Great Puzzle of Stock Market - HDFC | Stocks and Commodities

February 23, 2016
Time: 10.30 pm

Great Puzzle of Stock Market - HDFC:

1. We know that when the time is bad, FIIs sell the shares.
2. But what I am puzzled is the amount of selling in certain stocks.
3. I have taken HDFC, as the promoter stake is very very low. HDFC Bank, ICICI Bank, L&T and Infosys are the other shares where promoter holding is very very low.
4. Why I have taken a share with very low promoter stake?
5. When promoter stake is very very low, total market capitalisation is very close to free float market capitalisation.
6. I get the free float market capitalisation data from NSE website.
7. Free float market capitalisation of HDFC is about Rs 1660 crores.
8. Since January 1, when the selling started, HDFC shares worth Rs 10895 crores traded in NSE alone. Shares are being traded in BSE as well as MCX. I am ignoring those trades.
9. I am also ignoring the trades in F&O.
10. I am just considering only Cash market trades and that too only in NSE.
11. Out of the Rs 10895 crores of selling (remember there is equivalent amount of buying, if no buyer then how somebody can sell?) about 80% or about Rs 8500 crores is delivery based selling (or buying).
12. When the total Free Float Market Cap is only Rs 1660 crores, there has been a selling of about 6 times that figure in delivery based selling. That too in just less than 2 months.
13. If you analyse the other stocks, you will know that the story is more or less the same.
14. Then who is buying and who is selling?
15. Why are they buying and why are they selling?
16. Logically if the selling amount exceeds the Total Free Float Market Cap, the selling should stop as there will be no seller, assuming the the buyers in the last few days are not selling.
17. The fact that the selling equivalent to Free Float Market Cap happens once in every five days, shows that those who are buying and taking delivery keep on changing their mind and in turn they are selling just after 5 days.
18. So who says delivery based buying is for long term?
19. Assuming that the transaction cost is 0.5% (Brokerage, Service Tax, STT, Stamp Duty, Turnover Charges, SEBI Charge etc), 0.25% on buy side and 0.25% on sell side (Remember for every buyer there is one seller), total transaction in the last 2 months in HDFC alone was Rs 50 crores.
20. This is excluding intraday, F&O, BSE, MCX treades. In reality, more trades happen in F&O.
21. If you take all that into account, Rs 100 crore will be the total transaction charges.
22. This is only for 1 stock, there are about 200 stocks which are being traded actively and another 800 stocks which are traded actively but not in F&O.
23. If you take all the trades together, about Rs 5000 crore is going out of the system as transaction charges.
24. If you see on net, if people lose Rs 5000 crores per month, all these would have gone as transaction charges and there will be no one with profit.
25. If somebody needs to make profit, then some people have to lose more than Rs 5000 crore per month.
26. Yet every one feel that he can make money in stock market.
27. I really do not understand how the system works and who makes money.
28. What lures the people to the stock market?
29. No 1 business family, Anil Ambani, all his company stocks are trading at 10% of its value in 2008.
30. Bank of India was trading around Rs 180 in 2004, now trading at less than half that price.
31. India's number 1 PSU Bank, SBI is trading at less than half the price of 2008.
32. GMR Infra, Unitech, JP Associates, GVK Infra, LITL, IVRCL Infra, the list is endless which lost more than 90% of its value since 2008.
33. Are the investors here to make some money for themselves?
34. Or are the investors here for the benefit of intermediaries and industrialists?
35. Every investor should think over.