Learn
and believe in company's fundamentals. A strong company will ultimately present
you with hefty profits in the long-term. You must be aware that in the short
term, market moves as per factors that affect market sentiments than
factors that influence organisations long-term prospects and performance.
Core strength
and long successful performance of a business is what superior fundamentals
basically mean. There is no doubt that fundamentals will dictate your stocks
performance in the long-term but in the short term sentiments have an equal
sway in the market.
Understand
that fundamentals alone does not define the day to day performance of a company's
stock. It is also characterized by the markets sentiments towards that
particular company's business. This is drawn from the news and events around
that company's business and various other complex regional and global
economic, political factors. Some of these news and events will have a true
reflection on an organisations business while others would be just weak
factors which only temporarily affect market gains and losses without any
true affect on the long-term market performance.
Defining the Fundamentals and
Sentiments:
Fundamentals are dictated by the economic
well-being of a company such as revenue, earnings, assets, liabilities and
growth. These factors are used to determine the worth of an investment. Fundamentals
are those factors that are tied to the business. Factors that influence
business fundamentals in another angle can be also called as profits,
management performance, product line, sector, future growth, and cash flow etc.
A company which is fundamentally strong is a company that can be trusted to
perform, can bring great benefits to its share holders in the long-term.
Sentiments are
those things that cause markets to go down or up. The difference is that
sentiments can move the market without any fundamental or qualitative change
in the business or its prospects. Sentiments normally is a response to news
events. It can be a sentiment affecting a particular business, for
example policy of relaxation of sugar export by the Govt. for sugar business
and one that affects the whole of the market like a change of Govt.
Only if that
news or event progresses in such a way that it goes on to truly affect the
performance of a business or a sector, we can say that, particular sentiment
did in fact have an affect on the stock performance.
learn to discern the mind of the market:
Hundreds of
factors can be classified as those things that affect market sentiments. When you see share prices moving up or down, it may be due to the news
coming out in favour or against a particular business. This does not mean
that the particular business have suddenly improved or lost business.
Growth of the
markets are also tied to the economic growth in the country. As far as
Indian economy is considered it is on a path of phenomenal growth and that
continues to be good news for a strong capital market. Profits of any
company is tied to the economic growth where the profits rise and fall
according to how economy swings.
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