Nifty may bounce back to 6k post some correction: Expert

In an interview with CNBC-TV18, Amit Trivedi, Director at Fin Stream Financial Advisors, spoke about his reading of the market and his outlook.

Below is a verbatim transcript: Q: Give us a word on how you are calling this series for the index? A: After moving between 5,900 and 6,100 levels in January, we think this current series can see some volatility specifically on the downside. This is predominantly because if you look at global markets, they have also rallied quite a bit and there is some kind of a pullback happening there. Also, after February 15 focus will move to Budget and what is happening to US debt ceiling discussions. So, we think broadly the range would slightly increase now to 6,100 on the upside and around 5,600-5,700 on the lower end for the markets. Q: You are looking at this as a shallow correction, just a pullback, not a complete reversal of the trend because some traders have started talking about a reversal and the trend which takes us down to 5,400-5,500 kind of levels even? A: No. I think this is broadly a correction that we are seeing in markets because I expect 2013 to be a more trading year in that sense. So, you would have 5-7 percent kind of corrections and we will again probably bounce back to around 5,900-6,000 levels. So, that is what my expectation is that we should be at around 5,800 give or take 100-150 points here and there. Q: How would you approach yesterday's biggest loser, Bank of Baroda (BoB)? A: After yesterday's result, the stock has corrected to 6-7 percent. We think this underperformance should continue in markets. So, individuals can go for a ratio trade in BoB because the stock did not go beyond Rs 880 levels before results also. We think investors can buy 880 Calls right now at around Rs 5.50 and sell two 900 Calls at Rs 3.50. So, there is a net cash inflow of Rs 1.50 and the breakeven point is investors will make at least Rs 1.50 if BoB remains at any value less than Rs 920 levels, which is Rs 120 from current levels. So, there is a lot of advantage in the strategy. _PAGEBREAK_ Q: What kind of approach do you have for some of these capital goods, infrastructure names because Bharat Heavy Electricals Ltd (BHEL) has corrected quite a bit post results, even Larsen & Toubro (L&T) has not made much headway, what would be a prudent way to approach them from a trading perspective? A: After results, BHEL has corrected and it is down to around Rs 215 levels. We think for both L&T and BHEL, the upsides are capped maximum to 10 percent of where they are currently in this particular series. For BHEL, we are recommending that the investors can go and sell 260 strike Calls at around Rs 0.45, which it is trading right now. So you make around Rs 450 and you benefit if BHEL remains any value less than Rs 260 and currently at Rs 250 you have 20 percent headway to that particular price point. Similarly, for L&T, we have a slightly different strategy. We think L&T has been moving in that Rs 1,500-1,520 to around Rs 1,650 levels and is consolidating at these levels. So investors can execute a ladder strategy in L&T, which is buy 1,550 Call at around Rs 40 and sell 1,600 Call at Rs 22 and 1,650 Call at Rs 10. So, there is an initial investment of approximately Rs 8 in this strategy and investors will benefit if L&T remains any valuable between Rs 1,558 and Rs 1,690 levels. Q: You have got a strategy on Tata Motors and that has been a pretty volatile stock, how are you playing it? A: Since the management discussion or coming out with their forecast, Tata Motors has reacted on the lower side. So, we think the stock should be more volatile and remain at current levels of around Rs 280-300-310 kind of levels and there is not much upside beyond that. Because of the results that are expected in the February month, option implied volatility are slightly on the higher side at around 45 percent. So we think investors can go and sell 360 strike Call Options at around Rs 0.75 so you make around Rs 750 if Tata Motors remains below Rs 360 levels and you make around 2 percent on the margin deployed of around Rs 40,000 in this particular trade. Q: From the auto space, you have got a strategy on Maruti Suzuki this morning? A: Yes, although for the entire February series, I think buying Options is a better strategy given the expected volatility in the second half of the month. However, we think from one-two weeks perspective, investors can go and do a ratio trade in Maruti Suzuki. Maruti Suzuki after results has been consolidating between Rs 1,550-1,600 kind of levels. So, investors can buy 1,650 Calls of Maruti Suzuki at around Rs 24 and sell two 1,700 Calls at around Rs 12. There is zero rupees invested in this trade and in the next three-four days, we think the spread will open up around Rs 2-3 at which price, investors can book profit in this particular trade. Q: What is your trading call for Cipla? A: Cipla is expected to come out with numbers because of which the Option implied volatility has gone up slightly. We think investors can sell 380 strike Put and 440 strike Call whenever the combined price becomes around Rs 7. Currently it is Rs 6 or so. After results this should come down to around Rs 4.5 at which one can unwind this particular trade.