Ever felt like the stock market moves faster than you can keep up? You're not alone! While the stock market offers great opportunities, constantly watching and making decisions can be tough.
This is where algo trading comes in. Imagine having a super-powered assistant who follows your instructions and trades automatically. Sounds cool, right? But is it the right fit for you? Let's break down algo trading and compare it to the tried-and-tested method – traditional investing – to see which one suits you better.
Traditional trading refers to the buying and selling of financial assets such as stocks, bonds, currencies, or commodities through established exchanges or markets using conventional methods. In traditional trading, investors typically place orders through brokers, who execute these orders on their behalf on centralized exchanges. The goal of traditional trading is often to buy assets at a lower price and sell them at a higher price to make a profit. This approach usually involves holding onto assets for a longer period, with the intention of capitalizing on market trends and economic conditions.
Traditional trading contrasts with newer forms of trading, such as high-frequency trading or algorithmic trading, which rely on advanced technology and rapid execution strategies.
Algorithmic trading often referred to as algo trading, is a method of executing trades using automated, pre-programmed trading instructions. In algo trading, computer algorithms analyze market data, such as price movements, volume, and other indicators, to generate buy or sell signals. These algorithms are designed to execute trades automatically based on specific criteria, such as timing, price, or quantity.
Algo trading can be used in various financial markets, including stocks, bonds, currencies, commodities, and derivatives. It allows for rapid execution of trades and can process large volumes of orders with minimal human intervention.
The primary goals of algo trading are to reduce transaction costs, minimize market impact, and maximize trading efficiency. By removing human emotions and biases from the trading process, algo trading aims to achieve consistent and disciplined trading results.
Overall, algo trading has become increasingly popular among institutional investors, hedge funds, and professional traders due to its potential for enhancing trading performance and risk management capabilities.
Key Differences:
Now that you know the differences between traditional investing and algo trading, how do you decide which one is right for you? Here are a few things to consider:
In the end, there’s no one-size-fits-all answer when it comes to choosing between traditional investing and algo trading. Both approaches have their own merits and challenges, and the right choice depends on your individual circumstances and preferences.
Whether you’re drawn to the simplicity and stability of traditional investing or the speed and potential of algo trading, the key is to do your research, understand the risks involved, and stay true to your investment goals. By carefully considering your options and making informed decisions, you can embark on a path that aligns with your financial aspirations and helps you build wealth over time.
So, whether you’re a tortoise or a hare in the race to financial success, remember that the journey is just as important as the destination.
Happy investing!
Investing in the stock market can be both exciting and daunting, especially for beginners. With so many variables to consider, making informed investment decisions is crucial. Thankfully, stock market calculators are powerful tools that can simplify the process and help investors plan their investments effectively. In this blog, we'll explore the importance of stock market calculators in investment planning, how they work, and why every investor should incorporate them into their financial toolkit.
Stock market calculators are online tools designed to perform various calculations related to stock investments. They can help investors analyze potential returns, assess risks, and make informed decisions about buying, selling, or holding stocks. These calculators utilize mathematical formulas and historical data to provide users with valuable insights into their investment portfolios.
There are several types of stock market calculators available, each serving a specific purpose in investment planning:
For example, if you invest Rs.1000 every month for 10 years, the calculator will tell you how much your investment could grow over the time.
Stock market calculators play a crucial role in investment planning for several reasons:
In conclusion, stock market calculators are essential tools for investors at every stage of their investment journey. Whether you're a beginner or an experienced investor, incorporating these calculators into your investment planning process can help you make smarter decisions, manage risk effectively, and achieve your financial goals.
So, next time you're considering an investment opportunity, don't forget to leverage the power of stock market calculators to make informed and strategic investment decisions.
Happy investing!
Investing in mutual funds can be a game-changer in your financial journey. It offers a diversified portfolio managed by professionals, making it an attractive option for both seasoned investors and beginners alike. However, with so many mutual fund options available in the Indian market, selecting the right ones can be very difficult.
Before diving into the selection process, let's understand the basics of mutual funds. A mutual fund pools money from numerous investors to invest in a diversified portfolio of stocks, bonds, or other securities. These funds are managed by experienced fund managers who make investment decisions based on the fund's objectives.
Mutual funds come in various types, each catering to different investment objectives and risk profiles.
Before selecting mutual funds, it's crucial to assess your risk tolerance. Your risk tolerance is influenced by factors like your investment goals, time horizon, and financial situation. Here's a simple risk assessment to help you gauge your risk appetite:
Once you determine your risk tolerance level, you can align it with suitable mutual fund categories. For example, if you have a long-term investment horizon and a high risk tolerance, equity funds may be suitable for you.
Past performance is often considered an essential factor in selecting mutual funds. While historical performance doesn't guarantee future results, it provides insights into how the fund has performed in different market conditions. When analyzing fund performance, consider the following metrics:
Know Yourself: Your Investment Goals and Risk Appetite
Before you dive into the world of mutual funds, it's crucial to understand your own financial situation. Here are two key factors to consider:
• Investment Goals: What are you saving for? A fancy new phone (short-term) or retirement (long-term)? Different goals have different time horizons, which will influence your fund choices.
• Risk Appetite: How comfortable are you with your money going up and down? Higher potential returns often come with higher risk.
Here's a table to help you understand the relationship between risk appetite, time horizon, and suitable fund types:
Remember: This is a general guideline. There are many different types of mutual funds within each category, so do your research!
Now that you know your risk profile and goals, it's time to find the perfect mutual fund. Here are some key things to look for:
Here's an example: Let's say you're 25 years old and have a high-risk appetite. Your goal is retirement, which is a long-term goal (20+ years). Based on this, you might consider an equity fund that invests in a mix of large-cap and mid-cap companies. You'd then compare different equity funds based on their performance, expense ratio, and the experience of the fund manager.
Once you've analyzed the performance of various mutual funds, shortlist the top-performing funds that align with your risk profile and investment goals. Here's a step-by-step guide to selecting the best mutual funds:
Step 1: Define Your Investment Goals: Determine your investment objectives, whether it's wealth creation, retirement planning, tax-saving, or income generation.
Step 2: Assess Your Risk Tolerance: Evaluate your risk tolerance based on your investment horizon and financial situation.
Step 3: Research Mutual Fund Categories: Understand the different types of mutual funds and their risk-return profiles.
Step 4: Analyze Fund Performance: Review the historical performance, risk-adjusted returns, expense ratio, and portfolio composition of shortlisted funds.
Step 5: Diversify Your Portfolio: Build a diversified portfolio by investing in a mix of equity, debt, and hybrid funds to spread risk.
Step 6: Monitor Your Investments: Regularly review your portfolio's performance and make adjustments if necessary to stay on track with your investment goals.
Conclusion:
Choosing the best mutual funds requires careful consideration of various factors, including your investment goals, risk tolerance, and fund performance. By following the tips outlined in this blog, you can make informed decisions and build a robust mutual fund portfolio that helps you achieve your financial aspirations. Remember, investing is a journey, and staying disciplined and patient is key to long-term success. Happy investing!
Options and futures are two commonly traded financial instruments that offer investors opportunities for profit and risk management in the financial markets. While both options and futures involve contracts to buy or sell assets at specified prices on predetermined dates, they operate in separate ways and cater to different investment strategies. Understanding the differences between options and futures is essential for investors seeking to navigate these markets effectively and make good decisions about their investment portfolios. In this blog, we'll explore the key characteristics of options and futures, their respective advantages and disadvantages, and how they can be utilized in various trading strategies. Whether you're a beginner or an experienced trader, gaining a clear understanding of options and futures can empower you to make more confident and strategic investment decisions. So, let’s break down the basics of options and futures to help you understand how they differ.
Options are contracts that give the buyer the right, but not the obligation, to buy or sell an asset at a predetermined price (called the strike price) on or before a specified date (called the expiration date).
There are two types of options: call options and put options.
Futures, on the other hand, are contracts that obligate the buyer to purchase or sell an asset (such as a commodity or financial instrument) at a predetermined price on a specified date in the future. Futures contracts are standardized and traded on organized exchanges.
Consider a farmer who wants to lock in the price of wheat for next year's harvest. They could enter into a futures contract to sell a certain amount of wheat at a specified price per bushel. This allows the farmer to hedge against the risk of falling wheat prices.
In summary, options and futures are both types of financial contracts, but they operate in different ways. Options provide the buyer with the right, but not the obligation, to buy or sell an asset, while futures contracts obligate the buyer to fulfill the terms of the contract. Understanding the differences between options and futures can help you make more thoughtful decisions when trading in the financial markets.
Are you interested in making money from the stock market but not sure where to start? You might have heard about day trading and swing trading, but what do these terms really mean? Let's simplify it for you.
Day trading is where traders buy and sell stocks within the same trading day. They aim to take advantage of small price movements and make quick profits. Day traders closely monitor the market and make multiple trades throughout the day, sometimes holding a stock for just a few minutes or hours.
Swing trading is a bit slower-paced compared to day trading. Swing traders hold onto stocks for a few days to a few weeks, aiming to capture short-to-medium-term price movements. They look for stocks that might go up or down a lot in price, and then they try to make money by following those price changes.
Choosing between day trading and swing trading depends on your personality, time availability, and risk tolerance. If you thrive in fast-paced environments and can dedicate a lot of time to trading, day trading might be for you. On the other hand, if you prefer a more relaxed approach and have limited time to spare, swing trading could be a better fit.
Remember, both day trading and swing trading come with their own risks and rewards. It's essential to educate yourself, practice with a demo account, and start small before diving into the world of trading. With patience, discipline, and a solid strategy, you can find success in either approach. Happy trading!
The way trades are settled in the financial industry has changed over time. In the past, it used to take weeks for transactions to be completed. But now, thanks to improvements in technology and how things are done, settlements happen much faster. Here is history of how trade settlements took time:
Now, regulators like the Securities and Exchange Board of India (Sebi) are pushing for even faster settlements, like "T+0," where transactions are settled on the same day as the trade. This change will start with a test run for a small number of stocks and brokers. Overall, these improvements make trading smoother, safer, and more efficient for everyone involved.
Trade Settlement is like closing a deal in the world of trading. When you buy or sell stocks, bonds, or other financial assets, the trade isn't finalized immediately. Trade settlement is the process of making sure everything is squared away and both parties involved in the trade have fulfilled their obligations.
Normally, when you buy a stock, it takes a few days (usually 2 days, hence T+2) for the settlement to happen. This means you can't sell the stock or access the money until then. T+0 changes this! With T+0 trades, the settlement happens on the same day, allowing you to receive the money and trade the stock freely by the end of the trading session.
T+0 trades happen during a shorter trading session in the morning (9:15 am - 1:30 pm). There are no pre-opening sessions or special auctions for these stocks. To identify T+0 stocks, look for a "#" symbol added to the stock code.
T+0 stocks have price bands to manage volatility. The price can only move up or down by 1% compared to the previous day's closing price of the regular (T+2) stock. This band adjusts throughout the day based on price movements.
SEBI has proposed that the new settlement process will be implemented in two phases in the first phase an optional t plus 0 settlement cycle is proposed for trades until 1:30 p.m. with the settlement of funds and securities to be completed on the same day by 4:30 p.m
In the second phase an optional immediate trade settlement for funds and securities will be introduced allowing trading until 3:30 p.m. after the implementation of this phase 1
List of securities for Trading in T+0 rolling settlement cycle in Equity Segment
The introduction of T+0 settlement in India is a significant development for the stock market. Here's a breakdown of the potential impacts, both positive and negative:
Faster Trades: T+0 settlements mean money moves quickly, so we can react faster to changes in the market. This helps things run smoother.
Overall, the impact of T+0 is likely to be positive for the Indian stock market in the long run. However, careful monitoring and adjustments might be necessary to address potential challenges and ensure a smooth transition.
It's important to note that T+0 is a new feature, and its full impact will become clearer over time. Investors and traders should carefully consider their risk tolerance and trading strategies before participating in T+0 trades.
T+0 trading can be beneficial for:
This is a new feature, so talk to your broker for more details and any specific requirements they might have.
On February 1, 2024, Finance Minister Nirmala Sitharaman unveiled the Interim Budget for the fiscal year 2024–25, outlining the government's vision and strategies to propel India towards sustainable growth. The guiding principle of Reform, Perform, Transform' sets the tone for the budget's comprehensive approach. This analysis explores the key updates, strategies, and financial estimates presented in the budget, emphasizing its focus on four pivotal areas: the poor, youth, women, and farmers.
The Finance Minister highlighted India's successful navigation of global complexities and challenges, attributing it to structural reforms and pro-people programs. The Finance Minister acknowledged the improved efficiency in savings, credit, and investments, reflecting the strengthening of the financial sector.
A new scheme was introduced to enhance deep-tech capabilities for the defense sector, aligning with the government's focus on national security and technological advancements.
The government unveiled plans to prioritize vaccination against cervical cancer for girls aged 9 to 14, demonstrating a commitment to women's health and preventive healthcare measures.
The Finance Minister acknowledged the complexity of global affairs, citing challenges posed by wars. However, she highlighted India's resilience and successful management, positioning the country for sustained high growth.
To enhance taxpayer services, the Finance Minister proposed the withdrawal of outstanding direct tax demands up to Rs. 25,000 for years up to 2009-10 and Rs.10,000 for the period from 2010 to 2015, providing relief to around 1 crore taxpayers.
The Finance Minister maintained existing tax rates for direct and indirect taxes, including import duties. She addressed expiring tax exemptions for startups and IFSC units, proposing an extension until March 31, 2025, to ensure continuity in taxation.
The Finance Minister highlighted the positive impact of GST, reducing the compliance burden on trade and industry. She cited a survey indicating that 94% of industry leaders view the transition to GST as largely positive, benefiting states and consumers.
The Finance Minister acknowledged the simplification of tax procedures, citing the new tax scheme with no liability for those earning up to Rs. 7 lakh a year. Other reforms included a decrease in corporate tax rates and expedited processing of tax returns.
- Total receipts (other than borrowings): Rs. 30.80 lakh crores
- Total expenditure: Rs. 47.66 lakh crores
- Tax receipts: Rs. 26.02 lakh crores
- Fiscal deficit estimated at 5.1% of GDP
- Revised estimates of total receipts (other than borrowings): Rs. 27.56 lakh crores
- Revised estimates of total expenditure: Rs. 44.90 lakh crores
- Revised fiscal deficit at 5.8% of GDP, reflecting a prudent fiscal approach
1. AmritKaal as Karthavya Kaal: The government expressed its commitment to creating a high-growth economy, focusing on milestone-linked reforms by providing a 50-year interest-free loan of Rs.75,000 crore to states.
2. FDI- First Develop India: Highlighting the success of FDI inflow from 2014-23, The Finance Minister emphasized negotiating bilateral treaties with a focus on 'First, Develop India.'
3. Next-Generation Reforms: The Finance Minister announced the government's intent to undertake next-generation reforms, indicating a forward-looking approach to economic development.
1.Railways:Three major railway corridor programs were introduced, aiming to enhance logistics efficiency and safety for passenger trains. Additionally, a significant conversion of rail bogeys to Vande Bharat standards was proposed.
2. Green Energy: Initiatives in green energy included viability gap funding for shore-wind energy, coal gasification and liquification capacity, and mandatory blending of compressed biogas in natural gas for transport and domestic use.
3.E-Vehicle Ecosystem and Bio-Manufacturing: The government pledged to expand and strengthen the e-vehicle sector and launch a scheme for bio-manufacturing to encourage biodegradable materials.
4.Domestic Tourism: Acknowledging the success of G20 events, the government expressed support for developing tourism centers globally, offering long-term interest-free loans to states for this purpose.
1. Societal Changes: A high-powered committee was proposed to review challenges arising from population growth and demographic changes.
2. Empowering Women: The government recognized the role of self-help groups (SHGs) in transforming the rural socio-economic landscape and aimed to honor and raise the target for such groups.
3. Technological Changes: A corpus of Rs. 1 lakh crore was proposed for providing interest-free loans to encourage private sector research and innovation in sunrise domains.
The Finance Minister presented a vision for "Viksit Bharat," envisioning a prosperous India in harmony with nature. The Finance Minister emphasized the potential of India to lead global growth, leveraging the demographic dividend, technology, and sustainable practices.
The Union Budget 2024-25 outlined a holistic vision for India's development, addressing challenges and embracing growth through strategic initiatives, economic reforms, and sectoral allocations. With a focus on fiscal prudence, the budget aims to propel the country towards a sustainable and inclusive future,fostering innovation, and leveraging India's inherent strengths. As the government continues to navigate global complexities, the budget reflects a commitment to building a resilient and vibrant economy, paving the way for a Viksit Bharat.
Equal weight index funds are a type of index fund that follow an alternative weighting methodology. Unlike traditional market capitalization-weighted index funds, where stocks are weighted based on their market value, equal weight index funds assign equal weight to each stock within the index. This means that every stock in the index has an equal impact on the fund's performance, regardless of its market capitalization.
In an equal weight index fund, each stock in the index is assigned the same weight, regardless of its market capitalization. This means that the fund invests an equal amount of money in each stock. For example, if an equal weight index fund tracks an index with 50 stocks, it will allocate 2% (100% / 50) of its assets to each stock.To maintain the equal weight allocation, the fund periodically rebalances its portfolio, usually on a quarterly or semi-annual basis. During rebalancing, the fund buys or sells stocks to ensure that each stock maintains its equal weight in the portfolio.
Equal weight index funds may be suitable for investors who:
Aspect Equal Weight Index Funds Market Capitalization-Weighted Index Funds Weighting Methodology Equal weight allocation to all stocks Weighted based on market capitalization Diversification Higher diversification across all stocks Concentrated exposure to larger companies Performance Potential Outperformance during smaller stock rallies Reflects market movements of larger stocks Rebalancing Frequency Periodic rebalancing to maintain equal weightage Less frequent rebalancing Transaction Costs Potentially higher due to rebalancing Lower turnover, potentially lower costs Volatility Can exhibit higher volatility Generally lower volatility Market Efficiency Potentially includes less efficient companies Reflects market efficiency Transparency and Simplicity Transparent and straightforward investment strategy Straightforward investment strategy
In today's digital age, where financial transactions are conducted online, it is crucial to safeguard your demat account from potential fraud. As a stockbroker company, we understand the importance of protecting your investments and ensuring the security of your demat account. In this blog, we will provide you with valuable insights and practical tips on how to protect your demat account from fraud. Let's dive in!
Protecting your demat account from fraud is essential for safeguarding your investments and financial well-being. By following these simple yet effective tips, you can significantly reduce the risk of falling victim to fraudulent activities. Stay vigilant, be proactive, and regularly update your knowledge about demat account security. Remember, your financial security is in your hands!
For more detailed information and personalized guidance, feel free to Contact Swastika Investmart. We are committed to providing a secure and reliable platform for your investments.
Startup Funding is an essential part of building a successful new business. It provides the necessary capital to develop and grow the business and can help turn a great idea into a profitable and sustainable company.
Startup funding is typically used to cover expenses such as product development, marketing, hiring, and office space. Depending on the stage of the business, the amount of funding needed can vary significantly.
Startups require funding to turn their ideas into reality, attract and retain talent, market and sell their products, expand their business, cover operational costs, and compete with established players in their industry.
Funding is required by startups for several reasons:
Here are the common stages of startups and the corresponding sources of funding:
In addition to the sources of funding mentioned earlier, startups can also explore other financing options such as debt financing, lines of credit, and revenue-based financing. It's important for startups to choose the right source of funding that aligns with their growth stage and long-term goals.
Here are the steps to obtain startup funding in India:
Investors typically look for certain key factors when considering investing in startups. Here are some of the main things that investors look for:
Here are some key points on why investors invest in startups:
There are several government schemes available for startups in India in 2023. Some of the well-known schemes are listed below:
1. Startup India: The Startup India scheme was started in 2016 with the aim of encouraging innovation and entrepreneurship in the country. It provides funding, mentorship, and other resources to startups to help in the growth of their businesses.
2. Atal Innovation Mission: The Atal Innovation Mission was started in 2016 with the goal of encouraging innovation and entrepreneurship among young people in India. Young entrepreneurs can find funding, mentorship, and other resources from that.
3. Pradhan Mantri Mudra Yojana: Pradhan Mantri Mudra Yojana was launched in 2015 to provide funding to small and micro enterprises in the country. It offers loans of up to Rs. 10 lakhs to support the establishment and growth of businesses.
4. MSME Sambandh Portal: The Ministry of Micro, Small, and Medium Enterprises has launched an online portal called MSME Sambandh, which aims to provide easy access to information about government schemes and services for MSMEs.
5. Credit Guarantee Fund Scheme for Micro and Small Enterprises: This scheme aims to provide collateral-free credit to MSMEs by guaranteeing loans provided by banks and financial institutions.
6. National Small Industries Corporation Subsidy: The National Small Industries Corporation provides various subsidies and schemes to MSMEs, including a marketing assistance scheme, a credit support scheme, and a raw material assistance scheme.
7. Technology Upgradation Fund Scheme: This scheme provides financial assistance to MSMEs for upgrading their technology and machinery.
10. National Manufacturing Competitiveness Programme: This programme aims to enhance the competitiveness of Indian manufacturing industries by providing funding and support for various activities, such as quality improvement, technology upgradation, and marketing.
11. Digital India: The Digital India initiative aims to transform India into a digitally empowered society and knowledge economy. It provides various schemes and initiatives to promote digital literacy, e-governance, and digital infrastructure development.
These are just a few of the government schemes available for startups in India. You can visit the Startup India website or speak to a business advisor to learn more about these schemes and how to apply for them.
Government startup rules vary by country, but here are some common examples of regulations and policies that governments may implement to support and regulate startups:
Investing in the stock market can be a great way to grow your wealth and secure your financial future. But before you start investing, it's important to understand the different types of investors in the stock market. Knowing the different types of investors can help you make better investment decisions and achieve your financial goals.
Retail investors are individual investors who invest in the stock market. These investors typically invest smaller amounts of money Retail investors may invest through online trading platforms or through a dealer with a broker.
Institutional investors are large organizations that invest in the stock market. These organizations include mutual funds, pension funds, insurance companies, pension funds etc. Institutional investors typically invest large sums of money and have professional investment managers who make investment decisions on behalf of the organization.
Hedge funds are pool funds of investors. These funds are managed by professional fund managers and they use risky management strategy for buying and selling securities. Investors who invest in hedge funds are called hedge fund investors.
Day traders are investors who buy and sell stocks within the same trading day. Day traders typically use technical analysis and charting tools to identify short-term price movements in the market. Day traders may invest through online trading platforms or through a dealer with a stock broker.
Swing traders are investors who hold onto stocks for a few days to a few weeks. Swing traders typically use a combination of technical analysis and fundamental analysis to identify stocks with short-term price momentum. Swing traders may invest through online trading platforms or through a dealer with a stockbroker.
Index fund investors are investors who invest in index funds. Index funds are mutual funds or exchange-traded funds (ETFs) that track a specific market index, such as the S&P 500. Index fund investors typically invest in index funds to achieve diversification and to minimize their investment costs.
ESG investors are investors who invest in companies that prioritize environmental, social, and governance (ESG) factors. ESG investors typically use a combination of financial analysis and non-financial analysis to identify companies that are socially responsible and have a positive impact on the environment and society.
High Net Worth Individuals (HNIs) are individuals with a significant amount of wealth, widely defined in India investible surplus of more than Rs.5 crores. HNIs are an important segment of investors in the financial market, and their investment decisions can have a significant impact on the market. HNIs have a wide range of investment options available to them, including stocks, bonds, real estate, alternative investments, and private equity.
Domestic Institutional Investors (DIIs) are institutional investors that operate within a country's borders and are involved in investing in financial markets. DIIs include entities such as mutual funds, insurance companies, pension funds, and banks. DIIs are important players in the Indian stock market and contribute significantly to the liquidity of the market. They are subject to regulations and guidelines set by regulatory bodies such as the Securities and Exchange Board of India (SEBI). DIIs play a vital role in providing stability to the market and creating a balance in the demand and supply of securities.
Foreign Institutional Investors (FIIs) or Foreign Portfolio Investors (FPI) are institutional investors from outside a country that invest in financial markets within that country. FIIs/FPIs include hedge funds, pension funds, sovereign wealth funds, and other institutional investors. They bring in foreign capital to the domestic market, which helps in boosting liquidity and improving the overall performance of the market. FIIs/FPIs are subject to regulatory guidelines set by the regulatory authorities of the country where they are investing. They play a crucial role in the growth and development of the domestic market by bringing in foreign investment and expertise.
The first way to categorize investors is based on their investment category. There are three main categories of investors:
Equity investors buy shares in companies in the hope of earning a return on their investment through dividends or capital gains. They invest in stocks, which can be highly volatile but also have the potential for high returns over the long term.
Fixed-income investors invest in debt securities such as bonds, which provide a steady income stream in the form of interest payments. Bonds are generally considered less risky than stocks, but they also offer lower returns.
Alternative investors invest in assets that are not traditional stocks or bonds, such as real estate, commodities, or hedge funds. These investments can be highly specialized and often require a high degree of expertise to understand and evaluate. Alternative investments can offer diversification benefits and potentially higher returns, but they are also typically riskier than traditional investments.
Investors can also be grouped based on their investment style. There are three main investment styles:
Value investors look for undervalued stocks that are trading below their intrinsic value. They seek out companies with strong fundamentals and a margin of safety, and they aim to buy stocks at a discount to their true value. Value investors tend to have a long-term investment horizon and are willing to hold stocks for years or even decades.
Growth investors focus on companies that are growing quickly and have high earnings potential. They seek out companies with strong growth prospects and are willing to pay a premium for these stocks. Growth investors tend to have a shorter investment horizon than value investors and are more focused on short-term earnings growth.
Passive investors take a more hands-off approach to investing and seek to match the performance of a broad market index, such as the S&P 500. They achieve this by investing in index funds or exchange-traded funds (ETFs) that track the performance of the index. Passive investors tend to have a lower risk tolerance and a longer investment horizon than active investors.
Finally, investors can also be grouped based on their risk appetite. There are three main types of investors based on their risk tolerance:
Conservative investors prioritize capital preservation over high returns. They are willing to accept lower returns in exchange for lower risk and are more likely to invest in fixed-income securities such as bonds. Conservative investors tend to have a shorter investment horizon and are more concerned with avoiding losses than maximizing gains.
Moderate investors seek a balance between risk and return. They are willing to accept some degree of risk in exchange for the potential for higher returns, but they also prioritize capital preservation. Moderate investors tend to have a longer investment horizon than conservative investors and are more focused on building wealth over the long term.
Aggressive investors prioritize high returns over capital preservation. They are willing to take on higher levels of risk in exchange for the potential for higher returns and are more likely to invest in equities or alternative investments. Aggressive investors tend to have a longer investment horizon than moderate or conservative investors and are more focused on achieving their financial goals than on avoiding losses.
There are many different types of investors in the stock market, each with their own investment strategies and goals. Whether you are a retail investor or an institutional investor, it's important to understand the different types of investors and to choose an investment strategy that aligns with your financial goals and risk tolerance.
Governor Shaktikanta Das announced the Monetary Policy Committee's (MPC) decision on the RBI. Here are the Key RBI MPC Highlights
“Never lose your faith in the destiny of India.”
- Governor Shaktikanta Das
1. RBI MPC raise the repo rate by 25 basis points to 6.50% on Wednesday.
2. The Governor says that while inflation is expected to moderate in FY24 it will rule above the 4% target-
The Governor of the Reserve Bank of India (RBI) has stated that although inflation is expected to decrease in financial year 24, it may still exceed the target of 4%. The International Monetary Fund (IMF) has also revised its global growth projections for the years 2022 and 2023, indicating an upward trend.
3. The Governor says the Indian economy remains resilient.-
The Reserve Bank of India (RBI) governor reported that capacity utilization increased to 74.5% in the second quarter, indicating positive growth in the private sector. Investment activity continues to show improvement, with non-food bank credit growing by 16.7% as of January 27, 2023, and robust growth in fixed investment seen in November and December. Despite a decline in merchandise exports, the indicators of fixed investment are showing signs of strength. The governor also stated that there are indications of additional capacity being created in the private sector.
4. RBI GOV says real GDP growth for FY24 is projected at 6.4%-
According to Das, the Consumer Price Index (CPI) inflation for the fiscal year 2023 is expected to be 6.5%, with the fourth quarter estimated to be at 5.7%. There is a considerable amount of uncertainty regarding the trajectory of global commodity prices. Commodity prices are likely to remain high with the easing of Covid-19 restrictions, and this could result in the pass-through of commodity prices keeping core inflation elevated. The low volatility of the Indian rupee compared to other currencies will limit the impact of imported price pressures. The average crude oil basket is projected to be $95 per barrel.
5. RBI projects retail inflation lower at 6.5% for FY23 from 6.7%; 5.3% for the next fiscal-
The Consumer Price Index (CPI) is projected to reach 5.3% in fiscal year 24. Inflation is expected to be at 5% in the first quarter, 5.4% in the second and third quarters, and 5.6% in the fourth quarter. There is concern about the persistent nature of core inflation and it is crucial to see a clear decrease in inflation. It is imperative to maintain a strong commitment to reducing CPI inflation. The monetary policy must be adjusted accordingly to ensure a sustainable reduction in inflation.
6. The RBI has reported that system liquidity remains in surplus, although it has diminished in comparison to previous levels. The central bank has stated that it will remain agile and ready to cater to the productive requirements of the economy. To ensure proper functioning, the RBI will carry out operations on both sides of the liquidity adjustment framework as necessary. In line with this, the RBI has proposed restoring the market hours of the G-Sec market to 9 am to 5 pm. additionally, the RBI has suggested expanding G-Sec lending and borrowing activities to further enhance market liquidity.
7. The current account deficit (CAD) for H1FY23 was 2.2% of GDP, and it will moderate in H2FY23.
Regulatory organizations would receive recommendations from RBI on how to safeguard against the effects of climate change, according to Das. General guidelines for accepting green deposits, Framework for disclosing financial risks associated to climate change, and advice on stress testing and climate scenario analysis would be provided.
8. RBI GOV says MPC will continue to maintain a strong vigil on inflation outlook-
The Monetary Policy Committee of the Reserve Bank of India will continue to closely monitor the inflation outlook. Inflation is expected to remain at 5.6% in the fourth quarter of the financial year 2023. Although the policy rate has increased, it still remains lower than its pre-pandemic levels. When taking inflation into consideration, the policy rate is still lower than its pre-pandemic level. In general, the overall monetary conditions continue to be supportive of the economy.
9. Other Measures to be taken by RBI-RBI proposes to allow some foreign travelers and inbound travelers in India to use UPI for merchant payments. RBI To Launch QR Code-Based Coin Vending Machines that will issue coins against debits to customer's UPI-linked accounts.
Following the Reserve Bank of India's announcement of a lesser-than-anticipated interest rate increase, Indian equities were trading higher on Wednesday. As of 10:06 a.m. IST, the S&P BSE Sensex was up 0.68% to 60,695.09, while the Nifty 50 index was up 0.72% at 17,849.85.
Indian government bond rates increased slightly on Wednesday as a result of the Reserve Bank of India (RBI) maintaining its monetary stance while raising the repo rate as anticipated. As of 11:30 IST, the benchmark 10-year yield was 7.3435 percent. Prior to the policy decision, it was trading at 7.3124% after Tuesday's closing price of 7.3102%.
Rupee prices were unchanged at 82.69 to the dollar. The RBI MPC's decision to raise the repo rate by 25 basis points had no significant effect on the currency since the markets had already priced it in.
Have you ever realized that while scrolling your YouTube, it starts suggesting videos of your interest or are aligned with your watch history? Did you ever realize how subtly your YouTube became so personalized and got curated as per your interests?
Well, that is an AI-based algorithm that is effortlessly working to make your YouTube feed curated as per your interest and such that you could spend hours ignoring what’s going on all around. Interestingly, YouTube is using Machine Learning algorithms (subfield of AI which is able to learn and adapt without following explicit instruction) for the last 6 years and now it is evident enough that YouTube has become an indispensable part of our daily life. Furthermore, the suggestions made by the ML model start getting better eventually as you use it and that is how the machine learning models functions i.e. by training and testing its models with the user input and optimizing the accuracy. Similar implementation can be observed on digital platforms like Instagram, Meta aka Facebook, Netflix, Google Maps, Spotify and whatnot. In fact, the most revenue generating business for Meta i.e. ads is working on ML Algos.
From a bird’s eye view, Artificial intelligence is not a standalone tech but rather an umbrella with multiple techs under it such as Machine Learning, Deep Learning, Natural Language Processing, Fuzzy Logic, etc. Furthermore, the application of all these individual techs is observed in our daily life. For instance, audio/chat bots that one must have used on a phone app like IRCTC, are built on Natural language processing or Amazon Alexa. Thankful to the Indian start-up ecosystem, wherein tech enthusiasts across the nation are solving various ground problems from, agriculture to healthcare, using AI-based tech methods to solve the problem with the least time and team possible.
Lately, the acceptance of Artificial Intelligence has increased exponentially not just as an explicit model used in capstone projects but also with its various applications in day-to-day life. Knowingly or unknowingly, the adaptation of AI has increased so much that even an infant is familiar with Amazon Alexa/Siri. Therefore, the impact of AI in conjunction with IoT has become ubiquitous in daily life. On an organizational level as well, the use of AI has increased drastically post COVID wherein companies are using it for data and behavioral analytics. Taking forward, the recent developments in AI-based applications have made them even more demanding. Tools like auto image drawing, auto background remover, and AI-based vocal splitter are recent developments that have helped save time with very accurate results.
On the contrary note, the future sentiments of AI are apprehensive as it has a threat to the unskilled and semi-skilled workforce as the 4th Industrial revolution is more AI-Centric and intended towards improvising efficiency. However considering the recent development in the applications, AI and its aligned techs have proven to be a boon than a curse and therefore future regulation from authorities might help in avoiding the adversities that come along with such advancements. Briefly, the consolidated AI-based tech has helped save time, energy, and manpower with its various day-to-day applications, therefore, making it part of the daily lifestyle with even more favorable reception in the future.
US inflation is currently at 41 year high which has made people worried about the Fed rate hikes and its aggressive move. What will be its impact on the Indian Stock Market and global markets?
So First let us discuss how does inflation works? When there is inflation usually the central bank it is the Federal Reserve of the US, raises its policy rates in order to regulate the money flow in the economy. This helps in reducing the demand and decreases the purchasing power of people which further controls the flow of money in the economy.
Now as the US economy is a want-based economy and if they decide to curb inflation rather than focus on the growth of the economy then there may be chances of economic slowdown or recession. The extra aggressiveness from the Federal Reserve may lead to an increase in the Interest rate and a decrease in demand, the impact of which may be seen within 6 to 15 months.
Now talking about the global market so there may be a quite possibility of the Market reacting negatively.
Because of rising gas, food, and rent costs, tightening household budgets, and pressure from the Federal Reserve to raise interest rates swiftly, the probability of a recession increased, driving U.S. inflation to 9.1 % in June.
The government's consumer price index climbed 9.1 percent over the previous year, the highest annual gain since 1981, with rising energy prices accounting for over half of the increase. There will be a cascading impact on China due to the US Commodity market as the consumption supply will reduce and economies may suffer. There is also a rise in gasoline prices for countries like Europe and the US.
Did you know that the last time inflation was high was November of 1981 and there was a Global recession in 2008?
Let us now discuss its impact on the Indian Markets. As far as India is concerned we know that it is a need-based economy. The key impact will be seen in commodity prices. In India currently, the Inflation rate stands at 7.01%.
The commodity prices are going down. Agro commodity prices may go down if there is more farm production which will be beneficial for the decrease in their prices.
Now, Looking at the positive picture in the past Few months FIIs selling has also reduced. However, there may be a short-term impact of 6-9 months’ time and price correction may be their US yield can go from 7.36 up to 7.89 %. This is majorly due to falling interest rates & quantitative easing.
Given that the difference in interest rates between India and the US is narrowing, India would lose some of its appeal as a destination for currency carry trade. A churn in emerging market equities due to greater returns in the US debt markets might potentially affect foreign investors' enthusiasm for investing in India, due to the outflows from Indian equities and debt markets, this might have an effect on currency markets.
In response to ongoing inflation as well as ongoing good job and pay growth, Fed policymakers have already indicated a second 75 basis-point increase in interest rates later in July. Traders had fully priced in a three-quarter percentage-point increase for this month even before the figures were revealed.
Companies with higher credit ratings will be seen as lower risks and hence they get loan applications approved more easily than other companies.
A credit rating can act as a deciding factor that helps borrowers in making decisions whether to buy or not to buy a loan from that particular organization. In the case of the stock market, a credit rating allows investors to make an important decision regarding the performance of a company.
There are certain agencies that evaluate the risk tolerance of a company. In other words, the credit rating provided by these agencies assists in making a correlation between risk and return tradeoff of an instrument.
To accomplish the whole process, they come up with a tool that helps analysts to measure the risk of any debt instruments and assess if the returns are performing well against the risks.
A company's credit rating is an important consideration when choosing a company's stock to indicate its position in the market, and its credit rating indicates that a particular company is possible, so a credit rating is.
It is a useful source of information for investors. Repay the agreed loan amount without any problems. Poor credit ratings, on the other hand, indicate that the company may have a hard time paying off the full loan.
This allows investors to make appropriate decisions when choosing a company's stock. If a company fails to repay a loan, it is given the image that the company does not have enough cash to repay its debt and the stock price plummets.
A rating agency is a company that assesses a borrower's ability to repay a loan borrowed by an investor on time. Rating agencies assess the financial position of a company, state, or country and propose measures to improve future financial accountability to borrowers. The main rating agencies in India are:
Sr. No
Credit Rating Agency
Establishment Year
Objective
Functions
Rating Scale
1
CRISIL
1987
The primary objective of CRISIL is to identify the creditworthiness of the companies. The companies mainly consist of public limited companies, banks and financial institutions.
Provide ratings to the companies.
Identify the solutions for the smooth working of small and mid-term enterprises.
AAA, AA, A - Good Credit Rating
BBB, BB - Average Credit Rating
B, C, D - Low Credit Rating
2
ICRA
1991
ICRA provides guidance to the stock analysts and institutions. It also improves the transparency of the regulators such as SEBI, RBI and others.
Provides guidance and information to the individuals, institutional investors and borrowers.
The rating scale of ICRA includes long, mid and short term deposits, securities and instruments respectively.
3
CARE
1993
The CARE company prepares the report on the credit rating on credit ratings and generates research reports.
Help the corporations to generate capital for numerous requirements.
Rating based on two types of instruments - Long term instruments and short term instruments
Credit Basis is the main reason a company, state, or government is given a rating. Rating agencies need to make the rationale for the rating publicly available, including a detailed investigation of the factors, the rating and the justification of risk factors.
Gearing Ratio:
A gearing ratio is a financial ratio that compares a company's liabilities to other financial standards such as stocks and company assets. A high gearing ratio for a company indicates that the company is in a strong financial position.
Diversification of product composition refers to the complete set of products or services offered by a company. When a company trades a wide range of commodities, if the company's commodities do not make a profit, they are collected by other commodities, so the risk is limited.
Working Capital Demand Loan
Licensed to meet daily business needs. If a company can meet its short-term operational needs, it can certainly meet its obligations.
Net Interest Margin
Net interest margin is a measure of the difference between interest expense and interest income, adjusted for return on total assets. A positive net interest margin indicates that the company is operating profitably, and a negative net interest margin indicates investment inefficiency.
Net Worth
A company's net worth is calculated by subtracting total assets from total liabilities. It shows the financial condition of the company. If total liabilities exceed total assets, creditors may not be confident in the company's ability to repay loans.
Total Debt to Total Assets
It shows the amount of debt a company uses to fund its assets. The higher the ratio, the higher the volatility of profit per share due to changes in the unit of operating profit, and the higher the risk of investing in a company.
After discussing the concept of credit ratings and their key rating factors, the next blog will discuss case studies for better understanding.
Needless to say, credit rating plays an important role in deciding the worthiness of a company, these ratings also have some limitations. The ratings majorly depend on subjective information and senior analysts or investment bankers’ judgment.
Hence, it is imperative to ponder certain things before investing:
There has been a lot of buzz in the stock market about IPOs as many IPOs came in the year 2021 and gave extraordinary returns to their shareholders.
Also, people take much interest in IPOs as they find them as a major investment product and provide new hopes to the people.
In other words, investors find new investment hope in these IPOs and as a result of this, the IPO of Zomato, which opened on July 14, was subscribed 1.05 times on the first day of its launching.
The retail investors subscribed to the Zomato IPO almost 2.69 times which is a history in itself. If we talk about the non-institutional investors, then they have put in bids of 13 per cent against the reservation which is a difficult thing to forget in the history of SME-IPOs.
Here, an important question often comes to the investor’s mind: How did the listing price of an IPO decide?
Before getting a dig deep into the whole scenario, let's take a sneak peek at the listing price:
When a private limited company wants to become public for the very first time, it needs to get its stock listed on the major stock exchanges. To complete a process, the company is required to decide the opening price of shares which is known as the listing price.
The launching period of IPO is of three days and post that the investors are allowed to purchase the shares at a given price. Here, the listing comes into place.
Please note that the allocation of shares takes place only after IPO launching.
The IPO listing price is different from the offer price and is decided majorly by the investment bank which is assisting the company during the IPO launching process.
After the successful launching of an IPO on the stock exchange, it becomes available for every shareholder to trade in the stock market.
Now, the shareholders can be actively involved in buying and selling shares in the secondary market.
Several factors will impact how the good IPO gets listed on the stock exchange and how does it affect the IPO listing price:
Demand for a share makes a huge impact on the listing price of an IPO. Hence, the IPO price is also affected by the market demand of the company as the higher the demand, the higher will be the listing price.
The demand for the SME-IPO is affected by numerous factors including the potentiality of a company, its expected valuation, growth sector and more.
Let’s understand the listing process with a suitable example:
If the demand for an IPO is higher, then the chance of that IPO getting oversubscribed more, which in turn makes few of many get a chance to subscribe to it. If it is oversubscribed, many investors will get deprived of the IPO allotment process, and hence the demand surge.
The rising demand makes the IPO firm increase its listing price and hence more investors will trade it in the stock market.
Hence, a high demand, low availability of shares can result in great listing prices and hence great listing gains or vice-versa.
The listing price of an IPO is also affected by the growth prospects of a company. For instance, a company that wants to launch its IPO often comes with several objectives like paying debts, operational costs, which also plays a major role in the listing prices.
If a company comes with the objectives of growing and expanding its businesses, the majority of the retail investors will look forward to the same.
This will increase the orders, which in turn increase the demand of the IPO which eventually increases its listing price. The company is likely to list at a good price if there are any chances for good growth.
A grey market is a place that is considered under regulated but often gets highlighted when it comes to a demand for IPO. It is the extra amount investors pay along with the offer price.
For example: if the offer price of an IPO is Rs 150 and its GMP is Rs 50. This indicated that the investor is willing to pay Rs 200 for the same IPO in the grey market.
An offer to sell an IPO indicates the number of shares that existing investors are willing to dilute in the IPO.
If OFS is more than a fresh issue, it certainly means that there is a reason why current investors no longer want to be part of the company.
This can be a turn-off for some investors. However, this is not always the case. If a company has high growth potential, it can prosper.
However, a large OFS value can adversely affect the list price.
Retail investors play a crucial role in deciding the IPO listing price. As more retailers are looking for an IPO, it further results in deciding the listing price.
A comparative analysis of the stock market analysts can also affect the market sentiments to a greater extent. If the investors are looking interested in a particular IPO and the market sentiments are positive, it is a good indication.
However, if there is a lack of interest of the retail investors, there are higher chances that the IPO listing price is considered low.
These are various factors that have a significant impact on the listing price of an IPO.
Therefore, always keep these factors in mind if you don't know how to choose an IPO listing time in India.
Good IPO listings are those which can give you attractive profits and also help you to increase the visibility of the company.
As stated above, numerous factors help promoters find the listing price of the company which includes investors’ interest, GMP, company valuation and most importantly the demand and supply of an IPO.
Have you ever thought of getting benefits from a fall in the value of an asset in the portfolio?
Sounds interesting, right.
Well, the answer is Yes.
You can take advantage of the assets whose values are decreasing day by day.
The term is known as tax-loss harvesting. Investors often use tax-loss harvesting to improve stock trading returns.
As honest citizens, paying taxes should be our responsibility so as to ensure the country’s security, progress and well-being.
Actually, no one wants to pay a huge amount of their earnings as income tax. Those, who come under the category of high income, have to pay a huge percentage of tax. For instance, the total tax liability of a salaried person could be around 30% which makes a huge impact on their finances.
Tax-Loss harvesting is the way through which you can increase post-tax returns on investment. With this method, you can maximize wealth aggregation especially at the beginning of the portfolio.
To get a brief of tax-loss harvesting and how it helps you minimize your long term capital gains, you need to know how long term capital gain is taxed.
Long term capital gains on equities are re-introduced by the late finance minister Mr Arun Jaitley in 2018.
As per the provision of the financial budget of 2018, any long term gain made from equity investment above 1 Lakh per year is taxable at 10%.
Here, the long term capital gains are the return you make by selling equity investment held for more than 12 months.
If you are a newbie into the stock market or mutual fund, your yearly gain may not necessarily cross the amount of Rs 1 Lakh.
But if you continuously invest and gain share market trading returns, in the long run, you will be in the situation to cross the threshold after some time.
Let’s understand it with an example:
If you invest Rs 5000 per month in equity funds with an average return of 12%, you will easily achieve taxable gains in the span of 2 years.
Here, we present a table where you can see the SIP amount and capital gains with annualized returns of 12 per cent in different periods.
SIP AmountAfter 24 MonthsAfter 36 MonthsAfter 48 MonthsAfter 60 Months5,00015,32535,39665,0761,05,5188,00024,52056,6341,04,1221,68,82912,00036,78084,9511,56,1832,53,24315,00045,9451,06,1891,95,2293,16,55430,00091,9492,12,3783,90,4586,33,108
Hence, people who have large equity portfolios will have huge gains. If you want to pay no tax or less tax, make sure these gains should not exceed the tax-free limit. That’s where tax-loss harvesting comes into play.
Tax-loss harvesting is a way of selling a part of your mutual fund units in order to book long term capital gains and start reinvesting the same amount in the same mutual fund.
Still not understand? Let’s take another example:
Example 1
Let’s assume you have invested Rs 6,00,000 in an equity mutual fund on 21 August 2021 and on 31 August, the value of the investment becomes Rs 6,90,000.
Now, if you redeem the investment, your gain will be Rs 90,000 and hence your tax liability will be zero. As the tax has to be paid only if gains exceed the limit of Rs 1 Lakh.
Now, if you reinvest the entire amount i.e. Rs 6,90,000 after redeeming in the same mutual fund, it will be counted as a fresh investment along with the date of investment.
If the investment value increases up to Rs 7,50,000 post 1 year. When you redeem the investment amount, your gain will be Rs 60,000 which is less than Rs 1 Lakh.
Had you not redeemed Rs 6,90,000 and reinvested in the same mutual fund, your long term gains would have been up to Rs 1,50,000 and hence, you are required to pay 10% tax on the amount which exceeds Rs 1,00,000.
Now, you have to pay tax for the amount above Rs 1 Lakh. hence, the tax applicable would be Rs 5000 i.e (10% of 50,000).
Still, Confused? Let’s take another example:
Example 2:
Tax-loss harvesting allows you to book losses and use the loss amount to offset capital gains in another instrument in order to minimize liability.
For instance, if you invest Rs 2 Lakh in a fund on 2 August 2021 and on August 15, 2021, your investment value would is Rs 1.85 Lakhs. Hence, your long term capital loss is Rs 15,000.
Now, if you sell the investment instrument, it is obvious you are suffering from losses, but you can use the entire loss amount to offset any long term capital gain in order to bring down tax liability.
For instance, within two years, you sell a long term capital gain and book a profit of Rs 1.5 Lakh. Since the capital gain is above 1 lakh i.e Rs 50,000, you have to pay tax.
Now, you may decrease the total tax applied on Rs 50,000 by subtracting the Rs 15000 from Rs 1.5 Lakh.
Hence, your long-term capital gain will be Rs 1.5 Lakh - Rs 15,000 = Rs 1,35,000. Now you need to pay tax only at Rs 35,000 not on Rs 50,000.
This is how the tax-loss harvesting strategy works. It saves tax for many investors.
Here are three ways a person can minimize their tax liability:
Tax planning is a legal method used to minimize tax liability. This can be achieved with proper tax planning. A person can easily minimize tax by taking advantage of many things such as exemptions and deductions.
Many people compare tax avoidance with tax evasion. However, they are different t methods. Tax avoidance is a legal method that helps investors to minimize their taxes. It is the use of smart strategies to reduce a person’s tax liability.
Tax evasion is an illegal way of minimizing tax, which is also known as tax fraud. We strongly advise you to stay away from such fraudulent methods.
Tax gain and tax loss harvesting are the best ways to minimize the tax you normally pay on equity trading investments. Do remember, you have to reinvest the money as soon as you get the redemption amount in your account.
COVID 19 has increased the use of digital technologies which turned out well for the IT sector. If we talk about the pharma sector, there has been a much increase in the pharma stocks as investors focus shifted to COVID 19 related opportunities.
Till December 2020, many things have changed as many SMEs faced a huge decline in their growth. Also, top-notch companies have gone through crises that can’t be ignored.
In such a deeply problematic situation, one thing that performs exceptionally well during a financial and economic crisis in Indian Stock Markets.
The Nifty 50 index has experienced a remarkable recovery from its all-time lows in March. At the beginning of January 2021, the index had risen to 14%.
If you look at the top ten stocks that have generated outstanding stock market trading returns in 2020, it's none other than IT and Pharma companies that have emerged as the largest stocks.
In 2021, stocks of pharma companies remain on the top yet best-performing sectors in the Indian stock market.
In addition to this, the importance of pharma companies has been rising continuously as the demand for medicines, immunity boosters, and life-saving drugs take superiority to save lives.
Further, as the news of the third wave of COVID has come out, the people of India again keep their eyes on the pharma sector to save the country from the upcoming disaster.
Few companies have benefited from the vaccination drive.
Cadila Healthcare, popularly known as Zydus Cadila, is a leading pharmaceutical company headquartered in Ahmedabad.
India primarily engaged in the manufacture of generic drugs and the company is ranked 100th in the Fortune India 500 list in 2020.
Cadila Healthcare has produced the first vaccine called ZyCoV-D, built on a DNA platform.
Also, it has received a EUA (Emergency Use Authorization) from regulators. As per the sources, ZyCoV-D is considered India’s second home-grown vaccine post-Covaxin. The vaccine has come in 3 doses with a success rate of 66.6%.
In the June quarter of 2021, Cadila Healthcare witnessed a rise of 29.3% net profit Year on Year. Also, the huge demand for the vaccines made outstanding sales in the Indian market as it has witnessed a revenue increase of 14.5% year on year.
Introduction:
Cipla Limited is an Indian multinational pharmaceutical company, known for manufacturing medicines to treat depression, respiratory diseases, cardiovascular diseases, arthritis, weight control and other medicinal conditions.
Furthermore, the Drugs Controller General of India has given a go-ahead signal to import India’s Moderna’s Covid 19 vaccine.
The success rate of Moderna’s vaccine is 94.1%. It will be imported in ready to use form. As per the prescription, the vaccine can be stored for seven months, however, if a vial is opened, it can be used for a maximum of 30 days.
As of June 2021, Cipla witnessed a sharp rise of 24% in net profits Year on Year. Furthermore, the revenue also saw a massive increase of 27% year on year. The figures for profit have clearly shown that the Cipla has benefitted from the impact of the second wave of Covid-19.
Introduction:
Dr Reddy’s Laboratories is an Indian multinational pharmaceutical company. Headquartered in Hyderabad, the company is committed to providing affordable and innovative medicines for normal people.
Dr Reddy’s Laboratories entered into a partnership with the Russian Direct Investment Fund and produced a vaccine called Sputnik V. According to sources, the vaccine has marked a success rate of 91.6%.
From September 2021 onwards, the company is likely to begin the production of this vaccine. However, the company saw a slight decline in operating profits in June 2021. Profits declined 13% year on year as there was a marginal slump in the profits of Rs 5.7 billion.
Introduction:
Panacea Biotec is a pharmaceutical company and vaccine maker company registered in India. With principal offices in Delhi, Mumbai, the company got listed in 1995 as Panacea Biotec.
The company has tied with Dr Reddy’s Laboratories, Human Vaccine and Generium to produce nearly 25 million doses of Sputnik V. In other words, it acts as an intermediary between Generium and Dr Reddy’s Laboratories.
Panacea purchases the products from the company Generium prepares vaccines and distributes them to Dr Reddy for the overall supply within the country.
Even though the company manufactures vaccines, it also suffers from losses. In June 2021, the net loss observed for Panacea is $ 574 Million. Unfortunately, the revenue is still flat for the company.
Introduction:
Wockhardt Limited is a pharmaceutical and biotechnology company that manufactures biopharmaceuticals, nutrition products, formulations, active pharmaceutical ingredients and more.
Headquartered in Mumbai, the company has manufacturing plants in India, UK, Ireland, France, the US, Ireland and France.
Besides panacea, Wockhardt is the next company that is responsible for the supply of Sputnik V and Sputnik Light vaccines. The deal had taken place among three companies: i.e. Wockhardt, Enso Healthcare and Human Vaccine LLC.
Human Vaccine LLC is a subsidiary of the Russian Direct Investment Fund. Wockhardt is likely to supply nearly 600 million doses of vaccine Sputnik V and Sputnik Light Vaccines.
In the June 2021 quarter, the company received 3 patents and currently holds 766 patents. However, the company also faced a huge loss of Rs 65.8 billion for the first quarter.
The pharma stocks stated above are likely to benefit from the vaccination drives. Hence, it is essential to figure out how much time is left for the vaccination approval. Some companies already have their vaccines out in the market, while few just started their manufacturer setup.
Also, check out the companies that have completed all the clearances required by the regulators. Select those companies’ stocks whose products are being prepared or ready to release in the future. It will be a more profitable long-term plan.
Stock trading always works when one follows it for a long time because it involves many things such as determining the financial ratios and the value of a company.
Trading is a profession that dates back to the time of the Barter exchange. During those days, two parties came together and made a deal for goods that one party needed and the other had. That formed the main foundation of trading.
A stock market is a place where buyers and sellers perform the transaction of the stocks. These business securities are listed on a public exchange and securities which are traded privately. The first modern stock was traded on the Nieuwe Brug in Amsterdam for the Dutch East India Company in 1602.
The first derivatives were traded in 1607 by a single company. However, the dividends were distributed after some years. Futures trading and options trading were also invented in Amsterdam after a few years.
Nowadays, stock market trading has gained attention even from those who know nothing about the share market and trading. Many people seek trading as a better investment option as it gives them a better purpose to extend their wealth.
Developing interest in the stock market made some people millionaires. However, there are other people too who have lost everything in the stock market. Do remember that the stock market is just like a game.
Here, you need to play with the securities and in return, you will receive outstanding returns. The most important thing while dealing in the stock market is that you need to place every move minutely.
Similarly, you need to know how to enter and exit from the market. Here the timing plays a very important role.
Below we will look at the general principles that will make your trading smooth and better than before.
Knowledge is something that helps investors to get insight into the stock market. With adequate knowledge of the stock market, many people successfully increase their wealth. Also, top stock market giants such as Warren Buffet, Rakesh Jhunjhunwala advised many newbies to read books and learn the basic principles, gather information from different investors and apply them in the stock market.
Homework is the best practice when it comes to stock trading. Make a complete list of the stocks you want money to invest in. Also, keep informed about the companies that are currently doing best in the market.
Share Market Trading without a plan always leads you to failure. It is important to learn the mechanism of stock trading like how it works, how much volatile the stock market is, potential stocks, penny stocks etc.
Trading is a roadmap that tells you which steps to be followed to achieve desired results. A successful trading plan involves setting the target price, monitoring and following a trend, taking a price action and setting the maximum loss you can bear.
Beginners generally have a curiosity to invest in many stocks. They invested in many irrelevant stocks and ended up making losses. Therefore, it is advised to focus on 3-4 stocks at a time and not more than that. Following a few stocks is quite easy as compared to other stocks.
Conservative trading strategy helps to guard you against the downside. Plan your strategy in such a way that your losses should be minimum. In share market trading, everyone has to face some type of profit and loss.
It would be easier if you make losses as a part of trading. Therefore it is important to monitor your losses in a certain way that it becomes a part of your trading strategy.
Share trading is a risky job so don't let it waste your hard-earned money. According to the stock market experts, if you are using leverage, you should be very careful about it. Please make sure that your risk is as per your trading strategy.
When any person starts to trade, its primary goal is to achieve high profits. However, there will be situations when things go against your trading plan, hence as a result, you have to book huge losses so that you survive to fight another day. Stop-loss can do this for you. Stop loss is essential and hence it should be used for every trade.
We always think only about profit while entering the stock market. But it never happens every time, sometimes there are certain events where we need to face losses and hence it is also important to protect our downsides.
Investors often come across situations where our emotions dominate our pre-decided strategy and rules. This is the time where we need to refrain from our emotions and stick to the rules we set for ourselves.
For instance, if you lost in stocks of XYZ company, don’t make a mindset of retrieving the lost money from that stock only. Maybe that particular stock isn't apt for your online trading strategy now. Hence, it is better to get out of it.
Trading is not apt for those who become emotional during market time. In fact, it is for those who actively follow discipline, patience, methods and being unemotional. Even if you decide not to deviate from your methods and rules; in the long run, you will suffer if you don’t stick to your stock trading strategy.
Trading needs a focused mind, and hence if you are doing trading, it's quite essential to stay focused. Complacency can make you suffer. It is tough to make money in the market hence you need to pay attention to each detail. Being focused can increase your chances of identifying trends.
Trading is always volatile and therefore you need to stay updated with the current information in briefs such as charts, price movement, stock market news and other global news that is required to finger out the trend.
In addition to this, you would not want a situation where your orders did not properly execute as you lag somewhere. Hence, it is important to go for the technology where you will get all the essential information that keeps you updated while dealing with the stocks.
Investment is something that gives you outstanding returns if done properly. If you have excessive funds lying in your bank account, save them wisely. You might have heard the above statement from every stock analyst who manages your wealth profile. This is because money is always measured in terms of time.
The time value of money states that the amount of money you have in present is worth more than that the same amount of money you will have in the future. Instead of letting your money sit idle, it would be much better if you park your surplus fund with liquid ETFs.
Liquid ETFs or Liquid Exchange Traded Funds are the mutual funds whose units are traded on the stock exchange. Unlike normal ETFs, the investment in liquid ETFs generally happens in overnight securities such as Repo or Reverse Repo securities, landing obligations and collateralized borrowings.
The primary motive of liquid ETF is to provide an income filled with low risk, at the same time gives a high liquidity level.
Investors who park their funds in liquid ETFs can earn significant returns on idle funds while at the same time remaining liquid to benefit from lucrative investment opportunities.
Liquid ETFs are only suited for large retail investors, portfolio management service (PMS) providers. Futures and Options (F&O) brokers and institutions invest directly in equities, HNI (High Net-worth Individuals).
These are several liquid ETF funds that are readily available to trade. These liquid funds can be traded immediately.
Equity market investors and traders have a habit of making continuous profits from transactions. However, sometimes they even face a loss but these are part of daily work.
The investors who have a tremendous amount of money, always find a better alternative so that they can increase their profit to a greater extent. One such alternative is liquid ETFs. Investing in ETFs enables investors to earn extra profit from excessive funds.
NSE and BSE are the funds that are available for trading where buyers and sellers quickly perform the transactions during the stock market hours on any stock trading days.
ETFs are gaining a lot of popularity these days as many investors consider liquid ETFs as the best instrument that can do wonders with their money.
However, if you are deprived of several benefits of investing in liquid ETFs or exchange-traded funds, this blog will help you out.
ETFs are not for long term investment. They are for short term investments and provide high liquidity, these are always preferred by high profile investors. Like other stocks, these funds are also listed in stock exchanges which are traded during the day. These funds are inter-linked with intraday trading and therefore the prices of the ETF heavily depend on the intraday trades.
For instance, if the intraday rates of the underlying assets change, the ETF prices also change. ETF investors are the experienced ones, and therefore they know what they have paid and what they will receive at the selling.
With liquid ETFs, investors move money from one place to another, construct strategies around their investment and manage intraday portfolios. Investing in ETFs allows investors to successfully invest in a diversified portfolio such as stocks, bonds, commodities, derivatives.
ETFs are passively managed funds that are specially designed to offer low-risk returns and high liquidity. Investors invest in an ETF when they sell equities from their portfolio. Many stockbrokers enable investors to reinvest 100 per cent of the proceeds into an ETF that too on the same day.
The stock market follows a settlement cycle of T+2 days, i.e. ETF units will get credited to investors’ accounts on the settlement day.
ETFs offer many benefits as in this type of scheme, individual investors hold their investment until they find a better alternative to move their funds. Another advantage of ETFs is that investors can forward the funds as a pledge against cash margins if investing in derivative segments.
Many brokerage houses accept ETFs as a cash margin if they want to trade in the derivatives segment.
Liquid exchange-traded funds offer investors better portfolio management by allowing them to invest in various sectors, industries, and country categories. They provide investors easy exposure to desired stock market segments.
ETFs are now available in the major asset classes, thus making them a good investment option. Also, investors can select to trade ETFs during stock market volatility or continue to invest based on their financial plans to earn profits.
The cost of investing in ETFs is quite less than mutual funds as the lower the costs, the higher the returns. Operational costs are an integral part of the structured investment as these costs include portfolio management fees, marketing costs, administrative expenses, distribution costs and more.
Here, lowering the costs means non-involvement of fund managers which means lower expenses of the funds. ETFs have lower expenses in transfers, monthly statements. Unlike open-ended funds, brokerages do require to send regular updates to the investors.
Mutual funds have more taxes than ETFs. This is because ETFs have a lower capital gain. The rate of capital gain tax applied to ETFs is also less as compared to mutual fund investments.
Liquid ETFs have only one dividend option. The daily earned dividends get reinvested into ETFs. Some ETF funds will credit bonus to its investors account weekly or monthly. Since the stock trading returns are low, brokerages waive off brokerage fees and depository participant changes on these funds.
Mutual funds and ETFs are similar investment types. However, the difference lies in the services they provide. ETFs provide higher liquidity than mutual funds and are also convenient to tap when cash flow is needed.
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Source: SEBI study dated January 25, 2023 on “Analysis of Profit and Loss of Individual Traders dealing in equity Futures and Options (F&O) Segment”, wherein Aggregate Level findings are based on annual Profit/Loss incurred by individual traders in equity F&O during FY 2021-22.
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