DHFL and infibeam both had worst day few days back. As per news articles, these were due to WhatsApp fake news and rumors. If we have to consider efficient market hypothesis, since issue is clarified, stock should trade back to previous level. Even if we consider some dent in investor confident, it should be somewhat lower that pre-rumour price but if you look at the price today, it has fallen like house of cards.
Retail investors generally have limited information. They don’t have access to any top management of company. They don’t have time (and money) to attend investors presentations as well.
Based on my limited knowledge on trading (I am not a long time trader), following could be possible reasons :
- Operators are active on these stocks, they may not be able to game it like they do in penny stocks but still they are active.
- There is no smoke without fire !
- Both had good rally in last few years and most of the investors want to cash out to avoid any future crash like this (something like bank run) and others are extra cautious to invest into stock due to recent market events which is keeping price low.
I either case, legendary trader Jesse livermore has said “Don’t fight the tape”.
Please let me know your analysis of both of these stocks OR add any other stock similar to this situation.
Disclosure: I have never invested or traded these two stocks. I hold GRUH finance in my long term portfolio and was thinking of adding IBULHSGFIN to my long term portfolio looking at growth rate and continuous dividend payment track record, however I was saved by a week’s delay in purchase decision
The biggest dumbness retailers have exhibited this year has been - to either average or enter stocks which have fallen a lot.
Be it PCJEWELLER, VAKRANGEE, DHFL, INFIBEAM, etc etc
They dont understand this is not 2014-2017. This is 2018. This is election year.
If you apply the same investing principles every year, whatever you earn in bull run, you will lose twice of that in one year of downfall.
I have seen so many investors say stuffs like “Stock fell on rumor”, “Whatsapp rumor”, “That article on Moneylife is fake”, now all those investors are stuck with penny stocks.
If there are people who still believe the stock really fell due to Whatsapp rumor, or Vakrangee fell due to article, then i guess we should open market for 5 year old toddlers also haha
Certainly doesn’t look like rumors to me. Especially in the case of Infibeam. Had it been rumors, what explains infi. getting chopped by another 25% today !! Dhfl is bound to bounce back but for infi. it’s not looking good to me. I think it’s heading towards being a penny stock.
Are you sure about DHFL to bounce back
Well bigger upsets have happened in the stock markets before. So, nothing can be said for sure. I just have the intuition that it will recover sooner or later.
Two lessons learnt are
- Buy and hold does not work always (It might work for some stock or for some time frame).
- Having stop loss for your short term as well as long term investment is MUST.
Please let me know if you have any other observations…
Know your risk capacity.
Don’t follow big hunters of Dalal Street, NEWS channels; most of the time (99% ) they are manipulative.
Stay away from mortgage companies.
Don’t play options and leveraged orders for intraday, if you don’t have spare money.
Of course it will bounce back but to see that one should hang upside down.
As per news reports RK is buying loads of DHFL.
RJ would have bought 1 crore shares
And shorted 2 crore shares in Future lots due to which DHFL had went into FNO ban
Quite possible… without hedging he wouldn’t have earned so much money.
NBFCs as well as some corporates in india are very risky…nobody can judge when they would go bust. I would stay away from most of mid/small caps & focus only on quality stocks as you never know when rumors turn into reality. Corporate governance is very poor in few companies & they work with operators/analysts/media to jack up stock prices…this is happening for several yrs but SEBI is not getting up from sleep. Nowadays you can’t even trust credit rating agencies & auditors so only God can save investors.
Sometimes it seems credit rating agencies are joke. They downgrade companies after default, latest example is IL&FS.
Same are the auditing companies. Best strategy is to use proper risk management in Indian stock market.
If you have a time, please do watch Big Short. There is a scene where one of the employee of credit rating agency admits it. (PS. This is not a fictional movie).
May be 1 reason for this type of midcap selloff in past few month is pledging of shares of biggies when those were on peak to lenders and when it falls below threshold those holding big qty force to sell it in throw away price. “Just read somewhere”
Well retailers don’t have access to info . but is it possible to see % of pledged qty of stock of any company because it can give an idea of total no of shares in trading or delivery is available for trader . because buying such company with more % of pledged stock and low circulation are always vulnerable for sudden selloff like dhfl etc…
Why there is no Lower Circuit for DHFL when there was a sudden drop
No brother due to average I gain profit in pc jewellers… no one can’t predict market bhai
PC Jewellers - Sau choohe kha ke billi haj ko chali
But good to know you are in profit there
How can we check corporate governance rating of listed companies… any website?
As this is an issue for an investor to rely them for longterm…