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Investing in the stock market is a great way to grow your wealth, but it can also be risky if you don’t know the nitty-gritty of investment. According to Trade Brains, over 90% of people lose money in the stock market because they invest blindly in any kind of stock without doing proper research first.
Ankita Kumari, a banker and financial analyst, says one way to identify promising stocks is to look for hot stocks that are in great demand due to positive financial performance. For example, in 2023, Amazon’s stock price rose by 76%, and Shopify also increased by 186%, making it one of the best-performing stocks.
Another way to identify undervalued stocks is by looking at the price-to-book value ratio (P/B) ratio of a stock. According to yahoo.com, stocks with low P/B ratios are likely to be undervalued but ironically, they represent a good investment opportunity with high growth prospects in the long run. Therefore, by following the right strategies and techniques, you can identify promising stocks for investment in India and make consistent returns. In this article, we will explore some of the practical ways industry experts identify the best stocks to buy in India.
Global Market Trends and Technical Analysis
You can closely monitor global market trends and events like rising interest rates and inflation by paying attention to the ES1 futures movement. E-mini S&P 500 (ES1 futures) are electronically traded futures and options contracts on the Chicago Mercantile Exchange that can allow investors to hedge their bets or speculate on the price movements of the S&P 500 index. Invariably, they are designed to mirror the performance of the S&P 500 index, which represents the market capitalizations of 500 top companies with their common stock listed on NASDAQ or the New York Stock Exchange. Thus, significant shifts, such as rising or falling futures prices, will provide insights into how the broader market is performing and identify sectors that are likely to perform well in the future.
Progressively, to get more insight into promising stocks, you can technically analyze chart patterns, such as support and resistance levels, trendlines, and chart indicators like moving averages and Relative Strength Index (RSI). For example, A stock or index that has an RSI value below 50 is in a bearish trend, while one above 50 is in a bullish trend. These patterns reveal potential buy or sell signals.
Additionally, industry experts like bankrate.com and Kiplinger.com recommend identifying companies with strong fundamentals, such as increasing revenue, growing profits, high market capitalization, and positive cash flow. Stocks from such companies will survive smoothly when there’s market volatility and still rake in decent profits in the long run. Also, consider the market before taking any position in the stock market. Start by surveying the market size and how large it is operating because the movement of stock largely depends on 75% of the velocity of the market.
Look for Hot Stocks
Hot stocks are those that are in great demand as a result of positive financial performance. These stocks often generate tremendous investor interest, driving up the stock price. To identify hot stocks, look for those that have seen a sharp increase in price variation or price volatility, as this indicates a growing investor interest and demand, regardless of the industry. Also, check out for the trade volume when there’s an upward movement of price.
According to corporatefinanceinstitute.com, trade volume indicates the number of shares sold over a period. When the trade volume is high, it shows that the stocks are frequently traded and have a high liquidity level.
For example, Apple has a high trade volume of more than 70 million shares, same goes for Tesla with a daily average of more than 40 million shares as shown by webull.com. These companies have had significant growth in recent years.
Conclusively, identifying promising and long-term profitable stocks in India is possible, but investors must monitor global market trends and indicators to make informed decisions. Also, it’s important to carefully follow the strategies and techniques above so investors can make informed decisions when investing in the stock market and achieve their financial goals.
