Focus on what is possible at your end rather than worrying about inflation, oil prices, GDP numbers, etc.
Can you predict the market direction, oil prices, etc. ? Not really Can you take action when your stocks start falling? Yes
If you don’t have an exit plan then you may follow this very simple one below:
Low conviction stocks: Sell if they fall below 20EMA or below your purchase price.
High conviction stocks: Give them more room but sell if they fall below 50EMA.
Stocks that are already in loss: Your personal call depending on your thesis. You should know why you bought it in the first place.
Selling will always be filled with regret. Either you sell too soon or you sell too late. But if you want to grow as an investor, you have to learn to live with this emotion.
But it’s best to have an exit plan. I have seen my big profits turn into losses. I don’t want to repeat that again. Either you can learn from others mistakes or you can pay a price to learn the same lesson.
Note: All this is not applicable if you’re a TRUE fundamental investor.
EMA- Exponential Moving Average
I feel, We all would be busy by now trying to catch up with…my pf is down by -5%…biggest single day down i saw recently…anyway,i again bought few i liked…though i tried not to fall in love with them …but that emotional bias i am still trying to overcome(i couldnt today !)
the Question
is it correction ? retest ?
or is the music slowing down ? …is it time to run ?
It will be foolhardy for me to affirm if this is a correction, retest or start of a long way down but to me it was long time coming. Particularly with the last six months bull run (>35% jump in small caps), in my opinion another 10% fall would in fact be good for the overall health of the market.
Its hard to know, my portfolio is down north of 3%. Added few on the names I was confident on, and few of them, I’m hesitant as they might be falling knife. Kotak’s report likely triggered this. I’m sure the markets will shrug it off and move on as long as earnings don’t disappoint in the next few months. Music has started slowing down on frothy areas. Looking back, I missed taking profits 3-4 stocks, which could have given some psychological relief in this fall nonetheless those are quality names and should recover in the long run.
Not tracking, I maintain a blacklist where I keep such stocks which I have read and rejected due to governance issues.
I ignore minor governance issues when investing in small caps but not the ones like refex, uflex…
Emotion of greed was absolutely prevalent. I also was experiencing it.
I will narrate an example. During the last few years there’s only one IPO, I had subscribed to. A government company with zero NPAs, very decent growth coming at 0.8-0.9 P/B. I put in a big application. Got full allotment. Stock listed at discount. And went down 30% from there. Results declared were good. At a point it came to 0.6 book and sustainable+growing dividend yield of 7%. I did add during these falls and it became a decent sized bet for me. IPO was at 26 Rs and went down to 18 levels. Dividend for last year was 1.40 Rs. My expectation was a dividend and at some point maybe a 40-50% appreciation.
Somehow this stock got fancied and has gone all the way to 90+. P/B upwards of 2.5 and div yield less than 2%. The stock gave me 2.5X, much more than I deserved and expected.
“Bhaav Bhagwaan Che” is the stupidest thing in my view. At both ends the pricing was absolutely wrong. There is no such thing as efficient markets.
Example like these, and there are many more, tells me about the euphoria in the markets. And markets were ripe for a correction. Reasons will be attributed now. But the real reason, is huge pockets of overvaluations.
Everyone would have an opinion and no one can really say for sure.
My opinion is that this is just a minor blip/ profit booking in a structurally strong bull market.
I won’t call it a reversal of trend unless market goes below previous high of 18900.
I believe there will be some more blips like this but the ultimate destination Nifty is headed to is atleast 24000 in 2024. I have arrived at this approximate number using both fundamental and technical indicators in valuing Nifty. And this rising tide will take all stocks up along with it.
In fact, our portfolios will be much higher by this Diwali in Nov than where we are today!
@LarryWink Here is my quick take on the way markets move. 1) 80% of the time market is on an upwards trend while 20% of the time the market is on a downwards trend. 2) Percentage fall/day in bear market is about 3x times that of Percentage rise/day in bull market. 3) On an average the market returns are around 13-14% p.a. for the Indian stock market. There could be divergence to these rules in the short term but in longer term things will converge around these rules.
Using these three rules you can see if there has been a divergence from these rules in recent times. Triangulate using your assumptions to estimate if you see market as going up or down.
I won’t comment on individual stocks that you hold but like the fact that you follow the dictum “buy on dips”.
