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.
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?
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
‘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
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
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
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
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
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
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
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
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.
September 10, 2019
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
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
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.
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.
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.
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:
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.
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.
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
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
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.
December 06, 2019
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
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
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
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