INSUBCONTINENT EXCLUSIVE:
By DK AggarwalIn a market dominated by investors and traders who are in a hurry to make money, have old ways of valuing and investing stocks
stopped working?
Both investors and traders want to make money, but traders actually want to make a quick buck
They try to profit from short-term gains in stock price fluctuations depending on demand, supply and price patterns
Investors, on the other hand, invest in fast growing companies that appreciate in value in the long run, tracking fundamentals
It is not that old ways of valuing and investing in stocks have stopped working
However, as new tools of research emerged, they have quickened discounting of information in prices
In valuing a stock, one looks at growth margins, profitability and valuations, but the way we look at these things has undergone a sea
change.
Undoubtedly, the main factor determining demand for a stock is the quality of the company
Analysts and investors now look at the leaders and the leading indicators to gauze the growth of a sector a company belongs to
To understand the prospects of the industry, one also needs to understand marcoeconomic variables
In the auto sector, benefits of positive scale-effects spreads across the entire ecosystem, ranging from vehicle manufacturers, suppliers,
On the demand side, the sector has direct linkage to the agri sector
If there is a good monsoon and better crop output, we can easily gauze that there will be good demand for passenger vehicles and bikes
A strong rural and agri-sector spurs demand for tractors and light commercial vehicles
Similarly, with help of core sector data, one can easily foresee the prospects for heavy commercial vehicles.
Government policies such as
axle norms, BS-VI emission, crude oil prices, demand for second-hand vehicles, interest rate, too, play a key role in the demand dynamics of
Over the past few months, the new norms on axle load altered the landscape for commercial vehicles (CVs) in the country.
Another example: as
the economy grows, so do the corporate earnings, economic growth creates jobs, which create income and grow sales of companies
The better the job scenario, the greater the booster for consumer demand, which drives more revenues into companies' cash registers
This approach allows investors to gain throughout an economic cycle, in which the general market situation become favourable, generating
good returns over time.
Chairman and MD, SMC Investments and Advisors
