Investment in Stock Market

1. Faculty Development Program
Investment in Stock Markets
on 31st Mary 2021 Time: 4.30 p.m.-6.00 p.m
Prof. (Dr.) Saurabh Agarwal
Ph D (FMS, Delhi University), M. Phil. (DSE, DU), M. Com.
(DSE, DU), B. Com. (H) (SRCC), UGC (NET), AMT (AIMA)
Professor of Accounting & Finance & Principal, IIF College
of Commerce, Affiliated to CCS University, Meerut

2. Hidden Gem
 IPO Undersubscribed
 Morgan Stanley picked up
13% stake at INR 95/-
 In 2018, an INR 10,000/-
investment during IPO
would be more than INR 2.5
Crore, including bonuses
and stock splits

3. RIL

4. Fastest Wealth Creator

5. Value Investing
 Value investing is an investment philosophy which
focuses on making purchases which are significantly
lower than the intrinsic value
 One makes wealth when the world recognises the
intrinsic value and makes purchases and hence there
is a rise in demand and consequently the price rises
 However, it works contrary to normal average
human actions
 In drug testing, patient’s recovery is faster if they are
told that it is an expensive medicine that is being
given to them

6. Investing the Buffet Way
 1. High Intrinsic Value
 2. Company Management
 3. Good Network
 4. High Switching Cost
 5. Low Cost Advantage
 6. Intangible Assets
 7. Economies of Scale
 8. Sustainable Expansion

7. Fundamental Analysis
 Graham’s filter
 The simply criteria that he used in his studies involved using the earnings yield (inverse
of the P/E ratio) and the ratio of stockholders’ equity.
 Earnings yield, the first criterion Graham put forward, was to be at least twice that of
what AAA-rated corporate bonds yielded. According to him, for an investor to venture
into stocks, that should be minimum rate of return.
 The other criterion was based on the assumption that a company should own at least
twice of what it owes. In other words, the ratio of shareholders’ equity to total assets
should be minimum of 50 per cent.
 This mechanical stock selection called for holding a portfolio of 30 such stocks for a
period of three years or till a 50 percent gain was realised – whichever occurred first.
 How much could an investor applying this technique expect to gain? Using both these
fields, and on the basis of extensive back-testing dating back 50 years, Graham suggested
that an investor following this strategy could have netted twice as much as the Dow and
could, going forward, expect annualised gains of at least 15 per cent.
 Additionally, all stock had to have a maximum P/E of 10. He was against buying stocks
above the premium.

8. Fundamentally strong stocks
 From 2010-2020
 Aarti Industries Ltd.
 Can Fin Homes Ltd.
 Canara Bank, GHCL Ltd.
 Gujarat State Fertilizers & Chemicals Ltd.
 J K Tyre & Inds. Ltd.
 Jindal Saw Ltd.
 NMDC Ltd.
 Uco Bank
 Tata Steel
 Agarwal, Saurabh and Megha Agarwal, (2020), “Back of Basics: Does Benjamin Graham Filters help identify Value Stocks on Nifty 500?”,
Effulgence, ISSN (O) 2456-6675/ISSN (P) 0972-8058, Vol. 18, No. 2, pp. 1-12. Available at
https://effulgence.rdias.ac.in/user/article_pdf/Vol18_2_1.pdf Indexed and listed in J-Gate, Indian Citation Index, UGC (earlier) and Crossref.

9. Fundamentally strong sectors
Index/ Event Window +1 +3 +5 +10 +20 +30 +254
Nifty Auto
GARCH (1,1)
-5.2711*
(-3.7272)
-11.8815*
(-5.9407)
-16.9244*
(-6.9094)
-2.4824
(-0.7485)
-8.8807***
(-1.9379)
0.2906
(0.0522)
9.7144
(0.6083)
Nifty Bank
GARCH (1,1)
-2.1059
(-1.4891)
3.9159**
(1.9580)
-2.5090
(-1.0243)
-7.3853**
(-2.2268)
-9.8763**
(-2.1552)
-19.8386*
(-3.5631)
-15.4504
(-0.9675)
Nifty Energy
GARCH (1,1)
0.2938
(0.2077)
0.7757
(0.3878)
9.0879*
(3.7101)
0.4430
(0.1336)
6.9807
(1.5233)
2.5340
(0.4551)
-23.3559
( -1.4626)
Nifty FMCG
GARCH (1,1)
-2.4182***
(-1.7099)
-0.1467
(-0.0734)
8.3479*
(3.4080)
7.6765**
(2.3146)
-2.0602
(-0.4496)
9.6043***
(1.7250)
-26.4812***
(-1.6583)
Nifty Healthcare
MM Model
-4.2533*
(-3.0075)
-6.2489*
(-3.1244)
-0.7169
(-0.2927)
13.9242*
(4.1983)
20.7188*
(4.5212)
18.0588*
(3.2435)
14.5491
0.9111
Nifty Infrastructure
MM Model
-3.9302*
(-2.7791)
-7.0894*
(-3.5447)
-2.4564
(-1.0028)
-1.5791
(-0.4761)
3.1302
(0.6831)
9.4317***
(1.6940)
8.1202
(0.5085)
Nifty IT
GARCH (1,1)
3.3844**
(2.3932)
3.4151***
(1.7076)
5.5622**
(2.2707)
1.0689
(0.3223)
2.8983
(0.6325)
7.9895
(1.4350)
40.3727**
(2.5282)
Nifty Media
GARCH (1,1)
-4.5135*
(-3.1915)
-8.0055*
(-4.0027)
-8.5811*
(-3.5032)
-8.5584*
(-2.5804)
-8.3652***
(-1.8254)
-5.6888
(-1.0217)
-21.0181
(-1.3162)
Nifty Pharma
MM Model
-3.2457**
(-2.2951)
-4.7321**
(-2.3661)
0.8441
(0.3446)
15.6354*
(4.7142)
22.9042*
(4.9981)
20.6689*
(3.7122)
22.3557
(1.4000)
Nifty Realty
MM Model
-9.1941*
(-6.5012)
-9.5262*
(-4.7631)
-12.5308*
(-5.1157)
-14.6123*
(-4.4058)
-18.6309*
(-4.0656)
-20.5360*
(-3.6884)
-18.3375
(-1.1483)
Agarwal, Saurabh, Megha Agarwal and Renu Ghosh, (2021), “Do sectoral indices react differently to lockdown imposed due
to Covid-19? Lessons for Wealth Generation”, Working Paper

10. Holdings

11. Equity and Gold

12. News and Views
 Is it a Good Pick?
Source: Business Line 25th May 2020

13. Stocks or Fixed Income Securities

14. IPOs

15. Asset Classes
Real estate
Commodities
Equities/Spot Market
Gold
Mutual
Financial derivatives
Hedge funds
Bitcoins
Artworks
Structured products

16. Thank you and Jai Hind