Why Tech Mahindra did not move up in spite of Bonus and Stock Split?

06 February 2015

Why Tech Mahindra did not move up in spite of Bonus and Stock Split?

Greetings from Hitesh! I keep on receiving questions and the above one is the latest one. My regular reader is holding Tech Mahindra and he is puzzled that HCL Tech moved up by Rs.300 after results and bonus announcements on 30^th Jan. But Tech Mahindra – in spite of bonus / stock split and 12% growth in net profit (higher than HCL Tech) – did not move up at all? His question is logical and let me try to deal with that.

Let me give you some other cases also. Company declares excellent results and price goes down!! Company declares bad result and price moves up. Take an example of Reliance Ind, it moved up by more than Rs.50, after bad numbers!!

This is usual thing in market and you can find out many such events if you keep observing in details.

Have you observed this also?

A typical middle class guy is being taught about hard work / honesty / integrity / truthfulness while growing up. When he grows up he sees that the cheaters/ 100% dishonest guys and duty avoiders are more successful than normal guys.

Another example – a guy who smokes/drinks and does all kind of wrong things with his body remains in good health and non smoker – non drinker – health conscious guy has lot of health issues!!

How Normal Guy Thinks?

In spite of above observations, Normal guy’s way of thinking is logical. He thinks - if A is equal to B and B is equal to C – then A must be equal to C!! This may be 100% correct in geometry but in life and market these rules may not always work.

Is Market a Perfect?

Look at the mutual fund guy/SIP guy or proponent of perfect market theorist – they always like you to believe that market is perfect. If market is perfect, then how come one shares moves up and other do not, in spite of giving better results?

What Most Successful Investors Do?

They do not believe in Perfect Market Theory. They do not believe in SIP. They do not believe in Mutual Fund. If you take an example of Mr.Buffett, he has always said – “If market would have been perfect, I would have been a begger!!”

We also follow Mr.Buffett and we do not expect market to behave as per our idealistic logic. We accept the market as it is. When we accept the market as it is – it shows us the things which normal investors can’t see.

What is our view?

We want to end this post with a simple question – if a wife of Doctor and a wife of Patient go to a temple – one praying for her husband’s growth in business and other praying for fast recovery of her husband from ailments – Whom do you think the GOD will listen?

What Next?

Logical thinkers were of the opinion that during last week of December – FIIs will take a holiday!! And see the figures – they were investing like anything in that week!! They missed the once is a life time opportunity.

If you still want to miss the market opportunity – you can do so. Those who want to make money please join us.

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Live With Passion…Invest With Passion.

Hitesh Parikh.