Coal India is one of the famous public-sector-undertakings (PSUs) in the country. Hence, there is always a buzz about its stock, as several investors show interest in buying its shares.
If you want to buy this stock, you should definitely analyse Coal India’s share price. At the same time, you should be careful to avoid the mistakes, which a lot of investors make while considering this stock.
Here are the 5 most common mistakes people make while investing in the shares of Coal India:
- They think that it is like any other PSU: There is no denying that Coal India is a PSU. However, it would be a mistake to assume that it is like other PSUs, which can be somewhat slow and inefficient in their operations. On the contrary, Coal India has earned the badge of a “Maharatna company,” which is given by the Government of India to only a few select central public sector enterprises. The company earned this status for its outstanding financial and operational performance. When a PSU earns a “Maharatna” status, it has greater autonomy and authority in its operations than other PSUs. Hence, investors should not think that Coal India is like any other PSU.
- Green energy may replace coal: A lot of people think that green energy may replace coal, thereby badly impacting the prospects of Coal India. The fact is that approximately 57% of primary commercial energy depends upon coal in India. When it comes to energy, India does not have any other reliable source apart from coal. Hence, it is unlikely that green energy sources will replace coal anytime soon.
- Not understanding the regulations well: Before investing in Coal India, investors need to understand the regulations governing the coal sector. If they do not understand these regulations well enough, they will not be able to assess the performance and prospects of Coal India. For example, at the moment, the regulations allow consumers to import coal from any source of their choice based on their contractual prices on the payment of applicable duty. However, Coal India provides coal to Indian consumers at a discounted rate to international prices. Therefore, even though many consumers can import coal, they still buy it from Coal India. That said, as an investor, you should understand these aspects before investing in this stock.
- Not considering its dividend-paying potential: Often, people invest in Indian stocks hoping that they will earn only through capital gains. In other words, they do not consider the dividend-paying potential of stocks. However, Coal India has declared dividends for 14 consecutive years. Therefore, not considering dividend payout while investing in Coal India is a huge mistake.
- Not analysing Coal India’s share price well enough: Investors make this mistake not only in the case of Coal India but while investing in other companies as well. It is not enough to check whether a company is good or not because you also need to examine whether it is worth investing at its current price or not. In the last one year, the stock price of Coal India has already risen by around 74%. Hence, before investing in it, you should analyse whether it has room for further growth. If not, then you should not invest in it.
Conclusion
If you are on the verge of demat account opening and want to invest in the stocks of PSU companies, then Coal India should definitely be on your radar. That said, you should not make the common mistakes explained above. If you avoid these mistakes, it is very likely that you will make an informed decision.
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