The mystery fund playing God and wreaking havoc on the stock market_The Ken

[Raghvendra N Dhoot]

This document, titled **"The mystery fund playing God and wreaking havoc on the stock market"**, published by **The Ken** on **09 Jan 2025**, investigates the mysterious activities of a foreign hedge fund that has been manipulating the Indian stock market, particularly on **weekly options expiry days**. The fund's actions have caused significant volatility, leading to massive profits for itself while causing losses for other traders. Below is a **comprehensive summary** and **key points** from the document:

---

### **Key Points**

1. **Mysterious Market Manipulation**:
   - Since **April 2024**, there have been **inexplicable moves** in the Indian stock market indices (Sensex and Nifty) on **weekly options expiry days**.
   - Expert traders point to a **foreign hedge fund** with **deep pockets** as the master manipulator, which has been **gaming the system** to reap massive profits at the expense of other traders.

2. **Modus Operandi**:
   - The manipulator uses two strategies:
     - **Violent Expiry**: On some days, the fund induces **sharp, wild swings** in the indices (e.g., a 3,000-point intraday swing in the Sensex on **13 December 2024**) to benefit from the options it has bought.
     - **Quiet Expiry**: On other days, the fund keeps the indices in an **unnaturally tight range** to benefit from the options it has sold.
   - The manipulator **rigs the index** by buying or selling large quantities of **index constituents** (e.g., Reliance Industries, HDFC Bank, ITC) to influence the index movement.

3. **Impact on Implied Volatility (IV)**:
   - Normally, **implied volatility (IV)** of options should be influenced by the underlying index movement. However, the manipulator has reversed this relationship, causing **IV to move before the index**, which is a clear sign of manipulation.
   - On **violent expiry days**, the manipulator buys large quantities of options, causing IV to spike. On **quiet expiry days**, the manipulator sells options, causing IV to drop to unnaturally low levels.

4. **Profit Estimates**:
   - The manipulator is estimated to make **Rs 500 crore (US$58 million) per week**, or **Rs 25,000 crore annually**, at the expense of other traders.
   - The fund’s actions have caused significant losses for **individual traders**, with **90% of retail F&O traders losing money** over the past three years, amounting to **Rs 1.8 lakh crore** in cumulative losses.

5. **Regulatory Concerns**:
   - The **Securities and Exchange Board of India (SEBI)** has been made aware of the issue but has not yet taken significant action to curb the manipulation.
   - SEBI has reduced the number of **weekly options expiries** from five to two since **November 2024**, but this has not stopped the manipulator, who now builds positions throughout the week and settles them on expiry or non-expiry days.

6. **Broader Market Impact**:
   - The manipulator’s actions are not just affecting options traders but also **day traders, swing traders, and long-term investors**, who are forced to buy or sell stocks at manipulated prices.
   - This manipulation is **eroding the integrity** of India’s financial markets and could deter foreign investment due to heightened risk.

---

### **Detailed Summary**

#### **1. The Manipulator’s Strategy**:
   - The manipulator uses **options trading** to its advantage by **rigging the index** through large-scale buying or selling of **index constituents** (stocks like Reliance, HDFC Bank, etc.).
   - On **violent expiry days**, the fund buys large quantities of **call or put options**, causing **implied volatility (IV)** to spike. It then manipulates the index to move sharply in the desired direction, making its options positions highly profitable.
   - On **quiet expiry days**, the fund sells options, causing IV to drop, and keeps the index in a tight range to ensure the options expire worthless, allowing it to pocket the premiums.

#### **2. Examples of Manipulation**:
   - **13 December 2024**: The Sensex swung **3,000 points intraday**, with the manipulator likely benefiting from a **violent expiry**.
   - **21 November 2024**: The Nifty was kept in a **tight range**, with the manipulator benefiting from a **quiet expiry**.
   - The manipulator’s actions have been observed on multiple expiry days since **April 2024**, including as recently as **2 January 2025**.

#### **3. Options Trading Basics**:
   - **Options contracts** give the buyer the right to buy (call) or sell (put) an asset at a predetermined price (strike price) on a predetermined date (expiry date).
   - The manipulator exploits the **decay of options** as they near expiry, buying or selling them at strategic times to maximize profits.

#### **4. Regulatory Response**:
   - SEBI has been **aware of the issue** but has not yet taken significant steps to curb the manipulation.
   - The regulator has reduced the number of **weekly options expiries** from five to two, but this has not stopped the manipulator, who now builds positions throughout the week and settles them on expiry or non-expiry days.

#### **5. Broader Market Impact**:
   - The manipulator’s actions are **hurting all market participants**, including **retail traders, day traders, and long-term investors**.
   - The **integrity of India’s financial markets** is being compromised, which could deter foreign investment and harm the country’s reputation as an investment destination.

---

### **Conclusion**:
The document highlights the **grave threat** posed by a **mysterious foreign hedge fund** that has been **manipulating the Indian stock market** through **options trading**. The fund’s actions have caused **massive volatility** on expiry days, leading to **significant profits for itself** and **heavy losses for other traders**. While **SEBI** has taken some steps to curb the exponential growth of F&O trading, it has yet to address the **manipulation of the market itself**. The ball is now in **SEBI’s court** to take decisive action and protect the **integrity of India’s financial markets**.

---

### **Call to Action**:
The document ends with a call for **tips** from readers who may have information about similar market manipulations, encouraging them to share leads securely with **The Ken**.

Thanks,
Raghvendra Narendra Dhoot
WhatsApp - https://wa.me/message/IGBD7R75QVRKK1

Telegram - JAMUNAJAL

Raghav's Picks: Leveraging Knowledge and Understanding to Win in a Volatile World, since 18th May 2005.

Disclaimer and Exclusion of Liability