Will the markets remain in limbo for a while?

Who would have thought - having started at 15,500+ in the morning, that we would get almost to 15,000 by the time the trade ended. The intraday swing was simply too large.

The morning looked fine, the US was up, Asian markets were all rallying and we came in and started with a 200-point gap-up. Shorts were covering, it looked like the worst was behind us, the global mood had settled, and the market looked like it had a fair shot of going back to where it came down from, and then came the afternoon.

By about 1:30 in the afternoon, we came to know that BNP Paribas in France had been bitten by the subprime bug. It had frozen three of its funds because of the subprime exposure and that sent most of the European markets into a bit of a tizzy.

Most of them while we were trading, were down about 1.5% apiece, and from 15,500 the slide that started, took us all the way down to about 15,000. Almost a 500-point fall at one point from the highest point of the day; recovered a bit, but still managed to close only about a couple of hundred points down.

And the Nifty , after trading at 4,520+ closed at 4,400, barely by the skin of its teeth. So, a 120-point plus slide from the top of the day. This has been one alarming sell-off in the second half of the day. In absolute terms it may not look very large. But from the highest point of the day it has sold-off quite substantially.

It was interesting how the Nifty Futures was responding while all of this was happening. When the first cut came, the shorts that were trapped, might actually have squared up some of their positions. But the Nifty Futures discount came down to about 20-24 points. But by the time trade ended, that had widened to 45-48 points. So, fresh shorts built up once again, as the market realised that the volatility has not died down yet. So, it is global in nature and it has tipped us from the highs of the day quite significantly. Now, we just have to wait and see what the US does overnight and how the Asian markets pick it up early in the morning tomorrow.

Significantly, volumes picked up quite a bit in today’s trade. We reached nearly Rs 70,000 crore in today’s session, which is the highest that we have seen in the last many sessions. It is disturbing to see so much volatility accompanied by extremely high volumes and most of the volumes were happening in the Nifty Futures today as it swung around wildly.

The midcaps did not do very well. We saw the advance-decline ratio, which started at 10:1, advance to declines, close at almost 3 declining stocks to every advancing stock. So, the picture had turned around completely by the time trade ended for us.

In the large cap space, SBI, Reliance , Hindustan Unilever , were some of the stocks that dented us and the rupee also curiously did not do much today. It has not depreciated a whole lot just yet. And technology is still struggling. It had a good rally yesterday, but today came off with the rest of the market, with most of the frontline tech stocks, actually closing in the red.

Outside the index, we had some decent rallies in stocks like Orbit , Lanco , Emkay Shares . But they were few and far between. The more material, liquid lot actually took a bit of a hammering. Stocks like IFCI , IDBI , Neyveli , PFC, India Cement , all those liquid stocks took a big hammering today. In fact, the midcap index lost about a couple of percentage points, which was not good going at all.

Omaxe listed and listed at about Rs 400 on its issue price of Rs 310. But with the rest of the market came off and closed around Rs 350-360. So, it is not a bad listing, not one of those disastrous ones, but not a spectacular one at all. So, a difficult day to list, at least a difficult afternoon to list.

Net-net, the take away from today’s trade is that we have not put the global volatility behind us just yet. It still continues; and our edginess is also shown by every bit of adverse global news that comes in the way we sold-off today.

So, we need to fasten our seat belts and see how the next few days pan out. It still remains in a bit of a limbo, and extremely prone to cues from the global markets.