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The stock market has been growing at a fast pace. From 2003 to 2006, the Sensex has risen from 3000 levels to 9000 plus levels. Steady inflow from the FIIs and confidence of the individual investors makes investing in India lucrative.

Sector

It has long been the prevalent view that the art of successful investment lies first in the choice of those industries or sectors that are most likely to grow in the future, and then identifying the most promising companies in these industries. Also, the sectors should be picked according to your own comfort zone. Only those sectors should be picked in which you have basic understanding of the nature and workings of the industry. This understanding helps in making wise decisions about your investment portfolio as per the changes and movements in the sector. Analysis of a sector should be done with a lot of caution. A sector, which is bound to get affected most by changes in government policies and the budget, should be avoided as there are risks associated with such sectors. But it is not as easy as it looks in retrospect because obvious prospects for physical growth do not translate into obvious profits for the investors.

Company Analysis

After decades of research, thousands of Equity Analysts and Advisors still debate on one question: How to pick a stock? The truth is, there is no fool-proof method. There is no infallible strategy or technique that can guarantee success. The term "fundamentally strong" has been overused so much that it has somewhat become a cliché.

Company Analysis is not as complicated as it seems. A general idea about the financials of the company and common sense can qualify a layman to use the term "fundamentally strong".

The goal of analyzing a company's fundamentals is to find a stock's "intrinsic value" - a fancy term for what you believe a stock is really worth - as opposed to the value at which it is being traded in the marketplace. If the intrinsic value is more than the current share price, it makes sense to buy the stock.

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