The Indian stock markets are becoming a gambler’s den. Knowing when to buy, and more importantly, when to sell is more a game of chance than science. I’m increasingly coming to the view that this is something best left to professionals. For the retail investor, sifting through the volume of information (and dis-information) that is available and arriving at a right investment strategy is virtually impossible. To boot, many of us don’t have the nerve to hold on and sell too early in a rising market, or in a falling market, we don’t know when to sell and continue to hold on to stocks way past their sell by date.
A case in point is my investment in the three oil marketing companies, BPCL, HPCL and IOL. I had made good profits in these stocks in the 2003-04 period. Sometime last year, when the market tanked, I thought that I would take a contrarian bet on these stocks, after all, the demand is ever increasing, they were well off 52 week highs and the market was totally ignoring them. To my misfortune, the market conditions became extremely negative for these companies, crude oil prices spiked, the government did not allow them to hike prices and their losses mounted. Though they were compensated for their losses, the markets took an extremely dim view of their prospects and the stocks lost almost 35-40% from the prices that I bought them. I had completely stopped looked at their prices as it seemed like I had no hope of ever making any money on them till 2025.
And then suddenly last week, the stock price of these companies went up by almost 25-30% each. There was absolutely no trigger for this, crude oil prices were rising to all time highs, there was no sign of the government allowing them to increase fuel prices, nothing to indicate that their prospects were getting better. To me, it looks like the other stocks had got so expensive that the punters were looking for something cheap to buy. Whatever the reason was, I didn’t care. For the first time in almost 2 years, they hit my purchase price. I sold and exited with no profit or loss.
It’s not just these stocks. In the mid 90s, I’d invested in a company called VBC Industries at Rs 20/share. After the IPO scam, the company disappeared and I got so frustrated that in 2001, I tore up the certificates and burnt them. Recently, I found that their shares were trading at Rs 35.
