(By- Harshita setia)
Mere saving is not enough, you must invest to beat inflation. The value of money you are saving is depleting every year and one of the ways of beating inflation is by investing in dividend-paying stocks. If only it was as easy as it sounds, just invest in the stock market and you have saved yourself from inflation. There is still a need to perform your research and analyze the market before investing in stocks. The stock market is unpredictable and your good guesses might take a bad turn sometimes.
Sensex as of 25th March, 2021 has a trading range of 48K-49K. This is after the range has declined from 52K, a mark crossed in the month of February, 2021. The trading range was at its all-time high in February this year. Bullish investors might be blamed for this, as per a popular opinion, bulls have invested their money in the market and are now withdrawing the same as they are now confident about the profits. Another opinion depicts inflation as a reason for the situation claiming that even the sky is not the limit for the prices of fuel. This seems to be a valid reason somehow as people tend to spend on the necessary goods rather than buying unsecured stocks.
But then again these are just opinions, not facts.
Analysation (March, 2020- March, 2021)
March 2020 commenced with minor crashes and on March 23, 20, the day lockdown was announced, the market crashed to 25K points from 40K points in February. As a reaction to this drop, investors started purchasing shares at a rapid rate, more number-of transactions were taking place almost every day. The stock market once again showed its unpredictable nature when it was at its all-time high within 5 months of this major crash. In October, when the pandemic was still going on, Sensex was rising. Finally, on January 21, 2021, Sensex for the first time crossed the points of 50K, basically, in 10 months the market jumped from 25K to 50K.
Previous crash stories:
In the early 2000s, the market crossed 5K points for the first time due to technological changes, the market kept rising till 2007-2008 and crossed 20K points, the reason being global liquidity. This was the first time it rose 15K points in just 7 years before the global market crashed. The market fell to 9K following this crash. An economic crisis followed this.
Predictions based on my analysis:
As per my analysis, Sensex might cross 100K points by the 2030s. Nifty might also rise to 60K which is presently ranging between 14K-15K.
The question still subsists, whether this is the right time to invest or not?
Well, the time to invest was when the market crashed, investors who did, have booked profit when the market was at its full-time high. But it’s never too late, you cannot decide the future of your stocks, you can only guess the outcomes based on your analysis and research of the market. It’s all about being persistent, patient, and not caring about every up and down of the market. In the long run, investing seems profitable. When you are playing a long-term game in the market, you need not worry about any up or down taking place in one day, week, or month, you are here for a longer period, years probably.
A common mistake made by new investors is that they follow trends, bulls, and bears instead of doing proper research themselves. Take an example of the time when Elon Musk tweeted that “Use signal”, referring to an app named signal, people misinterpreted it to be a stock named signal and the prices of the stock named signal went up as a result.
As long as you are avoiding this, you are safer than other investors. Take decisions by yourself and don’t be manipulated by the trends.
Here’s what to research upon
The things you should be considering and doing research upon before investing are:
- PE ratio of the company whose stocks you are buying. The profit earning ratio is calculated by dividing the market value price per share by the company’s earnings per share. The lesser the better.
- The pros and cons, policies, and amendments in the policies of the company, highly affect the market value of the shares.
At Least these points are to be considered in your research before you make an actual purchase.
(The statistics mentioned in the blog are regarding the BSE)