The wild fluctuation in stock prices has left investors unnerved. But a section of experts strongly believe that India is in a sweet spot relative to other economies. India is relatively better placed among the emerging economies and should benefit from the various initiatives the Government has taken over the past 18 months, said Sohini Andani, Fund Manager, SBI Mutual Fund, at the Bullet-Proof Investing-2016 seminar organised by the Tamilnadu Investors’ Association here on Saturday.

But, with the markets trending down, experts advise caution when it comes to stock picking. So what are the factors that investors need to keep in mind while investing in equities?

Chokkalingam, CIO, Equinomics Research, feels that as an investor one needs to understand and evaluate the management and their execution capability.

While most of us focus on recent financials and profitability, Balakrishnan, an independent analyst, stresses on the need to look at the long-term trend in financial performance. He urged investors to look beyond just revenue and profit and focus on balance sheet metrics such as return ratios (return on capital employed).

"There is a story behind every business and it is important to understand that," insists Harrish Zaveri, fund manager, DSP BlackRock Mutual Fund. Even as the market has its reservations about the airline sector, he listed the factors in favour of the sector such as negative working capital (airline companies collect full fare from customers in advance) and falling crude prices. "Though the space is capital intensive, companies such as Interglobe Aviation, which owns Indigo, have managed to put capital to efficient use by adopting the asset-light lease model," he said.

But, investing is not a one-time exercise, agree experts. Investors need to be nimble-footed and review portfolios regularly, urges Rajeev Thakkar, CIO, PPFAS Mutual Fund. Stocks which were once market darlings have lost favour; the moats and disruptions have changed the way businesses are run and investor perceptions. "Coca-Cola, which was Warren Buffet’s favourite in the late 80s, is no longer one," he observed.

Extending the manufacturing analogy of 5s to investing, Krishnakumar, CIO of Sundaram Mutual Fund, in his keynote address said “simplicity and scalability of business, sound management, sustainable competitive advantage and steady cash flow go a long way in creating wealth for shareholders”.

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