How much returns I can expect through long term investment in Nifty stocks?

• To invest on any stock in Nifty an investor must conduct a rigorous analysis in a methodical manner. Besides that, one must also tick the basic parameters that govern the fundamentals and consistency of a company’s stock. In the article, one can find the essential analysis needed in picking a stock for the long term.
• An investor can obtain a good return over the long term investment and the only reason is simple arithmetic. An interest earned on the principle gets accumulated and the amount gets compounded many times. In equity markets, due to volatility, short term risks reduce the principle and the return becomes lesser and lesser. Hence, long term is the best chosen option.
• An investor must ponder on the business fundamentals in different spheres such as ethics, corporate social responsibility, and assess the business credentials for at least 3 years passed out.
• The individual who desires for long term investment must select a company based on large capital, mid capital, and small capital. Then, the individual must analyze long term sustainable performances. In addition, an individual must work upon the business risk factors involved in the companies. In a way, one must be able to perform the risk analysis with a high precision. Only after attaining a thorough understanding of the company, one is advised to invest in any chosen company.

Check these Elements Before Picking the Stocks:

• The market capitalization explains the financial capability and its withholding capacity when stocks fluctuate. Companies when attain higher capitalization they will be able to overcome volatility in lower risk levels. Hence an investor must select stocks of high market capital companies that exhibit lower risk levels.
• Companies are built on portfolios, and if a company runs additional subsidiaries deviant from core business then its profitability should not be endorsed. While checking for investments in a company, the core businesses should generate an operating profit margin more than 15 percent. Therefore a thumb rule is, the operating profit margin is equivalent to the ratio of operating profit to sales revenue. That means, OPM = operating profit / sales revenue. Analysts say that the profit growth for three years must be more than 10 percent. One perfect example for the above statement is the Asian Paints.

In order to support the above statements, the story of Asian Paints and its raise in the Nifty is the best suited example.

Asian Paints:

• Asian Paints concentrates on the core business It attracts consumers from various categories of businesses.
• They are into domestic paints, decorative paints, and industrial paints. Asian Paints mints its revenue from paint manufacturing and it is 70 -80 percent.

Asian Paints Product Profile:

• The company channels into chemicals, wall covering, waterproofing, adhesives, sanitizers, and kitchen and bath fittings.

Product Share:

• If one observes it, Asian Paints have 50 percent market share in the domestic paint market and 60 percent market share isn decorative paint market.

Asian Stock Holding:

• Asian promoters hold 53 percent of the stake as per December 21 records, and individual shareholding up to 2 lakh retail investors up to 12 percent and institutions hold 28 percent of the company stake and others hold about 7 percent.

Strategic Advantage:

• In the financial year 2020, the dealer network of Asian Paints is 70,000 while the nearest peer, Berger Paints is at 30,000. The company has a distribution network and pricing advantage that establishes a monopoly in the Indian markets when compared to its peers.

Financial performances:

• The financials of Asian Paints speak about annual average revenue growth of 8 percent ( CAGR) between FY 21 and FY 17. The profit growth was about 13 percent.
• More importantly the debt to equity ratio of the company is less than 1. That means, it is a clear indicator that it maintains a good balance sheet.
• In December, FY ( 2021-22) the year on year revenue of Asian Paints rose to 25 percent and the profit fell 18 percent.