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Trade in stock market with caution.

Adam1980 — 2009-04-05T12:25:10-07:00

The present rebound in the [URL="http://stockmarket.bizoppjunction.com/"]stock market[/URL] might be either a stock rally in the bear market or it might be actually be the start of a bull market.

So trade cautiously till the trends for a bull market rally can be verified.

Can you make a killing buying penny stocks? - Read This Article

Stock Market India — 2007-04-10T02:41:28-07:00

Anyone looking for a low-priced stock in the Indian stock markets will face no difficulty in finding one. Over 60% of the shares traded at the end of March 1999 were priced below Rs. 15 on the Bombay Stock Exchange. And this was four months after a bull market had been in existence, with the sensex up about a thousand points from its November 1998 low of 2,741. Any investor would love to own a "penny stock" (to borrow the term from Wall Street) which is set to shoot up. The profits to be made on such stocks, after all, are tremendous. Penny stock enthusiasts will easily point out several instances of stocks which have risen five-fold during this calendar year. But is there really a fortune to be made on such stocks?
The answer, unfortunately, is no. While a few investors may get lucky and make a killing on a couple of stocks, the majority who try their hand at playing penny stocks will lose money sooner or later. To understand why this is so, let us take a look at the behaviour of these stocks.
The most important point to bear in mind is that if a share is cheap, there is usually a good reason for its low price. These are not the stocks into which the smart money flows at the beginning of a bull market. After the sensex bottomed out at 2,741 at the end of November last year, it gained 22% in the next six weeks. During this time, only 4% of the stocks priced below Rs. 15 improved in price.
One of these � Krypton � made an apparently spectacular gain of 4900%, but this was because it started off from a price of just 5 paise! Trading this stock (and many others like it) would have been next to impossible, as the daily trading volume rarely exceeded 2,000 shares during the stock's spectacular rise.
However, by the time a bull market is 2-3 months old, a noticeable number of cheap stocks have appreciated five-folds or more, and this is what captures the imagination of a few investors. Low-priced stocks are also not "constrained" by the 8% price rise limit imposed by the circuit-breaker system, making them apparently even more attractive.
The trouble is that not all penny stocks are set to rise and remain at high levels. As pointed out earlier, despite a four month old bull market, three out of every five traded stocks are still below Rs. 15. In fact, nearly 40% of them are even below Rs. 5. The odds of catching a stock which is set to rise are therefore stacked up against the investor.
Another problem arises due the relative inactivity of the stock, which makes it possible for the share price to be easily "manipulated". An operator could be deliberately bidding a higher price to make it appear to be on a rising track.
The "bull run" in such stocks typically ends with a bull market. Trading volumes dry up, and it is virtually impossible to get rid of the stock once a bear market is under way. The stock then gives back all the gains it made during its brief ascendancy. As most investors who buy such stocks do so closer to their peaks than their bottoms, they end up making big losses.
The previous bull market and the bear market that followed illustrate this point. The sensex enjoyed a brief bull market that took it up from 3,164 on 29 Jan 98 to 4,322 on 22 Apr 98. During this time, a little over 250 stocks priced below Rs 15 at the start of the bull market at least doubled in price. However, by the end of the year, only 16 of these 250 were priced above Rs. 15, with the rest having hastily returned to their starting blocks or worse.
We are now at a stage where the present bull market is being tested. The sensex had plunged 4.5% in a single session on Apr 5 following the news that the ruling BJP-led coalition was on the verge of losing its majority in parliament. Such large falls have in the past spelt the end of bull markets, and investors should avoid penny stocks like the plague at this juncture. In fact, this may be a good time to unload such stocks, as there may still be some residual demand for them.
It must be mentioned that there are rare bull runs when stocks of every description begin to rise sharply without much reason. This usually happens when the "public" enters the market in a big way, typified by the panwala giving tips to his customers. We saw such an occurrence when the sensex soared from under 2,000 to over 4,500 in the first quarter of 1992, and we will probably see it again when the sensex crosses 5,000 or 6,000. Even under such circumstances, penny stocks remain a dangerous investment option.

Credits: Deepak Mohani (http://www.trendwatchindia.com)

Future of Shasun chemicals

kannappan_max — 2006-09-04T22:45:53-07:00

Hi i purchased 100 shares of shasun chemicals for 102,three months back.now its quoting at 82. should i hold it or should i book loss. Please advice me.

Ideas for succeeding in Volatile Markets

seafon — 2006-08-13T08:13:04-07:00

Bryan Adam's once sang "Summer of 69". If I had my way, I'd possibly rename that to the Summer of 2003. Well that may not rhyme but who cares, after all that was the start of the big big bull rally that we are currently in.A rally that started from the mid 3000 levels to life beyond 10000.

Of course while we have seen the market more than treble over this three year period, this hasn't come with its share of pain. Couple of mighty corrections in the months of May'04 and 06 would have challenged the conviction of even the most convinced. After all whoever said "holding power" is key to success.

You may be able to identify a great business (note the word business and not stock) but when you buy that stock, more often than not, its fully priced in. When you buy a stock, you buy its future earnings. You need to look at the fundamentals and more importantly the quality of the management.

There is a saying that its possibly better buying a bad business with a great management than buying a good business with a bad management.

You must remember that no matter what the price, you need to be prepared for a certain downside risk. Equity is not for the faint hearted. It tests the conviction of everyone of us. It is for this reason that we derive superlative returns out of this asset class.

Sadly though, most persons with little or no investment knowledge get carried away when they see their peers making money in good times and they think investing is a cake walk. This is where we falter. This is where we need to excercise extra caution because these are the persons who are not investing in businesses or looking at the management but simply to what the pink papers and the business channels project.

Events of the last quarter would have spooked many long and short term investors. While the short term investors may be licking their wonds, the long term investors need to take a fresh look at their investments. It simply makes sense to park a major portion of your money with quality companies.

Yes you will not get astronomical returns from these stocks, that is why it could make sense to include a couple of mid caps in your portfolio, that should not be more than 20 odd percent. This will ensure that at any point of time if the tred does reverse negatively, the extent of damage is small.

...........................contd next week

Disclaimer; The views are strictly personal and in no way reflect those of my employer, subsidiaries and affiliates at any point of time. I may at any point of time have an open position in the securities mentioned herein.It is not intended as an offer or solicitation for the purchase or sale of any financial instrument.

Forthcoming IPO Updates and News

Stock Market India — 2006-03-12T06:21:20-08:00

Check out the Forthcoming IPO Updates and News updated regularly

Stock Splits, Bonus Issues and Right Issues

Stock Market India — 2006-03-12T04:34:48-08:00

Hi All, If you need to know about stock splits and bonus issues, you may like to check out Stock Split news, Bonus Issue announcements and Right Issue announcements page.

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Stock Market India — 2006-03-12T04:25:22-08:00

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