FINANCIAL RISK AND REWARD-MY NERVOUS EXPERIENCE BY CA R.V.RAO HYDERABAD-9849436267

FINANCIAL RISK AND REWARD – MY NERVOUS EXPERIENCE
BY CA R.V.RAO- HYDERABAD-MOBILE 9849436267
post@istory.posterous.com

I bought 200 eq. shares of Satyam computers Ltd@ Rs 1600 per share in the year 2001 ( I do not quite remember if it was the year 2001 or 2002) on a Monday only with an intention to sell on or before Friday in the same week. The intention was to gain on increase in share price in the 5 days. since in those days the settlement cycle was 5 days, there was no need to settle in a day or two like we do now. This action of purchase of 200 shares of Satyam computers was based on an insider news that the quarterly results to be announce in that week it self would be excellent and share price would go up.
Since the settlement has a 5 day period, I was hoping that the share price would go up and I would make money without investing any money. My broker was told that i would settle on or before the Friday . I enjoyed my broker’s confidence but I had not enjoyed any limits with my broker.
Frankly speaking I was a salaried class employee and was clearly not in a position to pay Rs 320000(200 shares x Rs 1600 per share )plus brokerage .
it was my sheer hope that the share price would go up on quarterly results announcement and I would sell and make money on or before that Friday.
Easy money I thought I would make without any investment, since I enjoyed my broker confidence.
The quarterly results were duly announced in 2or 3 days .but the results were not encouraging enough to increase the share price.on the contrary the share price declined gradually from Rs 1600/- to Rs. 1100/
I was shocked and do not know how to react and how to salvage the situation and come out of the grave situation.
The share broker was calling me up every day after Friday that either I should book loss of Rs 100000(200 sharesx Rs.500 per share which is the decrease in price ) and pay him the money.
Or he told me that I should pay Rs 3,20000 plus brokerage …and take delivery.
Since I did not expect f such a drastic fall in share price in only 5 days and since I do not have financial muscle or resources, I was not in a position to tell hoim yes or no for any of these 2 alternatives.
After constant pressure from my broker and also since I did not want to book loss of Rs 100000
(remember what WARRN BUFFET-SHARE GURU said long back- that only 2 points we need to remember in stock market- 1.) never book a loss 2) remember the point 1. ) ,
I decided to take delivery .but where is the money.i remember that HSBC bank was offering loans under the title- asset finance . so I rushed to HSBC f or loan of Rs 320000/- against the 200 shares of Satyam Computers .HSBC bank officials asked me to take delivery of the shares and keep them in my demat account and pledge the shares to HSBC and .then only I will get the loan amount to pay to my broker.
I filled up necessary application for loan which was forwarded to GSBC head office in Mumbai.
Meanwhile I asked my broker to give delivery challan in my name and transfeered the 200 shares to my demat account.
Then I asked my D.P where I have my demat account that I need to pledge the shares to HSBC..they assisted me in cpmpleting the necessary formalities for pledge.
By that time HSBC sanctioned my loan against shares . I pledged the shares to them , and took loan and paid my briker.
I was taking a lot of time to come out of the situation in which I was because of the sudden and sharp drop in share price and my rushing for loan etc…
Gradually the share price went up to Rs4500/ when I sold the shares .
But I learnt a big valuable lesson that one should not day trade without knowing the technicals of stock market or atleast one should be financially sound to meet any eventuality.
So this was my nervous experiment in stock markets and how I was rewarded for a risk I have taken.
REGARDS AND THANKS,
R.V.RAO- HYDERABAD
MOBILE 9849436267