Sunday, November 29, 2009

Market-casual thoughts

Today, I wish to talk on few investment concerns. At straight, every smoker knows that cigarette smoking is harmful to health and every drinker is aware alcohol is ruinous. We get these cautions on every packet of cigarettes or bottles of wines. But some of us consume the both or any, even after the absolute consciousness. The plain purpose of above words in such a blog, related to investment myths. Any way, we don’t have such cautions available on scrips. Majority of us treats investment advices on the way, chain smokers or heavy drinkers responds to the cautions quoted above.

The path of the market seems on a slipping floor. It is not showing any boldness, responds in a very sensitive manner like a teenager. Market is reacting to every related news with an antagonistic way. 300-500 points up or down of Sensex in a single session is none a matter to us. The market is even capable to bring down or up some 2000 points in just a week or in 3-4 trading sessions. What is going on?

My clients usually ask such questions. Few of them even ask for short term recommendations. But, I am not sufficiently expert to answer them in any condition. But I wish to spread few words my own. The path of the market is mysterious. I don’t think, any one can calculate the market’s future. But we still read a lot of expert views everyday in Medias. They predicts in their way, market is passing it’s own way. Majority of them come again shamelessly and blasts new bombs. I have a collection of their statements since last few years which I kept in separate folders by names, and it is really interesting when we look now. About predictions, the only possible thing is, we can reach on certain presumptions considering various aspects related to economy or market. Nothing else!

On the other side, the unpredictable nature is one of the most charming side of market. Just recall the days of year 2008. Market was declining day by day on global cues. Was there any attractions? And before that, market were on mountaineering, everyone were making money but short live, and lost than they made. Simply, the real allure of the market concealed in, expecting the unexpected. Everyone here is to make good money by fastest means. I don’t know any one, who buy stocks to play with hard earned coins.

A big percentage of investors enter in the market with a pre-assumption of immediate gains. But normally market sides them on the shore, like oceans do with scraps. Long term investment is an established and widely accepted strategy even if very less people follows. A very few short term/Intra day traders makes good money too, but less in size compare to the patient investment. Experts says, the current volatile market is one of the solid opportunities to make good money, after the previous extreme lows which most of us missed out. But, here again, I am not proficient in that way. But I wish to be….

Let us see, how people buy stocks? A large part of retail investors buy stocks while the market moves to north. The intention is to take positions before market reaches in higher levels. When a crash occurs, most of them sell out their entire holdings irrespective of company potentials, cause the scarcity to further declines. Probably these people pay heavy brokerage almost nearest to their gains in long run.

Some investors take their positions in upcoming market and sell out on nominal gains. If a crash occurs and stays for longer time, they even divert their funds to other investment options. These people never wish to stay their money idle.

A very few category of investors get pleasant while market is crashing or on inconsistency. They always keep a considerable portion of their money idle and sit on it calmly. When market crashes, or in between sucker rallies, they put their money and manage exit meeting their pre-assigned target with legitimate profit before next crash. It is the best strategy for short term traders, but not practical for everyone .

Some people buy stocks in batches while market crashes or responds erratic, sucker rallies bring the market again in heights, they stay calm, they wait for the next more solid crash to get the same stocks (on which they have downright faith) in lesser prices. They accumulate their favourite stocks in more genuine prices. These people come normally in the category of patient long term investors and who actually makes money in the real depth. I wish to be here. Moreover, interested to deal with people who keep this mindset.

I am always in favour of long term or patient investments, but I truly respect few day traders who make consistent gains. I personally know few such smart and hardworking guys. They work hard to keep pace with the market and doing extensive research before play the game. They unearth some positive news, collect maximum details on the news, company details, graphs, charts etc.. Then put their money with brave heart. Probably the result will be fruitful according to the positive reaction to the news/info. These are the people who benefits maximum from the minimum time. A real intraday trader should have an immediate decision making capability, utter braveness, a solid background for high risk tolerance, good knowledge on the scrip/company, charts/graphs, resistance levels, awareness of the farthest possible reaction levels etc… If you have it in you, go ahead and try your luck.

But, majority of my intraday friends are on the other side. They sit in front of the system by around 9 am or before. Looks like preparing for a 100 Mtr sprint. With 2-3 mobile phones (to avoid chances of missing even a single tip from their most [un]trusted sources) to receive tips, resistance levels, entry prices, intraday targets etc.. Or, some of them closely watches the initial moves of indices, and put their/broker’s money blindly… Usually, most of the days happens bad for them. Any slight negative news usually brings the market to heavy collapse and they compelled to sell out on lose. Sometimes, the market goes up, but the scrip they bought to south only.... Most of them cannot even deliver good stocks because they usually play with margins. The interesting thing is they surely discuss their sporadic gains with us, which rarely occurs, but the loses never. Next day they sit again to recover the earlier lose with a fresh guy’s tip mostly paid ones.

I think its enough for now, usually I am hesitate to read lengthy contents, so hope my readers too.

Comments Please

Shabu Thachat –


  1. Both investing and trading need skills. According to me investors and traders loss money by buying and selling when news or result is out. News and results will be factored in before we hear it unless we have connections with insiders or operators. If hit ratio of a tip provider is high then more traders will start follow him. Big players are making money by trading against sentiments of majority traders. They trade in such a way that stop loss of majority traders are hit. So hit ratio of tip providers reduces with time.

  2. Dear James,

    Thank you for the power packed comment...


  3. In US Market Reacts after the News come out, But in India, as james sir told, its already factored and the moment news comes in traders jump in and they will stuck in above the insider buyers level..and insiders will be the first to book profits. Its difficult for Trader to Become Billionaire and For those who stick for years makes HandSome lucre. Traders burns oil more than long terms investors.

    In this Dynamic Market..we should check our PF once in a week..Because No decade will be same as 2002-2008...during which few smart ppl like Shabu sir made hand some money..the same era does not hold from 2009-2014 [till congress govt last] may go south or north who knows. 60% of indian market owned by we have to keep tab on global trend in order to fine tune our PF according to global scenario. Gone are the days [1930] where stimulus money floated within country..but now money floating thought the Earth. So Being alert is good thing.

    Some people make many based on news. For Eg: When dubai crisis hit india on friday..and BoB news came out about its exposure ppl started shorting it and some ppl rollover it on monday to short more..but GDP surprised them..and they covered the position with some loss too.

    How do Fund Managers add Stock to their PF here is how :

    Let's take a situation that a fund manager of a fund XYZ want to add a new stock in fund portfolio for example Dabur India . Fund manager wants 2-3% of dabur india, that means it needs 5 million shares. On an average 1 million shares of Dabur india change hand on NSE. Hence fund manager will have to keep buying for 5 days every stock on that counter to get 5 million stocks. Now since he is just keep buying it will dry up supply and his purchase price will skyrocket.
    What can fund manager do to get stocks at lowest possible price ? Strategy is hidden in accumulation. He buys 50000 stocks and then sells 5000 at lower price to bring seller to table. Once enough seller are there he executes a big order to catch all that supply.. here is how it goes on tape,
    Dabur India Ltd stocks opens at 120 in morning .
    Sellers 10000 at 120, 20000 at 121, 10000 at 121.5, 50000 at 122
    Fund manager sees that he can get 90000 shares below Rs 122. He sends one order and volume spikes up. He catches all fish swimming below net at 122. Now price on board is 122.
    A new lot of seller emerges on tape 50000 at 123, 30000 at 123.5 .
    But he won't execute another order above 122. Instead he will sell may be 5000 stocks at 121. That will bring down price on board at 121. More sellers collect to sell at 121 and 122. He executes another order to get everything below 123. Now he has more then 100000 stocks in his pocket below 123.
    This is called accumulation. Buy more and sell less.


  4. A good idea is to buy on roumors and sell on news...:)...

    Another really nice article from Shabu...

    I think the really important point all of us have to understand is that money does not come free...u need to work hard on the case of investing the work is not physical is mental labor and investment of time...

    So one needs to invest time to research and apply his/her common sense (more then anything else) to carefully pick the stocks and businesses to invest in...

    Traders in general make money one day and lose more then made the other day...its not investing...its just gambling and addiction...sophisticated gamblers would be a good name...

  5. Dear Mahesh,

    Thank you for such a detailed and informative comment.

    Not only Fund Managers but a lot of other people also practicing the same Boiler Room Tactics everyday in market. Please check my own post regarding, in the following link.

    I wish to talk a bit on your opinion on the comparison of time, 2002-08 and 2009-14. May be you are right, but I weighing the most final task, to make money.

    Market always offers opportunuties to make good money, even in extreme bear face. The only difference is, in bull era, almost everyone makes money and the majority mislays by end, but in bear market, there is very few.

    Do you believe?, roughly an average of 6-10 scrips always earns 100% or more within every previous 30 days irrespective of Market conditions. I am watching this by months and it happens always. Some times the numbers are beyond our expectations, but the minimum is there. But how we spot them, thats the matter.

    Faisal placed the answer below for this question...

    "money does not come free...u need to work hard on the case of investing the work is not physical is mental labor and investment of time..."

    Any way thanks a lot Mahesh.., Thank you faisal
    Shabu Thachat

  6. Thank you Faisal,

    You are absolutely right. If you are ready to dig, the treasure is not far away. If your are ready to take the burden of mental toil, it will show you new paths, it guides you, it riches your experiences and above all it bestow you good money. I would like to rate this comment as one of the best in its category.

    Thanks and regards , Shabu Thachat

  7. Dear Mahesh,

    Please don't call me sir. I am not an expert. I subscribed to your friendfeed after seeing your comment on solar bio-fuel in this blog. In 1990's sensex and nifty didn't move much but some investors made huge money during that time also. In last 6 months when you made money from stocks like edserv many investors lost money from stocks like bharti airtel. So in stock market some people always make money and some people always loss money. But it is good to limit our dreams. Experts like shabu sir have big dreams because they have more knowledge than us.

    Dear Faisal sir,

    You are right. We need to work hard to make money. Many traders make money by buying on rumors and selling on news. But source of rumors is also important. Tv channels spread rumors only after big players took positions in that stock. So rumors spread by big media's should be treated us news.

  8. Thank you Shabu for yet another infomartive post..

    As you said in your one of the comment's that , every 6-10 scrips does make 100% return in last 30 days of there sessions..True to everybody word !!! .. But really which basis we can catch hold of these is out of my limit .. ;).

    I think coming to investing and trading, we need to be combo-pack in current volatile world, switching are quite often necessary & practical i feel. First thing is we should respect market as they behave - rationally or irrationally, and depending upon the sentiments across we need to switch ...sometimes i feel there are more traders mindesets now in market than real longterm investors mindset which is why we see fluctuation so intense..and we need to respect that whether it comes in comfort zone or not...

    Online 'Trading', adds to this fuel , as decision can be taken in matter of one click( think of paper work previos days), as i do sometimes , with some bad sentiments flowing mkt life is volatile nowadays and it will become more and more as technology advances..

    i may be wrong in correct:)


  9. Dear Venkat..

    Thanks for the comment... You are correct in all respects that technology is a speed generator in every facet of life... The matter is , where we stands and the concern is our speed....


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The blog is associated with information on Indian stock market and author’s investment view points on various emerging stocks/sectors. The contents discussed in this blog are purely my own personal opinion and in no case weigh it as any kind of recommendation for stock market investment. The sheer purpose of this blog is to educate the interested community on market related subjects based on my experience and I am, in no way, responsible for investment decisions based on the contents described in this blog.

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