Trade update

20 Things You Always Wanted to Know about stocks

2014-12-17T16:27:00.000+05:30

Things You Always Wanted to Know about stocks

1. What is a stock?

A holder of stock (a shareholder) has a claim to be a part of the company's assets and earnings. In other words, a shareholder is an owner of a company. The ownership of the shareholder is determined by the number of shares a person owns relative to the number of outstanding shares.

2. Why should I invest in stock market?

The stock market is a popular form of investment for investors. Investing is just a smaller part of a much bigger thing called financial planning. Stock market can give you multiple returns that no other asset class can match but with the same amount of risk. There are various reasons to invest in stock market
a) To provide for a longer life span – you need to plan for your future and save for post retirement period. With investment, you can have some savings to take care of you when retired. But the investment in share market should start early as long-term investment can get better returns.
b) To beat inflation – investing at the right time can save you during inflation; stocks are a good hedge against inflation. Inflation erodes your purchasing power and puts pressure on your fixed income. At that time, investments or a part of asset that you kept aside as investment in stocks may help you during inflation.
c) To maintain your standard of living – investment in stocks can maintain your standard of living post retirement even during a rise in price of various commodities.

3. How to invest in stocks?

Investing in stocks is not at all difficult; it just needs the understanding of how market works and what are the modes or requirements to invest in stock market.
a) You need to identify your goals
b) Plan the time horizon i.e for how long you want to invest and meet your requirements.
c) Decide on how much you would need to accomplish your goals
d) Qualitative analysis of the company is also important before investing
e) Select the investment option available in market such as fixed income or debt instrument, equities and this also depends on your future needs and risk profile
f) Select an investment method. It includes investing through mutual fund, brokers or managing it yourself.

4. How to select a stock for investment?

Selecting a stock requires a lot of research work. These include:
a) The first step includes selecting a sector for investment such as information technology (IT) sector, auto sector, energy, aviation etc.
b) Once you have selected a sector, the next step is selecting a company within that sector. It involves large-cap, mid-cap and small-cap companies
c) See the past performance of a company you choose to invest in
d) Fundamental analysis which involves evaluating company’s balance sheets and various ratios
e) Diversify your investment to reduce risk
f) Look for a long-term investment for better returns

5. When should I start investing in stocks?

There is no time limit or age to start investing in stocks, but if you start investing early you can gain the benefit for investing in long term and get better returns. Whereas, if you invest late, the benefit which you would have got may be less, the level of risk which you can take also becomes low resulting in low risk, low returns.

6. What are the types of shares in India?

According to company law there are two types of shares in India
a) Preference shares: Preference shares are those shares which are given preference regards to dividend portion which is fixed profit. They are less risky than equity shares. For example, in case of low profit, a company first pays to preference shareholder and may not pay to equity shareholders.
b) Equity shares: They are the ordinary shares and do not enjoy any preference. The dividend paid are fluctuating.
Other types of shares includes
a) Deferred shares: These are held by the founders of the company. Profit to these share holders is given only when other shareholders receive their dividends.
b) Bonus shares: Bonus shares are free of charge. These are given to shareholders as a bonus. It is a bonus for all the existing shareholders in form of shares instead of cash.

7. What are the risks involved in investing in stock market?

Investing in share market involves risk. The types of risk are:
a) Market risk: The price of shares is not just driven by the internal environment or performance of the company, but also by supply and demand of its shares and the liquidity in market. It is always good to invest in long term to be safe form daily fluctuations in the price of shares.
b) Company risk: It is within the company that is failing to grow and the shareholders do not get any dividends. This type of risk cannot be avoided but can be minimised to greater extent and for this, you need to do full-fledged research before investing in a company.
c) Inflation risk: This is the risk of uncertainty on the future value and risk that inflation will have adverse effect on your investment. Here, you should research on the growth of your purchasing power during inflation.
d) Regulatory risk: The company is subject to some kind of regulation. It refers to risk if any new laws are introduced by regulatory body, which may affect the business.

8. What is a time horizon for investing in stock market?

Usually there is no time horizon as such to invest in stock market, but experts suggest investing for a long term to get better returns and one should start investing as early as possible.

9. How diversifying investment can minimise risk?

The investor or trader investing in stock market should always diversify the portfolio in order to minimise losses. Diversifying means investing in different sectors as investing in single or specific sector can be risky. For example, if IT stocks are hit and if you have invested in different sectors then it would not impact you much. But don’t over diversify that managing it becomes difficult.

10. What causes stock prices to change?

Stock prices change every day due to supply and demand in market based on negative and positive outlook of people towards particular stock. The next thing that affects stock price to change is the earnings of company i.e the profit it makes. For example, if the results of company are bad then stock price falls and if they are positive then stock price rises. There are various methods that people use to determine the rise and fall in stock price, but it is just estimation as nobody can predict how the prices will change.

11. What is intraday trading? What is the difference between intraday and delivery trading?

Buying and selling of shares in a single trading session is called intraday trading. You can trade shares within seconds, minutes and hours in a day. It can give you profit when you analyse perfectly. In delivery trading, you buy shares and sell them after one day. The advantage of delivery trading is that you don’t need to sell the share on same day even if it is at loss. On the other hand, the brokerage charges in intraday trading is very less as compared to delivery trading.

12. What is the process of taxation on investing in shares? What is a short term capital gain and long term capital gain?

There are various taxes levied on transactions in equity shares such as securities transaction tax (STT), service tax, capital gains tax. Under capital gains tax, there is short term capital gain i.e. if you sell the shares within a year of purchasing them and long term capital gain is levied if you sell shares after a year of purchasing them. The dividends earned on shares are tax-free.

13. What do bullish and bearish markets mean?

The terms bear and bull describe upward and downward market trends. The bearish market refers to decline in market while the bullish market refers to rise in the share market. Investors generally follow a buy low and sell high strategy.

14. What are primary and secondary markets?

There are two types of stock markets in India: primary and secondary market
Primary market is where a company issues its shares for first time, when it wishes to raise capital or expand its business operations. This is done through initial public offering (IPO). In secondary market, people buy the shares of the company already listed on the stock exchange. To carry out an online transaction in stock market, you need a demat account.

15. Which are the popular stock exchanges in India?

There are two main stock exchanges in India: the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The BSE index is known as SENSEX, while the NSE index is called as Nifty. Another exchange, other than these two, is a Multi Commodity Exchange (MCX) which is an independent commodity exchange in India.

16. What is an insider trading?

Insider trading is buying and selling of securities by a person who has access to information of company which is not public. It is illegal activity and unfair with other investors. One of the indicators of insider trading is spike in stock price before any major announcement by the company.

17. What are blue chip stocks?

These are stocks of well-established and large companies operating for many years. They generally pay stable dividends to shareholders and most investors have a positive outlook on stocks of these companies. Blue chip is a kind of nickname given to stocks which are mostly safer.

18. How can I buy stocks?

You can buy stocks of a company from a stock exchange with the help of a broker or you can also buy stocks online for that you need to have an online trading account.

19. How can I gain maximum benefit from investing in stock market?

Planning before investing is very important. It includes whether you want to invest for long term or short term. Though long term investment is considered better to gain maximum benefits, you should start with short term investing. Once you gain profit, you can expand the portfolio.
a) Set a goal: You should set a goal or objective and make strategies to achieve those in a specific period of time
b) Time value of money: It is a simple concept of making your money work for you. If you invest for long term you can gain maximum benefit
c) Calculating risk: There is always some amount of risk involved in investing in stocks. Here you need to calculate the amount of risk that you can take.
d) Diversification: Diversification of investment is diversifying your risk. Always have a mix of high and low risk investments. This is done to ensure that if you lose in one sector then you may recover your loss by gaining in another sector.
e) Invest consistently: Effective wealth building can be achieved by investing consistently in market.

20. What is securities transaction tax?
Securities transaction tax (STT) is levied on every single transaction that you do on the stock exchange. It gets added to the price of stock at the time of transaction so there is no way to avoid it

What is MCX- SX(Multi Commodity Exchange) ?

2014-12-17T16:15:00.000+05:30

MCX-SX :: Multi Commodity Exchange -Stock Exchange India is an Indian stock exchange. It commenced operations in the Currency Derivatives (CD) segment on October 7, 2008 under the regulatory framework of Securities & Exchange Board of India (SEBI) and Reserve Bank of India (RBI). The Exchange is recognised by SEBI under Section 4 of Securities Contracts (Regulation) Act, 1956. In line with global best practices and regulatory requirements, clearing and settlement is conducted through a separate clearing corporation, MCX-SXAT Clearing Corporation Ltd. (MCX-SXAT CCL).

The Exchange received permissions to deal in Interest Rate Derivatives, Equity, Futures & Options on Equity and Wholesale Debt Segment, vide SEBI’s letter dated July 10, 2012.MCX-SX was granted the status of a “recognized stock exchange” by the Ministry of Corporate Affairs (MCA),Government of India on December 21, 2012. It received “commencement certificate” from market regulator SEBI for trading in new segments such as Equity, Futures and Options on Equity, Interest Rate Derivatives and Wholesale Debt Market on December 19, 2012.

Foreign Exchange Risk and Benefits

2013-09-26T13:42:00.000+05:30

In this section, we'll take a look at some of the benefits and risks associated with the forex market. We'll also discuss how it differs from the equity market in order to get a greater understanding of how the forex market works.

The Good and the Bad:

We already have mentioned that factors such as the size, volatility and global structure of the foreign exchange market have all contributed to its rapid success. Given the highly liquid nature of this market, investors are able to place extremely large trades without affecting any given exchange rate. These large positions are made available to forex traders because of the low margin requirements used by the majority of the industry's brokers. For example, it is possible for a trader to control a position of US$100,000 by putting down as little as US$1,000 up front and borrowing the remainder from his or her forex broker. This amount of leverage acts as a double-edged sword because investors can realize large gains when rates make a small favorable change, but they also run the risk of a massive loss when the rates move against them. Despite the foreign exchange risks, the amount of leverage available in the forex market is what makes it attractive for many speculators.

The currency market is also the only market that is truly open 24 hours a day with decent liquidity throughout the day. For traders who may have a day job or just a busy schedule, it is an optimal market to trade in. As you can see from the chart below, the major trading hubs are spread throughout many different time zones, eliminating the need to wait for an opening or closing bell. As the U.S. trading closes, other markets in the East are opening, making it possible to trade at any time during the day.

Time Zone	Time (ET)
Tokyo Open	7:00 pm
Tokyo Close	4:00 am
London Open	3:00 am
London Close	12:00 pm
New York Open	8:00 am
New York Close	5:00 pm

While the forex market may offer more excitement to the investor, the risks are also higher in comparison to trading equities. The ultra-high leverage of the forex market means that huge gains can quickly turn to damaging losses and can wipe out the majority of your account in a matter of minutes. This is important for all new traders to understand, because in the forex market - due to the large amount of money involved and the number of players - traders will react quickly to information released into the market, leading to sharp moves in the price of the currency pair.

Though currencies don't tend to move as sharply as equities on a percentage basis (where a company's stock can lose a large portion of its value in a matter of minutes after a bad announcement), it is the leverage in the spot market that creates the volatility. For example, if you are using 100:1 leverage on $1,000 invested, you control $100,000 in capital. If you put $100,000 into a currency and the currency's price moves 1% against you, the value of the capital will have decreased to $99,000 - a loss of $1,000, or all of your invested capital, representing a 100% loss. In the equities market, most traders do not use leverage, therefore a 1% loss in the stock's value on a $1,000 investment, would only mean a loss of $10. Therefore, it is important to take into account the risks involved in the forex market before diving in.

Differences Between Forex and Equities

A major difference between the forex and equities markets is the number of traded instruments: the forex market has very few compared to the thousands found in the equities market. The majority of forex traders focus their efforts on seven different currency pairs: the four majors, which include (EUR/USD, USD/JPY, GBP/USD, USD/CHF); and the three commodity pairs (USD/CAD, AUD/USD, NZD/USD). All other pairs are just different combinations of the same currencies, otherwise known as cross currencies. This makes currency trading easier to follow because rather than having to cherry-pick between 10,000 stocks to find the best value, all that FX traders need to do is "keep up" on the economic and political news of eight countries.

The equity markets often can hit a lull, resulting in shrinking volumes and activity. As a result, it may be hard to open and close positions when desired. Furthermore, in a declining market, it is only with extreme ingenuity that an equities investor can make a profit. It is difficult to short-sell in the U.S. equities market because of strict rules and regulations regarding the process. On the other hand, forex offers the opportunity to profit in both rising and declining markets because with each trade, you are buying and selling simultaneously, and short-selling is, therefore, inherent in every transaction. In addition, since the forex market is so liquid, traders are not required to wait for an uptick before they are allowed to enter into a short position - as they are in the equities market.

Due to the extreme liquidity of the forex market, margins are low and leverage is high. It just is not possible to find such low margin rates in the equities markets; most margin traders in the equities markets need at least 50% of the value of the investment available as margin, whereas forex traders need as little as 1%. Furthermore, commissions in the equities market are much higher than in the forex market. Traditional brokers ask for commission fees on top of the spread, plus the fees that have to be paid to the exchange. Spot forex brokers take only the spread as their fee for the transaction.

By now you should have a basic understanding of what the forex market is and how it works

What is Forex Trading?

2013-09-26T12:39:00.000+05:30

Forex Trading is trading currencies from different countries against each other. Forex is acronym of Foreign Exchange.

For example, in Europe the currency in circulation is called the Euro (EUR) and in the United States the currency in circulation is called the US Dollar (USD). An example of a forex trade is to buy the Euro while simultaneously selling US Dollar. This is called going long on the EUR/USD.

How Does Forex Trading Work?

Forex trading is typically done through a broker or market maker. As a forex trader you can choose a currency pair that you expect to change in value and place a trade accordingly. For example, if you had purchased 1,000 Euros in January of 2005, it would have cost you around $1,200 USD. Throughout 2005 the Euroâ€™s value vs. the U.S. Dollarâ€™s value increased. At the end of the year 1,000 Euros was worth $1,300 U.S. Dollars. If you had chosen to end your trade at that point, you would have a $100 gain.

Forex trades can be placed through a broker or market maker. Orders can be placed with just a few clicks and the broker then passes the order along to a partner in the Interbank Market to fill your position. When you close your trade, the broker closes the position on the Interbank Market and credits your account with the loss or gain. This can all happen literally within a few seconds.

Indian stock market and finance apps for your smartphone

2013-09-10T14:31:00.000+05:30

Those trading in the stock market need to stay abreast with the latest financial news, but finding and keeping a track of information about the stock market isn't tedious anymore. There are several mobile apps that serve almost every "stock" purpose, from checking the latest prices of commodities to controlling your stock profile.

We have listed five such Indian stock market and finance apps, which are quite handy for novice as well as veterans of the stock market.

1. Moneycontrol’s Markets on mobile - Android, BlackBerry, iOS, Symbian, Windows Mobile

The app is available for a broad range of platforms namely, iOS (iPhone and iPad), Android, BlackBerry, Symbian and Windows. However, Android users won’t find it on the Google Play store but can download it here.

2. Stock Watch - Android

The Stock Watch is one of the highest rated apps that lets Android users keep a tab on the Indian and global economy. It can be used as a tool to follow India’s most important stock exchanges.

3. Yahoo! Finance- Android,iOS

The app can be downloaded on Android and iOSdevices.

4. NSE Mobile Trading - Android, iOS

If you are looking for a free app to simply monitor the stock market, then the NSE Mobile Trading will prove to be extremely beneficial. This complete trading and market monitoring tool has a simple user interface which provides real time streaming quotes. The mobile app has been recently updated to improve its streaming capabilities, and gets a new option to enable "ticker bar" from Settings. It is available for both iOS and Android users. This is a free monitoring app but users looking for more can take further advantage of this app by subscribing to it here.

5. Investar- Android, iOS

The new Watchlist Synchronization allows users to keep a backup of their watchslists and/or synchronise them with the desktop software Investar 3.0. The Investar app is available for Android and iOS users.

There are several other stock market and finanace-related apps in app stores for different platforms. Which one according to you is the most helpful stock market app?

What is Bombay Stock Exchange(BSE) ?

2013-09-10T14:15:00.001+05:30

The S&P BSE SENSEX (S&P Bombay Stock Exchange Sensitive Index), also-called the BSE 30 or simply the SENSEX, is a free-float market capitalization-weighted stock market index of 30 well-established and financially sound companies listed on BSE Ltd.

The 30 component companies which are some of the largest and most actively traded stocks, are representative of various industrial sectors of the Indian economy. Published since 1 January 1986, the S&P BSE SENSEX is regarded as the pulse of the domestic stock markets in India. The base value of the S&P BSE SENSEX is taken as 100 on 1 April 1979, and its base year as 1978–79

On 25 July 2001 BSE launched DOLLEX-30, a dollar-linked version of S&P BSE SENSEX. As of 21 April 2011, the market capitalisation of S&P BSE SENSEX was about 29733 billion (US$455 billion) (47.68% of market capitalisation of BSE), while its free-float market capitalisation was 15690 billion (US$240 billion).

Calculation

The BSE constantly reviews and modifies its composition to be sure it reflects current market conditions. The index is calculated based on a free float capitalisation method, a variation of the market capitalisation method. Instead of using a company's outstanding shares it uses its float, or shares that are readily available for trading. As per free float capitalisation methodology, the level of index at any point of time reflects the free float market value of 30 component stocks relative to a base period. The market capitalisation of a company is determined by multiplying the price of its stock by the number of shares issued by of corporate actions, replacement of scrips, etc.

The index has increased by over ten times from June 1990 to the present. Using information from April 1979 onwards, the long-run rate of return on the S&P BSE SENSEX works out to be 18.6% per annum, which translates to roughly 9% per annum.

What is National Stock Exchange (NSE) ?

2013-09-09T13:02:00.000+05:30

The National Stock Exchange (NSE) (Hindi: राष्ट्रीय शेयर बाज़ार Rashtriya Śhare Bāzaār) is stock exchange located in Mumbai, India. It is the 11th largest stock exchange in the world by market capitalisation and largest in India by daily turnover and number of trades, for both equities and derivative trading.

NSE has a market capitalisation of more than US$1 trillion (₹ 67,637.81 billion) and 1,665 companies listed as of December 2012. Though a number of other exchanges exist, NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India, and between them are responsible for the vast majority of share transactions. The NSE's key index is the S&P CNX Nifty, now known as the NSE NIFTY (National Stock Exchange Fifty), an index of fifty major stocks weighted by market capitalisation.

NSE is mutually owned by a set of leading financial institutions, banks, insurance companies and other financial intermediaries in India but its ownership and management operate as separate entities. There are at least 2 foreign investors NYSE Euronext and Goldman Sachs who have taken a stake in the NSE.

As of 2006, the NSE VSAT terminals, 2799 in total, cover more than 1500 cities across India. In 2011, NSE was the third largest stock exchange in the world in terms of the number of contracts (1221 million) traded in equity derivatives. It is the second fastest growing stock exchange in the world with a recorded growth of 16.6%.

Online Trading Websites in India

2013-09-08T12:49:00.000+05:30

Online Trading is an Investing online, or self-directed investing, has become the norm for individual investors and traders over the past decade.

If you want to trade online you need a Computer and Internet Connection to place your buy and sell orders.

BSE India

Established in 1875, BSE Ltd. (formerly known as Bombay Stock Exchange Ltd.), is Asia’s first Stock Exchange and one of India’s leading exchange groups. Over the past 137 years, BSE has facilitated the growth of the Indian corporate sector by providing it an efficient capital-raising platform.

NSE India

The National Stock Exchange (NSE) is India's leading stock exchange covering various cities and towns across the country.

Best Websites to do Trading online are
1. Sharekhan2. icici direct3. SBIcap sec4. HDFC Sec5. kotak Securities6. India bulls7. Angel Broking8. Motilal oswal9. Geojit bnp paribas