Heard on the street

Feeling the pain on FMP Street

Extreme situations sometimes call for extreme measures, but in the interests of the lesser good rather than the greater good.

That was the experience of a high net worth individual (HNI) who invested in the FMP of a leading MNC bank with a fairly large mutual fund arm in India.

The investor was made to run around to redeem his investments. His grouse was that despite repeated requests, the fund manager did not update him on the portfolio strategy. Due to the poor choice of securities, the portfolio has seen a sharp erosion in value.

The fund manager also admitted that NAVs were kept depressed to prevent exits. To add insult to injury, the HNI was charged an exit load on his redemptions.

Finding solace in volatility

While traders seeking some respite from the unnerving market slide found some solace on Monday, they were shocked to see the India VIX (NSE���s volatility index) jump by over 22% to close at 57.13%. The VIX usually has an inverse relation to the index, with extremely high values pointing to market bottoms.

So a huge jump on a day when the Nifty gained well over 1.5% must have come as a shock to even the people who have designed it. Although the VIX���s random movements are not a new thing, it is the truncated trading week which is to be blamed this time around.

With the last Thursday of the month being a trading holiday on account of Bhaubeej, the October derivative contracts are scheduled to expire a day earlier on Wednesday.

As the VIX rolls into the mid and far month contracts and with eight days remaining for expiry; the day���s figures are based on November and December option contracts.

Going by the fact that traders are finding it difficult to even take care of the October contracts, the volumes in November and December contracts are anybody���s guess.

Contributed by Deeptha Rajkumar & Shakti Shankar Patra