Nifty may hold 5500 in July; sell on rise: Angel Broking

Sharing trading strategy for July series, Siddharth Bhamre of Angel Broking told CNBC-TV18 that he saw resistance in the market at 5750-5800 levels. He expected the market may bounce upto 5720 levels on the upper side and hold 5500 on the lower side in the July series.

He advised investors on being mostly on the short side for the July series on the condition that the foreign institutional investors (FIIs) continued their sell-off. Speaking on the oil and gas index, he saw Gas Authority of India Limited (GAIL) as a good opportunity for short covering. He advised investors to watch out for stocks such as HUL, Hero MotoCorp, Indian Oil Corporation, IDBI and NTPC in the last one hour of trade before expiry. Also read: Remain short on EMs; Europe to stabalise soon: UBS Below is the edited transcript of his interview to CNBC-TV18. Q: Any strategies on specific stocks in the last one hour of trade before expiry? A: There are some stocks with very high formation of short positions. But equal amount of percentage rollovers has not been seen. So, we are identifying some stocks, especially couple of stocks in large caps. Keep an eye on Hindustan Unilever (HUL) and Hero MotoCorp. These stocks may be fairly volatile. A lot of short positions were formed in Hero MotoCorp in June expiry. Watch out for some sort of short covering so that stock bounces up and at higher levels in July these people again go short. Expect some kind of spike over HUL too. Interestingly this time there are a lot of midcap stocks where that phenomenon is observed; though not purely midcap, but stocks like Indian Oil Corporation (IOC), Industrial Development Bank of India (IDBI). In large caps, one more stock where rollovers are bit less and can expect action is National Thermal Power Corporation (NTPC). There might be some volatility in last 45 minutes to one hour. Q: What are the indications that you are getting for the July series? The June series has been quite debilitating for the market with an 8 percent slide that we have seen. Could we head southwards in the July series as well? What would the markers look like? A: Things are not very clear now. The resistance is around this 5,750-5,800 levels. There we have seen good amount of call writing in this market. Like we mentioned in the beginning of this week; a bounce till 5700 to 5720-5730 odd levels might be seen. One would be happy to short this market at those levels. Those levels are here, but we would like to wait for a day not to see the market movements. But to see the foreign institutional investor (FII) activities that is in tomorrow's trading session. If FIIs continue to sell in cash market and form index short positions then this is a wonderful opportunity again to go short. On the lower side, we are not expecting huge corrections as such. Probably we might to go 5500, or probably stabilise there. It maybe a range bound market. But within that range, July would be like sell on rise kind of market. These are the indications we are getting from the initial statistics which F&O market is throwing to us. Q: What is your take on the oil and gas index? How much increase can we see from current levels? What sort of accumulation are you seeing within that sector and specific stocks? Are there fresh longs being added there? A: Gas Authority of India (GAIL) is one stock where a huge formation of short positions is seen. They are getting rolled over also. We have taken a contra bet in GAIL couple of days back. There is scope of good amount of short covering in GAIL and that becomes a preferred pick in that segment. At the same time Reliance is showing lot of strength. We have seen corrections happening not because of huge formation of short positions. But whenever the stock is going up, we are seeing formation of long positions. Trying to take some contra bets in Oil Marketing Companies (OMC) like Hindustan Petroleum and others. Q: Where you are expecting closing of this expiry? A: If you look at June 20, market activities are very interesting. It fell down three percent. Despite going up, Implied volatility (IV) came down. At 5700 Call Option, a huge built-up of around 82,000 plus contracts was seen. FIIs were sellers in index Options. Though we were expecting this bounce in morning we are not expecting a close which would be substantially above 5700. So those guys who have bought today probably 5700 Call Options would be disappointed. Do not expect closing above 5700. In this current range without much of volatility you may see expiry ending, but stock specific yes, there would be a lot of volatility. Q: What are you spotting in terms of the PSU banking space? A couple of these stocks such as Allahabad Bank, UCO Bank and a couple of these other stocks have been quite weak for the past couple of trading sessions? A: Allahabad Bank, Bank of Baroda (BOB), Canara Bank, Punjab National Bank (PNB), to an extent State Bank of India (SBI), are seeing huge formation of short positions in midcap PSU names. We are seeing high rollovers too. Until market shows you a surge above 5800 levels, these guys who have formed short positions, have no reason to square off their positions. They have been shorting since quite sometime and are sitting on good amount of profit. We are not expecting market to go significantly above 5750 and 5800 is strong resistance. Not expecting any kind of short covering rally in them. I think these names are sell on rise. Such days or probably a day or two when market bounces and these stocks bounce on some sort of short covering; you should use those rallies to short PSU names. However, midcap stocks shorting are something which is very risky. So, we would suggest only those traders how have that discipline of following stop losses should do that. But overall, from portfolio perspective, if you are having midcap PSU banks then you can think of lightening up that portfolio. Or if you have cash, and you are thinking of buying because some of them on adjusted price-to-book value they are looking quite cheap. But mind you these stocks can further go down from current levels. So I am not at all optimistic on them. Q: If you had to position yourself into the July series on the long side on the Nifty or in a sector, which one would it be on strategy terms? What would you be possibly looking at on the short side? A: More of short ideas for coming series. Today it would be ideal to go long in 5700 in July. Put and if you see levels between 5750-5800 short Nifty, subject to only one condition; look for FII data on Friday and Monday. If selling continues, carry on your shorting positions. Not many longs; but one space where we would have some positive bias would be oil and gas space. Reliance, Cairn, GAIL and Hindustan Petroleum would be stocks where biasness would be positive for at least first half of the coming series.