The Euphoria/Exuberance in
the stock markets are always temporary…unless the investors professionally
invest in and take away the profits at the right time…..normally get trapped in
the boom time….tend to keep their investment for more gains and averaging while
falling… become a huge burden to carry for more losses..book the LOSSES at the
bottom of the trough.
The tides of "Highs and
Lows"- a natural phenomena in the stock markets. Most of the company’s
valuations rise phenomenally in the boom times but bust in the economic down
turn. The retail investors get attracted to markets in the BOOM time and burn
their fingers during the down turn due to lack of understanding of the stock markets behavoiur.
I can say, fails to follow the ”RULES OF THE GAME”…some examples…of my choice….
The News Head lines…made as…”THE BEST
BUYS” from any Indian company is non other than Tata steel acquiring CORUS in
Jan-2007 for 12.04 billion USD. The company at one times was the world’s best
low cost steel producer but with a 56th rank in volumes, now 3rd largest in the world with Corus
acquisition.
What it means to the Investors, who
invested in Tata Steel when the high profile coverage was in the headlines. The
stock jumped from Rs Rs 450-430 range in Jan-Feb-07 to a high of Rs 1048 in
Oct-07. The jump in volumes is directly proportional to the profits, but the
prolonged recession made the differenc…….and now….????.
Now after 5 years, a series of down
turn put the TataSteel stock falling from a High of Rs 1050 in OCT-2007 to a
low of Rs 150, DEC-08. For example a retail Investor invested Rs ONE LAKH has
to become Rs 2 LAKH by now,(…incase made fixed deposit) means the price of Tata
Steel should be close to Rs 2100 by now.
The amount that was invested at the
high by a common investor for good returns….waiting…lack of exit capacity…to
book the loss is no joke….now the inefficiency of not taking a right decision…
a pretext of consoling once own heart burn fact…in the name of LONG TERM
INVESTMENT…it is a good company…TATA company…the price will come sooner than
later…..The above statements have no value when it comes to STOCK MARKETS. I
used to mention to my close friends that the “Bourses” are “Slaughter Houses”
for retail/novice investors.
In the boom times the retail investor
see more positive headlines, thinks every thing rosy….gets free tips…. Lured by
the rise in the Index and come with their hard earned money to gain some extra
money…thinking…as if every-thing is made ready…JUST BUY…Take away HUGE PROFITS.
This is not the case at any time in the STOCK MARKETS.
Take the Case of TATA MOTORS… started
its operations in 1954 in collaboration with German auto major Daimler Benz.
The Company has grown from then to world 18th largest auto maker, 4th largest truck manufacturer and 2nd largest Bus manufacturer.
The Company bought the Jaguar and Land
Rover in 2008 for 2.5 UDS from Ford Motors. In March-Apr-08 when the deal was
completed, the stock was ruling Rs 711-600 range, High was at Rs 816 in Jan-08.
In case the same Retail Investor invested at the High at Rs 800, the stock fell
to a low of Rs 122 in Nov-08 along with the general fall across the globe in
the Stock markets ….as the stock market journey is a perennial one, continued
till date and will continue…. In the process the Tata Motors stock could touch
a high of Rs 1380 in Dec-10. The stock face value now stands at Rs 2. After the
spilt the stock could touch a high of Rs 320, registered in Apr-12 (equals to
Rs 1600). The investment of Rs ONE LAKH doubled in Just FOUR years….
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