The markets continue to be choppy and volatile. Such a situation can continue for weeks. The short term trend has changed to Up. The intermediate trend is Down. The primary or long term trend continues to be Up. In such a scenario of extreme volatility, we have to change our strategies. Even Investors have to behave like Traders.
The strategy clearly has to be to buy on a dip and book your profits on a rally and also follow stop losses. The average historical volatility for Nifty is 30%. Presently it is 60%, almost double its long term average. Since the markets are volatile, the stop losses have to be kept sensibly. Small stop losses are likely to trigger easily. As long as the volatility remains high, one must keep the volumes low to keep a control over losses.
Bonus in Reliance Power Reliance Power is going to have a meeting on 24 Feb to consider issue of free bonus shares to all shareholders other than promoters. The company had come with an IPO in Jan 2008 wherein it issued shares to Retail investors at Rs.430/- and to QIBs at Rs.450/- per share. The shares were listed in NSE and BSE on 11 Feb and have not seen the price of Rs.450/- ever since. Having created a record by being over-subscribed 72 times the price, after listing it has seen a low of Rs.333 on 13 Feb. The management of the company claims that it is taking this step to look after the interest of its share holders and to compensate them for the short term loss incurred by them.
In actual fact, this is just a ploy to reduce the IPO price, which had been set very aggressively at the time of issue. In a way, it is an admission by the company that the IPO was grossly overpriced. It is being done only to win back the favour of retail public as the ADA Group has plans to raise capital in at least three issues during the year. An adverse public reaction is likely to damage the prospects of the Group raising the requisite capital.
The investors, at large, should learn a lesson from all that has transpired in the Primary market during the past few months that they should not take their investment decisions based on the market hype or the so called ‘grey market premium’, which in any case is, manipulated by the vested interests. The public must understand that the bonus issue does not, in any way, change the market capitalization of the company. Col. (Retd.) Mahesh Sharma
The strategy clearly has to be to buy on a dip and book your profits on a rally and also follow stop losses. The average historical volatility for Nifty is 30%. Presently it is 60%, almost double its long term average. Since the markets are volatile, the stop losses have to be kept sensibly. Small stop losses are likely to trigger easily. As long as the volatility remains high, one must keep the volumes low to keep a control over losses.
Bonus in Reliance Power Reliance Power is going to have a meeting on 24 Feb to consider issue of free bonus shares to all shareholders other than promoters. The company had come with an IPO in Jan 2008 wherein it issued shares to Retail investors at Rs.430/- and to QIBs at Rs.450/- per share. The shares were listed in NSE and BSE on 11 Feb and have not seen the price of Rs.450/- ever since. Having created a record by being over-subscribed 72 times the price, after listing it has seen a low of Rs.333 on 13 Feb. The management of the company claims that it is taking this step to look after the interest of its share holders and to compensate them for the short term loss incurred by them.
In actual fact, this is just a ploy to reduce the IPO price, which had been set very aggressively at the time of issue. In a way, it is an admission by the company that the IPO was grossly overpriced. It is being done only to win back the favour of retail public as the ADA Group has plans to raise capital in at least three issues during the year. An adverse public reaction is likely to damage the prospects of the Group raising the requisite capital.
The investors, at large, should learn a lesson from all that has transpired in the Primary market during the past few months that they should not take their investment decisions based on the market hype or the so called ‘grey market premium’, which in any case is, manipulated by the vested interests. The public must understand that the bonus issue does not, in any way, change the market capitalization of the company. Col. (Retd.) Mahesh Sharma
No comments:
Post a Comment