Nifty to hover in 5600-5900 in Aug series: Investworks.in

For August series, Nifty could trade in the range of 5,600-5,900, Amit Trivedi, Co-Founder, Investworks.in told CNBC-TV18 in an interview.

He believes Tata Motors stock should be trading at more than Rs 290-300 levels in the coming days for the August series on the back of JLR numbers.
In the oil and gas space, he feels ONGC has moved from around Rs 340 to around Rs 270 levels. The stock should consolidate at these levels and if there is a downfall then ONGC should give some support to market, he adds. Below is the verbatim transcript of Amit Trivedi's interview on CNBC-TV18 Q: What is your strategy on the index today?
A: If you look at the US jobs data that came on Thursday, it was slightly better than expected, which is again suggesting that the Fed will start tightening the stimulus September onwards. That should create some volatility in not just ours but global markets. If you look at valuations in general, emerging markets (EMs) are trading at around 10 times price to earning compared to developed markets at around 14 times. So, the downside seems to be protected especially in equities and what we are seeing is money is flowing out of predominantly fixed income market hence equity markets to that extent could be slightly protected in nature. So we think for the August series, 5,600 on the lower side and 5,900 on the higher side could be a broad range to look at. Q: Can you take us through Tata Motors? That was a fairly decent run that we saw on Wednesday, how are the options placed there and is it good to go for more, there is fundamental news apart from the moves on Wednesday?
A: We saw a big move on Tata Motors on Wednesday predominantly kicking in from JLR numbers. So we think the stock should be more than Rs 290-300 levels in the coming days for the August series, plus you have the entire discussion about euro zone coming out of recession, which could aid these stocks especially Tata Steel and Tata Motors. So a strategy that we feel one can do is go and sell Puts of 270 strike on Tata Motors trading at Rs 1, so we make a cash inflow of Rs 1,000 on the margin deployed of around 40,000, which is 2.5 percent returns if Tata Motors remains any value above Rs 270 which is close to around 15 percent from current levels. Q: Likewise Bharti Airtel, we did see some activity in that stock, the incoming news has been a little positive with a big foreign shareholder increasing its stake probably a reiteration of faith, how will you play it?
A: We are not considering stocks that are near the money strikes options per se predominantly because markets are very volatile and one day up, two days down kind of a scenario. We have gone to play very safe. We are looking at deep out-of-the-money options again for Bharti Airtel. So Bharti Airtel at around Rs 340 one can sell 300 Puts at around 60-80 paise so you make around Rs 800 on a margin deployed of 40,000 and you are protected till 15 percent fall in Bharti Airtel. Q: Oil and gas has had a good run day before yesterday, how would you approach Oil and Natural Gas Corporation (ONGC)?
A: All these stocks are becoming quite volatile in the sense that stocks like ITC and all which did go to a new 52-week high have corrected from there. Similarly, ONGC has moved from around Rs 340 down to around Rs 270 levels. We think the stock should consolidate at these levels and if there is a downfall then ONGC should give some support to market.
So we think a ladder strategy in ONGC could be worked out, which is one can buy 290 strike Calls and sell 300 and 320 strike Calls. So you make an investment of Rs 2 in this strategy and if the stock remains here or goes marginally up then the spread of Rs 2 will open up to around Rs 3.50 at which price one can unwind the trade.