Profit-Loss is the core psychology which keeps the stock market running. Several theories have been established in both technical as well as in the fundamental analysis domain to cut down the losses and increase the profits. In tandem to these theories, several stock market experts have emerged offline and online by recommending buy-sell scrips to its users.
This article will help you understand whether these are really an stock market expert or commentator.
The stock market is seen as one of the economic barometers of a country. A stock exchange is the main organism of the stock market eco-system. In India currently, there are 7 active stock exchanges. Of these exchanges, NSE and BSE are the most popular ones. There are several debates regarding NSE or BSE which is better, for which an article has been published on FundsBase, discovering that certainly, NSE is more popular than BSE. In India, Securities and Exchange Board of India regulates the stock market. This includes all the stock exchanges and the financial intermediaries. SEBI has also provided a platform called SCORES where an investor’s grievance is handled directly by the appropriate authorities.
Since the inception, stock markets have evolved as a very attractive hub to raise funds for corporates as well as earning opportunities for the participants. Despite the several stock market myths, recently there has been a sudden increase noticed in the figure of the stock market participants. All credit goes to the strict supervision of SEBI, the regulatory authority of the Indian stock market. This strict supervision is applied by the combined efforts of 20 departments of SEBI.
For decades, the stock market participants have been trying to figure out the ways to earn more and lose less in the market. Interestingly, this activity has taken quite a momentum in the 21st century. This may be attributed to the huge temporal stock market data available for the analysts. This pile of data has helped to establish various theories in both technical and fundamental analysis domain.
Digital revolution swept-off many traditional brokers who had always treated the stock market as their monopoly. When middlemen were removed, the knowledge and trading platform were made available directly to the participants. When participants got the freedom, the enthusiasts dug out more deeply and established more firm and winning theories.⇯
The Stock Market Experts
Lots of professional and independent data analysts sensed the profit-inclined psychology of the market participants. Several experts/analysts started mushrooming every nook and corner offline and online. While a couple of them are genuine, most are just running a shop to make a profit for themselves. These experts/analysts recommend buy-sell-hold for particular scrips routinely. Such recommendation comes in various formats e.g. television, email subscribers, sms, social media and face to face personally. Some mediums are free while some charge a fee.
Users of Stock Experts
No product can exist without getting consumed in the market. Thus consumers are required for any service or product to sustain. The users of stock market experts/analysts are categorized below depending on their psychological state.
- The Novices
- The Speculator
- The Lazies
- The Busy-Bee
- The Experimenters
A newbie to the stock market. He/she has no clue about how to progress. The best way is to find the one who knows (or at least seems that he/she knows). This psychology tends to find an expert. Usually, it lands to someone, on the television screen.
Speculator is also one of the categories of the market participants. This type is also usually a novice but in just an advanced stage. It knows the buy-sell process and the basics but doesn’t know how to earn the profits. This category is psychologically a gambler, thus believes in taking its chance. This chance mostly results in a huge capital loss. Continuous losses lead to finding a help other than him/her. This search ends up to an expert/analyst.
Learning something new is the toughest task on the planet. Its the toughest because one has to fight with own self. One has to dilute or in the worst case scenarios completely wipe out the old learnings to get expertise on the new one. Old and new learnings may be the cardinal directions. A lazy is not the one who grabs the bed most of the time instead, the one who can’t leave the bed when necessary. A lazy has to fight too much to learn something new. The easy choice is to find a helping hand so that the pain to learn can be avoided. Here comes the experts/analysts in the picture.
This may be a businessman or a 9:00 to 5:00 worker. Stock market attracts this category and it enters. This one is neither lazy nor a speculator but doesn’t find time to learn something new. This situation inclines him/her towards some medium providing the buy-sell recommendations.⇯
They experiment with everything. Yes, that’s right. They believe in doing experiments with even the widely accepted theories. If a theory is working perfectly for the whole of the world but not for them, even then a conclusion is found. That theory is not applicable. That widely accepted theory is excluded forever, from their further improvisations. For them, experts/analysts also need to be tested and verified. Its just a part of their experimentation.
SEBI Guideline for Research Analyst
There are several experts/analysts providing their services online and offline. Do you know that many of these are working illegally? SEBI, the market regulator in India has provided the guidelines to register as a research analyst in the securities market (Research Analysts) Regulations, 2014 (“RA Regulations”).
These regulations were notified on September 01, 2014. The RA Regulations have come into effect from December 01, 2014.
The regulations specify conditions for registration, certification, limitations on trading by research analysts, limitations on compensations of research analyst, various disclosures to be made during public appearance and during making recommendations through public media, code of conduct, records to be maintained, manner of conducting inspection, etc.
This information is provided so that you can make sure whether your expert/analyst has registered itself under SEBI or not. Also, it can help you in case you are planning a startup as a research analyst.
Recently, SEBI has started a crackdown to take legal action against the non-registered buy-sell recommendation providers. This happened after several non-registered WhatsApp buy-sell recommendation groups came into limelight.⇯
Stock Market Expert or Commentator
The very basic idea for taking the help of an expert/analyst is to make sure that the losses are cut down and profit is maximized. Right!
But, does that really happen?
I presume you have listened to the commentary of a cricket match. Have you analysed the statements, before a ball is thrown and the statements after the hit-miss by the batsman? Do you find it interesting how the commentator does the cover-up?
What do they actually do? Are they really worth listening? Are they just making watch the match more interesting? For what they are receiving the money?
If that money had been yours, would you have paid them the money for the same commentary or prefer using the same money for something else.
The intention of this post is not to dilute the fun of the cricket match but just to extrapolate the psychological nodes to the stock market recommendations.
Let’s drape it to the market experts/analysts recommendations and see what comes out.
The statement before the ball is a preface and the after hit-miss is the aftermath.⇯
There are several theories prevailing in the technical analysis and the fundamental analysis domain in the stock market. Usually a genuine expert/analyst gets a buy-sell signal based on a well-established theory which has worked flawlessly in the past for him/her. But unlike other sciences, the stock market doesn’t function on rigid theories. This is attributed to the fact that there are several factors that affect the stock market.
A practical situation for two genuine analysts
For a scrip at a temporal point, two experts/analysts may observe a trend differently, and conclude results in the cardinal directions. Both will recommend opposite activity to their users. One will recommend to buy while another to sell. Obviously, both can’t be right. Thus, one’s users will eventually make money while the another one’s will lose.
This happened because one of the analysts was able to calculate the consequence and the intensity of those factors correctly while another one failed.
These experts/analysts have to give recommendations on a routine basis, which means they are bounded to give recommendations whether or not they are confident about the same. This is done by doing fancy explanations about a present or past trend.
This recommendation is a PREFACE. A Commentary, before the ball reaches to the batsman.
Remember, these service providers may be genuine researchers or just a part of a group whose main objective is to manipulate the price of a scrip. If a manipulator service provider recommends an activity to its wide user-base and if it’s applied as a token of trust, then the price is manipulated. This activity is called a scam and we have seen some biggest scams in Indian stock market. All these scammers were somehow using the recommendation process by the trusted service providers (both registered and non-registered).⇯
Now the ball is up to the batsman. It may be a hit or a miss.
After applying the recommendation of the expert/analyst you may earn or you may lose. In case you win that’s ok but what if you lose? What if your loss is more than you can afford?
Are you going to apply the recommendation from the same source once again? I suppose NO.
The reason for not applying the recommendation in future is that you have faced losses in three dimensions.
- In the stock market
- The loss of value to money, you paid to the expert/analyst.
- You feel bad for trusting someone else and not learning it yourself.
May be next time you will learn more and prefer to lose money by taking your own decisions.
Obviously the chances of winning may drop but eventually one day you will start taking better decisions and winning more on your own.
But what does the expert/analyst has to say after their recommendation goes flat or wrong. It’s always hilarious to hear the coverups from their side.
Illustrating the cover-ups may dilute the core intention of this article. You may have gone through those coverups. Maybe that’s why you have started taking your own decisions.
Own-decisions Own-failures Own-winning = Self-Growth
Stock market experts/analysts are mushrooming every nook and corner both offline and online. They recommend buy-sell for a certain scrip to its users. It’s interesting to see how they cover up their failures portraying themselves as just a commentator and not as an expert on the subject.
To see if market is open today see Stock Market Holiday for year 2019