After posting yet another success story this year, by making impressive profits on the investments made by students of the Indian Institute of Management-Lucknow (IIM-L) - Credence Capital, a fund, set up by the students with finance background from the institute in July 2007, is all set to witness the launch of 'currency-trading.'
Currency trading involves the buying of one currency and the selling of another, simultaneously with value of one currency relative to another. The relative supply and demand of both currencies determines the exchange rate value.
"We are encouraged to launch currency trading and we are confident that we would be able to repeat the success story yet again," said Rahul Krishna, a second year student at IIM-L and a fund manager with Credence Capital.
What makes the students confident is the fact that their equity fund contributed an impressive 17.96 % return, while the derivative fund gave an even better return of 25.84%. "At the same period, Nifty, returned just 5.56%. Our fund was less risky than Nifty but still we profited more," he said. The fund manager explained that IIM-L students usually make a lot of queries before making investment and hence there is a lot more responsibility on the fund managers to ensure that students get value for money. Krishna said, "We ensured strict stop losses, kept losses at a minimum, churned stocks and thus got successful yet again." Stop-loss is an option that freezes the stock at a certain position. "You think that there are some chances that NIFTY may go up to 5450 instead of moving down to 5370. If you want that your position should get squared-off as soon as NIFTY moves above 5440, you can place a buy stop-loss order at 5440. This will ensure (98% chance, because sometimes stop-loss order may not trigger at all) that as soon as the NIFTY hits 5440, your position gets automatically squared off and your maximum loss in that case is limited to INR 20X50= INR 1000/- only," Krishna said.
He said, "This ensures that you can roam around freely with our losses limited to INR 1000, but profits can be unlimited. When we say NIFTY, we mean NIFTY March Futures contract value."