An analysis of the
Nifty, which was almost at the same level on two different dates, has proved the point that stocks do not follow the index, but the other way round could be true. Thus, experts suggest you to track your portfolio and not the index while picking or
dropping stocks.
We have considered the Nifty on August 26, when it at 4747.8, and on December 15, when the index closed at 4746.4. Though the index is almost at the same level, the movements of specific stocks deviated wildly compared to the difference in the index, hardly 1.45 points or 0.03 per cent. August 26 has a special significance being the Nifty's lowest closing level since January.
Stocks that held strong amid sell-off At the extremes, information technology (IT) major Wipro was up over 27 per cent in this threeand-a-half month period, while capital goods maker BHEL was down by over 28 per cent. In all, 26 stocks ended in the negative on December 15, compared to August 26, while only 24 ended in positive territory.
Experts share tips on how to predict stock price movement "Generally, investors look at the index before taking a trading decision. However, if the stocks in the portfolio tumble, the portfolio losses could be as high as 25 per cent, and vice versa. Thus, following the Nifty while taking investment decisions could be dangerous and misleading," said Rajesh Jain, chief executive officer (CEO), Insight Wealth Advisory."
What to do with shares with no buyers "The change in stock valuations are based more on their specific fundamentals than the general macro-economic fundamentals and global sentiments that the index reflects," Jain added. Even sector fundamentals could change with time as is reflected in cement sector stocks. All the four in the Nifty have posted gains in the range of 12-16 per cent. In the last three months, these firms have hiked rates in the light of a slight demand uptick.
The three IT stocks in the Nifty also spiralled during this period, owing to steep weakening of the rupee. Three of the five top gainers were software exporters, which are expected to benefit from the over 16 per cent dip in value of rupee against dollar since July-end.
On the other hand, capital goods and metal stocks were the worst sufferers. The three capital goods stocks in the Nifty slid in the range of 21-28 per cent, while metal stocks slipped in the range of eight to 25 per cent, with the exception of Jindal Steel, which notched up gains of nearly 14 per cent. "Index is least important for the individual investor. Instead he/she should track their own portfolio of stocks and the sectors they are in," Jain said.
When the general indices like Nifty spikes, it should be reflecting the macro-economic fundamentals or general trends in the global markets. But sectoral indices could be of some help in tracking the fundamentals of stocks, though they do not capture company-specific events.
"Tracking the index for investment decisions could leave the investor in steep losses at times, at around 25 per cent in this case," Jain added.
Courtesy: Mail Today 
Special 
