See Nifty holding at 5580; support at 5620-5580: MF Global

The market has been consolidating over the last few days and Vineet Bhatnagar, MD of MF Global feels the market is correcting slowly and it would have been better if the correction was a quicker and sharper one. According to him, the Nifty has a support at 5620 and 5580. Moving ahead, he sees the Nifty holding the 5580 level and he believes it could be an opportunity to buy or accumulate new positions. Overall, Bhatnagar does not see a panic situation in the market at the moment, unless there are some unforeseen circumstances.

Also read: Nifty may not cross 5800 in Oct series: Ambareesh Baliga Here is the edited transcript of the interview on CNBC-TV18. Q: It has seen a touch of correction the last few days in the October series. What's your prognosis for the rest of the October series for the Nifty?
A: I think for the moment the market does look a bit sold off in the sense that we are not able to see a capitulation come about because of the way the market has been correcting. It is a bit slow. We would have been far happier if the correction would have been sharper and quicker so that the capitulation could have set in faster and more decisively.
With the way the market is panning out in the last few trading days and even the way it has opened this morning, it appears that the slow slide down is the way it will continue. As a support we are looking at 5620 and 5580. Q: What have you read in the recent FII data in the futures market because yesterday it appeared that they were probably booking out of some of their long positions?
A: That is true. We noticed the same in the index futures space, the FIIs, the OI was down by about 3 percent and that is primarily on account of the fact that some of the long positions that they have taken even during the early part of this particular cycle was coming in for profit booking. In fact if you look at the data, the aggregate of the sell that happened across index futures, single stock futures and even the underlying cash is a negative number for FII. Q: Any signs that volatility is about to pick up out here in India, is the VIX or any of the option pricing suggesting that after the correction of the last four days?
A: In fact the implied volatility is almost across all the strikes from 5,400-5,900 for Nifty have been on the uptick. The volumes have been rising quite modestly, 20-40 bps almost every trading session. Therefore, as compared to what we have seen as a very low volatility regime in August and September has come up slowly but surely as far as the beginning of October series is concerned. Q: You think we will get away with 5,600 in this correction and below that level would market participants start to get a little worried?
A: I think we should be able to see 5,580 hold. I think as against market participants getting worried perhaps it could be an opportunity for some of the astute traders and investors to come in to buy or accumulate new positions.
Given the fact that the framework that everybody was awaiting or was skeptical about has already been laid out in front of us, unless there are serious and grave challenges around a parliament session where most of the policy measures that have been announced do not see the light of the day, I do not think there is going to be a panic in terms of a doom's day kind of a slight.
_PAGEBREAK_ Q: What could be a good strategy then for the Nifty in terms of futures or options for the rest of the October series?
A: We are pacing our strategy on the simple fact that 5,580 stays and therefore, we are picking up the strike of 5,500. You sell a put of 5,500 strike and in order to see the bounce back which should come about after good capitulation, buy a call of 5,600 and sell two calls of 5,800 primarily capping the current rally to just about 5,780-5,800 level. Q: What kind of a strategy would be prudent on the Bank Nifty at this point?
A: Given the fact that there were some rate cut that happened on SBI as well as Union Bank, rather than doing a trade on Bank Nifty as a sectoral index, I think it maybe more advisable from the traders point of view to take positions on some of the single names like ICICI Bank for instance. Q: How would you approach some of the segments in the market which despite such a strong September are beginning to see some accumulation of short positions like names in infrastructure, select real estate names like DLF?
A: Over the last few trading sessions, there was an across the board price correction in all the sectors. Therefore, all the leading bellwethers within those sectors and some of the names that you would see in any particular sector were showing that correction.
DLF perhaps would have suffered quite clearly on account of the newsflow around it. One was not seeing equal amount of strength even in sectors like pharmaceutical and FMCG, though Asian Paints for instance was holding up quite strongly in the FMCG space.
Likewise, in IT ahead of the results, Infosys options were showing tremendous amount of discrepancy in terms of the volumes, the IVs of Infosys options are at a 52-week high at around 54 percent. Therefore, we put out a strategy yesterday to do an ATM 2,500 sale of the straddle for Infosys basing on the premise that the volumes would fall from 54 percent to 25-30 percent range. Q: Any stocks or sectors which look overbought after the September rally which could be vulnerable to a bigger pullback?
A: I do not think there is anything that stands out in terms of showing a disproportionate level of overbought at this point in time. I would play it safe by saying that if the tide were to turn, after a broad based market makes a good support, there should be a relief price movement on the upside across almost all factors. Q: By the time the October series rolls forward to expiry, you think we would be closer to the high that we saw of late, which is closer to 5,800?
A: I would guess so. I would think that it should be in the region of about 5,750 or upwards.