Where is the panic button?

The Nifty, for the first time in 4 months, fell below 8000 yesterday. In normal times, this would not prompt for such a fearful title. But in this case, panic might be an understatement.

These are not normal times we are living in.

nifty-panic_700x244
When is it too late to press the panic button?

The headline grabbing news of PM Modi’s demonetization program swept the nation this week. Each and every citizen has been affected. It was such a brazen move that, as a collective public, we are still not exactly sure what to make out of the whole situation.

Massive queues at ATMs. Wondering daily whether the general euphoria that swept through the nation was premature. Is it possible that the entire operation will become a huge disaster? Rating firms are predicting a drop in GDP due to demonetization. We’re not just talking about a small GDP drop either.

Several news organisations quoted an Ambit Capital report that predicts that GDP growth will most likely decelerate from 6.4 percent in the first half of this fiscal to 0.5 percent in the second half—with a distinct possibility of GDP growth contracting in the third quarter.

This is massive news. A 6.5% swing is unprecedented. Add to that the fact that we have a Prime Minister who is imploring the nation to wait “50 days,” suggesting that the country can punish the government if it does not meet the 50-day quota.

When was the last time we have faced such a wide ranging societal situation that affects every demographic?

And that is what makes us wonder if that button with a big P needs to be pressed. But wait, there’s more drama to incorporate into this truly, one-of-a-kind situation.

The United States just voted in their next President, and he’s an enigma amongst enigmas. A man who basically rose to power through Twitter, bullying, sexism, and saying literally anything to get votes—somehow, someway, made his way into the most powerful seat in the world! Donald Trump, the billionaire magnate with zero political experience, is now the leader of the most powerful country in the world. A large majority of America is simply in disbelief that Trump is the next President of the United States.

With demonetization and the rise of perhaps one of the most controversial World Leaders in decades, India is in a precarious situation. It is impossible to tell the exact ripple effect of all this news. So far, the situation doesn’t seem to be out of control. The VIX, which measures volatility, has hovered up in November, but for the most part has not jumped up out of control. This is good news, but might also indicate that investors are simply waiting to see how demonetization impacts the economy.

In the past month, the markets have fallen almost 10%. PM Modi did announce a rate cut due to higher deposits at banks; this should have rallied the markets, but did not.

So the real question comes down to this: what will it take for the markets to climb back up? Do you think the markets will keep tanking? Or do you think that, in due time, the markets will rally? How important is the 50 day benchmark that the Prime Minister has provided? Finally, how does Donald Trump’s ascent to Presidency affect the entire situation?

We welcome your comments and inputs 🙂

  • Rajesh

    To-Mr.Raghu-Mcx has increased margins by double, but Rksv not increased exposer for intraday on mcx. I heard you were trader once, so I hope you understand my request and take immediate action. Thank you.

    • Dear Nikhil,

      Thanks for the feedback! Yes margins are important and we are always on the lookout on what is the appropriate levels of margins to provide. In these volatile times, we might not raise margins on MCX, but we have raised margins on the following segments:

      1. New Margins in MIS. This applies for shorting options and futures only.

      Dream plan – 4X Margin

      2. New Margins in MIS – This applies to Equities.

      Basic plan – 15X Margin in NSE and 20x margin in BSE

      3. New Margins in MIS – This applies to Currency Derivatives.

      Basic plan – 4X Margin.

      We will surely look to raise margins in MCX soon. I appreciate your feedback Nikhil. I’m still a trader 😉

      Cheers,
      Raghu

      • Nikhil

        To-Mr-Raghu- thank you for your reply just what I want to say that earlier I mean upto 31st November 2016 if I want to trade crude Mini in intraday I would have to pay around 1250 rupees but after one day on December 1st 2016 I have seen crude Mini I have to pay 2500 rupees this is because SEBI has increased the initial margins by almost double so carry forward crude Mini I have to pay 5000 rupees instead of earlier day it is 2500 rupees. The volatility is same nothing changed in one day. Please look into this matter because 2500 rupees for crude Mini is not worth to trade at all, this hefty margins will Dent my profits , actually I am not asking you to increase margins at all because if you increase the margins the amount I am paying for intraday the same amount I have paid on November 31st. In India the margins are really heavy as per my knowledge you are there in US you know how the margins are there, please have a look into this matters I have raised, once again I am thanking you for listening me….. may I know that do you trade in Indian commodities like crude gold copper.

        • Dear Nikhil,

          We will definitely look into this. I know how margins in the US (and other countries) differ from India so I do understand your concerns. I will check with the risk team and get back to you personally on this.

          I rarely trade in Indian commodities 🙂

          Cheers,
          Raghu

          • Nikhil

            To-Mr-Raghu- is there any update on my request.thanking you.

          • Dear Nikhil,

            As you rightfully mentioned in your earlier comment, the increase in margins were levied by the exchange (MCX).

            As of now, we do not have plans to increase intraday margins for MCX. While the exchange can make a swift change overnight and double down on its margin requirement, we don’t have that liberty 🙂 We need to always ensure that our clients’ risk is protected at all times. By providing higher intraday margins in a reactionary manner, it puts your money at risk. We are devising a plan to slowly increase intraday margins. As of now, let’s see how the exchange reacts to the latest news developments (as you rightfully mentioned, volatility has not gone up significantly on MCX. Therefore, it is our view is thatmargins will be brought down again on the exchange level in due time).

            I hope I was able to answer your query to the best of my abilities 🙂

            Cheers,
            Raghu

          • Nikhil

            Yes , but mcx don’t double down margins because it’s a mandatory rule from SEBI to collect more margin (double)from clients not because volatility, because SEBI intention is to bring mcx margins in tandem with NSE nifty or stock futures so in future it will pave the way for single ledger for both eqity and commodity segments..As already in NSE you are providing 5x margin you can also provide the same amount of margin for intraday in mcx.( As per my best knowledge this is right ) because mcx can’t collect less than SEBI mandated margins at any given time, so I don’t think mcx will double down margins ( it’s not FMC any more, SEBI is SEBI Rules at first place)…And SEBI don’t change its rules overnight so Mcx also…….Thank you for taking my request and all your efforts………

  • Nikhil

    To-Mr-Raghu -As i requested you in the previous post 2.5 months ago i am still waiting to get FX spot rates in upstox they have been not added since the upstox is introduced and rksv Nest mobile is removed so please include Fx spot rates in the Upstox. Please consider this FX issue seriously …….. ( 2)And also with upstox I m facing problems in market times which is terrible to me, and Left with Call n trade, kindly refer this pic-

    • Orpheus Almeida

      Hey Nikhil,

      Guessing your using the WEB platform. We will add spot rate feeds for currency derivatives soon. Also sorry about the issues you faced during market, you can access our alternate platform at nest.rksv.in as a backup if by any chance anything goes wrong.

      • Nikhil

        No I am not telling you about web, I am telling you about mobile application ,I already given request for this and my request is not considered or being neglected ,can you check my previous comments there I have requested that I want FX rates in mobile but I didn’t got that will you give FX rates on mobile or will you don’t give that I need clarification on this because I am waiting waiting and waiting I can’t wait anymore. I don’t want to waste your time because I have another options to choose if you can give me clear cut decision on this FX issue. Thank you for your reply I am hoping that you can solve this issue immediately you know spot rates are very important to me and I am paying for everything so I deserve basic rates which is am not getting right now now and I am urging(too bad) for that….( please check my previous comments throughly for reference, i raised so many concerns and requested to solve them but none of them was considered or resolved) . Thanks once again..

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