BapiManoj JenaBy Prashanta Chandra Panda and Manoj Jena, Bhubaneswar, December 21, 2015 : Entering into stock market is dream come true for average Indians. Elites are way ahead in trading here. However, if you are born into a broker’s family, it is in your DNA.

Now it is time for salaried, self employed and business people to think for the safe and yet gainful avenues to keep their savings intact and growing. Returns and earnings from fixed deposits are marginal and historically less than the life style inflation. Interest rates are fluctuating with the demand for money. The world has been following loose monetary policy to prolong the growth. In India returns are mostly less than the usual consumer price index. Tax is another consideration for which you are forced to reallocate your portfolio to keep intact hard earned savings. Yes, fixed deposits have stability and no risks as you can calculate return much in advance. You end up making a comparison between nominal gains versus real gain the moment your focus is shifted to price variations in the time period.

The other important saving indicators forced into our psychology are that of Life Insurance Policies. At times we recalculate life and returns in terms of Pension Policy, one time endowments, child policy. People feel more secured and more confused regarding rewards for security afterwards. We get to know about the load factor, exit fees, fund management fees when we liquidate our position in Unit Linked Policies of different insurance firms.

Historically this escapes our calculations at the beginning though referred in the brochure. Sales person come with a template loaded with forecasted data speaking about profits those can be made in next few years. You believe yes, the immediate reward is in front of you and in a hurry allocation part of your investments. Being partly literate or even at times not knowing about the stock market we trust ourselves adventurous for bigger rewards with all safety gadgets attached and functioning.

Next in our choices comes opting for health insurance policies. Unfortunately this is not much discussed in India. Bottlenecks observed in their service delivery in the public health system are slowly forcing the common man to look at it with hope. Interestingly there is no aggressive marketing of these products to cover more people to spread the expenses in case policy holders avail the services.

Awareness for promoting current policy holders to avail facilities is not found. In between we find strong desire to hold gold as saving option for public. Traditionally gold has been a strong weakness of Indian community. It is the most desirable gift that gives shine to your wealth. You inherit, you add and you gift it to cement the human bondage and your wealth. You can buy in tranches with regular interval. Current movement in gold prices has led us to rethink the weightage that we Indians have been historically favouring this sector. Another critical shift in the thought process has been weightatge we traditionally have been giving to short term returns.

Next in line comes the most important identification of your presence, status and at times security, i.e. land. For some it is a house or flat or both. Interestingly you go for it when you view a longer horizon of life in terms of its designs and receivables to support such design. You review your accumulation and measure the future flows, to arrive at your decision to go for the most prized possession of your life.

Now let us get into the real subject. The passion to hold company stocks is pregnant largely with financially literate man, to some extent among the semi-literate mass irrespective of their wealth or social status. Easier way to get the taste is through mutual funds who take decisions on your behalf. You workout your preference for mutual fund house looking at the performance of the fund over the years. Learned ones look at the allocation of funds to different sectors and money market to anticipate the volatility. Here the question is how you undertake basic study required to agree or question others advises on stocks.

One needs to a longer period before thinking of entering into this market. Following sensitive index to judge the safety of your capital has limitations. Sensex is limited to 30, though respected as health or mood of the capital market. More than 5000 no. of companies are listed in the BSE. Numbers increase if you add the exclusively listed NSE ones. Stocks are layered as large cap, mid cap and small caps. Everyone has a price which can be referred as inherent value. And there are shares of once known companies traded at low prices. No doubt prices are the true motivators. Now the question comes are they truly valued, undervalued or grossly overvalued.

We understand getting advises from various financial advisors are essential. But after that you need to analyse on their tips. Brokers always gain in by the number of trades and volume and yes they are rationale in their own ways. One has to understand the link between real sector and share value. Role of economic policies, taxes, natural resource allocation policies have large bearing on the fortune of many stocks.

The investing hypothesis one of the remarkable facts is that nobody can beat the market forever, not even Warrant Buffet. Yes you can beat the market; may be in a major percentage of your trades on a short term basis performing better than the market; however in long-run the market has to win.

Investing has gradually changed from the game of fundamentals to the game of information. We need to do adequate fundamental analysis while simultaneously remaining competitive with the market information. None of the research makes you complete about the stocks and the associated returns with it. The completing criteria for this are one’s risk appetite and the adjusted valuation of the stock positions.

Just think of launching a start-up, can you imagine the kind of analysis you need to enter the market for the particular business starting from each point of revenue generation to each rupee of profit. How much revenue income can be expected in the next few years and how much profit will help for the sustainability of the business? What should be the profit margin and what could be the different cost heads impacting the business? What could be various scenarios where the profit margin of your business may get dented?

Whether the market competitors in your business are much alarming to eat into your revenue or can they impact your business negatively? Just like for launching a company one need to look at above scenarios and many more things for the sustainability and growth, before investing money in other’s businesses one must similarly research the fundamentals on which that particular business is dependent on.

For immediate information about a company, individual can go to the company websites as well as other informative websites such as www.moneycontrol.com, www.nseindia.com, www.bse.com, and etc. Apart from picking information from these websites one can use the help of various research reports available in the public domain which helps to know about the company and the related business and competitions in the industry.

But again there is no limit to the research, which can establish at 100% accuracy about the future stock prices. Many unforeseen events add to the risk which impact negatively or positively on the stock price on day to day basis. Interlinkage of different global markets also adds to the complexity of the stock performance in a particular time domain. However, certain underlying factors could be overlooked. One has to understand the link between real sector and share value. Role of economic policies, taxes, natural resource allocation policies have large bearing on the fortune of many stocks.

Pharma companies are mostly cash rich or cash surplus. They are acyclical in their behaviour. Profit margins are better. These are definite reasons for safe picks! But, apart from that one needs to know the basket of different generic medicines they represent, whether sales are dominated by single brand, time period available for IPRs and perhaps distribution of revenue from sales in domestic market and foreign markets especially US, Russia and Europe. Losing or gaining one such market may change your gains from these shares.

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