GAFLA

LEARNING THROUGH MOVIE

BY SHASHIPRAKASH SAINI MBA-IB FMS BHU

BULL MARKET AND BEAR MARKET

A market trend is the tendency of a market to move in particular direction over a period of time A bear market describes a downward market trend Whereas a bull market describes a upward market trend The terms bull market and bear market can be used to describe the overall market or even sections or sectors of the market Ex- the market is bullish on technology stocks and bearish on pharma stocks

CONTD
Bull operator

Bear operator

The golden phase of the economy from 2000-2007 was a great example of a bull phase If anyone bought stocks at that time , in hope of selling them later at higher price that person is called bull operator A bull market has optimistic outlook , i.e prices are expected to increase in future

Obviously , bull cannot last forever and then bears take over The bear operator has pessimistic outlook of the market They expect market will fall down for some considerable time They make profit by short selling

MORE ANIMAL TERMS USED IN STOCK MARKET

CHICKEN PIG

Chicken are those investors who are full of undue fear to step into market They are always afraid that they will lose money Since returns are tied to risks, they have to contend to rock bottom returns

Pigs are high-risk investors looking for the one big score in a short period of time Pigs buy on hot tips and invest in companies without doing their due diligence Professional traders love the pigs, as it's often from their losses that the bulls and bears reap their profits

HAMMERING
The rapid and concentrated sale of a stock thought to be overvalued by the market. It performed by investors and speculators who believe that prices are inflated and that a period of liquidation is imminent
Hammering the market is achieved through large sale orders or many small sell orders. In some cases, investors may even collaborate on orders to attempt to push the share's price even lower

Hammering is done in bull phase by bear operators so that market can fall and comes in bear phase. Thus by short selling bear operator can make profit
Whereas bull operator tries to maintain market in bull phase by purchasing the falling stocks so that bull run continues

HOW HAMMERING WAS TACKLED

In the early 1990s, the banks in India had to maintain a particular amount of their deposits in government bonds
This ratio was called SLR ( Statutory Liquidity Ratio)

The government decided that the banks need not show their details on each day, they need to do it only on Fridays
That meant that banks would sell bonds in the earlier part of the week and then buy bonds back at the end of the week. The capital freed in the starting of the week could then be invested

CONTD
Lets say that there are two banks A (short) and B (plus). He took the money from A and went to B and said that he would pay the money on the next day to B but he needed the bonds right now
But he offered a 15 % return for bank B for the one day extension. Bank B readily agreed with this since it was getting such a nice return

Now since broker was dealing with many banks at the same time he could then keep some capital with him at all times

CONTD..

He takes money from A on monday, and tells B that hell pay on Tuesday, then he takes money from C on Tuesday and tells D that hell pay on Wednesday and the money he gets from C is paid to B and as a result he has some working capital with him at all times if this goes on with other banks throughout the week The banks at that time were not allowed to invest in the equity markets Subodh Mehta had very cleverly squeezed some capital out of the banking system. This capital he invested in the stock market and managed to tackle hammering done by bear operators

LIBERALISATION: ECONOMIC
REFORMS
The new policy attempted to remove unnecessary hurdles in securing licenses, adjusting output to administered prices and denying industrial licensing to companies. A number of measures were undertaken in this regard
Fiscal stabilisation to check fiscal deficit to keep it at much lower level

Integration with the global economy by removing controls on foreign trade and exchange rates, lowering tariffs and rationalising their structure and substantially
Internal liberalisation to increase competitive pressure

Relaxing regulations regarding external capital flows and proactive policy for attracting FDI to encourage growth