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Week Recap


Crazy week, so I post zis update.

Inflation hits 11.98%
At 11.98% we are just being silly. There is no point of anything at this rate. We have to stop this madness, because the longer inflation is at this point the higher the impact is going to be on everything.

Add to it the great steel results and the mention that they will raise prices soon. It’s going to get worse, so:

RBI Raises Rates by 50 bps to 9%
And ICICI and HDFC raised loan rates by 75 bps. And perhaps, says Crisil, banks will see a steep rise in defaults, both on credit cards and on personal loans. The loss liability is higher as RBI is not going to like a tough recovery stance, and the overall high inflation/high interest rate cycle will definitely result in job losses – meaning less income, and more defaults. Vicious.

Futures Expiry after a volatile month
The month the trading was insane. First the index went all the way down to 3800, and in a matter of a week, recovered to 4500. Moves of 3% were common – there was a 6% up day and a 5% down day as well. This is probably the most volatile month in the Nifty’s history.

And guess where the index ends up on expiry day: at 4333, a few points away from the June expiry value. Roller coasters always let you off where you started, huh?

Crude Destruction
Crude fell from its highs of $144+ to some $121. Some people got hurt, some people rejoiced. I don’t trade crude so no impact on anything I did, except of course I can write about it.

Results: Nifty lost the EPS battle
But you already knew that.

Trading Systems
The mad month had big upsides and big downsides. One system lost its head in the volatility, and gave us a big drawdown after which we said goodbye to it. Another one literally made up for it – but we had learnt a lesson and reduced leverage to zero (so in capital terms the loss was bigger than the gain). From last expiry to this one, we were up only 3% or so against a flat index, but July as a month has been lousy.

Still, the intraday systems have done well. One is way above estimates and back tests – less than a 3% draw down with a 20% return this month (unlevered), and another is flat. The learnings are enormous, of course – and the more we research, the more systems we discard and the educational process improves.

Now is the time for bigger and better systems. I can’t believe management so I will not even think fundamental – but price is great as an indicator. Only problem right now is that the volumes are lousy.

Hopefully the coming few weeks will be better. For all the drama, it feels good to come out of it without having to pay a lot for the education.


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