ET NowIn a chat with ET Now, Tushar Mahajan, Head of Derivatives (Head of Listed Futures & Options, India), Nomura, talks about the markets. Excerpts:
ET Now: The volumes were fairly decent for the first day of the new series on Friday. May be the S&P upgrade had to do something with it. How have you looked at the series gone by? What is your feeling about this current series? How do you think it will shape up over the course of the next 15-20 days?
Tushar Mahajan: We are definitely entering a truncated series, with a host of holidays coming in this month. On Friday we saw a lot of volatility as well as a lot of volume in the markets, which is a little unusual for the first day of a series. Probably that is why we are seeing a much quieter session today.
But given what happened in September, we did see a fair amount of volatility. It was almost after 7 or 8 series that we saw a negative close to the month. So, that was a bit of a dampener in the September series. In October, given that it is going to be a festive month, overall activities are probably going to be much lighter than what usually has been in the recent series.
Our overall sense is that the markets may have some sharper moves on the downside. But the downside will be fairly limited — may be till about 7800 to 7850. So, where will the series end? It is difficult to say. But I would tend to think that this market will end up with a positive note.
So, hopefully we should be able to cross at some point during the series the 8200-odd resistance, which has been a bit difficult to surmount over the last month or a month-and-a-half.
ET Now: Would it mean that you might look at option positions on the index right now?
Tushar Mahajan: That is correct. One way to look at playing the upside is to buy some 8200-odd calls. The last time I checked them, they were trading around the 40-45 odd range. You can finance some of them by selling the 8400-odd calls, because while we are talking about an upside move for the October series, we would not see a 500 kind of jump on the Nifty.
ET Now: It has been anything but quiet for the pharma space in today’s session. In particular, Sun and Ranbaxy ensured that even in Friday’s session pharma was in news. Now what happens over the course of the next few days for that because Sun and Ranbaxy are active, we have seen Aurobindo Pharma been in a mood of its own and not that Cipla and a couple of other are left far behind. It is a difficult space because there is so much that is doing well. What do you like there?
Tushar Mahajan: The sector as a whole is in a bit of an upswing right now. Interestingly, unlike a lot of other sectors where it is more of a sectoral story, in this sector stocks are doing well and each one has its own story to play out. There are different reasons behind their individual moves. But overall, what we are seeing in the space is that there is a reasonable amount of interest at this point in time as well.
The roll-overs in this space have been very active. Usually from a trading standpoint you do not see too many positions around in this sector per se, but in the last one or two series, the open interest has been higher. We have seen a lot of strong roll-overs happening in this series. That momentum continues into October as well.
Amongst the large cap names, we obviously like Sun Pharma, especially given that the uncertainty now is beginning to fade away with the US FDA issues. Also, we like Aurobindo Pharma for the way the company has moved forward with its newer launches.
ET Now: The view on pharma, oil and gas of course has been focused all throughout the September series in expectation that there will be some announcement as far as gas pricing was concerned. That got postponed. How are you looking at the oil marketing companies – ONGC, Reliance — from the futures and options perspective?
Tushar Mahajan: While there was a lot going on in the sector in September, surprisingly the overall rollover data or the rollover action was not too encouraging. Despite this reasonably sharp correction that we saw in the oil prices towards the later part of September, we did not see a similarly encouraging move on the oil marketing companies. It was because they had already run up reasonably well and that is all in the price.
But going forward, the action on these stocks is probably going to be limited by the way oil prices are moving. If at all we begin to hear something around the diesel deregulation issue, is unsure. So, the market is probably now going to look at what the government does. It will look for clarity of these issues.
I do not think you are going to see too much action happening with Reliance Industries right now.
ET Now: The volumes were fairly decent for the first day of the new series on Friday. May be the S&P upgrade had to do something with it. How have you looked at the series gone by? What is your feeling about this current series? How do you think it will shape up over the course of the next 15-20 days?
Tushar Mahajan: We are definitely entering a truncated series, with a host of holidays coming in this month. On Friday we saw a lot of volatility as well as a lot of volume in the markets, which is a little unusual for the first day of a series. Probably that is why we are seeing a much quieter session today.
But given what happened in September, we did see a fair amount of volatility. It was almost after 7 or 8 series that we saw a negative close to the month. So, that was a bit of a dampener in the September series. In October, given that it is going to be a festive month, overall activities are probably going to be much lighter than what usually has been in the recent series.
Our overall sense is that the markets may have some sharper moves on the downside. But the downside will be fairly limited — may be till about 7800 to 7850. So, where will the series end? It is difficult to say. But I would tend to think that this market will end up with a positive note.
So, hopefully we should be able to cross at some point during the series the 8200-odd resistance, which has been a bit difficult to surmount over the last month or a month-and-a-half.
ET Now: Would it mean that you might look at option positions on the index right now?
Tushar Mahajan: That is correct. One way to look at playing the upside is to buy some 8200-odd calls. The last time I checked them, they were trading around the 40-45 odd range. You can finance some of them by selling the 8400-odd calls, because while we are talking about an upside move for the October series, we would not see a 500 kind of jump on the Nifty.
So, it probably might be a good trade to buy some 8200 calls. It is because if the underlying momentum continues to be relatively stronger, we could see that resistance breached this month.
Tushar Mahajan: The sector as a whole is in a bit of an upswing right now. Interestingly, unlike a lot of other sectors where it is more of a sectoral story, in this sector stocks are doing well and each one has its own story to play out. There are different reasons behind their individual moves. But overall, what we are seeing in the space is that there is a reasonable amount of interest at this point in time as well.
The roll-overs in this space have been very active. Usually from a trading standpoint you do not see too many positions around in this sector per se, but in the last one or two series, the open interest has been higher. We have seen a lot of strong roll-overs happening in this series. That momentum continues into October as well.
Amongst the large cap names, we obviously like Sun Pharma, especially given that the uncertainty now is beginning to fade away with the US FDA issues. Also, we like Aurobindo Pharma for the way the company has moved forward with its newer launches.
ET Now: The view on pharma, oil and gas of course has been focused all throughout the September series in expectation that there will be some announcement as far as gas pricing was concerned. That got postponed. How are you looking at the oil marketing companies – ONGC, Reliance — from the futures and options perspective?
Tushar Mahajan: While there was a lot going on in the sector in September, surprisingly the overall rollover data or the rollover action was not too encouraging. Despite this reasonably sharp correction that we saw in the oil prices towards the later part of September, we did not see a similarly encouraging move on the oil marketing companies. It was because they had already run up reasonably well and that is all in the price.
But going forward, the action on these stocks is probably going to be limited by the way oil prices are moving. If at all we begin to hear something around the diesel deregulation issue, is unsure. So, the market is probably now going to look at what the government does. It will look for clarity of these issues.
I do not think you are going to see too much action happening with Reliance Industries right now.
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