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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