reminiscences ga

Reminiscences of A Technical Analyst Around Dalal Street

By Dr. C. K. Narayan

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www.growthavenues.com

PREFACE

Reminiscing about your experiences is the prerogative of the gen-Past and in that respect this book has been fun to write. It carried me down memory lanes, made me examine some of my own silly ideas and the various blind alleys that I ran down in the past in search of the El Dorado of the markets! It was fun doing so, recalling the various characters who populated your life for good or bad, the lessons you learnt along the way, whether or not you applied them. But more than the nostalgia, it is the opportunity to cull them together and present them in a format that I hope will be of interest to the reader and more so, of help to some budding technical analysts and market traders. The desire of every one who has been down the road is to see that the others who follow on that trail dont make the same mistakes. My goal is no different. I have written this trip down the years mainly to serve as a small historical record of TA in Indian markets and to point out some pitfalls along the way that youngsters may want to avoid. I thank ATMA for triggering the process that helped create this book and present some thoughts and experiences to the technical analysts and other market participants. I trust they will enjoy reading it as much as I did writing it.

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INDEX

Chapter 1: The Long Road To Technical Analysis 4

Chapter 2: The Learning Years 15

Chapter 3: Core Competence- and why it is important 24

Chapter 4: Trading Markets at last! The great leap forward for technical analysis. 27

Chapter 5: The Institutional years- the value of developing perspective 33

Chapter 6: TA as a business 36

Chapter 7: The view from the 37th Floor Looking back, looking forward 39

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Chapter 1: The long road to technical analysis It was just another day back in 1977. I was back from my college and was chilling at home, listening to some nice Classic Rock (my favorite genre of music) when my brother returned from office. He called out to me and said he wanted to discuss something with me. As happens to any youngster at that time, I quickly went over all my recent events, thinking, Was there something wrong that I had done? I really couldnt think of anything that should have got me into trouble so I told myself this must be something routine. When I went to the other room to see my brother, he had lots of papers in front of him and was arranging them in some order. He used to handle the money related stuff after my father died in 1972. Not that there was any substantial corpus to manage, for, my father died within three months of retirement as a Central Govt employee and the collective corpus of retirement and death benefits didnt amount to much. I was about 19 at that time and my brother was 27. He worked in a bank so I suppose he got automatically selected for handling the money stuff. I was too engrossed in being a teenage college kid anyway and never really bothered about money and all. I used to be a bit enterprising during my college days and had found ways and means to ensure that I earned some extra pocket money, by some means or the other. I had this independent streak to make money even when I was a kid. I recall a time back when I was in my fifth standard or so, when I found some items that I could trade in and make a small bit of money. So it appears, that somehow I was destined to end up in the markets!! Trading, was somehow inherent within me right from younger days!

Be that as it may, here I was, facing my brother and his papers and he had this serious look on his face. What now, I thought to myself? It proved to be a lot more than what I had anticipated. I want you to start looking after these things now, said my brother, gesturing at the papers in front of him. I have been transferred to Porbandar and I will not be around to take care of it and someone has to. Our elder brother doesnt have the time. But you are in college and you will have a lot of time. I began to protest. But I am in Dentistry, I said, and this is all finance. I know nothing about it. The protest didnt work. Look, we have no choice.

Someone has got to take care of it and right now you are the only one. So stop whining and start listening. Well, that was that. Thus began my indoctrination into stock markets. From someone who had very little idea of what it was and just had some vague idea of what to do. It was really my brother in law who was the stock market man. It is thanks to him that my journey into the markets really began. Encountering Stocks You see, when my father died, we got some funds. We were three brothers and I was the youngest. No one had a clue about anything in the world as my two brothers had just finished their graduations and were recently employed. And here we were, suddenly, hit with a personal tragedy of sudden demise of our parents and not knowing anything about how to survive this world. Thankfully, my brother in law (elder to all of us) was a man of means and also had firm head on square shoulders. He took charge of

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the money that was received upon my fathers demise and after putting something aside in FDs, he then told us that he was going to put the rest of the money into stocks. For someone to do this in 1975, with small proceeds and three young kids out on their own, it was either a crazy idea or something particularly wise. I would like to think of it as the latter. Mind you, I am talking 1975 when equity wasnt even a known thing! But my brother-in-law was a smart guy and apparently knew his onions. The money was invested into Hindustan Lever, Bata, ITC, SPIC and Great Eastern Shipping. If I recall correctly, we had approximately 100-200 shares in each of these. Before you think that it would have been a tidy amount, let me clue you into the real picture. All of these stocks were priced around Rs.16-17 and only Bata was about Rs.30. So you can now get an idea of my princely start into stock market investing. The entire corpus was about Rs.15000-20000. This is like a one-time dinner bill today in a fancy restaurant but I am talking here about a lifes savings of a man who worked his entire life and retired from service. And it was papers relating to these investments and some FD receipts etc. that my brother was alluding

to. I was apprehensive, but one of my qualities has been to always quickly accept whatever is there in front of me. This has been one of my greatest strengths in the market, something that I would find out much, much later. But at that time, I simply resigned myself to this mundane chore and sat down to hear my brother tell me what is what. He took me thru the differences between shares and FDs and though both were certificates, I could understand the differences. I was happy, finally, when he said, All you have to ensure is that if

any dividend cheque is received from the company, make sure that it goes into our account. If any other letter comes, then let me know about it. That sounded simple enough. I could do that without really messing up my current life, I thought to myself, and immediately nodded my assent. And that, my friends, is the rather tepid start to my career in the stock markets! I have always been a diligent sort of fellow even when young and am a bit finicky when it comes to keeping records. I am mentioning these in particular because these are qualities that I believe stood in me in good stead when I gave a more serious tilt to my market interests later. So I started off by making a list of the stocks, their names, current prices and approximate times when the dividend cheque could be expected. After that it was a cinch to do the job. And so this went on for a few months. After about a year or so, I started paying a little more attention to the stocks we were holding- mainly because they were not moving at all! To me that seemed like a waste of money! The dividend cheques were small (in those days there was actually an embargo on the amount of dividends that a company could declare) and hence unexciting to a 19 year old! So I started looking around at other stocks and what they were doing. This was the first move towards learning about my future environment. The first money flush Around 1977, the public issue market started picking up after the govt passed the FERA dilution act a couple of years before that. This was one of the greatest bonanzas for the investors. It was almost like handing out money at Flora Fountain! Here were the best of the foreign companies that were forced by the act to dilute their holding to 40% shareholding and this created one of the most fantastic opportunities to make money for Indian investors who understood the opportunity, as most of these stock sales happened below intrinsic values! But the companies chose to do this happily because now these companies were able to operate expand and diversify in any industry open to the other local firms! Thus for most foreign companies, FERA dilution provided an opportunity to become Indian and to expand. It thus became a win-win situation for the companies and for investors. With our permanent

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colonial hangover (it is still not gone, I sometimes think!) Indian investors were more than happy to own foreign owned companies and quickly bid those stocks up when they were listed. My greatest excitement occurred when I applied for Colgate Palmolives IPO and was allotted 50 shares. The shares were issued at Rs 25 and were listed at Rs 100- something unheard of during those days! Colgate actually created a history of sorts at that time with the listing and I dont think there was any company that listed at such a wide multiple from the issue price! For me, it was a heady experience because this was, like, my first big foray into the markets and what a resounding success! Compared to what was happening in the stocks we held in the portfolio, this was a humdinger. Hindustan Lever and ITC looked like dumb widows in front of this nubile maiden called Colgate! And, my career as a stock market enthusiast was launched with Colgate! Some younger readers may find it interesting to know that Thums Up which survives to this day really came about because of this FERA act! During the 1970s, Coca Cola was one of the companies that chose to leave India rather than comply with what it felt was the restrictive announcements of the govt. In 1977, George Fernandes of the Janata Party became the Industries Minister and being formerly a militant trade unionist, his policy framing was seen as most unfriendly by foreign owned companies. Among those that chose to leave India at that time were IBM and Coca Cola. While the former did not really impact the common man, the shutting of operations of the latter certainly did, because Coke and Fanta etc were the favorites among all the people (Pepsi was not in India at that time, so Coke pretty much ruled). Their departure left a big hole which the govt sought to fill by introducing their own cola drink, aptly titled 77, standing for the eponymous year when the Congress was tumbled from power for the first time since Independence! However, the market place would simply not accept a govt made fashion drink like a cola (for, that was what it really was!) and this gave the Chouhans of Parle the golden opportunity to launch Thums Up. Until then, they were well known for Gold Spot, an orange drink but seeing the vacant space in the cola market, Parle seized the advantage with a quick move. The rest, as they say, is all history! And there was no holding me back. At around that time, a few of us, friends who were all interested in the stock markets, got introduced to a sharp bank manager, who somehow found a way to fund our IPO applications. To this day I do not know whether what he did was legit or not, but we did not really ask! This funding today is very much the norm but I am talking 1978 here when there were restrictions on just about everything!! We could make multiple applications in the public issue and the bank would be the second applicant and the entire funding would be from the bank. We paid interest on the number of days the funds were used (just like today) but since the entire process would take, like, a month or more for the process to be completed, we did end up paying some decent interest. Maybe thats why the bank management (it was a cooperative bank) did not ask too many questions. As soon as the stock would list we would dump it on the first day and encash our profits. This was such a well-oiled operation that there really was never a need to be doing any other thing such as analysis or estimate prospects of the stock for the future etc! All we were doing was applying in public issues of Fera related companies and raking it in. Castrol, Ciba Geigy, Ponds, Burroughs Wellcome, Ingersoll Rand, Dorr-Oliver etc etc, name after name, they just kept coming and it was one of the best times of my life as a 20 year old making very good money with almost no effort. The money was also put up by someone else (the cooperative bank) and all we had to was find the names to fill in as the first applicant. I suddenly was most friendly to distant cousins and other acquaintances (who were, mostly,

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strangers to the markets) and since I had a slightly persuasive nature and reams and reams of enthusiasm, they all (mostly) agreed to lend their names. Only a few of them asked for some share of the spoils which suited me just fine!

Of course nothing lasts forever and soon the flood of issues ran out and the bank then withdrew the funding when they ran into a few bum deals. That was the end of the good times! Now that I was bitten by the bug of the market, I needed to be part of it and get some action. So one fine day I just decided to go to the market. Off I went to Dalal Street, to the stock market, as it were and was disappointed to find a building that was in the process of being demolished. The new imposing stock exchange tower was already coming up (it began

construction in 1970) and the wing facing Dalal Street was already pretty much complete. I entered Dalal Street and was caught by surprise at the roar that was in the air. It was quite, quite loud, like being next a school during recess time! Only, this recess lasted two full hours! But the roar itself created even more excitement in me. For, it was a sign of life, throbbing, pulsating, and reverberating every second! For someone who came looking for action, boy, did I find it! At that point of time, I did not have the courage to go inside the building and take a closer look. But there was this gap between the old building and the new one and you could see thru that gap as brokers and subbrokers went whizzing past with some book in their hand and faces full of concentration and expressions. Energised, I went back home with a conviction that this was the place for me. But here I was, soon to become a Doctor, completing my course in Dentistry. I was always a good student in my school and college and it was no different with Dentistry. I actually became a University Rank Holder and cleared my subjects rather effortlessly. Studying came easy to me as it was part of my natural set up I suppose. I have always been a curious person by nature and wanted to know absolutely everything about everything! I had an insatiable desire to read and even during my college days, I would read up books that were outside the prescribed syllabus so that I would know the subject better. The extra bits that I could add to my answers perhaps did the trick in ensuring that I was always near the top end of the class all thru my academic career. But now a new desire was born within me. Bitten by the easy money induced by public issue allotment and charged up by that one visit to Dalal Street, I was already on my new path but didnt know it at that time. Like any good boy, I completed my career course and thought about setting up practice as a Dentist. This is what boys from respectable families did. And they get married and raise children who will then follow Papa as a dentist too, perhaps! Death of a dental surgeon As luck would have it, there was another chap in the Dental course whose friends father happened to be working with a broker. And that is how I ended up visiting Dalal Street again. By now, the new BSE tower was functional and the initial floors were occupied. The trading ring had shifted to the third floor of the building and my first broker (PPJ Shroff) invited me to come during trading time. I cannot forget the first time I went there. As I reached the entrance of the spanking new BSE tower, the roar of the ring was already audible. The difference was that it was less of an assault since it had shifted three floors higher from the ground! But I was already anticipating the roar and felt my excitement rise as I began to hear it. Ascending the steps to the third floor, that excitement became only greater as I saw signs of market activity with every step. People just hanging around, people talking to others (mostly in Gujarati)

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about some stock or the other, people rushing about with different expressions, sub brokers conferring with clients. I went all the way till the doorway to the Ring and stood outside it. Enthralled. The level of

activity was unbelievable. I could peek inside and see a lot of people milling inside, shouting and gesticulating to one another and writing on a small pad they carried in their hands. At some places within the Ring I saw people actually jostling. It wasnt a fight though- as it may have appeared from the outside- but rather a process, I would discover later, of ensuring that some specific sought after stock was either bought or sold. I did not know it at that time but the Ring composed of Jobbers or the market makers and the Clerks or the subbrokers who would execute the trades. I saw along a wall rows and rows of telephones, hotlines from the ring to the

brokers office and these were manned by different set of people who seemed to be having this super hearing ability because the din was so much that it was even difficult to hear yourself think! And scores of these Clerks would come out of the Ring, confer with their clients, run right back in to execute the order. Some in a hurry would just shout from near the door to a client waiting just outside and basically add to the existing cacophony! But I loved it all! Mesmerized I just stood there, I think for the entire two hours that the market was open! Doing nothing but just absorbing the atmosphere, sinking it within me and knowing from every pore that this is what I want to do in my life! I think that is the day I died as a Dentist (although I would continue to be in the profession for another five more years!) and was reborn as a Market Man!

I started visiting the market often, just to get that fix of the thrill of being there. Since the official language of the market appeared to be Gujarati, I even started learning Gujarati. Fortunately, it is an easy enough language to learn and understand and I picked it up quickly. I even began to read, with considerable difficulty of course, Monday copies of Mumbai Samachar (only the stock column) with the help of another friend. Just so that I could keep myself abreast with what was happening. The Gujaratis seem to be clued in and I could not have it any other way. They also held sway in the market and there was hardly anyone else from any other community that you could find there. To this day, whenever I speak numbers, it still comes out automatically in Gujarati!! I think I picked that up from the public address system in the BSE. During the trading time, they had a wire service that would announce the prices of leading stocks several times during the day. The

announcer would lead off with the name of the stock, state the price in numbers and repeat the same in Gujarati. So hearing that over and over every day several times, the numbers in Gujarati kind of just sank into my subconscious and remains there till this day! I recall it would always start with Century Textile and followed by Tata Ordinary. In the early 90s, Century had been replaced by ACC as the first name, owing perhaps to the sudden surge that we saw in its price in those years. I would wait every day for the closing quotation that would be announced at 2.30pm. Then it would be time to gravitate towards the

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second floor where two big blackboards were strung on the wall, with stock names on them. Stock exchange officials would come along around 3 pm and start writing the official prices on the board one by one in chalk. There were many who stood around the board writing down the prices in their notebooks. Very soon I started doing the same. Although we got these prices in the papers the next day, the thrill of having them (fresh!) lent it a different context, a different meaning perhaps! I dont know why I did it. But I did it anyway because it seemed like the thing to do! Besides, it made me happy. Anything moving me along the pathway of building a stock market career made me happy. Enter Dhansukhbhai It was now well into 1979 and it was about this time- I was in my third year as a BDS student- that I ran into one of the characters who would change the course of my life some more. A genial old man, who came as a patient to me at the Govt Dental College, Mumbai. In the course of a light conversation with him, I asked him what he did for a living. Imagine my surprise when he said that he was a stock subbroker! And that is how I got into hardcore trading. You see, Dhansukhbhai was a subbrokerwith a Dabba stock broker. At that time I had very limited idea of how trading occurred but inside of me I knew that I really wanted to do it. So when he took me to the market I saw a very different piece of action going on there. This was my second broker and all he had was a table space on the fourth floor (one among the very many that were there on that floor) and people were milling around the table and placing orders. The Dabba is a great system for a trader, although illegal. I didnt know it but I loved the fact that you could just place the order and it would be filled right away! Dabba trading is a practice where the broker himself acts as a kind of an exchange. He fills you for your order whether its a buy or a sell. Meaning, he takes the other side of your trade. It is in practice to this day and perhaps flourishing too as all settlements happen thru cash. This is a parallel trading system and try as they might, the authorities have been unable to eradicate it. The advantage it offers to a trader is that you get an instant fill at the price quoted for your entire quantity. In contrast (during those days), you had to place the order and the broking clerk would go the Ring, and try to execute it. Sometimes it would get filled and sometime it wouldnt. But he has many more orders to execute so he would finish one round of execution and return to you after some time. Till then you have no idea whether your trade is filled or not. When trading fast and large, this doesnt work (not unless the broker is prepared to give you a highly personalized service) and hence people preferred the Dabba where, buy or sell, you were done in a flash. It also assisted trading because, being a mini exchange in itself, the people running the show would give you continuous quotes. They did this by having a hotline into the ring where someone would man it and the line would be open all the time. The man in the Ring would give continuously updated prices thru the hotline and the Dabba runner would keep making the market in the main stocks thru the trading day. This was a much more efficient system for hard core traders as they were with the market all the time compared to those who went the normal route who had to wait to know, sometimes only by late evening whether they were filled or not! More, since the system existed outside the main market legal frame, the entire settlement happened in cash- which suited a lot of people just fine. I began visiting the 4th floor office often and began trading. Using what? Nothing. Just like most other traders begin to trade even today. With nothing but expectations and hope and a (completely wrong) belief that there is really nothing that needs to be known before one can begin trading! You stood there and listened to others discussing some stock or the other. You pick out the one who seems to be knowing what he is doing and just follow him. I had marked out one Pandya and one Lakhani who used

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to trade big and always carried a smug expression on their faces. As far as many of us were concerned, that smug expression meant that he knew something! And so, several others and I would simply repeat trades being done by this Pandya or Lakhani. As a newbie trader, the concept of short selling was unknown to me and this is one of the things that I learnt while at the Dabba outfit. I was thrilled beyond words! Not only can you buy and sell (the only thing that I knew existed) but you could now also sell and buy and still make a profit! Wow. I just doubled my possibilities here, I thought. There were Pandya and Lakhani, sometimes buying sharp or some other time selling like crazy. While we never knew the actual genesis behind the trades (they actually traded at two or three other brokers on the same floor, all of them running Dabba), we just presumed they were what they appeared to be- fresh buys or fresh sells! So we would follow in that wake, thinking that we are following a master trader. The truth, turned out to be quite different. While Pandya and Lakhani et al were continuing to be smug and active, I found myself bleeding. A little by little but the damn wound wouldnt clot and stop bleeding. I never knew if they made money but I most certainly wasnt. It came to a point when I had to start selling a couple of shares to fund my loss making activity. I continued to invest into stocks that someone would recommend or the ones that I fancied for no particular reason- just a gut feel- and some would make money while others didnt. Whatever money I made was being frittered away in the desultory attempt to trade. My intellectual side would not permit this kind of affairs to go on. That led me to Fundamental Analysis and its existence. And an encounter with another gentleman who would change my life by yet another shade. His name was PK Marfatia and at that time, he created a storm in the market by coming out with a publication that actually recommended scrips for buying based on analysis! Something quite non normal for most of us. He published a magazine called Investors World and when I read a copy (it used to sell at Rs 20 which was a bloody fortune in those days! For comparison, you could get a vada-pav for about 0.50p). As soon as I read this, I knew that this was the way to go. We have to analyse and reason with variables that affect the performance of the company. A case for investment is what he would present the arguments under and I found that approach very, very persuasive. The road to fundamental analysis Immediately, I decided to pursue fundamental analysis. Off I went to meet Marfatia, put together the money to pay him to become a client and waited eagerly for the next issue of the Investor World. I lapped it up. I began reading books on How to read balance sheets and How to analyse a stock fundamentally (mainly from British Council). I went in search of local authors and found a couple- one by Hemant Dani and another called Business Forecasting by GR Mansukhani. Strangely, these people also followed something called Technical analysis but I didnt bother about it at that time, thinking that my focus is on something else. In those days (perhaps it is still there now) there was a Shareholders Association which had a library with balance sheets of many companies. This was situated in Bhupen Chambers, right across from the BSE tower. After the market was over (it ran those days from 12 to 2 pm), I would go to the Shareholders Association library and start reading balance sheets (even though I was just getting to the grips of how to). I also came across the BSE Directory that stored all information of stocks by sector and that I thought was a treasure chest! Not only the company background but also

the figures- all in one place! Wow. I used to devour those volumes one by one thru the next several months! I became a regular in that place and there were other similar nuts like me and so we became a kind of informal fundamental club that talked about numbers and value. Since most of the others of this informal club were CAs or Commerce graduates, I kept my mouth shut and largely listened. That helped.

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So, one fine day, I got this new issue of Investor World in which Marfatia had analysed the prospects of Great Eastern Shipping and how it was now poised for heading higher. Under Case for Investment, he presented arguments that seemed, to me, unimpeachable. Now here is where familiarity plays a role in investing and trading. Since we had held GE Shipping from earlier, I was already familiar with the company and hence perhaps more attuned to receive good news about it. In all the time that I had held it, the stock never, never performed, remaining sticky around the Rs 18 levels for years! I got fed up and sold it and was delighted when it sank to near 10 levels. I congratulated myself on a job well done. Never looked at it again since then.Hence when this detailed analysis on GE Shipping came up, I was more than surprise to know that the prices were now at 60! I felt cheated and like a fool at the same time. I now needed to redeem my error of selling out something that had tripled! So I was a complete believer of whatever was written. Now that I had redeem myself, of course the situation became different. GE Shipping was no longer just a stock. It was a symbol of my failure. Since I had sold it way back at 16 and now it was 60, I had so much of losses to recover! This is the kind of mindset that develops when one is not educated properly in the ways of the market. I did not realize back then I was making the classic error of substituting my psychoses on to the stock and expecting it to clean me up. This is what traders do all the time. The reasons why they trade something the way they do is almost completely divorced from the reality of trading. Unfortunately, it is a lesson that many of us learn thru many years of trading. There is no training imparted in this area as it is so abstract that people dont even feel that it exists! How can you then expect to know or learn about something that you dont even know exists?? GE Shipping was in the budla list and that gave me an opportunity at redemption. I could now trade a substantially larger quantity so that I could quickly recoup the losses that I had made by selling it early. (It did not matter to me that the two events were apart by about 12 months or more!). So I went and bought myself 3000 shares at a price of 64. According to the Investor World, the target price was 120 and I firmly believed it and was already tasting the success in my mouth! To make me even more convinced, the stock moved to 71. I came to know, for the first time in my life, about things like Baltic Freight Index and Bulk Carriers and OBO vessels. I read up on Shipping industry quickly and the more I read the more convinced I was that 120 for GEShipping was a shoo-in. The prices continued to improve a bit more, reaching 74 and I was on a high. And then it stopped. And turned around. Very quickly it hit 67. No problem, I told everyone, the BFI is up and Great Eastern ruled the seas! The market didnt buy my talk. Of course it wouldnt but did I know better? No way! I thought that if I spoke convincingly enough (at least to myself!) then eventually this thing should go where it is

supposed to go! But GES continued to drift and was soon at 60. Now, the 3000 share position (which was a lot for a still-in-college kid of 21 to hold) began to hurt. Chimanbhai, my broker, suddenly started to speak to me a lot more and all the time it was about clearing the debit. Until now, I rarely faced the situation where the broker had to ask me for money, for most of my trades were small and under control. I tried to reassure him that the stock would go up, even showed him a copy of the Investor World with the analysis. But he

was polite and said, I dont follow all these things. It is for educated people like you. Please pay the difference and you can continue to hold for your expected target. I paid out whatever money I had and that saved the day. Just.

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Prices continued to drop and soon reached 50. I was now bleeding profusely and Chimanbhai had, by now, become the Devil incarnate! Every time I thought of him the vision was only of him asking me for more money! I cursed him and held him responsible (probably) for the current price of GEShip. Dont you know this is going to go up, you Dolt! Stop bothering me for this money, I wanted to scream at him. But of course nothing would do. So I began selling my stock. Hindustan Lever was the first to go. I remember selling it at around 32. I reasoned that this stock was never moving anywhere and just churned between 30 and 34 forever. And in any case we were selling it at a profit- after having bought at 18. And it was for a good cause- I was holding the super stock, after all. The one that is going to go to 120! This is how we end up reasoning all our losers. The unwillingness to let go of a loser is one of the biggest reasons for trader wipeout. And that is exactly what happened to me. The stock continued dropping and hit 42. My spirits hit somewhere around minus 420! I could not sit nor stand nor sleep nor eat. Stock after stock that we owned was being sold to hold on to this dud- all in the hope of revival and redemption! Not being able to bear it anymore I went back to Marfatia and told him about my status. He sat with me, going over the stats of GEShip, concluding finally by saying that I should probably get my price back. Mind, no more talk of 120, but who cared? He had said the magic words- that it would come back to my price and that is all that I wanted now. Profits be damned! So, enthused, I went back to the markets and to buoy me up a bit, the Co announced a bonus issue at 2:3. So now I would get 2000 shares more on my original holding of 3000 shares! This should send the prices higher, I thought. But little did I know that the market already had wind of this and welcomed the news by pushing the prices down to 36!! I now didnt even have the heart to go back to Marfatia! To cut this story short now, the stock went ex bonus and continued dropping, hitting slightly below 10 levels by the end of the year. I could not bear the pain any more and I bailed out at 9.75! It was the biggest loss of my career until then, one that I could not take financially or mentally. All the stocks that we held were sold to finance this and finally we were left with nothing!

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While this trade inflicted the greatest amount of pain in my entire trading life, it also taught me the most important lesson of them all. That I should not rely on anyone so much that I abandon my ability to act altogether. I am sure when Investor World put out the first call they would have analysed the prospects accurately. But I cannot forgive the second chance that I gave the man when, knowing the situation, he held out a hope of redemption just because he did not want to admit to being wrong. The stock never looked up for the next many years! All thru the pendency of the trade I found myself powerless to act, getting progressively reduced to an increasingly helpless state, frustrating myself in the process and hating myself for it. My faith in fundamental analysis eroded, because the practitioner was faulty. That was probably a wrong conclusion. The subject itself has nothing to do with the practitioner or his short comings. But an aggrieved mind demands retribution and not reasons. So the subject got blamed and I was turned off it. But I realized that I needed to know what to do and for that I had to learn- about markets, about methods, about risk containment, about analysis, about everything. Thus, my learning phase was about to begin. It would last the next several years. And it would take me to where I eventually ended up- into Technical Analysis.

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The unofficial Options Market on the Street One of the menaces in those days was Kerb Trading, which the exchanges tried their best to banish but never really succeeded. Since trading time was short (12-2 pm only), it seldom sated the appetite of the active trader. So, they found a way of continuing their trades on the street. Next to Dalal Street was Hamam Street and that was the site of kerb trading. Outside the Lalit Restaurant was the official kerb exchange! It was a well- structured enterprise, with its own set of brokers who would stand for the trade and ensure its performance. In those days, your word was the key and people honored that, whether in profit or in loss. All trades would be entered into the official books on the following day. Much before the options markets commenced in 2002, we had a kerb version of this market called jhota-phatak or teji-mandi. This market was created and run by a single man, a tall, imposing bespectacled oldish gentleman by name BabuPhatak. He would make the market and everyone traded with him. He gave you bids and offers for calls, puts and straddles. All of these were for just the next day (so one day option contracts) and the settlement price would be announced at 1.45 pm by a designated broker. BabuPhatak would wait outside the trading ring and this designated broker (an old timer) would go around the ring, every day exactly at 1.45 and state what the expiration price was. Of course the list was limited to a very few stocks like ACC, Tisco and sometimes Reliance. On special days like Diwali muhurat or budget day etc. special rates would be quoted in advance! It was a fantastic system that ran smoothly and I dont recall a single instance when some default occurred on this. I myself played this market almost on a daily basis. It used to be a nice way to earn some extra cash when you were short the options and being a one day contract limited your risk pretty much. Of course the premiums were small too. It went into a bit of a decline when the then BSE chief MR Mayya banned BabuPhatak from entering the building!! Only such draconian measures could bring it to a slowdown. It was fun while it lasted, though!

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Chapter 2: The Learning Years As I wrote earlier, I was seized with knowing and once I focus on a subject, it becomes a bit of an obsession. Thus, conquering the market became my single focus in early 1980. Those days we had nothing by way of reading material available locally. So I wrote to a couple of my friends in the US, hoping that they could find me something. A couple of them answered and soon thereafter two books landed up at my desk, courtesy some cousin who had travelled back from the US. The first was Ways of Wall Street, a general account of how business was done in the US markets. Informative but no great learning. The second book caught my attention almost immediately. Entitled The Art of Low Risk Investing, the book was all about using Moving Averages. This book was my introduction to a subject within technical analysis but somehow that book never said so.

My mind must have been primed for this sort of thing because I took to the method instantly. It explained in simple terms the use of 5/15/25 period moving averages and lay down some simple rules of how to buy and sell stocks based on crossover rules. At the end of the books first reading, I knew instantly one thing- that I would no longer be a helpless bystander. Here was an approach that allowed me to control my action or at least be in the know of what needs to be done. Whether I do it or not is entirely another question. This was a far cry from the GE Shipping days when I had no clue as to what to do- except stand there and hope. I did not need any further prodding. I particularly liked a passage in the book where he

describes the descent of US Steel, a top heavyweight of the markets during its time, and stated that even the directors of the Co were able to exit the stock only around $12 while his method helped to capture the sell signal somewhere around $45!! This was music to my ears and a tonic to my brain. I immediately rigged up a book with the columns for writing down prices and calculating the averages. I then began a process of noting down prices of many stocks, picking the names in a completely random fashion. At that time I really had no idea of what was a good stock and which was not. I probably went by whether I liked the sound of the name- Anil Steel? Naah, too tame. Armada Metal? Wow, zingy! Lets pick that one. Never mind the fact that the latter was probably some small time fly-by-night affair! The list by itself did not really matter. What happened from that exercise is the more important outcome. As I regularly wrote the prices of the stocks, I began to notice that there was some moves of the stock within the day. It began at a certain price (open) and then went up and then down ( I believed that was the sequence- how quaint!) and finally came back up to finish the day at a different level (close). This triggered in me thoughts of how I could perhaps catch the stock near the low and then ride it to the high, all within the day! This would be the solution to all my problems, wouldnt it? I wonder if there are people thinking that way today too! Writing the prices I also began to get a feel of when they started to move, something that created in my mind a sense of price movement. For the moving average method I used the closing price only. I would port that diligently from the price book into the MA book and update the calculations in that one every day. The method itself was pretty straight forward and it helped instill into me a sense of discipline in following a certain approach. I admit to getting quite bored of that approach quite quickly. It was unexciting and oftentimes pretty boring work. While I enjoyed updating the prices in my book, the chore of converting many of those into the three moving average periods and then check on which ones were

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flashing signals became tedious and like any newbie analyst, I wanted to move on to something more interesting, more exciting perhaps.

I used to frequent a shop near Metro cinema called the New and Secondhand book shop, and the owner there was a kindly gentleman who always allowed me the luxury of just browsing thru the literally thousands of books that lay stacked in that small narrow shop. But my interest in reading was so varied and that shop was such a treasure trove of books and available cheap!- that I would many times spend entire day there just browsing thru rows and rows of books, leafing thru them and buying them by the dozens. Writing about this eponymous store in a blog Book Caf, the author Aakanksha Singh, writes, The best aspect of this bookstore, apart from its huge collection, is the atmosphere. There is a lingering smell of dusty books that pervades the shop. As you browse through the long, endless shelves and come across books in beautiful bindings, hardbound, leather

bound, you get the feeling that you are transported back in time, wandering in a lost library that has some how managed to salvage its books in a pretty good condition. The seclusion of these shelves allows you to feel that you are about to explore or discover a new book. And trust me, you are bound to stumble upon some rare book or an old one at least if you look diligently. This feeling of seclusion and exploration is heightened on the first floor where it is rather dark but not dingy. Here there are some research/encyclopedia type books. Not many people come up here and you are mostly alone browsing these shelves.

I wholly second those sentiments. In and thru these browsing sessions, one day I came upon some course material (probably) of Bajaj Institute of Management that spoke about stock analysis. I rifled thru it with some interest and towards the back section of the book, there was an entire chapter devoted to what was called Technical Analysis. This was my first brush with the subject. Recall that I was already getting into that groove, even without realizing it, thru the process of writing down the prices. Thus, the chapter on charts struck an immediate chord in my mind. I realized that I was already kind of constructing charts of price movements in my mind as I was writing down the prices! After a long time I felt energized and I quickly went and got myself some chart paper and began to work on my first chart. The year was 1980. I remember my first hand drawn chart was on a stock called Atlas Copco.

I wish I could magically produce that chart here as an exhibit! Do authors who write autobiographies really preserve their old photographs? Do they already know when they are young that they would one day write a book? Hell, I dont even have a photograph of my parents, leave alone any of mine as a youngster! This idea of writing my Reminiscences came after much prodding and though this would be more interesting if it was illustrated, how the devil does one go back to get such photos? The Doyen of TA- G R Mansukhani.

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And so began the quest for TA knowledge. Problem was that there simply was none available! I suddenly remembered then about the book that I had earlier bought by author G R Mansukhani. I recalled that even though his book that I had bought (Business Forecasting) was more about economic trends and I had read it from a fundamental analysis perspective, he did allude a lot to charts. So off I went to meet him. And what a meeting it was! Mansukhani, can be truly said to be the doyen of technical analysis in India. He was the pioneer and was drawing charts and commenting on them and writing about companies using TA as an approach way back at a time when (no one in my recollection at least) the subject was relatively unknown. My meeting with Mansukhani created a strong impression on me. He was already well into his 60s by then and he spoke to me at length about the subject and how it could help me. He directed me to his book Golden Investment Strategy that had the basics of the subject covered with some simple methods for trading and investing. Back in those days, the concepts of candlesticks and oscillators etc were yet unknown or undeveloped and hence the book was more about traditional technical analysis (patterns, trends, moving averages etc). I thanked him, bought his book, subscribed to his newsletter and came away a convert. I think I still have the file of his newsletters back from those years. For students of history, it makes interesting reading. The way he would analyze using technical parameters and then link it all up to what was happening in the economy and the markets in general created in me the holistic picture of technical analysis. I think that presentation stayed with me throughout and my current analysis as well as writing style would be akin to the way he presented it. I am indebted to him for imbuing in me a sense of the big picture even when you are looking at smaller time frames as well as the importance of linking technical pictures with current market action and surrounding sentiment. I used to write for a publication called Intelligent Investor and once while discussing with the Editor RajshekharIyer, one of the sharpest minds in the fundamental analysis who is also extremely open to technical analysis, we considered the possibility of doing interviews of veterans from the field of TA. Rajshekhar knew of Mansukhani and we agreed that we would set off the series with an interview of his and I called him up to fix up the time. This was in the late 90s and by then he had already retired from active business but still kept himself abreast of the markets on a personal basis and even offered training to interested people! I met him at his residence and he was sharp and with the times as he was back in 1980 when I met him first. His answers were crisp and to the point and it was such a joy to do that interview! It remains one of the high points in my life. Interacting with knowledgeable people is always a fulfilling endeavor. I wish I had those tapes to listen to or can read that manuscript of the interview again. But alas, Intelligent Investor was taken over some years after this and I dont know if those records will ever be available. I had, by 1981, set up my own clinic and had begun practicing Dentistry. My search for TA knowledge continued in the scanty world of Indian publications. The bible says Seek and ye shall find and that is something I found to be true in my case. My search for material on TA was so intense that it began to turn up in the most unlikely of places. A patient of mine turned out to know a cousin of his who apparently had a book that he used to read and rave about. I hounded this patient almost every day to get me that book and soon, I found myself in possession of a copy of the TA bible, Edwards and Magees Technical analysis of stock trends. This seminal work opened my eyes further, to the world of trends and patterns and how they impact the way that stock prices move. My charts suddenly lit up as my mind was now able to help my eyes truly see the chart! And I saw patterns everywhere! There is a head and shoulder, here is a triangle, that is a wedge! Modern day TAs who may be more familiar with all these elements may find my excitement amusing but for me, in early 1981, it was like finding a mirage in a desert! Imagine a young enthusiast trying to find some one or some thing to help him along the way and

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there is nothing around? Kind of reminds of that scene in Titanic, when the few who got on to the lifeboats shouted Help in the middle of a vast ocean! With no one around it was a cry of desperation. How do you think those people would have felt if their cry was suddenly answered by a passing ship? What bounds their relief and joy? For me, it was not dissimilar to that situation. The first big forecast- 1981 I was now on the road- with a copy of Magee, Zoharchak (Moving average book) and Mansukhani giving me company and my hand drawn charts and data entry book! I was unstoppable and bursting with ideas about stock moves. The market in 1981 was already part of a small bull phase. This was on since the lows of 1975 and as I plotted the chart, I found that the market was probably headed into a culmination. Though I cannot show you the original chart, I have reproduced here a print of what I was looking at back then.

The index was about to hit a perfectly channeled move and after doing so, it broke the internal channel as well. The bull market was about 5 years old, having commenced from the lows after the disastrous Dividend Control act of 1974 saw the market plunge over 20% in a day and then continue to halve across the next 12 months. Economic conditions, though better, were still quite irregular. Though the academic papers would put the start of the economic reforms from somewhere around early 1980, the implementation of the policies was too politicized and varied from year to year. The conditions were ripe for a market correction and I gave out such a call to all those who were known to me.

My first big forecast using chartsThe 1981 high for the market!

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At that time, forecasting on the Index was almost completely an unknown and the only person doing this to some degree was GR Mansukhani thru his newsletters. I wrote Mansukhani with my forecast and he was kind enough to reply, stating that I am on the right track and to persist with this line of analysis. I could not have felt prouder than I did on that day! It was not until late 1984 that the market managed to exceed the highs made in 1981, so as far as index forecasts go, this was a pretty good one. I actioned this using some shorts on the budla system then prevalent and soon developed a small reputation for being a bearishly inclined analyst! Not that this was intentional but then I am happy to recollect that even though the market did not really favor much participation in those days, going short helped you to earn the budla ( or contango charges paid by the buyers) and one was happy to make those small but consistent gains. Also, it taught me the important lesson of the trend being paramount to success in the market, a valuable lesson that so many youngsters today seem to overlook. In their anxiety to capture profits, the state of the trend is often missed and technical signals are taken out of context. They will not work with the same efficacy when used out of context. But how can you know that if you have not spent time burnishing your basics? When you are in a hurry to know and cant find the time nor effort to inform yourself sufficiently, these kind of mistakes are bound to occur. Oscillators and Elliot Waves Sometime during 1984, I came to know about some technical analysis training programs being conducted by TalakshiGosar and Ramesh Parikh. Gosar was a journalist and wrote in the Gujarati media and later on for the Daily while Ramesh Parikh was an active trader. I quickly signed up for the program and it was held at the Broadway auditorium at Dadar on weekends and to my surprise, very well attended. For the first time I came across other people who were equally passionate about the subject of TA and that was an interesting development. We all began to share what we had and some of us pooled in our chart drawings. We Xeroxed each others charts so that we could have a larger repertoire and stayed in touch. At this seminar I got to meet people like Deepak Shah, DhirajGutka, SiddharthLahiri each of whom would go on to establish individual identities in the world of technical analysis in the years ahead.

This seminar is the one where I got introduced to Elliot Waves for the first time and I was blown over yet another time by another aspect of technical analysis. I was already quite adept at traditional technical analysis and I found Elliot to be a finer detailing of the trend action that the Dow theory lays down. As I often like to say in my training seminars, the difference between Dow and Elliot is the quality of the brush used for painting. The former does the job with the brush used to apply a coat of paint on a wall whereas the latter is like painting an expression on a girls face on a canvas-

you need to use those fine hair brushes to achieve the right expression. Since I had already read up a good amount of detail on basics of TA, I did not attend the seminar of Gosar and went directly for the Elliot seminars done by Ramesh Parikh. He was a good teacher. My concept of a good teacher of Elliot is one who is able to convey the concept of Degrees in wave structure clearly to the audience. Perhaps, since my mind was already somewhat prepared for TA by the work I had put in over the past 3-4 years, it was easier for me to see the wave structure as it unfolded but I would still give credit to Rameshbhai who was able to put across the concepts of Elliot rather well. I know the difficulty of this job from my own experiences at teaching this subject in later years. Many people simply dont get the degree

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concept and are therefore unable to really use the power of EW analysis. Progress labelling, as Neely later put it in his book, is the key to forecasting with Elliot. At the same seminar, we also got introduced to the concept of an Oscillator and here was yet another twist to the technical tale! We learnt about the ROC (Rate of Change) and the fact that there could be an indicator that could signal us ahead of time that the trend was about to change was almost revolutionary! Here we all were, using trendlines and moving averages and patterns (largely trend following items) and trying to do our best to forecast with them. And along comes Gerald Appels creation, the ROC, with its concepts of Overbought/Oversold and Divergence and that was enough to create a small Tsunami in the technical world. Although J Welles Wilder had set the ball rolling in 1978 with his book on designing oscillator systems, we got to hear about the ROC first (which was actually created by Gerald Appel in 1982 and published in his book Time Trend II) possibly because it was fresh off the press or maybe Rameshbhai got that book ahead of reading Wilders classic! Be that as it may, it kindled in me a fresh zeal to now follow the mathematical side of the market.

By 1984 I was well established in my private Dental practice but still chose to be in the market every single day. Dentistry was work but market was a passion!! So I would board the train from Mulund (where I had my clinic) for VT, a journey that took just over an hour and in those days, the trains were much less crowded than they are today and we would get comfortable seats as it was also not the peak time. I used the one hour to update my moving average tables (I still continued with the 5-15-25 MA system) and now also would calculate the ROC using a calculator. I also had my price notebook with me and would also draw the intra day chart (using just the 4 points of data we had OHLC!!) on a chart paper that I carried with me every day. So it was a very busy one hour and there was no time to waste really because I had to complete all the work before the train reached VT! Taking a bus to the BSE towers, I would spend the time looking at the intra day chart that I had created and make plans for how to approach the markets. Of course in those days there was no index trading so we largely used the index

charts for deciding the overall directions of the markets. It may be hard to conceive for todays youngsters as to how one could construct a pseudo intraday chart using eod data. Here is a shot of how it looked (I got this programmed into a software, about which I shall speak later).

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It certainly gives one a better idea of how the market moved compared to just the daily bar chart. Let me remind youngsters reading this that in 1984 we had no computers, no intra day data, no software, no data service even! We had to collect all the data by ourselves, plot it on the chart manually and draw in all the lines and channels and calculate the moving averages and plot them as well as now do the calculations for ROC for every stock that we were interested in. Further, we had to maintain a separate chart of Intra day (as above), daily, weekly and monthly. If the moves became bigger, we had to redraw the chart using a Ratio chart paper (for Log scaled charts) and one for each time frame! So you can now understand the kind of odds that we were battling to do TA and I cant think of anything other than our enthusiasm that kept us all going! We came across the RSI only sometime around 1985, when someone managed to get a copy of Widlers book. Word spread like wildfire in the TA circuit. Here is this magic indicator where, as soon as the level of 70 is hit, you sell and when the indicator hits 30, you buy! Wow. All problems solved! Compared to the ROC (which is a 0-based oscillator with no definite levels above or below) the RSI seemed like the new improved version, a DilipChaabria model of an indicator, if you will!! People who knew about it spoke in hushed tones, like they were carrying some sort of State secret. I remember that I had to almost wrench it out of a technical analyst journalist called Rao (I forget his first name) and it was only after he was plied with a couple of pegs at the Press club, that he opened up and told me what it was. I almost didnt sleep that night! I was up till early hours of the morning, working out the RSI for stock after stock and then plotting them on the chart. This may appear to be laborious work- and it was- but when you love the subject so much and it holds out all kinds of promises of deliverance to you, I doubt if you will ever see the work involved! Thats how

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it was for me. It continues to remain so till this day. There are days even today when I work almost 15-16 hours in a day. People at home complain that I am taking on too much stress with all this work. But I remain mystified till today- I never feel a morsel of tiredness even after putting in a long day on the charts. When you remain in love, everything is just perfect! I fell in love with TA one fine day in the attic of the New and Secondhand book shop in 1980. It is 2015 today and I dont think that love has diminished even by an iota! Gaur Gaurang Prabhu of Iskcon, in one of his discourses, speaks on tiredness from work. He says that we are all tired at the end of the day when we come back from the office even though we travelled there in our AC car, we sat in our cabins in an AC office, we returned in the evening similarly in an AC car driven home by the driver. And during the day, we probably spent approximately a couple of hours working on something. The rest of the time was spent on drinking endless cups of tea, attending meetings (a good way to pass the time), chitchat with colleagues and generally trying to pretend to be working when the boss is passing by! How right he is about the assessment of an average day of an executive in an office. Why at all should we then feel tired when we get home, asks Prabhu? He answers, saying that we are all the time worried about the past or the future and we seldom spend much time in the present. To illustrate his point he asks us to look at a child. He plays all day but as soon as you reach home, he is all over you, asking you to join him in play. You wonder where he gets the energy from? It is 11 pm at night and your 3 year old is still tearing across the hallway, full of beans and refusing to come to bed! According to Prabhu, this is because the child is only concentrated in the present and is never worried about the future or held down by the past! He offers that as a solution to our problems of our tiredness- just be in the present. Your energy will never dissipate. I realise that when people are seeing me work for long hours on the charts and presume that I should be tired, they are seeing everything from the past-future perspective. In reality, with charts, I am so completely in the present that, just like the child, I am never tired! Thus, Technical Analysis is way to be full of energy and live a full life! It is only those that are concerned about their lack of success with analysis (the past) or worried about how it will shape up (the future) that will find themselves strained by the work. I soon became an Elliot enthusiast and in that course I came across one Subramaniam who lived near my house in Sion and was like a full time trader. He introduced me to W.D Gann and gave me a book by Donald Vodopich called Trading for Profits with Precision Timing. This book sought to combine one element of WD Ganns work (the angle lines) with Elliot wave counts. I thought it pretty ingenious and was grabbed by the fact that you could draw a trendline with just one data point. That book proved to be the starting point for what would become a lifelong association with the methods of W.D.Gann! As ever, when a topic grabs my attention, I devote my entire time to it. Thus I began a search for Ganns material and that led me to an old gent named Kanjibhai Shah, who was kind enough to lend me some more material on Gann as well as George Bayer and also set me off into greater research into that topic.

I started to research Ganns work and this proved to be a labyrinth from which, 30 years later, I am still to emerge! I used Vodopichs methods as a base, wrote to the Kansas Board of Trade to get myself a Gann Angle plotter (paid $5 for it), and now plotting Gann angles on my charts became the additional chore during my chart updates in the train journey from Mulund to VT every day! Fellow travelers would often be amused about what I was doing but that deterred me none. I would just smile back at them and continue with my work. I have never allowed other peoples skepticism to denude my

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enthusiasm ever in any matter. Once you are convinced why should other peoples opinion really matter? What matters is only that you have found sufficient reasons to get convinced and not just doing it out of some sudden fancy. Today, Gann angles are one of my predominant ways of analyzing the charts. Thank you, Subramaniam, wherever you are. You set me off on this path and it has taken me far. Be blessed. Mention cannot go without Atul Xerox, a small stationery shop near the BSE that played such an important role in the life of every budding technical analyst back in the mid 80s. I dont quite know how he got the books, but somewhere along the way, Atul Xerox managed to do a copying job on some TA books. Word then spread that you could get to buy TA books from there. Soon the shop was flooded with orders! I used to be a regular visitor to find out if something new showed up. And every now and then something would show up. It really didnt take any extra skills for any other Xerox shop to do the same thing at that time. But somehow, everyone with a TA book headed out to this one particular shop to get it copied. He would take nice back-to-back Xerox, bind the book nicely and soon he became quite knowledgeable about the books too! He had, I recall, a ready list of books available with him as inventory! The only thing I think he didnt do was put out some poster announcing the New Arrival!! Had it not been for this small shop and its enterprise in getting hold of more books of the genre, we would have all found our learning curve getting elongated by another few years. Richard Schabacker, HM Gartley, Max Guenther, John J Murphy, Edwards and Magee. You name it, we read it and created our own collection of Xerox edition of these books because of Atul Xerox!! God bless this shop for meeting our needs at a time when getting books from abroad was unaffordable for most of us. With so much chart drawing it became more and more difficult to find the time and work started to lag. I was soon finding my entire Sundays going away with me just completing the weekly/ monthly charts, drawing the averages, the angles, calculating the oscilators etc. This was the time I hired a couple of college going youngsters who would come home every evening and update the charts daily. It solved the problem of time but I really missed the extra sharpness it would give me to actually plot the chart and develop a feel for the chart as prices develop. I would strongly suggest that new entrants to the field of TA should attempt to draw at least one or two charts manually and keep that on. It makes a big difference in how you see the prices. The switch to markets as a fulltime occupation During my frequent visits to the market I happened to meet another fellow south Indian by name Sundar Iyer who was a subbroker. The initial affinity may have been owing to the fact that there were so few South Indians in the market that it was natural clannishness to go with a fellow traveler from the South. However, I am of a liberal nature in such matters and it was more the sharp business acumen of Sundar that really got me together with him and we became good friends. The friendship survives into today and my admiration for his abilities remains undiminished. I dont think I have met very many more people in my life who have a greater focus on how to make money from the markets. Sundar has that incredible sense of stock picking and though he would never admit it, I truly believe that he has such fantastic timing skills inbuilt in him that he could have been a TA with ease! I teamed up with Sundar and we made some very good money when the markets began doing better in 1983. Somewhere in mid 1984, Sundar bought a membership card on the BSE and with that came the moment when I made the switch to markets as a full time career. I always knew that this is where I wanted to end up. I thought, when I set up my clinical practice in 1980 that I would stick to Dentistry for at least 10 years. The bull market that took birth in 1984 and my friend Sundar buying his membership by that time, cut short the Dental career to a brief four years. I left the profession without any further thought on 19 August 1984 and entered into the broking world full time.

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Chapter 3: Core Competence- and why it is important.

Looking back at my life, I think it was a huge mistake for me to become a sub broker. You see, I was never cut out for that kind of work. I thrived on intellectual pursuit, on detailed study, correlations, patterns, forecasting, tracking, and finessing. A broker needs to be focused on business, on running the day to day operations with detachment, being on the ball with payments both to and from clients, on client acquisition, on creating client satisfaction, on firmness of handling delinquency etc. I had none of those qualities. I didnt have those aspirations!! I should have become a full time Analyst. Unfortunately in those days, it was early days still for Research to have become the common practice that it is today. Fundamental research was being done by a mere handful of people. Publications were just starting to come on to the scene. Technical analysis was largely unknown. But I was already into analysis as a passionate endeavor. And I had people asking me for advice. I mistook that interest as a possible business but did not realize that it was not for broking operations. I really should have launched an Advisory business as early as 1984-85. I am certain I would have done far, far better than I fared as a sub broker.

Be that as it may, I launched into a career as a subbroker. This certainly interfered with my dedication towards technical analysis as I had lesser time to devote to it. Nevertheless, I persisted and possibly have to credit my passion for the subject for finding me the energy. I continued to read, develop methods but application was sporadic. As a result, the output also remained sporadic. I actually think now that I wasted 10 good years of my life (actually my peak productive years from the age of 25 to 35) in pursuing a career that was just not my core strength. Indeed, I did harm to myself by moving away from it and paid the price.

But the broking business also taught me a few lessons. It taught me how not to judge people from what they appear. I work on trust and honesty and I believed, wrongly it now appears, that everyone else would transact with me the same way. However, I found out later, much to my dismay, that people were seldom who they seemed to be and when the odds turned against you, it became difficult to know who is your friend anymore. Turning shades faster than chameleons, former friends suddenly seemed like unrecognizable strangers and people whom you carried thru your own efforts turned against you when you least expected it. But having got into it and then trapped in the deep end, I found it difficult to swim my way out of it. I have always relied upon my innate ability to help myself out of any situation in my life. Since my parents died early (I was only 14 then), I have pretty much led my own life, although my elder brother was a tower of strength behind my back all the time. I had relied more on my own counsel and not sought help even when I should have. This was one of the occasions when I was clearly out of my depth and should have reached out. Not having done so led to a delay in exiting this business. Let that be a lesson to budding business people. At younger ages, we are never as smart as we think we are. Wisdom comes but with age and experience and there is no substitute for it. If you are young and if you are in trouble, never hesitate to ask a knowledgeable elder for advice. Your life may take quite a change. I stuck to the broking line right till the last day when the trading ring shut down in March of 1994. By then I had moved to market making for the last two years, a line of work where my strong memory and

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ease with numbers helped me make a success of it. Thus I was sad to see the ring come to an end. It was an era of a rather easy way of making money. As a market maker you remain largely in control. And you can manipulate the system to your advantage. This helped quite a few of the brokers to amass considerable amounts of money thru the years. I myself did well in that line in the last two years of my Ring life. Electronic trading commenced soon thereafter and by then the NSE had also been launched. I remember that we all used to refer to it rather derisively as the 3-stock exchange because, around its early days, the bulk of the trading at the NSE used to comprise of just a few stocks. The BSE ruled and most of us were certain that the NSE would be a failure! But as history has shown, it was the BSE that went into a decline over the years. Was it complacency among the brokers? Was it the battle with the authorities about the various impositions on the brokers? Was it the fact that the members were from the old school while the NSE brokers were the newer lot who were more affined towards the electronic trading system? Maybe it was a bit of all these that finally did the BSE in. But an organization like the BSE cant be kept down and there is far too much history around it and behind it. Its making a comeback slowly on the derivative front as well as perhaps in the other market segments. Today the NSE can well be blamed for being a monopoly a complaint that was once levied against the BSE!

The transition into the electronic trading media was not a smooth one. Only the far sighted among the players saw the paradigm shift that was now present- we had moved from a closed circuit, broker driven system- opaque at best- to a totally different order driven system where the entire country was on an even level. Jobbers, markets makers, brokers no longer enjoyed the kind of secrecy and dominance and ability to control that they once held and this created an upheaval in the way the business was done. The initial BOLT system favored a Market

Making driven system and we all believed that we would continue to dominate as in the days of yore and therefore plunged right in. The stage was larger and we felt we could probably gain even more! But we were all in for a nasty surprise ahead. The transition took a while and just as in every case where there is some confusion with the process, here too the mischief mongers were quick to appear. They took advantage of the loopholes that still existed in the process and succeeded in mulcting many a trader, me included. I didn't mind losing money because of my errors or misjudgments but I found it difficult to accept being cheated by a faulty system. With the money disappearing fast, I thought it prudent to move away from this activity and preserve what I had left. For the first time since 1982, I was leaving the market place, something that I never thought would ever happen. What lesson did I draw from this phase of my life? That which the self help books advocate all the time- stick to your core competence if you want to do well. I wasted, yes wasted, about ten years of my life doing something that I was not very good at and in the process, moving away from building my strength in my subject. It was not dissimilar to how people approach trading. Everyone thinks he has the competence to do it, little realizing that it requires a complete overhaul of one's personality. I went into broking without much thinking, believing it to be an extension of what I wanted to do in the financial markets. The years did give me some learning and experience but not the kind that I desired or really needed. Of course one is enriched by any experience that one gathers in the markets. From that

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standpoint, the chance to experience the broking business, a first- hand look at the trading process etc. were good experiences no doubt. But the price I paid for moving away from my core competence area was high. I would definitely not advice budding analysts to ever take their sight away from what they want to do in this field. It is a voluminous area of work and there is little scope for time and energy dissipation in non- core areas.

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Chapter 4: Trading Markets at last! The great leap forward for technical analysis. The first charting software in India Even through the time that I was engaged in stock broking work, I never let go of the passion for TA. With lesser time available for charting I toyed with the idea of developing a software. By 1988, charting software had made an appearance in India. The first of these was an outfit called RPK Software and they caused a small flutter by having a software that would plot and print charts. We were all mesmerized of course. RPK ran a chart print service and we would all line up there to buy prints of different companies at stiff price! Then destiny played its part. My wifes cousin who worked at TCS back then came home with a friend of his. I spoke to them about my interest in developing a software and this friend, his name is AbhayPatil, said he could do the job. He was planning to quit TCS and turn freelance anyway. And that is how ASA software came about! Abhay quoted me a fee of Rs 39000 for the development- a rather tidy sum of money back in the late 80s. I did not have all the money, so I got together a couple of fellow TAs of that time one of them being Kalpraj Dharamsey, one of todays bulge bracket market players- and together we funded the creation of ASA which was meant for our own use only. Of course none of us was really interested in the commercial end of the software and we never bothered about becoming owners of the software. RPK never really marketed their software and were keener to be a chart print supplier. Abhay kept working on the software and by 1990 he had come up with a much better version. My belief is that ASA was truly Indias first technical analysis software and I am happy that I provided all the inputs for its creation and it still continues to be my top favorite software of all time despite the fact that I have another 10-20 more! But the credit for the first commercially available TA software probably was bagged by another that was made at around the same time. This was Trend, a software made by KiranSagarkar, who has been another indefatigable player in the TA software field. Kiran proved to be more business savvy than Abhay and I recall he launched the software (even though it was not complete) with a small bang that attracted the TA community. To this day, Kirans products remain at the forefront of TA softwares and in its current form is probably one of the most widely used one. ASA is associated with VivekPatil- Abhays brother- who is the better known face. He is the market guy while Abhay continued to remain the technology person. They have seldom pushed their product aggressively and are content to be among their clients who are actually quite a number, by the way. I do believe that the ASA users are a band of loyalists and forever remained devoted to this software. My belief is unshaken that it is even today one of the most advanced piece of software available and though Abhay can be held guilty of not moving it to a Windows format (it still runs on DOS!) that does not take away the value of the software. I have personally put in methods and tools and technics way back in 1988-90 that many of the even modern day softwares cannot boast of. Abhay is a gifted programmer and one who understood the nature of technical analysis almost the instant it was conveyed to him. I think it is just providence that we both managed to meet.

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I cant let this narration go without giving people an idea of the kind of difficulty we used to have with plotting a chart even using a software! When I got the software program design commissioned, we were all working with a PC made up of just two floppy drives. Many youngsters today dont even know what a floppy drive is! For their information, these were drives that had a capacity of 64 kb, yes thats right, KB. Today we are used to GB and TB is becoming common place. So imagine working with 64kb. For comparisons, GB is 0.1% of TB and MB is 0.1% of GB and KB was 0.1% of MB. So what you are used to today (TB) is really a One Billion times more capacity than where all this began! We used to have the program disk in Drive A and the data disk in Drive B. Plotting one chart would take approximately 2-5 minutes! I still remember the day when I got my first 1 MB hard disk drive and transferred all the program and the data into the hard disk- I felt like I had climbed the Everest or some such! When we first designed ASA, we had to manually input the data into the machine and I recall requisitioning the services of my wife and sister to input the data every day. My sister would read out the quote from the Economic Times and my wife would then punch that data into the machine! This process would take a few hours- longer if you maintained more stocks. Tracking all stocks- despite the PC- was out of question! I think it was not until a few years later that the BSE started making available the prices as a file. My peon used to go with a floppy disk every day to the exchange and get the file which we would then upload into the software. In the beginning we got just A group stock prices. It took another couple of years for the BSE to make the B group prices available. This is why you find Group A shares with history from 1984 while Group B shares data is available only from 1990 (even though many of these companies existed before 1990 or even 1984!). Even on promise of payment, older data could not be made available! Fortunately, I had hand written price data of many shares dating from 1968 and I have painstakingly input all that data into the software and created probably the longest data base available today for many of the stocks. VivekPatil took the trouble to get hold of RBI data of prices and created those charts in ASA, which is also a great help to get a long-term perspective on stock movements. Contrast all that with todays net based delivery of ready processed data that downloads and updates your database all within some 5 minutes! What a boon technology has been! In retrospect, it now seems like the machinations of the mischief mongers that forced me out of the jobbing game was probably one of the best things to ever happen. Now that I was no longer attending the market, I got a chance to get back to Technical Analysis once again. And by now I also had the benefit of a decade plus of market experience. And also, I was older. I threw myself back into the subject now with redoubled vigor. This was about the time when I got into teaching and writing full time. The Great Leap Ahead for Technical Analysis in 1995 By then trading had got established and the NSE actually became a trading exchange. More, the different settlement dates between the NSE and the BSE led to substantial arbitrage work. This was a bonanza for many and many a substantial fortune was built on this business thru the next decade. It was the time when the market was hungry for some good quality advice on trading. With computerized trading now a rage, the bid-ask spread came down to just a tic or two ( in contrast to a tic size of 2-10 points during the Ring days!) and that made day trading viable. Also, the volumes went up substantially. During the period of 1995-1998, the market essentially went nowhere and created a large range between 4000-3000 on the sensex. Since we had just ended a long term bull market, we were also undergoing a substantial correction in equity prices and hence fundamentals simply stopped working. People knew only the fundamental route even to trade and hence were bereft of ideas of how to play the new type of market. Budla had got banned long back and there was no easy way of making money any more for those who were uneducated about the ways of the new market place.

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I believe the trading market of 1994-1998 along with the NSE coming to fore as an exchange that really was the giant leap forward for technical analysis.

With known methods failing steadily and miserably, people were forced to seek out something that addressed the shorter time frames. The only that fits the bill is technical analysis and that is how TA started on a rising path- something that is yet on the ascent in 2015!! Fortunately I realized this change well in advance and I came out with (possibly) the first intra day trading advisory service in the country. I called it Techni Trend and I used to send this out by fax to subscribers. There was still no email back then because the internet was not yet born (at least in India). The product met with a resounding success, something far more than I had expected. You can imagine the paucity of services during that time and the hunger for such a service by the fact that I used to send out the advice late in the night and people would wait up till late in the night (as late as 1 and 2 am!!) just so they could get the product. I kid you not. This is a fact. It got to a level where I simply could not send the fax by myself and was wondering how to scale up when I had a chance meeting with an old school mate of mine one day in the local train. We were meeting after a long time and he mentioned that he was working with Global Telecom who was in data dissemination. This was like a godsend! I promptly landed up at his office the next day, signed up for the service. At one stroke my problems were all solved. All I had to do was send my letter to Global and they would in turn send the fax to all other clients of mine!! Techonology was once again at hand to push the scale higher! This was the chance to really scale up but somehow lack of vision and some other financial compulsions at that time prevented me from going all out and I think I lost out on a very big opportunity to grab the mantle on the advisory service at that time. I was probably among the few people who was doing it at that scale and using technology to push the barriers outward. But I slackened when I should have really hit it hard and I live to regret that till today. But the only thing that I can say makes me proud is the fact that the trading advisory service that is such a rage today- was probably launched for the first time in India by me in 1994. It was a market that I helped create. Pioneering TA Training Programs Another area that I think I may have had a strong influence is the creation of Technical Analysis training. I never knew I could train and had never ever tried it before in my life until 1993-94. Thru the years I had kept up my exhaustive reading on books procured either from Atul Xerox or thru my own efforts from my friends overseas. This had made me sufficiently knowledgeable about methods within TA and the over 10 years of application had burnished that knowledge in as well. This prompted one of my acquaintances to suggest that perhaps we could hold a training program to educate others on use of TA. He offered to take on the logistics of creating such a program and to my surprise he managed to rope in over 40 students in no time. Along with PrafulChheda, a long time friend and colleague, the two of us launched the first training program (after that effort by Gosar and Parikh back in 1985) on TA at the Indian Merchants Chamber. The program went thru so well that we were requested for a more advanced version and we created and conducted that too. This set off a domino of training programs and soon I was doing training programs with various peop

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