The Investor & Indian Stock Market – Trends, How To’s and The Bigger Picture

0
694
WEALTH PRESERVATION

Most markets are volatile; they are sentiment driven and go up and down. It’s the same with the Indian market. The Indian economy is booming though, there are a lot of companies in different sectors from Banking, Pharmaceuticals, Telecom, Oil, Real Estate and Software and more. India has a healthy bunch of companies in all these Industries.

Understanding the Market Scenario

For a new Investor, the Indian markets are incredible; they are flush with money-making companies that don’t come to the limelight. There are companies that are leaders in their space and still have a decent P/E Ratio.

The Indian market is also a conservative market and it self corrects well. It’s also over the years become a reliable market, where the world’s news don’t affect the markets as much as the internal markets.

Getting Started

There are many companies that deal with Stock Market trading in India. But, there are a lot of newer companies that have cropped up and are doing wonderful work. A company in this space is Zerodha. They offer the lowest trading prices and also a state of the art interface in trading. They also have a bunch of high-tech products that let you do intense analytics and other trading related work.

Going for a newer firm is better because of the real-time updates they provide, app based trading and a better trading interface. Dedicated stock broking companies are more likely to provide better service as compared to bank based trading companies.

Understand your Risk profile

What do you want out of Stock Market?

If you want to build wealth slowly and have a low risk appetite, it’s probably better to go long-term and be an investor. IF your risk appetite is much more, then you can dabble with trading, except you stand to lose all the money you put in. So treading with caution would be a wise choice before trading.

There are cases where investors split their money and put some money towards trading and the other for Investing. For a trader, going towards High Beta stocks is a good idea because of their variation.

These are riskier but more likely to jump high and make you huge returns. Here’s a list of stocks that are high beta and that have provided high returns in the past year.

In a lot of cases, starting off with trading can be a hard task. Which stocks to invest in? How much to buy? What is a good company? Is it a growing industry? These questions trouble every trader and Investor.  If you want to start immediately, a good choice would be is to register for a stock advisory firm. At a price of INR 2,000 Rs a month, you’ll get stock recommendations, portfolio allocation advice and other services. This is a great way to start building a portfolio and start generating good returns.

Also read:What is Dead Cat Bounce?

Trading and Investing on your own

Picking stocks on your own can be a hard task but it can be a very rewarding experience. Generally the rule of thumb is to buy low and sell high. Many people understand this, but aren’t too sure about the purchase price being right and being low. Some of the best tips for trading are:

Tips for Trading

  • Make sure to get the stock at a lower price and look out for new announcements and other ancillary news that will affect the stock.
  • Find out if a stock is high-beta. A high beta stock moves up and down, you don’t want to trade in stocks that barely move a rupee on a daily basis.
  • Don’t choose penny stocks and unknown companies. Penny stocks are just dumping stocks and you never know who’s controlling them for their benefit. Unknown companies are risky because their lack of reputation doesn’t make them accountable.
  • Choose popular stocks with high beta and that pay dividend if you get things wrong.

Tips for Investing

Choosing stocks to invest in much more of a laborious task. But here are some strategies.

  • Do you research and look out for growing Industries and Industries with potential.
  • Look out for companies in these Industries who are doing exceedingly well.
  • Look at their revenues and look for business advantages, if any.
  • Also, check the price and see if it’s overpriced or not based on ratios and calculations.
  • Invest in large quantities and wait it out.

The Indian stock market is like any other stock market and you need to strategize well. Before you do even the riskiest of things, always understand what you stand to loose and understand the basics of the things you do. Rakesh Jhunjhunwala is one of India’s best Investors and he also trades once in a while and his favorite quote is “Trend is my best friend”. He uses trend analysis to pick stocks and trades with them. As you can see, there is a science behind trading and you need the right knowledge, tools and resources to execute it. You stand a better chance to succeed when you are prepared.

Also read: Five rules for those who want to get rich by trading stock