What is Stock Market Analysis?

September 28, 2021 Trading 3 min read
stock analysis

In the last year, from 31st March 2020 till September 2021, share market investors have bathed in money! Returns that you wouldn’t see a 5 to 10-year investment horizon have been gained in less than 14 months. The Sensex is at an all-time high, and don’t you wish you could see it beforehand?  Some investors did excellent stock analysis when there was time, and now, they are 5-10 times richer in a year. 

So, what is stock analysis? 

As the name indicates, this has to do with analysing a stock, fundamentally and technically. When it comes to investing in the BAZAAR, there is just as much money to be made as there is to lose. The returns entice many investors; unfortunately, not knowing how to do it right can lead to blind shots and failure. 

So, the question remains: how do we do it right? 

To make stock investments correctly, you need to know how to analyse a stock

To begin with, stock analysis is about analysing the stock in every way possible. This obviously has a stock market analysis too. All the stocks comprise the Sensex, making it natural to study the co-dependence between the indices and each entity sectorally. 

In simple words, have a macroscopic viewpoint. When the whole market crashes, it’s predominantly noticed that all stocks crash. This may still have exceptions. However, a majority of the herd will follow the trend. This, however, shouldn’t panic you into withdrawing faster, though! If you have a plan for your securities, then you should stick with your plan.

Start by looking at the stock market analysis, then go down to the sector, the company, and then arrive at the shares you might buy. This should be your stock-picking strategy

Once you pick the stocks you are interested in, you might still want to do a double-check and not base the decision entirely on hear-say. 

You would have to analyse shares for yourself. Don’t worry! TradeSmart is an online discount brokerage, which also offers you helpful tips on how to go about it. 

To learn stock market analysis, we have to first group stock analysis in two categories:  

  • Fundamental analysis: 

Before you pick a share for the longer haul, do check where the company is standing. Performances and revenues can vary with time, but the current situation will give you a fair idea of what you can expect from that company. 

A few questions to ask when you analyse a share fundamentally would be:

  • Is the company debt-free? 
  • How is the revenue from the past three years? Are they in losses? 
  • What are their plans for the future?
  • How good is the company when it comes to compliance with the government, environment, and society? 
  • What is the scope of work for them? 
  • What is their attrition rate? 

You can find these details in their quarterly reports too. 

  • Technical analysis:

When you are into trading, how a company performs is of little use. More focus has to be on how the share is doing. The psychology and promise surrounding its upwind in the coming days or weeks or months, what is the stock chart hinting at. Look for signs of a trend reversal, support levels, and historical patterns. 

Stock market technical analysis is more suited for short-range investments, a maximum of one year, while fundamental analysis goes better for long-range investors. 

Stock Market Technical Analysis Vs Fundamental 

Parameter for Comparison Technical Analysis Fundamental Analysis
Focuses on The share’s momentum, volume, price, etc. The company’s performance, prospect, etc.
Span Valid for less than a year More than a year

Although both, fundamental and technical analysis, have their fandoms, most investors use both these schools of thought before coming to a conclusion. The fundamental analysis can help you rate a company based on its likelihood to perform in the future. On the other hand, there is a better view of the short-range when you do stock market technical analysis

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