According to Anant Rao, Senior Analyst, ICICI Securities, this is not a great time to short. He said till the time markets do not come out of 4620-5000 range, there won’t be any clarity and the chaos would continue.
CNBC-TV18's exclusive interview with Anant Rao, Senior Analyst, ICICI Securities
Q: What will you advise will you give a Nifty trader at this point in time, is it a great time to short?
A: No not exactly.Post-Budget, markets have been trading in the range of 4,620 on the lower side and 5,000, which was yesterday’s peak, on the higher side. If I take a look at the implied volatility or the options, are very much factoring in these wild oscillations, 10% on the upside from 4,620 and then back 9%. So till the time markets come out of this range, there won’t be any clarity and this chaos would continue.
Q: What are you seeing in terms of this market finding a bottom at this point in time, given the kind of futures build up you are seeing on the index?
A: Futures build up are largely hedged positions. We have to understand that people who are worried about their portfolio are largely looking at hedging their cash positions in the Nifty futures and that’s largely because the other indices like CNX 100 or a Junior Nifty or a Bank Nifty don’t offer that kind of liquidity. So even portfolios, which is predominantly a midcap portfolio or a sectoral theme based portfolio is getting hedged by Nifty and that’s adding on to the pressure.
Q: Where are the supports congregating if you looked at the Put-Call numbers?
A: If I take the support on the Put-Call side and if my option set up says that predominantly all the Puts in the markets which are there, for example if I take the Put option build up from 5,100-5,200 strikes to all the way to 4,600 strike, I find that majority of the positions or Put options are in money. So in the money Puts, when the market falls even by 1-point the gamma-risk for the seller of Put becomes very high and it is almost very tough to manage the gamma-risk.
At the same time, if you look at the Call option side, majority of the selling starts from 4,900-4,800 Call option and goes all the way upto 5,500. So they are all OTM Puts. This tells me that the upside for the markets are capped somewhere between 5,000-5,100 levels. On the down side, if I take a look that technically the immediate of low of 4,620 and I know that we have come to the low of 4,640 today, so if 4,620 that’s the Monday low holds then it’s okay, then we will be back again in the trading range of 4,600 to 5,000 but if it gives away and the big question is, would it give away and if it gives away, then let the market find its own bottom.
Source: Moneycontrol.com
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