Finance

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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

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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.

For more on Business & Stock Market News, visit BloombergQuint.

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How Is A Stock Excluded or Included In The Nifty Index

by Vinaya HS on September 25, 2017

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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.

For more on Business & Stock Market News, visit BloombergQuint.

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MCX Gets SEBI Approval For Launching Gold Options

by Vinaya HS on September 25, 2017

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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.

For more on Business & Stock Market News, visit BloombergQuint.

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NHAI To Go Aggressive On TOT Model; Plans IPO

by Vinaya HS on September 25, 2017

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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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The Niti Aayog has formed a task force recently. The newly formed task force aims to devise an action plan and strategies on how to boost the country’s exports and generate more employment.

The commission said that the employees of the country have aspirations but the kind of work most of the employees are employed in are not as productive and they also get low wages because they work in a small, micro and own-account enterprises.

The task force is constituted of 15 members and collectively they are addresses as, ‘Task Force on Employment and Exports’, the market news confirms. The newly formed panel will work under the Vice Chairman of the Niti Aayog, Rajiv Kumar. The task force will also include many secretaries from various government departments, industry experts and economists.

The recent release on the task force has also communicated that there is an urgent need for sustained expansion of the organized sector in the country which is key to address the most worrisome issue of India’s unemployment and under-employment. Not only the focus is to create more employment opportunities in the country for the deserving workforce of India but this strategy will also help in creating a shift towards more labor intensive goods and services which must be utilized for the purpose of exports.

According to the official release, the other terms of reference include suggesting ways to enhance the availability of data on the trade so that it is “reliable, globally comparable and timely, particularly with respect to trade in services”.

Along with suggesting the ways to increase the exports of the country and create more organized employment, the ‘Task Force on Employment and Exports’ will also address other important issues like giving the recommendations on sector-specific policy interventions in the key employment sectors. The panel will also talk about the several measures that can be taken to enhance the trade in services carrying the employment potential in high degrees, as per the business news.

The panel also aims to propose a comprehensive plan of action to generate more and more employment and lessen under-employment in both the sectors of goods and services and also address the low wage issue by increasing the country’s overall exports in the prime labor intensive industries.

The task force is also asked to identify key macroeconomic factors that are constraining the country’s exports so that the next action can be thought. They are also expected to suggest and devise methods so that such irritants can be suitably addressed. Monitoring the effectiveness of the performance of the schemes that still exist which were introduced with an intention to promote exports is also one of the prime key responsibility area of the task force. The other area the panel will look into is to addressing the issues that are related to the logistics, export credits and trade facilitation. The task force is expected to submit its final report by the month of November, as per the Niti Aayog.

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The government wishes to go e-mobile and one of the ways suggested by the Chief Executive Officer of NITI Aayog, Amitabh Kant, is to make the country an export hub of electric vehicles. This has come in accordance with the government’s effort for a mass shift to EV’s or electric vehicles by the year 2030 so that every vehicle on Indian roads by 2030 whether it is personal or commercial, is run by electricity.

Recently 57th Annual Convention was held where Kant has said that out of all the developing nations, the penetration of the vehicles in India is the lowest which is only 20 vehicles per 1000 people. He also added that because other countries have higher penetration, it will be difficult for them to make it switch to electric car and because India has low penetration levels, it will be an advantage for our country to become leader in the export hub for electric vehicles.

The government is very clear in stating that by 2032, almost all the vehicles that will be sold in India will become fully electric. The government plans to do so by making several strategies and putting them to action. One of the plan include outright purchase of electric vehicles (EV) by government offices and departments for the official use and also by the state transport for using as the public transport, as the market news says.

Kant also conveyed that by the year 2025, the price of electronic vehicles will be on par with an internal combustion car be it petrol or diesel. Also, by 2026 the sales of the electronic vehicles globally are expected to command 10.4% of the total sales. Kant also revealed that their vision is that the Indian car market will achieve zero tail pipe emission by the year 2040.

As a result, the automobile companies like Mahindra & Mahindra, Tata Motors, Maruti Suzuki, Toyota, Audi and Hyundai have already started investing into the developing electric vehicles. While some of the automobile giants have started working on the plans to build EVs for the future. While Mahindra & Mahindra is the only automobile company to produce and launch electronic vehicles in the country Tata Motors and Hyundai are planning to launch EVs over the next 3 years.

The government is focusing on giving a strong threshold to developing of the battery capacity and making the country a battery production hub. As of now, almost 80% of the world’s battery supply comes from China.

Niti Aayog in the month of May had also recommended to offer fiscal incentives to the manufacturers of EV and had also discouraged the privately-owned petrol- and diesel-fuelled vehicles. This was done to move India towards E-mobility and to meet energy and environment needs. As per the business news, it is believed that India can save about 64% of the energy demand from the road sector for passenger mobility and 37% of carbon emissions in 2030 through its EV program.

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How Do Nifty Options Indicate Market Range?

by Vinaya HS on September 24, 2017

in Finance

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While most of the traders are well versed with how the Nifty options indicate market range but not everybody is aware of their value and significance as being the predictive tools.

Nifty options chain permits you to buy or sell Nifty options at a particular level in exchange for a price which is called as “premium” which you have to pay to the sellers. The options are of two types – the calls options and the puts option. One of the most dependable indicators of the Nifty future market direction is the put/call options volume ratio. If you track the daily and weekly volume of puts and calls, you will be able to know the feelings of traders. If you find there are too many put buyers, it usually indicates that a market slowdown is going to come while if you find that there are too many call buyers, it hints that market top is going to come.

When you are bullish on the market you buy a Nifty call option, and when the market is bearish, you should buy a put option. The seller of the call or put collects a premium from you, which is nothing but the option’s price. The buyers on the net basis can be either retail or the FII’s or foreign institutional investors. Option sellers are normally HNIs and prop desks of brokers. Options can be used as a hedging tool for one’s portfolio. For example, if you have a part of Nifty 50 stocks in your portfolio, you can buy a put option on Nifty.

If the Nifty goes down, your portfolio will come under the loss which will be at a level to be counterbalanced by the put option which increases in the value. Also, if you hold long Nifty futures which gets diminishing in its value, you can counterbalance your loss by becoming the net buyers of the index put options.

One can tell the market range through Nifty by looking at the open interest or OI on the option strikes or levels. The OI gives a very wide kind of market range. Open interest is the total number of open or outstanding options and futures contracts on a particular day which is delivered on a particular day.

Open interest is a part of futures and options markets where a lot of contracts keep changing from day to day not like the stock market, where the shares of a stock mostly remain constant. The increasing open interest means that a new or additional money is coming to the market which also means that existing market trend is gaining momentum which will continue further. Whereas the decreasing open interest means that the money is going out of the market that means it is a waning momentum and the market trend is soon going to change. An increase in open interest is considered as the bullish signal and a decreasing open interest usually signals at the bearish sign.

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The insurance regulating body of the country, IRDAI has directed the insurance companies to ensure that they comply with FEMA or Foreign Exchange Management Act norms on options. The insurance companies who have a joint venture or JV with the foreign partners have been asked by the Insurance Regulatory and Development Authority of India to determine if the agreements that have ‘option clauses’ are already in compliance with FEMA rules. If they are not found complying, the regulator has instructed them to fill the gaps in the agreements at the earliest, as per latest stock market news.

IRDAI further details that the insurers must comply with the FEMA norms that are in relation to the attributes like pricing and also relating to put and call options in the Foreign exchange management rules.

Previously in the year 2013 in the month of November, The Reserve Bank of India (RBI) had made an amendment in the Foreign exchange management rules. As per that amendment, the reserve bank had allowed the ‘optionality clause’ and also ‘put and call options’ in the contracts. To add more, the RBI in consultation with government had also said at the same time, that any agreement that was entered into before the amended rules with ‘options’ will be treated as breaking the rules. Hence, it is a must for all the insurance providers who have a joint venture with foreign entities to follow the RBI guidelines as related to the FEMA.

The news has raised several queries and doubts for the insurance companies. The stock market has also reacted to this news and the reports confirm that many insurance companies got in touch with the IRDAI and asked the regulator if their Joint Venture agreements which were signed before the rules or their existing contracts with the clauses of optionality prior to the amendment notification were in compliance with the FEMA norms or not.

For example, in 2001 the JV agreement was completed between Bajaj Auto and Allianz. Allianz is the German insurer that has the call option to raise its stake in the life insurance joint venture from 26% to 74% at a pre-determined price. If the call option was used by the end of July’16, this pre-determined price would have been Rs 5.42 per share along with interest of 16% pa. But after the year 2016, Allianz will now have to pay the market price.

Hence, now it is the responsibility of the insurers to go through their Joint venture agreements with foreign entities and maintain the compliance with pricing rules for options. If they are found in any breach of the norm, the insurer should make instant amendment in the pact to confirm compliance with rules. However, the regulator has not made an announcement regarding the time frame within which this activity must be completed. Hence, in absence of any specified timeline of compliance, the insurance providers can take their time, but all said and done the sooner they comply, the better.

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SEBI To Regulate Mutual Fund Rankings

by Vinaya HS on September 23, 2017

in Finance

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Realizing the significance of the ranking activity of the mutual fund schemes by the ranking agencies and issuing them to public in a research report, which forms the deciding criterion of the investment for many people, Securities and Exchange Board of India has proposed that this activity of ranking of Mutual Fund schemes would be now regulated by SEBI (Research Analyst) Regulations 2014.

The legal news says that there has been a reason for bringing the ranking agencies under the ambit of Sebi board. This move of introducing regulations on the operations of mutual fund is directed at bringing more transparency between the mutual fund ranking giants like Value Research, Morningstar, and others. According to the consultation paper, these ranking agencies will now have to register with the market regulator as research analyst under SEBI to have their operations continued legitimately.

As a part of other set of rules, the ranking agencies will have to integrate a clearly defined and well-laid methodology for doing the rankings. Now onwards, the companies will have to take care that they must do the rankings on the basis of the performance of mutual fund schemes on the parameter of quantitative performance measurements. The ranking companies are also expected to reveal the important details like criteria, name of category, number of funds evaluated in a certain category, and also the data used to compile for doing the ranking of different mutual funds schemes. Also, these revelations should not be found confusing or difficult to understand. It is a must that all the investors should be able to easily understand these disclosures. Along with this, as the new rule by SEBI has suggested, the ranking agencies will also have to disclose how much is the holding of the promoters and directors in a particular scheme.

The share market news also has a rule for those companies who do not want to rate a particular mutual fund scheme. In case any ranking agency prefers to not rate a certain mutual fund scheme, as per the new rule, it is required that they must reveal a sensible reason for the same. Board has made it clear that all the non-inclusions must come with justified reasons. Another important thing to note is, these companies should be operational independently and without an interference and influence of AMCs or the Asset management companies. In other words, such companies must not admit any contemplation to rank any mutual funds schemes.

The ranking must also put a disclaimer stating clearly that, “the past performance is no guarantee of future returns” along with the prevalent and usual disclaimer which the companies have been using previously that “Mutual fund investments are subject to market risks, read all scheme related documents carefully.”

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The term Put-Call Ratio (PCR), is an indicator or a tool which is commonly implemented to understand the mood of the options market. The ratio is taken out by dividing the number of traded put options by the amount of traded call options. When this ratio increases, it is interpreted to understand that the investors involve a lot of their money into the put options instead of putting them in the call options. The rise in the traded put options indicates that investors are either trying to theorize that the market will move further down.

How Does It Affect The Market?

The increasing ratio of the put call ratio is a clear signal that the investors are gradually starting to move towards the instruments that profit when the prices lower down rather than when they are supposed to rise. As the number of call options is the subjected as the denominator of the ratio, a decrease of traded calls will cause an increase in the value of the ratio. This is imperative because the market that indicates this is starting to loosen its outlook.

Interpreting The Put Call Ratios

The minimum amount for the nifty call put ratio is not 1.00 because of the equity options that the traders and investors always purchase more calls than that of puts. The average ratio, however, is usually lesser than 1.00 for the stock options. When the average ratio comes closer to 1.00 or more, it signals a bearish statement. More than the average number means more puts are being purchased compared to that of the calls. Some traders bet against the repressed, and the usual outlook gets bearish. When the ratio comes close to 0.50 or less, it indicates an optimistic sentiment. If the put call ratio is high in a degrading market, it reflects how bearish the sentiment is and when it rises, the market is considered as an optimistic one.

Looking At The Put Call Ratio As A Contrarian Indicator

The put call ratio can be implemented to determine when the investing traders might be getting either too much optimistic or too bearish. A high leverage put call ratio is an optimistic sign as it points to over-bearish investors and inversely.

How To Trade With Nifty Call Put?

There are two types of options in Nifty known as Call and Put. The nifty call put is the type of contracts that expire on every last Thursday of the month that has an expiry date. When you buy or sell a futures contract, you can either sell it before the expiry date, or you can hold your place open until the contract expires. Moving from the house settles the trade, and these options are known as European style options.

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SEBI Forms Committee On Fair Market Conduct

by Vinaya HS on September 23, 2017

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A panel has been formed by the Securities and Exchange Board of India (Sebi). This committee is constituted on ‘fair market conduct’. The panel will be led by Mr. T K Viswanathan, who is the former Lok Sabha secretary general and the law secretary. Also, the panel will have several representatives from the Sebi, mutual funds, retail and institutional brokers, audit firms, law firms, chambers of commerce, stock exchanges, data analytics firms, and other legal firms too.

This committee by the market regulator Sebi, will recommend the measures on how to improve the surveillance of the markets and also on the strengthening of the rules for algo trades along with various other norms.

The panel will work towards recommending the improvements to the current Sebi rules and norms. The norms that includes prohibition of insider trading (PIT) and fraudulent and unfair trade practices (FUTP) will be addressed. The primary function of the panel has also been set to look at the trading plans, handling the unpublished price sensitive information during takeovers. The job of the committee also includes the aligning of insider-trading rules with provisions of the Companies Act. Along with this, the panel will also suggest evidentiary issues in anti-fraud enforcement, the share market news confirms.

As per the latest legal news, it is utmost important for the board to stay far ahead in order to avoid any fraudulent activity, as many new forms of communications have started occurring. The matter of prime importance for the Sebi is currently to make sure that there is a fair access and the flow of price sensitive information to avoid insider trading which is regulated and monitored. Sebi notes that the securities market environment must be dynamic and the periodic review of the regulations and surveillance mechanisms is need of the hour to efficiently execute the goal of the market regulator. The market regulator believes in a fair and efficient securities market which is key for the investor confidence. Sebi intends to keep the market free from all the fraudulent and manipulative practices by inculcating the practice of fair market conduct.

Further to detail more on the KRA of the newly formed committee, the panel is given the job of making the recommendations for the short term and the medium term measures to improve the surveillance of the markets. Also, the task of suggesting in the issues of high-frequency trades and harnessing of technology and analytics in surveillance is also assigned to the committee. The committee has been given a time line of four months to make the submission of their final report.

Sebi had also set up a committee in the last month with an aim of suggesting the measures on how to improve the standards of corporate governance of the listed companies. This high profile committee was formed under the leadership of the Managing Director of Kotak Mahindra Bank, Uday Kotak, who is the chairman of this committee.

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