Jan 23, 2013, 12.48 PM | Source: CNBC-TV18
In an interview to CNBC-TV18, Amit Gupta of ICICI Direct shared his reading and outlook on Futures and Options (F&O) market and specific stocks.
Amit Gupta (more)
Head- Derivatives, ICICIdirect.com | Capital Expertise: F&O
Below is the verbatim transcript of an interview aired on CNBC-TV18.
Q: Would you buy this small dip in the Nifty or do you expect a more meaningful pullback in the last few days of the series?
A: When market was near 5,900, we had a target of 6,150. We still believe that these levels should hit on the higher side.
However, what has changed is the bullishness in the market. If taken a look from June 2012 to December 2012, there was a lot of skepticism in the market and the market kept on moving up.
Now, I feel the bullishness is back because one indicator in derivative that we look at is the Put-Call ratio of open interest (PCROI). It was just hovering in the last year and now in this month, we are seeing it moving continuously. It is 1.17 now. That means the Put writers have more say than the Call writers for the time being. That is very evident because 5,900 Put, which was holding the base with the highest Put base has now come to 6,000 within a span of one week.
Now at 5,980-6,000, it will provide good base or good support for the market but once 5,980 is breached, there maybe more leverage closure happening in the market. This is another fear factor because stock Futures, open interest is one of the highest right now compared to the last year.
We have 230 crore outstanding shares in the stock Future segment. When the stocks were at 5,950, they had a higher price than the same stocks at 6,100 and this is happening just because people were looking for quick money, they went long in stock Futures and with a little bit of jitters in Nifty, we are seeing the stocks are falling. So, we have to take this thing into stride till 5,980 is held and look for a target of 6,150.
Q: You have got a strategy on LIC Housing Finance ?
A: Yes, because there are two ways to trade in this market now either you have a low leverage or you have a stock where most of the short bias is there. I think LIC Housing Finance is one of those stocks which are more short bias.
I believe in the last six-seven months, it was consolidating in the range of around Rs 240 to Rs 270. Around Rs 240-250, we saw a lot of short creation happening and now after the breakout came, people are still averaging the short positions and this is evident in the open interest (OI), which is at an elevated levels even now. So, we are not seeing the closer in OI yet. The 50 day moving average is also placed around Rs 275 and the higher band of the last six months is Rs 270-275. It is consolidating above this and the kind of fall one is seeing in the market during the intraday, one is not seeing that kind of fall happening in this stock. So, that may bode well with LIC Housing Finance.
Any decline towards this range of Rs 270-275 should be bought into and look for target of Rs 310. Keep stop loss below the average price of the last six months, which was at Rs 260, so one can keep the stop loss at Rs 255.
Q: What do you see in the Futures & Options (F&O) space in the oil and gas sector?
A: I think that is looking pretty good, in fact whatever short positions were there are stuck up and it is possible that whenever these stocks are falling one may see more short covering happening. This is where I do not see any major cracks in the oil and gas space particularly Oil and Natural Gas Corporation (ONGC) because Rs 300 levels is going to be very crucial support now, Rs 300-310 for ONGC and the build-up one saw in the stock previously was quite hefty.
Q: What is a good way to approach Hindustan Unilever (HUL)?
A: I think good way could be to buy in cash portfolio around Rs 440 levels. I do not see much downside in the stock from those levels and it is possible it will spend time between Rs 440 to Rs 450 before it starts moving up.