Case Studies Analysis for Managerial Economics Internal Assessment Solutions

Managerial Economics Internal Assessment 2 – CASE STUDY ANALYSIS

 

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Case 1- Demand Forecasting in the Restaurant Business

Traditionally in hospitality, restaurant demand forecasting has focussed on sales. Labour spend has been calculated as a percentage of sales – a manager will allocate labour across the week, and they will sense check the allocation against allowed spend and increase or decrease the amount of labour dependent on the forecasted sales for that week. While we might never be able to move away from the model of using a set allowance of hours, spend, or cost to do restaurant demand forecasting, there is another metric you should be considering when planning out the labour required for the coming weeks: activity levels.

Failing to consider activity levels while doing your labour planning can lead to you having too many or not enough team members throughout the week – which can impact many areas of your business. For example, having too many members of staff on will lead to a smaller profit margin. Having too few staff members can lead to missed sales opportunities, but also lead to unhappy and stressed out teams, as well as poor customer satisfaction. What commonly happens is that the beginning of the week starts off with lots of team members, due to the available budget, but towards the end of the week, as the budget decreases, there is a lack of staff on peak trading days to recover the overspend when the business wasn’t as busy.

Restaurant demand forecasting can be difficult, but there are many ways to make this process easier. One of the best ways to do your forecasting is to use staff scheduling software that allows you to plan shifts in 15 minute intervals, using past activity data from your PoS, combined with weather forecasts, to make sure you have the right staff in the right place at the right time. This will allow you to do your scheduling by focussing on sales rather than cutting labour.

This will help your team massively: not only will they not be running around like headless chickens, but as they are able to deliver better service to their customers, they should receive better tips. In essence, you are reducing their stress and increasing their potential earnings, making them happier and more loyal.

Furthermore, customers will also feel the effect. No longer will they be sat at their table trying to grab the attention of the front-of-house staff, whizzing past them at top speed, in order to pay their bill and get home. There will be a smaller chance of incorrect dishes being delivered, as well as the correct dishes being of a better quality due to having the right number of staff in the kitchen.

Managers wanting to shift the conversation from reducing labour costs to instead increasing sales need to have the right tools and data in front of them to be able to do so. For this reason, Fourth’s Labour Productivity solution provides exactly that: visibility, control, and the ability to grow with confidence.

Questions

  1. What is demand forecasting and why is it important?
  2. What method of demand forecasting is being used now? Include the advantages and disadvantages.
  3. Which method is suggested and why?
  4. Which method of demand forecasting, in your opinion, is best for this industry?

Case 2-Oil is on the verge of equilibrium as output declines

U.S. crude-oil production has been falling, but the size of the declines have been getting visibly smaller and smaller—offering a sign that market may be headed toward a delicate balance.

The drop in production has been going on for roughly 1½ years now, said Charles Perry, chief executive officer of energy-consulting firm Perry Management. “But the market is huge—like a big ship—and it takes time to turn it,” he said. At the same time, there has been a gradual fall in demand, which may mean that the market is “near the bottom and approaching a balanced market,” said Perry. That would be “good news for the supply side of the market—the sooner the market is balanced, the sooner they can expect some price recovery.”

U.S. commercial crude-oil supplies topped out above 543 million barrels on a weekly basis in late April of this year, according to Energy Information Administration data. That was the highest level based on weekly data going back to the August 1982. The glut of crude inventories had fuelled a drop in crude-oil futures prices below $30 a barrel in mid-February to their lowest settlement level since 2003.

“A big part of the reason oil bottomed in February was due to U.S. production declines beginning to accelerate. [which] caused analysts to begin revising their outlook for the global oil supply and demand situation to come into balance in the second half of 2016,” said Tyler Richey, co-editor of the 7:00’s Report.

Traders started to bet that the low prices for oil would hurt production, and in the weeks following that low, various oil companies announced cutbacks in exploration and production spending and the market saw repeated declines in shale-oil output and decreases in the number of active U.S. rigs drilling for crude.

Demand for crude also was expected to climb as refiners stocked up on fuel for the summer driving season, drawing down the glut of the crude supplies even further, though eventually building up a surplus of petroleum products.

Questions

  1. Explain the demand curve, supply curve and the equilibrium point.
  2. Where is the crude oil firms, at this point in time, according to the article? Why?
  3. If USA continues to produce more alternative energy, explain what will happen to the crude oil prices.

Case 3-Booming Business: Indian Hotel Industry

Based on the general features and facilities offered, the Ministry of Tourism, government of India classifies hotels into seven categories; five star deluxe, five star, four star, three star, two start, on star and heritage hotels. These apart there are hotels in the unorganized sector that have a significant presence across and cater primarily to economy tourists. Encouraged by the boom in tourism and increased spending on leisure, here has been an influx of globally renowned groups by way of joint ventures.

The premium and luxury segment (high end 5-star deluxe and 5-star hotels) mainly cater to the business and up market foreign leisure travelers and offer a high quality and wide range of services. These constitute about 30% of the hospitality industry in India. The Mid- Market Segment (# & $ stars) offers most of the essential services of luxury hotels without high costs, since the tax component of this segment are lower compared to the premium segment. The Budget Segment comprises 1 & 2 star hotels, which provide inexpensive accommodation to the highly price conscious segment of travelers. Heritage hotels are architecturally distinctive properties such as palaces and forts, built prior to 1950, that have been converted into hotels.

In face of stiff competition, hotels in India have come up with ingenious ways to attract customers. These hotels distinguish themselves with beds, bathroom, amenities and complimentary breakfast. Other facilities may include innovations in food and beverages, spa, fitness center or other lifestyle facilities. The ongoing revolution in cuisine has been accompanied by innovations such as free standing, niche restaurants.

Questions:

  1. Do you think the hotel industry is monopolistically competitive? What all features of the industry are suggestive of the same?
  2. Comment on differentiation offered by hotels in India.

Case 4- Government Intervention

The price of raw sugar recently reached its highest level since 1981 due to problems with supply. Historically, raw sugar has traded at between 10 and 12 US cents per pound at the New York Board of Trade. But the price increased to over 18 cents last month.

Growing demand in Brazil for sugar to be turned into ethanol for fuel, coupled with a sharp fall in Indian production have both been factors in the price increase. Sugar production in India for 2008-09 fell 45% year-on-year due to less rain in the monsoon season damaging a number of agricultural crops.

The London-based International Sugar Organisation predicts that global consumption of sugar is likely to outstrip production by 9m tonnes next year, forcing food companies and governments to dig into stockpiles. In the US, snack producers including Mars, Nestlé and Krispy Kreme Doughnuts put pressure on the US government to relax import controls, warning that otherwise they might run out of sugar, Commentators predict that most shoppers will be unaffected because sugar is such a small part of a consumer’s typical spending in a week that no one will notice an increase in price.

Questions

  1. Explain, using supply and demand analysis, why the price of sugar has been increasing
  2. Do you think a) the supply and b) the demand for sugar is price elastic or inelastic?

Justify your choices and explain whether this means any given change in supply or demand will have a bigger effect on the equilibrium price of quantity.

  1. How might companies such as Mars and Nestlé react to an increase in the price of sugar?

Case 5- CNG vehicles have arrived

CNG (Compressed Natural Gas) has grown into one of the major fuel sources used in car engines globally. In all, 28 CNG models are in production globally by Audi, Fiat, Ford, Honda, Hyundai, Lincoln, Mercedes Benz, Opel, Peogeot, Renault, Toyota and Volkswagen. Some of the countries have taken big lead in this field. Pakistan tops the list more than 60 percent vehicles running on CNG followed by Armenia (32 percent).

The main factor causing this rapid growth includes current energy crisis increasing environmental awareness and the price differentials between CNG and petrol. A look of price will make the point more clear. In India, CNG cost at Rs. 35 per kg compared with Rs. 65 per liter of petrol. Although India has only 1.3 percent of its vehicles running on CNG but New Delhi is home to largest fleet of CNG public transportation vehicles in the world because the use of CNG is mandated for the public transport system in New Delhi. Consumers throughout the country are following it. Automakers are currently vying for marketing positions to further India’s effort for CNG conversion.

Questions:

  1. What is the relationship between the demand for CNG and petrol?
  2. What will be the impact on demand for CNG if prices of petrol decline?
  3. In your opinion, what could be the reason for difference in usage of CNG in India and Pakistan?
  4. According to you, why the CNG demand in India is not increasing?

Case 6- The Air transport sector in India

The air transport sector in India has undergone massive changes in the last three decades. The Air Corporation Act 1953 led to nationalization of the airlines services. Consequently the assets of nine existing companies were transferred to two entities in the aviation sector controlled by the Government of India – Indian Airlines and Air India. For many years, air travel in India was perceived as an elitist activity and there was restricted growth in the industry. In 1986, private sector players were permitted as air taxi operators.

This led to entry of Jet, Air Sahara, NEPC, East-West & Modiluft. With the passing of the Air Corporation Act 1994, this sector was opened up and private carriers were permitted to operate scheduled services. While six operators were granted license only Jet and Air Sahara were able to start their services. However, the year 2003 marked a watershed in the history of civil aviation in India with the entry of low cost carriers like Air Deccan and Spice Jet. This was followed by entry of other private airlines, large and small on to the market, including Kingfisher Airlines, Paramount and Go Air.

From the year 2003 onwards the perception of air travel changed. Aviation became more affordable. There has been a large increase in passenger traffic. Also there has been intense price competition that has resulted in discounted fares, promotional offers and introduction of flights to newer destinations. The co-existence of full service carriers and low cost carriers has also given the consumer a wide choice of service on the market. However, this intense price competition led to losses for the airlines. As a result, the market structure in the air transport sector is undergoing rapid changes. There appear -to be major corporate restructuring measures underway in this sector mainly in the form of mergers and acquisitions (M&As).

The mergers of Indian Airlines with Air India, Kingfisher with Air Deccan and Jet airways with Sahara have led to an industry structure which is sufficiently concentrated to raise a fundamental question about whether the operation of market forces are adequate to prevent the abuse of market power. Thus as a result of the ongoing M&As, from being till recently an industry with around twelve players involved in stiff competition, the industry is now left with nine players of which three are big players and the remaining are small ones.

The changing market structure has provided a new competitive dimension to the industry. It is expected that as a result of the M&As taking place and resultant scale economies, efficiency and productivity will increase, thereby leading to enhancement of profits. It is in fact argued that such consolidation is needed in order to ensure efficient and sustained functioning of the airline operators. However as a result of the M&As, the nature of the market, which was earlier open to many players thereby enhancing competitiveness, is now changing. It is perceived that this may lead to anti – competitive practices on the market with some large players dominating the market.

a.  Name the market structures the Indian Airline Industry belonged to:

b.  After the civil aviation sector was opened up for private players, why do you think the sector got flooded with various airlines?

c.  “Entry of several private airlines increased the competition in the civil aviation ” How did this benefit the customers? Comment.

d.  Why do you think most of the airlines were making losses before the industry resorted to mergers and acquisitions?

e. As the number of airlines is now reduced, how do you think the competition among them will change?

Case 7- Deemed-to-be University in India

Deemed-to-be University is a status of autonomy granted by UGC (University Grant Commission) of India. This status of deemed-to-be University is granted by the Department of Higher Education, Union Human Resource Development Ministry, on the advice of the University Grant Commission (UGC) of India, under Section 3 of the UGC Act 1956.

Indian higher education system has expanded at a fast pace by adding nearly 20,000 colleges and more than 8 million students in a decade from 2000–01 to 2010–11. As of 2019, India has 911 universities, with a break up of 48 central universities, 400 state universities, 126 deemed- to-be universities, 337 private universities. There are five institutions established and functioning under the State Act and 95 Institutes of National Importance, which include IIMs, AIIMS, IITs, IIEST and NITs among others. Other institutions include 39,071 colleges as Government Degree Colleges and Private Degree Colleges, including 1800 exclusive women’s colleges, functioning under these universities and institutions as reported by the UGC in 2019.

UGC also issued a list of 24 fake universities in October 2019. Out of the approved Universities and colleges, there are 708 autonomous institutes as per UGC. Autonomous status empowered to examine their degrees, up to a Ph.D. level in some cases, or non-autonomous, in which case their examinations are under the supervision of the university to which they are affiliated; in either case, however, degrees are awarded in the name of the university rather than the college.

The emphasis on the tertiary level of education lies in science and technology. Indian educational institutions by 2004 consisted of a large number of technology institutes. Distance learning and open education is also a feature of the Indian higher education system and is looked after by the Distance Education Council. Indira Gandhi National Open University (IGNOU) is the largest university in the world by number of students, having approximately million students across the

On the demand side, it may be stated that while merely 6 percent of Indian students who clear the secondary level, choose to pursue higher education, in absolute numbers, this 6 percent amounts to a lot of students. The dichotomy lies in the fact that India’s mammoth higher education system, which is still inadequate to cater to the number of aspirants for higher education, is, on the other hand, churning out many more graduates from its middle and lower- level institutions than can find suitable employment.

This immense demand-supply gap, the inability of most Indian students to pursue studies abroad, as well as the value accorded to foreign degrees in India has provided an attractive opportunity that many western universities and technical colleges are beginning to explore. Indian institutions are also entering into partnerships with established foreign universities and institutions to offer well-structured professional courses in business management and media studies. It is observed that in anticipation of educational services coming into the fold of the GATS, well-established names like Lancaster University, Purdue, and Sunderland are looking towards India for new markets for their courses and programs.

With the rise in Private Universities, there has been an increase in the number of advertisements in media. Moreover, social media promotion is a strength of new-generation educational institutions. This has further enhanced the cost of these universities. In spite of the higher costs, educational institutions can compete and withstand in the Indian market by charging a competitive fee from the students. The huge demand for higher education leads to rising in the supply by Deemed-to-be universities.

The competition among colleges and universities to attract more students have surpassed the non-price competition. In short run, the forecasted demand for Deemed-to-be universities is high. This may further lead to opening more deemed-to-be universities in future.

Questions

  1. Do you think that Education Industry in India is in a Monopolistic market- substantiate your answer?
  2. Draw a price-output determination diagram for Deemed-to-be University.
  3. Do you think that this kind of market is different from monopoly? Explain with diagrams.

Case 8- Fitness Industry in India

At the end of FY2018, revenues in the Indian fitness market amounted to USD 908 million. Further growth in the segment, expected at a CAGR of 9.3% between 2018 and 2022, is expected to take the total market value to a whopping USD 1,296 million in 2022.Revenue is expected to show an annual growth rate (CAGR 2018 -2022) of % resulting in a market volume of US$1,296m in However, a fact worth noting is that a major portion of these revenues will be driven by the consumption of fitness wearables.

Simultaneously, the number of upscale fitness centres is growing at a pace similar to the rapid rise in disposable income among consumers between the ages of 20 to 45 years old. The Indian fitness industry is also helping bring about a much-needed revolution in the country that’s triggered by the increasing number of cases of obesity, diabetes, and heart disease. This is also one of the key reasons behind the sudden surge in the number of weight loss products available in the market, as well as the spike in health club and gym memberships. Spending money on gym memberships, which was earlier perceived to be a luxury, is now becoming a way of life for several people. Furthermore, there is an increasing number of people in tier 2 and tier 3 cities looking for wellness and fitness solutions, with most men opting for muscle-building training and women for cardio-vascular and strength training.

CureFit has set an ambitious aim of a tenfold surge in annual revenue to $1 billion by 2022. CureFit was launched in May 2016 by Myntra co-founder Mukesh Bansal, and former Chief Business Officer of Flipkart, Ankit Nagori. The company has its headquarters located in Bangalore, India. Cure.fit has signed up Hrithik Roshan as its brand ambassador. On acquiring Cult in 2016, the company launched a unique HRX workout with Hrithik Roshan in March 2017, and also acquired Fitness First, The Tribe, B2B logistics startup Opinio, and online food-tech company, Kristy Kitchen. CureFit rebranded two of the three centres of a1000yoga as mind-fit while the third was converted into a Cult fitness centre. The brand also partnered with Tiger Shroff’s clothing line, PROWL in March 2018, for a new fitness program comprising a mix of combat, dance, and functional fitness.

The Bengaluru-based firm has a distinctive business model of offering food (through its Eat.fit brand), physical fitness (Cult.fit), mental wellness (Mind.fit), primary care (Care.fit), and fitness clothing (Cult Sport) on one platform (an app). CureFit has created a tech platform to help customers manage their everyday health regimes including food, which is backed by an offline, proprietary fulfilment network to service them. While fitness centre chains such as Planet Fitness and Talwalkars Better Value Fitness have gone public, CureFit is the first to provide these five interconnected offerings on one platform. Hence, cross-selling of products has happened easily, helping grow its revenue. The company aims to have a total of 25 million customers in the next three years on the back of its global expansion and introduction of several new products.

Cure.fit delivers physical and mental wellbeing across 4 flagship verticals – cult.fit, eat.fit, mind.fit and care.fit. Currently, cure.fit is serviceable in Bengaluru, Hyderabad, Delhi and Gurugram. Cult.fit is a chain of group workout fitness centres across Bengaluru, Hyderabad, Delhi     and     Gurugram.     It      comprises      different      workout      formats      such as Zumba, Yoga, Boxing, Strength & Conditioning, and Sports Conditioning etc. Eat.fit is an online food ordering and delivery platform that delivers daily health meals. It also offers weekly and monthly subscriptions. Mind.fit is a chain of mental fitness centres that comprises Yoga and Meditation as its primary offerings. It also provides Do-it-yourself packs, such as Sleep Stories, Yoga Nidra and Pranayama, on the cure.fit app. Care.fit provides doctor consultations and full-body checkup at its health centre with Pharmacy & Diagnostics facility (Ultrasound, ECG, TMT, X-ray, Blood & Urine tests). Care.fit offers zero wait time, 24*7 video consultation and free follow up for the users.

Cult.fit, which started out in 2015 as a single centre in the Sarjapura neighbourhood and is now a chain of 12 with a loyal following. Founded by fitness enthusiast and former professional basketball player Rishabh Telang. A year later, the company was acquired for $3 million by healthcare startup CureFit. Cult offers energetic 50-minute sessions of strength & conditioning exercises, mixed martial arts, yoga, zumba, or boxing—no treadmills and no other machines. The secret to its success also has a lot to do with its hyper-local strategy, focused on a handful of neighbourhoods, and a tech-savvy approach that makes the company quintessentially Bengalurean.

Cult.fit, which started out in 2015 as a single centre in the Sarjapura neighborhood and is now a chain of 12 with a loyal following. Founded by fitness enthusiast and former professional basketball player Rishabh Telang. A year later, the company was acquired for $3 million by healthcare startup CureFit. Cult offers energetic 50-minute sessions of strength & conditioning exercises, mixed martial arts, yoga, zumba, or boxing—no treadmills and no other machines. The secret to its success also has a lot to do with its hyper-local strategy, focused on a handful of neighborhoods, and a tech-savvy approach that makes the company quintessentially Bengalurean.

Cult has around 10,000 members now, Telang said, and they’re regular in attending sessions. The company is also profitable, he added. While a spokesperson declined to share financial information, Curefit’s co-founder Bansal told the Mint newspaper in June that 10 of Cult’s centres in Bengaluru each make revenues of $10,000 every month.

A three-month Cult membership costs Rs. 9,000 and offers access to unlimited classes at any of the centres. There’s also a more flexible, albeit costlier, option to pay Rs300 per class. In both cases, the first week is free for new users, and everyone has to book their sessions with a click of a button on Cult’s website or via the Curefit app, which was launched earlier this year.

Despite the presence of several large players, there are still many small independent gyms

operating. However, merger and acquisitions have occurred, indicating that the structure of industry is changing. In both the structures, non-price competition is vital.

Questions

  1. Gym-Fitness Industry in India is in monopolistic or Oligopoly market- substantiate your answer.
  2. Draw a price-output determination diagram for care-fit.
  3. Care-fit came out with the non-price competition products and services in the Indian market-discuss.
  4. If the fixed cost of cult fit centre is 10, 00,000 and variable cost is Rs. 2000 for three months, Find out the BEP quantity.

Case 9- Scooter share hits multi-year low as urban lockdown cripples demand

Scooters, a common sight in urban jungles, saw sales take a beating during the lockdown as buyers were either forced to put off purchases due to financial constraints or return home disappointed due to dealership closures. As a result, the market share of scooters in the two- wheeler segment fell to 27.36 percent during the April-August period, its lowest level in six years. Scooter sales had touched a lifetime high of 33.21 percent in FY18, according to data shared by the Society of Indian Automobile Manufacturers (SIAM).

Though the launch of the Honda Activa, India’s highest-selling scooter, took place nearly 20 years ago, scooters have largely remained an urban phenomenon. This is due to reasons such as underdeveloped roads outside cities, low mileage and lower power compared to bikes.

Rural markets were the first to be eased out of the Centre’s Covid-19 lockdown, leading to dealers opening their doors. Urban pockets, however, were the last to see two-wheeler dealerships reopen. This, say manufacturers, was the primary reason for the sharp swing in market share towards motorcycles. SIAM figures show scooter sales declined 56 percent during the April-August period to 1.13 million units from 2.56 million units cl 1.13 million units clocked in the same period last year. The decline in motorcycle sales during the same five months was less severe — a fall of 46 percent to 2.82 million units.

Honda Motorcycle and Scooter India (HMSI) is the largest player in the scooter segment, with a share of 52 percent. TVS Motor Company is second with 21 percent and Hero MotoCorp third with 10 percent. Suzuki, Yamaha and Piaggio make up the rest of the India market share.

“In FY20 and FY19, the contribution of scooters did not change from 32 percent. The majority of volumes from scooters come from urban and semi-urban India and this is where the maximum lockdown happened,” said YS Guleria, Director (sales and marketing) HMSI, speaking to Moneycontrol.

Honda believes that there has been no shift in the buying pattern of consumers since the lifting of the lockdown. The Japanese company, whose scooter brands in India include Activa, Dio and Grazia, blames the disparities in areas under lockdowns for the loss in share of scooters from the domestic two-wheeler market.

“The moment unlocking started going up to Unlock 5.0, when the majority of the country reopened, we were not in a position to dispatch scooters to these urban markets because the network itself was closed. Once they opened up we have been able to add volumes on a month- on-month basis,” added Guleria.

Scooters are estimated to have generated only 20 percent of their sales from rural markets, while the penetration of motorcycles is more than 70 percent. The balance is steered by mopeds. But demand for scooters, says Honda, is once again gaining momentum in urban markets. “Scooters are consumed more in urban India and they are coming back. Over the coming months we will see the scooter contribution going up. It is not that there has been any change in terms of usage pattern as such. Different geographies were under different stages of lockdowns”, added Guleria. Over the last few weeks Suzuki and Hero have launched refreshed versions of their existing scooter models to ride the resurgence. Suzuki launched the Access 125 and the Burgman Street with Bluetooth technology, while Hero launched the Maestro Edge 125 Stealth.

Questions

  1. Why Scooter is considered an urban phenomena?
  2. Is Scooter Industry in India an Oligopoly market? Find out the market share of vehicles (both commercial and passengers) in India to justify your answer.
  3. What are factors affecting future demand of scooter in India?

Case 10- Indian Stock Market

The Indian market has rallied more than 30 percent since March 30 to reclaim crucial resistance levels on the way up. The S&P BSE Sensex reclaimed 38,000 while the Nifty50 was back above 11,200 by September 30. Flows from Foreign Institutional Investors played a big role in supporting the markets, as FIIs were net buyers in the cash segment for more than Rs 20,000 crore. The influx of liquidity not only pushed up quality heavyweights but also small and midcaps higher. The S&P BSE midcap index rallied by about 40 percent while the small cap index closed with gains of more than 54 percent during the same period.

Despite the strong rally, many stocks have failed to perform and are trading below their long- term moving averages. So, what should investors do? The coronavirus outbreak has led to a “new normal” for the economy as well. There are some sectors that have benefitted from COVID-19, others are just playing catch-up and the remaining are struggling to survive.

“There are always laggards with respect to the market movement, as few sectors which would lead the up move and then the rally gets broader-based and laggard stocks to catch up with the market momentum, but one has to be very selective in choosing the stocks from these sectors,” Rajeev Srivastava, Chief Business Officer at Reliance Securities told Money control.

There are 19 stocks in the BSE universe with a market cap of more than Rs 1,000 crore that have plunged 10-50 percent since March and are also trading below 200-DMA. The list includes names like HUL, PNB, Arvind Fashion, DCB Bank, Bank of Baroda, Chalet Hotels, Bank of Baroda, and Omaxe, etc. among others, data from Ace Equity showed.

If a stock trades below its long-term moving averages, it should be considered a red flag but investors should avoid basing their decision on just one indicator. They should conduct thorough research and the reasons why it has underperformed. “Judging a stock only on the basis of its 200-DMA would be an incorrect approach. Ideally, investors should conduct sufficient due diligence and risk profiling while separating quality gems from the abundant haystack of stocks,” Umesh Mehta, Head of Research, Samco Group told Money control.

“If stocks have lagged and are below their trading DMA, they could have either underperformed or they could be good-value buys who just haven’t gained momentum yet. It is better to study the fundamentals and reasons for their underperformance before generalizing an approach to pick stocks,” he said.

What should be the portfolio strategy? Studying the fundamentals always gives us insight into the stock and its relative performance with respect to peers but experts feel that COVID has changed businesses and economically weak companies may find it hard to survive.

“Post the economic shocks like Covid-19 there will be a sector-specific move. Sectors like auto, pharma, IT and cement may continue to rally but sectors like FMCG may take some rest,” Vishal Wagh, Research Head, Bonanza Portfolio Ltd told Money control.

“Banking and NBFC may face resistance on higher levels. In this kind of shock, economically weak companies may face many challenges to reach past growth. Many companies will die and many will go for diversification. So, one should do a stock-specific analysis before going for investment,” he said.

When your investment is down substantially, it is not always easy to move out and get into something that is doing well. Though it is an ideal strategy, it is difficult to execute, say experts. “We are in times where bigger firms have the wherewithal to sustain this period of uncertainty or those how have been quick to adapt to new normal. This has enlarged the performance gap between winners and losers,” Siddarth Bhamre, Independent Market Strategist told Money control.

“New money should go into performers and not in averaging something which has not done well. Yes, there will be names which do better going forward but portfolio-allocation should not be aggressive in such names,” he said.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions

  1. “In the Post Covid, -Sectors like auto, pharma, IT and cement may continue to rally but sectors like FMCG may take some rest,”- Explain from demand side.
  2. Price of shares is determined by demand and supply-Explain.
  3. Stock market is the best example of Perfect competition-Justify.

 

 

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