Question Bank Series 3

How do we judge markets when they are highly volatile?
Wow!! Judging stock markets when the volatility is at its peak, could most of the times prove to be tough challenge. There are no bench marks that could possibly be set, which may suggest … “okie it’s this, this & that one - which you need to keep in mind while judging volatile markets. “ No, it work’s too less that way. But there are few strategies that come through experience which I shall let you know, which even you guys could possibly think - while you judge & time the markets next time.

1> Understanding the Common Phenomenons: - On any given trading day, when you decide to trade – make sure you ask yourself “which are the factors that might influence the markets today?” & make a note of all possibilities that you come across. For Ex: If it’s a Thursday… you should know that Inflation numbers will be rolled out, If it’s the 15th day of the month or close to that date… IIP number for the previous month will be rolled out … etc. These are few things which we can call it as common phenomenon which you can easily keep a tab on & time the markets accordingly. IIP & Inflation, are two numbers that will certainly leave effect & thus move the markets either up or down.

2> Knowing the Corporate Result Calendar: - This is a “Must Know” element. Keeping a track of corporate calendar will help you decide, how much effect it can have on an individual stock & cause to move. For Ex: If you know that the result will be out for Infosys stock tomorrow, you can choose to buy the stock today & sell tomorrow when the stock price will rally on account of a good result.

3> Knowing Current Global Sentiment: - Knowing what’s currently making headlines in the global market is a costly information. For: If you know that US auto bail out package has failed in the US senate today, then you can certainly expect global stock markets to react to this sentiment & pull the market down. So in such cases, if you are trading on delivery based buying – you can sell it today. And then buy Nifty Puts or go short on Nifty futures.

These are few stock market funda’s which you can consider while you choose to play with markets. Your experience in this dynamic markets, Swift reaction to information & off course ability to “Analyze” information when everybody around you just “Reads” – are few parameters based on which an individual trader can script his success in stock markets.


What will be the future of stock markets, since it looks tragic at the moment & the signs of recovery are pretty bleak?
Good one mam. Phir bhi, Aap ne tho sawal ko seedha keechke, hamari pet [stomach] par hi maar diya, huh ? Okie, let me channelize your thinking a little bit so that you can could add more views to it, even before you jump into thinking that, there could be an end for the stock markets.
Please know that a stock market of a country is the symbol of trade & commerce and economic prosperity indicators. And an economy, if it were to be explained in simplest of terms, is the profit a country makes by judging the sentiments between a buyer & a seller. So this clearly suggests that, as long as there is “a buyer when somebody offers to sell” & as long as there is “a seller when somebody wants to buy”, a trade pattern will be set based on this. And it is this same buying & selling trade pattern on a broader level, that is called as stock markets of a country. So if think you there might be an end for stock markets in future, it may happen only when you as an individual completely stop buying what you need & stop selling what you have. :)
I understand that there are too many rounds of advice sessions going on about “how to analyze market trends”… I would not like to add on to that… One thing which I would persist on always would be….. do not get over cautious about Sensex numbers or Nifty numbers… Its only a representative sample of collective stocks on a weighted average basis. Watch out for prices of individual stocks, Compare it with previously valued prices, if you see that its low… just go ahead & buy those stocks … Coz any individual stock, comprises of two types of news

1> – Stock News
2> – Index news.

Index news comes into picture only during big fall & big upside for indexed numbers such as NIFTY or a Sensex… & the Stock news is much based on news about individual company & this an indicator that the company that stands out & moves a stock price upwards. So a fair game plan should be to go through individual companies’ capacities, which ever sector it belongs to. Speaking about the slowdown of Indian markets, as I have told even earlier we are just reacting to a global sentiment prevalent all across the world market at the moment. Indian markets are just paying this small cost, for being aligned parallel to other emerging economies of the world. If you wish to know more about resurrection phase of Indian markets & its advantage points you could check out our article posted in this link… http://theclubsharewala2.blogspot.com/ .

Also feel free to express your views after reading it, as it helps we analysts judge our thought process & avoid having conservative ideas about the markets. We completely respect your views on this.

What could be the aftermath of Mumbai tragedy on the stock markets, both in short & long term period?
- Yes, the Mumbai tragic episode has been a worrisome incident for more reasons for the Indian stock market insiders. You might call my notion a little more than “mean minded” if I told you guys that … I would pity more for upcoming Indian Business Ventures more than pitying for lost lives in the recent tragic event. Going by the current scene of people’s outrage against the Indian government policy makers & government reacting to those remarks made by asking few leaders to step down, is just like inviting more unwanted bad days ahead. This is certainly a plight, which needs to be quickly addressed. Getting the Indian government to work on a stimulus package to save the economy from further slow down should be a priority at the moment. Coz if this element of economic factor is ignored now, there never would be any chance for damage control any time in future. The manufacturing industry has been waiting with bated breath for over months now to begin production after getting the necessary sanctions from the government in the form of stimulus package & a slow down in this will be a result of breaking of BCP cycle… i.e “Business Continuity Plan”. A slowdown in manufacturing sector will force the Foreign Institutional Investors to move away from Indian markets & this can only increase the momentum of the downward spiral of our countries economics’. To be more precise yet in simple terms … “If you need a company who pays you the salary, so that you could feed your self & your family, it’s your time to act on this issue first”.

This is one reason which is pushing our strong feeling, that the media needs to strongly focus on getting the act right by stressing more on getting the money packet out from government as a priority rather than seeking government’s attention on resignation drama. Yes, going by the rage I have against the government even I willfully condemn & support causes that has like wise thinking, but need for the hour is not emotional thinking instead rationale thinking. Again if I were to think like a true strategic advisor for India – yes, we desperately wanted this kind of rage in people some time soon against the government so that we can make a beginning for an evolution phase & have the lazy government heads roll.

But going by the people’s emotion that we have seen even earlier during previous crisis moments like Mumbai serial bomb blasts & others, people’s rage or the anger is absolutely impotent. We strain our voices with full anger over every possible communicative means, but loose it over a period of time even before its heard. I hope we are not marking a beginning of a similar rage amongst people, which is all set to die down soon with the burst of a bubble. Aap hi bolo bhai saab, kya hum kuch alag bol rahe hain, jo aap isse pehle nahi suna hai, ya nahi dekha hai… If we really believe in what we think & stand by it consistently during changing times, only then we can change this world.

Why is that you always suggest in your discussions, that atleast 10,000 rupees should be your initial investment while newbies enter stock markets?
Yes I have suggested in many places to set your capital budget to minimum of 10k rupees while you shop for shares in our Indian Stock Market setup. As you all know, one should have atleast “Demat A/C” with a banker & a “Trading A/C” with a brokering unit or a banker in order to trade shares in the market. Okie, let’s start by asking these questions to ourselves… How much does your banker charge you for your Demat A/C – in & around 750 rs … How much does your brokering unit charge you for your Trading A/C… in & around 250 rs [100 rs for NSE & 100 rs for BSE]. So its guaranteed that every year you end up paying 1,000 rupees irrespective of you make profit or loss on your capital.

If I would calculate the same in terms of percentage, I would end up loosing 10% of my 10k capital just for keeping my accounts alive & active. Okie, now think what if your capital is 5,000 rs… you end up coughing up 20% of your capital just like a minimum amount due on a Credit Card. :) And mind you these are figures just to keep your account active, I still haven’t included Brokerage charges, Transaction charges, Stamp duty on buying & selling, Security transaction tax & Sebi tax. ? … ab aap hi decide karlo madamji, aapki muft distribution cere-money ka bulava aur kis kisko bhejna hai …

All queries could be directed to Analyst@theclubsharewala.com. Topic on US economy is wide opened for everybody to comment up on. Please write to us, if you had a different view on this or if you felt that this issue has another phase which is never seen.