Traders shun night-outs, lest Greek woes strike

When Europe sneezes, India catches a cold. Or, so it appears from the aversion of market participants in recent weeks to hold on to their positions.

Fears of a debt crisis in Europe and an accompanying sell-off in India have caused participants to trade on an intra-day basis and cut positions over the weekend or even through the night.

The crises in Europe are centred on Greece, which is dealing with debt issues that threaten to spread to other parts of Europe, including Portugal and Spain. Leaders of the European Union, the 27 member bloc of which Greece is a part, on Thursday reached an agreement to help the country deal with its crises.

Previously, fears of a default had resulted in foreign institutional investors selling Rs 3,563.30 crore worth of Indian equities and the benchmark index, the Sensex, losing 1312.22 points since the beginning of the year.

The delivery volumes, or the number of trades that result in actual change in ownership, have dropped substantially since the markets began to fall. In the first week of trading this year, as much as 46.3% of trades resulted in delivery on the Bombay Stock Exchange. This figure dropped to 40.2% this week (markets are closed Friday on account of Mahashivaratri).

On the National Stock Exchange, deliveries have dropped from 39.9% in January to 33%. “People have been preferring to square off their positions and avoid maintaining them overnight. The fear has been that any adverse news about the issues in Greece and also in Spain and Portugal could lead to large swings overnight,” said Anup Bagchi, executive director, ICICI Securities. 

“People are sceptical about the movement of the market and there is more trading happening than the building of long-term positions. There is a fatigue, which has come in with the kind of volatility that we have seen recently and people prefer to trade intra-day,” said Jitendra Panda, senior vice-president, Motilal Oswal Securities.

The Budget, the next big event on the horizon, also has people cautious.  “After the Budget, depending on the provisions, investors are likely to take more long-term calls on which sector could show the most growth,” said Panda.

“The Budget and any decision taken on the securities transaction tax are likely to have an impact on the kind of long-term capital that we might see coming in,” said Rakesh Bansal, CEO, New Age Wealth Management.  He believes the crucial support for the market remains at 4550 and the resistance at 4950.