Four young men across three Indian states are making anything between Rs8.5 lakh and Rs27 lakh a year offering stock tips through messages (SMSes) on mobile phones to 150 customers in Mumbai, and they claim that by following their advice, customers could have earned returns of up to 350% in the last five months of 2007 alone.
“This is the function of a bull market—that there is a market for everything,” says R. Balakrishnan, executive director (equity research) at Mumbai’s Centrum Broking Pvt. Ltd. “There is a niche market for such services as long as the market delivers. There is an astrology website which predicts which shares to buy, when and when not. There are people who pay for such advices.”
Mint couldn’t independently ascertain the quantum of returns earned by subscribers. The four men, Aditya Deorah, Hiren Padia, Mitul Doshi and Shalin Shah, who call themselves Team Stock Researchers —they have not incorporated a company yet—did not provide a list of their subscribers.
However, they did provide Mint with a spreadsheet of all their calls and how specific stocks and broader indices have performed since.
Other stock brokerages and investment advisers, including Reliance Money and Centrum, have their own SMS-based services, but they also have research departments that study markets and companies.
None of the members of Team Stock Researchers has any educational qualification related to the stock markets. The four met in a chat room on Indian stocks and decided to set up the SMS service, which was launched in May.
India’s stock market boom— Sensex, the benchmark index of the Bombay Stock Exchange, rose 46.8% in 2006 and 45% in 2007—has resulted in an increase in the number of portfolio management companies and investment advisories pitching their services to investors. While some investors opt for large companies and brokerages, others make their own decisions on the basis of tips that promise quick, and sharp returns.
A dealer with a Mumbai-based domestic brokerage says there is plenty of demand for quick-money tips and this will grow as long as the bull run on bourses continues. “Some investors spend less time in stock picking than what they spend on choosing a shirt,” he says.
A blog run by Team Stock Researchers, www.niftyviews.blogspot.com, features a free live chat room where investors can talk stocks. The group uses a web-based messaging platform to send out SMSes. Each SMS sent to paid customers costs them about 50 paise. It also sends free messages to potential subscribers through SMS GupShup, a free group-messaging platform built by Webaroo, a closely held company that offers web access on mobile devices. These messages do not cost anything as Webaroo places ads on such SMSes.
This reporter subscribed to the free service and on 9 November received a long-term buy call on Diamond Cable Ltd. Between then and 1 January, the stock appreciated more than 58%. Team Stock Researchers claims that the call was based on its analysis of the fundamental value of the company as well as a technical analysis of the stock.
Similarly, in December, this reporter received a tip from Team Stock Researchers to buy Forbes and Co. Ltd. Between the third week of December and 4 January, the stock rose by more than 76%.
To be sure, speculators have long used the mechanism of generating enough interest in their stocks (called “support” in stock market lingo) to boost their stock prices. Mint could not ascertain whether the increase in the share prices of these scrips was on account of any such attempt.
The four market movers who churn out hot stock tips are based in four different cities.
Kolkata-based Deorah, 21, is an undergraduate student in economics.
The eldest of the lot, Padia, 25, has a commerce degree, with a specialization in marketing, from the Saurashtra University in Rajkot, where he lives.
Doshi, from Surat, has completed an undergraduate course in business administration from an institute in his city.
The fourth member, Mumbai-based 21-year-old Shah, is a student of architecture at LB Hiray College.
Team Stock Researchers offers different schemes to subscribers. For so-called safe traders, there is a fortnightly email stock tips package that costs Rs5,500 a year.
The SMS-based daily calls cost Rs7,000 annually and the premium intra-day call package, that targets day-traders, costs Rs11,500. On the derivative market, a premium F&O (futures and options) package is priced at Rs18,000 a year and calls on Nifty index futures Rs13,000.