some great tips of share market

What must I do now?

This is the question probably every equity investor would have asked himself a number of times in the past few months.

With the stock market moving to dizzying heights before succumbing to gravity, it's easy to get nervous or over-excited.

Here's what we suggest you do when the bulls and bears kick up a lot of dust.

What you must NOT do

1. Don't panic

The market is volatile. Accept that. It will keep fluctuating. Don't panic.

If the prices of your shares have plummeted, there is no reason to want to get rid of them in a hurry. Stay invested if nothing fundamental about your company has changed.

Ditto with your mutual fund. Does the Net Asset Value deep dipping and then rising slightly? Hold on. Don't sell unnecessarily.

2. Don't make huge investments

When the market dips, go ahead and buy some stocks. But don't invest huge amounts. Pick up the shares in stages.

Keep some money aside and zero in on a few companies you believe in.

When the market dips --buy them. When the market dips again, , you can pick up some more. Keep buying the shares periodically.

Everyone knows that they should buy when the market has reached its lowest and sell the shares when the market peaks. But the fact remains, no one can time the market.

It is impossible for an individual to state when the share price has reached rock bottom. Instead, buy shares over a period of time; this way, you will average your costs.

Pick a few stocks and invest in them gradually.

Ditto with a mutual fund. Invest small amounts gradually via a Systematic Investment Plan. Here, you invest a fixed amount every month into your fund and you get units allocated to you.

3. Don't chase performance

A stock does not become a good buy simply because its price has been rising phenomenally. Once investors start selling, the price will drop drastically.

Ditto with a mutual fund. Every fund will show a great return in the current bull run. That does not make it a good fund. Track the performance of the fund over a bull and bear market; only then make your choice.

4. Don't ignore expenses

When you buy and sell shares, you will have to pay a brokerage fee and a Securities Transaction Tax. This could nip into your profits specially if you are selling for small gains (where the price of stock has risen by a few rupees).

With mutual funds, if you have already paid an entry load, then you most probably won't have to pay an exit load. Entry loads and exit loads are fees levied on the Net Asset Value (price of a unit of a fund). Entry load is levied when you buy units and an exit load when you sell them.

If you sell your shares of equity funds within a year of buying, you end up paying a short-term capital gains tax of 10% on your profit. If you sell after a year, you pay no tax (long-term capital gains tax is nil).

What you MUST do

1. Get rid of the junk

Any shares you bought but no longer want to keep? If they are showing a profit, you could consider selling them. Even if they are not going to give you a substantial profit, it is time to dump them and utilise the money elsewhere if you no longer believe in them.

Similarly with a dud fund; sell the units and deploy the money in a more fruitful investment.

2. Diversify

Don't just buy stocks in one sector. Make sure you are invested in stocks of various sectors.

Also, when you look at your total equity investments, don't just look at stocks. Look at equity funds as well.

To balance your equity investments, put a portion of your investments in fixed income instruments like the Public Provident Fund, post office deposits, bonds and National Savings Certificates.

If you have none of these or very little investment in these, consider a balanced fund or a debt fund.

3. Believe in your investment

Don't invest in shares based on a tip, no matter who gives it to you.

Tread cautiously. Invest in stocks you truly believe in. Look at the fundamentals. Analyse the company and ask yourself if you want to be part of it.

Are you happy with the way a particular fund manager manages his fund and the objective of the fund? If yes, consider investing in it.

4. Stick to your strategy

If you decided you only want 60% of all your investments in equity, don't over-exceed that limit because the stock market has been delivering great returns.

Stick to your allocation.

General Market Advice:

1. Never chase a stock.

2. Buy when markets are in the grip of panic.

3. Only buy fundamentally strong stocks, which are undervalued.

4. Buy stocks grown in top line and bottom line over the past years.

5. Invest in companies with proven management.

6. Avoid loss-making companies.

7. PE Ratio and Growth in earnings per share are the key.

8. Look for the dividend paying record.

9. Invest in stocks for sure returns.

10. Stocks have been the high yielding asset class over the past.

11. Stocks are an asset class.

12. The basic property of any asset class is to grow.

13. Buy when everyone is selling and sell when everyone buys.

14. Invest a fixed amount each month.

Last But not least Trust our tips and then invest to earn huge profit

indian stock market overhyped companies

The stock market has made a deep plummet, today and once again the issue of overvalued companies has come to the fore.

Today there are companies which have a PE of 35 to 45. Unless some bonanaza growth is expected of these companies, the ratio simply means that for an investor to get a return on his investment, he has to wait till the 2040s!

Sounds ridiculous? Let us discuss this more.

Let us look at what PE ratio is, for an unintiated reader.

Let us take a company A.

Let us assume that it has only 100 shares. So, each one share holder, owns 1% of the company.

Now let us assume that this company makes a profit of Rs. 10,000 in a financial year.

Therefore, the share of profit for each share is Rs. 10,000 divided by 100 i.e. Rs. 100.

This is called the Earning Per Share or EPS of the share.

Now let us assume that this share is being traded in the secondary market or the stock market for a price of Rs. 700.

In that case, the PE or Price per Earning ratio of the share will be Rs. 700 divided by Rs. 100 (or the share price divided by the EPS) i.e. 7. So, if the earning of this company stays stable at Rs. 10,000 per annum, it will take a share purchaser or investor, a period of 7 years to get his money back. By the 8th year, he will start getting a return on his investment.

Now that we have put the EPS and PE definitions behind us, let us look at the current market scenario and do it with real examples.

ICICI Bank has an EPS of 32.88 Rupees in the FY ending 2007. It is trading at Rs. 720. So, the PE of ICICI bank is Rs. 720 / Rs. 32.88 or the PE is 21.89.

Now let us take another company in the same (banking) sector: Allahabad Bank.

Allahabad Bank has an EPS of Rs. 21.31 whereas its share price is Rs. 68. So, the PE of Allahabad Bank is Rs. 68 / Rs. 21.31 or the PE of Allahabad Bank is 3.19.

These simple calculations tell us that for every Rupee that ICICI Bank and Allahabad Bank earn, their price is approximately 21 and 3 times, respectively!!!

Such a big difference! Does this give you an idea of what hype can do to a share or a market?

The reason why ICICI bank trades at 21-22 times its profit in comparsion to Allahabad bank is the perception that ICICI bank is better managed than Allahabad Bank, the implication being that the latter being a public sector bank will not be as efficiently run. This argument is probably true albeit to a certain extent. For example, ICICI bank has inter branch networking and ATMs and swank offices and probably an upwordly mobile clientele. However, any business is measured by its bottomline.

The presumption that ICICI Bank, by virtue of its technology, is worth 7 times that of Allahabad bank, for every Rupee made as profit, is at best a very speculative idea. And in the current market scenario, very risky indeed.

Let us look at it from another angle. If I buy an Allahabad Bank share, my share of the company is - let us presume for a moment - not so well managed that I only earn Rs. 21.31 paise.

On the other hand, if you purchase an ICICI Bank share, your share of the company is so well managed that you make 32.88 Rupees. Common sense would say that your share of the company is better managed than mine, by a factor of about 50%. Right? Then how on earth does your share cost you more than ten times than mine? It does, because your share is better known than mine or is perceieved to be that of a good company.

At the end of the day, if I buy 150 shares of Allahabad bank - which will cost me about Rs. 15,300

and

on the other hand you buy 100 shares of ICICI bank - which will cost you Rs. 72,000

then your and my share of earning will be the same.

In other words, an investment of Rs. 15,300 in Allahabad Bank is the same as investment of Rs. 72,000 in ICICI Bank.

This simple calculation can give us an insight into how and which shares fall the most, during bearish trends in the market. I do concede that if a company like ICICI bank is managed well it will probably show better growth than another company in the same sector. But, these assumptions of better growth have to be within the realms of practical and reasonable possiblities.

When we speculate as a people or a market, we end up making either panicky or euphoric decisions. The result is that we end up buying stock even when the PE is skyrocketing. On the other hand we continue to ignore companies which have sound financials and thereby give up on opportunities to make money on them.

Even for a trader, if he buys ICICI Bank, for him to get a 10% return, the share will have to reach Rs. 792. While, using the same example of Allahabad Bank, if the stock goes to Rs. 75, he will make the same profit and with much lesser risk.

Talking about risk, let us look at the book values of each companies.

The book value of an ICICI Bank share is Rs. 270.35. (the share price is Rs. 720)

The book value of an Allahabad Bank share is Rs. 97.8 (the share price is Rs. 68 )

Conventional economics tell you that if you are buying a share below its book value, then you are less likely to lose money than if you are buying something above its book value - which in effect is paying a premium to the value.

This is not just theory. The share price of Allahabad Bank did go to Rs. 148 in the last 6 months. And the above calculations tell me that it can simply reach there, again, without much ado.

I hope this article has been of some use to the readers. I am sure if more and more people look at fundamentals of a company more than hype, lesser people will get hurt and they can smoothen the graph of their capital market invesment returns.

Stock recommendations for 2008-09

After a long time, I am giving stock picks for my blog readers. All these stocks will give good returns if you give them 1 year time. Forget short term fluctuations in these stocks and invest for long term. Accumulate more of these stocks on every dip.

RBI credit policy once again disappointed Indian stock market investors Why are you expecting rate cut in the election year? Which government will want to see rise in inflation at this crucial time? Upcoming budget will also disappoint investors. Better prepare for that.

Indian stock markets will see more volatility from February 1st onwards due to short selling by big institutions. 500-1000 point intra-day swings will become common due to SEBI’s new policies.

What happens if US Federal will not announce rate cut? Markets will crash. I am waiting for this crucial decision before making fresh investments



Best Stock picks for long term investors:

1. Reliance Communications:

• Due to its GSM foray, number of subscribers will rise.
• According to rumours, apple may give iphone contract to R-Com. So, it will attract high end customers and ARPUs will rise.
• Due to aggressive management (proven capabilities), it may go any extent to attract GSM subscribers from other networks.
• Its business is less dependent on American financial system. Weakening dollar will boost its other income.
• Indian telecom story will continue for some more time.

2. Reliance Petroleum:

• It is almost like a bank fixed deposit.
• It will unlock its true value 2-3 months before the commencement of refinery.
• You need to forget short term fluctuations.

3. Glenmark Pharma, Educomp solutions and Divis Labs: • All of them have just announced wonderful results.
• All are maintaining good performance for the last 2 years.
• High P/Es are concern. Enter into them on any correction.

4. Wockhardt: • Upcoming IPO will boost this stock prices.
• Good stock for short-medium term investors.

5. L&T:
• Only for high risk investors due to its high valuations.
• Demerger of L&T in 2010 will surely benefit long term investors.
• L&T may be risky stock for short-medium term investors.

6. Reliance industries
• Accumulate more of this stock (below 2500) and wait for 1 year.
• Reliance Retail and Reliance Life Sciences may list in the markets in the coming days.

7. Welspun Gujarat:

It continues to remain my favourite stock irrespective of market situation. Fundamentally sound stock like this will never give negative returns.

8. Among metal companies, I prefer Jindal Steel while ABG Shipyard is a good one in the shipping sector.

9. IDFC is my stock pick among financial stocks. IFCI is a good bet with risk. If Banking stocks get corrected more, enter into ICICI bankand Axis bank.

10. BHEL and ACC may give decent returns for long term investors.

My views on Stock Markets:

1. SEBI allowed FIIs for short selling in Indian Stock markets from February 1st onwards. So better prepare for more volatile markets.

2. Stock investments may not give you stunning returns but if you invest in accumulating manner for long term, you will get decent returns.

3. Subprime crisis will rise in America will rise in the second half of 2008 due to arrival of floating interest rates. If there is no significant rise in household income, American market will go into recession. If that happens, stock markets will crash (BSE-14,000&NSE-4,000).

4. It is better for short term investors short term investors to stay away from markets. After 4 years of Bull Run experience, Indian investors are finding it difficult to change their mindset for bear market situation. They are still expecting miracles due to lack of awareness about looming crisis in the United States.

5. Retail investors should stay away from derivatives and penny stocks. Invest in fundamentally good stocks at reasonable valuations.

6. According to my opinion, upcoming budget may not give boost for stock markets. UPA government may present “Election budget”. In my view, stock markets will crash after the budget. I can’t rule out pre-budget rally.

7. Investors in Tata steel(corus), Hindalco and Tata Motors(Nano) will need to wait 2-3 years to get real benefits.

8. Tata Chemicals, Matrix Labs, Infosys and Indian hotels are my wild bets for long term investors.

9. Zylog systems is a good stock among the new businesses. I have doubts over Everonn valuations.

10. Gateway Distriparks may bounce back at any time. It has good prospects in the logistics.

Accumulate the above mentioned stocks at reasonable prices and wait for 1 year to get decent returns.

london stock exchange

Companies across the world come to the London Stock Exchange looking to raise money to develop and grow their businesses. Listing on our markets gives companies the opportunity to tap into one of the world's deepest and most liquid pools of capital.

There are more than 2,800 companies listed on our markets, worth over £3,500bn. In 2004 there were 293 IPOs on our markets raising £7,100m new capital. Our markets cater for companies large and small, from start-ups to global brands. We supervise our markets rigorously to ensure their integrity and fairness for all market participants.

The Main Market

The Main Market is Europe’s most prestigious and effective listings venue for established companies, a proven way to raise capital and gain profile. The Main Market has around 1,800 companies with a total market capitalisation of more than £3,500bn.

AIM

AIM is the world’s leading small-cap growth market - in 2004 AIM alone accounted for 65% of all IPOs in Western Europe. Currently there are more than 1,060 issuers listed on AIM with a combined market capitalisation of £37bn.

International companies

The London Stock Exchange is a global marketplace. Around 350 companies in 54 different countries use a London listing to gain the profile and access to capital they need to grow into truly global companies. They are drawn by the quality of our markets, their depth of liquidity and the sophistication and long-term approach of the institutional investor community in London.

crashes in stock market

A stock market crash is often defined as a sharp dip in share prices of equitiesstock exchanges. In parallel with various economic factors, a reason for stock market crashes is also due to panic. Often, stock market crashes end up with speculative economic bubbles. listed on the

There have been famous stock market crashes that have ended in the loss of billions of dollars and wealth destruction on a massive scale. An increasing number of people are involved in the stock market, especially since the social security and retirement plans are being increasingly privatized and linked to stocks and bonds and other elements of the market. There have been a number of famous stock market crashes like the Wall Street Crash of 1929, the stock market crash of 1973–4, the Black Monday of 1987, the Dot-com bubble of 2000. But those stock market crashes did not begin in 1929, or 1987. They actually started years or months before the crash really hit hard.

One of the most famous stock market crashes started October 24, 1929 on Black Thursday. The Dow Jones Industrial lost 50% during this stock market crash. It was the beginning of the Great Depression. Another famous crash took place on October 19, 1987 – Black Monday. On Black Monday itself, the Dow Jones fell by 22.6% after completing a 5 year continuous rise in share prices. This event not only shook the USA, but quickly spread across the world. Thus, by the end of October, stock exchanges in Australia lost 41.8%, Canada lost 22.5%, Hong Kong lost 45.8% and Great Britain lost 26.4%. Names “Black Monday” and “Black Tuesday” are also used for October 28-29,1929, which followed Terrible Thursday – starting day of the stock market crash in 1929. The crash in 1987 raised some mysticism – main news or events did not predict the catastrophe and visible reasons for the collapse were not identified. This event had put many important assumptions, of modern economics, under uncertainty, namely, the theory of rational conduct of human being, the theory of market equilibrium and the hypothesis of market efficiency. For some time after the crash, trading in stock exchanges worldwide was halted, since the exchange's computers did not perform well owing to enormous quantity of trades being received at one time. This halt in trading allowed the Federal Reserve system and central banks of other countries to take measures to control the spreading of worldwide financial crisis. In the United States the SEC introduced several new measures of control into the stock market in an attempt to prevent a re-occurrence of the events of Black Monday. Computer systems were upgraded in the stock exchanges to handle larger trading volumes in a more accurate and controlled manner. The SEC modified the margin requirements in an attempt to lower the volatility of common stocks, stock options and the futures market. The New York Stock Exchange and the Chicago Mercantile Exchange introduced the concept of a circuit breaker. The circuit breaker halts trading if the Dow declines a prescribed number of points for a prescribed amount of time.

Function and purpose of stock market

Function and purpose

The stock market is one of the most important sources for companies to raise money. This allows businesses to be publicly traded, or raise additional capital for expansion by selling shares of ownership of the company in a public market. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate.

History has shown that the price of shares and other assets is an important part of the dynamics of economic activity, and can influence or be an indicator of social mood. Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption. Therefore, central banks tend to keep an eye on the control and behavior of the stock market and, in general, on the smooth operation of financial system functions. Financial stability is the raison d'être of central banks.

Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transaction.

The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as employment. In this way the financial system contributes to increased prosperity.

trading in exchange

Participants in the stock market range from small individual stock investors to large hedge fund traders, who can be based anywhere. Their orders usually end up with a professional at a stock exchange, who executes the order.

Some exchanges are physical locations where transactions are carried out on a trading floor, by a method known as open outcry. This type of auction is used in stock exchanges and commodity exchanges where traders may enter "verbal" bids and offers simultaneously. The other type of exchange is a virtual kind, composed of a network of computers where trades are made electronically via traders.

Actual trades are based on an auction market paradigm where a potential buyer bids a specific price for a stock and a potential seller asks a specific price for the stock. (Buying or selling at market means you will accept any ask price or bid price for the stock, respectively.) When the bid and ask prices match, a sale takes place on a first come first served basis if there are multiple bidders or askers at a given price.

The purpose of a stock exchange is to facilitate the exchange of securities between buyers and sellers, thus providing a marketplace (virtual or real). The exchanges provide real-time trading information on the listed securities, facilitating price discovery.

The New York Stock Exchange is a physical exchange, also referred to as a listedspecialist, who goes to the floor trading post to trade stock. The specialist's job is to match buy and sell orders using open outcry. If a spread exists, no trade immediately takes place--in this case the specialist should use his/her own resources (money or stock) to close the difference after his/her judged time. Once a trade has been made the details are reported on the "tape" and sent back to the brokerage firm, which then notifies the investor who placed the order. Although there is a significant amount of human contact in this process, computers play an important role, especially for so-called "program trading". exchange — only stocks listed with the exchange may be traded. Orders enter by way of exchange members and flow down to a

The NASDAQ is a virtual listed exchange, where all of the trading is done over a computer network. The process is similar to the New York Stock Exchange. However, buyers and sellers are electronically matched. One or more NASDAQ market makers will always provide a bid and ask price at which they will always purchase or sell 'their' stock. [1].

The Paris Bourse, now part of Euronext, is an order-driven, electronic stock exchange. It was automated in the late 1980s. Prior to the 1980s, it consisted of an open outcry exchange. Stockbrokers met on the trading floor or the Palais Brongniart. In 1986, the CATS trading system was introduced, and the order matching process was fully automated.

From time to time, active trading (especially in large blocks of securities) have moved away from the 'active' exchanges. Securities firms, led by UBS AG, Goldman Sachs Group Inc. and Credit Suisse Group, already steer 12 percent of U.S. security trades away from the exchanges to their internal systems. That share probably will increase to 18 percent by 2010 as more investment banks bypass the NYSE and NASDAQ and pair buyers and sellers of securities themselves, according to data compiled by Boston-based Aite Group LLC, a brokerage-industry consultant [citation needed].

Now that computers have eliminated the need for trading floors like the Big Board's, the balance of power in equity markets is shifting. By bringing more orders in-house, where clients can move big blocks of stock anonymously, brokers. pay the exchanges less in fees and capture a bigger share of the $11 billion a year that institutional investors pay in trading commissions