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Bonus Share and its impact on stock prices

-By Anurag Pant

It becomes very confusing when it comes to the selection of companies. Which companies should I choose? Which companies are the most preferred choices among mutual funds?

Although there are many ways to pick up companies but today, we are going to learn that how can we select those companies in which most of the mutual funds are investing people’s money and that are giving them good interest. But before we start learning this topic, let me remind you that this is a very basic approach for the selection of companies but it is the most fundamental thing that every investor must know so if you are a beginner or someone who doesn’t know anything about investing, it is the right thing to start with.

I have divided this method into two steps in which the first method is to select mutual funds and then in the second step we will pick companies from those mutual funds. Following are the tools that we will be going to use in this process.

Crisil.com

Valueresearch.com

Our first step involves finding out mutual funds. For this, we will use crisil.com, and there we have to choose between various categories of mutual funds. Let’s say I have chosen only three categories which are – Large-cap funds, Mid-cap funds, and Small-cap funds. In all these categories which I have selected (three in this case), I will pick up only rank 1 and rank 2 mutual funds from each one as these are more reliable. After making the list of mutual funds I will go to the second step where I will analyze each company from each mutual fund. I will go to valueresearch.com and analyze the top holdings of each mutual fund. From that table, I will select only those companies where 3year high and percentage assets are the same. For example, I have chosen a mutual fund let’s say IDFC Large Cap Fund. Now I will look at its top holdings table from value research.com and from that table I will pick up those companies where 3year high and %Assets are high.

Company

Sector

P/E

3Y High

3Y Low

% Assets

Reliance Industries

Energy

33.63

9.77

1.95

8.97

Infosys

Technology

26.76

8.10

1.14

7.52

Bharti Airtel

Communication

--

8.07

0.00

7.02

HDFC Bank

Financial

23.00

9.94

5.20

6.56

Tata Consultancy Services

Technology

32.89

6.29

0.00

5.14

HDFC

Financial

16.86

7.45

0.00

4.23

Mahindra & Mahindra

Automobile

--

4.41

0.00

4.09

ICICI Bank

Financial

28.27

9.09

0.00

4.02

Ultratech Cement

Construction

21.71

4.17

0.00

3.35

Aurobindo Pharma

Healthcare

15.42

3.88

0.00

3.14

Ipca Laboratories

Healthcare

29.87

3.13

0.00

3.13

Maruti Suzuki India

Automobile

53.25

3.79

0.00

3.08

ITC

FMCG

14.52

6.64

0.00

3.08

Dr. Reddy's Lab

Healthcare

42.90

3.14

0.00

3.08

Hindustan Unilever

FMCG

71.87

4.29

1.82

3.02

EPL

Chemicals

39.64

2.88

0.00

2.88

Fine Organic Industries

Chemicals

53.78

2.38

0.00

2.22

Hero Motocorp

Automobile

25.40

3.22

0.00

2.17

Divi's Laboratories

Healthcare

51.01

3.07

0.00

2.13

Larsen & Toubro

Construction

15.77

5.91

0.00

2.04

State Bank of India

Financial

8.38

5.61

0.00

2.03

Tech Mahindra

Technology

20.57

3.10

0.00

1.89

HCL Technologies

Technology

18.97

1.78

0.00

1.78

Bajaj Auto

Automobile

20.91

1.89

0.00

1.56

Aavas Financiers

Financial

45.86

2.07

0.00

1.30

Indicates an increase or decrease or no change in holding since last portfolio

Indicates a new holding since last portfolio

As on 30-Sep-2020

In the above table, there are only three companies where %change and 3year high are the same and those companies are Ipca Laboratories, EPL, and HCL Technologies. So, I will make a list of all these companies from mutual funds which I had selected and at the end, I will be left with around 100 companies in which most of them gets repeated several times which is a good indication as more than 1 mutual fund has invested in that company.

This way we can select companies by analyzing mutual funds but keep one thing in mind that this is only the first step which aims towards selecting companies so before investing in any of these companies, it is very important to do its technical analysis on a real-time basis so that you can find the trend in real-time which will help you in doing rational investing.