Trading in the Indian Stock markets

Now that I am about to finish my majors, one of which happens to be in economics, I have decided to finally learn some tricks of the trade - literally. ( Fun fact: OED has appended a rather controversial meaning to the word. Check here ) The idea is to start trading virtually in the Indian stock markets. I will be using icicidirect’s platform for virtual stock trading, although the UI as of now seems very discouraging. I might change to something else, with time. The big question is of course how am I goint to invest. Well, I initially intended to invest like a sensex linked fund. That means, I wanted to divide the total money I have among the same stocks and the same weights as is used to calculate the sensex. This was out of a simple observation that as of today the sensex more than doubled in the last five years and this happened while the sensex was clouded with all the negative sentiments and other things like that which financial newspapers report. These days it looks like things are hunky dory in the market and hence it’s best to invest in the market. That said, I also realised that such indices tend to follow a cycle and it looks like we are on the peaks these days and it may not be the best starting point to buy in a sensex linked manner, hence I am choosing to select my stocks in a different manner. It’s 2 in the afternoon and I had a heavy lunch, so I do not feel like doing a lot of work. I am taking the path of least resistance. I have basically selected a few stocks from the 30 in the sensex because I like the companies and more than 66% of the users of moneycontrol.com think that I should buy the stock. Simple. No brains. It’s almost like picking the stocks at random. Since this is testing the waters, I am buying one share of each company and will judge my portfolio’s performance in percentage terms only. Here are the stocks that I am buying: 1) Infosys 2) HDFC Bank 3) Tata Steel 4)  ONGC 5) Unilever   Now if I look at the graphs, all these stocks are doing really well right now (and hence they should fall in time to come), but I am still sticking to the (very stupid) strategy. Let the users tell me what should I do. It is almost like an experiment. I check moneycontrol for these five stocks everyday and sell only if more than 50% of the users think I should sell a stock. If they do, I sell the stock and shift to another stock that they recommend I should buy. I will sell all stocks and end the experiment, if my portfolio value increases/reduces by 20 percent of what I started with.  I plan to continue on this experiment for the coming month. Setting christmas day as my deadline to evaluate the strategy.

EDIT: Adding post christmas analysis

Well, this experiment saw a very depressing end. Somehow my account on the virtual trading site I had been using got reset and now I have no record of how my stock selections have done. Honestly, my interest in trading waned with time and I didn’t follow any stocks after the first few weeks of writing this post.  From the little time I did follow I learnt that virtual trading requires a lot more motivation than real trading, where real profits and losses keep you interested in the markets. I should however take this lesson keeping in mind that I didn’t put in enough effort to generate a real interest in the stock markets. Some other time, maybe.

Another thing I learnt was that with the small capital that is typical of investors like me, the gains are slow and not very great. This definitely takes away the thrill  - something that pulled me towards trading in the first place. Whenever I do decide to get back to the markets I must figure a way out of the buzz kill that time becomes ever so often.

So I guess I can end this post here. The post made me start a new category of personal finance on the blog and now that I will be finally earning I should hopefully have something to write about in this regard as time passes by.