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View Poll Results: Stocks as a percentage of my net assets are -
0 - 25% -- I'm like the most conservative Indians. I love FDs. 396 32.27%
26 - 50% -- I have a few stocks. 549 44.74%
51 - 75% -- I'm an active trader. 201 16.38%
76 - 100% -- Hey, I'm an i-banker!!! 81 6.60%
Voters: 1227. You may not vote on this poll

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Old 19th October 2021, 18:19   #4696
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Re: Do you play the stock market

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Originally Posted by vinodh_eee View Post
Hi SmartCat
Most stocks are surging, but IRCTC stands out among them. Surged closed to 300% in 6 months. Everyday I keep telling myself, today I am going to sell it if it dips, but dips never came in the last few days. What's happening?
I hope you have sold your stake in IRCTC. Apparently it was the positive speculation which had ballooned the price so much. With F&O ban on IRCTC, speculators booked their profits. Difficult to know if this trend will follow on other puffed up stocks.

What do the experts suggest? Should we wait for the IRCTC script to normalize and then enter into a fresh position?

Last edited by Chetan_Rao : 19th October 2021 at 22:21. Reason: typos
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Old 19th October 2021, 22:18   #4697
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Re: Do you play the stock market

NIFTY seems flying and on steroids, but until how long? I kind of lost confidence in the market when NIFTY was at 14.5k and sold most of the stocks. I remember Tata Motors when I first put money during the pandemic was at below 100 levels, but not it is at above 500 levels.

Would the NIFTY balloon burst at some point? Or am I being pessimistic.
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Old 20th October 2021, 10:14   #4698
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Re: Do you play the stock market

I have some basic questions on bonus issue.

1. Where do the companies issue the bonus shares from? What I understand is all the existing shares are held by someone or the other. Is it that the company creates more shares to be distributed as bonus. Similar to printing currency?

2. If more shares are created then the total outstanding increases, which causes the share price to come down proportionately. What is the benefit to the shareholder in such a case?
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Old 20th October 2021, 10:31   #4699
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Re: Do you play the stock market

Gents, no point in wondering about stock price (why is it up? why is it down?) or NIFTY. As mentioned many times before, all you have to do is maintain a particular asset allocation (eg: 50% equities/50% debt). For individual stocks, have some kind of hard valuation metrics (based on trailing or forward PE ratio for example) below which you will buy a stock.

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Originally Posted by fordday View Post
Is it that the company creates more shares to be distributed as bonus. Similar to printing currency?
Yeah, sort of like a country creating currency, but not exactly.

Quote:
If more shares are created then the total outstanding increases, which causes the share price to come down proportionately. What is the benefit to the shareholder in such a case?
No benefit to shareholders as such. Just time pass.
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Old 20th October 2021, 10:56   #4700
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Re: Do you play the stock market

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No benefit to shareholders as such. Just time pass.
I knew it , just wanted to validate. This is all trickery to remain in the news or worse to divert attention from poor performance.


The bonus issue rhetoric that is passed on nowadays like -

company A is rewarding its shareholders with bonus
highly profit making company B with much cash is distributing bonus
companies to look out for offering bonus issue in next few weeks

This seems to create a very tempting offer for the uninitiated.
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Old 20th October 2021, 11:17   #4701
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Re: Do you play the stock market

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Originally Posted by fordday View Post
2. If more shares are created then the total outstanding increases, which causes the share price to come down proportionately. What is the benefit to the shareholder in such a case?
Quote:
Originally Posted by SmartCat View Post
Yeah, sort of like a country creating currency, but not exactly.

No benefit to shareholders as such. Just time pass.
I see two benefits to the shareholders.

If a share becomes more affordable, there will be more demand for the share. E.g. If a rs 10,000/- becomes rs 200/- after a bonus issue, then there will be more new investors willing to buy it.

Secondly, part of your holdings can be liquidated.
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Old 20th October 2021, 11:23   #4702
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Re: Do you play the stock market

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If a share becomes more affordable, there will be more demand for the share. E.g. If a rs 10,000/- becomes rs 200/- after a bonus issue, then there will be more new investors willing to buy it.
Better liquidity is a valid point. Or else we will end up with more MRFs:

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Quote:
Secondly, part of your holdings can be liquidated.
hmm? You can liquidate part of holdings even without the bonus shares no?
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Old 20th October 2021, 11:29   #4703
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Re: Do you play the stock market

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Originally Posted by SmartCat View Post
Better liquidity is a valid point. Or else we will end up with more MRFs:

Attachment 2221370



hmm? You can liquidate part of holdings even without the bonus shares no?
I think what he meant was you can't sell fractional shares. This brings down the minimum value that one can sell.
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Old 20th October 2021, 12:51   #4704
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Re: Do you play the stock market

Quote:
Originally Posted by fordday View Post
What is the benefit to the shareholder in such a case?
Quote:
Originally Posted by SmartCat View Post
No benefit to shareholders as such. Just time pass.
Is there any benefit on taxation front, or there are rules that prevent such activity?
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Old 20th October 2021, 14:14   #4705
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Re: Do you play the stock market

Quote:
Originally Posted by fordday View Post
I have some basic questions on bonus issue.

1. Where do the companies issue the bonus shares from? What I understand is all the existing shares are held by someone or the other. Is it that the company creates more shares to be distributed as bonus. Similar to printing currency?

2. If more shares are created then the total outstanding increases, which causes the share price to come down proportionately. What is the benefit to the shareholder in such a case?
1) My understanding is if bonus shares are to be issued, the company should have plenty of cash reserves part of which will be transferred to capital account, and corresponding amount of bonus shares issued. They can't come out of thin air. Companies sometimes choose to distribute accumulated earnings as bonus shares instead of dividends. A stock split is different though. The number of shares will increase, but share capital will be constant.

2) What outstanding? Shares are not debt. If the company folds up the sharehoder loses his money. It is his investment in the company's business, and any businessman will lose his capital if his business folds up. A shareholder's holdings are his percentage of the liability to the company's business, just like they are his percentage to the profits.

Last edited by Gansan : 20th October 2021 at 14:28.
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Old 20th October 2021, 16:16   #4706
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Re: Do you play the stock market

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Originally Posted by Gansan View Post
1) My understanding is if bonus shares are to be issued, the company should have plenty of cash reserves part of which will be transferred to capital account, and corresponding amount of bonus shares issued.
Correct, bonus shares can be issued out of reserves, but not necessarily cash reserves. What that does is it reduces the dividend payment capacity of the company (in accounting and legal terms) and symbolizes reinvestment of earnings into business.

Quote:
Originally Posted by Gansan View Post
A shareholder's holdings are his percentage of the liability to the company's business, just like they are his percentage to the profits.
When number of shares increase, in theory it does no good. But practically, it has shown to increase share price over the period. I think of two reasons for this:
1) There is increased liquidity (increase in public float as they call it) in the market. There are more shares available for trading, eventually resulting in a better market.
2) The reserves are no longer distributable and that means they are perpetually expected to earn the same return as company's business, rather than being paid in cash some day.

Most of these things are not technical/ mathematical valuation inputs but help nevertheless.
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Old 20th October 2021, 16:46   #4707
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Re: Do you play the stock market

This chap says CSK share value exceeds that of owner India Cements, may be listed soon and other team owners may follow suit in future. Video is in Tamil, won't be difficult for members from kerala to understand and probably to those from Bangalore as well.

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Old 20th October 2021, 20:32   #4708
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Re: Do you play the stock market

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Originally Posted by Gansan View Post
This chap says CSK share value exceeds that of owner India Cements
Is CSK fully owned by 'India Cements'?
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Old 20th October 2021, 21:35   #4709
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Re: Do you play the stock market

He says so, till the 75th anniversary of India Cements last year. That was when CSK was hived off as a seperate company and it's shares were given to existing India Cements shareholders. Says it is trading in the grey market for Rs 135, up from Rs 35 last year. Says it may officially be listed soon, and the other teams may also be listed one by one.

Seems India Cements MD said during the last AGM CSK is now a bigger brand than India Cements, and is driving the company's cement sales in the Northern markets where they had no or negligible sales previously. That the cement brand is literally piggybacking on brand CSK.
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Old 21st October 2021, 15:46   #4710
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Re: Do you play the stock market

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Originally Posted by Gansan View Post
2) What outstanding? Shares are not debt.
I meant the total shares outstanding (or the number of shares). After bonus the share price drops proportionate to the bonus issue. E.g. Apollo Tricoat issued 1:1 bonus last month, so the share price halved from 1500 to 750ish.


Quote:
Originally Posted by SLK View Post
When number of shares increase, in theory it does no good. But practically, it has shown to increase share price over the period. I think of two reasons for this:
1) There is increased liquidity (increase in public float as they call it) in the market. There are more shares available for trading, eventually resulting in a better market.
This brings us to another point of buyback vs bonus. Buyback and bonus are both dished out as reward to share holders. In buyback, the company buys a proportion of shares from the share holders and extinguish it. This reduces the total number of shares. So the share price increases immediately in proportion.

But in bonus issue its the opposite. And if the share price increases after bonus, its because of secondary factors.
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