Hi Guyz,
The last 15 days has been eventful to say the least for all those who closely follow the stock markets...And happenings include, SENSEX has soared up from 18000 to 19000 in just 4 trading sessions. ET termed it as "Stupendous Madness". The draft policy on the P- Notes as expected had both criticisms and appreciations. With Damodaran saying that the opaqueness of this instrument is the cause of this sudden policy change whereas our FM Chidambaram said that it is not about the "P – notes" but about the moderation of Capitals flowing into Indian Share market. Yes, this does seem to make sense...
Statistics shows that around 30 billion dollars (1 billion dollar = 4000 crores) have been pumped into into India through the FII channel in the last 45 days. This was one of the major causes for the rupee value to appreciate. Looking at these numbers SEBI's move on P-notes does not come as a surprise to all of us.
The very next day after this move by SEBI there was this disastrous fall ( of around 1500 points from 19000 to 17500 which is a circuit breaker which I believe is happening for the 4 th time in the history of Indian Share market) and then a remarkable recovery with SENSEX closing at around 18800 levels..
So, should it be the "economy that should be driving the market" (or) the other way around "market driving the economy". Few days before the P- Notes move, the proceedings indicated that it is the later statement that was true which anyways is not a encouraging sign for a growing economy such as India...
Let me cut short on this story and get into my mainstream business…Here is a comprehensive set of questions that I could think of (so far) to become a shrewd buyer of stocks. Having said that this list of questions is not complete per se and this will continue to grow as I read further.
Before you invest in your hard earned money in a particular scrip try and find out the answers to all/most of these questions. In my opinion this is a bare minimum homework that all of us have to do before investing if we are serious about this business. We can't rely on an analyst to do all this for us…Do a reality check for yourself on the confidence levels, before you have understood all this and after you have answered all these questions?
For all those who would want to "STAY INVESTED" this list of questions could provide a framework for making a rational decision.
- What is the sector to which the company belongs to?
- Do you understand about the business intricacies of this sector?
- What is the rate at which this sector is been growing in India for the last 5 years?
- What is percentage contribution of this sector to Indian GDP?
- How is the global demand for the product/service that they produce? (Or) in other words how is the global business outlook for this sector?
- Is this sector dependant on domestic markets (or) global markets? Essentially is it an export oriented business?
- Are the raw materials for producing the product/service imported?
- Do you foresee a sudden rise in the price of these raw materials?
- Are you aware of any government policies that might go against (or) in favor of this particular sector
- If it is an export oriented business, how does the rupee value appreciation (or) dollar value depreciation affects this particular sector?
- What is the growth rate of this company for the last 3-5 years?
- Is this company among the top 5 player in this sector in India?
- If there is a global competition in the business what is their global ranking?
- Has the growth rate of the company surpassed the sector growth rate in the last 3-5 years?
- Do you believe that this trend will continue for the next 3 years?
- What is the overall "revenues" of this company?
- What is their operating/net profit margin?
- Have this company maintained a consistent margin (OPM, NPM) in the last 3-5 years?
- What is the total number of outstanding shares (or) shares issued by the company to the public?
- What is their EPS?
- How is their EPS growth in the last 5 years?
- What is your projected EPS based on their future earnings?
- What is the sectoral P/E range?
- What is the P/E at which it is currently trading?
- Do you know how the news about the new order gets translated into the balance sheet and by when?
- What is the P/E for the CMP based on the future earnings?
- Do you know about the management of this company? What is you confidence level on their management?
- What is the 52 week High/Low for this scrip?
- Have you looked at the chart for this scrip (1 month, 3 months, 1 year, and 3 years)?
- Do you understand the support and resistance for this particular scrip?
- Do you know their debt to equity ratio?
- Are you aware of any M&A that they might happen in near future?
- Are you aware of any large orders that might get in the near future?
- Is this stock an A, B - B1, B2 category stock?
- Do you know of any other companies in this sector based on the above analysis where the numbers might be better than this?
- How has been the investor sentiment (or) how is the market hype on this stock in the past?
- Is this company listed in any other parts of the world other than BSE/NSE?
- How are the brokers'/analysts' rating on this particular scrip?
- Have you had a look at the 50 day/200 day moving averages for this scrip?
- Have you had a look at their last three years P/L statement and Balance sheet?
- Do you know the competitors for this company and their P/E?
- Do you know the face value of the scrip?
- Do you know about the dividend per share for the last 3 years?
- Do you know the market capitalization of this stock?
- Would you know of the other mutual funds that have invested in this company?
- What is the average momentum of this stock (no of shares traded) in a day/week/month?
- Is it a BLUE CHIP stock?
- Do you know of any bonus shares that this company had announced already?
- Do you know the split up of investors in this scrip like FII, retail, mutual fund etc.,
- Is it the right time to buy this scrip (say market is down for issues such as p Notes). You might feel that there will never be such a kind of good buying opportunity again.
- Have you observed any seasonal trends in the price fluctuation of this scrip? Like just before the day of the quarterly or annual results announcement the stocks price keeps soaring up.
GDP - Gross Domestic product
OPM - Operating Profit Margin
NPM - Net Profit Margin
EPS - Earnings Per share
P/E - Price to Earnings ratio
CMP – Current Market Price
BSE - Bombay Stock Exchange
NSE - National Stock Exchange
P/L - Profit and Loss
M&A - Mergers and acquisitions
FII - Foreign institutional Investors
YoY – Year on Year
Thanks,
Kiru.
