See Nifty above 6300; upbeat on Tata Steel, L&T: PhillipCap

Vineet Bhatnagar, MD, PhillipCapital is confident that the Nifty will breach 6300 levels and head towards the earlier high of 6357 on back of global cues.

According to him foreign institutional investors (FIIs) have not only shown a trading appetite on the long side for Nifty but have also bought around Rs 8000 crore in the current series uptil, which has also helped Nifty move higher.

The Bank Nifty could also make higher highs given the fact that the broad based index is expected to move higher, says Bhatnagar.

He believes Bharti Airtel could surprise on the upside. From the metal and capital goods space, he is bullish on Tata Steel and Larsen and Toubro respectively.

Also read: See momentum slowing down; Nifty top around 6300: ICICI Sec

Below is the verbatim transcript of his interview on CNBC-TV18

Q: This has been an extraordinary series. How do you think this series might finish? Is there still a chance that the index goes pass 6,300?

A: I think so. I think there is a good chance that index could go beyond 6,300. If you look at it technically or as a chartist would say - if a number or a resistance like 6,230 is taken out, it should head towards the goalpost of 6,357, which was the earlier high.

Given the news that is trickling in - in terms of the global macro and Fed related news will support Nifty to inch high.

Q: If you believe that the Nifty could go beyond 6,300 on the upside, what about the downside for this market because yesterday we did see foreign institutional investors (FIIs) buying about Rs 800 crore in index Options. Are they buying protection on the downside around 6,000 Put off level?

A: Yes, there is a Put protection that is equitably distributed at 6,000 and 6,100 strik - that is for the market as a whole.

However, if you were to zero down to the trading activity that the FIIs have demonstrated as far as the Futures and Options (F&O) space is concerned then you would notice that the open interest in the index Futures which is on the long side is about USD 1.5 billion now in notional value, whereas about a week ten days ago, the number was about USD 900 million. Meaning, the FIIs have continued to show a trading appetite on the long side for Nifty.

Likewise, for the series up till now about Rs 8,000 crore has been bought in the cash market by the FIIs. This is over and above the long cash Futures arbitrage book that perhaps comes about because of the way the market is behaving now.

Q: What would you recommend as a strategy if you think 6,230 resistance crossing can give this market at least another 5 percent in terms of gains? What is the index strategy you are recommending?

A: The index strategy is a ratio bull spread, which is buy one Call of 6,200 and sell two of 6,300. On the charts one needs to be wary about stops, we think that there is a good support that comes at 6,098. For the short-term 6130 or 6,140 is the support that should be held. However, 6,098 is the number that we are looking at if market were to start turning down.

Over the last one-two days is that while Nifty has continued to show an upward march, there is also an approach by the traders or the trading positions that they want to continue to book profits rather than leaving it for too late because some of the recent memories have not been that flattering in terms of P&L’s getting whipsawed as far as traders are concerned.

That is the approach we believe is happening over the last few trading sessions.

Q: Bank Nifty has outperformed the Nifty especially in the last few weeks. How would you trade that index and is it all set to make higher highs?

A: I think so. Over the last one or two trading sessions we are seeing that the public sector undertaking (PSU) banks which had fallen out of favour from the traders’ radar have started coming back. There was a long side activity on State Bank of India (SBI), IDBI Bank, Punjab National Bank (PNB), Bank of Baroda. The private sector banks also look alright and they have always been the first line of stocks that people have taken exposure to.

So, Bank Nifty continues to look on the right footing given the fact that we are expecting the broad based index to move towards higher numbers.

Q: Apart from Bank Nifty what are the other Nifty constituents which could take the market closer to that level that you are speaking about, 6,300 or so?

A: Bharti Airtel looks in a sweet spot to us, not necessarily immediately in terms of the price move that we are expecting but it is looking to be a stock that could come out with a surprise. A lot of underperformance or a contraction in the price had happened because of the concerns surrounding the Africa operation but we believe that the Africa operation is coming out of pessimism or the difficult macro environment that it had been operating in. So, that particular stock is going see a big uplift amongst the Nifty components.

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Q: Among the individual stocks which look poised to help the index towards 6,300 mark if it comes?

A: The frontline banking stocks have continued to show some strength. Other than Bharti, there could be continued interest that will be visible in the IT stocks. We did see some kind of profit booking in Infosys, Wipro and Tata Consultancy Services (TCS) but that interest is going to continue to be there.

So, as long as the market is supportive and stays above 6,230, all these favourites are going to be back in action once again.

Tata Steel could also be another stock to watch out for in terms of the play that will start unfolding as far as cyclicals is concerned. One would notice that the metal sector such as Arcelor Mittal in Western Europe market has started doing well. So, there is a rub-off that would start seeing in the Indian metal companies as well.

Q: What about Larsen and Toubro (L&T). One would have not expected that to be one of the top gainers this series but it is. Do you think L&T will start to move higher?

A: Thematically, L&T is one of the preferred choices when one is cherry picking stocks in capital goods sector in India. As an engineering, procurement and construction (EPC) contractor, a company with great corporate governance and the ability to execute projects both domestically as well as in overseas market, L&T has always been a great stock to look at.

I think what dampened the sentiments was the previous quarter, but this quarter when the results came out, the confidence and the faith returned. It is also a reflection of the underlying economic activity.

L&T will remain a stock that will continue to perform well going forward as economy picks up.