Money Tree

1. Buy stocks while they are moving up; don’t try to catch a falling knife.

An old saying, but true. The most important thing in trading is to trade with the trend. A stock should be bought while it is in an uptrend and is moving up. A number of investors think that is has already moved so much how far it can go and ignore the stock thinking that they should have bought it a month ago. But actually there are more chances of a momentum stock’s climbing higher than those which have yet not started moving up. Last year sugar stocks fell more than 50 percent and a number of investors thought that they have already halved, how far can they fall so it becomes a good buy, but the fundamentals did not suggest buying sugar stocks and now they have went down to as low as a third of what they were a year ago. There are oversold situations in the markets and there is a bottom to every fall, but it is impossible to predict a bottom. We have to wait till the downtrend reverses and the stock starts rebounding, there you have to catch it and ride the momentum. Let the knife fall, vibrate for some time and then you may pick it up; there are less chances of injuring yourself.

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The salient features and extracts from the Red Herring Prospectus of the issue are given hereunder:

Issue Opens On : June 12, 2007
Issue Closes On : June 19, 2007
Issue Size : 29,00,000 equity shares
Face Value : Rs.10/-
Price Range : Rs. 150 to Rs. 175/-
Issue Type : Book Building
Tick Size : Re.1/-
Market Lot : 40
Minimum Order Qty : 40
Listing Stock Exchange : BSE, NSE

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GLOBAL MARKETS

US Markets

The US Markets closed flat yesterday.

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The salient features and extracts from the Red Herring Prospectus of the issue are given hereunder:

Issue Opens On : June 11, 2007
Issue Closes On : June 13, 2007
Issue Size : Rs. 1,10,00,00,000
Face Value : Rs.10/-
Price Range : Rs. 230 to Rs. 270/-
Issue Type : Book Building
Tick Size : Re.1/-
Market Lot : 25
Minimum Order Qty : 25
Listing Stock Exchange : BSE, NSE

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After opening gap up in the morning NIFTY touched 4200 levels but could not hold on to that and remained around 4180 for a long time of the day and then in the last half hour from 2.30 p.m. onwards it started slipping and now has lost almost all its morning gains. Currently at 3.05 p.m NIFTY is 4145 and Sensex is at 14078. The advance decline ratio has also turned negative with 450 advancing stocks to 629 declining. The major pullers of NIFTY are Gail which is up 8.2 percent at 317, HP up 4.65 percent at Rs.273 and BP up 2.67 percent at Rs. 340. Zee is the major dragger of NIFTY, down almost 3 percent at Rs.276.5. The midcap index has turned negative and currently is down about 0.5 percent.

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GLOBAL MARKETS

US Markets

The US Markets bounced back on friday and closed with more than 1 percent gains.

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DLF Ltd. has come out with an IPO to open for subscription from 11th June 2007.

The salient features and extracts from the Red Herring Prospectus of the issue are given hereunder:

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When it comes to make a long term call, I think 9 out of 10 analysts will be right or may be 10 out of 10, and even an experienced investor who reads well, will be able to make a right call but when it comes to making a short term call it becomes an arduous job for the most learnt researchers. There are so many factors which contribute to the movement of prices that it becomes very difficult to predict their trend. However an insight of all major events, news flows, financial information and basics of the company gives us a view whether the price of the stock is justified or not, is it worth owning the stock at the given price or the stock is already overvalued. It works well if you make a prediction for the long term, but the short term movements are always governed by macroeconomic factors, general trends and Government announcements which are not predictable, therefore it is easy to make a long term call by using fundamental analysis. And that is why most of the mutual funds take long term calls considering them to be safe. For example you find a stock which is going very cheap and fundamentals suggest buying the stock but suddenly some negative factor triggers in US and there is a sell off in Global markets and our markets are also not spared and that stock also could not swim against the stream and is hammered down and a good stock gives you a negative return in the short term in spite of being a value buying. But if you have bought if with a long term view and the company is fundamentally sound the stock will rebound when the crisis is over and will give you a good return in the long term. The whole discussion was to bring home the fact that if you are novice to this market make your first call a long term call, there are more chances of making money. After some experience you can become a swing trader or a day trader but first be an investor.

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Both NIFTY and Sensex closed in the red after a volatile session. The NIFTY had a gap down opening in the morning and slipped to 4126 and from there it bounced back and went in the positive territory for some time but fell down again in the last leg of trade to close at 4145 down 34.5 points from its previous close, Sensex also lost 122.37 points to close at 14063.81. The major contributors to the fall in NIFTY were ACC down 5.27 percent at 762, OBC down almost 5 percent at Rs. 212, HDFC down 3.72 percent at Rs. 1751, VSNL down 4.3 percent at Rs.452, TATA Steel down 5.19 percent at 583, SAIL down 4.57 percent at Rs. 124 and HP and BP were also down more than 3.5 percent at 261 and 331 respectively. A few Nifty gainers were hindalco up 3.23 percent at 128, satyam up 2.5 percent at 493.7 and ONGC up 2.3 percent at 872. The advance decline ratio was also negative with 368 advancing stocks to 729 declining.

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GLOBAL MARKETS

US Markets

The US downtrend continues and the markets had a sharp knock again yesterday on fears of rates hike by the US FED. Both Dow and Nasdaq were down more than 1.5 percent.

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