A falling share price does not necessarily make a stock cheap, just as a rising price does not, by itself, make it expensive. According to Kotak Institutional Equities (KIE), investors need to look beyond price movements and focus on the value of the underlying business, the earnings it is expected to generate and the valuation investors are willing to assign to those earnings.
In their report, Investing 101 and endless, pointless discussions, Sanjeev Prasad, Anindya Bhowmik and Sunita Baldawa of KIE argue that investors' preoccupation with market flows, ownership patterns and share prices has diverted attention from value, which they describe as the only relevant issue in investing.
