5 Benefits of an Online Demat Account

by Vinaya HS on November 19, 2017

in Finance

The following post is a sponsored post.

If you want to buy and sell shares on the stock markets, you must have a dematerialization or demat account. For this, you have to undergo a one-time procedure of signing the form and submitting the required documents.

Once you complete the formalities of opening an account, you may enjoy several benefits. Here are five such advantages.

1. Eliminate the risk of theft or robbery

When you hold your investments in an electronic form, there is no risk of theft or robbery of the physical certificates. Furthermore, you eliminate the possibility of any forgery when you hold your investments in a demat account.

2. Quick and immediate share transfers

Prior to the availability of such accounts, shares had to be sent to the registrar or the company to get these transferred to your name. This was a time consuming and cumbersome process. Furthermore, there was a risk of losing the certificates. With a demat account online, the transfer happens immediately without any risk of shares being lost or damaged in transit.

Moreover, earlier you needed to buy stamps when you wanted to transfer physical certificates. However, the dematerialization accounts levy security transaction tax, which eliminates the requirement of buying and using transfer stamps.

3. Buy and sell a single share

Prior to dematerialization, you were unable to buy or sell a share in odd lots. You could trade only in marketable lots, such as 50, 100, and so on. However, with dematerialization, you may trade in any quantity, which may be as low as one share. In addition to being more convenient, the online platform has reduced the transaction costs.

4. Nomination facility

A dematerialization account allows you to nominate another person without making him a joint holder. This provides you with better control over the account and efficient transfer to your nominee in case of your demise.

5. Multiple holdings in a single account

A dematerialization account allows you to trade and hold various financial instruments such as bonds, non-convertible debentures (NCDs), tax-free bonds, shares, fixed deposits, and much more in a single location. In addition, corporate actions like issues of rights or bonus shares are executed immediately without any delay or hassles. You do not have to wait to receive the physical certificates after the corporate announcement.

When you open a demat account online, you are able to reduce the transaction costs. You do not have to spend money on a registered post to send physical certificates to different locations when you buy or sell shares. Furthermore, you are able to easily track your investment portfolio and know the current market prices and the loss or profits on your holdings. When you choose an online trading account and link your bank account to your dematerialization account, the entire procedure becomes convenient and quick.

So, open a dematerialization account online and start investing today.

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Things You Need To Know About Personal Loans

by Vinaya HS on November 14, 2017

in Finance

The following post is a sponsored post.

In general, loans are attached to specific causes such as home loan, car loan, education loan etc. On the contrary, a personal loan is an all-purpose loan that can be utilized to fulfill all of your personal financial needs. Be it an international vacation, wedding expenses, home renovation or medical emergencies, a personal loan can fill your budget gaps in every way. However, taking a loan is serious business. Therefore, here are the important things you need to know before you sign the dotted line.

It Is an Unsecured Loan

A personal loan is an unsecured loan. Therefore you need not use an asset as a collateral. Even if you are unable to repay the loan amount, the bank cannot seize your assets directly. Moreover, you do not require any sort of guarantor in order to get the loan approved. Nonetheless the lender will check your credit score and your income sources to gauge your ability to pay back the loan.

High Interest Rate

A personal loan generally carries a high interest rate as it does not need a collateral. Since the lender is taking a high risk by giving you an unsecured loan, you will have to pay a heavy interest. In India, personal loan rates vary between 11% and 22%.

Quick Processing Time

Since personal loans do not require any security or guarantee, the document processing is usually done within 24-48 hours. Hence, personal loans are apt for financial emergencies.

All-Purpose Loan

The best part about a personal loan is that you need not specify the reason for taking the loan. Once you apply for the loan, the amount will be credited to your account and you may use it as per your convenience.

Minimum Paperwork

Tedious paperwork is the worst thing you need at the time of financial emergencies. The paperwork involved in the application for a personal loan is minimal. You need not submit any proofs and certification of your assets. Hence you can get done with your paperwork in no time.

Understand the Type of Interest Rate

Personal loans carry two types of interest rates i.e. fixed and variable interest rates. Personal loans with a fixed interest rate tend to higher than personal loans with variable interest rate when you initially repay the loan. However, your monthly repayment amount remains the fixed throughout the loan tenure. On the other hand, the interest rates on variable personal loans increases gradually with time. Although personal loans with fixed interest might seem expensive initially, it is nevertheless the safest option.

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The Tech-Savvy Customer Is Now The King!

by Vinaya HS on November 9, 2017

in Finance

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Nagesh was driving down with his family from Delhi to Lucknow for a big fat family wedding. He was almost half-way through and was about to stop at a Food Court for snacks and refreshments. At that very panicking moment, he realized that he had forgotten his wallet and did not have much loose cash with him. But then he came across the sign for payment via e-wallet or QR Code scan for food as well as petrol and his problem was solved.

Social Media, Analytics, Mobile, and Cloud (SMAC) is revolutionizing the financial services sector and has been leveraged for giving more power and financial autonomy to the customers. The demonetization drive has almost nullified the use of cash in day-to-day transactions. There is a constant debate about whether the financial services sector is effectively using the emerging technologies.

Experts have cited five technologies that are bound to transform the financial services sector in the next decade – Wearable devices, Internet of Things, Next-Gen Biometrics, Virtual assistants and natural language question answering (NLQA), and new currencies.


Empowering you
As the economy grows and incomes reach a new high, the standards of living will hike in their own way across the globe. Individuals would want to travel, buy high-value goods, start up new ventures, and grow further. Financial institutions will never lose their relevance as long as they innovate and keep their technology platform upbeat.

Personal Loans and Business Loan are commonly considered by individuals for varying reasons such as for an exotic travel plan, a medical emergency, a new car or a new gadget. However, today they also look out for convenience and ease of availability when they consider a bank or a financial institution for borrowing a personal loan or a business loan.

Financial institutions such as Tata Capital not only offer a seamless digital platform for extending loans but also provide some inventive loan products and EMI repayment options. Today you can simply download the application on your mobile, check the status on your loan, calculate the EMI via online personal loan EMI Calculator, and instantly make the EMI repayment via your credit cards or even Mobile Wallets. You never know you could even get pleasantly surprised with a Cashback or a movie ticket on EMI payment.

It could be a marketing gimmick or a transformation triggered by adoption of new technologies, the fact is, customers are at the core of every decision-making. Financial institutions need to and are leveraging these digital technologies to empower the customers in every way.

Today individuals need convenience and accessibility to funds instead of toiling at the long bank queues. How can this be possible without a robust technology interface? The transformative digital platform is the long-term answer for this.

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10 Things to Consider While Buying Health Insurance

by Vinaya HS on November 9, 2017

in Finance

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To secure the financial well-being and health of your family, availing of insurance coverage is crucial. Choosing the appropriate policy will provide you with the peace of mind. Being covered ensures you and your loved ones receive the best treatment in case the need arises.

Healthcare costs are constantly rising and delaying your decision to buy a health plan is not advisable. Stressful living, unhealthy eating habits, and sedentary lifestyles increase the possibility of suffering from serious ailments like diabetes, cardiovascular diseases, and hypertension.

You may avoid buying an individual plan because you are covered under your company’s group insurance. However, the coverage may be insufficient. Furthermore, if you quit or lose your job you will no longer be insured.

Most companies allow you to buy health insurance online. Here are ten things you must consider before making a decision.

1. Determine the appropriate sum assured

When you are making this decision, you need to consider the healthcare expenses and their increase due to inflation. Furthermore, you must take into account your family history and other risk factors. Availing of a higher sum assured is recommended as treating critical illnesses may be very expensive.

2. Start at an early age

It is advisable to procure health coverage at an early age. This is because you will be able to avail of higher coverage at a lower premium. Furthermore, risks associated with health increase with age and insurers may deny coverage at a later date.

3. Check for lifetime renewability

You will most likely file a health insurance claim when you are older. Therefore, choosing an insurance plan that offers renewability during these years is important to ensure you are completely protected.

4. Avoid claim loading plans

If you choose a claim loading plan, the premium continues to increase in case of any critical illness that requires long-term treatment. As a result, you may not be able to afford the higher premium and lose the coverage.

5. Choose restore or top-up plans

In case you need to completely use the benefits under the family floater health insurance plan, a restore benefit is advantageous. The sum assured is automatically restored in case the entire amount is utilized during the policy term.

6. Provide accurate information

It is important that you provide accurate information to the insurer at the time of purchasing the policy. It is crucial you do not withhold any information, such as pre-existing conditions in order to avoid paying a higher premium or ensure you are not denied a policy. If you withhold information or provide incorrect data, your claim may be rejected in case the need arises.

7. Check for the waiting period

Most health insurance policies and plans include a waiting period for pre-existing medical conditions. This may vary from two years to five years. During this time, the insurance company does not cover any expenses related to such conditions. It is recommended you choose an insurer that provides the lowest waiting period.

8. Opt for minimum sub-limit

It is recommended you choose to buy medical insurance online with no or minimum sub-limit. You must ensure there is no cap on room rent because it will limit the type of room you may choose in case of a hospitalization. Sub-limits specify the maximum limit for different expenses and expenses exceeding these would need to be paid through your personal resources.

9. Know the hospital network

An important thing to consider when you buy mediclaim policy online is the hospital network. A wider network of hospitals means you are able to benefit from cashless treatment at more facilities. Therefore, you are assured that you will not have to bear the expenses and later claim reimbursement in case you or your family member is hospitalized.

10. Read the inclusions and exclusions

It is crucial you read all the terms and conditions before signing on the dotted line. Understanding all the inclusions and exclusions beforehand will prevent disappointment later when the need arises.

Although procuring the policy at a lower premium is desirable, it must not be the only factor. It is important you check the claim settlement ratio, no claim bonus benefits, and additional riders available before making your choice. It is recommended you compare different private health insurance plans and policies to make an informed decision.

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Investing in the Stock Market Made Easy

by Vinaya HS on November 2, 2017

in Finance

The following post is a sponsored post.

The stock market may seem intimidating and confusing. You are going to be investing your hard earned money and expecting good returns. However, there are some things to keep in mind before you start investing.

1. Be prepared

Before you take the plunge you need to know how to invest in stock market. Ensure that you have determined the following things:

Choose your options: The most important thing to determine is the type of stocks or company that you will be investing in. You may go for the companies on the Nifty 50. You may also choose among small-, mid-, and large-cap companies.

Set your budget: Analyze your finances and determine your budget and the amount of money that you will need to get your desired returns.

Open an online trading account: A dematerialized account is necessary for trading in the stock market. It will be better to open an online trading account because you will be able to trade from anywhere and at any time.

Broker: You may seek help from a broker or a consultancy service in case you are wondering how to invest in shares. A broker is required to carry out any stock market transaction.

2. Analyze the company

Now that you have the basics covered and you are ready to invest, you have to choose which company you will invest in. For determining your best bet, you may do a fundamental analysis. This method basically helps you in determining what the intrinsic value of the company’s stock is. If the intrinsic value is more than the amount it is being traded at currently, then it is a good idea to invest in that company.

The intrinsic value is the total amount of future profits that the company is projected to make. This practice of fundamental analysis is a good way to determine the stocks’ value that will increase in the future and give you a good return in the long term.

3. Ratio analysis

Ratio analysis is another way that will help you to know the performance of the company that you are going to invest in. This method allows you to measure different companies of the same industry and select the one that is performing the best.

There are some ratios that you may use to determine the performance of your chosen company. These are:

P/E ratio: The price to earnings ratio determines how much an investor is paying for each unit of the earnings.

Debt to equity ratio: This ratio compares the level of the amount that is borrowed to the level of the capital.

P/BV ratio: The price to book value ratio helps in comparing a company’s market price and its book value. Book value is the amount that remains when the company liquidates its assets and repays its liabilities.

OPM: This ratio determines the operational efficiency of the company and its pricing power. It is known as Operating Profit Margin.

EV: Enterprise value by Earnings before interest, tax, depreciation and amortization (EBITDA) is used along with the P/E ratio to determine the value of a company. EV is basically the market capitalization added with debt and subtracted with cash.

4. Other tips to keep in mind

There are a few other tips to keep in mind to help you know how to invest in stocks and get a good return on your investment.

Do not go by the herd mentality: Your decision to invest in a particular stock should be made by yourself on the basis of careful evaluation. It is better to avoid the herd mentality and end up buying the shares that your cousin, neighbor, or colleague is buying without any research.

Invest in the business not just the stock: It is better to invest in a business that you understand so that you will be able to gauge how market conditions will affect your investment. Buying the stock of a company whose working you don’t understand may leave you feeling out of the loop.

Be disciplined: It is very important to have a disciplined approach when it comes to investing. Getting swept up in the volatility of the market might result in losses. If you systematically invest and hold onto your investment patiently, it is more likely that you will get great returns.

Diversify: The importance of diversifying your portfolio cannot be stressed enough. By diversifying and buying different types of securities, you lower your risk and increase chances of a stable return.

Follow these tips mentioned above and start investing today for better returns.

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Types of Health Insurance Plans

by Vinaya HS on October 27, 2017

in Finance

The following post is a sponsored post.

In order to protect yourself against the ever-increasing medical bills in case of a medical condition or a disease, it is necessary to invest in a health care plan. Such a policy pays for all hospitalization-related expenses, as well as pre-hospitalization, and post-hospitalization charges. Some policies also offer coverage for critical illnesses, domiciliary treatment, alternative treatment, and also provides health checkups.

There are various types of health insurance policies available in India. Some of the most popular ones are:

1. Individual health plans

As the name suggests, individual health plans are meant to cover individuals. In case of hospitalization, all your medical bills will be taken care of by your insurance provider. You may also avail of the cashless claim facility at network hospitals. This ensures that you do not have to run from pillar to post trying to arrange the necessary capital. Focus on your speedy recovery instead of worrying about settling your medical bills. Another benefit of individual health plans is that you may choose from a wide range of additional covers. This helps to enhance your coverage and protects your financial interests better.

2. Family floater health plans

A family floater plan is another type of health care policy. By investing in such a plan, you may receive medical coverage for yourself, your spouse, children, as well as parents. A major advantage of such a plan is that you have to pay just a single annual premium as compared to individual plans. You do not have to track and maintain multiple policies. Many insurance providers offer discounts on such plans as multiple members are covered under the same policy. Apart from all this, you may also avail of cashless facility at network hospitals in case any of the covered members require medical treatment.

3. Critical illness plans

Critical illness refers to life-threatening medical conditions such as cancer, loss of limbs, major burns, blindness, kidney failure, bone marrow transplant, and stroke, besides many others. In order to protect yourself against such conditions, you may opt for critical illness insurance. You may either buy a standalone critical illness plan or a rider supplementing your existing health care plan. In case you are diagnosed with any of the illnesses on the predetermined list of your policy, you are entitled to receive a lump sum cash benefit. This helps you cover all expenses associated with your illness.

It is imperative to analyze the features and benefits of each of these policy types and select a plan that meets your needs the best. By investing in the right health care plan, you may avail of the best treatment without any financial burden. Besides, you may claim tax benefits on the premiums paid towards your policy. Such policies go a long way in mitigating financial losses and ensuring complete peace of mind.

To make the most of the benefits, explore the numerous types of health insurance plans of Kotak General Insurance, here.

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An Investment For The Wanderlust In You

by Vinaya HS on October 27, 2017

in Finance

The following post is a sponsored post.

Remember your college days when you always wanted to go to Goa with friends, but the plan never materialized? Back then, we lacked enough money. Fast forward to now, and cash still remains short.

But now, you can pay equated monthly installments (EMIs) to finance a vacation with your family. Read on to find out how.

The roadblocks

Before we discuss how to tackle the finances, let’s first recognize the financial challenges. Most people avoid vacations as they do not have enough savings in their account. Also, vacation is usually considered as a luxury and not a necessity. This is because paying your children’s school fees, loan EMIs and systematic investment plans (SIPs) take priority over splurging for a vacation.

The solution

However, there is an alternate path. There are ways in which you can go for a vacation while not having to worry about your children’s fees, EMIs and SIPs.

You could tap into your savings, take a loan or invest beforehand. Taking money out of your savings is not prudent as they should be reserved for emergencies. The loan option would result in you building a debt. Instead, you could invest your way to an exotic destination.

There are several investment options that can fetch you returns in a short period of time. Stocks, treasury bills (T-bills) and mutual funds are some of the options. But, stocks are considered too risky, while T-bills are on the other end of the spectrum and provide low returns. Mutual funds, however, are relatively safer and provide higher returns than T-bills.

How could mutual funds help?

You could invest a part or whole of your savings account money into a mutual fund. Say, you have Rs 5 lakh in your savings account. If you were to invest this amount for a year in a short-term debt fund, like Franklin Templeton STIF, you could earn around Rs 50,000 in a relatively short duration.

But, even if you don’t have savings, you can still start with an SIP. You might already have an ongoing SIP. However, it wouldn’t hurt to start another SIP that would help satiate the wanderlust in you. All you need to do is budget expenses and make room for another SIP.

When to invest in mutual funds

If you have a travel budget of Rs 1 lakh, you can start an SIP with Rs 8,000 to meet your target within a year. It is ideal that you start an SIP at least 4 months prior to a domestic holiday. The duration increases to at least 8 months in case you want to go overseas.

Mutual funds are a great investment option even for people who don’t draw a huge salary. The minimum investment for a mutual fund is Rs 500. However, investing Rs 500 every month would take some time to build a corpus large enough for a vacation.

Bottom line

The SIP investment amount would differ depending on the number of vacation days and the number of people going on a vacation. It would even differ for different destinations. However, SIP investments could be the difference between you going for a vacation and staying at home this festive season.

So plan for your dream vacation right away!

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Parents often open a bank account for their children at an early age to help them learn about saving and managing money. It also helps parents build a corpus for their child’s future.

Instead of toys and playsets, you may consider gifting a saving account on your child’s next birthday. Following are ten benefits of opening a bank account for your kid:

1. Helps kids develop the habit of savings A huge benefit of opening a bank account for kids is that it teaches them prudent financial habits from an early age. They may try to save a small amount received as pocket money or through any other source.

2. Acts as an investment strategy Kids have a huge advantage as compared to adults—time is on their side. Making small investments over a period of time helps in accumulating a substantial amount.

3. Provides perks and offers Such bank accounts provide a host of perks, privileges, and discounts on shopping of kid’s apparel, dining, and edutainment, besides others.

4. Secures your child’s education Gifting your child a bank account at an early age accumulates savings over a period of time. The corpus may then be utilized to meet educational expenses.

5. Teaches your child fundamentals of banking Opening an account for your child helps them have a basic understanding of how banking works. Numerous banks provide a passbook upon opening of an account. This helps children understand how to record deposits and withdrawals. It also shows them how their savings add up.

6. Easy to use It is only obvious that a bank account for children will be easily accessible. Besides, banks have also ensured to make the account opening process as easy as possible.

7. Benefit of attractive interest rates Your kids may enjoy attractive interest on the deposited amount. Some banks offer interest rates as high as 6 percent per annum, thus helping them grow their wealth. This encourages them to save more than often.

8. Requires low or no minimum balance Most banks either have low or zero balance savings accounts for kids. This means that the account may be operated without the need to maintain a minimum monthly average balance or quarterly average balance. Therefore, there is no imposition of non-maintenance charges in case of failure to maintain the minimum balance.

9. Provides a debit card Many banks offer a junior debit card, which may be used at an Automated Teller Machine (ATM) to make transactions or to purchase items at a store. This prepares your kid to use credit responsibly in the future.

10. Allows parental supervision Banks have certain limitations with which children may operate their account independently. This ensures that risks are limited. Kids may, therefore, operate their account with parental supervision. You may guide them and teach them efficient money management skills.

Opening a bank account for your kids is indeed the best gift you may give them. It helps them learn how money grows with time and ensures that they become financially independent in the future.

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The Securities and exchange Board of India has provided even more flexibility as the board has now permitted the mutual funds to use the IRF or the interest rate futures contracts to hedge risks from volatility in the interest rates, as per the Indian legal news.

The interest rate futures provide for future delivery of an interest- bearing security like the government bonds etc. Such contracts offer the benefit of an avenue which is used to hedge against the risks that is always associated with the ups and downs in the interest rates.

As the SEBI mentions in its circular, in order to diminish the risk of the interest rate in a debt portfolio, the mutual funds are now allowed to hedge the portfolio or become the part of the portfolio. And it may include one or more securities as well on weighted average modified duration basis by using interest rate futures.

Along with this, the mutual funds are now expected to reveal their hedging positions through the IRF in a particular debt portfolio, the details of the IRFs which are used for hedging, debt and money market securities transacted online, and the investments that are made in the interest rate derivatives in the monthly portfolio disclosure.

Sebi has also said that if the interest rate future which is used for hedging the interest rate risk has different underlying security than the current position it is being hedged, then it will be concluded as the imperfect hedging which will be exempted from the gross exposure, up to maximum of 20% of the net assets of the scheme, on a condition that the exposure to IRFs is created only for hedging the instrument based on the weighted average modified duration of the bond portfolio or part of the portfolio.

Mutual Funds are allowed to do the imperfect hedging, and will not be treated in the gross exposure limits, if the correlation between the portfolio and the IRF is at least 0.9 at the time of initiation of hedge. If there is any difference from the correlation criteria, the same must be re-balanced within five working days. If the same is not rebalanced within the five working days, the derivative positions created for hedging will be treated under the gross exposure.

As the SEBI says, the genuine nature of the mutual fund scheme must not change by hedging the portfolio or being the part of the portfolio. It is also important that before the start of the imperfect hedging, all the unit holders of the current scheme must be given a timeline of minimum a month or 30 days to exit at prevailing net asset value (NAV) without charging of exit load.

The board also added that the risks associated with imperfect hedging will have to be unveiled and also discussed by apt examples in the offer documents and must also be told to the investors through any way of correspondence.

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It happened for the very first time in the last 10 months that the bearish play by the foreign Investors on the Nifty futures was found more than the bullish bets recently. This happened when there was a downside in the stock market and the market sentiment was quite low.

Since the month of August, it was observed that the FPIs were the net sellers in the cash segment for as many as 28 trading sessions out of the total of 38 sessions. And from that time onwards, these investors have been on the short positions only on the Nifty futures.

As per the recent data on the National Stock Exchange, it was seen that the FPIs were net short 1,180 contracts in the index futures where the net long in index futures was found to be 3,226 contracts. It was also observed that the FPIs long-short ratio in index futures was at 49.8 per cent. This long-short ratio was below 50 per cent for the first time in last ten months. The reason for a shortfall in the long short ratio in index futures was that there was a fresh shorting in index futures worth Rs. 250 Cr from FIIs in a recent trading session. This clearly states that the FIIs are more bent on the short positions in index futures than long positions.

With this, Nifty has gone below its 100-day average of 9,768.45 and the benchmark indices fell for the seventh consecutive session which was the longest ever losing streak in this year. The experts believe that further selling by the FII’s might make the index future fall to 9,500 points. FPIs have sold more than Rs 20,000 crore worth of shares since 1st August.

The earnings recovery scenario in the country is passive in the near future due to the disturbances like GST and the foreign investors moving to the other markets within the emerging market space which are trading at a cheaper price-to-earnings multiple.

The derivative experts say that the foreign investors have recently sold more than Rs 1,000 Cr in the cash segment every single day in the last few trading sessions, which is very disturbing, And, hence the movement of the rupee will be critical for the market direction. It is believed that the range of 6666.30 will be critical for the rupee. And if there is a rebound from that area, the Nifty should find support near 9,700. In July when it crossed the mark of 10,000 for the very first time which kept on soaring around psychologically for quite some days, the indices had seen a correction which got reversed after going to a low of 9685.55 on 11th August.

The derivative analysts hope for a correction of around 200 points in case the crucial level of 9,700 is not continuous.

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How To Trade In Sideways Market Using Options

by Vinaya HS on October 21, 2017

in Finance

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Looking at the history, it has always been observed that most of the times the stock market remains to be in a relatively narrow range which is neither an uptrend nor a downtrend. This is the situation which we call as ‘sideways market’. During ‘sideways market’ phases, most of the traders tend to lose huge money. This happens as a result of an aggressive position and more because of the absence of the knowledge on how to deal with these market conditions.

There have already been a number of write-ups where it has been advised that in these situations or during the sideways market, one must avoid trading. But it is also true that if we use right options trading strategies, the traders will not only end up protecting their profits but may also get substantial profits in the end.

Some of the basic options strategies that can be used in sideways market conditions are discussed here to help you.

Short Straddle strategy: This is the strategy that is created by holding relatively short positions in both the call option and the put option that have the same strike price and the maturity date. The maximum profit gained is the amount of the premium which is collected by selling the options.

Short Strangle: This is yet another good options strategy to trade. It is quite like the straddle strategy. The difference is that in the case of a Strangle, there is the strike price which is created by using out-of-the-money strikes of both call and put options. A strangle can protect both money and time for traders that have a limited budget.

Ratio Bull Call Spread: In this strategy, you must buy At-The-Money call option and also sell the two Out-of-the-money call options. It is used when a stock is trading at the downside of the range and is likely to increase to a certain level after a short interval. Selling the two call options helps in reducing the upfront payment for the position making the risk-reward ratio quite easy.

Ratio Bear Put Spread: Like the Ratio Bull Call Spread strategy, the Ratio Bear Put Spread involves buying At-the-money put option and selling two Out-of-the-money put options. It is used when a stock is trading on a high side of the range and correction is likely.

It is also advised to the traders to be very cautious as they plan to venture into the strategies of the Short Straddle and the Short Strangle because the risk here is unlimited. They are also advised to keep away from these strategies in case a big event is lined up. A big event is always followed by the higher volatility in terms of price movement in the underlying stock/index.

Check out live put call ratio values on BloombergQuint.

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What is the GST Bill?

by Vinaya HS on October 11, 2017

in Finance

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The Goods and Services Tax is claimed to be the greatest tax reforms since India became independent. The system before GST was riddled with multiple indirect taxes and the new single tax regime has subsumed these. The primary objective of this tax reform was to eliminate the cascading effect of taxes on the production and distribution of products and services.

Cascading effect of tax

This is the effect of multiple taxes being levied by the various states and central government. Central government taxes included central sales tax (CST), income tax, security transaction tax (STT), service tax, and excise duty. State levies included octroi and state excise, sales tax or value-added tax (VAT), entry tax, agriculture tax, and property tax. This multiple tax structure increased the burden on consumers who paid higher prices for goods and services. It also made Indian businesses uncompetitive in the global markets. All these negative effects will be eliminated under the single tax regime.

Implementation challenges

The government has implemented a dual rate system. It includes the Central GST (CGST) and State GST (SGST). Revenues earned through CGST will be retained by the Central authority. The states will collect the SGST. An Integrated GST (IGST) for intra-state sales will be collected by the Central Government.

An important hurdle in the implementation of the new tax regime is the coordination among different states. Furthermore, states will lose revenues with the elimination of the various taxes. However, the government will compensate such losses for a period of five years.

Overcoming implementation challenges

The dual federal structure of the GST will be beneficial in handling inter-state as well as intra-state transactions. In the new tax structure, all types of supply of goods and services, such as rent, barter, sales, transfer, and exchange will be liable for CGST and SGST.

The single tax rule will also be beneficial in bringing transparency in the entire system. The new rule will overcome the complexities and shortfalls within the supply chain resulting due to the complicated multiple layer regulatory environment.

Benefits of GST

The single tax regime will bring several positives for the Indian economy. Here are six such benefits expected in the longer period.

1. The entire country becomes a uniform single market, which will reduce costs and time and make the movement of goods and services simpler and efficient.

2. Although the industries will benefit from a lower tax burden, the total tax revenues for the government are expected to increase. This is because the simplicity and uniformity will reduce tax evasion and encourage more people to pay taxes.

3. The simple online procedures will reduce the paperwork and eliminate the long and cumbersome processes that were applicable under the multiple tax structure.

4. As tax burdens reduce for the various players in the supply chain, the benefits will be passed on to the final consumers. The reduced expenses will help manufacturers reduce the costs for various products.

5. Over a longer period of time, the Gross Domestic Product (GDP) is expected to increase by 2% to 2.5%.

6. With the Indian prices becoming globally competitive, the exports are estimated to increase between 10% and 14%.

For more GST news and information, readers are recommended to check the Internet. Several informative resources are available online.

The new single tax regime bodes well for the country. Businesses and consumers will benefit from a simplified and uniform structure.

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SIP and the Magic of Compounding

by Vinaya HS on October 11, 2017

in Finance

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The first rule of investing is to start now irrespective of your age. A disciplined investor is able to earn higher returns and build more wealth through the power of compounding.

About compounding
Compounding originates from the term compound interest. Compound interest arises when your interest earnings are added to the principal amount. This allows your interest earnings to earn additional returns. The addition of the interest earnings to the principal amount is known as compounding. You may use an online calculator to estimate and understand your returns through the magic of compounding.

Benefit of compounding

One of the biggest benefits of compounding is that you may be able to accrue high returns over a little period of time. This is because with compounding, your returns also earn returns and this continues until you stay invested. This enables you to accumulate huge profits at a fast pace. However, you must follow a disciplined approach and continue making regular investments to enjoy the benefit of compounding.

When you do not withdraw your earnings from investments and reinvest these, over a period, you are able to generate higher returns. Through compounding, your investments have the capability to become an efficient income-generating asset.

Understanding the power of compounding

Let us use an example to understand the power of compounding. Assume that you invest INR 50,000 in a financial product that offers a 10% annual return. You opt to reinvest the interest, which is added to your initial investment amount. Here is how your money will grow over a period of 20 years.

Interest earned in the first year would be INR 5,000 (10% on INR 50,000)

Principal amount in the second year would be INR 55,000 (50,000+5,000)

Interest earned in the second year would be INR 5,500 (10% on INR 55,000)

Principal amount in the third year would be INR 60,500 (55,000+5,500)

Interest earned in the third year will increase to INR 6,050 (10% on INR 60,500)

The addition of the annual interest continues during the entire investment period. Therefore, at the end of 20 years, your accumulated interest will be over INR 3.36 lakh because you choose to reinvest the interest.

Maximize your benefits by investing early

From the example mentioned above, it is seen that you are able to generate higher returns by investing for a longer period of time. When you invested INR 50,000 at 10% interest for a period of 20 years, you were able to accumulate more than INR 3.36 lakh. However, if you invested the same amount for a period of 10 years, your accumulated wealth would have been INR 1.3 lakh. You would have earned around INR 2.06 lakh less. Therefore, compounding provides maximum benefits when you start investing early. This is especially recommended when you want to plan your retirement. Investing when you are 35 years old will help you retire with four times the corpus when compared to beginning at the age of 50 years.

SIP and compounding

Investing in the stock market entails risk and requires basic knowledge and understanding of stocks. If you are not willing to assume this risk, you may opt for a Systematic Investment Plan (SIP) in an equity mutual fund. When you invest in SIPs, you are able to generate higher returns. An SIP means that you invest a specific amount at regular intervals in a fund. You may not have a huge amount for one-time investment and an SIP gives you the opportunity to invest in a disciplined manner. Over a longer period, SIP is able to generate significant returns.

In SIPs, investment does not entail high risk. It is an excellent way to reduce your risk against market volatility. It allows you to make small investments over a period to earn higher returns. Moreover, an SIP calculator will help you understand the potential returns you may earn through compounding.

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How F&O Data Hint At Nifty Levels?

by Vinaya HS on September 25, 2017

in Finance

The following post is a sponsored post.

In the month of July this year, the stock markets had ended at an all time high and the traders and investors were expecting a 10,000 level as per the share market news.

Open Interest or OI is something that talks about at what level the traders take the positions keeping their fingers crossed on whether the Nifty is going up or going down. These levels are referred to as “strikes”. These come at the intervals of 50 points of Nifty for example 9,900, 9,850, 9,800, 9,950, 10,000 and so on.

Now talking about how one can build the position at these levels, one can buy monthly call or put options on Nifty. One can buy call options if you are expecting the market to rise in the near future and one can sell the put options if one is confident that the market is not going to fall. In the same way, one can buy put option if you are bearish and similarly one can sell the call option if one expects the Nifty not to rise any further.

Options are the instruments that enables the holder to buy or sell the underlying asset at a fixed price. An option can be ‘call’ or ‘put’. In call option, the buyer buys the asset at strike price and can demand sale of the asset from the seller and the seller has to comply. In a ‘put’ option, the buyer can sell the asset at the strike price to the buyer and yet again, the buyer can sell and the seller has to buy. The price paid for an option is called the premium.

Now in order to purchase and sale the options, if you wish to buy a call option or a put option, the buyer will have to pay a premium amount. This premium amount is nothing but the price of an option at a particular interval or “strike”. To cite an example to make you understand better, let us take into consideration the July options, which expires on Thursday. 10,000 strike call was around Rs. 15 a share where 75 shares make one lot where the 9,800 put costs around Rs 13. Now in order to make profit, the Nifty must breach 10,015 before it expires or goes below 9,787 before or at expiry time. The seller of the option will receive the premium that you pay. In case the option expires out of money or at the money, the buyer forfeits either the entire premium or a major chunk of the premium amount. If it is in the money, the seller of the option will give the required money to the buyer.

Talking about the maximum OI or open interest, it is at 10,000 -67.84 lakh shares for calls and the maximum OI or open interest is at 9,800 -64.63 lakh shares for puts. This also means that the resistance of Nifty option chain this series is at 10,000 and support is at 9,800.

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How Is A Stock Excluded or Included In The Nifty Index

by Vinaya HS on September 25, 2017

in Finance

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Nifty index was introduced in the year 1996 and 50 stocks were made part of it. Since then it has experienced a high rate of churning and till March’ 2017 only 16 constituents are now the part of the original list. Rest all of them were replaced. On March 31st, Idea Cellular and Bharat heavy electricals were replaced with IOC (Indian Oil Cooperation) and Indiabulls Housing Finance.

Nifty index was created to benchmark the fund portfolios, index derivatives and index funds. The constituent company needs to fulfill a certain criterion to get included as stocks in the nifty index. To get included in the Nifty index, the stock should have traded at an average impact cost of 0.5% or lesser in the last six months for 90% of the observations. Another criterion is that it should also have at least twice the float adjusted market capitalization of the current smallest index constituent. Also, in order to get the eligibility for inclusion, the constituent company must be domiciled in India and traded on the exchange. The stock should be able to get traded in F&O or the futures and options segment on the NSE too. Other few factors that are taken into consideration are market capitalization, liquidity and trading frequency.

Talking about the exclusion, two times every year a new list of eligible stocks is reviewed and compared with the original stocks constituting the Nifty index. After the review, if it is found a spin off, merger or acquisition or if there are some small constituents which can be excluded and there are some new stocks that can replace them, then the changes are made. The changes are made by re balancing the index semi-annually and a time period of four weeks is given by the exchange to make the necessary changes.

India Index Services and Products is a group company of the National Stock Exchange (NSE) India, that owns and manages 67 indices under Nifty brand that also includes the Nifty index. IISL has constituted a committee called the Index Maintenance Subcommittee which is the deciding authority that makes all the decisions pertaining to the inclusions and exclusions in the index.

Another important thing business news confirms is that the index level does not change after the necessary changes are made. In fact, when a new stock is added after replacing a stock in the index, the index divisor is so adjusted that the change in the index market value as a result of this inclusion and exclusion does not change the index level. Also, in the last year February, IISL had made changes in the stock selection that included the Differential Voting Rights of securities.

As per the recent share market news, Nifty index will go back to the 50 stocks from the current 51 stocks from September 29 this year. ACC Ltd., Bank of Baroda Ltd., Tata Power Co. Ltd. and Tata Motors DVR will be excluded and Bajaj Finance Ltd., Hindustan Petroleum Corporation Ltd. and UPL Ltd. will be added.

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MCX Gets SEBI Approval For Launching Gold Options

by Vinaya HS on September 25, 2017

in Finance

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MCX, the country’s largest commodity exchange launches options trading in gold. MCX has introduced the gold trading options after it has got a nod from the capital and commodity market regulator, SEBI. The Managing Director of MCX, Murgank Paranjape, has confirmed the approval.

The news says that the Sebi approval to launch options had come earlier the month of August. In fact, the MCX has been involved with the members since a month and a half for mock trading sessions to prepare the market for options. An MCX spokesperson has confirmed the developments without adding too much on the details.

With the introduction of the gold option trading, now the investors and hedgers will be aided with a tool to allow them to minimize their price risk at a fraction of cost as compared to currently available futures trading.

As per the Murgank Paranjape, the exchange is yet to give a firm date regarding the launch of gold options because the mock trading is still on the go. This mock trading by MCX is happening since the last week of the month of June because Sebi had allowed and issued norms for the launch of commodity options on 14 June. He also added that he wishes to conduct few more awareness campaigns because it is a new instrument for commodity investors. They will fix a date for the launch only after they feel that their members and bullion traders are ready and comfortable.

The legal news also points out that the exchange is also improving its technology as they are expecting an increased participation after one year of the nifty option chain launch and they would be ready to launch gold options by October. Though all the systems at the exchange are all set for the launch but the exchange has not finalized a date yet. MCX is ensuring that members and hedgers are prepared to trade in options before that.

The mock trading by MCX has a participation of more than 60% to 70% of the members and is going smooth as of now. But the exchange is still waiting to have even more participation. The exchange is going to give a fixed date only after 95% of the members test the system.

Options trading is hoping to deepen the market by inviting the new investors and boosting the corporate participation. As per the recent announcement, SEBI had allowed Category III Alternate Investment Funds to invest in the commodity futures market. It allowed and issued norms for the launch of commodity options in June. The regulator has initially allowed only one commodity option per exchange.

As per the Sebi rules, the Non-agricultural commodities need to have an average turnover of Rs. 1,000 crore and the commodity needs to be in the top five list in terms of daily turnover. On the basis of this criterion, MCX has chosen gold because it is the most liquid commodity on its platform.

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NHAI To Go Aggressive On TOT Model; Plans IPO

by Vinaya HS on September 25, 2017

in Finance

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The latest share market news points out that the National Highway Authority of India (NHAI) could soon go public and come up with their IPO.

To increase the funds for the construction of the highway in the times when the private investment is weakening, the NHAI has come up with a plan of an aggressive monetizing of their projects by transferring these on a long-term lease to global funds. It has been strategizing to hit the capital market by upcoming IPO or initial public offering. Though the process might take a few months to be finalized.

NHAI has the Budget support like they have a share of the road cess proceeds and also the toll revenue but the NHAI has conventionally raised debt through taxable and tax-free bonds. NHAI has said that If the road transport and highways ministry helps, they will hit the equity market but for that they seek corporatization.

IPO have been doing good lately and hence many companies want to join the league to take an advantage of it. There were almost 20 new listings in the year 2017 till now and many companies are in pipeline with their IPOs for the remaining year. Among other public-sector entities, IRCTC and IRCON are also expected to raise funds from the capital markets. SBI Life Insurance, ICICI Lombard are also going to hit in the Indian equity markets.

It was witnessed that in the months between the April to August’2017, the speed of the construction was only 21 km/day. The NHAI has been asked to construct 6,000 km highways in the year 2018 and award 10,000 km projects. The central government has been targeting to increase the highway construction to 41 km/day. But, NHAI has only constructed 972 km and awarded an unimpressive 315 km in the first five months of this year. In the financial year 2017, NHAI has constructed 2,628 km and awarded 4,355 km.

The experts share that it might not be easy for NHAI to have a convenient IPO process and it also might be a time taking process. NHAI may have a tough time catching up the compliance and disclosures. Currently, even their annual reports have come with a delay of one year. Also, because NHAI is not a profit-making organization and they had already suffered the losses amounting to Rs 221 crore in the year 2015-16, hence NHAI will have to explain to the potential investors and assure them on the returns on equity and profits they would make.

As per the chairman of NHAI, Deepak Kumar, he sis not comment much on the upcoming IPO, but revealed that they are hoping to raise Rs. 7,000 Cr. by giving 9 nine projects in the first tranche under the toll-operate-transfer (TOT) model soon. This TOT model, through which the government is planning to lease out 75 operational national highways to the private players that also includes the global funds with long-term capital, will be creating a business opportunity for existing players and for the new entrants as well.

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ICEX has launched 1 carat diamond futures contract, world’s first ever such trading. At the recent launch of world’s first diamond future contracts, the contract was traded at Rs. 3,279/cent where one cent carries the value of the one-hundredth of a carat. This contract is up for its delivery in the month of November this year.

India is a leading global diamond polishing hub, catering to more than 90% of the world’s polishing market for rough diamonds. India imports rough diamond of value more than 19 billion dollars and exports the polished diamonds worth 24 billion dollars annually.

ICEX, the Indian Commodity Exchange, has launched the diamond futures contracts to facilitate the exporters with a hedging instrument. Till now the registered members are 103, ICEX has introduced 1 carat diamond futures contract which is followed by contracts on the monthly settlement basis. After the this first contract is successful in the share market, other contracts of 50 cents and 30 cents will also be launched on nifty future. This 1 carat contract will have their delivery center based in the city of Surat, Gujarat and will expire in the months of November, December and January.

Another major announcement that was made as well was the merger of ICEX with National Multi Commodity Exchange (NMCE), which is an exchange based in Ahmedabad, Gujarat. ICEX will soon contact the National Company Law Tribunal (NCLT), Ahmedabad to get the green signal on the merger. After it gets the nod on the merger from NCLT, the ICEX will be permitted to introduce some agricultural commodities like rubber and coffee.

This diamond futures launch was made a reality after several efforts of persuasion and coaxing of two and a half years where several ministries were approached and convinced about the scope of this contract. Since diamond is not a notified commodity, it was important for the exchange to persuade the government officers about the need of such contract. Sebi also took some time to approve the contract as the board had to consult the physical market intermediaries in person.

It has been for the nine months that ICEX has been polling polished diamond prices. This polling prices from the actual market is treated as the benchmark for the settlement of the contract. The price variation would be Re 1 with an initial margin of 5% on the basis of VAR or value at risk. ICEX will be providing the HVS2 quality diamond which will also be certified by the International Institute of Diamond Grading & Research (IIDGR), a De Beers group company where Malca Amit will provide the vaulting services.

The diamond futures contract can be traded in one cent. One can collect many over some time to add up to 1 carat after which it can be made a deliverable like systematic investment plan (SIP). Till the time it is delivered, the trade quantity will remain with the trader and the price quoted will include the delivery and transaction charges too.

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There has been an upward trend in the number of stocks entering the trading ban in the segment of futures and options. It was seen that before the June expiry, the shares of as many as 14 companies were banned by the National Stock Exchange for the reason that their aggregate OI or open interest positions in these scrips had gone beyond the 95% of the market wide position limit.

After the aggregate OI or open interest across exchanges falls below 80% the market wide position limit, then only the regular trading in the script is recommenced. Until then the trading members can carry on their trade just to reduce their positions by counterbalancing them till the normal trading in the stock is restarted.

As the rules say, the market wide position limit should be lesser than 30 times the average number of shares traded on the daily basis as on the previous calendar month in that particular security in the equity segment or 20% of the number of free float shares or the shares that are held by the non-promoters.

The number of stocks which are on the rise under trading ban even at the beginning of the week-2 of the futures and options cycle, the sincere traders and investors are having a difficult time to make an entry in the derivative segment.

As per the Nifty future news, there are several doubts that there are a few operators who are taking the advantage of the situation as they are not allowing others to take a position in contra to their holding by entering the cheap deep out-of-the-money options. It is expected that if the existing norms are changed, it will lead to a better situation which will also better the efficiency and liquidity in the derivative or F&O market. It will be better if instead of existing 20% free-float, if at all it can be increased to a 30% to 35% or even to 50%, it can increase the average number of shares traded up to 30 times. This will create more relaxation and better avenues for the traders of F&O segment.

Also, as compared to the existing rule of adding all open positions across derivatives to calculate the limit, if the limit can be compartmentalized between futures and options by dividing the total limit between them in the ratio of 30:70 or 40:60, nothing like it. For example, if the limit is 20 lakh for an underlying asset, six lakh can be allocated to the futures segment and the rest to options segment. This will help in safeguarding the incessant trading in the contract especially in the futures.

Talking about the segment of Nifty option chain, deep out-of-the-money options should be given limited space as it will allow the near and at-the-money options to be made more liquidized.

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In wake of the right to privacy and the major thrust of the Supreme Court on upholding of the right to privacy which is a fundamental right including the informational privacy, will be making a strong impact on the collection and sharing of the data by the tech giants such as Google, Facebook, Apple and WhatsApp in the country.

Until now, the privacy was considered as a regular law and not a fundamental right where the former can be enforced via civil filing while the violation of latter can be questioned directly at High Court and Supreme Court, the tech news says. The citizens are now armed where they have all the right to raise a question to the tech giant’s popular apps and services they use and share the user data. WhatsApp has created a commotion in public when it announced changes to its privacy policy and when it decided to share customer data with Facebook.

It was not difficult for the nine-judge bench to recognize the issue of informational privacy as an important aspect of the right to privacy. The bench also talked about the threats and the dangers that can arise due to the sharing of information using the various technological means.

The ruling which has recognized the importance of informational privacy, has equipped the citizens to approach the court in case they feel that their right to privacy is under any danger or threat. What more, it could also provide legal backing for petitions in courts on how popular apps and services are handling, saving and potentially sharing user data.

The legal news India highlights that the Chief Justice J.S. Khehar and other Justices have said that the Informational privacy is a facet of the right to privacy. Also, a five-judge constitution bench is hearing a plea regarding whether WhatsApp’s user data-sharing policy is violative of citizens’ right to privacy. The government is presently involved in the process of creating a data protection legislation. The central government has also appointed an expert group which is headed by the former Supreme Court judge B.N. Srikrishna.

Now it has become the responsibility of the government to make a strong data protection law which is aimed at creating a balance between individual interests and legitimate interests of the state. It has put the private companies involved in collecting and using user’s data under scrutiny.

As per the data expert, until now there has not been any way to monitor and control the private enterprises who gets the access to messages, notifications and contacts without the customers’ knowledge. The recognition of the right to privacy as a basic fundamental right and its applicability against these private players as against the state will be a big revolution. As of now, the data protection provisions are part of the Information Technology Reasonable Security Practices and Procedures and Sensitive Practices and Procedures and sensitive personal data or information Rules of 2011 for secure storage of personal data online.

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