most sectors of the broader index would lead the rally for some more time. It is difficult to assess till what levels we can go because in this expiry we have not seen much of Call writing happening.
If you look at the higher strike prices above 5,800 levels, not much of Call option built-up is there and even if it is there, we are not sure given this significant volatility whether people have written or bought them, especially what happens when market is around 5,500-5,600, weaker hands try to sell lot of Call options of deep out of money strikes.
Nifty at life time highs; uptrend may soon face resistance as markets become overbought
THIS LETTER HAS BEEN BULLISH FOR MANY DAYS. WHILE THE LONG TERM TREND IS NOW UP, A CORRECTION MAY BE COMING SOON.
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