Quality Rather Than Quantity 

Crude oil shock

The subprime problem was putting pressure on US and European banks and the stock markets.  Crude oil price from the levels of $40 per barrel in 2004, moved to levels of more than $100 per barrel in Jan 2008 and to the peak of $147 in July 2008. These factors were hurting the world economy and the stock markets. FII inflows dried up and later turned net sellers and the Indian markets tanked. The price of crude oil cooled to $70 per barrel in October and below $40 in December 2008 but that did not helped world markets. The global financial crisis was putting huge pressure on the world markets. During the up move of oil price the pain was for the oil consumers and with the oil price hitting a low of $34 the pain had shifted on the oil producers. The global economic downturn had put pressure on the crude oil price. Stimulus package of many nations improved the world economy the oil price has moved up to $80 per barrel.

Long-term investment

Markets move in both the directions and what should be the investment strategy?  Investment in stock market can be a great pleasure if one is not greedy and not in great hurry to make money. Longer the time frame it will be that much easier to make money and conversely, shorter the time frame it will be that much difficult to make money. Besides, tax on long-term capital gains is nil or less than tax on short-term capital gains.

Fundamentals

It is always good to invest in fundamentally sound stocks only. This can save from severe capital erosion even during the bear phase. Besides, during the bad times also these stocks will not pose any liquidity problem. How can one identify fundamentally strong stocks?  Stock Exchanges have strong parameters to identify and to select stocks that can fit into the elite club of market index like Sensex and Nifty. Stock Exchanges also indentify and select strong stocks in different industrial sectors. It is always good to be with the market indices and the sector indices. The Stock Exchanges always keep watch on these indices and pull out the weak stock and replace with stronger ones.

Technical Analysis

Some people buy stocks based on fundamental factors and some people buy stocks based on technical factors. It will be prudent to take advantage of both fundamental and technical factors. Technical analysis of all the stocks in the Sensex, Nifty and Nifty Junior can be viewed in Market Index and stocks from different industries in Sector Index. Some index leaders and laggards can also be viewed.

200 day moving average
Technical analysis using simple 200 day moving average (dma) gives the long-term trend of the market, sector or any scrip. Stock trading above 200 day moving average indicates strength and will be a buy candidate with long-term point of view. On the contrary, stock trading below 200 day moving average indicates weakness and will be a sell candidate with long-term point of view.
The stocks trading above 200 dma are shown in blue colour, stocks trading close to 200 dma are shown in orange colour and stocks trading below 200 dma are shown in red colour. When a stock starts trading close to 200 dma the stock can further strengthen and move above 200 dma. Similarly, when a stock trading above 200 dma starts trading below 200 dma the stock can further weaken and go down.
The daily quotes of Sensex and Nifty can be viewed at left hand side of the page. On clicking View, another page opens and two years chart with 200 day moving average (red line) and with 100 day moving average (green line). Where market quotes are not in the left hand side the daily quotes of different stocks are available in the main page. From the chart one can judge the strength of the index or stock by comparing with the movement of 100 and 200 day moving averages.

100 day moving average
Technical analysis using simple 100 day moving average gives the medium-term trend of the market, sector or any scrip. When 100 dma moves above 200 dma, bullish cross-over happens. In other words, when the green line moves above the red line that is a positive sign. On the contrary, when 100 dma moves below 200 dma, bearish cross-over happens. In other words, when the green line moves below the red line that is a negative sign.

Volume
In the chart, below the stock price movement one can see the trading volume shown as vertical bars. Stock moving high with high volume is a good sign as it shows large participation. Stock moving high with low volume is not a good sign as it shows less participation. Similarly, stock moving low with high volume is not a good sign but stock moving low with low volume is not a bad sign.

Few points to remember

• Buy cheap (sheep)
• Sell dear (deer)
• It is not easy to buy at the bottom
• It is difficult to sell at the top
• Invest with surplus funds
• Never play in the market with borrowed money

Well folks, it’s time to invest with long-term point of view.

Happy investing!