DIIs giving mkt cold shoulder; hold shorts: Angel Broking

Siddharth Bhamre, Angel Broking believes that the deep cut seen in the market is due to lack of domestic buyers and not because elections might be held earlier.

"Usually foreign institutional investors (FIIs) are buyers domestic institutional investors (DIIs) are sellers of an equal amount and vice-versa, but currently FIIs sold approximately around Rs 350 crore, but the DIIs bought only Rs 35-38 crore," he said in an interview to CNBC-TV18.

Also read: Is Nifty, midcap trading pattern similar to 2008's bear mkt?

One should hold onto to short positions and those who missed out on the shorting opportunity can create long positions in 5,600 and 5,700 Put Options, One can look at shorting stocks in the banking and IT space, he recommended.

Below is the verbatim transcript of his interview on CNBC-TV18

Q: What are you recommending to investors at this point with the Nifty at these levels, would it be a short bias?

A: We have been mentioning shorting this market ever since that bounce we saw from 5,700 to 5,900-5,950 and we suggest one to continue to hold onto those short positions. A couple of days back we had said that for somebody who has missed out on the shorting opportunity can create long positions in 5,600 and 5,700 Put Options
So, those positions can also be held on.

Reasons for the same are pretty clear, if one looks at yesterday’ statistics and the FII index Futures data; they were sellers of around Rs 750 crore. If one looks at index Options, there were buyers of Rs 850-880 crore and built up was more in Call Option, which clearly suggests that they are forming a strategy called Call Hedge, where you short the Futures and you buy Call Options to protect that short Future position.

If one looks at the cash market data, FII where sellers only of Rs 350 crore approximately but DIIs were absent. They just bought Rs 35-38 crore. Usually we see that whenever FIIs are buyers DIIs are sellers of an equal amount and when FIIs are sellers DIIs are more or less buyers of an equal amount. The DIIs were absent because they don’t have money. Whatever redemptions have happened are not because fund mangers are bearish but because retail and High Networth Individual (HNI) are taking money out of equity and putting somewhere else.

So, now there is no support coming at lower levels and despite low volumes we are seeing market going down by 80-90 points. We all know that elections may or may not happen this year but a lot of people would be expecting that because of election probably this market is going down. However, I don’t think so. This market is going down because you don’t have buyers especially from domestic front.

Moreover if the question is will there be any resurgence of liquidity anytime soon in our market? The answer to that is no because of euro-dollar equation. Tuesday, we had mentioned that the bounce in euro compared to dollar was mainly because non-manufacturing numbers in the US were a bit disappointing. But again euro has gone below 1.28 levels, which clearly suggests that liquidity issue would continue and market would drift down further. So, hold on to your short Nifty Futures position and hold on to your long Put positions.

Q: Do you have any recommendations on individual stocks where fresh short positions could be taken?

A: We have been suggesting banking space specially private sector banks like Axis Bank, HDFC Bank and even HDFC Limited which we initiated shorts this week, to hold on to those short positions.

Today morning, we initiated shorts in IT. Yesterday if one were paying attention to what happened in the US then one would have initiated short positions today in the IT sector  because the issue of non-manufacturing data coming weak would impact the IT sector.

We saw Infosys having good amount of long positions which got created from that bounce back of Rs 2800 to Rs 2950-2980 odd levels and Rs 3000 is a good resistance. So, around those levels one should have created short positions in Infosys.

We still feel that IT sector has further scope to go down because a lot of people are hiding in IT sectors just in the name of defense and not because they feel that valuations in IT are comfortable. I believe their you might see long unwinding pressure further, so continue to hold on to your short positions in IT space as well.