Synopsis
It is important to know the reason why you are buying a stock β it has a direct correlation to the amount of time you may hold it. It is equally important, however, to assign a reason for selling a stock at a particular point of time. Why? Because that has a strong correlation to the probability that you will buy the stock again β at a higher price. To illustrate: A recent development in Brazil led to a spike in global sugar prices. Now, if you bought a sugar stock because of that, you may sell it. But if you bought it because sugar companies are transitioning from the agro to the clean energy sector because of ethanol β then you got it right, and there is no reason to sell. In fact, something interesting happened β or did not happen β before the coming Maharashtra elections which adds to the list of reasons why sugar stocks should not be sold.
Even as recently as a decade back, the sugar industry β its promoters, a few bankers, and shareholders β used to get jittery whenever there were elections in two states β Uttar Pradesh and Maharashtra, the two biggest producers of sugar in India. The reason: State elections were usually preceded by a hike in the minimum support price for sugarcane farmers. This meant that sugar mills had to pay more to buy cane from the farmers. Of course, in
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