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It is February, once more…. - Views on News from Equitymaster
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  • Feb 13, 2002

    It is February, once more….

    And it is budget time! The rumours begin about the benefits that many industries or companies will get. The punters and market churners come out of their slumber and volumes on the stock exchanges rise to new highs. Small investors, lured by the galloping trends in share prices, jump onto the bandwagon. As the news of easy money spreads, the Index surges and makes the front pages of newspapers, attracting more interest in the markets.

    The Finance Minister rises to speak in Parliament. As he presents his budget for a “new” and “vibrant” India the FM envisages what the closing Index level will be and how TV channels, internet web casts and the traditional print media will hail the FM as the new bull leader in India’s destined path to glory.

    Alas, as the FM reads his budget speech, the markets will hesitatingly rise, then fall, then collapse. Rather than focusing on the good and bad points in the budget, the media will focus on the deflating equity markets. An agitated FM will lash out at manipulators, short sellers, and vagabond NRIs and FIIs.

    The small investor will be spared the wrath of the FM but not the wrath of the market decline. Yet again, the small investor will be left holding junk shares with no value, while the smarter folks who got the market going will be counting their wonderful capital gains.

    Speculating on what the budget will bring and what it will not is a fool’s game. Stay away from it. Continue to plan your investments based on the following principles:

    1. Does the company have a good management team that understands the business?
    2. What are the long term plans of the company?
    3. Can it achieve those long-term plans with the size of the balance sheet and the skill of its management team?
    4. Can it withstand competition?
    5. What government regulations can hurt or benefit its business and how sustainable are these government regulations in light of WTO and other global obligations and agreements that India has entered into?
    6. Is the share price low compared to the intrinsic value of the company?

    Use the data we have on www.equitymaster.com to help you plan your investments or contact our affiliate, www.qasl.com if you need the help of an investment advisor.

    But please don’t rush in and get caught into yet another trap created by rampancy punters eager to make some money on your mistakes!



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    Aug 22, 2017 01:43 PM