No one is right all the times. Recognising the market signals is a very important part of your portfolio creation, says P V Subramanyam
If you are not a very strong person the markets are a cruel place to seek reassurance. Many of us are brittle -- an unanswered phone call can make some of us wonder our worth!
Of course if you are in sales, you are used to calls not being returned, but for the non-sales person (who is weak) the market can kill you.
Literally. Markets give you a feedback so quickly, and so accurately, that you are stunned. Most times shocked.
You have put a process in place, done the research, sometimes even met the management. And the market makes you look like a fool. Within hours, or weeks.
Or sometimes you decide to buy a little and then do detailed research. Gives you fantastic profits -- and you kick yourself for buying too little.
A friend was recently excited that Procter & Gamble went to hit Rs 7800+. She had bought it in December 2013 for about Rs 1000. Brilliant.
What's the catch?
She had bought whole of 1 share. Imagine the agony.
Using the market's feedback on a daily basis can be very difficult, and utterly useless if you are a long term investor. To me it does not matter that Bharti Airtel, Reliance Industries, and Tata Power may go nowhere in the next 6 months.
With experience you learn to call the bluff too.
At Rs 12 a share in case of Ashok Leyland the market was telling me 'ALL is going to close down and the company is finished'. At Rs 90 the market was telling me that the Tata Motors DVR has a lot of problems and it was doomed. Even now the gap between the DVR and the share price is not justified, but hey that is the market's lie number N.
There are some investors who respect the market, some who dig in. If I have bought Reliance Industries at Rs 950, I find it difficult to take a view that oil can go to $ 20 a barrel. Or that the 4G is just not round the corner. It hurts. Or that Tata Power has a problem in Mundra. There is nothing that I can do. I can accept my mistakes and move on. Either I stick with these companies or move on to the FMCG pack.
Not accepting -- and blaming the whole world for what went wrong in Bharti Airtel, Tata Tele Maharashtra, etc. would ruin my finances especially if I had a big stake. These are not EPS accruing, well at least not immediately. My stake is not too big, my cost is low and my patience infinite.
If you have all these 3 buy these shares. Or stay away.
Look at EID Parry. It is a share that I always do delivery based trading. I do have a position, but I also sold very heavily at a higher price (around Rs 220). So if I do buy it now at Rs 160, I may not be too wrong. However, I am not in a hurry to replace all the shares... so I may be buying in lots. Not long ago EID Parry was at Rs 130... will it go there again? No clue. Will it go to Rs 110? No clue.
No one is right all the times. Recognising the market signals is a very important part of your portfolio creation. Look at Crest India -- from a high of Rs 1200 to about Rs 1.2 today has been one tumultuous ride. Clearly the company is finished.
Illustration: Uttam Ghosh/Rediff.com