Conquering Greed and Fear in Stock Market Investment

May 24, 2009                     

Indian Stock market has greeted the clear cut mandate in favour of Congress led UPA and absence of  “Left” interference  with a poll vault jump of 2110 points on May 18 just with just 60 seconds of trading. Sensex had gained 26% in 2009 but within few seconds on May 18t, Sensex gain jumped to 48%. The rupee climbed 3% against the dollar, the biggest gains in two decades. The market was looking for stability and it got what it wanted. 

Fearful Black Monday - May 17, 2004 and Hopeful Golden Monday May 18, 2009

Current euphoria is a contrast from the Congress victory five years ago. The Sensex plunged 11 percent on May 17, 2004, the most in more than a decade, twice attracting suspension of trading on investors fear and concern that a government formed by the Congress Party and communist allies would slow the pace of growth. Left party was the strong component of 2004 UPA government. The Sensex stood at 5020.89 at the start of trading, and fell to 4227.50 in one day. The Sensex closed at 4505.16. Monday May 17, 2004 considered as Black Monday in Indian Stock market history.

On May 18th 2009, market zoomed on HOPE, a hope that the  pro-reformist agenda of UPA government without Left party, will accelerate the growth and economy will move into fast track. Monday May 18, 2009 became Golden Monday for Indian market.

At the end,. Indian democracy is the real winner. Indian voters gave a strong message to the entire world and whole world started looking at India once again as a potential superpower.

Foreign Institutional Investors are back.

FII’s always keep close watch around the global and Indian politics and economy and are the first ones to sniff any positive or negative developments..  In  April itself, FII ‘s started pumping money into Indian stock market.   In April 2009 they have made a gross purchase of equities worth Rs 40881 crores, while they sold shares valuing Rs 33497 crore, resulting in a net purchase of 7384 crore.. In May already in first 3 weeks they have purchased equity worth 54520 crores while they sold equity of  40344 rores resulting net buy of 14176 This is the highest net buying by FII’s since October 2007.

According to data for the past 24 months, market movements show that the market has moved in the direction of FII trend. Data also shows that FII selling was highest in   Nov-Dec 2007 and  Jan 2008  when the market was at peak.  FII’s wants to invest in the economy which is going up and India remains a long term reliable and profit play for FII’s. 


Retail investors need to be very cautious
To make money in the stock market investors should buy when the market is low and sell when it is high. But unfortunately individual investors who are usually “late comers” in the market usually buy high with greed and sell low in panic. 

“It is optimism that is the enemy of the rational buyer” Warren Buffet

Once again retail investor’s mindset has changed suddenly.  There is huge cash waiting to enter into Indian market.  Suddenly growth became visible and hence retail investors started chasing growth stocks instead of value stocks. Construction and Real estate stocks, which have been hammered over the last year, saw sharp rise in their value as investors bet the incoming government would boost infrastructure spending. The markets are looking forward to the government’s reinforcement in foundation of pension, insurance and disinvestment areas. And another hope is that the Central bank will trim the cash reserve ratio for banks and will adopt measures to drive interest rates down.

Individual investors are backward looking, and the stock market is forward looking. Legendary investor Warren Buffett once remarked about about the Internet bubble: "The world went mad. What we learn from history is that people don't learn from history”

When things look bright, analysts are back in business TV screens with smile giving their recommendations and predictions. Top analysts are of opinion that Sensex will hit 21000 in 2010. Same analysts were proclaiming the glory of Sensex in December 2008, predicting it touching 25000 by mid of 2008. Markets tend to swing from"depths of despair to euphoric highs and we are probably at euphoric highs right now. This might take us to spectacular height.. But caution is the watchword for  retail investors 

As the market peaks, almost anything is considered as a “can’t miss” investment.. However, investors should keep in mind that rampant euphoria is occasionally the set-up for a violent correction. The rally may be halted any time  by global markets, monetary and fiscal constraints and bad news form manufacturing and industrial data. It is better for long term investors to look for value and  should  not get caught up in euphoria.

“For some reason people take their cues from price action rather than from values. Price is what you pay. Value is what you get” Warren buffet

Conquering greed, fear and impatience:

Greed, fear and impatience are the three worst enemies of an investor and investor wins when he conquers these three enemies.  Fear and greed are two biggest emotions which moves market up and down and impatience is a emotion which derails the investor form his investment plan. The primary concern of investment is to make more money and accumulate wealth. But if emotions start ruling the investment strategies, inevitably, investor will make a wrong decision. An investor with” get-rich-quick” mentality loses his control over the emotions resulting losing track of this investment plan

Reason for these emotions is ‘Volatility” which is a inherent feature of stock market. Volatility is a reality that can't be avoided. More we can control our emotions, the better off we are as an investor. . When markets are rising, investors tend to forget about the fundamentals and overall strategies and that can lead to problems. When market reached 20000 in December 07, analysts were quick to proclaim the glory of Sensex predicting its reach to 25000.. Retail investors poured money into the stock market when Sensex was trading at expensive 28 P/E (price-earning ratio).  

Situation was opposite when valuation was very cheap (Sensex P/E less than 10) and Sensex was trading 8000-1000 levels.  During this period out of fear investors either rushed out of the market or tightly holding cash Analysts were quick to paint a gloomy picture and to predict market will bottom at 6000 levels. Investors have let fear dictate their investment decisions.  Many investors who had discontinued Systematic Investment Plan (SIPs),  have missed the recent rally.

Letting fear dictate investment decisions and rushing out of the market at an inopportune time will cause disappointment.  “I should have invested when market was 8000 levels” this is the general statement from the investors.
How to take rational decisions 

It is almost impossible to time the market.  Market will take off with any positive news when investors least expect it and it will not look back for some time. This is what happened on May 18th. All those who stand at the sidelines holding cash will feel disappointed and frustrated having “miss” the chance to reap the benefits of sudden rally.

A patient investor is always successful and never misses out. An investor who makes compounded annual growth of 20-25% for long term is a real winner. An investor who made 100 percent in a short time might not even be there as an equity investor in long term. One who uses the market to make quick bucks often loses more than he makes because market is erratic and unpredictable. A patient investor is the one who has a clear cut plan, understand his risk profile and then invest. A systematic Investment plan is the best way to win over emotions and take rational decisions.

Those who have sufficient knowledge and time to monitor the market can buy shares systematically through their demat account.  However, recent study revealed that most of the investors who have opened demat account have become traders rather than investors. May have become addicted to trading in stock market have lost focus on their actual job and profession, even lost their job.
The best way is to participate in Indian growth story is buying “ basket of shares” through  mutual funds where professional fund managers with in-depth market research buys shares on behalf of investors. Systematic Investment plan in mutual fund is a brilliant strategy which saves you from the volatility of the market and allows a investor to participate in stock market irrespective of market conditions in a disciplined manner. 

Investing in SIP is very simple. Investor should have pancard to invest in mutual funds Those who do not have pancard casn obtain it easily. Investor can easity build a corpus of more than 1 crore for  retirement or for child education with monthly investment of Rs. 10000 for 15 years with 20% compounding annual growth. Diversified mutual funds have given more than 25% compounding returns over last 15 years. Those who have started their SIP investment one year back has already have a return of approx 20-25%.  Sensex was at 17000 level during this time last year and at present it is at 14000 levels During this period SIP investors have gained approx 20-25%.


There is tremendous amount of hope for medium term and long term growth due to the decisive pro-reform victory. UPA government has a huge responsibility to perform on the economic front. Currently SENSEX is trading at 18 P/E. For short term we have concern on valuations. and also concern on current account, budget deficit and weaker rupee.  The Reserve Bank of India Governor on May 22nd has cautioned the new Government that another fiscal stimulus package would exert pressure on the rising fiscal deficit. However he is very hopeful that right mix of macroeconomic policy and corporate strategy, the economy will emerge form the global recession stronger than before.  Stock market is a leading indicator of the economy. Market is already charging ahead reacting to the next part of the economic cycle.  2009 -10 is a year of sowing and accumulation. As political risk is very low, Indian fundamentals offers a golden opportunity to create long term value for the investors by  investing  in the growth oriented quality businesses of 2nd fastest growing economy. 

“20 years from now, you will be more disappointed by the things that you did not do, than by the ones that you did…so, explore, dream and discover” – Mark Twain

The writer is financial consultants at Win-Win Investments, Mangalore, can be contacted  at email: or Cell:  +91 9980202153 

Andrew L D'Cunha - Archives:

by Andrew L D Cunha
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Comment on this article

  • Rampa, kudla

    Thu, May 28 2009

    What to invest excess money, when there is no excess left itself. Live life to the fullest and enjoy. All the rest is rubbish - You didn''t come with anything and you go with nothing.

  • Richard M D'' Souza, Bajpe/Bahrain

    Wed, May 27 2009

    Friend Keep up the good work. People need advise and you are doing exactly the same. Guys out there... if you wanna invest or adivs=ise WIN WIN INVESTMENT is the right place. Service and advise best in town. It's my experience. Now is the time.

  • R.bhandarkar., M''lore

    Tue, May 26 2009

    Mr.D''Cunha-It''s good that u have mentioned about FII''s but please let the readers know that the credentials of many investing in India are suspect! so much so that even Auditing firms like PWC which were setting up exam papers or questions at least for CA exams)have tarnished their names! These stock markets like ours depend upon the whims of a few!! have u realised what would happen if any of the skeletons in the Ambani''s closet start rolling out ? then there would be no place to hide even for the UPA Govt! The Investment guides are just useless for the same purpose. People with no experience should never ever enter these stock markets!! It''s a jackal''s jungle out there! Only those with money might and those who have reached the point of No Return may be advised to stay!!

  • A.D''Cunha Shenoy, Mangaluru

    Mon, May 25 2009

    Investment certainly is a game played by many players. Dont play the game when rules are uncertain. Stock market has no rules. Even the best of the best cannot forsee the peaks and valleys which depends on many factors including hype and hoopla. Real slow growth is sustainable. Instant growth is risky and vulnerable. Invest only the the EXCESS money and be prepared for the worst. Do not loose what you have for your survival. Always remember middle investment agents/brokers work for themselves and not for the average invester. This has been proved in the current crises.

  • A.S.Mathew, U.S.A.

    Mon, May 25 2009

    It is an informative article. A saleman has to sell himself to the customer, before he can sell the product. When India is a solid place of political stability and religious freedom, naturally capital inflow will be accelerated to India like a river. India is going to experience greater economic growth in the days ahead, surprising other affluent nations.

  • Godwin D''Souza, Moodubelle

    Mon, May 25 2009

    Stock market investment is not a gamble as said by a reader. Fundamentally strong companies like Infosys, Reliance, L&T etc. have given good returns to their investors over the years. Please study the company before investing. If you cannot do it yourself, get professional help. Be patient.

  • A.R.Suvarna, Mangalore

    Mon, May 25 2009

    Daijiworld has published this article at a right time when lots of my friends and others are jumping to invest in shares without understanding anything. Those people should read this article and take decision. Investors should not become greedy. Slow and steady wins the race.

  • Veena Anitha Hegde, Kadri

    Mon, May 25 2009

    Stock market investment is not a gamble at all. As mentioned in the article it is investment in quality companies of India. My dad is investing in Indian stock market since last 25 years and I am investing in SIP. This article gives good direction. Thanks to Daijiworld and Mr.D Cuhna.

  • Thomas Baretto, Navilur/Austria

    Sun, May 24 2009

    People who did not learn from history will at least learn from this article. It gives rays of hope and encourages everyone who wants to invest money in India. Many who lost their hard earned money due to greed, fear and impatience will change their thinking. Dear Mr. Andrew D Cunha, you have done a good job. Thanks a lot. Daijiworld is encouraging people by publishing such standard, informative articles. Even the new Govt.of India brings hope to the people. One finds enough things which make life difficult. I even know a few people who were not only discouraged but even went to the extent of commitiing suicide. I thank all the people who prudently elected the present Govt. to rule and to lead India in the right direction. Let our people work together with the hope of seeing our Mother-India reaching the hights, internationally!

  • judith, mumbai

    Sun, May 24 2009

    In stock market it is difficult to ascertain the highest or lowest point. It is a gamble after all.

  • Edmond G. Noronha, Kirem - Sharjah

    Sun, May 24 2009

    Hi Andrew Brilliant in sharing your market full of thoughts. Rgds

  • John Pereira, Kulshekar/Ghatkopar

    Sun, May 24 2009

    Timely article will help us to disciple/clarify our doubts, apprehensions and give us a guideline for taking a cautious approach by genuine investors

  • Manohar Veigas, UDUPI

    Sun, May 24 2009

    This article by Mr. Andrew D''Cunha has been able to throw light on the actual facts in a nutshell. One thing is for sure, we will not be seeing any lows of 8000 sensex and the low-side has been seeing continuous correction. With the UPA in majority and almost wipe-out of the left, the Indian Economy will be able to reform its economy to withstand the world recession and that''s good news to cheer. Regarding the upward trend, I feel slowly but surely the returns in the Stock Market would rise. Investors with a minimum 2-3 years waiting period, investing in good-track record stocks would reap the fruit of the future booming economy.

  • Amita D Souza, Mangalore

    Sun, May 24 2009

    Timely Article. Many people lost money without proper guidance. My husband also lost money as he invested more amount when market at 20000 and sold at 11000. Daijiword is is giving good guidance. Thank you. I have asked my husband and others to read this article

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