April 7 Market Mayhem Causes Panic Among Traders; Slashes Exposure to Fraction

Though traders expected the market to fall on April 7, however, the extent of the decline caused shockwaves across the street, creating an environment of panic among the market participants. Traders decided to cut their exposure to a fraction until clarity on global events such as tariffs and counter tariffs emerges.

All the major indices opened with a gap-down of about 5%, ending 3% lower than the previous day’s close. India VIX (Volatility Index), shot up by 65% in a single day.

Traders were surprised by the extent of the fall and sudden spike in the last one hour of trading on April 7.

Jitendra Jain, a veteran trader, said he had no-trade day on April 7 following Friday's market close. According to him, many traders avoided quarterly payout on Friday (April 4) bought cheap out-of-the-money options and incurred massive losses.

Brokers are mandated to transfer unused funds back to the clients' bank accounts on quarterly basis, which fell on April 4. Making these payments into the banks can be an operational hassle, so, if large sums of money are involved, traders buy options. However, this step proved to be a hassle in this volatile market.

Another veteran trader said that one person had to take a loss of close to ₹50 lakh because of this reason.

Jain plans to deploy only 25 percent of his capital in the coming days and Rajesh Sriwastava, another veteran trader, only 10%. “There is too much uncertainty,” Sriwastava said, adding, “unless there is a clear signal from the US that there will be a resolution to the tariff stand-off, this uncertainty will remain and we will deploying only a fraction of the capital”.

Sriwastava, and a few other traders to whom Moneycontrol spoke to, said that they were even surprised by the recovery made by the market in the last one hour. Sriwastava said, “It could not be explained by anything since the global conditions were still uncertain.”

According to him, a 90-day pause in US tariff rollout, which has been much talked about, could result in a relief rally but that still does not give confidence to re-enter the market as before this correction.