Money Masters

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Market Mantra

It's been quite some time since I started dabbling with stocks and a what a ride it has already been. I have already witnessed markets scale highs in late 2007 and then hit the bottom in late 2008 and then again rise back to hit yet another high in 2010. I've expiremented a lot in these last three years, have had my share of successes and failures, have made a lot of mistakes but one thing for sure is, I've learnt a lot in these 3 years. It's been a steep learning curve for me and I'm more confident about the decisions I make today in the market, stocks I pick and the trades I make. I would like to share a few things that I feel are really important for every market participant.

1. The most important quality that everyone should have is humility. Everybody here makes mistakes. There's no two ways about it. The person who admits his or her mistakes and learns from the mistakes is the one who succeeds in the long term. There's no point having a sense of false pride in the market. Well don't get me wrong here. What I just said doesn't mean one should not have self belief in one's own decisions. Self belief is really important in markets especially with so much clamour and cacophony that goes on in markets. What I'm saying is more to do with mixing emotions with decisions. How many times have you held on to your trades, stocks just because you didn't want to exit in a loss even though you knew somewhere in your mind that the decision you made was wrong and you should have exited. As easy as it sounds, I'm sure many of us make the same mistake repeatedly and keep hoping and praying that the trade we made would work out well. This is especially true for short term trades in the market. Praying that the bet goes in your favour doesn't take you anywhere. If you believe that you made a mistake, correct it and move on. That's what works in markets.
2. Patience is a virtue that everyone should possess. Don't confuse patience with praying. They are two different things. Simply put, many of enter or exit at the wrong time for the lack of patience. How many times has it happened that you bought something where you truly had conviction but could not hold on to it for the lack of patience and squared off your position and regretted later. How many times has it happened that you entered a trade when you should not have just because everyone else did.
3. Don't get too carried away either by Greed or Fear. Many a times we take our decisions out of Greed or Fear. Don't mix emotions with your decisions.
4. Markets may behave irrationally in the short term. Don't fight with the market.
5. Know what you are doing. Don't blindly follow the herd. The tip culture is widely prevelant in markets.
6. Distinguishing good ideas from so called 'tips'. One should always be open be open to ideas. One always gets varied opinions. Ability to listen to all the varied opinions and being able to arrive at the right judgement is the key. This is my opinion, comes with experience.

What I've said is nothing new and what everyone already knows is true somewhere in the corner of their minds. I just want to reiterate and reinforce these ideas. Whatever I've just said is based on my tryst with the markets in the last few years. Believe me, as easy as it may sound, it is not.
 

Pump and Dump

Remember the dialogue, "Blue Horse Shoe loves Blue Star Airlines" from the movie Wall Street ? If yes, then you already know what I'm hinting at here. For others I would suggest, go watch the movie "Wall Street".  Its worth a watch for all those who are really interested in the world of stock market.
                                     
Well coming back to the topic, "Pump and Dump" is a strategy used by some market participants with vested interests to artificially create a market for a stock by spreading rumors or creating false propaganda about the stock so that the stock can be dumped in the market. The stocks chosen are generally small caps with little volume so that the price can be easily moved. These so called operators take a position in the stock before creating the hype about the stock and later when market is ready for the stock, they dump their holdings making a neat profit. In today's modern world, there are numerous means by which information can be spread to a target audience at the click of a button making it really easy for an operator to create market for a stock.
On second thought, one would think, Are people really so dumb to fall for such a scam? Well, think again. I mentioned in my previous blog about the prevalent "Tip culture" that exists in the Indian markets. Given this scenario, it should not be very difficult to get a handful of people interested in buying the stock of a hollow company.

What made me write about this topic is the flurry of sms spam that I've been receiving lately. Each sms trying to sell me the idea of buying a particular stock. I thought it would be good to educate market participants about this scheme and the risks associated with blindly following the "tip". The least I would say is, go check out the details about the company before buying into its stock.
Let me take an example. I received the following sms about ROTAM COMM. from TM-Primestk on April 5th.
ZROTAM (512359): Buy @ 147.75 target 171/195. Company got order worth 1200cr. 15 day holding.
You can look at the Price Volume chart here for the stock. The chart is pretty much self explanatory. You can see how the volumes increased from near zero level taking the price along with it and now the stock is hitting lower circuit with decreasing volumes. Also, the message talks about a 12cr company getting a order worth 1200cr which is very odd.

I've recieved more such messages and I'm sharing these messages with you guys so that you can analyze the price movement of these stocks.

TM-FASTCALL

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Buy Dividend paying SAHYADRI(532841) CMP 177 TRG 300+ in 1-2 months. EPS of 30. Superb Results awaited. Buy Now before its buying freeze.
-April 19, 16
Buy NRB(530367) CMP 95 TARGET 125+ in 7 days. Buy Now before it goes up
-April 15

Buy Sark Systems(533056) CMP 35 Trgt 50+ in 15-20 days. Huge expansion plan to enter into education segment. Buy now.
-April 15

Sure BTST call. Buy Barak Valley before it hits the upper Circuit CMP 44.50 Trgt 60+ in 3 days and diamond cable CMP 173 TRGT 225 Buy Now Don't miss.
-April 16

Sure shot BTST call: Buy Kisan Moulding(530145) before it hits upper circuit. CMP 94. TRGT 125+ in 7 days. Buy now don't miss.
-April 8, 6

TM-Smtproft

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Buy FIRSTSOURCE sol(532809) CMP 32 Tgt 50 in 2 mnths. UK based equity firm KKR & Co to buy 68% controlling stake by buyout for $250mn. www.smartprofit.in
-April 19, 18

TM-SuperCal

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PROFIT-CALL : Buy KILPEST(532067) @ 18.50. Company bags big order and plans expansion and planning FPO. Target Rs. 28/32/38. Good Financials
-April 19

TM-TOPGAINS

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100% SURE SHOT- Buy 2000/5000 shares CHEVIOT(526817) at CMP with intraday target of 330 or 20% UPPER CIRCUIT and SHORT TERM target 380. Buy very fast
-April 19

Buy WHBRADY(501391) CMP with intraday target 170 or upper circuit BTST target 185 and 1 months target 220.
-April 8

TA-LiveTips

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Buy @opening as much as you can. SUJANA TOWERS @ 58. Reasons : Increase in promoters holding gradually. Upside Price Target of 66-75 www.LiveTips.co.in
-April 19

TA-capstock

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INTRADAY JACKPOT CALL : BUY in Bulk ZORGNCOM(512097) @ CMP . Delivery Target 245 and 330. SL 205. So, Dont miss it. Dont panic. Sure profit.
-April 16

DM-DrmGains

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DREAMGAINS stock futures Intraday calls gave a massive return of 68K in the last week. For free trials on such rocking calls, SMS DG to 56767. DREAMGAINS.com
-April 16

TD4Focus

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Fire..with good results BSE Cash buy BECKONIN(531937) @ 11 Stoploss 8. Short term target 18 and 28. Don't miss the golden opportunity. www.focusinvestment.in
- 15 Apr

TM-BIGBULLS

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INTRADAY SURE SHOT STOCK- SELL 5000/10000 shares ISFT(533181) with intraday target near lower circuit. Sell huge quantity.
-April 5

TM-PrimeStk

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ZROTAM(512359) : Buy @ 147.75 target 171/195. Company got order worth 1200cr. 15 day holding.
-April 5

For people who still think money can be made by acting on the messages sent by some arbitrary guys, I have just one thing to say. "There are no free lunches in this world... my friend".

[I would really appreciate your comments and thoughts on this topic]

Investment Philosophies of Individuals

It's been a while since I have been investing in the Indian Stock Market. Along the way, I've come across a lot of people and this post is just an observation about the perspectives of different individuals about the stock market and their investing styles.

1) Category 1 : "Don't care"
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This category of people is not bothered about putting their money to work even though most of them end up working really hard for the money they earn. They either don't have the time or are too lazy to think about investments. They end up choosing whatever comes their way and are never bothered about choosing one form of investment over the other. This surprises me a
little bit because, they do care about money but still are not bothered about putting their money to work.

2) Category 2 : Eternal Pessimist
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Stock market is not to be trusted. "Share Bazaar nahi yeh toh 'Satta Bazaar' hai"(Stock market is a gambling den). No matter what, never put my money in the market. You will always end up losing money. Stock market is for rich people and not for middle class salaried people. Instead choose safer instruments such as Fixed Deposits. I don't know the reason for their paranoia but I guess these are the guys who have burnt there fingers in the market in the past or know of someone who has.

3) Category 3 : Safe Players
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These are the guys who want to invest in equities but don't want to do it themselves as they don't have enough understanding of the market. Instead they feel, choosing the investments is better left to the fund managers who have investment expertise.
Hence, they end up choosing Mutual Funds, ULIP's or other forms of investment instruments where the so called experts make decisions on their behalf.

4) Category 4 : Eternal Optimist
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These guys are knowledgeable about the market and want to invest on their own. They have a long term investment horizon and are not concerned too much with the short term market fluctuations. For them, buying into stocks is same as buying into businesses. They look at valuations and other fundamental aspects of a stock before buying into it.

5) Category 5 : The Opportunists
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These are the guys who don't invest on a regular basis but do keep track of the markets. They make an investment whenever they sense there is an opportunity in the market and exit when the prospects don't look very good. They don't have any specific time horizon for an investment. They hold there investments as long as they feel there is value in the stock and exit when they feel otherwise.

6) category 6 : The Trader
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These are the guys who don't look at the fundamentals of a stock before buying into it. They look at taking advantage of the short term fluctuations in the market and making money out of it. They are the ones who are most prevalent in the Stock market. Some of them use the technical indicators to make buy/sell decisions whereas most others use "TIPS" to make buy/sell decisions. Well, For Indian markets, Getting tips is really easy. Everyone is willing a give a free tip. The tip culture is so prevalent today that even the news channels have shows like Awaaz Kaarobar Stock 20:20 where analysts provide stock recommendations on 40 stocks on a daily basis.

I want to write more on the prevalent tip culture in the Indian markets but probably in an other blog post as it is a topic of discussion in itself. I personally feel tips are not bad as long as one uses them as hints to research more on the stock before making an investment decision. Tips can be dangerous when one blindly follows them without any knowledge about the stock.