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It was a truncated week but it was full of action where we saw a strong tussle between bulls and bears. Nifty and Sensex started Monday with new highs of 13777/47055 respectively but on the same day we have seen a sharp fall on the back of worries of a new strain of Covid19 from the UK where Nifty has fallen more than 600 points and Sensex has fallen more than 2000 points at one point of time but then as Stock Market observed that this issue is not so serious which made Bulls comeback aggressively where market rallied for three consecutive days.
At the end of the week, Nifty and Sensex ended on a flat note whereas Sensex continues its 8th-week winning streak while Nifty ends with a minor loss of 0.08%.
If we talk about cash market data then Foreign Institutional Investors are continuing their buying momentum where they bought around 2591 cr, though momentum has slowed down because generally FIIs’ flow remains muted around the Christmas and New Year holiday and we are expecting tepid flow in next week as well. DIIs are still in a selling mode where they sold around 3400Cr.
In the F&O market, FIIs’ long exposure in the cash market stands at 68% which is a comfortable level whereas PCR stands at 1.75 mark which is a little overbought level.
As we discussed last week that 13770-13820 is a critical supply area for the Nifty where we have seen a sharp fall from there but Nifty respected its 20-DMA and then witnessed smart pullback but it is still stock trading below the 13770-13820 zone where if it manages to cross 13820 levels then we can expect a strong rally and Nifty can easily cross 14000 marks. On the downside, 13550 is an immediate support level while 13415 is 20-DMA which remains critical support on a closing basis.
If we talk about Banknifty then 30800-31000 is a critical supply zone but if it manages to take out this zone then we can expect a strong rally towards the 31500/32000 level or even it can head towards its all-time high. On the downside, 30000 is an immediate and strong support level while 29000 is critical support on the downside.
F&O expiry: The market can remain volatile due to the December month F&O expiry.
The most important clue for the Next week will be that we are going to say bye-bye to the most uncertain year 2020 and we are going to welcome 2021 full of positive energy. So wishing you all on behalf of the Swastika family: “A very Happy, Healthy, Peaceful and a Prosperous New Year.”
Swastika Investmart is known for its analysis and proficiency in identifying the right company valuation and help startups and SMEs to go public with the right company valuation. With the state of the art methodologies and 29 years of unmatched market expertise in business valuation services, Swastika helps the associated patrons, stakeholders, promoters and potential investors in getting the best company valuation when businesses are struggling to perform, thereby providing a fair business valuation to the company and thereby strengthening investor’s confidence.
Swastika’s company valuation pedagogy includes:
Strengthening the company’s valuation
Providing Financial advice for SMEs
Merchant Loan Syndication
Apart from that, Swastika has successfully launched various IPO’s including Sharika enterprises, Zodiac energy limited, Innovana Thinklabs ltd and more.
Whenever a company decides to grow, it realizes IPO to raise its capital. With raising capital, they may be able to purchase additional property, equipment, R&D.
Besides, they can generate new potential customers who are ready to invest in their company. Swastika’s IPO valuation services will give you a clear picture of the IPO.
For instance, the company assists you in selecting the right IPO valuation methods, how the value of IPO share prices are determined in the stock market, Pre IPO valuation and more.
Business valuation is the dire need of any business, whether it is small, medium or large. Without having a proper assessment, you can't determine the value of a business.
It is recommended that every business owner should have its company valuation as it allows you to get a real understanding of your company. It can be performed with the help of asset’s values, a company’s cash flows.
Measuring the business valuation of a company can tell you about the present growth of your company.
Swastika’s business value services give you complete support regarding business valuation services. It will give you a clear assessment of your company’s value. Besides, you can plan your business growth in future as well.
One of the main purposes of company valuation is to sell the product of the business and increase its brand awareness. Other purposes are negotiation and improving business performance, assisting founders in evaluating companies.
At Swastika, you will get quality business valuation services at minimum prices. Besides, you will get a complete analysis of company valuation along with the past and present reports.
A detailed analysis will help you get a thorough knowledge of business valuation with the valuation of capital investments, the value of capitalization, the value of capital investments and more.
Valuation of a business is the first step in securing capital. If you are borrowing a good amount of capital for your business, the lender, on the other hand, definitely wants to know about the existing leverages in your company. With the aid of Swastika’s company valuation services, you will get genuine tips regarding company valuation, capital investments and securing capital for your business.
1. A better understanding of a company’s assets
For a business owner, it is important to find out the detailed assessment of the business assets because, with financial figures, you will get a clear understanding of how much you can reinvest into the company.
2. Obtaining accurate company value
Obtaining a company value is important because it helps you to know about the preservation of money, growth, the future value of the business, and future development of businesses.
Company valuation is important for any business as it helps to determine the company’s financial worth. Other benefits of assessing a company's valuation include market capitalization, fundraise, analysis of asset’s value, reverse cash flows and more.
"If we want our regulators to do better, we have to embrace a simple idea: regulation isn't an obstacle to thriving free markets; it's a vital part of them." ~ James Surowiecki
To control the smooth functioning of any department there should be one controller who will look after its performance. They prepare the rule which needs to be followed and make necessary amendments when they see any loophole in it. It is necessary to regulate the capital market to make it's functioning smooth and hassle-free, a major reason for capital market regulation is to make it's functioning more fair and transparent.
Ministry of Finance: This is the topmost office in the country as far as financial matters in the country are concerned and overlooks all the Financial Participants in the Country.
Following are the major law under this segment which regulates the Indian Capital Market.
Securities Exchange Board of India: Securities and Exchange Board of India is the main head of the Financial Markets and the main regulator in the Capital Markets. It performs various functions to maintain the smooth flow of financial markets.
AMFI: Association of Mutual Funds India an authorized regulatory body headed by Mr C.V.R Rajendran, regulates the whole mutual fund industry in India, It regulates licenses work for the betterment of the industry and aims to develop the mutual fund market in India.
Many investors will suggest you go through the fundamentals of a company before picking any stocks. This means that you are required to check the financial records of a company which tells you that the stocks are worth investing in or not.
To be frank, not everyone is a finance expert to know everything about a company’s fundamental elements.
Here, I am going to share with you the 5 financial ratios you should study before investing in stocks:
This is one of the crucial financial ratios investors have been using for a long time. P/E ratio is defined as the ratio of the current share price to the earning of the company per share. The ratio helps investors to determine whether the stock is undervalued or overvalued in the market.
For instance, if the company has overall earnings of Rs 1000 and has shares of 100 currently trading in the market. Therefore, it's earning per share is Rs 10. This means that you are paying Rs 10 to the company and in return, you get Rs 1 from the company’s earnings which is not good.
To be honest, there is no ideal price to identify P/E ratio of any stock. You cannot determine the exact P/E ratio as every industry has a different benchmark. If we compare the P/E ratio of two FMCG companies, let's say Hindustan Lever and Britannia, we will get to know that HUL is overvalued as compared to Britannia as the P/E of HUL is greater than 70 while the P/E ratio of Britannia is nearly 50.
The P/E ratio of JK Paper is 4 and if you compare this P/E ratio with HUL and Britannia, you will get an incorrect picture as the industries are very different. Hence it is suggested to know the industry benchmarks while analyzing the P/E of a company.
Return on equity depicts the rate of return on the stock of a company. It’s a way to know about the company’s return on stock investment. Return on equity ratio is defined as Net income to total shareholder’s equity. This is an important ratio as it helps investors to determine how well a company shares its profit with its shareholders.
For instance, if investors contributed Rs 100 in equity and the total equity of the company is Rs 100. With this equity, if a company generates Rs 20 then ROE is 20%. On the other hand, if another company with the same equity generates an income of Rs 40, then the ROE of that company will be 40%. The company that generates better ROE is considered as good to invest in.
Return on Equity is defined as Net income/ Average Stockholder’s equity.
Price to Book Ratio is calculated as Price per share divided by Book value per share. The ratio simply depicts the comparison of a company’s market capitalization to its book value.
Price to Book ratio gives investors an idea of how much shareholders willing to pay for the net asset of a company. Generally, a low P/B ratio is considered good. Do remember that the ratio should be compared within the same industry. For example, the P/B ratio of a manufacturing company should be compared with the P/B ratio of another manufacturing company.
The dividend yield ratio is calculated as the amount of dividend a company pays to its shareholders over the years to its current stock market price. For example, if the share price of a company is Rs 100 and it gives a dividend of Rs 10 then the dividend yield ratio will be 10%.
To get deeper into this, let's assume that an investor purchases a stock at a price of Rs 100. A year later, the stock price is still constant, i.e Rs 100. Is this a good investment? Of course not. You receive a zero per cent return from that company.
Needless to say, the Debt to Equity ratio depicts the amount of debt and equity of a company. This gives investors a clear idea of how much the company running on borrowed capital and owned funds.
Debt to Equity Ratio is defined as total liabilities/total shareholder equity.
Ideally, it is suggested to invest in a company which gives you high ROE for at least 3 years.
Predicting a stock market trend is not an easy task; some say, the stock market runs on investors’ sentiments while some traders deny the fact. However, this is not the case. Of course, investors’ sentiments affect the stock market to a greater extent but some economic factors play a crucial role in identifying the prediction of the stock market.
To begin with, economic news may heavily impact the stock market as the economy goes up, and so too grows the stock’s profitability. Top companies whose shares are currently trending at the top in the stock market mostly rely on a strong economic environment. As the economy grows, many investors look forward to buying products and services, which in turn increases stock prices.
On the contrary, when the economy struggles, people start to avoid spending on products that may heavily impact a company’s stock and as a result, the stock market experiences a strong decline.
Fundamental analysis of stocks helps investors to identify the real worth of stock, technical analysis, on the other hand, provides a detailed insight into stock and tries to capture the market’s psychology.
Some of the economic factors are inflation, the country's GDP, unemployment, retail sales and more. The majority of these factors affect the stock's performance. If investors are completely aware of these factors, they can upgrade their portfolio to minimize their losses.
Let’s look at the economic factors that directly influence stock market growth:
This is one of the biggest economic factors which directly impacts the country’s economy. Gross domestic product is the final value of goods and services produced in a country during a specific period of time. It tells the overall economic performance of a country. Usually, GDP is calculated on an annual basis while sometimes it is measured quarterly.
In many countries such as the US, the government yearly releases GDP reports along with the annualized GDP for each fiscal quarter. In simple terms, GDP is a measure of economic growth which tells the overall health of the country.
If the GDP of any country performs well, investors buy shares hoping that the stocks will provide them outstanding returns. However, if the GDP is contracting, the profitability of the companies tend to decrease as the investors start to avoid purchasing stocks which in turn cause a significant drop in the stock market.
The upliftment of GDP encourages investors to purchase more stocks as they are optimistic about the earnings of the stock market.
Wages gives a clear report on the economy. For instance, consumer spending automatically drops whenever the unemployment rate is high. As the funds are limited, people show less interest in buying; they spend less amount on secondary items and allocate funds only to needy items.
This may reduce the earning capacity of the companies which highly affects the stock market prices.
Conversely, if the employment rates are rising and vice versa, then the market condition forces investors to buy more stocks which makes a positive impact on the stock market.
GDP and inflation are the two factors that affect the stock market as it impacts overall consumer spending. Inflation, in general terms, is defined as the rising price of goods and services within a particular economy. It means the price of goods and services is continuously rising which decreases the purchasing power of consumers.
Rising costs may heavily impact business and their profits as no investors are ready to purchase the stocks of these companies which suffer businesses a lot. Hence, when the inflation rate rises, the stock market falls very badly.
Rising inflation makes investors hedge their portfolio as rising inflation increases the volatility of the stock market.
Needless to say, high-interest rates negatively affect the stock market as rising interest rates limit the borrowing capital for the businesses which in turn hamper the growth of the business. This can heavily impact business growth, potential earnings and stock prices.
Rising interest rates also form a great impact on consumers. This is because rising interest rates affect the mortgage interest payments which decrease the purchasing power of the consumers.
Exchange rates are also an important factor that influences the US stock market. A weak exchange rate signifies cheaper export rates internationally. This is good for those companies who regularly export goods and services. A high exchange rate is directly related to cheaper imports, hence it is apt for companies who use imported goods such as manufacturing goods.
Understanding the macroeconomic indicators and setting your portfolio according to them is the hallmark of any investor. It is seen that many investors get easily influenced by so-called analytical reports without going through it. For a successful investor, it is important to invest some time in understanding the microeconomic factors of a country before investing.
The lure of making easy money always draws investor’s attention towards stock market trading. However, the process of stock trading is not as easy as it seems to be. For successful stock trading, investors are required to have a sound understanding of the market. Knowing fundamental analysis and technical analysis should be on their priority lists as it enables them to make a potential return in minimum time. If not, then instead of generating any profit, investors are most likely to suffer huge losses in the stock market.
As the stock market giant Warren Buffet said; the money in the stock market is not built in a day. Preparing a strong portfolio maybe even tougher. It requires a lot of patience, adherence to make successful money in the stock market. He further said an investor needs to give some time to his stocks to get compounded over the years. The wealth of an investor is built over the years and so is the world-class company. For a successful investor, it is required to develop the appetite to digest the short term losses. Firstly investors need to identify the quality stocks which can provide them with long term gains. Secondly, do the fundamental analysis and technical analysis of a stock as it gives them a clear idea about the past performance of a stock. Plus the investors will also get to know the future trend of a stock according to market predictions.
According to Philip Fisher, author of Common Stocks and Uncommon Profits once said, the stock market is filled with the investors who only run behind the price rather than the value of a stock. For a smart investor, it would be feasible if he chases the value of a stock as it enables them to identify the prospectus of the company, sustainability of its products/services, and the ability to generate capital to meet the future demands. The growth of a stock depends on its potential earnings and the company’s ability to execute it.
A smart investor is the one who has the potential to think and invest in the future. Mature markets with vested features eventually phase out and are often replaced by high-quality products with upgraded features. Nokia, who once was the market leader of the mobile phone company couldn't hold the smartphone wave and ultimately lost out to the top upgraded companies such as Apple, Samsung and Sony Ericsson.
It is extremely important to predict the stock market price before entering the market. With time to market, investors can lose their hard earning money in no time. Many experienced investors give advice not to time the market as no one has done with success. This is because no one can accurately tell the top and bottom prices of any stock.
If you look at the history of the stock market, you will get to know that even the best bulls in the stock market had given a bundle of panic movements to investors. Due to unpredictable market trends and volatility, many investors had lost the money even if the market experienced a bullish trend. However, all the investors who had maintained their disciplined approach during the market ups and downs, have generated greater returns. If you are looking for long term stock market returns, it would be ideal to have a systematic approach for investing.
Planning before investing is extremely important as it enables investors to get a clear insight into stocks such as which stocks are worth buying and which are not. After the successful accomplishment of a plan, one must analyze the structure of the stock market along with the company, an investor wants to trade-in. Analyzing the stock market includes studying the stock market in-depth, technical analysis of a stock and time to buy or sell a stock in the market. Once an investor goes through all the aspects of the market, they are ready to start trading in the stock market.
It is always said that the first loss is the smallest loss in the stock market. Many investors continuously invested in the companies which are making a loss hoping that someday the same company will provide them outstanding returns. This is not a winning strategy. No matter if you are a trader or investor, he must be able to take fast decisions when continuous losses are identified. Such errors are made by experienced traders also. Therefore, it is better to understand the losses rather than understanding the profits, as losses will help you to understand the market more clearly.
Investing in the stock market may provide you with potential returns if done carefully. Entering into the stock market without having proper planning may always incur a great loss to the investors. Therefore it is ideal to make your homework first before stepping into the stock market. If you are a newbie or a professional who is trying to retrieve attractive returns from the stock market then Swastika acts as a one-stop solution for you.Try Swastika Investmart to manage your wealth profile. Click here to open a Demat account or feel free to contact us.
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