'What happened at NSE on Wed has impact on investor emotions'
February 25, 2021 11:38
On Wednesday, February 24, the Nifty, after touching a 17 trading day-low of 14,504 closed at 14,982, a whopping 274 point or 1.86 per cent gain, on a day when the National Stock Exchange, the exchange on which Nifty Futures is traded, was halted for trading at around 11.40 am, a good 1 hour 34 minutes after the ticker for the spot Nifty froze at 10.06 am according to some reports.
Much of the action, and a dramatic one at that, was witnessed when the NSE resumed trading post market hours. When trading resumed at 3.45 pm (the NSE on normal days opens at 9.15 am and closes at 3.30 pm) and continued till 5 pm, day-traders who had open positions on the index futures as well as stock futures and cash began covering their positions frantically, given the monthly expiry on Thursday, February 25, the Nifty opened the trade at around 14,760 and rose sharply towards the 15,000 psychological mark within an hour.
Interestingly, and intriguingly -- because the honchos at the NSE and the market regulator SEBI will surely look into this; in fact, the SEBI has asked the NSE for a root-cause analysis (external link) of events that led to a complete trading halt since 11.40 am -- on the Nifty futures, a freak trade printed the 15,524 mark (the exchange will surely throw light on the volume of shares that traded a massive 500 points above the Nifty Futures close of 14996; SEBI too will not let this pass just as easily), before closing below the 15,000 mark.
Gaurav Garg, head of research at CapitalVia Global Research Limited, explains what happened to Prasanna D Zore/Rediff.com:
How do retail investors suffer when NSE suffers a glitch like it did on Wednesday and why was trading halted on the NSE from 11.40 am till the market close and the again resumed from 3.45 pm to 5 pm? What would be your advice to day traders?
The glitch was about the NSE not being able to get some feed from their telecom service providers. The spot index price (Nifty 50) was stuck at the same level for more than 90 minutes (according to reports the spot prices stopped moving from 10.06 am and trading was halted at 11.40 am) before they actually decided to halt trading.
These glitches affect intra-day traders more than long-term traders and if you are not ready for these type of risks then retail investors should only enter for the long-term. They should not indulge in day-trading.
Definitely, from sentiment point of view when these things get reported and become bold headlines in newspapers they do scare retail investors who want to enter the markets. Retail investors are obviously scared and left to think twice before they enter when they read about such happenings in the market.
What happened has an impact more on emotions and sentiments of retail investors.
Day-traders were surely a worried lot for they had to worry about their open positions and they did not know till the market closed how they were going to square off their positions.
Thursday is the monthly expiry so there are huge F&O positions that are open; it must really have been a tough day for day-traders.
For long term investors, events like this have a temporary sentimental impact.
What led to the sudden jump in the market after NSE opened for trade post the glitch at 3.45 pm? The markets were not so bullish in the morning when trading halted at 11.40 am...
After five days of losing-streak, short covering action was witnessed due to which Nifty touched 15,000 intra-day (some freak trade was even done at 15524, 500 points away from close on Wednesday) and closed just below that level. Nifty Bank (an index of banking stocks from the public and private sector) which surged more than 1,300 points because of announcement by Finance Minister Nirmala Sitharaman that the government is lifting embargo on private banks to participate in the government tax and other revenue collection programmes.
With this, private banks can now be equal partners in development of the Indian economy, furthering the government's social sector initiatives and enhancing customer convenience.
We might see some more positive momentum coming in on Thursday, February 25 as it is monthly expiry (when all futures and options contracts for the given months expire and have to be settled) and a fair bit of short covering can happen.
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