Its almost a month that the Stock Market started to fall from its all time high SENSEX of 12612 to a low of 9200 some two weeks back.
Yesterday SENSEX closed at 10401. During the last 2 weeks SENSEX dropped by 1000 points, followed by a lightening 1000 points rally in just 2 trading sessions. Last two weeks have witnessed probably the largest fluctuations in the SENSEX in the history of our Stock Markets. At today’s SENSEX of 10400 market capitalizations of all listed companies is Rs. 660,000 crores or US $ 146 billion. When the SENSEX was 12600, Market cap was US $ 177 billion. That means a drop of 25 % in the SENSEX brought down the market cap by almost US $ 44 billion. Add to this the speculative LOSS/ GAIN in F & O section which could be almost 25 % of the drop in Market cap. , that is US $11 billion.
Neglecting brokerage and STT, which anyway is less than 0.5 % , it turns out that almost US$ 22 billion (25% of the total market cap plus F & O ) have changed hands during the last one month of mind boggling SENSEX GYRATIONS.
So who are the WINNERS and the LOSERS?
First the LOSERS:
1. Most of those Retail Investors who follow the HERD mentality ,that is they BUY on TIPS when everyone is BUYING and Stock Price is hitting the UPPER CIRCUT daily. However when additional demand dies down and retail investor is fully invested and mostly leveraged , share price starts to come down . These brand of Investors never apply STOP LOSS limits and when the market crashes , leveraged positions are squared off at 52 week low prices.
2.Mutual Funds also come under REDEMPTION pressures when market goes down suddenly and they are forced to sell in a falling market thus bringing the prices down further.
And now the WINNERS:
FII’s, FI’s and MUTUAL FUNDS sitting on CASH wait for such BUYING opportunities , when market crashes like it did last month.. FII”s keep on booking profits on regular intervals and that way they are always 30-40% sitting on cash.
Lessons for the retail investor :
1. Do not leverage your position while BUYING into equity. Invest only that amount in equity which is surplus for a year at least.
2. Whenever you feel that there is profit to be booked in equity , SELL and bring the profits to your Bank.
3. Whenever you feel that you had bought the share at a higher price book your loss and debit it to experience.
4. Do not follow TIPS blindly. Try to understand the business of the company before you invest in the shares of that company.
5. Use F & O for only hedging and protecting your capital from value erosion. Do not speculate. Always remember that there is a bigger speculator in the Market than you and he can tempt you to lose money
- BUY @ Rs. 6 – 7
- TARGET @ Rs. 12 in one year
- STOP LOSS RS. 5.5
- BOOK PROFIT RS. 10-11
Financials of Chemplast Sanmar
- Equity 48 crore shares of FV Re. 1 ( 75 % owned by Promoters Sanmar Holding ) 11% by Banks and FI’s
- ONLY 11% by Public
- Sale : Rs. 700 Crore
- PAT Rs. 37 crore
- P/E : 8
- Refrigerant gases (Rs. 18.40 crores received from MONTREAL PRTOCOL for CDM. It’s like SRF LTD which is commanding P /E of 20.)
- PVC: Suspension Resin, Paste resin and BSR
- SILICON WAFERS used for PHOTOVOLTAIC CELLS TO HARNESS SOLAR ENERGY
- INDUSTRIAL ALCOHOL
- POWER 17 MW plant based on LNG Caustic Soda and Chlorine
Demand can come from FII’s as company has been trading in Carbon Credits and is well known globally.
Declaration : I hold a position in this stock , and this is impersonal recommendation. Investors are advised to satisfy themselves before making any investment in Chemplast Sanmar.
Detailed report of the Company with global scenario is available on payment.