Sunday, April 26, 2015

Volatility - An unsustainable Goliath

Last financial year, be it from a January - December period or April - March period, was a year with great returns for investors in bourses across the globe. Indices across globe gave returns of around 15 - 40 % on an average, the best performing asset class for the investors. Metals lost sheen, crude starting plummeting ( Short Bets though minted a lot but took brokers by surprise initially) but bourses were the best return reapers for the brokers/investors.

Though it seems like that bourses would yet again be the best return minting instrument but the imbibed volatility of indices makes it really tricky for a retail investor to track the markets. Algorithmic trading with massive bets makes it really intriguing for the retail investors to gauge the momentum and that is where they burn their fingers. I dont have the precise numbers right now with Retail investors'/FII's or DII's gain/loss percentage, but the implied volatility has kept the small and brittle investors on their toes.

This year with Greece's oust almost inevitable, until a dramatic treaty is signed with the creditors in couple of weeks, US Fed's unavoidable interest rate hike lined up in 2-4 months, China's stability concerns, Yemen's stability and crude's supply concerns and domestic economy's reliance on global trade, it is said to be a year of big bang Volatilities.

In India, the upcoming monsoon's 8-10% deficit prediction would be of a big worry as well. Where on one hand, the effects of Modi's 1 year regime is still not visible on the ground, unsustained nature's bait (unseasonal rains and recent earthquake's destruction) would add on to the already volatile markets.

This year without knowing where the markets would actually move, one thing is for sure that the movements would be massive and would be unsustainable for atleast the retail investors.