In an interview to CNBC-TV18's Latha Venkatesh, Sonia Shenoy and Anuj Singhal, Amit Gupta of ICICI Direct shared his reading and outlook on the market and also gave recommendations on various stocks.
Below is the verbatim transcript of the interview.
Sonia: Where do you see the series expire today and what will be the strategy for the day?
A: Looking at the current set up, this expiry should be above 9,150 levels in fact most of the day, we may remain in the range of 9,150 to 9,200. 9,200 call base is pretty higher so the move above that if it comes in the early morning, after this trade starts then the short covering pattern can be very huge and then we can see a very sharp move otherwise there is more likelihood of Nifty between 9,150 and 9,200.
One important factor here is that if you look at the open interest (OI) in Nifty and Bank Nifty both, we started the March series with a very high OI positions in both the indices but the roll spread is very low. That is only 30 points in Nifty and in Bank Nifty also next month future and the near month future, the difference is only 30 points. That means it is not the long position, which are getting rolled into the next month. The short traders are stuck up in this market because of this sharp move, which can lead to some kind of short covering again and again towards the expiry.
We are going to have the first expiry above 9,000 now and I think the Bank Nifty weekly expiry – because the market is moving towards the monetary policy, we should focus there and start writing 21,000-21,100 Put option in Bank Nifty. My assumption is even if private banking remains sideways, public sector undertaking (PSU) banking can provide some kind of momentum to the index and that is why these Put options can be written where the implied volatility has already started falling. So we have already started selling April 6 weekly expiry Put options of 21,100 in the market.
Latha: What stocks are you trading?
A: The private banking and the public sector undertaking (PSU) banking both we are giving to our clients particularly the midcap space. For example, Karnataka Bank. Last four years now, the stock was facing a lot of resistance near Rs 130 levels but this time the OI is almost 54 million shares and generally it has been whenever it has reached to this level, generally the OI has been around 17-18 million shares. So we are seeing more than double jump right now in this particular OI position and that is why these long positions can take the stock much higher from these levels. So for this particular series also, we have started giving this stock to our clients and it can move towards its first target that is Rs 154 and beyond that it can move much ahead.
Another is Punjab National Bank (PNB) because in June, July 2016 we saw the stock almost got doubled from the lower levels from Rs 75 to Rs 150 but for the last eight months, it has remained near Rs 150 levels. If you observe now, the OI positions around 50-52 million shares were getting rolled but now we have seen almost 10-12 percent of closure of these short positions in the stock.
Along with this if you look at the Put writing positions at 140 and 145 both the Put strikes have been written in PNB. So it has formed a good base here and it can move towards Rs 165 or Rs 170 levels also in the coming days. So from the banking space, these two stocks can be looked at.
Along with this for March expiry, that is for today, some short covering can be seen in Tata Global because 150 Call base was the highest. For the last couple of days, it has been closing above that level. We have seen the positions being shifted to Rs 155. So I am buying 150 Call for today only. That is Re 1 of premium. So you buy this, possibly the target of Rs 4 can be met.
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