Stock Market Investment Strategy for 2010 and 2010

we saw in spectacular growth for stock market investments in the year 2009. Many stock market investors who started investing in the stocks around the begining of 2009 would have doubled or tripled their investment during the last year. This is mainly due the cheap valuations of stocks towards the end of 2008 due global economic crisis and the way Indian marched forward by pumping liquidity into the system and strong domestic demand that more or less shielded the indian economy from the crisis to an extent. 2009 was an exceptional year and the same the returns can not be expected in 2010 and going forward.

Coming to year 2010, we started seeing the consolidation of stock markets. It is time for investors to be very careful and they have reset their expectations and look at the big picture. Stocks are not cheap any more. The Sensex is currently trading at a P/E around 22.2 and P/B around 3.7. Historically sensex has traded in the range of 15 to 16 P/E. That means the stocks are currently commanding high valuations with respect to their earnings. We are in overvalued zone. Expecting higher returns from an already overvalued markets is not wise. These valuations can only be justified if the earnings of the Indian corporates grow substantially and the free liquidity continues to be available in the system.If we observe carefully, there has been no growth in the earnings of the sensex companies. So going forward it is very important that our corporates register good growth. If Indian companies register good growth, the sensex P/E could come down and stock markets can sustain current valuations or move forward. If the growth is lacking, then the rise in stock market has to be considered as mere speculation and excess liquidity. This will carry more risk.So if we see EPS of indian companies going up in the next few quarters, w could see a rerating of Indian markets and the sensex and go up. If EPS remains constant, market should correct from the current levels as they are already overprices but due to excess liquidity in the system the markets could rise again after correction. But this situation presents substantial risk because of high hopes.

So the overall situation of the current stock markets does not suit serious long-term passive investors. Such investors have to wait for correction and should invest in specfic stocks are that fundamentally sound, has good growth potential and are available at reasonable valuations (typically with PE < 20 if the stocks are not in the high growth and high margin sectors).Meanwhile the current situation of high liquidity can be used by active short term traders to make good short term returns. Follow strict stop-loss policy for all your short term trades.

Guide to Investment Strategy in india

A well-planned investment strategy is essential before having any investment decisions. A business strategy is generally based upon long run period. Formation of business strategy largely dependent upon the factors such as long-term goals and risk on the investment.As the return on investment is not always clear, so the investors prepare the strategy so as to face the ongoing challenges in investment. A balanced investment strategy is generally required in the process of investment, which possesses long time period and some risk tolerance.In the case, when a strategy is aggressive the chance of attaining a higher goal is higher. An efficient strategy can be obtained from portfolio theory, which shows good estimates on risk and return.Investment Strategy is usually considered to be more of a branch of finance than economics. It is defined as set of rules, a definite behavior or procedure guiding an investor to choose his investment portfolio. For example, investing in mutual funds has recently emerged as a very favorable investment strategy.

An investment strategy is centered on a risk-return tradeoff for a potential investor. High return investment instruments such as real estate and mutual funds usually have more risks associated with it than low return-low risk investment opportunities. Return on investment can be calculated on past or current investment or on the estimated return on future investment.A passive investment strategy attempted to minimize transaction costs.An active investment strategy guide used to maximize returns based on moves such as proper market timing.
Small time investors can adopt the buy and hold investment strategy to invest in equities, which although volatile in nature, give favorable long run returns. Investing in equity markets for small time investors is associated with the investors holding on for very long periods. In the case of real estate
, the holding period extends the lifespan of the mortgage. Notably, in case of this strategy, indexing or buying a small proportion of all the shares in market index or a mutual fund is a purely passive variant of the above strategy.

Investment strategies can also denote the investment strategies a national or federal government should follow to bring about economic growth in a country. This can only be achieved by domestic investment as well as significant FDI (Foreign Direct Investment) flows to particular sectors of countries, especially the less developed ones of Asia and Africa.

In case of India, infrastructural problems, excessive government intervention, rigid labor laws and corruption are stifling the flow of FDI in the critical sectors. Less developed countries such as those in the Asia- Pacific region and Africa can bring about much needed development in these economies.

Investment strategies from HDFC, Reliance

HDFC and Reliance Mutual Fund have emerged as the top fund houses in terms of returns for three consecutive quarters in the ET Quarterly analysis. ET Intelligence Group met Sunil Singhania , head equities, Reliance Mutual Fund, and Srinivasan Rao , senior fund manager, HDFC Mutual Fund , to discuss about their wining investment strategies.

INVESTMENT STRATEGIES
Srinivasan Rao: We essentially continue to follow bottom-up stock picking model. The management quality of companies that we select for investment is an important factor for us. We strive to build a portfolio of such companies with sustainable earnings growth. This should help us beat the instances of an economic downturn.

Sunil Singhania: We continuously evolve our strategies considering that India is an emerging country. We feel a premium has to be given to quality rather than quantity of companies in the portfolio. The Satyam scam has also taught us to avoid companies wherein the management is slightly of dubious reputation. We are keen to invest in niche business models.

SECTORS BULLISH ON:
Srinivasan Rao: We are bullish on India-centric consumption theme. The sectors such as financial, infrastructure (more of capital goods companies) and pharma (selectively) look attractive.
Sunil Singhania: Consumption is the buzz word today. The way the young India thinks, spends and invests is different from the previous generations. We are bullish on banking, infrastructure and cement sectors

SECTORS STAYING AWAY FROM:
Srinivasan Rao: We are underweight on the power sector. Also commodity-driven sectors such as metals, real estate and cement continue to remain low key.
Sunil Singhania: We are avoiding telecom, metals and reality sectors. We are not comfortable with the current valuations in these sectors.

Investment Strategy Guide to Investment Strategy

A well-planned investment strategy is essential before having any investment decisions. A business strategy is generally based upon long run period. Formation of business strategy largely dependent upon the factors such as long-term goals and risk on the investment.

As the return on investment is not always clear, so the investors prepare the strategy so as to face the ongoing challenges in investment. A balanced investment strategy is generally required in the process of investment, which possesses long time period and some risk tolerance.

In the case, when a strategy is aggressive the chance of attaining a higher goal is higher. An efficient strategy can be obtained from portfolio theory, which shows good estimates on risk and return.

Investment Strategy is usually considered to be more of a branch of finance than economics. It is defined as set of rules, a definite behaviour or procedure guiding an investor to choose his investment portfolio. For example, investing in mutual funds has recently emerged as a very favourable investment strategy.

An investment strategy is centred on a risk-return trade off for a potential investor. High return investment instruments such as real estate and mutual funds usually have more risks associated with it than low return-low risk investment opportunities. Return on investment can be calculated on past or current investment or on the estimated return on future investment.