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Mkt may test 5400 if 5530 is breached

Discuss Mkt may test 5400 if 5530 is breached within the Stock Markets Tips & Gyan !! forums, part of the Quiz , Marketplace and Community games category; In an interview to CNBC-TV18, Amit Gupta of ICICI Direct tells what he expects from the market. Gupta says if ...

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Mkt may test 5400 if 5530 is breached - November 21st, 2012

In an interview to CNBC-TV18, Amit Gupta of ICICI Direct tells what he expects from the market. Gupta says if the important support of 5,530 is breached, then Nifty can touch 5,400.

He opines that for a short call in the market, one should just wait for 5,530 to be taken out and then buy 5,400 put option. He believes, "that can give you good money". Gupta also advises to go long on Wipro and short on Canara Bank.

Also read: UBS remains tactically bullish on markets

Below is the edited transcript of the copy.

Q: How is it looking for the index, because it has been quite rangebound, there have been reports of some FII selling in market?

A: A couple of weeks ago, I had mentioned the range of 5,530 to 5,680 in the market. We are still very much in that particular range. One interesting observation is, if you look at the FII index option buying in this series, we have already seen around Rs 6,800 crore of index option buying and the market has not gone anywhere.

Now particularly, if you look at the last one year, whenever such a buying happens and in one particular day if it exceeds Rs 1,500 crore, then generally over the period a direction comes into the market. I feel that in the coming 15-20 sessions, we are going to see the direction.

If I have to bet on the direction, then I think it could possibly be on the downside. If you observe, 5,660 was the level when they started buying the options and we saw that the open interest was increased. That was happening at 5,400 put strike. Now, it is almost 20,000 contracts sitting in 5,400 put. That has started from November 1 and we have seen that around November 14-15, when the market was down from 5,660, again there was a buying of Rs 1,500 crore by the FIIs.

So, if you look at the price, the average price at which they are buying the 5400 put is somewhere around Rs 14-15. If the important support of 5,530 is breached in the next one-two sessions, then you are going to see a good directional move till 5,400 in the market because only then will they make money. Right now 5,400 put is only Rs 5-6. That means the FIIs are not making money in whatever they bought so far.

So, if they have to make money, 5,530 immediately has to be taken out and then 5,400 maybe tested. That may possibly happen. If somebody has to take a short call in the market, just wait for 5,530 to be taken out and then buy 5,400 put option that can give you good money.
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