Friday, March 19, 2021

One Flew Over The Cuckoo's Nest

 Let me be clear that the headline has nothing to do with the movie that got Jack Nicholson his Oscar! It is all to do with the markets as they are.

And they are - all over the place. Naturally I get asked what to do? I do not predict(rather cannot) as I am not Nostradamus. Yet it seems clear that the Indian markets are trying very hard to recognise that 'some' green shoots in the economy are visible.

The situation is really bad but it's in such times that stocks react to future positives - bit too much if you start discounting FY23 results!!So being realistic is a very necessary attribute. A lot of stocks have moved up. let me illustrate

Stock A was priced at Rs 300 last year. It then fell to 200 and subsequently went back up to 300. How much as it gained or lost? A lot of investors seem to think that the stock is overpriced just because you are seeing the leg 200-300↗ and not the ⬇ 300 - 200 hence doing smart research is imperative.

New stories are being spun about the rising from the ashes of corporate mis governance, outright fraud and such others of companies that are not investment worthy. But what can one do when those suffering FOMO are lapping up the stories. Seen it happen in every bull market and does not look like 2021 will be any exception except feeling sympathetic towards those who get trapped in such useless companies at prices that they may never reach again. Yes Bank anyone?

These are the Cuckoos nest!!

As mentioned earlier too this is the time to de stress, gym, yoga or whatever your choice runs to. If you are invested in a good thematic firm then hold tight or have the courage to look for good businesses and deploy only 20% of your capital.

Another Cuckoo's Nest is the string of IPOs which have been oversubscribed at astronomical rates as if there will not be another opportunity to purchase the very same same stocks.

๐Ÿ‘‰Check.....are funds being raised for new projects, expansions etc

Or it is to give original investors an exit? Which means it is an OFS(Offer for Sale)

➜Are you subscribing because a marquee investor is mentioned as holding a stake?

Was the company registered 10 years back as XYZ Oils Ltd and have come out with an IPO as XYZ Oils Fintech Ltd. ?(Yes its common practise to add the name of the "Hot" sector before listing application!!)

All old, boring scams that resurface every time the bulls roam Dalal Street. Read the Red Herring Prospectus(RHP) a boring document full of useless verbiage but important if you want to know what one is getting into.

Indian Market View: If the Nifty can hold 14500 then look for an immediate bounce back to near all time highs for the market. For long term investors the level of 13,800 is very important. For traders it is good all the time as long as you do not get stuck with one worldview!!

Be flexible and yes Research is very Important. Happy Investing & Happy Holi !!!!๐Ÿ”†