Summary
This blog discusses five points that are often overlooked when investing in the stock market. It emphasizes the importance of understanding the fundamentals of a business before investing and highlights the potential for Nifty stocks to become multi-baggers. It advises against investing in penny stocks without proper research and cautioning against catching a falling knife. Additionally, it recommends staying away from stocks with questionable management and being cautious when buying stocks immediately after listing.
Highlights
💰 Understanding the fundamentals of a business is crucial before investing in the stock market.
📈 Nifty stocks have the potential to become multi-baggers, proving their fundamental strength.
⚠️ Be cautious when investing in penny stocks and avoid back-to-back upper and lower circuits.
🔪 Avoid catching a falling knife by assessing if anything has changed in the company before investing.
🚫 Stay away from stocks with questionable management and governance issues.
📊 Be cautious when buying stocks immediately after listing, as valuations may be inflated.
Hey folks!!! I welcome you all to a very very important video. What happened? After looking at the title you might be like ah I know this sales growth profit growth ROE, ROC this that no no no no we are not going to discuss all those factors today we are going to talk about five points which are generally less talked about so I’m sure by the end of the video you are going to be like oh my god I did learn something new today so keep on watching the video till the end.
So let’s get started with the first point. You know many people feel that there is one way to get rich in the stock market. We have to try and scout for stocks which are like one rupee or two rupee stocks and then they will turn up to like 20 rupees and 30 rupees and that’s where I’ll become rich in a few days but that does not happen in the stock market. The stock market is not like I mean buying stocks is not like buying lottery tickets you have to understand the fundamentals of the business, you have to understand the mode of the business and then think about investing in it.
Many people feel that the only way to invest in the stock market is by investing in penny stocks and they are the only stocks which become multi-baggers. Many people will tell you with conviction that large-cap stocks Nifty stocks will never become multi baggers they are already at a very high level. Now first and foremost we have to understand the meaning of multi-baggers and then we will understand whether Nifty stocks also become multi-baggers or not.
So for that, I’ll take you to Wikipedia okay what does it say a multi-bagger stock is an equity stock which gives a return of more than 100% simple. So the moment the stock has doubled it means that it’s a multi-bagger stock. Now if you were to ask me if are there any Nifty stocks which have doubled in a matter of let’s say three years see why did I say three years we at the beginning of 2024? If I were to go like four or five years then we have that Corona fall and if I measure the upside from the lowermost point of Corona then it will not be fair enough right so this is a home work for you what you can do is check the returns of these three four stocks just to give you an example Tata Motors, State Bank of India, Bharati Airtel, ITC favorite of many people memer’s favorite basically so these three four stocks check the return from 1st January 2021 so 21, 22, 23 three years return check and they have more than doubled.
Now who says that Nifty stocks or large caps never become multi-baggers, they do become multi-baggers and these prove these stocks have proven themselves they are fundamentally strong they do have certain modes so obviously the risk involved would be lower okay? Now also one more point is that whenever it is about investing in penny stocks many people get some kind of tips from their friend’s stipends now what will they say and you know what happens have a look at this oh for more at its peak buy buy buy and then again for more let’s buy that is what happens when you keep on investing in stocks which are hitting back to back upper circuits there are a lot of penny stocks where it does happen exactly like this and typically retail individual investors tend to invest at the highest possible point so please ensure that you don’t fall a trap for this for more kind of a situation and you better stay away from penny stocks which are hitting back to back upper circuits and back to back lower circuits, so always remember safety first.
The next point that you should consider before buying stocks is that never catch a falling knife. Now what do I mean by that I’m sure you might have seen certain stocks in the last few weeks only which have crashed like anything if you have been following my channel you’ll understand which stock am I talking about right now many people feel that it has already crashed by 70% has already crashed by 80% this might be the lowest point and from here ideally it will see some reversal and I’m going to take a contra bet is what people feel but always remember that if nothing has changed in the company even if the stock has corrected like 70-80% there are great chances that the stock might fall further, so before you think about averaging in that stock or before you think about taking a contra bet on that stock try to see if something has changed in the stock or not, try to see whether the problem because of which the stock started to see the downfall whether some sort of solution is in picture for that stock or not, if it was about some problem in the product whether the there is some solution that has been found for that product or not if there was a problematic management whether these people are now being replaced or not so all in all what you have to see whether there are certain parameters that have changed because of which a reversal can happen in a stock so just remember this I’m repeating this again just because the stock is falling don’t catch that falling knife your hands are going to bleed.
Now let’s go on to the next point wherein we should stay away from stocks which have questionable management. Now what do I mean by that? The moment you feel that this management is such where governance is at stake, where governance can be questioned when their integrity can be questioned, where there are certain litigations on the management, ideally you should stay away from such stocks. A lot of fund houses also give a lot of importance to ESG parameters and ESG mai G is nothing but about governance right so as good investors you ideally should stay away from companies where the management itself is questionable. Now you’ll be like if we are talking about investing in IPOs as an example how will we understand whether there are any cases against the management or not, against the company against the directors or not, well there is a separate chunk in the RHP.
Basically wherein it is very clearly given what are the litigations against the company what are litigations against the directors, and if there are any litigations by the company also that are separately given so we should not be bothered about litigations by the company because they’re against someone else but if there are litigations against the company against the management try to see what are the sort of these litigations and if they are about questioning the governance ideally stay away from such companies. Moving on to the next point which is about buying stocks immediately post listing now what do I mean by this you might be like Rachana are you kidding!!! there are so many cases that if we invest on day one of listing they give mind-blowing returns.
See I’m not against the philosophy of investing in stocks on day one of listing I have invested in certain companies on day one of listing. I’ll tell you what happens the stock on day one already has doubled let us say okay after that also it is growing let’s say on an average of 3% to 4% sometimes it’s let’s say hitting back-to-back upper circuits of 5% 10% whatnot and then again the buzz gets created in that stock retail individual investors majority of them will be late in entering the party and then what happens is that then the valuations of that particular stock are so crazy they’re way above the industry average and that is where retail individual investors enter, if this be so the moment the market mood changes if market starts turning bearish these are the stocks which ones which are high in PE as compared to the industry PE stocks which are high in valuations they are the ones which take the beating first okay so whenever you are buying post listing just be aware just check whether the valuations are not sky high and then only invest.