Stock Market offers excellent returns when compared to any other asset class for investors who has

enough
knowledge, patience and emotional balance. A successful stock market investor should have a very good reason for
all his investments and should be convinced that his investments will perform better in the future irrespective of how
they performed in the past. This conviction takes good amount of reaserch into the nature of investments, individual
stocks and sectors. Once convince an investor should have patience to give the investment enough time to perform
and be in control of his emotions towards short termups and downs.
Here are some of the lessons every investor should keep in mind to have success in Stock Market Investments.
Source: http://business.rediff.com/report/2009/apr/15/perfin-10-golden-rules-for-investing-in-stocks.htm
LESSON 1: There is no such thing as a good stock
There are only good companies. When someone tells you this is a good stock you need to look beyond the stock
chart. Why is the company a good company? How will it grow its business? If you cant answer these questions, you
dont know what you own.
LESSON 2: Have a premise
When you buy a stock you must have a premise. A premise is a reason why that particular stock will go up. For best
results, the premise will be one that explains why the companys line of business will increase, and why the
marketplace will value that business at current or higher multiples. Without a premise, you dont own an
investment, you just own a stock.
LESSON 3: Think trends. Buy stocks
If you really want to invest in big growth stocks, you need to invest in secular trends. Secular trends are events
unrelated to either the economy or individual company events. The advent of the PC, the birth of the Internet,
and the desire for wireless phones, are all secular trends. The biggest investment winners are those companies
which are ideally placed to reap the benefits of large secular changes.
Microsoft and Intel rode the transition to PCs as computing power became cheaper and cheaper. Nokia, Motorola,
Qualcomm, and Ericsson all found them-selves unable to keep up with demand in the mid 1990s, when wireless
phones finally reached the critical price points. If you want really big winners, find the trend, then find the stocks.
LESSON 4: Know your risk tolerance
The biggest mistake most investors make is to buy positions with more risk than they can really tolerate. This is
where most people got hurt in the Internet bubble burst. They had no idea they owned risky stocks. If you can
always tolerate, both financially and emotionally, the complete loss of your entire position, you obviously will be
okay. But most people arent in that position. Figure out how much downside you can live with without having to
sell. Figure this out before you buy the stock.
LESSON 5: Dont average down to feel better

Averaging down is often a way to lose more. If you believe in the company, and the price goes down, you may
want to invest more. But if you, like many others, purchase more simply to lower your break even stock price,
you are making a mistake. If you find yourself calculating new average price per share points, you might be
averaging down for the wrong reason.
LESSON 6: Dont miss the train to shave a dime
If you are investing in a major trend through a stock, and have a multi-year investment horizon, what difference
does a few cents per share make on your purchase? Many investors try to place buys with limit orders just below
the ask, and wind up missing the purchase.
If you really want a stock, particularly a big position, place a limit order at the ask, or even slightly higher. You
will at least get the order. This is especially important if you are trying to buy far more shares than the current ask
size. If you are right about the trend, you will never miss the extra ten cents per share.
LESSON 7: Dont buy hot and watch cold
Many investors buy a hot stock and immediately look for big gains. When they dont happen, the stock falls away
from the daily attention list. Pretty soon it starts to edge downward, and, emotionally, the investor stops watching
it.
Pain avoidance is common to us all. But you cant let pain avoidance prevent you from watching your stock. If you
do, you often take a look two months later and find the stock is far from hot, and you are now presented with a
really painful decision.
LESSON 8: A hold is as good as a buy
There is no such thing as a hold decision. If you wouldnt buy the stock again today, assuming you had additional
money, you should either sell, or admit that you are confused. Resolve the confusion. The hold condition often
happens when you have owned a stock for years, are way ahead of your basis, and are basically happy.
But what is driving the stock today? What will make the price rise in the future? Why would you buy the stock
today, assuming you didnt own it? If you dont know, you dont have a premise for this stock. See rule 2.
LESSON 9: Dont be an inadvertent long-term holder
When your premise doesnt work out, or you no longer believe in the stock, you must sell, even if it means a loss.
Holding on just to get my money back is the single biggest reason for losing more money. Who owned all those
stocks that lost 98 per cent of their value in 2000? A good percentage was owned by people who turned into longterm holders inadvertently, when they made the decision to just stick it out.
LESSON 10: You will lose money
You wont be right every time. If you are going to be an investor, you need to become accustomed to losing money
on some positions. This rule is the natural consequence of living up to rules 5, 7, and 9. Taking losses is often the
only way you can save your capital from further losses.

Technical Analysis is founded on three basic Principles. They are:

Discounting mechanism - Every known piece of information is already priced into the market.

Study of Mass Psychology -Market move based on mass psychology and may not always reflect the
underlying strength or weaknesses.

Markets always are trending or consolidating - Trends and Consolidations basically defines the ranges in
which markets move for a certain period of time.

There are basic things that drive the technical aspects and stock market movements. They are

Three main movements - primary, secondary, minor trends.

Market will always move in action and reaction.

Markets do tend to trend. A trending is defined by higher high and lower high - lower high and lower low for
up and lower trends

Investing in the stock markets is both risky and profitable venture. On one hand, the returns on investment are
usually higher than traditional investments, while on the other, the risk of loss is also higher. A detailed analysis
of the companys financial statements is important for two reasons:
1. Minimize the risk of investing in non-profitable stocks
2. Keeping track of stocks you already hold
A very important aspect of financial analysis of a company is verifying its key ratios. They can be calculated using
information from the financial statements of a company and they reflect its financial health. To begin with you should
have the latest annual report of the company. You can also get information from the stock exchanges where these
stocks are traded, especially, if you need information for a quarter period. It is a good idea to have annual reports for
few previous years.
This will be helpful in comparing current periods statistics with prior periods. It is also important to compare a
companys ratios with those of its competitors or similar industries and with the market ratios in general. Hence, it is
important that you have reliable data on competitors financials too. You will get data on markets as a whole from
trade magazines or stock exchanges.
How should you analyze financial statements? For example, you hold equity stock in ABC Ltd. You would like to
evaluate the financial ratios of the company.
ABC Ltd. Financial Statement Excerpts

Revenue: Rs 5,00,000
Net Income: Rs 50,000
Dividend to Preference stockholders: Rs.
5,000.00
Assets: Rs 450,000

Average Equity: Rs 200,000 (2,000

shares of Rs. 100 each)
Market price of Stock: Rs 50
Purchase Price of Stock: Rs 40
Dividend paid on Equity Shares: Rs 10

Total Liabilities: Rs 150,000

i. Earnings per share: This ratio is given in the Income Statement of companies and hence there is no real need to
compute it. However, if you wish to calculate:
EPS =

Net Income after Interest and Taxes and dividend to preferred stockholders

Average number of equity shares outstanding

= 45,000.00

= 22.50

2,000.00
i.e. a single share invested generates Rs. 22.50 in net earnings.
A high EPS in comparison to competitors EPS or a steadily increasing ratio are encouraging factors to invest in a
companys stocks.
ii. Return on Equity: This is calculated to verify if a company is using its capital efficiently to generate earnings. A
growing return on equity ratio is a good sign.
Return on Equity = Net Income after Interest and Taxes
Average Common Equity

= 50,000.00

= 0.25 or 25%

2,00,000.00

i.e., every rupee of equity capital invested in the company generates Rs.0.25 in earnings
iii. P/E or Price Earnings ratio: The ratio indicates the amount an investor will pay in return for a rupees earnings in
the company. A higher P/E ratio indicates that the stock is in more demand as compared to competitors stock.
P/E = Market price of Stock
EPS

50.00

= 2.22

22.50

iv. Dividend Payout Ratio: It compares the dividend paid by the company to the net earnings for the period.
Dividend Payout Ratio = Cash dividend per equity share
EPS

10.00

= 0.44 or 44%

22.50

An increasing dividend payout ratio over the years is an indicator of organizations growth. While deciding between
stocks of different companies, it is advisable to buy stock of a company having a higher dividend payout ratio, if other
factors affecting stocks are same.
v. Total return on stock: Although not a ratio, it is important to know the total returns on your investments. This
number incorporates changes in stock prices since it was purchased.

Total Return =
=

Dividend + changes in stock prices / purchase price of stock.

10 + 10 = Rs 20

vi. Debt Equity Ratio: This shows the total debt of a company in relation to the amount of equity of stockholders.
This ratio will help you understand the financial leverage of a company. How much debt does ABC Ltd. have for every
rupee of equity?
Debt Equity Ratio = Total Liabilities
Total Equity

150,000

= 0.75 or 75%

200,000

A high debt equity ratio implies that the company uses large amounts of loans / borrowings in its business. This can
affect the companys ability to raise further debt and increase the cost of borrowing funds in the future. A ratio higher
than 50% may also suggest liquidity crunch in a company.
Source: http://www.rediff.com/money/2010/apr/15perfin-things-to-learn-before-you-invest-in-stocks.htm
Here is an interesting article that I came across in Economic Times today. The Article discusses about why, how and
when to book profits from your stocks when the stock markets are volatile. Profit Booking has always been a tricky
business for normal retail investors. We tend to hook on to our stocks sometimes that we miss out opportunities to
sell and make profits. These are some strategies for investors to book profits and avoid missing out on opportunities:
Set target and phase exit Booking profits at regular stages is one of the most basic strategies. Wealth managers
suggest maintaining a book profits and cut loss target on investments and keeping track of them. However, many
investors do not follow it or lose track of the targets.
It is therefore advisable to keep booking profits regularly, whenever the price moves significantly. Smaller milestones
can be set in steps of 10 to 20 percent price movements.
Regular selling and booking profits enables investors to average out the opportunities and use them in a systematic
manner.
Some strategies that are discussed in this article are:

Identify sell signals

Market trends

Sharp run-up

Being objective

Major Business Reforms fy2010

The much awaited 3G auction was completed with Indian goverment getting a bonanza of a trillion rupees
(Rs 1 lakh crore), much above the expected revenues from the auction. This helped bringing down the fiscal
deficit by a few points which is a positive over-all. However, the telecom companies suffered by having to
pay huge sums to get the much needed spectrum to start the 3G services.

The SEBI listing guideline stated that public shareholding in all companies will have to be brought up to 25%
in three years. A good news for retail investors. This opened up chances of very good investment
oppurtunities in some good PSU companies as well as some good private sector companies.

Fuel price reforms saw the government free petrol prices and raise kerosene, diesel and cooking gas rates.
A good fiscal reform from Indian government which will help control deficit and curb ever increasing subsidy
bills. A good news especially for Oil Marketing companies such as BPCL, HPCL, IOC etc. However, the
common man suffered with this move.

The base rate system for bank lending was introduced and SBI set its base rate of 7.5%. The base rates for
various banks now range from 7.5% to 8.5%.

All the above moves are generally considered to be good reforms. Some are expected to empower Indian
consumers and minority shareholders. Others work in favour of the companies and economy as a while.
However, all are welcome moves. However, the rising inflation becomes the biggest worry.

Penny Stocks are those stocks that trade for very small share price and the companies not very well known. Penny
stocks are usually (but not necessarily) trade for low valuations (P/E) and has great volatility and carry more risk.
Having said this, Penny stocks can also have the potential to give exceptional returns in a very short time for those
daring, high-risk taking, knowledgeable and well-informed traders.
Penny stocks are low priced usually for some reason such as the companies are looking for raising capital and have
not enough capital in hand to record robust growth. These penny stock companies may have been operating in
sectors that have good prospects and run by good management and may have just insufficient funds due to which
their share is low-priced. If you can identify such hidden gems (penny stocks) then you can profit from them in a big
way then things turn favorable with these companies. It is well-known fact that small companies tend to record higher
growth rates than established companies and sio can give higer rate of returns. So before underestamiting penny
stocks, it is worthwhile to look at them as what they are worth and their potential to turn your small capital into big
amount.

Risks of investing in Penny Stocks

You need to very cautious and careful with penny stocks. Penny stocks usually carry high risk due to their
greater volatility.

These are generally traded in bigger lots such as in 1000s. So you may not be able to sell them as and
when you want as there may not buyers always. Penny stocks might not be so frequently traded on stock
exchanges.

Opportunity:
Keeping aside all these factors, a well planned strategy might take you to hidden gems. But before you really enter
into this arena ask yourself few questions:
1. Why you are buying a specific Penny Stock? What are its growth prospects?
2. What is the exit price for the stock?
Before you make your self sold to the idea of buying the penny stock, consider the fillwing factors and make sure the
parameters are good enogh to your satisfaction.
1. Company Fundamentals: Make sure that the penny stock company has enough cash-flow and enough capital to
hang on in the business. Check the balance sheet, cash-flow statement, profit-loss statement etc. to get an idea of
the companies fundamentals. Dont touch the company if it has significant problems in these areas.
2. Understand the Sector: Research the business of the company and see if the sector in which operates has good
growth potential and this perticular company has enough prospect to cash in on that growth.
3. Valuations (PE and PEG ratios): Compare P/E ratio of the stock with its coparable peers and also have an idea
on the future growth estimates of the company. Only buy the stock with reasonable P/E and high enough P/E/G
4. Trading Volume: Only buy stocks with high liquidity. That way, you will be able to sell the stocks when you want
to.
However, the best strategy in case of buying penny stocks is to minimize the risk is to plan your exit having decided
your expected profits. Do not just pump and dump the stock for reason that it costs you less than other stocks and will
reach very high levels one day.
If you carefully follow these cautions and identify some stocks that have all these parameters then probably you can
make very good amount to return from these penny stocks. Good luck and remember, only invest a small portion of
your total portfolio in penny stocks and dont be too greedy. After all, these are high risk, high return investments.

Banking & Finance industry is engine to drive the economic growth forward. A good and powerful banking system
represents the economys health. A Sound banking system serves as a significant trade enabler to the country.
During the recent global crisis, Indian banking industry came out with flying colors on the back of stringent stipulations
laid down by the Central bank.
With the opening up of the sector in early Nineties by the government, the industry has received a significant boost by
the emergence of the private sector banks which increased competitiveness and enhanced the level of banking
facilities to a top notch level.
For a sustained economic growth for the country, unmatched banking and financial services is a must in order to
facilitate the increasing need of swift and hassle-free transactions. Banking sector is an enabler to the economic
growth.
Top Stock Picks in Banking & Finance:

State Bank of India

Bank of Baroda

Union Bank of India

Corporation Bank

HDFC Bank

ICICI

Best Stocks to buy for long term returns in Food Processing Sector:
Food Processing sector is one of the sectors which is expected to perform well in the coming years. India is now
growing at a rapid pace (compared to rest of the world) of 8 to 9% per year and this growth will continue for many
years. This economic growth creates many jobs esp. for younger population. Compared to the past, we now have
more families in which both wife and husband go for work. And this trend is on the rise. These couples dont have
time to cook and they consume ready-made food and packaged or ready-to-cook food items. Also the rise in the
standard of living in the middle and upper-middle class families coupled with growing consumerism in India, will
create a lot of demand for processed food and premium food items such as Basmati Rice.
The upcoming years are likely to witness a fast growth in ready-to-consume food products like health drinks, frozen
food products for low-shelf life food articles, ready-made Aata (flour), fruit juices, ready-to-cook meals, quicker snack
products like noodles and pastas, etc. with increase in percentage of working couples and busy life style.
Top Stock Picks in Food Processing Sector

REI Agro

ITC

Ruchi Soya

LT Foods

Best Stocks to buy for long term investment in Power Sector: Power has always been a scarce commodity in
India. We all suffer from power cuts on a daily basis and even industries suffer the power cuts. Whats more, the
demand for power is always on the rise. With expectations of India growing at 8 to 9% will only create more and more
demand for electricity. This scenario presents a unique opportunity for large corporates to invest in power generation
businesses and to the investors to invest and reap long term profits from these investments.
The government has targeted electricity for all by 2012 by the end of 11th Five Year Plan. The demand of electricity is
growing exponentially. And, herein lays the opportunities for investors to plough their money in public and private
sector companies both.
At present, coal based thermal power plants accounts for almost two-thirds of the energy needs of the country.
However, the government is increasingly becoming aware about the benefits of generating power through cleaner
nuclear power plants.
More recently, during the Budget 2010 announcement, the government has also laid emphasis on the development of
non-conventional energy resources such as Solar and Wind Energy. Rural electrification is also a significant initiative
by the government to allow access to electricity in remote regions in India.
Top Stock Picks in Power Sector:

NTPC (Power Generation)

Power Grid Corporation (Power Transmission)

Tata Power (Power Generation)

Rural Electrification (Power Sector NBFC)

BHEL (Power Equipments)

Natural Gas producing and transporting companies will has bright prospects in the coming years. The Natural Gas
Production & Infrastructure sector has showed a robust performance in the last quarter for FY10, which is likely to
continue in future as the availability of gas increases and the necessary infrastructure is put in place.
As the availability of the natural gas is growing and demand remains strong, the transporting infrastructure is the only
bottleneck in the future growth of the industry. All the companies have lined up heavy capex plans to extend their
pipeline networks and increase their gas carrying capacity.
All the companies are currently trading in a price-to-earnings multiple (P/E) range of 13 and 18.5 as against the
Sensex P/E of 20.3. These valuations appear attractive for long-term investment, considering the expected profit
growth in the coming years.
Top Stock Picks:

GAIL

Gujarat State Petronet Ltd (GSPL)

Gujarat Gas Company Ltd (GGCL)

Indraprastha Gas (IGL)

Related Article: Natural gas players: Attractive for a long term

Source: Economic Times

Here are some of the stock recommended to buy for long term by the experts at Sharekhan Brokerage Firm. These
Stocks are recommended for long term gains based on fundamentals. As th Indian Stock Markets are currently
trading week and under pressure, we may see short term fluctuation in these stocks as well.
Punjab National Bank

CMP: Rs 1014

Target Price: Rs 1158

The Net Profits for Q4 are inline with the expectations. The loan sanctioning rate is looking good. Due to the
weakness in treasury profits, in Q4 the Non-Interest income has seen slight decline.
Union Bank of India

CMP: Rs 290

Target Price: Rs 349

Q4 Results of Union Bank of India are very encouraging. The loan growth has exceeded the expectations. The net
interest margin (NIM) has exceeded expectation. NIM recorded this growth because of a reduction in interest paid on
deposits.
Source: Economic Times
Presented below is a synopsis of an article published in Economic Times discussing about the best sectors to
invest for medium to long term in Indian Stock Markets in FY 2010-2011.
Sector 1: AUTO
The auto sector is doing well over the last few quarters , backed by tremendous volume growth due to the rise in
disposable incomes of the middle income group, and launch of new models in the market.
Analysts believe the volume growth is expected to remain strong in the coming quarters and auto stocks are
expected to do well in the medium term.
Sector 2: BANKING
The credit growth has picked up over the last few months and is expected to remain strong with improved economic
conditions and pick-up in corporate demand.
The interest rates are also expected to go up in the short term which favours banks. Loans are repriced immediately.
Therefore, the net interest margins (NIM) are likely to go up.
A higher NIM along with loan growth results in improved earnings in the medium to long terms.
Sector 3: HOTELS & TOURISM

The travel and tourism sector in general is picking up.

The thrust on domestic tourism and rise in disposable incomes of the middle income segment will result in more
business for the companies operating in the hotel and tourism sector.
Sector 4: INFORMATION TECHNOLOGY
The information technology sector has the potential to do well as the global economic conditions improve.
Investors should go for frontrunner companies that have well-diversified execution models, a wide base and the
power to hedge against sharp currency movements.
Sector 5: PAPER
The paper sector is expected to fare well with improved economic conditions and corporate growth.
The paper prices have moved up over the last few months and the companies are expected to encash on the
increased demand and pricing situation in the coming few quarters.
Investors can add some front-runner paper companies to their portfolio to increase diversity.
Sector 6: TYRES
The companies in the tyre sector are expected to do well from a medium term perspective, fuelled by robust demand.
The auto sector (both two-wheelers and four-wheelers ) has had major volume growth over the last few quarters due
to improved economic conditions and consumer sentiments . Also, a number of new automobile companies are
planning to enter the market.
There are some concerns on the rise in raw material prices (rubber) but the robust demand will help the tyre
manufactures to pass on the cost to customers and hence the outlook for this sector is promising in the coming
quarters.
Top sectors in 2010 for stock market investing - 2009 will be remembered as a year that gave phenominal returns
to stock market investors. And now coming to 2010, every stock market investor seems to highly euphoric and
investing in stocks with high expectations. But its time for a sensible investor to reevaluate his expectations as the
current high priced scenario can easily disappoint investors. Gone are the days of undervalued stocks. The Sensex is
currently trading at a PE of 22. Sensex historically trades in a PE range of 15 to 16. So the current valuations of most
major stocks are overvalued and hence a correction is due. On the other side, the growth story of India Inc seems to
be encouraging, so the long term prospects are still good in may sectors.
So lets look at how different sectors might work out in 2010:
Gold: Gold should continue its growth in 2010 due to investors seeking safety in times of higher inflation and dollar
loosing its value.
Automobile: Automobiles sector seems to be catching up its lost ground and the sales in the recent quarters of all
major auto makers clearly demonstration a turn around in this sector. Demand for automobiles should remain

encouraging in 2010 too and auto companies should maintain good growth. Auto ancillary companies will provide
better opportunities. Look for stocks like amtek auto.
Banking: This is one of the sectors that is going to show continued growth on the back of growing Indian economy.
Banking sector should provide the credit needed for the improving economy. We have already seen credit growth
growing exceptionally in November as compared to September. Top picks in this sector are PSU banks such as SBI,
Bank of Baroda and Private banks such as Axis Bank and IndusInd Bank. Long term investor should be caustious as
these scripts have gone up real quick. So accumulate these in corrections.
Power: Power is a good sector for only long term investors. Only patient long term investors should invest in this
sector. In short term, it will not give good returns but over long term, it will give good returns. There is a lot of capital
in this sector that is in the process of building new capacity. Lot of capital has been raised recently through various
IPOs such as Jindal, Adani, NHPC etc. It takes time for this capital to start producing revenue. One has to wait 3 to 4
years for good returns in this sector.
Oil & Gas: This sector seems to be encouraging in 2010. Oil and Gas prices will continue to go up in 2010 due to
falling dollar price. This should work in favor of oil and gas exploration and pipe companies. Green energy stocks
such as Praj, Suzlon etc should also perform good due to the increase in oil prices.
Infrastructure: Infrastructure sector start performing from second quarter of 2010 but stocks will have to be chosen
carefully. Stocks with good execution capabilities of management and good cash flows will perform better.
Infrastructure could underperform for short term.
Engineering & capital goods: As the economy is improving, Engineering and Capital Goods sector should perform
well in 2010. There will be demand for engineering services and capital goods due to an increase in infrastructure
activities.
Health care & Pharmacy: Health Care and Pharma is a defensive sector and will continue to perform good. This
sector may not give phenominal results but this may not disappoint also. This sector is the best best choice for
hedging your portfolio.
Cement: Cement sector is not l;ooking good for the short term due to falling cement prices but select stocks provide
good opportunities to invest. Stocks related to commonwealth games area will perform better.

Telecom: Due to the fierce compitition and falling margins, the telecom sector should continue to suffer. It could give
some short term upsides due to recent undervaluation but its better to stay away for medium to long term.
Mines & Minerals: Because of the increase in demand for raw materials as the economy improves, Mines and
Minerals should perform well.
Agriculture: Prospects of this sector depends on monsoon next year and government focus and spending on
agriculture in budget.
Information technology: IT seems to one of the sectors that might perform well in 2010. As companies around the
world seems to be allocating the IT budgets that were on hold last year, order books will increase but still companies
will have tough time showing good profits due to rupee appreciation. However, good midcaps might outperform large
caps in 2010.

Metals: Any surge in commodity prices due to falling dollar could lead to a rally in metal stocks. Demand of metals on
account of growing economy could also lead to growth
Real estate: Affordable housing sector could dominate Real Estate this year. There is already a lot of Supply, so the
growth prospects in this sector seems to be low. Better to stay away from this sector in 2010.
Tourism, Hopitality and Hotels: The commonwealth games might provide a trigger for the growth in this sector.
Select stocks in this sector could outperform next year due to surge in tourism and travel activities next year due to
commonwealth games