It is easier said than done when it comes to timing the market, says a share dealer

For Dinesh Kumar Gupta, detailed worksheets done by him to trade on Monday ahead of the exit polls in the derivatives segment to profit out of market volatility turned futile as Friday’s surge caught him unawares.

Clearly stumped

“All my strategies, which include plain vanilla long futures to slightly cumbersome strategies involving options, will remain only on paper after Friday’s sharp gain,” he said, adding that he will not risk the trade next week, as he was clearly stumped on Friday’s movement.

Not just Gupta, most traders who thought of buying options or futures next week, may have to watch the movements only from the sidelines, as option prices climbed to the highest level since 2009. According to Bloomberg data, India VIX, which gauges the cost of options on the CNX Nifty Index, surged to the highest level since August 2009.

Exit poll leak

Market watchers said a few participants took the advantage of a selective leak of exit poll results suggesting that the Bharatiya Janata Party-led National Democratic Alliance would be very close to the majority mark, leaving others stranded.

Ramesh Chordia, a share dealer and an independent analyst in Chennai, said it is easier said than done when it comes to timing the market. “Can anyone predict when is the best time to enter or exit the market? When the market reacts, it rallies quickly and those trying to time their entry and exit may actually miss the chance,” he said.

UBS early this week in a report said: “Any major directional move is likely to happen only on May 16 and after, in our view, though exit polls will play some role in directing sentiment till the 16th.”

Arun Kejriwal of KRIS Securities said market has risen sharply on Friday expecting a clear mandate. “Entering the market with long positions on Monday will be difficult at these levels,” he added. One should not jump the gun till a clear picture emerges, he said.

Jayant Manglik, President — Retail Distribution, Religare Securities, said: “We were in profit-taking phase for the last two weeks and today’s abrupt rise ended the same. Now, all indications are in the favour of this northward rise to continue ahead as well.”

However, one should remain focused and keep the long positions hedged as elections are set to conclude on Monday and exit polls may bring in some surprise, he added.

(This article was published on May 9, 2014)
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