Dear friends,
Flat close for the overall markets on Friday. In fact it recovered towards the last part since Nifty was trading quite low during the middle of the day.
European and US markets have closed negative on Friday evening. Depending on the Asian markets, our markets may be flat or weak too due to lack of any major positive global cues.
Nifty is in Hold zone for short term.
The indications for individual stocks for short term only are –
DON’T BUY – VEDANTA, ITC, HDFC, TITAN, AXIS BANK, YES BANK
HOLD – INFOSYS, SBI, M&M, MARUTI, RELIANCE INDUSTRIES, TCS
WAIT TO SELL – HDFC BANK
SELL – ASIAN PAINT, HINDALCO
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Question from a Workshop participant –
“I am observing that Vedanta share price is falling and Titan share price is flat from many days. Should we continue long term Investment in these companies? Once you had mentioned in the blog that after some days you would say whether to continue investing in Vedanta for long term or not. Please guide me.”
Our Answer –
As you are aware, Vedanta is facing the issue of a copper plant closure in Tamil Nadu and hence the negative news has pushed its share price down. As per calculations made by analysts, the Tamil Nadu contributed around 5% of the profits of the company. However, you might have noticed that the share price has fallen from around Rs.290 to Rs.240 which is around 20% down.
This is good example of how investors get very pessimistic and over-react to a news. Ideally if this was science like Physics or Chemistry or even Mathematics, then a particular action would result in an expected reaction. In this case, Vedanta shares should have fallen by 5-10% but it has fallen by around 20%. This could be an over-reaction.
As of now, some reports are coming that a similar local agitation (like in Tamil Nadu) has been started by people near Vedanta’s Orissa plant. We will have to take a call or whether to continue investing based on the developments in the coming weeks or months.
This is why Stock Market investing is not only a Science but also an Art and by only looking at it purely in terms of numbers, we may not always do well.
There is a very interesting observation made by a famous investor-
“Stock Markets are profitable in the long term, but not all investors make profits”
This means that stock markets do well and appreciate over a long period but individual investors make many mistakes and end up not taking full advantage of the returns from stock markets.
For now, just hold on to it for long term and if your vision of long term is 10 years plus, then you can even continue to invest regularly.
Similarly, at other times, a particular good news in a company results in the share price jumping much more than the benefit that may come from that good news. This is an over-reaction on the positive side.
Titan shares had appreciated a lot during the last 2 months or so and now recently for last few weeks, it has been quite flat. Each company performs well or badly at different periods. A company’s share price not moving for a few days should not concern us much since as long as the company’s business is doing well, we do not have much to worry. We can continue to invest regularly for long term.
The above concern is like being worried that Virat Kohli has scored at an average of 30 runs per innings in the last 10 months. Of course, Virat Kolhi’s average is much above 45 runs per innings and at times, he scores a few low scores and at other times, he scores medium scores. As long as you are confident that he is good player and is matching your expectations over a period, he should be in the team.
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All the best!
Dr.Bharath Chandra and Rohan
