Nifty may retest 5950; go long: Aditya Birla Money

The December futures and options contracts will expire this week.  In an interview to CNBC-TV18, Hemant Thukral of Aditya Birla Money says for the medium-term, not only for the expiry week, 5,750 to 5,800 becomes very crucial support area.

He expects the market to retest 5,950 on the higher side. “I think we should take a bet on the long side, keeping a stop loss of 5,780 in cash for all the long positions. The more it comes closer to 5,800, the bet remains on the long side. Traders having long positions in cash levels should keep a strict stop loss of 5,780,” he cautions. He further says, Bank Nifty has the potential to outperform and some of the midcap banks are showing extraordinary rollovers. Also read: Trading tips on 7 stocks; 2 multibaggers Below is the edited transcript of his interview on CNBC-TV18: Q: What is your view on how to approach the Nifty at the start of the expiry week? A: Nifty, right now, is behaving more or less on the expected lines. We were facing a problem around 5,950-5,980 mark and similarly we should respect the Put writers of 5,800 also. Even for the January series, the highest Put writers are still betting on 5,800. So, even for medium-term and not only for the expiry week, 5,750 to 5,800 becomes very crucial support area. We closed on Friday around these areas. I think we should take a bet on the long side, keeping a stop loss of 5,780 in cash for all the long positions. I am expecting market to retest 5,950 once again on the higher side. So, the more it comes closer to 5,800, the bet remains on the long side. It is important that traders keep a strict stop loss of 5,780 in cash levels, for all long positions. Q: There was weakness that was led by the Bank Nifty as well on Friday, on that are you going with a shorting strategy or do you think that can still hold out? A: If this market has to hold the levels of 5,780 or 5,800 then it cannot do that, unless and until Bank Nifty respects its support. Bank Nifty has managed to hold on to its supports very well; in fact Nifty broke below 5,850 but the Bank Nifty never went below 12,200 levels. I still feel Bank Nifty has the potential to outperform. Especially some of the midcap banks are showing extraordinary rollovers already. Our top pick would be Federal Bank, which has already shown very aggressive rollovers to the next series, not only that the rollover cost has picked up. So it is showing that long positions are being rolled. Technically too, on medium charts this stock has given breakouts above Rs 485-490 levels. If a trader can carry positions even in January contract, I see a big target on Federal Bank around Rs 570-575. Since traders have to keep a stop loss, I will maintain stop loss around Rs 485. Q: You have a strategy on Tata Consultancy Services (TCS) as well for the day. What kind of target price do you see there? A: This maybe a slight contrarian call. With only three days left for expiry, and this being a truncated week, there are lot of short positions which are still open in the market, in both IT majors be it Infosys or TCS. On Friday we saw that TCS has started seeing the sign of short covering already and I see it developing more as we move forward towards expiry week. So this strategy is only for next three-four days where I am expecting TCS to retest Rs 1,293-1,295 levels on the upside, which is also its 50 day moving average. So one can go long on Futures itself but a tight stop loss has to be kept around Rs 1,230-1,235 mark from where TCS has given a breakout on daily charts. So TCS can be given preference over Infosys on the IT side. Q: Big knock on metals on Friday, did you see significant unwinding on any of those stocks? A: Yes, basically we have seen some profit booking coming in, which cannot be ruled out because metals have seen a sharp rally. But having said that, I do not feel that metals have turned negative in the short-term also, because the way things are rolling over though three days are still left for expiry, stocks like Tata Steel seems to be showing some strength on the rollover front already. So we cannot rule out metals totally on whether they will be able to outperform or not, but you have to pickup individual stocks. Tata Steel is the top pick for me, seeing the rollover data going forward in January series. On Friday, we have seen some profit booking but no major short positions in any of the metal stocks. _PAGEBREAK_ Q: How would you approach some of these volatile names that got hit on Friday, the likes of Punj Lloyd, IFCI, any shorting opportunities there? A: With regards to the shorting candidates, I am worried about the capital goods side of the market. Whether we are talking about largecaps like BHEL or Larsen and Toubro or whether we are talking about midcaps like Punj Lloyd or Voltas, the way the rolls positions are happening the cost is coming down. I am not bothered about the profit taking that we have seen on Friday. It is telling that going forward also these stocks may continue to underperform. So, I will be seller on rise, for capital goods sector as a whole. Top pick in shorting would be BHEL and L&T. Q: Going into January, what kind of range traders talking about for the market because that’s also a volatile month to call? A: Yes, and we should not forget that it is the longest series till 31st January. It is one of the longest series to start with. Put writers are betting a lot on 5,800. The highest open interest in January series is 5,800 and 5,700 Put. I do not think the market participants to go below that range of 5,750 on the downside. On upside again it’s the 6,000 Call writers which has started accumulating again so that’s the highest end. 6,000-6,030 will not only remain a psychological resistance level but may prove to be a very stiff resistance for another month. For me going forward, the range is very similar to December series; 5,750 on the downside and 6,030 on the upside. That is the range if we check the writers, and adjust the premium of Options.