A WORD OF CAUTION

Most of the stock market participants are in a happy mood
when indices ruling at a two year high. Since this rally
is broad based even retail investors are making handsome
profit. I am sure ,in a market like this any word of
caution will be ignored and there is lot of justification
for doing that. I am not discouraging anyone from
investing even at this point but just a caution about the
stock selection. We are here to make money, even that with
no waiting.When we take the list of stocks hitting new highs
everyday ,most of the names other than from the ‘A'group
are not familiar for majority of the investors. Why it
happens so?. There is two reasons for spurt in share prices
now,one is genuine buying by investors hoping better
performance of the company ahead and secondly because
of the activities of promoters and operators to en-cashing
the opportunity available in the market because of the
prevailing sentiment.Promoters of the first type of companies
may not interested in the daily movement of their share
prices and they are concentrating only in the business and
believing that in the long run the share price will eventually
reflect the financial strength of their companies .Share prices
of such companies may move slowly even in a bull market
because there is only genuine investors in such counters.
On the other side,promoters of some lesser known companies
are interested only in the share price movement and not in
their business.Such promoters are trying to push up the
prices of the shares in a hurry and distribute it to the retailers
and make gain out of it. Movement of such stocks are very
speedy and may be even trade only in upper circuits for
many days.In such a situation ,retailers feels desperate
by keeping slow moving good stocks and tempting to offload
such stocks and run behind fast moving stocks without
checking their basics.When the nature of market changes or
promoter/operator offloading is over ,fast moving stocks
crash down even more faster and never come back since
there is no business behind it.If one’s entry and exit is at
correct point such stocks may give returns but in 90% cases
the retailers will be in wrong foot due to many reasons
including greed and loss substantial amount and even exit
from such stocks are possible only in the following bull
market which may occur after many years. On the other
hand slow moving stocks of companies concentrating in
business always give decent return in long term because
the business also growing. So,while investing in bull market,
always take risk only at affordable level and don’t
forget- preserving our capital is important than making
money from market.