Why the Hindenburg storm is NOT over yet | How stock prices move? | Akshat Shrivastava
Summary
TLDRThe video discusses the ongoing Hindenburg issue's impact on the Indian stock market, emphasizing the importance of understanding macroeconomic factors and stock price movements. It explains the supply and demand dynamics affecting stock prices and the role of counter buyers. The speaker warns of potential market corrections, particularly for small and mid-cap stocks, and advises investors to focus on fundamentals, diversify portfolios, and prepare for volatility. The video also touches on the Indian job market's challenges and promotes a master class on AI for skill enhancement.
Takeaways
- 📉 The Hindenburg issue is not resolved and has implications for the Indian stock market, particularly with short positions built for the September to November period.
- 📈 Despite celebrations of the Indian stock market's resilience, the real concern is the potential impact around November due to Hindenburg's short positions.
- 🤔 The video emphasizes the importance of understanding how stock prices move, debunking the simplistic view that stock prices rise with good results and fall with bad.
- 📊 The script explains the supply and demand concept in stock pricing, highlighting how changes in demand can shift the demand curve and affect stock prices.
- 📉 The video discusses the risk to different types of stocks, including Adani stocks and HDFC stock, and the potential for overvalued stocks to become hyper overvalued.
- 💼 The speaker recommends learning high-impact skills like artificial intelligence, especially in times of economic uncertainty, and mentions a free master class for the first 1,000 sign-ups.
- 🌐 The video touches on the political sensitivity of the Hindenburg report and the allegations against the CB chairman, urging investors to focus on macroeconomics and investing rather than taking political sides.
- 💡 The importance of understanding the role of counter buyers in the stock market is highlighted, explaining how the absence of buyers can lead to a fall in stock prices.
- 📊 The script points out that foreign institutional investors (FIIs) are not heavily investing in the Indian market, which contrasts with domestic institutional investors (DIIs) that are actively buying.
- 📈 The growth of Systematic Investment Plans (SIPs) and their contribution to the Indian market is noted, but there's a warning about the potential risk if retail investors slow down their SIP investments.
- 🌐 The video concludes with advice for investors to diversify internationally, prepare for market volatility, avoid buying stocks based on nationalism, and focus on fundamentals to preserve investments.
Q & A
What is the main issue discussed in the video?
-The main issue discussed in the video is the Hindenburg issue and its impact on the Indian stock market, particularly the short positions built by Hindenburg for the period of September to November.
Why is the Hindenburg issue still a concern according to the video?
-The Hindenburg issue is still a concern because Hindenburg has built massive short positions in the Indian market for November, which could potentially affect the stock prices and market stability.
What is the role of supply and demand in stock price movement as explained in the video?
-The video explains that stock prices move based on the supply and demand graph. When demand for a stock decreases, the demand curve shifts leftwards, leading to a lower stock price at the new intersection point of the supply and demand curves.
Why is the speaker cautious about the Indian job market in the context of the stock market?
-The speaker is cautious about the Indian job market because the unemployment rate is rising, which can affect consumer confidence and spending, potentially impacting the stock market.
What is the significance of the master class mentioned in the video?
-The master class mentioned in the video is significant because it offers an opportunity to learn high-impact skills like artificial intelligence, which can be beneficial in times of market volatility and unemployment.
What are the two key rounds between Adani and Hindenburg as described in the video?
-The first round was when Hindenburg shorted a lot of Adani stocks in January 2023, and the second round started recently when Hindenburg targeted the Chairman of Adani, making allegations and engaging in a back-and-forth of clarifications.
How does the video explain the impact of FII (Foreign Institutional Investors) on the Indian stock market?
-The video explains that FII have been net sellers in the Indian market for the last few years, which means they are not buying into the market, which could be a concern for market stability.
What is the role of DII (Domestic Institutional Investors) in the Indian stock market as per the video?
-DII are the ones creating counter buying positions in the Indian market, supporting it whenever it falls. They are buying the stocks that FII are not, and their actions are largely funded by the increasing SIP (Systematic Investment Plan) contributions from retail investors.
What is the potential risk to the Indian stock market according to the video?
-The potential risk to the Indian stock market is that it is heavily dependent on SIP contributions from retail investors, which could be volatile. If there is a shock in the market or a slowdown in SIP contributions, the market could be hit very hard.
What advice does the speaker give to investors regarding portfolio management in the current market scenario?
-The speaker advises investors to diversify their portfolio internationally, be prepared for market volatility, avoid buying stocks based on nationalism or emotions, and focus on fundamentals to preserve their investments.
Outlines
📉 Hindenburg's Impact on Indian Stock Market
The video discusses the ongoing concerns regarding Hindenburg's short position in the Indian market, emphasizing that despite recent celebrations, the situation is still concerning as massive short positions were built for the period around November. The speaker also plans to explain the dynamics of stock price movements and the risks associated with different types of stocks, such as those of Adani and HDFC. Additionally, the video touches on the rising unemployment rate in India and promotes a master class on artificial intelligence for skill development.
📈 Understanding Stock Price Movements and Market Influences
This paragraph delves into the mechanics of how stock prices move, focusing on the supply and demand graph. It explains that stock prices are determined by the intersection of supply and demand curves, and that changes in demand can significantly affect prices. The speaker uses examples of overvalued stocks and counter buyers to illustrate how demand is manipulated in the market. The paragraph also discusses the role of domestic institutional investors (DIIs) in supporting the Indian market and the importance of understanding market trends and the behavior of foreign institutional investors (FIIs).
💹 Market Trends and the Role of SIP Contributions
The speaker outlines current market trends in India, highlighting that foreign institutional investors are not actively buying into the Indian market, while domestic institutional investors are supported by a significant rise in systematic investment plan (SIP) contributions. This growth in SIP investments has led to a dependency on retail investors, which could pose a risk if these investors withdraw their investments due to market shocks. The video warns of the potential for a severe market correction if retail investors become volatile.
🌐 Diversification and Managing Valuation Risk
The final paragraph emphasizes the importance of international diversification and being prepared for market volatility. The speaker advises against investing based on nationalism and instead encourages investors to focus on fundamentals. The video also discusses the concept of valuation risk, suggesting that the market is currently at an all-time high and vulnerable to a significant correction. The speaker concludes by urging investors to study the fundamentals of stocks, diversify their investments, and be prepared for potential market fluctuations.
Mindmap
Keywords
💡Hindenburg issue
💡Short position
💡Supply and demand
💡Stock price movement
💡Counter buyers
💡Foreign Institutional Investors (FII)
💡Domestic Institutional Investors (DII)
💡Systematic Investment Plan (SIP)
💡Valuation risk
💡Market correction
💡Diversification
💡Fundamentals
Highlights
The Hindenburg issue's impact on the Indian stock market is still unfolding, with short positions built for September to November.
Investors should be concerned about the potential market fall around November due to Hindenburg's massive short positions.
Unemployment in India is rising, nearing 9%, indicating a concerning economic situation.
Learning high-impact skills like AI can be beneficial during uncertain economic times.
The video explains the complex dynamics of stock prices and market movements in a simple manner.
The first round of Hindenburg's shorting of Adani stocks occurred in January 2023, with stocks yet to recover.
The second round of Hindenburg's actions targets the Chairman of Adani Group, with allegations and clarifications being exchanged.
Investors should focus on macroeconomics and investing rather than taking political sides in the Hindenburg issue.
Understanding the supply and demand graph is crucial for grasping how stock prices move in the market.
Overvalued stocks can become hyper overvalued if demand increases, as seen in the case of Vai Renewables.
HDFC Bank and Kotak Bank's stock prices have not risen despite revenue and profit doubling due to stagnant demand.
Counter buyers play a significant role in managing or moving the demand of a stock.
Foreign Institutional Investors (FIIs) have been net sellers in the Indian market for the past few years.
Domestic Institutional Investors (DIIs) are the primary counter buyers in the Indian market, supported by SIP contributions.
A potential shock in the market could lead to a severe hit on Indian markets due to reliance on retail SIP investments.
Small and mid-cap stocks are particularly at risk during market corrections due to their high risk profile and DII support.
Market valuation risk is present as the Indian market is at an all-time high, with the potential for a significant fall.
International diversification and being prepared for volatility are recommended strategies for investors.
Avoid displaying nationalism by investing in specific private companies without considering their fundamentals.
The importance of transparency and trust in attracting foreign investment, crucial for a strong economy and stock market.
Investors should focus on reducing valuation risk and preserving their investments in the face of potential global shocks.
Transcripts
hi everyone welcome to today's video so
on this video I'm going to help you
understand systematically why the
Hindenburg issue is not over yet and
what are some of the key points that you
must remember this video is especially
important if you have invested a lot of
money in the Indian stock market right
now now the reason why I'm saying
Hindenburg issue is not over yet take a
look at this graphic it shows that
Hindenburg has built its short position
for September to November right in last
Zone it has built today people are
celebrating you know what Indian stock
market did not fall and it is great that
Indian stock market did not fall I
myself has invested a lot of money in
the Indian stock market I don't want it
to fall but the situation is not
regarding today the situation is
regarding what happens around November
right because that is when massive short
positions are built on the Indian market
by Hindenburg so that is the explanation
that I'm going to give you all right
additionally I will also speak about the
fact that how does exactly a stock price
move what is the risk to different type
of stocks like adani stocks HDFC stock
all that stuff so I'm going to have that
conversation with you and I'm going to
explain this entire very complicated
story in very simple points so let's go
Point by point and also on that note
that since we are very worried about the
market Fall we should equally be worried
about the job fall in the Indian job
markets right now the unemployment rate
is rising in India like anything it is
hitting close to 9% now which is a very
bad situation so during Times Like These
you can learn high impact skills like
artificial intelligence and in order to
do that I would highly recommend you to
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will happen at 7:00 p.m. so in case you
are interested you can check out the
links in the description and comment box
so with that said let's move over to the
main video so the first key point that
you must understand is the entire
Hindenburg adani SL sa chairman Saga
right so the first round was between
adani and Hindenburg and in that round
Hindenburg shorted a lot of adani stocks
they probably booked profits in it I
don't know I'm not privy to that and
that thing happened in January of 2023
for example if I just show you so here
is where the the Hindenburg shot was
right and till date adani Enterprise has
not recovered similarly a few other
adani stocks since that time Hindenberg
has shed adani stocks they haven't yet
recovered so this is a very important
point that we must be aware of so this
was round one between adani and
Hindenburg the second round started
literally like 3 4 days back when
Hindenberg came out that hey we are
going to like you know sort of do some
Daka in the Indian stock market and then
eventually it turned out that you know
they were targeting the gun towards the
sav chairman right and they said that
you know what okay there are like some
allegations against her that she
diverted funds to a foreign
entity I don't want to rehash the case
because this is a very politically
sensitive case people are taking sides I
don't want to get into the middle of all
this so I will leave the Judgment up to
you Hindenburg has issued their entire
report the CB chairman and her husband
has explained what their Viewpoint was
then another round of allegation was
made by Hindenberg and then a lot of
clarification back and forth is
happening right so this is where the
case is we as investor should not be
taking political sides here so let us
focus on the macroeconomics the
investing part of it which brings us to
point number two right and this is a
very important point and the point has
to do with the fact that exactly how do
stock prices move now people are not
understanding how exactly stock prices
are moved in a particular Market we
assume that you know what boss when good
results come the stock Rises and when
bad results comes the stock Falls that's
a childish understanding of the stock
market so in the next 1 one and a half
let me give you the Practical explainer
as to why do the stock prices move and
for this you need to understand two
concepts okay so the first key concept
is a graph called as supply and demand
curve or supply and demand graph of the
stock market so it looks something like
this right so this is the supply of any
stock or any asset for example nifty 50
and demand curve is downward sloping
okay now typically what happens is that
the supply of stocks usually Remains the
Same it's not as if that h tomorrow will
suddenly increase more number of stocks
or more number of outstanding stocks or
Adis are going to usually increase their
number of outstanding stocks please
notice the word usually of course the
stock supply can also be increased but
generally it does not go up dramatically
compared to demand so wherever the
supply curve and demand curve meets that
explains the price of a stock right so
this let's quote it P1 now what happens
is that in order to move any particular
stock price the demand of the stock is
played with for example Hindenberg came
out and
said what is the goal of Hindenburg well
the goal of Hindenberg is to move the
demand reduce the demand of stocks or in
general the Indian market demand they
want to kill it or like you know they
want to reduce it so if they are able to
successfully reduce it right then this
demand curve will shift leftwards and we
will get a new intersection Point
somewhere here and that leads to a fall
in price P2 okay so this is how a stock
price change now there are two three
related points for example there could
be a massively overvalued stock and I
will show you the example also now that
Stock's fair value should be let's say
150 rupees okay you are watching it
today and it keeps on going up it goes
to 250 rupees now can you definitely say
that it will fall from this point the
short answer is no an overvalued stock
can become hyper overvalued if the
demand of the stock can be increased a
classic case study is that of Vari
Renewables so take a look at this this
literally looks like a pump and dump and
the stock was taken up like 30 times or
40 times right from its basic price
there was no improvement in fundamentals
but the stock went up why because the
demand of the stock was managed right
this is first very important Point
second key Point our second key example
is that of HDFC bank and cotk bank right
for example right now you might be
scratching your head take a look at this
graphic you will see that in the last
four years the revenues of HDFC Bank
cotch Bank have doubled profits have
doubled there is no issue with the stock
but the stock is moving in a range why
because the demand of the stock is not
going up this is the insightful point
that you should know that brings me to
related point about the supply and
demand of the stock that how exactly is
the demand of a stock managed or moved
right so for this you need to understand
the concept of counter buyers right so
now what is the meaning of counter
buyers so let me explain it by showing
you the actual trade book so what you
will notice is that see this is ITC
stock so on the left side you are seeing
the buyers right buyers and on the right
side you're seeing sellers right red
sellers okay and this concept is called
as order book matching so let's assume
that the price of ITC currently is 265
okay and you want to sell right so you
are one seller and you have one stock so
you will place one bid to sell ITC at
265 rupees now if you get one buyer at
265 rupees then this trade is executed
right and you get money in your account
and all that stuff subsequently clearing
process right so we are not getting into
the technicalities of it now the reason
why a stock price Falls is this that hey
now you are trying to sell ITC at 265
you have one stock and you don't get a
counter buyer there is no one who is
willing to buy this stock so what will
happen next you will place the bit 265
to 263 P then you again don't get a
counter buyer you keep on doing that
exercise and at 250 you get your one
buyer to buy this stock so this is
called as order book matching that your
order got matched at 250 rupe and
therefore the price of the stock fell
from 265 to 250 right so this is the
meaning of falling of the stock this was
a technical explanation that I wanted to
give you and understanding these Salient
points is going to make you a better
investor so in case you are interested
in learning more about such fundamental
points I explain it on my member
Community excellent reviews about the
community so far so in case you want to
check it out I will put the link in the
description and comment box I also teach
International investing I personally
putting a lot of my money for
diversification purposes outside India
now any sensible investor should be
hedged right uh we are retail investors
we don't know what is going to happen
what news is going to come all that
stuff so I teach that style of investing
also so in case you are interested you
can definitely check it out so anyways
coming back and now explaining this
concept at a market level in India there
are two very important trends that are
happening in India right now in fact
there are two three Trends so I'll
explain it very very quickly the first
key trend is that FIS are not buying
into the Indian market too much this is
not my opinion this is what is happening
for the last 3 4 years so I will show
you the data you can see year-wise data
of FIS so FIS mean foreign institutional
investors these are foreign players
right so in 2024 they are net Sellers
and they have sold very aggressively in
2023 again fiis have sold the Indian
market they bought the Indian market in
these three years right but in total the
first two tabs and and in total G the
second tab right then you will see that
they are in the last 1 2 3 4 5 almost 5
years F have been net sellers or they
have not bought the India market very
very important point and you must
understand this okay so this is fact
number one fact number two then who is
actually buying it and who are the
counter buyers in the Indian market it
is the dii now what is the meaning of di
diis are they are like HDFC AMC nepon M
AMC all the fund managers and all that
stuff who are domestic institutional
players they are the ones buying the
Indian market okay now comes the
question that hey where are they getting
the money to buy the Indian market from
and why are they buying the Indian
market okay so for this you need to know
fact number three which has to do with
SIP contribution so for example this is
the entire chart take a look at this
that the total sip contribution in
October of 2016 was
3,434 crores this has gone almost five
times right in October of 2023 so in
almost 7 years 5x growth this is massive
right now why am I talking about sip
because the way this model works is that
see you are retail investors you will
run your sip every month every first of
the month you will give like 50,000
Rupees as investment to your fund
manager mutual funds whatever you invest
in this is given to companies like HDFC
AMC right this is given to companies
like nipon this is given to companies
like edel Vice and all that stuff they
are diis right they pick your money
right and then they end up buying or
creating those counter buyer positions
that I was telling you about right so
this is very important fact and if you
relate all these two three facts let me
sumarize because I'm getting to
something interesting here number one
foreign institutional investors are not
buying the Indian market number two diis
are the ones who are actually creating
counter buying positions in the Indian
market and supporting it whenever it
falls and number three the Sip
contribution is rising like anything and
there has been exponential growth of sip
Investments which brings us to very
interesting prognosis of the Indian
market and this is something that you
need to be very very careful about and
the fact is that see if for some reason
there is shock in the market that for
example retail investors are not very
comfortable doing sip or they slow down
their sip or if there is any kind of
panic in the market in the Sip Market in
in in India because retail investors are
very flimsy right I mean they are not
like that well versed with investing
World they have not gone through a lot
of hardening process per experience
right so for them they are much more
volatile right so they can leave the
market at any point in time so in case
there is a world oriented shock Indian
markets are going to get hit very very
badly this is not my opinion this is
what the data tells us this is point two
because fi money is not coming to India
to be honest the FI type of stocks are
not giving a run up now these are stocks
like HDFC Bank kotch bank right clean
clean companies uh um why am I telling
you these are fi type of stocks because
FIS what they do is that they do hedging
right so hedging that for example they
are buying HDFC Bank in the cash market
and they might be selling HDFC Bank in
the Futures Market why because they are
hedging their position ha ha 2 2,000
crores they will buy it in one go they
cannot be sitting on so many naked
positions per se they have to hedge it
they have to protect or buy a type of an
insurance otherwise they can go bankrupt
right so they can only do this fno on
limited set of stocks in India and this
is one of the reasons why HDFC bank and
KK Bank type of stock haven't really
given a run up because last 3 4 years fi
money has hardly come to India so this
is fact number one fact number two that
there are certain types of stocks that
diis prefer to buy right and for example
small cap midcap category is entirely or
almost entirely supported by diis or
domestic institutions not by Foreign
institutions per se because the risk
profile of these stocks is very high
okay the sumission of these two points
is that if you combine these two things
whenever the market correction happens
small and midgap are sitting on a keg of
powder right and they can go down very
aggressively this is point one point two
certain stocks where there are no
fundamentals but they are still being
bought by diis because of wide variety
of reasons I'll not go into them they
will fall like anything okay whenever
the correction happens I have zero
interest in politics I'm simply trying
to tell you and teach you these points
so that if you if this logic makes sense
you can reorganize your portfolio a bit
see small and midgap you have to be
confident you know Market is going to
survive nothing bad is going to happen
fundamentally weak stocks you should cut
positions not because ke they cannot
rise they can continue to
rise and keep getting money and they
keep on pumping in like small capap
midcap stocks then they can keep on
Rising but right now there is valuation
risk in the market now what is the
meaning of valuation risk let me explain
that also by using some technicals so
okay so valuation risk means that you
can see that this is the trading
long-term trading Channel we are
somewhere here at the support right now
if this support gets broken there is
another 10% fall now 10% fall is for the
broad Market the large caps but there is
at least a 20% fall for small and mid
gaps here right so this is the valuation
risk that we are running right now
because the market is at an all-time
high and any kind of global shock for
example if there is some war that breaks
out right and it gets escalated then
these are all Global risks that is there
so therefore at this stage you should
focus on reducing your valuation risk
why because F or foreign institutional
investors are also exactly doing the
same right they are going to safer
markets right safer markets now what are
safer markets safer markets are where
the valuation risk is less that's a
second there is more investor trust now
there is not an easy way for me to
explain this so I'll use a very simple
example what constitutes as a good
economy right so for example let's say
that we are talking about our domestic
tourism now people used to come to Goa
now because a statue has been built in
Gujarat now those same domestic touris
start going to Gujarat do you think that
this is real addition to our economy the
short answer is no right that money
would have anyways come to Goa but
instead of coming to Goa now it is just
simply going to Gujarat per se okay so
this is not like real increase in
prosperity or leading to any economic
strength per se okay so this is 0.1 but
on the flip side consider for example BJ
Khalifa right now BJ Khalifa in Dubai it
attracts a lot of foreign tourist they
come with it carry their National
currency from Sweden or like India they
convert it into Duram and put this into
Dubai economy or UAE economy now do you
think that in the second example the
economy is getting strengthened the
short answer is yes right and you don't
require like massive understanding of
Economics to understand this basic
simple point so similarly in the stock
market or for any economy it is very
critical that we bring foreign money in
and that requires transparency that
requires trust for example again I will
speak from uae's example so U real
estate has been giving very good returns
why is that because if you go and check
on this website call as Beth right you
will see that every single transaction
that happens in real estate has been put
on a blockchain you can track that which
apartment in which locality got sold for
which price what was the square fot or
square meter of that apartment that is a
level of transparency but do you feel
okay transacting in like Indian real
estate no there is massive opacity you
don't know like you know how much back
wide green money pink money is there and
all that stuff no idea of rates whatnot
so there is no transparency what do you
think foreigners do do foreigners really
buy real estate in India no so very less
very few foreigners would be buying it
similarly if similar situation starts
happening in the Indian Equity Market we
will entirely be dependent on your sips
that is the simple point you give your
sip till the time your sips are going
markets will keep on going up whatever
random stocks need to be purchased will
be purchased from that perspective and
whenever it corrects Whenever there is
any kind of external shock you are
holding a very high Sovereign risk right
so this is the precise problem that we
are witnessing right now what is it that
you should keep in mind as an investor
three four things I have started doing
personally myself number one I have
started to internationally diversify
over the next one year I will I will
diversify approximately 50% of my
portfolio outside India that seems like
a more reasonable Diversified bit this
is absolutely critical this is point one
point two you need to be prepared to
deal with volatility now what is the
meaning of volatility be prepared for
the 20 30% correction that can come very
fast and furious because our market
right now is retail driven right and
Retail people are very Emeral they are
very volatile so to say right right so
there is no head or leg or thought
process behind it one bad piece of news
can impact us really really badly so so
this is the problem that we are
witnessing and I think given this reason
only that Sab is coming so hard after
fos and whatnot right so this is point
two point three please do not display
your nationalism by buying specific
private companies that is not the sign
of nationalism please use your brain
that a businessman is not equal to India
and India is is not equal to a
businessman all the profits that compan
is making they are not putting it back
in the economy per se okay so this is a
simple point that I will tell you
valuations make
sense and buy that stock only that is
not a problem but buy things on
fundamentals because the problem in
terms of not buying things on
fundamentals is that you will buy some
random company like V Renewables again
take a look at this when it starts
falling when it corrects in a day by 20%
you would not know what to do with it
right so given all these points go on
fundamentals study the fundamentals of a
stock diversify your risk next 6 months
can be volatile and you need to figure
out a way to preserve your Investments
accordingly I hope you enjoyed this
conversation if you did do press the
like button and I'll see you soon
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