ET NowIn a chat with ET Now, Tushar Mahajan, Head of Derivatives (Head of Listed Futures & Options, India), Nomura, shares his views on markets and his Budget expectations. Excerpts:
ET Now: How could the Feb series shape up because it is a fairly tricky one? We went into the series being slightly strong, but somehow we seem to have just lost our way a little bit -- both for the large caps and even for the broader markets over the last couple of days. How do you think the next 20 odd days shape up in the run up till the Budget?
Tushar Mahajan: As we started the series by the end of Jan, there were very strong rollovers. You saw the market starting out pretty much at amongst the highest open interest, both in terms of the number of outstanding shares as well as value. There was a sense of positive sentiment which saw us through the entry of the series. Last three to four days haves definitely taken the sheen out and there are a couple of factors to that. One obviously is the fact that when the sentiment gets overtly bullish, people start to unhedge themselves. That itself is a sign of worry. But more importantly, you had the big disinvestment come through. So there was the overhang of paper coming through and there is talk that there should be more paper coming through in the next two months as well in the close of the fiscal.
Obviously earnings have not been too helpful in sustaining that momentum. We have seen relatively muted earnings quarter so far, except may be in small pockets like IT, where results have held up. and all of these things are probably adding to the reality of where the index should be trading in. So it is a mix of both profit-booking as well as fresh shorting that we are seeing. We have seen roughly about 25- point fall in the index from the peaks, a large part of the damage is done and we could probably see another 100 points or so. Our own sense is that levels around 8650-8680 should be a very strong support for the index.
So a large part of the downside is done and there should be some support coming through over there. All in all, over the next may be two weeks or so, we should see this consolidation around this level, though I will not rule out a pre-budget rally in the run up to the budget, which coincides with the March series so to say because of the dates of the budget. But closer to the end of the series, we could actually see a rally up to the 9000 levels.
ET Now: Given the kind of volatility and the weakness that we have seen of late and PSU banks clearly have been one weak pocket. What according to you would form leadership and take us back to 9000 levels and what according to you would continue to remain lacklustre, if not correct further?
Tushar Mahajan: In the short term, the pain in the banking sector is going to drive us and keep the pressure on in terms of the index. While the earnings so far, especially from the PSU banks, have not been too great, but you still have the big daddy which has to report may be another 10 days or so. So until the earnings are out of way, banks are going to continue to keep the index down. In the pre-budget rally, some of the pockets we expect to rally include the oil and gas space and the infrastructure space. In oil and gas we have already seen Reliance contributing a fair bit to the index over the last five-six days and that is a trend that might just continue. The other is the infrastructure space in anticipation of some benefits accruing to that sector in the budget. There could also be some move in the commodity space as well. These sectors have really underperformed this entire move, but you could start seeing the first signs of movement in names like Sesa Sterlite, Hindalco, and Tata Steel, among others.
ET Now: How could the Feb series shape up because it is a fairly tricky one? We went into the series being slightly strong, but somehow we seem to have just lost our way a little bit -- both for the large caps and even for the broader markets over the last couple of days. How do you think the next 20 odd days shape up in the run up till the Budget?
Tushar Mahajan: As we started the series by the end of Jan, there were very strong rollovers. You saw the market starting out pretty much at amongst the highest open interest, both in terms of the number of outstanding shares as well as value. There was a sense of positive sentiment which saw us through the entry of the series. Last three to four days haves definitely taken the sheen out and there are a couple of factors to that. One obviously is the fact that when the sentiment gets overtly bullish, people start to unhedge themselves. That itself is a sign of worry. But more importantly, you had the big disinvestment come through. So there was the overhang of paper coming through and there is talk that there should be more paper coming through in the next two months as well in the close of the fiscal.
Obviously earnings have not been too helpful in sustaining that momentum. We have seen relatively muted earnings quarter so far, except may be in small pockets like IT, where results have held up. and all of these things are probably adding to the reality of where the index should be trading in. So it is a mix of both profit-booking as well as fresh shorting that we are seeing. We have seen roughly about 25- point fall in the index from the peaks, a large part of the damage is done and we could probably see another 100 points or so. Our own sense is that levels around 8650-8680 should be a very strong support for the index.
So a large part of the downside is done and there should be some support coming through over there. All in all, over the next may be two weeks or so, we should see this consolidation around this level, though I will not rule out a pre-budget rally in the run up to the budget, which coincides with the March series so to say because of the dates of the budget. But closer to the end of the series, we could actually see a rally up to the 9000 levels.
ET Now: Given the kind of volatility and the weakness that we have seen of late and PSU banks clearly have been one weak pocket. What according to you would form leadership and take us back to 9000 levels and what according to you would continue to remain lacklustre, if not correct further?
Tushar Mahajan: In the short term, the pain in the banking sector is going to drive us and keep the pressure on in terms of the index. While the earnings so far, especially from the PSU banks, have not been too great, but you still have the big daddy which has to report may be another 10 days or so. So until the earnings are out of way, banks are going to continue to keep the index down. In the pre-budget rally, some of the pockets we expect to rally include the oil and gas space and the infrastructure space. In oil and gas we have already seen Reliance contributing a fair bit to the index over the last five-six days and that is a trend that might just continue. The other is the infrastructure space in anticipation of some benefits accruing to that sector in the budget. There could also be some move in the commodity space as well. These sectors have really underperformed this entire move, but you could start seeing the first signs of movement in names like Sesa Sterlite, Hindalco, and Tata Steel, among others.
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