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Jun 05, 2012, 12.22 PM IST
The market has seen some lower level puts getting added. If a trader wants to hedge his portfolio now, Siddharth Bhamre of Angel Broking says he won't buy the 4,200 put option.
The market has seen some lower level puts getting added. If a trader wants to hedge his portfolio now, Siddharth Bhamre of Angel Broking says he won’t buy the 4,200 put option. “If you want to hedge your portfolio you would buy at-the-money put options,” says Bhamre.
he won’t consider those trades as hedging trades because till 4,200 you are not hedged and you do not expect the market to correct so much in June. We are observing that FIIs are still shorting; they are continuously selling in the cash market so the trend remains negative.
As far as this huge build-up is happening in 4,200 and 4,300 put options, the last three months has been an interesting trend. “In April we used to see huge build-up in 4,800 and market participants use to think that probably market may come to those levels but we didn’t,” says Bhamre, adding that in May he saw huge build-up happening in 4,600 put option, again participants felt that market may come to those levels but we didn’t breach 4,800. Now we are seeing 4,200-4,300 built-up in put option.
His take is that again these levels may not come in June but certainly the way the structure of the market is shaping up, the way FIIs are shorting bank Nifty, the rallies are coming. Yesterday’s rally, after a gap down opening and when you see a 25-30 points positive in market - your F&O volumes should have been huge but volumes were not that great.
His call is that the market is in a downward trend, 4,800 which was very strong support for May series is not that strong for June and moment you will see a close below 4,800 you will see lot of participants coming for unwinding of their long position which would take us to 4,500-4,600 which is a strong support zone for the market. “We are not envisaging as of now any levels below that support zone. Our advice is to hold on to your short positions for further gains,” he adds.
Below is an edited transcript of his interview. Watch the accompanying video for more.
Q: Would you sell L&T this morning?
A: We have seen short covering rally. There is hardly any change in open interest probably, some short covering and some formation of speculative longs. But around Rs 1,200 this counter has a very strong resistance. I am not expecting breach of that resistance and the overall trend has been downward.
We are having a slightly negative view on infrastructure and capital goods. The stock has closed somewhere around Rs 1,175 futures so Rs 1,180 to Rs 1,200 I would short. I would fix a stop loss of Rs 1,230 or so and I am expecting it to touch the three digit mark but as of now we are confining to Rs 1,020 levels. So I would short L&T on rise.
Q: A lot of metal stocks are on the downside. For the day, would you buy into something like Sterlite Industries ?
A: It’s a short-term trade for two-three days and not beyond that. The stock has been correcting from more than Rs 100 levels and we have seen a lot of shorting happening over there. The stock has good support around Rs 88. We are expecting some short covering rally in the counter. So a contra trade can be initiated. Buy around Rs 88, fix a stop loss of Rs 86 and we are not expecting a major bounce but probably the short covering can take it to Rs 95-96 odd levels.
Q: How would you approach Ambuja Cement and ACC?
A: I won’t be optimistic to buy over there. In fact, I would utilise any bounce back over there to short just the way I would do it for banking or infra names.
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