Markets slight weak today

Blog meant for 19 April 2018 Thursday

Dear friends,

Nifty opened positively but could not hold on to higher levels and finally closed 23 points lower at 10526. Global cues are quite positive in Europe. US markets are flat as of now tonight. We have to see how Asian markets open tomorrow morning and based on which our markets will move.

There is chance of slight profit booking in our markets since so far this rally has been quite good and many investors may want to sell and book some profits.

Nifty is in Hold zone for short term.

The indications for individual stocks for short term only are –

WAIT TO BUY – VEDANTA

DON’T BUY –  SBI, INFOSYS

HOLD – TITAN, MARUTI, M&M, ASIAN PAINT, HDFC BANK,  RELIANCE INDUSTRIES, HINDALCO, TCS, HDFC, ITC

SELL – AXIS BANK

BUY – YES BANK (Wait one more day before you can decide to buy for short term)

Long term investors should invest regularly every month without worrying about the movement of stocks in short term.

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Question from a participant – 

I have attended the Stock Market Workshop about 7 months back. The following are the returns of stocks suggested in the Workshop for last 1 year.

 Company A – 10%   Company B-  30%  Company C – 9%  Company D – 49%  Company E – 100%  Company F- 27%   

Company G -23%

Company A, C & F have given low returns for last 1 year. Do you still suggest to invest in these companies?

From the suggested list of 7 stocks, if 3 of them are not performing decently, then we should be having alternatives right ?
Is this list still good enough for long term (5-10 years) ?

I feel we should have at least 10 stocks for long term considering that many sectors are ignored like FMCG/Auto Ancillary/Cements/Pharma and others. Please comment.

Our answer – 

Firstly, if we are ‘really’ investing for long term then, 6 months or 1 year is too short a time to judge companies and stocks. As long as the profits and business performance of the companies you are investing in are good and improving, certain stocks not appreciated too much should not be a concern. Only when the profits itself are deteriorating should we decide whether to continue investing in a company for long term.

Secondly, if you calculate the average returns of all the 7 stocks, it is coming to around 35% in the last 1 year which is very good and more than sufficient.

If we start judging each and every company every 3 or 6 months or 1 year and sell/stop investing in companies whose stock price have not appreciated much during the recent period, you are likely to see that even the best and leading companies in all sectors may have dull phases when growth is not high and thereby we may have no stocks in our portfolio at all !

We have seen in our portfolio that many times certain stocks stay in a narrow range for 1-2 years and then suddenly appreciate a lot in a short period. If we were impatient during that dull phase and sold, we would not have any shares left to enjoy the profit when it appreciated. 

It is like a judging a cricket player in 2 to 3 to 5 matches and if he does not perform, you brand him as “non-performing” and do not give him any more opportunities to play in his life. It would be interesting to see what would have happened to many leading players today such Virat Kohli, Rohit Sharma etc  if they were not given enough chances when they were first selected in the team. As long as you feel these players have lot of talent and potential, the selectors won’t mind giving a few extra chances to see whether they perform well. 

Similarly if you know that a company has great potential and a leader in its sector, we can afford to wait for some more time and then decide whether to stop investing in the company.

Another point to note is that if we did not invest in stocks, we would normally invest in fixed interest instruments such as FDs, PPF etc which are giving between 6-8% pa. as of now which are taxable.

So even if your entire portfolio is giving 15-25% per annum average over many years, it is a great returns by itself and more so if you compare it to other traditional instruments. If we are expecting anything more than 20-25% per annum average returns in long term, we are sure to be disappointed in the future.

Why an investor has to invest in 6-8 companies for long term is that even if 2-3 companies do not perform very well, the overall portfolio returns will still be quite good. We are not and should not expect all 8 companies to give highest possible returns.
It may be just like expecting all 6-7 batsmen in the cricket team to score well in all matches they play!

We definitely do not believe in changing a few stocks in the portfolio now and then just because a company’s stock has moved lesser than other companies. ‘Churning’ of the portfolio usually is not a great idea and we have seen it first hand in our portfolio and most investors who are in the market for a few years will realise it too. Hence, we do not suggest changing the stocks as of now even though they have grown lesser than other stocks. 

Also, if we invest every month, usually we get to average our purchase price and get good appreciation in long term even if the stock has not moved too much.

In the Workshop, we suggest a list of companies for long term to invest regularly. If you are interested and also are willing to take additional risk with the hope of additional returns, you are free to do adequate research and buy other companies which you feel may do better. 

We ignore certain sectors for specific reasons. But as mentioned, investors can do their own research and decide that their money can grow better in other sectors and companies and invest accordingly. 

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All the best!

Dr.Bharath Chandra and Rohan

Please do not comment on the blog. Any questions or clarifications can be asked by sending us an email with your registration number given to you during the Workshop. Questions without quoting registration number will not be answered.

(The above comments are only the personal views of the authors of this blog. Please do your own research before taking any investment decisions. The reader of this blog must understand and take full responsibility for the Profit or Loss made by taking actions based on the above views)

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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