Indian stock market has a silver lining amid global meltdown: Nithin Kamath


The co-founder of online brokerage Zerodha, Nithin Kamath, claimed on Monday that this dark cloud (global collapse) also had a silver lining for India in the form of “leverage” in the market. capital. Leverage in times like these usually accentuates the drop, Kamath writes on Twitter.

“The silver lining for India in the current global meltdown is that we may continue to outperform other markets on a relative basis due to low levels of leverage in our capital markets,” Kamath tweeted.

In a series of tweets, he explained how leverage resembles WMDs (Weapon of Mass Destruction), leading to excesses both uphill and downhill.

“When the markets fall, leveraged long positions are needed to provide additional margins, otherwise the positions are forced out, causing the markets to fall even further,” said the co-founder of Zerodha.

He added, “Thanks to regulatory changes, the leverage offered by brokers is now limited to margin funding and at very low levels. Higher margin requirements across the board have also reduced risk. Even lending against securities offered by NBFC/Banks is at historic lows.”

“Even in F&O, most business has shifted to options, which, while risky for a trader, does not carry as much risk of forced liquidations across the board as futures,” he said. -he adds.

“Btw, impossible to understand FII leverage outside of India that could lead to liquidations here,” he wrote on Twitter.

Kamath has previously expressed concern over the sharp drop in stock prices of big tech companies such as Apple, Microsoft, Google parent Alphabet and other tech-heavy companies across the globe, calling the market move a “crazy” and almost like dot-boom com.

On Monday, Dalal Street sank into a sea of ​​red, reflecting a slump in global equities, as investors braced for steeper rate hikes from the Federal Reserve after U.S. consumer inflation hit a high of four decades.

The incessant outflow of foreign funds and the rupiah’s breach of the 78 mark against the US dollar for the first time have further aggravated risk appetite.

Extending its losses to the second consecutive session, the 30-stock Sensex BSE fell 1,456.74 points or 2.68% to end at 52,846.70.

The broader NSE Nifty was up 427.40 points or 2.64% at 15,774.40.

Investor wealth has plummeted 6.64 lakh crore in Monday’s session, with the market capitalization of all BSE-listed companies falling to 2,45,19,673.44 crore.

Bajaj Finserv was the biggest loser in the Sensex pack, slipping 7.02%, followed by Bajaj Finance, IndusInd Bank, Tech Mahindra, ICICI Bank, TCS, NTPC, Infosys and SBI.

Nestlé India was the sole winner among Sensex voters, rising 0.46%.

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