2024 has been a year of record highs as India has witnessed massive growth in multiple segments. It is possibly one of the best times to invest in the Indian stock markets as there is a growing interest from foreign as well as retail investors.
India accounted for approximately 17.6% of global GDP growth in 2023, a significant rise from less than 8% in 2001. India is home to the largest young consumer market in the world, with an estimated 360 million consumers under the age of 30 by 2030.
If you are considering investing in India, here are a few strategies that will help you multiply your money.
Find Undervalued Stocks
Despite India being a very promising investment, some of the segments are currently overvalued. Small-cap stocks have been heavily overvalued for quite some time now. Hence, it’s important to understand that only picking fundamentally strong stocks will not help in the short run. One has to be cautious about the valuations as well.
Make sure to not be heavily invested in just one segment. Rather, find stocks that are undervalued and invest in them.
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One simple approach to finding undervalued stock is to look at the P/E ratio of the company and compare it with that sector’s average P/E ratio. If the company’s P/E is less than the sector’s P/E, that means it’s undervalued and you can invest in that stock.
However, it’s more complicated than it sounds as no two companies are identical and the sectoral P/E may not be a perfect comparison.
Identify top-performing sectors
There are phases when one sector performs better compared to the other. In the last five years, PSUs and the sugar sector saw a big rally. Another sector that’s going to be growing massively is the defence sector.
Stocks like Nykaa and Zomato are also witnessing a rally. This means that stocks with good e-commerce holding are likely to grow ahead.
Infrastructure investments are enhancing trade efficiency within India. Over the past decade, the length of India's national highway network has doubled to 155,000 kilometres.
The National Infrastructure Pipeline, initiated in August 2020, includes over 9,600 projects across various sectors such as energy, telecommunications, and clean water.
Investing in Companies that have high foreign investments
You can also consider investing in stocks where a lot of big companies invest. NSE has data on bulk and block trades. You can study the data and find out where large organisations are already investing and invest your money in those stocks. If large banks are taking positions in a particular company, it is quite possible for that company to perform well in the long run.
Exploring Alternate Avenues of Investments
Stock markets are a great place to make your money grow. However, it can be tricky if you don’t understand the markets too well. So it is always better to invest in a segment that you fully understand.
You can consider buying physical gold which is a much simpler option and provides you liquidity as well as good returns. Another simple option is to start a SIP in a mutual fund. You can start an SIP with as low as Rs 500 and invest every month.
However, if you can take higher risks, investing in real estate can provide you massive output. A small piece of land brought in a good locality can help you generate high rentals in the long run.
Diversify your investments based on your financial goals
You can also invest based on your financial goals. Clearly define your financial goals, the timeline for reaching them, and the level of risk you're comfortable with.
Concentrating your savings on similar types of investments can expose your money to excessive risk or limit your potential returns. To mitigate this, diversify your portfolio by spreading your investments across various asset classes.
You can diversify by investing in multiple subcategories within each asset class. However, keep in mind that diversification doesn't guarantee a risk reduction or an increase in returns.
Conclusion
As you grow in your professional journey, you save your money to invest it in the right places. However, it’s important to not get swayed into false schemes of making quick money.
It’s important to have a plan and stick to the plan as that will help you reduce your risks further generating high returns over the long run.
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