For all boarders who are sweating at the daily price movements of NIITTech, and who had expected the price to move as the book closure date approaches, but has not performed to their expectations, I would like to present the price performance chart presented on page no. 35 of the annual report of the company (rather than wasting time on trying to find out explanations for price movements it would be better if all boarders who wish to be long term shareholders of niittech read the annual report - that would be a better usage of time rather than fretting about inconsequential price movements on a daily basis)
Month Sensex High Low Mcap
(in cr.)
Apr 06 12043 239 202 849
May 06 10399 242 180 722
Jun 06 10609 191 131 684
Jul 06 10744 194 171 724
Aug 06 11699 202 179 721
Sep 06 12454 204 186 726
Oct 06 12962 262 184 941
Nov 06 13696 289 237 1006
Dec 06 13787 311 238 1179
Jan 07 14091 443 287 1541
Feb 07 12398 535 387 1542
Mar 07 13072 482 391 1706
Can u learn anything from the chart above ? Can u explain those price variations ? Imagine somebody buying at 242 and then seeing the price go down to 131 in 2 months, and when he would have got desperate and tired of holding and would sell, then he would see it go up to 262 in 3 months.
The biggest lesson is nobody on earth can time the market or any price movement of the stock, everything seems very neat and perfect when u analyze past data, unfortunately that is a mirage. But for anybody who had held out since April 06 through the price variations would have doubled is money in approx 13 months. Compare it with the sensex return and u will realize the fantastic return this stock gave, but look deeper and u will realize the high volatility which would have thrown 99% of the investors off balance and they would have sold and got out.
So, the biggest question is how do u have the emotional fortitude to face price volatility. That is why u have a portfolio, when u have a portfolio, the volatility cancels out and the overall volatility reduces as the number of stocks increase in ur portfolio. But the catch is, as the number of stocks increase in ur portfolio, the overall return of the portfolio goes down. Good sleep comes at a price.
The best is to have a single stock in the portfolio, but I dont think there is anybody who can withstand the volatility of 25% without any reason, because most stocks will show this kind of volatility, NIITTech is more volatile just because it is in midcap space, bcoz with 1 to 2 lac share trading volume a 20000 shares order for buy can make it jump substantially and same way a sell order can make it fall, however it requires huge volume to make a Infosys or Reliance to move up or fall. So NIITTech will always be more volatile till it reaches a market cap above 10000 cr, from where onwards its volatility will reduce bcoz it would have become big enough.
U will realize there are two basic emotions which exert pressure on u daily, one is greed, as the price rises u feel the pressure of greed, all internal voices tell u to sell and book the profits, as it falls u get into the grip of fear, of losing ur money. These are the emotional traps, and that is why, there are lot of people who boast of making money on the market but really very few do. So learn to tackle these forces of greed and fear, stop worrying about price movements. If ur money doubles in 2 years what is ur problem ? Where will u get such returns ? Why the hell do u want to hurt urself ? The daily price quotes, the TV, the analysts, the whole
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