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What is Value Investing in India

05 Jan 2023

A good investment strategy, value investing is an investment plan that involves purchasing stocks that trade for less than their book value. Selecting those stocks that the stock market is underestimating, value investors choose these because they think that the stock market overreacts where good news or bad news is concerned, and as a result, stock price movements won’t reflect a given company’s long-term prospects, but stock market reactions. Thus, the value of investing in shares like these provide chances to profit by purchasing stocks at low prices. You have probably heard of Warren Buffett (who hasn’t?). Today, he’sat the top of the list of value investors. Value investors, far from following the herd, use financial analysis to pick their stocks of interest. They are investors who believe in selecting stocks for the long run and choose companies of standard. 

  • What is the meaning of Value Investing?

Technically, the concept of value investing is easy to grasp. If you know the intrinsic value of something, you choose to purchase it at a reduced price, as if it were on sale. A commodity is on sale as its demand may not be high at that time. You save money buying it at a low cost. Stocks, like any other commodity you buy, go through periods of low and high demand. As a result, the value of stocks tend to fluctuate.

This doesn’t change, in any manner, the value that you get for your money. The price, high or low, is a reflection of demand, nothing more. Having said that, value investing meaning for savvy value investors is to get the most out of stocks by buying them at low prices. Value investors hold on to these, as they are in the process of profit for the long haul, and make a killing when these stocks go up. 

  • Value Investing Strategies

Value investing in India has become a trend, and India’s very own Manish Goyal has been touted as the “Warren Buffett of India”. Furthermore, it's important to note that the concept of value investing came from two professors from the Columbia Business School, James Dodd and Benjamin Graham in 1934.

Today, when online trading is as easy as pie, anyone can become a value investor, or so it seems. What’s crucial to know is what a cheap stock means. In the market, an inexpensive stock translates to one that is undervalued. However, investors dive deep into metrics to find out the value (intrinsic) of a particular stock. This intrinsic value of a stock is a blend of financial analysis and certain basic aspects of the company.

Hence, to discover intrinsic value, a value investor may study and research a company’s performance, financially, as well as revenue and earnings, profit and cash flow. Basic factors include a company’s business model and brand, as well as its targeted market segment and advantage competitively. By delving into these aspects, value investors work out a safety margin and then select the stock in question.

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