Volatile trade: Uncertain markets put traders in trouble

When the 30-share Sensex opened marginally down (from Friday’s closing) on Monday, short sellers would have been thrilled. After all, the Dow Jones Industrial Average (DJIA) had fallen on Friday. But, they were in for a significant disappointment. The jump in the Dow Jones futures and S&P futures, on the back of the UK government’s withdrawal of tax cut plans, saw the Sensex rising steadily to close at 58,410.98 points – up 491 points. The broader NSE Nifty climbed 126.10 points, or 0.73%, to end at 17,311.80.

Nilesh Shah, MD, Kotak Mahindra AMC, said: “This market has tested the nerves of the traders, because despite opening at a gap, it has moved in a completely different direction during the trading session. Since many traders have long options through leverage where even a small change leads to extreme payoffs, it has been a rather harrowing time for them.”

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And this trend is likely to continue for some more time. As Jyotivardhan Jaipuria, founder, Valentis Advisors, said: “Volatility is here to stay till the rise in the dollar peaks out and other currencies also start strengthening. Another important factor is global inflation, which is showing no signs of retreating. Add to this heady mix, the worsening of positions in the Russia-Ukraine war, and things do not look good at all.”

The good as well as bad news

TheIndian markets, compared to global peers, have remained unscathed, if one goes by year-to-date numbers. While most bigger markets have taken double-digit hits, the Sensex or Nifty have been more or less flat. For example: The Nikkei 225, Dow Jones, S&P 500, Hang Seng and Kospi are down between 16.65% 29%. The Sensex, on the other hand, has risen by a marginal 0.27% while the Nifty is down 0.24%. “So, there are fears that the Indian markets could also take a hit in the coming days,” added Jaipuria.

Bank stocks led Monday’s rally, with ICICI Bank, Axis Bank, Bajaj Finserv, State Bank of India, IndusIndia Bank and others witnessing strong buying. RIL and NTPC also contributed to the rise. Overall, the advance-decline ratio on the BSE was 1,520 (up) and 2,009 (down).

Larsen & Toubro, HCL Technologies, Wipro, Tata Steel, Nestle, Power Grid and Bharti Airtel were some of the major losers. In Asia, Kospi and Hang Seng were marginally up while Nikkei ended lower.