Home > Education > What is the "reason" behind the market moves?

What is the "reason" behind the market moves?

Friday, September 21, 2007 Leave a comment Go to comments

Today the biggest question on everybody’s mind is “why are all Reliance stocks moving up” but all I feel you should be bothered about is ‘Have you made money riding these stocks?”

I see people cooking up all kinds of “stories” to justify the move. Some say it is a scam while others say that Ambani brothers have joined hands again!(How intelligent?)

This is similar to what fundamental analysts do- find a reason and then issue a buy or sell. People find it easy to follow because it is ‘logical”(so smart!). Markets do the opposite of this- they first move and then comes the “why of it”. And sometimes the “why’ doesn’t even exist 🙂
Lets ask ourselves what might happen if the same Reliance stocks stage a strong reversal on Monday.The same guys will say that “the stocks were too expensive, so they had to correct” .The technical analyst shall say that “all of them were in overbought zone” so they had to fall.(Once again-how intelligent ?)

Reasons don’t make you the money.In hindsight I can justify almost “anything” and “everything”. I am surprised by the confidence such people have. Let me give you an example.

A few days back Mr. Nirmal Jain of Indiainfoline was ‘absolutely bearish” on the markets and saw that bearishness lasting for 6-9 months. (How accurate?) Today he again comes on TV and says that markets are going to “stay bullish’ for coming quarters. Earlier the ‘reasons’ for bearishness were “subprime problems” and today the reasons for “bullishness” are “India’s secular growth”!

(When markets were falling in August,I remember writing on the blog that one thing is “positive” in these falling markets- all the experts have become bearish! And incidentally markets bottomed out the same day itself (August 22).Read what I had written.)

Now check any of my previous recommendations. Do I ever ask you to buy because of ‘some news” or “inside information”?

Many of you might not have bought Reliance Capital at 1040 thinking that I didn’t give you a “strong reason’ to buy it. And also the stock was already “too high” or ” too expensive”.Now you can’t buy at 1550 because what was high and expensive at 1040 is definitely more expensive and higher at 1550!!

Please read my post-Infosys-a fundamentalist view to get a better understanding of what I am saying.

Similarly many people got annoyed when I gave a short sell call on Cipla when it was at 200. Three months later Cipla is(-15%) and whereas a RPL is (+50%). Now if you were buying CIPLA because it has already “fallen too much” or that it is a “fundamentally good company”, then you can continue to add it at lower levels till you get your “cost price”.

Coming back to markets-I am looking forward to the next week with extreme focus and caution. As many of my clients are sitting on decent profits, all I am asking them is to manage their risk and ride their profits.It is important to note that this is the time when most of the money shall be made or lost in the short term. So fasten your seat belts and enjoy the action. At the same time “remain in control”.

Good luck with your Reliance stocks!

  1. vijay rawat
    Monday, January 21, 2008 at 1:13 pm

    i want to know. the reason behind the down fall of indian stock market .

  2. sagecapital
    Tuesday, September 25, 2007 at 11:04 am

    JK- The trend reversed after CAIRN crossed 160-165 levels. I cannot ‘predict” when trends shall change. All I can do is to ride the current trend.

  3. jk
    Tuesday, September 25, 2007 at 10:03 am


  4. Senthil
    Sunday, September 23, 2007 at 10:38 pm


    Is Hindustan Zinc a good bet now?

  5. sagecapital
    Saturday, September 22, 2007 at 2:05 pm

    Shyam- Yes I was bearish when markets corrects. But I never said that this bearishness shall last for several months! All I talked about was the “possibility of a crash” as the signs looked similar to just before a major crash. My intention was to warn the short term players.
    I am not here to “predict”. I stay in the realm of “probability”.I truly believe that “forecasting market direction” is next to impossible.

  6. Shyam
    Saturday, September 22, 2007 at 12:34 pm

    NO !!!!!!!!!!!!!!!!!!!!!!
    SAGE, you were BEARISH on the market in AUGUST.
    I remember you talking about not knowing the bottom where it could be. And I had told that the correction can be maximum 30 0r 40 % what more can it be, and what was the history.
    You had told to stay away signs of market CRASH.
    My broad band is not working and I am not at home
    I am writing from a cyber cafe.
    Can we consider that you are BULLISH NOW ?
    now let us move, please come up with new IDEAS.

  1. Saturday, August 1, 2009 at 9:20 pm

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: