How To?

Guide On How To Do Stock Market Analysis And Tips To Invest In Stock Market

Personal Finance

Investing in the stock market is not that simple. Before starting, you should analyse the market to understand the asset you are investing in. You should look for trends and the performance of the stocks, among other things. Knowing how to do analysis will help you make better stock market decisions.

This guide will help you understand how to do your stock market analysis to obtain great results.

How to Do Stock Market Analysis?

To invest in the market, you should do a strong fundamental analysis of the companies that you are planning to invest in. Stock market analysis is a multi-step process. It helps you cover all the basics that will help you make the best investment decisions and generate wealth. Here is how you can analyse the stock market.

Analysing the Industry

Analysing the industry that you want to invest in is a great way to start. A comparative study of companies in the industry will help you understand their trends. Further, it will help you understand how well the company is performing when compared with its competitors.

Studying financial statements

Studying financial statements will help you understand the company’s performance. There are publicly available statements such as cash-flow statements, balance sheets, income statements, etc. that will give you clarity about the financial well-being and performance of the company. These statements give you important information about their profit and sales. You can use all this information to decide on investing in the company.

Research the company’s stock

After understanding the industry and the company, you should take a closer look at its stock. The study of the price-equity ratio (P/E ratio) of the stock will tell you if it is undervalued or overvalued. A stock with a high P/E ratio is an overvalued stock, and one with a low P/E ratio is undervalued. Analysing the stock using its P/E ratio and historical data will tell you if it’s worth buying. It will also tell you a lot about how the company is performing in the market.

Track news about the company

Before making your investment decision, you should keep an eye on the news related to the company. Be mindful to read news from verified sources. Tracking news related to the company will not only help you gain information but also help in predicting the performance of the company.

Analyse the Risk

Stock markets are exposed to risk. Before making any investment, you should spend some time understanding the risks related to your investment. For this, you should first understand your risk appetite, which is simply how much risk you are willing to take with your investment.

Before making a decision, you should study the size of the company. A small-cap company is riskier compared to a mid- or large-cap company. At the same time, consider how prone that company is to changes in government policies. Such an analysis of risk is key to making good investment decisions.

Tips to Invest in the Stock Market

Now that you have understood how to analyse the stock market, here are a few tips to keep handy when investing in the market.

  • Understand the Basics of the Stock Market: This is a no-brainer. When investing, you should have a basic understanding of how the market functions and what drives it. Before investing, spend some time and probably some money learning its technicalities. Never enter the stock market without any prior knowledge. This will help you understand the key functions of the market. It will also reduce the risk of losing your investment. 
  • Create a Diversified Portfolio: While investing in the stock market, don’t invest all of your money in just one stock. Rather, invest in a range of companies. Diversifying your portfolio will greatly reduce the risk of loss that investing in one stock can cause. A good way to diversify your portfolio is by investing in mutual funds or exchange-traded funds (ETFs). 
  • Invest in companies with strong fundamentals: While investing, you should look into the fundamentals of a company. Companies with strong fundamentals offer greater liquidity. They can also provide good returns in the long term. Therefore, invest only in companies with strong fundamentals, those that can withstand fluctuations and volatility. 
  • Invest in businesses that you understand: It is recommended to invest in a company that you have an interest in learning about. What a company does can greatly benefit you in your investment journey. If you understand their products and services, you can easily understand the impact of policies and market conditions on their share price. 
  • Avoid buying based on suggestions: Do not rely on rumours and advice, even from your close friends and family, while investing in the stock market. As an investor, you should conduct proper due diligence. Always study the company before investing in its shares. Do not rely on word-of-mouth for your investment decisions. 
  • Be patient; invest for the long term: Getting returns in the stock market is a long game. Be patient and invest for the long term for better returns. Do not check your returns every day; let your investments work for you. However, keep a keen eye on the market. 
  • Use a reliable intermediary to invest through: Several official stock brokers can open Demat and trading accounts for you. To invest, you should use a reliable intermediary. While looking for an intermediary, you should choose someone experienced and credible, like Piramal Enterprises Limited, to trade in the market.


This guide to stock market analysis will help you make better investment decisions and enter the market with the necessary knowledge required of an investor. For more stock market and personal finance knowledge, visit the Piramal Finance website and give your finance journey the knowledge it requires.