How to make profits in range bound markets-Kotak Securities
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Transcript of How to make profits in range bound markets-Kotak Securities
Making Profit in Range Bound Markets
What is a Range Bound Market ?
What is a Range Bound Market?
• Markets often move in a range when there is a lack of news flows and triggers which may take markets either ways
• Markets are range bound during the consolidation phase of a bull or a bear market
Profiting in Range Bound Markets
Profiting in Range bound Markets
• Picking up fundamentally strong companies– For long term investing, picking up fundamentally strong companies is
the best bet– They are more likely to perform in the longer run– It falls less when the markets fall and rises faster when the market
seems positive
Profiting in Range bound Markets
• Looking at the dividend yield– Capital appreciation & Dividend yield are interdependent– A stock with a good dividend yield is a best bet in falling markets– Dividend payout is not related to the market movement and is a good
source of income
• Portfolio Churning– Good portfolio churning give high returns in range bound markets– This strategy may look simple but is the most difficult to implement
and requires strong technical analysis skills– Always keep in mind the high costs associated with high portfolio
churning
Profiting in Range bound Markets
• Constant weighted asset allocation– This is a simple strategy where the weight to each asset class like
equity, debt, gold etc. is predefined– As the weights change because of market movement, the portfolio is
realigned by selling in one asset class which has gained and buying into the asset class which has fallen
– The disadvantage in this method is the mechanical approach
Profiting in Range bound Markets
• Hedging at the upper band– Investors may hedge their portfolios at higher band of the markets by
buying put options or selling call options– This will ensure neutral position even if the markets come down as the
loss on portfolio investment will be compensated by the gain on the derivative position
Profiting in Range bound Markets
Do I need to be cautious?
Words of Caution
• These strategies require a high degree of study and focus
• Playing around these strategies may be rewarding but the risk involved is also high
• Such strategies should be adopted only in consultation with a competent financial advisor
Remember: Making money in a bull or a bear market is an easier task as compared to a range bound market
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• Registered office: Kotak Securities Limited, 1st Floor, Bakhtawar, 229, Nariman Point, Mumbai - 400021. SEBI Registration No: NSE INB/INF/INE 230808130, BSE INB 010808153/INF 011133230/INE 011207251, OTC INB 200808136, MCXSX INE 260808130.
• Disclaimer: Investments in securities are subject to market risks, please read the SEBI prescribed Combined RDD prior to investing.
• * Awarded Best Brokerage Firm in India by Asia Money in 2006, 2007, 2008 and 2009