PREPARE FOR PICKING STOCKS

It is always difficult to be sure in stock market. The days before, when I did put down my opinion as “it is probably not the right time to pick up stock for small investors”( LINK), many of my friends were at serious difference with me.

I had my own reasons to come up with a statement like that.

As always the small investors tend to pick up stocks at higher price. How many of us could pick up our stocks at bottom, yesterday we came to know about the turn around of the market a tad later, by the time, it wheezed past many a miles, certainly we lost some good ground.

But again, the yesterday’s rally was the turn around of the market?

Probably not, the market again went down today for some reason that we could not think of. It seems the market will behave in weird way for some more time.
Or to me, till the liquidity re-injected from the refunds of Reliance Power IPO. That means after a week time. We can wait for some more time till a clear picture.

There are many a stocks which are at very attractive price right now. But the stocks which were at their best before the slide may not go back to the original position at the same rapid stride. History has many instances. Zoom your attention to the stocks with good fundamentals and which has prospects to grow, stock market always pays premium to growth story.

I have identified few stocks for picking up when the market stabilizes, but again I am suffering from liquidity crunch like most small investors.

Powergrid

GMR infra

PetronetLNG

ONGC

IFCI

RNRL

Nagarjuna Fertilizer

RPL

May be it is the right time to buy as per the market pundits, but listen to your inner self too. Most of the time, in such situation the gut-feelings presents the answer.

The loss or gain is yours, so nobody is going to shoulder responsibility but everybody will claim credits.

DO NOT BUY: WAIT FOR SOME MORE TIME

The present fall of Indian stock market is so violent and vicious it forced me out of my slumber of so called bloggers block. The sudden and completely unanticipated tanking of the market is the result of many factors and the factors were cumulative. That is the reason of this violent fall trailing with some bloody aftermath after every fall.

I was shivering in front of my computer when I saw the freefall of the market as if there is no bottom, interestingly similar feelings was there when the market was going up at a frenetic pace (my earlier blog). Such wild movement of the market is definitely not good for the small investors.

But market reign supreme. The market is very vindictive in the hands of market operators. Probably it calls for proactive Regulators which do not yield to the stage managed hulla-bol of unscrupulous element.

Probably, after a long time, the market is reinventing value, and discarding momentum. In that case what will be our next logical step to rise like Phoenix from the ashes of our portfolios?
Should we cherry-pick some good mid cap stocks, large cap stocks, dividend paying stock and what not at some attractive price as some experts are dishing out their advice.
(Sometime I can not stand some experts who pose as Mr. Know-all and have some preconceived ideas which in most cases turn out to be wrong, but never accepted it. aka. ONGC, RNRL, L&T haters )

For me sit tight and watch is the best policy for the time being and buy my stock only after the market turns around from the bottom of this abyss.

I am very much sure we have a bull market ahead of us and may be these developments are for the best interest of us.

SENSEX : POISED FOR CORRECTION?

There are two developments which may effect the Indian stock market on 17 th October 2007.

Firstly official from the Ministry of Finance said that the recent inflow of foreign money into our market is due to "Inflows are high as foreign institutional investors find Indian shares attractive" and "It is also because of the interest rate differentials". Link: News.

This is a statement made to control the damage from the statement made by Finance Minister Mr. P. Chidambaram. Link: News, earlier post.

And secondly SEBI is trying to control of Participatory Note participation in our market. The P-note is a derivative product used by overseas operators to protect their identity and the ease of entering and existing any market. Mostly the P-note is used for short term investment in market.
Read SEBI's Paper on the P-note here.

Many pundits beleive that the recent bull run of our market is also fuelled by the P-note phenomena to some extend.

We should be prepared to any kind of market reaction for both the above developments.

IT STOCKS FOLLOW CYCLE

Tomorrow is an important day for market- Infosys result day. Market is going up and on its way up catching many experts on the wrong foot. The result will determine whether the market will go further up or may pause a bit with correction.
I am dependent on the result, for the IT stock HCL Technology, I have in my portfolio.
Good result will buoy it up. Market is already anticipating some good result, seeing the movement of IT stocks in last two sessions.

Stocks follow cycle. A company grows, matures and then declines. Best time to buy a stock is when it grows. At present it is India shining story, so most Indian stocks are growing. Rate of growth depends on management and business model. Some stocks have unique business model which is difficult and even impossible to copy. A good management can change the scenario of a business.

At present the growing Indian IT industry have some very good business model and robust management, which is evident from the growth of the companies. The top five Infosys, TCS, Wipro, Satyam and HCL Technology generally lead the way for the smaller companies.

I wonder if Rakesh Jhunjhunwala has some stake in IT industry. If not, why?

We are not at par with Chinese in manufacturing sector, it is their forte. But IT and ITES is our forte, if it goes wrong, there will be some grim picture to portray. Lets keep my finger crossed and ears open, and ready for action at the drop of a hat.

Am I as nervous as the market?

SMART MONEY AND DEAD INVESTMENT

I often hear people putting the term smart money here and there. To me, very simply put, smart moneys are those which are getting return, often beat the bank interest by a fair margin. It is for the interest of a Really Small and Helpless Investors to know or assess whether their money is smart enough in a long term investment.

My small capital can earn much more than the bank interest if I study the market and roll my money. I would rather prefer to roll my money for some quick gain instead of sitting on it, which is possible in the present bull market.
Diversification with a small capital is not a good idea, because there are much small head areas to diversify.
Risk aversion by being disciplined (not being greedy) is another key. Sell at my target price, at prefixed time period (whichever is early) and being courageous to book loss if necessary. It seems 10-20% profit in a month is a very good bet.
Timing the market is a dumb idea. Nobody can predict stock prices and choose correct timings; at best I can guess it.
Really Small and Helpless Investors (RSHI) are generally the last to be tipped off. I should apply discretion, to accept them.
Day trading is most risky, avoid even though there are enough time at my disposal.

After selling of Cummins I asked my broker to buy IFCI. As I knew the person for some time he came up with advice that I should not buy when the Sensex / Nifty is at its peak and asked me to wait for some time. I heeded his advice and repented after the day, IFCI made a nice run today. Missed bus carries no passenger. May be a correction is on anvil, after listing of DLF. Respect history.

The following stock are in my mind, I should study them

IDBI- It is ripe for one month investment for 10-20% growth.

Yes Bank- less than a month, next target may be Rs. 220/-. RSHI may exit below that level.