Square-off longs, short Nifty between 5950-6000: Bhamre

In an interview to CNBC-TV18, Siddharth Bhamre, Angel Broking says that from here onwards they will be cautious on the market. He suggests squaring off long positions and buying some Nifty Put Options. "An aggressive trader can initiate shorts between 5950 to 6000 levels in the anticipation that euro may crack further."

Also read: Nifty to remain choppy; buy on dips says Sukhani He further adds that they are keeping a keen watch on the euro because from a short-term perspective euro-dollar equation is a sign of liquidity. If euro goes below 1.30 then this bounce back seen in our market may not sustain he believes. Bhamre says they are not upbeat on the Bank Nifty because all its components are either weak or near to their resistance. Below is the verbatim transcript of his interview on CNBC-TV18 Q: What did you make of the Foreign Institutional Investor (FII) behaviour yesterday in the Futures and Options market? A: We have seen cash-based buying happening relentlessly except the Budget day selling of Rs 1300 crore, the FIIs have been buying in cash market. Interestingly they have not been going long in index Futures in big way in this bounce back which is surprising. The data which popped up yesterday is that the index Options buy figure is more than Rs 2500 crore with rise in open interest of around 9-10 percent. If you look at the built-up which happened in 5900- 5800 and 5700 Puts clearly suggest that FIIs have been buying these put Options. We had seen the index Options buying in prior trading sessions also with rise in open interest of Put Options. So they have been buying Put Options. On the liquidity front to elaborate the point on what FIIs are doing and what they might do going forward; all this while when market was correcting from 6100 to 5680-5700, derivatives data was not giving any sign to go short. Rightly so, we have seen that bounce which has happened and the relief we because of this bounce. However, now data is becoming bit murkier because we all know that from a short-term perspective euro-dollar equation is a sign of liquidity. Now euro-dollar corrected from 1.36-1.37 odd levels to 1.30, as markets globally also corrected barring US market. Now, as markets bounced in Europe and emerging markets (EMs), we have not seeing bounce in euro, maybe because people are talking about stimulus being withdrawn from US. At the same time if you look at the treasury of US 10 year bond yields, they are moving above two, which clearly suggest that now liquidity prefers US denominated assets. So we are keeping a close watch on euro and if euro goes below 1.30-1.29 then this rally or bounce back may not sustain. It is true that we have been positive on market and this bounce has been a good relief. Off late we also have been recommending Call Options, large cap stocks to go long in. However, from here onwards we are cautious on market because we are anticipating that euro may go below 1.30 levels and the data which is coming from US retail sales or Chinese number, European numbers is clearly suggesting that data is in favour of US and hence in favour of stronger dollar. We would be a bit cautious on market at these levels and would suggest squaring off long positions. Buy some Nifty Put Options or probably an aggressive trader can initiate shorts between 5950 to 6000 levels in an anticipation that euro may crack further. Q: How are you guys approaching the Bank Nifty ahead of the policy? A: Not very upbeat from current levels on the Bank Nifty. There has been a bounce contributed by a lot of PSUs and other large caps, especially ICICI Bank, which contributed to a significant rally. Last week, we had recommended going long in ICICI Bank. However, lot of components of the Bank Nifty are looking bit weak now; Axis Bank where we had initiated some short positions in last two trading sessions, Rs 1400-1420 zone is acting as a big resistance and we have seen shorts accumulating over here. That is one stock in Bank Nifty which we are recommending to go short. HDFC Bank, which has the largest weightage in Bank Nifty is seeing good amount of shorting happening off-late after some bounce back. State Bank of India (SBI) has seen short covering rally around Rs 2220 to Rs 2250, which is close to its current market price. It faces strong resistance at those levels. ICICI Bank may not face resistance but then it is long heavy at this point of time. So you might see some long unwinding pressure if not shorting in ICICI Bank. Moreover, all the components of Bank Nifty are either weak or near to their resistance. I may not initiate aggressive shorts but certainly I am not going long. If I see a bounce back till 12300-12500 zone from where Bank Nifty corrected last time also then probably it would be a good shorting opportunity and the backdrop that euro crashes below 1.30. Q: You have a trading strategy on Hindustan Unilever (HUL) today? A: HUL has corrected significantly from Rs 500 plus levels and huge formation of shorts have been seen offlate. On Friday we initiated some long positions around Rs 437-438 levels in Future because we now expect market to stabilize at current levels or probably correct. Defensive space like HUL has seen a huge formation of short positions and it is near to its strong support zone of Rs 430-440 in Spot. So, a short covering bounce is visible. Technically, a good pattern has been formed where a bounce back or a trend reversal can be expected in the stock. So, even at current levels of Rs 441-442 Futures, one can go long. We have a target of Rs 465-470 for HUL and one can fix a stop loss of around Rs 434 and go long in this stock and trade with a positive bias. Same can be said for ITC as well. Q: Any specific stocks from the midcaps that stand out in terms of the ones that have seen a lot of long addition or huge short covering? A: Most of them but if you look at the current rise in market, it was predominantly because of short covering and some formation of longs in large cap names. However we have seen beaten down names that we don’t prefer to indulge in like GMR Infrastructure, Suzlon Energy, which have seen huge formation of long positions. We have seen Housing Development Infrastructure Ltd (HDIL) going up because of short covering. NHPC has reduced significant amount of open interest. So, lot of activity happening there. A strict advice is whether you are shorting or going long in this market, large caps and index is the space where one should be. Going back to market, there is a deviation in the data that despite market going up in last two trading sessions barring yesterday, implied volatility (IV) has gone up and there is a huge built-up in Put Options and buying by FIIs. This clearly suggests that from the Options front, the stronger hands are bit negative on the market. This negativity will be determined by the movement in euro-dollar equation. At the same time it may not be a huge change in trend but it is better to short at this point of time rather than going long that is what the data is suggesting.