Top Down and Bottom Up approach of Stock Investing: While performing the fundamental analysis of companies, two of the most common strategies to research stocks that are used by investors are top down and bottom up approaches. In this post, you’ll learn what exactly is top down and bottom up approach.
Here, we’ll learn how top down and bottom up approach work, the difference between them and which one may be more suitable to you. Let’s get started.
Top down approach
Have you ever heard any investor/analyst saying something like- “The electric vehicle industry looks particularly promising now. The industry is growing at a fast pace and I should invest in this industry”.
Well, here the investor is following the top down approach to find stocks.
In the top down approach, the investors first look into the macro picture of the economy and later work down to research the individual stocks.
The overall steps involved in top down approach is to first look at the big picture of the world i.e. which economy is doing great, then look at the general market in that economy, next find the particular sector that may outperform and finally research the best stock opportunity to invest within that sector.
For example, let’s say you studied that the European economy is growing at a very fast rate. Next, when you looked further into the European market, you found that especially the biotechnology industry in outperforming. And finally, you researched some appealing stocks in that industry to invest. This is the top down approach for stock investing.
Here, you start with the big picture and ultimately move down to find the suitable investing opportunity. Top down approach looks at the performance of the economy & sector and believes that if the industry is doing good– the chances are that the stocks in that industry will perform too.
A few of the major areas where the top down analysts pay attention are economic growth, GDP, monetary policy, inflation, prices of commodities, bond yields, etc before moving into the specific industry study.
The biggest advantage of top down approach is that there’s no pre-conceived notion about what may work and the selection of economy, industry & stocks are based on the real-time studies. Further, as they focuses on the strong sectors, the chances of underlying companies performing well are favorable.
However, one of the major flaw of top down approach is that here you may miss out a few good bargain stocks in the eliminated industries.
This approach is exact opposite of the top down approach. Here, you first start with company research and later move up to find the other details.
Bottom up approach tries to study the fundamental of the company regardless the market conditions, industry or the macroeconomic factors. While performing the bottom up approach, the investors studies how fundamentally strong the company is by focusing on its revenues, earnings, financial ratios, products/services, sales growth, management etc.
The key here is to find the potentially strong company which may outperform the industry and market in future. If the fundamental factors are good, then regardless of what the industry is doing, the bottom up investors will pick such companies to invest.
The biggest advantage of the bottom up approach is that the investors may find the best potentially strong company which can outperform even if the economy or industry as a whole declines. Bottom up approach helps in picking quality stocks.
On the other hand, one of the cons of bottom up approach is that the investor may have some pre-conceived notion of the company and in such condition, their investment decisions may be a little biased. Further, as these investors ignore the longer economic influence and market conditions, some investment returns may be adversely affected because of these factors.
Closing Thoughts
Top down and bottom up are entirely different approaches to analyze and invest in stocks. However, both have their own advantages and disadvantages.
The top down approach first looks at the broader economy and macroeconomic factors, and then move to the specific industry and the company within. On the other hand, bottom up approach starts at the company level and later moves up for the other important details.
In general, top down approach can be a little easier for the less experienced investors as they do not have to perform the intense stock research and analysis. They can start studying the most appealing industry and find the companies within to invest.
Anyways, both approaches have their own effectiveness and hence, difficult to say which one is better. Moreover, it also depends on the knowledge and preference of the investor. My final advice would be to better try out both the approaches and find out which one suits you the best for your investment strategy.
Hi, I am Kritesh (Tweet me here), an NSE Certified Equity Fundamental Analyst and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting
Indian Stock Market Crash in 2020: After making a peak of 42,273.87 points in Feb 2020, Sensex crashed over -38% by 23 March 2020 to 25,638.90 points. We are currently witnessing one of the fastest crashes in stock market history, even worse than the 2008 market crash as quoted by many leading market analysts. In this article, we are going to discuss the reason behind this stock market crash in 2020.
Here you’ll find everything that you want to learn regarding the Indian stock market crash in 2020. We’ll look into leading causes, facts, effects and what do economists have to say about the crisis. However, before we start the article, let’s first understand what exactly is a stock market crash so that everyone is on the same page. Let’s get started.
What is a stock market crash?
A stock market crash is when a market index faces a rapid and unanticipated severe drop in a day or a few days of trading. A double-digit percentage drop over a few days in the market index generally constitutes a stock market crash. A stock market crash may be caused due to economic bubbles, wars, large corporation hacks, changes in federal laws & regulations and natural disasters. They are generally followed by panic selling and can lead to bear markets, recessions and even depressions.
There have been a few measures to stop a crash. One being large entities purchasing massive quantities of stocks in order to curb panic selling. Trading halts have also been introduced but both these measures have not been proved to be actually effective in pausing a crash.
(The stock market crash of 1924 was one of the most unfortunate crashes where the Dow Jones Index lost 23% in two days and eventually led to ‘The Great Depression’.)
Do Stock Market crashes lead to Recession?
A stock market crash reduces the investors’ confidence in the economy and as the falling shares slowly wipe out investor wealth. Investors resort to selling off their holding at minimal costs. Due to lack of confidence investors also refuse to partake in the purchase of shares.
With the diminished wealth of investors and the valuations of companies dropping, it makes harder for companies to raise capital and secure debt. Companies in bad financial shape lead to layoffs resulting in a fall in demand in the economy. As the decline continues the economy contracts resulting in a recession. A stock market crash does not necessarily result in recession but a recession always results in a stock market crash.
The period between 17th January 2020 to 27th March 2020 saw the SENSEX lose 12,129.75 points. Multiple events were involved which led to a negative impact on the market.
The presentation of the Union Budget on 1st February 2020 coupled with the coronavirus panic led to the SENSEX falling by 2%. Later, WHO classified Coronavirus as a potential pandemic on February 28th, 2020 which led to both the Nifty and the Sensex ending with the worst weekly fall since 2009.
This was further followed by the shares of Yes Bank falling on March 6th due to bad loans and one of the worst NPA in the country. One of the founders of Yes Bank was also arrested on corruption charges. The fall after Yes Bank coupled with the effects of Coronavirus in Europe and the US resulted in the markets touching 35,636 points. (Read More: The Unravelling of Yes Bank – Fiasco Explained)
On 12th March the Sensex fell by 8.18% as a result of WHO declaring corona a pandemic. As the pandemic further spread and the number of cases in India worsened the stock Market plunged 13.5% on March 23rd. Besides, a countrywide lockdown of 21 days was announced by Prime Minister Narendra Modi starting from midnight March 24th. The lockdown was a necessity to curb the spread but it was the last thing the Indian economy required in its efforts to make a recovery.
A recession is typically described as 2 consecutive quarters of negative growth. However, a few more factors are also in play.
The NBER ( National Bureau of Economic Research) defines a recession as “ a significant decline in economic activity spread across the country lasting more than a few months visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.
With several predictions by notable economists indicating India having a negative GDP, the lockdown has further intensified all the other factors possibly directing the economy towards a recession due to lack of income to major portions of the sector, with tourism industry already facing unemployment, the other industries will definitely face the heat. The lockdown also guarantees a drop in production and a drop in wholesale retail and sales.
What has the Government done so far?
All efforts by the government began after the lockdown was announced. The Finance Minister Nirmala Sitharaman announced a financial relief package of Rs 170,000 crores. The package included hugely appreciated Rs 50 Lac insurance cover to every individual in the health sector. The finance minister also announced 5kg of wheat and 1kg of pulses in addition to the existing scheme to over 80 crore individuals.
This too was appreciated as the 21-day lockdown would rid the daily wage workers of any source of income. The withdrawal limit of the EPFO was hiked. This was done to transfer cash into the hands of individuals. This would also provide support to unemployed workers.
In addition, the Finance Minister also announced that the center will pay the Provident Fund requirements on behalf of both the employer and also the employee for 90% of the employees. This will further reduce the burden on small businesses as it is targeted towards firms with less than 100 employees and those that have salaries less than Rs 15,000.
(RBI Governor Shaktikanta Das in talks with the Finance Minister Nirmala Sitharaman)
The RBI announced a moratorium on EMI for the next 3 months and also cut the Repo rate by 0.75% to 4.4%. The Moratorium on EMI’s will reduce the burden on individuals.
The repo rate, on the other hand, will make it cheaper for individuals to avail loans, however, deposits will receive reduced interest. This is aimed at increasing cash in the hand of an individual resulting in an increased demand which in turn may lead to stimulating the economy.
What do economists have to say about the crisis?
— Raghuram Rajan
(Raghuram Rajan- Former RBI Governor)
Former governor of the RBI, Raghuram Rajan, known for predicting the 2008 financial crisis and recession in 2005, said in an interview that the most important requirement right now is to prioritize targets such as fulfilling supplies and physical resource requirements of the healthcare sector followed by reaching out to the poor and only then should the question of reduction of taxes and temporary income support should come into the picture.
On questioned about the impact coronavirus may have on the global economy he answered that due to the unprecedented situation we should first look into the Chinese economy and observe the relaxation placed in China and the response COVID-19 has to it and accordingly take an action depending on if the virus spread begins again after the relaxation.
This would mean that the lockdown would be required to be implemented for longer periods. He also said in the interview that it may be a little too early to predict if the COVID-19 pandemic will lead us towards depression. In addition, he further added that with a recession almost certainly on the cards we still can focus on avoiding a depression based on measures taken
— P. Chidambaram
( P. Chidambaram – Former Finance Minister)
The former finance minister advocated the lockdown but mentioned that a lockdown alone was not sufficient. He mentioned that a relief package of 5-6 Lac Rupees is the absolute minimum which is required. He also provided a 10 point action plan which included the direction of cash and food towards the urban poor, assurance that the employer will be reimbursed for any wages paid during the lockdown and also proposed cuts on the GST.
On being questioned about future economic recovery he answered saying that there is no economic recovery on the horizon. Although the growth for the last quarter stood at 4.7% due to corona as per global economic loss prediction of 2% percent the same may be applied to the Indian markets.
He also added that the situation the country is put in now is worse than the migration crisis post-independence, famines to date, the tsunami of 2004 and even bigger than the 2008 financial crash and in fact even bigger than all of them put together.
— Jayati Ghosh
(Jayati Ghosh – Indian Economist)
Jayati Ghost one of India’s foremost economists and also a Professor at JNU, Jayati Ghosh, took a much more critical stance to highlight the magnitude of the problem the lockdown will create.
According to Jayati Ghosh in a country like India, a lockdown of more than a week will have severe disruptions. The damage done by the lockdown is already greater than the damage caused by demonetization due to which the economy has still not recovered. A massive shock such as this will have a negative multiplier effect and will continue to permeate.
She added that lockdown which has already disrupted the demand within the economy, with the supply chain broken down will force farmers to get rid of their stock as they will not be able to sell their produce and any bulk buying or hoarding engaged in the consumer end will only lead to shortages in the economy.
On being asked on what effect this will have on the GDP she made it clear that she has reservations already of the GDP figures being fudged and are actually lower than that reported by the government due to which we may see negative GDP in the coming quarters.
Closing Thoughts
Prime Minister Narendra Modi announced that if the nation does not impose the lockdown, the country and our families will be set back by 21 years.
After taking a closer look which makes it clear that a lot more has to be done before it further devastates the country if poorly implemented and makes one wonder that if so, by how many years is the economy going to fall behind due to the lockdown. The government has to have a plan in place instead of abrupt decisions followed by a plan that may fall in line with such decisions. This is required to keep the economy from falling into a depression at all costs.
While looking into the Indian stock market crash in 2020, we should also not forget that it took the Dow Jones Index almost 25 years to recover from the crash that had led to The Great Depression. The financial package announced which currently makes up 0.8% of the GDP does not even reach the bare minimum set by former Finance Minister P. Chidambaram at 5 lac to 6 lac crore, let alone be compared to Western countries where they are set at 5- 15% of the GDP. The government still has to roll out policies swiftly to make the necessary yet draconian lockdown a success.
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
A Beginner’s Guide on how to buy a stock in stock market: These days, buying a stock is as simple as recharging your mobile or transferring money. All you need is a computer (or mobile phone) with an internet connection, a bank account (with some money in that account, obviously) and your trading account.
If you’ve watched the TV series “SCAM 1992” and how traders/investors used to place their buy/sell order through brokers in 1980s/90s, the scenario of the market at that time might scare you. It looked even worse than the fish market. However, this was the time 30-40 years back. Now, with the advancement of technology, not much physical appearance of brokers or time-taking paper works is required. Today, you can buy a stock sitting in your room in front of your laptop enjoying a snack and that too within two minutes. How? That’s what we are going to discuss in this article.
Today, we’ll cover how to buy a stock in stock market in the step by step process. Just be with me for the next 8-10 minutes. Let’s get started.
How to buy a stock in Stock Market?
Step 1: Get an Education and Research
A) Read, Read & Read
Buying shares online is an easy task these days because of the fast and easy trading apps. However, the tougher task is to find out what to buy. In order to find the right stock to buy, first, you need to have right skills and knowledge. Therefore, the first step is to read, research, and get an education.
Further, if you’re an avid reader, you can read investing books like The Intelligent Investor by Benjamin Graham, Common stocks, and uncommon profits by Philip Fisher, One up on wall street by Philip Fisher, etc. You can find the list of more recommended stock market investing books to read here. Finally, you can also enroll in different investing courses or workshops to pace up your learning curve.
In short, there are a lot of resources available online, both paid and free. The only thing required from your side is the enthusiasm to learn if you want to get enough knowledge and confidence in this industry.
B) Get Financial Knowledge
Good financial knowledge is key to success in the stock market. You need to understand how to read the financials of a company before entering the investing world. The basics of financial terms and ratios like Earnings per share (EPS), PE Ratio, Book Value, P/BV, Dividend yield, Return on Equity(ROE), Return on capital employed (ROCE), Debt/Equity ratio, etc should be known to you. This will help you to analyze the fundamentals of the company. Here are two posts that you should definitely read to boost your financial knowledge:
C) Start virtual Investing/Make your dummy portfolio
A portfolio is nothing but your collection of stocks from different sectors/industry. A portfolio shows how many shares you are owning from which sector and how they are performing. Generally, an investor can invest in multiple stocks depending on his preferences. A good portfolio maximizes the profit and minimizes the risk. Once you’ve learned the basics and got financial knowledge, next you need to make your dummy portfolio to test your learnings. This will help you to avoid losses that can be made by directly jumping into the market without any experience. Further, you can learn how to create your portfolio from this article: How to create your Stock Portfolio?
D) Follow the stocks you’re interested in for a few weeks
The last step before buying a stock from the stock market is to learn how to follow stocks in the stock market. You should know how to track stocks so that you can buy/sell them at the best time. There are different apps and websites like Moneycontrol, stockedge etc that you can use to follow the stocks. Further, we advise the beginners to at least follow the stocks for one month before buying them. You can learn how to follow a stock by reading this article: Learn how to follow Stock Market and trends.
Now that you know all the basics for the stock market, you can move further on How to buy a stock in Stock Market?
Step 2: Choose your brokerage account
You need a trading and demat account to start investing in the Indian stock market. Enter stockbrokers!
A trading account provides a platform to buy or sell the share in the market. It acts as an intermediary between your saving accounts and demat accounts. Further, a demat account is a facility to keep your shares in an electronic dematerialized form.
Demat and trading accounts are generally opened together (also known as 2-in-1 account) with most of the popular stockbrokers in India. For example, Zerodha, Angel Broking, 5 Paisa, etc.
A few big stockbrokers (generally bank brokers) also offer a 3-in-1 account i.e. Saving+Demat+Trading account to their clients. For example ICICI Direct, HDFC Securities, etc.
Basically, a stockbroker is an individual/organization who is a registered member of the stock exchange and are given license to participate in the securities market in place of its clients. From big banking corporations like ICICI Direct, HDFC Securities, Kotak Securities, etc to newer fastly growing startups like Zerodha, Fyers, etc all are examples of stockbrokers in India. A few other famous stockbrokers in India are Sharekhan, Motilal Oswal, Upstox, 5Paisa etc.
Stockbrokers can directly buy & sell stocks in the share market on behalf of their clients and charge a small commission for this service. However, the commission is minimal compared to the fast trading platform that they offer. Using these platforms, you can buy/sell stocks within minutes using your web/phone while sitting on your home sofa.
For the people who don’t simple and fast trading platform, we recommend using Zerodha, the discount broker.
Zerodha is the biggest discount broker in India and perfect for traders & investors looking for low brokerage and reliable trading platform. It offers a zero brokerage for delivery equity & direct mutual fund investments. For all intraday, F&O, currency, and commodity trades across NSE, BSE, MCX, it offers a brokerage of Flat ₹20 irrespective of the trading volume. Therefore, you can save a lot of brokerage charges on your trades using Zerodha as your broker.
Further, Zerodha has built its own trading applications (KITE) for the customers. It offers different trading terminals, websites, and mobile apps (Android/iOS) which are free for the customers. Anyways, if you prefer any other broker, do your research before opening the demat and trading account. A simple google search or reading the reviews by the existing users can help to find red flags about that brokerage firm.
Once you’ve set up your trading account and got enough investing knowledge, the last step is to actually start investing. For beginners, an easy approach to find companies to invest in by looking into widely recognized publically traded companies in India. (They are also called blue-chip stocks). Just look around and you won’t find it difficult to search for companies.
From toothpaste, hair oil, edible oil, shampoo to cars, banks, shoes, clothes, petrol pumps etc, everything has a company behind it.
Banks → ICICI, Yes Bank, HDFC Bank, Axis Bank, SBI, IOB, etc
Personal care → ITC, Colgate India, P&G India, Dabur, etc
Shoes → Bata, Khadims, Shree leathers, etc
Petroleum → HPCL, IOCL, BPCL, ONGC etc…
You have grown up while hearing the names of these companies. Why not study them and invest? And after you’re comfortable in researching these companies, dive into mid and small-sized companies or hidden gems, which are capable of giving high returns.
— Steps to Buy a Stock in Share Market
Once you’ve picked the company, log in to your brokerage account (Say Zerodha).
Select the Scrip/Company that you want to buy.
Enter the no of quantities of shares that you want to buy and select ‘MARKET’ order.
Place your order.
Check the order book to confirm the execution of buying.
Closing Thoughts
Before parting, let me give our final advice. Start investing as soon as possible, even with the smallest amount that you have. The time is in your favor when you start investing early (Ever heard of the power of compounding?). And this simple step to start early can help you accumulate a lot of wealth in the future.
That’s all for this article on How to buy a stock in Stock Market. Feel free to leave a comment if you have any questions. Take care & happy investing!
Hi, I am Kritesh (Tweet me here), an NSE Certified Equity Fundamental Analyst and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting
Hi Investors & Traders! Today, I am writing this post regarding the demat vs trading account because of the popular demand by our readers. Many of the readers of ‘Trade Brains’ asked me to cover this topic as they are constantly confused about what is a demat and trading account and their difference.
Therefore in this post, I am going to explain what is the difference between the demat and trading accounts in a very simplest possible words.
Most of the newbies who enter the stock market might already know that they’ll need a demat and trading account to start trading/investing in India. However, the majority of beginners do not know the difference and consider both the demat account and trading account to be the same. But in reality, both these accounts are entirely different and serve different purposes.
Difference between demat and trading account
— Trading Account
A trading account is a medium to buy and sell shares in a stock market. In simple words, it is used to place buy or sell order for a stock in the exchange.
Different stockbrokers offer different trading tools to their clients to simplify their trades. For example, Zerodha, the biggest stockbroker in India offers ‘KITE’ as their platform to trade in stocks. Once you have opened your trading account with a stockbroker, you can place your buy/sell orders using those platforms.
(Image: Kite Trading Platform by Zerodha)
— Demat Account
Demat account is the short form for ‘Dematerialised account’. It is similar to a bank account. Just as money is kept in your savings account, similarly your bought stocks are kept in your demat account.
In other words, a demat account serves as a facility where stocks that you buy are deposited and the stocks sold are taken away. Demat account is used only for the storage of stocks, not for transactions (buying/selling).
Example of Demat and Trading Accounts
Let us understand the difference between trading and demat account further with the help of an example. Assume that you wish to buy 100 stocks of Maruti Suzuki. Here, the sequence followed during the procedure will be as follows:
First of all, you’ll need to have a savings equal to or greater than the buying amount in your savings account.
Next, you’ll transfer the money from saving account to trading account.
Now, you’ll buy stocks of ‘Maruti Suzuki’ from the stock exchange by using your trading account and paying the amount.
Finally, the money is transferred to the seller through your trading account and stocks of ‘Maruti Suzuki’ will be transferred to your demat account.
Now let us assume that after a few months, you wish to sell 20 stocks of ‘Maruti Suzuki’ from your holdings of 100 stocks. Here, the sequence followed will be as follows:
First, you’ll place a sell order in the market using your trading account to find a buyer.
If a buyer is found, then the shares will move from your demat account to the buyer.
Finally, the money gained by selling your stocks will flow through your trading account to your linked savings account.
Before the internet became popular in India, there were no demat accounts. Share certificates were provided whenever you buy stocks (on papers). However, there were many limitations to using paper share certificates. They used to get torn, stolen, faced safety-related issues or the ink just gets fade away with time.
Nevertheless, after coming of the internet from the mid-1990s, the stocks started getting kept in the electronic dematerialized form in the demat account of the buyers. It resolved most of the limitations of the old paper share certificates.
A few other points to know about demat and trading account
Demat and trading accounts are opened together (also known as 2-in-1 account) with most of the popular stockbrokers in India. For example, Zerodha, Angel Broking, 5 Paisa, etc.
A few big stockbrokers (generally bank brokers) also offer a 3-in-1 account i.e. Saving+Demat+Trading account to their clients. For example ICICI Direct, HDFC Securities, etc.
In general, there are no annual maintenance charges for a trading account, where for the demat account this maintenance charge may vary from broker to broker. It is typically around Rs 300-400 per year.
These days, the investors and traders can open instant (paperless) demat and trading account within 10 minutes with major stockbrokers. Nonetheless, the facility of offline account opening is still popular in India and offered by all these brokers.
The account opening charge for demat and trading account also varies from broker to broker. A few brokers offer free account opening. However, the majority of them will charge somewhere between Rs 300-500 to open your brokerage account.
In addition, you are also allowed to open multiple demat and trading accounts using same PAN card. For instance, You can have multiple accounts- one in ICICI direct and other in Zerodha.
Finally, choose your broker wisely to open your demat and trading account if you want to avoid unnecessary charges and risks.
Let us quickly summarize what we discussed in this article regarding trading and demat account in India.
A trading account provides a platform to buy or sell the share in the market. It acts as an intermediary between your saving accounts and demat accounts. In simple words, it takes share from your demat account and sells them in the market.
On the other hand, it takes money from your savings account and buys a share to keep in a demat account. Further, a demat account is a facility to keep your shares in an electronic dematerialized form.
That’s all. I hope this post on the difference between demat and trading account is useful to the readers. If you have any doubts, comment below. I will be happy to help you out. Happy Investing!
Hi, I am Kritesh (Tweet me here), an NSE Certified Equity Fundamental Analyst and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting
Millennials Debt – The New Working Capital: The need for capital is the need of the hour; from growth to survival, money has become a vital non-natural resource. From an individuals’ need for basic necessities to running a business, the one-stop solution is capital. So what solves this need of capital? Either earn or borrow. Yes, ‘Debt’ is the easiest and the quickest way to fulfill the demand for money that exists in the economy.
The demand for money is a never-ending phenomenon and its mismanagement has been the root cause of some major financial debacles in history. Like the Bank’s NPA crisis, where hefty loans were distributed without measuring the exposure to the risk in a systematic way which made them bad loans leading to default in repayment. The NPA crisis in India started with NBFC’s, which was followed by the liquidity crisis, damping the economic growth of the country.
History has always given us a lesson and one must learn from it. Is the current debt-scenario of the new rising population of ‘Millennials’ in jeopardy? Let’s find out in this read.
The current scenario of ‘Debt’ among Millennials
Of the total population in India, Millennials account for almost 35%. As per a recent survey by CIBIL, it was found that, of the total loans sanctioned in India in the year 2018, around 39% of the loans were sanctioned to the Millennials group and these are increasing by every passing year.
As per CIBIL’s study, almost 72% of loans are for credit cards, personal loans, and consumer durables, and these come under the category of unsecured loans. While secured loans for two-wheeler and auto loans contribute 9% of the total loans.
Why are Millennials taking more and more loans?
The generation of Millennials is building a new spending culture and their rate of expenditure is on the rise. Where India is known for its saving culture, a new change in people’s lifestyle is pushing them towards a spending spree.
Millennials (aging between 18 to 35 Years) need for a loan and the rising burden of their debt is majorly driven due to the following-
— Education Fees and Related Expenses
Education is every individual’s right. But this basic right costs too much. Higher education standards have substantially risen due to more and more private universities entering the industry with better quality and demanding a hefty fee against it.
Further studying abroad has become a new trend among the youth and hence calls for money demand. The education industry doesn’t just stop at institutes but also includes coaching classes, which prepare the students for competitive exams. The importance of education can never be debated and hence no matter what, one will always look forward towards fulfilling this need. This adds to the need for an education loan.
— Vehicle Loans
In today’s modern world social status plays a very important role and it has become important among individuals to keep up with their social status. Having a self-owned car or a bike is one such way of giving meaning to social status.
— Marriage and Related Expenses
This is another industry that has shown an exponential rise over the last decade. Bollywood has always had a huge impact on its viewers. Movies showcasing high budget destination weddings, designer outfits, jewelry, party, etc. have had a huge impact on its audience leading to rising marriage loans.
— Travel and Leisure
Travel is another industry, which is surging. This includes a major chunk of the population attracted to foreign travels like Europe, America, Islands, etc. These trips cost huge and again add to the demand for money ultimately influencing people to borrow more.
Leisure activities like frequently going out for movies, parties, concerts, etc. have become an integral part of one’s busy life and are a stress buster, which further adds to the need for money.
— Ease of Borrowing
Technology has become a pillar of our lives. It has influenced our lives for good. Traditional lending platforms i.e. banks are now being accompanied by some new lending platforms like P2P (Peer-to-Peer) players such as IndiaLends, i2i Lending Lenden, RupeeCircle, CASHe, etc. These platforms have made borrowing easy by reducing the paperwork hassle and making everything online and at lower borrowing costs.
Additionally, these platforms also provide a loan with very small ticket size like of Rs.500, etc. and for a short duration like a month or a fortnight, which makes them much more attractive.
— Other Factors
Medical, Housing loans, Personal loans, etc. are a few other requirements shaping the demand for loans.
Is the rising Debt Burden on Millennials Good or Bad?
‘Debt’ has always had a negative image on the financial minds. This is one of the major reasons, which causes panic. Hence millennials’ rising dependency on loan is an issue that needs to be addressed.
In order to understand the risk associated with millennials’ debt, one needs to understand whether they have financial literacy and awareness with respect to this.
As per the data given by CIBIL, millennials who have a CIBIL credit score of less than 700 have improved it by an average of 65 points within six months of checking their scores. Further, the data also revealed that self-monitoring millennials have an average score of more than 740, which is higher than the non-millennials average score of 734.
An increased dependency on easy credit has made our lives simple but are we aware of the consequences if things go south. The lending platforms and banks over the past few years have been engaged in awareness activities of the customers in order to make them financially literate and conscious of the risks associated with borrowing and its defaults.
The data given by CIBIL directs us towards the fact that currently the debt-scenario among the millennials is under control and hasn’t shown any signs of another bubble ready to burst. But the question is for how long?
The new wave of digital borrowing and banks becoming more inclined towards retail loans are both changing the basic nature of India as a ‘Saving Economy’ towards a ‘Debt-Driven Economy’.
The past financial crisis like the 1929-30’s Great Depression, 1980 Savings and Loan Crisis, 1995 Dot Com Bubble, 2008 Financial Crisis and many have impacted the world economy but the Indian economy’s saving culture has saved us from all of them by absorbing the loss. The saving culture has always provided a thick cushion and protected people. Having savings reduces the financial dependency on institutions and government thereby reducing the exposure of the crisis.
Closing Thoughts
The world is advancing towards new technologies and new means of living but compromising on the old ways might cost us heavily in the next financial crisis. Nowadays the banks are selling loans rather than emphasizing the deposits as such. Household debt in India is more than the household savings. We must think twice about how much are we saving to keep our future secure and financially sound.
One of the biggest rules in finance is to manage the risk and so we should stay a step ahead in analyzing this new debt-culture and how can it be managed in order to downside the risk and avoid another crisis.
I am an MBA graduate specialised in Finance. I am a passionate stock market investor and a movie buff. I have always been inclined towards learning and development through different styles and new experiences. I believe knowledge is a vital ingredient for success. So here I am trying to contribute my best to add to your financial knowledge via this knowledge centre ‘Trade Brains’.
Do You Need a Finance Degree For a Career in Stock Market? The finance industry in India has been growing at a very fast pace for the last two decades. And along with the growth in the industry, there’s also a boom in job opportunities and enthusiasts willing to work in this field.
Although there are many job opportunities available in the stock market, however, one of the most frequently asked questions is- “Can a student from non-finance degree get a job on Dalal street?” How much relevant is having a finance, commerce or business degree to land a job in the world on the stock market.
Well, the short answer to this question is that you do not need a finance or business degree to get all the jobs in the stock market. A lot of financial companies hire employees from Engineering, mathematics, science, computing or economics background. In the era of internet technology, most of the financial giants are looking more for the skills and the aptitude of the candidates rather than just the degree.
Anyways, there are still a few careers in the market like Investment Banking, Equity Research, Risk Management, Portfolio Management, etc where a special skill set and expert knowledge of finance is required and having a degree can give an advantage to the candidates.
Nonetheless, having or not having a finance/commerce/business degree is just the starting point. There are a lot more things that you need to know if you want to build a career in the stock market industry which we are going to discuss in this post.
It’s always beneficial to have a background in Finance
When you have a background in finance, business, accounting or commerce, you already have got a minor exposure to the investing world. You might already know the lingo and familiar with the frequently used terms in the stock market like dividends, assets, liabilities, etc.
On the other hand, most of the non-finance guys are not even familiar with the most common terms of the market. Moreover, they find reading and understanding financial statements is quite challenging compared to people with a finance background.
Getting a job at Dalal Street Market
In a scenario where you are appearing in a job interview for a financial position, knowing these financial terms can help you impress the interviewer or at least not feeling like a dumb one. Besides, as stated, in a few financial positions, the interviewers create a barrier by shortlisting only candidates with a graduate degree in finance, commerce, business or accounting. And in all these cases, having a degree can be advantageous for you.
Moreover, if you want to become a SEBI registered investment advisor or research analyst, you will require an educational qualification of graduate or post-graduate degree in finance/accounting/commerce, etc. If you don’t meet the educational qualification, you cannot become a SEBI registered advisors/analyst and hence can’t have a career in the advisory field.
Overall, if you’re planning to become an investment advisor/research analysis, you’ll require a degree in these fields. Nonetheless, you can always enroll in post-graduate degrees of one or two years to get the degree and meet the educational qualifications.
When it comes to trading & investing or managing your own portfolio, you don’t require any degree.
Anyone can open their trading accounts and start trading in stocks. Many engineers, math/science majors, arts graduate or even people who don’t have any degree have been investing successfully and made a huge fortune from the market. A lot of successful stock market traders/investors do not have any background in finance or never did any course in this field. One of the best examples is Charlie Munger, a successful stock investor and vice-chairman of Berkshire Hathaway.
In short, if you are not interested in a 9-to-5 job or career in the Dalal street and just want to trade in stocks on your own, you won’t require any degree or certification. Here you can make money by using your knowledge and skillsets.
What to do when you don’t have a degree in Finance/Commerce?
It’s often said that Self-Education is the best form of learning. Even though if you do not have a degree in finance, you can learn the skills and impress the interviewer with your enthusiasm to master the market.
Start by learning the lingo. It’s really important to know financial terms if you want to break the initial barrier of entering the stock market world. Know the most frequently used investing terms and how to read the financial statements.
Further, if possible, take a few online courses to learn the trading/investing concept. Attend local investing workshops, seminars, etc. It would be best if you can find a mentor. Expand your knowledge base and try simulating platforms to trade in stocks without risking your money. And finally, try to land an internship in the finance company so that you can have a real experience of how things work in this industry.
Most people believe that a career in the stock market is only for people with finance or business background. But this is not true. Do not stop yourself from entering the exciting world of the stock market just because you do not have a finance degree. Here, having a skill set is more important compared to a degree. Moreover, even if you do not have a graduation degree in Finance/Commerce, you can go for reputed financial certifications like CFA, FRM, PRM, etc that will put you in the same position as those with degrees.
My final advice will be to focus on enhancing your skills and acquiring specialized knowledge. This will help you more in building your dream life than chasing over degrees.
Hi, I am Kritesh (Tweet me here), an NSE Certified Equity Fundamental Analyst and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting
Coronavirus impact on Global Indexes (2020) – US, Europe, Russia, India & More: India, currently in stage II of the novel coronavirus with over 500 cases reported throughout the country. This has resulted in an entire country imposing a lockdown. The center is still caught up in its efforts to make the gravity of the situation heard with the PM himself addressing the nation. The PM also had requested the nation to take part in a self-imposed curfew along with a noteworthy attempt at a show of admiration for all the essential services.
Indians today are going through a phase never experienced before at any of the earlier outbreaks. However, this turbulent phase has not only been limited to our personal lives but also as investors we are breaking into bearish conditions. These conditions were not foreseen at the initial stages of the outbreak.
With the Sensex falling over 36.54% since January 31st we take a look at how some other notable indexes around the world have fared against COVID-19 and also look into the respective government responses in such economies. The table below shows how the following global Indexes have performed since January 31:
Country
Index
% Change: Jan 31 - March 23, 2020
Russia
RTS
41.74%
Brazil
BOVESPA
41.04%
India
SENSEX
36.20%
Italy
FTSE MIB
32.30%
USA
DOW JONES
32.14%
Germany
DAX
31.22%
France
CAC
30.27%
UK
FTSE
28.76%
China
SSE COMPOSITE
3.15%
Quick Start: What is an Index?
Indices are used as a benchmark to measure performance. An index consists of major companies listed in the stock exchange which are measured together to arrive at a value representative of the entire market over a period of time. The stocks involved are weighted based on the capitalization of the respective company.
Country-based indexes track how the national stock exchange is performing. The NIFTY in India consists of the top 50 stocks listed in the NSE. The Sensex in India is representative of the top 30 stocks listed in the BSE. Further, an index is also a market sentiment indicator.
Coronavirus impact on Global Indexes
— Coronavirus effect on Russian Markets (RTS – 41.74%)
The Russian Trading System (RTS) Index faced an overall drop of 41.74% since January 31st. However, the problems faced by the RTS were not limited to the coronavirus panic but also due to the oil price crash. The crash was caused due to the Russian fallout with OPEC. This had a critical effect on the Russian economy due to its main export being oil.
Coronavirus affected the market once it further spread through the European region. This further led to the Foreign Investors engaging in panic selling. Russian Sberbank which declared a $3.2 billion in profit still suffered a fall of 5% in its stock price.
CEBR a leading economic consultancy from the UK forecasted the Russian economy to sink by 4% in 2020. The forecast also included little expectation of a short term rebound. Although the central bank remains uncertain about rate cuts, Russia will create a $4 billion anti-crisis fund to protect its economy from the coronavirus shock.
— Coronavirus against the Brazilian market (BOVESPA – 41.04%)
It may seem surprising to find a South American country to have a market hit as hard as the BOVESPA Index. The BOVESPA Index suffers a 41.04% market fall even though it is not considered a hotspot for coronavirus. This was because of the dependence of Brazilian exports on the Chinese markets.
In 2018, almost 25% of Brazilian exports and almost half of the commodity exports were directed towards China. These suffered a hit during the demand slump China faced due to the outbreak. This added to the roadblocks created by their business-minded President Jair Bolsonaro over the development of the Amazon Rainforest. This has led to investors avoiding the Brazilian market particularly after his unfavorable stance towards the environment after the Amazon fires.
The outbreak indirectly led to foreign investors further exiting the market in the crisis. The Brazilian market faces a situation where it fails to attract dip buyers as well. Furthermore, even the 30 billion package unveiled by the government has been criticized over its failure too adequately apprehend the magnitude of the problem.
— Coronavirus against European Markets
The problems in Europe can be attributed to most of the countries considering Corona an East Asian issue. Europe is currently a hotspot for the COVID-19 with Italy, Spain, Germany, and France being hit the worst. All of their markets fell at around 30% with further lockdowns imposed. The stock markets in Europe were further impacted after Trump announced a ban of all flights headed from Europe to the US.
( The famous painting ‘Mona Lisa’ by Italian artist Leonardo Da Vinci depicted with a medical mask over the coronavirus outbreak)
France also threatened to close its borders to the UK over its inadequate action taken towards containment of the virus. Over 6,000 people are suffering from the virus in the UK. The turmoil in Europe was further intensified with the German Chancellor Angela Merkel going into quarantine after one of her doctors was tested positive for coronavirus.
The European Central Bank is expected to cut interest rates into the negative territory. The Central Bank is to also extend long term loans to banks in an attempt to provide relief to Italy and the other European countries where coronavirus has a devastating effect.
Employment, Healthcare, Bonuses for Emergency Services and loans to Small and Medium businesses
Germany
$610
Companies hit by Corona in addition to relaxed tax norms
France
$335
Loans to Businesses, in addition, to pay to workers who lost jobs.
Spain
$200
To fight Corona Epidemic
Spain
$100
Small and Medium Businesses
UK
$424
Health services and Loan guarantee to Businesses
Britain’s Financial Conduct Authority has also directed companies to not release preliminary financial statements for at least another two weeks due to coronavirus.
— Coronavirus against the US Markets ( Dow Jones – 32.14%)
The US also suffered from the ignorance and underestimation of the virus. The virus has currently affected over 45,000 people in the US. Stock markets in the US were initially affected due to the crude oil price crash. This was due to the high marginal cost of production prevalent in the US which stands at 40$ per barrel whereas the barrel prices were slashed to around 30$ per barrel.
This was followed by the coronavirus panic and Trump travel ban against 26 European countries further impacting the Airline Industry. The number of coronavirus cases has exploded in the US since then.
(The ‘V-J Day in Times Square – New York’ iconic photograph depicted with medical masks over Coronavirus)
Measures taken by the US government include unemployment benefits, sick leave benefits, free coronavirus treatment including food and medical aid to people affected. Also, $50 billion has been announced as an immediate relief for the airline industry and $50 billion in further secured loans to other parts of the economy.
Congress is also further negotiating a 1 Trillion dollar rescue plan along with sharp rate cuts by the Federal Reserve. These measures have also led to corporations postponing layoffs in return for a big bailout.
— Coronavirus against the Indian Markets (Sensex – 36.20%)
With the Sensex falling 26.54% since January 31st and the Nifty 50 falling 31.85% in the last 30 days. Trouble began with the crude oil price fall which would have been welcome in any other situation as India relies heavily on import of crude oil. Any benefits due to the price fall were put to a halt due to the effects of coronavirus on the airline and tourism industry and eventual lockdowns which resulted in a drop in demand. With the officially reported cases within the country touching 500, the question remains if the healthcare infrastructure can bear the burden of an increase in cases.
The RBI announced that it will conduct an open market purchase of bonds worth up to Rs 15,000 crore besides announcing a fresh round of fund infusion from variable-rate repos. With the cases in India increasing the government has called for lockdown in multiple states which will further affect the volatility of the market.
However, the RBI has also created a unique Business Contingency Plan(BCP) by setting up a team of 90 process critical members from the RBI of which only half will work at any given time whereas the remaining half will wait on stand-by, 60 key personnel from their external vendors and 69 additional support staff, all to work in a War Room during the outbreak. A facility has been hired where the 219 members will be hosted.
Precautions are taken to an extent where all personnel will also be donning hazmat suits. This also includes the support staff involved in maintenance, security, kitchen, front desk, and the administration. The BCP also involves maintaining isolation and social distancing of the 219 members.
In addition to the actions taken by the RBI, the state governments are also resorting to providing financial relief to those affected by the respective lockdowns imposed.
— Coronavirus against the Chinese Markets ( SSE Composite Index – 3.15%)
The Chinese Shanghai Composite Index (SSE) has fallen 0.04% since 3rd February. These figures would not form a fair comparison as the epidemic hit China first in December, whereas all the other regions faced the pandemic in the other European countries increasing in February and March itself.
However, even when the fall is measured since December the net impact on the Chinese market lies at 4.53%. Then how is it possible that of all the countries China has one of the least impacted stock markets even after being the worst-hit place by a coronavirus and also being the point of origination.
The Chinese government imposed stringent lockdowns and also suffered a 10% fall between 22 January to 3rd February. This was followed by the central bank announcing that it would inject $174 billion worth of liquidity into the market through reverse repo operations in addition to rate cuts.
The Chinese policymakers found ways to reach vulnerable households of Social Security Fees, Utility bills and provided them with other immediate requirements during the lockdown. Also, the most important economic effect against the virus would be the aggressive stand taken by the authorities by doing everything necessary particularly by ramping up its healthcare needs, stringent lockdowns which gave a brighter outlook in terms of economic prospects as life slowly resumes in China.
However, Goldmann has forecasted that the Chinese economy instead of growing by 2.5% will contract by 9% in 2020.
The Road Ahead
(The Bullish Markets enjoyed previously by investors have come to a full stop. Interestingly stocks of gaming companies like Ubisoft are expected to be on the rise after lockdown and quarantine measures taken by the governments worldwide)
Lockdowns are now becoming a necessity. Rate cuts and infusion of cash into the economy seem to be the only way out to protect economies from the COVID-19 quicksand. However, we have currently seen countries that are facing coronavirus in the 3rd stage generally have a stronger infrastructure and better healthcare facilities but are still not able to cope.
Nations with a poorer infrastructure will face an impossible task if the spread of the virus spirals out of control. This calls for aggressive measures to the taken to prevent the spread of the virus in these countries until a suitable vaccine is officially declared by the WHO.
Pertaining to the current scenario banks like JP Morgan have forecasted a coronavirus driven recession that will rock the US and Europe by July. Deutsche Bank has also warned that based on current trends we could be facing a severe global recession over time.
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
The coronavirus outbreak has resulted in a huge crash in the stock market in India and the world. As the number of cases and casualties are rapidly increasing, there seems no stoppage in tanking the stock prices. In the last 30 days, the Indian benchmark Indexes ‘Sensex’ and ‘nifty’ fell over 30%. This is one of the fastest crashes ever seen in the stock market history.
Moreover, the month of March 2020 also witnessed two lower circuits where the exchanges were forced to stop trading for 45 minutes as the market fell over 10% within a day trading session.
Anyways, as the indexes and stock prices are down significantly since the outbreak, there may be some silver lining for the investors to pick good stocks at a huge bargain. Here is a quick study of the Nifty 50 constituent stocks and how they performed in the month of Feb-March 2020.
Nifty 50 Stocks – Feb March 2020 Performance
SYMBOL
COMPANY NAME
Price as of 1st Feb 2020
Current Price (24 March 2020)
Change (%)
INFY
Infosys Ltd
767.4
600
-21.81%
ADANIPORTS
Adani Ports and Special Economic Zone Ld
367.35
236.5
-35.62%
BRITANNIA
Britannia Industries Ltd
3230.05
2390
-26.01%
BAJFINANCE
Bajaj Finance Ltd
4359.35
2511
-42.40%
MARUTI
Maruti Suzuki India Ltd
7011.3
4545
-35.18%
HCLTECH
HCL Technologies Ltd
579.1
449
-22.47%
HINDUNILVR
Hindustan Unilever Ltd
2178.95
2011
-7.71%
KOTAKBANK
Kotak Mahindra Bank Ltd
1676.25
1178.65
-29.69%
RELIANCE
Reliance Industries Limited
1385.5
946
-31.72%
NESTLEIND
Nestle India Limited
16301
13639.95
-16.32%
ICICIBANK
ICICI Bank Ltd
515.55
298.55
-42.09%
WIPRO
Wipro Limited
237.4
178.25
-24.92%
TATAMOTORS
Tata Motors Limited Fully Paid Ord. Shrs
163.85
68.95
-57.92%
DRREDDY
Dr.Reddy's Laboratories Ltd
3144.15
2880
-8.40%
ONGC
Oil & Natural Gas Corporation Limited
103.45
62.7
-39.39%
TITAN
Titan Company Ltd
1186.4
828
-30.21%
NSE:UPL
UPL Ltd Fully Paid Ord. Shrs
513.3
263
-48.76%
EICHERMOT
Eicher Motors Ltd
19883.45
14150
-28.84%
SUNPHARMA
Sun Pharmaceutical Industries Limited
417.55
334
-20.01%
NTPC
NTPC Limited
110.25
78.4
-28.89%
ASIANPAINT
Asian Paints Ltd
1867.65
1536
-17.76%
JSWSTEEL
JSW Steel Limited Fully Paid Ord. Shrs
251.5
148
-41.15%
TECHM
Tech Mahindra Ltd
793.15
498
-37.21%
SBIN
State Bank of India
298.1
185.4
-37.81%
TCS
Container Store Group Inc
4.19
2.81
-32.94%
BAJAJ-AUTO
Bajaj Auto Ltd
3284.5
1969.1
-40.05%
VEDL
Vedanta Ltd
7.71
3.44
-55.38%
HINDALCO
Hindalco Industries Ltd
181.8
89
-51.05%
CIPLA
Cipla Ltd
444.55
379.5
-14.63%
BHARTIARTL
Bharti Airtel Limited
510.05
411.55
-19.31%
COALINDIA
Coal India Ltd
178.65
129
-27.79%
SHREECEM
Shree Cement Limited
23267.5
17030
-26.81%
HDFCBANK
HDFC Bank Limited
1192.8
774.8
-35.04%
TATASTEEL
Tata Steel Limited Fully Paid Ord. Shrs
436.05
271.9
-37.64%
HEROMOTOCO
Hero Motocorp Ltd
2376.15
1618
-31.91%
GAIL
GAIL (India) Limited
114.5
77.7
-32.14%
BAJAJFINSV
Bajaj Finserv Ltd
9086.15
4600
-49.37%
BPCL
Bharat Petroleum Corp Ltd
460.3
268
-41.78%
LT
Larsen & Toubro Limited
1286.65
710
-44.82%
ULTRACEMCO
UltraTech Cement Ltd
4370.65
3030
-30.67%
HDFC
Housing Development Finance Corp Ltd
2259.75
1504.35
-33.43%
IOC
Indian Oil Corporation Ltd
108.05
79.75
-26.19%
AXISBANK
Axis Bank Ltd
708.95
304.8
-57.01%
ZEEL
Zee Entertainment Enterprises Limited Fully Paid Ord. Shrs
256.6
119.6
-53.39%
ITC
ITC Ltd
207.6
151
-27.26%
INFRATEL
Bharti Infratel Ltd
229.3
140
-38.94%
POWERGRID
Power Grid Corporation of India Limited
187.35
148.8
-20.58%
INDUSINDBK
Indusind Bank Ltd
1263.1
313.6
-75.17%
GRASIM
Grasim Industries Ltd
780.4
400
-48.74%
M&M
Mahindra & Mahindra Limited
558.7
270
-51.67%
As you can notice from the above table, none of the constituents of Nifty 50 has given positive returns from 01 Feb 2020 till 24th March 2020. All of these stocks have given negative returns. However, the magnitude of the hammering in their prices varies from stocks to stocks.
Out of the 50 stocks in NSE Nifty, only two companies were able to limit losses within -10%. These were Hindustan Unilever (-7.71%) and Dr Reddy’s laboratory (-8.4%).
Next, 17 out of 50 companies’ share price has fallen between 10-30% in this time period. This list includes companies like Kotak Mahindra Bank (-29.7%), Eicher Motors (28.84%), ITC (-27.26%), Infosys (-21.81%), Asian Paints (-17.76%), NESTLE (-16.32%), etc.
For 24 companies in Nifty 50, the share price has fallen between 30-50%. This might be a good opportunity to look into these companies from an investing point of view. A few major stocks in this range are Bajaj Finserv (-49.37%), ICICI Bank (-42.09%), Bajaj Finance (-42.4%), ONGC (-39.39%), Maruti Suzuki (-35.18%), HDFC Bank (-35.04%), Reliance Industries (-31.72%) etc.
For the remaining 7 stocks, the coronavirus has turned out to be a disaster. Their share prices have fallen more than 50% from Feb 1 2020 till 24 March 2020. ‘IndusInd bank’ is the biggest loser in this list with the share price falling more than 75% in this time period.
Other beaten-down stocks with a decline more than 50% are Tata Motors (-57.92%), Axis Bank (-57.01%), Vedanta (-55.38%), Zee Entertainement (-53.39%), Mahindra & Mahindra (-51.67%) and Hindalco (-51.05%).
As India and the world are still fighting the war against coronavirus, the market is expected to decline further until this pandemic is contained. However, for the bargain hunters, this might be a great opportunity to pick the biggest companies in India at an amazingly discounted price.
Hi, I am Kritesh (Tweet me here), an NSE Certified Equity Fundamental Analyst and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting
Market Circuit Breakers Explained: Yesterday i.e. on 23rd March 2020, the Indian equity market hit a lower circuit breaker. The BSE benchmark index ‘Sensex’ fell over 10% in the morning because of which trading was halted on both NSE & BSE for 45 minutes.
A similar scenario happened on 13th March 2020 (10 days back), when nifty hit the lower circuit resulting in closing off the market for an hour (45 mins halt and 15 mins pre-opening session).
Anyways, what are these circuit breakers that result in halting the normal trading in the market? This is what we are going to understand in this article. Here, we’ll discuss what exactly are circuit breakers and in which situations trading are stopped in the Indian stock market and for how long. Let’s get started.
What is Market Circuit Breakers?
The Indian stock exchanges have implemented the index-based circuit breakers according to the guidelines of SEBI w.e.f 02 July 2001.
These circuits (lower or upper ) are an automatic mechanism to stop a freefall/crash or a massive surge in a security or an index during trading hours. If the index hits the lower or upper circuit, the trading session is stopped for some time. Overall, market circuit breakers are used to check the volatile swings in the market.
According to the SEBI rules:
The circuit breakers for the indexes will be applied at three stages, whenever the index crosses 10%, 15%, and 20% level. The stock exchanges calculate these Index circuit breaker limits levels based on the previous day’s closing level of the index.
When these circuit breakers are triggered, it will result in a trading halt in all equity and equity-based derivative markets nationwide.This means that if the index crosses its first stage of 10% (either upside or downside), the trading will halt in entire India i.e. no trading will take place on NSE and BSE.
Moreover, this circuit breaker can be triggered by the movement of any of the market benchmark index (Sensex or Nifty) whichever crosses the limit level first.
Let’s say Sensex fell above 10% and nifty is still at 9.7% down. In this scenario, the circuit breaker will be triggered as Sensex has breached the level. The circuit breaker does not require both the indexes to breach and either one crossing the level will trip the circuit breaker.
After the first circuit filter is breached, the market will re-open with a pre-opening session after a specified time. The extent of market halt and the pre-open session decided by the SEBI is given below:
Let’s understand the concept of circuit breaker better with the help of the same example discussed at the starting of this post.
On March 23, 2020, the Sensex lost 2,991 points or 10% at 9: 58 am. At the same time, Nifty 50 too declined 9.40% or 822 points to 7,923. This led to led to the triggering of circuit breakers on BSE and NSE. Trading on both these exchanges stopped and commenced at 10: 58 am (45 min halt and a 15-minute pre-open session).
Although market circuits breakers intend to control the volatility, however, it cannot stop a falling market. By the end of the day, Sensex and nifty post biggest one day fall ever. Sensex tanked nearly 4,000 points yesterday.
This is the second time this year (2020) when the Indian indices have hit the circuit breaker. On March 13, Nifty plunged 10.07% or 966 points to 8,625 at 9:20 am after which trading was halted for 45 minutes in the Indian equity market. Sensex plunged 3,090 points or 9.43% in early trade that day. However, as Nifty breached the circuit first, the trading session was stopped for an hour.
Market Circuit Breakers are an automatic mechanism used to check the volatile swings in the market. When these circuit breakers are triggered, they result in a trading halt in all equity and derivative markets nationwide.
This year the Indian stock market has already witnessed two lower circuits in the month of March. This is mainly because of the rising cases of coronavirus and the various announcements of the lockdown of states in India. If the Indian government and its people are not able to contain the outbreak of this coronavirus, we may expect other circuit breakers in the market soon. Take care. Till next time…!
Hi, I am Kritesh (Tweet me here), an NSE Certified Equity Fundamental Analyst and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting
Life During Coronavirus Times: In the last few weeks, if you’ve been living in a metropolitan city in India, you might have noticed several changes. A lot of usual day-to-day activities that you used to easily perform in previous months, might not be accessible to you now. For example, going out for dining with friends, attending the gym, relaxing at parks, partying, etc.
The reason behind all these changes is the pandemic coronavirus, an infectious disease caused by a new virus, that was originally found in China, and which later spread throughout the world. As of 22nd March 2020, this virus has affected over 340,000 people worldwide and resulted in the death of over 14,000 people. Here’s a live counter of coronavirus pandemic with real-time counts and world news:
As Coronavirus disease spreads primarily through contact with an infected person (when they cough or sneeze) and its vaccine has not been found yet, the government has taken various steps to tackle the situation and to limit its spread. In this post, we are going to discuss such changes that have already been made in India and its effects in the short and long-term. Let’s get started.
Changes Made to Tackle Coronavirus
Here are a few of the big and necessary changes that the government and the Indian population have implemented to fight back with coronavirus. Although these changes are temporary, however, they may last even for months:
1. Social Distancing
Although not a new concept, nonetheless, a lot many people are not familiar with social distancing. It is a set of non-pharmaceutical infection control actions intended to stop or slow down the spread of a contagious disease.
As this virus is contagious and spread by touch or when people come in contact, it is suggested to maintain a minimum distance of 1 m (or 3 ft) with others and not to indulge in groups bigger than five. Social/Physical distancing is the most common change seen in this coronavirus days.
2. Work from Home
A lot many corporate employees are mandatorily offered work from home for a sustained longer period for the first time in their career. Almost all big and small companies in the metropolitan cities have now given work from home to their employees. Although this might have resulted in lower productivity. However, work from home means less physical interaction, less traveling and minimal spread of the virus among colleagues at the workplace.
3. Lock-down/Curfew
After the success of ‘Janata Curfew’ started by PM Narendra Modi on 22nd March 2020, over 75 districts in India have now imposed a complete lock-down. As a lock-down is the only noticeable successful strategy that been followed by other big countries infected by the coronavirus, Indian states have also started implementing a similar lock-down/curfew strategy.
4. Travel Ban/Restrictions
As of 22nd March 2020, all the international flights are banned. Moreover, on the same day, Indian Railways also announced to cancel all passenger trains, and reduce suburban trains. By passenger trains, the ministry of railways means all mail, express trains, suburban trains, passenger trains, Kolkata Metro Rail, Konkan Railways, etc.
Effects of Coronavirus Spread
If the spread of coronavirus is not contained, the number of cases and casualties in India is expected to increase in the upcoming weeks. The total number of affected cases has already crossed +400 in India. The above-mentioned changes may help to fight back the virus. Nonetheless, here is a few common effects that may be noticed among the people because of coronavirus changes:
1. Dealing with Fear, Social (& Mental) Anxiety
Fear and anxiety are quite common during a pandemic. As the number of cases with coronavirus casualties in India will increase, it may increase the fear and anxiety among the population.
2. Personal cleanliness & hygiene
To control the spread of this contagious virus, washing hands frequently and cleanliness are a few of the key steps. Indians have now started taking care of their hygiene and cleanliness.
3. New kind of patriotism
Because of different changes made in the country like International travel ban, lock-down, and country first approach, it is expected to see a rise of new kind of patriotism among people. During Janata Curfew (22nd March 2020), we’ve already seen how the people of India appreciated the work done by Doctors, and servicemen by banging thalis, ringing bells and clapping hands for five minutes at 5 pm.
Financial and economical Effects
Now, let us talk about the stock market, finance and economy. How coronavirus days may impact us financially and economically:
1. Continued Bear Market
During the coronavirus days, the share prices and market have already witnessed a sharp crash. Within less than one month, all the major market indexes have fallen over 30%. Nonetheless, it is expected that the market will continue to run in a bear market for a continued longer duration. This is because the aftermath of this pandemic virus will take a lot more time to make things normal, both in the personal and professional lives of people.
2. Pay-cut or lay-offs
Due to the spread of the virus, a lot of companies are not able to perform well and their revenues are continuously tanking. And in order to avoid bankruptcy or financial stress, these companies may have to cut salaries, delay new hirings or even lay-off some employees. Moreover, the lay-off scenario may be worse in some highly affected industries like travel, tourism, hotels, airlines, bars, malls, etc that are heavily affected by the lockdown.
3. Rise of online businesses
Although the market and economy are continuously falling during the coronavirus days, however, there may be a silver lining for a few sectors during this time. A few industries like online learning (Byju’s, Unacademy, etc), online payment (Phonepe, Paytm), Online Grocery (Bigbasket, Amazon), E-commerce, etc are performing quite well as people are opting for their product/services from their homes. These industries are expected to boom during the coronavirus days.
In this post, we tried to discuss a few common changes and their effects in India during the coronavirus days. Nonetheless, these are just assumptions and it might be a little early to say what will exactly happen.
The next two weeks are quite crucial for India in its fight towards coronavirus and they may be the deciding factor. In these times, how the government of India and its people handles the situation will play a major role among the changes, effects, and aftermath that we may see in the future. Take Care and till next time…!
Hi, I am Kritesh (Tweet me here), an NSE Certified Equity Fundamental Analyst and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting
Passive ways to make money in India: “Passive income” certainly sounds like an interesting and appealing idea, but making money while you sleep is certainly not that easy. The majority of passive income ideas won’t really work (either limited or minimal financial returns or will need a great degree of effort from your side), certainly not like making money while you sleep.
So, the question is what really works? What are the ideas that can actually get the money ball rolling for you? Here are some top picks that can help you leverage some real basic factors for that continuous stream of passive income.
#11 Best Passive Ways to Make Money While You Sleep
1. Sell your art
You might be a skilled designer, a graphics expert or someone who just picks up the paint-brush as a hobby. But what if those raw pieces of your art can ensure you a continuous flow of money. There are several websites like Etsy, Zazzle, etc. that will pay you a nice amount of money for sharing your artworks with them.
These websites use your artworks to create patterns for their branded t-shirts, mobile covers, posters, mugs etc. Whenever these products are sold, you will be given a fair share of commission from the product price.
2. Express your skills via video channels [Youtube]
Got some special dance moves, singing skills, the art of mimicry, stand-in comedy or detailed workout sessions? Showcase your talent to the world using YouTube videos from your own channel. YouTube is an immensely popular and exciting medium for earning a decent flow of passive income for yourself.
You will be paid higher as per the number of views, likes, subscriptions, and popularity that your channel will get across different user groups.
Since the introduction of the digital age, online learning platforms and resources have gained a lot of popularity. There are certain web portals like Udemy, Coursera, Edx that offer digital certifications and classes to students across the globe. If you have specialization in any academic, technical or non-technical subject then you can structure your own educational courses on these websites. You will be paid for every subscription or registration that a user makes for your course.
Are you someone who is amazing with a camera in his hands? If yes, then there is a good scope for earning a decent flow of money with your stock photos. There are several websites like Shutterstock, Alamy or iStockPhoto that need photography enthusiasts or experts who can deliver some really amazing and high-quality images from different niches.
5. Rent your vacant property
Renting your own vacant property can also be a good way to earn some easy passive bucks. Some working professions even prefer moving in shared apartments and houses in order to save their hard earned money.
6. Start your own blog
Got some really exciting cooking recipes, life hacks, astrology tips or interesting hacks to share with others? Just go on and set up your web-blog. Once your blog gains popularity, you can use services like Google Adsense or AdWords to earn a considerable amount of money by displaying corporate or business advertisements on your blogs. Additionally, you can also set subscription fees for the users who want premium access to your content.
There are a number of bloggers who are making tons of money enjoying their life on a beach or travelling by setting passive ways to make money on their blog.
Note: If you are new to blogging and planning to launch your blog soon, we’ll recommend getting a hosting from “HOSTPAPA”. They offer most affordable hosting plans starting at just Rs 99/month. Here’s a quick link to get started. Cheers!
7. Sell your Ebooks
Fond of writing? Great! This can be one big opportunity for you to earn. Convert your passion for writing into some easy money. You can fetch 5-10$ easily with short write-ups of 70-80 pages, but make sure you choose the trending titles and themes. To sell your ebooks, you can choose various platforms, Amazon and iBook are two of the best once.
Market Investment Ways to Make Passive Income
8. Mutual Funds
What if you can earn regular income on your basic savings?
Mutual funds are the best passive ways to make money in India. You do not need to spend much time, knowledge or even money to start investing in mutual funds. These funds are managed by professional fund managers and there are several low-risk investment schemes that offer high returns compared to the interest amount that banks pay for your deposits with them. Nevertheless, you will need to select the mutual fund smartly to reduce the risk of financial loses.
If you are willing to invest some time, then investing directly in the stocks offers the highest returns and can easily be considered the best passive ways to make money with even limited investments. You can make money in stocks through capital appreciation and dividends. If you have a good working knowledge of stock market and shares, then it can ensure high returns for your basic investments, but such investments are always subjected to risks of market fluctuations.
New to stocks? Want to learn how to invest in Indian stock market from scratch? Here is an amazing online course: INVESTING IN STOCKS- THE COMPLETE COURSE FOR BEGINNERS. Enroll now and start your share market journey today.
10. Real estate Investments
Investing in the Real-estate market is another way of ensuring a continuous income stream on a part-time basis. You can either buy a rental property to ensure a monthly fixed amount or look for those perfect deals at the perfect time (when you purchase properties at a low price and then sell the same when the market hits a high.) In both the cases, you will be getting a decent amount of income on regular basis with minimal efforts.
11. E-commerce service outsourcing
An e-commerce portal that bridges the gap between the local retailers and customers can be a handy way of earning a continuous stream of passive income. Your e-commerce portal, website or app can be structured to serve the requirements of a locality, zone, town or a whole city.
Who knows it might develop into a fully-fledged business venture in future?
Duopolies in Indian Market:Visa vs MasterCard, Boeing vs Airbus, Coke vs Pepsi, Netflix vs Amazon prime, etc are some of the companies that have already been etched most notable duopolies throughout the world. Be it a boon or a bane, these mega-corporations cannot be named individually without mentioning the other. Such has been the tale of Duopolies, their fierce competition, and respectful cooperation eventually forming an interdependence where each has scaled summits.
(Rivalry noticed through Advertisements)
(Pepsi responded to the above-attempted sale of Coke’s secret ingredients by notifying Coka-Cola)
In this article, we further look at Duopolies that have shaped and extended their segments, particularly in the Indian markets.
Duopolies in Indian Market
— Zomato vs. Swiggy – Food tech
A decade ago Dominoes and their ’30 minutes or free’ scheme stood for food delivery in India. However, the real credit has to be given to Zomato and Swiggy for the development of the Food tech industry in India. They have now formed an integral part of our lives and also sets the perfect example of a duopoly in the Indian context in the food tech/delivery industry.
Zomato was founded in 2008 initially as a website that provided information on restaurants, access to their menus, the ability to view and provide reviews. However, they eventually ventured into the food delivery segment. On the other hand, Swiggy was set up as a food delivery platform from the beginning in 2014. Both competitors have used a strategic discounting model to attract and keep customers. Moreover, advertisements through social media have played a significant role in their growth and competition.
Strategies used by Zomato
Each of these corporations has strategically acquired other new entrants to enhance their growth to gain an upper hand. This was also done to use them as a doorway into new markets. Zomato has made 12 acquisitions which include companies throughout the globe. The acquisitions are involved in restaurant search service, table reservation, restaurant management platforms, logistic tech startups, food delivery startups with their most notable recent acquisition being UberEats. Zomato has also acquired companies involved in drone technology focusing on the possibility of a future with drone-based food delivery.
Strategies used by Swiggy
Swiggy also has made notable acquisitions like 48 east, Scootsy logistics and also invested in Fingerlix- a ready to eat food brand. They also enhanced its customer base by easing the payment systems for working customers by partnering with Sodexo. In addition, Swiggy has also partnered with Indifi technologies, a financing program for partner restaurants.
The strategies used by Zomato and Swiggy show how the food tech duopoly in India has competed using the technique of an acquisition. As mentioned earlier, this was also used as a medium to enter new markets and build on the structure already set up by the company taken over.
But when the pages are flipped over it also shows the difficulty a startup could face when competing with companies having greater control over the market. This is because they have already built resources over the years and are ready to burn through cash even after going through losses. They will eventually have to give in to the offer placed by either of the duopolies as it would be an uphill battle to compete with strategic discounting employed by either of the companies.
The ride-hailing segment in India is dominated by Ola and Uber. Uber a globally recognized corporation known for its ride-hailing service in 785 metro cities worldwide. They entered the Indian market in 2013 and currently boasts 14 million rides a week in India. Ola, on the other hand, had a three-year head start and currently boasts a reach of over 250 cities with 28 million weekly bookings.
Strategies used by Ola vs Uber
Ola and Uber too have used the strategies of acquisition and investment. Uber acquired Kareem particularly known for its service in the middle east and Ola has invested in VOGO to further its reach in the two-wheeler ride-hailing segment. Both Uber and Ola have competed aggressively in all road transport segments ( inc. two-wheeler, three-wheeler).
They have also entered other segments namely the food tech industry with Uber initiating UberEats and Ola acquiring Foodpanda. Uber has also extended its service to other means of transport through UberAir which uses VTOL aircraft in the US and also UberBoat in Mumbai at the jetty from Gateway of India to Alibaug. In addition, they are particularly keen on developing self-driving cars to be introduced in the ride-hailing segment.
However, in the case of Ola and Uber, we also see another side of the duopoly segment. Ola had been earlier accused of attempting to eliminate competition by lowering prices. This makes it impossible for new entrants to survive and then hiking prices when convenient.
Besides, both Ola and Uber have been accused of overcharging in situations where the same ride is charged different amounts based on the day, time, profile, history, rating of both the rider and the driver. This was opposed as both attempt to show a front of transparency to attract customers to their reasonable pricing. The same surge in pricing would not be acceptable when applied by local players.
They have also been accused of baiting riders with discounts and bonuses and then hiking fares without passing the gain from the price hike to the drivers. One of the main reasons that Uber and Ola have been in controversy is the fact the drivers are not considered employees of these corporations. They are instead considered as ‘contractors’ as this allows them to skirt legal obligations mandated towards employees.
If we look into the strategies used by Uber at a global stage to remain market heads they would seem to be straight out of a conspiracy novel. Uber to compete with Lyft in new York had formed a street team to gather information on Lyft’s expansion plans and lure their drivers into Uber. In 2014, 177 employees of Uber were accused to have intentionally ordering and canceling 5560 rides.
Uber also has been criticized for the development and implementation of the software tool ‘Greyball’ which was used to gather user data from their phones and avoid giving rides to law enforcement officers and those involved in sting operations. Uber also used the Ripley a panic button 24 times at the times of raids. Ripley would shut off and change the passwords of the staff computers when initiated. The controversy with Uber gets worse as they have been accused of implementing ‘God View’ a function used to track journalists and politicians.
When it comes to E-commerce the duopoly Flipkart and Amazon are said to have a combined market share of over 90% in the Indian market. Flipkart was founded in India in the year 2007 whereas Amazon had been launched in India in the year 2012.
Strategies used by Flipkart and Amazon
In comparison, the homegrown company ‘Flipkart’ has been a market leader even when facing Amazon. Flipkart being an Indian company has used this to its advantage by spreading its reach even to rural areas whereas Amazon had initially limited itself only to metro cities. Almost 45% of Flipkart’s sales currently come from smaller towns and cities giving them an edge over Amazon in India. Amazon, on the other hand, has targeted metro cities which formed 65% of its sales.
Flipkart too as noticed in the earlier examples has used similar strategies of acquisition ( Myntra, Jabong, PhonePe, and eBay). Amazon, on the other hand, has relied less on acquisition and more on forming partnership with local logistic companies to bolster business.
The entry of Walmart into India through the purchase of Flipkart gives an insight of means used by MNCs to enter new markets. This was also used by Zomato and Uber in the previous examples.
Disrupting a Duopoly
The duopoly held by MasterCard and Visa in the international payment segment was disrupted by the introduction of RuPay in India. After noticing multiple examples of new entrants not being able to compete with already set Duopolies eventually leading them to being acquired, the question arises on how RuPay was able to achieve this in India.
RuPay belonging to the domestic payment system was set up in India in the year 2005 by the Board of payment and Settlement systems by the Reserve Bank of India. The RuPay card was introduced in 2012. As the processing of the transaction in RuPay is within India they are lower than that of MasterCard and Visa. This is because the processing in MasterCard and Visa take place abroad resulting in a higher processing fee along with their higher fee structure.
The rise of RuPay can also be attributed to Prime Minister Narendra Modi who had publicly endorsed it. One of Modi’s schemes namely the PM Jan Dhan Yojana helped RuPay contend with global players. Here, financial services, bank accounts, and a RuPay card were made available to most of the rural population free of cost.
Government support, Deep Pockets and a focus on the local problems that MNCs overlook seem to have worked for RuPay to become the top player in India. However, this led to the government facing a lot of backlash on the global stage with Visa and MasterCard crying foul and alleging that Modi used patriotism which they viewed as a way of protectionism against them.
Closing Thoughts
After considering three of the most notable duopolies in India we can note that for the successful functioning of a company a certain degree of cooperation is required to maximize the profits. With both companies acting as a check on each other the greatest benefit reaches the consumer.
Example – strategic discounting used by Zomato and Swiggy. These benefits are not available in a monopoly. It is also important for the government to maintain stringent checks to avoid the formation of cartels. The best comparison can be seen in Uber. The management has been termed as a ‘ Group of Thugs’ in the US ( where it has a market share of over 65%) due to its unethical practices. In India however due to a stronghold by its competitor Ola it has had to forego its ‘win at all costs’ attitude which was also later forgone in its operation in the US.
Another disadvantage a duopoly may have is on the stakeholders in the operating region, particularly its employees. All the companies taken as an example burn through cash without achieving profitability for a considerable period of time. This is done to survive the competition and eliminate new entrants. Failure of any of the companies will result in mass layoffs. Even if they enter a position of being acquired, employees that may increase duplication of jobs will not be hired.
Acquiring a major market share does not then limit the competition in the Duopoly to each other. In the future, we will see many new entrants ready with deep pockets to take on these duopolies.
Amazon seems to be keen to make an entry into the food-tech segment. Also the Mukesh Ambani backed Jiomart has just made an entry into the eCommerce platform offering attractive incentives to users like savings of Rs. 3,000 on pre-registration.
The telecom sector, on the other hand, seems to be headed towards a duopoly with the supreme court taking a strong stand against Vodafone-Idea which owes the government $3.9 billion in dues interest and penalties. In the coming years, India will see Duopolies entering other segments and at the same time disrupt those that are currently in play.
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
The stock market and the economy are in a lot of talk in recent days. Seeing the market indexes declined by over 30% within a month, an obvious question among people is to understand how does the stock market affects the economy.
In this article, we are going to answer the same and discuss the effect of rising or falling stock market on the economy. In addition, we’ll also answer whether the stock market and the economy are the same or not. Let’s get started.
Why do we have a stock market?
A stock is a type of security that represents an individual’s ownership in a company and a stock market is a place where an investor can buy and sell ownership of such assets. Trading stock on a public exchange is essential for economic growth as it allows companies to raise capital through public funding, pay off debts or expand the business.
The stock market exists for two main reasons, the first is to provide a company with the opportunity to raise capital that can be used to expand and grow the business.
If a company issues one million shares that can sell at $4 a share, this allows them to raise $4 million for the business. Companies find it favorable to raise capital this way so they can avoid incurring debt and paying steep interest charges.
The stock market also provides investors with the opportunity to earn a share in the company’s profit.
One way to do this is to buy stocks and earn regular dividends on its value- that is the investor earns a certain amount of money for each stock they own.
Another way is to sell the stock to buyers for a profit when the price of the stock increases. If an investor buys a share for $20 and the price eventually increases to $25, the investor can sell the stock and realize a profit of 25%.
The increase and decrease in stock prices can influence numerous factors in the economy such as consumer and business confidence which can, in turn, have a positive or negative impact on the economy as a whole. Alternatively, different economic conditions can affect the stock market as well.
Here are a few ways the stock market can affect the economy of a country:
— Movements in the Stock Market
The movements in the individual prices of stocks give the stock market a volatile character. As stock prices move up or down, their volatility can have a positive or negative impact on consumers and businesses.
In the event of a bull market or a rise in the prices of stocks, the overall confidence in the economy increases. People’s spending also increases as they become more optimistic about the market. More investors also enter the market and this feeds into greater economic development in the nation.
When the prices of stock fall for a continuously longer period, also known as a bear market, it has a negative effect on the economy. People are pessimistic about the economic conditions and news reports on falling stock prices can often create a sense of panic. Fewer investors enter the market and people tend to invest in lower-risk assets which further depresses the state of the economy.
When stock prices rise and there is a bull market, people are more confident in the market conditions, and their investment increases. They tend to spend more on expensive items such as houses and cars. This is also known as the wealth effect which is how a change in a person’s income affects their spending habits and eventually leads to growth in the economy.
In the case of a bear market or a fall in stock prices, there is a negative wealth effect. It creates an environment of uncertainty among consumers and a fall in the value of their investment portfolios decreases spending on goods and services. This affects economic growth as consumer spending is a major component of Gross Domestic Product.
A common situation of the wealth effect was during the US housing market crash of 2008, which had a large negative impact on consumers wealth.
Apart from consumer spending, business investment is also a key indicator of economic growth.
When stock prices are high, businesses are likely to make more capital investments due to high market values. Many companies issue an IPO during this time as market optimism is high and it is a good time to raise capital through the sale of shares. There is also more mergers and acquisitions during a bull market and firms can use the value of their stock to buy out other companies. This increased investment feeds into greater economic growth.
When the stock market is bearish, it has the opposite effect on investment. Confidence in the economy decreases and businesses are no longer eager to invest in the economy. The decrease in share price makes it harder for companies to raise funding in the stock market.
Other factors
The stock market also affects the bond market and pension funds. A large part of pension funds are invested in the stock market and a decrease in the price of shares will lower the value of the fund and affect future pension payments. This can lower economic growth as people who depend on pension income will tend to save more and this lowers spending and eventually the GDP.
While a fall in share prices has a negative impact on economic growth and GDP of a nation, it has a positive effect on the bond market. When there is a depression in the stock market, people look for other assets to invest their money in such as bonds or gold. They often provide a better return on investment than shares in the stock market.
Remember, it is always important to diversify your investment portfolio and spread your risk. Don’t throw all your eggs into one basket.
Final Thoughts: Stock market and Economy are not the same
Contrary to popular belief, the stock market and the economy are two different things. The GDP of an economy and the stock market gains are incompatible and, in fact, there is little comparison between the two. The major reason for this discrepancy is the difference in the size of the two markets. The economy depends on millions of factors that can have both a positive and negative impact, while the stock market is only affected by one factor, the supply and demand of stocks.
For investors in the stock market, it is better to err on the side of caution and focus on the fundamentals of each stock rather than on the economy as a whole. As the saying goes ‘an economist is a trained professional paid to guess wrong about the economy’.
10 Best Youtube Channels to Learn Indian Stock Market: With the boom of the internet, self-education has never been easier. Now, you can learn any skill that you crave by sitting on your couch and watching youtube videos. And that too for FREE. There are tons of information and resources available on youtube to learn whatever you want. And if you want to acquire financial literacy without spending a dime, Youtube is definitely one of the best places where you should be.
Anyways, if you are a newbie to investing world, you might not know the best youtube channels to learn Indian stock market. After all, there are thousands of youtube channels that discuss stocks. But which ones give the best information? We’ll answer this question today. In this post, we are going to discuss ten Best Youtube Channels to learn Indian stock market.
Quick Note: There may be a few more good channels that we might miss in this post. This may be because we never watched their videos or the channel is launched recently. If we miss any of your favorite youtube channels feel free to mention in the comment box. We’ll be glad to add it to our list of best youtube channels for Indian Stock Market.
Nonetheless, you might not synergize with all the channels as they may cover different core areas like fundamentals, technicals or future/options trading strategies. Only subscribe to the channels that suit you the best and whose ideology you would like to follow. So, let’s get started with our list of 10 Best Youtube Channels to Learn Indian Stock Market. Here it goes.
10 Best Youtube Channels to Learn Indian Stock Market
This channel uploads animated financial education videos on stock market tutorials, mutual fund basics, book summaries, case studies, etc. FinnovationZ has uploaded over 320 videos on their channel and had got +41 million views on their videos with +670k subscribers. The videos on this channel are mostly in the Hindi language and very simple to understand. If you are a complete newbie to the stock market, this is a definite channel to subscribe.
Also known as Finology, Pranjal Kamra runs this channel and teaches the philosophy of value investing. On his channel, you can find over 130 videos on investing, stock analysis, mutual funds, and behavioral finance. Along with educational videos, Finology also offers courses, workshops, Excel tools, Advisory & research services etc on their website.
With over 550 videos and +210,000 subscribers, Elearn Markets is definitely ranked among one of the best youtube channels to learn Indian stock market. They cover videos on financial literacy, stock market trading, fundamental analysis, technical analysis and more. Besides, one of the most popular segments on their Youtube channel is ‘Meet market rockstars’.
Quick fact: The founders of Elearn markets are also the creator of one of the most downloaded and highest rated stock analysis app in India, named Stockedge.
This channel is hosted by Kritesh Abhishek and is focused to teach stock market investing and personal finance to the do-it-yourself (DIY) Investors. On Trade brains youtube channel, you can find simplified investing videos on stock market basics, valuations, mutual funds, investing strategies and much more. You can subscribe to the channel using this link.
Sunil Minglani is an expert on behavioral aspects of Stock Market and has rich experience in analyzing stock chart patterns which he has co-related with human psychological patterns at a deeper level. He has uploaded over 250 videos on his channel and got over +410k subscribers. On Sunil Miglani’s channel, you can find videos on stock market basics, human psychology, Q&A with Sunil Miglani, etc.
Nitin Bhatia is a Youtuber and founder of the blog nitinbhatia.in. On his youtube channel with over +549k subscribers, Nitin Bhatia uploads videos about stock trading & investing, Real Estate and Personal Finance to provide ‘Smart Ideas for Your Money’. He’s very consistent in making videos and has uploaded over 690 videos on his channel.
This channel uploads simple investing videos in Hindi & English on the stock market, mutual funds, taxes and other investment options in India. The videos are extremely simple to understand. They have uploaded over +720 videos on their youtube channel and received over +190k subscribers. Invest Yadnya also offers different services like financial planning on their website.
This channel is run by Ghanshyam Yadav, a trader and trainer in stock market from Mumbai. This channel focuses on stock market trading and technical analysis. Ghanshyam has uploaded over 1,400 videos on his channel and here you can find videos on Nifty Trading, Technical analysis, Candlestick patterns, charting software and more.
This channel is run by Mohd Faiz and the objective of this channel is to help the subscribers create wealth. Mr. Faiz has uploaded over +4,700 videos on this channel which has received over +95 million views. This channel upload videos on current news, technical analysis, stock charts, patterns and more.
The host of this channel, Varun Malhotra, Director EIFS, started investing at an age of 17. He dropped out of his Campus placements at IIM-A to continue his journey in the investment world. Since 2010, Varun Malhotra has trained over 500,000 Investors including the entire 250,000 strong force of Border Security Force. On his youtube channel, he uploads videos on stock market investments & mutual funds. Varun Malhotra has uploaded over +45 videos on youtube and earned+225k subscribers.
The marketGurukul channel is managed by Mr. Edward and is one of the best technical analysis youtube channels in Hindi. He uploads videos on Indian Stocks, Commodity or Forex Trading including Trading Psychology, Money Management along with hardcore Technical Analysis. You can find over +170 videos on this channel teaching technical analysis, Strategies, and Indicators to know the markets better, demo trading platform and more.
If you are not from a finance, commerce, business background or from a family of stock market enthusiasts, the chances are that you do not know the stock market lingo or even the frequently used terms like dividends, market cap, etc. Moreover, if you are in the learning stage, it’s a little difficult to master everything by yourself. Enters Youtube.
With the help of youtube channels, you can find online mentors who can help you to make your investing journey a lot easier. Further, interacting with Youtubers is also not very difficult. You can simply leave a comment on the videos and if the Youtuber is active, most likely, you’ll get the reply.
Final advice, watch the videos but do not copy their entire investment strategy or stock picks of the Youtubers. Ideally, Copycat investing doesn’t work. Be original and create your own investment style.
That’s all for this post. I hope it was useful for you. Have a great day and comment below which is your favorite YouTube channel to learn Indian stock market. Happy Investing!
An overview of online grocery market in India and it’s future: We all evolved from living in a world with no Internet to living in a world that cannot be imagined without Internet. Yes, we exist in the era of digitisation. From our daily needs to our daily activities we are surrounded by online apps, which have now become an integral part of our lives.
This article is to throw a light on how digitisation is taking over the ‘Indian Online Grocery Market’.
Food & Grocery Market in India stepping into the Digital Age
Let us recall the time when the only means to buy groceries was from brick & mortar stores or roadside peddlers and hawkers. From the time of stepping outside of home to the time when one can buy from home just at the tip of the hand, the Indian Grocery Market has enlarged.
In the year 2018, online F&G i.e. Food and Grocery stood at approximately $1 Billion and grew at almost 110% CAGR in its initial years of penetration from 2014 to 2018. The online F&G market in India as of CY19 accounts for almost 0.2% of the overall market share. It is expected to reach 1.2% and touch a $10.5 Billion by the year 2023.
However, the offline F&G dominates the market and holds the maximum share but the dynamics of this industry are changing drastically. The online F&G is growing by almost 25-30% rate and the anticipated CAGR for it is 66% from 2018-23. (Source- LIVEMINT, Financial Express)
Market Players in Online F&G Market in India
The rising start-up culture across the globe was the foundation that supported and motivated the application based modern age ideas like Byju’s, Cure.fit, Flipkart etc. Among these, the start-ups in the F&G industry were ‘Big Basket’, ‘Grofers’, ‘Ondoor’, ‘Godrej Nature’s Basket’ etc.
Moreover, in all of these, the most popular ones are ‘Big Basket’ and ‘Grofers’ with 1,00,000 and 40,000 orders in a day.
Apart from the newly established companies in this online space, there are few other giant offline F&G retail players that are now entering the online-based selling like ‘D-Mart’; ‘Reliance’ etc.
Additionally the large e-commerce players like Amazon and Flipkart’s FarmerMart have also initiated their operations in this segment. Online food delivery platform ‘Swiggy’ owned ‘Supr-Daily’; Dunzo; Milkbasket etc. are some other popular players.
Key Factors Influencing the Growth of Online F&G Industry in India
— Changes in Consumers Purchasing Patterns
The changing behavioural patterns in consumers purchasing habits is one of the most influential factors that has encouraged the ‘Online Grocery Market’.
With the rising e-commerce, consumers are more inclined towards purchasing online at the tip of the palm. The online transaction value of a retail shopper buying at-least once in a month is between Rs.900-1200.
It is a commonly notable habit nowadays where an individual with a free time is mostly scrolling through his/her social media accounts or other app-based services offered online.
— Convenience
Taking out time from a busy work schedule in office along with tiring days calls for much more suitable and convenient ways of living. Online purchasing is one such means, which eases one’s effort and offers a hassle-free purchasing from anywhere and at any time.
— Offline Players entering App-Based Online Space
On one hand where online purchasing is seen as a new way of living some others are facing a high competition and business model threat from the same.
Giant offline store-based retailers like D-Mart and Reliance, are now extending their operations from brick & mortar supermarkets to online-based selling websites. This implies that the how much big competition and opportunity is this online retail industry.
— Business Model
In order to succeed must have a strategically proven and tested business model that forms a strong base for the business idea. Selling groceries online is an idea which is supported by two types of business models-
— Internet Penetration
The average rate of using Internet per user is increasing at an exponential rate. With JIO’s price disruption the price for using Internet went down drastically and so the usage of Internet went up within last few years. Telecom operators are introducing more cheap plans for its users, which have increased the user dependency on Internet and related activities.
Indirectly this led to benefitting a large number of e-commerce players. Due to low-cost Internet, its accessibility among lower income level groups also increased thereby creating a larger customer base for online-based businesses.
— Heavy Discounts and Offers
In order to attract a large number of customers these online F&G players offer huge discounts and cash back schemes. Selling at high discounts calls for the ability to absorb losses as well. Being backed up by large private equity investors like Softbank backed Big-Basket, these players are well funded and stable financially. Thus having an added advantage.
— Low Cost of Establishment
The biggest expenditure for an offline store is the cost of establishing the store, which demands a suitable location, rental cost, construction cost (for self-owned outlets), staff salary, maintenance and other expenses. While on the contrary, an online store saves on all these costs.
— No-Geographical Barriers
A brick & mortar outlet calls for physical location and has a limitation of serving that area only, an online store has no barriers of servicing a specific area. Although it calls for a strong supply chain to reach interiors but this has been overcome by the online operators.
— Other Benefits
No time bound purchasing as apps are working 24×7. A wide variety of products are available. Certain players like Big-Basket offer specific delivery time in order to confirm the availability of the customer at the time of delivery and enhance consumer experience. Websites have a customer feedback on the product, which gives a much realistic view before purchase.
Drawbacks of Online based F&G Industry
Like every coin has two sides, similarly, this attractive online F&G market has its own limitations.
On one hand, where it is highly convenient and user-friendly it has its disadvantages like there is a lack of touch of the merchandise before purchase, frauds associated while purchasing online, delay in delivery, damaged or expired goods delivered, vegetables and fruits ordered online may not be fresh.
The rising awareness of health and eating healthy food raises concerns about buying groceries online.
Consumer behavior is a very crucial aspect of any industry. Where we are witnessing newer business models with every passing year based on the changing preferences of consumers, online business models are on the rise. This is due to the changing habits in our daily lifestyle. The future of online grocery market in India only looks bright despite its drawbacks that are being resolved by the existing players, and is an opportunity to make big money.
The existing online F&G market is at its nascent stage and is growing with more and more opportunities.
I am an MBA graduate specialised in Finance. I am a passionate stock market investor and a movie buff. I have always been inclined towards learning and development through different styles and new experiences. I believe knowledge is a vital ingredient for success. So here I am trying to contribute my best to add to your financial knowledge via this knowledge centre ‘Trade Brains’.
Indian Markets Weekly Wrapup: As investors searched desperately for sightings of a leeway from the slumping market, last Thursday provided a worse off trajectory with WHO declaring coronavirus a pandemic. This led to the chokehold on various industries being tightened as it seemed to have contributed to the perfect two-punch combo to knock the Indian markets into a bearish slump.
Investors watched on as 11 lakh crore worth of wealth vanished with Sensex crashing by 2929.26 points. It was accompanied by the Bank Nifty falling 2951.45 points along with Nifty 50 which continued slipping further with a 950.40 points loss as Foreign Portfolio Investors sold off their holdings in the Indian markets. All closing at a two year low on Thursday.
The Wreckage through the week
The Indian market has already been suffering from the jabs from the economic slowdown, with added political tremors felt throughout the country due to riots, followed by the Yes Bank fiasco. Here we look at some other major events throughout the week.
— The Oil price hook
Last week, the crude oil prices were slashed to $30 a barrel. The cause was rooted in the Russian refusal to corroborate with Saudi Arabia in their plans to increase the crude oil output due to supply chain disruptions caused by the coronavirus scare. The scare had resulted in a worldwide demand slump.
This news only added to the Monday Blues in the US where the marginal cost of production touches $40 per barrel. Also globally, as this was the biggest drop in crude oil prices since the Gulf War.
However, this came as a relief to the Indian markets. Being the third-largest oil importer even a dollar drop per barrel would eventually result in an annual reduction in the import bill by Rs 10,700 crores. The benefits are still doubted due to the impact of the falling rupee against the dollar which currently stands at over Rs 74.
The novel coronavirus outbreak had a devastating impact on any industry based in China or majorly dependant on China. By March 2020, the novel virus spread out to 119 countries. This was followed by the existing panic being materialized which already had investors all around the world bracing themselves for further impact on the market.
On Wednesday 11th, March 2020 with cases touching over 118,000, World Health Organisation (WHO) declared COVID-19 a pandemic. This was followed by a bloodbath the following day which wiped out most of the bullish movement achieved by the Sensex and the Nifty in the last two years confirming investments in India to be locked in a bearish state. This also led to a global turmoil with Dow Jones(US) posting a 10% fall, its largest loss in history and the FTSE ( London) losing 11%.
Indian Stock hits after Coronavirus being declared a Pandemic
The following notable stocks touched their lowest in 52 weeks on 12th, March 2020:
Reliance Industries (RIL)
Tata Consultancy Services (TCS)
HDFC Bank
Hero Motocorp
GAIL
Gillette
Notable Industry-wise effects
— Corona vs Healthcare Industry
Other significant effects are also to be faced by the Healthcare industry in India as over 90% of the medical supply is sourced from China. Supply disruptions are already faced in sourcing Active Pharmaceutical Ingredients(APV) from China which are used in the manufacturing of antiretrovirals used in the treatment of HIV. These are crucial as they are also currently being tested on patients infected with COVID-19.
— Corona vs. Airline and Tourism Industry
With WHO declaring coronavirus a pandemic, countries affected entered a lockdown. US banned travel from Europe and travel has been discouraged by the government.
This has led to the airline industry being affected by IndiGo airlines announcing an expected fall in the quarterly earnings after noticing a 15-20% fall in their bookings on a day to day basis. The shares of Indigo fell over 12% while Spicejet fell by nearly 20%. An even more severe impact expected in the tourism industry.
— Corona vs. Agriculture Industry
The effects of COVID-19 are now being experienced even in the agriculture industry due to its dependency on pesticides. The raw materials required are imported from China. The imports range from 40%- 90% depending on the chemicals required. If the current scenario persists this will eventually affect the food industry due to a reduction in the availability of pesticides which has already been plagued by rumors on a variety of foods that may aid the spread of the virus.
— Corona vs. Sports
Any action taken specifically to prevent the spread of the COVID-19 is laudable, but we can still note and relate to the impact that has been on entertainment and sports.
With multiple sporting leagues being canceled or played with closed doors the 13th edition of IPL has been suspended till April 15th. Estimated losses touching Rs.10,000 crores if canceled.
Effect of Coronavirus on Sectoral Indices
Last week, every Indian sectoral indices faced major losses (with only BSE Telecom facing a loss at 1.35%). All the remaining sectoral indices facing losses from 7.5% to 16.03%
Biggest Losers – Nifty Indexes
Nifty Media
16.03%
Nifty IT
13.56%
Nifty Metal
12.85%
Nifty Realty
12.57%
Nifty CPSE
12.57%
Outlook by End of the Week
With Friday, 13 March 2020, came the silver lining where market movements of Thursday were not repeated. Due to the effects of COVID-19 bearish markets were realized which were also noticed during the outbreak of SARS in 2003, Bird Flu in 2004, Ebola in 2014, and Zika in 2016. Here we can learn that the markets have always recovered into bullish positions and eventually performed better than ever.
Indians have already witnessed several decisions taken by the government that have led to being financial disasters, resulting in the eventual economic slowdown in the recent past. However, when the future of India is considered, there is little that can be done by a government in such market scenarios where it is trying to make up for the lead already gained by an outbreak.
Best option being to direct its focus on the root causes which involve the prevention of the virus spread and finding a cure before its too late. We have already learned from the effects on China and Italy where such outbreaks entering a lockdown phase result in graver consequences on the economy.
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
What ‘NOT’ do when the stock market is Volatile: Investing in the stock market is known to provide some of the highest long-term returns and can earn investors a profit in manifolds over the years.
People invest in stocks to reach their financial goals and earn a profit on their savings. It is a way to make money work for you rather than you working for the money.
What is stock market volatility?
Investing in stocks is a risky business. While investors can earn a high return on shares, we cannot overlook the volatility that comes with it.
Volatility can be described as the continuous change in the prices of stocks over a short period of time. Here, the price of stocks can rise on a certain day and can fall the very next day. For example, you may have seen situations where Sensex may have fallen over 400 points in a day and recovered on the very next. This can be considered as volatility.
High volatility also increases the VIX ratio (Volatility Index) also known as the Fear Index. It measures the amount of fear in the market as a result of the volatility.
The fear caused by a volatile market makes investors react in many different ways. Some start to panic as their investments get riskier and try to sell & exit the market. On the other hand, there are contrarian investors, who prefer investing only in situations when others are selling. Anyways, as shares start to lose value, investors often make hasty decisions that can result in terrible outcomes.
6 things you should NOT do when the stock market is volatile!
Here are six things investors should not do when the stock market is volatile:
1. Don’t Panic!
The number one reaction investors have when there is volatility in the market is to panic and make speculations. It is important not to be influenced by fear and do something irrational. Investors can consider buying a stock at a lower price but should not panic-sell. Instead, they should use this period of volatility to evaluate the stocks in their portfolio.
There are often many reasons why a person invests in a particular stock in the first place. If the fundamental values of why you invested in the stock are clear, then you should remain invested. However, if you are not sure of a particular investment, meet with your financial planner to decide a course of action to exit the market.
Remember, volatility in the market is only short-term, don’t panic-sell if your long-term objectives of investing in the market haven’t changed.
2. Don’t buy JUST BECAUSE prices are low!
When there is volatility in the stock market it is not advisable to invest in the market just because prices are low. This is because there is no guarantee that a stock with a low price today will increase in value in the future. In fact, the price may go even lower and you could end up in a value trap. (Also read- What are value traps?)
You need to analyze the stock’s fundamentals and track record. Look into factors like revenue growth, profit margin, price to earnings, debt-to-equity ratio etc as well as its future potential. If the stock shows a history of riskiness and volatility it would be best not to invest in them. Don’t be a bottom fisher!
3. Don’t believe everything you see on the news!
A sudden ‘breaking news’ segment on the stock market can cause people to make investment decisions that can prove to be disastrous in the future. News reports are not always authentic and often mislead or misguide the investor which can affect the sustainability of a stock.
News reports about the volatility of stock markets are usually short-lived and stock prices will bounce back like a ping-pong ball before you know it. This short-term volatility is often due to a current event in the economy. Once the event has passed, your stock price should be back to normal. As a serious investor, be aware of ‘breaking news’ but don’t follow it blindly.
4. Don’t make decisions based on international markets!
During certain periods, there can be a correlation between local and international stock markets. For example, a change in the leadership of a country could affect numerous economies around the world. But statistically speaking, such a correlation does not exist most of the time.
Volatility in the stock market is a reflection of individual events in an economy or movements in the economic cycle. The stock prices are a result of the anatomy of the local economy. For example, the Dow Jones in the US is completely independent of the stock prices in NSE’s NIFTY. Hence, investors should not be influenced by volatility in international markets, there may be various factors that could affect these stock prices.
5. Don’t rush to invest in volatile sectors!
An important rule for investors is to study trends in the market before investing. If there are particular stocks that drive bear markets- avoid these.
A stock that has a financial risk and a low standard of corporate regulations often leads to long-term problems and has a low chance of recovering. These stocks will have short bursts of upward movements but will have a long-term downward trend.
Do a market analysis of the sector you are investing in, if the industry shows a history of high volatility- you should remain cautious before you invest too much money into it.
6. Don’t put all your eggs in one basket- Diversify your portfolio!
One of the biggest mistakes an investor can make is not investing in a variety of stocks. If a certain industry shows potential for high returns, it is not a wise decision to invest all your money here. This is because if a certain economic event has a negative impact on the industry- it could result in a huge financial loss for the investor.
It is better to spread your risk and invest in different stocks that are stable, have a strong market presence and good growth potential. Here, even if you face volatility in one of your assets, you have a diverse portfolio of stocks to cover your losses.
An investor looking to reduce their risks and control losses should diversify their portfolio and not invest in too many volatile stocks. Greed can often take over fear and this can prove to be disastrous. Investors need to perform a thorough analysis of the stock market before picking stocks to invest in. If they do not have the bandwidth to do this, they can consult a financial advisor.
When the stock market is volatile, follow the tips listed above to help you get through a period of high stock market volatility. While it is important to safeguard your portfolio from the effects of a volatile market, remember the biggest risk is not taking any risk at all.
The Unravelling of Yes Bank:With news of Yes Bank shares tumbling with over 85% downfall (since 1st July 2019 till 6th March 2020) and founders accused of money laundering, it made Yes Bank hard to be recognized as the same bank that once attracted so many retail and veteran investors. Even big players such as Rakesh Jhunjhunwala made investments of over one crore in Yes Bank shares in the past.
In this post, we are going to cover the Yes Bank fiasco story in order to understand what exactly went wrong with Yes Bank. We are going to discuss how this stock (that was once the darling of the investing community) turned out to be one of the worst wealth destructors in recent years.
Yes Bank History
(Rana Kapoor: Co-founder, Yes Bank)
Incorporated in 2004, Yes Bank was founded by Rana Kapoor who headed the bank till 2018. His other co-founder – Ashok Kapur suffered demise during the 26/11 attacks in Mumbai which eventually led to an internal feud between his next of kin and Rana Kapoor.
Despite all these, Yes Bank also withstood many obstacles including the demonetization cash crunch which eventually worked out in their favor. It helped them rising up to become one of the digital transaction leaders having over 1,000 branches, 1,800 ATMs and over 1,8000 employees throughout the country by 2019.
What led to Yes Bank losing +85% in market value?
On 5 March 2020, the Reserve Bank of India (RBI) announced taking control of Yes Bank in an attempt to avoid the collapse of the bank. Although the stock crash may come as a surprise to many, there seem to evidently be many red flags placed by Yes Bank on the road to this date – 5th March 2020.
— Bad Investments
This began with Global financial services firm UBS flagging serious concerns in 2015 over the loans given out by the bank which included debt-ridden Cafe Coffee Day, DHFL, Anil Ambani led Reliance and also currently bankrupt and grounded airline Jet Airways.
— Manipulated NPA
Due to multiple bad loans Yes Bank started gaining undue attention from the RBI over their Non-Performing Assets (NPA). This was because Yes Bank was avoiding recognition of these bad loans as NPA, but instead resorting to providing these borrowers with extended new loans or having their existing loans restructured. This led to a wrong portrayal of NPA’s that shows the percentage of total loans or advances that are in default or in arrears.
Anyways, it was promptly caught by the RBI in 2015, 2016 and also in 2017 which involved the RBI directing Yes bank along with several other banks to report transparently. The stressed loans given out by Yes Bank stood at Rs 50,396 crores as of September 2019.
— Founders Dumping stock
In January 2019 Yes Bank announced that Rana Kapoor would step down from his CEO position due to restrictions placed by the RBI over the extension of his tenure. This was also followed by Kapoor along with other investors dumping their stake from Yes Bank in November 2019 which also led to a severe fall in the stock prices.
This came as a surprise as Kapoor’s earlier twitter handle claimed otherwise.
Within a month of Ravneet Gill taking over as head of Yes Bank on March 2019, Moody’s estimated their NPA to stand at 8% (which is an extremely high rate). This gave the picture that eight percent of all loans given out by Yes bank were Bad loans and hence they also downgraded them.
The gravity of the situation was realized when the rating was compared to that of countries like the United Kingdom, Australia and Canada having an NPA of less than 1% followed by countries like China, Germany, Japan and the USA having an NPA of less than 2%.
(Ravneet Gill, Former CEO)
Due to multiple factors that involved bad investments, manipulation of the balance sheet, dumping of holdings by the founders and a high NPA eventually led to the RBI imposing a moratorium on the bank on March 5th, 2020, due to which individuals were allowed an aggregate withdrawal of only Rs.50,000 till April 3rd, 2020 initially.
This action was taken by the RBI to avoid a situation of a bank run where all the depositors demand their deposits be withdrawn in full, particularly in cases where the stakeholders have lost their trust in their bank (a scenario of which Yes Bank has become a prime example).
The ailing banking sector in India which has relied on government intervention time and again has held State Bank of India (SBI) the Indian government bank to step up for the rescue of Yes Bank. SBI announced that it will purchase ownership of 49% with a Rs 7250 crore investment. Along with this, HDFC and ICICI are investing Rs.1000 crore each, Axis Bank investing 600 crores, Kotak Mahindra Bank investing 500 crores, Bandhan Bank investing 300 crores forming the dream team along with Jhunjhunwala, Damani and Azim Premji Foundation altogether making up an investment of over 12000 crores.
The SBI rescue does not only aim at providing financial relief to Yes Bank but also aims at avoiding any further panic among the depositors of Yes Bank and possibly avoid a bank run. Steps were further taken with the initial moratorium which was capped with a withdrawal limit of Rs.50,000 till April 3rd will now be lifted on March 18th at 6 p.m.
SBI has also appointed Prashant Kumar as the new CEO who had earlier worked in SBI and has an experience of over 30 years in the Banking sector. The SBI is also to nominate two officers as directors in the additional new board with RBI to appoint more directors if necessary.
(Prashant Kumar, Newly Appointed CEO)
Closing Thoughts
Ravneet Gill who had earlier helped Deutsche Bank achieve one of the lowest NPA as the CEO failed to steer Yes Bank away from the course set by Rana Kapoor. The former CEO and founder currently face allegations over his involvement in money laundering and corruption but the dream bailout team has somehow managed to shine a light at the end of the tunnel.
While the government plays the blame game with the opposition, we should take into consideration that the rising NPA involves multiple Indian banks having NPA’s higher than that reported by Yes Bank. As reported by CARE Ratings, it has put India in a ranking bracket which includes countries infamously known as PIIGS ( Portugal, Ireland, Italy, Greece, and Spain) who have faced severe debt crises in the recent past.
Moreover, with the economic slowdown already faced by India along with the recent Coronavirus scare and Oil price crash, the road doesn’t look bright for the government to take on added responsibilities of rescuing private banks.
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
The On-going Oil War (2020)- Causes & Effects: Global demand for energy is an upward moving trend-line majorly due to the growing and developing economies. As per EIA (U.S. Energy Information Administration), there would be an almost 50% increase in the world’s energy usage by 2050, which will be led by growth in Asia. Crude Oil contributes the maximum in energy production worldwide.
Oil isn’t just an energy source but a highly valuable commodity of the global economy. It has always been the most sensitive and influencing element when it comes to global trades, deals, and even wars. But the question is why so, what gives oil such immense governing power? Let’s find out in this piece of article.
The Global Oil Market Explained Briefly
Energy is one of the major underlying factors, which is running the economic activities. Brent Crude Oil contributes the maximum to the world’s energy production and consumption. Additionally ‘Crude Oil’ is the world’s largest traded commodity. This gives the oil an immense power to rule the global economy.
USA, Saudi Arabia, and Russia are the top three oil producers respectively, hence top oil-exporting countries followed by other Organization of the Petroleum Exporting Countries (OPEC). On the other hand, the world’s major oil consumers are the USA, China, Japan, and India. Both, the top producers as well as consumers of crude oil hold the maximum influential power on the global oil markets due to their high market shares.
(Source- Baker Hughes)
Why is the Global Oil Market in Crisis?
A recent outbreak of the pandemic ‘Coronavirus’, which started in China, has not just emerged as a threat to human life but has also turned out to be the root cause of unhealthy and unstable global economy.
China happens to be the major source of the global supply chain. Being the epicenter of the virus outbreak, China’s economic activities slowed down which hampered the global demand and supply scenario. Furthermore, other infected countries like Italy, America, Japan, etc. are on a lockdown in order to contain the virus.
The demand for oil fell in the last few months due to contracting economic activities around the globe and especially in China, which is the largest oil importer, subsequently this led price drop of oil in the global market. But the falling prices of the commodity fell even steeply than estimated as Saudi Arabia and Russia, two largest oil producers locked horns with each other.
The Beginning of ‘Oil-War’ in 2020
‘OPEC+’ (OPEC countries & Russia) recently held a conference in Vienna to come up with a contingency plan on the falling oil demand and subsequently falling oil prices. As per the International Energy Agency, the demand for oil will fall by 90,000 barrels per day accounting for the recent outbreak of ‘Coronavirus’.
As a solution, OPEC suggested a production cut in oil in response to falling oil demand, and stabilize the subsequently falling oil prices. But OPEC’s failed effort to convince Russia on the same led to the ‘Oil-War’.
On Russia’s disagreement to cut the oil production, Saudi Arabia member country of OPEC announced to increase its oil production followed by cutting its export prices of oil by $11, making the price $34 per barrel. This move by Saudi Arabia hurt all the other oil-producing countries.
Why did Russia refuse to cut Oil production?
Russia’s refusal to cut oil production and stabilize the price is explained as its way to hurt the USA’s Shale Oil Industry, which is one of the largest oil producers. Lower price per barrel will impact the USA’s Shale Oil margins. The oil extracting cost for USA is high, hence falling oil prices would further impact the profits for US Shale Oil companies.
How is Oil-War impacting oil-producing countries?
A beaten oil price, which is down by almost 25% due to on-going ‘Oil-War’, has some major implications. Being the most highly traded commodity, tanking oil prices is going to impact the revenues of the oil-run economies heavily. It is too soon to analyze the measure of the impact but, since the world’s economy is highly correlated to oil-prices and its demand, we can only imagine the impact if it gets worse.
What will be the impact on oil-importing countries?
While it only seems logical to say that tanking oil price is an opportunity of biggest oil importers like China, India, etc. but it isn’t that simple.
China, which is the largest oil importer and accounted for more than 80% of global oil demand growth in 2019, has already cut its oil demand 20% in February 2020 due to ‘Coronavirus’ impact. As a chain event similar fall in demand is seen worldwide. (Source- IEA, Business Insider)
Tanking oil price seems attractive to oil-importing countries, as it contributes to huge savings. But the scenario is a little different. Buying cheaper is profitable but with less demand, the benefit will not be passed over to a great extent.
The current scenario of the global oil market is dicey and uncertain. The extent of domination that oil has on the economies worldwide only points towards one direction that longer the war continues higher will be the impact.
Saudi Arabia and Russia both are oil-driven economies and hence affording a tanking oil-price for a longer duration will only hurt their economies in the long run.
On the other hand, USA’s influence on the global output of oil is not nothing. It is the largest oil-producing country, thus it can also influence majorly. However Trump hasn’t announced any move to secure USA from the current oil-war scenario, but that doesn’t make America vulnerable. If the oil-war continues sooner or later we might witness a power play by America.
It is evident from history that geopolitical tensions like the ‘US-China Trade War’, have only resulted in damages. However, where few suffer some others might take advantage. Only time will tell what turn will this ‘Oil-War’ take.
I am an MBA graduate specialised in Finance. I am a passionate stock market investor and a movie buff. I have always been inclined towards learning and development through different styles and new experiences. I believe knowledge is a vital ingredient for success. So here I am trying to contribute my best to add to your financial knowledge via this knowledge centre ‘Trade Brains’.
Understanding why do Stock Markets Exist: A stock market is a public market where people can buy and sell shares on the stock exchange. The stocks, also known as equities, represent ownership in the company.
Stock markets have existed for centuries. The oldest stock exchange was started in Belgium back in 1531. The brokers and moneylenders used to meet there to deal with the businesses. However, they never used actual stocks but traded in promissory notes and bonds. Later, the Amsterdam Stock Exchange was established in 1602 by the Dutch East India Company and regarded as the first real stock exchange.
Since its inception, stock markets have served many purposes, the most important being to provide companies with a source to raise capital for investment and expansion.
Why do stock markets exist?
Stock markets exist to serve the wider economy. It helps individuals earn a profit on their income when they invest in the stock market and allows firms to spread their risks and receive large rewards. It also enables the government to increase spending through the tax revenue they earn from corporations that trade on the stock exchange. The government uses the revenue to increase re-investment and employment capacity.
The stock market plays an important role in the economy of a country in terms of spending and investment. Without stock markets, many countries would not be as developed as they are. Alongside this, it has helped individuals become wealthy and increases the overall standard of living in many economies.
Following are some of the most important functions of a stock market in the economy:
— Stock market helps companies raise capital
If stock markets did not exist, companies would have to resort to borrowing from the bank to raise money for expansion. This would be a burden on the company as they would have to repay the loans with interest.
Fortunately, with stock markets, businesses have the ability to create an initial public offering and raise large amounts of cash without having to worry about repayment. Moreover, publicly traded companies have no obligation to pay dividends when they incur losses.
Capital raised this way can help companies expand operations and create jobs in the economy. From a greater economic perspective, consumer spending increases, governments can benefit from tax revenues and there will be lower levels of unemployment.
— Stock market helps create personal wealth
One of the most important benefits of the stock market is its ability to help generate personal wealth in the economy.
For the individual investor, the stock market provides a way to invest your income to earn a share of the companies’ profits. The revenue they earn can increase spending in the economy that can have a multiplier effect. The increased spending by individuals leads to increased investment and employment.
— It helps increase investment in the economy
One of the key drivers of Gross Domestic Product is the level of investment in the economy. Governments often create fiscal and monetary policies in the economy to promote greater investment. The stock market is considered to be one of the most prominent sources for people to invest money in.
Furthermore, investors are always looking to invest in companies with high growth potential. If the stock market is performing well, this not only increases investment from local investors but also attracts foreign direct investment as people abroad invest in the local stock exchange. For example, people in India can invest in the NYSE which helps increase GDP of the US economy or vice-versa.
— Market serves as an indicator of the state of the economy
(Sensex last +30 years graph)
The performance of the stock market is a rough indicator of how well the economy is performing. This often depends on speculators and perceptions of investors in the market. A rise or fall in the price of shares represents what cycle the economy is in such as a recession or a boom.
There is a symbiotic relationship between the state of the economy and the performance of the stock market. Economists use this as a way to analyze the past performance of investment and spending which helps them in the creation of new economic policies. The stock market serves as a barometer for the economy.
— Stock Market also affects non-investors in the economy
All members of society are affected by the stock market performance regardless of whether or not they invest in stocks.
People with pension funds and retirement accounts are impacted by low stock prices as the value of their accounts is tied to the stock market. Companies can also reduce employee benefits (pensions) as they can no longer afford to spend money on this which can delay the retirement age. Furthermore, when a company’s share price goes down, it affects job security as firms cut back on spending and many people could end up losing their jobs.
The stock market also impacts the rate of taxes and interest rates set by the government. During the Great Depression, the US government lowered taxes to induce borrowing but once the economy was out of depression, the government increased interest rates to encourage investment. Interest rates can affect a non-investor because a person renting out a home does not have to pay interest on a home loan directly but the landlord is likely to increase the rent to cover the high-interest expense.
Closing Thoughts
The stock market gives opportunities to the businesses and the public to transfer capital and ownership in a controlled, secure and managed environment. In addition to providing a convenient way for companies to raise capital and for individuals to increase wealth, the stock market helps keep a check on corporate regulation and increases the economic growth and prosperity of the nation.
