Stocks Archives - Stocksbaazigar

Fear of Missing Out

28th June 2020 by stocksbaazigar

‘Fear of Missing Out’ (FOMO) factor in the Stock Market is driving so much liquidity in Market that every bearish move is being negated by Buyers immediately. On Wednesday when a bearish engulfing pattern was seen in the Nifty Chart, Bears tried to short Market immediately after it opened gap down on Thursday. But Buyers were ready with their cash to invest on every dip, and Nifty managed to close near 10300. On Friday 26th March again Nifty closed above 10300. Nifty is holding 10300 from the last three sessions which clearly shows that it can move towards 10600 again. When Nifty made a bottom at 7511 in the March month many Investors didn’t invest in the market as they were fearing further fall in the Market. Analysts who come on Business Channels talked about 6500, 6100 then. Those who invested at those levels are sitting on 30-35% profits now as most of the stocks gave good rally in the last 3 months. Some even made 52 weeks high. Traders started booking profits since 10,000 levels on Nifty. Still Nifty continued to move towards 10600 thanks to FOMO factor in the Market. Stocksbaazigar won’t be surprised if Nifty attains much bigger targets like 10800, 11000 in the coming days due to this strength in the Index. Nifty will fall again to 7377 again from where it started rallying in a rising wedge pattern. The only question is WHEN? Dow Jones showed good correction on Friday. It has closed near its major support level. But a similar situation of FOMO is prevailing in the US Markets. Fed infused liquidity in the market, provided with stimulus packages, and ensured that Markets won’t crash beyond certain levels. From the experience of the 2008 financial crisis, they learned their lessons and were quick to understand that only ‘Liquidity infusion’ can boost the confidence of Investors in falling Market. Trump Govt started buying Bonds, made some policy changes in lending, and also focussed on reducing China-US Trade war tensions to save their economy. Every accusation on China for spreading Coronavirus fuelled the Trade war between the USA and China in the April-May months. From June, we have seen that President Trump has stopped tweeting about China as he understood that it can affect markets again. FAANG stocks (Facebook, Amazon, Apple, Netflix, Google) are performing well. Foreign Portfolio Investors are searching for cheaper investing avenues like emerging markets to park their money again. They are ready to take Risk-On trades again which is helping Indian stock markets. FIIs are net buyers in Indian Equities in the last 3 months. In India, RBI and Govt of India too ensured that there won’t be any liquidity crunch in the Market. Banks and NBFCs are no more in panic mode. Moratorium related mandates are given by honorable Supreme Court, so there is no confusion anymore. Investors are doing ‘delivery based buying’ in stocks like Bajaj Finance, HDFC Ltd, etc. which shows that they are ready to go against the verdict of Brokerage firms which reduced ratings of these stocks. After Franklin Templeton’s Credit Funds issue, investors redeemed their money from Credit Funds but they continued to do their SIPs in Equity Mutual Funds even during Lockdowns. Many new investors joined the investors club of India. A record number of Demat accounts were opened by brokerage companies in the last 3 months and many investors started the first SIP of their lives during this pandemic. This liquidity in Market increased strength of Market and reduced fear considerably. It attracted investors who were sitting on cash. They were waiting for Market Crash after the second wave of CoronaVirus but Nifty didn’t give up. It took support at 9500 levels and gave a rally of 1000 points in no time. If Nifty remains above 10300 for some more time and keeps achieving higher targets like 10600, 10800; fear of missing out factor will increase further which will take Nifty to 11000 or even 11200 before December 2020 Nifty is trading at 26 PE which seems highly expensive if we consider the earnings of companies in Q1 of FY 2020-21. RSI level is also showing that Nifty is in overbought territory. More than 1 Crore people in the world are infected by Coronavirus now, still Capitalist Market is not seeing it as a NEGATIVE trigger for bringing Indices down. In such a situation, every correction in the Market will only act as a buying opportunity. The V-shaped recovery in the Market has increased greed on Investors. Retail investors will get bull-trapped by big traders very soon. But the question remains the same – WHEN? Sometimes, we fear that it is the Traders Market, as fundamentals don’t support the current levels. But on the other hand, we understand that the market is forward-looking. It has already discounted the effect of a pandemic on economics for the FY 2020-21 and it is rationalizing itself for the Next financial year from right now. Traders with good trading skills don’t fear uncertainty. In fact, they love volatility as it helps them gain more. Only Investors are in a dilemma whether they should wait with Cash in hand or should invest (due to FOMO factor)? Stocksbaazigar suggests you to stop timing the market. You can never catch the bottom. All you can do is analyze the charts and speculate based on it. Investors kept waiting for right levels and Nifty ran by 3000 points, if they had invested it earlier they might have gained good capital gains so far. I hope they won’t regret after Nifty reaches 11,000. If they start investing in small quantities now and keep on adding more in every market fall, they will still remain in the Game. So it’s always better to stay invested rather than feeling left out. Create a watchlist of good fundamental stocks where you want to invest and add small quantities at every dip in the stock prices. Keep your positions light and well-diversified. If you will follow … Read more

Fixed Price Issue and Book Building Issue

20th January 2019 by stocksbaazigar

An Initial Public Offering (IPO) is a common way that a company goes public and sells shares for the first time to raise financing. There are two common types of IPOs: a fixed price and a book building offering. Let us discuss both types in detail in this post. What is meant by Issue Price? The Price at which a company’s shares are offered initially in the primary market is called as the Issue Price. When they begin to be traded, the Market Price may be above or below the issue price. Who decides the price of an issue? SEBI does not play any role in the price fixation. There is no price formula stipulated by SEBI. SEBI has provided guidelines under which Issuer shall decide the Issue price in consultation of Merchant Banker The Company and the merchant banker are required to give full disclosures of the parameters which they had considered while deciding the issue price. What is the Fixed Price Issue? Under the Fixed Price Offering, the company going public determines a fixed price at which its shares are offered to investors. Price at which the securities are offered and would be allotted is made known in advance to the investors. Demand for the securities offered is known only after the disclosure of the issue. To take part in this IPO, the investor must pay the full share price making the application. What is the Book Buiding Issue? Under Book building, the company going public offers a 20% price band within which investors are allowed to bid and the final price is determined by the issuer only after closure of the bidding Demand for the securities offered, and at various prices, is available on a real-time basis on the websites of major stock exchanged during the book building process. Investors must specify the number of shares they want to buy and how much they are willing to pay. Unlike Fixed price, there is no fixed price per share. What is the Book Building Process? Book Building is basically a process used in IPOs for efficient price discovery. It is a mechanism where, during the period for which IPO is open, bids are collected from Investors at various prices, which are above or equal to floor price. The process is directed towards both the institutional as well as retail investors. The issue price is determined after the bid closure based on the demand generated in the process. What is a Price Band in a book built IPO? The prospectus contains either the floor price for the securities or a price band within which the investors can bid. Floor Price is the minimum price at which bids can be made Cap price is the maximum price at which bids can be made The spread between the floor and cap of the price band should not be more than 20% It is up to the company to decide on the price band in consultation with the merchant bankers. The actual discovered issue price can be any price in the price band or any price above the floor price. This issue price is called ‘Cut-off price’. What is the main difference between the Book Building Issue and Fixed Price issue? Price at which securities will be allotted is not known in case of book building offer while in case of offer of shares through fixed price issue the price is known in advance to investors. Under book building, investors bid for shares at the floor price or above and after the closure of the book building process the price is determined for allotment of shares. In case of book building, the demand can be known everyday as the book is being built. But in case of Fixed price issue the demand is known at the closure of the issue.