India Equities: Managing Risk

Volatility continues in the mid-80's...I put in a price of Rs 70 to cover my Nifty 2600 short calls...it would mean Nifty was below 2500..the market went below 2500 and the trade was executed.

Then the market started up... I gave an order to sell Nifty 2600 calls at Rs. 150. Amazingly, that also was executed.

Absolute madness in markets....I am now long Nifty at (2436 - 62 (profit on calls) )=2374.
And I am short Nov Nifty 2600 calls at Rs 150.

This volatility has to come down...every order into the market seems to be getting executed, on the upside and downside.

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Indian Markets: In Search of...a bottom

Extreme Volatility continues in Indian equity markets..volumes continue to decline..the specter of hedge fund redemptions is hanging over the market. The last 5 days trading have the following day change in Nifty:

November 4, 2008 -5.44%
November 5, 2008 -3.25%
November 6, 2008 +4.71%
November 7, 2008 +3.37%
November 10, 2008 -2.77%
November 11, 2008 -6.55% (as at 3pm)

These six days give an annualized historical volatility of 80%. This is ridiculous volatility; anyone who thinks they know what is going on is fantasizing. The price-action in markets is destroying all small time speculators. Day trading is ending...investment clubs are a thing of the past...the Saas,bahu and Sensex set is back to doing what it would normally do..eat, gossip and get fat.

Technical analysis for day trading...in this market...NOT.

Everyone had an opinion on the markets and expected you to congratulate them on their brilliance...Uninformed opinion has lost its veneer of respectability.

It is back to hard work; proper analysis of companies , industries and the economy. Full blown scenario analysis with a healthy dollop of weighting for fat tails. Managing money and helping people create wealth will be back in the hands of professionals...if not, then there is a lot more pain ahead.

And, there will be a realistic view of expected returns in the future...let us hope.

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