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Wednesday, March 10, 2010

Market outlook and few important things to look at

Plenty of doomsayers who are predicting markets to crash to 10000 level would prove wrong and as I anticipate markets would stabilize at 16300-17500 levels before making a decisive upmove.However,investors should lower their expectations and should not expect same bumper returns.Moreover,there may be profit booking at every rise.Partly, investors are also to be blamed for picking stocks at any price (upon hearsay) without looking at fundamentals of the company or at the valuations.This time, investors should try to avoid following mistakes:

1)It will double in 1 month:If it were so, why tipster will tell you to make so much money?Instead, he himself will beg,borrow or steal to have enough money and buy entire quantity of such scrip for himself.

2)Looks good on the chart:Intraday or short term traders may sometimes make money on this basis.However,it is a strict No No for long term investors.One should remember that no business enterprise runs on charts.Hence, how business of share investing can run on charts?

3)Company has got an order:One should verify what is the execution period of such an order, when and how much it will contribute to company's topline and bottomline? Sometimes,bigger the order,lower the profit margin.

4)They are planning an expansion:Expansion of production capacity necessarily does not mean expansion of bottomline also.Whether big investment in new capacity will yield judicious returns?Whether there is enough demand to meet expanded capacity? In the past,many big companies became BIFR case after their mad expansion.

5)Won some export orders:Such order will constitute how much of total turnover in percentage terms?Did management clarify whether export orders are more remunerative or less remunerative?Export orders do not necessarily translate into higher profits.

6)Big Bull is buying:Did they ever tell you what big bull is selling?

7)Big Operator is buying:By the time such news reaches you,such operator has already turned into a seller and most probably,you are buyer of his sold quantities.

8)CDR/OTS:In many many cases,companies became significant due to siphoning off funds by the promoters.What is the guarantee that promoters will not again siphon off the funds after CDR?Many companies became CDR case due to inefficiencies and they will continue to remain inefficient even after CDR.CDR means better future for those companies which were genuinely suffering due to bad market conditions and promoters have genuine reputation.However, investors tend to pick any CDR case company without realizing that perhaps this was the only CDR case in that industry in which most other companies were faring well.

9)Going for GDR/FCCB: Most of the company's stock price falls sharply after GDR/FCCB issue.It clearly shows that share price was being ramped up before such issue.Hence, investors should avoid to buy such scrips at peak valuations just before GDR.

10)Brokers tells you to average the scrip.It is advisable to average the scrip only if price has come down due to bad sentiment.However, in many cases, price is coming down due to expected lower performance in view of which lay investor is not aware.It is like betting again and again, more and more on a losing horse.Instead, investors can make up for their mistakes by investing additional money only in some other companies which are doing better.

No one can exactly say whether market has bottomed or not? Investors should see whether the market will be higher than current level 6 to 12 month hence. If answer is yes, start investing.Equity is a long term instrument and if there is nothing wrong with the Indian companies you want to invest in, or the Indian economy and country as a whole, and if market is going down due to technical factors, investors should not panic, and wait.If, some FII are selling today,tomorrow, other FII will come to buy. There is no problem for long term investors.We should change our views only if fundamentals change.Finally, if, Indian economy is doing well and if Indian Equities are attractive,I feel that it is not due to Rahu-Ketu (politicians-bureaucrats) but INSPITE of them. Things are happening due to perseverance, intelligence, tolerance, hardwork and ambition of Indian citizens who deserve the real credit for nation building.Please correct me if I am wrong folks.

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This blog does not share personal information with third parties nor do we store any information about your visit to this blog other than to analyze and optimize your content and reading experience through the use of cookies.You can turn off the use of cookies at anytime by changing your specific browser settings.This privacy policy is subject to change without notice and was last updated on 20.3.2013. If you have any questions, feel free to contact me directly here: Investment in equity shares has its own risks.Sincere efforts have been made to present the right investment perspective.The information contained herein is based on analysis and up on sources that I consider reliable. I,however,do not vouch for the accuracy or the completeness thereof.This material is for personal information and am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.The stock price projections shown are not necessarily indicative of future price performance.The information herein, together with all estimates and forecasts, can change without notice.

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