Tech glitch, sharp rise of Sensex point to steep fall of Nifty

THE National Stock Exchange's technical glitch limited the trading for just two and half hours initially and later extended till 5 pm after the glitch was resolved. The issue arose because of the telecom link issue. All the day traders were in a confused state about their positions. The NSE shut at 11.40 am, and the market participants did not get any clarification about the resumption of the trading during the regular trading hours. Just before five minutes of regular closing, NSE announced the resumption of trading. Even then, some brokers complained about the order executions. Lack of communication with the NSE made jitters among the traders.

The Nifty closed with an astonishing gain of 274.20 points and closed at 14,982. The Bank Nifty registered a 1335.35 points gain and closed at 35,452.30. Even the Fin Nifty was up by 3.4 per cent. Barring IT Nifty, all the sectoral indices advanced and closed in positive territory. IT index fell by 0.11 per cent. India VIX was down by 4.20 per cent and settled at 24.17. The overall market breadth is extremely positive. Meanwhile, the trading activity shifted to BSE as the trading was as usual. The Sensex, at the end of the day, gained 1030.28 points and settled at 50,781.69.

With today's aberration of price movement because of a technical glitch, we cannot blindly trust today's gain. The benchmark indices, BSE Sensex and the Nifty closed above the 20DMA and above the prior day. The cash volumes were at a record level today. We need to get clarity on derivative positions. As there was a huge number of squared or covered positions added, there were many sharp moves that occurred in many of the stocks. The aberration may get cooled off by tomorrow.

The worry is about derivative trades that are expiring on Thursday and the Intraday option positions. Before the expiry, the rollover activity in the last three days has been very high. As the trading stalled, all the open orders stand cancelled. But, there is no clarity on intraday positions, which was highly leveraged.

Even positional trades also get a beating once the exchange opens for trading. Many traders are worried about their intraday position. The top broking house Zerodha announced that they could not do anything about the intraday Futures and Options position, which has created more worries.

The question is they squared off automatically or not? As NSE trading stopped out, the activity shifted to the BSE. The majority of the positions squared off at the end of the day as the fears of a probable major fall on Thursday increased. It is better to wait for indices to settle down and once the cool off period is over, take the positions in March contracts only positional. Better not to try intraday trading for the day.

(The author is a financial journalist, technical analyst, trainer, family fund manager)