One of the biggest mistakes that investors make, actually points to one critical thought about investing in general—valuation does matter while the share price of a stock does not. It is critical to understand the valuation of a company and whether one is investing in something that is overvalued or highly overpriced. Lots of Indian investors have seen their stock or mutual fund portfolios go down in value this year but tough times have always offered investors some of the biggest money-making opportunities of a lifetime. Retail Investors will remember the start of the Covid pandemic in 2020 and the huge panic it created. A mass panic produces excellent opportunities because it introduces incredible amounts of emotion into the market. And when emotion levels go off the charts, reasoning goes out the window. And when the markets are down, then the price of the asset becomes “decoupled” from the true value of assets. Buying good fundamental under-valued stocks now can present an excellent opportunity to make huge gains when the decoupling ends and normalcy returns. Like the Covid pandemic of 2020 (which investors are probably forgetting now), the current stock market topic is red hot inflation in the US and Fed policies on interest rates. But opportunities like these to earn money in a short period of time, doesn’t come often. Hence, even a small moderate investment made now can totally change your financial trajectory in the medium term. The Information Technology sector stocks has been battered badly in the last few months and the Indian top four I.T stocks such as Infosys, Wipro, Tata Consultancy Services and Tech Mahindra have seen their stock prices erode drastically. They are falling out of flavour from foreign investors’ portfolios and are being sold into by them every trading day. Even recently, there have been reports in the media wherein Goldman Sachs have downgraded their ratings to a sell on Tata Consultancy Services, Infosys and Tech Mahindra citing a sharp cut in dollar revenue growth forecast for the overall IT sector.
But a moot point to ponder is whether the world, evolving now after the Covid pandemic, new world alliances amid the energy crisis, FED stimulus, etc can live with more disruptions and without newer technologies. Analysts tracking the IT sector are secretly betting on Tata Consultancy Services or the TCS stock to perform well in the next one-two year time frame. The TCS stock has come down from Rs 4000 levels a year back to Rs 3000 levels at present. This is once in a lifetime opportunity for investors to buy the TCS stock for excellent price appreciation in the near future. Retail investors can purchase the TCS scrip in a SIP manner between Rs 2800 to 3000 entry points for superlative gains over the medium term.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.