ICICI Direct bets on Nifty at 6150; suggests F&O strategy

After its initital burst, the Nifty has slowed down considerably barely keeping head above 6000-mark. In an interview to CNBC-TV18, Amit Gupta of ICICI Direct said the market will remain in a consolidation mode before making a run towards 6100-6150 levels. "If one looks at the options build up, 5800 put and 6200 call is the highest base," he added.

Below is the edited transcript of his interview to CNBC-TV18 Q: What do you think about the Nifty? A: We feel that we are into consolidation before making an upmove towards 6,100-6,150 levels. The Nifty (Put Call Ratio) PCR OI is still hovering around. That means neither the put-writers nor the call-writers are very aggressive and the market is well-balanced. Nifty's Future Premium is around 40-41 points. Whenever it remains at elevated levels, the market goes into consolidation. It invites the shorts to come in and then the premium to come down. Then the market moves up on the back of short covering. I think we are into that phase. If one looks at the Options build up, 5800 put and 6,200 call is the highest bases. So, that is a broad range in which 5900 put eventually has seen very good build up coming up. This is almost coming closer to the highest base of 5800 put. That is going to be a good support. Also read: See meaningful correction once 6080-6100 crossed: Manghnani On the higher side, I am still betting on 6,100-6,150 levels. The stock specific momentum is likely to continue. This is quite evident with a stock futures open interest. It is around 218 crore shares, higher than any of the series in the last one year. That means, people are now a bit more buoyant into the mid-caps. This is why out of five or six sessions, only two or three are seeing the profit booking coming in. However, the stocks are taking out. We are positive on the laggard sectors like metals, oil and gas, and real estate. They haven’t moved up so far. There are shorts and now we are seeing the short covering coming into these sectors. So, one should play positive in them. _PAGEBREAK_ Q: Have you have got a trade on IDBI Bank from that space? A: Yes, as one peculiar feature of IDBI Bank is that there is consistent cash buying in the stock starting from the level of Rs 108. We have seen that in the month of December. It just consolidated above Rs 108 levels. That time, whenever it was coming down to Rs 108 there was heavy cash buying happening. Now it has taken out the higher band of the December series, which was Rs 114. So, I think any decline toward this level should be utilised to buy again. If one looks at the open interest position in the stock future, the elevated level that means the short covering still has to come in the stock. This is why I am betting for a target of Rs 126-128 on the higher side. The declines towards Rs 114 can be utilised to buy. Keep the stop around Rs 110. As I don’t think it whould come around the consolidation of Rs 108 or Rs 110 immediately. Q: The mid-cap that you have picked today is Dish TV? A: It moved up in the month of September from Rs 69 to Rs 82 level. That was a very good move and since then for the last three months it is just consolidating. In fact it is consolidating almost at the 50 percent retrenchment. This is around Rs 75-76 levels. Rs 75 Put option also has the highest open interest base. We have seen good delivery pick up around Rs 76 levels recently. Open interest, around five to six percent has got closed in the last two or three sessions. Still the stock has not seen that kind of up move yet. That will come because it is near a very good support. Looking at the risk-reward perspective also it looks much better. One can target Rs 90 on the higher side. Keep the stop loss below the at-the-money (ATM) highest Put, which is Rs 75, so it can be Rs 73.