Opt stock specific strategy than buying index: Expert

In an interview to CNBC-TV18, Siddharth Bhamre of Angel Broking shared his outlook on the F&O market and recommendations on various stocks.

Below is a verbatim transcript of the interview: Q: There has been a steady and a large wave of short covering in your market. Is there more to go from what you see on the data? A: If you carefully look at the foreign institutional investors (FIIs) segment, they have covered huge amount of their short positions in last four-five trading sessions where market has gone up. Our stance on the market was that around 5,520-5,530 you will not see more than 70-80 points bounce back. However, this has clearly surprised us on the negative side and we have stopped out in the range of 5,650 to 5,700. Right now, we are not holding any long positions because probably if we wanted to have gone long then around 5,500 or 5,600 was the level, not at current levels. We are saying so becuase we have not seen fresh formation of long positions by FIIs in F&O market as of now but at the same time they are buying in cash market, which is surprising. I am not trying to justify here that we are negative on the market. I am just trying to say that we are not buying now. If you look at the volumes of the market, it has shifted into stocks. Generally, stock futures volume in the F&O segment is around 8-9-10 percent, it has gone up to 15-16 percent, which is a huge shift in a very short span of time. So, people are adopting more stock specific approach. We have missed out on this bounce back, which has happened in Nifty but we are not going to buy at these higher levels. We are not sure if the dips will come and if the data changes -- in the sense if FIIs continue to buy -- then we would buy on dips or at 5,850-5,900 we see that it is just short covering and now FIIs have started forming short positions then we will short at higher levels. However, at this point of time that clarity is not there. So, we will not trade in Nifty. There are a lot of opportunities, which are happening in stocks and data, it is much clear in stocks so we would adopt stock specific approach rather than getting into Nifty or Bank Nifty at this point of time because we have missed out on it. Q: There were some signs of light yesterday in the metal space, you would buy into Jindal Steel and Power Ltd (JSPL) this morning? A: We have observed that there is a good amount of short position, which is still standing from last series to this series and the stock has been underperformer. So, it is quite possible that the impact of markets, which has happened on metal stocks be it Tata Steel or Hindalco Industries, would now have a rub-off effect on JSPL. So, we may see probably a half or one percent dip today, one can go long in JSPL for the target of Rs 364 and stop loss of Rs 330. One thing I would like to say here is that these are very short-term trades, play it for a day or two because if you look at the London Metal Exchange (LME), the prices of metals are still coming down, which does not augur well for the metal stocks though steel is not traded on LME but it has a direct correlation with aluminium or copper prices, which are traded on LME. So, these are very short-term trades from day or two perspective. Q: Hindustan Petroleum Corporation Ltd (HPCL) is a sell this morning? A: A lot of hue and cry had been made about how the crude oil prices have come down and how it would help reducing current account deficit (CAD) and how it would be beneficial for oil marketing companies (OMCs). But we have not seen significant formation of long positions in this bounce back in HPCL from around Rs 290 levels to Rs 317-318, which is currently trading at. Nobody is pointing out that since last two trading sessions, the brent has gone up from USD 96.50 per barrel to USD 100.50 per barrel. So, probably these long traders who have formed some long positions and short traders like me would take this opportunity to short HPCL and other OMCs at higher levels. HPCL reason being yesterday we did not see significant volumes and there was not much of an open interest (OI) movement also. It is near resistance of Rs 300-325 zone. So short at current levels, fix a stop loss somewhere around Rs 326. I am expecting sub Rs 300 levels but right now target of Rs 300. Q: You also have a short call on ITC today? A: Yes. Not very significant formation of long positions, there were two trading sessions when company hiked its cigarette prices in a range of 14-18 percent across its well-known brands. We have seen some longs over there. However, if you look at the charts, rise is very significant in price and the volumes are declining. Yesterday there was very paltry volumes in cash market segment. It is trading at all-time high levels but expect long unwinding to happen in ITC if people are very gung-ho about buying into high beta now which we are hearing a lot. So, expect long unwinding and fresh formation of short positions in ITC. Rs 302 is what we are expecting, not very aggressive targets. Q: What is happening with IT going into the next series? Are you seeing a rollover of shorts, were there a couple of long positions that are getting closed out now, what is happening with that space? A: It is more of shorting. In fact there was a huge built up yesterday in Wipro. After Infosys also we have seen huge short positions piling up over there. This has had a negative impact on Tata Consultancy Services (TCS) where we have not seen very huge quantum of short positions but yes, there also we are seeing some kind of formation of short positions along with long unwinding. That is the reason we are not seeing significant rise in TCS in terms of OI. So, we believe IT space would continue to remain under pressure.