Do it yourself

The sentiments of greed (risk-taking) and fear (risk-aversion) are two key factors that determine the breadth and depth of the stock market performance over a short term. In the risk-averse phase usually themes like large cap, defensive, value, dividend yield, etc. lead the market performance. In this scenario, the market breadth is usually narrow; fewer companies raise fresh capital; volatility is low; and market breadth is consistently poor. On the other hand, in the risk-taking phase, themes like small and midcap, growth, cyclicals, etc. lead the market performance. In an environment supporting risk-taking, usually the market breadth is strong, volumes are above average, and volatility is higher. The primary market is very active in this phase, as a larger number of entrepreneurs look to raise fresh capital for growth and deleveraging. The year 2024, however, has seen some divergent trends. Several contradictions prevailed, which not only raise doubts about the validity of the...

  In the past two weeks, Indian markets have witnessed heightened intraday volatility. Out of the last nine trading sessions, on six occasions markets witnessed a sharp sell-off from the day’s high levels. Even though, on a weekly basis, Nifty managed to close with marginal gains, the jitteriness amongst traders is conspicuous. The case of Last Friday is particularly noteworthy. The benchmark Nifty corrected almost 2% from the day’s high within a few minutes, ostensibly due to a media report suggesting implementation of the Direct Tax Code in the July 2024 final budget for FY25. The volatility index (India VIX) spiked over 33% to a multi-month high. The finance minister outrightly denied the report calling it “Pure speculation”.   In my view, three clear inferences could be drawn from this instance. First, the market is bravely holding up, in line with the global trend. However, the risk appetite of investors and traders may be diminishing. The margin for error, should so...