Do you BUY/SELL in a Bear Market
With the financial markets achieving new heights (NIFTY is hovering 11700 and the SENSEX close to reaching 39000 for the first time) many of you have been asking is it the right time to BUY / SELL .As always there is no right answer in the jungle where the Bulls Run & the Bears Slog. This is the third article in my financial / investment series the first being Do you Live from One payday to another followed by Cheatsheet to Investing.
The current rally has been driven mostly by the best among the best (The elite few among the NIFTY-50) . Firms like TCS , Reliance Industries and others like the newest entrant JSW Steel has created tremendous R.O.I for investors . Also most of the IT firms have been making a kill due to the depreciation of an all time low of 71 against the US Dollar in our 71st year of Independence and also companies which focus on exporting. The safest thing to do would be book profits ( Ideally long term , so there are tax benefits) , You could sell certain shares & later buy them at a cheaper price . Most people prefer the same but the demerit of this method there is no certainty that the price will reduce.
Another method which I follow where by If I have 50 Shares of a firm , I sell 50 & buy back 40 shares at a different price later and from the money of that remaining 10 shares I treat myself . Ever Since I have started saving systematically , I have been more purchasing power & I am loving it .
Case Study 1 : State Bank of India
The State Bank of India is a stock which has consistently performed well & delivered yields to the shareholders , However since it is a Public Sector Bank under the huge influence of The government and various issues like bad loans plaguing the bank ecosystem , bank prices tend to fluctuate a lot . SBI is one share which has to be bought at the right price to ensure decent returns and if you do your research & wait for the chance to pounce , more often than not you get what you bargained
Case Study 2 : JSW Steel
From the above graph we can see that JSW steel has been moving from strength to strength , Its price rose by 50 Rs to almost 200 the day G.S.T was implemented it is now trading at close to Rs 400 & it has been selected to Replace Lupin in the NIFTY 50 . So we can assume that it is perfectly priced considering that we expect JSW to get a lot costlier come September 28
IN A BEAR Market
* Focus on the firms which have delivered high returns consistently
* At a time where the markets are beating estimates & moving forward it is harder to spot & find Value Buys , this is why it is better to focus on Brands
* Dont Try waiting for a better time to purchase if possible (Follow systematic approach of monthly investing) . Timing the market is easier said than done
The above are all logical & systematic approaches which mitigate risks , in the jungle where the bear slogs & bulls run the approach which yields the most return of Investments are laced with higher percentage of risk . For making such decisions you have to be informed of contexts , well equipped about the functioning of the firms and still you could be hit in the face with a macroeconomic situation which you were not prepared to handle.
Ever since the present government has come to power in India , it has been positive news for big businesses , the government has gone out of the way to help the big firms . In the short run certain small firms & people will have to face hardship , they smart way to use this is mainly by investing in certain firms . Any one who would have invested in the firm which revolutionized mobile internet by reducing the prices drastically in 2014 would have tripled their investment (300 %). Similarly most of the ports in the country are being developed by a firm which has heavy focus on the power industry as well the same party is gonna remain in power in 2019 , So when the present government regains power the markets are expected to reciprocate the same & the Indian Financial Markets are gonna reach new heights . The worst case is a coalition which will face problems from Day 1 to which the markets wont be kind and we may witness a bloodbath .
The current rally has been driven mostly by the best among the best (The elite few among the NIFTY-50) . Firms like TCS , Reliance Industries and others like the newest entrant JSW Steel has created tremendous R.O.I for investors . Also most of the IT firms have been making a kill due to the depreciation of an all time low of 71 against the US Dollar in our 71st year of Independence and also companies which focus on exporting. The safest thing to do would be book profits ( Ideally long term , so there are tax benefits) , You could sell certain shares & later buy them at a cheaper price . Most people prefer the same but the demerit of this method there is no certainty that the price will reduce.
Another method which I follow where by If I have 50 Shares of a firm , I sell 50 & buy back 40 shares at a different price later and from the money of that remaining 10 shares I treat myself . Ever Since I have started saving systematically , I have been more purchasing power & I am loving it .
The State Bank of India is a stock which has consistently performed well & delivered yields to the shareholders , However since it is a Public Sector Bank under the huge influence of The government and various issues like bad loans plaguing the bank ecosystem , bank prices tend to fluctuate a lot . SBI is one share which has to be bought at the right price to ensure decent returns and if you do your research & wait for the chance to pounce , more often than not you get what you bargained
Case Study 2 : JSW Steel
From the above graph we can see that JSW steel has been moving from strength to strength , Its price rose by 50 Rs to almost 200 the day G.S.T was implemented it is now trading at close to Rs 400 & it has been selected to Replace Lupin in the NIFTY 50 . So we can assume that it is perfectly priced considering that we expect JSW to get a lot costlier come September 28
IN A BEAR Market
* Focus on the firms which have delivered high returns consistently
* At a time where the markets are beating estimates & moving forward it is harder to spot & find Value Buys , this is why it is better to focus on Brands
* Dont Try waiting for a better time to purchase if possible (Follow systematic approach of monthly investing) . Timing the market is easier said than done
The above are all logical & systematic approaches which mitigate risks , in the jungle where the bear slogs & bulls run the approach which yields the most return of Investments are laced with higher percentage of risk . For making such decisions you have to be informed of contexts , well equipped about the functioning of the firms and still you could be hit in the face with a macroeconomic situation which you were not prepared to handle.
Ever since the present government has come to power in India , it has been positive news for big businesses , the government has gone out of the way to help the big firms . In the short run certain small firms & people will have to face hardship , they smart way to use this is mainly by investing in certain firms . Any one who would have invested in the firm which revolutionized mobile internet by reducing the prices drastically in 2014 would have tripled their investment (300 %). Similarly most of the ports in the country are being developed by a firm which has heavy focus on the power industry as well the same party is gonna remain in power in 2019 , So when the present government regains power the markets are expected to reciprocate the same & the Indian Financial Markets are gonna reach new heights . The worst case is a coalition which will face problems from Day 1 to which the markets wont be kind and we may witness a bloodbath .
So from the above paragraph you could see my inclination is to BUY and as we do in all things we have to negotiate when we purchase something , in the case of financial markets the only form of a negotiation possible is the time at which you buy it . When you have to purchase a share you have to do your research and wait for the perfect time . The market always goes in cycles and thanks to marvelous individuals like the president of a western super power and his trade wars these days the market oscillates faster than any pendulum which you had experimented in High School. So there is always the chance to buy the share / stock you want at a price which is a BEST BUY.
Disclaimers
1) Government helping big firms and causing hardships to the regular Indian is only trouble in the short run & will be a success in the long run like Demonetization .
2) These are opinions & assumptions are of the author who has been investing in financial markets for a couple of years which is still in a nascent agent .
Disclaimers
1) Government helping big firms and causing hardships to the regular Indian is only trouble in the short run & will be a success in the long run like Demonetization .
2) These are opinions & assumptions are of the author who has been investing in financial markets for a couple of years which is still in a nascent agent .
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