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.
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3 comments:
Yes, its a good way to maximize the returns from the market. But the only catch is that some companies without good fundamentals issue bonus shares only to fatten the pockets of the promoters, who then exit the stocks leaving the investors in deep trouble. So we must go only for good companies. Also regarding IPOs many companies are very highly valued and can be avoided by the retail investors.
But very good article and hope for more of the same.
Whatever the pundits say about market movement I have learnt one thing from many years in the market. One can never predict the day to day fluctuations of the stock market. If you have money to spare and forget, you can invest in some good frontline stocks and you will see that in a couple of years the value will multiply.. But if you need the money, please keep off the market and invest in some liquid debt funds.
Please do not mention IPOs. Anil Ambani has made sure that only he gains from the Rel Power IPO. The other IPOs which were withdrawn after subscription was even worse.
Thus in these current times, only the secondary market is worth looking at, please shun all IPOs until and unless the greedy promoters learn to give a fair valuation to the IPOs.
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