Practical advice for existing shareholders of Yes bank
Disclaimer : I am not a Sebi Registered adviser and currently invested in Yes Bank with average holding @45 Rs. This article is based on Yes Bank taken over by RBI and placed under moratorium on 5th Mar 2020. The content of the articles are not relevant if there are any future developments which are not in sync with this article. This article is not meant for traders. Please consult your financial adviser before making any decision on buy, sell or hold. You are advised to have your conviction and owning the decision thereafter.
As per the recent developments, Yes bank is placed under moratorium by RBI and SBI , LIC are potential investors with dilution of shares. So in such a case what an existing shareholder can do.
Should an existing investor buy, sell or hold? A dilemma which refuses to die down every minute and becomes more bigger with every news link.
Stocks may fail or fall due to technical reasons (overpriced) , due to bear market (every stock falling) , due to bad policies (power stocks, aviation are good examples), or change in fundamental story.
Be clear that Yes bank has fallen due to change in its fundamentals and its story has changed. Whatever thesis we have for Yes Bank at the time of investing is changed forever and this is the time to have a relook on yes bank investment.
So what we can do as retail investor when you are up against
- Change in fundamentals
- Lot of Traders
- Insider news operators
- Big fund houses
- Prevalent misinformation
Here is the practical advise in three scenarios
HOLD Yes Bank shares
Hold if your average is too high (beyond 60 Rs and further) (CMP Yes Bank is ~16 Rs) and don’t book losses. Let the losses remain on paper.
You can not do anything with pennies anyway.
Wait for investment thesis by SBI, other players to play out
Let the stock get stable and take a call again but do remember not to throw good money after bad money.
Buy Or Sell Yes Bank Shares
This section is specifically for investors holding positions below 60 Rs.
First step you should do is look existing amount as fresh investment in new bank or a new company & ask yourself few questions
◆Will new Yesbank be multibeggar in near future?
◆Can I afford to lose all what i invested till now or further money in Yesbank debacle?
◆Will brand value of Yes Bank remain intact among customers and depositors after moratorium.
◆Will new customers open their account in Yes Bank ?
and like wise you can frame more questions
◆Are there better opportunity in this falling market?
◆Will old customers withdraw all money on first given opportunity from Yes Bank?
and like wise you can frame more questions
If the answer is YES (for Qs in Section 1) along with NO ( for Qs in Section 2), Then read Option 3 down further
If the answer is Yes for some of the above questions in section 2 along with No answers to some questions in section 1, Then there are three options
Option 1. Think it is one of the bad ideas and sell if liquidity is a challenge. Book your losses and Move on to next opportunity.
Option 2. Hold if liquidity is not a problem. You may recover some of the price and decide accordingly. Don’t throw good money after bad money
Option 3. You have enough liquidity and can afford to lose all money invested in yes bank plus you have enough time horizon to play like 3-5 years, Go and buy shares of new Yes Bank and average your holding if shares available at below 10 Rs. Even if you choose option 3, allocate not more than what you afford to lose completely. I would not advise you to go beyond 5% to 10% capital in yes bank of your total capital allocated in market. Definitely a Riskiest option but rewards (if any) will be equally high.
Choose your option wisely based on current liquidity, your risk appetite and investment horizon and do as much due diligence as possible on your holding.
I hope this article might have brought some clarity to your current thoughts. Any feedback’s are welcome.
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