Coronavirus pandemic hits several businesses around the globe very badly. No doubt, India is also going through the same situation. For short term investors, it is a curse but if you are a long term investor it is a really good opportunity to buy good companies stocks at a very attractive price.
Best Stocks to Buy in India During Lockdown
However, seeing the current play of the market may change your thought a bit. But without proper information, losing money is the most obvious thing you could do.
“So, what are the best stocks to buy in India during lockdown?” This is the question of the masses.
The economy has slowed down but there are many opportunities in the market for investors to invest. At this time anybody can invest in good companies with some little research and will get good returns in the future.
You should first increase your Intelligence Quotient (IQ) in the Term of Finances. Working on that here are some of the guidelines to choose good companies to invest for you.
1. Invest in Industry Leaders
Industry leaders are the trendsetters, they are usually first to make an innovation or to benefit from it. Leaders are well-known companies, their products are more preferred, they have greater market share, they have higher cash flows.
All these make them extremely attractive in the view of the public, DIIs, and FIIs (Foreign Institutional Investors). Further, when market leaders are ones who are least affected in the times of downfall. Market leaders are characterized by greater market caps, P/E ratio when compared to the relevant industry.
2. Low debt or debt-free
Capital is the money required by the company to fund its business. Two major sources of capital are Equity Shares and Debt. While there is no legal requirement to pay the equity shareholders, Debts are hard and interest is required to be paid even in case of losses. Further, debt adds financial pressures on the Revenues of the company.
Companies with lower debts can survive even the harsh blows of the market. Who would you like to give your money to? If a person/company already has debts they are less likely to get more or get them at higher interest rates. Companies with lower debts usually do better in the time of crisis and recession.
3. Brand Equity
This is one of the classic principles suitable for investing in the modern period. Which Company comes to your mind when anyone says carbonated drinks, smartphones, or cars?
These are the companies with higher bargaining power and the consumers are willing to pay them some premium and preference over their rivals. These reputations give them an added advantage in the stock market too.
4. Large Cap Companies
Market Cap of a Company is calculated by multiplying its Total No. of Equity shares by its Current Share price. Further, the Companies which have a Market Cap of more than 20,000 Crores are generally considered as Large Cap companies. Large Cap Companies are usually the top-performing in their relevant Industries.
Large caps are stocks of large well-established companies with stable business models that are considered safe investments. They can bring you moderate yet safe returns. Mid-cap companies are usually in the growing phase and have the potential to grow to large-cap.
Small-cap companies usually include start-ups, mature companies with small industry size, etc. Hence, investing your hard-earned money in large caps would be a safe investment in the majority of the cases.
Above all, if large companies stocks are available at huge discounted prices then making an investment in small companies doesn’t make any sense.
The valuation of a company plays a major role in determining its share price. Suppose a company has a valuation of ₹ 500 crores, and currently has 100 crore shares then the share price would be ₹ 5 (simple maths, isn’t it?). The major question which arises is the origin of the amount of ₹ 500 crores.
To elaborate, consider Jio (don’t consider it as investment advice), as per the recent news Facebook bought a 9.99% stake at ₹ 43,574 crores. So the total valuation would be ₹ 4,36,176 crores. Getting an idea about the valuations of the Company usually gives you an idea of the price of the stocks in the near future.
6. Demand and Supply
As the companies need to sell their products to their consumers to generate revenues. On the basis of the judgment, you can tell whether a sector will have some increased or reduced demand in the near future.
The demand would be then met by the supply which would ultimately result in increased revenues and as a final result, the prices will go up.
7. Upcoming Projects
Any company with good future prospects is likely to gain price in the markets. As the projects signify the strength and ability of the company. The investors shall closely look towards the current and upcoming projects of the Company to get a better idea of their investments.
The fundamental analysis basically depends upon some ratios which would help you to compare the stocks. For example, a student (A) gets 9 marks another (B) gets 63 marks, who is intelligent? The most probable answer is B, right? But what if I say A gets 9 marks out of 10, whereas B gets 63/100, the game changed?
By nearly looking at some numbers you can never judge anything, but when you start to compare by percentage, efficiency, capacity, and others, the magic happens. Things start to become clear. The fundamental analysis comprises looking at ROE, ROCE, P/E ratio, Book value to Market value ratio, Debt to Equity, etc.
9. Bonus Tips:
In the world of investing, the word diversification is classified as one of the most heard words, there is a famous quote “Never put all your eggs in one basket” but what does it mean? Imagine that you are going to the market to buy eggs, further on the way home you accidentally tripped and fell. The results are imaginable; to tackle this in terms of market, people often invest in not only one share but many of them. So, even if one of them shows a decline they are not drastically affected.
With all the above discussion we would be able to pick the best stocks to buy in India during lockdown. A share with a combination of 10 or more of the above features could have the potential to get you the kickstart needed to your investing Career.
Note: Even if there a Short term losses, chances of gains in them are usually more than others.
Keeping all the above things in mind we would be able to minimize our losses, maximize our gains, and find the best stocks to buy in India during lockdown. As a rule of thumb, never ignore your gut feelings; they are one of the strongest indicators. What do you think?