My experience in the Indian stock market
I grew up in a typical Indian middle-class family in a small town. During my school days, we used to follow a routine of having dinner at 9 pm while watching news on a telugu channel (E-TV).
Towards the end of the program, the newsreader would talk about what happened in the share markets and I never understood a thing of what she was speaking. I just used to giggle when she said “Sensex” as it had “sex” in it. When I asked my dad to explain, he tried to but I was still not mature or smart enough to digest the knowledge. But I always used to keenly watch those fascinating graphs and wonder what the fuck was going on inside that famous building. The same story continued until I joined college.
Days went by quickly in college and after I joined my first job, my father made me invest in UTI retirement benefit mutual fund despite my strong reluctance. He said that by investing small amount every month from that young age, I would end up with a huge corpus by the time I retire. I was just earning 25000 per month at that time and putting away 3000 every month sounded like a nightmare and totally unnecessary. I never actually thought about retirement back then. I always believed life is short and you need to live life every moment.
I thought investing is only for the rich. It’s only later that I realized investing is what makes one rich.
My second job was at Housing.com. During a casual conversation on personal finance, one of my colleagues recommended me to read a book called “The Blueprint” by Ankur Kapoor and Abhik Prasad. I read the first few pages of that book and immediately got excited.
One of the first paragraphs of the book says if you are just leaving your money in your bank account, you get 4% interest which is taxable and India’s avg inflation is hovering around 7%, which essentially means you are losing money by not investing.
That was thought-provoking. It was the starting point of my interest in the finance industry. I completed reading that book in a day and it gave me basics of how stock markets and mutual funds work. I invested in a couple more equity mutual funds after reading it.
Then I joined a startup in Bangalore and learnt that one of my colleagues was into direct stock investments. He always looked super mysterious to everyone as he had absolutely no expression on his face. Most of the times, he was neither happy nor sad nor angry. He was calm. Super fucking calm. He used to keep aside the money required to pay his rent, food and other bills and invest the rest of his salary into the stock market. He had been apparently doing this since his college days. One fine day, he showed me his portfolio and I saw a jaw-dropping value of close to 50 lacs. I was super excited and we started having lots of discussions since then. I started loving the knowledge he had and asked him where to start.
He suggested me to go through Varsity, Zerodha’s learning module. And he also strongly advised me not to venture into trading but just do long-term investments in fundamentally strong companies.
Markets, Trading, and Investing Simplified.zerodha.com
Varsity is a fantastic material and I strongly recommend everyone to read it. Doesn’t matter if you want to invest or not but you should just go ahead and read this material. It’s such profound knowledge shared freely by the Zerodha team. Kudos to them! It explains right from how a company is formed to why it goes to stock markets to what are stock markets to fundamental analysis to technical analysis to futures and options to trading strategies. And the beauty of it is everything is explained in simple layman terms.
That’s it. This module helped me leap-frog me from a typical Indian middle-class boy staying away from stocks to jumping deep into the market with all that I had.
I started investing heavily in all equity mutual funds, including sectoral funds which possess the highest risk. I also started direct stock investments. I slowly ventured into intraday trading levelling up my risk appetite. Then started Futures and Options trading which is the highest level of risk a retailer can take in the markets. It’s a pure adrenaline rush. I completely ignored my colleague’s advice of not going into trading. I even ventured into cryptocurrency world including investing in random ICOs but let’s not get there. It’s a different story altogether :)
I still remember my first futures trade. It was SBI futures. I blindly initiated an intra-day buy trade (without realizing it was intra-day), saw a potential profit of +4000 in just 2 minutes. I was super excited, went for a bath thinking that it would go to 20–30k by end of the day and if I can keep doing this regularly, I’ll never have to work anymore. I was thinking of composing my resignation e-mail. I took a shower, came back and opened the trading terminal again and horrified to see -8500 in red. By end of the day, I made 16,500 loss and the trade automatically got squared off as I hadn’t realized it was an intra-day trade. I tried again in the next trading session and made 23k loss in a day. I never lost a sum of ~40k that quickly.
I did not stop and started following free tips from various telegram and whatsapp channels. And fortunately, I quickly realized it was always a 50–50 chance of making money by following these tips. It’s just useless.
I put a big pause to FnO trading and started reading more on the subject. I took courses on NSE. I read up investopedia and other good material.
I tried again and this time, the burn was less severe. My decisions were logical and I was not doing blind gambling. I made profits in few trades and kept strict stop losses for trades that went against me instead of averaging. It seemed to be going fine.
There were quite a few trades like this where I made 10k profit in 15 min and successfully booked the profit.
I was able to do this consistently for 3–4 sessions and then lose out more money in a single session than what I gained in the last 3–4 sessions.
I was basically eating like a chicken and shitting like an elephant in derivatives trading.
At the end of the last financial year, I realized I have a net loss of 44,000 after paying STT etc. And now the horror comes. If you do derivatives trading and want to offset your losses against other gains, you need to report the losses in your tax returns. And you can’t do it yourself as you need to get an audit done by a CA. 44k is not a small amount to ignore. So, I went ahead, paid 8000 to a CA to do the audit and file my income tax returns.
So, I finally took my ex-colleague’s advice and stopped trading now that my loan EMI also started. I am only focussing on long-term investments and mutual funds.
So, what did I learn from stock markets?
A hell lot.
First of all, stocks made me fucking unemotional about money. Be it gaining or losing. I just don’t feel anything now if I gain 20k in a day or lose 20k in a day, which is happening almost every day now given the volatility of the markets in the last few days. Seeing numbers like this, and much worse than this, on a bearish day is now a pretty common scenario:
and I feel absolutely nothing. When the market is bullish, I see similar numbers on the positive side.
I have some money parked in Yesbank shares. It was one of my most profitable bets until a month or two back and now this happened:
>40% crash in a week. It’s the stock bearing the highest loss in my portfolio now. I wouldn’t go into details of why this happened but do I feel worried or sad? No. I feel nothing.
Apart from being unemotional, I also learned all the stock market lessons you keep hearing, the hard way. These are the typical lessons which you read everywhere but don’t follow and end up learning after you actually hit the blocks.
- Timing is important. You need to know when to exit better than when to enter.
- Most importantly, patience is the key. Time in the market is more important than timing the market.
- Don’t trade with half-knowledge.
- and finally, you definitely need some luck with trading. Yes, you do.
- Stick to mutual funds if you don’t want any headache.
Apart from making money, this episode of my life improved my knowledge in general on how the whole world works. We are all living in one tightly integrated economy which can have butterfly effects. A tiny change in fuel price could lead to disasters in certain economies. Before stocks, when I see the news that petrol prices have increased by 5 paise, I was like meh, how does it matter. I now know that it fucking destroys wealth elsewhere. Before stocks, when I read about US dollar going strong against rupee, I used to feel patriotic and thought we need to do something to make Indian rupee better. I still feel that but the first thing I would look for now is to take a look at the stocks of export companies because a strong dollar is a good news for such stocks.
And there are many many more such lessons.
So, what do I want to tell others now?
- If you are a young adult having a source of income, start investing today if you haven’t already. You may never be able to do it later in life when you have a loan or get married or have kids.
- Even if you are the risk-taking type, don’t go into trading. Not intraday. Not Futures. Not Options. Do proper fundamental analysis and go for long-term investments in good companies. This is a great book I would recommend:
" Hundreds of books are there about ""How to make money from stocks?"" Still 80% small investors suffer loss in the…www.amazon.in
- If you don’t want to take any risk in direct stocks, mutual funds are the best way to start your investment journey.
Ah, mutual funds again. Let me connect the dots. I did not stop my learning in this field even after making losses. In fact, I now realized what to do and what not to do here. Whenever I go to my hometown and start having discussions on this topic with my friends, most of them have absolutely no clue. They are still stuck in thinking of the word ‘sex’ in ‘sensex’. There are people who earn quite well but don’t invest at all due to complete lack of awareness. There are people who invest in shitty schemes in small towns. I saw an opportunity there. Why can’t I be an advisor and get these people to invest in the markets in the easiest way possible, yes — mutual funds? I wondered.
So, a few months back, I prepared for the regulatory examination required to sell Mutual Funds, conducted by NISM. I passed the exam and now I am a certified mutual fund advisor (ARN-150349).
This is the story of me from a nobody to a certified advisor helping others invest in mutual funds. Do follow my facebook page here:
Want to know more? Find me on www.raviteja.in