STOCK MARKET PART-2 : INVESTORS Vs TRADERS

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In Part-1: Boom (Bull Run) Vs Doom (Bear Run) It was summarised that there 8-10 large cap stocks that mainly drive Sensex, Nifty50 (and are common in Sensex & Nifty50) upward or downwards. FII & DII are the major players and market moves depending upon their net buying or selling in Cash Market (Delivery or Margin Trading).

On 28^Th Nov’2019 when these indices made their respective all-time high, many of the large cap & other stock also made their life time high adding more than Rs. 52,194 crores in market cap (Refer Table-1). RIL recorded 10 Lakh Crores in the market cap on 28^Th Nov’2019.

Table-1: List of top 8 companies that added Rs. 52,194 Crores (25^Th Nov’2019 to 29^Th Nov’2019)

*RIL Cap touched Rs. 10.0 Lakh Crores on 28^Th Nov’2019. TCS & ITC witness the erosion of Rs. 6,698.0 Crores & Rs. 1,557.2 Crores respectively during the same period.

During the subsequent week (From Friday 29^Th Nov’2019 to Thursday 5^Th Dec’2019) all indices have dropped from the closing points of 28.11.2019. FII and DII Buy & Sell data are given in Table-2 and their effect on market.

Table-2: FII & DII data from 29^Th Nov’2019 to 5^Th Dec’2019

*In cash segments stocks are traded on delivery basis or margin trading on NSE & BSE

Investors vs. Traders:

With the falling bank interest, investors look for new investment opportunities and get attracted to Stock market for investment to get better return. I have come across several people who have invested on the basis of others (brokers, relatives, friends) suggestions and ended up losing their money. There are others who in order to make fast money do the trading and get trapped. There is ample opportunity to make money in stock market either through investment or by trading if invested through proper analysis. Just investing in any stocks without doing your own analysis is not the guarantee for good returns. Every day there are no. of investors sharing about their losses on Business channels. Besides selection of stock to invest, the entry point of investment in the stock is also vital. There are many stocks listed with BSE & NSE but all do not give returns. Many stocks has given good returns on the investment in last 52 weeks (Refer Table-3) as also many good stocks viz. Tata Motors, Sun Pharma, Vedanta, Gail, Hero Motors, Maruti, Yes bank etc are trading at much lower prices while stocks like Jet Airways, DHFL, Anil Ambani Group of Companies viz. Reliance Power, Reliance Capital, etc are at their lowest or not traded.

Stock Market is a high-risk business with unexpected movement & volatility. If anyone is intending to do trading, it is advised to note that trading is a fulltime job which requires all time presence on screen to monitor your trade or in front of TV watching your preferred Business Channel for any news that can affect the market. Just for example, on 5^Th Dec’2019 when RBI Governor declared no change in repo rates points, market & various stocks dipped immediately by many points. A profit-making trade suddenly resulted in losses because of unexpected movement. Market movements is on the basis of FII, DII and big broker houses engaged in intra-day trading. Details on various trading mode with risks & volatility will be shared in Part-3: Trading – Future Vs Options.

For those who intend to invest in stock market need to decide on:

1. Period of Investment.
2. Amount to be invested

It is suggested to invest or trade according to your investment and risk-taking capacity. Never put all your egg in one basket. Choose the stocks listed in NIFTY-50 (which covers most of stocks listed with Sensex-30), Top 6 Banking Stocks of Bank Nifty, and MID cap stocks. Study and analyse their performance on stock market for at-least past 1-year, the company present performance & corporate governance etc. As many large cap & mid cap stocks have made their life time high and still rated high by various Brokerage & rating agencies. These may be added in your portfolio on dip in their prices. Make your portfolio a mix of various sectors (Banking, NBFC, FMCG, Pharma, Auto, IT, Metal, PSUs, Gas & Oil etc) and divide it proportionately to cover the volatility associated with various sectors.

Stock Market and shares are highly sensitive to news & events. In the ongoing US-China trade war, Metal stocks have seen many ups & downs. Similarly, on any news of a pharma company, stock shows high volatility depending upon +ve or -ve news. Companies monthly & quarterly performances also affect the respective stocks. Government Policy also affect the market depending upon news or political issues. However, stocks of good companies with sound performance & corporate governance keep performing well giving good returns.

While investing in stock market, make your portfolio after having information & data as per your satisfaction. In Table-3 some of the stocks are listed for information that I have been tracking (or invested) as also the low & high they made during the period.

Table-3: Performance of Some Stocks Dec’2018 – Nov’2019

Table-3: Performance of Some Stocks Dec’2018 – Nov’2019 (Cont.)

When invested in stock, everyday volatility is not a botheration but it is necessary to keep the track of your investment & exit on right time to maximise your profits and minimise your losses.

Trading in Stock market needs deep knowledge & time commitment and have high risks business. This will be shared in “Stock Market Part-3 Trading: Futures Vs Options” along with some data & technical charts.

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BY JAGDISH SETHI (IIT ROORKE)

A “Project Management Consultant” with over 43-year experience has worked on numerous projects in diverse field (Atomic Power Projects, Chemical & Fertilisers, Food and Pharmaceuticals). Last 16 years executed large EPC project for Water Management as Project Director associated with EPC companies.

Twitter Handle: Jagdish Sethi @jcsethi