Being a contrarian would pay even this year. That's the impression one gets after seeing the first trading week of the New Year.
The year 2019 would be defined by volatility, which essentially means that the new year wouldn’t be much different from what the last 12 months had been for the Indian equity market.
In the derivative market, it is the option sellers who make money most of the time. But when they get hit on the wrong side, their loss is pretty bad.
The Nifty had lost just 51 points last week, but the index’s intra-week movements gave enough jitters to traders having both long and short positions, as the Nifty moved in both directions.
Till Thursday, it appeared the Indian market would deliver another week of outperformance against developed markets and other Asian peers. The market mood was upbeat.
Asset prices mostly move in a trend. They either move up, down or sideways with periodic breaks. Every investor or trader is comfortable dealing with these trends.
The market has a tendency to surprise even veterans of the trade. Some market surprises will be remembered and factored in for years on end. The eventful last week held many such surprises.
Despite positive macro developments, the Indian market went into a corrective mode last week.
A key purpose of derivatives instruments is to give a protective cover to one’s trade against event risks.
Last week, the short-covering rally during the November series expiry took the bears by surprise. The bear operators had a busy day on Thursday, making haste to cover their positions.