Hi, The explanation given here is of help to a common man. It is good in that way. However, there is a misleading information also. The last table gives a comparison of values of shares of select tech companies based on their market price in 2004 and 2000. So many changes have taken place in between these years e.g., the face value of Infosys has been changed from Rs.10 to Rs.5 and they have issued bonus shares and huge dividends (recently, they announced Rs.500 dividend per share which is astronomical). This information if missing in the table or the explanation given. Hence, a lay man may develop unnecessary fears about mutual funds as well share markets. Kindly give realistic figures or avoid such examples which are unambiguous. You can give the example of textiles companies whose fortunes have fluctuated so much and now appearing to improve again. Similarly, companies in metals sector as well. Nevertheless, it is a matter of converting your good job into a better one.
You have put in the line "As for the stock examples, neither bonus issues nor stock splits are taken into account. It is presented solely to indicate that the price of shares can zoom to astronomical levels during a bull run"
Well, to present the price of a share at 2 different times without considering the bonus issues and stock splits is totally misleading the reader.
The article seems to have been written for a person new to stock market...in such a case, you are not helping him by putting in the price comparison that you have.
If the face value of a share changes from 10/- to 1/- and it opens at 200/- instead of 2000/- on the next tradind day, will you make it a headline that share price of a company falls 90% in a day and then write a note in the end : 'We have not considered the stock split"....
I think the last table takes the meaning away from your article. You have put Infosys and silverline in the same bracket... it would have been more appropriate has you compared the price after considering the bonus issues and splits.
Strangely, the K-10 stocks which were ruling the roost in 2000 and now are almost worthless find no mention in the table.
Hi, Though the article presents the point of view of the author, he should take care that the statistics quoted are used in context.
Example. Infosys Jan 2000, Rs 16,931.65 Dec 2004, Rs 2,076.65
The author has neglected to mention that Bonus shares were issued by the company in the ratio 3:1, thereby reducing the value of the share to 25% of its value.
I disagree with the message in this article. Specifically, the table: 'share prices of the darlings of 2000'. The shares of Infosys were worth Rs 16932 in Jan 2000. There have, hovever been three stock splits: 26-Jan-00 [2:1], 27-Jan-00 [2:1], 01-Jul-04 [4:1]. Netting off these, the share was worth less than Rs 1000 then, to the Rs 2076 today - a 100% appreciation. Add to this the consistent dividends, and you have a winner. Satyam too is a similar story. Yes some stocks fail, like Silverline. But please do get the facts right. Also a well managed, professional equity mutual fund can consistently outperform the Sensex and other indices, and does not require much involvement from the consumer. The IT industry itself has a higher risk rating than other industries. And potentially higher returns. This needs to be understood. Regards,
The author of the column seems to be quoting the misleading figures to substantiate his stand. The share values of the IT gients shown in the last table of the column, for comparison in the 2000 and 2004 values, are wrong. The author has not pointed out that the shares have gone under split and bonuses which reduces their values linearly. i.e. A share of Infosys worth 16,931.65 in 2000 has gone for a split of 1:2 and a bonus of 1:3, i.e. the comparison shall be done between 16,931.65/8=2116.45 and todays stock value, And not between 16,931.65 and todays stock value. The author obviously has not done it unknowingly, given his knowledge of the stock market reflected in this column. Please refrain from making such populist statements. They will be misleading to the people who are new to the arena.
The subject here - whether the MF IPOs should be avoided, has not been answered clearly. What you have explained as an example is true for any MF, not necessarily an IPO. Does it make more sense to invest in an MF IPO compared to an established one when the market is low?
