Moneylife Events
“Stocks are a part of business; but we ignore that and get influenced by the price changes

Many of us are not hardwired to understand finance and thus give in to our emotional biases. Very few investors may have a clearly defined process for investing. In a Moneylife Foundation event titled ‘Buying stocks safely”, we described how one can develop a safe method for investing in stocks.

Many investors burn their fingers in the stock market because they blindly follow tips and advice freely available. They do not follow a process or have a discipline to cross-check the facts and invest directly. In the second exclusive workshop on ‘How to Invest Safely in Stocks’ conducted by Moneylife Foundation, Debashis Basu, editor, Moneylife, covered the main reasons why investors lose money in stocks, the myths and facts about stocks, how one can develop a process of investing and winning strategies one could adopt. Most investors usually have no clue about the financials of the company or how a company is expected to perform. Though a company may be fundamentally strong, it could be highly priced and thus price appreciation would be low. Even if an investor knows how and when to invest, exiting at the right time is also extremely crucial.


There is lot of free advice available all over the internet. Some may be good, while most of the other is just noise and these sources do not have adequate data to prove their stance. Thus, investors following the latter source may have false beliefs of the stock market, inflation and GDP is correlated to the stock market movement being one example. All these can be both right and wrong as certain rules work under certain conditions. As far as GDP growth versus stocks is concerned, there is little or no correlation. Before investing, one also needs to accept the fact that stocks are risky. “Stocks fetch higher returns in the long-term but can fall by 30%-70% in one year and may take years to recover. It takes years to understand this. You don’t need to focus on the price when you are analysing the business” said Mr Basu. If the business is good, prices will appreciate over the long-term. “Daily movement of price is pure noise,” he explained.


The two factors that essentially drive the market, said Mr Basu, are expected profit growth and valuation. Explaining these two factors he said, “Earnings growth determines the trajectory of the stock, whereas, valuation determines the profit or loss. If one can pick a stock with high earnings growth and which is under-valuated, you can almost never end up with a loss” Great businesses at low prices over a long period of time is what one should look for, he advised.


While giving the participants buying ideas, Mr Basu explained that one should look to buy good companies in market panic. He also mentioned which sectors can do well giving India’s consumption demand. “The maximum gains have come from the consumption sector”, he said. If one does not wish to try and time the market, one could invest is through a systematic investment plan.


As important as buying is, when to sell is a common predicament faced by investors. Mr Basu informed the audience on how to avoid making bad selling decisions. “If a stock has fallen 30%-40% in a fundamentally good company you should not sell unless you need the money, on the other hand you should invest more,” he said.


The session was followed by an interactive question and answer session where Moneylife Foundation members raised their queries.


This session was attended by savers across categories. If you would like to be informed of many more such events in future become a Moneylife Foundation member. Click here to register. (Join Moneylife Foundation)



Suiketu Shah

4 years ago

Wrong advise(most of it unsolicted by brokers aka relationship manager who are unemployable people out to loot you like hardcore criminals)in equities is worst than no advise.

Mastering shares is not difficult if you know who to learn from.

Sensex, Nifty may stage a rally if last week's low holds: Weekly closing report

A slight strength in rupee can spark a market rally. This very likely since dollar has been weakening over the last week.

The holiday shortened week too ended in the negative for the third consecutive time. Market moved down on the concerns of weakening rupee and on growing uncertainty over when the Federal Reserve will start to wind down its stimulus.


The Sensex lost 375 points (or 2%) to close the week at 18,789 and the Nifty settled at 5,566, down 112 points ( or 2%). The market has been down three weeks in a row.


On Monday, the indices rose marginally, bucking the seven-day continuous fall. The HSBC India Composite Output Index, which maps both services and manufacturing activity, fell to 48.4 in July from 50.9 in June, indicating an overall contraction. On Tuesday, the indices had the highest absolute fall since 20 June 2013. The indices were pulled down with the rupee hitting its record low. After market hours, news came in of the appointment of Raghuram Rajan, the country's chief economic advisor to the finance ministry, as the 23rd governor of RBI. On Wednesday too, the indices fell on the concern over the US economic data. Market participants expected the Fed to bring in its asset-purchase program by the end of the year. On Thursday, the indices closed in the positive after China reported much better than expected trade results for July, marking a sharp recovery from the previous month.


Among the indices on the NSE, India Volatility (up 1%) and Nifty Midcap 50 (up 1%) were among the top gainers this week, while CNX 100 (down 2%) and CNX 200 (down 2%) were among the losers.


Among the other indices, Metal (up 5%) and Realty (up 3%) were among the top gainers this week while Finance (down 3%) and Pharma (down 3%) were among the losers.


The top gainers on the Nifty this week were Ranbaxy Lab (up 32%); Jindal Steel & Power (up 11%); Reliance Infrastructure (up 11%); Tata Steel (up 8%) and DLF (up 8%). BHEL (down 22%); Asian Paints (down 13%); Lupin (down 10%); Sun Pharma (down 9%) and Tata Power (down 8%) were the top losers this week.


Out of the 27 main sectors tracked by Moneylife, the top five and the bottom five sectors were:



Top ML sectors


Worst ML sectors




Foods & Beverages


Non-ferrous metals


Consumer durables








Financial services




Consumer products



The first meeting of the sub-committee of Financial Stability and Development Council (FSDC), chaired by RBI Governor D Subbarao was held on Wednesday, where the participants discussed the “potential risk to stability of the domestic financial system”. The sub-panel also expressed concern on the deteriorating asset quality of public-sector banks and discussed corrective measures for this.


The second meeting, of the high-level committee on external commercial borrowings (ECBs), discussed measures to relax ECB norms to allow leveraged firms to tap foreign markets for funds, and to repay rupee loans from ECB proceeds.


Market fall and the issue of corporate governance

The recent market fall is not all about economic crisis. Implementation of healthy corporate governance is another factor that led to the wreck

If you think that the fall in share prices of major companies during last two months has happened only because of prevailing economic crisis in India, it is time to think again. While there is no doubt economic crisis has eroded value of many stocks, what has added fuel to the fire is the deficiency in implementation of healthy corporate governance practices by several companies. Investors have lost huge amount of money not only because of volatility but also because of non-compliance with corporate governance policies by many companies. Corporate governance practices exist only in glossy pages of annual reports of these companies and are yet to be implemented in its true spirit. Let us look at some cases to understand this.

Yes Bank’s share price, a darling of many analysts and investors, has fallen to around Rs280 from its all-time high of Rs547, in a span of less than three months, which means about 50% loss in the value. Share price of the Bank fell by 17% on 31 July 2013, when the corporate governance issue came to the fore. Madhu Kapur, the widow of Ashok Kapur, one of the promoters of the bank along with Rana Kapoor, raised corporate governance issues in an affidavit filed before the Bombay High Court over the rejection of her daughter Shagun Gogia’s nomination as a director.

Another company, Gitanjali Gems, has been in news for multiple reasons. Share price of the company has already tanked more than 90% from its all time high and nobody knows what will be the lowest level for the stock. After market regulator Securities and Exchange Board of India (SEBI) cracked down on Prime Securities, the stock price of Gitanjali Gems started tumbling. This was a case of alleged market price manipulation and lack of transparency and can be associated with deficient corporate governance practices once again.

Recent fall in shares of Financial Technologies and Multi Commodity Exchange Of India Ltd (MCX) are also broadly linked to corporate governance issue in which though regulator failed to take note of regulatory deficiencies, the company also did not set high standards of voluntary compliance with regulation.

There are many such examples in the recent times where companies have failed to follow corporate governance practice causing huge loss to the shareholders. Opto Circuits is one such example, where the share price had tumbled at the beginning of the current year after it failed to notify resignation of its company secretary on time. Once a premier stock, it has now become a penny stock. Infosys also faced issues of corporate governance when Narayan Murthy re-joined the IT company thus raising doubts on high standards set by him, though this did not cause loss to the shareholders.

There are many companies, which have lost more than 90% of the value over the last one year. Many of them have seen unprecedented fall in the share price because of corporate governance issue.

In India, companies fail to meet even the basic tenants of corporate governance. Let us look at transparency, which is one of corner stone of corporate governance.  ITC on its approach to corporate governance, mentions its approach towards transparency as, “ITC believes that transparency means explaining Company's policies and actions to those to whom it has responsibilities. Therefore, transparency must lead to maximum appropriate disclosures without jeopardising the Company's strategic interests. Internally, transparency means openness in Company's relationship with its employees, as well as the conduct of its business in a manner that will bear scrutiny. We believe transparency enhances accountability.”

This sounds great and ITC has been following this aspect of corporate governance. However, do all the companies follow it? ‘Conduct of business in a manner that will bear scrutiny’ evades many companies. Shareholders, especially the minor ones, have no idea about such transparency, as many companies do not find it necessary to be transparent. Minor shareholders are the ones who suffer major losses. The recent case of NDTV highlighted by Moneylife points this aspect.

While companies are expected to take responsibility to set exemplary standards of ethical behaviour, both within the organisation as well as in their external relationships, there are cases like the Micromax, where the mobile handset maker’s MD is caught allegedly bribing MCD officials. Other constituents of corporate governance such as, trusteeship, empowerment and accountability, continue to evade many companies.  Companies like Educomp reach a stage where salaries not paid for long time to the employees with management justifying the failure as the risk arising from prevailing market conditions thereby putting aside failure of proper corporate governance compliance.

A series of lapses on corporate governance front shows the risk that Indian investors are exposed to. We know that a chain is as strong as its weakest link. The deficiency on corporate governance front is working out as the weakest link in case of many Indian companies. Time has come when we should not buy stocks only on the basis of fundamental and technical analysis. Need of the hour is corporate governance analysis. Unfortunately, the data points available here are very limited.


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