Sunday 30 December 2012

Making fortune in Share market - a biggest myth busted

The Indian stock markets particularly NSE and BSE are believed to have created
millionaires overnight so much so that gullible investors get sucked into
the financial jungle only to find that they have lost huge sums of money and they are not alone.
Find out why?
Making money in Shares - a biggest myth busted
People generally enter the share markets to make quick bucks as it is often learnt that there is huge amount of money in the Share markets.  The NSE has a daily turnover of 1.5K crores onwards and BSE is not far behind.  And it creates a perception that there is a huge profit to be made in the markets.  But the truth is quite different.  Interested, read on....

First of all let me say that making money in share markets is a biggest myth perpetrated by the Business TV Channels through their so called Analysts and Stock Gurus.   Even Mr.Rakesh Jhunjhunwala the biggest bull of recent times had commented on Mahurat Day Trading in 2011 that 98 % of retail investors loose money.  I agree to that in fact I disagree to the figure, I'd say that only 1% retail investors make money and that too because they just invest and forget about the investment.  Why because these 1% people have surplus money and quite easily park this surplus money in the markets and forget about it.  And in the long run they can make a neat profit. 
But can ordinary salaried or self employed individuals like us afford such surplus money? No.  We have to invest from our salary or profits in the markets and as such we generally tend to get into the buying selling part and slowly and steadily into the Intra day part and finally into the F & O part.  By the time we are done our money is done away with.
Let me bring to your certain facts of our Markets.
1.  The highest volumes grosser share in  BSE is Cals Refineries.  It is priced at 0.14 paise per share and the volumes always top 50 lacs shares each day.  When you research on the company you will find that the company has nothing in assets save a website which is half complete.  The so called Refinery as indicated by them in their IPO is still on the drawing board.
2.  Ditto for Shree Astavinayak.  The price of this company was at 51.00 in Oct 2012 now it is at Rs.2.60,  and already there are allegations by the investors against the company board about financial misappropriations by them.  20 lakhs shares of this company are traded on the bourses every day.
3.  A Company like  Jubilant Foodworks  which has a sales of Rs.342 crores and PAT of 32.00 crores for 3Q 2012 is trading at Rs.1297.00 and a company like Essar Oil with a Sales of 23000 crores and PAT of 105 crores is trading at Rs.60.00
I can go on and on with examples like this such Bata which was Rs.230 in Jan 2010 and is trading @ Rs.860+ today for no reason at all. 
Recently there were two IPOs CARE and Bharati Infratel, while CARE opened to 26% appreciation over its IPO price the Bharati Infratel lost 13.1 % on its IPO listing day.  This really proves that there are smart operators who are behind this boom and bust scenario.
The day IIP figrues were release in 2nd Qtr 2012, the figures were pretty gloomy but still the managed to put on 35 points and the very next day it lost 115 points.  In the evening as every day the analyst and trade gurus were quick to blame the loss on weak IIP numbers.  Where were they when the NSE gained 35 points on the IIP release day?  Why did NSE gain 35 points that day is anybodies guess.
The more you study the markets, the more you will be able to notice the underhand dealing of the shares.  You only have to notice it.  A company called Prakash Controwell which in my opinion was a penny stock was listed at a IPO price of Rs.138.00 a share.  It listed with a 66 % gain on the listing day to close at 229.00.  Further for next three to four days it daily hit the 20% upper circuit. 
Now the same share is trading at Rs.17.00.  Imagine how many fools would this company have given birth to and how many people may have lost a fortune in this company.
Lets not forget Kingfisher Airways, the king of good times company.  At a time when it was running in August 2012 it hit a all time low of Rs.7.00 and since then much water has passed under the bridge, the company has been unable to pay its employees salary for full year, the licences of the company have been suspended and yet it is trading at 15.25 an appreciation of almost 100% plus over its August price.  Why?  May be Mr.Mallya can answer that.
A small time investor generally starts with investing in shares to the tune of Rs.50000.00 to 100000.00  in a good scrip probably through a IPO,  the share broker continuously tempts him to sell it once it crosses his buy price and ultimately he gives in and sell making a neat profit.  But unknowing to him, a gambler in him is born.  He starts to think that every share will give him same kind of returns so slowly and steadily at the goading of the share broker, who is giving him tips enters into Intraday market.  As every gambler would know, he just happens to have beginners luck so he starts making around Rs.2000.00 to 3000.00 daily.  He thinks this is a very easy way of earning money.  The broker then introduces him to Futures and Options market.  The day this guy learns F & O he has become a professional speculator.  More often than not he will lose money.
A friend of mine invested Rs.100000.00 for the first time in Coal India IPO.  He subscribed for for 400 shares at 245.00 a share, which was allotted to him.  On the listing day, it jumped to a intra day high of Rs.345.00.  But my friend was not as lucky.  The moment it opened on the bourses at Rs.287 + the share broker started pestering him to sell it, giving as many as 15 calls in half an hour.  Ultimately my friend gave up and relented by agreeing to sell it for 305.00 making a neat profit of Rs.24000.00 .  However next day when the share broker started giving him tips, he asked my advise.  I advised him to buy only blue chips like Tata motors, L&T, ICICI or SBI.  He did the same and now he has made a pile of money.  He is not into trading as such he is very content.  Every now and then he asks my advise and I tell him not to put any more money into the market.
This is the advise I give all of you who are interested in the share markets.  If you really want invest in blue chips, avoid all other stock, they may make you penniless in the future.  The top  companies in 2000 Y2K boom like Pentafour, HFCL etc are either not trading or are penny stock at this moment.  So don't put your money in something stupid.  Better save your money in a Bank FD, it may not give you 100 % returns but it will give you assured returns. 
I hope you learnt a lot from this article.  Please post your comments/likes/unlikes or criticisms.  I welcome it.  I have made a similar post on Insurance companies, please read it here.

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  1. I think its a game of luck.

  2. Thank u for tips.Liked yr views.

  3. Same is true for the mutual funds also. It is advised to the new comers in share market that they should start from mutual funds but that is also not safe.

  4. Yes I know I will put up a blog on both mutual funds and Insurance and the way the cheat us

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  6. I liked your post.

  7. Good to know this about the stock market


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