Nifty likely to correct; unwind longs: Yogesh Radke

Consolidation, he says is a must for a further upmove,.

Talking about expiry, he says the January expiry may not define the next levels for the market.

According to him the stocks that are going to go through OFS, divestment may come under pressure for a few days post the event.

Below is the transcript of Yogesh Radke\\'s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Sonia: It is expiry day so one can expect some volatility but give us a sense of what the February series looks like, what are the initial estimates on what the Nifty levels could be?A: I will say that this would not be the expiry which will be defining the next levels but surely the way the Nifty has moved and the amount of leveraged positions that have come into the system and also the recent announcements of the divestments and the fund raisings, which have come into the picture, which may create some amount of pressure on the index per se.So for sure the leverage positions in the market has gone as high as one lakh crore plus in the futures market, which is quite the highest level we have seen obviously on the back of market moving up and also leverage positions coming into the market. Sonia: Can you tell us about some levels on the index itself, there is a lot of supply that will be hitting the market soon in the form of the likes of Tata Motors, HDFC Bank etc, on the downside what are the levels to watch on the index?A: We have done an analysis a couple of months back, which has given an average fall on index by around 4 percent odd. Whenever such big size issuances have come in. As you rightly said that the offer-for-sale (OFS) which has been announced, the rights issues which have been announced or the fund raisings by the fund which are more than around 75,000 crore which is big size supply which is coming into the market. Nifty may see some amount of cooling off on the back of this supply, levels would be difficult to give on that front because when such type of supply comes in, as I said that around 4 percent Nifty drops down in the upcoming days, so around 8,600-8,500 levels could be seen on the market.As we have seen 8-9 trading sessions straight forward move from 8,100 levels to 9,000, we are just short by 15 points away from the magical mark of 9,000 levels. That gives you some amount of indication that market is looking towards some amount of consolidation or correction and that 9,000 mark would be a good strong resistance for the market.Sonia: What would your comment be on Coal India specifically on what investors should do with this OFS?A: Obviously it is an offer-for-sale and it is on a price parity basis for which allocations should be done. So it would depend also on what the floor price is announced today evening. So right now, I am not sure that it opened up some 5 percent down and now it might be trading there, low. But it is a huge supply around 12,000 crore plus 12,000 additional supply so the stock may see some amount of pressure during the day. Latha: What has been the experience for stocks that have seen such huge issuances, are you likely to see an immediate dip which will last for a quarter or two?A: It is difficult to say on a quarter or two but surely the counters where such huge suppliers do come in, historically we have seen the counters being under pressure. It is very obvious that we may see the counter under pressure for next couple of days. Now, a quarter or two that is a function of how the supply comes into the market further and how the flows in the market comes in the upcoming days. We are seeing more than Rs 10,000 crore which have been seen in just last trading sessions from the FIIs, which have come into the market and now such big issuances. We need to see that the huge supply which is there from the OFSs and rights issues, how it shapes up the market but I will surely hold a cautious view on the market and one should lighten up their leverage positions which are there.As I said at the beginning, we are at present standing with one lakh crore open interest (OI) in the futures market alone. Rollovers are to the extent of around 70 percent and further today’s rollover will take it to some 75-80 percent. Still we will be standing with an open interest of around Rs 75,000 crore, which is also high in terms of level of the leverage positions in the market. One has to be cautious at this moment. I think that unwinding of your long leverage positions makes sense at the junction. We have huge issuances, which were announced yesterday itself back-to-back with even Competition Commission of India (CCI) giving approval for the rights issue or the fund raising by the HDFC Bank also, you have Tata Motors also, so multiple issuances which are coming, SBI has also announced Rs 15,000 crore of rights issue so there are many things, initial public offers (IPOs) are lined up in the system so market may consolidate at these levels. I will not say that the market is just going to crash down or something because we still have the India story going on but after such a sharp move of 12 consecutive trading sessions, there has to be some amount of consolidation for the next move in the market.