HNIs, algo prop traders can have a huge impact from STT hike: Mehul Kothari

"FM's move can have a big impact on options traders. Retailers who trade in a negligible number of lots won’t be affected much but HNIs and prop traders can have a huge impact," says Mehul Kothari – AVP – Technical Research, Anand Rathi Shares & Stock Brokers.

In an interview with ETMarkets, Kothari said: “Even the algo traders who trade for a very small margin in options will take it as a hole in the pocket. Overall, the decision will impact the option volumes throughout the exchange.” Edited excerpts:

In a volatile week for Indian markets, Nifty50 failed to hold on to 17,000 levels. What led to the price action?
There has been no respite for the bulls on D-Street. Once again the domestic markets remained under pressure amid weak global cues.

In addition, the news of a rise in STT on options trading further dented the sentiments. As a result, the Nifty50 index closed the week below the 17,000 mark with a loss of around 1%.

On the upside, it failed to sustain above the 17,200 mark.

We are heading for a truncated week with expiry on Wednesday – any levels which traders should watch out for?
At this point in time, Nifty is still holding on to the support of the lower end of a falling channel. This channel holds importance because the index is trading inside this falling channel since it made an all-time high.

In addition, we are witnessing a bullish harmonic AB=CD pattern at the 16,900 mark. Also, FII’s long-short ratio in index futures has reached below 10%, which is the lowest ratio in recent times.

All the mentioned technical evidence indicates a high possibility of bounce from here on. Thus, on the downside, 16,800 seems to be strong support for the coming week.

In case of a bounce, Nifty might retest 17,500 in the coming weeks. On the contrary, even a breach of 16,800 might not convince us for a bearish approach.

Any important trigger points which could impact markets in the coming week?
Instead of any positive triggers, the absence of any negative trigger might impact the markets in the coming week.

Markets have been constantly surviving negative news and have been absorbing the selling pressure quite well.

Govt also threw a googly by hiking STT on options. What is the kind of impact you see on options trading? How will be impacted more by this amendment?
This can have a big impact on options traders. Retailers who trade in a negligible number of lots won’t be affected much but the HNIs and prop traders can have a huge impact.

Even the algo traders who trade for a very small margin in options will take it as a hole in the pocket. Overall, the decision will impact the option volumes throughout the exchange.

Metal and Realty indices fell more than 3% in the week gone by. What led to the price action?
High rates and probable global slowdown in the developed world have been impacting the demand scenarios for commodities and Realty.

Any value picks post-recent correction that traders can look at for the next 1-2 months?
There are many good stocks available at the oversold zone as per the technical. However, due to the uncertainties across the globe, we would advise them with an investment approach and not as a trading bet.

We are liking stocks like Pidilite Industries, Bata India, Eicher Motors, United Spirits, BPCL, etc. at this rate. Investors can start accumulating them with a horizon of over one year.

What should investors do amid volatility, especially from global cues? How to pick stocks amid volatility?
At least the first half of 2023 might be more challenging than the previous year for equity markets. The ideal approach in such kind of scenario can be to not take any big trading bets.

Traders should remain flexible to play in both directions with the intent of taking away small profits. On the other hand, investors should avoid deploying fresh longs in one go.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)