Common Mistakes to Avoid While Using a Demat Account (Beginner’s Guide)

Sometimes it seems like a fortune that investment in stocks gives you a tremendous return more than your imagination. The sum invested in this kind of stock is quite very low. Apart from this, the investment which we made takes a long-term run to provide these returns.

As it is always considered that investment in equities will provide a return in long term. But there is always a question that arises how we can select is good value investing stock that can give better returns in the long term.

Every investor desires to have a good return from his investments. But for that, they often do a lot of study or research work to get desired results.

It is not that easy to identify multibagger stocks as there are more than 5000+ companies listed on the exchange in the Indian Stock Market, an investor must be selective with the sector of investment alongside all the other factors related to that sector's growth, future outlook, etc.

A great saying by Mr. Warren Buffett

“Our eyes are placed in front because it is more important to look ahead than look back”

This statement means whatever we decide to do today will have an impact in the future, so if we invest Rs 1000 today it may be Rs. 100000 Or Rs. 1 crore anything can happen.

Method to identify multibagger stocks.

1) Identify Companies Management:

Management plays a vital role in the growth of companies business. As it said no business succeeds without a capable management team. The sustained growth & success of every business is a strong & capable management team.

One can look at other multiple aspects like governance practices, board, diversion of funds, pledging of shares, discipline, and most important financial matters, etc. to determine the strength of the company’s management team.

2) Competitiveness:

The best way to identify multi-bagger stocks in India is to understand the ability of companies to be competitive. A company can remain in the competition by offering the best quality services and products as it grows ahead. To understand whether a company has a competitive advantage, just see how innovative they are.

3) Promoters Holding in the Company:

One of the most important factors is to know that the holding of promoters remains the same for a long tenure as they are the ones who started that business and their commitments show how honestly they are focusing on the growth of the company. The longer the promoter is associated with the company the more reliable they are.

4) Earnings Growth:

A shareholder receives when the company makes profits. When you analyze the earnings of a multi-bagger stock, you will find a high growth in the earnings of the company due to its various growth models like revenue growth, profitability, and also its allocation towards the capital.

5) Allocation of Funds:

Companies use their internal funds (Profit after tax) to expand the business or launch some new products for the expansion. This helps companies to have a lower debt against their equity and helps them to generate free cash flow This cash can be used to pay future expansion expenses or dividends.

6) Future Growth:

A company might not be able to make money and survive if it doesn’t have a versatile range of products or services as the markets are very dynamic in nature & the current scenario the world over is looking for change and advancement. The major characteristics of a multibagger stock are that the management is very clear about its vision and can take the necessary steps to achieve the same.

Our Country is the largest supplier of generic medicines across the world. The pharmaceutical industry supplies 50% of global demand,&  40% of generic medicines in the US, and 25% of other medicines in the UK. India ranks 3rd position in terms of pharmaceutical products in terms of volume and stands 14th in terms of value.

The domestic Pharma industry includes 3,000 drug manufacturing companies and 10,500 units for manufacturing. India has an important position in the global pharmaceutical supply. The country holds a large number of scientists and engineers with high potential to take the industry ahead.

As per the Indian Economic Survey in 2021, the Domestic market is expected to grow nearly 3 times in the next decade. Our domestic market is estimated at around  US$ 41 billion by 2021 and may reach US$ 65 billion by 2024. The biotechnology industry in India was valued earlier in 2019  at US$ 64 billion which is expected to reach up to US$ 150 billion by 2025. Our exports of drugs & pharmaceuticals stood at US$ 22.15 billion in FY21.

With the slogan of PM Mr. Narendra Modi “Self Dependent India” and to achieve self-reliance and reduce dependency on imports for essential bulk drugs, the Department of Pharmaceuticals has initiated a PLI scheme in this union budget to promote domestic manufacturing.

Under this Union Budget 2021-22, the Ministry of Health and Family Welfare has allocated a sum of Rs. 73,932 cr. and the Department of Health Research has been allocated with Rs. 2,663 cr.Indian government allocates Rs. 37,130 cr for the 'National Health Mission’. Prime Minister Atma Nirbhar Swasth Bharat Yojana got an allocation of Rs. 64,180 cr.

The Ministry of AYUSH gets allocation Rs. 2,970 cr. With all such developments and growths, India is moving ahead to be the Pharmaceutical Giant in the upcoming decade. The best example is Covaxin & Covishield which India exports to other countries. That shows India is emerging as a Major Pharmaceutical supplier.

The spending on medicines in India is expected to grow approx. 9 to 12% in coming next five years, which leads India to become the part top 10 countries in terms of spending on medicines

Moving forward, with better growth in terms of domestic sales which also depends on the ability of companies to align their product portfolio towards other chronic therapies for diseases like cardiovascular, anti-diabetes, antidepressants, and anti-cancers, which gradually spikes up in recent days.

The Government of India has taken various steps to reduce the cost and bring down healthcare expenses. A quick introduction of generic drugs in the market has remained in focus and is expected to benefit pharmaceutical companies in India. Along with the focus on rural health development programs & lifesaving drugs and other preventive vaccines also surge well for the companies. To trade in pharmaceutical sector stocks open demat account with us.

With an increase in global demand for metal investors interest shifted towards steel producers. As the global inventory level is coming down.

Even The World Steel Association on April 15 forested that the steel demand will grow up by 5.8% to reach 1.874 billion mt in 2021, even after declining by 0.2% in 2020, as the impact of the COVID-19 pandemic on the sector turns out to be less than it's earlier predicted.

In India, the finished steel consumption grew up to a CAGR of 5.2% during the financial year 2016 to 2020 and reached 100 MT.

The production of crude steel and finished steel in India is increased by 108.5 MT and 101.03 MT in the last financial year, respectively. From April 2020 till January 2021, The cumulative production of finished steel is 76.04 MT in India.

Growth Prospect:

The steel production capacity to be increased by 300MT by the year 2030-31 whereas the production of crude steel is expected to reach 255MT by 2030-31. Whereas the production of finished steel is to reach 230 MT.

Sector-Wise Demand:

The steel demand is going to rise post-Covid-19 as the all the pending projects will resume their working again. The sector like infrastructure and real estate contributes 62% of India’s steel consumption & demand. Growth of this sector 8.6% in 2018. Which slow down to 5.4% in 2019, & Pick up in 2020 & Expected to grow by 7% till 2024.

The contribution in demand for steel in the Railway sector is 3% which is growing at a fast pace. The automobile industry in India is the fourth largest & contributes 9% of steel demand.

Our country is the largest manufacturer of two-wheeler, tractors, and we are the fourth largest in passenger vehicles production, and stand seventh in commercial vehicles. The capital goods sector contributes 15% of steel demand.

It has various sub-segments like machinery and other equipment which are most prominent.

This segment is further divided into construction and earth-moving machinery, plant & heavy electrical machines. The consumer durables sector has a 5% contribution to India’s steel demand.

India is a consumption-driven economy and the sector has witnessed robust growth in the past few years. The Intermediate products sector contributes 6% of steel demand. This segment is closely associated with the auto sector, oil, and gas sector.

5 Top Performing Stock in Steel Sector

Jindal Steel & Power Limited

Business: The company is the largest integrated steel manufacturer, along with the power generation & infrastructure segment.

Returns during a pandemic: JSPL has given a 208% return from its 52 week low of Rs 62. Made a high of Rs 501

JSW Steel

Business: JSW steel is in the business of manufacturing & sale of Iron & steel products

Returns during a pandemic: JSW Steel has given a 267% return from its 52 week low of Rs 132.50. Made a high of Rs 773.

Steel Authority of India Limited

Business: SAIL is a Government-owned company primarily in the business of manufacturing & selling Iron & steel products

Returns during a Pandemic: SAIL has given a 291% return from its 52 week low of Rs 20.15. Made a high of Rs 151.30.

TATA Steel

Business: The company engaged in the business of steel manufacturing from mining & processing Iron Ore to production & distribution of Finished products.

Returns during a pandemic: TATA Steel has given a 251% return from its 52 week low of Rs 250.85. Made a high of Rs 1246.85.

Hindalco Industries Ltd.

Business: Primarily the company is engaged in the business of Aluminium production & products of Aluminium & copper and copper products. It is a company under the flagship of Aditya Birla Group

Returns during a Pandemic: Hindalco has given a 182% return from its 52 week low of Rs 84.90. Made a high of Rs 427.50.

Introduction

Today, we’ll dive into the concept of low volatility investment—a strategy designed to minimize risk while aiming for steady returns. Low volatility investments are less affected by market fluctuations, making them attractive to conservative investors who prioritize stability. Let’s break down what low volatility investment is, why it’s beneficial, and how it works.

What is Low Volatility Investment?

Low volatility investment involves selecting assets or portfolios that exhibit less fluctuation in price compared to the broader market. These investments experience smaller price swings, providing a more stable and predictable return profile.

Why Choose Low Volatility Investments?

1. Reduced Risk: Low volatility investments are less likely to experience dramatic price drops, which helps protect investors from sharp market downturns.
2. Stable Returns: These investments tend to offer more consistent returns over time, which is ideal for investors who prefer stability and are risk-averse.
3. Lower Stress: Investors in low volatility assets generally face less anxiety from market swings, as these investments are less sensitive to market volatility.

How Do Low Volatility Investments Work?

1. Investment Selection: Low volatility investments usually include high-quality stocks, bonds, or funds that have historically shown less price volatility. These assets are chosen based on their stability and reliable performance.
2. Portfolio Construction: A low volatility investment portfolio is built by selecting assets with lower beta coefficients (a measure of volatility relative to the market). This approach ensures that the overall portfolio experiences less fluctuation compared to the market.
3. Diversification: Diversifying across various low volatility assets further reduces risk. Combining stable stocks with bonds or other low-risk assets can enhance the portfolio’s stability.

Benefits of Low Volatility Investments

1. Capital Preservation: By reducing the risk of large losses, low volatility investments help preserve capital, which is crucial for long-term financial goals.
2. Consistent Performance: These investments often provide steady, albeit sometimes modest, returns, making them a reliable choice for long-term planning.
3. Risk Management: Low volatility investments can serve as a buffer during market downturns, decreasing the overall risk of the investment portfolio.

Examples of Low Volatility Investments

1. High-Quality Stocks: Companies with stable earnings and strong financials are known for their lower volatility. Examples in the Indian market include:some text
   • Hindustan Unilever: A major player in the consumer goods sector, known for its consistent performance and stable earnings.
   • NTPC Limited: A leading power generation company with a steady income stream and lower price fluctuations.
2. Government Bonds: Bonds issued by the Indian government, such as Indian Government Securities (G-Secs), are considered low volatility due to their low risk of default.
3. Low Volatility Funds: Mutual funds and exchange-traded funds (ETFs) designed to focus on low volatility stocks can provide diversification and stability. For instance, the Nifty Low Volatility 50 Index invests in stocks with lower volatility, aiming to offer stable returns.

Risks and Considerations

1. Lower Returns: Low volatility investments may offer lower returns compared to more aggressive investment strategies, which could be a downside for those seeking higher growth.
2. Inflation Risk: Over time, the steady returns of low volatility investments might not keep pace with inflation, potentially reducing purchasing power.
3. Market Conditions: In rapidly rising markets, low volatility investments might lag behind high-growth assets, as they are designed to be less responsive to market upswings.

Conclusion

Low volatility investments offer a strategy for those seeking stability and reduced risk in their portfolios. By focusing on assets with lower price fluctuations, investors can enjoy more predictable returns and better capital preservation. However, it’s important to consider the trade-offs, such as potentially lower returns and inflation risk. Understanding your financial goals and risk tolerance is essential for making updated investment decisions.

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Our economy is still recovering from the impact of Covid-19. Our country is going through the 2nd  wave of the pandemic and is still trying to overcome the losses that happened due to the serious issue of Covid-19.

Recently the GDP data arrived which shows some relief for us, But still, we are facing the serious issues of Inflation across the necessity items.

One of the major is Crude Oil/ Petroleum the prices in India are crossing the mark of Rs.100/ltr which directly affects the economy. The foremost impact is on the transportation & logistics, which somehow leads to rising in the prices of many essential items & products.

But with the advancement in technologies now we are shifting towards the easiest way of transportation which can work with the help of electricity in the most efficient manner.

The Indian market will soon see a new turnaround in this segment as the market will grow up to USD 47 billion by the end of 2026.

These vehicles are more cost-efficient, will have zero pollution and are more in demand in the USA and other countries. Everyone is looking at Electronic Vehicles as the future and which is soon going to happen.

Even the Government of India has announced a PLI scheme of Rs.57000 Cr for the manufacturing of auto parts which will boost it further.

Here is a list of some important auto-ancillary companies which are benefited:

Exide Industries:

The company manufactures lead-acid storage batteries from 2.5 ampere-hours to 20,600 ampere-hours. The company manufactures automotive batteries, industrial batteries, and submarine batteries.

Amara Raja Batteries:

The company is one of the largest manufacturers of lead-acid batteries for both industrial and automotive applications in the Indian battery industry.

Jamna Auto Industries:

This company is engaged in manufacturing and selling Tapered Leaf, Parabolic Springs, and Lift Axles. It was the first company to introduce parabolic springs in India.

Lumax Industries:

The company is a leading supplier of lighting systems in an automobile which includes Head & Tail Lamps, Sundry and Auxiliary Lamps & other accessories for two and four wheeler, Buses & trucks, Tractors, and earthmovers.

Minda Industries:

They are engaged in the manufacturing of auto components which includes auto electrical parts & their relative accessories.

Asahi India:

This company is a glass manufacturing company in India which is manufactured laminated windshield, antenna printed back lite, solar control glass, Glass antennas, etc. It also manufactures floating glass-like reflective glass.

Gabriel India:

The company offers a wide range of ride control products and also enjoys a monopoly position in the market.

Bharat Seats:

The company manufacture completes seating & interior components for the automobile. This includes Two & Four wheeler seating, Mould Carpets, Mainframe for a two-wheeler, & Railways Seats.

Motherson Sumi:

The company engaged in the manufacturing of automotive wiring, Harnesses, Mirror for passenger vehicles. Mother-son Sumi is also a leading supplier of plastic components & modules in the industry.

Furthermore, companies which are engaged in Tire manufacturing, Power Generation, and supplying will be beneficial. Moreover, the EV segment will bring a positive change in the automobile segment.

Note: Details shared here are only for educational purposes.

Just think what if you bought Sensex in 1980 and held on to it now? The answer is: you would have multiplied your wealth nearly by 370 times. There are similar cases as well.

For instance, an investment of Rs 10,000 in Wipro in 1980 would be worth Rs 450 crore today. Also, the investment of Rs 1 Lakh in Eicher Motors in 2002 would be 20 crores today.

Still don't understand the concept? The examples that we have explained above are real case studies and many stocks have given huge returns in 2021.

There is a story about the company Infosys. In 1995, the company had launched its SME IPO and the one who invested a little amount of Rs 10,000 in Infosys IPO, is now enjoying a huge profit of $1 million.

In 2009, the share price of Eicher Motors was Rs 597.4, now the share price of the same stock is Rs 2,635.

Now the question arises, why do buy and hold stocks work in Indian equities? Buying an emerging stock and holding it for the long term will give you outstanding stock market trading returns in the future.

The Logic of Buy and Hold Strategy

There is no set definition for the term buy and hold but yes the meaning of buy and hold is quite straightforward. Needless to say, investments in equities are riskier than other financial securities. Due to inadequate knowledge about the stock market, worst advisory services, many people have lost a huge amount by investing in equity.

In addition, some people invest in equities for a short time and as a result, they suffer from a loss. However, if people concentrate on buy and hold strategies for stocks, they will eventually achieve greater returns in the future.

Purpose of Buy and Hold Strategy

Buy and hold is a long term passive strategy where investors keep a stable portfolio irrespective of short term fluctuations. As per the statistical data, buy and hold strategy is always a long term bet that will give you attractive returns in the future.

Equities are riskier instruments, but with a longer holding period, it can be turned out to be a fair investment strategy.

In other words, the market goes up more often than it goes down and compounding the returns during the good time of the stock market gives a higher yield than other financial instruments.

Below are the reasons why the buy and hold strategy has always worked for Indian equities:

1. India began its growth in 1992 after the liberalization of the economy. However, real growth has been witnessed since 2003. That’s the reason real growth has started as the economy expands.
2. As the economy started to expand, the growth of the stocks has also started which in turn increases the GDP of the country. Therefore, the stocks interlinked with the GDP growth gave outstanding returns in the 15 years. The stocks that gave the highest returns are from the sectors such as banking, automobile, consumer goods, capital goods and more.
3. In recent times, we have seen a large growth in manufacturing companies. As a result, today India has companies such as Tata Motors, L&T, TCS, Reliance Industries and more.
4. Consumer demand is directly proportional to the rise in income levels. In the last 20 years, the per capita income has increased sharply, however it is low according to the global standards. Rising per capita income increases the consumer demand which in turn increases the wealth in the market.
5. Known sectors of the country like telecom, automobile, PSU bank have shown comparatively less growth for a long time. However, for the few years, these sectors have shown a drastic growth in the market-leading to wealth creation in the stock market.
6. Many investors still invest in old companies. To experience the real growth in your wealth, you need to invest in new companies such as HDFC Bank, TCS, Adani Greens and more. We experience a similar trend in the US market also. For instance, tech-automation companies have managed to create tremendous wealth in the last 15 years. That has encouraged the US people to stock the buy and hold strategy.
7. Technology and communication created a huge wealth in India. Smartphone, the internet, the spread of smartphones, smart ERP solution and digital initiative taken by the government for the improvement of efficiency of Indian companies. This, in turn, increases the equities in the Indian stock market too.
8. Indian has consistently seen mid-cap companies converting into large-cap companies. Due to the rising economy of the country, the companies such as Lupin, Eicher Cadilla has managed to create huge wealth within a shorter life span.
9. FII’s interest in the Indian stock market is also one of the key reasons for the success of the buy and hold strategy. The participation of FII in the Indian stock market has impacted it positively. In other words, FII is capable of maintaining liquidity in Indian stocks. Also, it helps stocks to achieve potential strength.
10. Indian corporates enjoy the beautiful combination of their growth and margin mean-reversing consistently. That means, buying quality stocks and holding them for a longer period is now becoming an attractive investment option among the Indian people.

The crux of the story which we have mentioned above is that the buy and hold strategy still works in India. Many people who invested a long time back in equity stocks, now enjoying a whopping return of $1 million. For better returns, you just need to identify good quality stocks and hold them for a longer-term.