November 20, 2019

Market outlook

Daily charts:
- trend is up on daily charts
- today nifty closed .5% in positive at 11999
- AD was flat

- pattern formed doji

- highest OI at 11900 PE followed by 12000 CE

Everyone is a thief, and now a terrorist also

The root cause of this rupturing of our social fabric is the Modi government’s ‘mala fide unless proven otherwise’ doctrine of governance. The premise of the government’s policy framework seems to be that economic participants have mala-fide intent unless they can prove otherwise. This suspicion that every industrialist, banker, policymaker, regulator, entrepreneur and citizen is out to defraud the government has led to a complete breakdown of trust in our society. This has halted economic development, with bankers unable to lend, industrialists unable to invest and policymakers unable to act.

The Modi government seems to view everything and everyone through a tainted prism of suspicion and distrust due to which every policy of previous governments are presumed to be of bad intent, every loan sanctioned considered undeserving and every new industrial project deemed to be crony in nature.......


Where to buy or sell is the least important part of trading


November 19, 2019

Market outlook

Daily charts:
- trend is up on daily charts
- today nifty closed 0.5% in positive at 11940
- AD was 1:1 (flat)

- swing low support 11800
- highest OI at 11800 PE followed by 12000 CE

November 18, 2019

Mitesh Patel: The angry young man of options trading

Mitesh Patel is one of the most visible twitter handle in the options trading in India. Not one to shy away from a confrontation, he is as aggressive on social media as he is with his trading.

A man with humble roots, Patel is by-and-large a self-trained trader who does not mince words to protect his territory. Having paid the market a part of his salary as tuition fees for nearly a decade before he could find his mojo, it is no surprise that Patel is possessive about his achievement.

Behind the aggressive mask is a shrewd and calculative trader who has discovered the secrets of making money. Patel is among those traders who post and discusses his trades, wins and losses with much fervour


Urge PM To "Set Aside His Deep-Rooted Suspicion Of...": Manmohan Singh

Prime Minister Narendra Modi should set aside his "deep-rooted suspicion of industrialists and entrepreneurs", which has halted economic development and ruptured India's social fabric, his predecessor Manmohan Singh has said in a hard-hitting editorial in The Hindu newspaper.

The "toxic combination of deep distrust, pervasive fear and a sense of hopelessness in our society is stifling economic activity, and hence, economic growth," the former Prime Minister said in the piece titled "The Fountainhead of India's Economic Malaise" published on Monday.

"I urge the Prime Minister to set aside his deep-rooted suspicion of industrialists and entrepreneurs and nurse us back to a confident and mutually trustworthy society that can revive the animal spirits and help our economy soar," Manmohan Singh wrote.

The state of the economy, said the former Prime Minister, was worrying not just because of what he called disturbing statistics like 15-year low in GDP growth, a 45-year high in joblessness, a four-decade low in household consumption, bad loans and a 15-year low in electricity consumption. "These are mere manifestations of a deeper underlying malaise that plagues the nation's economy today," he wrote.


Choose your cup of poison carefully

The concept matters


Market outlook

Daily charts:
- trend is up on daily charts
- today nifty closed flat at 11894
- AD was flat

- VIX up 4%

- highest open interest 12000 CE
- max increase is 11900 CE
- expiry likely to be below 12000

Full blown recession?

How India’s growth bubble fizzled out

India’s gross domestic product (GDP) growth has slowed sharply from 8% a year last year to 5% in the second quarter this year. Optimists, Indian and international, say growth will pick up soon. The International Monetary Fund (IMF) projects the Indian economy will hum at 7.5% a year by 2021. Such optimism is dangerous.

GDP growth could, in fact, fall and languish in the 3-to-5% a year range. The ongoing slowdown is not a short-term disruption. Rather, a financial bubble that began inflating nearly three decades ago is finally fizzling out.

Indian policymakers have patted themselves on the back during these past growth years. They have relied on a narrow vision of economic liberalization, which could do little to generate long-term growth but which did create deep financial pathologies and inequalities.


November 16, 2019

Modi govt's 'unrealistic' tax targets take toll on IT officials, many quit

...Over a dozen tax officials interviewed by Reuters said they are stuck between a push to meet unrealistic collection targets, which influence their appraisals and transfers, and the fear of being accused of over-zealousness if they crack down on evasion.

Critics say Modi's demands of his tax officials are symptomatic of the confusion surrounding his government's economic policies, and that the bungling has contributed to a slowdown in growth.

Twenty-two top-level tax department officers have opted for voluntary retirement so far this year and around 34 did so in 2018, according to data provided by....


BANKNIFTY weightage


NIFTY weekly charts

- trend is up
- spinning top/ doji for 2nd consecutive week

- as long as 11600 holds, nothing to worry

- waiting for weekly close above 12000
- so far this is not happening

- highest OI remains at 12000 CE...resistance

BANKNIFTY technicals

- trend is up
- support 30000
- resistance 32000

- 30500 expected to hold this expiry

November 15, 2019

The Trump impeachment comedy

Ignore data if it does not support your views

Salaries do not attract GST


Open positions and stoploss


Market outlook

Daily charts:
- trend is up on daily charts
- today nifty closed flat at 11895
- AD was 4:5

- doji was formed

-  highest OI at 12000CE

For option traders...

You being right does not mean I am wrong


November 14, 2019

Stock charts

LAST updated: 14-NOV-2019 

Market outlook

Daily charts:
- trend is up on daily charts
- today nifty closed 0.25% in positive at 11870
- AD was 7:11

- VIX down 6%

- option writing support 11600 resistance 12000

Trade for the process and not the money

Secret to wealth

This happens only in India...shut schools and then ask children to run

MANAGE RISK all the time

No market trends all the time. No range sustains all the time. No strategy works all the time. That's why you MANAGE RISK all the time!

Govt is desperate for income - 18% GST on HO salaries

November 13, 2019

What if RELIANCE was not up 3% today?

- RELIANCE was up 3% today
- but NIFTY closed 0.6% in negative
- if RELIANCE was flat
-  then NIFTY would have been another 60 points down


Market outlook

Daily charts:
- trend is up on daily charts
- today nifty closed 0.6% in negative at 11840
- AD was 7:11

- option writing support 11600 resistance 12000

Strange... NSE Advance Decline chart

November 11, 2019

Brokers OHLC charts/ data Mismatch and Stoploss / Limit Orders got executed wrongly

Indian Exchanges provides free Level 2 access to its members (Brokers/). Level 2 data contains the Last traded price, Top 5 Bid x Ask levels from the orderbook. The complete depth of the exchange orderbook is not exposed and currently, Level 2 data is restricted only up to 5 levels (depth of the market). Some brokers even provide Level 3 data to their premium clients to identify liquidity pools for their premium customers.

And Level 1 data that most of the data vendors/Websites use primarily gets only LTP, Bid Price, Bid Qty, Ask Price, ASK Qty only for the first level in the orderbook.

Both Level 1 and Level 2 data which is sent in realtime by the Indian Exchanges are not a real tick data instead they send consolidated 1-second data feed for Level 1 (snapshot data) and every broker in the country to receive snapshot Level 2/Level 3 data (consolidated data) which updates 2-4 every second (But not reports all the ticks).

A Tick is generated by the exchange whenever there is a change in LTP price or any order cancellations/order modifications are done in the orderbook it will be reported in the form of Tick data. Which exchange call it as a TBT feed (tick by tick data feed). And every second gigantic amount of ticks are generated every second which is humongous data to transmit over the internet in realtime

Currently, TBT feed is accessible only by the High-frequency trading firms where their servers are colocated to the exchange server to tap and process the data faster to execute their low latency trading strategies.


Market outlook

Daily charts:
- trend is up on daily charts
- today markets closed flat at 11913
- AD was flat

- trading range was extremely small..

Grim Trigger Play in Maharashtra CM politics BJP vs Shiv Sena

A "Grim Trigger" (also called the grim strategy or just grim) is a trigger strategy for a repeated game.

Initially, a player using grim trigger will cooperate, but as soon as the opponent defects (thus satisfying the trigger condition), the player using grim trigger will defect for the remainder of the iterated game. Since a single defect by the opponent triggers defection forever, grim trigger is the most strictly unforgiving of strategies in an iterated game.


November 9, 2019

NIFTY weekly charts

- trend is up
- lot of tussle seen around 12000 levels
- weekly close above 12000 will be bullish sign

- weekly expiry shows highest OI at 12000 CE
- monthly expiry shows highest OI at 11600 PE
- difficult trading environment

- big spoiler: nifty PE ratio now around 28
- does not make sense for long term investors to enter now

BANKNIFTY technicals

- trend is up
- swing low around 30000
- double top near 31000

- note rally from 27500 to 30500 has taken a longer time than the same fall
- this is not  a bullish sign

- weekly expiry shows highest OI at 30500 PE-30000  PE
- monthly expiry shows highest OI at 30000 PE
- above levels are expected to give support
- this means option writers are bullish

November 8, 2019

Avoid rent seekers


S Gurumurthy on demonetisation


Market outlook

Daily charts:
- trend is up on daily charts
- today nifty closed 0.9% in negative at 11908
- AD was 7:11

- past  few days nifty is unable to sustain near day's highs
- yesterday's hanging man was a nice warning

- option writing support 11600 res 12000

November 7, 2019

Buy signals



Open interest analyss

- this weekly expiry, option writers escaped with min injuries
- the dominant view was expiry below 12000; expiry happened at 12016

- monthly expiry stats show
- highest OI at 11900 PE
- option writers do not expect 11600 to break
- increased writing seen at 11900 PE
- in other words, cautiously bullish

Market outlook

Daily charts:
- trend is up on  daily charts
- today nifty closed .4% in positive at 12016
- AD was flat

- doji/ hanging man formed
- if markets close above 12000, this will be the weekly close above this level

The role of P/E multiples in determining investment returns

Two of the most common fallacies of investing in the stock market are:

  • P/E multiple of 10x is cheap and P/E multiple of 50x is expensive
  • During time periods when P/E multiples of great companies compress, share prices of poor quality companies will outperform those of great companies.

Let’s do a quick statistical analysis to test these two points. As shown in the exhibits that follow, the BSE100 universe in India has had no significant correlation between starting period valuations (as at the beginning of the concerned period) and subsequent long-term returns, no matter which phase of the stock market one looks at.


Pay Up, But Don't Overpay

Did the fellow who paid 68 times earnings for Nestlé India in 1992 overpay? If he had, his long-term return should have been poor, right? But that didn’t happen. It didn’t happen because even at a P/E of 68, the growing earnings stream the company would deliver over the next two decades was not being fully factored in that “crazy” price. So, perhaps the fellow who bought it at that price was not that crazy after all.

It seems to me that Indian stock markets have systematically undervalued Nestlé India by ignoring its long-term growth potential. But, you ask, how much more can Nestlé India grow? I will let you dwell on this by providing you with a few data points.


Breakout stock charts

LAST updated: 06-NOV-2019 

November 6, 2019

Market outlook

Daily charts:
- trend is up on daily charts
- today nifty closed 0.4% in positive at  11961
- AD was flat

- "outside" bar formed
- tussle between bulls and bears going on

- option writing support 11900 resistance 12000 (highest OI in calls)

Who is DarkInfosious in #INFOSYS

November 5, 2019

Market outlook

Daily charts:
- trend is up on daily charts
- today nifty closed 0.2% in negative at 11917
- AD was 7:11

- lower low formed
- outside bar formed
- buying seen at lower levels

- highest OI persists at 12000 CE
- limited upside seen

NIFTY Std Deviation wrt 50 DMA

November 4, 2019

Market outlook

Daily charts:
- trend is up on daily charts
- today nifty closed 0.4% in positive at 11945
- AD was 10:7

- last 3-4 days, nifty forming higher high higher low
- but close is always near open thus forming a doji
- a small correction cannot be ruled to shake out the weak hands

- looks like expiry will be below 12000
- open interest says so

November 3, 2019

NIFTY weekly charts

- trend is up
- strong resistance around 12000
- support 11500-11000

BANKNIFTY technicals

- trend is up
- support around 29700 (minor) and 29000
- prev swing high/ resistance 30800

November 1, 2019

Market outlook

Daily charts:
- trend is up on daily charts
- today nifty closed 0.2% in positive at 11900
- AD was 5:4

- VIX dropped 4%

3 min charts:
- took one long trade
- stopped out at small loss
- did nothing thereafter

- decision levels 11880-11940 F

Active income versus passive income


Source: unknown/ unreliable

October 31, 2019

The fence paradox


NIFTY monthly charts

- trend is up
- market sideways for a year
- sup and res lines drawn
- if this is respected, it will mean end of bull run

BANKNIFTY monthly charts

- trend is up
- support 26000
- resistance 32000

The tools you use to trade do not make you the money

Extract from an ebook which is there on vfm for ages...

If we placed 100 consistently profitable traders in a room and asked each to discuss his or her trading style and techniques in five sentences or less, in my experience, whilst each person would use different tools and styles, they would all be trying to achieve the same goal – that is, to generate profits.

Every time you speak with another trader (regardless of whether he or she is successful), every time you read a trading book, every time you receive advice, there will always be new information to take in – usually about an entry technique, or a new style, method or indicator. Everyone has an opinion. There are many successful traders – or at least people who have had just one profitable trade – and they have achieved this success even though they all use different tools and techniques.

Out of our sample of 100 consistently profitable traders, 40 may use fundamental analysis, 40 may use technical analysis and 20 may just use intuition or gut feel. Even then, the 40 who use fundamental analysis may use different aspects of that field. Some may rely on various ratios, while others may not take any ratios into account and rely solely on insider activity. The list and combinations are infinite.

Of the technical traders, some will rely on moving averages, some on an RSI or other indicator, while others will rely only on price patterns and volume. Yet again, the pieces to the puzzle can be infinite. My point is that each profitable trader will use a different technique, style, investment time frame, information sources and tools.

If all of the 100 traders are profitable through using different techniques, the common denominator cannot be the tools being used. It must be something else.

If you agree with the above, it becomes easier to suggest that it will not matter which indicator, tool, time frame or software package is superior, and it's certainly not a tightly held secret or insider knowledge that makes them all profitable. All indicators, all technical analysis techniques, all fundamental analysis techniques, all software – everything you use to trade and invest – are nothing but tools.

The tools you use to trade do not maketh the money!


Market outlook

Daily charts:
- trend is up on daily charts
- today nifty closed 0.3% in positive at 11881
- AD was 2:1

- pattern formed - doji showing tussle between bulls and bears
- this tussle is clearly reflected in intraday charts

- expect more of this around 12000 levels

Hum Jio Tum Maro

October 30, 2019

This is very good news - SEBI may lower margin requirements for hedged trades in F&O segment

A recent study by EY showed that margins on derivative trades in India are up to 500 times higher compared to global exchanges.

SEBI-appointed Risk Management Review Committee (RMRC) met on October 16 and agreed to most recommendations of the sub-working group. This group had proposed lower margins for hedged positions and status quo on unhedged derivative positions.

A hedged position consists of two opposing trades in the same security. This reduces risk, but at the same time also limits profits.

For instance, in a put-call parity arbitrage trade, which involves buying the call option and selling a put option of the same strike price (say 11,500 on the Nifty) and selling the Nifty futures, a trader currently has to pay Rs 1.16 lakh as margin. Under the proposed margin structure, the margin applicable to this combined trade will fall to Rs 5,000.

If there is only one leg of the trade, then the present margin rules will apply.


Market outlook

Daily charts:
- trend is up on daily charts
- today markets closed 0.5% in positive at 11844
- AD was 5:4

- hanging man formed

October 29, 2019

BUllish stocks

LAST updated: 29-OCT-2019 

Market outlook

Daily charts:
- trend is up on daily charts
- today nifty closed 1.4% in positive at 11787
- AD was 10:7

- this was a nice breakout day
- Friday's bar was an excellent indication
- expect more upsides but a pause around 12000

- higher swing low defined at 11450 spot

- however VIX was up 5%
- ideally this should have dropped down substantially

Excellent thread on option trading by @PRSundar64

Lot of misintrepreations, lot of negativities, lot of 'seizing the opportunity' by many people, jumping into the fray.

I may take a break from social media or i may completely withdraw from social media.
What ever I have gain by this media, I have already gained.

I am here now for others gain.
That I may have review.
Before doing that I wish to open up my mind.
As usual, will start with a story.

Whwn my son was 4 years old, my wife wanted him to go to kirana shop and buy something for Rs 20. She gave him Rs 100. He insisted she should give only Rs 20. My wife did not have Rs 20 note, insisted he should take Rs 100. He started crying. My wife was puzzled.

She asked for reason, he replied, "If I have Rs 100, I am sure in addition to what you ask me to buy, I will be tempted to buy a chocolate and late will get scolding from you" 😂😂😂

When my wife told me this I told her he has bright future.

Everyone has some short coming, if you your short coming, sure you will have bright future. If you are arrogant, not to accept your short coming, that is where you miss the life.

When I started my journey in stock market, for that matter when I started thinking of doing any business, first thing that came to my mind, I should be making money, even if I am stupid.

The reason is I know I am not an intelligent. For that matter nobody is intelligent in stock market.
That is why I have chosen to be an option seller.
Let me tell you once again, Option selling is the game of stupids.
If you do not agree, look at the comments in Twitter.

When most of the option buyers claim to be intelligents, naturally, counter parties, i.e. option sellers will have to be stupids.
But here the point is not who is intelligent and who is stupid, point here is who is making money?


October 27, 2019

Big VIX Options Trade Braces for a 2008-Like Volatility Surge

Someone is betting big that the U.S. stock market is on track for the kind of turbulence not seen since the global financial crisis.

Trading in call options on the Cboe Volatility Index, known as the VIX, outweighed puts by more than 2-to-1 on Friday with the index at its lowest level since July as stocks rallied. The standout trade was one block of 50,000 April $65 calls that were bought for 10 cents. Those contracts would imply a surge in the VIX of almost 500% from its current level.

While the magnitude of the strike price is remarkable, Macro Risk Advisors derivatives strategist Maxwell Grinacoff said the April expiration date is even more interesting. That time frame could capture the impact of a potential recession, a breakdown in U.S.-China trade talks and a variety of political risks linked to the Democratic presidential primary and impeachment proceedings against Donald Trump, he said in an interview


October 26, 2019

NIFTY weekly charts

- trend is up
- support 11500 - 11000
- resistance 12000

BANK NIFTY technicals

- trend is up
- support 29000
- above 29700, more upsides possible

October 25, 2019

Height of stupidity by the babus who run India... ease of doing business is a joke

Market outlook

Daily charts:
- trend is up on daily charts
- today nifty closed flat at 11584
- AD was 7:10

- today markets were volatile
- it broke recent supports, sold off, took support at 11500 and recovered
- VIX dropped 6% during all this

- option writing support 11500 resistance 12000

- overall bias is bullish and
- 11500 is a good support

October 24, 2019

RBI shuts down another business... and this was how VFMDirect started

- for the record, I started off as a Direct Selling Agent for the financial services industry
- at the age of 32
- I had 7-8 years experience in this industry so the SWOT analysis was propah
- the VFMDirect stands for Value for Money and Direct is for Direct Marketing
- I shut this business in less than 6 months but I retained the name
- stoploss hit
- all this was some time in 1997-98
- then later evolved into other businesses... no planning.. just take the road when it comes

- RBI's action will have a huge impact - expect DSAs to shut down and employees to lose their jobs
- on the plus side, banks will be forced to create their own direct selling teams on their payrolls
- but this can increase overall costs
- either way, the consumer will suffer


Death of the TELCOs

Buy signals

LAST updated: 24-OCT-2019 

Market outlook

Daily charts:
- trend is up on daily charts
- today nifty closed 0.2% in negative at 11583
- AD was 4:5

- above 11700, expect move to 12000

MTNL BSNL revival package: tax payers money to go down the drain

- there is no way MTNL BSNL can compete with the private sector
- government should not be running any business
- all this money will go down the drain

- forget bold decisions for now


October 23, 2019

Emotions Emotions Emotions

Are markets in the "bust" stage or phase zero? View by Manish Chokhani

Market outlook

Daily charts:
- trend is up on daily charts
- today markets closed flat at 11604
- AD was flat

- first lower high lower low formed today
- some few more is welcome

October 22, 2019

INFY support 600 on weekly charts

Market outlook

Daily charts:
- trend is up on daily charts
- today nifty closed 0.6% in negative at 11590
- AD was flat

- note prev swing high around 11700
- and rally from 11200 to current levels was always with a higher low
- formation of "lower high lower low" for 2-3 days is healthy for any rally
- this has not happened so far and it does, it will be good for the market

- highest OI for this weekly series is at 11700 CE
- next highest OI is at 11600 PE
- tight trading range?

Why the tide that lifts Sensex and Nifty leaves small, mid-cap stocks untouched

Even though there may be nothing fundamentally wrong with a number of small and mid-cap stocks, they continue to be victims of a SEBI norm with regard to restructuring of equity schemes of mutual fund that has killed buying interest in them.

Recent data shows that more than 77 per cent of the total investments by mutual funds and insurance companies is concentrated only in India’s top 50 listed companies (those in the Nifty index).

Mutual funds, insurance companies and other domestic financial institutions (FIs) hold stocks worth more than Rs 20 lakh crore (nearly $300 billion) on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), out of which the share of investm..


INFOSYS charts... insider trading?

- stock is in weekend news due to some whistleblower complaint
- let us see what charts tell

- on 30 min, trend is clearly down

- on daily charts, one would be out of long in SEP
- the big bar in OCT failed to draw repeat buying
- now support around 760... will this break today?

- now here is the kicker
- the whistleblower letter is dated 20th SEP... same day as the longs got stopped out
- but the letter has come in public domain only recently


October 19, 2019

It may be both, may not be both; may be partly one or may be partly the other

Sitharaman waffled when asked if the current economic slowdown was because of cyclical or structural factors — an issue on which there has been fierce debate among economists.

“It may be both, may not be both; may be partly one or may be partly the other,” Sitharaman said. “I’m not getting into that at this stage. I don’t have the luxury of sitting and looking at which way it is going.”

The Union finance minister conceded that the economy wasn’t growing as fast as it once did. “It’s not 8 per cent. It’s not seven. It’s come down to six and so on…. But I don’t want to underestimate the potential that India is showing even in this adverse circumstance,” Sitharaman said.


October 18, 2019

What constitutes Quant Trading and what does not?


The operative word here is “mathematical models”.  Of course this can include probabilistic and statistical models as well.

So to sum it up, Quant trading is the application of Mathematics, Statistics and Probability theory in the area of trading.

For example, if you are looking at a simple Moving Average Cross over system, you may want to calculate the Conditional Probability and the Probability Distribution for various outcomes in terms of price. But merely trading a Moving Average Cross over system without having done the statistical work does not qualify as Quant trading.


Buy signals with charts

LAST updated: 18-OCT-2019 

Market outlook

Daily charts:
- trend is up on daily charts
- today nifty closed 0.65% in positive at 11661
- AD was 11:5

- resistance around 11700-800
- 11700 is an important swing high

Consumption in rural India hits a 7-year low

Rural household consumption slumped to a seven-year low in the September quarter, in a sign that the prolonged agrarian distress and near-stagnant rural incomes have eroded demand for consumer goods, market researcher Nielsen said.

Consumption of packaged consumer goods by rural households also grew at a slower pace than in urban areas for the first time in seven years, Nielsen said in a quarterly report on Thursday.

The rural economy has been plagued by falling crop prices and declining incomes, resulting in a severe slump in demand. Falling income has not only singed farmers but also landless wage workers, who together account for two-thirds of all rural households.


Urban Highway Removal: To Your Health

The famed U.S. intellectual Lewis Mumford once said, “Forget the damned motor car and build the cities for lovers and friends.” A recently released report on freeway removal from by the Institute for Transportation and Development Policy and EMBARQ (producer The City Fix) seems to be getting a bit closer to that ideal, providing case studies on cities that have successfully removed freeways tearing their cities asunder or separating waterfronts from the enjoyment of residents.

The report notes that cities are undertaking these highway removal projects to foster economic development and offer better solutions to meet mobility needs. One additional key aspect to consider is the effect of these highways on quality of life and public health—from air pollution to traffic crashes to limiting the ability of residents to be active in their daily lives. These considerations will need further research, but several positive benefits can be observed from what already exists.

Removing a freeway and replacing it with a greener boulevard or park can reduce the “urban heat island” effect and air pollution. In Seoul, Korea, when the city turned the Cheonggyecheon Expressway into a 5.8-kilometer linear park and daylighted stream, this led to a reduction of the heat island effect by as much as 8 degrees Celsius, according to summertime measurements in comparison to nearby paved roadway conditions.


BANKNIFTY - trend is up

Daily chart:

Hourly chart:

Good Things Happen, Because Bad Things Are Allowed To: Karachi Stock Exchange Version

Markets are going to be volatile, because that’s by design. If you curtail volatility, forcibly, it doesn’t end well.

Oh, and people have tried.

In Pakistan in 2008, they framed a rule: markets cannot go down. Meaning, stocks prices would have a lower bound, limited to the price of the previous day. You couldn’t bid the price down below that price. This was set by the SECP, the securities regulator of Pakistan.

This soothed some fears as the Karachi Stock Exchange index had already plunged from 15,000 to 9000, with a 15% drop in a week. If you don’t allow prices to go down further, then life would be so much better!

A strange thing happened. There were just no buyers for stocks. People wanted to buy, no doubt, but not at current prices. And without a buyer, there was nothing a seller could do but to place his orders at the lowest possible number – the high of the previous day.

Between September and December 2008, as the world was crashing and burning (the NSE Nifty fell about 40% in this period) the Karachi Index was at exactly the same level, because no one was willing to buy higher, and you were not allowed to sell lower.

When reality dawned, and apparently it took three months then, the authorities decided to remove the price “freeze”. Consequently the stock market dropped another 40% and only then stabilised and returned to go up more than 10x from the lows.


October 16, 2019

Market outlook

Daily charts:
- trend is up on daily charts
- today nifty closed 0.4% in positive at 11471
- AD was flat

- trading range was very small
- small hanging man formed

Nice thread on bull and bear markets

This small/midcap bear market is our 2nd most brutal in history. In 1992 you knew the Harshad was caught. In 2000 NASDAQ was bleeding & Ketan had been trapped. This time it was the system cracking - a box full of fire crackers catching fire. You don’t know which one bursts when!

Post the fall in 1992, EOUs, FMCG and software took over the leadership. Anything to do with ‘EOU’ was bid up. Post 2000 the large pharma companies like Dr Reddy’s starting moving and so did a lot of PSU divestment candidates.

Though the Govt. sold only a handful of PSUs the rally spread across the sector far and wide SCI, BEL, BEML, EIL, CONCOR & more were the shining stars till 2003. Companies that were debt free available at single digit P/Es with a dividend yield of 7% to 10% went up 10 to 30x.