May series to end above 6100, hold longs: Angel Broking

In an interview to CNBC-TV18, Siddharth Bhamre of Angel Broking shared outlook on F&O market.

Below is a verbatim transcript of the interview: Q: Big pullback on the Nifty yesterday, how are you trading the index now and with what kind of target on the Nifty? A: We have been suggesting not to panic in this fall, which happened from 6,200 to sub-6,000 levels. After quite some time we have initiated long positions in Nifty and Bank Nifty around 5,950-5,960 odd levels not because it was support - yes it was support but we did not find any merit in the falls and that is the reason we mentioned not to panic in this fall. First thing, our clear observation was that there was hardly any formation of short positions by foreign institutional investors (FIIs) and despite all this talks about how QE3 (quantitative easing) is going to stop or pause, there was hardly any lack of liquidity in markets. We saw cash base buying continuing. At the same time, when we were going through the minutes of what Fed Chairman, Ben Bernanke, has to say, never ever in his speech he had mentioned that he is thinking of stopping it. Not just Fed, anybody from any central bank would stop going ahead with QE when the growth rate is high and the unemployment numbers are coming down. So we did not understand that why market fell so significantly because of that. Now, in the pullback the rally has happened. This may continue for some time but again FIIs have not formed fresh long positions in index futures significantly. There is around Rs 200 crore of index futures long positions, which they have formed yesterday but the quantum is not very high. One more positive from the F&O data is the selling in Put option. Yesterday's 6,000 and 6,100 Put option saw both around 40,000 contracts built up. A lot of people would say this is buying of Put option but we believe it is selling of Put option because implied volatility has corrected with rise in built up in option which clearly suggests that this is writing of options by FIIs. So, we are anticipating a close of expiry above 6,100 and hence would suggest to hold on to long positions, which we created in Nifty at lower levels. Q: Public sector banks have been dragging the Bank Nifty, do you think it is ripe for a bounce back? A: Certainly. A couple of trading sessions back there was around 2.5 percent correction in Bank Nifty completely because of 13 percent long unwinding in open interest (OI) of index. Now we are seeing formation of long positions. On Monday, we have initiated buy at 12,800 Call option around Rs 80, that has given good returns. I think Bank Nifty can further go up from current levels because correction was because of unwinding and now the bounce back is because of formation of long positions. Not just index, if you look at the private sector components, which contribute higher weightage compared to public sector undertaking (PSU) where you are mentioning some concerns, there we are seeing formation of long positions be it ICICI Bank, Axis Bank or even HDFC and HDFC Bank. So those people, who are perturbed that probably at these higher levels do not want to buy Bank Nifty index futures, can go ahead and buy 13,000 Call option at a dip. It is trading somewhere around Rs 74-75, a dip till Rs 60 can happen and go long over there. So, we are anticipating Bank Nifty again to go to those 13,000-13,300 levels and probably surpass those levels too. Buy index futures and if you are wary about the risk pertaining to index future then 13,000 Call option is apt for this expiry. Q: Jaiprakash Associates is another high beta purchase for you today? A: Correction in this counter from Rs 80 to Rs 67-68 came in no time and there was huge surge in OI, from 55-56 million contracts to 73 million contracts as on yesterday. We are seeing some cash base buying happening near that strong support of Rs 67-68 and some formation of long positions though not very huge has been seen yesterday. We are anticipating further formation of long positions, which would in turn trigger short covering. One can go long at current levels, though we are not expecting very huge upside, the stock can go to Rs 75-76 levels. One should fix a small stop loss somewhere around Rs 66 and go long and trade with positive bias in this.