Risk taking and Risk avoiding
When we buy stocks we take the risk for future profit or loss in that company business. Thus today's buyer benefits from future growth. This is when we have a longer holding period. If the company prospects are good then the seller factors that growth in the price and sells us the security at a premium.
Now let us see the reverse. When sentiment is bad and growth outlook is pessimistic, it is the seller who wants to sell out the security thereby de-risking herself and wanting cash in return. She would also be wanting to buy the security at a lower level in the future.In this case the buyer would factor in pessimism and offer a lower price. That is what we call discounted prices in stock market parlance.
This is what is happening in Indian stock markets for the past two months. A not so clear growth outlook has forced the participants to take a bearish view of the markets. It does not mean that India is not growing well or that there are some structural problems within the Indian economy. For a cash market investor this is an ideal opportunity to buy good blue chips at good valuations. Indian economy has the resilience to outlive rising crude prices. It is an opportunity to turn India into a 'natural gas' driven economy.Indian innovative spirit will shine in economic adversity.
rgds
Vibhas
Now let us see the reverse. When sentiment is bad and growth outlook is pessimistic, it is the seller who wants to sell out the security thereby de-risking herself and wanting cash in return. She would also be wanting to buy the security at a lower level in the future.In this case the buyer would factor in pessimism and offer a lower price. That is what we call discounted prices in stock market parlance.
This is what is happening in Indian stock markets for the past two months. A not so clear growth outlook has forced the participants to take a bearish view of the markets. It does not mean that India is not growing well or that there are some structural problems within the Indian economy. For a cash market investor this is an ideal opportunity to buy good blue chips at good valuations. Indian economy has the resilience to outlive rising crude prices. It is an opportunity to turn India into a 'natural gas' driven economy.Indian innovative spirit will shine in economic adversity.
rgds
Vibhas
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2 comments:
Hi Vibhas,
This article was opptimistic and inspiring for investors, who are seeing a downward trend.
I agree with you, this trend has nothing to conclude India is not growing but I am sure some other factors are also driving the down-slope apart from crude oil and selling psychology combined with FIs.
I am glad to see your comment on good time to invest in good stable blue-chips for future profits and hedging the short-trem loss.
Manoj
Hi Manoj,
Good to hear from you.
Crude oil and risk avoidance by FIIs is already factored in the price.
These are good times to buy, slowly but surely.
rgds
Vibhas
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