Profit and loss: Buoyant markets resurrect day traders
In a volatile market, a few minutes delay can make the difference between earning a profit and incurring a loss.business Updated: Jan 18, 2015 02:53 IST
Every morning, sharp at 9am Sunanda Bhadekar (32), a resident of Vasant Kunj in Delhi, tunes into a business news channel and sits glued to the TV set till 3.30pm eagerly lapping up tips on which stocks will rise.
Simultaneously, on her laptop she buys stocks recommended by the channel’s panel of experts and sells them before the end of the day, usually at a profit. This is called day trading.
“I had never traded in stocks till last year,” said Bhadekar, who quit her job as assistant manager in a multinational food products company four years ago following the birth of her daughter. “A former colleague first suggested that I could gainfully utilize my time by trading in stocks.”
“It’s easy money,” she said. “I know people like me have lost money in the past, but I’m very careful and have returned a profit in each of the nine months I’ve been in the business. The extra money allows me to buy things that I couldn’t earlier.”
“In a bull run, it is easy for newcomers to make money. But when the market turns volatile, things can go horribly wrong and even seasoned investors can incur huge losses. You need a strategy, careful study and discipline to stay in the game,” said Anurag Bhatia, CEO of investment firm Minance.com.
“It’s exciting… you can earn thousands of rupees in minutes. Experts say this bull run will continue for years. I’ll exit the market when experts say the boom has run its course,” said Hardika Shah (36), a Kolkata-based housewife who, like Bhadekar, entered the market recently. But empirical evidence shows that even seasoned investors are rarely able to time the market so perfectly. Result: many investors lose their shirts.
Bhadekar and Shah are among the tens of thousands of investors who have entered the stock market recently, lured by newspaper and television reports of the boom in the stock market — the BSE Sensex has gained about 30% from 22,000-levels to 28,121 over the last year — and mostly second-hand tales of friends or associates who hit the jackpot.
“There are two types of day traders — the evolved ones, who take informed decisions based on global and domestic cues, and the ones who buy or sell based on prices they see on the screen. A large percentage of day traders belong to the latter category,” Jayant Manglik, president- retail distribution, Religare Securities, told HT.
ICICI Bank, HDFC Bank, Religare and several other banks and financial services companies offer platforms that allow investors to trade on the stock market. All one has to do is register online. Though precise numbers are not available, sources said, almost every site offering day trading facilities has seen a jump in the number of registrations.
It’s a pattern that emerges every time there’s a boom in the stock markets. Such small investors entered the market when the boom was already well underway. When the previous booms lost steam, many of them lost massive amounts of money.
Murali Krishnan (52), who took early retirement from a large US software company based in Bangalore, chooses his shares carefully. He studies company balance sheets and tries to make informed choices. “With the government bringing reforms and the economy on the cusp of a revival, it’s a good time to trade,” he said.
“Day trading is quite stressful,” said Bhatia. “The difficulty lies in getting a good software and live feed of stock prices as some feeds have a 20-second delay when compared to the actual stock price.”
In a volatile market, a few minutes delay can make the difference between earning a profit and incurring a loss.
Though they don’t realize it, most day traders — especially the ones who blindly follow “tips” from experts either on TV channels or friends — are actually gambling. If they’re lucky, they can earn good money. But past experience shows that such people usually end up as losers at the end of every boom-bust cycle.