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Several hundred years ago, mankind, through the creation of money, began to accumulate capital to build productive facilities that no one person could afford. This was the beginning of the need for the stock market. Investors needed a way to sell their investments as their circumstances changed.
From an original arrangement where investments were illiquid, we now have very liquid markets where investments can be bought and sold with relative ease and with a fairly low cost of transaction.

Over the last two decades, the common investor has discovered new arenas of investment. The liberalization and opening up of economy has opened new doors to the proverbial treasure, apart from the regular orthodox modes. Most of the investors look for best returns from their investment barring those orthodox lots who avoid risks. There is a plethora of opportunities available to park surplus funds, the most interesting and the most volatile being the stock market.

To invest successfully over a lifetime in the stock market does not require any unusual business insights or inside information. What is required is faith in your investment decision and the patience to watch the stock grow. If a layman follows the general rules to investing, he would be able to make handsome profits over a period of time. In order to beat the averages, what is required is an understanding of what we call in financial terminology, E-S-C, i.e., Economy-Sector-Company Analysis.

Economy

Before investing, due consideration should be given to the state of the economy. If the economy is doing well, the money which is invested has a lesser probability of getting eroded, whereas in an economy which is not doing well, money invested can be lost if not put in the right companies.

The Indian Economy has significantly grown in recent years. Both social and economic indicators have reflected their respective positive impact for the development of the economy. A strong BOP position in recent years has resulted in a steady accumulation of foreign exchange reserves. The main contributors to capital account surplus being the banking capital inflows, foreign institutional investments and other capital inflows.

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* Contributed by -
Nidhi Sharma,
MBA (Global), Batch 2005-07,
IMT, Nagpur.