How to Trade Stocks & Indices? – How to Invest.. series
Ref: 10-004 of 19 May, 2010 By Kalidas PDF Downlaod from Box.net
I am writing this article at the request of many readers who want to know how do I identify and select the stocks for trading and investment purpose. The methods I am going to share apply to almost all markets. However, I may give examples from US and Indian market with occasional reference to Hong Kong market.
I am covering stocks first and then the convertible bonds as this article series progresses. The stock market is meant for masses. Even a small investor can dabble into the market with limited means. However, convertible bond is meant for mostly very knowledgeable investors of fairly good Net Worth (called High Net Worth or HNW) investors and Mutual Funds specializing in bonds.
First of all, let me give show you some facts of life or the eternal truth relating to Stock Market or for that matter – Capital market in general. Each of the following pronouncements is referenced later at appropriate stages to prove my point.
These are the 23 commandments of the stock market. They are not codified anywhere in the world. These are unwritten rules, always in force, never documented, always debated, always investigated, never proved, always commented on and yet never concluded.
Initially, my emphasis is to give you some trading rules on how to buy or sell the stock. Whether one is a long term, medium term or short-term investor, the fact is he must know how and when to buy and sell the stock. The real investment game will be discussed in second article after about 15 days, which will disclose my methods of identifying the stocks for various term investments. Convertible Bonds, a hybrid security between stock and bond, will be discussed in the third article.
WHAT IS STOCK MARKET?
Rule-1
The stock market is a “Devil’s Game”.
• God, Truth, righteousness, fairness etc. always take back seat.
• Nevertheless, God (and Gold) always have last laugh when the crash arrives.
• Stockbrokers, Fund Managers, Rating agencies, Regulators, Analysts and Politicians are “Devil’s Advocates”
• Death, Accidents, new Customer and Market Crash always come without notice. Always be prepared to face such eventualities and seize outstanding opportunities.
• No one knows when the bull market began or ended; no one also knows when the bear market began and ended. Analyst’s always double talk, they are more like red ringworms with face or mouth on either side. They always “go with the wind”.
• The Devil’s advocates always concoct theories. One of them is “Discounted theory of actual events”. Another is “Better than Expected” or “Worse than expected” when they are proved wrong.
Rule-2
Bullish Markets are symbolized by SUN and bearish (market) by MOON.
• The markets usually rise on “sunny day” and retract on “cloudy or rainy day”. It is very much true in city like Hong Kong.
• Look out of the window and see how the day is in early morning. Moon or night brings in more rainfall. Even cloud does not hold water and throws it away as rain. If the day is heavy or rainy, one does not feel like working nor wants to buy anything. In fact he will feel like selling or throwing the stock away the way cloud does.
• Sun denotes brain, which imparts certainty and intellects. This is why people feel like working on sunny day. Moon represents “Mind” which is always volatile, fickle or chanchal. Moon also denotes uncertain mind or uncertainty. This is why the markets usually fall during the period of uncertainty.
Rule-3
Future earnings determine the prospects of a stock, not underlying asset value (book value)
• Earnings, earnings and earnings alone determine the market trend either on upside or downside.
• Current earnings or P/E are the most inaccurate guide to the intelligent investor. The trend setting investors look only at future prospects to determine his actions (Buy, Add, Sell, Reduce or Hold)
• Looking at the book value or NAV (for stocks) is the criteria of the old age. Such valuations were useful to determine the realizable asset value in case the company goes for bankruptcy. If the company were to go for bankruptcy, there was no question of investing into that company. Those who look at the asset value alone, regardless of earning power, are destined to lose big time. As a rule, when the Analysts start pitching Asset or Book Value of the company as attractive reason, it is time to get out of that stock.
Rule-4
Do not try to make small money all the time; it is enough if one makes big money at few times.
• Most investors or speculators try to make small money (what I call “sandwich money”) in fast and furious trades; a smart and seasoned investor makes big money in few slow and steady trades.
• Do not try to make money in every trade. It is enough if one makes money in 7 out of 10 trades.
RALLIES AND CORRECTIONS
Rule-5
Normal rallies and correction last for 2 and ½ days, good rallies and correction last for 3 and ½ days and speculative rally and correction (crash) last for 5 days or more.
• When the stock rallies and closes near high, it means that unfilled orders will carry through on the following session (day). When it rises for 2 days, it will rise further for half day on third day and then profit taking sets in. It applies to all markets and investment products including commodities.
• Similarly, when the stock closes near day low, it means that sell orders have not been filled and carried over. The stock continues its downward journey on following sessions.
• Weekly high or low on good volume indicates bullish or bearish tone that is carried over to coming week. When the stock closes near week high on good volume, it determines its upward trend for the coming week.
German Chancellor turned out to be a wily lady. She banned all derivatives and naked short selling of Euro and Euro bonds. Now when the US$ Index contract matures in June, the holder will need to cover the shorted currencies because there is no cash settlement – just physical delivery type of settlement.
Near the expiry of US$ Index contracts, the currencies like Euro, Aussie dollar and GBP will rise suddenly by 5% to 8% in less than a day ahead of expiry. Euro could rise to 1.41/$ and Aussie dollar to 0.95/$. Geithner never expected this and he will deliver lectures in Europe to allow free trading of financial product in the name of free trade. Germans are not going to listen. The lady is simply too smart for Americans.
THINGS TO NOTE
Rule-6
Never count percentages, rely on absolutes
• Most business channels talk more of percentages, not absolutes. Watch CNBC, Bloomberg, CBS or others, the Anchors speak for percentages at least 3 times in any sentence.
• % always look small when the base is high; similarly percentages look very high when the base is small.
• It is the money in your pocket that counts, which is “absolute”. That is what you are going to spend.
• When stock drops from say, 100 to 30, the % drop is 70%; when the same stock rebounds from 30 to 100 (original level) it is a jump of 233%. Absolute numbers remain same.
• Only idiots rely on percentages; smart investors rely only on absolutes.
Rule-7
99% investors buy first and then sell; only smart 1% investors (short sellers) sell first and buy back later.
• Stock market builds on hopes that the stock will go up so that they can make profit. This is why 99% of investors buy long (buy first and hold).
• Smart investors (short sellers) work against such hopes and they sell first (short) and buy back later. They usually make more money than others.
• When the short sellers sells and stock goes up, he should sell more to average up his sale price. The profit taking will set in and he will make money easily.
• Selling first and buying (or covering later) is most businessmen do unconsciously. They get sale order first and confirm the sale. (Sold first). Then they go their suppliers to buy the goods (covering short)
• It may not be possible for small investors to short sell due to restrictive exchange rules that normally favor the large brokers, mutual funds of hedge funds. For them, buying long is the only solution.
Rule-8
Round numbers and Beautiful girls never comes in one’s hand. Always be flexible in setting number target for sale or buy.
• Most investors keep “round figures” as the buy or sale target which is not achieved most of the times wasting the time of investors and his brokers. 10, 20,30, 100, 500, 1000 are the round figure targets.
• If an investor wants have his trade successfully executed, he should set the target about 10 to 15 points (or 0.5% to 1.5% depending on stock value) above or below the intended round number price. Say, if he wants to sell a stock at 30. He may write sell order at 29.85. Similarly, he wants to by at 30, he may write buy order at 30.10 or better 30.35.
• The round number levels are as slippery as beautiful girls. There are thousands of buyers and sellers at round numbers. Smart investors always accept lower than round number for sales or higher than round numbers for purchase.
• Be a large hearted investor. Learn to leave something on table and do not become greedy to earn last dollar or rupee.
HOW THE STOCKS AND INDICES MOVE?
Rule-9
Indices above 5800 move in increments of 400 and 600 pts for critical levels. They move in increments of 200 pts at other intermediary levels. Those levels are supported or resisted by 35 points on either side.
• Say, 9,800, 10,200, 10800, 11,200………..14,200, 14,800…16,200, 16,800, 17,200, 17,800, 18,200 and so on.
• All intermediary levels are say, 10,400, 10,600 etc. where movement increments are 200 points on either side.
• The market operators unconsciously test the upside and downside level by about 35 points on either side of critical level. Say, the indices are falling to 10,800. The index will still go down further to 10,765 from where it will rebound. Similarly, when the index is rising and hit 10,800 level, it may go a bit further by 35 points before deciding whether to go higher or go down in profit taking.
• If one wants to buy the Index when it is falling, he may write limit order to buy at 10,765 (If the critical level breached is 10,800). Similarly, when the index is rising he may add 35 pts to write sell order for indices (10,800 +35 = 10,835)
• If index rises above XX,200, it is possible it will rise to Xx,800. Similarly when it falls below XX,800 and stay below that level for 2 days, it is possible it may go down further by 600 pts to test the further support of XX,200 levels. Thus, if the stock falls below 10,800 and stays for 2 days, it will go down to 10,200 unless there are strong reasons to go above 10,800 level.
• These are rules of thumb.
WHAT MOVES THE STOCKS?
Rule-10
When really bad news hit the stock or the market due to economic events, such as market crash overseas, debt crisis, exchange crisis, etc. – allow 3 days to 5 days before jumping in.
• Over 80% of short term trades are margin based. That is, investors borrow from banks or brokers to leverage his trades. They glee in good times, and weep in bad times.
• When the market tanks by 5% to 10% in single session, and closes near day low, the margin calls originate on following day. If the market goes down further, the margin call pick up momentum.
• The broker or financier issue margin call to the investor and give him notice to make good the margin, If he does not, the financing banks or brokers sell the stock on 2nd or 3rd day of the margin calls.
• Such forced sales usually take place at about one our later after market opening. Since they are forced sellers, they usually sell at the market or bid prices. The spread widens with the result that losses to investors mount at alarming rate. It is therefore good time to buy during the time of forced selling.
• One may buy long term on margin if the stock or market has tanked over 50%. When the market drops 70% it is time to accumulate good index stocks on margin basis.
• In market crash, the fundamentals do not work. Pick up whichever good stock has dropped most.
Rule-11
The stock moves on its own strength, industry’s strength, country’s market strength and global market strength. (Read strength = strength + weakness)
• When the stock moves on its own strength, it invariably makes money.
• When the stock moves on sectoral strength, it still makes money.
• When the stock moves on Country’s market strength, it makes less money.
• When the stock moves on global market strength, it makes least money.
Rule-12
When the earnings of the company can be easily worked out, they tend to trade at low P/E; Similarly, when the earnings of a company can not be anticipated, the stock usually trade at high P/E ratio.
• Single product companies such as commodity companies usually trade at low P/E because their revenue can be figured out with reference to commodity mined and market price thereof.
• Similarly, utility companies such as Power producers, Water distributors, telecom companies and energy companies tend to trade at low P/E.
• Similarly, holding companies trade at low P/E because its earnings could be easily figured out by summing up the profit share in subsidiary companies. Unless the holding company has its own identity and business.
• Stock market always ignores present earnings or P/E or EPS. It always seeks to anticipate the future earning prospects or things beyond.
• A famous song “Choli ke pichhe kya hai…” sums up this section. Suspense creates excitement that moves the stocks and the markets.
Rule-13
Given a choice, go for the stocks of subsidiary companies rather than holding company. When a person wants to buy the stock of holding company because it has not moved (or cheaper) whereas other subsidiaries did (or became expensive), it is time to get out, not get in. It is the peak.
• Again it is the earnings and its visibility. The stock of holding companies usually trade at lower level than other subsidiaries for the reason that the earnings of holding company do not hold surprises – they are just arithmetical sum total of all subsidiaries.
• The subsidiaries may trade at 15 times P/E but holding company at 6 to 8 times because if there are not to be growth in the earnings of subsidiaries, the earnings of holding company would have peaked.
• UNLESS of course, the holding company has own independent activities that may cover over 50% of its total earnings including subsidiaries.
Rule-14
The stocks usually move in a group regardless of fundamentals. Get out of less worthy ones.
• This is especially true in Asian bourses where most of the leading companies are family controlled enterprises.
• Say, there is good news about Birla group in India, all stocks in Birla group will move. Similarly for Tata, Ambanis (both Mukesh and Anil known as MDAG and ADAG), Jindals etc.
• This is the time to lighten up on stocks on good news and load up on those stocks on bad news.
Rule-15
When the stock moves on non-financial news – such as political, social or anti social news, use the opportunities to load up or sell out after a few days.
• Stock market relies mainly on financial fundamentals, not others.
• When the political crisis hurts the stocks, treat as buy opportunities after 3 to 5 days.
• If anti social events such as bomb blasts take place, treat as buy opportunity and jump in immediately.
• Never anticipate political, social and judicial events and take anticipatory position immediately before those events.
• Similarly, when the political events engineer rallies, such as outcome of election, get out of stocks within next 5 days of such euphoria.
• Similarly, when the political events cause steep fall, such as outcome of election – hung parliament or coalition government – treat as buy opportunities.
• Politicians may change – they come and go – but the bureaucrats remain same. It takes long time to change established policies.
• Normally the bureaucrats rule the nation most of the time – the politicians are merely rubber stamps. Bureaucrats or so called experts’ advice the politicians and they have domineering effects on financial policies unless the Leadership is strong and imaginative.
WHEN TO ENTER OR REFRAIN FROM THE MARKET
Rule-16
One need not be in the market all the time; however, the market should be on his radar all the time.
• A smart investor acts like a lion. Just as the lion kills its pray only when he is hungry (not otherwise), an intelligent investor is discreet enough to participate in the market for a kill only when the market is attractive.
• The market is a dynamic force. It should be under the watch of an investor even if he does not participate.
Rule-17
Always be a player, not the bystander or spectator. It is the player who makes a run or a century, not the bystander.
• There are 2 batsman in the field and 20,000 spectators. It is only those with the bat facing a ball make runs or a century.
HOW TO BUY, SELL AND TRADE THE STOCKS? – FUNDAMENTAL STRATEGY
Rule-18
Do not buy or sell after reading or watching business TV channels.
• Many brokers or investment banks have financial journalists on their roll what they call PR exercise. They feed the information with definite intent.
• Do not let your impulsive instinct to shroud your logic or judgment.
• When every one knows what is read or watched on media, there is little room to make good money.
Rule-19
Buy or sell “Three Weeks” ahead of expectation of event, and reverse the bet “Three Working days” ahead of scheduled event.
• It is similar to “Buy on rumors, sell on facts” and vice versa.
• The stocks usually move ahead of events. The brokers start tipping around after taking proprietary position. They usually get out a day before the scheduled event.
Rule-20
Do not try be a bottom pincher OR a peak picker.
• Always remember very few people are found near the bottom or at the peak.
• Start buying when the stock recovers by 8% from steep fall and start selling when the stock is within 15% of target price.
• When you feel buying just buy, and when you want to sell, just sell without waiting in the line or Queue.
• One never succeeds in bottom fishing or peak picking. Be practical
HOW TO BUY, SELL AND TRADE THE STOCKS? – STRATEGY TO ACTIONS
Rule-21
Always sell in first 15 to 30 minutes of market opening. Buy in next 60 minutes. Sell before lunchtime, and again buy back 30 minutes before close (provided there are no adverse international events)
• The market makers or operators make two levels in the morning trades – low and high – within which they operate all day long.
• Always sell in first 15 to 30 minutes of trades. The rise in price is mostly not so real trade based, but operator based.
• The stock consolidates for 60 to 90 minutes after first 30 minutes. The market makers then buy back a little to cover their short position.
• Some market makers or operators sell ahead of lunch hours. The broker crowd is thin during lunchtime, which helps smart operators to dictate trend. It is said that a smart broker never takes lunch. This is why most steep corrections take place during lunch time (1:00 PM to 2: 00 PM) and near the close (Last 15 minutes)
• Last 15 minutes of trades reverses the morning bets. If the stock has risen, it will fall (due to bulls liquidation), and if it has fallen, it will rise (due to short recovering) during this period.
• If the spread between Bid and Offer widens, it means that the market makers want to sell first and buy back only later at much lower price. The stock usually falls later in the day so that they can recover their short position.
• If the spread between bids and offer narrows down, it means that the market makers are engaged in stock accumulating stage by forcing the level down. The stock usually gets higher later in the day.
Rule-22
Buy a stock after 45 minutes and before 90 minutes of opening trade.
• Most people sell the stock in the morning after reading newspaper or watching business channels. Such selling is active after 45 minutes of opening. The market makers also recover their shorts when the real sellers rope in.
• Most people buy the stocks only in the afternoon, saying they want to study the market. Even if they studied the market, it holds good for the day, not beyond. Anything can happen at night when dictating US market opens and closes before the world market opens from Australia to Arabia.
• Study yourself. How many times you bought the stocks in the early morning hours? How many times you bought the stocks in the afternoon, especially after lunch hours?
• Often, the market makers set two levels – high and low of the stock. The investor, trader or speculator – whatever name you call – will try to set these levels as his benchmark and try to get high price for his sale and low price for his buy. He rarely succeeds.
• The stocks usually moves in first and last 30~45 minutes of a daily trading session. The stock usually hardly moves or moves sideways during intermediary 4 hours. Nothing usually happens during this time, and yet the daily trader glues to the screen doing also nothing.
• A smart person would operate during first and last 30~45 minutes and then take time off to attend his normal work.
• This rule does not apply when the market is in crash or deep correction mode due to other complex factors.
Rule-23
Always follow 35:85 rule while trading stocks.
• Watch out interesting numbers 35 and 85 at all times. Study almost all active stocks for their daily pattern. One will notice day high and low around this level.
• If the stock is valued at Rs 50, for instance, it is possible it may have fluctuated between 48.85 on downside and 51.35 in normal days.
• When the stock goes to say 48.50, a round number, it is possible the traders might force it lower to 48.35 to see whether any support comes in. If it does, the trader recovers his short position quickly.
• Look at today’s Gold prices – 1085, 1135, 1185, 1235 are the levels to which it touched and then either progressed or corrected.
• It applies to any commodity, forex trades, bonds, CBs, property markets etc.
These are the 23 unwritten yet widely followed Commandments from the years long observations by the Kalidas (Anil Selarka). I am sharing this knowledge and experience with the readers of this blog.
Above are merely daily trading tactics. The real Long Term and Medium Term tactics will be discussed in next article – How to Select the Stocks and Bonds? However, the tactics as above will be used to time and control the purchase and sales activity
CAUTION: Kindly note that the contents of this article are “copyrighted”. General permission is granted to anyone only if they acknowledge the source as “this Article and the Author”. Ungrateful copycats are not welcome and will be proceeded against legally for violation of copyrights and intellectual property.
Kalidas (Anil Selarka)
Hong Kong, 19th May 2010
Link to this page
Sir,
Do you have any must read recommendations to build one’s knowledge on finance, investing and stock markets. I am not sure if you had mentioned a while back about a book on mystic numbers? Is that something in the works?
George, New Jersey
george
14 Jun 10 at 9:07 AM
Hi Anil
I am a New Zealand resident and I support my daughter’s education & living expenses in Australia and therefore had invested in Gold at Rs17,200 level and I hold the physical position in India.
I also have some funds in India which I need to move to either pay for my daughter’s fees & living or repay some of the mortgage that I have here on a regular basis. I have three questions : 1) At what price level should I exit gold this year? 2) When is a good time to import the Indian money either into Australia or NZ, some tips on where the NZ and Aus $ is headed would help ? 3. Is it a good time to invest in the Indian stock markets now, I do understand them a bit but have not been in touch with them for the last 10 years?
I have always treasured your guidance and advice and have found your artcles very beneficial.
Many thanks and Regards
Kamesh, Auckland, New Zealand
Kalidas says………….Wednesday, 9/Jun/2010
My target for gold is very high – it is minimum $4350 and Maximum $6,400 against current value of $ 1250. This time around, the gold will rise by 10% in matter of days before pausing at $1385 for more consolidation.
Price of gold in terms of rupee depends on Rupee/$ parity. The Government of India idiotically promotes weaker rupee. However, profound weakness of $ will be seen in matter of days – when the US$ Index options and future contracts come to expiry stage. In short term Rupee may trade between Rs 43.50 to 47.50. With gold rising, and rupee falling or maintaining same value with little bit of strengthening here and there (by about 5%), The price of gold in short term may rise to Rs 23500 per 10 grams in a few months (2 or 3)
In medium term, presuming rupee rate at Rs 39/$, and gold prices rising to at least $2575 level, the gold price may rise to Rs 31,000/10 gms (Rs 39/$ parity) or Rs 36,000/10 gms (Rs 44.50/$ parity). Use those level to exit from gold for profit booking level. My 3 years target is Rs 45,000/10 gms regardless of exchange rate.
Right now, both Aussie dollar and NZ dollar are very attractive buy. The present fall is due to paper trading in USD Index and over blowing Euro zone crisis. At the moment, your region’s currency is better buy than Indian rupee. When your currencies gain 15%, then only think of buying Rupee against your currencies.
For your daughter’s education, just buy the following stocks on at least 3 years hold period basis (7 years better)
HPCL, BPCL, IOC and MRPL at Current market prices
IFCI (now), DCB (Development Credit Bank) and UCO Bank (at
SAIL, Hindalco
MTNL (Buy its ADR in New York), Tata Tele (< Rs 20), VSNL
Prefer large cap stocks to other volatile names if you do not have large investment budget.
Kamesh Sunderarajan
6 Jun 10 at 2:54 PM
Dear Sir,
I have a general question For quite a span of time observing your sell call , I have sold out most of the equities with the exception of favourites (spicejet, UCO,RNRL and few others). So during this time span I am facing a difficulty in just maintaining the cash in bank (which attracts @ 3.5% ROI, which is not converted into FD) and loose (uninvested) money is always at a risk to be spent for impulsive buying.
What would be the best way to lock up money for a variable time span ? buying gold or FD or any thing else you can suggest.
Thanks,
Atharva, Pune, India
Kalidas says…Tuesday, June 01, 2010
You have itching “khujli” problem in your hand. Those who control the urge to spend especially when the money is lying idle, can make the most money. When you are waiting for correction, you must be ready to move cash back into equity at the speed of light.
3.5% return on Savings is not bad enough. In Hong Kong, we do not make even 0.5% in a year. There are some banks who have Flexi FD scheme where the deposits are issued in one lot but treated as multiple units of 1000 each. When you want, just break the deposit to nearest 1000 and credit to normal savings account. This way you have flexibility of having FD and also liquid funds at the time of need.
You do not have gold in your portfolio. Buy some. When you have outstanding opportunity in equity, just sell Gold whether or not you are in profit or loss, and buy those desired equities. You are never going to lose in gold over 7% whereas the equities would have become cheaper by 15% to 20% in correction. Your net gain for entry is still 8% to 12%
Atharva
31 May 10 at 5:06 PM
Dear Anil Sir,
yesterday the biggest deal in Indian real estate took place, where LODHA bought 6 acre land in MUMBAI for 5000+ crores.
Due to european crisis people will pull out their black money from european banks and safest heaven for black money is real estate, hence in Mumbai prices are firm despite slow down. Do you see any slow down from here ?
I read your how to invest in real estate, and looked to me, that some of rules are not applicable in Mumbai , like 12x times rent multiple should be the price for outright..
In Mumbai there is no rule, real estate has only one direction , that is UP , up and only UP.
Regards,
$amir, 05/27/2010, Mumbai
Kalidas says…Friday, May 28, 2010
Do not make bland statement about any news. Mention the link. I have no time to struggle with the search.
The volume of black money has come down. I do not buy the story that black money hoarders are depositing money with European banks. They are usually last resort. Further, the regulations in opening accounts are so tough in USA and Europe that hoarding tons of money there is nothing but a cheap talk.
My 12X times formula offers best bargain rates for property where you can not go wrong. The whole Western World has suffered massive property crash and it will take 12 years for them to recover.
India has seen such crash in late nineties and suffered for over 7 years. Higher you go, the steeper you fall and longer it takes to recover.
One should not pay over 18 times the annual rental value to have decent manageable price. Beyond that it is still a speculation. Be a seller at higher price. I am going to do that soon and this is why I am coming to India soon.
When I am going to sell, I do not advise my readers to buy – it is as simple as that. Use my formula as rough guide to understand level of risk you are going to take. Everything corrects – you have seen that and will see in every stock, market, commodity and in personal life as well.
$amir
27 May 10 at 1:56 PM
Dear Kalidas Sir,
I played Rule no 21 today in IFCI successfully.
Could you suggest if given the current turmoil, can I still play it tomorrow ? may be could you suggest some more picks, that can be played in rule 21 ?
bcoz IFCI lotsize being huge, and being trader’s one of top favorite, spread is very less, and queue is long
Regards,
$amir, Mumbai, 05/25/2010, 11:30 PM
Kalidas says…Wednesday, May 26, 2010
The rules are universal, applies to all markets, at all times. Use it anytime.
$amir
26 May 10 at 2:00 AM
Dear Kalidasji
Thanks for enlighten us sir, I feel secure to have you online answering our question/query. Feels like GOD is around me.I have loss heavily in last crash of 2007-2008 and promise myself not to come again in stock market, But your confidence and guidance again give me power to invest (not speculate). I do not care whether this time I am right or wrong but I am happy to be in known path guided by you. I will be greatful if you can provide the list of stocks which we can buy in dips and the allocation of equity ( indian only)in whole portfolio.
With Warm Regards
Renu Khanna
New Delhi, India, May 25,2010
Kalidas says…Wednesday, May 26, 2010
The market is an ocean. Whatever you throw in, comes back later because the Ocean does not keep anything forever. If you have lost once so what? Be wiser and make up again by changing your outlook, design, strategy and methods.
My stocks are already listed in this column number of times in the past. I reiterate them here again:
GAS STOCKS
Petronet
GSPL
OIL PRODCERS
Cairns
OIL REFINERS
BPCL
HPCL
IOC
MRPL
RIL
BANKS & Finance Institution
DCB (Dvelopmen Credit Bank)
Dena Bank
IFCI
LIC Housing Finance
M&M Finance
Standard Chartered IDR (New issue)
UCO Bank
HIGH TECH
Satyam Computers
TCS
Steel:
SAIL (<181, preferably 161 Buy some around Rs 181)
ISPAT <16
Jidal Stainless Ltd.
ENTERTAINMENT
Deccan Herald
Dish TV
Tips Industries (Long term)
TV Today
HOTELS
India Hotel
Taj GVK Hotel
AIRLINES
Spicejet
Renu Khanna
25 May 10 at 7:37 PM
Kalidas,
As the saying goes- if you want to feed a man for a day , give him a fish to eat , if you want to feed him for life, teach him how to fish.
You are a guru to many like me . Not for giving me stock tips, or making me some money but for teaching me how to invest (also not to invest at times ) and to be patient & happy with what i get.
I will surely make money in stocks & out of it. And you certainly would be responsible for most of it.
Deekay
New Delhi.
deekay
25 May 10 at 3:03 PM
Dear Kalidas Sir ,
Another master piece article from your side. I am pretty sure its not only a guiding star for novice like me but even people who are in this trade for years. The way you access any situation and have a logical reasoning is simply brilliant.
After reading your blogs I do see lot of patience building in me , asI was a perfect example to Rule#4 , where all the time I have made’ sandwich money’ and have lost the big wave …but I am sure i will use your article as a gospel for equity investment.
Thanks,
Atharva, Pune, India
Kalidas says…Monday, May 24, 2010
If you can do that, you will be real “chela” or disciple. When I retire to the high mountains of Himalayas, I may be known as “Swami Anilanand” or “Mama Kalidas”
Atharva
24 May 10 at 12:52 PM
Dear Kalidas sir, What an article. This we should take a print out and distribute to our well wishers and also preserve it to our future generation. Once again hats off. When is your other books are released. eagerly waiting.
Thanks and regards
Raviprakasham, chenna, India
Kalidas says…Monday, May 24, 2010
Thanks. I intend to take “eBook” route in future. Not all books can have the format of Sub Prime Resolved.
Raviprakasham
24 May 10 at 12:23 PM
Sir,
Wonderful article !!! These tips could have only come from someone who has immense experience and knowledge of money / markets/ financials / life in general like you. Really admire your knowledge, intellect and imagination.
Regards,
Sumit Gupta
Surat, India.
Kalidas says…Monday, May 24, 2010
Thanks
Sumit Gupta
24 May 10 at 12:01 PM
Dear Kalidasji
This is the best piece of writing on finance I have read after Rem. of an Operator. I think it goes without saying that you are indeed a true stalwart. I thank you for this excellent bit of education. God Bless you. Pranams.
Kalidas says…Sunday, May 23, 2010
NOTE: Always append your name, city and country to your signature. Please follow protocol rigidly if you want reply. Your query will be ignored otherwise.
Thanks anyway for your best wishes and good words.
Rajeev Juneja
23 May 10 at 6:11 PM
Dear Sir ,
Thanks so much for sharing your valuable, treasured inputs and time .. There will always be 2 people whom i will be indebted to when i make money through shares and that will be YOUR GOOD SELF(less) Kalidasji and my friend who introduced me to your site . Once again thanking you for every good thing you are sharing with us for our well being and my prayers for you and your family’s well being !!!
Regards
Sajith,chennai,22nd may 2010
Kalidas says…Sunday, May 23, 2010
Thanks for your best wishes.
sajith
23 May 10 at 2:14 AM
Dear Anil Sir,
It is fantastic article and I read it 3 times so far. Also, I am reading all your old articles. I will have to keep reading until I grasp the whole lot. But the most difficult part for me is to apply in real life scenario. I have told myself so many times not to buy on impulse and still it happens. How to avoid it?
One more thing I would like to say is, I have just finished my MBA here. Although I am working as a senior manager (4 years) with good pay in a relatively safe job, I always feel I could do better in investments in India.
And for the same, I think I have found an excellent mentor who can point in right direction and gives unbiased advice. Only regret I have is I found out about you too late. If I had seen this blog two years back when I started in the stock market, I could have made a lot better money and decisions regarding my finances.
Just want to thank you for such a fantastic work. God bless you with everything.
Regards,
Amit,
Galway, Ireland.
20:47 21st May 2010.
Kalidas says…Saturday, May 22, 2010
Never regret missing time. It does not help. One always learns. Although I was good in banking, I acquired the knowledge of finance in real sense from the age of 39 and it took 17 years to become relatively more knowledgeable or expert as you might call it.
At least you are lucky that you got me as tutor to teach you some facts of my life. Your learning curve is considerably shortened. for me, I had none and I had to learn by trial and error. When I went wrong, there was no one to ask to.
It is said that ” guru bina gyan nahin…” which is a fact. There was famous song from Baiju Bawra in which Birju (Bharat Bhushan) sings the best ever bhakti song “Mana tada pat…” where one of the stanga is ” Guru Bina Gyan Kahan se paoon…”
Better later than never. Life always teaches us the lesson, sometime easy way, sometime hard way.
Regarding impulsive buying or acting, use the following trick occasionally.
GO TO THE SUPER MARKET with a resolve that you will not buy anything. Just take a stroll and come out of it without spending a dime. NOW, spend about 30 minutes, looking at the labels but never ever buy it. Initially, go there with a wallet without any money. After few days, go there with money inside the wallet but you should not buy anything, not even drinks or chocolate.
After few sessions, your impulsive buying or selling will be restrained.
Amit
22 May 10 at 3:54 AM
Dear Kalidas Sir
Superb article, I have already read it 3 times, and I will read as many times till my actions become unconsciously following the written rules. being in JPMC, I can imagine how great a talent you are.
Sir. Unfortunate are those, who do not listen to your suggestions for resolving sub prime crisis. I will start observing this rules from Monday onwards.
I have few questions
1) Where can one buy and sell palladium in Mumbai? I googled but it only shows of a mall named Palladium.
2) Could you explain me this line from Rule No 15 with an example “Never anticipate political, social and judicial events and take anticipatory position immediately before those events.“ some example ?
3) Could you please explain rule no 13 and 19 with some real life example, typically the “event” mentioned in rule 19, is that like dividend consideration, stock split, like such stock related events ? or election, budget , rate hike , RBI action , those kind of events?. Would request,if possible a live example will make it embossed in the brain.
$Amir, Mumbai , 05/21/2010 11:45 PM
Kalidas says…Saturday, May 22, 2010
Thanks. The article reflects my 36 years of financial experience of which last 17 years as stockbroker was the most educatig one.
Regarding your questions:
1. Use Justdial.com as search engine. It will turn out full details of the dealers in the city you name it. Otherwise, try MMTC also. I would prefer to buy from USA, UK and Europe from where you can buy physically or in the form of common pool. Try KITCO.com if you do not want physical delivery.
2. I will come out with “Composite version of the article” in 2 days in the form of PDF file (downloadable) where I will give real life example. Because the article extends more due to details, I can not reproduce in the web format. One can download as “Full Composite Version”. The link will be mentioned on top line itself.
Your question 3 is answered above.
$amir
22 May 10 at 2:21 AM
Dear Sir,
The article u shared is priceless.
Thank you for sharing the same with all of us.
Regards
Mohit
Punjab
Mohit
22 May 10 at 1:29 AM
This is actually I want to Know from you since long time. Thanks.
This is very useful practical guidance. It will take few times of reading to understand fully for me.
I have a discussion related to Rule No. 20 of Sell.
As you said in Rule No. 20 that One should sell his holding when stock reaches 15% of his sell target.
First, I think very few people can set Realistic target. If any investor is sure about his target then he must follow your rule no. 20 but what about the investors who fell to set realistic target.
I have another word in my mind for those people, like me.
You used to say one should cut his loses when stocks drops below 11% of his purchase price. ( This thing you have not said in this article.) Then why should he not sell when stocks reaches below 11% or 15% or maximum 20% from it’s recent high?
Suppose, I buy a share of price Rs. 50 and I set target of Rs. 200 on future earning. Now, According to you I should sell share at price of Rs. 180 (15% low from target). If What Stocks rallies to 150 and drops back at level of again 50-60. Then will not he miss the bus of rally?
But if he set 15% low from the stocks high (i.e. 150×15% = 128). Then he must sell share at 128. No question to ask. just sell. if stocks rallies further 200 then let it go. just sell below 15% from it’s latest high.
Is not this Correct theme of Selling?
Because many people really fail to set realistic targets. Even they cant understand future earnings. Most small investors are novice in this devil’s game who do not understand which side Share capital come in Balance sheet. liability or assets?
I too am novice.
Great article.
Thanking You
Jayesh
Navi Mumbai
Jayesh
20 May 10 at 9:55 PM
Hello Kalidasji,
Thanks for giving such a practical insight in the article. I am an investor and trade against my investment holdings. I do follow most of the rules you have mentioned.
My querie is that how do you get correct and accurate company information to like order book for construction cos and pending sales orders for commodity cos to make a judgement on the future earnings prospects of the company, because as you said TV news and newspaper reporting on these matters can be biased.
Thank you
Siddhartha Shah
Kalidas says…Thursday, May 20, 2010
Order book can be faked also. The balance sheet of any construction company is most complex exercise. You have to rely on Management report and also read with Auditor’s report. You have to use check and balance and also do some detective work.
Siddhartha Shah
20 May 10 at 8:55 PM