December has been the most volatile series of 2014 with the Nifty oscillating 1000 points from the top to the bottom and then a sharp recovery. Nifty has lost 3 percent this series but Bank Nifty has been resilient. In an interview with CNBC-TV18's Menaka Doshi, Anuj Singhal and Senthil Chengalvarayan, Siddarth Bhamre of Angel Broking shares his outlook on how the expiry may pan out and cues for the January series.
Below is the verbatim transcript of the interview:
Menaka: What do you make of how we are ending the December series and what does this tell you about the January series?
A: We were of the opinion some time back that 8180-8200 is what we are expecting. However, we had changed, changed in the sense we had given up on that view few days back when market was trying to move above 8350 levels. Now what we are seeing is 8200 is quite likely for today's session. There are lot of activities, which have happened in 8300 call, 8250 put. Not many people have given much attention towards 8200 put. It is not just important to see what happens on last day but overall in this series what was happening in strike prices throughout the month. We have observed that there was good amount of buying which was done by FIIs in 8300 put options and that time the premium prevailing was around Rs 40-50. They are still holding those positions. We have not seen any unwinding in those put options. So, for them to make money in those put options market should close below 8250 odd levels at least breakeven point and they will make some money out of it. So, we will in the fag end move towards 8200, that is what we are assuming though we are not very confident about it what we were like last time. However if I look at the January series we are not very optimistic. We are not seeing this market immediately in first half of January series going above 8450 odd levels. In put options we are seeing built-up happening in deep out of money strike prices and again stronger hands are active over there.
IVs of calls are higher than IVs of puts that clearly suggests the sentiment that people are still wiling to buy this market on dips rather than think of shorting this market.
In this entire fall, shorting has not taken place. People have just squared off their longs and they are buying again. So, there is a complacency in market that this market is not going to correct beyond 5-6 percent.
Liquidity indicators there is whatsoever no bounce back which is seen in crude oil which has been the main reason why globally we are seeing so much of uncertainty. So, as long as Brent crude doesn’t move above USD 62 odd levels we are not thinking of buying this market though in yesterdays trading session FIIs have bought Rs 1400 crore of index futures. Now this can be a confusion because last time if you remember beginning of December series also two days FIIs were net buyers in big way in index futures but we all know how December series panned out. So, we are not optimistic at least in first half of January series.
Anuj: What about the bank Nifty which has been the more resilient one. In fact, just two days back it was nearly at all time highs?
A: I acknowledge the fact that it is near its all time high but then that momentum is not there even in Nifty. In fact, Nifty 10 days before was at all time high but we saw the correction. So, I won't give too much of weightage that it is a all time highs so it may not correct. What we are doing is instead of suggesting shorting in bank Nifty we are suggesting at higher levels shorting Nifty or buying put options of Nifty because put IVs are lesser than call IVs. However, in bank Nifty what we are seeing is the components of bank Nifty are showing varying trends.
HDFC and HDFC Bank these two stocks are showing strength whereas we are seeing that ICICI Bank, Axis Bank are exhausting at higher levels. So shorting ICICI Bank, Axis Bank is advisable. HDFC Bank has a good weightage in bank Nifty. So, either you form a pair where you go long in HDFC Bank and short ICICI, Axis or you go short in ICICI Axis and long bank Nifty. However, a clear trade in bank Nifty is not emerging for us. So, our biasness remains negative and that is the reason we won't go long in bank Nifty as well.
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