Sitting on a See-Saw

Sitting on a See-Saw

Time and again a wave of euphoria picks up the market when it has slid a few hundred points. The constant undercurrent of holding the market high is beginning to make investors reckless as they are tempted to believe that the market is now ignoring whatever the news inflow may be and will therefore stay firm. Thus, there is some misreading in the market and the tilt is towards the belief that the risk in investing is very low while the returns are sky high. Statistically speaking, this may be true of late but it should not undermine one’s caution and understanding of risk.

It is a known fact and one easily forgotten by investors that when the euphoria appears too good to be true, it should be considered as a warning signal to start pacing out and to begin shifting investments into safer quality stocks. My aim in this editorial is neither to scare you away from the markets nor to conclude that the markets have run their course. However, along with having been a wealth-creator for our readers for the past 35 years we as much believe in their wealth protection too. So, keep this in mind as you venture further into the current action-packed bullish market scenario.

Now, talking about multiplying wealth in the quickest possible way, I think investors have found that investing in quality IPOs is the best way to do so. One can dream big without the fear of failing in IPOs and that’s not me talking but the performance of the IPOs since 2020. Their performance on the bourses is also telling us that you should try investing in the same stock post the listing of the IPO in case shares are not allocated to you. That said, one cannot simply and blindly follow this strategy as history as shown that IPOs too have destroyed wealth once overdone.

Hence, choosing IPOs as the main subject for the cover story in this issue was an obvious choice. The story highlights various IPO trends which can be useful for investors. Do note that normally the first few IPOs are from genuine quality companies and then as the IPO season picks further momentum many a low quality company also slip into the crowd taking advantage of the investors’ bullish euphoria. One needs to read this carefully and not get carried away. Also, many a times the humungous IPOs actually end up damaging the secondary market for a short while as they suck out a large amount of liquidity from other stocks.

So, though the IPO is an exciting space to be engaged in, do not take it for granted and stay tuned to the IPO analysis published on our website regularly. In this issue we have also performed a detailed analysis of the petroleum sector. It should give you a good insight and we hope you can use this sector report and observations to your advantage. With the current China technology sell-off, fears about the third wave of the pandemic, IMF cutting the country’s growth forecast and some weak economic ground realities lingering around, the market appears to be in an interesting bullish-bearish space.

How will things play out? Are we peaking out or is this just a plateau before the next climb? That’s a million-dollar question! As always, we, at DSIJ, will continue to keep studying the environment and guide you through all challenging times. The idea would be to continue to be in a wait and watch situation while booking profit where handsome gains have been made and freshly entering selective quality stocks. It’s time to remain focused and not get swayed by temporary and misleading populous excitement. Keep the seatbelt on since there may be some interesting times just around the corner.

RAJESH V PADODE
Managing Director & Editor

 

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