Don't short sell L&T; buy Reliance Power Puts : HDFC Sec

In an interview to CNBC-TV18, VK Sharma of HDFC Securities shares his reading and outlook market and specific stocks.

Below is the edited transcript of Sharma's interview to CNBC-TV18. Q: Have there been fresh short positions though which have been built up in both these counters over the last few days, Larsen and Toubro (L&T) and State Bank of India (SBI)?
A: Both the counters have seen short positions despite the stock having tumbled. For instance, in L&T, we did see positions being built to the extent of 7 percent although the stock had tumbled 6 percent. So, positional stake is being built on the shorter side.
In SBI, we saw positions being built to the extent of 3 percent. There the addition is less but the fall was more almost 8 percent. So, my sense is that for L&T, the advantage is for the third day it will fall today if it falls. So I think buying on the third day of the fall would be a good idea. So I would not advise further short selling in L&T.
SBI can go up substantially higher because of the short covering. My sense is that I will go short here in the morning itself. If I have to trade on SBI rather trade on the longer side but my sense is that because the US markets are closed on Monday, we will not have any cues to look forward to for Tuesdays. So I think the weakness could return to the markets on Monday and not today. The market could rebound from here.

Q: How do you approach some of these high beta names from the Anil Dhirubhai Ambani Group (ADAG) pack, Reliance Power, Reliance Capital, how would you trade them?
A: Ideally, these stocks have done well in this rally. So you should not be shorting them but we will see some rebound in the morning. So in Reliance Capital, I will buy the 340 Put, which was available at around Rs 11 yesterday, at around Rs 8 when the price goes up. Keep a stop loss of Rs 2-3 and hope to sell this at around Rs 15.

I will use the rebound in Reliance Power as well to buy a Put at a lower rate than what it was available yesterday and hold it till the next Tuesday at least. Q: You have got a bearish orientation on Bharti Airtel as well?
A: Although in terms of short positions, mild positions on Bharti Airtel were built to the extent of 1 percent and shorts may have not been built on other stocks. Largely most of the weakness that has happened is on account of the fall.
So in case of Bharti Airtel, my sense is when it rallies, the 300 Put which was available at around Rs 5, I will prefer buying it at around Rs 4 and hold it with a stop loss of Rs 2 and hope to make a decent profit of around Rs 4 by selling this Put option at around Rs 8.
So, I’m mildly bearish in Bharti Airtel. Not greatly bearish.