Share Market Theory.

Amol Gopal Kabra (CA,CS,DISA) (Practicing CA) (8524 Points)

24 April 2009  

You must have read or heard about this story.. Still wanted to share it with you all..

This is a story of Merchant and the Monkeys.. No no.. not the one you heard in your childhood.. This is a different one.

Once upon a time, there was a Merchant. He came to a nearby village where there were lots and lots of monkeys. The villagers were irritated with the monkeys. That fine day when the merchnat came to that village, he had an offer for the villagers. An attractive offer.

He offered the villagers that he will buy monkeys from them @ Rs.10 per monkey. The villagers were happy. They started catching monkeys and sell them to the merchant. The merchant would keep the monkeys in a cage for the purpose. 

After some days, the merchant offered Rs.20 per monkey. The villagers were happy again. They started catching more and more monkeys to sell them to the merchant. Now what happened is that the number of monkeys in the village started reducing.

Now, the merchant offered Rs.30 per monkey. Till this tine, all the moneys in the village were with the merchant. So , the villagers started catching them from nearby villages. After some days, all the monkeys in the region were with the merchant. All was going fine till now.

Now the merchant offered Rs.100 per monkey. But the villagers were not happy as there was hardly any monkey that they can sell. Then , the merchant informed the villagers that he had to go back to the city for a week and asked the villagers to carry on the dealing with his agent who came over there.

The merchant returned back to the city. Here, in the village, the agent had another deal with the villagers. He offered that he will sell them the monkeys with him @ Rs.75 and advised them to sell those back to the merchant @ Rs.100 when he comes back. The villagers were damn happy. They started buying the monkeys and in less than a week, all the monkeys were sold. Then, the agent returned back to the city.

That day onwards, neither the merchant returned to the village nor the agent.

This is nothing but story of stock market where, the Merchant and the agent are the Big Players in the market and the brokers, the monkeys are the Share and the villagers are the poor small shareholders.

Hope you liked the story.

Thank you.