Monday, June 9, 2008


When the Sensex was at 21,000, how many experts on the business channels were advising investors to sell? I can remember only one, Gul Tekchandani. All the others were busy predicting index levels from 24,000 to 30,000 to come up. Remember the reasons they were quoting to make you buy? Insurance companies have X 1000 crores to invest. Mutual funds have mopped up so many thousand crores. All this money was just waiting to enter the markets and promising to take it to new highs.

Fast forward to the situation now. When markets are about to hit 2008 lows, these same guys are advising you to sell, because the markets are headed still lower. Nice, easy way to make money guys, buy at 21,000 and sell at 15,000.

Another thing that bugs me about business analysts is that they give you all kinds of jargon in the hope that you believe that they know what they are talking about. This one is my favourite. An investor asks the analyst that he has bought a stock which is now showing losses. Should he hold or sell? The analyst advises him as follows " ABC stock has support at X levels, if it breaks the next support is at Y and if that breaks too, then it has long term support at Z". What does that tell the poor guy who has lost some money and hopes to get some quality advice about what he should do next. Come on guys. There is some real hard earned money here, not some paper trading game.

Then again the way these analysts encourage day trading is a real shame. They give out all kinds of daily calls, knowing fully well that day trading is a losers' game even for people with deep pockets, leave alone small investors. The poor guy watching TV sees a person with impressive sounding credentials, spewing out even more impressive jargon, giving him a tip. He does not realise that the tip is going out to a million more viewers like him, at the same time. So what is the value of that tip?

Truth be told, business channels are nothing but entertainment to the vast majority of investors out there. They are the new "Saas Bahu" soaps. Only they are infinitely more dangerous. At least you don't lose money watching soaps. Investors need to realise that there is no substitute for hard work to succeed in the markets. Tips don't work. Sure, you may make money a couple of times acting on tips, but eventually it is certain that you will lose.

Select whatever method you believe is the best for you. It could be fundamental, technical, growth, value, dividend yield, whatever. Study it well and only then invest your hard earned money. You may still make losses, but you know that you have done your best. As in all things, there is an element of luck involved in investing and perhaps this time luck was not on your side.






Uma said...

thanks for checking out Infy for me, I picked up puts since it's looking weak. So what are your views on Nifty now? I have once again committed the folly of going long on Nifty...but close to my SL of 4400. I'll check back for your reply

Mahendra Naik said...

Nifty has bounced back from precarious levels. I would look out for a double bottom formation, and not get rid of longs in a hurry. Its my gut feel and I could be wrong, as all the experts are calling for a further fall. Also look out for a double top in crude. What a chartist' delight to have a double top in oil and double bottom in Nifty. But I think i am commiting the cardinal sin of chartists i.e. jumping the gun. We need to wait for the formation to develop, but Nifty bouncing back has got me excited.

Uma said...

"Nice, easy way to make money guys, buy at 21,000 and sell at 15,000." that one cracked me up!! lol. One thing I saw about Nifty today was that even tho heavyweights such as Reliance, Infy and ICICIBank looked weak, Nifty was shooting up. Somehow, that indicated to me that the rest of Nifty had over-reacted to the downtrend and likely to go up.
Now Nifty is very volatile, so I feel it's time to take each trend with a pinch of salt.

Uma said...

mahendra, I think Nifty is more closely linked with Rupee/USD than with crude. Crude fixation is more of an American thing, as their economy is totally oil dependent.

Mahendra Naik said...

You're right Uma, but see the co-relation between the 3. Our Mkts are influenced by what Dow/Nasdaq do the previous night. Again crude has a large role to play in the Re/$ equation by influencing imports.

Ninad Kunder said...

Hi Mahendra

I completely agree with you most of the guys who come on TV are a complete joke.

They honestly do harm to the investor fraternity with their short term outlook and flip flopping thoughts on the markets.

The newspaper ones are no better with articles today recommending investing in debt funds and equity funds were the flavour at 21000 Sensex.




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