Circuit Breakers

Circuit breakers on the stock market work in a similar way to how an electrical fuse halts the working of the devices once there is too much load. It helps in stopping the system for a small period of time rather than breaking the system.

Technorati Tags: Indian Stock Markets,BSE NSE Circuits

Index Circuits

In case the index(BSE or NSE) rises or falls by more than ten percent, the circuit breaker kicks in and halts trading. Depending on the change in indexes, different period of break times are put in. Complete information related to the how much time the trading is halted can be found here. In case of a 10% movement of either of these indices, there would be a one-hour market halt if the movement takes place before 1:00 p.m. In case the movement takes place at or after 1:00 p.m. but before 2:30 p.m. there would be trading halt for ½ hour. In case movement takes place at or after 2:30 p.m. there will be no trading halt at the 10% level and market shall continue trading. In case if the market hits 10% before 1 p.m. then as explained there would be a one hour halt in trading and after resumption of trade in case if the market hits 15% in either index, then there shall be a two-hour halt. If the 15% trigger is reached on or after 1:00p.m. but before 2:00 p.m., there shall be a one-hour halt. If the 15% trigger is reached on or after 2:00 p.m. the trading shall halt for the remaining part of the day. If the market fails to resume at 10% then the next limit is placed at 15% and finally at 20%. In case if market fails to resume from 15% and if it hits 20% irrespective of the time, the trading shall be halt for remaining part of the day.

Circuits on Individual stocks

Circuits are also present on individual stocks. The stocks present in the BSE 30 and the Nifty 50 do not have any circuits built on them. These are known as the Non Index scripts. Incase there is huge percentage swings in these stocks, the whole market circuits can be triggered. For the other stocks on the nifty, circuits are built at 2,5 or 10 percent. This limit is determined by the impact cost and other things related to the script. These values are calculated monthly and for  a new stock ,it is placed in a group which has most companies in the same market cap.

Spotting the next Orchid chemicals ...

Orchid chemicals is stock that had fallen from its peak of 300 to a low of 110 about a fortnight ago. But the stock has seen amazing recovery and gained something like 23 percent  on Monday and has reached a price of 223. If you had invested in this stock 15 days earlier you could have made a profit of hundred percent.

Orchid chemicals lost a whopping 44 percent of its value on the day of when Bear Sterns was sold to JP Morgan for $2 a share. Bear Sterns sold nearly all its assets in the Indian market and sold its stake in Orchid chemicals completely and this lead to margins calls for two firms Indiabulls and Religare securities. A nice article here on what happened during that day.

The company is still based on solid fundamentals and had reported  91%increase in the net profit in Q3 December 2007 over Q3 December 2006. It reported a sales growth of nearly 40% in the same period. Stakes sold in the market by Bear Sterns have been picked up by other Investment banks like Credit Suisse and with Ranbaxy picking up a 9.4 percent stake in the company, Its price has sky rocketed with a 23 percent increase yesterday. And as I am writing this down,  its already up another ten percent in today's trading.

Its much easier to write about such recoveries once they have happened, the trick lies in spotting such stocks that can have a V shaped recovery. So what do you think would be the next Orchid chemicals ???

Technorati Tags: Orchid Chemicals,India,Stocks

Markets searching for Leadership?

The Bombay Stock Exchange and the National Stock Exchange for quite sometime are showing a flip-flop behaviour triggered by global events more importantly worries of a US recession. This being the fact that the US Fed has cut interest rates repeatedly, which usually is a reason for our markets to cheer.

Should we really look for external factors before believing our own domestic story? Or is it the case of the domestic story hinging upon global factors upon which it bound to slow down in the times to come. Surely the consumerism shown by the present Indian middle class can vouch for a strong growth momentum being maintained on the domestic front.

Stocks like RNRL, RPL, India Infoline etc. had sky rocketed based on factors other than their current intrinsic values. Now the same people who had bet on their positive outlook for the future seem to have lost their belief for reasons unknown. Are we waiting for the FIIs to show us the way? Or is the time right, to set the ball rolling for a year bigger than 2007.