Equity market players can ensure better returns, and thereby minimise losses, by using technical analysis tools, according to renowned Mumbai-based stock analyst Dr C K Narayan. | |
| Speaking at a workshop organised by Capstocks and Securities ( India ) here, Narayan said that technical analysis would provide a deep insight into how the market moves. |
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| "It reveals at what levels a particular stock is being traded and its momentum, whereas fundamental analysis only deals with events related to a company, sector or the economy in general. It is vital for those eager to book profits to utilise the tools of technical analysis," he said. |
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| Explaining that technical analysis is a superior method when compared to fundamental analysis, which most investors rely on, Narayan said, "technical analysis helps in timing the market, in knowing and deciding when to buy or sell." |
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| "For various reasons, technical analysis has been misunderstood, poorly marketed and positioned," he said. The basic human nature of rejecting something not known to them is the primary reason for the slower acceptance of technical analysis. "Technical analysis provides insight into how to set up a trade, how to define the initial risks, to estimate targets and help in deciding when to exit and make re-entry into the market." |
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| "Conventional wisdom related to investing need not result in better returns for the investors. For example buying when the prices are low need not be a good strategy for all stocks. For the day traders and intra-day traders, it is essential that they choose volatile stocks and stocks with good institutional support. Those are the stocks that are likely to provide immediate returns for the trader. It is also important for investors to look at the dominant sectors in each rally and invest more in these sectors to ensure liquidity," he felt. |
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| Pointing out that there were no good stocks or bad stocks, Narayan said the timing regarding when to buy and sell was more important in booking profits. In 1991-92, the conventional wisdom was to invest in blue chips but those stocks were now trading below par, he added. |
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| Adding that technical analysis would help in managing investments better than blindly trading in the market, he said many institutions, including BSE, provide courses in technical analysis. It was the individual investor or trader to customise the tools of technical analysis to his advantage, he said. |
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| Capstocks managing director V Rajendran who spoke on the occasion said investors could make use of the services of the full technical analysis department functioning at Capstocks since 1996. |
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