See Nifty make a dash to 9000 in April series: Nomura

From a derivatives perspective, Mahajan advices selling 9000 Calls.

Below is the edited transcript of Tushar Mahajan’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.

Sonia: It has been a good series so far for the Nifty up almost about 4 percent this month already. What is the sense you are getting about how the April series will come to an end?

A: We have had a good run to the start of this fiscal and especially given what we saw towards the last part of March it has been a healthy recovery. However, just on some more facts we have seen 10 days on the trout so far with the markets being positive. Typically, you don’t see any kind of a move, just a one way move lasting that long.

So my own sense is that while the underline trend is positive short-term over the next 2-3 days you should probably see some kind of a small correction. Nothing deep given the kind of rally that you have seen may be just about a 100-120 points odd on the Nifty so it gets back to that 8,740 level before it resumes it’s leg up. However, for the series I would think that there is good chance that we still have about 12 days to go for the expiry. There is a good chance that the market may make a dash towards 9,000 within the series itself.

Latha: What is the view on the Bank Nifty itself; it was an underperformer through March?

A: It has been an underperformer now for a bit and today’s performance which is spread both across private sector banks and public sector banks is a good indicator of probably things to come forward. At this point in time as well we would not get overtly bullish on the banks.

Obviously there has been positive news flow around that with the last two macro data release both Index of Industrial Production (IIP) and Consumer Price Index (CPI) but over all there is a lot left fundamentally there. We could see the Index move up, it is trading about 19,000-19,100 levels odd. Another 200-300 points from hereon but the upsides get capped around the 19,400-19,300 levels odd.

Latha: Any individuals banks to play in the future & option (F&O) space, I mean is ICICI Bank basing out, will Punjab National Bank’s (PNB) recovery continue or would you play smaller guys, Yes Bank or IndusInd Bank variety?

A: The one to play from a trading point of view is clearly ICICI Bank. The stock like you say is very well basing out. It is probably going to start moving sharply ahead. ICICI Bank on the private sector bank is the one to play. On the public sector side we like both State Bank of India (SBI) and PNB at the current levels. SBI though has the overhang of the equity issuance which could come through at any point in time. However, SBI and PNB both are the ones to play on the long side.

Sonia: If this market does go to the 9,000 level, as you suggested a while back, what is the best derivative strategy to play for the rest of the series?

A: My own sense is that the upside clearly gets capped at the 9,000 odd levels. Surprisingly, the volatilities have also inched up higher in the last few trading sessions given the way markets have moved. At this point in time, if you want to trade a derivative strategy, clearly from this expiry perspective 9,000 looks like cap. So, selling 9,000 Calls is probably a good strategy. On the downside one could also sell 8,700. Selling 8,700 to 9,000 should be a good strategy at this point in time. It gets covered about a 100-50 points moves on both sides.

Latha: How will IT now play? Tata Consultancy Services (TCS) numbers are due on Thursday. Any strategies on the IT companies?

A: Again, the sector has been an underperformer. One has to recall that IT was probably the only sector which was withholding the earnings for probably the last quarter when they had come out. Going forward, given the fact that most of the IT companies have given a muted set of guidance so far, that has been the underperformer. Any kind of positive surprise from this muted space could lead to an out performance on the IT space. Obviously, one has to do this after TCS reports to see what kind of quality of earning will be there. You could see a long IT trade coming through.

Latha: What about stocks like Gujarat Gas? Is it active at all in F&O?

A: No, very illiquid. It is not a stock which has had too much investor interest from foreigners per se. I don’t know whether it is liquidity function or just that the oil and gas space is not too loved right now.

Sonia: Just wanted a slightly longer-term view from your end. Have we put the down trend behind us and do you see this market now get back to making higher-tops and higher-bottoms?

A: It depends on what kind of timeframe are we looking at from a longer term perspective. What happened in March to my mind was more of a correction, given the kind of huge run that we had seen through most of the last fiscal year and that is what it was. Was it the beginning of down trends? I don’t think so. In longer term, this market is definitely poised higher. We will see the market making higher-tops and higher-lows, which is a classic sign of an uptrend, but the grind from hereon will be the slope of increase. That should be much more flatter compared to what we saw like an exponential increase previously.

Latha: Do you have any strategy on Apollo Tyres?

A: No. It is one of those midcap stocks which has traded with the long buys but nothing to do from hereon.

Disclosures: We have been pushing some of these stocks names to our clients as well. No individual positions.