5 less discussed points to consider before investing in Stock Market | CA Rachana Ranade
Published: 2024-02-16
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Available
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Analyzed
Published: 2024-02-16
Status:
Available
|
Analyzed
Predictions from this Video
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Large-cap stocks like Tata Motors, State Bank of India, Bharti Airtel, and ITC have more than doubled in value between January 1, 2021, and the end of 2023, demonstrating that large-cap stocks can indeed become multi-baggers.
"check the returns of these three four stocks just to give you an example Tata Motors, State Bank of India, Bharati Airtel, ITC favorite of many people memer's favorite basically so these three four stocks check the return from 1st January 2021 so 21, 22, 23 three years return check and they have more than doubled."
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Retail investors often invest in penny stocks at their peak when they hit consecutive upper circuits, and these stocks are likely to fall further, exhibiting back-to-back lower circuits. Investors should avoid such penny stocks.
"so please ensure that you don't fall a trap for this for more kind of a situation and you better stay away from penny stocks which are hitting back to back upper circuits and back to back lower circuits,"
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Even if a stock has fallen significantly (70-80%), it may continue to decline if fundamental aspects of the company, such as product issues, management, or underlying problems, have not changed or been resolved. Investors should look for fundamental changes before considering averaging in or taking a contra bet.
"always remember that if nothing has changed in the company even if the stock has corrected like 70-80% there are great chances that the stock might fall further, so before you think about averaging in that stock or before you think about taking a contra bet on that stock try to see if something has changed in the stock or not, try to to see whether the problem because of which the stock started to see the downfall whether some sort of solution is in picture for that stock or not, if it was about some problem in the product whether the there is some solution that has been found for that product or not if there was a problematic management whether these people are now being replaced or not"
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Investors should avoid stocks of companies where the management has questionable governance, integrity, or is involved in litigations, as these factors can negatively impact the company's performance.
"The moment you feel that this management is such where governance is at stake, where governance can be questioned, when their integrity can be questioned, where there are certain litigations on the management, ideally you should stay away from such stocks."
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When investing in IPOs, if there are litigations against the company or its management that question governance, it is advisable to stay away from such companies.
"if there are litigations against the company against the management try to see what are the sort of these litigations and if they are about questioning the governance ideally stay away from such companies."
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Stocks bought immediately after listing that trade at significantly high valuations (high PE ratio compared to industry average) are most vulnerable to sharp declines when market sentiment turns bearish. Investors should check valuations before investing in such stocks.
"if this be so the moment the market mood changes if market starts turning bearish these are the stocks which ones which are absolutely high in PE as compared to the industry PE stocks which are high in valuations they are the ones which take the beating first okay so whenever you are buying post listing just be aware just check whether the valuations are not sky high and then only invest."
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Large-cap stocks like Tata Motors, State Bank of India, Bharti Airtel, and ITC have the potential to become multi-baggers, as evidenced by their doubling in value from January 1, 2021, to the time of the video.
"check the returns of these three four stocks just to give you an example Tata Motors, State Bank of India, Bharati Airtel, ITC favorite of many people memer's favorite basically so these three four stocks check the return from 1st January 2021 so 21, 22, 23 three years return check and they have more than doubled. Now who says that Nifty stocks or large caps never become multi baggers, they do become multi baggers and in fact these are proven these these stocks have proven themselves they are fundamentally strong they do have certain mode so obviously the risk involved would be definitely lower."
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Retail investors should avoid penny stocks that are experiencing consecutive upper and lower circuits, as they often invest at peak prices.
"there are a lot of penny stocks where it does happen exactly like this and typically retail individual investors tend to invest at the highest possible point so please ensure that you don't fall a trap for this for more kind of a situation and you better stay away from penny stocks which are hitting back to back upper circuits and back to back lower circuits"
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Investors should not buy stocks that are rapidly declining without fundamental changes in the company, as they risk further losses.
"just because the stock is falling don't catch that falling knife your hands are going to bleed."
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Investors should avoid companies with management whose integrity, governance, or legal standing is questionable, as indicated by litigations.
"The moment you feel that this management is such where governance is at stake, where governance can be questioned, when their integrity can be questioned, where there are certain litigations on the management, ideally you should stay away from such stocks."
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When considering IPOs, investors should review the Risk Factors (RHP) for any litigations against the company or its management that question governance, and avoid such stocks.
"well there is a separate chunk in the RHP. Basically wherein it is very clearly given what are the litigations against the company what are litigations against the directors, if there are any litigations by the company also that is separately given so we should not be bothered about litigations by the company because they're against someone else but if there are litigations against the company against the management try to see what are the sort of these litigations and if they are about questioning the governance ideally stay away from such companies."
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Investors should be cautious when buying stocks immediately after listing, especially if their valuations are significantly above industry averages, as these stocks are more susceptible to sharp declines when market sentiment turns negative.
"the stock on day one already has doubled let us say okay after that also it is growing let's say on an average 3% 4% sometimes it's let's say hitting back to back upper circuits of 5% 10% whatnot and then again the buzz gets created in that stock retail individual investors majority of them will be late in entering the party and then what happens is that at that point in time the valuations of that particular stock are so crazy they're way above the industry average and that is where retail individual investors enter, if this be so the moment the market mood changes if market starts turning bearish these are the stocks which ones which are absolutely high in PE as compared to the industry PE stocks which are high in valuations they are the ones which take the beating first okay so whenever you are buying post listing just be aware just check whether the valuations are not sky high and then only invest."
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