For June, accrue Nifty at around 4,800 levels: HSBC Invest

Yesterday, the GDP data and the expiry coincided, which saw a lot of concentrated effort to hold onto the Nifty which was clearly visible at around the 4,900 mark, says Karun Mutha, senior vice president - head equity & derivatives advisory, HSBC Invest Direct.

For the first part of the June series, we have seen global cues starting with some negative bias but he sees an opportunity. We know the maxim – ‘Buy in May and wait for a sunny day’. Probably, what we need to look at are the various data facts where we are already starting with one of the lowest point in terms of the open interest in Nifty.
A lot of pessimism already been built in the Nifty is already out. So the open interest or values at stake are quite low, he adds. Selectively, the Nifty should be accumulated at around 4,800 levels which seems to be the levels for the month of June series starting where the largest open interest has been seen building up. Of course the earlier one was 4,500 which it in fact was seen moving up.
Mutha says that if one looks at some of the FII data, cumulatively they have been sellers for the whole month of May and finally they expired most of their positions making a bank sale of around Rs 1,200 crore yesterday on the index futures and probably they will start with this new series with a fresh outlook.
Not the least important is the volatility index which seems to have been peaking out at around 27 levels. If we see that particular level being achieved in June series we will see the same drifting down and which is an exact an indication why the Nifty should move up as it has a negative correlation with the Nifty. Below is an edited transcript of his interview to CNBC-TV18. Watch the accompanying video for more. Q: Specific to the Nifty, on which key heavyweights did you see a sharp rollover of short positions? Where would you expect to see more pressure?
A: We had seen banking stocks being battered the most and we had seen sharp rollover of those positions but if you see the positions that got rolled over they were almost 78% and the Nifty was slightly lower around 49%. So the banking stocks were the key stocks wherein we had seen a lot of shorts being build up over the next month series. Of course the rally was again from the lows in the May was clearly the banking and perhaps there could be some profit booking and fresh shorts being built up in that particular sector. Q: If you had to advice a couple of long trades for the first half of the June series what would those be?
A: I would really select those stocks which haven’t been making much noise in the May series. The volatility has been steady and particularly picking some of them would be out of this table of Coal India and Cairn. I think both the stocks have been relatively stable, gradually moving up from the lows that they have made in the May series. The last what we saw was also the open interest accumulation - Cairn which had almost 93 lakh shares on the open interest has accumulated almost 36 lakh shares and that is the additional rollover that has happened on that and we saw the firm price move.
Also in terms of Coal India, there has been an addition of around 4 lakh shares over a base of almost 32 lakh shares so that is a significant addition seen on both of these stocks with a steady price move on the upward side. Both these stocks could be used as a trading opportunity for the month of June on the long side.