Bears retaliate with full force

Markets witness highest single day fall ever, down 826 points

It was a scray session at the markets today with sensex registering its highest single day fall in the history of stock market. Therewas mayhem all around with stock prices plummeting on the trading bolts. It was red everywhere.

Today's fall can be attributed to following factors:

Heavy selling by FII's in view of government's plan to consider FII's earnings as a business income and not as capital gains. Currently long term capital gain is exempted from tax and short term gain is taxed at 10%. The proposal if brought would mean a tax rate of 40% for the FII's. Another big factor dragging the markets down was the exteremely weak indicators from the global stock markets specially the asian markets. To add to the woes were the disappointing results from Tata Steel and Punjab Ntional Bank.

What should the investor do now ?

The first thing to do is not to repeat the mistake that investors made on May 17, 2004. Those investors who had the courage to hold on to their stocks during that black monday were jumping with joy within six months. Those investors who used the opportunity to enter at those levels were rewarded with excellent returns.

Hence it is very important for investor to take a medium to long term call on their holdings and do not sell their stocks for dirt price. This is a correction phase and should be utilised to enter the markets rather than exiting the markets.

Pick fundamentally good stocks during the ongoing correction and take a view of at least 3-4 months and you would not repent later. At this stage prefer blue chips as compared to midcaps to avoid risk. Those who are already invested should maintain a hold and wait for markets to revive. It is very unfortunate that a big part of general public who invest in stock markets generally put their money at the high end of bullish phase and end up purchasing stocks at higher prices and when such correction occurs they start selling. I hope that the visitors of this bolg would not make such grave mistakes of making holes in their own pockets . We are inevsting here to earn and not to loose so invest smartly and be happy irrespective of the market moods.

Happy Investing !




19 comments:

manoj said...

well said rajesh. Hats off to you sir! your articles speaks of your understanding of stock markets. I am planning to grab some stocks tomorrow.

regards
manoj

ABHAY said...

hELLO RAJESH,

i WANT TO ASK THAT IF THE MARKETS CORRECT FURTHER TO SAY TILL 10000 LEVELS,WILL WE NOT GET BETTER PRICES THEN TO ENTER INTO THE STOCKS.

wHAT DO U SUGGEST TO BUY AT THESE LEVELS.eXPERTS ON CNBC TV 18 ARE VYING FOR HINDUSTAN ZINC.wHAT DO YOU SAY.

bEST rEGARDS.

Anonymous said...

i am holding 200 shares of hindalco at average price 240 per share...will I get my money back within one month ? I am shivering at the thought of the loss of the capital.

insider said...

sensex will gain 300 points tomorrow

Anonymous said...

wow today was an amazing session... after every hour i was eager to have a look at my portfolio, and it was falling down like 9 pins... unfortunately i am not left with spare cash at the moment and will have to wait for the pay day :-) to invest more in this dirt cheap market.

Thanks Rajesh, I agree with you, that none of the value investors should start selling off their stocks at dirt cheap prices. Hold on to it and if possible lower the average of fundamentally sound and blue chip stocks... They are gonna reward handsomely.

Dear anonymous, if you need your money back in a month, you should not have invested in equities, instead should have kept your money in bank... if you have the courage and patience... hold on to it for at least 6 months.

Cheers
Gaurav

Rajesh Soni said...

Hi Abhay
In that case you have to take a call on the markets. If you feel that markets would go down till 11000, then surely you will get better prices then today. But it is very difficult to do bottom fishing and a good way out would be to start acumulating at each fall so that you do not find yourself left out.

Rajesh Soni said...

Hi Anonymous,
I would advice you to hold on the stocks. I will not give any timeline, but Hindalco is a good stock and would bounce back once the sell off stops.

Anonymous said...

Dear Rajesh Sir,

Well Said...Hats off to you..!!
Do you have any idea about TVSMotors..
I hold 200 stocks purchased @ 180..
Its going down..
Whats your advice sir.?

mohit said...

Hi rajesh
What is your view on today's fall ? It looks like we are in intermediate bear stage. if that's the case the sensex may well be headed to 10000 levels. what stocks do you suggest to pick at current levels ?
thanks
mohit

Anonymous said...

what is going to happen to monday? looks like we may see some more fall(say another 300 points)due to margin pressures.

Any comments ?

Anonymous said...

I want to invest in following with view of 9-12 months. Please share your thought of these shares.

Reliance, IVRCL, SBI, BHEL, Thermax,Satyam computers, Gujarath ambuja, Bajaj Hindustan

Rajesh

Rajesh Soni said...

on TVS Motor
If I am correct the stock was around 95 Rs. in January 2006 and then never looked back before touching 180 in the month of April 2006. You have bought the stock at the peak level. Hence you might have to wait some time to get back your price.

Rajesh Soni said...

Hi Mohit
It's difficult to predict markets. ALl the so called pundits or expert were taken for a ride yesterday when they were expecting a pull back rally and the markets actually went down further 500 points. As i said before instead of looking at index(unless you play in index options & futures), one should look at the stocks he is planning to buy and take decision accordingly. Keep adding in little quantities at each stage if you feel markets will go down further.

Rajesh Soni said...

I would prefer not to forecast monday's market but would hope now that the pull back starts from here, else it may add to the fear factor and push further redemptions.

Rajesh Soni said...

Hi Rajesh
Over a short period of time markets behave like a voting machine. They tend to project the emotions of the people. But in long term markets behave like a weighing machine. They would rate each stock according to its real worth. The stocks mentioned by you look good for a 12 months perspective.

nilesh said...

Rajesh,

"Investment Guru expects markets to continue the firm trend in tommorow's trade." is what u said on May 17 abt May 18, what happened was stark opposite of it with market ending down 826 pts.

these days you have started sounding like those technical experts on business channels. most of people come on your blog expecting great value buy and analysis of good stocks. i would appreciate if you could go back to your old analysis of stocks.

Anonymous said...

Hi rajesh
since you are of view that this is the time to go for a buy, would request you to kindly suggest few stocks where we can put money for a 3-6 months perspective.

thanks
mohit

Narendra said...

Nilesh,

Nobody can predict the market on day today basis.
Prediction will be for a period and you must understand that.

Everybody was telling that market is very bullish.
It doesn't mean that, market will not go down.
Bearish doesn't mean that, it will not go up!
It is just the trend and you cannot and should not jusdge each and every days trade on this.

Nobody foresaw 800+ fall. And whatever has happened is for good only.
You can get stocks of very good companies like RIL, Infosys etc at a much lower price and you must be happy for that.
If you keep judging the market on a day-to-day basis, then you will never be able to buy lower and sell upper.

Rajesh Soni is doing a community service and you must understand that, this is a place where high risk is involved. And whatever "Investment Ideas" he has given, most of them have done well. Nobody can be 100% perfect. If you think, he is not good, you can stop coming here. But, you must not criticise a person who has tried to help you.

Regards,
Narendra

Nilesh said...

Narendra, I have also benefitted from his ideas and I know he is trying to help us.

I was just pointing to his recent posts (he himself was trying to predict market on day to day basis, I was just pointing that this is not what people come here for). his blog title is "Investment Guru" and not "trading guru".

I hope he took it as constructive criticism.