5300 likely if 5480 is broken; buy Bharti: ICICI Direct

The market is expected to be at 5,480 on the lower side and 5,650-5,680 range on the higher side this week, says Amit Gupta, ICICI Direct. The market can slip towards 5,300 if 5,480 is taken out on the downside, he says.

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He is not too positive on the cement space. He advises going short on the ACC stock in Rs 1,180-1,200 range. "Go short, accumulate the shorts. Once the stock starts slipping, it can go down till Rs 1,120," Gupta says. He advises them to keep a stop loss at Rs 1,240.
He sees buying in telecom stocks and expects Bharti to outperform in the short-term. Below is the verbatim transcript of Amit Gupta’s interview on CNBC-TV18 Q: Last week we got a cut down by 2 percent on the Nifty and the Sensex. What is the prognosis for this week? How do you approach today?
A: Two things have happened in the last week, in fact in the last two sessions we saw the market breath becoming positive, which was not seen since July 19. Therefore, it was a long period and it was positive on Thursday session. If one looks at the foreign institutional investors (FIIs) figures in index Options, it was Rs 1,500 crore negative. That means that at such a high volatility of 22-23 percent if one looks at India VIX, I think the short volatility players have entered into a market and they are trying to eat this volatility and trying to take it in their favour and that is why some sell Call and sell Put that means short strangle or short straddle kind of strategies are formed in the market.
So, when such a thing happens, generally market stuck up in a range and that is why on the lower side 5,480, on the higher side, 5,650-5,680 could be the range for the market in this week which is a truncated week. But afterwards if 5,480 is taken out on the downside, one can see market slip towards 5,300 because the buying which was seen in 5,300 Put at the start of the series is still intact and we have not seen positions getting closed. We saw people bought around 5,300 Put at Rs 15 and that went up to Rs 35-40 also, but not much closure is seen in that particular open interest. So, I am not saying I am not cautious. We are still cautious in the market, till 5,680 on closing basis, is not taken out. So, for the time being we are playing for a range bound, we are selling Calls and Puts and our stop loss is 5,480 below which we will open our shorts again. Q: We did see a lot of short covering because of the index decidedly finding some support below 5,500 marks. Are there any of those stocks which you would use to short?
A: Cement space is looking weak. In the last two sessions of the last week, we saw a bit of bounce 5,500. However, ACC is unable to retrace strongly and from August 1, the movement of this scrip has been continuously under pressure and previously it was moving in a range of Rs 1,200-1,240 and whatever was happening in the market was a range for ACC and once this announcement of ACC-Ambuja Cements merger came, we saw heavy volumes, six month high volumes around Rs 1,200 levels and from there the breakdown came in the stock and since then we have seen around 12 percent addition coming into the futures of ACC of near month and the stock has not been able to take out Rs 1,200. So, that will remain a very stiff resistance.
Therefore, I would advice to go short in the stock, Rs 1,180-1,200 range. One can pick to go short, accumulate the shorts and then on the downside once the stock starts slipping, it can go down till Rs 1,120 also. One can keep stop loss at Rs 1,240. Q: What is your call on Bharti Airtel for the day?
A: Some buying is definitely seen in the telecom stocks. Nifty’s April low of 5,566, Bharti had a low of Rs 275. Nifty has broken this, breached that level, but Bharti is 20 percent away from there. So, clear outperformance in the short-term is seen from the stock. Q: If I were to ride the upmove in the market today, where should I be placing my stop loss and till what level would you be comfortable on the upside?
A: It is 5,480 positionally because that is April low and that is very important. Last week we reverted from these levels. On the higher side one can mark on 5,680, but I am not expecting beyond this, this week and one can keep on hovering within this range. Q: Anything you would watch out for in the finance space, any of the non-banking financial companies (NBFC) where there is a position?
A: In the mid-cap space one can look at Rural Electrification Corporation (REC), Power Finance Corporation (REC) from short covering perspective because once the market breadth started getting positive the oversold candidates have good platform now for two-three sessions to perform.
So, from trading bounce perspective, one can look at them otherwise heavyweights like HDFC are still under pressure, the kind of breakdown we have seen below Rs 800 in HDFC, I will remain skeptical in this space and the kind of beating we have seen in LIC Housing Finance is still very scary. So, I will look at PFC, REC from short covering perspective.