How to select stocks for investment in India

How to find best shares to invest in India

These are some of the most important points to consider when researching an Indian Company to invest in their shares.

Ownership of the Company, Promoters share percentage

One essential aspect to consider when researching any Company in India to invest in is to look at the proportion of the promoters shareholding in the Company. If they have a large percentage of ownership, say over 50% of the shares, it means that the promoters are serious about the growth of the company. It is very unlikely they will syphon off funds from a company where they are in complete control. But the reverse is true if the promoters share in the company are less than 30%. You have to be careful in such companies and make sure that the management is an honest lot.

What is the reputation of the Company’s products in the market

Check if the company’s products are well known in the market. If the general feeling in the market is that the company’s products are good and reliable, then it is a good company to invest in. Are the products of the Company the leading brand in that sector. Examples of good brands in India where they are market leaders in their segment of the business are brands like Maruti in the Auto sector, SBI (State Bank of India) in the Banking Sector, HUL (Hindustan Unilever) in the FMCG (Fast Moving Consumer Goods) sector and so on. Share Prices of such Companies where they are market leaders are sure to be expensive, but their share prices keep increasing, and they pay handsome dividends each year.

Analysis of the Companies financial results and Peer Group Analysis

You should look at the Company’s Balance sheet which will be available online at the Company’s website. Sources like BSE or NSE will also provide information of any listed company. You should look at the top line and bottom line figures of the company and compare it with other companies in the same activity. This type of analysis is called a Peer Group Analysis. You should look at the EPS (Earnings per Share), P/E Ratio (Price to Earnings Ratio), EBITDA, (Earnings before interest, taxes, depreciation and amortization), Book Value, Top line total sales and Bottom line profitability of the Company. Compare all these values with the company’s competitors, the peer group. Year to year growth in sales and profitability means it is a good company to invest in.

Debt-to-Equity Ratio

Debt-to-Equity Ratio is defined as the total debts the Company to its total equity capital. A Company that has debts equal to its equity capital is said to have a 1:1 Debt-to-Equity Ratio. Be careful of investing in a Company that has a high Debt-to-Equity Ratio, that is debts of the Company should be minimal, in fact, look for Companies that have cash reserves on its books.

Price-to-Earnings Ratio (P/E)

Perhaps one of the most important parameters for you to decide whether the share price of the Company is too high. The P/E ratio is a comparison of the stock’s price to the Earnings per Share (EPS). Compare the P/E ratio of the Company with its Peer Group. A good company having a low P/E ratio is said to be a “Value” Company. Warren Buffett, one of the most successful investor in the world, uses “value” investing method. This has made him one of the richest men in the world by investing in “Value” shares.

Dividend History

A company which pays a regular dividend is a sign of a Company in good health.

Check if any Mutual Funds has made investments in the Company

If any of the Mutual Funds has made investments in the Company, then it is an indication of a good Company, since mutual funds have dedicated teams of Share and Company Analysts researching into Companies, and they invest only in good Companies.

Best Shares to Invest in India, Best Indian Shares to buy today

To find the best shares to invest in India requires a lot of research work. One of the best methods to find the best Indian Shares to buy today is to go to the NSE (National Stock Exchange) website and analysing the 50 Companies that are in the NSE NIFTY, Junior NIFTY, and other NSE Indexes. You can do this by visiting this NSE live market website. Here you see at the right side of each share, the so-called ‘sparklines’ of the 50 NIFTY companies. The Shares are given in the order of the biggest gainers of the day or whose shares have gone up most in value percentage wise at the moment of your entering that site.

There are several values shown, Under the ‘Today’ tab are shown a small graph called a ‘sparkline’ which represents the price of the Share Vs time of day. Under the ‘Open’ tab is the opening price, Under ‘High’ tab, is shown the days high price and under ‘Low’ tab is shown the days low price. ‘LTP’ stands for last traded price, ‘Change’ shows change from the closing price of the previous day, ’52w H’ and ’52w L’ stands for the High and Low prices during the last 52 weeks or 1 year.

If you click on any of the Company names in the first column on the NSE live market website, it takes you to the page of that Company on the NSE site. These individual pages of the Companies in the NSE NIFTY give a lot of information about that Company. This is an important page to do research on any Indian Company in the NSE NIFTY.

Keep studying the NSE NIFTY live price web page and keep visiting the individual companies pages. After a few days of this you will get to know the top Companies of India, and with time, you will be able to almost guess correctly which way the NIFTY index will move, just by studying this web page together with the market sentiment.

From the analysis of companies you do, make a list of the Companies that you think are good. Now you have to Google search each of the Companies you have selected. Most of the time the selected company’s website will be there in the search result. Make sure you go to their website and look at all their pages. Look at their ‘news’ page. Some important news which is not yet known to the general public may be there. Once that news appears in the press and is known widely, the Company’s share price will jump.

Also on the Google search page, click on the tab ‘News’ at the bottom of the search box. This will give you all the news items about the Company, and you should analyse it. At the bottom of the news result page, you will find a “Create Alert” button. Click on this and enter your details including emails. Then whenever there is important news about the selected Company, you will get an email. It is better if you create a ‘Gmail’ account and give that email address.

Researching and analysing Companies is a long drawn out, time-consuming process. If you do this research diligently, you will make good profits. After some time of following this procedure, you will become an expert in picking the right shares and knowing which are the best Shares to Invest in India.

Best stock research sites

We have below a list of the best share research sites, visit these websites regularly and read. These websites for Indian share research provide a lot of information. These are the recommended sites for share research in India. They are in alphabetical order:

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