What Cause the Market to Go up and Down

It is difficult to identify specific factors that influence the market as a whole. The stock market is a complex, interrelated system of large and small investors making uncoordinated decisions about a huge variety of investments.

The market, so to speak, could be construed as sort of an ecosystem, one organised by the "invisible hand". Each market participant acts and plays freely using their individual ideas and by following their own personal interests. "The market" is shorthand for the collective values of individuals and companies.

There are basic economic principles that can help explain any up and down market movements, and with experience and data, there are more specific indicators market experts have identified as being significant.

The Basics: Supply and Demand

In a market economy, any price movement can be explained by a temporary difference between what providers are supplying and what consumers are demanding. This is why economists say that markets tend towards equilibrium, where supply equals demand. This is how it works with stocks; supply is the amount of shares people want to sell, and demand is the amount of shares people want to purchase.

If there is a greater number of buyers than sellers (more demand), the buyers bid up the prices of the stocks to entice sellers to be willing to sell or produce more. Conversely, a larger number of sellers bids down the price of stocks hoping to entice buyers to purchase.

Individually, security instruments like stocks and bonds are dependent on the performance of the issuing entity (business or government) and the likelihood the entity will be valued more highly in the future (stocks) or be able to repay its debts (bonds).

Widely Accepted Market Indicators

This begs a new question: What creates more buyers or more sellers?

Confidence in the stability of future investments plays a significant role in whether markets go up or down. Investors are more likely to purchase stocks if they are convinced their shares will increase in value in the future. If, however, there is a reason to believe that shares will perform poorly, there are often more investors looking to sell than to buy.

Events that affect investor confidence include:

• ·       Wars or other conflicts
• ·       Concerns over inflation or deflation
• ·       Government fiscal and monetary policy
• ·       Technological changes
• ·       Natural disasters/extreme weather fluctuations
• ·       Regulation or deregulation
• ·       Changes in the trust of whole industries such as the financial industry
• ·       Changes in the trust in the legal system

For example, It took Sensex just 17 months to add 31,000 points from a March 2020 low of sub-26,000 level to hit 61000 level for the first time ever on Tuesday. This is against 31 years (since its inception in 1986) the index took to touch the 31,000 mark for the first time in May 2017. This move is attributed to the COVID-19 pandemic, which created a lot of uncertainty about the future. Therefore, the market had many more sellers than buyers.

Interest rates are also believed to play a major role in the valuation of any stock or bond. There are several reasons for this, and there is some debate about which is most important. First, interest rates affect how much investors, banks, businesses, and governments are willing to borrow, therefore affecting how much money is spent in the economy. Additionally, rising interest rates make certain "safer" investments a more attractive alternative to stocks.

Bottom Line

While using your instincts and intuition when investing, it’s easy to let your emotions get the best of you. Keep in mind that even with careful research, investing always carries some inherent risk. It’s a good idea to diversify your portfolio as much as possible, so that you’re spreading out your risk over multiple investments. An easy way to do this is by primarily Mutual fund Schemes instead of individual stocks.

Mutual Funds are great ways to build wealth with relatively low maintenance and low barriers to entry. If you also want to invest in individual stocks, it’s always a good idea to do your research and become well-informed about a stock’s past and potential performance before buying anything.

Ultimately, though the stock market may have its ups and downs in the short term, investing in equity funds of mutual funds is a great way to build wealth in the long term. Be sure that you’re investing smartly with a strategy that suits your financial goals, and keep your focus on your long-term goals (such as saving for retirement) to avoid making hasty decisions based on short-term panic or the fear of missing out.

You Can Contact me on any of your Investment and Insurance Requirements.

Ritesh Sheth Call on: 9930444099 email : riteshdsheth@gmail.com 

DISCLAIMER:

An Investor Education & Awareness Initiative.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

*Investments in equity shares, debentures, Bonds etc., are not obligations of, or guaranteed and are subject to investment risks.

The Services and Information provided are for general guidance and information purposes only, and they do not, in any manner, indicate any assurance or opinion whatsoever.

I Marks no representation, warranty, or guarantee as to the quality, accuracy, completeness, performance, or fitness of any alert, article, view, video, information, advice, tool, calculator, analysis, report, data, content news, price, statistic, comment, feedback, advertisement, etc., provided on, or through are personal in nature (collectively known as “Services and Information”).

The Services and Information are dependent on various assumptions, individual preferences, and other factors. Thus, results or analyses cannot be construed to be entirely accurate, and may not be suitable for all categories of users. Hence, they should not be solely relied on when making investment decisions. Your investment / financial decision shall always be at your own discretion and based on your independent research. Nothing contained on, or in any Services and Information would construe me or my family, or any of its employees / authorized representatives as having been in any way involved in your decision making process. Any information and commentaries provided on are not meant to be an endorsement of any stock / investment advice. These are meant for general information only.

What are Dynamic Asset Allocation or Balanced Advantage Funds?

Dynamic Asset Allocation or Balanced Advantage Funds are hybrid funds, which are free to manage their exposure to equity and debt instruments without any caps or minimum exposure limits from the SEBI. These funds change their exposure to equity and debt instruments as per the changing equity valuations with the help of their in-house proprietary models. These models help their funds to eliminate human biases during investment decision making. They also maintain exposure to equity derivatives to implement hedging strategies and benefit from equity tax treatment during overvalued equity market conditions.

Advantages of Balanced Advantage Funds 

You can manage market volatility and aim to limit your losses when markets correct 

1. The strategy focuses on buying and selling assets based on valuations; for instance it may sell assets with high valuations and purchase assets that may be fairly valued depending on the schemes investment strategy. 
2. By investing across asset classes your portfolio risk is diversified. 
3. Performing asset classes can make up for the returns of underperforming ones.

Why invest in Dynamic Asset Allocation or Balanced Advantage Funds?

• Aims to deliver long-term returns closer to equity funds but with significant lower volatility
• Combines the features of potential capital appreciation, capital preservation and volatility control
• Aims to generate capital gains primarily through dynamic management of equity allocation as per varying market conditions
• Aims to provide stability and regular income through exposure to fixed income instruments
• Portfolio rebalancing decisions are usually based on a well-defined and time tested models without any biases
• Offers higher tax efficiency than asset allocation implemented by the investor himself.

  Who should invest in Dynamic Asset Allocation Funds?

  • Investors seeking to create long term wealth with lower volatility
  • Those seeking exposure to equity and debt asset classes with a dynamic asset allocation
  • Those wishing to participate in equity markets with a relatively conservative approach
  • Fresh mutual fund investors seeking to gain equity market exposure with lower volatility
  • Intermediate investors looking for an automated solution during over-valued or confusing market conditions.
  • Experienced investors seeking an automated asset allocation model from the fund house itself. 

Few Examples For Better Understanding 

Kotak Balanced Advantage 

• Uses a 2-factor model using Trend/Sentiment Data and Trailing NIFTY 50 P/E to make the most of ‘Buying Low and Selling High’ investment mantra
• The model measures the future of market conditions and removes behavioral & emotional biases from investing
• Other factors used for stock selection include fundamental attributes like P/B and market cap to GDP ratios

 Edelweiss Balanced Advantage Fund 

• Invests in equity & debt instruments on the basis of a predefined Asset Allocation Model called Procyclical Edelweiss Equity Health Indicator (EEHI) Model
• Actively participates in arbitrage opportunities to generate absolute alpha
• EEHI Model aims to capture the upside during the bull market and protect downside in bear markets
• EEHI Model is purely quantitative in nature built on two key pillars – Market Trend and Health of the Trend
• Equity portfolio of the fund comprises of high quality and consistently growing companies available at reasonable valuations
• Net equity exposure ranges from 30% to 80% of the fund portfolio
• Follows a growth-oriented multi-cap strategy
• Debt portfolio of the fund follows active duration management focused on accrual income
• Arbitrage strategy of the fund involves hedging, capture spreads & corporate actions 

 L&T Balanced Advantage Fund 

• Follows an active strategy to manage market volatility
• Increases the net equity allocation when the P/B & P/E multiples of the market is low and vice versa
• Sets its equity exposure based on an internal model
• Metrics used for deciding debt-equity allocation may also include interest rate cycle, dividend yield, earnings yield, market cap to GDP ratio, medium to long term outlook of the asset class, etc
• The stock selection process is supplemented with the proprietary G.E.M (Generation of Ideas, Evaluation of companies and Manufacturing and Monitoring of portfolios) investing process to invest in quality businesses having reasonable valuations and a strong management track record

 IDFC Dynamic Equity Fund 

• Uses a pre-defined model to indicate the range of active equity allocation based on P/E levels
• The range of equity allocation is reset once in a month based on the weighted P/E ratio of the Nifty 50 for the previous month-end
• Changes within the equity portfolio takes place dynamically on day to day basis
• Follows a multi-cap approach for the equity portfolio
• Prefers higher allocation to large caps during lower exposure to active equity
• Debt portfolio of the fund is actively managed focusing on high credit quality and following short-to-medium duration strategies for containing the duration risk

 DSP Dynamic Asset Allocation Fund 

• Core equity allocation is fixed on the basis of 2-factor asset allocation model using fundamental & technical analysis
• Equity allocation can range between 20% and 90% depending on the outcome of the asset allocation model with the rest of the corpus being allocated to debt and arbitrage instruments
• Combines P/B & P/E ratios of Nifty 50 TRI to determine the attractiveness of equity valuations
• Seeks to generate income through exposure to debt securities and by using arbitrage and other derivative strategies.

 Nippon India Balanced Advantage Fund 

• Uses an in-house proprietary Model following valuations & trend following to set the allocation for unhedged equity
• Aims to offer triple benefits of emotions-free asset allocation, lower downside risk through hedging and generation of long term alpha through active sector and stock selection
• Maintains a large cap oriented portfolio well-diversified across sectors
• Investment universe covers all listed large and midcap stocks having derivatives
• Uses a conservative approach for managing debt portfolio by focusing on shorter end of investment through a combination of liquid and short term fixed income securities
• Aims at realising ‘Alpha Potential’ in full market cycle through upside participation in rising markets and downside risk management in falling markets.

 Aditya Birla Sun Life Balanced Advantage Fund 

• Aims to buy in underpriced opportunities and sell out during overpriced situation
• Runs a well-tested P/E based model to determine its ‘Net Equity Exposure’
• Uses derivatives to reduce the net equity exposure during overvalued markets
• Uses fundamental research to select stocks with potential of adding alpha over a longer period of time
• Open to invest in opportunities available across the market capitalization
• Uses top-down approach to identify growth sectors and bottom-up approach to identify individual stocks.

 ICICI Prudential Balanced Advantage Fund 

• Invests primarily in equities and uses derivatives exposure to reduce the downside risk of the portfolio
• Uses an in-house asset allocation model based on long term historical mean Price to Book Value (P/BV) ratio
• Invest across market capitalisations for equity exposure
• Increases equity exposure during attractive valuations and reduces equity exposure expensive market valuations
• Invests in fixed income securities too to generate accrual income and capital appreciation

Invesco India Dynamic Equity Fund 

• Uses a pre-defined model to indicate the range of active equity allocation based on P/E levels
• The range of equity allocation is reset once in a month based on the weighted P/E ratio of the Nifty 50 for the previous month-end
• Changes within the equity portfolio takes place dynamically on day to day basis
• Follows a multi-cap approach for the equity portfolio
• Prefers higher allocation to large caps during lower exposure to active equity
• Debt portfolio of the fund is actively managed focusing on high credit quality and following short-to-medium duration strategies for containing the duration risk

 Motilal Oswal Dynamic Fund 

• Makes equity allocation on the basis of Motilal Oswal Value Index (MOVI)
• MOVI is calculated on the basis of PE, PB and dividend yield ratios of Nifty 50 Index
• Equity exposure can range between 65% and 100% of the overall fund portfolio
• Prefers a focused portfolio with high conviction stocks based on the principle of ‘Buy Right: Sit Tight’
• Invests in equities across market-capitalization and sectors
• Exposure to equity derivatives can go up to 35% of the overall fund portfolio
• Derivatives exposure is made using arbitrage strategy and hedged position
• Debt exposure can go up to 35% of the overall fund portfolio.

An Investor Education & Awareness Initiative

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Inflation Vs Growth

Inflation Vs Growth

What should be the focus at the moment? Inflation or Growth? With the current inflation numbers being printed,the concerns rise again on the stance of RBI and the direction ahead. What really impacts the inflation,to my mind are two constituents:

International Oil Prices

Cost of Grains

The Oil price as a factor is totally out of our control & as India consumes 5% of the Global Oil Production per day,any Dollar change in the price of Oil has a deep impact on the domestic pricing. Also with the weakening of INR to Dollar, we tend to import further more inflation. 

For years and years we have been dependent on Monsoon for our Kharif and Rabi produce. Each year the Food Inflation that accounts around 35% weight in the CPI basket fluctuates our Inflationary expectations. 

Further with a huge borrowing programme,we have been keeping the yields artificially low. Even though GSAPs have been announced, the fresh GSEC auction results have been in front of us. 

So should we be worried for Inflation, Interest rates or Growth.

Targeting a higher Double Digit Nominal GDP Growth rate of around 15% with Inflation targeted around 6/7% will lead us to a Real GDP Growth rate of around 9% for a few ahead years. 

Liquidity is not the issue today, the issue remains to part funds with credible borrowers and their ability to multiply and payback. Employment generation is the Key at the moment for a higher Consumption capacity and savings as well,as they are interrelated.

Gradually as the interest moves up,the small saving schemes will provide better returns and the money supply will get balanced between a suitable consumption & savings. 

As a developing market,Growth is what will attract the FPI inflows and the Retail Equity Inflows into the markets,hence providing a superior alpha in that space as the Corporate Earnings improve. 

The need is to inculcate the long term savings pattern which should be 20 years plus,while the short term interest rates need be low for the Consumption cycle to kick in across the spectrum.

Equity SIPs are always what we talk about,ever considered SIP in Debt Funds for a Long Term Savings as well as the reinvestment rates move up? 

The Views are Personal.

How to Select Shares to Buy?

“Long ago, Ben Graham taught me that ‘Price is what you pay; value is what you get.’ Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.” -Warren Buffett

Here are the eight essential steps that you need to follow for picking winning stocks to invest in the Indian stock market.

1. Does the company has Good Fundamentals?

2. Do You Understand the Products/Services offered by the Company?

3. Will people still be Using this Product/Service in 15-20 years from now?

4. Does the Company Have a MOAT (or Low-Cost Durable Competitive Advantage)?

5. What is the Company Doing that Its Competitors are not?

6. Does the Company has a Big Debt?

7. Is the Company’s Management Efficient and Qualified?

 8. Is the Company Constantly in the News and Overly Popular?

1. Does the company has Good Fundamentals?

To find the answer to this question, there is a 2-minute drill to find a fundamentally strong company. Using this drill, you can filter the financially healthy companies so that you can proceed to investigate further. If the company is not fundamentally strong, there is no need to learn more about its products/services, competitors, future prospects, etc.

You can move to the next steps only once you confirm that the company has given good past performance and is worth investing in. For this 2-minute drill, you need to look into the financials of the company. Here are 8 financial ratios and their trend that should be carefully noted in this step:

1. Earnings Per Share (EPS) – Increasing for the last 5 years

2. Price to Earnings Ratio (PE) – Lower compared to competitors and industry average

3. Price to Book Ratio (PBV) – Lower compared to competitors and industry average

4. Debt to Equity Ratio – Should be less than 1 (Preferably debt<0.5 or Zero)

5. Return on Equity (ROE) – Should be greater than 15% (Last 3 Yrs Avg)

6. Price to Sales Ratio (P/S) – Smaller value is preferred

7. Current Ratio – Should be greater than 1

8.  Dividend– Increasing for the last 5 years

To begin your 2-min drill. Once you are confident that the company fulfills most of the criteria mentioned above, you can start researching the company further.

These financial ratios, however, tells us about past performance. You cannot decide whether the company will perform the same or better in the future based on just past trends. Therefore, you need to consider other important factors too while evaluating a stock to buy in the Indian stock market. These factors are discussed in the next steps.

2. Do You Understand the Products/Services offered by the Company?

 You might ask why is it so important to understand the company. Let’s comprehend this with the help of an example. Assume that you have to choose a classmate for whom you’ll be paying for 36 months of expenses. In return for this, he/she will give you a quarter of his/her earnings thereafter for the rest of their lives. Whom will you choose?

While choosing, you must be thinking to select the one who is most likely to have a great income in the future. Further, will you choose a guy/girl randomly, whom you know nothing about? As you don’t know that person, there is no way that you can predict how much he/she will earn in the future. The same goes for stocks. If you can understand the stock, you can easily make an informed decision whether to buy, hold or sell the stock at any time. Hence, always invest in the companies that you understand.

There are a number of companies that everyone knows and understands. From toothpaste, soaps, towels, t-shirts, jeans, shoes to bikes, cars, airlines, banks; there is a company behind every product. Invest in such companies. Do not buy the stock of ‘ABC Chemicals’ without knowing what products it produces.

3. Will people still be Using this Product/Service in 15-20 years from now?

 The next step is to ask about the future of the company. Always look for a company with a long life. Such companies have huge growth potential and the power of compounding applies to such companies. Avoid investing in companies having a life of just a few years.

For example, do you think people will be using soaps 20 years from now? The answer is ‘Yes’. It’s been there for over 100 years and will surely continue in the future. Maybe the fragrance will change, but the soap will be there. Now, take another example. What do you think about pen drives? Do you think that people, 20 years from now, will still use pen drives? The answer might be no. Overall, select only a stock to invest in the Indian stock market that will last for the next 15-20 years.

4. Does the Company Have a MOAT (or Low-Cost Durable Competitive Advantage)?

“I like businesses I can understand. We’ll start with that. That narrows it down about 90% …There’s all kinds of things I don’t understand, but fortunately there’s enough I do understand. You got this big, wide world out there. Almost every company is publicly owned…You got all American business, practically, available to you. Now, to start with, it doesn’t make sense to go with things you think you can[‘t] understand. But you can understand some things. I can understand this. I mean you can understand this. Anybody can understand this. I mean this is a product that basically hasn’t been changed much…since 1886…and it’s a simple business. It’s not an easy business. I don’t want a business that’s easy for competitors. And I want a business with a moat around it. I want a very valuable castle in the middle. And then I want…the Duke who’s in charge of that castle to be honest and hard working and able. And then I want a big moat around the castle, and that moat can be various things.”

Warren Buffet (Source: Warren Buffett On Economic Moats)

 Invest in companies with ‘MOAT’

This concept of ‘MOAT’ was popularized by Mr. Warren Buffet. A moat is a deep, wide ditch surrounding a castle, fort, or town, typically filled with water and intended as a defense against attack. Some stocks have a similar moat around them. That’s why it’s really tough for its competitors to defeat them in its sector.

For example, Maggi (NESTLE)! It has become such a common name in Indian homes that Maggi is considered as a synonym to Noodles. Another example is Colgate– the toothpaste producing company. This company is dominating its industry and the people simply want to buy Colgate toothpaste. Similarly, Maruti Suzuki has got a moat in the passenger car sector. Maruti Suzuki has been in dominating in the Indian car sector with over 50% market share for the last few decades.

In addition, while selecting an ‘unbreathable moat’ look for such companies in which the switching cost is high. For example, Banks or IT companies. How rarely people change their bank accounts just because the competitor is giving 0.1% more interest rate. Coal India, ITC, IRCTC, etc are a few of the other Indian companies with big moats.

5. What is the Company Doing that Its Competitors are not?

Find the unique selling point of the company. Learn what this company is doing which its competitors are not doing.

To understand better, let us analyze the Indian automobile sector. There are a number of automobile companies in India. However, when we consider the passenger vehicles (Cars and SUVs), Maruti Suzuki is the leading company in India. There are a number of Indian and global competitors against Maruti in this sector like Tata Motors, Hyundai, Honda, Ford, etc. However, they have not been able to break the Maruti’s moat.

Maruti Suzuki is dominating because of its cost advantage and the easily available service centers that it provides. Most competitors of Maruti are not able to compete on its selling price. Further, Maruti’s service center can be found on every corner of the streets. It’s really simple and easy to get a Maruti car serviced even in small cities and that too at a little price. On the other hand, try to get your ‘FORD’ car serviced. You will rarely find any authentic ford service center around you. That’s why people prefer buying Maruti cars in India. And hence, Maruti Suzuki is able to increase its sales consistently and give good returns to its shareholders.

Overall, investigate first what the company is doing that its competitors are not before you select a stock to invest in Indian stock market. Whether you’re investing in a banking stock or Tyres, there will be many companies and competitors. Find out the USP of the company in which you’re interested to invest.

 

6. Does the Company has a Big Debt?

Big debts in a company are the same as the big hole in the boat. If the hole in the boat is not filled soon, then it won’t be able to cross the long sea and will definitely sink in between.

Before you select a stock to invest in Indian stock market, read its balance sheet to find out the debts on the liabilities side. Avoid investing in companies with big debts. Further, while investing the companies in the banking sector, look for its Non-performing assets (NPA). Avoid companies in the banking sector with huge NPA’s.

 7. Is the Company’s Management Efficient and Qualified?

This is one of the most crucial questions to ask before you select a stock to invest in Indian stock market. The management is the soul of the company. Good management can prosper the company to new heights. On the other hand, bad management can lead to the downfall of the company.

It is really important to research carefully about the management of the company that you plan to invest in the Indian stock market. First, do some research, and find out who is running the company. Among other things, you should know who its CEO, CFO, MD, and CIO are along with their qualifications and past experience. Next, here are a few points to check the efficiency of the company:

— Strategy and goals

Go through the Vision, Mission, and Value statement of the company. Together, mission and vision guide strategy development, help communicate the company’s purpose to shareholders and inform the goals and objectives set to determine whether the strategy is on track. These defined future statements for the company can help an investor to decide whether to select a stock to invest in the Indian stock market or not.

— Length of tenure of Management

This can help to judge the stability in the management of the company. A long length of tenure of the top management with the steady growth of the company is a good sign. However, sometimes, a change in management is considered an adept signal when the last management was not performing well enough. Nevertheless, the long tenure of good management in a consistently growing company is a sign of a healthy company.

— Promoter’s buying and share buybacks

The promoters of the company have the best knowledge about the company’s performance. The management and the top officials can understand the future aspects of the company and if they believe that the company will outperform in the future, they are mostly correct. Therefore, promoter’s buying and share buybacks are signals that the owners trust in the future of the company and it’s a good company to select a stock to invest in Indian stock market.

In addition, the other scenario, where the promoters or CEO is selling the stocks, is an independent activity and cannot be treated as a bad signal. We cannot judge the company’s future is in the dark just because the promoters are selling a small portion of their stocks once in a while. Maybe, the promoters need money to start another venture, buy a new house or enjoy a vacation. Everyone has the right to sell stocks when they need them the most, and so do the founders.

In short, the promoter’s buying and share buybacks are signals of a good company. However, we cannot judge the company’s future based on just the promoter’s selling little stock. Please note, if the promoters are selling a lot of stocks continuously without explaining the reason, then it’s a matter to investigate further.

— Perks and Compensations to Staff and Workers

If the company is giving good perks to its staff and employees, then again it’s a sign of good management. The results of a company depend a lot on the performance of its staff and employees. Happy employees will give their best performance.

However, if there is continuous strikes or increasing worker union demands, then it means that the management is not able to fulfill the needs of its workers and employees. Such cases are a bad sign for investors in the company.

— Financial ratios ROE and ROCE

The management’s efficiency can also be judged using a few financial ratios. Return on Equity (ROE) and Return on Capital Employed (ROCE) are the best tools to judge the management’s performance and the resulting potential for future growth in value.

ROE is the percentage expression of a company’s net income as it is returned as a value to shareholders. This formula allows investors and analysts an alternative measure of the company’s profitability and calculates the efficiency with which a company generates a profit using the funds that shareholders have invested.

ROCE is the primary measure of how efficiently a company utilizes all available capital to generate additional profits.

A high and steady ROE and ROCE for the last few couples of years is considered a sign of good management. As a thumb rule, invest only in companies with the ROE and ROCE of above 15% continuously for the last 5 years.

— Transparency

This is the last, but one of the most important factors while judging the management. The integrity of the management is the key to the growth of the company. It’s the management’s duty to be ‘fair’ and announce the quarterly & annual results to its shareholders honestly without any manipulations.

Just as the management takes the credit to announce the good results of the company; in the same way, the management should come forward in times of bad results to explain the reasons for its poor performance to its shareholders. Good management always maintains the transparency of its organization. 

8. Is the Company Constantly in the News and Overly Popular?

The stock market is based on the sentiments of the people. Overly popular stocks that are consistently in news affect the expectations and decisions of the public. These stocks can be inflated by the hype of the media. As people expect greater results from such companies, even after giving good returns the stock prices of such companies may fall.

That’s why try to avoid buying stocks of such companies for easy returns. The hot stocks are more subjected to market volatility and the boring stocks are the one, which gives the best returns.

Quick Tips: Apart from the above eight stock-picking tips on how to selfec t shares to buy in India, here are a few additional tips to select a stock to invest in the Indian stock market:

"Cheap isn’t always good, and expensive isn’t always bad"

While investing in growth stocks, sometimes it’s okay to invest the stocks with a high PE ratio. Some growth stocks have huge future potentials and can give multiple times returns. Moreover, while selecting an undervalued stock, you should investigate further why the stock is undervalued. Many companies sell cheaply because they do not have much growth opportunity in the future.

 Invest in Mid-cap companies for Higher Returns

 The mid-cap companies can give the best returns. These companies have the potential to become a large-cap company in the long term frame. They have a high growth rate compared to the large caps that have already reached saturation and the chances of giving multiple-time returns are highly unlikely.

In addition, Mid-cap companies have good capital to stay out of debt and live a long life. Overall, a good growth mid-cap stock can easily become a multi-bagger, i.e. a stock which gives multiple times returns.

Past results do not guarantee future performance

 Do not rely totally on the financial reports to select a stock to invest in the Indian stock market. These reports show the past performance of the companies. However, future growth depends on various aspects of management, competitors, industry, economy, etc. Always look at both the quantitative and qualitative aspects of the company before investing.

Summary: 

These are the key points to consider while choosing a stock to invest in. Now, let us summarize the 8 questions to answer on how to select shares to Buy in India for consistent returns:

Does the company have good fundamentals? 2-minute drill to filter companies using financials.

1. Do you understand the products or services offered by the company?

2. Will people still be using this product or service in 15-20 years from now?

3.Does the company have a low-cost durable competitive advantage?

4. What the company is doing that its competitors are not?

5.Does the company has a low debt?

6. Is the company’s management efficient and qualified?

7. Is the company constantly in News and overly popular?

8. Is the company’s and overly popular?.

That’s all for this post on How to Select Shares to Buy. I hope you have understood all the steps and questions to be answered before you select a stock to invest in the Indian stock market.

By

Ritesh.Sheth CWM^®

CHARTERED WEALTH MANAGER

              Helping you invest better...  

 

Why is market going up in Covid scenario ?

Why is market going up in Covid scenario ?

In general, people are thinking all businesses are affected due to covid and all companies will be facing loss.But in reality, what is happening ? Will go by sectorwise.

Pharma 💉💊

After covid, Pharma sector got huge benefit, that need not to be explained. Everyone can understand by themselves

IT sector 💿🖥💻

IT sector are doing very good because of very less expense due to work from home. All the projects are getting completed without any issue. Companies started making huge profits.

FMCG 🍔🍟🍕🥪🍜

All FMCG products are countinued to sell in big volume especially during lockdown period. This sector is not affected by covid at all. Infact, more sales in santizing products.

Metal ⛓⚒🛠🔧

Gold & Silver: You know what happened. Any crisis, gold price will shoot up. All companies which dealing with gold got benefited.

Steel, copper and alloy:

Immediately after lockdown, every where sudden demand in raw metal requirements which leads to price increase. Now most of the metals and minerals are trading in life time high.

Auto sector 🚗🛵🏍

After lockdown, people realised that the travelling in public may lead to virus spread. People who can afford where buying car, bike, etc. Automobile got sudden spike in demand. All industries related to automobile got benefited.

Oil and Gas 🗯🆖

During lockdown, crude price crashed and all oil and gas companies stored as much as possible. But we have not seen any petroleum products price cheaper. Eg. Petrol, diesol etc. Infact, we are paying more than precovid price. 

Financial 💰💶💵💷💴

Financial companies are got effected only because of increasing NPA. But once the companies started recovering the initial loss and making profit, things will be settled down.

Telecom 📱📞☎️

After covid, all school, office activities are happening using mobile, internet etc. Which leads telecom to perform better.

Power and engineering ⚙🔩

During lockdown, especially engineering sectors got affected and now things are getting better.

Amusement and entertainment 🎳🎯🎬Most affected sector is amusement parks and theatres. It will be affected till improvement in covid scenario. 

Conclusion:Most corporate companies are doing well even after covid. Infact, lot of companies got benefited. Most affected - common people, MSMEs, street vendors and daily wages.Now you may be convinced why Nifty is trading near all time high.

Hybrid Funds is it good to invest?

 Introduction to Best Hybrid Funds

Hybrid funds, as the name suggests, invest across both equity and debt securities to constitute a diversified portfolio. Investing in these funds is a better way of diversifying your portfolio rather than separately investing in several individual securities.

Hybrid funds are further classified into equity-oriented hybrid and debt-oriented hybrid funds depending on their equity exposure. If equity exposure is more than 65%, then it is said to an equity-oriented hybrid fund. If not, it is a debt-oriented fund.

Who Should Invest in Hybrid Funds?

Investing in hybrid funds is suitable for those who are willing to take some risk in exchange for the potential to earn much higher returns than debt funds. Anybody looking to diversify their portfolio should consider investing in these funds.

If you are not willing to assume higher levels of risk and are looking to gain exposure to a portfolio dominated by debt securities, then you may invest in debt-oriented hybrid funds. The exposure of these funds towards equity is on the lower side, generally less than 35%. These funds are relatively stable than equity funds and may provide higher returns than debt funds.

If you are looking to gain exposure to an equity-oriented portfolio having some exposure toward debt securities, then you may consider investing in hybrid funds. The debt exposure of these funds is restricted to under 35%. This gives you the benefit of diversification and the presence of debt securities mitigates market volatility to some extent.

Risks Associated With Hybrid Funds

Generally, hybrid funds are regarded as a higher level of risk as compared to a debt fund but lower as compared to an equity fund. The fund manager strives to balance the risk-reward ratio by modifying the composition of the fund’s portfolio by following the prevailing market trend.

Hybrid funds carry all the risks that come associated with both equity and debt securities. These funds carry credit risk, interest rate risk, market risk, liquidity risk, concentration risk and volatility risk. All hybrid fund investors automatically assume all these risks on gaining exposure to a hybrid fund.

Things to Consider Before Investing in a Hybrid Fund

You have to consider the following points before investing in a hybrid fund:

Risk profile You need to assess your risk profile and choose to invest in that hybrid fund whose risk levels are matching yours. Investment horizon If your investment horizon is shorter than five years, then you may consider investing in a debt-oriented hybrid fund. If it is longer than five years, then you may choose to invest in an equity-oriented hybrid fund. Equity-oriented portfolios require longer tenures to mitigate market volatility to a greater extent. The type of hybrid fund Since the rate of taxation of capital gains offered by hybrid funds depends on their type, you should essentially be aware of the type of hybrid fund you are choosing to invest in. This helps in planning your taxes better.

Advantages of Investing in Hybrid Funds

The following are some of the advantages of investing in hybrid funds:

• As these funds invest across both equity and debt securities, it naturally gives you the benefit of diversification.
• The fund manager modified the composition of the portfolio depending on the market conditions. He tries to reap the best out of both equity and debt segments.
• These funds are known to provide higher returns than a debt fund while carrying lower levels of risk.
• First-time equity investors may consider getting started by investing in a hybrid fund. This gives them a controlled exposure to equities.

 

Disclaimer:

The views are for personal use and for educational propose only. Ritesh Sheth & Family or Tejas Consultancy does not guarantee the accuracy, adequacy or completeness of any information in this emailer and is not responsible for any errors or omissions or for results obtained from the use of such information.

This BLOG is addressed to and intended for the investors of Ritesh Sheth & Tejas Consultancy only. You are advised to contact Ritesh Sheth & Tejas Consultancy to clarify any issue that you may have with regards to any information contained in this blog. Ritesh Sheth & Family or Tejas Consultancy does not have any liability to any person on account of the use of information provided herein and the said information is provided on a best effort basis. In case of investments in any of our schemes, please read the offer documents carefully before investing. 

What is BITCOIN? A simple explanation.

 Let me try to explain using an example of prison currency.

Prisoners need a proxy for currency as they are not allowed to possess cash. So how do they “pay” for laundry service, hygiene products, protection, a haircut, a book, chocolate or even alcohol? The medium of exchange must be durable, uniform and have a wide acceptance. That is how Ramen noodles and canned fish became prison currency. But cigarettes are top of the pecking order.

Notebooks are kept. Prisoner X will note down how many cigarettes he owes Prisoner Y, and Prisoner Y will make note of what Prisoner X owes him. That book documents all the transactions. The ledgers are draw in an identical fashion. So all books have the same template. To prevent fake entries, a third individual is selected as a witness. He signs the entry made in the books of Prisoner X and Prisoner Y.

Cigarettes / instant noodles / canned fish are bitcoin.
Notebooks are ledgers.
The similar format in the notebooks is blockchain.

Is bitcoin money?

There are 3 functions of money:

1. Money is a store of value. It can be used as a means of saving and allocating capital. It holds its value over time, despite inflation slowly eroding the purchasing power of money.
2. Money is a unit of account. It can measure value in transactions. It can be used to record debts and make calculations. It is divisible and countable. It can account for profits, losses, income, expenses, debt and wealth.
3. Money is a medium of exchange. It is accepted as a method of payment. When you go to the store, you can be confident that the cashier will accept your money, and not demand your shoes as a barter exchange.

Though increasing in popularity, bitcoin is not universally accepted as a unit of account and a means of payment. Far from it. Countries can even ban it. As billionaire Mark Cuban said: Bitcoin would have to be so easy to use it’s a no-brainer. It would have to be completely friction-free and understandable by everybody first. So easy, in fact, that grandma could do it”.

Is bitcoin like gold?

Gold and bitcoin are both speculative; their prices are not determined by cash flow, revenue, earnings, interest payments or dividends. Though bitcoin is sometimes referred to as “new gold”, the similarity ends there. Since gold exists in the physical realm it has to be stored someplace. It is universally acknowledged and humanity has a long history with it. While gold is classified as a commodity, cryptocurrency has eluded categorisation.

What is bitcoin?

• Bitcoin is a cryptocurrency. There are thousands of cryptocurrencies, the most popular being bitcoin.
• A cryptocurrency is created and held electronically. Call it digital currency or virtual money. It can be used to buy goods and services online.
• Cryptocurrencies are powered by blockchain --- a decentralized technology that manages and records transactions spread across many computers. Each "block" contains many transactions. Blocks are "chained" together linearly. Blocks are like a page in a physical ledger signed with maths (cryptography).
• Cryptocurrency uses an online ledger with strong cryptography to secure online transactions.
• Bitcoin was introduced to the world via a whitepaper authored under the pseudonym Satoshi Nakamoto. The creator’s gender, race, nationality, or whether it is an individual or a group, remains a tantalizing mystery.

It is NOT dependent on central banks that control money supply.
It does NOT flow through the traditional banking system.
It is NOT controlled by a monetary agency, institution or country.
It is NOT paper money like the rupee, dollar, euro or yen.
It is NOT backed by gold or central banks or monetary authorities or countries; it is backed by code.

 

Disclaimer:

The views are for personal use and for educational propose only. Ritesh Sheth & Family or Tejas Consultancy does not guarantee the accuracy, adequacy or completeness of any information in this emailer and is not responsible for any errors or omissions or for results obtained from the use of such information.

This BLOG is addressed to and intended for the investors of Ritesh Sheth & Tejas Consultancy only. You are advised to contact Ritesh Sheth & Tejas Consultancy to clarify any issue that you may have with regards to any information contained in this blog. Ritesh Sheth & Family or Tejas Consultancy does not have any liability to any person on account of the use of information provided herein and the said information is provided on a best effort basis. In case of investments in any of our schemes, please read the offer documents carefully before investing.