Hold long positions; Bank Nifty may not outperform: Bhamre

In an interview to CNBC-TV18 Siddharth Bhamre of Angel Broking shared his reading on the futures and options market. Market participants who are long on the market at 5,730-5,740 should continue to hold on to their long positions and trade with a positive bias, he suggested.

"There are lots of stocks where we are seeing positive momentum. Be it stock specific or broader market, shorting is not advisable," he added.

He expects to see a 5-6 percent rise in Bank Nifty from the current levels if Nifty performs well. However, one should not expect significant outperformance from this index.

Also read: Jai Bala says market on its last flourish.

"Bank Nifty might further rise from here, probably 12,600 to 12,800. Bank Nifty would be market performer. Do not expect significant outperformance because the quantum of short positions there has come down," he explained.

Below is the edited script of his interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee

Q: What is the next direction for the Nifty and how are you trading the index in your market?

A: Last week, on Tuesday, we had changed our view that we are no more bearish on the market but at the same time we were not expecting this kind of a jump in the market. As market moved above 5,730, we were forced to go long on this market. We all know that liquidity is coming back and FIIs are buying in cash market though same cannot be said in Futures and Options (F&O). They have been buying index options in big way and that’s the reason we are seeing that implied volatility (IV) has gone up from 11.5 to almost 14 percent. They have been buying Options and the quantum is equal both in Calls as well as Puts, so it is pretty unclear on the F&O front as to what these guys are up to.

One hint that we are getting from the market is of skepticism among the weaker hands. In fact, on the expiry day, we were saying that there was huge unwinding on Tuesday in 5,600 and 5,700 Call Option of November series but 5,800 didn’t see unwinding. That means people who were short didn’t cover those positions and that is the reason we were so confident that expiry may take place above 5,800 probably till 5,820. Now, same trades which people have done of selling out of money (OTM) calls and got stuck, in December Options also people have been doing selling of Options trade since one week before the expiry.

Right now, we have lot of participants who are short 5,900 Call, 5,800 Call and 6,000 Call of December. Everybody is anticipating that because market has run up so significantly in the last three-four trading sessions, there would be a correction and they would buy on correction or probably short now. Because of this skepticism weaker hands are not getting into market. This according to us would result into market not correcting and even if, there would be some kind of correction those would be intraday corrections.

We are anticipating that probably we are heading towards 6,000. Although it may not be in a same pace that we saw in last three-four trading sessions, we are heading towards 6,000 without any correction. Then when we go above 6,000, to say 6,050 and the market corrects and comes back to 6,000 then retail would come into the market. So, I believe those who are long in this market, who have gone long above 5,730-5,740, should continue to hold on to long positions and trade with positive bias. There are lots of stocks also where we are seeing positive momentum. So be it stock specific or broader market we would suggest shorting is not advisable.

Q: What about the Bank Nifty. What kind of targets do you see for that in the December series?

A: For the Bank Nifty 11,800 was level of strong resistance and we have breached that resistance. Yesterday, we saw weakness in HDFC Bank which has maximum weightage, but Axis Bank, ICICI Bank and State Bank of India (SBI) are all showing signs of fresh upside and the momentum might continue in these counters. So, HDFC might be lacklustre or probably there might be a one-two day correction.

I think the Bank Nifty might further rise from here, probably to levels of 12,600 to 12,800. You would see 5-6 percent rise in Bank Nifty as well, if Nifty goes there but this time Bank Nifty would be a market performer. Do not expect significant outperformance by Bank Nifty because the positions have been reduced. The quantum of short positions, which were there in Bank Nifty has come down. That was reflected in the lower rollover figures as well. So there would be a mix of all sectors rather than one particular sector, which would take markets higher.

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Q: You like IVRCL from infrastructure space?

A: Yes. We are seeing that a lot of midcaps are doing good and now there would be participation by people who have been missing out in the rally. Midcap infra stocks have not performed and there are lot of short positions which are still standing. So the idea is to get into high beta space in this market. Though IVRCL has moved significantly, almost around 10 percent from lower levels of Rs 38-39, there is lot of scope on the higher side. Although we are not expecting very significant upside, Rs 49 can be expected. One can go long at current levels with a stop loss around Rs 40 and target of Rs 49.

There are lot of other names in capital goods and infrastructure space like GMR Infrastructure, Havells India and some of the ancillary companies like Exide Industries, where good amount of short covering can take place. So keep an eye on these stocks as market consolidates or moves with a positive bias.

Q: You are trading Cipla, how are you calling that?

A: It is a liquidity driven call combined with F&O data. Apart from those significant short positions which got formed around 12th and 13th September, we have see huge amount of long positions formed in November. Since fresh funds are not there, probably people would book profits in defensives and get into high beta. So, I am expecting a long unwinding pressure in Cipla. Probably at a rise of around Rs 418-420 levels in Futures, one can go short and fix a stop loss somewhere around Rs 430 and I am expecting a target price around Rs 395 to Rs 400 zone. So I am negative on defensive and positive on high beta.

At the same time, I would like to add that when we are say that we are positive on the market; we are not in the camp which says that we are now heading into a fresh bull run. What we are really saying is that dollar is depreciating against euro and look crude oil prices are is going up. So all these liquidity indicators, clubbed with FII data are suggesting that this is not a market where you short. Let the momentum continue and because there is retail skepticism you would see this momentum continue to probably more than 6,000 levels. So that is the reason rather than saying that we are heading towards 6,600 or 7,000 levels which lots of participants are talking in the market.

Q: For somebody who is not carrying a position would you buy right away or wait for dips of 40-50 points to take some fresh long positions?

A: Maybe you should probably wait for dips but these dips might be intraday dips and you may not see closing levels of market down by 40-50 points. So probably you can just average out during the day. We are seeing rising trends in implied volatility.

If you see dips, you can buy Futures now and also buy Call options of 5,900 in Nifty. The targets are not very significant, so around 6,000-6,060 range book profits and move out.