Hold On!! Markets Crash Again

It reminded me of March 20 when the global markets crashed on the apprehensions of coronavirus alleged to have been transmitted from Wuhan, China. Indexes alarmingly collapsed to lower levels and stocks sent shivers down the fragile spine of investors globally.

However, the brave souls who showed confidence and resilience in the financial markets were soon rewarded as the markets rebounded scaling new heights after a few months. Dow Jones, Nasdaq, Sensex, and all global indices not only retrieved their lost glories but also attained unprecedented levels.

Dow crossing 31000 and Nasdaq easing past 13000 levels was like leading from the front. The investors reposing confidence in the fundamentals having invested with due diligence were suitably rewarded as the stocks picked up during the pandemic multiplied their wealth multiple times.

Tesla, Amazon, Zoom in USA and Reliance, Bajaj Finance, TCS from India jumped to higher levels. Exactly after 11 months, we have witnessed another collapse again. It started from China and like a virus butchering the US, Australia, and Asian markets in no uncertain manner.

India following the Asian markets lost 1939 points on BSE and more than 500 points on Sensex. It was a double shock for Indian investors as many lost big money on Wednesday due to a glitch at the NSE resulting in interruption of business for more than four hours. Poor guys!! suffering losses for none of their faults. Huge losses accrued to the traders and today’s fall has added miseries to these investors again. US markets will be opening later tonight to decide the direction of global markets on Monday.

Bond yields to the extent of 1.61% have made the big investors exiting stock markets and preferring bonds for safe investment. This migration of funds will certainly impact the market sentiments. All markets will be watching Dow movements tonight and any good news will help recovery on Monday.

My genuine advice for the investors to maintain their composure and sit tight by selecting a few Cherry picks with cheaper valuation on the way. However, traders to sit on the sidelines for a few sessions and watch only the movements in this volatile turbulent market. Those who can’t resist the temptations must keep themselves covered by marking a stop loss to minimize the exposure. Avoid playing index and bet on the fundamentally strong stocks with lot of promise and potential. There are many in the market that you need to identify

Good luck! Friends

Success usually comes to those who are too busy to be looking for it….

Bumpy Rides

Pandemic crisis is back again as the number of COVID-19 cases and deaths have started rising everywhere acrosss the world. Europe which had a devastating experience earlier is watching burst of 2nd and 3rd wave as authorities are contemplating to reimpose the restrictions to safeguard their citizens from this deadly virus.

Unabated numbers in USA and India with Brazil at number three provide a horrible look as the ever increasing numbers have no respite for the health authorites. Despite claims by several Medicine companies, countries and scientists, Corona Vaccine looks a distant reality for the time being .

However a disturbing Lull in the overall Economic activities caused by social distancing or other restrictive measures taken by the states have started showing a little bit prominence in the recent past. The people worldwide have become accustomed to the pandemic conditions as unlocking of lockdowns and movement of public is sending markets in motion.

IT and consultancy companies have acclimatised themselves to the new environment by allowing their employees to work from home. Pharma companies and Hospitals have accounted for unprecedented volumes of business, Consumer goods online sellers like Amazon are having huge turnover forcing them to employ more workforce in their ranks. The courier/delivery companies are having their field day too as shopping online has become order of the day in the given curcumstances.

Suddenly sanitisation and sensitisation has become part and parcel of our lives. Everybody is cautious about washing his/her hands several times a day or keeping social distance to avoid contacts with strangers apprehending risk of COVID-19.The school kids and teachers have adopted themselves to new system of online education by sticking to their Laptops/ipads for long hours during the day. Alas!! movement of kids for outdoor games/sports is thing of the past and I am sure this is going to impact the overall growth of these kids

The stock markets are generally shown as two different types of animals; Bull and Bear indicating sluggish market or upbeat market conditions. Unfortunately the Bears broke hearts of many in march 2020 as the global markets witnessed a big fall in March/April 2020 giving an impression of no recovery in the near future due to pandemic conditions.

The chances of recovery looked bleak due to unemployment numbers/decreased economic activities and no visible solution to COVID-19. While the stock markets slept for a few months, the yellow and white metal showed briliance by achieving the unprecedented historical prices.

However, the stimulus announced by various Govts worldwide for the small businesses and unemployed people found liquidity in the market. Professionals sitting indoors during the lockdowns realised the significance of Stock markets as they could easily keep themselves busy by finding a new source of income through IPOs/Day Trading or Investments. The result was there to be seen as the smiles returned on the faces of broking houses/investors and everybody concerned with the stock markets.

Multiple subscription in the IPOs globally and Indian markets in particular kept the sentiments booming as we saw Dow Zones and Nasdaq achieving their historical heights and other International markets followed the suit either by recovering fully from the damages or closing near to these numbers.

The global economic outlook is encouraging as the economic activites appear far more satisfactory now. We are still not out of turbulent times and a few bumpy rides here and there can cause heart burns.. Brave and visionery steps by the heads of states/Novel inputs by the Policy Makers/Early solution to Corona Vaccine may be the right answer to the prevailing challenging conditions

Turbulence Again!!

Looking at the charts of International markets, the red sign is again signalling danger as 90% of the markets have either closed in red or going to follow the DOW zones and European markets today. Nifty lost about 300 points closing at 11680, whereas the broader Sensex brought tears in the eyes of investors by shedding more than 1000 points and closing at 39728.

Major culprit again seems to be Coronavirus! Resurgence of COVID-19 in Europe has made the investors scary and hurry for offloading their investments. France, UK , Germany, Netherlands and other European countries have shown sudden spurt in Corona cases with no signs of solace coming from medical fraternity about Corona Vaccine in the near future.

Another big news coming from USA is also not easing the rout as the stimulus proposed by the Administration is also losing steam due to the Presidential Elections only a few days away.

Adding fuel to the fire seems to be the Chinese efforts to aggravate the situation at Indian Borders with instructions coming from Xi Jinping to be ready for a war in near future. 60000 strong Army has been posted on the borders by the Chinese to intimidate the Indians which some experts are looking more as a strategy than a real war

Though traders will have volatile markets to their liking but not a good time for investors to exit. This turbulance may be longer due to the cited reasons but Investors to stay invested and add quality stocks at cheaper valuations if any

Initial Public Offerings (IPO): The Party is Over !!!

Indian stock markets repeated their 2018 feat by bringing long awaited 8 IPOs in Sep.2020 despite the COVID-19 scary market sentiments. With liquidity no problem, all these IPO’s were oversuscribed multiple times. Barring a few, all performed well and the fortunate investors made profits on the first day of listing.

In September 2020, Happiest Minds Technologies witnessed subscription of 151 times, Chemcon Speciality Chemicals 149.3 times, Mazagon Dock Shipbuilders 157.4 times, Route Mobile 73.3 times, CAMS 47 times, Likhitha Infrastructure 8.4 times, Angel Broking 3.94 times and UTI AMC 2.3 times.

However overdose of IPO’s had its effect on the stock prices of all these companies declining from their listing price and UTI asset Management performed miserably on its debut with the stock closing at Rs.476/- (15% lower than its issuing price). If this can happen to India’s number 2 Mutual Fund Company having very strong financials and just right valuation then who knows the fate of other companies?

With no visible respite from COVID-19 globally and Corona Vaccine not happening in visible near future, normalisation of economic activities looks a distant dream. However the performance of global markets including India has found a new stream of retail investors who are flushed with liquidity and enough spare time to try their hands in the stock market.

Nifty is almost returning to 12000 and SENSEX touching 40000 levels, we may see continued interest by the retail investors to keep trying their hands on the future IPO’s too. The long awaited amongst them are Burger Kings India Ltd, Studds Accessories Ltd and Stove Craft Ltd. All these comapnies have strong brand value, market presence and bright future prospectus. These IPO’s lined up for October or November 2020 may generate enthusism and we will see multiple times oversubscription again

Party may not be over yet!!!

Penny Stocks-Luring Investment

Penny share terminology originated from overseas in 1934 making way for small retail investors who could not afford participating in the stock market due to their meagre resources. In India any share trading around @Rs10/- is deemed as a penny stock. You can find hundreds of such stocks in the market with a little bit research work.

Beginners are tempted to invest in these shares for earning big with a very low stake as there are stories circulating in the market which divert the attention of first time investors from Long term perspectiove to getting rich overnight.

With the advent of “You Tube Channels” You can see a large number of so called experts streaming their channels with little knowledge about the subject. That provides them an opportunity to showcase their talent to the viewers who are venturing into stock market for the first time. They will talk of Damani, Jhunjhunwala and so many others citing the names of companies which made them rich from a scratch. This could be true but Miracles can’t happen frequently.

However a calculated risk after thorough study of the various parameters with due diligence is certainly bound to provide good results if you are an investor with right temperament and considering option for long term investment. Before taking a dip, you must mark a stop loss while trading in penny stocks. There are liquidity and volumes issues with such stocks and you may end up with a big hole in your pocket

Penny shares are generally held by a group of investors who can lure you into speculation by jacking up prices temporarily. You may not find enough buyers when you wanted to sell for booking some profits. Watch out the number of trades when you are looking at the volumes for ensuring correctness/genuineness of the transactions. If the number of trades are small as compared to the volumes, it’s a signal to be more circumspect. Better avoid the stock!!

However if you are seriously into it as an investor, there is every possibility that low investment may fetch you handsome returns also. You must analyse the company before investment of your hard earned money in Penny stocks. First and most important factor remains the management whether they have sufficient experience, vision and investor’s interest in mind. Such information is easily available and can be googled any time.

Never pick up a stock which is continuously hitting 52 week low circuits. You need to search those penny stocks which are consitently hitting 52 week highs. No stock will become multibagger without hitting multiple fresh highs. Coming events cast their shadows before. Yes such stocks are a candidate for future multibagger.

Once you have shortlisted a few stocks, you need to study their fundamentals, Recent Revenues,Promoter holding,Pledge of shares by the promoters,Industry outlook,Govt policies and the visionery outllok of the management. A proven management with right frame of mind can only pull through the rough weather. Any decrease in promoter holding or increase in pledge of shares is a RED SIGNAL

The under noted few companies have proved how a penny stock can be pulled out of woods through better management and visionary outlook

Biofil Chemicals & Pharmaceuticals : The stock has risen more than 1000% to Rs 170 as on November 20, 2020 from Rs 13 as on June 30, 2020

CG Power & Industrial Solutions Ltd: The stock has risen 300 percent to Rs 34 as on November 20, 2020 from Rs 8 as on 30/06/2020

J&K Bank: With a large number of alleged irregualarities, this stock nosedived from 34 levels in 2019 to 11.70 june last year. However it has started picking up again after good results and stabilty in the state. The Bank is having more than 60% business outside the state which could turn it into a candidate for a potential upside down in near future.

Investors with high risk appetite can venture into this high risk unpredictable portfolio of Penny Stocks by setting aside some part of their resources. However, Regular due diligence is required by analysing various parameters for earning big bucks. Don’t show greed and fall prey by picking those shares which have lost value recently and are trading continuously below 52 week highs for the last few sessions.

Stay safe and remain invested by choosing the right ones

Stock Investments: A Serious Business!! Part I

Investments in stocks are one of the most lucrative, tempting and rewarding investment avenues available in the market. Yes, of course! If you invest wisely by identifying the right stock by using your normal prudence and a little bit patience. I am going to touch the most important parameters which need meticulous compliance to ensure continuous increase in value with minimum risk. I will discuss all the parameters daily to allow you to comprehend the subject before diving in to the pool of volatality and uncertainty with your hard earned money as under:

1. Management: Well if you have made up your mind to invest in a particular stock, the first important thing you must know is the quality of the promoters and team of professionals who are engaged in day to day operations of the company. By any imagination, you are going to be a partner of this company to the extent of your share holding and your money will be secure only in the hands of an experienced promoters who are keen in growth of the company by taking into consideration the interest of retail investors. Although exhaustive information about the promoters is not always available on the internet but you can easily search about the frauds or any other malactivities of the company by googling for a few minutes. The vision of CEO and management can easily be ascertained by watching videos and going through annual reports of the company. A good management will grow its own networth besides creating wealth for the investors. The likes of Tatas, Ajim Premji, Mukesh Ambani,Narayana Murthy, Hindujas, Mittals, Birlas have earned name and fame by following business ethics and creating opportunities for investors to find their financial goals in life. There is no dearth of good promoters and able administrators but you need to find one for your own safety and growth
2. Past Performance: Equally important aspect of strength and values of the company is its past performnce over the years. You can have a glance at the last financials of the company for the last three years. All the information is easily available on the company’s website or NSE where the Top Line and Bottom line can be seen and analysed quickly. A good company’s growth over the years will be stable and keeping in pace with the industry level. Any downtrend in sales/profits/dividends/reserves will caution against investment in such company for the only reason that eveything is not normal with business or working conditions of the company. Better keep at arms length and look for some other company
3. Promoter’s Contribution: I am very particular about the quantum of contribution of promoters in any business. Considerable participation will ensure that the promoters are running this comaony as a main business. Anything around 50% of the capital ensures commitment and dedicated interest of the promoters in this particular business activity. However if the quality of promoters is time tested, this ratio can be considered at lower level too but in no case public holding should be the largest chunk in the capital. The beter portion of capital in good companies is subscribed by the FIIS/Mutual Funds
4. Share Holding Pledged by the Promoters: A clear signal of diversification of business is foreseen in this information. There could be two reasons for this development. Firstly, the lenders are not interested in lending to the company without tangible security and secondly the amount is being utilised in some other business. In both the cases interest of a small investors is certainly hampered and you should stay awy from such companies. There are a large number of other companies which can be considered for safer investments
5. Investments by the Mutual Funds/FIIS: I deem it as one of the major features in analysing the credentials of any company before investment. Since FIIS and Mutual Funds are managed by top professionals and they are equipped with more tools and informations before deciding to invest in a company, my first reaction is to search for these investments. If the top fund houses have invested or considering to invest their funds with the company, I am 60% decided for putting my money into such company. These were a few features which need only a few minutes to decide whether we are going for this stock or not Once we are Ok with the initial analysis, we will see how the technical part helps us in deciding whether to go far or against investing in a company . We will scrutinize the undernoted ratios available on the public domains or website of the company in our next post tomorrow morning to see whether we should venture into investment in this company and if yes to what extent.

1. 6.PE(Price to Earning) Ratio
2. 7. EPS(Earning per Share)
3. 8. EBIDTA(Earning Before )
4. 9. PEG(P/E to Growth) Ratio
5. 10. DE(Debt equity) Ratio
6. 11.ROCE(Return on Capital Employed)
7. 12. ROE(Return on Equity)
8. 13.Dividend Track Record

Let’s Create Wealth-1

Hi Friends, Thanks for your continued support and let’s start where we left of yesterday in our effort to employ our idle money lying in the bank’s savings or current account for generation of passive income. All of us understand that the balances lying in our savings accounts don’t get sufficient returns to beat inflation part which eats out the real value of money regularly. We are talking from the beginners point of view who are being initiated into investments through stock markets.

A stock which is being considered for investment is subjected to strict scrutiny through various yard sticks by the investors/Financial Experts before considering any buy or sell call in a particular trading session. However to keeep the things simple, I will take up a few financial ratios which are easily available on website of the company or the Regulator’s platform as a public document. Let’s consider an example of XYZ Ltd Company to elaborate further:

1. Book Value: We need to know about this value as a yardstick to know the real value of share of the company on a particular day. This is the amount available for the share holder after adjustment of all liabilities in the event of closure of operations by the company. This is what you are left with in the grimmest and rarest of circumstances. Book Value of Company XYZ Ltd stock as on date is 21.29$ and we will compare with the market price later on
2. Market Price/Price: This the value of the stock which you will be paying for buying a particular stock. Market Price of XYZ Ltd stock is 243.05$
3. EPS(Earning Per Share): Net Profit/Total number of shares This ratio gives clear picture of operations and profitibility of the company. Comparison over the past few years will confirm that the company is doing well in business and may bring passive income for the shareholders through dividends/bonus shares. This is one of the most important parameters for selectin g any stock for investment. EPS of XYZ Ltd stock is $12.01 which is commendable
4. P/B (Price to Book Value): Market Price/Book Value. This Price to Book ratio is a financial ratio used to compare a company’s current market price with its book value. The PB Ratio less than 1 will make the company suspicious about its operations and may not be a good choice to invest. However this parameter is not the only yardstick but it should be co related with other financial ratios before taking a call. P/B of XYZ Ltd share should be 243.05/21.29=11 which is very healthy and acceptable due to valuation of the company but we will try to analyse further before putting in our hard earned money into this stock
5. PE Ratio: This is one of the most relevant information which defines the relation between market price of a share and EPS to understnad as to how much discount or premium is being charged by the market. In simple words how much money any investor is ready to pay for the stock to earn 1$ out of it. This ratio is used for valuing companies and to know whether the company is undervalued or overvalued. Let’s consider a live case of XYZ Ltd share which is trading at $ 243 in the Stock Exchange today. EPS of the share is $12.01. PE Ratio will be 243/12.01=20 app This means the stock is commanding a premium in the market and for every one dollar you will have to pay 20$ to buy one share of XYZ Ltd . You can compare this value with the average industry PE to know whether it is in line with the Industry levels
6. Debt Equity Ratio: This ratio shows total indebtednes of the company and its comfort level in debt servicing . Total debt/ Equity figures available on the Balance Sheet can be used for calculation of this financial ratio easily Any thing less than 1 is a very good sign and shows health of the company. However in no case you should venture into buying a share of the company whose debt equity ratio is more than 2. Debt Equity Ratio of XYZ Ltd stock as on date is 0.88 which is acceptable and conducive to its growth in future
7. ROE or ROCE: Return on Capital employed. This shows efficiency of a company in managing its equity to optimum level for running its business. Higher the better!! ROCE of XYZ Ltd is 52.13 which is very high and doing justice to the confidence of its share holders/Investors.
8. Performance of the company for the last three years: This information will provide you insider view of the operations of the company Any constant growth in the sales/profits/dividends will impact the value of share positively but the zig zag movement of figures in the balance sheet will indicate something wrong going on with the company as the sustained growth is not coming which may be due to unhealthy practices of the managemnt or some operational problems like unrest in the workforce/marketability of the products etc
9. Financials of XYZ Ltd for the last three years lifted from a public domain are as under and you can see how all the important parameters have been showing constant growth. You can easily find such informaion for any company which you are interested to invest through shares

Item	2018	2017	2016
Revenue	265595	229234	215639
Cost of goods sold	163756	141048	131376
Gross Profit	101839	88186	84263
Operating Income	70898	61344	60024
Net Income	59531	48351	46687
EBITDA	81801	71501	70529
EPS	12.01	9.27	8.35

I have taken an example of one of the best managed and result oriented company so that you can understand the concept of investment easily by taking holistic view of the information. Hope you will now feel comfortable to take your first step in building wealth and target to achieve your coveted goals easily. Nothing is impossible in this world: you have to keep learning with patience without ever shying of taking calculated risks on your march to creating wealth.. Have a relaxed day

Let’s Create Wealth

We have seen a large number of investors accumulating huge wealth by investing wisely in the stock markets irrespective of the fact that these markets are the most volatile centres in nature. Fortunes favour the brave!! and who doesn’t know the king of stock market Warren Buffet, a billionaire and rated as one of the ten richest people across the globe. And that’s because he shares the belief that, over the time, the world will improve, will grow and will be a better and more efficient place to live than it was before. George Soros, ICahn, Ray Dalio,James Simons,Steve Cohan,David Tepper, besides Rakesh Jhunjhunwala from India are the great rich people who have earned their fortunes through the stock markets The money has not come overnight but it’s the result of consistent efforts, timing the market, investing in valued shares and taking the calculated risks.

Investments in stock markets are the highest yielding avenues available for investors who maintain their calm during the turbulent times as the markets keep testing your nerves with high level of volatility. Regular study of the industry reports coupled with periodical performance analysed through various parameters keeps your portfolio insulated against sudden losses as the investments are like a child who needs proper pampering/caring/feeding/education and regular check ups to grow into a healthy and well informed young man.

It’s very easy to start investing in stock market as mere opening of investment/brokerage/Demat account provides you minimum requirement for gaining entry for buying/selling of stocks of your choice. Yes the first part is as sample as ABC and most of the investors may find the going a bit tough in selection/study of the individual share initially. There have been instances of huge loss occurring to the investors where the money has been spent in buying only on getting tips from the so called market experts or TV Channels. The use of digital information and expert’s recommendations bear implications as this could have come through a marketing efforts by a group of vested promoters. A thorough independent study takes only a few minutes before plunging into this very volatile world but it can help you in becoming financial literate to save your hard earned money.

Recently I came across hundreds of recommendations on various TV Channels/You Tube Channels who were recommending shares of their choice citing various reasons for a bumper rewards on a particular trading session known as Muhurat Trading on the auspicious festival of Diwali in India. The markets are opened for one hour on this day which otherwise turned out to be a HOLIDAY. This is the hype created by motivated people/professionals who try to lure your greedy instincts by forcing you to buy a particular stock through induced marketing skills. You need to be aware of such practices in vogue across all the global markets irrespective of the country you are living in. You need to take care of following important observations before committing yourself to buying mode in the stock market:

1. Start with a small amount as this will provide you an opportunity to test the waters before taking a plunge in the river. Have patience and don’t react on movements of the market on daily basis as you are entering this market as an investor to grow your wealth and not as a trader who plays on speculation only. This is not a gambling like casino where number appears purely on your luck. The stock market is a business which has certain basic perinciples to show preservance consistently. The right decision taken after proper analysis before investment will certainly bring good fortunes unlike casinos.
2. Allocate a fix part of your savings to this portfolio depending on your risk appetite but never put entire money in stock market as there could be other avenues available where your investment is safe with low yield
3. Invest initially in Large Cap companies who have track record of continuous growth over the past few years. This may not give you big returns but will keep your money safe initially. Study their financial information of at least for the last five years and see various parameters of sales/profit/debts/other features which doesn’t require any technical skill. Compare to see if these figures are increasing or decreasing. Try to learn about the group or promoters whether the company is paying regular dividends or involved in some litigation which may hamper their business in future. You will find consistency in the working of these big companies and learn the basic information which will help you in analysing smaller companies too.
4. Nobody has learnt anything FREE as nothing comes free in this world. Even the so called free use of Social platforms come by sacrificing your personal infomation and privacy!! Every success comes with sustained efforts after tasting setback/losses/fall and wrong decisions. Don’t get upset with your failures as these are the stepping stones for your smiling future. Just try to learn from your failures and be careful while riding the cycle again.
5. Don’t depend blindly on the recommendations of experts without seeing any logical evidence. Try to analyse the information by co relating exhaustive data available on various platforms and using your own due diligence and normal prudence before investing in the stock.
6. Don’t put all eggs in one basket. Invest wisely in diverse industries. In the ever changing vibrant economies, the priorities of Governments and promoters keep changing. Any particular industry or a stock which remained rising continuously over the years may just relax providing you an opportunity to enter the stock on lower valuations. Dont reshuffle your portfolio frequently as such practice will only enrich the brokers

Invest when others are exiting from the market. During the Dot com bubble 2000, Sub Prime Fiasco 2008 or Harshad Mehta Scam 1992, when most of the investors were scared away due to the crash in stock markets, the great players were busy accumulating the quality shares at throw away prices. Never in the industry, any slump in the stock markets has remained in vogue for more than 15 months. When the stock markets returned to senses, the heart burns were visible as the small investors had dumped all their holdings by selling the shares at unbelievable discounted prices and you can imagine the fortunes of those who had acted wisely by grabbing the opportunity in a big way. The COVID-19 has also seen see-saw movements of global markets during the current financial year and crash in shares of non essential items have seen prominent stocks losing their values to the extent of 80%.

The long term valuation of the stock continues increasing not only by appreciating in the value/price of the stock but also from the regular dividends/bonuses/rights issues offered to the holder from time to time. Reinvestment of all these incomes keep the value multiplying to higher levels for diversion into passive income investments later on . We will discuss investments for passive income and also look at the various parameters for identifying a stock for its valuation in our next post. Till then: Have a relaxed day