EQUITY-Stocks

Rs.10,000 to Rs.741 Crores: Let’s just assume that you bought 100 shares of Wipro each at a face value of Rs.100 in the year 1980. Total investment: Rs.10,000. You don’t touch it at all, no profit booking or buying more shares. Occasionally companies provide benefits to its shareholders by way of corporate actions. They could provide bonus shares for shares that you hold, they could do a stock split where a high face value share would be broken down into smaller face value shares, but the number of shares increases proportionately.

Wipro has done various such bonuses (11 nos.) and stock splits (2nos.) in its history of 1980-2017. Let’s now see the different corporate actions and how the number of stocks would’ve grown:

With just that initial investment of Rs.10,000 (100 shares) you now would end up with 1,92,00,000 shares of the company because of all the stock splits and bonus shares. The current stock price of Wipro is about Rs.386 per share, as of 26 February, 2019. Rs.386 × 1,92,00,000 = Rs.741,12,00,000 or about Rs.741 crores. That is a CAGR (Compound Annual Growth Rate) of 41.42%. Does any of your bank FD give you 41% annual interest rate? It was all possible because of the free shares that the company gave to its shareholders as an incentive for investing in their company.

How about an additional yearly pay out of Rs.1.92 crores?

If you thought that Rs.741 crores out of a meagre investment of Rs.10,000 were unbelievable, here comes another shocker. Every year the company announces dividends from its operating profits for its shareholders. As a shareholder, you would also get this benefit for how many ever stocks you hold.

For example, the last year 2018, the company announced Re.1 per share as dividend. So, you get back Rs.1.92 crores just for holding the shares. Until recently dividends were also not taxed. But now any aggregate dividend above Rs.10 lakhs is taxed at 10%. See following videos on WIPRO story in Hindi & English:

(7478) Share Market Real Story | Rs. 10,000 to Rs.880 Crore | Wipro Stock | Stock Market Equity – YouTube

Now the present price of Wipro share is around Rs 700/- also 1:3 bonus given in 2019 (64,00,000 more shares added to 1,92,00,000=2,56,00,000) so present value becomes Rs 700× 2,56,00,000= Rs 179200,00,000/- or about Rs 1800 crores + dividend yield of 0.20% = Rs 3.60 Cr every year. But Rs 10,000 was a big amount in 1980 so merely investing Rs 1000/100 in 1980 would become 180/18 crores+Dividend yield of 0.20% on the total amount every year.

But avoid Wipro now as its profit growth has much slowed down, instead buy Tata Elxsi, Tata Technologies Ltd., LTIMindtree Ltd, L&T Technology Services Ltd. in IT sector.

How can I get returns like this?

There have been numerous such companies that have given great returns to investors, like Reliance, TCS, Infosys, Titan etc. No one can predict which company would grow to such a huge level before 30 years. Remember, for every story like Wipro, there are thousands of companies which have eroded investors wealth and become penny stocks. Investing in equities alone isn’t enough, investing in the right company is even more important. But now on the internet many sites like screener.in, moneyworks4me.com, tickertape.in, moneycontrol.com, companiesmarketcap.com, value.today, search engine google.com etc.  have come up that provide a lot of information on companies for investing which will become obvious in the text.

Like market indexes, volatile trend is also shown by stock prices (see Max Price Charts): i) Reliance: Rs 53-647-301-1533-1055-2077-2856-2203 (see Max Price Chart below) ii) TCS: Rs 324-125-1357-1110-2183-1806-4045-2926 iii) HDFC Bank: 25-168-86-334-618-1264-904-1734-1350-1625 vi) Bajaj Finance: Rs 150-1055-850-7672-2287-4781-1895-5538-7793-5067-8050-5932-6800 v) Jubilant FoodWorks: Rs 23-190-78-362-282-918-426.

reliance ind stock price – Google Search

(See Max Price Chart)

So, invest in stocks only if you are ready to bear the volatility in short-term. In fact, volatility provide us the opportunity to buy good stocks at lower levels. Important is to remain invested in fundamentally good companies (net profit/sales/ROE-ROCE good/increasing etc. in the long-term). If you sell a good stock in panic when price is low then one day you would end up selling whole portfolio. There is no concern if problems are only external as mentioned above with no internal issues like company’s continuous falling sales/profits/corporate governance issues etc.

Legendary investor Warren Buffet says “make volatility your friend” and his holding period for quality businesses /good stocks is “Forever”. Volatility matters for traders whose trading horizon is in hours or days. Those of us who invest for years or even decades know that markets pretty much go up all the time.  Over the longer-term stocks outperform other financial assets like debt funds/bonds and cash. It is said that for complainers’ market is of repenting- stock price rise after you sell/fall after you buy.

Buffet also says unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.

However, be careful about renowned companies/experts giving stock price targets. They give higher targets when they/clients want to sell, and lower targets when they want to buy.

– Around 2,113companies are listed on the National Stock Exchange as of December 31, 2022, and 5,311 companies on the Bombay Stock Exchange (BSE) as of January 13, 2023. According to SEBI’s all companies that are listed on the stock exchanges are categorized as below:

Large cap- Top 100 companies in terms of market capitalization are categorized as large cap companies.

Mid Cap: Companies ranked 101 to 250.

Small Cap: Companies ranked from the 251 to 500.

Micro Cap: Companies ranked from 501 position onwards.

3-Step Guide to Select Indian Companies for Investment

Proceed further as given below:

1) Move from top to downwards by decreasing market cap order in i) “List of Top 100 Indian Companies by market capitalization” in moneycontrol.com or ii) Sector wise companies list in screener.in or iii) List of Nifty 500/BSE 500 Index Companies given in the portfolio of Motilal Oswal Nifty 500 Index and HDFC S&P BSE 500 Index Funds. 

2) Select “Growth” companies showing increase in price in the long-term/Max Stock Price Chart e.g., TCS: Rs 181 (April 01, 2005) to 3935 (October 08, 2021). Avoid risky stocks having ii) “Downward” stock price trend e.g., Coal India Ltd: Price Rs 350 (05.11.2010) to Rs 184 (14.10.2021) or iii) “Cyclical” stock price trend e.g., Vedanta Ltd: Price 37 (01.04.2005)-201-92-469-123-293-63 (12.04.2016)-345- again 63 (01.04.2020) -405-213 and so on (Charts given in the text below).

3) Hold the stocks for the Long-Term/Forever as explained in the example of “Wipro Ltd.” earlier (just an example, don’t invest in Wipro as it has slowest growth now).

-Use following websites/options for Indian stock analysis- i) screener.in for detailed Indian stock analysis and ii) google.com to see percentage returns, e.g.,” TCS stock price” in NSE or BSE to get 1Year/5Y/Max Percentage Return Figures, Financials, Compare with Peers etc. Use both methods patiently to get complete data. Further, may see iii) moneyworks4me.com & iv) tickertape.in to further corroborate the stock data.

Following is the detailed description of above steps to select Indian Companies for investment:

1) Google search “List of Top 100 Indian companies by market capitalization” in moneycontrol.com. Move from top to downwards Reliance-TCS-HDFC bank and so on in decreasing market cap order “screener.in Top 500 Companies of India” (Top 500 companies – Screener). To be safe initially select market leaders, well-known companies/brands.

Top Companies In India: Top Companies in India by Market Capitalization, Top BSE Companies by Market Capitalization, Top BSE Companies (moneycontrol.com)

Top 100

2) Suppose you select TCS, then go to screener.in (main site for Indian stock analysis, register on the site), type company name TCS. See Max (maximum) Price Chart given below. If price shows Growth/Increasing trend, Rs 181 (April 01, 2005) to 3935 (October 08, 2021) select the company to see more data in comparison with peers as given below:

TCS- Select, Price Rs 181 (April 01, 2005) to 3935 (October 08, 2021)

Tata Consultancy Services Ltd financial results and price chart – Screener

(See Max Price Chart)

Further down in screener.in, see PROS and CONS.

Under Peer Comparison given are other parameters of TCS (Chart given below):

– CMP (Current Market Price) /All Time High, Market Capitalization

-PE Ratio: The price-to-earnings ratio (P/E) is used to determine stock valuation. It is calculated by dividing the current Stock Price by the Earnings Per Share-EPS (PE = Stock Price/EPS), see PE Ratio v/s EPS chart below. Typically, the average P/E ratio is around 20 to 25 but varies from industry/sector to industry/sector.

In good companies if you see valuations (PE) for 10-15 years, sometime PE goes very high/sometime very low, but EPS (Earning Per Share) rise in the long-term (see EPS v/s PE chart for TCS below). So, if you go for the long-term, valuations doesn’t matter. If the stock price doesn’t rise much, high PE is discounted by increase in EPS with time.

If PE decreasing and stock price also falling/not increasing- it shows earnings/profits of the company are increasing (company is a value buy), and if PE increasing and stock price also increasing- shows fall in earnings, not a good buying price.

Companies that grow faster than average typically have higher P/Es, such as technology companies (Tata Elxsi PE 57), FMCG (Nestle India- 82, Varun Beverages- 62) & Retail (Avenue Supermart- 93). Market gives valuations as per profit growth. See PE v/s EPS chart of TCS Ltd for 10 years as below:

-PB Ratio (not shown in table): When it comes to banks/NBFCs, the P/B ratio may be more relevant than the P/E ratio to value banks for following reasons.

-First, banks have a unique business model compared to other industries. They hold significant assets, such as loans and securities, which generate interest income over time. They also have significant liabilities, such as deposits on which bank pays interest, and which they use to fund their operations. Due to this business model, a bank’s book value can be a more reliable indicator of its financial health than its earnings.

-Second, banks tend to have more volatile earnings than other industries. The banking industry is subject to various economic factors, such as interest rates, inflation, and credit risk. These factors can cause a bank’s earnings to fluctuate significantly yearly. As a result, using the P/E ratio to value a bank’s stock can be less reliable than using the P/B ratio.

Thus, the P/B ratio, which compares a bank’s market capitalization to its book value, provides a better picture of its financial strength and asset quality than the P/E ratio, which focuses on earnings. 

What is the Price to Book ratio?

The book value of equity is nothing but the value of a company’s assets on the balance sheet of the company. The book value is obtained by finding the difference between the assets and liabilities of a company.

The P/B ratio is calculated by dividing the total market capitalization of a company by the book value of the assets:

Price to Book ratio = Total Market Capitalization / Book value of assets

OR

Price to Book ratio = Market price per share / Book value of assets per share

-Book Value per Share = (Total assets – intangible assets such as brand recognition and intellectual property – total liabilities) ÷ number of outstanding shares

This ratio provides insight into how the market values a company’s assets relative to its market price.

Importance of the P/B ratio

P/B ratio’ varies from industry to industry. Comparing the P/B ratio of a technology (intangible assets) company to that of a manufacturing company (tangible assets) may not provide helpful insights since their business models and assets may differ significantly.

A P/B ratio below 1 suggests that the company’s stock is trading at a discount to its book value (considered a solid investment by value investors since it suggests the stock trades at a discount to its book value), while a P/B ratio above 1 implies that the company’s stock is trading at a higher value than its book value (means stock is overvalued). For example: if a company’s PB ratio is 5. This means investors are paying five times for a company’s assets.

The P/E ratio, on the other hand, compares a company’s current stock price to its earnings per share (EPS).

It is important to note that the market value of equity is often higher than a company’s book value. The market values a company’s intangible assets, such as brand recognition and intellectual property, which may not be reflected in its book value and therefore, its book value of assets might be low as in tech-intensive companies (such as services firms and software development companies).

On the other hand, tangible asset-intensive companies will possess a high net book value of assets. Therefore, the comparison between such companies based on the Price-to-book value ratio will compromise the analysis.

-Understanding tangible assets is very easy. Anything that can be felt/touched and has a physical presence is tangible. Tangible benefits are quantitative and measurable. Examples of tangible assets are machinery, computers, furniture, building, vehicles, land, stocks.

-Intangible assets are intellectual property rights, copyright, company logo, goodwill, patents trademarks, brand name (Consumer Sector- e.g., PepsiCo Technology Sector- e.g., Microsoft and Apple, Pharma- Abbott, Media and Entertainment, Automobile Sector- Brand names like Mercedes and BMW are worth billions of dollars).

Intangible assets are nonphysical long-term assets, cannot be touched or felt/ subjective in nature that exist only on record/balance sheet. Depending on the type of asset, they are definite or indefinite intangible assets. An example of a definite intangible asset is a company patent because it will expire once the patent term expires. On the contrary, a firm brand name will remain throughout its existence.

Importance of tangible and intangible resources: In today’s fast-paced technology sector, both real (tangible) and intangible resources are critical. The company’s tangible and intangible resources enable it to produce a lot of money and continue to operate.

See above tables for the following text:

Along with other parameters, most important are MOAT- market leadership/competition in the sector, Profit Growth & ROCE (as it considers debt also) as given below.

–Profit growth: 5/10-years (Medium and Long-Term, an ideal growth will be around 15-25% annually). Not like Suzlon Energy where even after 5 quarters profits not showing turn around. Sustainable growth in profits can create long-term wealth. But growth can be destructive too. If a company chases growth at any cost like by taking more debt, it will put a dent in its ROCE (details given under ROCE). Thus, only profit growth won’t ensure wealth creation. Other factors are also required.

Companies like Asian Paints, Pidilite Industries and Tube Investments of India also invest in other good performing/subsidiary companies- Apcotex Industries Ltd, Vinyl Chemicals and CG Power & Industrial Solutions, respectively, whose profits are not included in their profit numbers, so their actual profit growth is much more than visible.

-Dividend Yield (not given in chart): In general, dividend yields of 2% to 4% are considered strong. When comparing stocks, it’s important to see other factors than just the dividend yield. For dividends, may see IT companies (TCS, HCL Technologies Ltd) or FMCG Companies (Hindustan Unilever, Nestle India, Britannia Ind, ITC Ltd). Here dividends increase with time with increase in stock price.

It is important that company give dividend even if it is very low Rs 1/50 paisa/ 10 paisa. It shows company is making profit and dividend is growing.

If promoter holding is high (75%) as in MNC/government companies (government wants more money, so gives more dividend) and if Cash Flow is very good, then they will get the company delisted so that all dividends from Cash Flow come to them why distribute it to public. Cadbury India, Ray Ban Sun Optics India and UTV Software Communications got themselves delisted to take all cash flows, as they generated strong cash flows. Companies like Parle and Bisleri having good cash flows have no desire to get listed.

New companies like Paytm, Zomato etc. list themselves to give exit to existing investors via OFS.

-Sales/Revenue growth- 5/10 years: 5-10% is usually considered good for large-cap companies, while for mid-cap/small-cap companies, sales growth of over 10% is more achievable. This is measured on a TTM basis.

-ROE: Return on Equity calculated by dividing net profits by shareholders equity (equity+ reserves) minus debt (ROE= Net Profit/Shareholders Equity-Debt). The higher a company’s ROE percentage, the better. ROE can vary substantially from sector to sector, a return on equity ratio of 15% to 20% is usually considered good.

ROE is highly related to the capital requirement (debt). For example, telecom and oil are very capital intensive, so have relatively low ROEs. On the other hand, Information Technology and FMCG are less capital intensive and have a higher ROE.

ROE is a good lesson on how to adopt a dividend pay-out policy. A company with high ROE should have a low dividend pay-out and a company with low ROE should typically have a high dividend pay-out.

-ROCE: Efficient capital allocation is the hallmark of a multibaggar. ROCE measures the returns company is generating on the capital invested/measures company’s efficiency. ROCE= Net Profit/Return on Capital Employed (equity + debt & other sources of funds), minus cash which is not used in the business & current liabilities. Higher the ratio, the better. That’s because it is a measure of profitability.

A ROCE of at least 20%increasing-positive trend over the years is usually a good sign that the company is in a good financial position. It is useful to compare companies with significant debt/companies in capital-intensive sectors, such as utilities and telecom.

Profits have to be backed by superior ROCE because even if a high-ROCE goes through a temporary, but significant decline in profit, it has the ability to overcome it e.g., Page Industries has five-year median ROCE of 64.1%. Despite a 14% fall in profit over FY19-21, it bounced back with a 58% growth in net profit. 

Ajay Tyagi of UTI AMC says “Valuation alone never excites us” (Value Research, India- November 13, 2023). I just believe in buying high-quality businesses that create strong economic value, which I define as the ability of the business to generate Return on Capital Employed (RoCE) higher than the cost of capital. Any business that generates high RoCE over the business cycle will also generate strong cash flows. As such, these businesses have surplus cash on their balance sheets and do not have to rely on borrowings to fund their growth. I look for consistency in outcomes over the long term. The second most important thing for me is the long-term growth runway available to the business. While there may be significant economic value being generated by a business, I need to gain conviction about whether the business can compound this economic value over the next several years or not.

The core hypothesis of my investment philosophy is that we should start with quality (ROCE higher than the cost of capital), then look at growth and finally, look at valuation. If I find a great company that delivers scores high on both quality and growth but is not very attractive in terms of valuations, I wait for a good entry point, start by building exposure gradually and scale it up over time as my conviction about the business strengthens.

(ROE/ROCE comparison: Warren Buffett says that he prefers companies where the ROE and the ROCE is approximately equal and is above 20%. ROE is more useful from a shareholder point of view and determining the trajectory of the P/E Ratio. But ROCE is more useful if you look at the business as a whole!

Both ROE and ROCE are useful for evaluating a company’s overall performance. A high ROE with a low ROCE denotes that a company is likely to succumb to debt. When ROCE exceeds ROE, it indicates that the company has effectively used debt to lower its overall cost of capital. However, the higher ROCE shows that the company is generating higher returns for the debt holders than for the equity holders. This might not be good news for stockholders. it is better to go for companies where the ROE and ROCE are not dramatically contrasting). 

-Debt/Equity ratio: A good debt-to-equity ratio is less than 1.0, while a risky debt-to-equity ratio is greater than 2.0. Banks/NBFC’s have high D/E ratio as they borrow capital in order to lend to customers. Dividend is required but debt repayment is also required as in case of Vedanata Ltd (Dividend Yield- 30%) but debt repayment is the biggest concern.

-OPM (Operating Profit Margin): Although there’s no magic number, a good profit margin will typically fall between 5% and 10%.

– Free Cash Flow or FCF is the cash left over after a company has paid its operating expenses and capital expenditures.

Free Cash Flow (FCF) = Cash from Operations – Capital Expenditures

Capital expenditure varies from one financial year to another and also among industries. So, measure the FCF of a company for a long period. A very high free cash flow may indicate that a company is not investing enough in its business venture. A low FCF does not always mean poor financial standing. It often signifies heavy growth and expansion, it is low and negative in growth companies e.g., Avenue Supermarts and Reliance Industries Ltd show negative FCF for 10-years: -2524 and -1.93 Lac Crores, respectively, as in June’2023. 

FCF is a measure of a company’s financial performance/ability to generate additional revenues. It shows how much cash the company has at its disposal for owners, shareholders/buyback stocks, banks/debt holders that lend money to the business or for reinvestment in the business/new opportunities, after the extraction of all expenses from the total revenue.

Hence, it can be stated that free cash flow is an important financial unit of measuring a business’s profitability and efficiency, but also make use of other financial measurements to avail a more accurate and relevant financial standing of a company.

-Promotor/FII (Foreign Institutional Investors)/DII (Domestic Institutional Investors) Holding- all more the better, while less Retail Holding is good

-You can edit the columns, select parameters in screener.in as per your choice, arrange them and save. Preferably select following columns and arrangement may be in the order: Current Price (CMP), High Price All Time, Market Capitalization, Price to Earning (P/E), Profit Growth 5-Years, Profit Growth 10-Years, Sales Growth 10-Years, Return On Equity (ROE), Return on Capital Employed (ROCE), Debt to Equity Ratio, OPM, Free Cash Flow 10-Years, Promoter holding, FII holding & DII holding.

-Moving down in screener.in, see Quarterly Results- gives short-term Sales/Profit before tax etc. trend.

See charts below for following description:

-Long-term yearly Profit & Loss trend– Net Sales/Profit figures should be reasonable/broadly increasing trend in the last 5 to 10 years.

Compounded Profit Growth (preferably around 20-25%) and Sales Growth (to be around 5-10%) as mentioned earlier.

Stock Price CAGR (If Stock Price CAGR is more than Profit Growth, then stock is overvalued, so costly/has high PE. If CAGR less than Profit Growth, stock price is undervalued/cheap/has low PE. However, growth companies e.g., Varun Beverages have high PE and Stock Price CAGR. A similar CAGR and Profit growth ratios shows stock is fairly priced. Then see Return on Equity trend.

Under “Balance Sheet” (Chart given below), see Reserves, Borrowings etc. Reserves are cash that has been set aside for a specific purpose or to meet future liabilities like operating expenses, as well as for contingencies, such as legal settlements or natural disasters. Reserves are important for a company to maintain its liquidity and to ensure that it has enough cash on hand to meet its obligations.

–See yearly ROCE trend (Chart given below)– increasing or decreasing.

-Shareholding Pattern: (Chart given below). Promotors/FIIs-/DIIs– holdings are considered to be in strong hands as they don’t trade-buy/sell frequently, better higher/show increasing trend. Promotors holding shows faith of the owners in the company, as per SEBI rules after listing promotors can have maximum 75% holding. However, ITC Ltd, ICICI Bank, HDFC Bank, Larsen & Toubro Ltd have 0%, promotor holding as they have become professionally managed companies, the shares are held by the public at large with the majority stake being controlled by financial institutions. Here board of directors/professional’s team, instead of single owner/family manage the business. 

See that promoter is not buying at lower levels, then bringing a buy back and tendering shares or pledging shares at higher prices/ensure promoter is not selling at higher levels in any way. We get conviction from the management if promoter holding is more than 51%.

FII/DII holding is important as they invest after great due diligence. Public/Retail holding is considered to be in weaker hands as they trade frequently, also operators are present here and PMS too included – better low/show decreasing trend. In India, if FIIs sell and DIIs buy then it is good as this prevents the stock from falling much/however, in the USA etc. no such DIIs exist/buying support is there.  

There is no problem if prices of stocks fall due to temporary external issues like general weak market sentiment (as during covid period in 2020, and now in 2022-23 due to Russia-Ukraine war/inflation/rising interest rate), and sector underperformance (like present Technology companies in USA, and IT sector in India due to less demand from abroad) with no company specific internal problems (declining profits, audit/corporate governance issues etc.). Once the market sentiment recovers, good stocks again come on growth track.”    

– So, if the Max Price chart shows TCS is Growth stock (increasing stock price trend in the long-term/non-cyclic stock), and all parameters are good as compared with peers, select the company, here TCS for investment at a suitable price (see current price position in 1-Year High-Low/5-Year/Max Price chart).

–If in screener.in, the Max Stock Price (Charts given below) shows “Downward” stock price trend e.g., Coal India Ltd– Price Rs 350 (05.11.2010) to Rs 184 (14.10.2021) or “Cyclical” trend e.g., Vedanta Ltd- Price 37 (01.04.2005)-201-92-469-123-293-63 (12.04.2016)-345- again 63 (01.04.2020) -405-213 and so on- Avoid the companies.

Coal India Ltd financial results and price chart – Screener

(See Max Price Chart)

Vedanta Ltd financial results and price chart – Screener

(See Max Price Chart)

Also, in stocks as Vedanta Ltd one has to cyclically time the entry at low price and exit at higher levels, the call may go wrong/may result in capital loss. One may say they give dividend but even Britannia Industries have Dividend Yield of 4%, HDFC Bank- 1.05%, TCS- 1.08%, Infosys- 1.6% etc. along with growth.

–Further to see companies sector-wise in screener.in (Charts given below), go to screens, browse different sectors- see companies from top downwards (decreasing Market Cap) e.g., out of 39 Banks, only HDFC Bank, ICICI Bank and Axis Bank are good. Among PSU banks, SBI is considered good.

https://www.screener.in/explore/

Banks Companies – Screener

-FMCG List shows 113 companies, about 10 out of about top 16 are renowned (Hindustan Unilever Ltd, Nestle India, Britannia Industries, Adani Wilmar Ltd, Ruchi Soya Industries/Patanjali Foods Ltd., Tata Consumer Products, Varun Beverages, Hindustan Foods Ltd.)  and good on various factors.

FMCG Companies – Screener

-IT Sector shows 241 companies, say 04 (Tata Elxsi Ltd, Tata Technologies Ltd, LTI Mindtree Ltd, L&T Technology Services Ltd) out of top 21 are good.

IT – Software Companies – Screener

3) Hold the selected good stocks for long-term as explained earlier in the example of “Wipro” (just an example, don’t buy Wipro as it has slowest growth now).

-Can also select the stocks from Nifty 500 Index companies list which covers top 500 (Large, Mid and Small cap) companies in India as given in Motilal Oswal Nifty 500 Index Fund Portfolio. Also, BSE 500 list is similar as Nifty 500.

Motilal Oswal Nifty 500 Index Fund (MOFNIFTY500) – Regular Plan – Growth Portfolio | Portfolio – Moneycontrol

(See Portfolio)

HDFC S&P BSE 500 Index Fund Direct Growth – NAV, Mutual Fund Performance & Portfolio (groww.in)

(Holdings-See all)

–In addition to screener. in site, also use google.com to get percentage return figures etc. e.g.,” TCS stock price” in NSE or BSE, and see Market Cap, PE Ratio, Dividend Yield, 1Year/5Y/Max Percentage Return Figures, Financials, Compare with Peers etc. Prepare a table as given below. Use data of both screener.in and googgle.com to get maximum possible company information.

tcs stock price – Google Search

(See Max Price Chart)

See Financials (Revenue, Net Income, Net profit margin, Operating income, Cost of Revenue etc. Y/Y-Year on Year growth)

nse:tcs financials – Google Search

Compare with peers 5-Years & Maximum:

TATAELXSI ₹7,419.95 (▼1.00%) Tata Elxsi Ltd | Google Finance

– For comparative analysis of stocks based on above chart like tcs stock price – Google Search ,  prepare a table as given below and select companies with better 5-Year, & Average Maximum/all-time % Returns since, calculate Average Return %:

Stock Table- Indian Companies

– Invest/accumulate shares gradually whenever surplus funds are available. Don’t dip into emergency fund. Some good stocks are always available at reasonable prices, not all companies/sectors rise and fall at the same time. Earlier Asian Paints was at higher price than Kotak Mahindra Bank but now it is reverse. During Covid crisis pharma sector was high while IT/Banking and other sectors were down. Now the situation is opposite.

Diversify investments in growth companies/sectors- mainly Finance, Consumption (Retail, FMCG, Foods/Beverages, Consumer Durables, Gems/Jewellery, Paints, Plastic Products etc.), IT & Chemicals, then Pharma, Gas Distribution, Power/Energy, Telecom etc. Avoid cyclical (non-growth) sectors like Auto (except auto ancillaries which are required all the time), Airlines, Mining & Mineral, Oil Exploration/OMC’s (Oil Marketing Companies) etc.

Diversification minimizes risk. In good stocks risk is of volatility only and not losing money. More the returns, more the volatility. FCIC- Finance and Consumption (FC) are India driven (domestic) sectors, IT & Chemicals (IC) have export story. IT companies export services while Chemical/Pharma companies export products. FCIC sectors are easy to predict, not like Tata Power having uneven sales/profits. FC sectors are simple sectors (B2C- Business to Consumer), less volatile and not much research required. IC sectors are complex (B2B- Business to Business), consistency not good/more volatile but give more returns than FC sectors if bought on dips. 

Select stocks showing i) “Growth” Max stock price chart (e.g., HDFC Bank Ltd, Varun Beverages etc.), avoid stocks with ii) “Cyclical” Max stock price trend (Vedanta Ltd, ONGC Ltd etc.), and iii) stocks having “Down-trending” Max price (Coal India etc.).

Buy stocks which are available at a suitable price (say 20–25% down from all-time high/price at major support-consolidation level). Timing the market is easier said than done. Timing the market should not be a part of your core strategy. Buy good businesses, not stocks/stock price- don’t get disturbed by short-term stock price movement and sell. If Reliance Industries stock price falls, owner will not sell the company.

Allocate around 65% amount to Large Cap Companies, lower in Mid Cap (25%) and lowest in Small Cap (10 %) companies. Do not invest more than 10% in a single stock that too only in a large cap company, in smaller companies 2-5% (around Rs 15,000, the minimum IPO application amount) only. Also, not more than 25% of the total investment in a single sector.

Management of Finance (especially NBFCs as they have less regulations than banks/promoter stake must be more than 50%/promoter be strong), and Jewellery companies should be very good as most frauds happen only in such companies. Due to less regulations NBFCs can do all things/generate more returns which banks cannot but chances of NPAs are also higher in them. People trust banks because they are strictly regulated by the RBI but in the case of NBFCs, the regulation is less and hence, so is the trust. This is the primary reason why there are only a handful of NBFCs where people make deposits.

Banks and NBFCs need money to lend. And both are allowed to raise money from depositors. But NBFCs, unlike banks, don’t have the luxury of raising ‘easier and cheaper’ money via savings/current accounts (CASA) which is the cheapest and major source of funds for the banks.

NBFCs have been on the rise these days and thus, understanding this sector becomes quite pivotal. It will not be an exaggeration to say that these days NBFCs are as important as banks. These companies have surely made financial transactions a lot easier and simple for people.

In fact, with the acclaimed success of the likes of Bajaj Finance, the popularity of NBFCs has grown so much that many banks have also started operating in models similar to these NBFCs! Now that’s what competition does to incumbents, isn’t it? In Finance remain with big banks and NBFCs.

Insurance companies may be good as they get premiums in advance which they invest and earn good profits and pay later to claims or not required to pay at all. But just they have some government regulations/limits on investing.     

Chemical companies are of various types- Speciality, Oleochemicals, Agrochemicals, Commodity and EV. Agrochemicals are a kind of essential-noncyclic because they required by all the countries all the time as without them nothing is possible.                                                                       

LIST OF SELECTED INDIAN COMPANIES FROM DIFFERENT SECTORS which are among the best investments in the world:

Initially select well-known companies/brands (sector classification as given in icicidirect.com). DY- Dividend Yield >1% given.

While selecting a company be mindful of the volatility of stock price – see current price position in 1-year High-Low/5-Year/Max Price chart in screener.in/ google.com/tickertape.in. Better buy a good stock with intention to hold for long-term/Forever to get benefit of compounding effect/multibaggar returns.

Alcoholic Beverages: United Spirits Ltd

Auto/Auto ancillary: Tube Investments of India Ltd., Sona BLW Precision Forgings Ltd, Uno Minda Ltd

Banking/Finance: -HDFC Bank (Dividend Yield- 1.05%), ICICI Bank, Axis Bank, SBI 

-Bajaj Finance, Jio Financial Services, CDSL (DY 1.12%), BSE Ltd, Computer Age Management Services Ltd. (CAMS, DY 1.60%), KFin Technologies Ltd, Poonawalla Fincorp Limited

Chemicals & Fertilizers: Pidilite Industries, Aarti Ind, SRF Ltd, Linde India Ltd, Deepak Nitrite, Fine Organic Industries Ltd., Clean Science & Technology, Gujarat Fluorochemicals Ltd, Aether Industries Ltd, (Agrochemicals: PI Industries) 

Consumer Durables: Polycab India Ltd, Dixon Technologies (India) Ltd

Engineering/Capital Goods: Larsen & Toubro Ltd (DY 1.01%), Inox India Ltd

FMCG: ITC Ltd (Dividend Yield- 2.89%), Hindustan Unilever (Div.1.17%), Nestle India (DY1.03%), Britannia Industries (DY 4.06%), Patanjali Foods Ltd., Tata Consumer Products, Varun Beverages 

Gems & Jewellery: Titan Company Ltd

Hospitability/QSR (Quick Service Restaurant): Westlife Foodworld Ltd, Sapphire Foods India Ltd, Devyani International Ltd

Information Technology (IT): – Tata Elxsi Ltd, Tata Technology Services Ltd, L&T Infotech, L&T Technology Services Ltd.

-Info Edge India Ltd

Metals & Minerals: APL Apollo Tubes

Paints: Asian Paints

Pharma & Healthcare: Divis Laboratories, Abbott India, Apollo Hospitals Enterprise Ltd, Max Healthcare Institute Limited

Plastic & Packaging Products: Astral Ltd

Power/Generation/Distribution: Tata Power Company Ltd, Waaree Renewables Technologies Ltd

Refineries/Oil-Gas: Reliance Industries, Gujarat Gas Ltd

Retail: Avenue Supermarts Ltd, Trent (Tata Company), Metro Brands, Redtape Ltd

Sugar: Eid Parry (India) Ltd (Dividend Yield 1.24%)

Telecom/Telecom Equipment: Bharti Airtel, Tata Communications Ltd

ETFs (India & International): ICICI Prudential S&P BSE 500 ETF, Motilal Oswal MS NASDAQ 100 ETF, Mirae Asset Nasdaq Q50 ETF, Mirae Asset S&P 500 Top 50 ETF, Nippon India ETF Hang Seng BeES

You just can’t buy and forget, at least keep track of quarterly/annual results (Sales-Profit growth/ROE-ROCE/DE ratio/OPM/Shareholding pattern etc.) trend of stocks invested. Even after very good 3rd quarter December’2021 results price of a blue-chip company like Infosys falls. Market is supreme, everyone bows before it.

-Beware of unknown/unworthy stock recommendations by market experts, they are for short-term trading with SL (stop loss) which investors don’t apply and lose money. Experts are not allowed to give well-known companies by TV anchors. Be careful about the temptation to chase low quality stocks just because they are rallying.

-Presently for Indian/International stocks investment updates/information watch i) “Invest in Bharat/Invest in India”, ii) “Market Ka Punchnama”, and iii) “Learn Investing (e.g.,14 Lakh ka Strong Portfolio Risk Bahut Kam Hai)” etc. following YouTube videos:

(6300) Introduction to US Stock Markets | Investment Masterclass – YouTube