See 5350 as strong support for Nifty: Edelweiss

Atul Badkar, VP - Institutional Equities - Derivatives Desk at Edelweiss Securities spoke to CNBC-TV18 regarding the current trend in F&O market. Given the global market strength, he expects Nifty to rally towards 5,450 or 5,500, but it may not go beyond that.

"5,350 should act as a strong support and if that were to break, then we are looking at directly 5,250," he added. Also Read: Don't be misguided by rallies, mkt in downtrend: Sukhani Below is the verbatim transcript of Atul Badkar's interview on CNBC-TV18 Q: Do you have any conviction beyond 5,400 levels at all or would you exercise caution in going long now? A: There will be a lot of caution across all classes of investors to go long from here. In the last five trading sessions the Nifty has increased in open interest by about 65 percent with 6 percent price correction and from last expiry till date, we are down about 8 percent. The last five days have been extremely volatile and we have seen lot of churn across sectors. Broadly the range for this settlement in the next four-five days will be between 5,300 and 5,450. Around 5,350 should act as a strong support and if that were to break, they are looking at directly 5,250 and eventually the 5,180 which is a 61 percent retracement of the entire range from 4,530 to 6,200. So, these are the broad levels we have been keeping in mind over the last five days. Today, global markets seem to be pretty strong so we may rally towards 5,450 or maybe even 5,500 at best but beyond that I do not see too much strength in these markets. Any position from trading perspective will have to be extremely quick footed on getting stop losses in place. Q: You have chosen to play a long on Yes Bank. The stock suffered a good bit except for a brief upswing that we saw day before yesterday the stock has been little under the weather. What makes you bullish on that stock and what would be your levels? A: Yesterday, irrespective of the market showing strength, the banking index and across banks, you didn’t see too much movement on the upside. So, you had metals rallying, you had few other sectors going up but banks underperformed. If market were to hold 5,400 or even stay around here and slowly rally towards 5,450, you will see some bounce back in banks particularly the higher beta ones, maybe State Bank of India, ICICI Bank and Yes Bank. Yes Bank has been extremely volatile over the last few trading sessions, it has been down 15 percent-20 percent on particular days and it again rallied back. However, there are lots of shorts in this bank and any short covering can quickly take you to Rs 260 mark. From a trading perspective, immediately in the next four-five trading sessions you can take a long on Yes Bank but you have to keep your stop losses in place maybe 3-4 percent lower and you got to cut your longs and that goes even for Axis Bank, ICICI Bank and State Bank of India. Q: What about your long strategy on Reliance Industries? A: In this market it is always safer to stay with largecaps and Reliance is almost like a proxy to the index. So, by and large the Rs 800 levels or Rs 780-800 range should hold in Reliance. We have been seeing investor interest to buy the stock on dips. From Futures and Options (F&O) perspective we haven’t seen too much but it is relatively safer stock to be in. If you see a sustained rally, this stock will not give the excess returns but at least there will not be any capital erosion, which is why Reliance and Bharti Airtel are relatively safer stocks to be in.

Q: If you do see the downtrend resume in the market, at what point would you suggest opening of fresh short position and where would you suggest maintaining a stop loss now? A: We are looking at 5,350 and 5,300 because beyond that you have one major support which is 5,180. So, these are the key supports, you need to watch. If you are taking any longs from here, you need to cut them below 5,350. India by and large in the last few trading sessions has not been moving inline with global market. So, although we may think that we will open strong and since global cues are in our favour, we may continue to hold but that suddenly changes in the second half as you have seen in the last four-five trading sessions. The market is broadly in an extremely super volatile state where there is a lot of confusion across sectors. For few more trading sessions you will continue to see huge moves in stocks. Next week being the settlement with the expiry week, there will be a lot of pressure on rolls and that will create some more volatility but 5,350 and 5,180 are the two strong supports that one needs to keep in mind.