Investor Choices

Price to earnings ratio (P/E) Overvalued Or Undervalued???  Most common and wrongly interpreted term in the finance industry. Let us understand the concept of P/E   If the P/E is higher than that of comparable firms, it is said to be relatively overvalued, that is, overvalued relative to the other firms ("Not necessarily overvalued on an intrinsic value basis"). The converse is also true: if the P/E is lower than that of comparable firms, the firm is said to be relatively undervalued  ("Not necessarily undervalued on an intrinsic value basis"). Price to earnings is the ratio which shows how much respect the market is giving to a particular company for his future potential. Example: If P/E is 20 it means i am ready to pay 20 rs for every 1 rs earnings. Let’s move on a case study to understand the concept . Industry - Information Technology. Company A - P/E 20,  Sales - 100 Lakhs, Profits- 20 Lakhs Company B - P/E 80 , Sales -100 Lakhs, P...

  Porter 5 Forces Analysis Cement Industry (India)   India is the second largest producer of cement after china. Total production of cement is approx 350 mn tonnes since the past couple of years. Cement industry is a kind of ' cyclical industry ' which is dependent on expansion and contraction of the economy. Let's take a look how it depends. For example if the economy is growing only then there will be construction activities like Housing construction, Commercial Constructions or Industrial Constructions. Government initiatives are also helpful for the boost in this sector. If we pay attention, the government has taken initiatives by allowing expenditure outlay of approx  25,000 cr out of which 13,000 cr is allocated for the project of 98 smart cities.  Which is somehow creating opportunity in the sector. This sector is majorly controlled and supervised by the government which interferes with its price. It is a kind of concentrated sector as we can see on...

Hedge the portfolio with the help of 'Derivatives' (Futures). I have invested in the Stock Market but I am afraid that my portfolio might fall drastically and it has high probability.... How can I protect myself  from uncertain high probability loss ??? Here Comes into a picture the word 'Hedging'. Now the question arises how can i hedge my portfolio and the answer is 'Derivatives'. Yes my friend it is only possible with the help of derivatives. There are four types of derivatives Forward, Futures, Options and swaps. We will only discuss here about the Futures. Now understand the concept of perfect hedging with the help of FUTURES.  Let's take an Example- You have a diversified equity investment 200 cr and available balance in bank 20 cr. Beta of the portfolio - 2.2 (calculated as per specified approach) Nifty CMP: 11010  NIFTY futures 11500 expected fall maximum 10% from here. Now how many futures need to be sold for perfect hedging? 1 Index futur...

Risk management vs Accuracy (luck)   Why risk management overrule above all trading strategies??? Why does risk management overrule all charts, patterns and indicators in the stock market??? What risk management actually is??? How does it apply in live trading???   So many questions are there…and the answer is- Mindset > Strategy ! "Market rewards you only when, you stick to your logic..even if market is against to you"     Let's understand with my practical experience.. I was trading in market on the basis of my trading style ( it can be any style how you trade in the market ). I preferred to take only those trades where my Stop Loss and Target Price ratio would be 1:3 First Scenario (Risk Management) Trade 1: - 1,000 Trade 2: - 500 Trade 3: - 300 Trade 4: - 200 Trade 5: + 2,500 In this scenario I earned +500 pts Here my accuracy was 20% (unlucky) still I earned +500 pts. Second scenario (No Risk Management) Trade 1: +700 Tra...

Stock Market for beginners.    Do you want to start with the stock market but not sure from where to start with??   Let say, you have a good understanding of any business it may be Medicine, Textile, Leather product , Dairy product, Tour and Travel and so on. and you wanted to start a business. But you don't have sufficient capital that is required to start that business.     Here comes into the picture the role of 'Stock Market' . What you can do is simply look at the business about which you have a sound understanding and from that business choose the company which you think is doing good, invest it. Here investment is minimum you can buy 1 share or 10,000 shares as per the capital you have. And when the business will grow your investment will grow accordingly.   Now Question is, How to start with? To invest in any business you will have to open your D-mat account with a registered broker on stock exchange. examples: Motila...

How to analyse the Industry?   What is "Porter 5 Forces Model" and how can it be used?   Before any kind of investment in the share market it becomes necessary for us to analyse the Industry. For industry analyses we have a model called “Porter 5 Forces Model". This model basically works on 5 key parameters which should be considered before any kind of investment. Remember investment always does not mean Equity, it can be Debt or you want to start your own business also. So these are those 5 key parameters.   1) Threats of New Entrants  2) Bargaining Power of Buyers  3) Bargaining Power of Suppliers  5) Threats of Substitute  5) Rivalry among Existing Customers    1 Heavy Capital Requirement? 2 Economy Of Scale (Can Business produce High volume with Lower Cost)? 3 Business Differentiation (Which makes t...

Are you an INVESTOR? Are you an Entrepreneur? Do you want to grow your Business ? 💰   "This is for you" If you are looking for an investment in any business, it can be in any form i.e Equity, Debt, or you have already invested in any business as an entrepreneur. So, it becomes necessary for you to understand where your business actually stands as everything works in the form of a 'Life Cycle' so our business also works in a 'Life Cycle'  Business life cycle can be classified in four stages. 1. Start Up Stage. 2. Growth Stage. 3. Maturity Stage. 4. Declining Stage.   To survive and grow from every stage there are some well known strategies which are taught in MBA as part of strategic management curriculum.    With the help of these videos you will be able to understand where the business stands and you will be able to understand what the decision is management taking at business level hence you will be able to immediately c...