Thursday, January 13, 2011

Trading in Global Indices

Yes, we can.

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Market regulator SEBI Tuesday paved the way for Indian investors to trade in large indices of 24 global exchanges, including that of US, Europe and Asia.

As per a SEBI circular, Indian exchanges will be able to provide trading in derivatives contracts of these global indices.
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Thanks to Gaurav for pointing out this important piece of news for traders. It should be just a matter of time before the NSE introduces Index contracts on all the 24 global indices. So, the opportunity will come to trade in many different markets. There will be two practical issues:
1. Liquidity. Notice how the CNXIT contract remains illiquid. The foreign based indices may remain even more illiquid.
2. Trading Time. Will we trade when the original market is trading? This means trading on the Nikkei should start early morning, and, so on. If we do not trade in the same period, then our market will be confronted with repeated gaps and remain listless throughout the day. Notice how Silver/Gold contracts remain dull till 6 PM when trading starts in the USA.

With all of these issues, there is no doubt that interesting times are ahead.

Tuesday, January 11, 2011

Missing Retail

On Monday afternoon, the Nifty was down another 120 points or so when Ashu Madan from Religare was part of the guest list. I was also participating in the discussion. Ashu pointed out the absence of retail positions in the F&O segment. I wanted to clarify, therefore I asked a direct question to Ashu. My question was: Does this mean that the current decline is not due to the cutting of retail f&o positions? Yes, said Ashu. Retail was badly hurt when the mid caps fell in the early December decline, and, they did not come back. So, in the current decline, there were negligible F&O positions by retail. He pointed out that the selling is being done by people who actually want to get out.

My Notes: Often, when markets fall rapidly due to the cutting down of retail positions by brokers, a revival comes since smart money comes in to buy at lower levels. Now, smart money may be selling, then who will come to buy?

A second point: where is retail? Maybe, retail has become smarter than 'smart money'. I hope so.

Monday, January 10, 2011

The Trend is Down

I hope readers have been listening to me on ET Now, every morning. I have sufficient time to explain the Nifty trend, and this has been fairly consistent. Last week, I had advised taking of partial profits on Nifty, first at 6080 and then at 6150. I had suggested that 6130 should be used as a stop loss for any long positions.

On Friday morning, I explained that technicals have deterioriated sharply. The Nifty has failed to cross its previous highs, thus setting up a three drives pattern - in which three moves to the top or bottom fail. I ahd given a level of 6045 in Nifty Futures below which we become short sellers. I had also warned against entering mid caps and small caps.

Once 5940 was taken out, the intermediate trend turned down. Now, we are in this down trend, so we have to go with the flow.

If you are not getting ET Now on your cable/satellite then you should take the channel as an add-on. It is well worth the extra cost of 10 rupees or so per month.

Monday, January 3, 2011

Wishing you a happy new year

It is 2011, with the stock markets moving up day by day.

I am fairly busy with increased time committments to ET-Now and my own work, so I have not been able to write. I apologize for this absence. I hope readers have been watching me on TV, sharing my ideas on the markets.

The trend is up, which is what I say repeatedly. At current levels, it is wise to wait for a process of consolidation before taking new positions. Traders may take partial profits on rallies, there will be dips and corrections when positions can be restored.