I always thought I wil be a regular blogger now that I have a lot more time in life than earlier days. But I still got busy witnessing the Momentum in the Indian cricket and the Indian stock markets, over the last two months. Momentum has its pros and cons which have become more evident to me now that I have tracked Indian cricket for many years (not a die hard fan though) and Indian stock markets for over 3 years regularly.
What momentum does to either of the two is that it makes you overlook the weaker points or the fundamentals. Lets talk of cricket, things have really improved post the 20-20 cup win. Or should we say that we have played aussies and pakistanis in India the team looked better. But the team selection now has become really tougher which we always thought should have been so many years earlier. Now you have bundles of talent but no space to accomodate them. You have a promising player in Uthappa who hardly gets a chance to play a longer innings. All his life he has played an opener but he is number 7 in line up when we try an accomodate a player like Sehwag or some other oldie for the sake of it. There is not much of concern right now lets see what happens when the team plays overseas thats when you need to have more bowlers and the decision become difficult. Because though you have a deluge of batsmen now but bowlers are still amiss. Sreesanth according to me is a showman and not a bowler.
In the context of stock markets some of my friends consult me about investment decision. Instead what they most of times get from me is an age old lecture on long term investments and fundamentals. This is what the Indian market has done to people they want to make quick money, 1X 2X 3X the money in 2 months or so. For that you have more widely available stocks like RNRL or RPL or short in supply MMTC, STC etc and many more penny stocks. Having bought into almost all types of capitalisation stocks in Indian market I find the Peter Lynch method of investment most comfortable. "Sit through your investment if you are confident the business will do well". What's the fun in playing lottery through applying in Indian IPOs, such high craze for Indian equities have led to mindless valuations of companies. I personally applied for 4 Indian IPOs but didnt get any allotment, hence dont prefer them anymore. But still you find IPOs blitzkrieg on the debut. I dont think many people are aware about SEBI enquiry on Nissan Copper listing or recently stocks like MMTC, STC etc. which moved over 200% in a month on just nothing! I remember two of my friends saying why don't you tell about such stocks (MMTC, STC specifically). My reply was pretty simple 1) I dont know about these companies (At best I may know about 250 listed Indian companies, of which I own some 40) 2) Such stocks when they move either they may move on speculation or some positive developments which you may not be aware of or rigging.
What I know of investments now is pretty simple,
1) Buy equities for long term
2) Buy equities with the money which you don't require in recent future ( 2years from now atleast)
3. Buy equities only if you are ok with looking at -50% capital erosion also.
4. Buy equity of the companies whose products you may be using day in and day out. This the consumer logic. I own Rayban, Page Industries (Owners of Jockey brand), Auto companies.
5. If you are total novice just look at some CNBC, a few investment magazines and do read "One up on the Wall Street"
Momentum stocks like RNRL, RPL, L&T etc have led to market participants avoiding fundamentals and buying counters which are on upmove. Hence you have crazy valuations on REL, TATA Power etc. I recently read an article which said entire Asia is seein this phenomenon, new investors find comfort in buying momentum stocks as they provide easy exit and are readily traded. Value investing is gone for a toss.
I have now become a lazy investor. I just buy buy buy unless I need money and I keep buying the same stocks again and again. This is something I learnt in last three years. I earlier used to sell at 20-25% gain and not buy those stocks again and I learnt the most by missing a 4X on M&M, SAIL, SBI, UTI Bank etc all these stocks were some of my earliest picks. But now I proudly own GE Shipping 3X in 2 years and several 1Xs but I also own -0.5X but I dont panic. I found interesting ideas in GMR Infra, Thermax and Jindal Saw pipes but had no money for equities at those times. Now they have moved up and anywhich ways I cant all the stocks I like. On the contrary I proudly claim to have found about a stock like Sanghvi movers which I think has a real good potential. (already returned some 30%).
It is important to know how market operates then by boasting about 2X In month etc. But we really need some people else people like me will make stock market so boring that there may be days when there is no trade!!! 2X in one month sounds really temptiong to me too..;-) so some day I will trade on 10% Of my portfolio.
All said its important that you make 20% YOY in Indian market for some years to come. Invest cautiously and dont regret.
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