RULES & RUES

I have a set of rules for the RSHI, the Really Small and Helpless Investors.

1. The first is to cut losses.
2. The second is not to forget the first. With the small capital at his disposal a RSHI can not effort to lose his money.
3. The third is to find out what the herd is following, I can jump in the band wagon and jump out of it taking some profit, before anybody’s guess. Trick is not to be greedy there. The herd, in most cases, follows some tips which may not sustain for long.
4. The fourth is not to convert a losing trade to investment. Investment is something different, needs a through study on fundamentals. But in trade, it needs the study of the market sentiment. By Jove, some gut feelings too. Yes it is true “Do not follow the herd”. But swimming against the current needs lot of strength in wallet.
5. The fifth is to think about the consequences of a losing trade.

Now, to my previous investments, my first stock Cummins is going up and seems to go on and on. Already it has achieved my target. Now I am in dilemma? If I follow the market pundits I should book part profit after achieving the first target. But with that small numbers of stocks booking part profit means nothing. Again I can not effort to lose the profit if the market goes down. My gut feelings says the market will go up further, as it did not correct itself even after the mega issue of DLF, as most RSHI anticipated (influenced by prime time TV experts?). Should I wait for another week? These thinking occur to most RSHI, as they do not have the access to correct information and research.

It occurs to me now why most RSHI loses his money in stock market. Either they tend to sell the stocks when the stock has not reached its correct valuation or when the market goes down. Most cases they do not sell the stock in down market as they have to lose profit and they turn their trade to investment. Then they wait for agonizingly long period of time.

My case, I will ask my free advisors for their valuable tips. I have time as market is going to open on next monday. It seems I can not do away with market tips.

SERENE SMALL-CAP AND MODEST MID-CAP?

“We are in bear phase barring 6-7 stocks”.

May be it is true for Sensex and Nifty stocks. But if we consider Mid-cap and Small-cap stocks, it is entirely a different picture. They have outsmarted Sensex and Nifty by a wide margin. The launch of Mid-cap and Small-cap specific funds by all and sundry Fund Houses are the best proof of it.

Mid-cap and Small-caps offer ample opportunities, but question is how to identify them. There are thousands of stocks listed in BSE and NSE. To pick the winner should be definitely an arduous job. I am trying to frame rules for me for the vary purpose

The stock should be in news, so that people know that it exists.
The news should be in positive note. Financial well being and acquisition aboard goes well with Indian investors.
Investors’ interest is to be judged by the P/E value. It should be in higher range than its peers. Mid-cap and Small-cap stocks do not follow rationality; they tend to have unreasonable valuations.
Have any experts told anything positively in prime time TV, studied and reviewed in popular finance magazines? If yes it is a good sign.
Never go near them in downward market, they tend to go down at a much faster pace than the market.
Invest only the portion of your money, which you can effort to lose completely.
Monitor closely, book profit at the drop of anyone’s hat.

I will try to frame more rules and welcome anyone’s addition to this set of rules.

Some Mid-cap favorites of my fancy are:

Yes Bank because it has the potential to go further.
JBF Industries for the good stories behind.
Dena Bank as it is bookies favorite.
Finolex Industries for the high opinions of Small investors.
East India Hotel may be it is in an emerging sector.
Sriram Transport, you need logistics everywhere.

I will buy at least two of them after the market cools down and invest around ten thousand bucks on each. If I am lucky in picking up the correct scripts I may even double my money in double quick time.

GEMS FROM PUNDITS

I got some tips from blogger friend about the recent discussion among market pundits by mail. It makes me to note down the followings for my future stock selection reference: (Was it in Capitalideasonline.com ?)

(All big names : Ramesh Damani, Anoop Bhaskar, Prasant Jain, Madhu Kela, Sanjoy Bhattacharyya, Raamdeo Agarwala and Rakesh Jhunjhunwala were there according to the source.)

• Downside is very limited.
• We are already in a bear market barring 6-7 stocks.
• Profit growth will slow down.
• There should be 25-30% profit growth y-o-y.
• Some sector may be already saturated, eg. telecom or even technology.
• Some emerging sectors demand critical follow up like hospitality.

Stock Pick by

Rakesh Jhunjhunwala

Tata Steel

Titan

Bilcare

Sanjoy Bhattacharyya

Tata Elsxi

Grindwell Norton

Rane Madras

Raamdeo Agarwala

Tata Steel

Glaxo

Dena Bank

I will exercise restrain and cautious in picking up stock.

Grindwell Norton
150.00
532661.BO RANE MADRAS
98.00
TATAELXSI.NS
328.00
GLAXO.NS
1,274.15
526853.BO BILCARE LT
859.00
TITAN.NS
1,161.65

Can we do away with market tips?

STOCK DILEMMAS

I took the decision to enter stock market at a probably wrong time, the market is behaving weird. The word “volatile” is correct, though I did not appreciated the use before. Experts say “There is no right or wrong time to enter the market, invest in blue chips, sit tight for a few years and the return will beat the bank interest by a good margin”. I am doing it for last so many years, through mutual funds. Mutual funds are giving me good returns, some very handsomely. But the entry load at times gives me some jitters, they are so high. The fund managers are making money and living a good life out of our money. But honestly no complains either, till they give me some good returns.

I was missing the fun and excitement of stock market. The challenge to double your money at double quick time should be exiting. Identifying a winner is another story altogether. I mused on the followings:
To be an investor or a trader? Investor is out, I am going to be a trader. Day trading is exiting but with great degree of risks. Swing trading sounds good, but needs expertise or experience. SMS and Mail group costs almost my total profit from my small capital. And who can actually forecast stock, weather and luck correctly? Can I effort to lose concentration to my present job after some quick bucks with all the risks associated? How can I pick stock of my choice at my price if I do not follow it by minutes.

I am starting to read study materials, blogs and hearing experts opinions in TV. The biggest bull Mr. Rakesh Jhunjhunwala recently in an interview expressed his views on the present volatility of the market. In one sentence he told that market will never come below 11,000 marks. Does it indicates he foresees that the market shedding 3000 points from here on?

In my earlier blog I thought about Fortis and Binani Cement. I will wait for some time to pick the stocks up; I will continue watching them and pick up after some worthwhile trading on these stocks by some investors. Cummins India after some heady topsy-turvy is going up again.

I bought 30 shares of HCL Technology yesterday at Rs 339/-, effective price will be 2.2% more ie. Rs. 347/-. Above which I will make profit. Depreciation of Rupee is the main factor of my interest in software. I will look forward for around 10% profit in one month or less. This time I am not sure of my decision.

Ciao.

TIPS AND RECOMMENDATIONS

Tips on market are plenty, they float in air. One can expect them from the most unexpected quarters. Taking lunch with two stock experts (self proclaimed!) load me with full of them. They also warns me about the danger of picking tips without any analysis. Market Tips are mainly, as I believe are unconfirmed news, may be rumours without any basis. But stock market investors rely heavily on them, specially the small investors like me.

Most of the small investors also believe that the free recommendations by Brokers and Broking Houses as a prelude to unload their or their customers holdings. At times, if you follow their recommendations you can find that, that is the truth. But they have to keep their reputations, they just can not do that every time. They have expertise to value a stock more fairly than us, the small investors.

One also needs hell lot of time to spare to identify a potential winner with very limited resources of information. (Cummins India took me some real effort. Hey, it is going up!!) We have to depend on the tips and recommendations. And most common phenomena is erosion of our small capitals/ losing money. One has to be aware of these two while investing.

I am studying Fortis and Binani Cement, will the Institutional Investors of these two scripts allow them to linger in such darkness?

Ciao.

HIGH SENSEX

When I have decided to take a plunge in the capital market, Sensex is already at a very high point. There is probably a few notches to go up but a fathom less bottom to touch. Should I defer my investment till sensex come to a comfortable level?


But there are thousands of stock outside Sensex and Nifty. Some of which are still at very attractive price but lack of investors interest make them languish where they are. Investors' skill comes to handy to pick up those mid caps which may attract other investors interest in near term. I know many who invested in this type script but their investment remained dull, only due to lack of market interest, though the scripts have great potential in them.

I have identified a script, "Cummins India" which recently broke free of the stigma of low interest from investors as the volume has picked up. The script have great future, news (news2)shows that.

Yesterdays correction has prompted me to buy 30 numbers of the stok at Rs. 304.80, with brokerage it will come to around Rs. 307.00. I propose to keep the stock for about a month with a view of 20% appreciation. Lets see, I can effort some loss also if it does not come above it within my time.

Do not buy the stock at my reccomendation as I am a novice in the field.

Ciao.

CREATING ANT HILL

Creating wealth with minimum investment requires tenacity and timely action. Indian stock market offers enough opportunities for small investors even with dismal amount of money to invest. For that one requires (my rules)

• a demat account
• some spare money, which one can effort to lose completely
• understanding of the market dynamics
• courage to take calculated risks
• disciplines and rules, one should frame for himself and follow religiouly
• open ears and judgements
• a beleive that market spares no mistakes, not even the experts
• willingness to fight it out
• ability to learn from mistakes of others
• ability to smile even with unintentional loss to book
• boast successes and hide failures

Probably the first two are the easiest to have, and the last two most of us have already. The other virtues are not that easy to achieve, however we will credit them to the successful traders. Rests do not have them, may be in very limited amount.

There are many rules framed by experts one cand find them in websites, blogs, megazines and books. I will try to go through them and try to reframe my sets of rules. In the meantime I will continue investment and I will keep records of my investments in this blog.

Ciao.