Rupee will further pulldown mkt; sell banks: HDFC Sec

In an interview to CNBC-TV18, VK Sharma of HDFC Securities shared his reading and outlook on Futures and Options market and specific stocks.

Also Read: See strong resistance at 5900; mkt to be choppy: Sukhani

Below is the verbatim transcript of VK Sharma's interview on CNBC-TV18

Q: Lost some ground on Tuesday, but this morning looks like we will have a gap down. What kind of trade would you initiate on the Nifty for traders this morning?
A: One will have to expect market to open more than 70 points than what has been suggested by the SGX. Market is still pinkeye; it is not reflecting the real horror which the current rupee will now unfold. Therefore, as corporate go on to cover the positions that they have, not more than 10 percent of external commercial borrowings (ECBs) and other things are covered. So, currency is going to ensure that all the companies that have foreign exposure, go down and will take the market down further.
The yields are already up. So, buying a Put in the Nifty at 5,800 which currently quotes at Rs 75 odd will change by the time the market opens so that is the only real alternative and people should give up any semblance of the thought that interest rates could go down further. Therefore, banking stocks are an obvious sell.

Q: Since you believe this market is paving the path for lower levels, on the Option side do you have any kind of strategy to hedge?
A: The market is pinkeye, 5,800 Puts have been written, 6,000 Calls have been written but protection comes through either selling what you have in terms of booking partial losses or booking profits or in terms of buying Puts.
In the Nifty if your portfolio is something which the Nifty can protect then I do not think anything other than Nifty BeES, if your portfolio is another Nifty BeES, buying Put in the Nifty will not protect your portfolio, but buying in individual stocks will definitely do. However, somebody who wants to take a thumb rule then 5,800 Put, if you buy at 75 will partially protect portfolio. Those who still believe that let the market break the level of 5,050 first, for them buying 5,800 Put or sell 5,600 Call, essentially it will be a bear spread but gains will be limited if the market goes down and nothing will come to you if it falls below 5,600.

Q: Did you see through the course of Tuesday's trading session some short build-up especially within the Nifty?
A: Within the Nifty, metals have been favourite for short, people who want to go short. However, in the banking space also we saw some shorts happening and it was lead by Axis Bank, 1300 Put at around Rs 49 one can buy and the target is Rs 80 and keep a stop loss around Rs 35. Punjab National Bank (PNB) is not in the Nifty but it is somewhat of a weaker nature because the provision will come back in higher manner in this quarter. There I am suggesting buying 640 Put at around Rs 18, keep a stop loss at Rs 12 and hope to sell this around Rs 30. The best thing would be to buy Put in the Bank Nifty at the current levels.