Dear friends I felt it necessary to share my experience with you all on Indian Stock Market.
After retiring from a 33 years
of devoted service in Private Sector manufacturing Companies of repute and even
holding very senior positions I could not save much for my old age as I used my
limited money for buying good house and making trips to around 20 countries
which I wanted to visit with family before becoming old.
I started my Accounting
professional practice knowing well that it takes 2~3 years to start getting
professional work as one starts from ZERO experience of Practice. But in 2014
all of sudden it just struck to my mind that why not to give a try to Indian
Stock Markets as I being good at subject Financial management and also teaching
as faculty with ICSI added further to my desire. I started studying day and
night the financials of Companies listed with Indian stock exchanges. So I
started with a portfolio of 2M only. I did not resort to day to day trading. My
investments started giving good annual returns of around 1.2M.
I happened to stay for a couple
of months at Mumbai with my son and there while travelling thru Mumbai Local trains
I found the concept of Slow train which stops at every station and Fast which stops
only at specific stations and reaches its destination much faster and one could
change with the same cost of ticket during travel at any station if one gets
chance.
One fine morning it struck
to my mind that why not to apply this concept in Portfolio Management. So I started
switching over from slow moving stocks to faster moving stocks (but not high
beta stocks as they are risky) and believe me it worked wonders. This strategy
of stepping out of slow and jumping to faster stocks financially secured my old
age to a larger extent. Over the last three years handling portfolios (Mine own
as well as of clients) I learnt a great deal from Indian Stock markets and the
mentality and working of day to day brokers. I share my experience which readers
who invest in Shares may find useful while playing with Indian Stock Markets.
1. Never invest just on the
basis of tip even coming from close friend. Even established Stock markets
pundits are hands in glove with promoters for price fluctuation of any share. Do
your home work well before investing in any company. Study the business model
and future potential of its products and services. Do financial analysis of
audited results and check out the Contingent Liabilities/Related Party transactions/Asset
revaluation reserve/ and impact on future earnings.
2.Avoid highly indebted
companies and also higher Trading on Equity.
3.Study well the background
of Promoters specially if they have been involved in any Money laundering case
or debarred from trading by SEBI etc.
4.Do not get emotionally
attached to any share. Get rid off in case you find stagnancy in top line and
decrease in margins.
5.Go for companies having
good free cash.(Free cash means cash from operations before Depreciation and
then add or subtract net effect of change in working capital).If it is positive
then risk is low. Avoid companies with very high PE ratio as compared to its
Peer and Industry.
6.Keep a track of new start
ups as many start ups are disruptive in nature which can kill any company
faster.
7.Indian Stock market is in
between BERMUDA Triangle as it gets affected by USA Markets-Asian Markets before
start of the session and then in the afternoon by European markets.
8.Last trading session of
the week and last Thursday of the month are very important as there are wide
fluctuations in stock prices on these days.
9.Be careful about stocks
listed on BSE as many of them are penny stocks and played on day to day basis
by brokers in control of Promoters.
10.Never become panic in any
downfall unless the news is very adverse.
11.Do not play in F & O
and daily trading unless you are having expertise.
12.Moment you gain a good
return then come out of the stock and book profit even if you have to pay Short
term Capital gains Tax.
13.When ever any company goes
for Share face value split say from 10 to 1 and also goes for bonus issue then
come out before record date as the price at that time is generally maximum. After
such action price of such share generally goes down.
14.In companies where Indian
government also holds a big chunk and you find price suddenly going down or not
moving up then buy such share as brokers keep it low in case of disinvestment
of its holding by Goverment.(Brokers come to know in advance of such action of
the govt.)
15.Companies where holding
of mutual funds are there then come out before redemption of mutual funds are
due. Many mutual funds are to distribute dividends say around X-Mas in Dec and they
try to jack up share prices of these companies prior that. Come out in time as
moment they start selling the price nose dives.
16.Be careful in newly
started Non banking finance companies. Loan book may look attractive but in
such companies at later stages NPAs become a big problem.
17. Remain away from
investing in companies where Govt. Political Interference can be there any time
due to public interest.
18.Many Promoters in Indian
Companies have been doing grey market sales and now after implementation of GST
you may find sudden increase in their revenues and bottom lines. Go for such
companies which are especially in FMCG sectors.
19.Always keep some floating
cash ready to take advantage of temporary fall in markets.
20.Last but not the least
set aside sufficient funds in safe investments like Banks FDs/Post office/LIC
Schemes (like PMVVY for senior citizens with 8% p.a.fixed return for ten years-Scheme
is open for one year from May 2017 to May 2018 for Sr.Citizens only) to secure
yourself/and also take your health insurance cover.
CA Rakesh kumar Singhal
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