Sensex has made a historic move today with a triple circuit by closing almost 2100 points up.
First time ever trading was halted for a whole day because of an up move of more then the specified circuit limit levels based on quarterly closing which is at 975/1460/1950 + respectively. Sensex ended up 2110 points up.
The upmove has really surprised everyone of the street including me but for us its been a pleasant surprise as have been on stock specific longs and more the merrier.
Many would be creditting this move to the LEFT OUT feeling but data suggests it might be a SHORT OUT system issue which can be a lil serious.
Lets go through certain statistical facts and observations:
-- > All previous Sensex /Nifty circuits were down circuits aided by margin selling or external news. Volumes were always equal or more then the 2 week average qty. We never saw it hit the circuit limit 3rd time.
-- > This is the fastest time in which markets hit a circuit since the down circuit on p-note issue but it recovered by end of day. Total trading time was less then 2 minutes in the double halt today.
--- > Generally circuits are seen mainly due to either margin selling or an external event impact. P-note , Sub prime Dow Jones , Elections were numerous issues.
--- > The current up-move can be attributed to short covering and one of the most disturbing fact is the entire move on NSE has been through only 3000 crores. This implies the amount of shorts in the system have still not been covered and will be left scrambling to do the same tomorrow.
--- > In todays rise was so quick in seconds that BSE/NSE systems failed to put a freeze on the 1st circuit limit and the indices inched up to the 15% limit. Indices got a 2 hour halt together.
-- > As per derivatives data and market-men there is a huge amount of short build-up in Nifty futures and Calls of 3800 to 4200 series in Nifty have been written heavily. Some of this might be hedging and strategy positions which need to be covered desperately. Lot many brokers are into margin issues from clients with short positions. Will it be opposite of the MARGIN SELLING in earlier falls and we would see MARGIN BUYING in derivatives. Will not attribute any further buying to left out feeling. All in all the huge shorts still in the system and need to be covered for some normalcy in the index.
-- > Statistically its a classical short squeeze as SHORTS as even after a 17 % move the huge shorts in the system have got no chance to cover. Panic Buying by FII Hedge Funds , HNIs and other participants would be seen in the opening bell.
-- > As per statistics Domestic institutional investors /MFs and mainly Insurance companies have been the big buyers whereas FIIs were left out. Hope to see LIC and others coming out to sell to bring normalcy in the market.
-- > If this doesnt happen MARGIN BUYING by brokers , Panic buying by FIIs /MFs to increase allocations can wreck havoc in the system on opening bell. Hope SEBI and Exchanges need not intervene with differential ckt limits or time halts.
Somehow all this points to a safe booking route for investors who bought at lower levels. 14.5k/15.8k levels are one of the best to get out of over-run stocks book half or more of holdings.
This is just a personal view which may not be well -researched but exploring the current facts.
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