Haphazard Linkages

My posts seem to have a direct relationship with liquidity and credit availability in the markets... both have dried up! In this post I draw insights from the beautiful, non-linear world of Options. The title is a grammatical mess but it captures the central idea behind this post. I make a case for increasing volatility over the next two months in the Indian markets and possible ways for investors to play this. I'm am azed at the near-term thinking manifesting even in the options world. The markets are so riveted on the near month expiry that th ey forget there's a next month...and a month after that. India will go to elections starting mid-April and the spectacle will be for everyone to see over a 1 month period. As always, this time will most likely see tugs-of-word wars and plenty of ego-massages as one party tried to outdo the other in gaining the coveted majority number. Pre -election opinions point to a fractured mandate and there's a very high probabili...

After venting my thoughts on the state of India , the country, I return to the world of equities – and sanity - with this post. Seasons come and go, years go by…but to suggest some connection between the weather and the equity market would sound somewhat ludicrous, won’t it? I had this strange hypothesis of Summer being the worst ‘season’ to trade Indian equities, and Winter the best. Did the actual numbers support this theory? Apart from the intellectual exercise, I wanted to see if a trading strategy could be built around the Indian seasons. Here’s the outcome of my curiosity... In this post, I take a look at the performance of the BSE Sensex since its birth. A ‘filter’ he re is that I have split up the months of the calendar year based on the ‘Indian Seasons’. So, I have June to September representing the Monsoon season, October to January representing Winter, and February to May representing Summer. Summer Effect There are some sound reasons for Summer being th...

A common theme in investing is that, in the long-term, asset prices adhere to fundamentals. The road to adherence is often an irregular one, prices overshoot and undershoot along the way...but ultimately, they behave like obedient children. Sometimes though, the relationships between asset prices are hidden from the eye. Peer through the layers and one might just be able to come up with a relationship that could form the basis of a trading strategy. 'Corn'y Connection , is one such linkage... The Craze for Maize Lot of factors have driven corn (maize) prices of late. The rush of demand for et hanol has ensured that corn finally got its due. Apart from the fundamental factors of demand and supply, speculative demand for the commodity has served to increase the volatility in corn prices. Not surprisingly, corn prices have surged quite a bit (refer adjoining figure) . Along with the rise in corn prices, the 200-day historic volatility has increased significantly. Cor...