Good rally for markets today

Blog meant for 29 May 2018 Tuesday

Dear friends,

Nifty continued to rise today too. Nifty went up by 84 points and closed just below 10700 mark. Global cues are mixed tonight. European markets are mixed and US markets are currently flat.

Tomorrow, markets may open little weak or flat looking at the global cues right now. Also, profit booking can take place any time.

Nifty is in Buy zone for short term.

The indications for individual stocks for short term only are –

DON’T BUY –  TITAN, VEDANTA, RELIANCE INDUSTRIES, HDFC, ITC

HOLD – ASIAN PAINT, INFOSYS, SBI, HDFC BANK, AXIS BANK, YES BANK

WAIT TO BUY – MARUTI

WAIT TO SELL – TCS, M&M, HINDALCO

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If you have been following the news during the last 7-10 days, Tamil Nadu government, local people of Tuticorin and Vedanta company have been disputing against the running of a Copper plant.

The Tuticorin plant of Vedanta is one of the units of the company. Its supposedly accounts for 5% of the company’s total profits.

Today, the Tamil Nadu government has issued an order for closure of plant. The news can be read here – http://www.business-standard.com/article/companies/blow-for-vedanta-as-tamil-nadu-orders-permanent-closure-of-sterlite-factory-118052800794_1.html

We do not know who is right with respect to this decision. Whether Vedanta has been wrong in polluting the environment or the Tamil Nadu government is using this as an opportunity to make itself look more popular in the eyes of the people. Whatever is the story, as of now, the plant has been ordered to be closed but Vedanta will have the right to contest the decision in the Court. Unfortunately or fortunately, in India and many other countries, the slightest mistake by industries is dealt with very strictly by the Government.

As investors in Vedanta, we have a decision to take –

  1. Whether to Sell at loss now and assume that Vedanta will never recover from such a situation. This is assuming that Vedanta company will continue to face problems in its business for years to come in the long term.
  2. Hold the stocks we have and hope that this situation will not have a permanent damage on the company’s future and in due course, in few months or a year, the company is able to recover and get back to normal.

Right now, because of the negative news in the media, the share price has been pushed lower continuously by investors. Negative sentiments has a panic effect on share prices and we have to see how mush is justified. It may or may not be the true value of the company’s worth.

Maruti Suzuki faced a small problem like this a few years back when there was a strike in its factory and no production took place for many days. However, once it was solved, things slowly got back to normal and then the company became stronger.

This is of course a more serious problem for Vedanta but we will wait and see and not panic immediately.

Personally, we are of the opinion to Hold and wait and see what happens. Since it is only one of our stocks in the portfolio, the overall portfolio will not be drastically affected.

This is the reason we keep suggesting our participants to invest equal amount in all stocks and not extra money in any particular stock. Many investors make the mistake of buying lower priced stocks in larger quantities because they feel that the price is low and therefore can be bought easily.

Your investment must be divided equally in all stocks in the portfolio and not more money in lower price stocks and less money in highly priced stocks such as Maruti.

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All the best!

Dr.Bharath Chandra and Rohan

About the author

Dr. Bharath Chandra

Hi there! This is Dr. Bharath Chandra & Rohan, International Trainers & Success Coaches. We have addressed more than a crore people on Stock Market, Personality Development, Wealth Management and Financial Planning over the past 35 years.

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