Market to be volatile, avoid building position: HDFC Sec

In an interview to CNBC-TV18 VK Sharma of HDFC Securities shared reading and outlook on futures and options market.

It was a volatile session for the market on Tuesday, the Nifty swung wildly in a 90 point range and closed flat around 5,900. "The market bounced back after intraday dip from 5,865 gives confidence that the market is volatile," he said. Sharma suggested pruning positions when the Nifty edges higher, however one should avoid building position unless some clarity emerges on few key bills in the winter session of the parliament. Also read: 4 stocks everyone is keenly watching today Below is the edited transcript of Sharma's interview with CNBC-TV18. Q: What did you make of the volatility yesterday? A: Markets are always volatile and yesterday it took the cake. We don't make too much of a volatility, but when volatility creeps in, when the market is near its near term high or near term bottom then one needs to sit back and take notice. Weakness came into the markets after a new high was made intraday this means it was that portion when people were covering their shorts, people used to build fresh shorts in the market. This was not in consonance with what was happening in the markets and it was slightly worrying. But, the lower level of 5,838, which it has held so far didn't break. The market bounced back after a intraday dip from 5,865 gives confidence that the market is volatile, but higher top and higher bottom has been made. I would prune my positions while going up, but there is no confidence in terms of building position unless the parliament does clear some of the bills. Q: The CNX IT has been a big cross for the market to bear over the last few days; do you see more downside in the heavyweights there? A: I think a lot of positions are already built and those positions have been built, where people have been long. So the market is unlikely to get these people get off lightly. From the commentary that you have heard from the US companies as well as our domestic companies and traditionally, December not being a good quarter for them, there is some more legroom here on the downside. If the IT doesn't break another 100 points lower, it will be something very tangible for the market that it should have broken but it hasn’t. So I would be building short positions here. Q: Any specific heavyweight where there is a lot of shorting pressure yesterday? A: If you were to look at in the heavyweights, then Infosys still stands out. You did see short positions being built there and they exceeded by more than 2 percent and the stock went down by 1 percent. So, I suggest buying 2,300 Put at Rs 30 although it closed at Rs 39, the market would open with a slightly positive bias. So any rise, the Put premiums would come down and therefore one can use to build short positions. Buy Puts in Infosys. My target here is Rs 70 for this Put with a stop loss at Rs 15. Q: You have got a bearish view on Voltas for the day? A: Voltas is essentially going down and it is a fairly liquid stock in terms of Puts. I suggest that one can buy 110 Put which was available around Rs 5 and maybe when the prices slightly edge up, buy at around Rs 4. Keep a stop loss at Rs 2 and make Rs 4 in the process. But there is a limit to which Voltas can fall. So the downside is pretty limited. Do keep a stop loss of Rs 2 in this Put. Q: What is your trading strategy on IDFC? A: The positions were pruned yesterday in IDFC and the stock did go up as compared to the rest of the stocks in the financial space. I feel that one can still continue to be long in IDFC. If one wants to build fresh positions then maybe buying 180 Call at around Rs 3 with a stop loss of Rs 2 and hoping to make some Rs 3-4 here is my strategy in IDFC.