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How do you choose your stock market investments during IPL?

equity market
03 Apr 20246 mins readBy MOFSL

Introduction

The Indian Premier League (IPL) is one of India’s biggest sporting events. While it keeps the fans excited, it also puts some companies on their toes as they gear up for a profitable season. Investors must watch out for these companies to earn profits while enjoying exciting matches. 

There are many similarities between an equity investment and a T-20 match. You can learn several investment lessons from the cricketing tournament, some of which are discussed below. 

What does the IPL teach investors?

An investor must exercise the same discipline in investments as cricketers do to create the path for long-term returns. You have to be patient and stay invested for a long period. If you have a strong stock selection, it will prove to be a multi-bagger eventually. 

A T-20 team emphasises balance. It is equally essential to have a bowler as it is to have a batsman. Similarly, your investment portfolio must comprise steady, moderate return generators with aggressive performers to balance the returns. Moreover, like the goal of a team is to win, all the stocks in your portfolio should focus on contributing to wealth generation. 

The selection of players for an IPL team is done through an auction. In the same way, the first level of screening for your portfolio is done through the analysis of underlying companies. You must not make decisions based on emotions. 

Additionally, as the coach evaluates each player’s strength to create a diversified team, you must build a diversified portfolio after studying the company’s historical performance and estimating the value of different stocks. You must conduct a fundamental analysis and understand the economic conditions.

Lastly, just like a foreign player can contribute to a team’s win, you can add an international fund to your portfolio to hedge against the domestic market. It can result in time-bound portfolio growth. 

Tips to select stocks during the IPL

  • Add some strong market players to lay the foundation of your portfolio. 
  • Improve your portfolio’s stability with companies that offer a steady return on investments
  • Find stocks with the potential to deliver long-term growth and the ability to overcome periodic market movements. 
  • Rearrange the stocks in your portfolio frequently to align with the changing market trends.
  • Track stocks of sponsor companies of winning teams as they are likely to surge.
  • Pick stocks from sectors expected to witness increased demand.
  • Assess the market to identify stocks capable of performing under prevailing economic conditions. 

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IPL 2024: Best sectors to watch

  • Broadcasters

The IPL attracts a massive viewership. Thus, broadcasters with IPL rights are expected to earn a much higher advertising revenue. With more viewers, there will be more ad viewership, thereby increasing the broadcaster’s profitability. Consequently, the company’s stock price will also see a rise. 

  • Apparel companies

The demand for team merchandise increases during the IPL. Many IPL fans buy jerseys, caps, and other merchandise to showcase their support for a particular team. As the sales of companies making official jerseys and team gear undergo a big jump, your investments in the company can bear fruitful returns. 

  • Beverage companies

The IPL creates a lot of excitement among cricket lovers, and a cold drink can help elevate the excitement. Varun Beverages, Coca-Cola, and other beverage companies associated with the IPL can expect their sales to rise during the season. Their brand visibility and sales figures can further increase due to partnerships with the tournament or particular teams and aggressive marketing campaigns. 

  • Hospitality and tourism

Apart from broadcasters, apparel companies, and beverage companies, the hospitality and tourism industry is expected to benefit. In cities where matches are hosted, hotels witness higher bookings. â€‹â€‹â€‹â€‹â€‹â€‹â€‹

Conclusion

The IPL influences investors’ outlook and investment decisions. Its impact on the equity market is significant. However, you must be cautious while investing in stocks. Make sure you study a company’s overall financial health, its long-term growth plans, and its link with IPL for revenue. When you understand how IPL contributes to the profitability of various businesses, you can make wise investment decisions and fulfil your long-term financial goals.

 

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Disclaimer: The stocks, companies, or financial instruments mentioned in this blog are for informational purposes only and should not be considered as investment recommendations. It is advised to consult with your financial advisor before making any investment decisions. Investment in securities markets are subject to market risks, read all the related documents carefully before investing. Investors are strongly encouraged to carefully read the risk disclosure documents prior to participating in market-related investments or trading activities. Due to the volatile nature of financial markets, no guarantees can be made regarding investment returns. Motilal Oswal Financial Services Ltd. does not offer any assured returns on market-linked securities. Please note that past performance of stocks or indices is not indicative of future results.
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