Value Investing in Indian Stock Market

Anyone can invest and create wealth in stock market. Emotional balance is one of the most important trait if you want to create wealth. You should have the conviction to stay with the stock all the times if the company or stock is doing right things when the broader market is falling.

Lessons from Paragh parikh an investor following value investing principles, ran Parag parikh fund. He invested his own money in this fund as he was preaching and following the same lesson. Check out this youtube video to learn more about him.

Before investing in stock market, you should be clear with your expectations from it. Most importantly how much losses you can withstand and how long you can stay invested in it.

More than IQ, it is EQ - Emotional Quotient which is needed to make more money in stock market. Stock price keeps moving up and down, if you can stay invested for long term with conviction then you can create wealth - for doing this you need strong EQ

Value invetsing is finding the right stock at right valuation and sticking with the company for long term ,so that stock prices keep moving along with earnings growth of the companies. By this way you create wealth along with the growth of the company.

Buy in stock market when everyone else is selling, this is possible in a bear market. Extreme panic sets in and people rush to sell their stocks. If you want to book profits you should Sell in stock market when market condition is in extreme positive zone and there is over optimism.

Stop loss is especially needed if you are trading in stock market. Even if you had invested, then you can keep a threshold that once the stock price falls below this price I will sell this stock. Once you analyse the company in detail and have the conviction in this stock, then you can keep buying on dips.

Having set of rules or points helps you to invest in stock market easily. Here are my few points to check and invest.

All the wealth in stock market has been created in long run. Investing in stocks like Infosys, L&T, ITC, Eicher motors etc happened in the long run. Hence it is good to wait for long time.

In his career spanning from early 60's, Buffet has issued several news letters and quotes which are still relevant. Here are few lessons from the desk of Warren Buffet which can help you to take informed decision

There are 3 types of stocks - Large cap, Mid cap and small cap based on a company market capitalization.

Once you have this combination of 3, i.e Emotional Balance, Analysis and Time, then you will get the conviction to invest in stock market easily

You can also create wealth in stock market when you stay long and having the right mindset of wealth creation than just making money.

All that a value investor will do is fundamental analysis before investing in stock market. These are few points based on the content from NISM Research Analyst certification and from various books. Once you do this analysis you will be better to invest than many other investors.

Economic moat is the advantage a company has over other companies so that they stay profitable with market share in the long run. Shared few examples of Economic moat companies.

EIC Analysis stands for Economic, Industry and Company analysis. From broad level analysis comes down to specific company or stock. You will learn about Fidelity Business cycle which will help you to understand all this in much detailed manner.

Cash flow is based on net cash moving in and moving out of the business. If a company needs to stay longer, this is one of the important criteria that makes the company to stay profitable.

Analysing the management is by verifying if the company is moving in the right path as they said in the last few years. Stock price might move higher if there is change in the management after a long time.

If the company is in existence for longer period it offers some advantage and also you need to check if the company is evolving based on the current trend. There are companies which have got closed as they couldn’t survive harsh market conditions.

If the company is a disruptor and has the potential to be on top or stay competitive is one of the most important point as companies can stay relevant and also grow at healthy rate.

Is there any competition for the company ? Is the company losing market share and profitability ? There can be so many threats for new and existing companies in stock market. These parameters will help to avoid investing in a company which is having maximum threats.

Wrap of Fundamental Analysis course - By now you know how to analyse the important points of the companies so that you can take a decision to invest in stock market.

Key ratios are some of the key numbers to analyse when investing in a company. Once you analyse these numbers like PE, PB, Book Value, Dividend, ROE, ROA, PEG etc., offers great insights on the current outlook of the company and also if the stock price can move higher from the current level.

It is the ratio of market price of a company over its book value. This value is available for all the company but more importance is given to Banking sectors as it will help to find a company which is relatively cheaper to invest at a given point of time.

Book Value refers the total value of the company based on total assets and total liability. This is needed to determine the PB value of the company. Dividend is the profits shared by the company with the investors and everyone.

PE ratio refers to the company's share price to earnings per share. PE ratio keeps changing based on the EPS in a quarter. Though investment decision cannot be taken purely based on this, it is one of the determining numbers considered before investing.

Senex PE ratio offers great insights on when to enter and exit the stock market. If the PE is above 20 then you should be cautious enough and look into various macro conditions before investing, If the PE is between 16-20 then it is right time to enter but be cautious in selecting the right stock for bigger growth. If the sensex PE is less than 16, you can enter the right companies for long term growth easily as stock valuations of the companies would have gone down and stocks becomes cheaper.

ROE, ROA, PEG etc are some of the important numbers which states the performance of the company in the last few years. Last 5 years is generally considered to see the progress of the company

Wrap up of Key Ratios course - You can find the right stock price to enter based on key ratios like PE, PB, Book Value, Dividend, ROA. ROE etc

Stock market can fall because of so many reasons. In this course, I have shared points which are instrumental for the companies down fall.

A company can have good name in your locality or state but if there are serious issues in the company then it is wise to exit from the stock market or sell the stock

This phrase is easily said than done by many in stock market. Buying low needs conviction as you are going to buy when there is extreme pessimism and selling high requires equally higher conviction as it needs extreme optimism in your decision to sell.

If there is no cash flow in a company then there is no point in holding that stock as the Company is bleeding.

Don’t buy stocks when the price keeps going higher and higher. All the stock will come back to a level at certain point if the economic condition eases or if the earnings growth faces challenges in the short run or there is a bear market

It is difficult to time the market, as it keeps changing the behaviour. As the behaviour changes, the conviction on the stock also changes there by the investing decision also changes. In these conditions, what can be done is shared in this video.

When there is extreme bullish condition like the market condition in the recent bull run in 2021, certain stock prices keeps moving higher and higher irrespective of their earnings growth potential. During these condition certain penny stocks also keeps moving higher and higher, so it is better to avoid chasing next multibagger stock.

"this time it is different in market…" when ever market is falling people believe that this time is different and they keep investing. Your investment decision should be dependent on earnings growth and cash flow alone.

Welcome to Contrarian Investing. Before entering go through the Business cycle from fidelity links shared under Resource section of "Stock Market Investment Blueprint" course.

Contrarian investing is going against the market condition and taking advantage of the cheap stocks or assets available at that time. Warren Buffet is one of the contrarian investor, recently during 2020 crash period he chose to invest in infra and energy stocks when it was very cheap. Learn how to take advantage of business cycle in investing which will help you to be contrarian in any market condition.

As per EIC analysis, Sectoral analysis helps you to understand how a particular sector is performing. During early growth phase, it is infra, banking and related sectors which will drive the stock market and FMCG, Pharma will be out of favour.

Once you understand the sector, next level analysis you need to do is company level analysis. This will help you to choose specific stocks based on earnings growth of the companies and growth potential in the future.

Refer to Contrarian Investing Framework PDF provided in "Stock Market Investment Blueprint" course.