Share Market Investment Tips: In the challenging period of Covid-19, the strong boom of the stock market is not understood by most of the investors. The Sensex Nifty is at a new high at a time when extremely weak demand due to the lockdown has spoiled the balance sheets of companies and the condition of the economy. In fact, due to the epidemic, the culture of dealing with office work (work from home) rapidly gained momentum and due to the lock down, people stopped leaving the house.
In such a situation, unnecessary expenses are reduced, savings have increased and people have nothing left to do. Lakhs of such people started share trading. As a result, the number of new demat accounts reached to 1.07 crore between April 2020 and January 2021. This is more than double the number of new accounts opened in 2020, 2019, and 2018. This is the biggest reason for the boom in the stock market. This raises questions about the stability of the uptrend in the market. So investors need to be cautious.
Share Market Investment Tips
Since the onset of Covid-19, the trend of the domestic stock market has been largely astonishing. After the initial shock, the market did not look back. Even the second wave of the epidemic could not stop its flight, while the economic condition of the country is not very good. In such an environment, investors should rely on the fundamentals of equity investment to reduce risk.
Stability has decreased but vigilance is still needed
The domestic stock market has been quite volatile in the last 12 months, with first-time investors seizing this opportunity for short-term gains and an additional source of income. Now the volatility is easing and we can see that normalcy is returning to the market, but it is not looking easy for such short-term gains to continue. Obviously extra caution has to be taken.
Make quality a priority
Always invest in companies that are of high heritage and quality. Companies that meet all the quantitative parameters like ROI, leverage ratio, earning growth as well as qualitative parameters like (management, pedigree, accounting policy, protection of minority shareholders’ interest), good investment are considered
Look at company management
The stronger the management of a company, the better will be its business. An exceptional team of management can make even an average business grow. But if the management is not good then even a company with strong business can reach a disastrous situation. This is the reason why before investing, consider the management of the company.
Analysis of growth and pricing power
Before choosing a stock for investment, you should analyze the growth and pricing power of that company. This is a somewhat difficult analysis. One way to do this is to find out to what extent a company is able to sell its existing market share while maintaining its profits in the face of increased competition
Take care of the safety of capital
There is a rule of mathematics that to recover 20% fall, only 25% return on capital will be required, whereas to recover 50% fall, investment has to be doubled, so as an investor, if you enter the market, keep in mind that even if the profit is less, the capital is always safe. Increasing risk on capital in pursuit of higher returns would not be a good strategy.