Nifty falls again, large risks of a free fall

The Nifty continued its trending move, falling again to new lows, breaking the 4000 level decisively, then touching and closing at 3850. It is possible that 3850 may provide short term support for the Index. Below 3850, the Nifty has minor support at 3600, then a free fall. The nearest support after 3600 is at 2600. Now, this is not to suggest that the Index will fall to 2600. I do not know. But, the absence of support suggests that we do not have any measure of a point at which the Nifty may stop falling. Worrying
An upward sloping flag in the Nifty has broken down today. A flag is usually made half way in a decline. Earlier, we had calculated that the target for the flag comes at 3170. Again, a target is just that – a mathematical measure. It may or may not come about. We must remember that it does often work out, so the probability is in favor of meeting the target.

Financial Instruments of Mass Destruction ?

Derivatives – Warren Buffet called them “Financial Instruments of Mass Destruction” . These instruments are responsible for a lot of losses – Long term Capital Management, Amaranth, Barings, Society Generale…… It is a long list.
Derivatives in different shapes are responsible for the current finncial crisis in the USA which is now engulfing the entire world.
In India, the indiscriminate use of Derivatives has caused havoc and destruction. Here is how. First, The introduction of stock futures has turned the stock exchange into a gambler’s den. Lakhs of middle class families have been destroyed by losses caused by trading in stock futures – an instrument with no productive purpose. While Index Futures & Equity Options provide hedging and risk management benefits, stock futures are simply an instrument for gambling. This is the reason why no other country in the world offers such extensive trading in stock futures. 
We have created gambling dens in every nook and corner of the country. At this rate, an entire generation of the middle class will be addicted to gambling (in stock futures) ,destroying themselves. When this happens, we can say farewell to the India Story. Why are we doing this ? When the badla stystem was abolished, the regulators said that this was done to prevent unwamted speculation. We were told that the system will provide for Equity Options which will enable hedging and risk management. Fair enough. Instead, the country has been gifted with the ‘Mother of all Gambling Instruments’ – the stock future.
Now what purpose does the stock future serve ? Nothing. If you want to buy a share, you can buy it by paying the full amount or by buying it on margin. Thus, the stock future serves no puirpose when buying. If you want to sell a share, you can sell it outright, or borrow stocks to sell. For both buying and selling, you should be able to use Options. (Thanks to stock futures, the options market has languished, with no depth.)
When both buying and selling activities can be conducted without stock futures, what purpose do the futures serve ? Nothing. They are a pure and simple instrument for gambling.
Second, Proprietary trading in derivatives by some brokerages has caused an increase in risk in the financial system with an unfair influence on the market. The more respectable brokerages do not do such trading.
These are difficult times. In order to prevent a financial catastrophe, SEBI should withdraw the instrument of stock futures & ban Proprietary trading in derivatives by brokerages.