A day after commodity prices witnessed a sharp plunge, Nithin Kamath, founder and CEO of Zerodha, cautioned investors that similar extreme volatility could also hit equity markets.
In a post on X, Kamath said there are rare days when risk management systems fail as markets move so violently that traders lose more than their entire initial margin.
"As a broker, there are rare days when risk management simply doesn't work, when markets move so violently that traders lose more than their entire initial margin. When this happens, both the trader and the broker are sitting ducks with no way out. Yesterday was one of those days in commodity markets. All major metals hit lower circuits—the maximum they can move in a day," he wrote.
Kamath pointed out that all major metals hit lower circuits—the maximum limit they can fall in a single trading session. “Silver crashed 30%, gold 15%, and others followed. By the way, natural gas was on an upper circuit,” he noted.
Calling the episode unprecedented, Kamath said that in Zerodha’s 16 years of operations, such extreme moves were seen only once before—when crude oil prices turned negative during the COVID-19 pandemic. “But that was just one commodity, and commodity trading wasn’t nearly as popular as it is today,” he added.
Issuing a broader warning, Kamath said, “What happened in commodities yesterday can happen in equities too; we saw it in 2008.”
He underlined the importance of strict risk management, saying traders often underestimate the dangers of leverage. “The lesson is simple but critical: only trade with money you can afford to lose. You can trade successfully for a decade and lose it all in a single day if you’re not managing risk properly. There’s no margin call, no exit opportunity when markets gap through circuits like this,” he said.
Meanwhile, silver and gold prices recorded one of their steepest single-day falls in recent months on Friday, as investors rushed to book profits amid weak global cues and a strengthening US dollar.
Silver futures crashed nearly 17% to ?3.32 lakh per kilogram, while gold futures fell about 9% to ?1.54 lakh per 10 grams. On the Multi Commodity Exchange (MCX), silver futures for March delivery plunged by ?67,891, or 16.97%, to ?3,32,002 per kilogram—marking its sharpest single-day decline.
The metal had surged around 9% on Thursday to hit a record high of ?4,20,048 per kilogram before settling at ?3,99,893 per kilogram.
In a post on X, Kamath said there are rare days when risk management systems fail as markets move so violently that traders lose more than their entire initial margin.
"As a broker, there are rare days when risk management simply doesn't work, when markets move so violently that traders lose more than their entire initial margin. When this happens, both the trader and the broker are sitting ducks with no way out. Yesterday was one of those days in commodity markets. All major metals hit lower circuits—the maximum they can move in a day," he wrote.
Kamath pointed out that all major metals hit lower circuits—the maximum limit they can fall in a single trading session. “Silver crashed 30%, gold 15%, and others followed. By the way, natural gas was on an upper circuit,” he noted.
Calling the episode unprecedented, Kamath said that in Zerodha’s 16 years of operations, such extreme moves were seen only once before—when crude oil prices turned negative during the COVID-19 pandemic. “But that was just one commodity, and commodity trading wasn’t nearly as popular as it is today,” he added.
Issuing a broader warning, Kamath said, “What happened in commodities yesterday can happen in equities too; we saw it in 2008.”
He underlined the importance of strict risk management, saying traders often underestimate the dangers of leverage. “The lesson is simple but critical: only trade with money you can afford to lose. You can trade successfully for a decade and lose it all in a single day if you’re not managing risk properly. There’s no margin call, no exit opportunity when markets gap through circuits like this,” he said.
Meanwhile, silver and gold prices recorded one of their steepest single-day falls in recent months on Friday, as investors rushed to book profits amid weak global cues and a strengthening US dollar.
Silver futures crashed nearly 17% to ?3.32 lakh per kilogram, while gold futures fell about 9% to ?1.54 lakh per 10 grams. On the Multi Commodity Exchange (MCX), silver futures for March delivery plunged by ?67,891, or 16.97%, to ?3,32,002 per kilogram—marking its sharpest single-day decline.
The metal had surged around 9% on Thursday to hit a record high of ?4,20,048 per kilogram before settling at ?3,99,893 per kilogram.
