Volatility affecting rally

Blog meant for 15 March 2018 Thursday

Dear friends,

Once again volatile day for Nifty. It closed 16 points lower at 10411. European & US markets are flat as of now. Looks like Nifty may be little weak tomorrow too.

Nifty is still in Don’t Buy zone.

The indications for individual stocks for short term are –

DON’T BUY – HINDALCO, SBI, HDFC BANK, M&M, TCS, VEDANTA

HOLD – TITAN, INFOSYS, ASIAN PAINT

WAIT TO BUY – MARUTI, YES BANK, AXIS BANK

WAIT TO SELL – Reliance Industries, HDFC, ITC

Invest on a monthly basis for long term in bluechip stocks only.

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Question –

Since statistics and data all over the world show that long term investment in good companies results in returns much higher than other investment options, why do brokers or TV news encourage / advise buying and selling intra-day or very short term ?

Answer –

The job / role of a broker is to provide an investor a facility to buy and sell shares. Most times, they do not have any training about how to do research about stocks or how to approach investments. Their major training is to motivate investors to regularly trade so that the overall transactions of his company goes up and hence the brokerage earned by the company increases.

Whether an investor makes a profit or not, it does not matter to the broker since he gets a percentage commission on each trade. 

If an investors invests for long term and does not sell for many years, the broker does not get much benefit since he continues to provide the share brokering facility and incurs all costs but does not make any money from the investor unless he performs a transaction. 

Unfortunately, the interests of brokers and investors are opposite of each other and this is why most new investors get encouraged and motivated to do intra-day trading or Futures & Options when they have no idea about Stock Markets itself and end up losing money and faith in the Stock Markets. In such cases, the new investors lose money but the brokers earn his commission and is the happier out of the two parties. 

Similarly, many of the experts who come on TV are part of brokerage companies. Many of their clients watch these programs and get impressed by the expertise shown during the TV Programs and think that ultra short term investing (intra-day trading) etc. is the best and easiest way to make money. 

Also, majority of the people who watch TV during the day time may be full time traders in the Stock Markets and hence the advise given is for such traders and not for pure investors who intend to invest their saved money for better profits compared to FDs rather than making a living out of the income earned from Stock Markets.

Always, do your own research before any investment. Read and analyse the facts and figures as much as possible about a company or sector and then invest so that you feel more confident.

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All the best!

Dr.Bharath Chandra and Rohan

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(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)