Tips for investing in share markets

As an investor a question always arises in one's mind when to buy or sell stocks??

while purchasing or selling stocks following conditions should be clear in the mind of an investor.

One should exit a stock if following conditions are validated and should use his/her intellect and analysis ability to come to a conclusion on basis of following seven most important points for exiting or investing in stock.

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1. Stocks underperforming consistently :If the company has reported poor results in the previous two-three quarters and the stock price has not shown any upward trend, analysts recommend you should exit a stock.

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2. Over Valuation :You should closely look at valuation while selling a stock. Many a time, it happens that valuation is on the higher side of the range which is not supported by visibility of earnings and ownership.

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3. Costly Acqisition : Any value destructive acquisition, according to analysts, can lead to a three-four quarter effect on the stock price of a company. Thus, you should look to exit the stock for time being.
example - Tata motors stock rates in previous quarter after acquiring jaguar/rover brands since then the stocks of tata motors are on decline

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4. Global Conditions of Share markets : Analysts say you should also keep a check on the global cues, especially if the company shares have a majority of the sales overseas or its performance is linked to smooth functioning of operations in a foreign country.

example IT companies are much dependent on US markets and due to recession in US market shares of IT companies are on decline.

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5.Passive management :Keeping a close eye on the management practices may provide you the cue for a planned exit.Analyst feel that sometimes it so happens that the management turns selfish and is involved in unfair practices such as regular insider trading and exorbitant compensation.

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6. Financial model of the company : Analysts point out that you should evaluate the financial model of a company on a quarterly basis . It will serve not only as a guide to the current performance of the company, but also what its future goals are and how is it working towards it.

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7. Rising Costs of Inputs :Analysts say you should closely monitor raw material costs of the companies in which you have shares.For instance, in case of auto and capital goods sector, the prices of major raw materials such as metals and alloys have gone up but the price of finished products can’t be increased in the same proportion because of intense competition in the sector.

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