- Bull or bear , win the jallikattu
By *Dr. Thirumalai Kolundu*
There can't be any life without ups and downs. Even if you take our practice, it will go on increasing for several years, then after reaching a plaeuto, it will start coming down. This applies to share market also. Many would have wondered after seeing two days fall, whether it is start of bear phase or isolated incident.
I have seen several bull and bear phases . In bear phase our net worth will come down by several lakhs taking us in to mental depression. When I was sitting idle, I made a calculation, how much my net worth will
change when sensex goes up or down by 1 point, it is around Rs 300. Imagine if sensex goes down by 5000 points, how much it will decrease.
First let us have some understanding about bull and bear market
1. When you will see bull market?
• When macro economic conditions like GDP increase, inflation decreases, stable interest rate. ( healthy).
• When FII is pumping money ( like now. They are doing this since they are earning more here in India. They may stop this at any time which may lead to fall or nose diving of index. ( risky)
• DII may be net buyer , when FII is reducing
their investment, there by preventing a fall . ( only temporary effect ). Lic pumped money during April and may.
• Market driven by emotion and euphoria. Like now. Lot of new investors with out basic knowledge enter. In the last 6 months more than 2 crore new demat account has been opened. ( highly risky). Many unworthy stocks will be enjoying the season. As our RBI governor statement, Economy and market are disconnected.
When you see a bear market?
• When macro economic conditions are bad.
• When there is problems in the world major economies like US, Europe and China
• Geo political tension like US , Iran or US
• When FII start withdrawing .
• When DII can't support the market due to redemption pressure from its customers due to negative sentiments.
• When negative sentiment prevails, nobody can prevent a fall. Many of the first time investors will drown in the negative current and will never return back.
What is happening now?
• Real time economic parameters are no way matching the present market peak.
• Market is driven by euphoria.
• Lot of new investors without adequate knowledge want to play like Shewag.
• DII is net seller due to profit booking by investors .
• FII is pumping money. This is the main reason for the market hype. Only stocks which they are buying will increase. Many good PSU stocks are undervalued because FII doesn't show interest in them.
How to predict the fall?
• In money control, daily watch FII and DII activities. Now FII is net buyer and more than the selling by DII who are at present net sellers due to profit booking. When FII starts withdrawing , be cautious.
• Watch the Asian, Europe markets and Nasdaq. If they are in red consequentially for
many days, there is a chance for steep fall.
How to face the bull and bear market?
To be continued
FII - Foreign institutional investors
DII - Domestic institutional investors.
Bull or bear , win the jallikattu (2)
Yesterday we have seen the game changers in the market
1. Real economic conditions
2. Higher liquidity ( This happens when government puts more money in the hands of people and print more money. Major economies like US and India are printing
3. Mood of the population ( Euphoria or depression)
4. Unexpected events like covid pandemic.
5. FII entry or exit from market.
6. DII entry or exit from the market.
7. Entry of first time investors.
Now we will come to the real question.
How to face the bull and bear market? We need not bother about anything if we are confident about three things
1. Selection of stocks.
2. Selection of moods.
3. Selection of mode of buying.
Let us see one by one
1. Selection of stocks:
There is no need for over working our brain in stock selection. we need not run behind multibagger or low priced scripts or choice scripts. During 1986 to 1990, I bought a lot of shares recommended by a popular financial magazine as low priced scripts and choice scripts. Even today i am having more than 20 stocks, not in Demat account but as paper as these companies are not existing now.
Select 15 to 20 fundamentally strong companies which has got potential to grow as their will be persistent demand in future also for their products. you can increase the number of stocks as your experience increases.
For example Asian Paints and Pidilite are moat companies with more than 50% market share in sales.
HCL, wipro, Infosys, TCS are IT giants which will be in the centre stage for at least next 10 years.
HDFC bank, Kotak Mahendra bank are going to be market leaders in banking sector.
Insurance which is the fast growing sector in India at present is going to see very good players like HDFC Life, SBI Life.
Tata Motors will be one of the market leaders in electric vehicle which are going to be the vehicles of the future.
Reliance is slowly becoming a corporate giant which everyone likes to be part of.
Lot of good companies are there in public
sector units also like IRCTC, SBI cards, ONGC.
I have given only few examples. similarly you can select fundamentally strong companies which have performed performing and will perform.
2. Selection of Moods:
People feel very happy, euphoric and positively vibrant in Bull market. In bear market they feel depressed. I have seen lot of people shy away not only from stock market but even from stock market news, when the share prices are crashing down and they are loosing money. During bear phase , even financial WhatsApp groups were silent with less number of people reading the posts.
First thing we need to do is reversal of moods in a diagonal opposite way.
It is the Bull market where you have to be very careful and should be very cautious while buying the shares. Mad rush to buy shares without analysing the fundamentals is a impulsive behaviour which will later on lead to loss.
Bear market is a god given gift which has got the potential to make us wealthy. You can buy very good shares at a very low price and utilise this opportunity to built a good portfolio. On 25th march Asian paints share price was 1590 and pidilite 1300, HDFc bank 815. Imagine what will be your worth if you have bought at that time.
In bear market most of us miss the bus thinking that price will go down still further. We are as good as the financial experts in judging the momentum of the market. Sorry
sorry wrong statement. Financial Experts are as bad as common man like us in judging the market.
Lot of people lost their opportunity by listening to the people like him. What you should have done, as our Krish use to tell, buy 1% of your target number of shares you want to possess, every day. Nobody knows which is the bottom and when market will turn around. So this will be the best way.
Bull or bear , win the jallikattu (3)
Already we have seen selection of fundamentally Good stocks and how to alter our moods to face Bull or bear market without any difficulty. Finally we are going to see various methods to buy shares to create a sound portfolio. There are 3 ways which we can employ in buying the shares.
1. Passive investing:
If you are very busy and don't have any time to spend in the stock market, better be a passive investor. You can invest in the the Nifty 50 index. Your money will be invested in the top 50 companies which make the Nifty index. Here also you can invest in two ways.
• Invest every month some amount of money similar to systematic investment plan without bothering about the market ups and downs. You have to buy the Nifty BeES units through Demat account.
• Sensex will be falling every now and then. Even recently Sensex Had Fallen 1500 units on one day and 800 units on another day. Whenever there is opportunity like this you buy niftybees. you can buy more number of niftybees when the market is in recession. By this way you can get a decent return of 12 to 15% which will be even more than the large cap Mutual Fund returns.
2. Systematic building of a good portfolio:
First make it clear that investing in stock market is a long term affair and not for short
Second you make a Portfolio allocation which can be 15% of your investment to begin with and later on when you become very confident, you can increase your investment even up to 40% to 50%.
By selecting and investing in fundamentally Good stocks you can expect a decent return of of 15% to 25% CAGR.
Only When you get a grip of the market you can go for probable multibagger, Shares which will show a steep increase in a short time, Penny Stocks which has got a potential to increase ( some time bankrupt).
Then prepare a list of shares you want to invest and quantity of each share you want to possess.
Follow the same method as above. whenever Sensex Falls you buy a small quantity of share.
In bear market don't wait endlessly to see the bottom . When the Sensex is falling down accumulate 1% everyday or on alternative days.
After 5 to 10 years you will have a very good portfolio which surely is going to make you rich. Never miss the bus and as Warren Buffet says never lose money.
3. Nectar can investing:
This is based on coffee can investing with some modification. It is tested method of investing. Here the principle is shut and
you select a group of shares and buy designated numbers every month for one year. After one year you are going to shut the portfolio and keep it for 10 years. you are doing the same thing every year in the same set of the stocks or different set of stocks which fits into the selection criteria.
Nectar can of each year is going to give you very good Returns when you are going to keep it shut for 10 years. I have already written in detail about this type of investment. Main advantage of this type of investment is, you need not bother about market ups and downs which will give you lot of mental relief.
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