5800 key for Nifty; some stocks may see pain: ICICI Direct

In an interview to CNBC-TV18, Amit Gupta, head- Derivatives of ICICI Direct spoke about the outlook for the F&O market.

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Below is the verbatim transcript of his interview on CNBC-TV18 Q: What is the trading approach now on the Nifty after the big drop seen over the last five days?
A: This particular fall has been really sharp. Within four-five sessions you have seen Nifty come down almost 350 points. But now possibly Nifty is approaching towards the important support of 5680 and that is why some recovery can be seen from those levels. However, if you look at the Options data, in the starting of the month we saw 5800 Put was the highest base but now these positions are cutting down and are getting rolled to the lower strike of 5700.
In 5700 on Tuesday we saw almost 17 lakh shares being added. This is not a healthy exercise because if market has to hold it should hold at the initial highest Put ways of 5800 only. It should not continue to go down as you will see a bad market in that case. Right now we will wait for this week to get over.
If it is closing above 5800, then this particular mayhem would have stopped and then finally Nifty may start moving up further and just continuing the range of 5700 to 6100 for the time being. However, if Nifty closes the week below 5800 then you may have a problem for further three-four weeks as well. In that case, this particular stock specific pain is likely to continue and our index can also slip further.
In case of Bank Nifty, we have seen the kind of pain it is facing, it is close to 10300-10400. It may slip towards 10000 levels so the performers that have outperformed the market like FMCG or oil and gas should come back again, at least the heavy weights and hold the market or possibly then the short covering can be seen. However, yesterday the performers were falling bringing the market down. So this is a scenario where we have to wait for two-three sessions, look at the sustainability above 5800 and then take a call.
If you look at foreign institutional investors (FIIs) positions in index Futures they have not gone short still but are very cautious. In the last two months, cash segment have sold almost Rs 16000 crore in cash and in index Options they have bought around Rs 3500 crore a week before the last settlement. This means it is hedging for the long future positions they have done in index Options and have become cautious. So we are waiting for another two-three sessions and looking at the sustainability above 5800. Q: What about the IT stocks, what kind of trading positions do people have on the key faces there?
A: The way Infosys and Wipro were behaving before these quarterly results, it was clear that a very heavy short addition in both of these stocks and HCL Technologies and Tata Consultancy Services (TCS) were continuing with long formations.
If you look at HCL Tech, before the result announcement we had seen almost 18-20 percent of addition within three-four sessions. Infact in the last session it was almost 9.5 percent. So people were taking long bets in the stock in anticipation of some good results and that is why we have to see today’s opening. Now, if it is not able to hold Rs 900 possibly it may drift towards Rs 850-855 kind of levels. This is because if you look at the move from Rs 760 to Rs 900 in the stock, it is a very good retracement level around Rs 855 where it can form a base and again start moving up.
Wipro may be a short-term mover because the kind of short covering we are seeing in this stock, it is really sharp and is outperforming in the falling market as well. In the last session, we saw around 7 percent of open interest closer so that was only a short covering. It is possible it can move towards Rs 455-460 kind of levels as well.