Options better bet right now than futures: Manghnani

Anil Manghnani of Modern Shares & Stock Brokers believes 5930-5900 mark is a critical support level for the Nifty. "If it starts to trade below 5,900 then I fear that the fall could be a little faster," he told CNBC-TV18. If 5,900-5,930 holds, he says, there is always a potential to bounce back to 6,000-6,020 levels.

In terms of F&O strategy, Manghnani says options would be the better bet rather than trying to play the Nifty futures right now. “With the way the premium keeps fluctuating, you lose out a lot. I do not mind maybe taking a punt. Suppose, you have got a little bit of a pullback to closer to 6,000, I think maybe buying some Puts out there to protect yourself would probably be a better option," he says.

Below is a verbatim transcript:

Q: Give us a word on how to approach the Nifty after the stickiness we have seen in the past couple of days?

A: I think it is coming to a very crucial level now. 5,930-5,900 is very important support zone for Nifty. Yes, the broader market has been a problem for the last month or so and continues to disappoint but from the Nifty point of view, I think that is key. If it starts to trade below 5,900 then I fear that the fall could be a little faster. It will not be this drift-down, gradual, slowly where stocks are collapsing whereas the Nifty is not doing much. I do not think that will continue. I think then you will see a bigger fall across even largecaps. It will not just be smallcaps and midcaps. So, I think if 5,900-5,930 holds, there is always a potential to bounce back to 6,000-6,020 levels.

Q: The Bank Nifty has also come off quite a bit and is below 12,400 now, would you short anything in that index or any individual name?

A: I think for the first time after long time, the Bank Nifty is looking a little bit on the weaker side. I think 12,400 on a weekly closing basis will be first trigger that there is a problem for that index. So, keep that today in mind because it is Friday.

Yes Bank, which has had a fantastic run -- if you look at the longer-term charts, it may not suggest anything but in the absolute short-term, I think there is some downside. I think it will catch up on the way down because some of the other stocks especially in the public sector undertaking (PSUs) have fallen. Even the private banks need to start to come down. With a stop of Rs 519, this stock has now first time closed below 20 exponential moving average (EMA) in a long time. So probably it is headed to about Rs 487.

Q: You have a buy on Hindustan Petroleum Corporation Ltd (HPCL) today, what would the target there be?

A: I feel that after the sharp correction, it is worth a punt now. The stock has come off by Rs 50-60. Rs 310 as a stop and at least a pullback to about Rs 342 are the levels I would watch on this stock.

Q: Which trade, if you had to take one, would be a higher conviction trade for you, to try out a contrarion buy call in the support zone of 5,900-5,930 waiting for a bounce or take a preemptive short with the conviction that these levels will break?

A: I think Options would be the better bet rather than trying to play the Nifty futures because with the way the premium keeps fluctuating, you lose out a lot. I do not mind maybe taking a punt. Suppose, you have got a little bit of a pullback to closer to 6,000, I think maybe buying some Puts out there to protect yourself would probably be a better option right now.

My concern is not so much that whether 5,900 breaks, it is that the world markets have rallied quite a bit. They are a little stretched out whether you look at the Nikkei or the Shanghai or the S&P 500. If we are already slipping down and they start to correct -- even if they correct 5-7 percent -- it will be difficult for India to rally on its own. You have a problem where if 5,900 breaks and if they all start to correct then you start to fall faster. That is my only concern otherwise I would have said convincingly 5,900 is a support, go and buy out but I feel one correction globally is way overdue, which could be a problem for us at least for the next 15-20 days.