How To Select A Stock To Invest In Indian Stock Market For Consistent Returns?

1. How to select A Stock To Invest in Indian Stock Market For ConsistentReturns? So, you want to invest your money in the stock market and increase it! You have gone through many investment tips, newspapers, financial journals and subscribed to stock tips and recommendations from various experts and advisors. However, you are afraid to step forward. Why? This is because you understand that 9 out of 10 people lose money in the stock market. Now, the reason most of them lose is that they do not do their homework properly and depend to a large extent on their brokers to choose stocks to invest in the stock market. Therefore, you choose to handle it on your own and choose stocks to invest smartly. Although you can choose from the top 10 stock brokers in India to stay at the competitive edge, it is essential that you equip yourself with the right tools when it comes to investing in the right stocks. 1.Check company fundamentals It is not a tough job to filter a fundamentally steady company. If the company is not fundamentally strong quantitatively, there is no point in doing more research about its quality such as its products/services, competitors, future prospects etc. you can even connect with the top brokers in India and look for tips regarding the following crucial ratios. Below are 8 financial ratios and their trend that must be thoroughly inspected in this step: • Earnings Per Share (EPS) – Increasing for last 5 years • Price to Earnings Ratio (PE) – Low compared to companies in the same industry • Price to Book Ratio (P/BV) – Low compared companies in the same industry • Debt to Equity Ratio – Should be less than 1 (Preferably <0.5 or Zero-Debt)

2. • Return on Equity (ROE) – Should be greater than 20% (Avg. 3 Years) • Price to Sales Ratio (P/S) – Smaller value is preferred • Current Ratio – Should be greater than 1 • Dividend – High/Increasing for the last 5 years 2. Understand the products/services offered by the company After sorting the businesses using their financial ratios, it’s time to investigate further about the company. Understand the company first. Learn about its product and services. It’s necessary that the company’s products are easy-to-understand and has a quite forthright business model. There are different types of companies that most of us know and understand. From toothpaste, electronics, clothing, shoes to bikes, cars, airlines, banks; there is a company in the back of every product. Invest in such companies that you know well. Do not buy the stock of ‘XYZ Pharma’ without knowing what chemical products it makes. 3. Will people still be using the company’s product or service in 10-20 years from today? The next step is to check the life-cycle of the business. Always search for a company with a long life. Such companies carry enormous growth potential and the power of compounding is applicable to these companies. Avoid investing in companies having a life of just a few years. 4. Does the company have a low-cost tough competitive advantage or MOAT? This idea of ‘MOAT’ was brought by Mr. Warren Buffet. A moat refers to a deep, wide ditch near a castle, fort, or town, usually filled with water and intended as a defence against attack. Some stocks feature a similar moat around them. That’s whyit’s very harder for its competitors to overpower them in its domain. 5. Does the company have a huge debt? Big debt in a company is similar to a very big hole in the boat. If that boat hole is not fixed soon, So he would not be able to cross the long sea and would certainly sink in the middle. When you are choosing a stock to invest in the Indian stock market, look carefully at its financial documents. Avoid companies with large debt. Most of the times, accountants use financial loopholes to hide debt in their annual results. However, if you read the financial statements closely, you will be able to find these loans in the company's balance sheet.