- Date : 31/12/2021
- Read: 3 mins
Learn about some investment guidelines suggested by experts, as well as a few Indian stocks to consider investing in.
Beginners often find it difficult to sift through the vast array of stocks in the capital markets and identify the ones suitable for them to invest in.
Below are some guidelines suggested by experts and a few Indian stocks that you could consider.
- You could begin by looking for “moat companies” - those with a distinct advantage in terms of brand identity and high entry-level barriers that make it challenging for competitors to dethrone them. IRCTC is a good example.
- Invest only if you understand a company’s product or service.
- It is not always easy to establish if the company’s management has been ethical or competent but check their backgrounds as much as possible.
- Also, check a stock’s P/E ratio; a high figure reflects an overpriced stock. The average P/E of the Nifty in the last 20 years was around 20, meaning a ratio below 20 for an NSE-listed company shows potential.
You are advised to read up more on how to choose a stock. And now to look at a few recommended for beginners.
Godrej Consumer Products
Motilal Oswal recommends Godrej Consumer for several reasons:
- It has a moratorium on big-ticket acquisitions;
- Has better capital allocation in recent years;
- Sale of its UK business;
- The potential sale of its Latin America business;
- Tightening of its Africa business;
- Tailwinds in the soaps and the broader personal wash category in the post-Covid era
- The broking firm has set a target price of Rs 1,020, about 19% over its current market price.
Also Read: 25 Stock Market Terms For Beginners
Another stock that Motilal Oswal feels is safe for beginners is Petronet, which declared a final dividend of Rs 3.5 a share, in addition to an interim dividend of Rs 8, totalling Rs 11.5 per share, reflecting a dividend payout of 60% for FY21.
Profit after tax was up 9% year-on-year to Rs 2,950 crore.
Other analysts have backed HDFC Bank, India’s largest private sector bank, for beginners. The reasons cited:
- Consistent performance over the years;
- Accords due importance to all major and minor stakeholders;
- A favourite stock of FIIs and DIIs, a testimony to its strengths;
- Good returns potential
- Any uptick in the GDP will lift the banking sector, including HDFC.
Another recommendation is Bharti Airtel, ranked among the top four mobile service providers globally in terms of subscribers. Analysts recommend this because:
- India’s internet penetration is deepening, which means the stock of internet service providers like Bharti Airtel is rising too;
- It is the only listed telecom major not losing money;
- Tariff rates are bound to rise;
- Operations in 18 countries across Asia and Africa
Indian Oil Corp
Also high in the list of best stocks for beginners is Indian Oil, the biggest player in the national oil marketing business. Its main attractions are:
- High dividend-paying percentage, almost 6-8%;
- Transportation volumes are expected to reach pre-COVID levels soon