Navigating Yes Bank Shares: What to Do with High-Buying Prices
As a retail investor who has purchased a modest number of Yes Bank shares at a relatively high price, you might be wondering what to do next. This article aims to provide guidance on whether you should average down your cost, hold onto your shares, or consider exit strategies. Stay tuned as we explore the financial landscape of Yes Bank and its potential for recovery.
Understanding the Current Market and Technical Analysis
Firstly, it's important to recognize that your current buying price, around 75, is significantly higher than the current market price, which was 13 as of July 25, 2021. This high buying price could be concerning, especially given the stock's current valuation.
If you have the financial flexibility, you might consider averaging down your cost. By purchasing additional shares at the current market price, you can bring down your average cost per share. For example, buying 750 shares would cost you 9,750 (750 * 13) in comparison to your original 7,500 (100 * 75). Adding 1,750 more shares would make your overall cost 26,050, with an average cost of 15.03 per share.
However, it's crucial to weigh the costs and benefits. While averaging down can reduce your overall cost, it also increases the total investment. If you're in a position to do so, this strategy could be beneficial in the long run. Alternatively, if you're looking for short-term gains, selling some shares at the current market price can help mitigate your losses.
The Future Prospects for Yes Bank
Despite the challenges, there are reasons to be optimistic about Yes Bank. Over the past year, the bank, like others, has received intervention from the Reserve Bank of India (RBI), State Bank of India (SBI), and other financial institutions. These interventions have been pivotal in stabilizing the bank's financial operations, with recent results reflecting positive developments.
However, it’s important to note that these positive developments have not yet translated into significant improvements in the stock price. The stock has remained largely stagnant, hovering around 18-20 or 25 paise for over a month. This could be a sign that investors are cautious and waiting for clearer signals before making significant movements.
Despite this, some analysts are suggesting that the time might be right to book a profit. This advice is based on the assumption that the positive changes in the bank's operational and financial health are finally starting to be reflected in the stock price. However, it's also possible that the current market is stuck, and the stock could still have room to rise.
Recommended Course of Action
Given the current situation, my recommendation is to approach this stock with patience and a long-term perspective. Some seasoned investors have compared Yes Bank to stocks like Tata Motors, Ashok Leyland, and Vakrangee, suggesting that while the path to recovery might be slower, the potential return could be substantial.
With that in mind, my advice is:
Continue Holding: If you have the capacity to wait out the volatility, continue holding onto your shares. This strategy aligns with the belief that the stock has a break point and a potential for growth in the near future.Average Down: If you have additional funds, consider averaging down your cost by purchasing more shares at the current price. This can help reduce your overall cost base.Consider Exit: If you’re unable to absorb the loss and prefer a more active approach, consider exiting your position now before further losses occur. Take a calculated risk and weigh the pros and cons before making any decision.Conclusion
Staying in the game with Yes Bank shares, given the current market dynamics, can be a strategic play. However, it’s crucial to approach this with both a laid-back patience and vigilant eye on market trends. Whether you choose to average down, continue holding, or consider exit, the key is to stay informed and make decisions based on a clear strategy.
Remember, the views expressed in this article are for personal and educational purposes only. Always consult with a financial advisor before making any investment decisions.