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Opportunities and Threats: Trading the Indian Mkts

March 14, 2009

On December, in an effort to cull the mindless short selling occurring in the Indian markets, SEBI the Indian Security watchdog increased the lot size to approx 8 times the then prevailing lot size.

Understandably, the argument which was quite valid and fitting was since most of the stocks have fallen in the tunes of 60%-65%, hence to maintain the same underlying contract value it was imperative to increase and jack up the lot size. Which was perfect in itself, had they saw to it that the inordinately high exposure and margin size got reduced, which was in some cases upto 40%.

Nevertheless, it kept the index future lots intact both in size as well as margin demands while jacking up the individual lot size. e.g TCS lot size hiked to 500[from 175] and AMTEKAUTO hiked to 4900[from 900].

The main indices were not changed. The situation presented a highly interesting case. One one hand, since July,August a lot of new players came into the business of active speculation on the back of falling margin demands now got culled from this end because of mounting and changing risk dynamics.

One point fluctuation while giving or taking 900 rupees in AMTEKAUTO before, now entailed the risk  5000 INR with it. Needless to say, the risk profile of the assets became too unweildly to follow. Hence a lot of small time players, this author guesses were sucked out in March when the new lot size came into effect. Hazarding another guess, I would further go forward that the players moved from stock futures to index futures making the index much more efficient and balanced in its behaviour, while sucking away the liquidity,efficiency from the stock futures.

Thus as a result, NIFTY/MINIFTY should see a lot of sideways movement or atleast unmanageable, uncashable trends until unless you can take that ‘heat’ of the index, which can be seen from the tumultous rise of the NIFTY future on this Friday[4%]

Friday's move anulled all of the short side gains of bears. Its bulls till the 2751/2786/2822

We had continously two ‘buy’ days this week, Thursday and Friday thus countering the ‘sell’ week before that. Is it a pullback to the mean, or a pullback to the channel is yet to be seen. Although, the index had been quietly chasing the lower channel for quite some time,  a pullback was in the offing. Yet my experience says, that a counter trend pullback is usually on low volumes and extremely placid. This move was anything but placid. Notice the sharp increase in MACD signal and the fast stochastic.

While NIFTY showed this kind of behaviour, take a look at GAIL

Quiet Resurgence

It seem to be having a life of its own,heeding its own technicals nice rebounding off important support levels, rising even if the main index is down, with volumes nicely picking up. While MACD histogram is showing absolute lacklustre trends, it slowly seems to be breaking out on its own.Yet its difficult to say the least, if it will still continue its upward journey, as in the near past, it has shown quite a bit of sideways movement. Its risky call, and can be a pure technical buy,once it crosses this week’s high, i.e Friday’s high.[total discretionary call]

Furthermore, have a look at Ashok Leyland:

A lip smacking opportunity?

Lot size or no lot size, this had been showing an upmove since February and on this Friday broke the important level of 16.9. It just seems a highly, interesting scrip but the lot size is huge circa 19100. 😀

One Comment leave one →
  1. March 15, 2009 8:06 pm

    Glad to come across your blog.Would visit it often.

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