Stock Shastra

Before I invested in my first stock which was almost a year back in April, 09 I always thought stock investing was a game of snakes and ladders, where you went only up the ladder. This was till my dad’s friend, who too like my thoughts had been climbing the ladder for a very long time; lost a lot of money when the Sensex reached the mouth of the snake and his investments ended up reaching the bottom of the board game. This was sometime in October, 2008. Not only did he lose all the gains he had made in that one year, but the networth of his stocks was now lower than his investment. After that day I realized that when the snakes bites at 99, the probabilties of an investor seeing his investments at their 52 week lows is very high.
I decided to stay away from this whole [...]

Sudha, a housewife had just returned from her weekly kitty party session. She immediately turned on her computer at home and went to one of the trading websites. She was impatient. Mrs. Kumar at the kitty party had just mentioned how she had tried her luck at stock investing. She explained the thumb rule of of finding stocks at low P/E’ s being a good bet and went on bragging about how she had a earned a good Rs. 10000 in one month. As soon as Sudha heard this her thoughts were only on getting home early & finding stocks with low P/E s to invest in. She immediately logged on to one of the financial trading websites & looked for stocks that traded at price to earnings ratio less than 10 (a ratio Mrs. Kumar had mentioned as being a good buy.) She was excited to find some 50 [...]

I am sure most of us must have heard of those attractive cash back offers from some credit card schemes while we go on a shopping spree & got lured by such offers? Ever heard of such an offer while you are out on a stocks shopping spree?  Does a buyback offer of shares somewhere sound the same?
The latest buzz these days is the open offer of Satyam Shares. Hearing so much about it, I really wanted to know why various companies go in for a buyback.  In Satyam ‘s case it is very clear, Tech Mahindra is buying the stake from the public through an open offer.  Another obvious reason is to increase the promoter’s stake in the company.
Buyback is basically the reverse of issue of shares by a company where it offers to take back its shares by the investors at a specified price.
But what about the other [...]

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Affair between the Stock Market & RBI Monetary Policies
Is it so? So, what do you think, is there actually an affair between the two? Who is the more dominating one? Does a change in one’s mood immediately affect the other? Or are they like the timepass couple, quite indifferent to each other.
Before you think this is like some relationship consulting blog, let me confirm it is purely a financial one. So, let’s get back to our couple- monetary policies & stock market.
Does a slight twist in the monetary policies affects the stocks or is it the other way?
We all probably read in today’s paper that our Finance Minister Mr. Pranab Mukherjee has asked banks to cut interest rates and provide cheap credit so as to boost the economy. This is a way in which cheap credit is made available to the public in hand.
But how does a bank [...]

Retained Earnings V/S Dividends????
Which one do you choose? A company that declares dividend or a company that retains the profit???
This is always a tricky question & there are always different views on this topic.
Let’s see what they are:
The general perception people have is that by not paying dividends or not increasing the dividend policy the company is doing no good for the investors. This may or may not be true.
The good side about retaining the money is that the company may be investing the money in a fruitful project which may give you better returns a little later. The company may have intentions of launching a new product/service or building a new plant or probably is going in for expansion.
And the bad side??
There a few cases when a company does not benefit from the retained earnings. When does that happen?

When the management piles up cash far beyond its present or [...]