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Read this article to know during a huge fall mid-cap companies perform better.
I did some research today to find out what kind of companies will perform better in a rally if it comes after a huge downfall.
Here is what I found out.
Please have a look at the two images below taken on 22-Nov-2016 (Tuesday) at approx 1.10 pm to do a detailed research on what companies will participate most in a rally.
Here is image of last 30 days best performing companies on 22-Nov-2016 (Tuesday) from list of ALL stocks that are traded in NSE (National Stock Exchange):
Here is image of last 30 days best performing companies on 22-Nov-2016 (Tuesday) from list of Nifty-50 stocks only that form the basis of Nifty movement and are also traded in NSE (National Stock Exchange):
Please note that Nifty will move on the basis of these Nifty-50 stocks only. If they move positive and the rest move negative still Nifty will move positive. If Nifty-50 stocks move negative and the rest move positive, Nifty will move negative. From time to time the market makers of Nifty decide which stock to keep in Nifty 50 and which to move out as only 50 stocks are kept in Nifty 50. There is a selection criteria based on which a company qualifies to be in that elite group.
Here is the image of top Nifty-50 performers since last 30 days as on 22-Nov-2016:
Here is the image of top Nifty-50 losers since last 30 days as on 22-Nov-2016:
Greedy traders buy these stocks as they think a 90% fall will give them a 90% return as soon as the stock bounces. And they think it will happen in 30 days because the stock fell more than 90% in 30 days. This is nothing but pure speculation and greed which you MUST AVOID. Never enter an unknown stock if it has fallen huge. Only buy stocks that are well known among all stock traders and a company with a strong ECONOMY MOAT.
Update: I got a good response as a comment in this post so I have added it in the post itself as very rarely people read the comments:
Question: The top loser in your list like Viji Finance & Karur Vysya Bank is not looser to such a huge amount. Data for Viji finance is wrong in your source, & Karur Vysya Bank is down due to sub division of face value from 10 to 2.
The same is with Indo count stock split from 10 to 2.
So the thing is before jumping to conclusion we have to think for reasons of fall also.
Yes I agree, before coming into any conclusion a research is a must, but even the topic of the research is also important to see whether it deserves our time or not. In fact I got a few emails also about the same things which I will upload. But frankly please try to understand what I am saying which is the essence of the article that:
Do Not Get Greedy and Buy any Unknown and Less Traded Stock Under Any Circumstances Even if There Was a Split. A Split Does Not Justify Buying A Stock.
In fact all the stocks that you have mentioned, I heard for the first time. 90% of the stocks in that list I had no idea about and heard for the first time.
For example my website name is The Option Course – as soon as someone reads they will understand what it offers – it does not offer tips on Options, it offers a course on Options.
Hope it is now clear why I have said we need to stay away from these penny stocks.
What did I find out:
1. Not a single Nifty-50 company is in the top-performing list.
2. The top gainer of all companies is PNB Gilts Ltd. As of writing it has hit an upper circuit and trading is halted on this stock. In the last 30 days it is up by 67.37%. This is huge.
3. The top gainer of Nifty-50 companies is Hindalco Industries with a gain of just 8.17% in the last 30 days. Compare this to 67.37% of the top gainer.
4. Only 5 companies out of 50 are in positive the rest 45 have given negative return in the last 30 days. That is the reason Nifty is down since last 30 days.
5. Top loser in Nifty 50 is Asian Paints Ltd. sitting at a loss of 22.31%.
6. Top loser in all NSE companies is Viji Finance – from a high of 170.95 to trading at 12.00 today, which is a loss of 92.98%. Almost all money gone in 30 days. Which means unknown companies fall like there is no tomorrow.
IMPORTANT ADVICE WITH A WARNING:
DO NOT ever buy shares of companies that are not known at all to common people. In fact just today I knew about a company called Viji Finance. Even if it has fallen by 92.98% – I will still not buy it even if I want to buy just one share which is trading at Rs. 12/-. I would rather buy a chocolate for Rs. 50/- and give to my kids than buying even one share of an unknown company. Please NEVER EVER LOOK at these companies when you think of buying stocks. There are plenty of companies which are well known among retail traders and if you still have no idea please do research on only the Nifty 50 companies if you want to invest for long term in stock markets. Rest of the shares buy only after gaining some experience.
Here is where you can find list of Group Wise companies traded in BSE and NSE. Your research should be limited to Group A and B from NSE or BSE. The rest of the groups please do not even open the link so that by mistake you invest in a bad company.
STAY AWAY FROM GREED. IT NEVER MAKES MONEY.
What does my research says?
Bigger rally will be in Group B stocks. Unfortunately or fortunately they DO NOT contribute in the movement of Nifty so when Nifty will start moving up the move will be slow not like the way Group B shares will move.
This is Good News For What Kind Of Investors?
Those who are doing a SIP (systematic investment plan) monthly equal investments in 4 or 5 star rated mid-cap mutual funds. Within 4-5 months they are going to enjoy huge profits. If you are invested in mid-cap mutual funds please do not sell and exit now. This is time for some patience testing and more investing rather than losing patience and selling. Do not do it. Stay invested. It is matter of just some more time.
What others can do who have not invested in mid-caps?
Frankly it is better you sit on the sidelines and start investing in a good mid-cap fund by the SIP route. It is automated so there is not much work involved except just once when you decide to start.
Now days you can invest online in mutual funds as well. Of course you need to do KYC (Know Your Customer) which they will inform and collect the requisite documents from your home.
Please try to invest in direct-funds rather than through a broker in a normal fund. Direct funds give almost 1% return more than a normal funds where a broker is involved because some percentage is given to him for bringing a client and part of profits are also shared with him. That’s the reason I have shifted all my mutual funds holdings to Direct-Funds.
My returns are almost 12% per year since 2011. When I started investing in mutual funds, I did a few mistakes but that was due to bad advice by my broker who invested all my money in an NFO (New Fund Offer) which lost 10% in one year.
Of course this loss again forced me to do research on mutual funds as well. Now I do not invest in any fund which is less than 5 years in existence. Also I make sure it is rated a good fund 4 or 5 stars by CRISIL or Value Research or Money Control. And of course I invest in direct-funds only so that no broker takes my share of gains. Please click on the above links and research.
This is NOT a tip providing website. The above article is for educational purpose only. Before investing in any mid-cap mutual fund or a company please do your own research. Stock market investing is subject to market risks so please invest carefully and control your greed. Systematic investments is the best way to invest in any stock or a mutual-fund.
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Dilip Shaw, Founder
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