Its a bad, bad time in the stockmarket.
But remember, those of you who are ruing your losses, nobody who has been in this maket for over six months has really lost any money, your profits have been trimmed. The market has run up for the last year and this is time for reconciliation. Yes, for those who have entered as recently as three months, there has been a real erosion of wealth.
My advice is the same - Patience. For retail investors, this is the time to switch off from the market for a few days. This bear market will pass soon enough and you will begin to see the profits. So, take a break and have a longer horizon for maximum returns. Remember Warren Buffet "In the short term you can make money in the market, but in the long term, you create wealth".
Those of you who are sitting on cash, this is the time to enter the market. Many good scrips are now available at good valuations, so its time to stock up on these. But do check the valuations and the fundamentals of the company before buying up. Do not try to time the market, for no one can catch the bottom. Companies like Reliance, Punj Lloyd, GMR etc are looking quite good.
Reliance Power has been a bad experience for all investors. It was a double whammy, not only did the IPO bomb, it took down the market with it.
Many shareholders of Reliance Power booked loss on the first day and that was the reason for the fall. Today, the market was punishing Anil Ambani for dashing their hopes, thus one saw a decline in ADAG shares, specifically Reliance Power and Reliance Energy.
Those with gumption and courage can indeed pick up both these shares. The market has a very short memory and soon enough both these shares which are available at good valuations will start racing up. But this time, do book part of your profits and sit on some cash when the market starts riding high. Then when the next fall takes place, you can do some bottom fishing.
Good Luck next time !!
Tuesday, February 12, 2008
Thursday, January 24, 2008
The great Fall
Hi everyone,
Today is the 24th Jan 2008 and most of us have had a torrid time in the market.
A bad week, a bad month and a bad year - thats 2008 for you.
Most readers would be badly bruised by the fall and must be counting their losses. No words can cheer up someone who has seen his savings go down the drain.
But yet, my message is - cheer up !! Very soon, in fact very, very soon, the market will resume its upward journey and those who lost will probably receover their losses - that's the way the stockmarket functions.
Lets analyze why the Indian stockmarket tanked in the third week of Jan through to this week ;
Firstly it is a fact that the market was overvalued and over bought. Most of the players in the market acknowledged this fact and was, in fact, prepared for the fall. It is surprising that even with hight valuations, even with the sure knowledge that the markets would be on the way down, very few retail players booked their profits. The reason for this is that many retail players are long term and do not book their profits from time to time. This has both good and bad effects. Good because when you book profit on a share, you can sit on the money and wait for a correction to get into the market once more. Bad, because and it goes up, you lose out on the gains. My advice to retail players would be to hold on to the good stocks and book profits on the ones whose fundamentals look shaky.
The second reason for the fall in the market is the "greed and need factor". Indian operators basically play on the greed factor. Thus when the marketis on the way up, they buy recklessly, propelling the index into dizzy heights. At the same time when the cues become negative, they ditch these shares at theslightest hint of a downturn thereby sending the index into a tailspin.
The third reason for the fall is undoubtfully the US market. No matter what we hear from the pundits about decoupling, etc, the fact remains that when the US markets catch a chill, markets all over the world sneeze. More than this, the US economy has, for long been entwined with other economies and any downslide in this will affect these economies. Is is a surprising fact that the economies of most of the countries around the world are dependant on the well being of the US economy. Thus when the US economy is perceived to be sliding, the first effect is on the Dow Jones and the Nasdaq which end lower. The next morning, the Asian markets fall like nine pins and the Sensex and Nifty alson folow the. So much for decoupling!!!
Perhaps the fourth and last factor is the constant booking of profits in emerging markets by the FIIs. FIIs are very nimble on their feet and quickly exit countries, therby driving the markets down. Later they enter these same markets equally nimbly driving these markete through the stratosphere. There is no clear reason why they do this, or whether they gang up and conduct co-operated operations. But the fact is that when the FIIs perceive the valuations to be too high, or Government Regulation to be affecting them adversely, or when they feel global stocks are due for a meltdown, they exit from emrging markets, creating chaos, confusion and neverending pain for the retail investors.
What the retail player player must do :
1. Never have all your savings in the stockmarket. As you age, start shifting your money into more secure areas, so that your risk profile is maintained.
2. Always buy on fundamentals. Before buying a stock, do check the PE ratio, EPS, OPM, Beta, Book value and other fundamentals. If all these are good, decide to buy the stock.
3. Having bought into a fundamentally sound stock, hold on. Never underestimate the power of time. If there is no good reason to sell a stock, dont do it, unless you need the money or you have come upon a better stock and want to switch.
4. Never, ever, sell in panic. There may be many manic mondays and frightening fridays, ride the storm. Always think longterm. Your investment must have a longterm horizon. If you horizon is anything less than six months, you should not be in the market. If you need the money after two or three or four months, please keep the money in the bank, where it will be safe till you need it.
5.When you see the market at a high and valuations getting stretched, it is a good idea to sell a part, sit on the money and wait for the correction. Once you see the correction set in, try to get into stocks which are fundamentally sound and which have been hit hard. These are the ones which will bounce back fastest.
Good Luck, more later.
Today is the 24th Jan 2008 and most of us have had a torrid time in the market.
A bad week, a bad month and a bad year - thats 2008 for you.
Most readers would be badly bruised by the fall and must be counting their losses. No words can cheer up someone who has seen his savings go down the drain.
But yet, my message is - cheer up !! Very soon, in fact very, very soon, the market will resume its upward journey and those who lost will probably receover their losses - that's the way the stockmarket functions.
Lets analyze why the Indian stockmarket tanked in the third week of Jan through to this week ;
Firstly it is a fact that the market was overvalued and over bought. Most of the players in the market acknowledged this fact and was, in fact, prepared for the fall. It is surprising that even with hight valuations, even with the sure knowledge that the markets would be on the way down, very few retail players booked their profits. The reason for this is that many retail players are long term and do not book their profits from time to time. This has both good and bad effects. Good because when you book profit on a share, you can sit on the money and wait for a correction to get into the market once more. Bad, because and it goes up, you lose out on the gains. My advice to retail players would be to hold on to the good stocks and book profits on the ones whose fundamentals look shaky.
The second reason for the fall in the market is the "greed and need factor". Indian operators basically play on the greed factor. Thus when the marketis on the way up, they buy recklessly, propelling the index into dizzy heights. At the same time when the cues become negative, they ditch these shares at theslightest hint of a downturn thereby sending the index into a tailspin.
The third reason for the fall is undoubtfully the US market. No matter what we hear from the pundits about decoupling, etc, the fact remains that when the US markets catch a chill, markets all over the world sneeze. More than this, the US economy has, for long been entwined with other economies and any downslide in this will affect these economies. Is is a surprising fact that the economies of most of the countries around the world are dependant on the well being of the US economy. Thus when the US economy is perceived to be sliding, the first effect is on the Dow Jones and the Nasdaq which end lower. The next morning, the Asian markets fall like nine pins and the Sensex and Nifty alson folow the. So much for decoupling!!!
Perhaps the fourth and last factor is the constant booking of profits in emerging markets by the FIIs. FIIs are very nimble on their feet and quickly exit countries, therby driving the markets down. Later they enter these same markets equally nimbly driving these markete through the stratosphere. There is no clear reason why they do this, or whether they gang up and conduct co-operated operations. But the fact is that when the FIIs perceive the valuations to be too high, or Government Regulation to be affecting them adversely, or when they feel global stocks are due for a meltdown, they exit from emrging markets, creating chaos, confusion and neverending pain for the retail investors.
What the retail player player must do :
1. Never have all your savings in the stockmarket. As you age, start shifting your money into more secure areas, so that your risk profile is maintained.
2. Always buy on fundamentals. Before buying a stock, do check the PE ratio, EPS, OPM, Beta, Book value and other fundamentals. If all these are good, decide to buy the stock.
3. Having bought into a fundamentally sound stock, hold on. Never underestimate the power of time. If there is no good reason to sell a stock, dont do it, unless you need the money or you have come upon a better stock and want to switch.
4. Never, ever, sell in panic. There may be many manic mondays and frightening fridays, ride the storm. Always think longterm. Your investment must have a longterm horizon. If you horizon is anything less than six months, you should not be in the market. If you need the money after two or three or four months, please keep the money in the bank, where it will be safe till you need it.
5.When you see the market at a high and valuations getting stretched, it is a good idea to sell a part, sit on the money and wait for the correction. Once you see the correction set in, try to get into stocks which are fundamentally sound and which have been hit hard. These are the ones which will bounce back fastest.
Good Luck, more later.
Saturday, January 19, 2008
Bonus, Splits and IPOs
The Inidan stock market is passing through testing times. 250 points up one day, 700 points down over the next two days. As it goes up, so it goes down. Retail investors are feeling cheated. Many of them entered the market during the heady times when the Sensex was touching 20,000 and even 21,000. By now many of them must have already lost well over 20% of their money and are cursing the day they entered the market.
Many investment gurus and pundits who till the other day were crying hoarse on TV that 24,000 is the next target, have suddenly turned 180 degrees and are prophesizing that there is only one way to go - down. They talk of resistance levels, daily moving averages and other technical jargon which leaves most people more confused than ever.
In such a scenario, what is to be done ??
My advice is as follows :
1) If you are already invested, stay invested. Do not quit at this level. Indian stock market is not about the sub prime and certainly not about
the Dow Jones and the Nasdaq. Yes, these have a ripple effect in our markets, but the Sensex and the Nifty are driven by the India story. The main drivers here are the Indian Economy and the performance of the particular stocks. In the long run, these stocks will all fare well and give handsome returns. If you have chosen the stock with care and after going through the fundamentals there is no reason to sell unless the fundamentals have changed for the worse. And certainly no need to quit at a loss. There should be only three reasons to sell a stock - First, if there is reason to beleive that the fundamentals have worsened, Second if you need the money for some reason or the other, and Third, if you want to get into a stock which is substantailly better than the one you are holding now. So hold on for maximum gains.
2) If you have money and want to invest, let me tell you that the stockmarket is still the best space to be in. But invest with care and after checking the fundamentals. In my next post, I will take you through the ropes as far as fundamental investing is concerned. Do not try to time the market. Timing the market is best left to professionals and you may well miss an opportunity if you wait for the right timing.
3) Go for those companies which are looking at bonus issues or splits or both. These will no doubt unlock the value and the price of these shares will go up quite a bit. A good company which has decided to issue bonus shares or go for a split will see an immediate increase in ite value. The price will run up before the record date. Further, even after the bonus or split, the price will run up, as the liquidity increases. So look for these companies and go for the. But remember to check the fundamentals first.
4) Check out the IPOs. In the present Indian scenario, too much money is chasing too less stocks. Thus IPOs issued by well known companies give excellent listing gains. These IPOs can be used to maximise wealth. But remember, dont be greedy, on the listing day, be sure to let go atleast 50% of the shares allotted, if not more. Keep this money for the next IPO.
IPO is a game which if played well, can give big returns.
These are a few guideling for sensibly investing. We will discuss in more details later on.
Watch this page.
Many investment gurus and pundits who till the other day were crying hoarse on TV that 24,000 is the next target, have suddenly turned 180 degrees and are prophesizing that there is only one way to go - down. They talk of resistance levels, daily moving averages and other technical jargon which leaves most people more confused than ever.
In such a scenario, what is to be done ??
My advice is as follows :
1) If you are already invested, stay invested. Do not quit at this level. Indian stock market is not about the sub prime and certainly not about
the Dow Jones and the Nasdaq. Yes, these have a ripple effect in our markets, but the Sensex and the Nifty are driven by the India story. The main drivers here are the Indian Economy and the performance of the particular stocks. In the long run, these stocks will all fare well and give handsome returns. If you have chosen the stock with care and after going through the fundamentals there is no reason to sell unless the fundamentals have changed for the worse. And certainly no need to quit at a loss. There should be only three reasons to sell a stock - First, if there is reason to beleive that the fundamentals have worsened, Second if you need the money for some reason or the other, and Third, if you want to get into a stock which is substantailly better than the one you are holding now. So hold on for maximum gains.
2) If you have money and want to invest, let me tell you that the stockmarket is still the best space to be in. But invest with care and after checking the fundamentals. In my next post, I will take you through the ropes as far as fundamental investing is concerned. Do not try to time the market. Timing the market is best left to professionals and you may well miss an opportunity if you wait for the right timing.
3) Go for those companies which are looking at bonus issues or splits or both. These will no doubt unlock the value and the price of these shares will go up quite a bit. A good company which has decided to issue bonus shares or go for a split will see an immediate increase in ite value. The price will run up before the record date. Further, even after the bonus or split, the price will run up, as the liquidity increases. So look for these companies and go for the. But remember to check the fundamentals first.
4) Check out the IPOs. In the present Indian scenario, too much money is chasing too less stocks. Thus IPOs issued by well known companies give excellent listing gains. These IPOs can be used to maximise wealth. But remember, dont be greedy, on the listing day, be sure to let go atleast 50% of the shares allotted, if not more. Keep this money for the next IPO.
IPO is a game which if played well, can give big returns.
These are a few guideling for sensibly investing. We will discuss in more details later on.
Watch this page.
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