In a nutshell, it all lies in its quality of management. At the end of the day, firms are nothing but a group of people working together to achieve a common goal.
A company’s management plays a vital role in shaping the fortunes of a business. Ultimately it is the management that decides this goal and steers the company towards it.
Over the years, we have seen great shuffles of leadership roles in many companies. Whenever a new individual with rich experience joins the organization, there is a lot of enthusiasm and confidence among investors.
Some firms have witnessed a significant turnaround in their business while others failed. A classic example would be N. Chandrasekaran taking over the helm of India’s biggest conglomerate Tata Sons in 2017. Tata Group’s market capitalization has risen from Rs. 4.8 lakh crore on April 1, 2017 to Rs 23.6 lakh crore as on March 31, 2022.
Similarly, the appointment of Suresh Narayanan was a blessing for
in 2015 when the company was facing the worst crisis ever with its brand “Maggi”. He restored confidence in the business and brought back the trust of its customers and investors.
On the other hand, the management of changed in 2009 when Chanda Kochhar became the CEO of the company. She stepped down in 2018 due to a conflict of interest.
The absolute return of the stock during her tenure was 308 per cent excluding dividends. This was far less compared to private banking peers like
, , and which generated gains of 3,463 per cent, 1,066 per cent, and 768 per cent, respectively, during the same period.
It is important to note that success doesn’t always last in a business. One bad decision can lead to the erosion of shareholders’ value. Investors often fall into the trap and end up losing money.
Therefore, before investing in any company, investors should determine the quality and integrity of the management.
Here are some of the factors that one may look at…
Investors should keep in mind the advice of the veteran investor Warren Buffet who said, “I think you judge management by two yardsticks. One is how well they run the business, and I think you can learn a lot about that by reading about both what they’ve accomplished and what their competitors have accomplished, and seeing how they have allocated capital over time.”
In order to identify good or bad businesses, investors are advised to carefully study and monitor the management’s actions.
Nifty50 index closed on a negative note after forming a bearish evening star candlestick pattern on the weekly timeframe. The short-term trend is still bullish, however, the market still remains elevated from the means at the same time, so the upside is likely to remain capped. The said candlestick pattern suggests a mild profit booking decline. On the other hand, BankNifty and major US equity indices are exhibiting relative strength in the short term. We believe the levels around 17400 on Nifty are likely to act as make or break levels. A break below the same can lead to a retest of the 17100 going ahead. Until then traders are suggested to maintain a mildly bullish outlook.
Expectations of the Week:
Although the upcoming trading week will be shorter than usual, it will undoubtedly be action-packed. To start with, Mr. Market would be all ears for India’s GDP growth rate and S&P Global Manufacturing PMI to determine the progress of the economy. On the global front, markets are expected to be choppy in the next week as US initial jobless claims and unemployment rate unfolds. Nifty50 closed the week at 17558.90, down 1.12 per cent.