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24 Mar 2020 by Pradeep U
Fluctuating Share Prices - How to Gain From It? – Research & Ranking

Share markets in India and share prices never move in a straight line.

Ever noticed this?

Yes, it is indeed a fact and this happens because of market volatility. Check out the below graph of Nifty 50 for a 5 year period ranging from March 2015 to March 2020.

In the above graph, it is quite evident that over the long term, markets are eventually going up, but in between, there are some hiccups, i.e., corrections.

So, what does this mean?

It simply means every correction in the share prices offers an opportunity for an investor to buy more at discounted prices.

It simply means every correction in the share market in India is an opportunity for an investor to buy more discounted prices.

Consider it as a sale at your favourite store. Now, what would do we usually do when we come across a 30% or 40% or even 50% or more sale on our favourite brands?

The obvious answer is to buy more. Isn’t it?

The same principle applies in the share market in India too. However, what happens, in reality, is just the opposite.

Most share market investors panic at first sight of correction and end up selling their stocks for losses.

"In the middle of difficulty lies opportunity" - Albert Einstein.

As mentioned earlier, investors who look at market correction as an opportunity to buy stocks trading below their intrinsic value can create significant wealth.

Through this article, let's take a detailed look at:

A) How stock market volatility gives rise to imperfections in share prices resulting in mispriced opportunities?

B) How Research & Ranking can help you in identifying and investing in shares trading below their intrinsic value?

C) How to gain from fluctuating share prices by investing in current mispriced opportunities in the market?

A) How stock market volatility gives rise to imperfections in share prices resulting in mispriced opportunities?

Share prices depend on multiple factors, but the most primary consideration is the number of buyers and sellers.  When there is a high demand for a stock, i.e. a high number of buyers the price of the stock is bound to increase on the other hand when there is a low demand for a stock, i.e. a high number of sellers, the share price is bound to decrease.

In the long term stock prices of companies listed in the share market in India are decided on the basis of earnings of the company.

When a company does well in terms of sales and revenue, the value of the company is ultimately reflected in its share prices.

However, in the short term share prices are influenced by multiple factors such as political, global instability, rise in oil prices, terrorist attacks, the threat of armed conflicts etc. to name a few.

To help better understand this, let's take a look at a few examples from the past below:

Example 1

On 14th September 2019, Saudi Arabia's two major oil plants were attacked by armed drones reducing almost 50 per cent of the country's global crude supply. This led to escalations if tensions in the Gulf region with America blaming Iran for the attack.

Spooked by the threat of potential escalation leading to armed conflict in the Gulf region, the share markets in India corrected sharply with Nifty falling by almost 300 points over the week. However, in less than a week, the Indian share markets not only recovered but touched new highs with Nifty touching 11,600 levels.

Now here we have used the example of Nifty 50 as it represents the weighted average of 50 Indian company stocks in 13 sectors and is one of the leading stock index benchmarks used in India.

Example 2

Post the announcement of the FPI surcharge in Budget 2019, Foreign Portfolio Investors (FPI’s) & Foreign Institutional Investors (FII’s) who have been one of the biggest drivers of share market in India started selling stocks.

This resulted in a free fall in the Indian markets with the benchmark Nifty 50 correcting from 11,788 in June 2019 to 11,023 in Aug 2019. However, post the rollback of the FPI surcharge by the government the benchmark index Nifty 50 bounced back quickly and touched 11,877 in October 2019.

The above two examples are the latest ones. However, if one looks back in history, there are many such examples of market correction triggered by domestic and global events which have resulted in a significant correction in share prices.

An important point for an investor to note here is that irrespective of the correction in stock market indices and share prices there are no fundamental changes in good quality stocks.

For example, if the stock price of a company which is fundamentally sound in terms of consistently growing revenues, is well managed, has low or zero debt and has scalable business model, corrects as a part of the overall market correction due to temporary domestic or global events but has a potential to bounce back in the foreseeable future, thereby delivering good returns in the medium term.

Example 3

On March 23rd, 2020 Indian benchmark indices the Sensex and Nifty touched their yearly lows a correction of almost 35-40% from their yearly highs achieved in January 2020 due to rising fears of Coronavirus cases and slowdown in the economy due to lockdown. But markets brushed off these fears and have recovered to a great extent and are only 15% down from their January highs.

Now that you have a clear picture of how corrections in the stock market in India can give rise to stock price imperfections let's take a look at the second and most important part, i.e. identifying those mispriced opportunities.

B) How Research & Ranking can help you in identifying and investing in shares trading below their intrinsic value?

Using a winning combination of technology and in-depth research, our team of experts will identify those fundamentally sound stocks which are trading below their intrinsic value and have the potential to multiply investor wealth by 25-50% over the next 6-18 months.

So essentially you will receive investment recommendations of 10-12 fundamentally sound businesses; i.e. one stock recommendation each month. However, at times when you may also receive two investment opportunities in a month.

Along with the stock recommendation, Research & Ranking will also provide you with a detailed research report which highlights the rationale behind the analysis and the upside potential of the stock.

It will also include information such as:

  • The price range in which recommended stock has to be purchased and exited.
  • A short update every six months until the recommendation to exit to track earnings growth/major events in the stock/industry.
  • A quarterly fact sheet to capture open and closed positions, profit booked/accrued of the portfolio stocks.
  • Alerts via SMS, email & updates on your personalized dashboard and mobile app.

C) How to gain from fluctuating share prices by investing in current mispriced opportunities in the market?

 Step# 1

Sign up for Mispriced Opportunities Strategy by visiting our website.

https://www.researchandranking.com/mispriced-opportunities

In this page, you can view the subscription details of the Mispriced Opportunities Strategy.

You can choose from any of the two subscription plans offered by us for the Mispriced Opportunities Strategy, i.e. one-year subscription for Rs.18,000 and three-year subscription for Rs.36,000.

Save Rs.18000 by opting for a 3-year subscription, which translates to a discount of cool 33% discount on the otherwise payable on a yearly subscription for three years.

You can make payments through NEFT/RTGS/IMPS/UPI.

Step# 2

Check registered email for our welcome email.

Once you have made the payment, you will receive a Welcome Email from our customer service from the address createwealth@researchandranking.com containing details such as the link for Research & Ranking dashboard, your username and password to log in. 

Step# 3

Visit https://dashboard.researchandranking.com

Enter the registered email address and password to login & update your Profile.

Once you verify your email address and mobile number and complete the mandatory fields, click on I agree to Terms & Conditions and click Submit.

According to SEBI guidelines, it is compulsory to attach your PAN card copy.

So keep it nearby.

You will then be redirected to the Mispriced Opportunities which will appear as below.

Click on Stocks to Buy to view the list of stocks recommended in Mispriced Opportunities Strategy.

In this section, you can see the list of stocks to buy with essential details such as:

  • recommendation date
  • percentage allocation,
  • buying range
  • exit range
  • current price

Important things to note:

We will recommend only those stocks under Mispriced Opportunities which have passed our stringent fundamental test based on various quantitative and qualitative tests and should fall under one or more of the ten pre-defined categories of events.

Since the returns will be calculated on a portfolio level, you should be investing in all the recommended stocks as per the recommended portfolio allocation.

Research & Ranking will be providing you with an exit on a stock recommended to you even after your subscription period ends.

Any stock recommendation is valid only for the month in which it is recommended or as long as the stock price is within the buying range.

By clicking on Portfolio Details on the Dashboard, you can view your Portfolio and Stock/ Market details.

Investing in the mispriced opportunities in the Indian stock market using the R&R Dashboard is quite simple and can be done in just a few clicks.

At any time if you require any assistance, you contact our support team by clicking on Support.

Alternatively, you can also reach our support team by calling 022 6101 3838 or email us on support@researchandranking.com.

To summarize, Mispriced Opportunities Strategy offers investors an excellent opportunity to capitalize on the fluctuations in share prices by investing in good quality stocks trading below their intrinsic value. Such stocks have very strong fundamentals which can help them outperform with time.

Click here to get started now!

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