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Let The Buyer Beware


(Click here to be a part of the Investors' Premier League if you haven't been there already, and understand what we are talking about here) 

Wow is it burning up or what. Jaipur seems absolutely reluctant to leave its high perch at 15000k+, and Delhi, Kolkata, Mohali and Mumbai have entered into the 8000 rupee zone. A sudden surge of new investors and demand in the market has meant that prices of all stocks are on the rise, and some stocks, therefore, stand the risk of overheating. Or to rephrase, the risk sits perched right atop their head and is beginning to find its fingers around their throats. It does like the market, or atleast certain stocks, are getting ready for a fall.

Given this scenario there are three things to look at immediately

1) Which stocks to offload now, which ones are overheating

1.1) Which are the stocks to have which can still give high returns on investment.

2) Why now the gamble is not about investing in which stock to buy but rather on disinvesting and deciding which stock to sell

i) Consider off-loading these: Jaipur, Delhi, Kolkata, Mohali, Mumbai

There is no doubt the Jaipur team is doing incredibly well and the stock prices should soar. But 16k is a HELL lot of soaring.

The book values suggest that to touch 15000 points, Jaipur will have to not only keep up their fantastic run of performances from the first half but also score a billion runs each game, knock about a few hundred sixes and if possible, take a few double hat-tricks.
Delhi is better off, of course, with prices under 10,000. But it is still too hot to handle, especially with the team facing a slump. This maybe a good time to get rid of some of those stocks. The same applies for Mohali, and Mumbai, with an added risk in the latter's case being they still only have an outside chance of reaching the semi-finals.

Kolkata has had a good upward swing in fortunes, but the market seems to be reading a little too much into it, and is being too optimistic.


The dicey ones: Bangalore, Mumbai

The Bangalore team is down in the dumps, with an unhealthy mix of on-field troubles and internal strife ruining the team's future. But the question to answer is given the general poor showing and Vijay Mallaya's recent whingeing, is the performance going to fall further, or finally start peaking?

One logic is that it possibly can't get any worse than this. The other possibility is that Mallaya's comments would lead to further disharmony, insecurity and a general plummeting of spirits and the book values could actually stagnate, or even fall, something that looks like it has already started, after the 9 wicket loss to Mohali.

The opportunities: Chennai, Hyderabad

Chennai is an almost-certain semi-finalist, and have constantly delivered save a few games in between. Despite their good form, their current market price is still only 3000+. A huge opportunity that you shouldn't miss, 'cos this is almost certainly going to go up.
Hyderabad is still a bit of a judgement call. They haven't had much success and have constantly underperformed in terms of wins. But they have consistently managed to secure points somewhere, usually with the bat. Two big hundreds, from Gilly and Symonds early in the tournament has already taken their book value past 2000.
Even if they manage competent, half-decent performances, they are bound to grow steadily. With that there is additional bonus of the chance of Gilchrist, Afridi or any of other big name batsmen in their team producing a scorcher. If that happens, you will be sitting on a gold mine.

 ii) Disinvest now!

In normal circumstances the big nothing-to-everything gamble is picking on which stock will boom next. Here, your road to the top will also depend on which stocks do you offload now!

Ok, this may or may not be complicated, but let's try and be slow and simple here.

Fact 1) Unlike the normal stock market, here, the game is not just improving your portfolio, but doing better than the portfolio of the others, since it is about being the best from amongst everyone playing the game.

Fact 2) It is clear that certain stocks are over-heating, and are headed for a fall.

Putting fact 1 and fact 2 together, you will stand to gain and break into the top bracket if you off-load the stocks that may hit a fall in time, before others do. As a bonus, you could invest the extra money you gain in other stocks that you figure will rise in the next few days.

If you are a new investor in the market, the best thing to do might just be to stay put, invest sparingly or on only a few teams, and wait and watch for a few days.

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