Another freak event sends Nifty futures crashing over 5%

PALAK SHAH Updated on July 28, 2021

The fall in Nifty August futures was only for a few seconds and recovered to trade above 15,600 levels.

Derivative traders on the National Stock Exchange were taken by surprise on Wednesday, when Nifty futures for August expiry crashed 5 per cent or over 531 points to a low of 15,256 from its opening level of 15,787.

The current month’s Nifty futures and even the underlying index were trading higher than 15,700. A sudden spike/fall spells trouble for derivative traders as it triggers stop-loss orders, causing losses.

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Second such incident

Wednesday’s unusual move in Nifty futures was the second in less than three weeks. In July first week, traders were hit when the current month Nifty futures rose to a lifetime high of 16,546, surging 800 points or 5 per cent over its previous close of 15,741. At that time, the underlying Nifty index was trading below 15,800. On both occasions, the reversal to normal happened in a few seconds. The NSE had earlier said it was looking into specific trades and traders. But, on Wednesday, did not respond to BusinessLine.

“Until there is an investigation or NSE clarifies, we will treat this Nifty flash crash as a coincidence... Nifty traders either need to figure out how to limit losses due to such events or just stop trading. The second scenario seems to be the only option for now. It was a bad day for many...,” said a derivatives dealer at one of Mumbai’s largest stockbroking firms.

 

Published on July 28, 2021
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