FIIs seem to be creating short positions via options near resistance levels: Anu Jain

FIIs’ option data indicates that they are using the range extremely well. They seem to be creating short positions via options at the upper end of the band and reversing and creating long positions at the lower band, Anu Jain, Head-Equity Broking, IIFL Wealth said in an interview with Moneycontrol’s Kshitij Anand.

Q) The Nifty50 remained volatile throughout last week, but it managed to close above 15800 levels. What led to the price action on D-Street?

A) The Indian markets followed the global volatility last week with both China and US in a corrective mode. The Metals sector led the recovery on Thursday following reports that China may impose export duties on steel besides considering a hike in import duties.

Rising metal prices added to the positive sentiment in the sector. Mid-cap Tech and fine chemical companies posted stellar results.

The Tech sector supported the markets on expiry day while banking continued to show a weak trend. As a result, the Nifty closed in a mid-range near 15,800. We expect the Nifty to remain broadly in the 15,500 to 15,950 range.

Q) FIIs remain net sellers pulling out more than Rs 19000 crore from the cash segment of the Indian equity markets. What is leading to panic in FIIs and what do the options data suggest?

A) I would avoid terming this as panic selling. Most FIIs are sitting on profits. Any volatility leads to a certain amount of profit-booking and that’s what we are witnessing.

FIIs’ option data indicates that they are using the range extremely well. They seem to be creating short positions via options at the upper end of the band and reversing and creating long position at the lower band. That explains the swift recovery from 15,500 levels.

Q) What is your call on small & midcaps, which have remained slightly more resilient?

A) This segment is more performance-based. Companies that are delivering results are being bought into even during volatile sessions; the mid-cap tech companies and fine chemicals are examples of these. We remain confident and hold on to these mid-cap stocks.

Q) Sectorally, metal showed a strong move on Thursday, and for the week as well the Nifty Metal up nearly 8%. What is fuelling the rally in metal space?

A) The global commodity trends continue to positively impact the sector. During the week, we had breakouts in all steel, aluminium, and specialised product stocks.

The Chinese government policy on pricing will impact the entire sector. We remain optimistic about this sector and it’s good to hold on to these stocks.

Q) Based on rollover data and price action – what are your expectations from the August series? Can we hit fresh record highs, or will there will be some pressure considering it will be an IPO heavy month that could extract liquidity?

A) The Rollover data is not indicative of any major moves either side. There is money on the sidelines with FIIs sitting on cash. We do not expect upcoming IPOs to be a major drag.

Rather, we would watch for a range breakout with further build-up on futures and options to reassess our view. It’s still a 400-point range and markets may perhaps see more action in the mid-caps.

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Moneycontrol