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Markets stay volatile on derivatives expiry

Friday, November 30, 2007 Leave a comment Go to comments

Yesterday’s market action was very volatile because of the way November series panned out. Some were rolling over their losing positions while others were booking profits in stocks that had gone up considerably.I personally didn’t expect such volatility but now one needs to live with this high dose of volatility.

Yesterday’s market action was not encouraging for the bulls.Despite all the global positives, if you end up flat to negative-then its not a good sign. We need to closely watch the market action today because today there is no pressure to buy and sell in the derivatives segment.

Large caps are showing no momentum at all. Every rise is met with selling by the market participants. FIIs in particular have been on a selling spree and that trend has not reversed. Domestic players ca absorb that supply but it might be difficult for them to take this market higher. Also as most of the domestic player talk of “value”, they might just buy the dips rather than buy “momentum”.

I am focussing my attention to stocks in small cap and mid cap domain because you can still find some good stuff there. These stocks might have less correlation with the overall market trend.If the markets remain sideways, this category can outperform in the short term. At the same time, any sharp correction shall take down the whole universe of stocks with it.

May be this is just a time to preserve tons of money made in the last few months rather than get very adventurous. Looks like this is what FIIs are doing!

  1. sagecapital
    Sunday, December 2, 2007 at 8:51 am

    Ashish- This market shall send like any other market. A bubble shall be formed and then it shall finally burst.
    When will that happen is anybody’s guess? It has nothing to do with India becoming a developed nation or not. Stock prices shall reach frenzy levels much before India is finally developed .
    The key to making money shall be to take advantage of this frenzy and not be part of it!
    Do you know that sometime back in China it was difficult to find a full time maid because every person was becoming a day trader and the maids didn’t have enough time on their hands?

  2. ashish ji
    Saturday, December 1, 2007 at 2:17 pm

    “One thing I can say is that bull market corrections are quick and sharp whereas bear market corrections are less sharp and market slides gradually. Also a market top is usually accompanied by high volatility.” —

    Good said SAGE> VERY WELL DONE!!!

    I was READING REDIFF 2003 ARTICLE .. POEPL WRITING MARKET AT PEAK >>>… REFIDD 2004 article again same thing … MARKET HIGER BUT … and NOW same THING TOO … marKETT MORE HIGER but same ARTICLES etc. ETC>

    SAGE, tECHNICALS aside- whAT WILL TAKE INDIAN MARKET TO LOOSE GLAMOUR? ONCE WE WILL BECOM DEVELOPED NATIOn??? PLS EXPAin me. IF U STUDIES COMPLETE BULL CYCLE other countries .. HOW THEY ENDED? e.g. NIKKEI reached 30000 now back almost 15000 … why?? thanks!

  3. sagecapital
    Saturday, December 1, 2007 at 8:56 am

    Ideally they say a 30-40% correction from top sigals a bear market. But the same thing happenned during May 06 crash or a May 04 crash.(or correction).So I really don’t buy that definition!
    One thing I can say is that bull market corrections are quick and sharp whereas bear market corrections are less sharp and market slides gradually. Also a market top is usually accompanied by high volatility.
    Infact, just based on volatility I was able to avoid May 04 and may 06 crashes. A similar situation developed in the 5000+ levels also but we escaped crash although a P-note triggered mini crash was witnessed then also.
    So if I go by that observations, conditions might be ripe for a crash but predicting crashes is almost next to impossible!

    Friday’s market action was encouraging and we have been able to build many short term trading positions on the long side.
    November was difficult for us as if got whipsawed on many short term positions but December has already given us some big winners.
    Still we are not trading aggressive because my medium term systems are still indicating a “neutral zone”.

  4. ReyMax
    Saturday, December 1, 2007 at 2:27 am

    Which honest fund manager would be wanting to buy into this market? Why would domestic institutions be stepping into the shoes of FIIs ? Questions which dont have an honest answer.

    We are on the threshold of the steepest crash in the Indian Market – it is days away, not weeks. Just needs one secular negative trigger. A clerk leaking a draft circular would be enough to wipe out more than 30% capital in 10 days – it has happened before.

    To my mind, Put Options is the only game in town for the next 3 to 4 weeks. Steeper the crash, better it is.

    Finally, a question to all the experts and novice alike.
    When market goes up, we call it a rally. When it goes down, we call it volatilty , When market goes down more than 10% we call it correction, when market goes down 20 to 30%, we call it sharp correction. What then is a CRASH of the STOCK MARKET????

    Perhaps the market will tell us over the next few weeks.

    Cheers and take Sage’s advice – preserve your capital and your gains.

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