It simply takes a day's trade to rob you of years' gains
by Vyas Mohan/ DNA Money
Mr Bull (Piyush), as his friends fondly call him, is a student of commerce in Bombay University. He loves fast cars and partying. However, what he really fancied was the way he met his needs. Treading the razor-edged equity markets was some quick buck and real thrill. On May 18, 2006, after the trading, the broker asked him to pay Rs 17 lakh on the account of the loss he had suffered. However, Piyush claimed that his loss was not, in any case, more than Rs 2 lakh.
Subsequently, a complaint was filed with Sebi on the matter. The best of Bull’s days are now bygones.
Mr Singh (50) was a regular visitor to a brokerage located in the suburban Mumbai. Rarely did he own shares for more than a day, for the simple reason that he was making more money than those who held shares. Having started with Rs 50,000 three-and-half years back, his kitty had swollen to a little over Rs four lakh and that was enough for him to get his daughter married.
Since mid-May of 2006, he has not appeared in the broking house and his phone is not available ‘due to operational reasons’. The said instances are just the tip of an iceberg. Taken for a ride by the Sensex, post-May 11, day traders, who account for about half of the turnover on a day’s trade, have opted to stay out of the fence.
The Sensex, marched up from 8,800 to 12,600 covering an average 25 points a day. The fall was unexpectedly steep that it even created rumours of a scam similar to those in its woebegone days. The market clocked an average of more than 140 points in its slide from 12,600 levels to hit a low of 8,929 points.
“Day traders are not to be seen in the market after it fell. People in the industry put their loss together at Rs 600-700 crore from May 18 to first week of June, though no one is sure about this figure,” said Suresh Paramar of Darashaw Broking and Investment Banking.
“In the last one month, they have lost what they made in the last one year. They are fed up with the market. Even brokers do not want them to trade. What a day trader does not like is a market that moves in one direction, which has been the case in the recent past,” said Arun Kejriwal of Kejriwal Research and Investment Services.
Ideally, a day trader should be making money in a volatile market. A day trader would sell short on a day of fall and pick the stock at lower levels to profit. Some how, Indian traders did not make any money, though there were some isolated cases of gain. “I know people who have lost more than 20 lakh in a single day. They followed tips and went long on cement stocks like India Cements and Gujarat Ambuja. Luckily, I succeeded in doubling my investment in a week. I had gone put on Nifty and a couple of shares like HLL and Grasim. I squared off on May 17, 2006 and stayed away from the market for two weeks,” said a day trader who takes pride in his judgement of the market.
“Unfortunately, 99% of Indian day traders are bulls. Hence, they invariably lose on a day of fall. With the kind of losses they have suffered in the recent market fall, they are on a cautious foot and most brokers are advising their clients to stay away from day trading,” said Gaurang Shah, area manager of Geojit Financial Services.
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