What a crash in the market. Nifty went down by 2.33% on Friday (2 Feb 2018), because LTCG was introduced. Entire market was bleeding and the stocks went down by almost 7%-10%. My whole portfolio is down by 6%. I saw this coming but there are few things that I wasn’t ready for yet. PCJeweller crashed by 60%, I panicked and booked loss of Rs. 28,000 and exited at price of 284. I usually don’t panic like this but this case was different. Also the price did recover to 400 (my initial buy price) only to settle down later at 362.
PCJ’s name was dragged in the case of Vakrangee price manipulation and this is something that can wipe out all your money if you are not careful. Turns out Vakrangee sold all it’s holdings in open market and coupled with LTCG news this created a lot of panic. Feel sorry for those who lost more than me.
Let’s study whole portfolio. It is now down by 6% and invested amount is down by Rs. 1 lakh. I now have Rs. 73,000 in cash and am waiting for opportunities as corrections like these give you good entry price in multiple quality stocks. It’s a good thing that I made early entry (in late November and December 2017) so it is only down by 6% otherwise it could have been worse. Midcap and smallcap indices went down by 4%-5%, and hence the overall loss in my portfolio.
Ofcourse I will continue holding everything (unless the business model of the company get’s affected) even if the whole portfolio goes down by 30%. Last year I always used to sit and watch the market go up and down and used to book profit of only 5%-10% on stocks. I ended up making only 10% gains in a year where you could have made 150%-200% gains on your whole portfolio.
I remember clearly investing close to Rs. 1 Lakh in certain companies just before demonetization was announced and even though my portfolio was down by 25% I didn’t panic and book loss. In fact I averaged many holdings and gained close to 20% (on few companies) by Feb 2017 end. After that point I used to read news and everyone would say things like “no one knows where market will go”, or “the market could see some correction now”. Weeks went by and I was never able to find an entry point.
Now ofcourse I have learnt the lesson that most individuals lose money by waiting on sidelines and not by actually investing (loss in gains and not in initial amount). So I will be holding all my companies unless their results are bad or their business takes a hit.
As you all know LTCG has been introduced and in my case I will have to calculate my price (price as on 31st Jan 2018) and then if I book profit after a year, I will have to pay 10% tax on those gains.
If you are nervous about the markets going into bear phase, don’t be. This is not going to affect any business or their fundamentals and hence will be a short term correction. I initially thought that midcap correction could last till Feb 2018 end, but this correction could take Nifty down to maybe 10,300 till march first two weeks.
Most of the investors will be booking profit and some beginners will exit thinking that they should not invest in such conditions. So midcaps in particular could take a heavy beating. I expect my whole portfolio to be down by 15%-20% and then will go up. There is a chance that companies could correct only by 10%-15% more because there are those who want to enter into markets through SIP and were waiting for some correction.
Some investors (HNI etc.) will use this opportunity and add some stocks in their portfolio.
Changes Made :
- Sold PCJ at 284 and booked loss of 28,000.
Graphite India and HEG both posted awesome results and yet the price is going down because of LTCG introduction and panic selling.
As of 2 Feb 2018, this is my portfolio stock performance.
|Instrument||Qty.||Avg. cost||LTP||Current value||P&L||Net chg.|
The Concept Of Panic Selling Revisited
I remember panicking 4 times in past one year in Indian stock market. I will list all those cases here.
1) Indian Army Surgical Strike : In November 2017 (or sometime during October or December 2017) Indian army launched attacks against Pakistan army. I remember I had invested close to Rs. 40,000 and was busy with something else. I randomly decided to check my portfolio and it was down by almost 8%-10% (it was in 5% gain before that surgical strike). I remember seeing +5% and -8% within a gap of 30 mins. I googled “India news” and found out about the strike. I read some forums and communities and everyone was asked to remain calm as these things happen. I decided not to book loss and next day everything was up again. This was my first lesson of not panicking and doing something that you regret.
2) Demonetization : Talk about business model being affected. Currency ban means bad news for companies dealing in cash. I had invested close to Rs. 1 lakh and it went down by 25% within few days. I wanted to exit but decided not to panic and read some other blogs and forums. Most people were asked to stay away from taking fresh positions but there was one person (some blogger) who was invested heavily in PCJeweller (I was too but less amount) and Ashok Leyland and he was buying more of these. I decided to average some companies (PCJ being one of them) and I am glad I did. By end of January effect of Demonetization was gone and portfolio was up by 1%-2% and by Feb end it was up by 10%. I being a beginner booked it and was so happy with the profits.
3) Shell Companies : This happened in July-August period (I think) and I had bought some Smallcases (read my review on smallcase) and one of the holding’s name was in the list of shell companies. It was Prakash Industries. When this news broke out I think it was weekend or something else because the next day in went into lower circuit of 20%. It opened for a while and I exited (I had bought some from my side too) booking a loss of 19.5% or something. It was not that big amount but still I remember it because it recovered in a few days time. I hate when this happens. I didn’t read about shell companies patiently and remember some people saying that there is no way a company this big is a shell company. I think SEBI made some changes and allowed Prakash Industries to trade again, hence the recovery.
4) Price Volume Manipulation : This happened in last week of January 2018. Vakrangee (an Adhaar enrollment firm) was being investigated for price volume manipulation and it turns out it bought 20 million shares of PCJeweller in open market. Vakrangee was hitting daily lower circuits (Feel bad for those who invested in it) and on 2 Feb 2018 it decided to sell all it’s PCJeweller shares in open market. It was a mayhem and PCJ went down by 60%. I remember seeing the price down by 23% and went into shock. The price was hitting circuits of 30%, 40%, 50% and then 60%. It recovered from 230 to 335 and I wanted to exit but was stuck on the holding screen and didn’t really read what was happening. I never had experience of such a crash and panicked and sold all my shares at price of 284. An hour or two later it was trading at 412 (my buy price was 408). It felt really bad on booking loss but still I am sure in the long run this won’t really matter that much.
The most important lesson that I learnt in past year was Do not panic and make decisions. This can really affect your portfolio performance. Also unless the news is about poor management or business being affected, use dips as buying opportunities. I have read about so many companies : RCOM, JPASSOCIATES, Shilpi Cable, Satyam, Vakrangee etc., in such cases it would be alright if you panic but the first two cases from above list are buying opportunities.
Opportunities In Current Scenario
I am holding Rs. 73,000 in cash and will make some fresh entry in companies which have been beaten down badly in this carnage. I will either average Beekay steel industries, Graphite or HEG, or make fresh entry into 3 more companies (25,000 in each). Vikas Ecotech, Setco Auto, Ganesh Housing, Gufic Bio are my top choices. I could also go with Titan or Waterbase provided they correct little bit more.
LTCG vs Demonetisation
If you look at market correction then both are almost same but in the case of latter, it was the business being affected because people make purchases in cash. Most of the companies reported losses which were expected and hence the market corrected. But in case of demonetization stocks corrected by almost 15%-20%. In the case of LTCG too stock will correct by 15%-20% but their earnings won’t take a hit (might be different for companies which hold equities). So the recovery will be there and correction will be over in few weeks time.
In case of demonetization, market went down in Month of November and made recovery by Feb so that is almost 4 months into correction and recovery. In LTCG case I expect market to be at 11,000 by April first week or maybe sooner. People who want to sell (to avoid paying taxes) will have sold all their holdings by Feb 2nd week and Mutual fund houses might sell slowly by March end. Nifty could go down till 10,500 (worst case it might touch 10,200 or 10,300) and then ill rally.
Midcaps in particular will correct a lot (maybe by another 15%) but should start recovery by March second week. I will make fresh entry by Feb second week in stocks which correct a lot. I will make all notes and keep weekly gains and losses here on my blog. This will help other individuals too to see if it is a wise thing to exit or just stay invested. I won’t advise you to Buy, hold or sell (I cannot do that) but if you were waiting for corrections then this is a good one.
Let me know your thoughts in comment section.