Private investors are more interested in the futures and options (M&A) segment, whose share rose to 41% in April compared to an average of 38% over 12 months.
Market participants say that increased volatility is attracting investors who want to take advantage of the strong fluctuations in equity markets.
The increase in volatility offers operators more opportunities than if the markets were fixed or consolidated. After all, we have seen more than double the interest from private customers compared to last year, says Jimeet Modi, CEO of Samco Securities.
Each year, the VIX volatility indicator for the Indian markets has increased eightfold to a maximum of 83.61 times in March.
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However, market parties believe that a large exposure to the M&A segment can become risky for retailers as large negative movements can quickly lead to capital erosion.
On Tuesday, Nifty (largely traded in the M&A market) opened with an increase of more than 2%, after reports of collisions on the border between India and China pushed the main index into the red. Then it recovered and closed 1% higher. Investors who started building positions with put options pending a larger correction were surprised, which resulted in significant losses, – said the brokerage firm’s trader.
For example, in the graph the Nifty Put – with an exercise price of Rs. 9,900 – saw premiums rise to a daily maximum of Rs. 246 and then erode by 54% of those levels. Such measures led to an erosion of capital for investors who held large positions in the old camp, he added. The director of one of the leading brokerage and finance companies said that private investors should only enter the M&A segment with money they can afford to lose. Investors should never spend more than 5-10% of their portfolio on M&A, he said.
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The Executive Director added that the restrictions imposed by the Indian Securities Board on institutional investors in M&A until the end of March could help to balance M&A volumes for private investors. Since the 23rd. On 1 March, Sebi introduced certain limits for institutional investors to limit short selling, making long and short naked positions in the M&A segment possible under certain conditions.
However, some experts are talking about a temporary increase and think that the interest of private investors may decrease in the coming days.
During the freeze we noticed an increase in interest from market parties. Employees who are home alone seem to have converted short-term traders into short-term bets to take advantage of daily market volatility, said Deepak Jasani, head of retail research at HDFC Securities.
Those with a greater appetite for risky business with M&A. But few will ultimately benefit from this temporary distraction because the principles of learning, discipline and capital management take time to absorb, he added.