The Crash( 17.5.2006) and FII activities since then

[rajesh.sadhanala]

Nice one Pankaj, now trying to search for the stock Just kidding. Whatever u mentioned is very true and helps a lot to fine tune ur psychological factors inside each person and act upon it.

Really nice one to share with us.

Regards
Raj

Hi

I am going to tell one story

Tale of One Stock:

One fine morning on Sunday in April 2005, I was enjoying morning cup of tea and reading BusinessLine. Indices were on highs and I was feeling left out. I was unwilling to invest at current level as I was thinking that market is overpriced. While reading The newspaper I glanced through Investment advice column. After reading their ideas for investment, I was struck by one of their choice. I never heard of that name. So going through details, I thought would it be goo idea to invest in this. I had some small amount from PPF withdrawal. I had saved for Income tax and then in April had withdrawn some amount ( once in a year it is permitted).

So I searched through NSE and BSE website. Found that It is listed on NSE but not on BSE. Checked its Financials and found better. Had reserves. Sector ,it was operating in, was an outperformer. The stock did not seem highly priced. The day it was recommended, it was quoting at Rs. 40/- Nice new Investor mentality to own more number of shares at less price. While reading about the company, I also found that it is a subsidiary of Multinational operating in its own right.

All reaserch took some time. Remember I had just become the member of Traderji.com and had practically little idea about investment except that I took the plunge on 17th May 2004. Well , one day I saw the price going to Rs. 60 from rs. 40 in two days. BL had given a target of Rs. 150-180 for a year. So I become interested and brought 500 of that stock at Rs. 58+Brokerage+STT/stock.

Naturally I started monitoring it daily in my portfolio and on NSE website. While all my other investments were for three year perspective , it was for one year. Partly to avoid Short Term Capital Gains Tax (10%)and to reinvest the same in PPF while making further withdrawal thereby saving cool 15% in taxes. I fixed my target at Rs. 140.

I saw all others stocks moving up but this perticular stock refused to budge. I lost my hope and started reading SAINT's thread and AMIT and Supratik and Karthik's thread more vigourously. But my hopes were dashed by this stocks. Even though its fundamentals were good, it was as immobile as it could be.

One fine morning I heard the news of 21% dividend. You could imagine the joy I felt. The amount was small but I felt as if I have extracted my pound of flesh. The stock was hovering in red sometimes in green, it shot up. A cool Rs.3 upmove in one day. Again next day and the next day till it reached 75. Thereafter one day it fell to Rs. 70. I was curious. I found that day was ex date for getting dividend. For some days stock was in no delivery period.

Any way I was happy by the little gains. By July, I got may cheque and I promptly deposited in the bank. It covered my cost of demat etc. Any way stock resumed its saintly posture and stopped reacting to my fervant prayers for gains. I also cursed BL for giving such an Idea.Rest of the stocks were flying and this was limping .

I kept my patience , however. The I learnet about indicators and started applying them on this stocks. No amount of TA/FA could prod this stock into moving. Kept moving in a range of 70-75. Any way I was not in loss and full six months were to be covered.

One day Sometime in october I saw market take a breather. But this stock did not budge. The I realised that this is stone even for bears and I am , at least , safe with it.

One of the member started a thread on Bollinger Bands dear Mohan. So I applied that and immediately saw that its going into squeeze. One more stock I identified was Mcleod Russel then quoting at 67. So I put this query in the forum. Mohan confirmed that it is in bollinger band. I did not ask about the stock I was holding.Once I remember asking SAINT for it when I was at my wits end. His advise was to hold for long term. So I kept it. As for Mcleod Russ I was advised to look for sector leaders such as Tata Tea quoting at 800-900 then. I was uncomfortable with the price and PE so I din't go for it.

McLeodruss, I was convinced about for one reason that it became owner of a tea brand which I like most since my childhood and marketed by HLL. But my experince with other holding kept me away from it. I had stopped monitoring my stock as seeing the same price was making me depressed.

Any way one day when I opened my computer I saw this going to Rs. 90. I almost fainted. After that I regained hope that it might come to the target price after all in time for redemption. But again the same story. When all market zoomed up like bullet train this fellow again resumed saintly postures.

Then in Feb 2006 I thought enough is enough. I can not bear the imbecility of this stock and decided that once one year is complete I will sell it off. As soon as I decided this stock started running again. So in March 2006 it covered distance of 72 Rs. and closed at 162. Now I was almost intoxicated.

More than 100% gain was good enough for me. Then It fell back to 140. It again announced similar dividend. I told my mother that on completion of one year I will remove this from my portfolio.March to April this stock fell to 125 whereas market gathered momentum. Everybody was giving tips. So I thought, I am only unlucky guy. Most of the stocks in my watch list since 2005 had gained 7 time to 20 times and I paper invested. But seeing gains of 100 % in my stocks I was happy. Then came 12th May 2006. Nifty dropped dead. For next 10 days it continued like that. Almost all stocks on long term basis showed decline. But decline was confined to the gains that accrued during Jan to May first week. So I was not unduly alarmed.Except one or two which I invested in Jan2005.

This particular stock was giving me surprise. For four days that nifty was in free fall this was in upper circuit. Once again it reached 165 and hovered around it. Nifty had lost 15% by that time. Slowly the bear onslaught took hold of this stock and now it is at 102 only. But only few weeks ago it was at the same stage. So I feel that it shed what it gained during last leg of rally but still abovewhat it was one or two months ago( Rs. 90) . Perhaps, I became too greedy or too confident. Though my time frame was achieved and target was also more than achieved I kept hoping for more.Discipline in investment and also in trade is a must. I have revisited FA and was of the opinion that it could be continued. But the cash was for short term only. I have to reinvest in PPF the appreciated amount as originally planned.Time is still there till March 2007.

This particular stock has helped me in analysing my pschological states,fear, greed , anticipation of rise, calculating dividend % FA and TA. But most of all it taught me to be standing on your own legs and not to wait for crutches from others. It also told me if you are convinced about your Ideas go for it. never hesitate. Almost all stocks have moved in cyclical pattern. If something is at 52 week low but if FA is good it will reach its 52 wk high.It may fall again. So you decide what you want to do with it. You have to own up your decision and face the consequences and also enjoy the fruits of it. It has given rights offer at much less price so I decided to invest in it.

I have bored you enough with it. But this is true of most of the investors.
You may like to comment or criticise my decisions . Feel free to do that.I wanted to tell all this without naming the stock which has now been upgraded to a target of 300 for next year. I am confused.

Thanks for bearing with me for such a boring story. I know I am not a good story teller.

Pankaj

 

[pkjha30]

Hi

This is world update.

Europe is Very Very green.

Asia Pacific is also in green except china, New zeeland.

Latin America is in red

America is currently in red.
In Asia Pacific all indices that were green were so by less than 1.78%.

Except Indonesia and India. Indonesia was in green by 2.7% and India was by 5.5%

Remember , these are the two markets specifically targetted by analysts as overhyped.

JKSE shows that it suddenly moved up at 2.PM local time and closed while on upmove. So opening may be strong.

Sensex shows that it closed almost at the peak but little down from days high. Movement of sensex knows no bounds. It swings violently from one extreme to another. That will squeeze both bears and bulls alike. Finally only FIIs will be left on the scene, monarch of all that they see.

Extreme caution is advised for the investors.

May be double bottom in a bullish formation will emerge as Amit hinted.Bottom picking is slightly dengerous as to anticipate bottom is to time the market. Which is time and again advised against.

Invest only when uptrend is signalled. Invest only when you are comfortable with the valuation. Kindly read the book suggested by NKP in" Must Read(FA) Books" thread. For your convenience I have uploaded it in my brief case. You can download it from there.

Pankaj

 

[pkjha30]

Nice one Pankaj, now trying to search for the stock Just kidding. Whatever u mentioned is very true and helps a lot to fine tune ur psychological factors inside each person and act upon it.

Really nice one to share with us.

Regards
Raj

Hi Rajesh

That stock was in upper circuit and fell to 102. The reason being on 26th it has gone Ex-right. Rights issue was priced almost half of its value. Ratio is for every 10 stocks you wil get 3. So I can get 150 stocks for Rs. 11250. I get appreciation of rs. 15000 at current prices and the best part is that I get to keep this in my portfolio. Old acquisition can be sold off.

I think I have given enough hint to identify.

As this was short term It had tremendous learning value for me.

There are so many other stocks in my watch list
Here is a sample

Havells since Rs, 95
Taxmaco since Rs.162

Mahindea Gesco since Rs 40
Kirlosker since Rs, 70
Videocon Indutries since Rs 22
Areva since Rs 60
Alstom since Rs 40( this is another story about conviction and value perception, Amit knows about it)
Balaji since Rs 57
NDTV since Rs 101
VSNL since Rs 121.
Bharati since 145
But investment is not about watch list or money or tips or analysts' statements but about you conviction and willingness to take risk and about the perception. All the above stocks I identified on the basis of likely growth areas and parentage. But being newbie at that time I went for very select few. They are only keeping my portfolio afloat now. New acquisitions ??? I will have to give them time.

Pankaj

 

[rajesh.sadhanala]

Hi Rajesh

That stock was in upper circuit and fell to 102. The reason being on 26th it has gone Ex-right. Rights issue was priced almost half of its value. Ratio is for every 10 stocks you wil get 3. So I can get 150 stocks for Rs. 11250. I get appreciation of rs. 15000 at current prices and the best part is that I get to keep this in my portfolio. Old acquisition can be sold off.

I think I have given enough hint to identify.

As this was short term It had tremendous learning value for me.

There are so many other stocks in my watch list
Here is a sample

Havells since Rs, 95
Taxmaco since Rs.162

Mahindea Gesco since Rs 40
Kirlosker since Rs, 70
Videocon Indutries since Rs 22
Areva since Rs 60
Alstom since Rs 40( this is another story about conviction and value perception, Amit knows about it)
Balaji since Rs 57
NDTV since Rs 101
VSNL since Rs 121.
Bharati since 145
But investment is not about watch list or money or tips or analysts' statements but about you conviction and willingness to take risk and about the perception. All the above stocks I identified on the basis of likely growth areas and parentage. But being newbie at that time I went for very select few. They are only keeping my portfolio afloat now. New acquisitions ??? I will have to give them time.

Pankaj

Hi Pankaj,

Gr8 portifolio my friend, your comments on buying MFs is very true that u r good enough to take care of your investment.

Being a newbie, your stock selection is too good and at right time. I could see the valuations built up very nicely. I could see there a lot of factors that u would like to see when u pick up any stock. Could you share a few.

Regards
Raj

 

[pkjha30]

Hi Rajesh
Thanks for complements. Most of the stocks had not been recoomended at the time. I was warned against bottom picking. However , that was the time when you select any stock and it would be a winner.All stocks were quoting at the bottom. A company like HFCl was at 8 Rs. It was yet to shake its past. I think still the same position. Videocon shot up from 22 to 440 on the back of news abt its dabling in oil exploration. So as a newbie, I would think it was groaping in the dark.

That situation is not present now. Valuations are right through the roof in most of the cases. Still true to cyclical nature most will get their prices at 52 week high after unspecified duration. Some are permanently in dumps.

For a long term investment , one has to buy not at the peak or low but at the right valuation and seeing the real growth prospects (not the hyped one).While timing could be decided by technical factors but it would save few rupees only in the long run. In any case if there is quotational gain that gives pychological cushion.


Now coming to FIIs activities. There was an interesting article in BL which gave an interesting chart http://www.thehindubusinessline.com/iw/2006/06/11/images/2006061101240701.jpg. The whole article is herehttp://www.thehindubusinessline.com/iw/2006/06/11/stories/2006061101240700.htm
This shows FII and MFs were buying and selling almost in tendem. i.e. when FIIwere selling MFs were the buyer and vice versa. No wonder for last four day FIIs have been net buyer . However openly they are critical of the valuations of Indian stocks. It is also noticed that they are now buying (net) in Index futures, stock options and stock futures. This indicates that they are assessing positively. Further open interest by FIIs stood at approximately at Rs.21000 Lakhs.

The upmove did not look convincing. It was as if shorts were covering. So I don't expect market to go up sustantially. USA had ended in red. Other market partially in green and some in red. Weakness will continue. The reason being retail buying will not return till they are convinced.

Though it appears to be overdone but the sad fact remains that FIIs dictate which way market will move. They have not yet decided if valuations are right for retails(???). Once their buying will be completed Retails will be treated to songs of praise of Stock markets and how valuations are right and all that usual chorus of FROGs. Right now PE of Indian Indices stood at 15 while that of Russia is 11. How many of FIIs dare do business in Russia without fear of Law and order/Mafia et el. It was once a great power. But then it was and not is.

In any case advantage of doing business with India is something which can not be wished away. Hence , PE comparisons are deceptively simple. The only question FIIs need to answer is why they are buying if valuations are high. The real answer will be Yeh, I know valuations are fine . It is just that I don't want you to know it yet.

Thay will drag indices still lower. Remember when their buying come out in the open, indices will shoot up. I think people will get chance to enter at better prices.

This week is crucial. If FIIs stop buying from MFs market will plunge since there is anticipation and fear factor built in. Hence , the direction will emerge only after global factors are discounted. That will happen after fed rate decision, may be some easing of oil prices(which I think is something with which economy has to live with) and inflation data , employment figures of USA. Thereafter, sentimanes will take a direction.

So WAIT and WATCH. Don't jump in right away. keep a tab.

Pankaj

 

[Agilent]

This week is crucial. If FIIs stop buying from MFs market will plunge since there is anticipation and fear factor built in. Hence , the direction will emerge only after global factors are discounted. That will happen after fed rate decision, may be some easing of oil prices(which I think is something with which economy has to live with) and inflation data , employment figures of USA. Thereafter, sentimanes will take a direction.

So WAIT and WATCH. Don't jump in right away. keep a tab.

Pankaj

Excuse me Pankaj, but can u explain these two (marked red)

Thanks
AGILENT

 

[pkjha30]

Excuse me Pankaj, but can u explain these two (marked red)

Thanks
AGILENT

The buying and selling activity of FII and MF was mirroring each other. See the chart in previous post. When reatil investors are scared and are not in market who is buying. This was the question posed somewhere in this forum. The answer is their activities are in tendem .

Second one was a spelling mistake..it is sentiments. As global sentiments on the whole is negative, buying by retail investor will not be there until it improves. The factors which are mentioned are likely to improve the scenario.
Positive sentiments will emerge only when these factors are presented in a forceful manner coupled with overt buying by FIIs.

Let us not delude ourselves by thinking that positive sentiments will emerge without any of the factors being present. Friday's spurt may be just a relief not to be mistaken with upward trend.

Pankaj

 

[ucalegon]

Hi

I am going to tell one story

Tale of One Stock:
...
Pankaj

Awesome, thanks for that Pankaj. I have tried to be a sensible investor but greed takes its toll. Only one good thing is that I managed Bata fairly well - picked it up at the 84 levels, and sold constantly from 140, little at a time. Exited at 240 and then felt really bad as the stock went above 300! Now of course at 170 it's below my average exit price, so that's some temporary relief (tho in the longer term there may be more steam, I don't care now because my investment was targeted at only 100%)

I've done the partial profit thing and lost also - in opto circuits I put in some money in their recent IPO and sold half my holding at about double the price. The stock is in the lower circuit daily nowadays. When I bought the shares I was convinced that this has a 2 year return of around 100% - which is why I have decided to hold on to the remaining shares for a while (What choice do I have anyway, it's in the lower circuit!)

Cheers,
Deepak

 

[pkjha30]

Awesome, thanks for that Pankaj. I have tried to be a sensible investor but greed takes its toll. Only one good thing is that I managed Bata fairly well - picked it up at the 84 levels, and sold constantly from 140, little at a time. Exited at 240 and then felt really bad as the stock went above 300! Now of course at 170 it's below my average exit price, so that's some temporary relief (tho in the longer term there may be more steam, I don't care now because my investment was targeted at only 100%)

I've done the partial profit thing and lost also - in opto circuits I put in some money in their recent IPO and sold half my holding at about double the price. The stock is in the lower circuit daily nowadays. When I bought the shares I was convinced that this has a 2 year return of around 100% - which is why I have decided to hold on to the remaining shares for a while (What choice do I have anyway, it's in the lower circuit!)

Cheers,
Deepak

Hi deepak

Thanks. Opto circuits has circuits built into it. So when it goes up it will hit upper circuits I suppose.

As Satya said storm is raging out there. So wait on the sidelines.

Pankaj

 

[vinsu]

Hi All ,,

What i observe from the stocks that i track ,the ones that missed the rally on Friday are all down by 4% today on an average , but others like Arvind mills , Tractors India and Kernex Microsystems that were not a part fo Friday rally are today in positive by 13.23% , 2.02% , 13.5 at the time writing this . Does any of the members have any idea why?
Also please , if anybody have any info as to why Kernex Microsystems is suddenly seeing buying interest today .

Thanks
Vinsu