Under Developed market: Merger and Bonus/right shares as criteria of a good company!

Rajesh Sharma

My comment on Utsab Shrestha ji's status

Utsab ji,

I had written a post in September 14 and had posted it on Small Investor's Creative Ideas. I have re-posted here once again. Hopefully, that will answer your query at least partly. Moreover, I add here that many among us, we are emotionally immature, temperamentally unstable and educationally (about share market) weak. Hence, our overall reasoning for judgement has a narrow base - merger and bonus/rights share. We are operating in an under developed market and all of us should acknowledge such operational environment. Having said this, I have copied and pasted my text from Small Investor's Creative Ideas.

"Bonus shares
When I read announcement of dividend by a company, in my mind some classification baskets use to appear. If the percentage of bonus share is quite high, thinking that this may affect next year's performance if the company has no good growth prospect or plan, automatically my mind puts that company shares in basket 1. If it is a good mix and sounds not overloading the company for next year, I put it in basket 2. If the the bonus share percentage is too low and the company is too good, I put it in basket 3 and finally if there is no bonus share and there is only cash dividend, I put it in basket 4.

Keys:
Basket 1 = sell soon, in normal time; bonus crazy traders/investors are ready to pay any price right now.
Basket 2 = Hold for 6 months at least, see how things move and decide.
Basket 3 = Hold for long term. Low return but safe and sustainable.
Basket 4 = There is compulsion for now to hold but see opportunity to sell sometime in future.

I may be right or wrong I do not know, but often my mind asks me to do so."