The globalisation of Indian equity markets, thanks to the increasing role of foreign institutional investors, may well have led to big gains for the investors, but for traders, it has changed the rules of the game.
The market, whose movements are more and more determined by foreign events, is not the same for many veterans who are being forced to come up with new strategies and stay up longer for every rupee they make.
"I have shrunk my trading volume by nearly 80 per cent," says Rajesh Kapasi, a trader with IL&FS in Ghatkopar, "I can't trade in this kind of market." Kapasi says reacting to the volatility of day to day price movements.
"Till now, most traders were just counter-watching, but now everything seems determined by which FII or which mutual fund is coming to the market on Monday with how much to sell. Most traders I know are either completely out of the market or trading with very small volumes," he points out.
While the bull-run may have filled the pockets of many traders to the point of overflow over the last year, the first major bout of volatility, intensified by the increasing presence of foreign money, is making the traders' work seem nearly impossible to many within the ranks.
For example, foreign investor activity now accounted for nearly 18 per cent of the total turnover in May this year on BSE and NSE, against just 10 per cent May last year.
"It is a completely changed scenario now," says Nitin Parekh, a trader of 15 years based in Ahmedabad, "traders have to evolve a new strategy to cope with the new situation."
Parekh, who could more or less guarantee himself a return till now buying at closing hour and selling at opening bell next day due to the bullish trend, is forced to stretch his resources to make a profit now. "It has become very difficult to operate," he says.
"I have to look at the closing levels of global markets everyday. While earlier, you could get a hint at tomorrow's market direction by looking at Monday's trend, now it depends almost entirely on what happens in the foreign markets while you are sleeping," he adds.
The news-dependent nature of the current market, with the accompanying volatility, flummoxes everyone except the most well-informed of traders, he points out.
"Traders operate by collecting the volume and price data of a particular scrip and they take some time in making up their mind using the data. But now the condition is such that something usually happens in the time they take to make up their mind and the market, including the stock, reverse its trend," points out Parekh, who believes that Indian traders are on their way to evolving a new 'global' strategy.
Pankaj Ved, a trader based in Marine Lines, has been one of the quick ones to learn "The idea is to trade only intra-day," he says, "holding over-night is a no-no because you never know what you will find when you wake up." Ved, who also trades for others, has also evolved a strategy to beat the crash blues.
"Besides restricting trade to intra-day, have a very clearly defined stop-loss, whether you are in a climbing market that you shorted or a falling market when you are long," he says.
While the falling market may seem like a shorter's paradise, many traders have already burnt their fingers over the past one month.
"There is a tendency to increase the amount of exposure when you see that shorting (selling in the early trade to settle at lower prices later in a falling market) brings you more and more money, so, when the market finally decides to rally, your actual loss is more than what is represented by the rise in prices," Kapasi points out.Sensex Rise and Fall: Complete Coverage
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