Intro On Indian Stock Markets

This post explains my experience on entry tinto the indian stock markets. This can guide you in a way to avoid the frequently committed mistakes when one enters into the big bash of trading. The trap I fell into was looking into the past trends of stocks (say a year) and their returns. Most of the stocks were penny stocks which yielded around 200% returns in the last 1 year but they were purely operator driven.

When entering into stock market investing you should do more research on the current events. Especially the US currency and US stock markets which drive the globals stock trend. After that you should look for large cap stocks (say asset with 50000 crore Rs). Banks and Pharma stocks can be bought initially since these 2 sectors favorable offer good returns if invested for 1-2 years.

Don't fall into the trap of making quick money and invest in penny stocks (say asset with 30-500 crores). These will be company/oprator driven and wont give you a favorable return. If US dollar is strong, go for IT stocks. If US dollar is weak, invest in Gold. If the Indian Rupee is Weak, don't invest in stocks, go for mutual funds or bank FDs. If the Indian Rupee is strong, invest in Banks. 

If you are planning to make an entry into stock market, initially invest in large cap stocks like Sun Pharma, HDFC bank, TCS, Bharti Airtel etc. The aim should be to make good money in a span of 2 years. So our investment should be in large cap and midcaps. Study the company's performance in the last 5 years. Look for its balance sheet in the last 2 years and check their QoQ performance.

Please remember only 10% of your savings should be invested in stocks. Remaining should be invested in LIC, Health Insurance, FDs etc.

Happy Investing.

Thanks,

lic_rangarao@yahoo.co.in