Exit polls a trap for small investors in stocks?

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D-Street Tense as BJP Ride in Big States Seems Bumpy (News headline in the Economic Times, Delhi, December 10, 2018)

Ever since the exit polls have hinted at the possibility of defeat of the BJP in three states in the Hindi heartland, there is unanimity that post-result, there will be sharp decline in the stock prices. It must have made small investors nervous.

Ahead of the result of exit poll on December 7 (the results came after the stock markets had closed), the Sensex had fallen by over 369 points. Today, by 11:30 AM, the decline was more than 600 points.

Surprisingly, despite such strong warnings, several stocks, including some nifty heavyweights, have witnessed heavy trading. The volumes are in millions. True, panicky small investors must be trying to save whatever little they can do but there cannot be sale unless there are buyers. There may be speculative sellers hoping further decline when they will square up.

The world over, stock market is highly manipulated by powerful cartels. When market falls sharply, stock prices decline almost across-the-board. When market rises sharply, stock prices go up, almost across-the-board. Small investors cannot achieve such a feat because they cannot coordinate their purchase or sale. Such a scenario is possible only when cartels are operating. In such a scenario, most of the small investors suffer losses. Regulators remain mute spectators.

Such cartels cannot miss any opportunity to make a killing. My gut feeling is that taking advantage of the panic in the market, the cartels are cornering popular  traded shares.

I wonder, if it is a sign of the exit polls going wrong. If that happens, there will be sharp upward movement in the stock prices and those who have bought at lower prices will earn billions of rupees.

Heavily traded Nifty heavyweights

Share Price at 11:30 AM (Rs.) Decline in price Volume
Bank of Baroda 105.40 0.94% 5.57 million
HCL technology 948.40 1.35% 1.58 million
HDFC bank 2092.55 0.71% 1.38 million
Hindalco 218.10 0.32% 3.77 million
ITC 270.30 1.37% 3.6 million
Infosys 672.00 1.58% 1.76 million
Jindal steel and power 144.50 1.63% 5.11 million
ONGC 139.05 0.25% 14.46 million
Reliance industries 1088.80 3.97% 4.95 million
State bank of India 273.40 0.73% 3.8 3 million

 

Other heavily traded shares

Share Price at 11:30 AM (Rs.) Decline in price Volume
Bharat Electronics 79.15 1.19% 7.67 million
Federal bank 84.25 0.90% 4.77 million
GMR 14.95 1.64% 7.5 1 million
NBCC 49.25 4.92% 6.3 million
NCC 78.0 2.74% 2.23 million
PC jeweller 63.25 4.74% 6.11 million
Vakrangee 38.95 5.00 10.28 million

 

(Source: Moneycontrol.com)

 

Devendra Narain

December 10, 2018

PS

My assessment was correct. The operators had created panic to bring the stock prices down. Today, both Sensex and nifty have recovered all the losses and most of the stocks are in green. The sharp fall in the stock prices on December 10, had nothing to do with the fear of defeat of the BJP in the Hindi heartland.

Devendra Narain

December 12, 2018

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