Wednesday, September 19, 2007

About Sensex, Share Market and Trading/Investment...

Everybody is talking about Share market boom and Sensex today!Stock indices like Sensex(BSE) and Nifty(NSE) are reaching new and new peaks every few months...(Yes! not every few years ...It's every few months!)(and I feel months will be replaced by days when India becomes a super-power nation which also seems very much likely in 10-20 years time looking at the current Economic and GDP growth rate!)Sensex was in four figures some five years ago (in 3000's-4000's) and now it is in five figures!(It has crossed all time High - 16000 mark just today! What a day today to write the Blog on this topic!!!)Consider all these facts and still if you don't know anything about shares and stock markets then it is high time for you to start learning about it and come into action mode!Otherwise you will really miss out the greatest opportunity of making money smartly,wisely and within short time.

People fear stock markets because they say it is Gamble. Right. It is a type of gamble.There are sitting big players who keep playing in the markets all day and all seasons.They shake the market.But if you have learnt your lessons of how to INVEST in stock markets they can not affect you negatively.They can only help you multiply your money in shortest possible time!This is also a fact.So it is a risky business.But remember high risk-High Gain is the mantra!So if you take your steps with precaution and with knowledge and enthusiasm and not out of just intuition or desparation, you would surely earn handsomely...

There are a few basic rules of dealing in Stock marekts.I am 100% sure , if you follow these rules correctly, nobody can prevent you from earning very high money in shortest possible time.

Rule number 1 : Never never never indulge in Day-Trading (Buying in the morning and selling back in the afternoon) (Only one exception to this rule is when you achieve your target on the same day.) Always go for longterm Investment.

Rule number 2 : Always invest with a Target in mind.And strictly sell the shares when your target is achieved.Many people never sell their shares in hope that the stock will rise more and more and more.Many times your target price is reached and then the stock will start falling again and then the price may go even below the price at which you originally bought.Keep your self updated about the stocks you have invested in and sell them when your target is reached.Even though the price of the shares rises and rises more after you have sold them, you don't regret your decision.You have already reached your target! So be content and happy!There will be plenty of other good shares where you can reinvest your money.

Rule number 3 : Always invest in the good stocks.See the history prices of the stock you are interested in.Don't go by someone's tip.Do your homework well before investing.

Rule number 4 : Never buy a stock when it is trading at its year high / All time High value. That is the time when you should actually sell it. If you have money and you madly want to invest them anyhow look for the stocks which are trading at their year low values but are fundamentally strong stocks. (This does not mean you should by any stocks being traded at year low/all time low price)

Rule number 5 : Buy the stocks when they are ex-their price after Bonus issue or stock split. (When bonus is issued 1:2 that is one bonus share for every two shares held and the price of the stock is 30 Rs before bonus then Ex-bonus price would be aprrox 20 Rs. Similarly if a stock splits in Rs 1 from Rs. 10 then its price will fall ten times Ex-Split. that is if a stock is trading at 1000/- Rs. it will be 100/- Rs. Ex split.) This is the right time to buy. Infact most of the stocks will go down further below this Ex-price. So you may buy some at Ex-price and some more when it further falls. (For ex. recently price of Unitech shares was approx. 500 before bonus and Ex-price was approx 250 - after 1:1 bonus - so one could have bought it at that level. After this Ex-price it further fell to 232-233 levels where one could have bought some more shares of Unitech. and immediately after that the price rose to 280-290 levels , due to the announcement of Unitech to be included in Nifty Index)

Rule number 6 : When market crashes and Sensex falls by some 400-600 points (Nifty falling by 130-200 points) blindly buy very good stocks (may be the ones included in Sensex and Nifty indices)

Rule number 7 : If you have purchased a good company shares and after you purchased them the price starts falling (which most of the times will happen!), please don't loose the courage and sell them.Hold them.Try to buy more of them when the price goes very low and average out the price.The price will certainly go above the level at which you had bought.You should have lot of patience.

Rule number 8 : Once you start investing, keep your self abreast of the news about that company as well as overall sector and market movements.

Rule number 9 : Buy or sell in parts if you are not confident or have doubts about the market's future.When markets fall heavily, i suggested you to buy in Rule number 6, but one never knows when the market will stabilize,once it starts falling.So you may be tempted to wait for longer so that market falls further and you can buy the stocks at yet cheaper prices, but suddenly market starts rising again and you may never find the right price to buy!So when markets fall heavily, buy half or 1/3rd of the actual quantity you wish to buy.And buy the remaining, if markets further fall.But if markets start rising again suddenly then at least you have half or 1/3rd you bought to earn the profits...Same funda you can apply for selling.

Rule number 10 : Be patient. Have faith in God and stock markets and keep your fingers crossed!

All the Best and Happy Investing and earning huge money...!!!

(Note : If you have any queries reagarding some terms in the blog, please feel free to write/talk to me.)


  1. Good post dude .... now if u can just recommend some good stocks in ur next post, life will get so much more simpler ;)

  2. nice post ... and informative one

  3. Hi,
    Read your post.. good. Since your advice is basically aimed at new investors.. i wouldn't suggest stocks. The best way for them is to invest in Mutual funds with cost averaging. If they can invest Rs 1000 every month automatically, they really never have to worry if the market goes up or down.

  4. Your rules are made by wonderful crystal clear points. I am appreciating very much and thanks for the very valuable and informative tips