Buy into market volatility: Religare Securities

Here is a verbatim transcript of the exclusive interview with Ashu Madan on CNBC-TV18. Also watch the accompanying video.

Q1: What are you telling investors at all at this juncture? Do you think that they will have plenty of time and opportunity to buy stocks, no one need rush?

A: Yes, I agree to that. The investment climate is still not conducive. Even if at times we see all these bear market rallies, these are only acting as a sucker. Even if you have to trade those rallies, the theme is only trading.

Still at this juncture, even after fierce and sharp falls, we are still buyer of volatility. We are advising people to buy volatility, buy put options at every rise and that would be the appropriate action to do.

Any bounce back has to be utilized to either offload their existing holdings, because only then they will be able to participate in the trading moves. We have seen the capitulation to the highest level possible so post that there are very limited people who are still wishfully holding their portfolios. But unless you come out of it, you will not be able to trade this market. Any bounce backs are big sell offs.

Even today morning, eight out of ten people were of the view that the market would be fine. That itself is a testimony of the fact that beyond a point there are no short positions in the system also.

The only thing, which can lend a meaningful bounce back to the market, is short position. If short positions are not there, I do not think there is any good news domestically or globally, which can have a meaningful impact on the market on the positive side.

Q: What kind of a trading range you are looking at in particular your thoughts on what bedeviling the private sector banking space today?

A: Till sometime back private sector banks corrected on account of rumours and bad news within the system. There were too many short positions due to which we saw some bounce back. However, other than that (bounce bank), there is a definite problem on the hands. I do not think there can be smoke without fire.

So definitely the heat is there, it is only that how you play it. Looking at the trading range, on one hand I am very sure about the markets, at the same time, below 8,000 - the lows which we have seen in October probably should act as a floor, because last time when we reached to that low, nobody could react to the situation, everybody was caught unaware.

Now I feel that lot of people are interested in getting into these stocks at those levels and they have their shopping list ready. So probably closer to that range I think there is some floor.

Q: Despite the fact that there perhaps might be a lot of buyers at the lower levels and perhaps people are waiting for more severe dip to step into the market, sentiment globally seems weak; do you think that would impact the kind of flows that we are seeing in the market in the near-term?

A: Definitely, because all the action which we have seen and have been announced, the ground realities are absolutely different. All these actions and these statements can lend as a sentiment booster.But if you look at the ground realities, things are absolute - whether it is credit crisis whether it is the balance sheet of the corporates or whether it is stop losses or the business environment - it is a big apprehension around. The ground realities are very tough to deal with. So considering all that, I do not think that in the near future anything is going to happen.