Much has been spoken and written about the recent stock market mayhem. In the month of May, the Nifty Index registered a 5% fall, its worst monthly fall in 2012. In fact, this has been the third straight month where the markets witnessed a dip. The negative sentiment is expected to continue in June too, amid Eurozone crisis and missing GDP targets.
However, the Right Time to buy is when there is blood on the streets! Great returns do not come from investments made in good times. Instead, they typically come from investments made in adverse times. It is during these times that the best stocks i.e. the large-caps, the blue-chips trade below their fair values and later prove to be gold mines. And in the long run markets tend to value stocks close to their fair value, thus giving great returns. Although the markets can go lower, investors should keep buying equities in dips.
But can you buy any stocks? Absolutely not! That would be a terrible disaster and you may end up losing your hard earned money. Especially, in turbulent times like now, there is a greater need that you invest in safe stocks!!
So, what are safe stocks?
While there is no set rule for defining safe stocks, stocks that can be invested in by taking on low risk prove to be the best investments at such times. But how can you filter out the safe ones from the risky ones. One way could be to look at the large–cap, fundamentally strong companies that have proved to be market leaders in their respective sectors. Now, most of you must be wondering where can you find these stocks in one place.
The S&P CNX Nifty index is one such stock index which comprises of Blue-chip stockswhich comes with a low-risk quotient.
Why should you consider investing in the Nifty 50 Stocks?
The 50 stocks that form the NSE Nifty are characterised by certain features which make a good handful of them a safe investment bet. Let’s have a look at these features:
- The most important characteristic is that all these companies have a past track record of a strong financial performance. This gives us the confidence in the company’s ability to earn profits in the future. A few example are ITC, Asian Paints etc.
- These companies are usually the market leaders in the respective sectors. So, these companies would be the primary beneficiaries of good future prospects for the sector. Also, their success over the years most likely is the result of a sustainable competitive advantage that has allowed them to maintain this leadership. As a result, they also enjoy a high market share. Take the case of Tata Steel, BHEL – all are market leaders in their respective sectors.
- These are large cap companies. In fact, the Nifty Index represents about 65.57% of the free float market capitalization of the stocks listed on NSE as on March 30, 2012.
- These are high liquidity stocks. The total traded value for the last six months ending March 2012 of all index constituents is approximately 58.20% of the traded value of all stocks on the NSE. Hence, it is easier to buy and sell these shares.
- These companies have an ability to withstand economic shocks better than the others. Companies that can withstand severe economic setbacks will be in the best position to come back strongly once the economy stabilizes.
So, you can be rest assured that these are the best companies to invest in. In fact, most of the Mutual funds and FIIs have a huge share of their investments in these Nifty stocks! It is only obvious than that you should too invest a share of a portfolio in these Nifty 50 shares.
However, you may still argue that investing in Nifty shares may not be the best idea! Safe stocks (large-cap, established leaders like Nifty shares) can only give you low returns, to earn high returns you need to take high risks. However, the truth is that safe large-cap stocks fall below their fair price, especially during a market fall and offer amazing investing opportunities! To give you an example: What returns do you think you would have earned if you had invested in Tata Motors in October 2011 – A whopping ~97% within 6 months. For more proof on this keep watching this space and find out how you can make great returns from the Nifty 50 stocks.
In short, these companies offer you twin benefits: protection from erosion of capital and attractive returns over the long term.
Are all Nifty 50 companies worth investing?
Not all Nifty 50 companies are worth investing into. Some of them may have not done so well in the past and have some problems confronting them currently. Many investors have often lost money by investing in such companies.
So, to help you find out the best and the safest stocks from the Nifty 50 index, MoneyWorks4me has launched a new offering -the Nifty 50 Superstars. This offers you an exclusive space where every Nifty 50 stock comes with a COLOUR CODE (financial strength) and an MRP (real worth) so you instantly know which companies are available at the Right Price and the Right Timing.
So, do check out the Nifty 50 Superstars and earn great returns!