Nifty will take long to decisively break 6100: Edelweiss

In an interview to CNBC-TV18, Atul Badkar, VP - Institutional Equities - Derivatives Desk of Edelweiss Securities Ltd spoke about the current trend in F&O market.

Below is a verbatim transcript of the interview: Q: How is it looking from your part of market? What kind of targets are Nifty traders looking at on the futures side? A: We have had 7 or 8 trading sessions into this month already and it is very clear that the market is trying very hard to break that 6,100 sort of a psychological barrier and move towards the yearly high of 6,111 and beyond that. However, it is very evident that although you have global liquidity coming in, 6,100 seems to be a target that will take a little longer. The market structurally looks like we are going to be heading a lot higher, but until sometime more to go we will be consolidating in the range of roughly 5,920-6,100 and a broader range will be between 5,850 and 6,100. 5,850 simply because it is the 50-day exponential moving average (EMA), so that will be the eventual support but until then for a few more trading sessions, maybe even until the end of settlement i.e. end of May we will be trading roughly in the 200 point range., If you look at where the options open interest (OI) is on the Calls the 6,000 and 6,200 is very highest OIs and on the Puts it is all the way between 5,700-5,800 and 5,900. So if you look at stocks there has been sectoral churn. So banks doing well, then banks take a backseat, then you have IT doing well. So you have the sectoral churn coming in. Another interesting point to note is that while you have foreign institutional investors (FIIs) flow in the month of May which is close to around Rs 7,500 crore plus, domestics have been selling. So there is fine balance of liquidity at this point of time, but structurally 200 point range is where the settlement will be trading in. Q: Ranbaxy Laboratories slipped a bit on the news yesterday morning and then bounced right back. Do you see more gains here? A: Quite strongly in Ranbaxy Laboratories, the news that came out yesterday or the day before yesterday was the only negative that we were expecting in the stock and from here onwards quite a bit of negatives have already been priced in. Going forward we expect margins to expand. Fundamentally, we have a buy on the stock and even technically it has been consolidating in that range and we were bullish a little earlier than yesterday’s move. Even from these levels Rs 475 is very easily gettable, so like a 4-5 percent upside within the entire pharmaceutical pack, not just from a trading perspective but even fundamentally we believe Ranbaxy Laboratories should be a hold in the portfolio. Q: You have got a trading call on Oil and Natural Gas Corporation (ONGC) as well. How are you trading the heavyweight? A: Within the entire oil and gas pack apart from Reliance Industries Ltd (RIL), we believe that even ONGC has now moved into a new trajectory. For a long time it was sub-Rs 300 and now we are seeing this entire consolidation between Rs 300 and Rs 325. It even went higher then it sort of drew back a bit. However, within the sector, ONGC is likely to go back to Rs 345-350 levels, I think even fundamentally we have been quite bullish on the stock. Even earlier on clients seemed to be talking about this stock particularly in the oil and gas pack. So from Rs 326, if market were to correct a bit, ONGC will be more like a defensive cum long hold in the portfolio because the downside seems to be limited from here, but the upside will be a quick 4 or 5 percent. Q: You have got a short from that space on JSW Steel? A: From the entire commodities space Sterlite Industries (India), Hindalco Industries, Tata Steel, JSW Steel, all of them have been underperforming. JSW Steel particularly is short because we have been seeing good amount of short build-up in the stock. From current levels we feel that there could be consolidation and a bit of a pullback in the index.