India’s Biggest Gambling Industry!!!!

It was November 1^st, a public holiday in this part of the country. After much research – spent a couple of hours reading about the company, recommendations from various traders, blogs, I decided to invest in the public offer of a company.

Not having the form I decided to go to a near by stock trader – Geojit. I was there by 9:45. It was not a national holiday, so the stock markets were open. As I sit there filling up that form (filling those ipo forms are really a nightmare), people started to coming. By around 9:50 there were around 20-25 people in the office. People of all ages were there. A young guy – undoubtedly a software coolie, a middle aged woman, an old man – well past his retirement age, all of them. Each one of them glued to one of the 4 huge TFT monitors (trading terminals).

As the clock turns 9:55 (opening bells!!) each one starts making notes, shouting to get to know the prices of the stocks and deeply following those blue and red blocks on the black screen. Each one, ordering the guy operating the computer, to buy some stock or the other. By then a few more people had started coming to add to the chaos. It was nothing short of a fish market. A few were shouting, about the killer they made from a stock and I could see a few dejected faces.

If you were to visit the Bangalore Turf club, trust me you will find a similar behavior, but each one shouting the horses name instead of the stock names. I was told that since it was holiday, there were more men than women. On a normal trading day, there would be more women (all middle aged house wives) than men (which would mainly consist of retired men).

I am sure none of them would have done much research on the stocks they trade in, relying excessively on the stock tips by their stock traders or on the news flashes on the plasma TV in the room. In my view it is nothing more than gambling. Luckily the markets are doing well for the last 2-3 years, and most of them would have made some good profit. Also 2/3^rd of this would be day trading. You never know when you will be in for a big shock.

With the advent of online/phone trading, more and more of these software coolies are getting involved in the markets. I know a few people who spend more time on this during their work hours than on their work.

After seeing people around me (and some out of my own experience), I would suggest a few trading tips J :

• Stock markets are highly addictive, just like gambling, the more the profits you start making, the more you start to bet, and then on the D day, you will have it.
• Never ever get involved in day trading, unless of course you have some reliable information that by the end of the day India’s economy is going to double.
• If you want to trade in stocks, maintain a small but diversified portfolio, and track your companies in detail. Another golden rule – don’t take the “buy” advice/tips, but always consider the “sell” advice/tip from your agent.
• Entering the markets via the primary market (IPO) is a good option (again get to know about the company before you actually invest).
• Exit from non performing stocks. A very common mistake done my most investors is, holding on to underperforming stocks in the hope of them doing well. If you have invested in such stocks you have already made a mistake, exit it from them at the earliest and invest else where.
• Don’t invest too much of your wealth into stocks. Have a fine balance. Even if you were to loose it, it shouldn’t affect you much.
• Don’t get emotionally attached to the gains and losses.
• Invest in Mutual Funds (this too is tricky, will write in detail about this soon). Any day a better option.