Don’t get trapped in “Laav ! Laav! Markets” ~ Don’t Chase the Stock Price or the Sensex at 19000 ! fearing you’ll be left behind!
‘Laav’ meaning to ‘Give’ as in ‘Buy’ was a common frenzied scream ,particularly during bull runs, by hundreds of brokers, sub brokers and jobbers in BSE during Open Cry Trading in the Ring ~Such an Era peaked in the early 1990s when Modern Reforms were ushered in ~ There was BSE Exchange and UTI Big Daddy Investor and then there were the rest ! ~Brokers were one big Happy and Wealthy and Close Family with a few dominating the rest and setting the Adjustment or ‘Badla’ or ‘Contango’ Rates for the carry forward system in Specified Shares ! ~Since the Switch to Electronic Trading Platforms,the Broking Family has split and it’s become quite impersonal now ~ for many even the ‘r’ had fallen off ! from Broke’r’ ! ~ as the Game remained the same but the rules had changed !~ NSE now dominates with MCX threatening it too
Yesterday the Markets clearly ran ahead of themselves scoring 200 points on the Sensex and crossing and closing over 19000 !as if from now on it would be a one way street North !
Today the Sensex has cooled off over 160 points and is below 18900 levels at 2.30 pm ~ All Stocks that ran up yesterday have cooled off ! ~ an exception here or there can be ignored
Of course Sensex may bounce back but sleeping with Volatility is injurious to your health ~ Don’t Listen to half baked theories of making Volatility your Friend and earning in Trading and Derivatives consistently whether the Market goes up or Down ! ~ This is nothing but marketing bullshit from even some leading Brokers and Advisors !
While the Bullish Sentiment is clearly sensed and Momentum seen and even supported by Liquidity of huge FII Inflows upward of Rs 19000 crs in September 2012 alone be warned not to chase stocks in such a frenzy ! ~ The Risk of chasing Price,especially of High Beta Stocks ,is High ~ The Risk of Chasing Value remains Lower
It’s a herd investor psychology to jump in so as not to miss the boat !~ Fear remarkably begins to ebb and Greed and Temptation is too strong and Fundamentals of Valuation,especially Earnings Potential tend to be ignored ~ easy to be seduced by over-optimism on Future Prospects and get carried away by all Positive News on Companies and deliberately ignoring or underplaying Negative News and Risks
Smart Investors stock up on Quality Stocks when Markets are Gloomy and Dull and Flat and Bearish ~ there are a very few of such smart investors as it requires conviction,temperament,and a robust discipline and not worrying about notional losses as long as the selection conviction is strong ~even not afraid to average holding cost at lower prices ~ they even park monies in Trains at the Yard
While Most want to climb aboard the Train just before it’s leaving the Platform or somewhere along the journey and sadly many clamber aboard towards the journey end at high Prices ! ~ throws up Reinvestment and Timing the Market Risks !
Having said this ,when an opportunity does present itself you should know what to do and do it !
So does such an opportunity exist today !? Yes ! but selectively ~but don’t chase the Price !
Yesterday you may have placed a Buy Limit at Rs 160 for IDFC which had run up to Rs 165 ! ~ You missed it,so you thought ! ~ Now Today when it is available at Rs 159 you don’t want to play it ! ~I can open a whole Pandora’s Box on the belief that ‘The Trend is your Friend ! ~ maybe some other day !
And Chasing the Sensex at 19000 !? Well,the macro risk is high as the headwinds remain strong despite unleashing all these FDI Reforms ~ The macro valuation too is not a bargain at 14 times Earnings with FY 2012/13 Sensex Earnings expected to drop below 10% ~ unless we see visible growth in Earnings Growth Rates back towards 15% to 20% ~ Cement,Power and Oil are showing positive indications~don’t expect the Sensex to run away past 21000 too soon ~ if it does it would be ahead of Fundamentals and that would increase the Risk ~ Also I don’t see any justification or evidence of any PE re-rating in the near future
And for God Sake stop paying blind heed to those unsolicited SMSes that swarm your mobiles like Bees and that tell you to buy this or that stock ~ some even go a step further to tell you to buy in Bulk ! ~ unless you have assessed the Value vs Price on it~ This morning I got one for a Scrip on BSE at Rs 2.70 that should race away to Rs 4.10! with an ultimate target of Rs 10 ! ~Volumes now are a Million Shares ! ~ Don’t even bother to ask me which scrip!
Enjoy the Weekend ~ Cheers !