BIG OPERATORS VIS-À-VIS SMALL INVESTORS

Though the term “Operator” does not seem right for all high net worth investors or institutional investors, the term somehow stuck to them. They have the capacity to manipulate the market. They can artificially jack a stock up or dump it down the drain and that is for anybody’s guess. If they choose to operate in cartel they can manipulate the whole market. We have the terms Bear Cartel and Bull Operator in capital markets.

The recent additions to the term “Operator” are Foreign Institutional Investors (FIIs) and Hedge Funds. When they come; they come in swarms and when they go, go out in swarms. These dangerous/vicious Operators can even ruin the economy of a country if the regulators are not careful enough. The established cartels and regular Operator treat them in awe. They have enormous money power and very well designed market operation employing best brains, which can upset any apple cart. There are lots of stories floating around in market, how so and so were really upset and had to gulp down some bitter pills against their very will. At times; it seems to be some kind of poetic justice meted out for some unjust operations affecting the Really Small and Helpless Investors (RSHI) that was carried out some years/months/days earlier.

The small investors are helpless spectators of the drama. The intelligent ones utilize the tide and reap the benefits. But most jumps into the arena a bit late and sadly have to converts their trade into investment with some real long horizon (*). My policy is to be the spectator and not try to be intelligent. I will invest only after studying the script and invest in them if the script can satisfy my basic requirements of sound fundamentals and low P/E and good earnings. (Change of strategy!!)

Cummins India is coming back to news as some Broker house has put it into buy; probably now it is making good chart patterns. I still have the opinion that the script has potential to go further up and may touch new highs, though I had come out of it as I did not had enough space for profit booking. It is still buy in correction.(*)

The TCS result has put some interest back into IT space. The IT picture seems to be gloomy in near term, but Indian IT Companies have the dominance and enough fire power to pull their act together again. I had a long night on Sunday, and decided to stay put in HCL Technology at least till result. My gut feeling says it will break the resistance of INR 350 in near term, I repeat that is gut feeling only.

I have two stocks in mind which may offer some short/medium term trading opportunity.

Centurion Bank of Punjab: Sometime unreasonable P/E defies justification if good stories are anticipated.

JBF Industries: May be another story of pulling the act together.

Both stories are touch and go. Careful study will be required.

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.