Making money through equity investments

Making money through equity investments
17/04/2018

What is equity investment?

Every company requires cash to meet its present funding needs or development plans. An equity investment is an investment by persons or firms. The investment is generally in the form of stocks, wherein earnings are in the form of assets gains or bonuses. The investor ponders equity investments as the final method of making the best use of his capital. The investor recuperates his money only once he vends his stocks to others.

Equity investment can also be a fund for obtaining possession in a private business or as undertaking capital in fresh companies. The investor advances his revenue only once the company agrees to allocate the profits after liquidating the assets or while they sell their shareholdings to new investors. In the latter, the firm has to come across its responsibilities as the main concern.

How the stock market works!

An individual can buy and or sell any stocks of any company either through an online trading account or through their broker. As soon as you place the order, it's redirected to the related stock exchange, and the order is executed. Once the transaction is done, if it's a ‘buy,' then the stocks acquired are delivered to your demat account where they are kept in electronic form. If it's a ‘sell,' the stocks are taken out of your demat account and money is credited to your account.

Process of investing in equity markets

There are two basic methods that stock exchanges use to execute an equity trading:

•    Exchange floor

•    Electronic trading

1.    Exchange floor

Transaction on the floor of the popular stock exchange is a picture most of us have seen and cheered to on television. When the market is open, we see hundreds of people whoosh about shouting and screaming to one another, speaking on phones, staring at computer screens, and entering into deals with each other.

2.    Electronic trading

In this fast-moving world, the electronic market utilizes huge computer systems to match sellers with buyers and vice versa instead of human brokers. Many traders now favor this technique of equity trading.

Key benefits of equity investment

Below are the key reasons to invest in equity markets:

•    Wealth gains over the long-term

•    A decent source of revenue

•    Extremely liquid

•    Tax rewards

•    Corporate control

•    Limited liability

Conclusion

If you're interested in the stock market, it's recommended to trail market dealings and all related business news. This will aid you to comprehend if your broker is correct for you & whether your investments are meeting your goals.

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5 Stocks for next week 8th Jan-12th Jan 2018

5 Stocks for next week 8th Jan-12th Jan 2018
by Gautam Upadhyaya 01/05/2018

AJANTA PHARMA - BUY

Stock AJANTA PHARMA
Recommendation The stock has managed to give a breakout from its sideways consolidation on the daily chart. The stock has also shown good strength on the daily and weekly MACD Histogram.
Buy/Sell Range Target Stop Loss
Buy(cash) 1518-1525 1590 1474
NSE Code Market Cap(Rs in Cr) 52-week High /low 200 Day M.A
AJANTPHARM 13385 1870/1106 1418

JUST DIAL - BUY

Stock JUST DIAL
Recommendation The stock has given a flag pattern breakout and has also breached the declining trend line backed by a surge in volumes on the daily chart. The stock has taken support along the 10-day EMA on the weekly chart. 
Buy/Sell Range Target Stop Loss
Buy(cash 548-552 584 527
NSE Code Market Cap(Rs in Cr) 52-week High / low 200 Day M.A
JUSTDIAL 3697 619/326 459

NIIT TECH - Buy

Stock NIIT TECH
Recommendation The stock has given a breakout from its sideways consolidation on the daily chart backed by a surge in volumes; the stock has also taken support along the rising trend line on the daily chart.
Buy/Sell Range Target Stop Loss
Buy(cash) 666-671 698 648
NSE Code Market Cap(Rs in Cr) 52-week High /low 200 M.A
NIITTECH 4085 696/401 558

INDUSIND BANK - BUY

Stock INDUSIND BANK
Recommendation The stock has managed to give a breakout above the declining trend line on the daily chart and has managed to give a breakout from its sideways consolidation on the weekly chart. The stock has also witnessed bullish crossover on the daily MACD indicator which affirms our positive view on the stock.
Buy/Sell Range Target Stop Loss
Buy (cash) 1690-1700 1758 1657
NSE Code Market Cap(Rs in Cr) 52-week High / low 200 M.A
INDUSINDBK 101955 1818/1137 1562

INDIAN OIL CORPORATION - SELL

Stock INDAIN OIL CORPORATION
Recommendation The stock is in a lower top lower bottom chart structure on the daily chart and has given a close below its support levels. The weakness shown on the MACD histogram accentuates our negative view on the stock.
Buy/Sell Range Target Stop Loss
SELL-Jan Futures 385-387 374 393.2
NSE Code Market Cap(Rs in Cr) 52-week High /low 200 M.A
IOC 186369 462/341 393

Research Disclaimer

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Top 5 ELSS for 2018

Top 5 ELSS for 2018
by Jitender Singh 01/05/2018

Equity Linked Savings Scheme (ELSS) is a type of equity mutual fund in which investments up to Rs1.5 lakh per financial year are tax deductible under section 80C. In other words, investors don’t have to pay tax on investment up to Rs.1.5 lakh in ELSS. By investing in ELSS, an investor in the 30% tax bracket can save Rs.46,350 as tax.

Below table exhibits the amount of tax one can save by investing Rs.1.5 lakh in ELSS for different tax slabs.

Tax Bracket 5% 20% 30%
Tax Saving Rs.7,725 Rs.30,900 Rs.46,350

*Includes 3% cess also

Besides tax benefits, ELSS investments also offer other benefits discussed below.

  1. Wealth creation with tax-saving – Historically, it has been seen that ELSS schemes have given significantly higher returns than other tax saving schemes like PPF, 5-year FD, EPF, etc.
  2. Shortest lock-in period – ELSS has a lock-in period of 3 years, which is the shortest among all tax-saving instruments.
  3. Tax free capital gains: The long-term capital gains from investment are tax-free.
  4. Dividends are tax-free: Dividends received are tax-free in the hands of the investor right from the year of investment.
  5. Low investment amount: Investors can start investing with Rs500 in lump sum or via SIP in ELSS. Since it is difficult to invest a lump sum amount in one go, SIP helps a person to invest small amounts at regular intervals. SIP payment is auto-debited from your bank account every month.

ELSS is the best way to save tax and create wealth in the long term. Below are the top 5 recommended ELSS funds.

Scheme Name Fund Manager Corpus (cr) 1 Y (%) 3 Y (%) 5 Y (%)
Aditya Birla SL Tax Relief '96(G) Ajay Garg Rs.4,349 41.6 16.3 21.6
Axis LT Equity Fund(G) Jinesh Gopani Rs.15,408 35.7 12.2 22.4
DSPBR Tax Saver Fund-Reg(G) Rohit Singhania Rs.3,571 34.4 15.6 20.1
IDFC Tax Advt(ELSS) Fund-Reg(G) Daylynn Pinto Rs.798 52.2 17.4 21.6
Reliance Tax Saver (ELSS) Fund(G) Ashwani Kumar Rs.10,157 44.2 13.3 22.4

1 year returns are absolute; 3 year and 5 year returns are CAGR.
AUM as of November 2017, Returns are as on January 02, 2018

Aditya Birla SL Tax Relief ‘96 Fund

  • Aditya Birla SL Tax Relief ‘96 Fund does tactical allocation between large cap and mid-= cap stocks to ensure optimal risk reward.
  • As of November 2017, the fund has invested ~37% of its AUM in large cap stocks, ~55% in mid cap stocks and ~7% in small cap stocks to generate higher returns.

Axis Long Term Equity Fund

  • Axis Long Term Equity mutual fund  invests in companies with sustainable profit growth to generate wealth over 3-4 years.
  • Besides, the fund manager follows bottom-up approach to select the companies.
  • As of November 2017, the fund has invested ~66% of its AUM in large cap stocks while ~30% in mid cap stocks to generate alpha.

DSPBR Tax Saver Fund

  • DSPBR Tax Saver Fund primarily invests in large cap stocks with some tactical allocation to midcap and small cap stocks to generate higher returns.
  • The fund manager follows buy-and-hold strategy for majority of the portfolio. He also takes active and tactical calls to exploit the market opportunities.
  • As of November 2017, the fund has invested ~71% of its AUM in large cap stocks and ~22% in mid cap stocks to generate higher returns.

IDFC Tax Advantage (ELSS) Fund

  • IDFC Tax Advantage (ELSS) Fund does tactical allocation between large cap, mid cap and small cap stocks to generate higher returns.
  • As of November 2017, the fund has invested ~46% of its AUM in large cap stocks, 29% in mid cap stocks and 20% in small cap stocks in order to generate higher returns.

Reliance Tax Saver (ELSS) Fund

  • Reliance Tax Saver (ELSS) Fund does tactical allocation between large cap, mid cap and small cap stocks to generate high returns.
  • The fund invests in potential leaders with high growth prospects.
  • Generally, the fund takes 2-3 sector call at a time and invests in high conviction mid cap stocks.
  • As of November 2017, the fund has invested ~60% of its AUM in large cap stocks, 25% in mid cap stocks and 15% in small cap stocks in order to generate higher returns.

Research Disclaimer

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5 short term trades

5 short term trades
by Gautam Upadhyaya 02/06/2018

Short term calls are the buy/sell recommendations generated on the basis of technical and derivative data points with a trading horizon of 2-5 days. The objective is to capture stocks displaying strong momentum or a short-term reversal in trend. Short term calls will be generated in cash and F&O segments. The calls should be executed when the underlying price is quoting within the mentioned range.

1) Reliance Industries Limited - Buy

Stock

Reliance Industries Limited

Recommendation

The stock has formed a large bullish engulfing candlestick pattern and has witnessed a strong bounce from its 200-day EMA backed by a surge in volumes. Derivative data indicates fresh long formation.

Buy/Sell

Range

Target

Stop Loss

Buy (Cash)

1100-1110

1325

960


2) Tata Power Company Limited - Buy

 

Stock

Tata Power Company Limited

Recommendation

The stock is on the verge of a flag pattern breakout on the daily chart and has taken support along the rising trend line. It has also shown positive momentum on the weekly MACD histogram. Derivative data indicates fresh long formation in the stock.

Buy/Sell

Range

Target

Stop Loss

Buy(Cash)

75-76

91.5

65

3) ITC Ltd - Buy

Stock

ITC Ltd

Recommendation

The stock has witnessed a positive bounce from its support levels on the weekly chart (89-period EMA). It has also managed to give a close above its 200-day EMA on the daily chart. Derivative data indicates fresh long positions in the stock.

Buy/Sell

Range

Target

Stop Loss

Buy (Cash)

Rs280-283

Rs324

Rs254

 


Research Disclaimer

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5 Stocks for next week 5th Feb-9th Feb 2018

5 Stocks for next week 5th Feb-9th Feb 2018
by Gautam Upadhyaya 02/06/2018

MARUTI SUZUKI INDIA- SELL


Stock

MARUTI

Recommendation

The stock has breached its support levels on the daily chart and has witnessed a bearish crossover on the daily MACD indicators. Maruti has also given a close below its 10 period EMA on the weekly chart, which affirms our negative view on the stock.

Buy/Sell

Range

Target

Stop Loss

SELL(FEB FUTURES)

8980-9020

8600

9293

NSE Code

Market Cap(Rs in Cr)

52-week High /low

200 Day M.A

MARUTI

273140

10000/5804

8028


 

HDFC BANK- SELL


Stock

HDFC BANK

Recommendation

The stock has breached its support levels along the rising trend line and is on the verge of witnessing a bearish crossover on the daily MACD indicator. The stock has formed a shooting star candlestick pattern on the weekly chart.

Buy/Sell

Range

Target

Stop Loss

SELL(FEB FUTURES)

1948-1960

1880

1993

NSE Code

Market Cap(Rs in Cr)

52-week High /low

200 Day M.A

HDFCBANK

504763

2014-1294

1743


 

PIRAMAL ENTERPRISES-SELL

Stock

PIRAMAL ENTERPRISES

Recommendation

The stock has faced resistance along the declining trend line and has given a breakdown on the daily chart. Derivative data suggests fresh short position, which is indicated by a rise in O.I and decline in price.

Buy/Sell

Range

Target

Stop Loss

SELL(FEB FUTURES)

2642-2658

2505

2749

NSE Code

Market Cap(Rs in Cr)

52-week High /low

200 M.A

PEL

47779

3083/1700

2611


 

POWER FINANCE- SELL

Stock

POWER FINANCE

Recommendation

The stock has breached its support levels on the weekly chart after witnessing a sideways consolidation for nearly seven months. The stock has formed a large bearish candlestick patter on the daily chart. Derivative data suggests fresh short formation in the stock indicated by rise in open interest and decline in price. We expect the negative trend to continue in the following week.

Buy/Sell

Range

Target

Stop Loss

 Buy

110-112

104

115.8

NSE Code

Market Cap(Rs in Cr)

52-week High /low

200 M.A

PFC

29291

169/110

126


 

BRITANNIA LTD- BUY


Stock

BRITANNIA LTD

Recommendation

The stock is in a rising channel formation on the weekly chart and has given a positive bounce from its support levels. We expect the positive momentum to continue in the stock.

Buy/Sell

Range

Target

Stop Loss

Buy

4715-4729

4910

4572

NSE Code

Market Cap(Rs in Cr)

52-week High /low

200 M.A

BRITANNIA 

56787

4963/2918

4258


Research Disclaimer

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5 Stock Tips This Dussehra

5 Stock Tips This Dussehra
by Nikita Bhoota 02/06/2018

Dussehra is considered to be an auspicious festival in India. On this day, Lord Rama has killed Ravana. This festival signifies the victory of good over the evil. Similarly, an investor can overcome their loss-making investments by adding the right stocks in their portfolio. Based on research, fundamentals and valuations, we recommend the following stocks for investment this Dussehra.

Infosys

Infosys is the second largest IT Company in India. The company’s service lines are more focused on discretionary spends like ADM and ERP constituting 67% of the revenues. On the vertical front, BFSI accounts for 33% of the revenue. Geographically, North America contributes ~61.9% of the revenue followed by Europe (~22.5%) in FY17. We expect 11% revenue CAGR over FY17-19E due to pickup in BFSI and retail segment supported by higher customer spends in the US. Similarly, large deal wins will keep the growth momentum. We expect 8% EBITDA CAGR over FY17-FY19E due to increasing focus on cost optimization. We expect 5% PAT CAGR of over FY17-FY19E. The appointment of Mr Nandan Nilekani as the non-executive chairman would restore a sense of security among investors, employees, and clients. We expect an upside of 15% from CMP of Rs 898 over a period of 1 year.

Year Net Sales (Rs Cr) OPM (%) Net Profit (Rs Cr) EPS (Rs) PE (x) BVPS (Rs) P/BV (x)
FY17 68,485 27.2 14,353 62.5 14.4 296.2 3.0
FY18E 70,746 26.6 14,326 62.4 14.4 358.6 2.5
FY19E 76,058 27.1 14,993 65.3 13.8 423.9 2.1

Source: 5paisa research

Aurobindo Pharma

Aurobindo Pharma Limited (Aurobindo) manufactures generic pharmaceuticals and active pharmaceutical ingredients in India. The company's product portfolio is spread across six major therapeutic categories of antibiotics, anti-retrovirals (ARV), CVS, CNS, gastroenterological, pain management, and anti-allergic.  It derived 79% of revenue from generic pharmaceuticals and remaining from active pharmaceutical ingredients in FY17. Geographically, US business contributes 44% to Aurobindo’s total revenue.  We expect 20% revenue CAGR over FY17-FY19E due to strong pipeline of 134 products which majorly includes niche and high value products. Clearance to unit 7 in Hyderabad is also beneficial for the company. Further, recent approval for serum and tablet formulations of gRenvela will also boost the revenues. We expect margins to improve by 110 bps as strategic backward integration of marketing with API manufacturing is expected to reduce the intensity of ongoing pricing pressure. We expect 28% PAT CAGR over FY17-FY19E. We expect an upside of 15% from CMP of Rs 698 over a period of 1 year.

Year Net Sales (Rs Cr) OPM (%) Net Profit (Rs Cr) EPS (Rs) PE (x) BVPS (Rs) P/BV (x)
FY17 15,089 23.1 2,301 39.3 17.5 161.0 4.3
FY18E 16,301 23.2 2,386 40.7 16.9 201.7 3.4
FY19E 18,173 25.5 2,947 50.3 13.7 252.0 2.7

Source: 5paisa research

Manappuram Finance

Manappuram Finance is an NBFC, offering gold loans, microfinance, housing loans and commercial vehicle loans. Its AUM comprised of gold loan (81.4%), microfinance (13.14%), housing finance (2.2%) and others (1%) in FY17. We expect income to grow at 28% CAGR over FY17-FY19E on account of pickup in gold segment. The company is strongly focusing on short-term gold loans owing to current volatility in gold prices. Manappuram is also focusing on housing finance and microfinance and targets to derive 50% of revenue from these segments in next three years. We expect AUM to grow at 20% CAGR over FY17-FY19E. We expect GNPA to remain flat at 0.8% in FY18E. We expect an upside of 18% from CMP of Rs 95 over a period of 1 year.

Year NII (Rs Cr) Net Profit (Rs Cr) EPS (Rs) ROE (%) P/BV
FY17 1,943 726 1.7 24.8 2.8
FY18E 2,185 836 2.0 24.9 2.5
FY19E 2,489 959 2.3 24.9 2.1

Source: 5paisa research

Titan

Titan Company is India’s leading player in branded jewellery, watches and precision eyewear. Its revenue consists of Jewellery (78%), Watches (15%), Eyewear (3%) and others (4%) in FY17. We expect 42% revenue CAGR over FY17-FY19E on account of sub-brand Rivaah in wedding jewellery segment. With this, Titan targets to reach 40% market share in FY21E vs 22% in FY17E. Additionally, the entry in high value studded jewellery will also support the revenue growth. Recently, government has fixed GST rate of 3% (expected 5%) on gold which bodes well for the company. We expect EBITDA margins to improve by 90bps over FY17-FY19E on account of cost saving initiatives by the company. Titan is a debt free company which lends financial stability. We expect 60% PAT CAGR over FY17-FY19E. We expect an upside of 15% from CMP of Rs 587 over a period of 1 year.

Year Net Sales (Rs Cr) OPM (%) Net Profit (Rs Cr) EPS (Rs) PE (x) BVPS (Rs) P/BV (x)
FY17 12,614 9.5 761 8.6 68.5 48.6 12.1
FY18E 15,075 9.9 1,019 11.5 51.1 60.0 9.8
FY19E 17,968 10.4 1,285 14.5 40.6 74.5 7.9

Source: 5paisa research

Asian Paints Ltd (ASL)

Asian Paints is the largest paint manufacturer in India with market share of 53% in decorative paints and has a strong dealer network of ~45000 dealers. We expect revenue CAGR of 14% over FY17-FY19E on account of strong demand for decorative paints due to shorter repainting cycle (repainting forms 65% of the decorative paint demand). ASL is working on 2 Greenfield projects (Mysuru-6,00,000 KL and Vishakhapatnam- 5,00,000KL) to expand its decorative paint capacity.  The first phase of both the capacities- 3,00,000 KL will be completed by FY19E. GST will reduce the tax arbitrage for the unorganized segment (30% of industry) and will provide additional benefit to the organized players in the long run. We expect EBITDA CAGR of 14% over FY17-FY19E due to shift from distemper to external emulsion (high margin) in decorative paint business. We expect PAT CAGR of 11% over FY17-FY19E. We expect an upside of 15% from CMP of Rs 1161 over a period of 1 year.

Year Net Sales (Rs Cr) OPM (%) Net Profit(Rs Cr) EPS (Rs) PE (x) BVPS (Rs) P/BV (x)
FY17 15,290 19.8 2026 21.1 55 79.3 15.1
FY18E 17,244 19.6 2173 22.7 51 93.8 12.8
FY19E 19,908 19.9 2533 26.4 44 110.7 10.8

Source: 5paisa research