Mantra to identify profitable shares

Here is some information by which a common investor can identify the shares which would give him profitable returns.

Institutional investors put a great effect on sale-purchase from common investors. This is because they have more money to support the orders, thus increasing the effect on shares. Thus we can understand the value of institutional investors in equity market. Institutional investors easily combine good analyst of markets with them and also they have good approach to investment research.
Thus they lead others whenever there is a turn to explore Multibagger. Other than this, in most cases, they maintain their position for a long time period. Thus it's very necessary to know that institutional investors are purchasing which shares and which shares are out of their priority list. Small investors should be aware and should do adequate homework before taking any decision of investment. But if they also consider institutional activities along with these factors then they will get the reflection of basic idea of investment.

Normally, institutional investors concentrate their mind mutual fund, insurance and pension provider. The interest of institutional investors has been increased a lot in Indian equity in the past few years. According the data of Securities and Exchange Board of India (SEBI), "They have made purchases worth Rs. 59,724 in the eight months ending on August, 2010. This is 48% more as compared to purchases of same time period in last year. Generally, they have much focus on research and their strategy to investment is for medium to long term. This means that they invest in only those shares in which there is good prospects for medium term growth. Small investor is not familiar with the modern techniques of investments like Discount Cash Flow (DCF) for future business of company. Thus it's a more easy way to keep an eye on investment trends of institutional investors for long term investments. However, a person should not follow this strategy blindly.

According to an analysis of Investors' ReturnBSE100 Index, 18 shares emerged of different sectors like automobile, infrastructure, bank and IT, in which Foreign institutional investors (FII) and domestic institutional investors have increased their investment a lot from September 2009 quarter to the first quarter of financial year 2010. In a recent report of brokerage house on mutual fund activities, there is a reference of those shares which are now liking of equity fund managers. This includes many shares like TATA Motors, Reliance Industries, SBI, etc.

Analysis indicated that 12 shares included in the above study has given positive results. While the matter to be considered is that there is no guarantee of return from the copy of investment trend of institutional investors. These 12 shares include many those shares of different sectors which have easily left behind the returns of 6.4% in sensex from the end of September, 2009. However, the investors should take independent decisions on investments because no guarantee can be given for returns in future from these particular shares only.

In an analysis of MenuETIG for investors, many such shares has emerged form different sectors which can be considered from the point of view of long term investments. For example, let's take TATA Motors. FII is very excited for that share because of remarkable improvement in the condition of its foreign brand Jaguar and Land Rover (JLR). This change is due to the increase in global demand of reputed brand like Jaguar and Land Rover. Other than this, the company is also supported by its some steps taken in lessening costs. This share is trading at PE of 11.8 on the basis of past four quarters and consolidated. Its valuation seems to be very good.

In the same manner, India's biggest bank State Bank of India (SBI) has marked amazing improvement in its performance in quarter June, 2009. Bank was increasing with higher rates till financial year 2009 when it had entered 36% growth in profits on year-on-year basis and profit had reached to Rs. 9,121 crore. Hoer this story of growth had stopped in financial year 2010 and its net profit was flat. In actual, the growth of loan book had fallen down to 8% in quarter of March 2010. Analyst was worried that whether bank would be able to match with growth arte of its industry. But the performance of bank removed all worries in quarter of June 2010. Its share is now trading on PE of 18 while it was on PE of 25 in January 2008.

The exploration sector is expanding rapidly in India. Thus the share of the company, Welspun Corporation, supplying submerged arc welded pipe to oil sector, are looking very attractive. This share is trading on PE of 8.5 on the basis of past quarters and is very attractive.

Another company which should be referred here is HCL Technologies. It is a top gear IT services company in the country. The company has decided to revive again its BPO business. Thus common investors can consider such shares on which institutional investors are betting and can hope good profits in long term.

Article by Nidhi
Nidhi is a freelance content writer with 10+ years of experience. She has a great passion to write on valuable topics so as to provide precise information to her readers.

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Author: S B Choudhary09 Oct 2010 Member Level: Gold   Points : 1

Great Report Nidhi Jee, I am being a small investor always follow the pattern of FII's. Like in case of SBI Share, the investment of Life Insurance Corporation of India is very high.

This stock is doing very well on the charts and I hope SBI will give good return in future also.

Thanks for the beautiful and informative report on investing in profitiable shares.

Author: Pravat Kumar Das13 Sep 2014 Member Level: Gold   Points : 6

It is not easy to follow the trading strategy of DII or FII. Because strategy would not affect you if you are following a wrong money management. If you want to be a successful investor (not trader) then just divide your money in to 5 parts. Suppose you want to invest 1 lakh Rupees. Make it in to 20,000 each part.

From nifty 50 stocks choose 5 sectors.
1- Banking
2- automobile.
3- IT
5- Pharma

These sectors are always performed well because these are common necessary of human needs and those sector has huge demand in near decade also. So from those sectors choose your favorite stocks and start investing. If you make 5-10% profit in overall or in any individual stock, just book that profit and average with the loss counter and do rotate.
And check after 1 year, you must have earned more than 20% even in down market. Because in up market all stocks would go up but in down market most of time FMCG and pharma put performed which would reduce your loss.

Author: Jayesh Pawar19 Oct 2023 Member Level: Bronze   Points : 3

That's a nice article.

I would like to call those stocks as undervalued stocks. Undervalued stocks are those whose "Intrinsic value" is more, are doing profitable business but their price are low. You have to identify such shares and do the industry as well as economy analysis and select among those shares.

There are more than 6000 companies listed on Indian stock market, but its really a skill to identify the undervalued companies and invest in it. Various websites, apps provide tools which can be free or paid, depending upon the provider.
One can make their own screeners to draw the stocks based on different criterias.

I would like to share an article on how to screen the stocks from the available list. Will come up with one soon.

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