Indian Stock Market Tips

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There is a famous saying in the stock market - 'buy low and sell high', which is considered to be one of the main Indian stock market tips. Though this is considered to be the golden rule for all investors, yet most of the investors follow just the opposite rule. A retail investor would surely want to see returns on his investments overflowing, but the end result is really disappointing. That is why they end up buying high and selling low. Have you ever thought what drives this human psychology? This is because all humans have the tendency to chase the hot returns of the day before.

The sectoral scrips that shall always remain in hot demand are the ones in infrastructure and power. The scrips in the IT sector are seeing a comeback after a long time. But the real estate stocks still look stretched in terms of valuations. After the global crisis era, the banking stocks are expected to do well in the near future.

Tips for Indian Stock Market

  1. Investors have to look for bargain hunts. During the correction mode of the market, several good stocks had taken a huge hit. Despite good fundamentals the market momentum downwards has dragged them with it.

  2. Do not trade with short term. In the near future, the current market conditions may continue to prevail and thus not much return may be made in the short run. Think in the broader perspective.

  3. Stay away from derivatives. When market is range bound, the derivatives can be very costly for not so spectacular returns.

  4. The sectors like banking, a conduit to the economy's growth, shall be looked upon with a medium to long term view. Infrastructure, FMCG and pharma follow in line for a long term growth.

  5. The exuberance or the exhaustion, in any type of market, the retail investor should have a balanced approach to investments with a firm financial planning. There should be a goal oriented long term view with full awareness on the capacity to take risk and the capital available for investment.

  6. A regular review of the portfolio, in any type of the market, along with the goals set will enable the retail investors to be stable in approach to investments.

Why do stock markets suffer?

In the long term, the driving forces of the stock market are various economic, financial and global factors. But, in most of the cases, the retail investor looks forward to the short run - where the market gets driven by simple greed and fear, and normal human emotions. At a time when there are tough economic conditions, bites of political uncertainty, and consumer confidence is at the lowest level, the stock market exhibits worst performance than what the economic fundamentals predict.

Investing in Indian stock market - Some Tips

There is no need to time the market

Don't feel tempted. A retail investor might get tempted to time the stock market but it is always recommended to avoid the same. It is impossible to determine the trend that the stock market might follow. All trade patterns are dependant on market risks and are thus highly volatile.

Employ cost average method

one may buy stocks periodically but that 'buy price' shall always be an average one. But if there is a trend where you might want to time the market, you may be loosing out for buying at a high or low valuation.

Consider the tax involved

You might want to buy stocks for a long or a medium term but try to hold them for more than a year to get taxed at the long term capital gains rate (which is presently 18%). If the stock is sold off before a year, the investor gets taxed at the normal income tax rate.

Diversify your investments

All the investments should be diversified. It is recommended not to just invest in stocks. It is always better to diversify the investments into other asset classes including real estate, cash or sometimes even bonds. So, it all doesn't depend on the market risks. If one asset class underperforms, one has the option of getting exposure to some better performing assets.

Diversify the stocks

A retail investor can diversify the stocks in mutual funds. It is better to diversify the risks into different stocks - not just loading up the stocks in one or two scrips. Plan your portfolio after consulting a good financial advisor. If your portfolio isn't large enough to buy 15 or more different stocks, consider the purchase of one or more mutual funds. This shall surely help your risks getting diversified.

The Indian stock market tips should come as a handy tool to boost investment by the retail investor. It's time for the retail investor to get ready and start investing!

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