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Commentary

Of Crashes And Travels

I’ve been involved in moving to Mumbai – so no posts for the last few days. Today I am in Hubli, and preparing for tomorrow’s drive to Pune with my wife and 11 month old Varun. And I see that the market has crashed BIG time, and with my reliable Reliance Data Card I see how much I’ve lost (and gained!)

This looks pretty bad – Nifty at 5700, down from the 6300 levels just a few days back on Jan 8. A fall of 600 points in about 10 days, most of which happened in about three trading sessions.

I’ve maintained that the market has been overheated for the last three months – in fact I sold nearly all of my short-mid-term holdings in November, when the Index was around this level (5700 types). Still, this momentum was driven largely by retail and could have taken us anywhere, but it seems to have run out of steam now.

Is this the end? Will the index go down further or go back to earlier highs? I’ll be honest: I don’t know. It’s going down, the primary trend is down, and I would follow the trend. There may be pullbacks – bear market rallys are sharp and fast – which can seem to be an uptrend again. Don’t fall for it – I would use it as a place to get out at potentially lower losses on long trades.

My trades: My trailing stops have been triggered – Reliance for one (which I need to get out once I’m settled in Mumbai), Canara Bank (which I’m out of now) and some others, though I’m sticking with Pharma for now. The NiftyBEES which I hold is dangerously close to my exit point too.

I had also bought some 5800 puts (for Rs. 60) when the index was at 6200. Those seem to have helped – they are currently priced at 209+. I might choose to get out of them but only on a trend reversal. I have some short positions in ICICI which are doing quite well, and some more in the Mini Nifty contracts which is good because I can get out 20 at a time rather than 50 at a time. I’ve pretty much offset any long position losses against my short contracts.

If you asked me, I would simply say sell now. But I’ve been known to be wrong, so don’t take my advise at face value. The warning signs are out there, and things are ominous.

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