Listed companies publish their performance in quarterly financial statements to the stock market. Financial Year in India starts from 1st April and ends on 31st March. Thus the quarters are completed in June, September, December and March.The quarter is named after the month in which it is completed. Currently, listed companies are publishing their financial results after the end of the December quarter (October, November, December). With the end of the March quarter, companies publish their full financial position results for the financial year. It is a norm that the company should report the quarterly financial details to the stock exchanges within 45 days of the completion of the quarter.
Those who have invested in the company and who are planning to invest should pay close attention to this financial statement. Quarterly financial result plays a very important role in weighing the performance of a company. Nowadays companies don't just publish quarterly results.They publish details in comparison with the same quarter of the previous year and also publish advance notice (Guidance) of how the company's performance will be in the next few quarters.
Important points to note in quarterly financial results of companies are:
(1) Income growth..!
A company's total revenue growth or sales growth is very important. It needs to increase both in terms of numbers and value.For example, if the number of cars sold and the total sales volume of a car manufacturing company increases, it means that the company is doing very well. This is because the company's smaller cars are more in demand if the number increases and the sales volume decreases; It means there is no demand for big cars and luxury cars. This will reduce the profit growth of the company.Generally, if total sales increase, demand for that company's products is high; It means business is growing.An increase in net sales is also necessary. Net sales are net sales minus the value of unsold goods returned from gross sales. If its growth rate is high, it means that the company's sales are good.
(2) Profit margin..!
In the profit of a company, there are two types of operating profit and non-operating profit.
Operating profit is what a company earns from its main activity.It is important to note how much this profit margin is. If it is high and increasing it means that the company is doing well. A higher ratio means that the company is managing its costs very well.This operating profit comes from the services the company provides and the products it sells. Rental income to a company from its buildings,Interest and dividend income from its investments and profit from sale of assets are non-operating income. This income is often not sustainable. So, there is no need to worry too much about this income. But, operating income is very important. It is imperative to observe its increase and profit margin.Operating profit is net sales minus operating expenses.Operating expenses include employee salaries, office building rent, electricity bills, etc. Research and development expenses of companies like pharma also come under operating expenses.
(3) Net profit growth
A company is a good company if its sales increase at the same time as its profits increase. Profit growth should have increased compared to the same quarter of the previous year. That too the net profit remaining after income tax, interest expense should be more. This should have increased compared to the same quarter of the previous year.If the net profit of a company is high, then the price of that company's stock is likely to increase more.
(4) Management's opinion..!
A quarterly financial report contains a management commentary on how the company's performance will be for the current quarter and for the next few quarters. Through this, it will be known how the company is planning for the coming years. So it is necessary to read it carefully.
(5) Quarterly financial results and share price change..!
Share prices often change when companies release their quarterly financial results.
(6) A poor quarterly result; Share price increase..!
When quarterly financial results are released, net profit becomes more important.
In fact, if the company's profits and earnings undergo a sudden change, the share price undergoes an immediate change. Even if net profit and earnings differ from analysts' expectations, the change in share price is immediate. A company's net sales and net profit have declined significantly during the particular quarter. However, the share price has started to rise after the release of the quarterly financial report. In this situation, what is the reason for this should be analyzed and seen.Even if the financial performance of the company is poor, there are many reasons why the share price rises. Company gets new orders despite poor quarterly result; The company plans to significantly reduce its debt in the coming quarters; The stock price may increase due to further expansion.As the future of the company looks good even if the quarterly results are not good, long-term investors will start adding more shares to the stock. Thus, the price of the stock will start to rise.
(7) Good quarter result, share price decline..!
Likewise, if the company's share price falls after good quarterly results are released, one should know the reason and act accordingly. If quarterly results fall short of market expectations, the share price may fall. Stock prices may fall even if stockbrokers lower their target price.Don't sell a stock just because a company's performance is poor in one quarter. Stocks should be sold only if the company's performance has been deteriorating for 3-4 consecutive quarters.At the same time, if the company's business, management, and future are complicated, short-term, medium-term, and long-term investors may find it profitable to sell the stock and exit.
(8) Stock related things to watch out for..!
Quarterly financial results are important for those who have invested in the stock and are going to do so. Earnings Per Share (EPS) in a particular quarter, book value of a share, share capital increase or decrease i.e. founders,The price of the stock fluctuates depending on the details of foreign financial institutions, domestic financial institutions (insurance companies, mutual fund companies) invested and sold in the shares.Also, what percentage of the shares held by the promoters are mortgaged? Has it increased at the end of the quarter? It should be observed whether it has decreased. If mortgages continue to rise, problems like Satyam Computer are likely to arise. If the founder's share capital continues to decline, it is better to exit the company.If the founder keeps increasing the share capital in the company, it means that he has high confidence in the growth of the company. Investment in shares can be continued and increased.Investing in a stock or selling a stock should be done based on the business environment of the company, its future plans, fundamentals, sales and profit growth, debt reduction, cost reduction. Hope you will be paying close attention to quarterly financial statements?
(9) Quarter-Annual comparison: how to do?
A company's financial statements for a particular quarter should be compared with the previous quarter and the same quarter of the previous year. If there is growth in both these levels, it means that the company is on the right growth path.
Some industries can operate on a cyclical basis, and it is best to compare the quarterly results of such companies with the same quarter of the previous year.
(10) Interest expense expense and equity investment..!
How much total debt does the company have at the end of the quarter? Note how much interest is charged on it. If the proceeds from the sale are too much to pay interest on the loan, avoid making new investments in that company's stock. If the stock price does not rise properly if already invested then it is profitable to gradually sell the stock and exit.
(1)-Bajaj Holdings & Investment Ltd. operates as an Investment Company and is registered as a Non-Banking Financial Institution – Investment and Credit Company with the Reserve Bank of India.Company has reduced debt.
Company is almost debt free.
Company has been maintaining a healthy dividend payout of 24.0%
(2)- Emami Paper Mills Limited is engaged in production of Newsprint, Writing & Printing Paper and Multilayer Coated High-end Packaging Boards.Company has delivered good profit growth of 35.2% CAGR over last 5 years
(3)- Goldiam International Ltd is engaged in the business of manufacturing and exporting gold and diamond jewelry to global retailers. Company is almost debt free.
Company has delivered good profit growth of 32.7% CAGR over last 5 years
Company has been maintaining a healthy dividend payout of 22.4%
(4)-Garware Hi-Tech Films Limited (Formally Known as Garware Polyester Limited) is the pioneer and the largest exporters of polyester films in India with an experience of 3 decades. Also it is the sole manufacture of Solar Control window films in India and among the only 2 companies in the world having patented technology for manufacturing the UV stabilized dyed films and the only Company in the world with backward integration for manufacturing of its own raw material and all components for manufacture of Solar control window films. [1] It is a market leader with more than 90% market share in Shrink film manufacturing in India. Company has reduced debt.
Company is almost debt free.
Company has delivered good profit growth of 37.2% CAGR over last 5 years
(5)- Jindal Drilling & Industries, part of the Dharam Pal Jindal Group, is a leading Indian company in offshore drilling and allied services, including directional drilling and mud logging. Company has delivered good profit growth of 42.8% CAGR over last 5 years
9 Important ratios that help you earn profit in stock investment..!
The stock market is one of the most important investments in today's times, offering returns higher than the rate of inflation and paying less income tax on profits. Although some people call this investment gambling, it is an investment game. It is necessary to observe 9 important Financial Ratios to win this game and earn more income. Let's look at them in detail one by one.These ratios tell investors about the quality of the company's underlying business, performance and earnings performance of the stock.
(1) Earnings per share..!
Earnings per share (EPS) is the amount of money a company earns per share over a period of time . Earnings per share is the company's net profit divided by the total number of shares outstanding. It is calculated on quarterly or annual basis. It is profitable to have more.
A company's net profit is Rs. Let's say 1,000. The total number of shares traded in that company is 100. Here the return per share is 1000/100= Rs.10.
Formula: Earnings per share = Net profit of the company / Total number of shares
(2) P/E Ratio:
Renowned investor and author of Warren Buffett , Benjamin Graham , has said that the P/E ratio must be observed in stock selection. This is the most important ratio in stock investing.
The ratio of the market price of the stock to the earnings per share (EPS) is called Price to Earnings Ratio (P/E Ratio). Generally, a ratio below 25 is profitable.
A company's P/E ratio should be compared with the average P/E ratio of the sector to which the company belongs. Better if the P/E ratio of the company is lower than the average P/E ratio of the sector. Also, it should be compared with the P/E ratio of the competing companies. A stock with a low P/E ratio is likely to give higher returns in the future.
At the same time, the P/E ratio of the fastest growing companies can be as high as 40, 50 even. P/E ratio will be very high as many investors will come forward to pay premium price i.e. higher price when the company is estimated to grow well in the future. Paying attention to this and investing will be profitable.
If the current P/E ratio is lower than the average of the last 3, 5 and 10 year P/E ratio, the future growth of the company is better; It can be concluded that the share price will also increase.
Total number of shares traded in a company is 100. Assuming earnings per share is Rs.10 then P/E ratio is 100/10=10. That is, if the stock's P/E ratio is 10, to buy a share from the stock market, one needs to spend 10 times the earnings of the share. Simply put, this means that an investor pays Rs.10 to get Rs.1 in the company's earnings.
Formula: P/E ratio= Current share price/ Earnings per share
(3) P/EG ratio
This is also the proportion Benjamin Graham tells us to observe. Based on this ratio it can be decided whether the company's future growth is priced at a discount or a premium. That means it can measure whether the stock is undervalued or overvalued.
P/E Ratio / Earnings Growth Rate - PEG Ratio is obtained by dividing the P/E ratio by the company's expected earnings growth rate . This ratio should be calculated based on the expected revenue growth rate over various time periods. It is best to calculate on a long-term basis. Calculation based on next five year growth rate would be correct. A revenue growth rate of at least 25% is good. If this P/EG ratio is less than 1, it means that the share price is undervalued.
A company stock with a P/E ratio of 25 and earnings growth of 25% has a P/EG ratio of 25/25=1.
Formula: P/EG Ratio = P/E Ratio/ Company's Expected Earnings Growth
(4) P/B ratio:
The Price To Book Value Ratio ( P/BV Ratio) describes how much an investor is paying for every rupee of assets owned by the company . It is the ratio between share price and book value. Book value refers to how much a company would receive per share if it were sold for some reason.
A company's P/P ratio should be compared with the average P/P ratio of the sector in which the company belongs . Better if the ratio of the company is lower than the average P/P ratio of the sector. Also, the P/P ratio of competing companies should be compared. Investing in stocks with a P/P ratio of less than 1.5 is likely to yield good long-term returns.
Assuming the market price of a company share is Rs.100 and the book value of a share is Rs.150 then 100/150= 0.66. As the P/P ratio is less than 1.5, this company stock can be invested.
Formula: P/PV ratio = Market price of share/ Book value of a share
(5) Debt / Equity Ratio :
The ratio of a company's total debt to its shareholders' equity is called Debt / Equity Ratio . Better if this ratio is less than 1.
If a company has too much debt it is likely to become a big problem in difficult times. For example, during the Covid-19 crisis, companies with high debt and high interest rates were hit hard.
When making an investment, you need to look at what a company is borrowing for. For expansion work, you can invest in that company stock. If you want to pay off the debt, you will continue to be a company with debt anyway, so you have to think carefully and take the decision.
Also note the amount of interest on the loan. If the interest rate is very high then it is better to avoid investing in that company stock. Also, it is better to compare the debt/equity ratio of other companies in the sector and invest in the company stock with a lower ratio.
If a company's debt is Rs.50 crore and its share capital is Rs.100 then debt/share capital = 50/100= 0.5. As it is less than 1 you can invest in this company stock.
Formula: Total debt of the company / Total share capital of the company
(6) Income from share capital..!
Return On Equity (ROE ) indicates whether a company is getting good returns by investing the equity capital raised from its shareholders . This ratio is the company's net income divided by its share capital. Through this one can know the financial management skills of the management.
The higher the ratio, the better. The higher the number, the more profitable the stock investment will be. Generally, anything above 20 percent is profitable.
A company's net income is Rs. 50 and its share capital is Rs.200. Return on Equity = (50/200)100= 25%. As it is more than 20% you can invest in this company stock.
Formula: ( Net Income / Share Capital)* 100
(7) Income from assets..!
This also helps in knowing the financial management of a company. A company's net income divided by the value of total assets is Return On Assets (ROA) .
The higher the ratio, the better. The higher the ratio, the higher the company's income; That may resonate with stock investing as well. Generally a couple of percentage points higher than the inflation rate is better.
If the net income of a company is Rs.15 and the value of assets is Rs.100 then the return on assets is (15/100)100= 15%.
Formula: ( Net Income / Value of Total Assets)*100
(8) Dividend Yield:
Often profitable companies will continue to pay high dividends. This would be such percentage of the face value of the company share. If a company share has a face value of Rs 1, then the company pays a dividend of Rs 1 per share which is 100 percent. Let us assume that the face value of another company's share is Rs.10. If the company pays a dividend of Rs.1 it is 10%.
In that way, rather than looking at the dividend percentage, you should look at how much in rupee terms.
Specifically, look at the ratio of the share price to the amount of dividend paid in a year. If it is 4-5% then it can be concluded that it is a good company.
Let us assume that the net profit of a company is Rs.1000. The company keeps Rs.500 out of it for future use. The remaining Rs.500 is distributed to equity investors. The company has a total of 100 shares. A dividend of Rs.5 per share is available. If share price is Rs.100 then dividend yield=(5/100)100 = 5%.
The higher the dividend yield, the higher the profit for the investor.
Real estate companies like Raid and Invit are paying high dividends. Investors who focus on dividend income may consider these for investment.
Formula: Dividend Yield = (Annual Dividend per Share) / Share Price)*100
(9) Net Profit Ratio..!
Increasing the sales of a company is the best thing. However, if the cost also increases significantly, the profit will not be as much as it can be said. In that sense it is important to observe the profitability ratio of a company.
There are many types of profit ratio, to find the company's profit ratio, divide the company's profit by its sales. Gross profit is the result of subtracting the cost of sales from the company's sales . A company's profit after paying interest and income tax is the net profit . It should continue to increase. Should be 15-20%. This ratio is much higher in manufacturing companies. Investment decision should be made by comparing the net profit ratio of other companies in the particular industry sector.
Most experts will tell you to analyze the fundamentals of that particular company before choosing a stock to invest in . Accordingly how many people can scrutinize the company's financial documents and take a decision. Choosing the right stock can be done by analyzing some specific financial ratios. The financial ratios mentioned here help to understand the true value of a company. Also, the financial strength of the company can be known. Finding these ratios is no big deal; As these ratios are available to everyone on the internet, one can easily analyze them and make stock investments.
If you analyze the above ratios and invest based on them, you can expect good returns from equity investment in the long term.
Beyond strong financial ratios…!
We looked at key financial ratios that help us evaluate an individual company and its stock. Apart from these, the share price changes due to various factors. The stock price may fall due to various factors such as crude oil prices prevailing in the international market, war between countries, virus like Covid-19, financial crisis, economic recession etc. In the case of a good company stock, in such situations, if the stock price falls, additional investment will be profitable in the long run.
(1)- Coal India is mainly engaged in mining and production of coal. Company has delivered good profit growth of 31.9% CAGR over last 5 years
(2)- Diamines and Chemicals Ltd has been sole manufacturer of Ethyleneamines in india. Company has delivered good profit growth of 38.8% CAGR over last 5 years
(3)- SKM Egg Products Export Ltd is manufacture and sale of egg powder and liquid egg with varieties of blends used in food industry and health sector.Company has delivered good profit growth of 127% CAGR over last 5 years.
(4)- Coromandel international Ltd is agri solutions provider for the farming value chain. It specialises in fertilizers , crop protein, bio pesticides, speciality nutrients, organic fertilizers,etc. Company has delivered good profit growth of 38.8% CAGR over last 5 years
(5)- Expleo Solutions Ltd is an Indian based software service provider primarily delivering software validation and verification services to the BFSI industry worldwide. Company has delivered good profit growth of 33% CAGR over last 5 years
Formula: Company Profit Ratio = (Company Profit / Sales)100
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Dividend Stocks : Double Profit Investment..!
It can be seen that many of us are investing in fixed deposit schemes for the sake of steady income and security . The country's largest public sector bank , S. B. _ I , currently pays 7 percent interest per annum on a three-year fixed deposit . At the same time , many listed companies
The dividend yield is more than this . In that way , taking a little risk and investing in high dividend yielding company shares has the potential to earn more returns than fixed deposits . In that way, there are those among us who invest in stocks for dividend income .
Public sector stocks that give high dividend income ..!
Mostly public sector company stocks are mostly giving high dividend yield . _ A company reports dividend income as a percentage and in rupees . My NMDC Company has given 375 % dividend as interim dividend on 14th February . The face value of share is Rs.1 . Here 375% is Rs 3.75 as dividend is given on face value only . High dividend paying companies pay interim dividends every quarter ; The final dividend will be paid at the end of the financial year . Dividend yield is the ratio of the purchase price of the stock to the dividend called .
The formula for this
Dividend yield = ( Total dividend paid during the financial year / Purchase price of the share ) *100
For example , someone has bought a share for 100 rupees . If Rs 10 per share was paid in that financial year then the dividend yield is (10/100)*100 = 10%
Dividend Income:
Things to watch out for ..!
While investing in company stocks for dividend income it is imperative to observe some important points .
1. Interest income on bank fixed deposit investment is guaranteed . But , dividend income is not the same in equity investment ; There is no guarantee for that .
2. Income function:
If the company's earnings performance is suddenly not good, there is a possibility that the company will not pay dividends. If the shares can be sold and spent, there is a possibility that the company's performance is not good, and the share price may fall. Therefore, to reduce this risk, it is necessary to invest the investment amount in different company stocks. By doing this, the risk can be reduced even more if they are separate sectors.
3 . Risk taking capacity: There is a risk that the overall value of the equity investment will decrease if the price of the stock, which is already invested for dividend income, sees a large decline in the price due to a decline in the overall market .
Only those who can bear that loss and have the ability to take risk should invest for dividend income.
But, there is no need to worry too much as this risk will be spread over the long run.
3 . Underpriced Stocks: If the stock price is lower than the stock price , the dividend yield will be even more profitable . In the above example , if the share price is Rs 100 and the dividend paid in the financial year is Rs 10 , then the dividend yield is 10% . This is Rs 80 per share in the financial year Given Rs.10 the dividend yield is (10/80)*100= 12.5 % . Therefore , investing in stocks for dividend income is more profitable when the stock price is low . _
A good dividend paying company is on a growth path; If future growth is good, if the stock price has fallen too much during a general stock market decline, buying more of that stock at a lower price will be more profitable later on.
4. Issuance of bonus shares: In general, the number of shares will increase significantly in the long run when investing in company stocks that regularly issue bonus shares . Then the dividend amount and dividend yield will be higher . For example , a person has bought 100 shares . 100 if the company offers 1:1 free shares Share The will increase to 200 shares . If the same company again gives 1:1 free shares then 200 shares will increase to 400 shares . If the company offers free shares again at 1:1 then the investor will have a total of 800 shares.
A company pays an average annual dividend of Rs.10 per share. An investor buys 10,000 shares at a price of Rs.300Let's assume that he is staying. His investment is Rs. 30 lakhs. If he is given a dividend of Rs.10 per share, he will get a total dividend of Rs.1 lakh. The company is offering free shares on a 1:1 basis. In this case, the price of the stock held by the investors will increase to 20,000. Due to the issue of free shares, the price of the company's stock will decrease in proportion to the number of free shares. Here the share price of Rs.300 will fall to around Rs.150. But this Rs.150 is more likely to rise again gradually. Now the investor will have 20,000 shares. If the company pays a dividend of Rs.10 per share, he will get a total of Rs.20,000*10 as a total dividend of Rs.2 lakhs. The value of the investment will also be approximately 20,000*150 = Rs.30 lakhs.
Hence, while investing for dividend income, looking into companies offering bonus shares can be an additional benefit.
5. Increase in share price:
Apart from the dividend income in stock investment, long-term capital gains can be achieved through the appreciation of the stock price over the long term. Together these two can get double profit. Therefore, those who invest in stocks for dividend income, it would be extra profitable to invest by looking at how the price of those stocks have increased in the last 5, 10 years.
There is no income tax up to Rs 1 lakh in a financial year if the profit is made by selling the shares in stock investment for more than one year. Any gain beyond that is taxed at 10% irrespective of the income tax bracket. That way, you will have to pay less income than the equity investment gains.
Let's take a look at five important stocks with capital gains through dividend income and share price.
Important Stocks to Watch for Investment ..!
1. Indian Oil Corporation ;
One of the Maharatna companies operating under the control of the central government is I. oh _ C is Indian Oil Corporation . _ This company is engaged in oil drilling operations and production . Also , the work of refining petroleum products , transporting it through pipelines and marketing is going on .
India's leading oil refining and petroleum products marketing company has a very high dividend yield . Its dividend yield is 10.5% . Its share price in 2013 was around Rs . It was 50 . Currently Rs . 80 is becoming a tight trade . Three for investors The system offers free shares (Bonus) .
2. R E C :
R. Rural Electrification Corporation is a Central Public Sector Undertaking . This company provides loans for power distribution projects in the country . The dividend yield is 9.89 % .
In the last year 2013 , the share price of this company was Rs . It was 80 . Currently the share price is Rs . 115 and has given free shares to investors twice . _
3. H C L Tech .:
A global leader in IT services . _ It is one of the top 5 companies in India in terms of revenue . Its dividend yield is 4.41% . In the last year 2013 , the share price of this company was Rs . It was 180 . Currently the share price is Rs 1,080 . Three times for investors
Free shares are being offered .
4. Philips Carbon Black ltd:
It is a company belonging to the Sanjeev Goenka Group . It has been running since 1960 . _ It is the largest carbon black manufacturing company in India . The company operates in more than 40 countries . Its dividend yield is 4.91% .
Last year 2013 the share price was Rs . It was 7 . Currently the share price is Rs . It is 110 . It has given free shares to investors five times .
5. Power Grid Corporation :
India 's largest power distribution company . The public sector Maharatina company has a dividend yield of 5.21% . In 2013, the share price was Rs . It was 80 . Currently the share price is Rs . 225 is . _ One time free share is offered to the investors .
Apart from these , public sector mineral production company N. _ M. _ D. _ C , public sector alternative energy company GAIL , public sector housing and rural development company HUDCO , public sector mining company Coal India , and public sector lenders to power companies . Sector company Power Finance Corporation 's dividend yield is attractive . _ These can also be considered for investment . How about box income tax ?
Fixed deposit interest income is subject to income tax in whichever income tax bracket one falls under . Dividends paid by listed companies were exempt from income tax till recent years . Now one has to pay income tax on that income in whichever income tax bracket one
falls under. Hence , there is no difference between Fixed Deposit and Equity Dividend as far as Income Tax is concerned .
When to buy and when to sell on a stock investment ?: Guiding signals ..!
There are two types of stock market investors. A long-term investor is one who examines the growth of the world and the country, the future growth of the company, and the profit margin of the company and selects the role for the investment. Another is a short-term investor. How much is the demand for a stock? Will look at how much supply (supply) is and invest in techniques.
These short-term investors and traders (traders) know what is going on in the derivative (futures and options) market and what signals they are emitting so they can reduce losses and make a profit if they invest in the stock market or sell stocks.
Open Interest
The total number of contracts pending in the Futures and Options (F&O) market is the number of unfulfilled contracts at the end of the trading day called open interest.
Stock Price Rise, Volume & Open Interest Rise ..!
Open interest for a particular stock is high in the F&O market. At the same time, the share price is rising. Also, if the volume (number of shares traded) rises, the number of people investing in that stock increases.
In particular, it means that more and more new people are investing in that particular stock.
The share price may rise in the short term as more people are making long term investments in that stock. The complexity of buying that particular stock can take the rise in share price and the increase in the number of Open Interest & Volume.
Stock Price Rise & Value, Open Interest Decline ..!
If the number of open interest decreases it means that the investment is out of that particular stock. And the reason for the increase in the price of that particular stock means that short covering is happening. That is, the stock price increases as traders buy and sell (short selling) shares.
At the same time, the number of open trusts is declining as contracts close. If the volume also decreases, the problem of selling that particular stock can be taken as the increase in the share price and the decrease in the number of open interest, volume.
Stock Price Decline & Open Interest, Volume Increase.!
As short positions in the stock i.e. short selling increase the share price decreases and the number of open interest and volume increases. In this case the specific role has gone into the hands of the bear.
This means that the share price is going to go down after this. The stock price will see a decline until investors enter a short position. This can be taken as a signal to sell a particular stock and exit.
Stock Price, Volume & Open Interest Low!
If the number of open trusts is declining while the stock price is declining, it means that the stock price is going to return to the ups and downs after a temporary downturn. Decreased open interest means no new short selling. Also, if the volume goes down, this can be taken as a signal to buy a particular stock.
Put - Call ratio
This is a useful indicator to know the overall sentiment of the stock market
Put to Call Ratio. The put-to-call ratio is the value of the total put options traded on a given day, divided by the value of the traded total call options on the same day.
If the put-call rate rises ..!
This put-call ratio
An increase means that traders are putting more money into put options than call options. This can be taken as a signal that the share price is going up.
put - call ratio decreases
This put-call ratio
Decreasing means traders are putting more money into the call options than the put option. This can be taken as a signal that the stock is going down.
The above buy and sell strategies are for short term investors and traders. Long-term investors should look at the fundamentals and techniques of company stocks and make investments.
Stock Investment: Top Down Approach, Bottom Up Approach Which Will Help?
We have often heard mutual fund managers and leading stockbrokers choose to invest in stocks with a top down approach and a bottom up approach.
What it is Top Down Approach, Bottom Up Approach. Based on these we will look in detail at how to choose stocks for investment.
Top Down Approach Mode ..
Top-Down Approach can be referred to as the Top-Down Approach in Tamil. Its operation can be abbreviated as ESC (Economy - Sector - Company). That is, we must first examine the economy. That is, we need to examine whether the domestic and global economic situation is conducive to equity investment. If domestic and international economic growth is positive and positive, the next step is for the sector to decide which sector to invest in. We need to choose the sector that has the potential for bright growth in the future. After selecting the sector you should select the company that will excel in that sector and have the potential for growth in the future and invest in its shares.
Investors who follow the Top Down approach in the investment world are paying close attention to the macro economy and its cycle. Such investors want to invest in consumer-oriented sectors.Bottom Up Approach Method
Bottom-Up Approach can be described as a bottom-up approach in Tamil. This can be abbreviated as CSE (Company -– Sector - Economy). That is, one must first find a company that has the potential for growth in the future. The next step is depending on which sector the company belongs to. It remains to be seen whether its future will be better. The domestic and global economic situation should be examined if the sector is to be better. The decision to invest in that particular stock will be made if that is even better.
The bottom line is that a good corporate equity investment can create wealth for the investor if the economic situation is not good. Economic growth is not good and macro stock indices like Sensex and Nifty are generally likely to fall during periods of sluggish economic growth. At the same time, companies with higher domestic consumption and demand (e.g., increased demand for drugs due to corona spread, increased demand for IT service due to curfew) will be better off. For example, some stocks like ((specific instances like TTK Prestige, Eicher and Indo Count) can be mentioned. These stocks have given good returns during periods when the overall market is not performing well.
When the stock market is up (up or down) due to macro factors, the top up approach helps in choosing the stock investment. The macro factors here include interest rate change, employment, inflation rate, GDP.
International markets plummeted in 2008 during the global economic crisis and financial crisis caused by the US sub-prime problem, such as home loans to the ineligible. Similarly, international stock markets fell in December 2015 as the US raised interest rates after a very long hiatus. The P / E ratio of leading stock market indices tends to fall sharply during such periods. The valuation of the shares will also be attractive. Thus, the shares are available at affordable levels i.e. at affordable prices. The Top Down Approach works best in situations like this.
Investors who follow a bottom-up approach are often the ones who buy company shares and keep it for a long time and make a profit. They are the ones who have the most understanding of the fundamental matters of specific companies.
Which approach is right when?The Top Down approach goes from general to specific. This is the bottom-up approach that goes from exclusive to general.
When there is high volatility in the stock market, the bottom up approach does not work properly. Then it is wise and profitable to switch to a top-down approach.
At the same time, when choosing mid-cap stocks, it is best to follow a bottom-up approach rather than a top-down approach. The reason is that it has little to do with the operations of most mid-cap companies and the sprawling macro-economy. At the same time, when choosing large-cap company stocks, the bottom-up approach is more of a top-down approach.
The Top Down approach seeks opportunities to invest in market cycles. The bottom-up approach is looking for opportunities to invest in the strengths of companies' fundamentals.
Since the financial status of companies and the availability of credit assistance depend on macro factors, both economic factors are scrutinized.
In general, fund managers place a greater emphasis on economic growth but also adopt a bottom-up approach when it comes to stock selection.
Those who choose stocks for investment should choose the top down approach or the bottom up approach considering the circumstances. Only then can the right stocks be selected for investment.
Things to look out for in a departmental study ..!
After selecting the development sector, the sector should look at the production costs and pricing of the products.
It is important to note that not all companies can enter that particular field normally. Stockbrokers and fund managers avoid that sector if even ordinary people can succeed in it. The reason is that if everyone can enter and win, the price of the product will have to be set very low. Then the company's profit margin will be reduced.
In addition, the threat and weakness of the sector should be examined. Investment experts exclude sectors with high government control.
Things to look out for in the selection of companies ..!
When choosing a company for equity investment, it is important to consider the company's expense ratio and profit margin.
It is also necessary to examine the cash flow of the company, the amount of credit, the background of the founders and the management of the company.
Quarterly Results: Important things to look out for in stocks ..!
The listed companies publish its performance as a financial position report on a quarterly basis. It is important that those who have invested in the company and those who plan to invest pay close attention to this financial position statement.
Here are the important things to look for when selecting yours ..!
Poor performance, stock price rise ..!
A company's net sales and net profit decreased significantly during that particular quarter. However, the share price has started to rise after the release of the financial position report.
It remains to be seen what the reason for this is in this case. There are many reasons for the share price to rise as the company performs poorly.
The market expects worse financial conditions, the company has received new orders, plans to significantly reduce the company's debt in the coming quarters, and plans to expand.
Similarly, if the company's share price goes down after the quarterly results are released, you need to know the reason for it and act accordingly.
Long-term investors should not fail to buy and add shares in addition to the downturn, as the future of the company looks good. At the same time, it would be profitable for short-, medium- and long-term investors to withdraw from the stock if the company's future is critical.
Also, keep a quarterly conclusion and do not come to any conclusion. We need to explore whether to continue investing in that stock as the company’s share price continues to fall for 3 or 4 quarters.
Stock related issues ..!
When it comes to equity, one should also look at equity return (EPS), book value, increase / decrease in share capital, founders, foreign financial institutions, domestic financial institutions (mutual funds, insurance companies, etc.) investing / selling. In line with these changes, the company's share price will fluctuate as the quarterly financial position report is released. Among the things said here, rise is seen as positive and decrease as negative.
Shares mortgage
Has the share capital of its founders in the company decreased at the end of the particular quarter? Notice if there is an increase. It is important to be cautious if it continues to decline. This is how the problem arose in Satyam Computer.
Next the founders should also look at the extent to which the shares are mortgaged. It is important to be vigilant as stock mortgages continue to rise.
Those who belong to the company during the particular quarter, it is necessary to know the reason for buying or selling more shares and act accordingly. Founders and company owners are viewed positively if they buy shares. That alone is seen as a disadvantage if sold.
Warak loan of banks
Banks should avoid investing in such banking and financial institution stocks if their net worth is consistently high in financial institutions. It is better to get out of it if you have already invested. It's okay to lose through this.
At the same time, the decision to buy or sell a company share should not be based solely on quarterly results. Investment and sales decisions should be based on the business environment of the company, its future plans, the fundamentals of the company, sales growth, debt consolidation and cost reduction measures.
Whenever Stock market at its peak: 10 features to look out for ..!
The Indian stock market has touched a new high. The Bombay Stock Exchange (BSE) Sensex is up 56000 points and the National Stock Exchange (NSE) Nifty is up 16500 points. After that the market comes from a slight volatility. Mid and small cap stocks contributed the most to this decline. In this situation where the market is at its peak, small investors need to look at some key aspects.
1. Evaluation is very important
Valuation is very important in equity investment. Avoid re-investing in high-value company stocks when the stock market is at its peak. The reason is that prices are not likely to rise much after that.
2. Stop-loss is mandatory in stock trading ..!
Stop Loss is mandatory in daily and short-term trades. Do not trade without it. The reason is that the market may suddenly fall when it is at its peak. Shares of mid-cap and small-cap companies may also fall sharply.
3. Consider Technical Analysis ..!
At what price to buy a share; Technical analysis will indicate at what price to sell. In that sense, it is possible to trade and invest using it. At the same time, keep in mind that there is a three to ten chance of going wrong in Technical Analysis if something suddenly changes depending on the company, the country, and the world.
4. Do not turn a loss into a long-term investment.
Many will buy multiple shares with short-term intent. Those stocks will be at a loss even when the market is at its peak. Do not try to convert those shares into a long-term investment without wanting to sell them at a loss. You can not add wealth by investing in the stock market unless it becomes such a long term investment.
5. Consider the basics of the company
Be sure to look at the fundamentals (Fundamentals) of the companies. That too must be considered when it comes to long term investment. The basics are to look at the credibility of the company's founders, the debt-to-equity ratio, the share capital of the founders, the company's cash flow, net sales growth, net profit growth, and future expansion plans.
6. Do not make a total investment
Never make a total investment as far as stock market investing is concerned. That too should not make this mistake when the market is at its peak. Always divide the amount you plan to invest in a company into three or five parts. Invest this amount at regular intervals. Or invest in a market downturn. Until then, you can see a small return on that amount by keeping that amount in a liquid mutual fund.
7. Dividend investment in multi-sector company stocks
Many are investing in sector-based corporate stocks and sector funds. Investing in a single sector has always been a high risk. It is a good idea to split stock market investments into two categories. Dividing when the market is at its peak will also help reduce risk.
8. Beyond Index Shares!
In general, if the Sensex and Nifty indices are high, we say the market is at its peak. However, many company stocks outside of this index are available for investment at attractive ratings. It can identify such stocks and invest at market peaks.
9. Profit booking
Do not hesitate to take out partial profits if the stock has given you higher returns than expected. This is called part profit booking. The stock market can continue to sustain profits by taking out profits in between investments. Also, it can increase profits.
10. Follow Asset Allocation
Lastly, always invest according to your asset allocation according to your risk taking ability. That is, the asset allocation must be balanced from time to time, whether the market is ups or downs. If your equity investments (company stocks, equity funds) are highly profitable when the market is at its peak, sell them according to the asset allocation and increase your investment in debt based funds.
For example, one is fifty years old. He should have made 50 per cent of the stock market based investment, 30 per cent of the credit market based investment and 20 per cent of the gold based investment according to the Asset Allocation. His Rs. 2 lakh investment of Rs. 1 lakh per share and Rs. 60,000 depending on the loan and Rs. 40,000 Gold was also in the ETF. These investments are valued at Rs. 1.5 lakh, Rs. 70,000, Rs. Suppose it has increased to 50,000. 50: 30 according to his asset allotment; Rs. 1,35,000 as per 20; Rs. 81,000; Must be Rs.54,000. Therefore, to fix the asset allocation one has to sell 15,000 worth of shares in the stock investment, this Rs. 15,000 out of which Rs.11,000 is in loan schemes and Rs. 4,000 should also be invested in Gold ETFs.
Doing so can maintain the return on equity investment and reduce the risk of the investment portfolio.
Growth, Value Share: Investing in What?
SEBI divides the shares into Large Cap. Stocks, Medium Enterprise Shares and Small Company Stocks based on their stock market value. Analysts divide these stocks into Growth Stocks and Value Stocks. Let us look at these two types of stocks in detail.
Development stocks ..!
Growth stock is the stock of a company that has consistently given good returns. These companies often do not pay high dividends to investors. The reason is that the main purpose of these companies is to keep their share prices constantly rising.
These companies will be reinvesting their profits for its growth, expansion and technological facility.
Those who invest in these stocks invest with the intention that this stock will yield more returns than any other stock in the company-based sector, rather than the stock market. Thus, the price of these stocks will be subject to higher inflation. These companies are often hit in the press because of their rapid expansion. Then the share price will fluctuate.
Growth style investment is also known as momentum strategy. This is to chase stock price trends. Investing in stocks that are already performing well in the expectation that they will perform well in the future will also come in growth style. Growth stocks are driven by the rise of the stock market.
Investors who want a capital increase in the long run focus on this method. Investors are investing in growth stocks if the company achieves good growth in the future despite the high rating and stock ratio.
Value stocks
The price of these company shares is available cheaply. These companies are basically very strong. Due to stock market environment or company related issues the share price is currently falling and trading at a cheaper price.
For example, the share price plummeted during accusations that Nestl's Magee contained too much pesticide. But the share price soon recovered as the company was fundamentally strong.
These value companies often divide profits into dividends for investors. Moreover, the share price is not subject to high volatility.
Benjamin Graham, Father of Value Investing, said, “Buy shares in a company just as you would buy shares in a grocery store; Don't buy stocks like you buy perfumes. ”
That is, when we buy vegetables and groceries we place more emphasis on the health of our family and examine its quality and then ask for its price. Because we value the health of our family, but we do not value the quality and price of the perfume when we buy it. We will only notice its scent and attractiveness. Benjamin Graham tells us how to explore and buy groceries as well as explore stocks without succumbing to the tempting news about stocks.
How to determine the value role?
Good business, efficient management and a fundamentally strong company would now be underestimated. Thus, the value of its share will now be cheaper. All equity investors know about PE Ratio. It is the ratio between the price of the stock and its return. Let us see how to choose a value share based on this P / E ratio.
For example, a person buys a share of A for 100 rupees. Assume that the return on this stock investment is Rs.20. The investor pays 5 times as much as the return on the stock. The lower the BE ratio, the higher the return on equity investment.
Let’s take two company shares. Both A and E stocks are trading at the same price i.e. Rs. The PE ratio of stock A is 10 and the BE ratio of stock E is 14. Here’s a look at investing, since stock rating is attractive. Further, the PE ratio of the stock should be compared with the PE ratio of the sector. For example, the PE ratio of Infosys is 35. The average PE ratio of the IT sector is 41. Since Infosys PE is low compared to the industry PE, it has value and attractive share.
Supports the value investment style of renowned investor Warren Buffett. He talks about value investing ‘the price of the stock is the money you pay. Its value is what you get.
If a stock is selected for investment in the value investing system, the return on the stock price will be lower if the company's earnings expectation is lower. Margin of safety is very high in value investing. Margin of Safety is when a stock chooses to invest its next year's fair price. The price will be reduced by 15-20 per cent from this price and the purchase price will be fixed now. It would be safer to buy at such a low price.
Furthermore, value-based equity investing can protect one's portfolio from falling further during periods of stock market downturn.
Development role? Value share?
Growth stock, value stock whatever it is invested in let it be a long term investment. Next that company needs to be fundamentally strong. Many times, investors mistakenly choose penny stocks as value stocks that have fallen in price without a basic strength. Be very careful in this matter. Do not forget to seek the help of an expert if you are in doubt.
It is important to note the price trend of the stock before investing. It is very risky to invest without knowing this.
When it comes to stock market investing it can help you achieve your financial goals in the long run as well as add wealth. In that sense, it is not wrong to invest in Growth stocks and value stocks. Those who want to wait a long time and see good returns should invest more in value stocks. Others can attend and invest. Both of these investments are profitable at different levels of the stock market. So, as an investor is it a growth role? Value share? No need to worry too much about. Due to some issues the value was part of the potential to become part of the growth. Similarly, growth share is likely to become value share due to issues. In general, a stock investment mix is likely to yield good returns if both are equal.
Nifty 50 Value 20 Index
The Nifty 50 Value 20 Index (NIFTY50 Value 20 Index) is a selection of 20 stocks out of the 50 companies listed on the Nifty Index. .
Coal India, ONGC, Powercrete, Sun Pharma, JSW Steel, UPL, Hero MotoCorp, Bajaj Auto, Grossim Industries, Wipro, HU, L, I The index includes DTC, L&T, HDL Tech, Infosys, Tech Mahindra, Indus Ind Bank, Hindalco, TCS and NTPC.
8 Important Features To Consider Before Stock Investing ..!
The return on equity investment lies in choosing the right company stock. It is important to note the 8 key features.
1. Avoid share tips
Many of us have been investing in company stocks based on tips. It is better to avoid that habit. It is a good idea to do some ‘homework’ before starting a stock investment.
That is, it is important to know about the company you are going to invest in by reading the company's website, investment advisory, and stock referral companies' websites.
2. Investment period
You should only invest in company stocks if the investment period is at least three years. The reason is that the share price is subject to that level of inflation. Generally, stock market investments are compared to a roller coaster. Therefore, only those who have the strength to withstand the volatility of the stock price should engage in stock investing.
If your investment period and financial target period is about 3 years, you can invest in stocks of companies that do not have high inflation in stock prices and pay good dividends. Shares of companies listed on the Sensex 30 and Nifty 50 are less likely to be high risk as their balance sheet is good.
If the investment period and the financial target period are more than 3 years and more than 5 years, you can invest in company stocks with more than 150 companies out of 50 stocks in that type of high-risk stock market.
You can invest in high risk stocks if the investment period and the financial target period are more than 5 years. That is, you can invest in mid-cap and small-cap stocks. The longer the investment period, the longer it will take for stocks to rise again.
3. Investment strategies
In general, when it comes to equity investing, there are three main types of investment strategies: value investing, growth investing and income investing.
In a value investing investment style, a company's stock is invested in a position where the valuation is lower than other stocks in the same sector. Warren Buffett, one of the world's leading stock market investors, is making a profit by following this pattern.
The share of companies that continue to excel in generating revenue and profit is called the Growth share. Investing in these stocks is called Growth Investing. The price of these stocks will be higher.
Income Investing is the process of finding and investing in shares of a company that pays high dividends. Dividend refers to the profit growth of a company. A company that consistently pays high dividends to investors can be said to be a good company. Dividend income available in one year is the amount of bank fixed deposit that can be profitable.
Value Investing is ideal for high risk takers. Growth Investing is right for those who take moderate risk. Income Investing is suitable for low risk takers. By investing in a combination of these three types of stock investment styles, one can reduce the risk of the stock portfolio in the long run and provide a higher return.
4. Company Basics
Before investing in a company, it is important to consider the fundamentals of the company. Only if the foundation is strong will a building be sustainable. Who is the founder of a company in that category and how is its sales? How profitable is it? The investment decision should be based on a thorough examination of what future growth will look like.
The future growth of the company of the company you are going to invest in, you should make the decision to invest in that company only if you like the performance of its founders.
5. Debt free company ..!
Try to invest in debt free company stocks as much as possible. There may be a small amount of debt. It would not be a mistake if the loan was purchased to expand the business.
Avoid investing in the company's stock if you have taken out another loan to pay off one debt. The interest payable on the loan will reduce the profitability of the company.
6. Founder's share capital
Consider how much of a company's shares are owned by its founder or founders. If the share capital of the founders is very low then it is necessary to invest considering the reason for it.
If the share capital of the founders continues to decline, it is better to get out of it if you have already invested in that company stock.
7. Investment by investment companies ..
If mutual fund companies, insurance companies, and foreign financial institution investors (FIIs) have invested heavily in a company's stock, that stock may be considered for investment.
These companies will always invest in select stocks that are profitable.
7. Higher stock market value ..!
The market capitalization of a company should be somewhat higher. The lower the value, the higher the risk of investing in a company.
That does not mean investing in stocks with very high market capitalization.
You need to invest in large cap stocks, mid cap stocks, small cap stocks depending on your risk taking ability and investment period. It is always profitable to invest in a combination of stocks with different market capitalization value.
8. High volatility in stock prices
Some company stocks are seen with high volatility. In some company stocks the price may not be very high. It is better to choose stocks for investment according to the risk taking ability of the investor.
In general, a short-term 15%, 20%, 30% decline in stock market investment is all too common. Corona - 19 Even the price of many good company stocks fell by 50% or 60% in the early days of the impact. Therefore, the stock market can fall at any time. It is essential to have the ability to attack it.
Warren Buffett says those with risk aversion should come into the stock market even if the price of a stock drops by 50 percent after investing. Therefore, it is advisable to make a small investment in the stock market first, gain experience thereby and gradually increase the investment amount.
Also, do not hesitate to invest in good company stocks if the overall stock market falls. Also, it is important to have cash ready to invest then.
Dividing and investing
Basically no matter how strong the company is, no matter how good the stock, the total investment should not be put in a single stock. Doing so will greatly increase the risk on equity investment. In response, growth should be done by selecting five sectors and splitting the investment into several company stocks based on them.
Also, do not always make a total investment in stock market investment. Divide the investment amount by 5,6 and make the most of the market downturn.
There is a possibility of higher returns in the long run by splitting the investment in the above mentioned company shares according to the risk taking capacity of the investor.
