Or it could be short covering.
What you are considering fraud, technically isn't, just because you would be more prudent with the money doesn't mean it is fraud when others are not?
Firstly Kingfisher, you avoided it quite rightly. Others didn't but they are probably Day traders, and will have got stung, because the price has gone back down, so you did the correct thing and didn't touch it.
Others will have bought the stock on the principle of taking an evens bet, some will have been lucky other won't, the ones who were lucky will pretend to themselves it was skill, it wasn't, and those who lost will think it was bad timing it wasn't in both cases it was luck or lack of luck.
Deccan chronicle, has not paid a dividend so why are you even talking about it, forget and walk away.
I had a friend who did Day trading, he started with ￡500,000 (about rupees 50 million @ Feb 2014 prices) when I last saw him he was down to his last ￡90,000 (or rupees 9 million) he had had some spectacular gains and 1 month had made ￡25,000 (2.5 million R) however he also had many losses he lasted about 5 years day trading.
Invest for the long term look at the dividend payment and buy for 5 to 10 years.
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I hope it helps
Hello guys.
I am a person of Indian origin, so I naturally follow the markets back home.
I wanted to know, why is it that when a public company is hit by fraud, insolvency, or the company just crashes to the ground really hard, the stock price hits a floor,and then goes up again?
In the last two years, I've been observing some Indian companies.
1. Kingfisher Airlines
2. Deccan Chronicle (a newspaper company).
Case 1 was a company that had a crap business to begin with. Airlines with all the frills. Eventually they went bankrupt. The management went partying in Monaco, the company had all planes grounded, couldn't pay staff, etc.
The public, along with all institutions knew this. Why the hell would the stock price go up in this case ? Within a month it doubled. There was no DAMN business ! But the stock price kept shifting.
case 2.
This was not such a bad business. but the management/promoter body were frauds. They spent corporate loans and public money raised from the IPO to buy dozens of fancy cars, jets, etc etc. Total fraud lead the company to collapse.
This was also big in the media, and everyone knew how bad of a company it was. cases were filed against them by creditors but since they had proper connections in the government, they stayed out.
It went from a peak of 150 Rs to a floor price of 2. Then it moved back up to 4 again, way after everyone knew the fraudulent acts.
My main question is, why does this happen ? Are people just speculating ? Would it be safe to ride these stocks when it hits a floor ? It is a cardinal sin to go near companies like these as an educated investor, but two times, i have missed out on a 2x'er.
