In my previous post on Primary markets via the IPO,i discussed how the stock market is played.
But then ,IPO’s are more of an WAIT-N-WATCH kind of a thing where in the investor should be looking to build long term positions in order to build capital over a period of time.But,that should only be done if the company has the potential to grow substantially or else the investor might loose his money.So, it is very important to monitor the investment closely.
This IPO things sounds a bit boring.Ain’t it.All waiting and stuff,who wants that.i say, Show me the Money.
And so i oblige,rather my good friend and my financial guru does.I am very happy to have him on board and welcome him as the co-author.He is Manrag Jain a.k.a Mannu,and he is the one who sparked the stock market journey of mine.A marketing executive for GE,this guy is a sheer knowledge Pandora box.And i finally have managed to open the Pandora box,albeit a little.
Here’s how Manrag reads the Secondary Markets scenario in India.
Once the stock is listed…the tamasha begins…
1. The volumes traded on first day are huge as there would be many investors who make listing gains and exit. Then if the stock was heavily subscribed then there would be investors who could not get their hands on the stock. They rush to buy if they think that there is value.
2. Then there are Intra Day trades on select stocks. you have to close positions by day end. squaring off. its based on wafer thin margins. and done in huge volumes and mainly by experienced players. Every broker has some favourites intra day stocks and they usually trade in that basket only.
Remember only that stock which has huge equity base and is traded in considerable volumes is preferred so that there is no problem of finding buyer at time of selling.
For eg. Reliance group stocks, power grid, JP, IFCI, etc…..are traded in huge quanitites..but stocks like Zandu Pharma etc….are thinly traded….
3. Then there are buys by big boys FII’s(Foreign Investment Insitutions). FII”s are foreign bodies listed with SEBI who buy on indian exchanges. Till recent past almost entire trading was done by FII” and MF( mutual funds ) only. Only in this last 3 years bull run have the retail investors started to taste the choppy waters….
FII’s don’t buy in 100’s or 1000’s …When they buy they buy in lacs and millions…..So there decisions affect a lot the fate of particular stock on that particular day…..
4. Then also there are Private Placements and Private Equity buyouts…..Private Placements is done by company’s board and private equity buyouts are either done for value firms or those firms which PE’s think can give considerable returns after some changes in 2-3 years…
5 Thought there is also a Bond market ..but it is at a very fledgling stage in India….very few corporates issue fixed bonds…..
Now,that is too much gyan in too less words.but,that’s how we grow as both writers and readers.Reading between the lines and exploring the unknown gives the kick to indulge more.
Though,it is quite different from my style of writing i am sure readers will enjoy it all the more.
Please give comments as to how you liked reading this articles because it will help me motivate him to contribute more.
And if you didn’t like the article,please do tell me and i will be enjoying it even more;-)
I do promise to explain some things mentioned here in detail in the later posts,but this one was for my friend and i am not tweaking anything.
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