Master And Student - All about Stock Markets

Is the Gold story over for now ?

2013-05-19T11:25:00.002+05:30

Gold has given positive returns for the past 12 consecutive years, going up from Rs.500 per gram to Rs.3000 per gram. Recently, Gold fell more than 9% in a single day and is been falling since then, leading us to believe that the gold run may have been over for now.

Investors often seek guaranteed and safe returns and seeing the price of gold rise continuously over the previous years, they would have been led to believe that the price of gold would never crash. However, this is not the case and prices do correct after giving such big returns over the years.

The reasons attributed to fall in gold prices are dip in demand, rising speculative activity and increased participation in equities. Equities all over the world have performed well, despite the gloomy economic climate.

There are not many reasons for gold to remain as a good investment. Only reason that we could find is the slowing down of the perception of global economy, which make investors to park their funds in gold.

So what should retail investors do?

As we have saying in previous posts about gold, investments should be limited to 5-10% of one's portfolio and that too Gold ETFs are preferred ones. Avoid trading in commodities or investing in physical gold (unless it is for jewelry purposes) and limit your investments in gold.

Be a wise investor !

Investing in Insurance Companies

2013-04-09T07:17:00.000+05:30

Insurance is often described as banking without money given it engages in a risk management business model using other people's money. But is it wise to invest in such insurance companies? Definitely Yes ! Many analysts say the insurance market is in better shape than banking, and it may be an ideal time to invest in companies with better fundamentals and history.

Insurance is the transfer of risk from one party to another in exchange for the payment of a premium. The premium, in turn, is invested and used to pay out future claims and to operate the insurance company. In short, insurance companies are engaged in two primary revenue streams:
1. the assumption of other people's risk in exchange for money/premiums.
2. the management of such premiums (asset management).

What should investors look for when investing in insurance companies?

As with traditional metrics of investing stocks, there are some things that investors should look at while investing in insurance companies.
The first and foremost thing would be look at is its business model. As mentioned above it all depends on how well the company is selling its premiums and how well it manages such premiums.A critical piece of an insurance company's operations is to ensure that it always has enough capital to manage all the risk it has assumed.
Premium growth - Premium is the life-line of any insuring company’s growth. Premium growth is so important that commissions paid are generally the largest expense after premiums paid.
Credit rating. All insurance companies have a credit rating which reflects a third parties assessment of their ability to pay policies as they become due. The higher the credit rating the better.
Investment income. Money is made mostly through investment income. Investors have to watch out for, how well the insurance companies manage the investment income and what they are investing in and whether they are engaging in any hedging strategies.

Hence, insurance companies satisfying the above criteria and with good fundamentals can be considered for investing. Investors should look at the business side of the insurance companies and good distribution network. For those looking to invest in such insurance companies, you should keep an eye on Lloyds of London , where there is a lot of information on movements within the insurance industry.

Nifty Total Returns Index

2013-02-02T13:57:00.005+05:30

Nifty above 7,700 ! Surprised ?

The Total Returns Index, not known to many, is nothing but Nifty plus the total dividends announced by Nifty companies, which are assumed to be reinvested. Though not many are interested in dividends and are concerned about only in the rise in share prices, this is a surprise for them.

The Total Returns Index is currently above 7,700 (7,713 to be precise as on 1st Feb 2013), while the Nifty is below 6357, the all time high which it achieved in Jan 2008.

There is also Total Returns Index for Sensex which is currently at 26,230 and last time when we wrote about this index it was around 22,000. So what does this mean for a retail investor? Index investing better and that too investing in index ETFs like Nifty Bees, for a longer period of time, generates good returns along with the dividends announced.

Dividends play an important role in calculating your returns and hence before calculating your stock returns, check out how much dividends you have received to get the exact returns.

Dividends do matter !

Historical BSE Sensex returns - updated 2013

2013-01-06T11:34:00.002+05:30

We have already seen the historical returns of the BSE Sensex, which indicated an average return of about 20% per year, despite many yearly returns varying from -20% to +60%. The following table shows BSE Sensex historical data - open, close and the yearly returns of the sensex from 2000 to 2012.

There are some interesting points to note from the above table. Post 2008 crash of about 50% and 2011 negative returns of 24%, markets have given positive returns of 81% and 25%. Also the average returns for the past years is about 20% despite the markets being down 24%. The lesson is pretty much clear - long term investing pays and one need not bother too much about the ups and downs of the markets.

During the past few years, the returns from investing in individual stocks have been varied. Despite markets being at 2 year highs, only a few stocks are at similar highs, while most of them are still languishing well below their historical highs and are down anywhere between 80-90%. The message for retail investors is clear - index investing is better than individual stocks. Individual or Retail investors can achieve above-average returns by investing in index through Exchange Traded Funds (ETFs) like Nifty Bees or Top mutual funds, which have given consistent returns over longer term.

Be a wise investor !

SCORES - Sebi Complaints Redress System

2012-12-29T11:04:00.000+05:30

Securities and Exchange Board of India ( SEBI ) has launched a Sebi Complaints Redress System - SCORES, which facilitates you to lodge your complaint online with SEBI and subsequently view its status.

There will be occasions when you have a complaint against a listed company/ intermediary registered with SEBI. In the event of such complaint you should first approach the concerned company/ intermediary against whom you have a complaint. However, you may not be satisfied with their response. Therefore, you should know whom you should turn to, to get your complaint redressed.

SEBI takes up complaints related to issue and transfer of securities and non-payment of dividend with listed companies. In addition, SEBI also takes up complaints against the various intermediaries registered with it and related issues.

Which are the matters that are not considered as complaints in SCORES?

Complaints that are incomplete or not specific.
Allegations without supporting documents.
Offering suggestions or seeking guidance/explanation.
Seeking explanation for non-trading of shares or illiquidity of shares.
Not satisfied with trading price of the shares of the companies.
Non-listing of shares of private offer Disputes arising out of private agreement with companies/intermediaries.

You can post your complaints here at SCORES

Also, SEBI has provided Tollfree Helpline for Investors.
1800 266 7575 or 1800 22 7575. (All days from 9:30 AM to 5:30 PM excluding declared holidays).

Nice investor initiatives from SEBI and investors can make use of this helpline and redressal system.

CARE IPO Review

2012-12-09T16:25:00.000+05:30

Credit Analysis & Research Ltd (CARE) is the second largest credit rating company in India. CARE offers rating and grading services across a diverse range of instruments and industries including IPO grading, equity grading, and grading of various types of enterprises.The company being professionally managed has no identifiable promoter and has domestic banks and financial institutions as key shareholders.

Credit Analysis and Research (CARE) is entering the capital market on 7^th December 2012 through an offer for sale of 71.99 lakh equity shares of Rs.10 each in the price band of Rs. 700 - Rs. 750 Per Equity Share.

Issue Details:

Issue Open: Dec 07, 2012 - Dec 11, 2012.
Issue Size: 7,199,700 Equity Shares of Rs. 10.
Face Value: Rs. 10 Per Equity Share.
Issue Price: Rs. 700 - Rs. 750 Per Equity Share.
Market Lot: 20 Shares.
Minimum Order Quantity: 20 Shares.
Listing at BSE and NSE.

On a consolidated basis, for 6 months ended 30th September 2012, company’s total income was Rs. 104 crore, with a net profit of Rs. 50 crore, resulting in net margin of 54.6% and EPS of Rs. 17.43, on equity of Rs. 28.55 crore.

India’s largest credit rating agency and S&P’s 53% subsidiary CRISIL at current price of Rs. 1024, quotes at a PE multiple of 34 times and ICRA, in which Moody’s holds 28.5% equity stake, trades at 32 times. Whereas CARE, at the current IPO price is offered at lower P/E multiple of 20 times at the estimated EPS Rs. 35, which is attractive at current market conditions.

Hence, considering the valuations, investors can invest with a long term view and current market conditions favor those who invest for listing gains too.

NSE New Indices - Alpha, High Beta, Low Volatility

2012-11-28T10:43:00.001+05:30

NSE, National Stock Exchange, the country's premier stock exchange, has launched three new indices - the CNX Alpha Index, the CNX High Beta Index and the CNX Low Volatility Index.

These are strategic indices, which are designed on the basis of quantitative models / investment strategies to provide a single value for the aggregate performance of a number of companies. The companies must rank within the top 300 companies by average free-float market capitalization and aggregate turnover for the last six months.

CNX Alpha Index:
CNX Alpha index aims to measure the performance of securities listed on NSE with high Alphas, which are measured on the basis of their risk-adjusted value. Weights of securities in the index are assigned based on the alpha values. Security with highest alpha in the index gets highest weight.

CNX High Beta Index:
CNX High Beta Index aims to measure the performance of the stocks listed on NSE that h ave High Beta. Beta can be referred to as a measure of the sensitivity of stock returns to market returns. This index can be used by those who are looking for high-risk-high-return category of stocks.

CNX Low Volatility Index:
CNX Low Volatility Index aims to measure the performance of the least volatile securities listed on NSE. This index can be used to create a portfolio of least-volatile securities which shall curb the downside during the bear phases.

All the above indices have 50 stocks each in their respective index and they will be calculated on an end-of-day basis and their closing value would be available the NSE.The EOD Data and stocks comprising of these indices are available in NSE .

HDFC Equity Fund Review

2012-10-22T06:19:00.000+05:30

HDFC Equity Fund, from one of the leading mutual fund house HDFC, was launched in 1995 and since then it has been one of the top performing fund in the multi-cap category. While there are many funds that have been performing over short and medium term, we look at this fund because of its excellent performance over longer period of time.

Snapshot of the fund:

HDFC Equity fund is relatively a large fund managing assets worth US$ 2b( about 10000cr), with S and P CNX 500 index as the benchmark. This fund is basically a multi-cap fund having financials and energy as the top sector holdings. The top holdings include State Bank of India, Icici Bank, ITC, Infy and Tatamotor DVRs. The fund has both dividend and growth option.

Performance:

The fund has given stupendous returns of 21% per annum since inception and its past 3 year and 5 year returns stand at 7% p.a. and 10% p.a. respectively, while the market has gone nowhere in the past 5 years. The 10-year Systematic Investment
Plan (SIP) has given returns of about 24% p.a and one couldn't ask for better performance.

Disciplined Systematic Investment in this fund has certainly generated very good returns, for a passive investor. For the active investor, investments in this fund when markets are down sharply or during bearish phases will give you spectacular returns. It is one of the best funds to be in, for the long term.There is another equally good performing fund, HDFC Top 200 Fund and you can read more about it here HDFC Top 200 Fund

Nifty Crash 2012

2012-10-05T17:05:00.002+05:30

The country's leading stock exchange NSE was halted for a few minutes due to a crash of 1000 points in the S&P CNX Nifty, hitting a low of 4888 intra-day. Many of the Nifty stocks were down anywhere between 15-20%. As per NSE India website the circuit breaker rules (upper circuit and lower circuit) are as follows:

Index-based Market-wide Circuit Breakers:
The index-based market-wide circuit breaker system applies at 3 stages of the index movement, either way viz. at 10%, 15% and 20%.In case of a 20% movement of the index, trading shall be halted for the remainder of the day.

Since the index showed a downward movement of about 20%, the nse was closed and rightly so. But surprisingly, the exchange was re-opened in few minutes, citing reasons of erroneous trades by one of the broker for about 650cr.

From the following table you can check out the lows of index and other nifty stocks below: There were many stocks in the nifty down as much as 15-20% , all were actual trades done during normal market hours and no freak trades which would happen in small-cap or penny stocks.

Such a crash had happened in nifty futures a few months ago, for which the reason attributed was algo trading, but this one was a manual execution of orders. Considering market at these higher levels, big selling could be anticipated, if not such a big one. Traders should be aware of such events and get themselves protected using proper risk management systems. Had the markets been frozen, it would have been a black swan event and if you wonder what's this black swan is all about, you can read about it here at Black Swan Theory.

MCX-SX Index SX-40

2012-09-13T19:34:00.001+05:30

The country's new stock exchange MCX-SX would start functioning from Diwali and along with the new exchange, the investors and traders are in for a new index as well. The MCX-SX, which is expected to be a full-fledged stock exchange, is set to begin trading with about 1,000 - 1,200 stocks. MCX-SX will commence trading in cash market and derivative segments (futures and options).

Not only the exchange, MCX-SX is all set to take on the country's two most popularly traded equity indices, the Sensex-30 and the Nifty-50, with its own benchmark index SX-40. It will select top stocks from the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) to create the SX-40. The new index, SX-40 is expected to consisting of BSE-30 stocks and the rest 10 would be of picked from stocks reflecting the growth story of India.

Currently, the Sensex and Nifty are recognised globally, of which NSE comprising of exchange-traded funds (ETFs), exchange-traded futures and options and other index funds, generates a little over half of the trading volumes in India's equity derivative market. The new exchange MCX-SX and the new index SX-40 is definitely bound to catch everyone's attention globally as well as locally.

MCX Stock Exchange - MCX-SX

2012-09-13T18:50:00.002+05:30

MCX Stock Exchange Limited (MCX-SX), branded as India’s new stock exchange, is set to launch equity segment from Diwali, according to exchange sources.Earlier in 2008, MCX commenced operations in the Currency Derivatives (CD) and has been witnessing a steady and significant growth in average daily turnover and open interest ever since its inception. It has a separate clearing corporation, MCX-SX Clearing Corporation Ltd. (MCX-SX CCL), through which the clearing and settlement is conducted.

The currency derivatives segment at MCX-SX is supported by a strong membership base and witnesses a nation-wide participation. At the end of July 2012, MCX-SX had 751 members and saw participation from 714 towns and cities across India. MCX-SX has received permissions to deal in Interest Rate Derivatives, Equity, Futures & Options on Equity and Wholesale Debt Segment.

Following its success in Currency futures, MCX is all set to launch its equity operations from Diwali. What does this mean for an investor and trader?

MCX-SX is planning to offer competitive membership fees, which could trigger a price war causing the BSE and the NSE to revise their membership fee structure. This would help in reduced transaction charges for the investor and trader. Just like Bombay Stock Exchange BSE and National Stock Exchange NSE, investors and trader could buy and sell stocks, futures and options in MCX-SX. It's just that your broker has to be a member of MCX-SX and surely, leading brokers would provide trading facilities of MCX-SX, since the costs involved are going to be lesser than now.

Investor and traders, over the past 15 years are very much connected with BSE and NSE, but they are in for a change and it would be a new beginning for them.

Change is here, be part of it !

Just visit the new exchange here at MCX-SX.

Stock Trading Mobile Apps for Indian Markets

2012-08-06T17:40:00.004+05:30

With the emergence of smart phones, mobile applications have changed how we live our lives and these apps have also changed how we manage our investment and trading activities too. These apps have helped us to do our activities that we were only able to perform in a stationary environment into something that we can do anywhere, anytime. Along with many activities like banking and shopping, stock trading is also now made that much easier thanks to mobile apps.Though the market regulator has approved mobile trading long ago, trading through mobile is yet to catch up in a big way. Here are some of the apps available for Indian markets.

NSE Mobile Trading:

NSE Mobile Trading system provides a revolutionary application suite featuring comprehensive trading and market monitoring platform. It offers real time streaming quotes, with simple and user friendly interface for all type of users.

Some of the features include Live quotes of all the stocks of the major NSE indices, quotes of your favorite stock list, most active stocks by volume etc. You can download this Android app from Google Play - Nse Mobile Trading

There are other trading apps provided by leading brokerage houses like Kotak Mobile Stock Trader, ShareMobile etc. But these are limited to clients of the respective brokerages, whereas the NSE mobile trading provides quotes and charts without any log-in issues. And, those who are interested in gold price quotes, there is Kitco live which provides live gold prices, market info, charts, news, and more.

Using some of these apps will enable you to access enormous amount of data, which help you to make your trading decisions better, any time and any place.

Moneycontrol Terminal - Streaming Live Quotes

2012-07-16T17:44:00.001+05:30

Moneycontrol has introduced a new feature Moneycontrol Terminal - an enhanced version of real time price updates. Though there were live quotes provided by the website previously, the present form gives a better update of live quotes of indices and stocks.

This terminal provides live streaming quotes for both NSE and BSE free. It also provides quotes for most of the indices and also the constituents/stocks of the indices in BSE and NSE. The terminal also provides live news and other market news, which might be useful for traders. The hardware recommended is minimum of 1 GB RAM.

It would be better if stock of any choice could be added ( market watch of a set of stocks ), which would be easier to track one's trading positions. Anyway, this is a better alternative for people who don't have access to any trading software, to view live action of the markets.

You could just try the same here at Moneycontrol Terminal

What is a DVR Share?

2012-06-10T08:00:00.001+05:30

A DVR or Differential Voting Rights share is just like an ordinary equity share, but with voting fewer rights. For example, while a normal Tata Motors shareholder can vote as many times as the number of company shares he/she holds, those who hold DVR shares will need to hold 100 DVR shares to cast one vote. World over many famous companies such as Google, trade shares with different voting rights (DVR). In India it was Jagatjit Industries that was the first to do a DVR.

Companies issue DVR shares to prevention any hostile takeover and dilution of voting rights. This also helps strategic investors who are looking at a big investment in a company, but with fewer voting rights. Some of the companies who have issued DVRs, which are traded in NSE, include Tata Motors, Pantaloons, Jain Irrigation systems and Gujarat NRE Coke.

Is it suitable for retail investors to invest in DVR shares?

These are good instruments for long-term investors, typically small investors, who seek higher dividend and are not much interested in voting rights. Mostly, these shares trade at a discount to their corresponding equity shares and the discount rate ranges from 30-40%. If a retail investor decides to invest in a company's share based on the fundamentals, the same could be done in the company's DVRs.

The following reasons support investing in DVRs:

1. The discount factor - the company's share available at a lesser price for the same fundamentals. There is a chance of these discount being reduced, due to market forces. And this could provide some more appreciation, than the stock itself.
2. There is a chance of higher dividend being given than the regualar equity shares.(For e.g, Tata motors declared a higher dividend for DVRs).

What are the disadvantages?

DVR shares are usually thinly traded, which means these are illiquid stocks. Also, during bearish phase of the markets, the discount could widen and this could be a dampener factor. But, caution should taken that an investor should not invest, just because the DVR is available at a large discount.

Other than the few disadvantages mentioned above, the DVRs are good instruments for medium to long-term investors, provided the fundamentals warrant in investing in the company. Over time as investors feel more familiar with such type of instruments, more issues would follow and maybe the discounts would narrow.

Protecting Your Finances: How to Prevent Identity Theft

2012-06-04T06:41:00.001+05:30

I absolutely loathe getting calls from private, unknown, or 1-800's numbers. Nothing ever good comes from these calls—bill collectors, scammers probing for my background, and exes. Typically I don't even answer my cell when these numbers come up, but for some strange reason, something felt particularly "wrong" when I received a 1-800 call a few weeks ago. My intuition was right.

"Hi yes," said the woman on the other end, "I'm calling from Chase Bank and we've noticed some unusual purchasing activity on your account." At first I thought it was a scam, some criminal trying to swindle me for my account number. "Did you spend $2,000 at Ralph Lauren and Bebe's clothing and apparel on May 1?" she continued. Of course I didn't spend nearly an entire pay check on two frou-frou luxury clothing stores that I don't even dare walking into because I know I can't afford anything in there. I took a moment to excuse myself as I logged in my bank account online. And that's when my heart sunk. Stolen from my account? A whopping $2,000. I was a victim of identity theft.

While Chase assured me that if I filled out the right paperwork I'd get "most" of my money put back into my account (and I did), in retrospect, there was so much I could of done to try and prevent such a "inconvenience" from happening –and I do mean inconvenience. I had bills to pay and a trip I was taking in just a few short weeks. It couldn't have occurred at a worse time. That said, below are some ways you can learn from my mistakes and help protect yourself from credit card identity theft.

Shred all of your Bank Statements

The easiest thing you can do is invest in a shredder and properly dispose of all of your paper bank statements and credit card/debit card receipts that you don’t need anymore. You'd be surprised to learn how much a "professional" can do with just your name and the last four digits of your credit card number. Some scammers intentionally dig through trash in order to retrieve this information, so don't make their jobs any easier by throwing your sensitive documents in the dumpster whole—especially public trash cans like those found in parks.

Only use "Secured" Sites when Making Purchases

Ensuring that the website you're browsing is "secured" when making online purchases is essential. Otherwise, your credit card information, including your EFC and your billing address could potentially be a free-for-all. There are several different ways that you can make sure the page you are viewing is secured. The first is to look at the address. A secured website will read https:// ; an unsecured site will read http:// – notice how the secured website has an "s"? Pay close attention to these details. Another indication that the website is secured is that there will be a visible locked padlock on the address bar as well, before the https://. Click on the pad lock to make sure its certificate of authenticity hasn't expired. Some scammers are smart enough to forge fake padlocks on their malicious sites.

Change Pins and Passwords Frequently

It might be a tad annoying having to remember new passwords to your accounts, online log-ins, and debit card every six months or so, but doing this can really help potential criminals from hacking into your information. Don't ever make an "obvious" pin or password either, such as the last four digits of your social security number, phone number or your name.

Set up Alerts

Last but not least you want to set up alerts whenever money is taken out of your account to be sent to your phone. My bank was gracious enough to personally call me when my unfortunate circumstance happened (after all, my bank knew I never spent that much money at one time) but don't depend on your bank to give you a heads up. Always monitor your own account. This will help you catch unusual activity much more quickly which means the chances of you getting reimbursed are higher. This will also help you catch any discrepancies—perhaps a restaurant or hotel over charged you for something.

Criminals and hackers are smart. The smartest of the bunch may just very well find a way to your information despite your efforts. However, following the tips above can leave some sense of security that you're not handing over your information on a silver platter.

With knowledge of the best background check companies and tactics, Jane Smith provides vital information and tips throughout her blogs. Email her your thoughts or concerns at janesmith161 at gmail dot com.

What Exactly is Spread Betting and How Easy is it to Set Up?

2012-05-30T17:20:00.000+05:30

If you've never come across the words 'spread betting' in a financial sense, you would probably be forgiven for thinking that it has something to do with bookies and sporting events.

So what exactly does it entail?
In essence spread betting is a fairly simple concept. It merely entails placing a bet on which way you think a particular market is going to go. If you think the market is going to rise and you have bet on it going up (going long), then when it does you make a profit. If on the other hand you predict that the market is going to fall and you bet on that exact scenario (going short) and it does, then again,you make a profit. When you close your bet you can claim your profit.

Let's put this into a proper scenario...

Okay let's say that we bet on the NASDAQ and based on some recent news we think that it may go up, so we place a 'long' bid. If the index does exactly what we want it to do and rises, then we are in profit. How much profit depends on the spread. For example, say that the index started off life at 100 and it rises to 200. If we close the bet at this point then the spread would be 100. Therefore if we placed a £1.00 bet then we would have made a healthy profit of £100.

Risks
Obviously it isn't all cut and dried and there are definite risks involved in spread betting. For example if you got it horribly wrong and instead of the stocks going up by 100 points, they went down by the same margin, then you would then be 'in the hole' for £100. This can be prevented by placing a stop order should the stocks start to fall beyond a certain point, however it doesn't eliminate the risk altogether. The potential is there to incur heavy losses if you are not careful.

So how easy is a spread betting account to set up?
In essence, setting up a spread betting account online is a fairly simple process. Many of the trading platforms offer spread betting online and will also have demo platforms for you to practice. This is where many people look to dip their toes in the water and it's worthwhile checking out the brokers product spec before opening up a pro spread betting account. Download a practise demo version - it's an ideal starting place if you are looking to learn how to make money out of the stock markets.

Like anything it pays to do your research first before you jump in with both feet as success certainly isn't guaranteed. If you are happy to go ahead and have the funds to do so then spread betting is a great way to earn some extra cash, provided that you understand what you're doing.

Speciality Restaurants IPO Review

2012-05-15T07:20:00.002+05:30

Speciality Restaurants is coming out with its IPO plans to raise about Rs 171-181 crore and this issue is open for subscription from May 16 to May 18. Speciality Restaurants is the owner of restaurant brands such as Mainland China, Sigree, Machaan and Oh!Calcutta among others.

The company plans to use the proceeds of IPO for developing new restaurants and partial repayment of debt. About 80 per cent of the proceeds (Rs 131 crore) would be used for the development of 45 new restaurants.

Issue Details:

Issue Open: May 16, 2012 - May 18, 2012.
Issue Size: 11,739,415 Equity Shares of Rs. 10.
Issue Price: Rs. 146 - Rs. 155 Per Equity Share.
Market Lot: 40 Shares.
Listing At: BSE, NSE.

Fundamentals:

For the fiscal Years 2010 and 2011 the company reported an EPS of 3.92 and 5.48 respectively . For the full year 2012, the EPS could be around Rs.4.25 and at the upper band, the IPO is done at 36 times the 2012 earnings. The book value of the company stands at Rs.32 for the reported year 2011 and the issue is being done at 5 times the book value. The company is growing at 30% and considering the appetite for such companies in food industries segment, the issue is worth looking at. The only deterrent is the weak market condition and over pricing of the issue, in such market conditions. The company might do well post-listing, if not immediately.

Could be another Jubilant Foods ? Let's wait and watch.

Nifty Futures Flash Crash

2012-04-22T08:00:00.002+05:30

There was huge and abnormal activity in Nifty Futures on 20 April 2012 around 2.40 pm, when it fell from 5338 to 5000, a drop of 7% within few seconds. Later it recovered and settled around 5250/5300. During this crash the number of contracts traded were 35,000 lots or 17.5 lakh shares. What could have happened and how can a trader protect himself from such wild swings?

To start with, there could be many possibilities which could have caused this crash.The error could be due to wrong punch or entry of a sell order with a wrong quantity or price. Another possibility is that it may be due to algorithmic trading or prominently known as Algo trading, which is so programmed, that in case there is a fall below a particular price level, the algo will initiate a sell order no matter what the price is. There was also a similar flash crash in US markets in 2010, when Dowjones crashed about 1000 points in a matter of few seconds.

What does this all mean for a trader? As a trader, if you are long or short, you have to hedge your positions to minimize your risks in trading. One has to be prepared for such kind of flash crashes or up-freeze market, when markets went up 20% in 2009 post-election results.Any retail trader trading nifty futures or other similar derivative products, must hedge his positions buying puts or selling higher strike price calls. Say, one is long in nifty futures at 5300, it is better to sell 5400 strike calls or buy 5200 puts. There are many more such strategies which could be used depending upon individual trading positions.

As an investor, such wild swings give you big opportunities. Such crashes provide you an opportunity to buy good stocks for long-term, if they come down 15-20% , for no fundamental reason. As always, if wealth creation over the long term is really your objective, it is better for retail investors to invest in mutual funds and leave the rest to the market.

Akshaya Tritiya - Gold, Gold ETFs or Gold Funds?

2012-04-21T07:48:00.003+05:30

Akshaya Tritiya, by Indian tradition, is considered an auspicious day for buying gold. Nowadays, there are quite a few options for investors who want to invest in gold, other than physical gold. Prominent among them are Gold ETFs,Gold Funds and Gold coins from banks. Let us take a look some of the advantages and disadvantages of these products.

Physical Gold or Gold coins:

Buying and selling physical gold adds substantial costs to your purchases, since jewelers always charges a making cost of 7 to 21 per cent over and above the price of gold. Also, when you want to sell it back to the same jeweler, you would be offered lesser price than the market price, which is a big disadvantage in investing in physical gold.Also storing your physical gold in lockers can cost you about Rs.1000-5000, depending on the institutions which offer you lockers and there are always risks associated with such placements.

As far as Gold coins are concerned, they are similiar to physical gold, involving costs of about 4-5% of the price of the gold.You can either buy these coins from the jeweller or from leading banks. You have to note that,you cannot sell the coins back to the banks as most of them don't offer such facility.

Gold ETFs:

Exchange Trader Funds or ETFs: If you have missed earlier article about Gold ETFs, you can read it here at Gold ETFs. In short, ETFs are cheaper, liquid and easily bought and sold through any stock broker with a Dmat account. Check out the list of Gold ETFs avaialble.

Gold funds:

Gold funds ( Fund of funds) are similar to ETFs, but more simpler. They don't require Dmat accounts like ETFs and there could be some charges like entry and exit loads. These charges are less than 1%, which is the same you have to pay your stock broker when purchasing ETFs, so not much of a difference. The advantage with gold funds is that they can be bought with any amount as low as Rs.500 or 1000 depending upon the mutual fund. Also, SIP option is available, in which one can invest fixed amount every month. Check out about the features and various Gold Funds.

Conclusion:

Considering the pros and cons of all the investing options available, Gold Funds are better and ideal for retail investors and the next better option could be Gold Etfs. Now the bigger question is whether one can invest in gold at these prices ? Investors need to understand, gold as an asset class has given positive returns for the past 10 consecutive years. The prices cannot go up continously and they can correct and correct substantially. Also investing in gold should be limited to 10-15% of one's portfolio and Gold alone should not be one's core portfolio.

Invest wisely !

High Dividend Yield Stocks 2012

2012-04-09T07:13:00.004+05:30

What is Dividend Yield?

Dividends are payments made by a company to their shareholders and these payments are paid out of the profits made during the year. Dividend yields are returns from dividends, which can be calculated by dividing the dividend per share by the current market price of the stock. For e.g., a company quoting at 200, declares a dividend of 10, the dividend yield works out to 5%. High dividend yield stocks are for those investors who are looking for regular income as well as capital appreciation over a longer period of time.

These stocks can be picked up during market down trend or when market trend is not clear. In a downtrend, dividend yields of such companies goes up as the stock prices fall. Before investing in companies that provide high dividend yields, care to be taken that these companies have sound fundamentals, regular dividend paying and enjoy healthy cash flows. We have picked few stocks which have high dividend yields in the range of 6-9% and with a low P/E ratio. Though the earnings growth of these companies may not be among the highest in the industry, they manage to deliver good results across business and economic cycles. During this time of the year, the companies declare their annual results and dividends. Hence, before investing in these companies, watch out for their annual results and performances as well.

The stocks that are picked have been limited to CNX 500 Index and of course, there are few other stocks outside this index with better yields also. While investing in the above stocks, an investor should limit their exposure to about 15-20% of their portfolio, since dividend-investing alone should not be anyone's investing strategy. If you find any other such high dividend yielding stock which might have missed our attention, please inform us or post them in the comment section.

Is Short Selling Dangerous ?

2012-04-02T07:49:00.000+05:30

What is short selling?

Short selling is a a trading technique a trader uses to profit from the falling price of a stock. It is a technique of selling a stock without owning it, with the view that the price is likely to fall further and, hence, there is profit to be made by buying it back at a lower price.

When the market is bearish or in downtrend, it presents a window of opportunity for traders to make money by 'shorting' stocks with the hope that the market will continue to be bearish and this is where short selling comes into picture.

Is short selling dangerous?

To start with, traders should be aware that short-selling is trading and not investing. They should also be aware that trading requires lot of skills and discipline and there are risks involved with it. To find whether short selling is dangerous or not, let us look at some of the key points below.

Historically, individual stocks and equity markets, both domestic and global, have moved upwards (short-term movement aside). Thus, if we agree that the direction of markets is generally bound upwards, then holding on to a short position for a longer time is betting against the historical trend of a market is very risky.
A trader should always exit the market once the target is achieved or the stop loss is triggered. But as this discipline in market is against our natural instincts of fear and greed and lack of such discipline, makes the position riskier.
Theoretically, one stands to make only limited profit on a short sell with chances of unlimited loss. This is because, the stock price can rise to any level, whereas the gain is limited since the stock price cannot go below zero.

In Indian equity markets, short selling is typically undertaken via the futures and options route, since short positions in the cash markets can be held only intra-day. One may not be able to carry forward short positions in cash markets, since stock lending and borrowing is yet to kick in a big way to facilitate short selling in cash markets. As for as the futures are concerned, the quantity or the lot sizes of the stock futures are so high that many are not aware of the huge risks involved in short selling such instruments.

To summarize, though short selling could a profitable strategy occasionally, it could result in substantial losses and it should not be used by investors or traders who are new to the market and who do not understand the dynamics of stock market.

3 Ways to Survive a Bear Market

2012-03-26T07:12:00.000+05:30

If you were hiking in the mountains and stopped in a small river for a drink only to look up and see a bear charging at you, what would you do? Our instinctual reaction in a life-threatening situation, such as being charged by a bear, is to run. But wilderness experts will tell you that instead of running from a bear, you should curl into a small ball.

The moral of the story is that you can’t outrun a bear. And the same is true of metaphoric bears — a bear market, for example.

Anyone who has invested in the past decade, and especially in the past five years, has seen what finance people call a "bear market". What is a bear market? In the most basic terms, it is exactly what it sounds like: a confluence of unfortunate factors that make the stock market a terrible, scary place to be, especially for inexperienced investors.

Our instinctual response to a bear markets is the same as our reaction to a live bear — we want to run. We want to scramble and get out as soon as possible to protect our investments. The thing about a bear market, though, is that it is a natural period of decline. Inevitably, after a period of large gains, the market will sink. Here are three ways to handle a bear market and come out with all your limbs intact:

1. Don’t run. Just as with real bears, trying to run away from a bear market by selling out and transferring your assets into a cash market will generally yield worse results than just staying put. In fact, by trying to run, you only lock in your losses. Volatility in built into the market system, so you can’t let a bad spell shake your faith. If the market is down, the damage is already done to your investments, so don’t make it worse by jumping ship. Instead, plan for the troughs by taking a long-term approach. If you do this, you’ll be in an optimal position to ride the wave back to a prospering market when it recovers.

2. Take stock. One way to take a long-term approach is to review your asset allocation when the market is down and readjusting the mix based on your risk tolerance. Wise investors will tell you that you should be re-balancing your portfolio at least once a year anyway, regardless of how the market is doing.

3. Be consistent. It’s very important to stay the course, even when the market is down. Typically this means that you should continue to add to your portfolio as you would when the market is up. This strategy is called dollar-cost-averaging — if you have a set amount of money you invest each month, buying more when prices are low and less when prices are high, the average price per share you’ll pay will be less expensive than the standard average share price.

Timing the market is as difficult and futile as running from a bear. So curl up, and wait for the bear to drop you, and you’ll be likely to outperform others who try to run.

By-line:
Alvina Lopez is a freelance writer and blog junkie, who blogs about accredited online colleges. She welcomes your comments at her email Id: alvina.lopez at gmail dot com.

NBCC IPO Review National Buildings Construction Corporation

2012-03-15T19:56:00.000+05:30

National Buildings Construction Corporation NBCC is coming out with an IPO of 12,000,000 Equity Shares of Rs. 10 each by way of an offer for sale of Equity shares by GOI. The company, started in 1960, is one of the few public sector companies engaged in the business of (i) project management consultancy services for civil construction projects (PMC) (ii) civil infrastructure for power sector and (iii) real estate development.

The company is headquartered in New Delhi and in addition has 10 regional / zonal offices across India. The projects undertaken by the Company are spread across 23 states and 1 union territory in India.

Issue Details:

Issue Open: Mar 22 - Mar 27, 2012.
Issue Size: 12,000,000 Equity Shares of Rs. 10.
Issue Price: Rs.90-Rs.106.
Listing At: BSE, NSE.
CARE Rating: 4 indicating above average fundamentals.
A Discount of 5 % on the Offer Price shall be offered to Retail Bidders and Employees.

Positives of the company:

1.Established brand name and reputation.
2.Operations in diverse sectors with strong Order Book position.
3.Qualified and experienced management.
4.Significant experience and track record.
5.Vast Industry knowledge and technical expertise.

Key Risks:

1.The company's revenues are significantly dependent on our PMC business. Any decline in PMC business, could adversely affect the company's business prospects, financial condition and results of operations.
2.Certain board of directors are involved in a number of legal proceedings, which may adversely impact the company's business reputation.
3.There could be cyclical risks associated with this industry.

NBCC IPO Price:

The EPS for the year ended March 31, 2011 is Rs.11.71 and latest EPS is Rs.15. The book value stands at Rs. 72 and the issue is being offered at 1.5 times the book value. At the higher end of the offer price band of Rs.90-Rs.106 , the P/E ratio is 7 times, where most of the infra and construction companies are available. Currently, similar companies under the sector are reeling under pressure and going by the current scenario the issue is an above average one. Though the sector offers substantial growth, the company itself growing at 20%, there are concerns and risk factors which could affect the company's earnings. At the indicative offer price, the issue is better for long-term investors only and for traders who want to sell on listing, it could be a tricky one.

5 Mistakes to Avoid While Investing in Stocks

2012-03-05T07:21:00.001+05:30

Due to availability of easy access to online trading, provided by many brokerage houses, investing and trading has been made easy. This is great, because it encourages more people to explore investing for themselves, rather than depending on mutual funds and portfolio management schemes (PMS). But the big question is, whether an investor would be able to do their own research, pick stocks, invest and make money?

Yes, it is possible to be a successful investor and for that one needs to be aware of the common mistakes while investing. By avoiding these mistakes, their path to successful investing would be a smoother one.

1. Investing all the money in a single investment

You should never put all your eggs in one basket. Investing 100% of your capital in a single stock or a sector is not a good move. Since, one particular stock or sector may under-perform the market, while the rest of the market moves up. One has to have a diversified portfolio of different sectors and stocks. Diversification is a key to good investment.

2. Chasing News

Buy on rumors and sell on news, is an old jargon. Investing on news is a terrible move. If you are lucky enough, you would get away with it or else you would be stuck with that particular stock. Rather than following news and rumors, investments should be made in companies you understand and which you believe are fundamentally sound and currently undervalued.

3. Buying on Tips and calls

This is another form of news and rumors.We have already seen why tips and calls won't make you money. Tips and calls are given for traders and not for investors. And these calls are given with specific price targets and stop-losses. Investors buy on these tips, forget about stop-losses and stuck with the stock, knowing what to do. Make your investment decisions on your own using fundamental analysis.

4. Low-priced or Penny stocks

The low price of the cheap or penny stocks does not necessarily mean they are safe. So, even if you may see such shares rising up pretty fast in the short-term, over the long-term they don't perform well. It is not wise for a small investor to buy these penny stocks, which involves risk of losing his capital. Using good fundamental research techniques to define whether to buy a stock or not, helps in making good investment decision.

5. Buying on leverage

Leverage is available in many forms - like margin trading, futures etc., and using such leverage magnifies both the gains and the losses on a given investment. Use of leverage involves risk of capital and learning to control the risk does not come easily for a small investor. Hence it is in the good interest of the investor, buying on leverage is best avoided.

Remember, investing is not that easy and it is always wise to invest with a long-term view, whether you do it buy investing directly in stocks or through top mutual funds.

MCX Listing and Pre-open session for IPOs

2012-02-22T20:43:00.002+05:30

We have already seen how the pre-open session or call auction trading session for existing securities works. And similarly for the new listings of the IPOs during listing day, the exchanges have introduced a Special Pre-Open Session (SPOS) for IPOs and re-listed scrips.

Salient Features of Special Pre-open Session :

1. This session shall be conducted for IPO scrips only on the first day of trading, i.e. day of listing of the scrip on the Exchange and for Re-listed scrips only on the day of re-commencement of trading of that scrip on the Exchange.
2. SPOS shall be for duration of 60 minutes from 9:00am – 10:00am for scrips participating in that session and shall be followed by continuous trading session.
3. From the next trading day onwards, trading would be normal.
4. Only limit orders will be permitted during the special pre-open session and Market orders will not be accepted.
5. For IPOs of Issue size greater than Rs.250 cr - during pre-open session, there would no Price Bands. But, during the normal trading session it would be 20% of Equilibrium Price (Listing price).
For smaller issues, with size of less than Rs.250 cr., the price bands are 5%.

The above point is interesting, since there wouldn't be no 50/100 % moves after the listing price, which is intended to curtail huge swings in stock prices post-listing.For e.g., if the MCX issue price is fixed at Rs.1000 and during the pre-open session, the price discovered is at 1200, then the price band is fixed at 20% of the listing price, on either side. And because of this new method the volatility on the listing is expected to be substantially reduced.

MCX listing date is to going to be an interesting session, since this is the first time an IPO is being listed using the above methodology. Let us wait and watch, how the new method is being implemented.