In an interview with ET Now, Tushar Mahajan, Head of Derivatives (Head of Listed Futures& Options, India), Nomura, shares his views on markets.
ET Now: With all the volatility and with all the nervousness and tension around, how are you approaching the markets, where are you seeking protection?
Tushar Mahajan: What happened over the weekend in Greece and then the resultant impact on markets globally has been a bit of a surprise and given this uncertainty is going to continue for about the next one week or so. It is definitely prudent to just buy some downside puts maybe at 7800-8000 levels.
There is not going to be a strong economic impact on India per se with the Greek exit. However, there will just be a sentimental impact on markets globally. So, we could probably look to see another three per cent to four per cent fall. However, broadly looking at the underlying trend, notwithstanding the Greek issues, our markets should be pretty strong and if we have a favourable outcome of the referendum, we could see the markets go back to the 8400-8450 band.
ET Now: What could be the favourable outcome, as of now the street is divided?
Tushar Mahajan: Even if the outcome says that people want to stay with Greece, it won't end the uncertainty because you have Greece going into elections again and you do not know what the outcome of that election is going to be because effectively the Prime Minister would have lost its credibility given that he has been battling against the entire austerity and stuff like that.
But what markets do want to see is whether Greeks vote in favour of staying with the Eurozone or whether the IMF will rollover the debts right now which the Greek banks have to pay up, so that is what the immediate clarity that we want to see right now.
ET Now: If they are voting to be in the EU, they are also giving a stamp of approval on the conditions that EU has imposed for its debt renewal, which essentially calls for austerity. Given the uncertainty how would you play (the markets, considering) this risk?
Tushar Mahajan: It is not that you will see private companies going bust because of the Euro action. The story here is more sentimental. You could see those gap down moves come down to the 7800-7700 levels but for investors who are looking to play the India growth story, those are going to be clearly buying times.
So, from a trading point of view, you buy protection at that level. You do not want to buy protection at 8200 and 8100 because that is not what you are playing for. You are playing for a larger dip to go long on the markets, may be a 7800 put, you sell that against a 7300-7400 put because those are levels where people are going to go long on the markets irrespective of what is happening in Greece. You take a five per cent down hedge and then you time your buys accordingly.
ET Now: With all the volatility and with all the nervousness and tension around, how are you approaching the markets, where are you seeking protection?
Tushar Mahajan: What happened over the weekend in Greece and then the resultant impact on markets globally has been a bit of a surprise and given this uncertainty is going to continue for about the next one week or so. It is definitely prudent to just buy some downside puts maybe at 7800-8000 levels.
There is not going to be a strong economic impact on India per se with the Greek exit. However, there will just be a sentimental impact on markets globally. So, we could probably look to see another three per cent to four per cent fall. However, broadly looking at the underlying trend, notwithstanding the Greek issues, our markets should be pretty strong and if we have a favourable outcome of the referendum, we could see the markets go back to the 8400-8450 band.
ET Now: What could be the favourable outcome, as of now the street is divided?
Tushar Mahajan: Even if the outcome says that people want to stay with Greece, it won't end the uncertainty because you have Greece going into elections again and you do not know what the outcome of that election is going to be because effectively the Prime Minister would have lost its credibility given that he has been battling against the entire austerity and stuff like that.
But what markets do want to see is whether Greeks vote in favour of staying with the Eurozone or whether the IMF will rollover the debts right now which the Greek banks have to pay up, so that is what the immediate clarity that we want to see right now.
ET Now: If they are voting to be in the EU, they are also giving a stamp of approval on the conditions that EU has imposed for its debt renewal, which essentially calls for austerity. Given the uncertainty how would you play (the markets, considering) this risk?
Tushar Mahajan: It is not that you will see private companies going bust because of the Euro action. The story here is more sentimental. You could see those gap down moves come down to the 7800-7700 levels but for investors who are looking to play the India growth story, those are going to be clearly buying times.
So, from a trading point of view, you buy protection at that level. You do not want to buy protection at 8200 and 8100 because that is not what you are playing for. You are playing for a larger dip to go long on the markets, may be a 7800 put, you sell that against a 7300-7400 put because those are levels where people are going to go long on the markets irrespective of what is happening in Greece. You take a five per cent down hedge and then you time your buys accordingly.
