Intricacies of investment in corporate securities b.v.raghunandan

Page 1

Intricacies of Investment in Corporate Securities

Investor Awareness Week,ICWAI, Grace Towers, Mangalore.

February 12, 2011

Page 2

Equity Shares: Nature

• Equity shares of listed companies

• Ready Market• Long-term Investment• Meant for Seasoned

Investors• Study of Companies• Involves procedures

Page 3

King of Investment

• Dividend: Interim, Final and Special

• Bonus Shares• Market Value• Stock-Split• Buy-back• Rights Issue• Sponsored Issue• Strategic Value

Page 4

Qualities Needed

• Control on Emotions• Building up Rome• Going against Current• Understanding Market & Companies• Disbelief in market sentiments• Impact of Economic Events• Mistrust the Obvious• Total Faith

Page 5

Current Scenario: Problems

• Inflation• Scams• Swiss Bank Accounts• Political Impasse• Budget Blues• Infrastructure Slowdown• Reliance Conflict• Poor Market Sentiments

Page 6

Getting Started……….

-opening a bank account

-opening a demat account

-opening a trading account

-selection of sector

-selection of Companies

-timing of purchase

-timing of exit, if unavoidable

Page 7

Selection of Sector

• High Growth Sector: IT, Telecom, Pharmaceuticals, Automobiles, Auto-ancillaries, Financial Services

• Stable Industries: FMCG, Agro-inputs, Steel, Cement, Metals, Banks

• Sunrise Industries: Nuclear Power, Cooling Tower Construction, Railway Wagons and Locomotives, Infrastructure, Power, Ship-building

Page 8

Selection of Companies

• Consistently good performance• Efficient management• Rewarding shareholders• Acquisition spree• Professional management• High level of skills in project execution• Lobbying skill• Decent governance

Page 9

Factors to be Considered

• Price-Earning Ratio• Dividend rates• Earning per share• Growth in sales• Auditors Report• Avoiding hype• Diversification• Footprints

Page 10

Sectors to be Avoided

• Highly seasonal• High operating and

huge investment• Requiring huge size

real estate in city centers

• Constant demand for higher level of funding

• Acute competition

Page 11

Companies to be Avoided

• Trading in its shares through investment trusts

• Controversial management• Poor quality of accounting• Products of social resistance• Very long gestation period• Brokers’ favourites

Page 12

Ignorable Factors

• Technical Analysis• Samples of Data• Target and Stop-Loss• Media analysis• Market expectation• Opinions of experts• Suggestions of fund

managers

Page 13

Timing of Purchase & Sale

• Seasonality of market- year, week, derivative settlements

• Going counter-market and counter-sentiment

• Keep investible cash reserves

• Look for market mistakes• Avoid euphoric moments• No emotional purchase or

sale

Page 14

Avoidable Things

• Borrowing and Investing

• Investing Retirement Benefits

• Temporary Investments

• Distress Sale• Frenzied Buying

• Betting on a single sector

• Investing only in Growth Companies

• Investing only in shares

• Buying in Heated Market

• Selling in Depressed Market

Page 15

Wise Investor

• Shares Information • Transparency• Unaffected by market

movements• Unwavering loyalty (staying

invested)• Designs his own investment

objectives• Avoids derivatives trading• Avoids small and temporary

opportunities

Page 16

THANK YOU