Sell on rallies if Nifty breaks 5150: HDFC Sec

Sharma suggested that one should adopt a sell on rallies approach since there is no possibility for the Nifty to cross major resistance level of 5,350.

He doesn’t expect the Federal Reserve or the FOMC to make any big bang announcements in their forthcoming meetings. "It is a market which is sell on rallies and should be sold in case 5,150 breaks," he added.

Below is the edited transcript of Sharma’s interview with CNBC-TV18.

Q: What's the bias for the reminder of the August series now from here on, 5200 plus?

A: The bias so far has been positive based largely upon that one statement which Draghi made. The markets have rallied globally as well as ours. So, 5,150 is a good level and if that level breaks all those longs will be unwound and people would want to go for safety. So, currently the market is absolutely range bound.

We don’t foresee the Nifty crossing the 5,350 level which is a great resistance. At the most our strategy would be to sell on rallies because we don’t find that either the Fed will do anything today except for a tweak in the language or Mr. Draghi has something within his mandate which he can surprise us with tomorrow. So, it is a market which is sell on rallies and should be sold in case 5,150 breaks.

Q: Do you have a buy on Cipla today?

A: Cipla positions were added even yesterday almost to the extent of 37%. It also was backed up by good results that came in yesterday. So it will be difficult to get the 340 call which quoted at around Rs 9 yesterday. I have a strategy that you put a stop loss at Rs 6.

But my fear is that that won't be available cheap. So you might have to slightly write more cheques to buy this. May be you can buy the 340 call up to even Rs 12-13. Put an adequate stop loss and hope to make almost double the amount of the cost what you put in terms of buying the call.

Q: You have a short call on Apollo Tyres. What is your view?

A: Although the stock had done well largely based upon the fact that the raw material prices had gone down, stock had touched a high of almost Rs 84. Currently, my sense is the entire industry is down largely fairing that now it may be turn of the tyre industry to face the wrath of the CCI.

So to the extend if you have had a large portfolio in Apollo, my suggestion would be to buy the 75 Put, which was available at around Rs 2. If you are a trader you can put in probably a stop loss of Re 1 and hope to make Rs 3 on that.