When you read a heading like 'Today BSE Sensex closed higher by 726.72 points at 14,042.32' then most of the people don't dare to predict that market will tumble and will tumble so fast. But that's what I was saying (getting beating for that) when I wrote this on my blog on September 19, 2008. This warning was repeated by another warning on Oct 7, 2008, by that time Sensex was already at 11,695.24, when I reiterated that Sensex will tumble to 9000 levels. Today, when I am writing this article, the Sensex is at 8043 level and has already lost 7.56%.
This was my second prediction in a row which went absolutely accurate. The first one was about Rupee. When rupee was hovering between 36-38 levels and many were predicting the death of the dollar, it turned out to be rupee which surprised many. Rupee has touched a level of 50 now and presently trading at Rs 50.16. Both these predictions were based on macro economic environment and coincidently both were against the common belief that it will never happen - under no circumstances.
So what's next in the offing. Before I start writing about that, I would like to start on the note about the risk that many people take. I have spoken to at least two senior professionals. Both of them had purchased Unitech at a price of Rs 500+ and both of them have bought 200 shares. Today they do not know what should they do with that investment/gambling of Rs 1 lac and when will they be able to recover their investment, forget about profits? My question to them was/is, what was the sense to make that investment? No one knows as it was more of an erratic emotional investment decision that was made because the stock was moving up sharply and some nonsense 'technical' analyst predicted that it has strength to see new levels. Unfortunately that never happened and they lost almost 80% of their wealth (lost up to 95% till Friday). The important factor is not that only 'educated' people can fall prey to this, it can be anyone who is constantly getting flooded by media with the message that market is going to see moon.
There is another set of people who were always probing me to get investment ideas by leveraging (simple terms taking easy loans esp personal loan and investing the market). This is the second layer of speculators who are now out of the market.
I recommend and follow in the simple investment philosophy - Invest only what you can afford to lose but before investing make it sure that you don't lose. So for not losing you will have to come to the terms of investing only in sound businesses while understanding the overall/macro economic environment.
Now about what is next in the offing: the markets were always here and they will continue to be here only. Only the stocks will move out from weak hands to the strong hands. We will miss some of the players who were identified as the weak link in this game. In my last 15+ years in the market, I have seen several (almost 99%) people loosing their life time in the market and have seen very rare (just 1% or even less) who have earned decent returns from the market. But the common thing that I have found in those who have earned decent gains is they were well disciplined and have never been in a mad rush to make quick bucks.
I wrote in my previous post (subject: Spanish flu - The Great Depression of 1929 - Bird flu - Financial turmoil of 2008) this downfall was well expected and it will continue, albite with lowered intensity, till the end of December 2008. The market is now discounting December quarterly earning. The market to come out of this situation will take at least 6-9 months time. However, this will give us very exciting time from investment perspective. I am also very tempted to invest and may be investing gradually and very carefully, under no circumstances more than 1% of the total fund (my total exposure in stock market is very very low). This investment has to be very selective investment only in very high quality stocks which are offering huge cushion to the investment. Market will come down further but it will become better and better for those who want to stay here for long term.
Cheers,
Niteen S Dharmawat
http://dharmawat.blogspot.com/
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.
On Tuesday, October 7, 2008 Niteen S Dharmawat wrote:
Market Updates and course of action
Only 3 weeks ago, to be precise Sep 21 2008, there were not many takers of my call that market may meltdown to a level of 9000, please see the posting 'Reliance Industries Update' on the blog. But today when you see that the market - mostly paper wealth - getting chopped like pack of cards there are many who come to agree with this view. It's a common human tendency that we want status quo or if the change is expected then it should/will not hurt me and my financial goals in any of the way. The human tendency which is common amongst everyone is nothing but greed.
The market is not the only entity which is getting chopped off. The after effect, as anticipated, is further erosion of INR. The INR is now at 48.60-48.75 and coming close to 50. I may sound a dooms sayer here but the things are not very rosy and in fact things are slipping out of the hands of country like India. We did not require the outsiders to make mess out of our system. We should also be equally blamed. We have pursued populist policies including loan waiver schemes of the farmers, pay commission recommendation, not taking action while world-wide crude prices were witnessing a sharp rise etc. These all have a serious impact on the overall health of fiscal (deficit) and is going to impact INR, Inflation everything, stock market. The markets are a just reflection of the policies pursued world-over in a globally connected economy.
Now what's next if markets continue to melt like an active volcano erupts and engulfs anything and anyone that comes in the way? Invest in the quality stocks which are offering value for money, how to look for one? Simple, to find a multi-bagger stock or a stock which has intrinsic value please follow following simple rules:
- Single digit P/E
- 3-4% yield
- PEG (PE Growth ratio) is less than one
- No Debts OR Very Low Debts compared to equity
- Management buying the stock
- Always remember, when in doubt, stick to quality. Never speculate...
Cheers,
Niteen S Dharmawat
http://dharmawat.blogspot.com/
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.
On Mon, Sep 22, 2008 at 1:12 PM, Niteen S Dharmawat wrote:
Reliance Industries - Update
Reliance Industries is one my favorites. Some of you would recall that I have been recommending this stock from Rs 520 onwards when the feud between two warring brothers were on the street and media was opening fresh can of warms on a daily basis by flashing new breaking stories released by 'good sources' of warring brothers. The entire market during that time was in upswing while RIL stock was butchered to the extend that it became an untouchable stock. Later they reached a settlement and problem got resolved leading to unlocking huge value which I was talking about in my mails. The RIL stockholders were the biggest beneficiaries. They got shares in four companies free of cost. Today RIL is at 2100+ levels and the free stocks (RComm, RNRL, Reliance Energy etc) are doing equally good. This is a return of almost 6 times from the original recommendation.
Now what should we do with the stock with yesterday's 'big' announcement by Mukesh Ambani. One of the conclusions that we can draw is that the company is in a great shape to go to the new levels which means un-parallel growth and solid wealth creation for the shareholders. If you are holding the stock from 520 levels onward (and various other levels when it was re-recommended) then please continue to hold it. This single stock may help you plan your retirement, I am talking about real long term investment!!!
But if you want to buy more then is it the right time to enter in the stock? Should we really want to time the market or intrinsic value offered by the company is more important? The value offered by the company is, as I said earlier, going in the trajectory of un-parallel growth which will be realized over a period of 2-3 years. But the value offered by the market is something under question. So would advice immense caution while making any fresh exposure in the market. Let opportunities go but we should not loss our investment - should be the philosophy of the investment. I am of the opinion that market may come down to 9000 levels due to various reasons, discussed in earlier posting, over a period of next 6 months and that will be an amazing opportunity for investment. However, one can start investing from a level below 12000 thru' a stagger investment mechanism. If you have any questions, then please do write to me or post your comments on blog itself.
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.
Cheers,
Niteen S Dharmawat
http://dharmawat.blogspot.com/
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.
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