Boom & Bust Cycles of Stocks !

4 min read

In the world of stock markets, stories of jaw-dropping gains and heart-wrenching losses are not uncommon. One such story is that of Wipro, a prominent Indian company that has experienced its fair share of ups and downs. In this article, we will delve into the fascinating journey of Wipro’s stock and extract important lessons for stock market investors.

Wipro, a company known for its presence in software, oils, and electrical business, saw its stock trading on the National Stock Exchange (NSE) since its inception. The journey began modestly, with the stock priced around just Rs1. However, as the software boom gained momentum in the late 1990s, Wipro started diversifying into software, which propelled its stock price to new highs.

Within a short span of two years, the stock skyrocketed to nearly Rs 40, a staggering 40 times its initial value of Rs 1. This incredible growth would have made any investor sit up and take notice. Just imagine, an investment of one lakh turned into a whopping 40 lakhs in just two years. 

Truly astounding, right?

But here’s where the story takes an unexpected turn. The stock continued its meteoric rise and reached an all-time high of Rs 320, so basically Rs 1 lakh turning into approximately 3.2 crores, in February 2000. The mind-boggling growth of the stock compelled investors to believe that it had unlimited potential. 

However, the inevitable happened 

The stock market crash of 2000. Within a span of a few months, the stock plummeted back to Rs 47, erasing a significant portion of investors’ wealth.

Imagine the plight of an investor who had seen their 3.2 crores evaporate into a mere 45 lakhs. The dream of making 100 crores suddenly turned into a harsh reality. This rollercoaster ride continued for several years, with the stock reaching its lowest point of 24 lakhs in May 2003. It seemed like all hope was lost, and the stock would never regain its past glory.

However, as is often the case in the stock market, fortunes can change unexpectedly. After bottoming out, the stock gradually started to climb again. And after a gruelling wait of 20 years, in September 2020, the stock finally regained its previous all-time high. Patience and perseverance paid off for those who held on to their investments.

But the story doesn’t end there. The stock market is a volatile and unpredictable beast. Within a year, the stock doubled to more than Rs 720. Investors rejoiced, thinking that their patience and resilience had finally paid off. However, in a cruel twist of fate, the stock retreated once again and currently hovers around Rs 430.

So, what can we learn from the rise and fall of Wipro’s stock? 

The most critical lesson is the importance of actively managing your investments. Simply buying and holding forever is not a sustainable strategy, as the stock market can be irrational and prone to massive fluctuations. Investors need to be alert and know when to get in and get out.

Timing is everything in the stock market, and identifying stocks with high momentum is key to successful investing. Don’t be afraid to take profits when a stock has reached its peak and consider re-entering the market when favourable opportunities arise elsewhere. The goal is to free up capital and use it wisely to maximise returns.

It’s also crucial to remain level-headed and not fall prey to irrational exuberance or extreme pessimism. Investing is a long-term game, and short-term volatility should not cloud your judgement. Remember that every stock has its ups and downs, and it’s important to take a disciplined approach.

Lastly, diversification is a prudent strategy to mitigate risk. Instead of placing all your eggs in one basket, spread your investments across different stocks and sectors. This way, if one investment underperforms, your overall portfolio will not be severely impacted.

In conclusion, the journey of Wipro’s stock serves as a valuable lesson for stock market investors. It highlights the need for active management, astute decision-making, and emotional resilience. A buy-and-hold strategy may work for some, but the reality is that the stock market is a dynamic and unpredictable arena. By staying informed, making informed decisions, and adapting to market conditions, investors can navigate the stock market with greater confidence and increase their chances of success.

So, the next time you come across a stock that seems too good to be true, remember the rise and fall of Wipro’s stock. Keep in mind the lessons learned and approach your investments with caution and diligence. Happy investing!

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February 29, 2024 by Weekend Investing

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    Boom & Bust Cycles of Stocks !