Wednesday, June 13, 2018

 

Indian stock market update - June 13, 2018

Just a few months back, it seemed that the midcap and smallcap index and individual stocks would scale new highs, and make a lot of money for people in the past. However, October onwards, there was a lot of caution being talked about, since the valuations seemed unreasonable, and some of the small cap Mutual Funds had stopped taking new money from customers since there was a belief that a crash was around the corner, and at these valuations, there was little money to be made. However, the midcaps and smallcaps did go higher and higher, all the way into January. It was the months of January that started seeing the fall of these stocks, with sudden shocks. This continued into the months of February, and the indexes as well individual stocks started falling with a vengeance.
It has always been recommended by market experts that retail investors who buy smallcap and mid-cap stocks should do with a stop loss set, so that profits they have made can be taken out of the system - either this can be done when the investor feels that the stock has gone high enough and wants to do profit taking; or the stock has peaked, and the investor wants to get out when the stock has started falling (this strategy requires the investor to be disciplined in their approach and take action when their strategy calls for it). I am happy that I have managed to execute this strategy in this particular year, in the past, I have been emotional and held onto stocks when they are falling and have lost profit in this way. So, for example, in one stock which went upto Rs. 1400, I had reset my stop losses when the stock went on rising, and when it started falling, I was able to get around Rs. 1200 for a stock which is now at Rs 600. As a result, if there is a turnaround and the stock starts rising, I will have cash in my hands to start making purchasing again as opposed to the past when I would be holding the stock when it starts falling and keep on holding it.
I would strongly recommend investors to make a strategy that they believe that can bring them profit, and then follow that strategy. This is essential to make profit, and there is profit to be made in the Indian stock market.
Right now, the market is in a odd situation, with the stock market Nifty and Sensex still at highs, with the midcaps haven fallen; so a bit dicey whether the midcaps will recover. However, markets follow trends, and one should keep following the trends, and be ready to invest when the trend reverses. 

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