Mar 28, 2012, 01.43 PM | Source: CNBC-TV18

Nifty to end March series at around 5270-5300: MF Global

MD of MF Global Vineet Bhatnagar says the market could end the March series around 5,270-5,300 levels if the Finance Ministry indicates that it will relook GAAR with regards to Mauritius.

Vineet Bhatnagar

Managing Director, Phillip Capital

Expertise : F&O

More about the Expert...

With all the news surrounding the General Anti Avoidance Regulations (GAAR), yesterday was a volatile trading session for Indian equities. After the huge fall on Monday, the Nifty managed to claw its way back above the 5200 level and end the day on a good note.

It is due to yesterday’s whipsawed trading that managing director of MF Global Vineet Bhatnagar says the 5200 level on the Nifty will hold strong. Speaking exclusively to CNBC-TV18, he says that there is a lack of conviction in FII behaviour which could be related to GAAR, but this will turn before expiry. “The cash market doesn’t seem to indicate any panic, so we should see a built of long positions,” he said.

However, he sees the upside capped at 5400-5500 for now.

He goes on to say that the market could end the March series around 5,270-5,300 levels if the Finance Ministry indicates that it will relook GAAR with regards to Mauritius.

Bhatnagar’s best bets in the current scenario are metals and cement, where he sees some strength. “Even Bharti looks good because the weakness is less there,” he said.

Below is an edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.

Q: Could you lay out for us what exactly this deal with PhillipCapital implies whether or not they become the majority owners, whether it an all cash deal and what it means for the company in terms of whether its business dynamics change?

A: I am pleased to share with you that yesterday the company and its existing shareholders MF Global and Sify have entered into a share purchase agreement with PhillipCapital Group of Singapore wherein after the regulatory approvals PhillipCapital Group company would acquire the majority stake in the local business.

As far as the business dynamics are concerned, PhillipCapital has indicated their interest in all aspects of the business that we carry out currently and therefore we do not expect any change in the business model or the business plans here.

Q: What have you made of the intense volatility of the last few days on the Nifty? How do you think this expiry is headed and how the April series could be opening up?

A: I think what we saw yesterday was another affirmation of 5,200 being indeed a strong support. In fact, the whipsawed kind of trading that we saw in Nifty yesterday brought out the fact that 5,200 is something that is still holding up and there was an addition to the 5,200 Nifty strikes yesterday. The market seems to be behaving wherein 5,200 is a strong support and on the upside it is still capped at 5,400 to 5,500.

My sense is that if there is any news related information that comes out from the Finance Ministry in terms of the relook that they are having at GAAR with Mauritius it could perhaps take the market into the 5,270-5,300 levels which could perhaps be the expiry for tomorrow.

Q: What have you made of the FII activity of the last couple of days wherein the index futures seem to have sold quite a bit?

A: Yes, pretty much different from what they seem to be doing last Friday. Monday and Tuesday we saw that the addition that they were doing against the trend of last week’s Thursday and Friday trading was one where FII did come out of the long positions, they did build up a bit of short positions and therefore there seems to be a lack of conviction as far as one or two day trading behaviour is concerned from the FIIs.

It could be a sentimental thing, it could be related to some additional comfort that they want to see relating to GAAR, and if that does come about it should not take very long for them to swiftly build on the long side for expiry.

Q: It looks mostly like short build up these last two days, but have you been seeing significant long unwinding as well in terms of FII positions on the market?

A: No, I think the underlying cash market does not indicate any kind of panic. Of course the delta in terms of the amount of net purchase that they are doing in the underlying cash market has been getting smaller and smaller, but it is too premature or pre-emptive to say that there has been significant winding up of the long position from this client segment.

Q: Any specific heavyweights that are getting singled out because of this GAAR confusion, because for the first day or so it looked like there was intense heavyweight selling on the index?

A: I think that is more to do with the way the portfolios would sit in the books of all large FIIs because you would agree that the correlation of the portfolio with the benchmark index is going to be very high. Therefore it is natural that if you have to take a different view on the market as a whole you would of course come out and start looking at the heavyweights.

However, there are some of them that are still looking alright in terms of less weakness, Bharti being one of them. Even the metal sector is showing some level of strength, Hindalco, Sterlite and Tata Steel being some of them. There was some activity that we saw yesterday on the positive side on cement also, ACC and Ambuja. So that’s the behaviour that we noticed yesterday.


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