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In an efficient market with rational investors and complete information, the valuation of a stock will reflect its fundamental value. The concept of fully efficient markets includes that all information is available to everyone and is handled rationally by the investors. It also implies that it typically does not matter which securities an investor chooses to invest in as they are all fairly priced in the sense that the price reflects the security’s fundamental value given the market knowledge of the stock. So you should go for stock recommendations if you wish to get the best price for your stocks. This would indicate that success in stock picking is more rationally attributed to luck than excellent skills in price setting of securities. You need to get the idea of Indian stock market tips so that you can know the functioning of the stock market.
How to invest in Indian Stock markets?
Firstly, you need to stay away from inflation sensitive sectors like Real Estate, Banking and financials etc. Due to current price hike, inflation will rise further. Secondly, you have to concentrate on sectors like offshoring which have not affected much by these changes. Thirdly, you need to stay away from FMCG but Pharma is difficult to predict. On one hand, Government wants price control measures but on the other hand Pharma companies announced good results. You must also keep eye on stocks which lost heavily despite wonderful results in the last quarter. You should have some idea about the functioning of NSE, BSE, NASDAQ…etc.
Five points to highlight
Following five highlighting points can be advised to investors regarding where they should place their investments-
- No business survives long without cash. One should know how much cash the particular business generates and how much cash it consumes. What are the sources of it? What drains it? What's the timing of the inflows and outflows and how is it changing? More revenues (sales) often means more cash. But growing a business consumes cash. How fast can the company expand without straining its cash flow?
- When people talk about the bottom line, they generally mean net profit margin -- the money the company earns after paying all its expenses, interest, and taxes. But gross margin is important at the same time. Gross margin is nothing but the difference between a product's selling price and what it costs to make the product (the "costs of goods"), expressed as a percent of the selling price which can signal important shifts in a business.
- The investors must have a clear idea or otherwise must study on the velocity aspect.
- Margin multiplied by velocity equals return. If the return is lower than the cost, the investment is likely to be in trouble.
- The investors must have clear knowledge about the growth aspect of the share market.
Some tips for Stock Market investors:
Now here are some tips for investors who wish to invest their money in the stock market.
1. Decide yourself: One must read and listen about stock market tips and advice. But, have to do own research about stock and its business before buying shares. One must think twice before buying hot stocks.
2. Don’t get panic: This is the most significant point. If, one investor is a long term investor and invested in fundamentally sound companies, the money will give very good returns. So, need not to exit the holdings and can be accumulated more if money is there. But, quick returns over short term can not be expected.
3. Don’t overestimate crisis: need not to concentrate on negative triggers only. If one analyse the situation, one can find positive things like reasonable growth in economy and better than expected results by select companies etc.
4. Don’t underestimate inflation: This is the one of real problems. In election year, Government will go to any extent to contain inflation. It is better to stay away from inflation sensitive sectors like Real Estate, Auto and Banking.
5. Unbelievable returns: If one can accumulate good companies on every fall and invest in them for 2-3 years, such stocks will give wonderful returns over long term. Every sharp fall will be followed by reasonable Bull Run.
So, go for stock recommendations if you wish to earn good profits in the stock market.
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