Reviewing India’s Big Short Trade And Tata Motors (TTM) Swoon

By
Samantha LaDuc
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The tweet below was from October 26th after news hit the wires that Tata Motors (NYSE:TTM) CEO was being removed.  My thesis was simple: Tata Motors is the Indian stock market, so where they go, the stock market will follow. Bold huh.

 

A few days later a SIZE bearish options play hit and I knew I was in good company.

By Nov 4th my first swing short price targets had been hit:  Tata Motors (TTM) hit my 1st price target of $38 -6% and the iShares S&P India Nifty 50 Index (NASDAQ:INDY) was at -2%. And this on an equity basis (I trade mostly options). By Nov 14th, TTM was -13.5% and INDY -7.5% (on an equity basis).

This short trade thesis was clearly working but I didn’t want to overstay my welcome. I was actually thinking the stock, and the Indian stock market, would bounce as it approached its 61.8% Fibonacci retracement level. Then I read the following on Mauldin Economics:

“Lines formed at banks, with people waiting for days, only to find the bank ran out of smaller bills. Those without bank accounts had no way to make routine transactions. Already impoverished people had to spend their work time waiting to exchange their money. New bills intended to replace the old ones were scarce.” –  Modi’s “Demonetization” Turned into a Mess

Some People Died! And this type of news/policy greatly increases the prospects of a GDP contraction:

“Analysts are already saying the sudden contraction will hurt economic growth. Economists at Ambit Capital cut their 2017 GDP growth estimate almost in half, from 6.8% to 3.5%. They think the effects will last into 2018, too.

I have hedged my short trade here as price has fallen rather quickly. But I’ll keep monitoring the action in India as this is looking like a messy situation.  Thanks for reading and trade safe!

 

Twitter:  @SamanthaLaDuc

Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

 

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