Tag: First Time Investors

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Important Concepts

HOW TO SELL A STOCK WHICH IS HITTING CONTINUOUS LOWER CIRCUITS?

Trader Peter Tuchman works on the floor of the New York Stock Exchange, Friday, Dec. 28, 2018. Stocks are opening higher Friday as U.S. markets try to maintain the momentum from a late-day rally on Thursday. (AP Photo/Richard Drew)

There are various instances when we purchase a stock for short-term gains but instead, it starts hitting lower circuits. Today this post will inform you how to sell lower circuit stock.

The best way to sell a stock that is hitting continuous LC is by placing an order during the pre-open session. As soon as the pre-opening session is closed orders start executing.

First, let us understand about Upper and Lower Circuit Limits.

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WHAT HAPPENS TO ORDERS DURING CIRCUIT LIMITS?

If a particular stock hits the upper or lower circuits, trading is halted and you cannot place orders until the trading re-opens.

If you have pending orders with the broker at the time of circuit breakers, such orders can be modified or canceled only once the trading re-opens.

Upper circuit: When there are only buyers and no sellers in the market for a particular index or stock

Lower circuit: When there are only sellers and no buyers in the market for a particular index or stock

CIRCUIT LIMITS FOR INDIVIDUAL STOCKS

Stock specific circuit filters are applied on both BSE and NSE exchange. The percentage for circuit filter limit is 2%, 5%, 10%, 20%.
These circuit limits are not applicable to stocks in Futures and options segment For newly listed companies, there is a circuit limit of 20% from the issue price.

Why Your Order Still Pending After Trading Session?

If your order still in the pending state after the starting of the normal trading session, do not panic, keep your order open. When a stock hit in Upper Circuit or Lower Circuit after some time trading resumes. Then there are high chances that your order could be executed when trading resumes.

When there is a lot of panic in a particular stock, and you are sure that stock will hit LC, then it is advisable to place an AMO (After Market Order). AMO will ensure that your order placed as soon as the market pre-open starts.

On Zerodha, you easily place AMO under More Options. If you not sure how to place AMO on your trading platform, please contact them asap.

SELLING LOWER CIRCUIT STOCK

It is advisable that you should not buy stock on some random recommendations. There are a lot of companies that try to trick and manipulate stock prices.

Don’t create same mistake again, avoid investing in manipulated stocks.

How to Identify Garbage Stocks?

Read: How many shares you need to buy to increase the share prices?

Money-control list of only sellers

Learn Technical Analysis
How To Identify Demand & Supply Zones?
How to draw Inverse HnS?
How to trade IPO stock?
Where to track markets daily?
How to Manage Risk in Trading (Intraday/Positional)?
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General Investing Investing Lessons

I REGRET SELLING THIS STOCK : SatinCreditCare

I have occurred huge loss in Satin CreditCare, due to my impatience and following advice from others without my own discretion.

Moneycontrol link

I lost around Rs 10,000 in Satin because of my immaturity in the stock market.

Take a look at the Satin CreditCare price trend in last 3 years.

My journey in Satin CreditCare

I invested in satin in Feb 2017 with around Rs 9,000. That was sort of peak of this stock. Being a novice investor, I keep on averaging out as soon as stock decreases 10 points. At Jun 2017 My invested price in satin was around 38,000 with a current value as 28,000.

Satin works in the micro-finance sector and it was demonetization hugely affected its business. It posted huge losses in Q4 2017 and Q1 2018 from profitable quarters in 2017. Being a small firm there was not much of news and data available on the web apart from Annual reports.

I was getting impatience and sad to see such a huge loss on my portfolio. As of this saying,I was not willing to accept any further decline in the stock price. So I took a big decision, to exit from Satin @ 270 in early Jun 2017.

But to my huge surprise, the next day Satin Credit Care’s price climbed around 7%. And in last 5 months, it has grown 50% from the exit price.

On that day I learned a lesson, hard way.

For the people who what to jump into the overwhelming place of creating wealth. Some of my observations during my investments are

  1. To every new investor out there, first, decide your time frame of investing.
  2. You should ask yourself whether you are a Trader or an Investor. If you are not sure about this, please refrain yourself from investing, you are bound to lose money.
  3. An Investor should do his own research and invest for long term.
  4. Do not get panicked by the short-term volatility of the stock.
  5. Do not just sell a stock because it’s share price has fallen because Markets are uncertain and they will be uncertain.

This is why Investing is art rather than just science.

Read: Do not let your emotions control your investment decisions

Read:  How to invest when markets are all-time high?

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General Investing

BRIGHT & DARK SIDE OF INVESTING IN STOCK MARKET

Majority of investors make buying or selling decision in a haste which causes them to settle down with less profit or even loss sometimes.

There are few stocks which have always added wealth for its all investors. Whether you have bought a stock 10 years ago or 1 year ago. Short-term investments like less than 1 year are very much volatile and usually erode investor’s money.

Have a look on 5-year stock charts of some companies

 

1. Eicher Motors Ltd

2. Shree Cement Ltd

3. MRF Ltd

4. Avanti Feeds

All these companies have performed well and have been multibaggers in the last 5 years. There has been a constant demand for these companies stocks in the market. Do not get amazed if your broker still recommends any one of these stocks for long-term holding. Most of these have been companies are consistently posting growing results thereby showing improving profits and business stability.

But wait, this is only the bright side of the picture. Have a look at these company’s stock charts.

The dark side of Picture


1. Reliance Communication


2. Sun Pharmaceuticals

In both of these companies, if an investor would have invested his money when the companies were at the highest price, this would have been definitely eroded money. There are a lot of examples of such companies.

Most of such companies failed to deliver results according to the investor’s expectations. For example, RCOM has nearly 40,000 Crores of debt which reflected a very bad image among investors.

Let me share the secret to create wealth. If anyone wants to create wealth find a company whose business is emerging and performing reasonably good. Stay invested in the company until fundamentals do not change. When the company’s business improves and performs better then its stock price automatically follows it.

Read: Start investing using MoneyControl App

Read: New to investing, try Zerodha Smallcase

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Important Concepts Latest Post

PLANNING TO DIVERSIFY YOUR PORTFOLIO, THINK TWICE

 

Diversification means adding different sector of companies in your portfolio so that all the stocks do not go down at the same time. Thereby reducing the probability of severe losses during the market is down. It is very common with retail investors who keep adding companies in their portfolio from various sources.

Investor tends to diversify their portfolio so that they can get protect themselves from a specific sector or a company down risk. But sometimes this diversification comes with a heavy pay off. Thereby reducing portfolio profits to a large extent. An average portfolio should contain 10 to 40 companies. But there is no fixed rule on the number of companies which could be in the portfolio. It all depends on the investor’s investing regime. Generally, the more you add, less your profits will be.

Example of diversified portfolios

Lets us take an example of 2 portfolios having of  4 to 6 companies.

1. The first portfolio: has 4 companies

2. The second portfolio: has 6 companies

Clearly, the 1st portfolio has outperformed the 2nd one. It is also commonly known that the larger the portfolio you have, the more efforts you have to make in monitoring it.

It is well known to big ace investors that investing in a lot of companies is not easy. That’s why they also keep their portfolio small as it is easy to track and manage. For reference have a look at these investor’s portfolio

1. Dolly Khanna – portfolio has around 20 companies

2. Rakesh Junjunawal –  portfolio has around 40  companies. He also takes positional trades that’s why he’s having large holdings.

3. Radhakrishnan Damani –  portfolio has around 20 companies.

As a value and long-term investor, the moment you increase your portfolio above 30 stocks, your return also starts diminishing. It also becomes tiresome to manage the portfolio many times.

Read: How to invest when the market is all time high?

Keep your portfolio small which is easy to manage.

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General Investing Latest Post

INVESTING WHEN MARKET IS ALL TIME HIGH

Nifty hovering at 10400+ level

With the market being at all-time high, some investors are becoming more optimistic and some are becoming very cautious.

Today we will see market position doesn’t create wealth but the emerging or growing business definitely does. Let us see what market is?

Nifty is an aggregated index of top 50 companies listed on NSE. Whereas Sensex is aggregated index of top 30 companies listed on BSE. The selection of these top companies is monitored regularly and updated at frequent intervals. In a year indices have a minimum of 4 updates in the list of companies.

Read: What is Nifty and Sensex?

Do not let market to make investment decision for you. There are plenty of companies which are still undervalued in much hyped over-valuations.

Market are indices which are bound to attain higher levels. They grow with the economy and the earning of the comprising companies. But sometimes market grow at a higher pace without the growth in earning of the companies. Most of the investors start becoming optimistic about the future growth of the companies.

Now you know when the market is at all time high then companies comprising the index may be reasonably valued or over-valued. But NSE has over 5000+ listed companies and some of the companies are still undervalued. As an investor, your job is to find such companies and study them. If the companies pass all your tests then you can definitely invest in the same.

Read:  Should you consider stock price while buying?

Freely available resources for fundamental analysis

  1. MoneyControl app and website: will give you news update and financial data of various companies.
  2. Screener.in: Will help you in a detailed fundamental analysis of the company, also provide export to excel option.
  3. Stock Edge app: A power pack app, help you to technical analysis, provides various scan help you in making better trading decisions.

Investment requires patience and hard work. So always invest for long term.

 

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Important Concepts

WHY STOCK PRICES CHANGES?

 

Today we will understand why stock price changes frequently i.e. on daily basis.

Let us make an analogy of stock market to the game of Tug of war. Yeah, you heard it right! The stock market is like a game. It has 2 types of teams one is the buyer and the other is the seller. When both of these teams exert equal pressure, then the stock price more or less remain the same. If buying team becomes stronger and grows in size then opponent(sellers) starts losing and the stock price starts increasing.

The stock market could also be understood by the concept of demand and supply. If investors are over-enthusiastic about the company then they will the increase in demand and eventually stock price increases.

Now a question should come to your mind, why does any team become stronger or weaker?

The answer lies in the sentiments and behaviour of investors. Investors are playing the tug of war game and whenever they become greedy or optimistic, then they move on to buyer’s team and stock prices eventually rise. The opposite happens when investors become fearful or pessimistic about the growth of the company.

 

Read:  Why always long-term investing creates wealth?

This is a  very important question. We know that no one can predict the future but we humans still have a habit of predicting or speculating on future events or rewards. Let us understand this with a very simple example. Let’s say an FMCG company made an announcement that they will be opening 20 new stores across the country. It was well known that the company was growing very fast over the last 1 to 2 years. But as soon as the company made that statement investors become greedy and more optimistic about the company. As the result, they start buying shares of the company. You should note that the company has not yet started any new store. They have neither increased their profits or revenue since their last announcement. All investors did is speculating on a future event which is yet to happen.

Any speculations tend to change stock prices on the daily basis. There are many intraday traders who take advantage of these speculations and their action also causes the change in the stock prices.

Why should one even invest if stock prices change on speculations?

One should invest in any company to create wealth. But if you are investing in a fundamentally sound company which keeps on posting good results, you should verify the same by studying the company’s financial statements and their management’s growth strategy. Speculation does change stock prices on the daily basis but on a long run no speculation works. Only the company’s actions and its results determine the stock prices.

Read: Start investing using MoneyControl App

Thanks for reading.

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Important Concepts IPO Fundamentals

HOW TO IDENTIFY AND PICK RIGHT IPO STOCK

Indian markets are yet again at new highs and investors are full of greed. During the last 9 months, Nifty50 moved from 7900 to 10150 which converts to 28% returns. This sudden euphoria of the market has also increased the number of IPOs offering. Today in this post we will learn how to pick a right IPO stock.

Read: What is an IPO?

In 2017 to date around 27 IPOs have been filled by various companies. The good thing about all these IPOs was

  1. None of the IPO was withdrawn.
  2. Every IPOs was oversubscribed.
  3. Around 85% IPOs listed with premium which gives a quick return on investment.
  4. Most of IPOs were offered at a premium valuation.

Recent IPOs in 2017

Factors responsible for the poor listing of some IPOs

We saw that some of the IPOs were not able to give listing gains in-spite of the market at the peak. The major factors which caused this were

  1. The company was not having a decent growth record in last 3 to 5 years.
  2. The company’s valuation was very much stretched against their peers which were already listed.
  3. The company has opened a big issue size. For more than 2000 Crs.

Red herring prospectus

Any company which goes for IPO files a document known as Red herring prospectus with SEBI (government regulator). This document is prepared by the investment bank known as Book Running Lead Managers after proper background and financial records analysis of the company. So, this document contains everything about the company, its promoters, stakeholders, its main business, lawsuits against company or promoters etc. This document is very exhaustive and is usually over 500 pages.

How to evaluate an IPO

All broker/financial advisers usually extract data from Red herring prospectus before giving any rating to an IPO such as Subscribe/Avoid/Neutral.

Before bidding for an IPO, an investor should go through following things

  1. Look at the 3 and 5-year profit and revenue growth. These both should be at least positive or constant over the period. You should avoid companies with volatile numbers.
  2. Debt to equity ratio of the company should be at least constant or decreasing. You should be careful in selecting a company with very high debt/equity ratio (>2).
  3. The competitive edge of the company. For eg. Market leadership or Unique product or a big client base.
  4. Valuation against listed Peers. Investors should use the P/E ratio to compare valuation among peers of the company. An Investor should be careful with the company having very high P/E ratio. He should also compare P/E among the peers to get marker justification of the business.
  5. Purpose of the issue. Most of the companies use the money to pay their debts.
  6. An Investor should check the credibility of Promoters. If promoters are not looking promising then also IPO should be avoided.

An investor should not worry about calculating these numbers by self.  Usually, most brokers publish IPO review ahead of the IPO. An investor can use those numbers to make his/her own decision. Any detail information about the company could be easily obtained from Red herring prospectus.

Types of IPOs

Whenever any company raise money through IPOs they are under these 3 categories

  1. Fresh issue: Under this type of issue/IPO, the company will get the raised through IPO.
  2. Offer for sale: The company promoters or previous investor’s (VC or Angel ) are selling their stake through the IPO. The company will not get any money from IPO.
  3. Combination of the Fresh issue and Offer for sale

By knowing the type of IPO, an investor can understand the purpose of issue and promoter’s confidence in their business.

Read: How GMP or Kostak rates can help you earn 10% from IPO?

Now, we will take an example of Matrimony IPO and will analyse it based on above-given parameters.

Analyzing Matrimony IPO

Company Financials

Company’s past sales and profit figures seem to be very volatile and do not show any trend. Now, an Investor should become very cautious about investing in this type of company.

Issue Type of IPO

The company is raising 500Cr and out of which, only 25% is the fresh issue. An Investor should know that the majority part of IPO proceeding 75% will be taken by Private equity funds and promoters.

There was a litigation claim against the company made by Mr Rajan Desai and Real Soft, Inc and company paid off 53 Cr in 2016. There are also few cases related to PF and FEMA regulation pending against the company.

The company has no unique moat or a competitive edge that is why any new player or old ones with aggressive marketing can gain significant market share.

Read more on this IPO here

Now analyzing this IPO would be easy for anyone who is reading this post. We could at least say this IPO will not give huge listing gains and an investor should be cautious about this investment. He should do complete homework before making any decisions.

Happy investing.

Source MoneyControl

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General Investing

ARE STOCK MARKETS A GAMBLE?

Everyone wants to be rich and successful and there are a lot of ways to achieve the same. But the real truth is everyone could not be a billionaire. Everyone has a different set of skills and ambitions so are their expectations.

One of the ways to become rich is through investment in stock markets. When people start investing in stock market their primary reason is to create wealth and that too fast. The irony is that these people forget their patience when it comes to stock markets. And when these same people used to invest in bank FD and PPF, they had a patience of waiting for at least 3 to 5 years to get decent returns.

So what happens when they start investing in stock markets, why everyone wants to be rich overnight?

Let us see how one start investing in stock markets?

  1. They follow brokers calls or advice for their investment.
  2. They follow the advice of family member or a friend who has been investing previously.
  3. They follow call and advice shared on a business channel by financial analysts.
  4. They hire a financial advisor and follow his advice.
  5. They do their own research and analysis and start investing.

These are the only ways through which a person (retail investor) start his investments portfolio. You will be shocked to hear, that the percentage of people who fall in top 3 categories are most. Moreover, when it comes to investment most of us also shut down our brain. These people start following brokers, Tv analyst advice as they are the god of the stock market.

Read: Why long term investing creates wealth?

Remember wealth is not created overnight nor by purchasing a stock on someone’s recommendations. Do you think the stock market is all about buying low and selling high? Retail investors buy a stock in hope of getting returns from it but the price an investor pays for buying a stock is what matters most. Wealth is only created if you have bought stock of a company at fair value.

The stock market is a game of greed and fear. There are a lot of investors who have lost millions of money in it. But there are another set of investors (usually few) who made a fortune out of it. How they were able to do so?

  1. Investors had patience and courage to dig out the information whenever it is needed.
  2. Most of long term investors never acted on the small information and stayed invested in the company until its fundamental does not get changes.
  3. Long term investors always purchased stocks at their fair value.

Here we have another irony. The fair value of the stock which everyone talks about is not the same for every investor. If you ask 5 different investors you will get 5 different fair values of the same stock. Then the key is to stick to your analysis and keep improving until you master it.

Today I want to discuss a case of Avenue Supermarket (Dmart) and then we will try to analyze how one loses money in stock market.

Avenue supermarket IPO opened for subscription on 08 Mar 2017.  The IPO worth 1870 Cr got hugely oversubscribed by 100 times.

Most of the brokers were optimistic and gave a subscribe rating to this IPO but some of the big investors like Porinju were a bit a skeptical about its high valuation. Link 

But the IPO gave everyone a shock when it got listed with a bumper price on stock exchanges on 21 Mar 2017. The listing price (Rs 600) was just double of its issue price (Rs 299).

So if someone will buy the stock now he will be paying double of the issue price and definitely, the valuations were overstretched too. But then also Dmart remained everyone’s favourite.

In Apr 2017 almost every TV analysts were yelling about Dmart high valuation and everyone one should be cautious about buying it. Livemint also covered a post to tell that it is the world’s most expensive store.

So if an investor buys Dmart stocks now he should be knowing that there is a huge risk of downside and he can lose half of his money. If the company failed to give expected quarterly earning stock prices will definitely fall.

After 4 months of IPO in Sep 2017, Goldman Sachs initiated a buy coverage on Dmart with a target of Rs 1586  for next 10 years. On that day, Dmart’s shares zoomed about 18%. Everyone was knowing that they are paying 2.5 times of the IPO issue price which was just issued 6 months ago.

It is sorry to say that investors kept an eye only on the perspective gains but not on the downside of it. Novice investors keep an eye on a stock which is going high and high. They do not care about looking over other investment opportunities. About Dmart, even now the investors are saying it is overvalued. Link. Now if an investor who is invested into it should wait for at least 5-6 years to create wealth out of his investment. But most of the investors are short of patience and because of that, they start losing money in stock market.

Read: New to investing, learn fundamental analysis here

Read:  Stock market Scams

Yes, the stock market is a Gamble if you do not understand what you are doing. 

If one understands the market and doesn’t make hasty decisions he/she can create a good amount of fortune from it.

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General Investing Important Concepts Must Know Facts

STOCK MARKET SCAMS

The Stock Market is indeed a massive beast which is difficult to understand and manipulate. Understanding behavioural finance is key to excel in the stock market. But most of the people buy or sell a stock because they want to follow the trend. This trend could be in favour of you sometimes but not always.

Today, I want to talk about some type of scam which is still prevailing in markets. These scams are difficult to trace therefore SEBI could not take action against the culprits. The main prey of these scams are Retail Investors, people like me and you. As I said the market is difficult to manipulate but some stocks which fall below 500 Cr market capitalization are much easier to manipulate compared to others.

Read: How much shares you  need to buy to increase share price?

Idea behind Scam

A promoter or related person referred as operator decides to double or triple money in short period of time less than 1 year. The operator decides to buy a particular stock in huge quantity but less than that which cannot come into limelight. Now, the operator starts to promote, he hires some agency for sending fake/scam messages to retail investors. This process keeps on going for 1 to 6 months. Within a month, stock prices start to take a hit and getting stuck at Upper Circuit daily. After few months, the operator starts selling his stake. The operator is very happy as he has already doubled his money and now sitting on huge profits.

Who get trapped? 

Retail Investors get trapped in this scam. Once the stock operator decides to take his stakeout, stock start hitting Lower Circuit. Retail Investors start getting worried and they also start taking out money. Once this mass selling starts, the stock keeps hitting Lower Circuit and most of the retail investors get trapped.

See the fake/scam calls which I received in August 17.

 

Now check the market trend of these scripts.

My idea of posting this article is to help Retail Investors to avoid such cheap gimmicks and do not get trapped in such scam calls. There is nothing like easy money so stop becoming greedy and patiently wait for your investments to grow.

Read: Bitter truth about Stock Market

Happy Investing.

Credits for charts: TradingView

Categories
General Investing

WHY STOCK MARKET EXISTS?

Have you ever wondered why stock market exists? I always did but never thought that stock markets provide a boost to the whole economy. Let me explain how it does the same?

Need for Stock Exchanges

Stock exchanges are nothing more than a place where trades are executed. You can consider it as a marketplace where a seller and a buyer meet and do trade. In this era of computers, every transaction is facilitated electronically only.

Read: Brief introduction to stock markets

How it is beneficial for Economy?

When any company want to raise money for its expansion or want to provide an exit to its early investors they raise money from the public. Public (investors) always invest their money to create wealth for their future. In fact, equity is the best asset class which can protect one’s money from inflation.

Raising capital is good but what is a need to stock exchanges?

Now you must be wondering if an investor invests his money then why we need a stock exchange. A stock exchange provides a way to transact so that an investor who has previously invested in the company through IPO can get an easy exit. So this means any investor who has invested his money can exit from his investment anytime. This also applies the other way. Any prospective investor now can invest in the company by buying shares via stock exchanges.

What else?

The stock market also allows foreign investors to participate in the growth of the economy. Foreign investors participate in the stock market to create wealth. Generally developing economies provide better investment opportunities than developed ones.

Participants in stock markets

On a broader level there are 3 types of participants in stock markets.

  1. Retail Individual Investor (RII): These are investors like you and me. They usually invest in small quantities but there is not limit for individual to invest.
  2. Domestic Institutional Investor (DII): These are represented by domestic fund houses such as Mutual Funds. They usually invest in large amount in various companies.
  3. Foreign Institutional Investor (FII): These are some high worth foreign fund houses and investors. They also invest in large amounts in various companies.

Read: What is Sensex and Nifty 50?

I hope this post has been helpful to you. Happy Investing.

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