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EP3: Who is Behind The Change in Stock Price? | Stock Market Crash Course | Explained In Hindi | - YouTube
Channel: Convey by FinnovationZ
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An Indian company bought
Royal Enfield in 1992.
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Before that, Royal Enfield
was a British Company and
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at that time, the sales of
the company were poor.
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Nobody was buying Royal
Enfield motorcycles then.
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This state of affairs went on for years,
due to which the company owners felt
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that they should either sell off the
Royal Enfield Business or shut it down.
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They did try to sell off Royal Enfield
but could not locate any buyers.
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Meanwhile, Siddharth - the son
of the owner of the company -
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requested the management board of the
company to give him one last chance.
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He told them that he wanted to
try once to revive the company.
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Siddharth had a lot of
interest in Royal Enfield.
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First of all, he tried riding Royal
Enfield for thousands of kilometres
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and then found solutions for
all the drawbacks of the bike.
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He maintained the old and
vintage look of the product.
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Along with that, he worked on the
distribution of Royal Enfield and
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opened many mini-showrooms.
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Owing to these efforts by Siddharth,
the sales for Royal Enfield Motorcycles,
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which were 1,800 units/month in the year 2002,
have now escalated to 60k plus units/month.
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On account of the brilliant
performance by Royal Enfield,
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Eicher motors - who had bought
Royal Enfield in 1992 -
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has had a consistent
increase in its revenue.
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For now, approximately 90% of
revenue for Royal Enfield
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for the financial year 2021-2022 is
coming from Royal Enfield itself.
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It is the same company that Eicher
was thinking of shutting down.
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Because of this outstanding
performance by Royal Enfield,
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the revenue for Eicher motors has increased from
the year 2000 up to now by 18% compounded per annum.
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Meanwhile, the profit
has increased by 27%.
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Due to these factors, the
share price of the company
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has increased by more than
30% compounded per annum.
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In the financial year 2000, the revenue
earned by the company was ₹353 crores.
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It further increased to
₹4829 crores in 2010,
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while in the year 2020, it
amounted to ₹9153 crores.
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Similarly, the company had earned profits
worth ₹15 crores in the year 2000.
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It soared to ₹306
crores in 2010 and
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then in 2020, the company amassed a
whooping ₹1827 crores worth of profit.
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The share price of the company
was ₹3 in the financial year 2000.
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It escalated to ₹62 in 2010, while
in 2021, it is nearing about ₹2400.
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Namaskar. To understand
the stock market better,
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do watch our complete 'Beginner to
Expert' series, i.e., go through the
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entire 'Stock Market crash course'.
[140]
Also, share this series with more and more
people to make India financially literate.
[145]
If you are already aware
of the stock market basics,
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you can still watch this video because
you'll learn many new things for sure!
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In this episode, we'll talk about
the share prices of a company and
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the factors based on which
they increase or decrease.
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We'll learn this concept today
with the aid of detailed examples.
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We'll also talk about some free
tools - free websites or apps -
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which will help you analyze
companies and stay updated.
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Further in this series, we'll
go through stock market basics,
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we'll try to understand
which stocks to avoid,
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dos and don'ts of the stock market area
and also the practical applications.
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We'll also cover Fundamental Analysis and
Technical Analysis next in this series.
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We'll consider one more example to understand
the factors based on which share prices change.
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When Wipro started in 1949, it was a
refined oil and vegetable oil business.
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You might have heard about 'Dalda
Ghee'. Wipro used to manufacture it.
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In 1966, Mohammed Hasham Premji suddenly passed
away. Mr Azim Premji was only 21 at the time.
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At 21, he assumed the position
of the chairman of Wipro Industries.
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Then in 1980, when most of the
people in India were unaware
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of the concept of the Internet
and Information Technology,
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Mr Azim Premji decided to
step into the IT business.
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This decision was one
of his best decisions.
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Under his brilliant leadership
and executive qualities,
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he took Wipro to the summit of success.
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If any company performs
well in the long term,
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its share price also increases in the long term.
By long term, I mean 2-4 years or more than that.
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E.g., if the profit
earned by a company
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is currently worth ₹10 crores and
it rises to ₹100 crores in some time,
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then the share prices and value of
the company will increase as well.
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Talking about Wipro: in 1999,
its revenue was ₹2000 crores,
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which increased to ₹27,213 crores in 2010
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and now in the financial year 2021, it has
amassed ₹61,935 crores in the form of revenue.
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The profit margin in
1999 was ₹200 crores,
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which increased to ₹4631
crores in the year 2010
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and further, in 2021, it has
increased to ₹10,796 crores.
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With the consistently better
performance of the company,
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there is a consistent increase
in its share prices as well.
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In 1999, the share price of the company
was ₹13, which increased to ₹161 in 2010.
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Currently, it is more than ₹400.
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By now, you must have understood that
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with an increase in the profits and the
revenue of the company in the long term,
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there is an increase in
its share price as well.
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In another instance, if the profits
and the revenue of a company
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- instead of increasing, decreasing
rapidly in the long term -
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there will be a decrease
in its share prices, too.
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Let's understand this with
an interesting example.
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You must have used the products of the
company in question at some point in time.
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Videocon Industries was
once a market leader in
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the consumer electronics (manufacturing TV,
washing machine, refrigerator) business.
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You might have certainly used
some of these Videocon products.
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Videocon was the first company to get a
license to manufacture colour TV in India.
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Also, Videocon was then the world's
3rd largest picture tube manufacturer.
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If 20-25 years ago, you would have
invested ₹10,000 in Videocon Industries,
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then what would have been
its value today? Any idea?
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Lesser than ₹400. The fact that this
happened might have surprised you.
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Let us understand how this happened.
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Videocon Industries was once a market
leader in the consumer electronics sector.
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The company was gaining a good
amount of revenue and profits, too.
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Then it expanded its business
to several other domains.
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It entered the telecom sector, oil and
gas, retail and DTS services businesses.
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To do so, Videocon Industries needed a lot of
capital. It opted to take a loan from the bank.
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They borrowed a huge sum of money
from the bank in the form of a loan.
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But this move went a bit wrong.
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After establishing newer businesses, Videocon's
focus shifted from Consumer electronics.
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Due to this, nor did innovation take
place neither did product development.
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Till Videocon could
realize its mistake,
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other competitor brands like L.G., Sony, Samsung,
etc., had acquired a fair amount of market share.
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Now Videocon lost its top position
in the consumer electronics sector
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Also, the other new business avenues in
which Videocon stepped didn't perform well.
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On account of these losses, the company faced
difficulties while repaying the heavy loans due.
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Under these circumstances, Videocon sold
off its telecom business to Airtel.
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It also merged its DTS
services with Dish TV.
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Despite these efforts, the company still
had to repay a loan of ₹80,000 crores.
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Due to its consistent poor performance
and inability to repay its loans,
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Videocon filed for bankruptcy at last in 2018.
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Here you can see the course of
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the growth of the revenue, profits
and share prices of the company.
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There was a continuous decrease in the
revenue and profits of the company.
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Since 2010, there was an increase
in the losses of the company.
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Because of this, the share
price of the company
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which was around ₹400
in the year 2005,
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has now decreased to ₹1.50
in the financial year 2021.
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It means that there has been more than a 99%
decrease in its share price in the last 15 years.
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From this example, you
must have understood
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that when a business performs
poorly in the long term,
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its share prices decrease accordingly.
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Volatility is present and
recurring in the short term.
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Videocon Industries' performance in the
long term was undoubtedly deteriorating
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- there came periods in between where
the share prices increased by 5-10%.
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Generally, such short term
volatility is due to
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news, updates, recent trends and emotions
related to the company and its industries.
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Let's understand this
with an example, too.
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In March 2020, we came
to know via the news
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- that Coronavirus was
spreading like wildfire.
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Many countries had already
initiated the lockdown.
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This was some days before India
was under a lockdown as well.
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Many investors were worried that if the
Coronavirus Pandemic did spread in India,
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it will certainly have a negative impact on
the revenue and profits of Indian companies.
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Due to this fear, people began
heavily selling company shares.
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In this case, in the single month of March
2020, Sensex declined by more than 25%.
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The share prices of many Indian
companies decreased by more than 20-25%.
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In March 2020, Wipro's share
prices also decreased by 20%.
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But further in the long term due
to the Coronavirus Pandemic,
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neither did Wipro's revenue
decrease and nor did its profit.
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So the company's performance
remained consistent and
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as a result its share prices
were recovered quickly thereafter.
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However great might a
company's performance be,
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its share price does not show a
straight increase in the long term.
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As you can see on your screens, volatility
keeps on coming in the short term.
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Similarly, however poor might
a company's performance be,
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its share price does not
show a straight decrease.
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There are volatility fluctuations
that takes place in between.
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Whatever volatility comes from
news or trends is short-lived.
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When it was known via the
news that Videocon Industries
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- to reduce its loan amount -
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was selling stakes of
its oil block in Brazil,
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the share prices of Videocon kept on rising
for the next few days due to this news.
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But its business performance was still poor.
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So in the long term, Videocon's
share price kept on decreasing
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but its volatility remained
constant in the short term.
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How are share prices impacted due
to the trends in the stock market?
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Let's look at an interesting
example of the same.
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In 1999, people were investing
in Internet companies because
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they felt that in the long run,
all of them would be successful.
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Because many people were
investing in Internet companies,
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their share prices
were increasing rapidly.
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Convinced by these escalating
share prices, other people
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- without much thought
and for gaining profits -
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joined the bandwagon by
investing in such companies.
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But it did not go as those
investors thought it would.
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Most of the Internet companies in the coming years
couldn't exhibit a good profit and revenue growth.
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Their share prices
started decreasing faster.
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So in a way, the share price that
was increasing in the short term -
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due to the company's poor performance
couldn't sustain in the long term.
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Often, because of misunderstandings, many
fluctuations can be seen in the share prices.
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In March 2021, after the onset of the
second wave of the Covid pandemic,
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medicines, beds and oxygen
supply is not easily available.
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So in this situation, many stock market
investors thought that as of now,
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there is a scarcity
of oxygen supply.
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In this case, the companies that are
manufacturing oxygen can gain a lot of profit.
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Accordingly, many investors started purchasing
shares of the 'Bombay Oxygen' company.
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You can see here that the share
price of this company on 20 March 2020
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was around ₹10,000 and in the span of a month
the share prices doubled and rose even further.
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In this way, share prices were increasing rapidly
until 'Business Today' published a report.
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This report stated that 'Bombay Oxygen'
doesn't manufacture oxygen at all,
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and has not done so since 2019. As of
now, it's a non-banking financial company.
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Ever since this report came out, the company's
share price has been decreasing consistently.
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So, due to misconceptions, volatility is
recurrently generated in some of the shares.
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Any company requires time
to increase its business.
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None of the companies
grows in a day or two.
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So volatility and fluctuations keep
on occurring in the short term.
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Author of the book 'The Intelligent Investor'
and Mr Warren Buffet's teacher,
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Mr Benjamin Graham says,
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"In the short run, the market is a voting machine.
But in the long run, the market is a weighing machine."
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Meaning: The stock market in the short term
is volatile like a voting machine, while
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it's as clear as a weighing
machine in the long term.
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That is, it shows things as it is.
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And thus we can conclude that
the share price of the company
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follows its business
growth in the long term.
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And in this context, business growth refers to
revenue, profits and free cash flow growth.
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We'll learn all of these terms
further in 'Fundamental Analysis'.
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Now we have learnt the factors based on
which the share prices keep on changing.
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The next point is - where to check the share
prices of the company and its details?
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So now I'm going to tell you about some
free tools, free websites and apps,
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where you can check out the
share prices of the company,
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its details and its analytical facts for free!
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We'll start from screener.in.
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It is a very simple and free platform
and also is one of my favourites.
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You can simply go to screener.in
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and type in the name of the company
whose details you want to check out.
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You'll obtain several
details of the company.
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If you simultaneously open this website while
watching, will enhance your understanding.
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Here you can check out the
share price of the company,
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Its market capitalization,
dividend and many other features.
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On scrolling down a bit, you can
view a graph of its share prices.
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You can also check out the previous years'
record of the company's share prices.
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Live share prices of a
company can be available
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by simply Googling the keywords
'*name of the company* share price'.
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You can also use the
MoneyControl website or app.
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Along with that, in any brokerage firm
where you have opened your Demat account,
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you can view live share prices
in the apps provided by the firm.
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On scrolling a bit more, you
can find the pros and cons,
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financial statements like profit and loss
statements, balance sheets of the company.
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Towards the end, you can also view the company's
shareholding pattern and its annual reports.
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We'll learn about financial statements and annual
reports in detail further in 'Fundamental Analysis'.
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So don't worry about it.
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If you don't know even the
ABCs of financial statements,
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there's still no need to worry.
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We're going to learn about this
further in simple, lucid language.
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When you start investing,
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staying updated with the events of the
economy and business world is crucial
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Many a time, with the help of this information,
you might get several investment ideas.
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So now I'll tell you about the 4
tools that will keep you updated
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regarding the stock market, the
economy and the business sector.
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The first one is a newspaper. You
can refer to 'The Economic Times'
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and that will help you immensely.
You can also use bloombergquint.com.
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If you are looking for a Hindi newspaper,
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you can find the Hindi edition
of the 'Business Standard'.
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Also, if you go to jionews.com, you
can find a business column over there.
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If you click over here, you can
find Business news in Hindi.
[886]
Next is our email newsletters.
[888]
In our newsletters, we explain important news
on a daily basis in a very simple manner.
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And this email newsletter is absolutely FREE!
[897]
As of now, our newsletters are available
in both languages - English and Hindi.
[902]
By clicking on the link given in the
description box and in the comments section,
[904]
you can subscribe to this newsletter.
[907]
You can search for popular magazines
like 'Business Today' and 'Forbes'
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on the Jionews platform
and access them for free.
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It will keep you updated, too.
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The next free tool is Google Alerts.
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Put on a Google alert for news related
to whichever stock you need to track.
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The link to Google alerts has also been given in
the description box and in the comments section.
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After setting an alert, the moment news
related to any company is publicized,
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you'll receive an email alert
of the same on your email ID.
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We'll now wind up for the day.
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In the next episode, we'll talk
about shares that we should not buy.
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So in the next part,
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we are going to understand all
of this in a practical manner.
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So stay tuned and do
not miss the next part.
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Also, share this video with all
of your friends and family members
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whom you want to see become financially
literate people in the coming period of time.
[952]
Along with that, do tell us which example or
part you liked the most in the comments section.
[958]
Also, tell us in the comments section how
you are finding this entire series to be.
[962]
Thanks to all our viewers for subscribing to
'Convey' & watching all the videos of this series.
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