Siddarth Bhamre, Head Equity Derivatives at Angel Broking cautions that one should not get carried away by the bounce back in the market. Nifty has some very strong resistance around 8100-8150.
The week was a good one for the market but if one were to look at most of the components of the index, they haven’t added significant long positions is the word coming in from Siddarth Bhamre, Head Equity Derivatives at Angel Broking, adding that FIIs too have been playing more on the Options segment and have continued to sell in cash market.
So, he cautions that one should not get carried away by the bounce back. Nifty has some very strong resistance around 8100-8150.
The strong resistance for Bank Nifty is around 17600-17800 and it is unlikely that it would not move above those, so be cautions, says Bhamre.
For Just Dial too, he has a sell with stop loss at Rs 981 for target of Rs 853. It is a high risk trade, he adds.
However, he is upbeat on Wipro and recommends a buy with stop loss at Rs 558 for a target of Rs 598.
Below is the transcript of Siddarth Bhamre's interview with CNBC-TV18's Reema Tendulkar and Latha Venkatesh.
Reema: Through last week we saw the Nifty move in a very tight band of 7800-7900, what is your sense, which direction is the market likely to breakout?
A: The week gone by we have seen some bounce in market from lower levels thanks to Friday's session where we have seen banking stocks doing well. However if you look at most of the components of this index they haven’t added significant long positions. At the same time if you look at the liquidity parameters from FIIs perspective, they have been playing more on the options segment; they continue to sell in cash markets.
Even if you look at the USD-INR situation, we were trading at two year lows in terms of our domestic currency compared to dollar which does not augur well for incoming liquidity into our markets. We are not very optimistic from positions perspective in December series as of now. This series would be quite eventful. Right in first week we are seeing monetary policy which may not be a very big event but then come mid-December series we are all talking about US raising interest rates and liquidity moving more towards that market.
Taking all these things into consideration and we aren’t seeing much formation of long positions in F&O segment, we would suggest that not to get carried away by what bounce backs you saw last week and specially in Friday's trading session where banking did well. I think it may not sustain. You have very strong resistance in Nifty around 8100-8150. We may try to reach to those levels; mind you those are not very far. So, first half of December series we may try to go towards those levels but that resistance should hold and from those levels one can again initiate fresh shorts in this market.
Latha: Are you not even optimistic on the banking stocks, what are the key levels on the bank Nifty for instance and any strategy on individual banks like Bank of Baroda or the others that moved on Friday?
A: Bank Nifty we are thinking that this index should take strong resistance in a range of 17600-17800 zone and should not move above those levels. So, we would suggest to be cautious and not get carried away. Bank of Baroda and other PSU banks they have show good move in last couple of trading sessions but again we are not seeing formation of long positions over there. Not specifically in Bank of Baroda but we have trade in some of other private sector banks and that is more on the negative side, specially ICICI Bank. Again in Friday's session though stock did well we did not observe any formation of long positions.
In PSU space State Bank of India again we haven’t seen formation of long positions, all the rise is happening because of short covering. So, these two names are quite prominent in our list where we would sell on rise in banking space.
Latha: Tata Motors (DVR) has rallied about 50 percent in the last two months. Do you believe its up move is done for now, any strategy there?
A: We are bit cautious here. What we observe that DVR has slightly outperformed in last series compared to Tata Motors by 3.5-4 percent. At the same time we did see huge formation of long positions in November series and the underlying was going up. Strangely the rollovers have not taken place, less than 70 percent rollover.
Usually, Tata Motors and Tata Motors DVR see 80-85 percent rollovers and that is the norm. 67 percent rollovers in Tata Motors DVR suggests that long positions have not got rolled over. This is a high risk trade, we would suggest to short at current levels of say Rs 300-302, fix a stop loss somewhere around Rs 309, we don't have very aggressive price targets but I am expecting Rs 280-279 to come in this counter.
Reema: The other sell call that you have is on Just Dial. Now, this is underperformer, it is down 30 percent this year. How much lower can it go?
A: This stock has been in the news. More to do with what it has been doing in capital markets than its business and we have seen that there was huge rally which happened from lower levels of around Rs 750 to almost Rs 1,000. We did see some formation of long position, but the last leg of rally was purely because of short covering and there was this news which was going on that company is planning a buy-back. I do not think this news can enable stock to continue to go up the way it was going. Friday session we did see some correction, we did see formation of short positions as well. So, I am suggesting to go short. Again, this is a high risk trade. Short at current levels, I am expecting Just Dial to come at Rs 853 odd levels. Fix a stop somewhere around Rs 981 and go short.
Reema: On the buy side, you see upside in Wipro?
A: If you look at largecap IT stocks, Infosys and Tata Consultancy Services (TCS) have underperformed and Wipro has been flat in November series. So, what we are seeing is formation of long positions in Wipro at lower levels. Those positions getting rolled over as well. Rs 550-555 in this range, stock has very strong support and we are expecting counter to move above the recent resistance of around Rs 570-575 which can take this counter near to Rs 600 odd levels – Rs 598 is the target price. So, go long at current levels in Wipro in IT space with a stop of Rs 558.
Latha: The question everyone is asking, has pharmaceuticals stocks as a category and Dr Reddys Laboratories (DRL) and Sun Pharmaceuticals in particular, bottomed out?
A: No, I feel they have not bottomed out yet, but do they have same amount of downside which they saw? Answer to that is also no. So, case in point, two stocks where people have seen more pain is DRL and Sun Pharma. Here we have seen shorts getting piled up and they have got rolled over too. But there will be a point where markets start correcting and people starts searching for defensive names and people who are already short in these names like DRL and Sun Pharma, would probably move towards high beta names. So, as a contra-buy, probably, you can wait for a week or two and then start nibbling into Sun Pharma and DRL. So, if you ask me if I want to form fresh shorts in Sun Pharma and DRL, then I would say no.
Latha: Two stocks which have down well in the last month are GAIL and Mahindra and Mahindra (M&M). Any trade left there?
A: GAIL again, because of the news related to gas pricing, the stock has done really well. I really would not have a view on this counter because it is vulnerable to the news though we have seen huge formations have rolled over to. I would not suggest any trade. My technical team has just generated a contra-sell call on M&M on various parameters whereas in Futures and Options (F&O), we did see stock did outperform last series. I do not think stock would outperform in current series as well. So, I would suggest be cautious in M&M rather than getting carried away by the outperformance in last series.
Reema: And how would you view Reliance Industries after the big up move of last week?
A: Reliance has been going up without any formation of long positions. We did see that whatever positions which were there post results, there was a gap-up opening and most of the positions were long positions. After showing some corrections and covering that gap, Reliance has again started moving up. So, it would be difficult for this counter to sustain above Rs 1,000 levels.
I would suggest profit booking in reliance rather than going short at this point of time. And if stock comes to Rs 960-950 odd levels, then short strangle can be recommended. The moment, we are reaching towards mid of December series, you will see that implied volatilities (IV) will go up because of the event which we all are talking about and so would IVs in Reliance. And around Rs 950-960 short strangle would be recommended in Reliance industries because I am expecting a range bound movement in the stock.