‘Don’t touch call, put options for next 20-25 days’: Basant Maheshwari

Warning against suffering massive losses in equities and derivates, ahead of Lok Sabha elections 2024, eminent investor Basant Maheshwari has said that retail investors and traders should stay away from futures & options (F&O) markets till the outcome of elections on June 4, 2024. 

‘’The Indian market is extremely volatile right now and the VIX is rising consistently. It is better that traders absolutely do NOT touch call, put options for the next 20-25 days before the election results,” said the wealth manager in a recent video interview on his YouTube channel.

Maheshwari, who runs a SEBI-registered portfolio management company Basant Maheshwari Wealth Advisers LLP, said that the Indian market will not react the way we want it to ahead of election results. ‘’So, rather than taking long or short positions amid extreme volatility, it is better to stay away from derivates till the market regains stability,” said the analyst.

He added that market trajectory will only be clear after election outcome or maybe on June 3 when exit polls will be announced. Till then, he warns traders of refraining from taking positions which they may ‘regret sooner or later’.

India VIX always prone to ‘accidents’

Elaborating on the market volatility, Maheshwari said that when the India VIX index reached 10, it indicates that the market is always ‘prone to accidents’. ‘’When the India VIX index touches 10, it means it will be prone to accidents. So, traders should be ready for such accidents as soon as VIX rises and should not jump ‘up’ or ‘down’ with their stock or option positions,” said Maheshwari.

The market’s fear gauge — ‘India VIX’— indicates how much the Nifty 50 index is expected to change in the next 30 days. A major drop in the volatility index indicates that participants are confident about the near-term market trajectory. The volatility index typically experiences a decline once the election outcome is determined.

The India VIX spiking 72 per cent from the April lows indicates that high volatility will persist for some more time. VIX is based on Nifty index options prices. ‘’The spike in VIX is due to rising volume of options trades. Many investors are buying put options to protect their portfolio in case of an unexpected election outcome,” said analysts at Geojit Financial Services.

Stock Market

Domestic equity benchmarks logged their worst week since mid-March, dropping about 1.8 per cent each and snapping two straight weeks of gains. The volatility index gained 386 percentage points during the week to touch 18.47, a 19-month high. The recent strong performance of Chinese indices is also a trigger, prompting a shift of foreign inflows from Indian to Chinese markets.

A lower voter turnout so far in general election has raised questions whether Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) and its allies can achieve the landslide victory predicted by opinion polls just a month ago. Investors had already priced market stability over BJP returning to power, however, the current volatility has raised concerns of uncertainty. The counting of votes is scheduled for June 4, 2024.

“Heavy FII selling, and concerns over the outcome of ongoing general elections added to the overall pressure in the markets. The fourth phase of the ongoing Lok Sabha election will be held on Monday and may add to some volatility. Overall, we expect the market to consolidate in a broader range and take cues from Q4 results, global factors, and news flows around the general election,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services Ltd, said.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, and not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.


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Published: 11 May 2024, 06:07 PM IST

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