Markets Ahead-Can they stage a sharp pullback?

Are we going going to head back to 4000 or pullback to 6000+ levels? This is a billion dollar question that is haunting every investor’s mind.

Don’t you think that we worry too much about the tops and bottoms rather than our risk exposure in the market?

Many of the traders focussed too much on the top and the bottom without caring about their leverage in the market . One has already seen a carnage that happened in compressed time frame of 2-3 days. This happened because every leveraged player wanted to get out at the same time! This is one of the ramifications of living in a world where information is accessible every minute and trading possible with click of a mouse! So as soon as first sign of trouble are seen, the panic sell is pressed. And if you don’t press the “sell”, your broker does it on your behalf because you can’t pay the margins!

Only investors who were early in the game and were in control of their leverage are still in the money. Rest all have lost their shirt. According to the reports I have been reading almost 65-70% of futures open interest in the last two months was from the retail side!

Partly brokers are to blame for this fiasco because they never educate their clients about the pitfalls of doing futures trading. For them it is a big business driver in terms of volumes, so they actually encourage the clients to dabble more in the futures. On top of that, it also serves our government as it results in more STT being collected. I feel that this is the reason why more and more stocks are being added to the F&O list. I don’t understand the rationale of having so many stocks in F&O list. How many portfolio managers want to hedge a Sterlite Optical, RNRL or Essar Oil? All of us know that these are speculative plays rather than any investment plays.

Anyways, in the end the buck stops at the investor. We have to stay responsible and disciplined.

Coming back to markets, we had played for a bounce back to 5400-5500 levels . Till we cross 5500-5700 again,the medium term trend shall remain down. One good thing is that people are extremely bearish and are not participating in a big way(evident from volumes). So this market might have already formed a bottom at 4500 and might not retest it again. 4950-5000 might be a good base for this market, so there is a chance of these levels getting tested again.

It might be futile to predict the next big move on NIFTY. This can turn either way! This might be a good time to focus on stocks that look good on the longer term time frames. At the same time, till intra day volatility comes down, this market might not attract many players again.