Inferences from above Chart
- Bullish phase in metals is driven by global headwinds (2004-08, 2016-18 & current Mid 2020 onwards
- Normally bull rallies are very steep/sharp & for short duration (each rally was for around 2 years in last 17 years)
- Similarly corrections are also deep & fast (2008-09 & 2018-20)
- Bearish phase from 2010 to 2016 (much longer duration than bullish phase & driven by dwindling macro economic parameters)
- Returns generated in bull phase are almost wiped out in bearish phase
- Current rally is fastest & in shortest time duration (less than 1 year) the Nifty Metal index has crossed the peaks attained in 2008 & 2010 which in earlier periods it reached in 4 years & 2 years respectively
There is simply no doubt that investing is done by investors everywhere to create wealth by earning profits. While there have been many investing styles & strategies that have made headlines or are mentioned every now and then, two investment styles stand out due to their popularity and effectiveness ie Growth investing & Value investing. Although both these types are basically fundamental in their approach, they possess their own sets of merits & demerits.
Successful Equity investment requires making many rational and analytical decisions such as quality stock selection, finding the ideal entry & exit levels, allocation, diversification, risk management and so on. It also requires immense discipline & calmness so that rational decisions free from emotional turbulence & panic can be made. After all, panic is not a strategy. It’s chaotic!
At some point or the other, every equity investor has asked himself: Is it the right time to invest in the stock markets? Is the market overvalued? Have we bottomed out yet? Am I entering at the right levels? and so on and so forth.
A winning portfolio is essentially following a defined framework for investing and a proven research methodology. We would like to share the framework for investing and the stock selection process that we rely on here at StockAxis which makes use of 6 different factors to build a winning portfolio.
Amongst the various factors which play a significant role in driving the stock markets, the earnings season is often a very confusing one. This especially rings true during the current situation where markets are at an all-time high & various industry§ors are pushing record valuations.
If you want to remove the wall between your kitchen and your living room, you’ll probably hire a professional to ensure you’re not taking out any load-bearing beams. Why? Because one mistake could compromise the structural integrity of your home, leaving you with a bigger mess than you anticipated.
The Covid-19 pandemic that took the world by storm at the start of 2020, has left a lasting mark on our lives. The pandemic’s impact on our investments has been even more pronounced. With the stock markets going into a free fall in March 2020 leaving investors shaking in fear, followed by a rebound like never seen before, and subsequently, high volatility, is more than some investors could bear.
After four phases of lockdown, India is ready to restart from the month of June. While ‘Lockdown 5’ has been put in place, it comes with numerous relaxations. ‘Lockdown 5’, which starts from 1 June 2020, has permitted all shops to open, people (other than young children, the aged and the frail) to move out, inter-state and intra-state travel is permitted and trains have been restarted. Stock marketsoared last week as optimism over the reopening of our economy continues to fuel stocks.
Market volatility is a part of equity investing; having said that, the intensity of volatility has significantly increased as a result of the COVID-19 pandemic. Stock markets across the world have been on steep roller coaster rides, which has made investors’ stomach churn with anguish at every fall and then with euphoria at every rise. In this situation, StockAxis suggests five strategies to keep your investments in good stead.
- Don’t panic
Any investor will have fear in his heart when he sees the market drop steeply. Most investors rush to the markets to sell their holdings to cut their losses. It’s important to avoid giving in to panic. Stay objective. If you have quality stocks in your investment portfolio, companies that are industry leaders and will continue doing well, stay invested. In fact, take it a step further; invest more in such industry leaders in a graded manner at every downturn.
The Covid-19 virus has become a game changer in terms of the way we work, transact, earn and learn. The virus has made social distancing the norm, which, in turn, has led most of us resorting to the internet for nearly everything. One of the drawbacks of reliance on the virtual world amidst this virus has been the numerous tricksters looking to cheat vulnerable people by using electronic communication such as emails, electronic advertisements, text messages, etc. to siphon off money and/or obtain personal information. Here are a few such instances that we have come across. We request you to stay alert and protect yourself from such scams.
As you would be aware, there are numerous research laboratories across the world working towards a vaccine for COVID-19. Scamsters use this as a method to extract money from vulnerable investors. You may come across an email, text message or a website stating that a vaccine for COVID-19 has been found, and lure you into investing in the company that has ‘created’ the vaccine in order to reap high returns. These scamsters hold shares of a listed company whose price they manipulate upwards on the stock market. They then offer these shares at these high prices. When the investor agrees to invest at these prices, they sell their shares to the investor and reap high returns. Please note: so far, no vaccine has been created for this virus. Also, companies that are in the process of research for a vaccine are usually funded by governments and philanthropy foundations. There are some for-profit corporations that are also involved in vaccine research, but most of them have committed to offering the vaccine ‘at-cost’ to the world.
May 23, 2020 | 10963 Views
The ‘V-shaped’ rally which has followed the 39% plunge of Nifty-50 Index due to the COVID-19 pandemic has made it clear that almost every sector of the Indian economy has varying levels of exposure to this crisis. The modern world has never witnessed an induced recession before in the name of public health like we are experiencing at the moment, with government-mandated shutdowns in effect and social distancing restrictions. Not all industries have been impacted equally by this economic reality. Some have been affected badly whereas others are weathering the storm. Surprisingly, some are actually thriving.
The different levels of impact are actually visible in the Q1 performance numbers. The Nifty 50 finished down -24% for the quarter, but an investor’s participation in the downside had everything to do with exposure: Nifty Bank (-43), Financials (-38%), and Metals (-44%) got clobbered on the way down, while Technology (-18%), Pharma (-6%), and FMCG (-19%) outperformed on a relative basis. A handful of pharmaceutical companies even finished the quarter in positive territory.
May 16, 2020 | 11578 Views
It has been a while since the Indian government declared a nationwide lockdown due to the COVID-19 pandemic. People are curious about what the aftermath of the contagion would look like. It is no surprise that this catastrophic global incident will be followed by changes and adaptation. In fact, the adjustments have already begun.
There is a noticeable shift in consumer behaviour and consumption patterns. Our technology-dependent society has doubled-down on that need since the COVID-19 shutdown. Instead of going to the office, we now log on to the cloud. Due to a lack of access to the cinemas, we now stream from our couches. This modern pandemic has driven people to connect and socialize more than ever, with video calls enabling us to do it from the safety of our homes. E-commerce platforms are taking over the retail industry. Despite grocery stores remaining open as 'essential businesses,' the outbreak has left people afraid to leave their homes. Grocery delivery services have been stepping up to the coronavirus so that the consumers don't have to.
May 13, 2020 | 12515 Views
Whether you are an experienced investor or are relatively new to the equity markets, you are bound to have considered hiring a professional investment adviser at some point in your life. If not, you might as well consider it right now.
In a country like India, where the balance in the financial culture tips more towards savings, rather than investments, it is not surprising that only a small percentage of the Indian population is active in the equity markets. It can be due to multiple factors, such as fear of losses, lack of knowledge, lack of patience and skills & even a lack of financial literacy. However, many retail investors start their investment journey without any reliable professional guidance and hence wind up making rookie mistakes which inevitably leads to considerable loss of capital.
April 15, 2020 | 16016 Views
“History provides a crucial insight regarding market crises: they are inevitable, painful and ultimately surmountable.”
-Shelby M.C. Davis
There is a famous saying in Dalal street, ‘The markets run on three things - The fundamentals, The technicals & Investor sentiments’. Although the former two factors can be explained by mainly logic and statistics, the same cannot be said for the latter. It is difficult to understand and predict the market sentiment, if not impossible. It relies mostly on Investor psychology, emotions & their risk perception. It cannot be measured in definitive tools or formulas. However, it is way too important to be ignored. Its relevance in the markets is undoubtedly significant. It is oftentimes, the difference between extraordinary gains & heavy losses. It is also the difference between skilled investors and investors who usually lose major opportunities.
April 11, 2020 | 15345 Views
The only thing certain in life is uncertainty. As humans, we shun uncertainty and take measures to be prepared. We constantly strive for control in our lives… In fact, uncertainty (termed as volatility) in the stock markets makes us uncomfortable. At the same time, we know that if we can stomach this uncertainty, we will be rewarded with supernormal returns.
When volatility increases to unprecedented levels due to Black Swan events, such as the present Covid-19 virus, it usually leads to panic. Investors mindlessly start liquidating their equity investments without considering fundamentals of the stock, valuations, and the future outlook.
March 23, 2020 | 15523 Views
The news of the Corona virus (Covid-19) appears to have shaken the markets with the BSE Sensex recording a 4% single day drop. Every media publication has been upping the fear of the virus and its impact on the global economy and domestic economies of countries. The numbers too appear to be worrisome with about 80,000 cases and over 2,600 reported deaths so far.
There is, so far, no cure for this virus and the number of countries where the virus has travelled to, is rising. In this situation, we understand that investors are fearful and are looking to reduce their exposure to the markets with some even looking to exit. However, should you do so? Or does it make more sense to be patient and avoid making hasty decisions that you may regret later?
March 03, 2020 | 16416 Views
Stocks closed sharply lower yesterday, putting all the major indices in correction territory.
What is a correction?
It's a pullback between 10% to just under 20% (19.99%). (A pullback of 20% or more is defined as a bear market.)
Corrections in bull markets are normal and healthy. Granted, it doesn't feel normal or healthy when it's happening. But it's a common occurrence.
February 29, 2020 | 15011 Views
‘Risk’ in equity investing implies the possibility of incurring losses or earning returns that are lower than the market returns. The level of risk can vary from ‘nil’ or no risk, to ‘capital loss’ or complete erosion in capital invested. And there is a wide range between zero-risk to complete capital erosion. All of us have our own unique level of risk capacity and tolerance. ‘Risk capacity’ implies your ability to stomach risk in terms of your demographic profile (your age, number of dependants, income, etc.) while ‘risk tolerance’ implies your affinity towards risk or your ‘like’ or ‘dislike’ of risk. A combination of the two parameters provides your investment risk profile. Based on this, investors are broadly categorized as ‘High risk takers’, ‘Medium risk takers’ and ‘Low risk takers’. There could be a number of levels between these three broad categories.
December 20, 2019 | 13926 Views
The market’s recent flare-up – or flare-‘down’ – has created three camps in the investor community: those who have turned bearish, those who have become nervous enough to reduce their equity exposure, and those who remain bullish over the longer term and see this as an opportunity.
StockAxis belongs to the last camp.
December 13, 2019 | 11687 Views
If you are currently unsure, and contemplating whether to invest now or wait for a more opportune entry point due to current market conditions, we’ve put together some insights drawn from data-driven facts and our experience to hopefully lead you to a wise investment decision, one that you gives you investing comfort and confidence.
1. Nifty50 near to its Lifetime High but Midcaps continue to fall since January 2018
December 07, 2019 | 15042 Views
There have been widespread media announcements that India’s economy is slowing down. A number of reasons have been attributed to this slow down – lower purchasing power and demand, high bank NPAs, insufficient growth in number of jobs and so on. However, do keep in mind that while growth has been slower than expected, the economy is still growing. Taking issue with this kind of ‘weaker’ economic growth is more of a political stance than an investment mindset – stocks don’t care if growth is slower than average. Growth is growth, and as long as corporate earnings are increasing, stocks can do just fine.
At this stage of the economic, political, and bull market cycle, however, there is one factor that there seems to be no shortage of: uncertainty.
November 28, 2019 | 13929 Views
There are several reasons for an investment portfolio underperforming over time: poor stock selection, sub-optimal asset allocation decisions, mistimed trades, too much trading, investing based on a gut feeling, and so on. Ultimately, it boils down to the fact that an investors’ worst enemy – almost always – is himself or herself.
The field of behavioral finance is dedicated to understanding why and how investors themselves become the reasons for their investments underperforming. In this communication, we discuss one mistake that investors make – reacting to negative news – and its implications.
November 26, 2019 | 12154 Views
There are two critical decisions every investor needs to make with his equity investments – first, when to sell and second, when to continue holding the stock. Selling too soon is one of the most common mistakes investors make. Holding a losing stock is the other mistake. Let’s discuss these two aspects of equity investing.
November 03, 2019 | 12004 Views
When it comes to picking stocks, we often do a deep analysis of the company and its business model. While that is required, do you pay attention to the sector or industry the company belongs to? Did you know that about 40% of the movement in the price of a stock is directly related to the industry group in which the stock is placed? Let’s understand this better…
October 14, 2019 | 13232 Views
For years, most of the analysts and investors alike use Price-to-Earnings Ratio (P/E ratio) to assess the value of a company’s stock. A low P/E ratio is usually assumed to mean that the stock is undervalued and should be purchased, while a high P/E implies an overvalued stock that should be sold. This yardstick has been a prevalent factor in buy/sell decisions, but there is more than what meets the eye. A deeper analysis indicates that it is actually the percentage increase in EPS that should be the determinant of buy/sell decisions. Here is why:
October 10, 2019 | 14658 Views
These are historic times for the economy. And historic times for the market.
Over the last two trading days (20 September 2019 and 23 September 2019), the stock markets have risen nearly 3,000 points on the Sensex and nearly 900 points on the NSE Nifty. And this is just the beginning of the uptrend. The Indian stock markets are now poised to record historic growth levels as a result of a strong thrust from the government towards reforms.
April 29, 2019 | 10769 Views
Volatile markets (when markets rise and fall steeply within a few trading days or even during trading hours) can be discomforting. This is especially true when volatility is downward. However, smart investors use volatility to make better investment decisions, which, in turn, lead to attractive returns. Let’s understand the benefits that market volatility brings:
1. Volatility Keeps Investors Attentive
August 20, 2019 | 13353 Views
After an extended negative or bear phase in the stock markets, a sustainable upturn may be difficult to identify. To determine this turning point, it’s foolhardy to simply rely on instinct or personal judgement. A smart investor would rely on a tool based on historical research termed as ‘follow through day’.
So how does one figure this out? ‘Follow through day’, a system developed by William J. O’Neil, indicates an important change in the market.
August 08, 2019 | 12223 Views
As investors, we don’t generally like to admit this, but we make mistakes. Most mistakes committed by investors are related to emotions and irrational thinking. The issue is not the mistakes themselves, rather that they happen systematically, and that this results in mispricings in the market. While mispricings create opportunities for investors, it can be difficult to realise the benefits.
Most mistakes are behavioural. Here are two behavioural mistakes that investors must avoid – overreacting to news and aversion to uncertainty.
April 29, 2019 | 12840 Views
An individual investor, whether new or experienced, and want to make money and perform well investing in stocks, there are just three key steps to follow:
- Develop buying selection rules that let you pick the best stocks, and use charts to determine the right time to buy.
- Have a set of selling rules that tell you when to sell and nail down a profit or cut short a loss to avoid a possible larger loss.
- Need a specific method which tell you when the broader market are topping and headed down, and when they've finally hit bottom and turned into a new uptrend. That's all.
July 03, 2019 | 11255 Views
When the markets are falling, investors are often hopeful that things would become better and the stocks in their portfolio will regain their lost value. On the other hand, in a rising market, they become fearful about losing out on the profits they have gained, and sell their holdings too soon. Hope and fear are both common emotions found among investors, which results in making mistakes in their investing decisions. On the other hand, information and knowledge are weapons that investors can use to overcome their fears and relinquish the need for hope alone.
June 19, 2019 | 12311 Views
Successful investors are not lucky. They got there with hard work and made numerous mistakes in their investment journey. However, they persisted relentlessly to get their investments right till they eventually succeeded. Their success manifests in the form of multi bagger returns from carefully picked stocks that they closely monitor. And here is the most important rule they follow – they are patient. In other words, success does not happen overnight in investing.
We are fortunate to live in a period that offers tremendous opportunities to grow our personal wealth through investments in new ideas and industries. There is no dearth of investment opportunities. The key is to spot the right opportunities that will grow your investment multifold. Use these five closely guarded secrets that successful investors follow to make your investment journey fruitful:
June 12, 2019 | 12240 Views
Investors with >15yr industry experience spoke about the toughest market environment they have ever seen this time. We were in the bull market which on one hand is great but on the other hand is starting to make things confusing. Midcap indices were falling whereas the broader indices were making new highs. Normal bull market rules weren’t working, and inconsistencies make it even harder to invest now vs. even a downturn. Investors had a tough year, but this month has exacerbated the pain.
When the bearish phase in the overall market ends, as it always does at some point, you must find yourself holding stocks of the market leaders. It’s foolhardy to get upset and emotional with the market or lose your confidence. The next big race could be just a few months away.
May 08, 2019 | 11902 Views
Every day brings media reports of India’s economy losing steam, auto sales falling, industrial output being low and so on. At the same time, stock markets are at their peak. What should you do? Should you invest more, hold or sell? In our view, you should do what every successful investor does – have a long-term view on your investments. Current trends are transitory; however, history has repeatedly shown us that stock markets move one way over the long term – up.
There are numerous investors who stay on the sidelines when markets are at an all-time high with the belief that it’s too late to invest at this stage. Similarly, there are investors who do the same when markets are at their lowest with the belief that there could be a further fall due to pessimism.
March 22, 2019 | 10999 Views
Many investment gurus recommend the ‘buy and hold’ investment strategy when it comes to stocks. Unfortunately, most investors wrongly interpret this as ‘buy and forget’.
Purveyors of market timing would like us to believe that this investment strategy is no longer relevant to the current uncertain environment.
February 22, 2019 | 8957 Views
We are on the cusp of the fourth industrial revolution, where disruption is once again the central theme of the capital markets. The focus on disruption has led to rising valuations for technological companies, whereas traditional sector such as automotive has taken a backseat. Over the course of centuries, it is this very disruption that has helped increase standards of living and prosperity. Disruption is also a golden opportunity for investors to seek areas which will thrive and grow.
January 22, 2019 | 9781 Views
With the onset of June, massive discounts in retail sector will be up for grabs and everyone will utilize the best of this opportunity. It signifies value buying behavior of an individual, that everyone awaits the right value and right time. The time is Now.
But that's not all the value you are getting this summer, Nifty Midcap 50 /100 indices have seen a correction of 14% and 17% respectively since January 2018, so most of the stocks are at attractive values. Few of these stocks are Multibagger in making. Pick your high growth stock today and get multi-bagger returns.
June 19, 2019 | 10982 Views
When the markets are rising, it is easy to be at peace with your portfolio, but the true test of any investor is when the markets are passing through a phase of correction. It takes discipline, grit and determination to stay invested when there is an air of uncertainty. Here are some tips that will not only allow you to survive a correction, but also come out of it as a winner.
Short term dips are an integral part of investing
In his 1977 letter to Berkshire Hathaway shareholders, the famous investor Warren Buffett wrote, "We ordinarily make no attempt to buy equities for anticipated favorable stock price behavior in the short term.
November 06, 2018 | 9949 Views
Why smart investors look forward to stock market sell-offs
On October 18, 2018, the Sensex fell 1.33 per cent in a single day to 34,315.63 while the NSE Nifty plunged 1.43 per cent to 10,303.50. The fall in the benchmark indices has led to decline in the value of many stocks on the Indian bourses. Investors may feel jittery about the prospects of their individual portfolios losing worth, but a market sell-off also comes with its own silver lining.
The art and science of cherry-picking stocks
In India, while there has been an across-the-board dip in values, some sectors have been hurt in the sell-off more than the others. For instance, petroleum company stocks have come under stress due to the declining value of the Rupee as well as rising international crude prices. Banks too have been under pressure due to their potential exposure to the beleaguered Non-Banking Finance Companies (NBFCs). This provides opportunities for investors to cherry pick companies with strong fundamentals. Think of it as a stock-mega sale where everything is going for a discount.
October 29, 2018 | 5520 Views
The Sensex recently took its largest plunge since February of 2018, shedding 537 points reaching 36,305.02 (24 Sep 18) while the Nifty fell below the 11,000 mark to 10,974.40 (24 Sep 18). The volatility seen in the markets over the last few days may have unnerved some investors, but there is more than market movements to be considered.
September 25, 2018 | 5579 Views
As we go through another major macroeconomic event a.k.a. demonetization of Rs. 500 and Rs. 1000 currency notes, it may now be time to sit back and ask ourselves in what way this episode has affected your stocks and the impact it has had on your portfolio.
In the short run, the stock market is like a voting machine, driven by heavy emotions and hype. In the long run, however, it behaves like a weighing machine, where only fundamentally strong businesses make money for investors. Hence, demonetisation may prove to be a blessing in disguise for smart investors.
September 25, 2016 | 4596 Views