Be cautious! Buy on dips, shorting not good idea: Bhamre

Siddharth Bhamre of Angel Broking gives his view on market outlook and various stocks.

In an interview to CNBC-TV18, he says, "If you are thinking that there would be a huge correction in market, so let me pile up short positions then that strategy may backfire. Stock futures have already seen huge amount of accumulation of short positions in a lot of names". Bhamre further adds that he would have shorted at 6,100 on Nifty but did not do so thinking market would go high. So, shorting opportunity is gone. Right now, shorting may not be a good idea. Below is a verbatim transcript of the interview: Q: Have you changed your long strategy on the Nifty? A: No, we have not changed. However, 150 points down from where we were talking to hold on to a long position, it seems that the view is slightly going wrong. The observations from foreign institutional investors (FIIs) suggest that they have been on a pause mode rather than saying bearish or a cautious mode. Reason being, yes, there has been some shorting, which took place in index futures by them after a very long time, probably after 2-3 months. However, the quantum of those short positions is not beyond Rs 1,400-1,500 crore. There was some long unwinding to the tune of Rs 1,000 crore. So even if I club it together i.e. Rs 2,500 crore of shorting in index Futures i.e. Rs 1,500 crore of shorting and Rs 1,000 crore of unwinding of long positions but Rs 7,000 crore of cash base buying is seen since the beginning of this series. At the same time, stock futures they have been buying. If you look at the Call options data or I would say the stock options data of FIIs, there have been significant jump of 1,500 percent albeit on the low base. We have done some analysis of where the built up has happened significantly. If you look at stocks like ICICI Bank where Rs 1,200-1,250 strike price has been written, Bharat Heavy Electricals Ltd (BHEL) Rs 230-240 strike price written then you had strong largecap names like State Bank of India (SBI), Larsen and Toubro (L&T) where some Call options have been written. What these guys are thinking is that probably there is some kind of correction or probably a pause in an upward trend hence we square off some of our long positions in index futures and again start long positions whether it is in equity or in futures, let us write some Call options. So, when somebody does this, he is hinting or seeing some kind of correction in market, which may not be very significant. At the same time, even if view is slightly negative, I will hold on to my long position. That is when people try to do such strategies that is against my long stock Futures, I sell my Call options. So, for trader, it becomes difficult. If I still continue to say that no, hold on to your long position then that means I am being adamant. However, from investment or from positional perspective, I feel this market is still buy-on-dips. We are seeing negative cues coming from micro scenario. I do not think index of industrial production (IIP) numbers today are going to give any positive surprise to the market and even if it would be, it would be just a blip. I believe, one should be cautious but if you are thinking that there would be a huge correction in market and let me pile up short positions then that strategy may backfire. Stock futures have already seen huge amount of accumulation of short positions in a lot of names. I will not short here, I probably would have shorted at 6,100 but at that point of time, we were thinking market would go high. So shorting opportunity is gone, shorting right now may not be a good idea. Q: From the financials, you have a strategy on IDBI Bank today? A: Yes, we have seen stock correcting significantly from Rs 118 levels. Though, there was not pile up of huge short positions in beginning of this series, still there is 8-10 percent rise in open interest (OI), which is more on the shorter side. Yesterday, stock has shown some kind of pause and stability. Rs 97 to Rs 99 is a strong support range. Couple of months back, stock had taken support from this level and bounced again. We are not anticipating a huge short covering rally. However, I think fresh formation of long positions would make sure this stock would probably bounce back to Rs 108-109. So go long at current levels or probably a rupee down and fix a stop loss of Rs 96-97 and stay long in this counter. Q: Rashtriya Chemicals and Fertilisers (RCF) went up quite a bit yesterday but you have chosen Chambal Fertilisers and Chemicals for trade today? A: RCF went up more because of divestment -- many of the public sector undertaking (PSU) names were going up. Chambal Fertilisers and Chemicals has a good support around Rs 64 levels. It is trading around Rs 65, though we have not seen much of an open interest (OI) activity over here since beginning of this series. Q: If you are expecting a little bit more of a drift down, which are the levels where you would start accumulating once again or where you would ask even people who had gone short earlier to cover up or book some profits? A: Our technical guys were a bit skeptical on the market and they are looking at support levels of 5,800 to 5,820. If these levels do come, we would again start accumulating long positions from derivatives perspective provided FIIs do not go into selling index futures big time. At the same time, we are doing selective midcap and selective largecap buying. If IIP numbers are bad, you might see BHEL and L&T correcting. That would be a good opportunity to go long because as long as FIIs are buying and shorting index futures, I think the trend is upward and couple of 100 points correction from higher levels after more than 1,000 points rally -- if I see from six months perspective -- can be called as a correction rather than a trend reversal. So, I think like FIIs, we would also like to be in an accumulative phase and we would be more into largecap but selective midcap also now because the froth is out of midcap.