A multibagger lost in SWING - Thread on BSE stock.

Few months back BSE had given its single day biggest fall as SEBI had found wrong amount of transaction cost being paid to SEBI over the years, the figure was in somewhat 100s of crores with interest. This created panic in short term, however we noticed this can easily be paid off by BSE with its cash in hand figure and future for BSE overall looked promising due to increasing F&O activity in India. So we gave Squad a swing opportunity around Rs.2800.

Hit on VOLATILITY cycle :

As soon as we had entered stock, it went into a slow downtrend for few months.

Around Rs.2450 we made a E2 (Second entry) in stock. Blessed to have calm clients, who reacted positively to this discount and infact some squad members had asked for buy the dip opportunity in this stock themselves, we too showed some affirmation and gave them entries even when stock went till Rs.2100 Levels.

Finding Rationality in irrational situations :

The downturn was triggered by the fear of new rules maybe introduced by SEBI around budget like 30% flat tax on F&O maybe introduced and it will affect EPS (profitability) of BSE on larger scale - estimate 40% drop.

Ghav par Namak movement was Nirmala Tai increasing STCG tax and STT cost which drove further negative sentiments in stockmarket related stocks.

"Every crisis has logical opportunity", we analysed two scenarios here :

1) Is it realistic to expect govt cutting down its own income by demotivating F&O traders and playing with public sentiments, just for the good of us? I mean its so unlike of a Govt to lose potential income for itself just for the awareness of public.

2) Is there any other step govt might look into for not impacting its income on so large level? Logically only limiting the number of weekly expiry contracts sounded good rumor to somehow handle outrage losses of retailers and still not losing potential revenue.

NOW DO YOU REALISE THE CASE SCENARIO 2 WAS ACTUALLY AN OPPORTUNITY FOR BSE - IF LOOKED CLOSELY ... HOW?

NSE currently dominates the F&O segment in India with 80% market share and highest volume due to more number of contracts.

Rumors said SEBI may cut down number of contracts to 1 for each exchanges. This effectively means NSE has to give up 4 weekly contracts and BSE had to give up just 1 contract and now both these exchanges will have equal weight-age, effectively pushing BSE market share from 20% to somewhere around 50% in F&O segment which contributes huge amount in its revenue. Of course this becomes a competitive disadvantage for NSE at the same time.

With rumors proven right, stock gave positive momentum as soon as news broke out on SEBI imposing restrictions on exchanges for number of weekly expiry's by Nov 2024, stock has been touching new HIGHs.

In this roller coaster of sentimental opportunities, we booked our profit around 27% when stock reached around Rs.3500

Logic behind SELL? Well it was bought as a SWING, so at Rs3500, stock reached its potential target as per fibonacci tool. Valuation of stock also seemed sentimental driven going forward.

Do we REGRET SELLING stock early? Hell yeah we are humans so although materialistically it was a good profitable trade, psychologically it feels like a loss, if we were holding right now it would be more than 70-80% returns in portfolio.

But does this mean we made wrong decision? I don't think so, in Swing trading we are supposed to book profits and gain active income so respecting resistance zones is very crucial to book profits.

More on BSE stock positive sentiment is NSE looking to get listed on BSE that will push market capitalization of BSE as NSE is 5 times bigger company.

Are we looking at new entry in stock at current level? Hell NO, maybe if it comes on certain discount we may look into buying on dips at ideal support levels but on current valuation it doesn't seem to be ideal pick.

All the above reasons mentioned are already factored into the stock, any disappointing quarterly results or missed street estimates may put stock into decent correction.

If you're already holding the stock for long term, don't panic in few temporary downturns and track quarterly performance with stockmarket sentiments closely.

This blog was solely written to make our viewers understand sentimental expectations from a stock can break any resistance zones but sticking to your strategy is just as equally important in longer run. Being clear about swing and long term investment is also important to reduce your impact of REGRET in stockmarket and improve your decision making.

Maybe a better strategy would be to put trailing stoploss of 5-7% when stock was at our resistance zone, in such case we would be exiting around Rs.3900 (10% higher returns) but overall we feel it was right swing to capture hold and EXIT.

Regards,

Team GROWTHSQUAD.

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