Nifty to hover in 5750-6000 in Oct series: Hemant Thukral

Hemant Thukral of Aditya Birla Money feels that the market does not have the potential to cross 6,000 on the upside, however, he expects it to be less volatile in this series. He sees the Nifty hovering in 5750-6000 range in October series.

He feels that HDFC Bank and ICICI Bank may retest its lows and another 5-6 percent downside is likely. “I would short HDFC Bank keeping a stop loss of Rs 640 and a target of Rs 585”, he told CNBC-TV18. Meanwhile, he recommends buying Axis Bank and Yes Bank, which are outperforming others in the banking sector. He also suggests buying on Larsen and Toubro (L&T) and Bharat Heavy Electricals Limited (BHEL). Also read: 'Mkt not ready for earnings letdown; churn portfolio' Below is the edited transcript of his interview to CNBC-TV18. Q: What is your strategy first on the index and then your top trading call? A: The market, the moment it broke below 5950, is showing signs of weakness. Even if you see the rollovers, I have always been worried about the banking rollovers. They have been again starting on the short side. The oil and gas majors have also started to show rollovers on the short side. Both of these sectors are looking weak. If we get any opportunity due to expiry today to sell Nifty around 5910-5920 and with a stop loss of 5950, Nifty will retrace and retest the lower band that is 5800 and 5750 in coming few trading sessions. I am looking to short banks. HDFC Bank; the rollovers have been aggressive on the short side. Technically, Wednesday it broke below Rs 625 mark, which was also the 50 days moving average and acting as a support for it. So I would go and short HDFC Bank keeping a stop loss of Rs 640 and a target of Rs 585. Second very important stock on radar would be Reliance Industries. On Wednesday, Reliance gave away the 50 days moving average, which it was holding very well of Rs 865. Now it has closed at Rs 842, very close to the 200 days moving average around Rs 840. The way yesterdays rollovers have happened, the cost has trimmed down clearly telling that shorts have been piled up in the next series. If Reliance goes below Rs 840 then I would sell Reliance aggressively for a target of Rs 785-795, keeping a stop loss of Rs 865. I will sell aggressively only if it breaches Rs 840 that is their 200 days moving average. Q: What about ICICI Bank and ITC? If the index has to be managed in the last half hour or one hour surely people will have to move these stocks, what should we be prepared for? A: If you are talking about Thursday, and I still see ITC moving up in any case as open interest positions are still pending in ITC, some VWAP (Volume Weighted Average Price) buying may come into that. ITC, overall, is also not looking as weak as the other stocks. ITC can move back up to Rs 355-360. ICICI Bank; the problem really lies that there are still long positions which people have held up and bought from lower levels. Banks are the key to this market. If my stop loss has to trigger 5950 on the upside, it has to be through these banks. I will be watching them carefully, but right now ICICI Bank like HDFC Bank has also a potential to retest the lows another 5-6 percent on the downside. Q: Will you play Bharat Heavy Electricals (BHEL)? It has absolutely been the dark horse that performed miraculously this series itself 22 percent higher on the series and 9 percent yesterday. Is there a play there? A: I would put both L&T and BHEL as a buy. The way the positions have been rolled in both of them are showing signals of either shorts getting out of the system like in case of BHEL and in Larsen and Toubro (L&T) some rollover cost is positive. So, clearly telling that supportive buying is coming. Now BHEL yesterday has crossed that Rs 133-136 barrier which was acting as a resistance for it. Till the time it stays above Rs 137-138, one should trade with a positive view. Remember, if it crosses Rs 146 which has been its three months high, then we are talking about a rate of Rs 165. Definitely, I am positive on BHEL. Yes a strict stop loss has to be maintained so I will maintain a band of Rs 137-138 as a stop loss. Q: In the banking names, the biggest gainers have been Axis Bank up 21 percent and Yes Bank up 35 percent; remarkable recovery there as well. Do you expect more follow-through or would you start to get cautious on these two names? A: Yes some of the banks will outperform the banking sector in any case. May be an Axis Bank will outperform ICICI Bank, HDFC Bank the way the rollovers are shaping up. Very clearly, I don't see them outperforming so much. ICICI Bank and HDFC Bank I am expecting pressure that Axis Bank will be a clear winner. Yes Bank has come back to Rs 311. Now till the time it doesn’t break that Rs 298-303 zone, it looks much positive than its peers like IndusInd Bank. I would still be positive on Yes Bank, but banking sector itself is a big question mark. You can buy Yes Bank because it can outperform the peers but maintain a stop loss of Rs 298 on the same. Q: Are we starting next series with a bit of a disadvantage in terms of high rollovers? A: It is a sectoral mix, so I don't see this. If you see the next positions of Options 5700, Put has the highest open interest across all the Options in October. In fact it is a singe strike which has doubled the open interest individual strike prices. I don't see this market breaking 5650-5700. After two series of very high volatility we may stay in a tighter range than we are expecting; 5750 on the downside and 6000 on the upside. So, we may consolidate in this range for at least first 15 days, see how the results of the companies pan out. Some fresh positions will be taken over then. Till banking and oil and gas do not start signaling the positive trends, it will be very difficult for Nifty to cross 6000 on the upside.