Posts archive for September, 2020

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Farm Bill 2020 Explained – Are Farmers Winning or Losing?

In the recently launched famous Farm Bill 2020, three bills have been passed by the Indian Parliament aiming at introducing reforms in the agricultural sector. The importance of reforms can only be understood after considering that over 60% of the population works in the agriculture industry. This sector also contributes to about 18% of the country’s GDP. These bills currently face extreme objection by the opposition in both the houses. The bills have also led to intensifying protests by farmers in states like Punjab, Haryana, and Madhya Pradesh despite COVID-19.

A statewide bandh was imposed on Monday due to protests. But arent reforms positive changes or improvements implemented? Then why have these protests erupted? Today we try and understand these Bills, its possible effects on farmers in order to understand why they are opposed throughout the country.

The 3 Bills that were introduced in Farm Bill 2020

The three bills passed by the Indian Parliament aiming at introducing reforms in the agricultural sector in Farm Bill 2020 are:

‘Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill‘, 2020
‘Farmers’ (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill‘, 2020
‘Essential Commodities (Amendment) Bill‘, 2020

The laws claim to bring farmers closer to the market by changing where they can sell, the ability to store produce, and whether they can enter into contracts.

It may be surprising that the farmers were restricted to the following terms to date. Let us further explore why these laws were introduced and why these restrictions were present in the first place.

– ‘Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill‘, 2020

This law allows farmers to sell anywhere within the country under the ‘One Nation- One Market’ concept. The ECA initially restricted farmers from selling anywhere other than government-approved mandi’s. These government-approved mandis’ are called ‘Agriculture Product Market committees’ [APMC]. An APMC is a state-operated market where farmers are allowed to sell their produce to traders or middlemen. These middlemen then sell their produce to consumers throughout the country.

Some states had earlier criminalized farmers selling their produce anywhere other than these mandis’. Law had earlier criminalized farmers selling their produce anywhere other than these mandis’. These APMCs were initially set up to protect farmers from big retailers and ensure that prices do not get too high.

APMC’s also provide farmers with information regarding prices. This is done through MSP’s. MSP (Minimum Support Price) is the minimum price that farmers can be sold. The MSP’s are set by the government. Such price flooring ensures that farmers do not receive rates that are too low. But unfortunately for farmers, the prices in APMC’s although above MSP, are controlled by the middlemen cartels. These cartels come into an agreement over the price set beforehand.

The new bill passed also

(i) limiting the operation of APMC laws by states to the market yards;
(ii) Allows private parties to set up online trading platforms for trading in agricultural commodities
(iii) Sets up a dispute-resolution mechanism for buyers and farmers to be operated by a sub-divisional magistrate.

The new bill however does not do away with APMC’s. If the farmers still want to, they can go ahead and sell their produce at APMC’s and avail the MSP support. But they have the freedom to sell elsewhere and receive higher prices but are at the risk of not having MSP’s.

Why have there been protests then?

The downside to this law is that the person in question is a farmer who may not possess the bargaining leverage. This bill will lead to the entry of private corporates that further exploit the farmers

It is also naive to simply assume that farmers in Punjab who are accustomed to mandis will go ahead and sell their produce to buyers in Karnataka. India is still plagued by huge connectivity issues and the cost of transit might far exceed that paid to APMC’s. APMC has this advantage as they are already established they have roads connecting most of the villages making it easier for farmers to get to mandis.

You may have already noticed that although there have been differing views across the country, protests are concentrated to the states of Punjab, Haryana, M.P. This is because it is in these states that farmers rely on MSP and have strong market systems based on APMC’s. In fact, Bihar, Kerala, and Manipur do not follow the APMC system at all. In India, the state governments have the power to regulate agricultural markets and fairs. Hence different states have different approaches towards this.

In Haryana more than 75% of the wheat and Paddy is grown is bought by the government at MSP rates whereas this number is higher in Punjab at 85%. The Punjab government charges a 6% mandi tax apart from a 2.5% fee for maintaining APMC’s giving them an annual revenue Rs. 3500 crores. These revenues that are earned from farmers are then given back to them as graceful subsidies in the form of electricity etc. This plays a very important role in the voting dynamics and hence the unrest in these states.

– ‘Farmers’ (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill‘, 2020

This Bill ensures that farmers are allowed to enter into contracts with buyers. Here farming is carried out on the basis of the agreement between the buyers and the producers. One of the greatest advantages that farmers receive through this bill is the price assurance even before sowing his crops.

The scope of contract farming is huge as MNC’s regularly get into contracts with farmers in order to ensure they receive specified types of produce. For eg., Mcdonalds uses only a specified kind of potatoes for their Fries and gets them grown accordingly. Similarly, other chains too require specified produce and would prefer to be directly in touch with farmers rather than traders to ensure that they are organic and fresh.

The downside

The downside to this is, however, lies in the fact that over 86% of the country’s farmers are marginal farmers who own very little land. The possibility that huge corporations will go ahead and exploit the farmers through unbalanced contracts is high. These contracts include the dangers of turning farmers into slaves.

‘Essential Commodities (Amendment) Bill‘, 2020

Of all the 3 bills that have been passed, it is the ECA which was long overdue. The ECA has its roots in WW2 where laws were implemented by the British to exploit the supply within the country. The bill places restrictions on the storage of essential commodities like pulses, oilseeds, onions, etc but has now been amended. The amended ECA reduces the power that states and the center have.

Closing Thoughts

One of the reasons why there has been a lot of uproar throughout the country is due to the unconstitutional way in which the laws were passed as it is the state governments that regulate these aspects. The government should have included the opposition and also taken into account the voice of farmers in order to plug the loopholes in the bills.

This would not only create an assisted approach towards privatizing the sector but also avoid further exploitation. But unfortunately, the bills due to not being communicated appropriately have created an air of mistrust between the ruling, opposition, and the farmers.

Aron Almeida

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.

September 30, 2020 Aron Almeida News 7 comments

#19 Most Important Financial Ratios for Investors!

List of most important Financial ratios for investors: Reading the financial reports of a company can be a very tedious job. The annual reports of many of the companies are over hundreds of pages which consist of a number of financial jargon. Moreover, if you do not understand what these terms mean, you won’t be able to read the reports efficiently. Nevertheless, there are a number of financial ratios that have made the life of investors very simple. Now, you do not need to make a number of calculations and you can just use these financial ratios to understand the gist.

In this post, I’m going to explain the 19 most important financial ratios for investors. We will cover different types of ratios like valuation ratios, profitability ratios, liquidity ratios, efficiency ratios, and debt ratios.

Please note that you do not need to mug up all these ratios or formulas. You can easily find all these ratios of any public company in India on our stock research portal here. Just understand them and learn how & where they are used. These financial ratios are created to make your life easier, not tough. Let’s get started.

19 Most Important Financial ratios for Investors

A) Valuation Ratios

These ratios are also called Price ratios and are used to find whether the share price is over-valued, under-valued, or reasonably valued. Valuation ratios are relative and are generally more helpful in comparing the companies in the same sector (apple to apple comparison). For example, these ratios won’t be of that much use if you compare the valuation ratio of a company in the automobile industry with another company in the banking sector.

Here are a few of the most important Financial ratios for investors to validate a company’s valuation.

1. Price to Earnings (PE) ratio

The price to earnings ratio is one of the most widely used ratios by investors throughout the world. PE ratio is calculated by:

P/E ratio = (Market Price per share/ Earnings per share)

A company with a lower PE ratio is considered under-valued compared to another company in the same sector with a higher PE ratio. The average PE ratio value varies from industry to industry.

For example, the industry PE of Oil and refineries is around 10-12. On the other hand, the PE ratio of FMCG & personal cared is around 55-50. Therefore, you cannot compare the PE of a company from the Oil sector with another company from the FMCG sector. In such a scenario, you will always find oil companies undervalued compared to FMCG companies. However, you can compare the PE of one FMCG company with another company in the same industry, to find out which one is cheaper.

2. Price to Book Value (P/BV) ratio

The book value is referred to as the net asset value of a company. It is calculated as total assets minus intangible assets (patents, goodwill) and liabilities. The Price to book value (P/B) ratio can be calculated using this formula:

P/B ratio = (Market price per share/ book value per share)

Here, you can find book value per share by dividing the book value by the number of outstanding shares. As a thumb rule, a company with a lower P/B ratio is undervalued compared to the companies with a higher P/B ratio. However, this ratio also varies from industry to industry.

3. PEG ratio

PEG ratio or Price/Earnings to growth ratio is used to find the value of a stock by taking into consideration the company’s earnings growth. This ratio is considered to be more useful than the PE ratio as the PE ratio completely ignores the company’s growth rate. PEG ratio can be calculated using this formula:

PEG ratio = (PE ratio/ Projected annual growth in earnings)

A company with PEG < 1 is good for investment.

Stocks with a PEG ratio of less than 1 are considered undervalued relative to their EPS growth rates, whereas those with ratios of more than 1 are considered overvalued.

4. EV/EBITDA

This is a turnover valuation ratio. EV/EBITDA is a good valuation tool for companies with lots of debts. This ratio can be calculated by dividing enterprise value (EV) of a company by its EBITDA. Here,

EV = (Market capitalization + debt – Cash)
EBITDA = Earnings before interest tax depreciation amortization

A company with a lower EV/EBITDA value ratio means that the price is reasonable.

5. Price to Sales (P/S) ratio

The stock’s Price to sales ratio (P/S) ratio measures the price of a company’s stock against its annual sales. It can be calculated using the formula:

P/S ratio = (Price per share/ Annual sales per share)

Price to sales ratio can be used to compare companies in the same industry. Lower P/S ratio means that the company is undervalued.

6. Dividend yield

Dividends are the profits that the company shares with its shareholders as decided by the board of directors. Dividend yield can be calculated as:

Dividend yield = (Dividend per share/ price per share)

Now, how much dividend yield is good? It depends on the investor’s preference. A growing company may not give a good dividend as it uses that profit for its expansion. However, capital appreciation in a growing company can be large. On the other hand, well established large companies give a good dividend. But their growth rate is saturated. Therefore, it depends totally on investors whether they want a high yield stock or growing stock.

As a rule of thumb, a consistent and increasing dividend yield over the past few years should be preferred.

7. Dividend Payout

Companies do not distribute its entire profit to its shareholders. It may keep a few portions of the profit for its expansion or to carry out new plans and share the rest with its stockholders. Dividend payout tells you the percentage of the profit distributed as dividends. It can be calculated as:

Dividend payout = (Dividend/ net income)

For an investor, a steady dividend payout is favorable. However, a very high dividend payout like 80-90% maybe a little dangerous. Dividend/Income investors should be more careful to look into the dividend payout ratio before investing in dividend stocks.

B) Profitability ratio

Profitability ratios are used to measure the effectiveness of a company to generate profits from its business. A few of the most important financial ratios for investors to validate the company’s profitability ratios are ROA, ROE, EPS, Profit margin & ROCE as discussed below.

8. Return on assets (ROA)

Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets. It can be calculated as:

ROA = (Net income/ Average total assets)

A company with a higher ROA is better for investment as it means that the company’s management is efficient in using its assets to generate earnings. Always select companies with high ROA to invest in.

9. Earnings per share (EPS)

EPS is the annual earnings of a company expressed per common share value. It is calculated using the formula

EPS = (Net Income – Dividends on Preferred Stock) / Average Outstanding Shares

As a rule of thumb, companies with increasing earnings per share for the last couple of years can be considered as a healthy sign.

10. Return on equity (ROE)

ROE is the amount of net income returned as a percentage of shareholders’ equity. It can be calculated as:

ROE= (Net income/ average stockholder equity)

It shows how good is the company in rewarding its shareholders. A higher ROE means that the company generates a higher profit from the money that the shareholders have invested. Always invest in companies with an average ROE for last three years greater than 15%.

11. Net Profit Margin (NPM)

Increased revenue doesn’t always mean increased profits. The profit margin reveals how good a company is at converting revenue into profits available for shareholders. It can be calculated as:

Profit margin = (Net income/sales)

A company with a steady and increasing profit margin is suitable for investment.

12. Return on capital employed (ROCE)

ROCE measures the company’s profit and efficiency in terms of the capital it employs. It can be calculated as

ROCE= (EBIT/Capital Employed)

Where EBIT = Earnings before interest and tax. And further, Capital employed is the total number of capital that a company utilizes in order to generate profit. It can be calculated as the sum of the shareholder’s equity and debt liabilities. As a rule of thumb, invest in companies with higher ROCE compared to their competitors.

Also read: #27 Key terms in share market that you should know

C) Liquidity ratio

Liquidity ratios are used to check the company’s capability to meet its short-term obligations (like debts, borrowings, etc). A company with low liquidity cannot meet its short-term debts and may face difficulties to run it’s business efficiently. Here are a few of the most important financial ratios for investors to check the company’s liquidity:

13. Current Ratio

It tells you the ability of a company to pay its short-term liabilities with short-term assets. The current ratio can be calculated as:

Current ratio = (Current assets / current liabilities)

While investing, companies with a current ratio greater than 1 should be preferred. This means that the current assets should be greater than the current liabilities of a company.

14. Quick ratio

It is also called an acid test ratio. The quick ratio takes accounts of the assets that can pay the debt for the short term.

Quick ratio = (Current assets – Inventory) / Current liabilities

The quick ratio doesn’t consider inventory as current assets as it assumes that selling inventory will take some time and hence cannot meet the current liabilities. A company with a quick ratio greater than one means that it can meet its short-term debts and hence quick ratio greater than 1 should be preferred.

D) Efficiency ratio

Efficiency ratios are used to study a company’s efficiency to employ resources invested in its fixed and capital assets. Here are three of the most important financial ratios for investors to check the company’s efficiency:

15. Asset Turnover Ratio

It tells how good a company is at using its assets to generate revenue. Asset turnover ratio can be calculated as:

Asset turnover ratio = (Sales/ Average total assets)

The higher the asset turnover ratio, the better it’s for the company as it means that the company is generating more revenue per rupee spent.

16. Inventory Turnover Ratio

This ratio is used for those industries which use inventories like the automobile, FMCG, etc. A company should not collect piles of shares and should sell its inventories as early as possible. The inventory turnover ratio helps to check the efficiency of cycling inventory. It can be calculated as:

Inventory turnover ratio = (Costs of goods sold/ Average inventory)

The inventory turnover ratio tells how good a company is at replenishing its inventories.

17. Average collection period:

The average collection period is used to check how long the company takes to collect the payment owed by its receivables. It is calculated by dividing the average balance of account receivable by total net credit sales and multiplying the quotient by the total number of days in the period.

Average collection period = (AR * Days)/ Credit sales

Here, AR = Average amount of accounts receivable
Credit sales= Total amount of net credit sales in the period

The average collection period should be lower as a higher ratio means that the company is taking too long to collect the receivables and hence is unfavorable for the operations of the company.

Also read: 10 Must Read Books For Stock Market Investors.

E) Debt Ratio

Debt or solvency or leverage ratios are used to determine a company’s ability to meet its long-term liabilities. They are used to calculate how much debt a company has in its current financial situation. Here are the two most important Financial ratios for investors to check debt:

18. Debt/equity ratio

It is used to check how much capital amount is borrowed (debt) vs that of contributed by the shareholders (equity) in a company.

As a thumb rule, invest in companies with debt to equity ratio less than 1 as it means that the debts are less than the equity.

19. Interest coverage ratio

It is used to check how well the company can meet its interest payment obligation. Interest coverage ratio can be calculated by:

Interest coverage ratio = (EBIT/ Interest expense)

Where EBIT = Earnings before interest and taxes

The interest coverage ratio is a measure of the number of times a company could make the interest payments on its debt with its EBIT. A higher interest coverage ratio is preferable for a company as it reflects- debt serving ability of the company, on-time repayment capability, and credit rating for new borrowings

Always invest in a company with a high and stable Interest coverage ratio. As a thumb rule, avoid investing in companies with an interest coverage ratio less than 1, as it may be a sign of trouble and might mean that the company has not enough funds to pay its interests.

Closing Things

In this article, we discussed the list of most important Financial ratios for investors. If you want to look into these financial ratios for any publically listed company on Indian stock exchanges, you can go to our stock research portal. Here, you can find the five year analysis and factsheet of all these ratios.

That’s all for this post. I hope this article on the most important Financial ratios for investors is useful to the readers. In case I missed any important financial ratio, feel free to comment below. Happy Investing.

Kritesh Abhishek

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

www.linkedin.com/in/kriteshrules/

September 29, 2020 Kritesh Abhishek Investment Basics, Valuations 13 comments

Why Adani Green Shares are Rallying?

Stock analysis on why Adani Green shares are Rallying: Over the last year, the shares of Adani Green Ltd. have multiplied investor fortunes by over 12 times. This is the first company in the Adani Group led by Gautam Adani to cross the Rs. 1 trillion market capitalization.

This also made Adani Green the top solar generator globally. Today we take a look at the reasons for this increase.

Adani Green Energy Ltd. is currently the largest solar power producer in the world. AGEL is part of the diversified Adani Group. AGEL established its first solar project in 2015 and had completed just two solar projects by 2017. The Company went public in 2018 in plans to accelerate its growth to meet its targets. The company develops, owns, operates, and maintains utility, scale, grid-connected solar, and wind farms.

What was the cause of the Adani Green share rally?

Here are a few of the potential reasons why Adani Green shares are rallying:

1. Infrastructure Potential

Adani group tops among global solar developers because of its 2.3 GW operational projects, 2GW under construction. In addition to these, earlier this year in May AGEL won the world’s largest solar bid of 8GW worth $6 billion ( 45,000 crores) by the Solar Energy Corporation of India (SECI). This puts AGEL’s total capacity at 12.3GW. According to Mercom Capital, this puts AGEL at the no. 1 spot in the latest ranking of global solar companies by Mercom Capital.

In the last 3 years, AGEL’s capacity base grew 3.4 times, and the 8GW project awarded by SECI will ensure that this is carried forward. This also AGEL on track to achieve its target of reaching 25GW of renewable energy capacity by 2025.

AGEL is currently in the final stages of its talks regarding the takeover of 205 MW solar power plant owned by Essel Group. In order to meet the construction needs of 4 upcoming projects, AGEL has begun discussion with lenders like Standard Chartered Bank, JPMorgan, MUFG, Barclays, DBS Bank, and Qatar National Bank, among others.

2. Net Profit

Another reason that added to the rally was the net profit of Rs 55.64 crore from Q4 of the last fiscal announced in May this year. In the year before AGEL had reported a net loss of Rs. 94.08 crore in the corresponding quarter. The total income of the company during Q1FY21 rose to Rs 878.14 from Rs 675.23 crore in the same period last year.

Lower expenses were one of the factors responsible for profits this year. The company mentioned a change in the depreciation method. This led to a reduction in depreciation and amortization.

3. Global Interests

AGEL growth had sparked global interests in the firm. Earlier this year in April Total invested Rs. 3707 crore for a 50% partnership with Asian Green. Total is a global energy giant that produces market fuels, natural gas, and low carbon electricity. Total did this through its subsidiary Total SA which will enter into a 50:50 joint venture with AGEL.

Last week Vanguard Group too acquired 1,30,84,019 equity shares in AGEL leading to 3% gains on the stock price.

Closing Thoughts

Adani Green can produce over 12 GW and targets 25 GW by 2025. But does this warrant its Mcap exceeding Rs.1 Lac crore? Its production estimates peg the total cost at Rs. 30,000 crore. This is after considering Rs. 5 crores spent for each MW making the 1 lac crore value exceeding. NTPC a conventional energy producer has 19 times the operating asset base and much higher revenue but still is valued less than Rs.90,000 crores.

A good portion of the price increase is the future anticipation that the company will perform due to its infrastructural potential, increasing profitability, and global interest is shown above.

Apart from this, it is impossible to address that AGEL is present in multiple hurdles present like the huge cost of capital from secured rights for large-scale land requirements and transmission connectivity which is available to establish large players. AGEL also benefits from the high growth potential of the renewable industry which is also pushed for by the Indian government.

Aron Almeida

September 29, 2020 Aron Almeida Market, Stocks No comments yet

Different Charges on Share Trading Explained- Brokerage, STT & More!

Different Charges on Share Trading Explained. Brokerage, STT, DP & More (Updated): There are a number of charges and taxes involved while trading in India i.e. buying or selling of shares. Some of them are quite popular like Brokerage Charge & GST, while there are many others that the traders and investors are not aware of. In this post, I am going to explain all types of different charges on share trading. Some common ones are brokerage charges, Security transaction charges (STT), stamp duty, etc.

Anyways, before we start discussing them, let us spend a few minutes to learn a few basics things that you need to know first. So, be with me for the next 10-12 minutes to understand the explanation of all the different charges on share trading. Let’s get started.

1. Intraday Trading and Delivery

A lot many beginners trades in stocks and confuse it by investing or delivery. However, both of them are really different:

Intraday Trading: When you buy & sell a share on the same day, then it’s called Intraday trading. For example, you bought a share in the morning and sold it before the market closes on the same day, then it will be considered as an intraday
Delivery Trading: On contrary to Intraday, when you buy a share and hold it for at least one day, then it’s called a delivery. For example, you bought a share today and sold it after three days (or any day but today) then it will be considered as a delivery. Here you can sell the stock tomorrow, or the day after that, or a week later, a year later or 20 years later.

2. Full-Service Brokers and Discount Brokers:

Full-Service brokers: These are the traditional brokers who offer full-service trading services in stocks, commodities, currencies, mutual funds, etc along with research and advisory, portfolio and asset management, banking all in one account. For example, ICICI Direct, Kotak Securities. HDFC securities, etc.
Discount brokers: These are those budget brokers who offer high speed and the state-of-the-art execution platform for trading in stocks, commodities and currency derivatives. They charge a reduced commission (flat price) and do not provide trading advice. For example, Zerodha, 5Paisa, Angel Broking, Trade Smart Online, etc.

Also read: 8 Best Discount Brokers in India – Stockbrokers List 2020

In general, a full-service broker charges a brokerage between 0.03% – 0.60% of the transaction volume while trading in stocks. On the other hand, the discount brokers charge a flat fee (fixed rate of Rs 10 or Rs 20 per trade) on intraday. The majority of discount brokers also do not charge any fee on delivery trading.

It is important to note that you have to pay a brokerage charge on both sides of trading i.e. while buying a share and selling a share. Let’s take an example to understand the brokerage charge better.

Suppose there is a brokerage firm called – ABC. Now, this broker charges a brokerage fee of 0.275% on intraday trading and 0.55% on delivery trading. The total charges on both tradings can be given as-

	Intraday Trading	Delivery Trading
Brokerage	0.275% of total turnover	0.55% of total turnover
Turnover	If you buy 100 stocks at Rs 120 and sell at Rs 125, total turnover is (120100+ 125100=) Rs 24,500	If you buy 100 stocks at Rs 120 and sell at Rs 125, total turnover is (120100+ 125100=) Rs 24,500
Total Brokerage Cost	Total brokerage charge on Intraday trading (for both buying and selling) = 24,500 * 0.00275 = Rs 67.38	Total brokerage charge on Delivery (for both buying and selling) = 24,500 * 0.0055 = Rs 134.75

As the competition among the brokers is continuously increasing, these brokerage charges offered by the different brokers are also decreasing. For example, the discount brokers like Zerodha offers a flat fee of Rs 20 or 0.03% on Intraday trading (whichever is lower) and Delivery investments are FREE. Here are the Brokerage charges for different segments offered by Zerodha.

— Delivery Trading: FREE (Rs 0)
— Intraday Trading: Rs 20 per trade or 0.03% (whichever is minimum)
— Equity Futures: Rs 20 per trade
— Equity Options: Rs 20 per trade

Therefore, for the above table, assuming the same scenario, the person would be paying only Rs 7.35 in Intraday Trading and Zero Brokerage on Delivery, if he prefers Zerodha as its broker. Other discount brokers like 5Paisa, Upstox, Angel Broking, etc, also offer similar lower brokerage charges.

Now, apart from brokerage charges, there are also an additional couple of charges and taxes to be paid while share trading. As already mentioned earlier, some of them are Security transaction tax, service tax, stamps duty, transaction charges, SEBI turnover charges, depository participant (DP) charges, and also capital gain tax (which you’ve to pay at the end of the financial year but not while transacting).

Let’s understand these other different charges on share trading and taxes involved first. Further, we will also discuss an example at the end of this post to understand the charges and taxes involved better.

Different Charges on Share Trading

– Security Transaction Tax (STT)

Apart from brokerage, this is the second biggest charge involved while trading in stocks.
For delivery trading, STT is charged on both sides (buy & sell) of transactions and is equal to 0.1% of the total transaction price (on each side of trading).
For intraday and derivate trading (futures and options), STT is charged only when you sell the stock. For intraday, the STT charge is 0.025% of the total transaction price while selling.
For equity Futures, the STT is equal to 0.01% on the sell-side. On the other hand, for equity options trading, STT is equal to 0.05% on sell-side (on premium).

– Stamp Duty

Stamp duty is charged uniformly irrespective of the state of residence effective from July 1st, 2020. These new rates are only on the buy-side (and not on both buy and sell-side). Here are the new rates on stamp duty on different types of trades:

Type of trade	New stamp duty rate
Delivery equity trades	0.015% or Rs 1500 per crore on buy-side
Intraday equity trades	0.003% or Rs 300 per crore on buy-side
Futures (equity and commodity)	0.002% or Rs 200 per crore on buy-side
Options (equity and commodity)	0.003% or Rs 300 per crore on buy-side
Currency	0.0001% or Rs 10 per crore on buy-side
Mutual funds	0.005% or Rs 500 per crore on buy-side
Bonds	0.0001% or Rs 10 per crore on buy-side

Quick Note: Previously, the stamp duty was charged by the state government and hence not similar across all the states in India. A few states charged higher stamp duty, whereas a few of them charges lower duty taxes. Different states charge different stamp duty. Moreover, Stamp duty used to be charged on both sides of transactions while trading ( i.e. buying & selling) and hence are charged on the total turnover. **This rule changed after 1st July, 2020.

– Transaction Charges

The transaction charges is charged by the stock exchanges and that too on both sides of the trading. This charge is the same for intraday & delivery trading.
National stock exchange (NSE) charges a fee of 0.00325% of the total turnover as Transaction charges on Equity and Delivery Trading. On the other hand, Bombay stock exchange (BSE) charges a fee of 0.003% of total turnover as Transaction charges on Equity and Delivery Trading.
For Derivatives trading, BSE doesn’t cost any transaction charges. However, on NSE, the Exchange transaction charge is 0.0019% for futures trading and 0.05% of total turnover for Options Trading.

– SEBI Turnover Charges

SEBI stands for the Securities exchange board of India and it is the security market regulator. SEBI makes the rules and regulations on the exchanges for its proper functioning.
SEBI Turnover fee is charged on both sides of the transaction i.e. while buying and selling and is the same for all equity intraday, delivery, futures, and options trading.
The SEBI turnover charge is equal to Rs 10 per crore of the total turnover.

– Depository Participant (DP) Charges

There are two stock depositories in India- NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited). Whenever you buy a share, it is kept in an electronic form in a depository. For this service, the depositories charge some fixed amount.
The depositories don’t charge the traders or investors directory but charge the depository participant. Here, the brokerage firm or your demat account company is the depository participant (DP).
DP acts as a linkage between the depository and the investor as the investors cannot directly approach the depository. In short, the depository charges the DP and then the depository participant (DP) charges the investors.
For example, while trading with Zerodha, DP charge is equal to ₹13.5 + GST per scrip (irrespective of quantity), on the day, is debited from the trading account, i.e. when stocks are sold. This is charged by the depository and depository participant.

– Goods & Service Taxes (GST)

GST is the mandatory tax levied by the government on the services rendered and is equal to 18% of total brokerage and transaction charges.

– Capital Gain Taxes

Lastly, Capital gain taxes is the most important tax to understand in this article for the traders and investors. We are not going to cover all the details regarding capital gain taxes in this article, but just a short over. If you want to read the complete details, you can refer to this article.

There are two types of Capital gain taxes in India – Short-term capital gain tax and Long-term capital gain tax.
When you sell a stock before one year of buying, then it is considered as a Short-term. Here a flat 15% of the profit is charged as short-term capital gain tax.
When you sell a stock after one year of holding, then it is called the long-term. For the long term capital gain, you have to pay a tax equal to 10% of the gains, if it exceeds Rs 1 lakh.
For Intraday Traders, they need to pay taxes on their capital gains which depends on their tax slab. For example, if you’re in the highest tax slab and made some profits while intraday trading, you’ve to pay taxes of 30% on those gains.

Quick Note: You can also download our FREE android app of ‘Brokerage Calculator’ to find the total brokerage and actual profits/loss while trading in stocks ‘on your phone’. Here is the quick link!

Example of Different Charges on Share Trading

Now, let us see an example to understand these different charges on share trading and taxes involved better. Suppose there are two traders- Rajat and Prasad. Here, Rajat is a delivery trader who invests in the long-term i.e. for 2-3 years. On the other hand, Prasad is an intraday trader.

They both have their accounts in the same discount brokerage company named ABC. The brokerage charge for ABC is Rs 20 Per trade on intraday trading and FREE for delivery trading.

Also, let us suppose that both Rajat and Prasad have traded a total turnover of Rs 98,000 in a share (i.e. total cost involved while buying and selling). In addition, they both live in Maharastra.

Now the different charges and taxes paid by them for complete trading i.e. from buying to selling the shares can be given as-

	Prasad (Intraday Trader)	Rajat (Delivery Trader)
Buy Price	120	120
Sell Price	125	125
Quantity	400	400
Total Turnover	Rs 98000	Rs 98000
Exchange	NSE	NSE
State	Maharashtra	Maharashtra
Brokerage Charge	Rs 40 (Flat Rs 20 Per trade i.e. Buying & Sellling)	Rs 0 (FREE Delivery Trades)
STT	0.025% of sell side = 0.025 % of Rs 50,000 = Rs 12.5	0.1% on buy & sell = 0.1% of 98000 = Rs 98
Stamp Duty	0.003% of buy-side = 0.003% of 48,000 = Rs 1.44	0.015% of buy-side= 0.015% of 48,000 = Rs 7.2
Transaction Charges	0.00325% of total turnover = 0.00325% of Rs 10,000= Rs 3.18	0.00325% of total turnover = 0.00325% of Rs 10,000= Rs 3.18
SEBI Turnover Charges	Rs 10 / Crore of Total Turnover= Rs 0.10	Rs 10 / Crore of Total Turnover= Rs 0.10
GST	18% on (brokerage + transaction charges) = 0.18 * (40+ 3.18)= Rs 7.77	18% on (brokerage + transaction charges) = 0.18 * (0+ 3.18) = 0.57
Total Brokerage And Taxes	64.99	109.05
Total Profit or Loss	1935.01	1890.95
Capital Gain Tax	Depends on the tax Slab	Depends on Short/long term holding period

At first glance, it looks cheap to invest in intraday as the total charges are comparatively less here. But you should note that the frequency of trading for intraday traders is quite high. Many intraday traders easily make 2-3 high volume trades every day. So, they have to pay these brokerage charges and taxes again and again. On the other hand, delivery traders or long-term investors do not make such frequent trades.

Overall, charges and taxes are a very important part of trading and should not be ignored. You might think that you are in profit, but the real profit is the one which is left after deducting the charges and profit. I hope the traders will keep this in mind before trading the next time.

Zerodha Brokerage Calculator

Before ending this article, here’s the brokerage calculator for equity trades using Zerodha, the discount broker.

Quick Note: If you’re interested in opening your demat account with Zerodha, the No 1 stockbroker in India, here’s a direct link to the account opening page.

That’s all for this post. If you’ve any doubts related to the different charges on share trading in India, feel free to comment below. I’ll be happy to help you out. Cheers & Happy Trading!

Kritesh Abhishek

www.linkedin.com/in/kriteshrules/

September 25, 2020 Kritesh Abhishek Investment Basics, Online Brokers 84 comments

‘Vi’ – Vodafone-Idea Rebranding’s Reasons and Benefits!!

Understanding Vodafone-Idea Rebranding as Vi: Earlier this month ‘Vodafone Idea Ltd’, the resultant of a merger between Vodafone India Ltd and Idea Cellular Ltd. in 2018 rebranded itself as ‘Vi’ (read as ‘we’). With so much competition going on in the Indian telecom market, analysts were expecting Vodafone-Idea’s management to take some drastic steps. Vodafone-Idea needed some steps to fight back Reliance Jio and Bharti Airtel to grow its customers and margin.

Today, we take a look at the reasons behind the Vodafone-Idea rebranding as Vi, and the possible future of Vi.

‘Vi’ – Vodafone-Idea Rebranding: Why it was done? & Reactions?

Rebranding is a market strategy where a new name, symbol, or change in design is done for an already-established brand in order to create a new corporate image for the organization.

In the case of Vi, such reactive rebranding was done to mark the final step towards the integration of the two brands, three years after the news of the merger was first announced. Vodafone India Ltd and Idea Cellular Ltd were two brands that came together to survive the disruptions in the telecom industry post the introduction of Jio.

The rebranding luckily created a lot of social media buzz. But, not all were in favor of Vi with even Jio entering the fun.

It is clear that Vi now wants to be seen as a competitor and not just a survivor like its parent companies. But rebranding is an expensive affair and comes with added risks. When Snapdeal had created a new identity in 2016, the company spent close to 200 crores. When BP changed its logo to a Helios flower it cost the company $211 million.

In 2010 Zain, a telecom company was acquired by Airtel and renamed to Airtel Kenya. But unfortunately, the brand has undergone multiple rebrandings in the past. Starting from Kencel to Celtel in 2004, then to Zain in 2008 and finally Airtel Kenya. This brand change resulted in confused customers.

Although this cost seems excessive for a simple name change it is necessary as building awareness for a new brand in consumer minds is not easy. This includes multiple costs apart from market research. An actual implementation includes changing the signage on buildings, company letterheads, websites, and name tags. And also putting up advertisements to let the consumers know about the rebranding.

Also read: The Telecom War in India – Jio, Airtel, Vodafone?

Plans post ‘Vi’ Vodafone-Idea Rebranding

Things finally started going their way when the company finally received the much-needed relief where the nation’s apex court granted 10 years to pay the billions it owes to the government. The first step that the company is likely to take will be raising funds in order to meet its immediate operating expenses, government dues, interest payments, etc. The company plans to do this by issuing convertible bonds. The hybrid bonds will have tenures of around 10 years.

Once this is done the immediate focus of the company will be on improving its ARPU’s (Average Revenue Per User). Unfortunately for Vi, they currently have one of the lowest ARPU in the industry in comparison to Airtel and Jio. This is important because in order for the firm to achieve a cash flow breakeven it will need to generate double the ARPU’s it currently has.

In addition to this, the company will have to focus on retaining its falling active subscriber base. Vodafone Idea in the last few years has lost close to 100 million subscribers to new entrant Jio. One of the major reasons for this fall is the lack of exposure to the 4G network.

This is bound to affect retention as its competitors are currently preparing themselves for 5G networks. Once its operational efficiencies are improved the next round of financing is expected to come from equities which can be utilized to further strengthen its position in the industry.

Closing Thoughts

After Vodafone-Idea rebranding as Vi, they have also started offering many attractive deals and plans, which are somewhat similar or better than their competitors.

Although Vodafone Idea has rebranded itself to Vi in search of a fresh start, however, only time will tell about the effectiveness of the new brand. Luckily for Vi, if everything goes in its favor, it will be viewed as the underdog that rose to compete, instead of being viewed as two loss-making entities that came together for survival.

Aron Almeida

September 24, 2020 Aron Almeida Market, News No comments yet

What are Preferred Stocks? Meaning, Types, Benefits & More!

Understanding what are Preferred Stocks and why are they beneficial: The dream security for many would be one that provides you both the inherent security found in bonds and returns of an equity stock at the same time. Luckily enough for us, such financial instruments exist and not only provide security but also steady returns in the form of dividends. This flexible security is known as a Preferred Stock or a Preference Share.

Today, we are going to discuss what are preferred bonds. Here, we’ll cover their meaning and also clear out what these bond and equity hybrids are in order to better understand and decide if they can actually be preferred over their parents

What are Preferred Stock/Preference Shares?

Many of us do not know that there are two types of stocks. The first being the common stock which we are accustomed to. The second being preference shares.

Preference Shares or Preferred Stocks offer investors preferential right over common stock when it comes to earnings and asset distribution. However, in exchange for these preferential rights, preference shares do not possess the voting rights in a company that the common stock holds.

What are the benefits of Preferred Stocks?

The investors benefit in the following ways when it comes to preference shares

1. Fixed Income

This means when dividends are announced, the payments will first have to be made to preference shareholders and only then to common shareholders. The dividend rates of preference shares are fixed at a predetermined rate or some other floating factor depending on the terms of the issue.

The decision on when dividends have to be paid is at the discretion of the board. This is because the Preference shareholders do not possess and voting rights in order to influence the board members or decisions.

2. Security in the case of winding up

Also in the case of winding up of a company, it is the preference shareholders who have priority in claiming the company assets. Only after the obligations to Preference shareholders are fulfilled will the obligations to common stock begin.

It is because of the above reasons that the Preference shares are known to be a hybrid. Just like bonds they offer regular returns with no voting rights. But like equity, the shares are allowed the trade and have the potential to appreciate in price.

Hierarchy of Bonds, Preference shares, and Equity shareholders

— In terms of Returns

It is the interest on bonds that are first serviced from the profits made by the company. Only then will the preference shareholders be paid the dividends due to them. In a case where the profits made are not sufficient then the preference shareholders and common shareholders can be left out. This is because unlike for bonds if the company does not pay preference shareholders it does not mean that the company is in default.

The bonds here are treated as debt whereas preference shares are not. In a scenario where there are sufficient returns first the interest on bonds is paid. Next, the preference shareholders are paid based on the rates set. Lastly, the remaining amount is paid to the equity shareholders. Only then is the remainder paid to the common shareholders. The dividends to preferential shareholders are preferred but not guaranteed.

Unlike bonds and preference share, there is no rate set to equity. This means that there is no upper limit nor lower limit to the dividends they receive. In exchange for preferential treatment, the preference shareholders will never receive dividends in excess of the rates prescribed to them.

Despite this common stock are greater wealth creators in comparison to preferred stock and bonds. This is because there is no limit on the increase in the stock price. When it comes to Preference shares the price generally looms around the face value.

— In terms of Claim over Assets

In the case of winding up, it is the bondholders who are first paid off followed by the preference shareholders and then the common stockholders.

— In terms of Risk

Preferred stocks are less riskier in comparison to equity. But when compared to bonds preference shareholders are considered to be riskier. This is because they fall back when it comes to being compared over the claim of assets and fixed interest rates that bonds have.

Equity shareholders are the riskiest here as they get leftovers of the bondholders and preference shareholders in the case of winding up. In a case, where the company is performing poorly, the share prices of common stock are also adversely affected.

Types of Preferred stock

There are various types of preferred stock. The following are the most commonly used

1. Cumulative Preference Shares

Say a company is in a bad shape and is forced to suspend dividends for the year. Here if the shares are Cumulative Preference shares, they are still entitled to receive the dividend for the year. Such a missed dividend payment will be added to the dividend payments of the following years and paid to the cumulative preference shareholders.

Eg. Company ABC has issued Cumulative Preference shares. ABC has issued 3000 10% cumulative preference shares at Rs.100 face value. Here the dividends payments ABC is obliged to make is Rs 30,000. But due to COVID-19, the ABC can only pay Rs. 10,000 of the dividend in 2020. Here the Rs. 20,000 is carried forward as arrears and paid the next year. Hence ABC will have to make a total dividend payment of Rs. 50,000 in 2021. Amount arising from Rs. 20,000 carried forward and Rs. 30,000 accruing in 2021.

2. Convertible Preference Shares

These preference shares can be exchanged for a predetermined number of common shares. Convertible Preference Shares can be converted only when the Board of Directors decides to convert them.

3. Callable preference Shares

Callable preference shares can be called back similar to bonds. In a call, the shares issued are bought back by the company by paying its holders the par value and at times a premium. This is done by the company in situations when the interest rates in the market fall. In such a situation the company realizes that it does not have to keep servicing the preference shares at the high rates it was issued a few years ago. The company simply calls back the shares and then reissues it at lower rates.

4. Perpetual Preferred Stock

Here there is no fixed date on which the investors will receive back the capital. Here shares are issued in perpetuity.

The types of preference shares mentioned above are common examples. The company, however, may combine one variant with the other and issue a preference share eg. Convertible Cumulative Preference Shares. If there are multiple issues of preference shares the shares may be ranked by priority.

In preference shares, the highest-ranking is called prior, followed by preference, 2nd preference, etc. The dividends and final settlements will be made in the order of this ranking.

Where are these Preference Shares available?

Preference shares are traded on the same exchanges like that of common stock. However, their issues are rare as companies do not generally go for preferred stock making their market small and their liquidity limited. The price of preference shares on these exchanges are determined by a variety of factors like dividend rate, the creditworthiness of a company, type of preference share eg, cumulative, convertible, etc.

The share prices of Preference shares like bonds have an inverse relationship with interest rates.

Also read: How to Invest in Share Market? A Beginner’s Guide!

What to look before buying Preference Stocks?

Apart from looking at the type of preference share and the interest offered, it is also important necessary to figure out why the company issuing Preference Shares?

It is a known fact that companies issue preference shares in order to avoid dilution of capital. But it is also noticed that companies issue preference shares when they have trouble accessing other means of capital. This may be because banks are refusing loans due to their low creditworthiness. Raising money through Preference Shares is cheaper as it gives the option to the company to only serve them when they are able to, unlike other debt instruments.

Another reason may also be that preference shares do not reduce the creditworthiness of a company, unlike debt that is added to the balance sheet. The company can issue preference shares that act like debt but are shown as equities in the balance sheet. Happy Investing!

Aron Almeida

September 23, 2020 Aron Almeida Beginner's guide, Investment Basics 2 comments

Can Reliance Retail Replicate the Success of Jio in the Retail Sector?

After severely disrupting the telecom sector, Mukesh Ambani led Reliance has set its eyes on the Indian retail sector. Today, we are going to discuss one of the most popular questions these days i.e. can Reliance Retail replicate the success of Jio in the retail sector similar to what they did in telecom? Here, we assess the acquisition spree undertaken by reliance and the possibility of a disruption in the retail segment. Let’s get started.

Reliance and Future group acquisition

On August 29th, Reliance Retail reached an agreement with Future Group. According to the deal, Reliance would buy Future retail, wholesale, logistics, and warehousing business for $3.4 billion (Rs. 24713 cr.)

The Future Group was founded by Indian businessman Kishore Biyani as a stonewashed fabric seller in the 1980s. Today it is known for its retail segment which includes the BigBazaar hypermarket chain, Pantaloons clothing shop, FBB, Foodhall, Easyday, Nilgiris, Central, and Brand Factory.

But unfortunately for the Future group, its success came with huge amounts of debt and the COVID-19 pandemic finally broke the last straw. The deal gives Reliance access to 1500 stores in more than 400 cities with millions of customers.

Why did Reliance Choose Future?

Future despite being a brand that used to be successful is loaded with debt and doesn’t come close to compete with Reliance retail which as of September 2019 had over 10900 stores in 6700+ cities. The answer to this could lie in Futures’ presence on a scale in the brick and mortar retailing established brands, work systems, and human resources built over the years. The sale comes with established label brands that have a vendor ecosystem that has been developed.

The deal also includes Futures supply chain solutions which offer warehousing and logistics services. Its customers include the likes of Tata which uses this company as a service provider for dealers across the country and such a deal would help Mukesh Ambani in expanding his reach.

The deal, however, fell through with restrictions placed on the man who led the organized retail revolution in India. Kishore Biyani and his family members are not allowed to re-enter the retail segment for the coming 15 years. This is part of the non-compete agreements that are valid generally for 3-5 years.

The possible reasons for the long period maybe the financials of Future. Biyani is still allowed to operate in the home retailing sector through hometown stores. He owns Praxis Retail which has around 48 stores and has a generated revenue of Rs.702 crore in the last fiscal year.

Investing and Acquisition Spree of Reliance in Retail

After disrupting the telecom spree, Reliance recognized the potential of the Indian retail sector. This began in 2018 with Reliance announcing its entry into the e-commerce space with an online and offline hybrid system. This was followed by a series of acquisitions and finally the founding of Jiomart late in 2019.

Acquisitions and Investments

One of Reliance retails biggest acquisitions includes that of Hamleys for Rs. 620 crores. The acquisition of the 259-year-old toy store chain will give reliance added foothold in global markets to compete with the likes of Wallmart and Amazon. Reliances other investments include Genesis Luxury Fashion, apparel firm Future 101 Design, GLF Lifestyle brands, GIB body care, etc. and Zivame. Reliance also acquired Rhea Retail. In the pharma, segment Reliance acquired an online pharma company Netmeds for 420 crores.

Reliance has not limited itself to only expanding into the organized retail segment. It has also taken steps to ensure that the retail segment can be easily integrated into the online market place by making some significant acquisitions in the following startups

Other Acquisitions

Company Acquired	Function
Grab	Logistics startup
C-Square	software firm
Reverie Language Technologies	A vernacular language-as-a-service platform that enables real-time delivery of online content in many vernacular languages.
EasyGov	Indian government schemes/services aggregator enables people to apply for various government schemes
SankhyaSutra Labs	A multi-physics simulation service helps to find solutions to industrial problems.

Strategy for the Retail Sector

Reliance first entered into the retail segment in 2006. At this point, Reliance has not even been partitioned between Mukesh and Anil Ambani. By 2014 Reliance already had surpassed market leaders like Future in terms of revenue. It was in 2018 that Reliance tested the eCommerce space through reliancefreshdirect.com and ajio.com. In November 2018 reliance began testing JioMart “Desh ki Nayi Dukan”. It was tested in Mumbai, Thane, and Kalyan. Here orders could be placed through the instant messaging app Whatsapp. This gives Reliance access to the massive 400 million user base through Jio and Whatsapp. In the eCommerce, space Reliance is still behind market leaders like Amazon and Walmart.

So what plans does Mukesh Ambani have in store for the retail sector?

After having fair amounts of success in the organized retail sector Reliance has turned its focus towards the unorganized sector which includes local Kiranas. Mukesh Ambani has made it clear that Reliance’s future includes prospects where 50% of the groups’ revenue would be made through consumer-facing business in a decades time. Retail currently accounts for 21% of Reliances revenue.

In order to achieve this goal through the unorganized sector Reliance place to get local merchants on its eCommerce platform. Here the digital infrastructure built by Reliance Jio will be combined with its physical retail business. This is also known as O2O (Online to Offline marketplace) a business model used by Chinese eCommerce giant Alibaba. Here the consumer searches and orders the product through an online platform but buys it through offline channels. In the midst of all this will be the Point of Sale (PoS) terminal which is still being tested.

This PoS terminal will not only help merchants carry out common debit and credit card transactions but also enable them to keep a product inventory and also order through the wholesale store network. The apps and systems that will enable this are still being tested.

After understanding the design set in place the acquisition mentioned earlier(particularly support services) look more like strategic acquisitions. Examples include the purchase of ‘Grab a Grub’ a Mumbai based hyperlocal delivery company, Csquare info solutions – a company that provides software solutions for distributors and retailers, Haptik Infotech will provide conversation AI-enabled devices to users. These strategic acquisitions will not only boost Reliance’s mission but also help the startups extend their reach and funding under Reliance.

Challenges in the Unorganized Sector

One of the challenges that Reliance would face is getting local traders to tag along. Praveen Khandelwal, Secretary-General of the Confederation of All India Traders has lobbied in the past against eCommerce MNC’s players. He also states that the same rules would apply to domestic entrants as well.

This is mainly due to the predatory pricing followed by eCommerce players. This is mainly due to the predatory pricing followed by eCommerce players. If we look at how Reliance had gained significant market share in the telecom sector it becomes clear that there is a good possibility that the same predatory pricing measures may be used in the initial stages of the retail venture.

The Big Question: Can Reliance Retail Disrupt the Retail segment?

The Indian retail market was valued at 700 billion in 2019 and is expected to grow to $1.3trillion by 2025. Out of this the organized retail sector forms only a 10% share. The online retail segment is much smaller than this and it is worth only 3% of the total retail market in India. This shows why Mukesh Ambani was towards the retail segment.

Infiltrating the unorganized sector through the means of retail offers unlimited scope for growth. This also shows how only a small portion of the market has been tapped offering room for multiple players. Reliance may be able to grow within the sector but a disruption like the one seen in telecom is far fetched.

Bloomberg reported that a 40% stake has been offered to Amazon in Reliance retail in exchange for a $20 billion investment in the company. What’s interesting is that the near future will bring the possibility that two of the wealthiest men teaming up or otherwise competing to exploit the vast Indian retail opportunity.

Aron Almeida

September 22, 2020 Aron Almeida Market, News No comments yet

Indian Auto Ancillary Industry – Top Companies in 2020!

A Study on top companies in Indian Auto Ancillary Industry: The Auto Ancilliary Industry includes companies that provide supporting equipment to the primary products of a vehicle company. This support may be in the form of Tyres, Battery, Brakes, Suspension, etc.

Such industries enable vehicle companies to focus on their core competencies while they are able to produce quality parts they specialize in. The high growth prospects of the Auto Ancillary Industry makes it one of the sunrise industries in the Indian markets. Today, we take a look at the Auto Ancillary Industry in India and its top players. Let’s get started.

The Auto Ancilliary Industry in India

The Auto Ancilliary sector from India is mainly focussed domestically and does not play a large role globally. But this tips the scale in its favor when we look at the strides it can make in terms of growth. An Auto Ancilliary Industry is heavily dependent on the Automobile Industry. Luckily enough the Indian Automobile industry is the world’s fourth-largest, with the country currently being the world’s fifth-largest manufacturer of cars and seventh-largest manufacturer of commercial vehicles in 2019.

The Auto Component Manufacturers account for 2.3% of India’s Gross Domestic Product (GDP) and employs as many as 1.5 million people directly and indirectly each. Currently, the turnover of the industry stood at Rs 1.79 lakh crore (US$ 25.61 billion) in FY20 (till September 2019) and the export of auto components grew 2.7 percent to reach Rs 51,397 crore (US$ 7.35 billion) during the same time.

As per Automobile Component Manufacturers Association (ACMA), automobile components export from India is expected to reach US$ 80 billion by 2026. The Indian auto components industry aims to achieve US$ 200 billion in revenue by 2026.

Top Auto Ancilliary Companies in India

A. Tyre Segment

1. MRF Limited

MRF Limited is India’s Largest Tyre Company in terms of total sales and MCAP. The company initially started off in Madras as a balloon factory. It was in 1952 that the company decided to enter rubber manufacturing.

MRF today has come a long way to not only have a quarter of the market share but also has extended its presence to 65 countries. MRF makes and sells tyres not just for passenger cars and motorcycles, but also for trucks and buses, farm machinery, Pickup, 3-Wheeler, etc. The company also manufactures other rubber products such as conveyor belts and toys.

2. Balkrishna Industries Limited (BKT)

Balkrishna Industries Limited (BKT) is a leading manufacturer that specializes in the Off-Highway tire market. This includes specialist segments like mining, earthmoving, agriculture, construction, and other industrial tyre segments.

The company was founded in 1987 and since then has achieved the status of one of the best quality tyre brands in India. BKT has developed into a global player in the Off-Highway tire industry with a 6% global market share. Balkrishna Industries predominantly caters to the replacement market in North America and Europe. The Italian football second division, Serie B is known as Serie BKT after Balkrishna Industries purchased naming rights.

3. Apollo Tyres

Apollo Tyres was founded in 1972 and is headquartered in Gurgaon, India. Since then it has become one of the leading global suppliers of tyres and boasts a presence in over 100 countries. The company markets its products under two brands Apollo and Vredestein.

If tyres that come as original fitment with new vehicles are considered then Apollo Tyres takes the top spot. The company currently makes radials for cars, bikes, and a host of other commercial vehicles.

4. CEAT Ltd

CEAT is one of India’s leading tyre manufacturers today and has a strong global dominance. It was founded in 1958 and is now headquartered in Mumbai. CEAT, however, was not originally an Indian company. It was originally founded in Italy(1924) and the name CEAT was an abbreviation for ‘Cavi Elettrici e Affini Torino’. It was in 1982 that the RPG Group acquired the company.

Today, it makes tyres for cars, bikes, trucks, SUVs, Auto-rickshaws, buses, tractors, and various other vehicles. CEAT produces over 165 million tyres every year and offers the widest range of tyres to all segments and manufacturers.

5. Goodyear India

Goodyear is one of the world’s oldest and largest tyre companies. It was established in the year 1898 and is one of the most recognizable brands in today’s age. Goodyear has been in the Indian markets since 1960 and since then has developed a good understanding of what the Indian consumer wants and delivers accordingly.

Its products in the Indian markets include value offerings, high-performance radials, and rugged, off-road-ready tyres. Apart from this, Goodyear is known for supplying radials to Formula One cars and also serves airplanes.

B. Battery Segment

1. Exide Industries

Indian company Exide is one of the biggest manufacturers of batteries in the whole world. The company as old as independent India itself was incorporated as Associated Battery Makers (Eastern) Ltd. The company was renamed Chloride Electric Storage Co (India) Ltd and then again in 1995 the name was changed to Exide Industries.

Exide today forms a large portion of India’s battery exports. The company supplies automotive and industrial lead-acid batteries ranging from 2.5Ah to as high as 20,500Ah.

2. Amara Raja Batteries

Amara Raja Batteries is one of the largest manufacturers of lead acid batteries for both industrial and automotive applications. It sells its products under the brand Amaron and Powerzone. Amaron is the second-largest selling automotive battery brand in India. Powerzone on the offers a wide range of inverters, home UPS and inverter batteries.

The company not only makes batteries for distribution in India, but exports its products Africa, Asia Pacific, and the Middle East.

3. HBL Power Systems LTD

HBL Power Systems LTD offers specialized batteries and finds its biggest buyers in the aviation industry. The company was founded in 1997 and successfully developed its first product i.e an aircraft battery. Over the years the company also began manufacturing custom-designed, high-quality, cost-effective batteries to meet the needs of various core industries.

Apart from airways, the firm distributes its batteries to other sectors like railways, defense, and other heavy industries.

C. Other Auto Ancillary Industry Companies

1. Bosch Ltd

Bosch is originally a German engineering and technology MNC founded in 1886. The company entered India in 1922 but ventured into the auto ancillary only in 1951 after purchasing a 49% stake in Motor Industries Company Ltd (MICO). In 2008 MICO was renamed to Bosch Ltd.

Although the company functions in areas like Mobility Solutions, Industrial Technology, Consumer Goods, and Energy and Building Technology 84% of its revenues from India come from its automotive business. Bosch currently has a turnover of over $3 billion and 18 manufacturing sites, and seven development and application centers.

2. Motherson Sumi Systems Limited (MSSL)

Motherson Sumi Systems Limited (MSSL) was established in 1986 through a joint partnership between Samvardhana Motherson Group and Sumitomo Wiring Systems of Japan. MSSL is one of the leading auto component manufacturers. They specialize in automotive wiring harnesses, dashboards, door trims, bumpers, mirrors for passenger cars, and is also a leading supplier of plastic components and modules to the automotive industry.

The company recently acquired 80% of the stock of a German-based company called Peguform Group.

3. Endurance Technologies

Endurance Technologies Limited was incorporated on December 27, 1999. The company is one of India’s leading automotive component manufacturing companies. The company manufactures and supplies a diverse range of components.

Its products include aluminum Die–Casting Products, two-wheeler aluminum alloy wheels, shock absorbers, front forks for motorcycles and hydraulic and gas-charged dampers, struts, gas springs clutches, friction plates, hydraulic disc brakes, rotary brake discs, hydraulic drum brakes, and tandem master cylinders. The company has 16 manufacturing plants within India 2 in Germany.

4. WABCO India Limited

WABCO India Limited is a leading supplier engaged in manufacturing automotive components and related services. The Company provides safety and vehicle control solutions to the commercial vehicle segment of the automotive industry.

WABCO is also engaged in the manufacture of air brake actuation systems for commercial vehicles. The Company is also involved in various other segments, such as off-highway, defense, luxury bus, car, and trailers.

5. Sundram Fasteners

Sundaram Fasteners established in 1966 is a part of the TVS Group. Over the years they have grown into global leaders, manufacturing critical, high precision components for the automotive, infrastructure, windmill, and aviation sectors.

In Auto Ancillaries the company produces iron powder, tappets, shafts and hubs, couplings and gears, gear shifters, automotive pumps, radiator caps, hot forged components, cold extruded parts, powder metal components, and high-tensile fasteners.

Closing Thoughts

The auto ancillary industry is in the growth phase and is expected to grow at a double-digit CAGR between the period 2019-2026. Although investing in the Auto ancillary industry seems to be attractive it is important to note that all rumors to the automobile sector are also felt in the auto ancillary industry. These include impacts from festival seasons, credit crunch, bank interest rates, fuel costs, etc.

Another important factor that is expected to have a significant impact on the industry in the coming years is the push for Electric vehicles. Hence for inventors looking for long term investments selecting a company that is in tune with the changing needs into the electric segment would be optimal.

Aron Almeida

September 17, 2020 Aron Almeida Market, Stocks No comments yet

Indian Pharmaceutical Industry - Major Pharma Shares in India cover

Indian Pharmaceutical Industry – Best Pharma Shares in India!

Quick analysis of major shares in the Indian Pharmaceutical Industry: There is no other industry in the country that has achieved a global stature as that of the Indian Pharmaceutical Industry. The fact that the Indian Pharmaceutical industry has the possibility of soon being called the ‘Pharmacy to the World’, speaks volumes.

Today, we are going to discuss Indian Pharmaceutical Industry along with the major pharma shares in India. Here, we will give you an insight into the current state of the Indian Pharmaceutical Industry and the top-performing Indian companies.

Role Played by the Indian Pharmaceutical Industry

The Indian Pharmaceutical Industry plays a very important role in the global pharma markets. The industry supplies over 50 percent of global demand for various vaccines, 40 percent of generic demand in the US, and 25 percent of all medicine in the UK. Presently, over 80 percent of drugs used globally to combat AIDS are sourced from India.

India also constitutes 40 to 70 percent of supply to the World Health Organization’s demand for DPT and BCG vaccines and 90 percent of the global demand for the measles vaccine. Indian drugs are exported to more than 200 countries in the world making it the largest provider of generic drugs globally.

The Indian Pharma industry has been able to achieve this because of its unique characteristics. The drugs produced by Indian companies are low priced but still maintain the high regulatory standards of markets like the US and Europe. The reason for the drugs being of low price is mainly due to the large labor pool available. This also includes scientists and engineers with potential in comparison to their counterparts abroad.

The industry also reveals a highly competitive domestic environment which keeps the prices low. The low prices are one of the reasons why although India ranks tenth globally in terms of value but third in volume. The low prices coupled with the high quality offered which fall in line with the USFDA standards make the drugs not only accepted but also demanded everywhere in the world.

Growth prospects of the Indian Pharma Industry

Data from 1969 would help us better understand the growth prospects and the potential of the Indian Pharma industry. As of 1969, the Indian domestic market was dominated by foreign players holding a 95% market share. As of 2020 Indian pharma has an 85% domestic share and alone accounted for 15% of the global market. Pessimistic estimates have shown that the Indian Pharmaceutical market is expected to reach a value of between US$50 billion and US$74 billion by 2020.

This growth is mainly driven by the growth in medical infrastructure within the country. This would extend the accessibility to sections that lacked such healthcare before. The rising awareness and the ability to afford medicines will also account for a significant portion of domestic growth. India is projected to become one of the top 10 countries in terms of medical spending.

By 2040, India is also predicted to be the most populated country on earth, overtaking China. Other reasons for a boost in the global growth of Indian pharma would be the increase in branded drugs becoming off-patent over time. All these reasons coupled up would account for domestic growth making India attractive to international investors.

As global developed markets slow down, emerging markets like India, Russia, China, Brazil will account for greater roles in the pharma industry both as producers and consumers.

Pharmaceutical Industry – Best Pharma Shares in India

1. Sun Pharma

Sun Pharmaceuticals is Indias largest pharmaceutical company and the fifth largest specialty generic company in the world. The MNC was established by Mr. Dilip Shanghvi in 1983 offering products to treat psychiatry ailments.

Today the company offers its capabilities by producing branded generics, specialty, OTC products, antiretrovirals (ARVs), active pharmaceutical ingredients (APIs), etc. Its formulations treat various areas like cardiology, psychiatry, neurology, gastroenterology, and diabetology.

2. Aurobindo

Aurobindo Pharma was established in 1986 by Mr. P. V. Ramprasad Reddy, Mr. K. Nityananda Reddy, and other committed professionals. The company first began operations in a single manufacturing unit of Semi-Synthetic penicillin in Pondicherry. Today Aurobindo Pharma sells over 300 products in over 125 countries.

About 35% of sales are generated through APIs, 65% from the formulations business, of which 63% of formulation sales are from the United States. It is noteworthy that Aurobindo Pharma has one of the highest exposure to imports of APIs from China, mainly for antiretroviral and antibiotic drugs.

3. Lupin

Lupin Ltd. was established in 1968 and is currently amongst the top 10 generic companies in the world. Its businesses include formulations, Active Pharmaceutical Ingredients (API), drug delivery systems, and biotechnology. It is also known for growth therapies like Cardiology, Central Nervous System, Diabetology, Respiratory, Gynecology, Anti-Infective, Gastro-Intestinal, and Oncology.

4. Dr. Reddys Labratory

Dr. Reddy’s Laboratories was founded by Anji Reddy in 1984. The MNC manufactures and markets a wide range of pharmaceuticals in India and oversea,s and has over 190 medications, 60 active pharmaceutical ingredients (APIs) for drug manufacture, diagnostic kits, critical care, and biotechnology products.

5. Cipla

Cipla formerly known as Chemical, Industrial & Pharmaceutical Laboratories was founded by Dr. K.A. Hamied in 1935. The company has its presence around the world and is a therapy leader in India for anti-malarial with a market share of over 34%. The company also has a vast portfolio with more than 1,500 products in the market.

Cipla is known for its key role in selling HIV medicines in sub-Saharan Africa at one–twenty-fifth of the cost of medicines sold by other manufacturers.

Pharma Industry amidst COVID-19

The Covid-19 pandemic has exposed the reliance of the Indian pharma on China for the procurement of API (Active Pharmaceutical Ingredient). China was one of the leading countries to produce and sell APIs to the rest of the world until recently. The early effects of the coronavirus on China impacted the supply of such API throughout the world.

Pharma’s use Chinese ingredients to produce one-fifth of the world’s supply of medicines. For the number of medicines manufactured the reliance on Chinese APIs is as high as 70%. The figures in the manufacturing of antibiotics are much worse as they rely as high as 90% on Chinese imports.

Despite this Indian pharma’s have still strived to meet up to the added expectation during COVID-19. The industry has been able to also view the pandemic as an opportunity by providing drugs to many friendly countries. This was seen in situations when countries like the United States requested India to export the anti-malarial medicine — Hydroxychloroquine — in order to combat COVID-19. The industry rising up to the occasions have made global powers realize the potential of Indian pharma’s in becoming the Pharmacy to the world.

Despite the COVID-19 impact, the domestic pharma industry will grow between 4-6 percent in FY21. Following this it is also expected to have an 8-11% compounded annual growth rate (CAGR) in the FY 2020-2023 period.

Closing Thoughts

As seen above, the Indian pharma industry has unlimited potential especially in the post corona environment as global powers become skeptical towards China. In order for the industry to take advantage of the global scenario, the government’s role is of paramount importance.

It is important that the government raises its healthcare spending to 3% of GDP YoY. The lack of focus on directing adequate spending towards healthcare was seen in the shortages of healthcare personnel, equipment, and infrastructure. It is also necessary that both the increase and reduction in prices are regulated.

Extremely low prices have the possibility of making Indian pharma’s an unattractive investment opportunity. This may wipe out up to a $20 billion market opportunity. Another aspect that requires attention is the increased focus required in the AatmaNirbhartha of API. COVID-19 has shown both the cracks and the possibilities that the Indian pharma industry possesses.

With the right policies ensuring growth and guiding the industry it is entirely possible that India becomes the “Pharmacy to the World” in the future.

Aron Almeida

September 15, 2020 Aron Almeida Market, Stocks No comments yet

Socially Responsible Investing (SRI): Why it matters?

Introduction to Socially Responsible Investing (SRI): Deciding how you want to invest your money is often hard. You need to take many factors into consideration such as risk, returns, taxes, and inflation. It takes a lot of forethought and groundwork to figure out a way to get the best return on your investments.

Yet, there are some investors who choose to invest in companies that are not only financially stable but also make a positive impact on the environment. Here, we are talking about Sustainable or ethical investors, who in the investing world are also known as Socially responsible investors.

Today, we are going to discuss what is Socially responsible investing or SRI, why it is important, and finally, how to become a Socially Responsible investor. Let’s get started.

What is Socially Responsible Investing?

Socially Responsible Investing or SRI is choosing to invest in stocks that provide a financial gain as well as do social good. Here, investors tend to look into the ethical factor along with the fundamentals of a company become investing.

In SRI, the companies are evaluated based on the ESG index: environment, social justice, and corporate governance.

SRI helps in creating a big impact on the world along with making good returns. Although the socially-responsible investing concept is still up and coming in India, it is expected to gain greater momentum in the next few years. Companies have become more aware of the ESG factors and are looking to incorporate more of it into their business practices.

Socially Responsible Investing History

Socially responsible investing began in the early 1700s when the Quakers refused to participate in the slave trade in the U.S. Pastor John Wesley, the leader of the Methodist church claimed it was a sin to make a profit at the cost of your neighbor’s well-being. He stated that it was unethical to gamble and invest in industries that used toxic chemicals.

For many decades after John Wesley’s speech, investors avoided industries such as tobacco and liquor referring to them as ‘sin industries’. This evolved in the 1960s when investors decided to invest their money in companies that promoted social causes such as women’s rights and civil liberty.

Socially responsible investing played a huge role in South Africa during the 1980s when investors began pulling out their money due to the apartheid or the segregation of races. SRI had a prominent role in helping bring an end to the apartheid in 1994.

Sustainability Indexes

If you look into the American and European nations, they already a family of indices evaluating the sustainability performance of thousands of companies trading publicly. The Dow Jones Sustainability Indices (DJSI) launched in 1999, are the longest-running global sustainability benchmarks worldwide. To be incorporated in the DJSI, companies are assessed and selected based on their long-term economic, social and environmental asset management plans.

For India, S&P BSE has three main indices that measure corporate sustainability: S&P BSE 100 ESG INDEX, S&P BSE GREENEX, and S&P BSE CARBONEX. For NSE, a few of the Sustainability Indexes are the Nifty 100 ESG Index and Nifty 100 enhanced ESG index.

Nifty100 ESG Index is designed to reflect the performance of companies within the Nifty 100 index, based on Environmental, Social and Governance (ESG) scores. The weight of each constituent in the index is tilted based on ESG score assigned to the company i.e. the constituent weight is derived from its free-float market capitalization and ESG score.
Nifty100 Enhanced ESG Index is designed to reflect the performance of companies within the Nifty 100 index based on Environmental, Social and Governance (ESG) score. Companies should have a normalized ESG score of at least 50% to form part of this index. The weight of each constituent in the index is tilted based on ESG score assigned to the company, i.e. the constituent weight is derived from its free-float market capitalization and the ESG score.

How to be a Socially Responsible Investor?

Here are a few points that can help you become a socially responsible investor:

— Know the difference

The first and foremost important step to becoming a socially responsible investor is to know the difference between traditional and responsible investing. The difference might be in returns that you get from your investments. The returns from socially responsible investing may differ a little from the traditional one as you might be leaving behind a lot of high return investment options. However, always remember the reason why you have opted for this way of investing.

— Do your research

This is where investors use negative and positive screening to shortlist investment options. In the negative screening, they avoid investing in companies that don’t relate to their social values. Many mutual funds that are socially responsible screen out tobacco and liquor companies. One type of negative screening is divestment, this is where investors take their money out of certain companies because they do not like their business practices or social values.

Along with screening out negative companies, it is also important for investors to choose companies that align with their values. These are companies that strive to bring change to a social aspect that the investor finds important along with their socially responsible business practices. This is also known as impact investing or incorporation of ESG.

— Use your influence as a shareholder

Shareholders not only invest in companies that align with their values but they also use their position to influence the actions of the company in which they own stock. Investors do this by filing a shareholder resolution. This is a document outlining the shareholder’s suggestions for management on how to run the company in a more socially responsible way.

— Invest in the community

This is where an investor invests in companies that have a positive impact on the community. This is usually done in low-income areas where the investment is used to provide loans to people and small-business owners who would otherwise have trouble getting approved for a loan. Community investments also support ‘green companies’ that have a large carbon footprint on the environment.

— Lead by examples

Socially responsible investing is still in the early adoption phase. By making the right investment choices, you can make a real positive impact on the community- along with building wealth. Moreover, sooner or later, social consciousness will become the selling point for global companies. And you, being a part of it, can lead the movement.

How to get started with Socially Responsible Investing?

1. Decide what your social principles are

Before you choose your stocks you need to decide what social goals you want to promote. You should focus on your values and what you want to achieve through your investments.

2. Decide what your financial goals are

The next step is to decide what financial goals you want to achieve through your investment just as you would with any other investment. You need to decide how much return you need to meet your goals as well as how much risk you are willing to handle. SRI has been shown to provide comparable returns as a traditional stock would.

3. Choose the fund that meets your needs and goals

Once you have decided what your social and financial goals are, the next step is to find the investment that’s right for you. The most common ESG funds in India include Tata Ethical Fund, Taurus Ethical Fund, and Reliance ETF Shariah BeES.

Social investing has also resulted in the success of micro-finance. This was created by social investors to create an impact on small businesses and has now become an industry worth over $8bn and is now a mainstream financial service.

Conclusion

Socially Responsible investing is becoming increasingly popular in India and there has been a visible shift in the market strategy adopted by many participants as they incorporate social, economic and governance (ESG) factors into their investment process. Stakeholders realize the importance of their role in financial markets to influence sustainable growth.

According to the Indian Impact Investors council ‘more than 30 impact funds have invested in social enterprises in India’. There has been $2billion investment in over 300 companies in India.

While socially responsible investing is still not as big as traditional investing in India, it is still a rapidly growing market. Social investing in India has helped provide basic needs such as housing and education to the poor. Many investors have now realized the power and influence they have to make a positive impact on society.

September 14, 2020 Divya Premkumar Beginner's guide, Investment Basics No comments yet

What is CAPM – Capital Asset Pricing Model?

Simplifying what is CAPM – Capital Asset Pricing Model: One of the most popular and prevalent laws states that “Greater the risk, greater the reward”. This holds true even when we take into account the stock market and the returns earned. Assets like government bonds come with low risk-low returns, blue-chip equities come with medium risk- medium return, and high risk-returns in equity stock is generally noticed with new entrants.

All seems well and good when we are able to compare different asset classes as above. But how would you differentiate the expected returns between stocks of the same asset class? And even when done among different asset classes how is this differentiation quantifiable?

Today, we discuss the CAPM an investment theory that provides the answers to these very problems. The model has been so integral to financial management that it has even been suggested that finance became a full-fledged scientific discipline’ only when William Sharpe published his derivation of the CAPM in 1986.

What is CAPM?

The Capital Asset Pricing Model provides us with a formula that describes the relationship between expected return and the risk of investing in that security. The CAPM formula provides investors with an expected return that they should be expecting taking up the risk on the security.

On the other hand, it is also used by the management of the company to calculate the cost of equity or the rate at which the will service the shareholder equity in order to fairly compensate its shareholders for taking up the risk.

How to Calculate returns using CAPM?

The expected return for security can be calculated using the following formula:

Where,

Rf = Risk-Free Rate
Rm = Expected return of the market
Ra = Expected return from the security.

Simplifying the Expected Return Calculation Formula

A first glimpse of the formula shown above is good enough to spin heads. Now we go ahead and simplify it in order to make it more understandable.

1. Rf = Risk-Free Rate

Generally, government-issued bonds are known to be one of the most secure investments. This is why the rate provided by these government bonds is termed as the risk-free rate.

2. Beta – Stock’s volatility Measure

Beta here is the measure of the stock’s risk which is captured by measuring the volatility a stock faces in relation to the overall market. Here the average market return is 1. Say the Beta of a company A is 1.5. This would mean that for every 1% increase in the market return the shares of A’ will increase by 1.5%. But also a 1% decrease would mean that shares of A will decrease by 1.5%. Stocks like this are highly volatile.

Take another example where the Beta of a company is 0.5. This would mean that for every 1% increase in the market return the shares of A’ will increase by 0.5%. But also a 1% decrease would mean that shares of A will decrease by 0.5%. Stocks like this are of low volatility.

3. Rm = Expected return of the market

The expected return from the market is achieved by either following what research companies estimate. Or by computing historical averages from the past say for eg. the average Nifty return for the last 10 years. This is used in the formula in order to find the market risk premium. The market risk premium is shown in the formula as (Rm-Rf). This in simpler words shows the additional return available from the market in comparison to the Risk-Free rate.

After reading the above the formula simply becomes,

Expected Return from the Mkt. = Risk-Free Rate + (Beta * Market Risk Premium)

A Simple Example to Understand it further

Let us calculate the expected rate of return for ABC company. Say the risk-free rate is 3% by looking into the current government-issued bond rates. ABC operates in the textile industry which has a Beta of 1.3%. Indian Markets, on the other hand, are expected to rise in value by 8% per year.

Here, the expected return rate can be calculated as,

Expected Return from the Mkt. = Risk-Free Rate + (Beta * Market Risk Premium) = 3% + 1.3 * (8% – 3%) = 9.5%

Assumptions of the CAPM

Before concluding this article, let us also discuss a few of the assumptions considered during CAPM calculations:

All investors have relevant information about the companies.
All investors are rational, risk-averse, and seek to maximize their returns from investments.

As in most cases, the assumptions are unrealistic in the real world turning them into limitations of the model.

Also read: How to read Financial Statements of a Company?

Closing Thoughts

In this article, we tried to simplify what is CAPM i.e. Capital Asset Pricing Model. This approach has both its pros and cons while calculating the expected rate of return of an asset.

Over the years a number of shortcomings have come about with regards to the CAPM but it still remains widely used because of its simplicity and ease of comparison of investment alternatives. The CAPM however does not remain restricted to finding expected returns but is also used in portfolio building by investors. Its key advantages however will always lie in its ability to translate into estimates of expected return, keeping it useful.

Aron Almeida

September 11, 2020 Aron Almeida Valuations 1 comment

‘The Magic Formula’ Investing Strategy by Joel Greenblatt!

Unraveling the Magic Formula investing Strategy by Investing Ace Joel Greenblatt: Have you ever wondered if you would get an indestructible investment strategy if you combine the strategies of investment gurus in a perfect mix? The magic formula of Investing by Joel Greenblatt does exactly this. It combines the strategies of Warren Buffets value investing and Benjamin Grahams Deep value approach in order to create the winning ‘Magic Formula’.

In this article, we are going to cover this ‘The Magic Formula’ Investing Strategy by Joel Greenblatt. Here, we’ll discuss the exact magic formula approach and how it can be applied to your stock-picking technique and portfolios.

Who is Joel Greenblatt?

Joel Greenblatt is a hedge fund manager and professor at Columbia University. He runs Gotham Funds with his partner, Robert Goldstein. Joel is considered a genius by other fund managers at wall street. Such was his acumen, that post the release of his book ‘You Can Be A Stock Market Genius’, many hedge funds claimed they were following his approach.

The Magic Formula which we are about to discuss today is from his second book, ‘The Little Book That Beats the Market’. This book was specifically written by him in order to assist small investors with a simple strategy. According to Joel Greenblatt, The Magic Formula when tested by him offered 24% returns from 1988-2009.

What is Magic Formula Investing?

In the book “The Little Book that Still Beats The Market”, Joel Greenblatt focuses on his magic formula investing strategy that is based on two financial ratios- Return on capital and Earnings Yield. Let’s discuss each of these ratios.

1. Return on capital (ROC)

ROC is the ratio of the pre-tax operating earnings (EBIT) to tangible capital employed (Net working capital + Net fixed capital). It can be calculated by using the following formula: ROC = EBIT/ (Net working capital + Net Fixed capital).

Joel Greenblatt described why he used ROC in place of the commonly used financial ratios like ROE (Return on equity) or ROA (Return on assets). This is because, first of all, EBIT avoids the distortions arising from the differences in tax rates for different companies while comparing. Second, the net working capital plus net fixed capital is used in place of fixed assets as it actually tells how much capital is needed to conduct the working of the company’s business.

Overall, Return on capital tells how efficient the company is in turning your investments into profits.

2. Earnings Yield

Enterprise value is the market value of equity (including preferred shares) + net interest – bearing debt. Earning Yield can be calculated as: Earning yield = EBIT / Enterprise value.

This ratio tells how much money you can expect to make per year for each rupee you invest in the share.

In short, from the above two discussed financial rations, ROC tells how good is the company, and Earning yield tells how good is the price.

Next, here are the three steps suggested by the author Joel Greenblatt in his book ‘The little book that beats the market’ to find companies for investment:

Find the earning yields and return on capitals of the stock to evaluate stocks.
Rank the companies according to the above two factors and combine them to find the best companies for investment.
Have patience and remain invested for the long term. Lack of patience is why people fail to implement the magic formula.

How to use magic formula using the above ratios?

Find the Return on capital (ROC) and Earning yield (EY) for all the companies.
Sort all the companies in ranks by ROC.
Sort all the companies in ranks by EY.
Invest in the top 30 companies based on the combined factors.

Company Symbol	ROC Rank	EY Rank	Combined Rank
A	1	153	154
B	2	35	37
C	3	37	40
D	4	480	484
E	5	13	18
F	6	127	133
G	7	78	85
H	8	512	520

Now, we try to find the companies with the lowest combined factor rank.

For example, for company A, although it ranks 1 for the Return on capital. However, its earning yield rank is quite low and that’s why it’s combined rank is quite high. On the other hand, for company E, both ROC and EY rank are decent and hence its combined rank is good for investment.

Also read: Peter Lynch’s Investment Strategy and Success Tips!

How to use the Magic Formula Investing Strategy efficiently?

The Magic Formula is based on the simple principle that if you buy good companies at cheap prices you are going to do well. In a note of caution, Greenblatt emphasizes that for the formula to work its magic it must be applied for a period of 5 years. The following are the steps to be followed in order to implement this strategy.

1. The very first step involves deciding the total amount that you want to invest along with the number of stocks. Greenblatt suggests creating a portfolio of 20-30 stocks.

2. The next step includes setting up an investment pattern for the period when you would buy the stocks. Greenblatt expects the investments to be bought in batches spread out through the year. I.e. if you plan on investing in 20 stocks you can plan of buying stocks in batches of 5 every 3 months. Or if you plan on investing in 21 stocks you can plan of buying stocks in batches of 7 every 4 months.

3. The next step is to try and allocate the predetermined total investment amount equally among the number of stocks selected. This means that if you have decided to invest in 20 stocks with a capital of $200,000, then $10,000 must be spent on each stock.

4. Now we sort the companies in order to only include companies with a market capitalization of over $50 million, $100 million, or $200 million. This will depend on the risk an investor can stomach. On whether he would prefer to invest in stocks that have greater growth prospects in the lower Mcap or ones that are stable with higher Mcap.

5. Determine the company’s earnings yield, which is EBIT/EV.

6. Determine the company’s return on capital, which is EBIT/(net fixed assets + working capital).\

7. Based on the last two steps, rank the stocks according to earnings yield and return on capital. Once ranking them individually is on the 2 parameters is done, rank them based on the combined ranks of the two-parameter. This can be done by adding the ranks of stock in the 2 parameters.

8. Invest in the highest-ranked companies calculated whenever the predetermined dates to invest in the batches arrive.

9. Rebalance the portfolio once per year, selling losers 51 weeks after purchase and selling winners 53 weeks after purchase. This is for tax purposes, as losses can be considered for the same year, and stocks that gain are to be held for longer in order to benefit from the reduced Long term Capital Gain tax rate.

The two parameters used above i.e help us identify stocks that are of high value(earnings yield) and at the same time are below the average price(ROC).

Closing Thoughts

The Magic formula is a relatively simple investment strategy that is easy to understand. Its implementation, however, may take some toll. In order to ensure that it does not cause much of a hindrance, it is best that investors continuously keep recording.

This involves the plan and activity performed along with the appropriate dates. By doing so investors will avoid any confusion. These may arise regarding when they have to buy stocks and when they have to rebalance their portfolios. Happy Investing!

Aron Almeida

September 10, 2020 Aron Almeida Invest Intelligently No comments yet

Mutual Fund Selection – Six Key Technical Factors to Consider!

A study of Technical Factors involved during Right mutual Fund Selection: Mutual Fund as a financial product has gained a lot of dominance in recent years. With the growing education of financial products and government advertising schemes like ‘Mutual Fund Sahi hai”, people are now more aware of the various mutual fund investment avenues.

In our previous article on how to pick a mutual fund, we had given insights on the various fundamental factors, we should consider and understand before selecting a Mutual Fund to invest. Through this article, we aim to look at and explain the various technical factors that need to be considered for mutual fund selection. Thorough knowledge of both fundamental and technical factors goes a long way in picking the right funds to invest in.

Anyways, before understanding the technicalities, let us revise the concept of Mutual funds to brush up our basics. Let’s get started.

What is Mutual Fund?

To put it in simple words, a Mutual fund is a pool of money which is been collected from various investors who want to invest their money in the stock market and other profitable assets but do want to go through the whole process of selecting the avenues to invest. They just park their money with a Financial Institution (in this case AMC), which in turn takes on the mantel of investing the pooled fund and generate returns for investors.

The funds are being managed by the fund managers, who use their skill and experience in generating the best possible returns for the investors. Eventually, these returns are sent back to the initial investors, after deduction of the basic costs required to run that fund.

Technical Factors to consider for Mutual Fund Selection

Here are six of the most important technical factors that the investors need to consider for mutual fund selection. Anyways, the best part about these technical factors are they are very simple to analyze. Let’s look into these technical factors:

1) Expense Ratio

This probably is one of the most important factors that is sometimes overlooked a few investors while deciding upon a mutual fund.

The expense ratio is the fee that is charged by the Asset Management Company (AMC) for managing the mutual fund. It basically includes the fee the fund manager, other operational and administrative expense which are incurred while managing the fund. Expense cost is charged on a year to year basis.

Generally, the expense ratio is also the function of the size of the fund. The type of Mutual funds (Growth and Direct) also impacts the expense ratio. The expense ratio of Direct mutual funds is lesser compared to Growth mutual funds.

In India, the expense ratio generally varies between 1% to 2.5% of the total fund value, depending on the fund house and type of fund.

2) Fund’s Portfolio

This is one very important consideration while buying a mutual fund. With the help of careful analysis and research, we can choose the fund which has a portfolio that suits our risk profile. And even the size of the portfolio makes a lot of difference in choosing a mutual fund.

Say, if we were to choose a blue-chip fund to invest. A fund that has diversified investment in 50-60 stocks, is more likely to perform in line with the performance of Nifty, and the fund which had a smaller portfolio is likely to have more volatile returns.

The quality of shares in the portfolio also makes a difference in the performance of the fund. The fund which includes sector leaders has more sable returns compared to one that is laggards of the industry.

3) Rating Agencies

The rating given by rating agencies provides valuable insight into the performance of the funds. For example, CRISIL Ratings of different mutual funds. Just to put in perspective, a rating of 5 on 5 generally means the fund has been performing better than expected in their category. They have been managing risks that are well within the acceptable limit. While rating a fund, the historical performance may be given higher weightage by different rating agencies. It a basically a consistency parameter of the mutual fund.

4) AUM (Asset Under Management)

The total value of the assets which are being managed by the fund (AUM), gives a big picture of the quality of the fund. The fund which has a large AUM has a faith of a large number of investors which in turn gives an indication that it is managed in a professional and cordial manner. And these funds are managed by professional Fund Managers. The following are some of the factors which have an impact on the AUM of the fund:

The Fluctuations of the market
The performance of the fund i.e., if the fund performs well, then the AUM of the fund increases and it attracts more investors to put money in the fund.
Size of the fund. If the fund is of big size, then the returns generated will be higher which in turn will increase the size of the AUM of the fund

5) Category Returns

One’s performance is always judged by how they perform compared to their peers. Similarly, in the case of mutual funds, the performance of the funds, compared to their category peers holds a lot of significance.

Again to take the example of Bluechip Funds:

Figure : Mutual funds peer comparison (www.moneycontrol.com)

Now, if we look at the figure above, we see the performance comparison of the Blue chip funds category. And the categorical comparison helps us in understanding the fund’s performance. There are various parameters to choose from. And one can filter the funds, depending on one’s preference, and make an informed judgment while buying the fund.

6) Risk Ratios

The last on the list, but one of the most important parameters in judging the funds’ performance. The risk ratios help us in understanding the risks taken to generate returns for the investors. Through this article, we will have a look at the two risk factors: Standard deviation & Beta.

Standard Deviation (SD): This parameter judges the volatility of the fund over the last three years. If the SD value is low, it generally indicates low risk and low volatile funds and which ultimately leads to more predictable performance. Therefore, if we have two funds, Fund A and Fund B. If both the funds are giving similar returns, and if one has a lower standard deviation than others, then it is advisable to choose a fund with a lower standard deviation.

Beta: Even beta is used to understand the volatility of the fund. If the fund had a high beta, then the funds is generally more volatile. It is advised to choose funds that have low beta value.

Even while doing the risk analysis of the category of the funds, the ones which have low beta and standard deviation should always be the preferred choice.

Conclusion

In this article, we tried to cover the technical factors that you should look into during mutual fund selection for right investments. Here are the top takeaways from this article:

A clear understanding of both technical and fundamental factors goes a long way in choosing the right fund to invest.
The size of the fund along with portfolio diversification should be given due importance in choosing the fund
The expense ratio gives information about the cost of managing the fund. The lower the expense ratio, the higher the returns for the investors.
The categorical comparison helps in selecting the right fund which matches one’s risk profile
The risk factors that measure the volatility of the funds should be carefully analyzed and the fund with low volatility should be preferred while investing.

That’s all for this post. I hope this was helpful to you. If you’ve got any queries related to the above-discussed factors for mutual fund selection, feel free to comment below. I’ll be happy to help. Happy Investing.

Hitesh Singhi

Hitesh Singhi is an active derivative trader with over +10 years of experience of trading in Futures and Options in Indian Equity market and International energy products like Brent Crude, WTI Crude, RBOB, Gasoline etc. He has traded on BSE, NSE, ICE Exchange & NYMEX Exchange. By qualification, Hitesh has a graduate degree in Business Management and an MBA in Finance. Connect with Hitesh over Twitter here!

www.linkedin.com/in/hitesh-singhi-46564a11/

September 9, 2020 Hitesh Singhi Mutual Funds 1 comment

Investing in Incredible India thematic investments trade brains

Investing in Incredible India – Companies to Look Out!

An analysis of Investing in Incredible India thematic stocks: India is one of the known tourist destinations in the world, thanks to the magnificent monuments, rich cultural heritage, and history. An added advantage has been the diversity offered in every aspect by different states that leaves tourists wondering if they even are visiting the same country.

This tourism is not only limited to options of sightseeing but also includes religious attractions and other medical/wellness tourism that involve Ayurvedic and spa therapy. Today, we have a look at the tourism industry from the perspective of an investor in order to provide insights into what picture it has to offer.

An Overview of the Tourism Sector in India

The tourism sector in India attracts close to 11 million foreign tourists every year. The Taj Mahal alone attracts nearly 6 million people. The domestic tourism industry brings in a huge contribution to the industry The Kumbh Mela saw a whopping 150 million visitors in 2019.

This has resulted in the Indian tourism industry growing at a fast pace (nearly 10% YoY). As of 2018 Tourism industry was one of the major growth drivers of India’s economy contributing close to $250 billion or 10% of the country’s gross GDP.

— What forms part of the tourism sector?

The sectors that form part of tourism include the following

1) Tours and Travel Agencies

These include tour operators, travel agents, online travel agencies, etc. They offer tours and travel services packages in a single product. These packages include travel, accommodation, and guides These services and packages are also provided online. For eg. Thomas Cook, Cox and Kings, Goibibo, Makemytrip.

2) Transportation

The transport sector connects tourists and destinations around the world. This sector is comprised of the Airline Industry, Car Rentals, Water Transport, Railways, etc. If we look into the aviation industry in India, a few of the leading companies are Indigo, Spice jet & Jet Airways. Further, in the railway, the only publically listed company in India is IRCTC.

3) Accommodation and catering

The Accommodation sector forms one of the most integral parts of the tourism industry. This is because tourists need a place to stay and rest. These may range from top-class hotels, camping, or rented accommodations. Taj Vivanta, Club Mahindra, Airbnb, etc. If we look into affordable housings, OYO has made a remarkable presence in this sector.

4) Food and Beverages

Apart from being one of the basic needs, it is also safe to say that this sector alone attracts a portion of tourists both domestic and foreign. This includes restaurants, bars, cafes, nightclubs, etc.

5) Other Connected Sectors

These include attractions, financial services (currency exchange), the entertainment sector( casino, shopping malls, theme parks), etc. For Example Goan Beaches, Imagica waterpark, UB city.

Why should you invest in the Indian tourism sector?

— General Scenario while Investing in Incredible India

Apart from the potential already mentioned above, there are multiple reasons why one should invest in the tourism sector. The most important being the government support. The government has brought forward many schemes like Incredible India in order to market and boost tourism. The government has also allocated funds and introduced policies that are aimed at preserving tourist sites.

In 2014, the government introduced the e-tourist visa which enabled tourists to get an Indian visa quickly online. The government in order to gain tourist confidence also introduced a Tourist police task force specifically established to ensure the safety and security of tourists.

In order to boost the domestic acceptance of tourists, the government also officially introduced slogans like ‘ Athithi Devo Bhava’. It is rare to find another industry where the government has taken the initiative of marketing and maintaining the assets and resources.

— Investing in Incredible India during COVID-19

It may come as a surprise if you were told that there may be a ray of opportunity in investing in the tourism-related sectors during the pandemic we are in. This is because of all the sectors it is tourism that is the worst hit. This has sent the stocks of most tourism dependant companies tumbling.

But it is also important to foresee that the pandemic will end one day with the introduction of a vaccine. This, in turn, has the possibility of leading to an explosion of tourism after people have spent months cooped up in their homes due to fear of traveling.

If not the normalization will also lead to the tourism sector reaching pre-COVID levels. This provides investors the opportunity to buy stocks in a distressed sector that have the ability to weather the storm at cheaper rates increasing the probability of booking returns in the short-term.

Below are some of the companies associated with the tourism industry along. The table includes companies along with the MCAP, Debt to Equity ratio along with their respective promoters pledge.

Name of the Company	MCAP (In cr.)	DEBT/EQUITY	Pledged Shares
India Tourism Development Corporation Ltd	1909.23	0	0
Mahindra Holidays & Resorts India Ltd.	2317.83	0	0
EIH Ltd	3826.66	0.09	0
Thomas Cook	1,182.11	0.25	0
BLS Internation	957.91	0	0
Chalet Hotels Ltd	3,239.38	1.03	32.12
Westlife Devolopment	5,565.15	0.32	0
VRL Logistics	1346.12	0.31	0
The Indian Hotels Company Ltd.	9329.73	0.42	0
Spicejet Ltd.	2793.49	(-0.55)	44.01
Interglobe Aviation	46,544.96	0.06	0
Lemon Tree Hotels Ltd	1893.47	0.31	34.14

Closing Thoughts

While Investing in Incredible India theme, one should remember that the tourism industry although distressed currently will not always remain so. The major assets i.e. monuments, cultures, traditions remain despite the pandemic. Selecting stocks that have the ability to weather the storm provides investors with the opportunity to ride the profits in the short term.

Aron Almeida

September 8, 2020 Aron Almeida Market, Stocks No comments yet

How to follow Stock Market? Basics for Beginners!

When a newbie enters the stock market, one of the first questions that come to their mind is How to follow stock Market? Here, by following the stock market, we mean how to know the share prices of the Indian companies, market index, or the most basic paraments of the market.

For seasoned investors, it’s easier to follow the stock market as they have been doing it for years. They already know lots of websites or apps to track and follow stocks or indexes. However, for beginners, they might get easily confused about how to follow stock market, and may even feel silly asking this basic question to a mature investor.

If you’re one such stock market beginner, do not worry. We have got you covered. In this post, we going to exactly teach you how to follow stock market. These few simple tricks about following the stock market and its trends, which once known, even a beginner can follow the market like a pro.

Please note that although this post about ‘how to follow stock market’ is basically targeted for beginners, however, intermediate and advanced level investors can also get benefits from this article. Do read it till the end to get the maximum benefits. Also, there is a bonus tip for the readers in the last section. Let’s get started.

How to follow Stock Market?

Here are a few of the simple yet powerful websites from where you can follow stock market. Below, we have also described how to easily navigate and use these sites efficiently. Here it goes:

1. Google Search

Google is the first and easiest source to follow a stock. Just type the name of the stock and google will give you all the details about that stock. For example, if you want to follow the stock of Tata Motors and want to know its, just type ‘Tata motors share price’ on google. The result will be like this:

Please note that here you have to type “Company name + Share” or “Company name + Stock” to get the stock details.

Further, On Google, you can track the share price movement of the stock for a given period of 1 day, 5day, 1 month, 1 year, 5 years or max, by simply clicking on different tabs. For example, if you click on ‘1 month’ in the tab, you can see the price movement of that stock for the last 1 month i.e. how the share price moved in the last 30 days to date.

The best part is that the simplicity of google makes it best for beginners to start following the market. The only disadvantage of tracking stock market prices on Google is that you have to type the names of different stocks every time when you want to track that stocks. If you have many stocks to track, say more than 10 (Ex Reliance, Tata Steel, HPCL, ONGC, BPCL, Titan, Infosys…..) then it will become a hectic job for you as you have to type the stock name over and over again. Here a shortcut is “Following” the stock or creating a watchlist.

Nevertheless, Google is the first place for all the beginners where they can learn how to follow the stock market. Therefore, you should also get used to it. Try googling the stock price of a few stocks and indexes on google on your own now.

Exercise: Type “Nifty50” on google and see what appears.

Further, also try different stocks that you are interested in. This is the first step to learn how to follow stock market. In case, you do not remember much names, here is a list of few major stocks in NIFTY50 that you can search:

	Name	Industry	Weight
1.	Reliance Industries Ltd.	Energy - Oil & Gas	10.77%
2.	HDFC Bank Ltd.	Banking	10.66%
3.	Infosys Ltd.	Information Technology	7.42%
4.	Housing Development Finance Corporation Ltd.	Financial Services	7.29%
5.	ICICI Bank Ltd.	Banking	6.59%
6.	Tata Consultancy Services Ltd.	Information Technology	4.86%
7.	Kotak Mahindra Bank Ltd.	Banking	4.16%
8.	Hindustan Unilever Ltd.	Consumer Goods	3.04%
9.	AXIS Bank Ltd.	Banking	2.87%
10	ITC Ltd.	Consumer Goods	2.84%
11.	Larsen & Toubro Ltd.	Construction	2.78%
12.	State Bank of India	Banking	2.39%
13.	Bajaj Finance Ltd.	Financial Services	2.23%
14.	Bharti Airtel Ltd.	Telecommunication	2.13%
15.	Asian Paints Ltd.	Consumer Goods	1.64%
16.	HCL Technologies Ltd.	Information Technology	1.58%
17.	Maruti Suzuki India Ltd.	Automobile	1.46%
18.	Mahindra & Mahindra Ltd.	Automobile	1.23%
19.	UltraTech Cement Ltd.	Cement	1.13%
20.	Sun Pharmaceutical Industries Ltd.	Pharmaceuticals	1.03%
21.	Wipro Ltd.	Information Technology	0.97%
22.	IndusInd Bank Ltd.	Banking	0.96%
23.	Titan Company Ltd.	Consumer Goods	0.94%
24	Bajaj Finserv Ltd.	Financial Services	0.93%
25.	Nestle India Ltd.	Consumer Goods	0.92%
26.	Tata Motors Ltd.	Automobile	0.92%
27.	Tech Mahindra Ltd.	Information Technology	0.91%
28.	HDFC Life Insurance Co. Ltd.	Insurance	0.88%
29.	Power Grid Corporation of India Ltd.	Energy - Power	0.88%
30.	Dr. Reddy’s Laboratories Ltd.	Pharmaceuticals	0.86%
31.	Tata Steel Ltd.	Metals	0.86%
32.	NTPC Ltd.	Energy - Power	0.83%
33.	Bajaj Auto Ltd.	Automobile	0.79%
34.	Adani Port and Special Economic Zone	Infrastructure	0.79%
35.	Hindalco Industries Ltd.	Metals	0.79%
36.	Grasim Industries Ltd.	Cement	0.74%
37.	Divi’s Laboratories Ltd.	Pharmaceuticals	0.68%
38.	Hero MotoCorp Ltd.	Automobile	0.67%
39.	Oil & Natural Gas Corporation Ltd.	Energy - Oil & Gas	0.65%
40.	Cipla Ltd.	Pharmaceuticals	0.64%
41.	Britannia Industries Ltd.	Consumer Goods	0.63%
42.	JSW Steel Ltd.	Metals	0.61%
43.	Bharat Petroleum Corp. Ltd.	Energy - Oil & Gas	0.58%
44.	Eicher Motors Ltd.	Automobile	0.56%
45.	Shree Cement Ltd.	Cement	0.56%
46.	SBI Life Insurance Co.	Insurance	0.54%
47.	Coal India Ltd.	Energy & Mining	0.51%
48.	UPL Ltd.	Chemicals	0.49%
49.	GAIL (India) Ltd.	Energy - Oil & Gas	0.42%
50.	Indian Oil Corporation Ltd.	Energy - Oil & Gas	0.40%

NOTE: Do not search Facebook, Google, Apple’s stock price. Although you can find the share details of these companies, but the stock prices will be shown in dollars on Google. This is because these are foreign stocks and listed in foreign stock exchanges, not India. They trade in foreign currency.

Only Indian companies are listed on Indian Stock Exchanges. Therefore, companies like Apple, Facebook, Samsung, etc that are not Indian companies can’t be traded in India. They are listed on their respective country’s stock exchange. For example- Facebook on New York Stock Exchange (NYSE), Samsung on South Korea Exchange, etc.

2. Trade Brains Portal

First of all, if you are confused about where to get started, you can start by visiting the ALL STOCKS page at Trade Brains Portal. Here, you’ll get the list of all the +5,000 publically listed companies in India and also their industry. You can start researching on this page to at least know Indian stocks and what stock investment options are available to you.

Next, you can make a watchlist of stocks on Trade Brains Portal. This means that you can save stocks in your own created list for tracking their price movements and also you can set a target price. Let’s say you add 10 stocks to your watchlist. Now, you just have to go to your watchlist whenever you want to follow the stocks or market.

(Image: Watchlist of Trade Brains Portal)

Trade Brains Portal – How to use for Stock Research?

3. Moneycontrol

Moneycontrol is probably the oldest and most popular website in India if you want to learn how to follow stock market. The website gives you all the info you want to know about a stock along with the latest financial news. In addition, moneycontrol also offers a mobile app, which is in fact even better than the website. You can download the app and easily follow the market using it.

On the website or app, enter the stock name on the top search box and you will get all the details that you wish to see. You can read this article if you wish to know more about moneycontrol features:

Money Control App – Best hacks for Beginners

4. Screener.in

Screener.in is another of the powerful financial website for fundamental analysis of stocks. One of the good features of this site is that the last 10 Years’ financial reports of all the Indian companies are available here.

In addition, you can also download data from this website in excel form. Further, you can add stocks to your Wishlist to get notifications in your mail the alerts if there is any corporate action on the stocks in your Wishlist. Therefore, you can easily stay updated with the latest news like quarterly results, dividend dates, etc once you log in to the site and add the stock names to your Wishlist.

5. Yahoo Finance

Yahoo Finance and Google Finance are the most searched finances website for stock market analysis. This website is very resourceful to learn how to follow stock market and contains massive data of stocks along with the latest news and other powerful tools. Yahoo Finance is very friendly and you will get all the major information which you want to learn about the stock here.

Summary

In this post, we tried to cover e major sources on how to follow stock market. Surely, there are many other websites too that can be used if you want to keep up-to-date with the market trends. However, for beginners, we recommend you to first familiarize yourself with these websites and get used to how to get the stock information from these sites. Definitely, these websites will give you all the information that you want to learn about the stock market. Do check them out.

Here is a summary of links to all the financial websites discussed in this post for your ease.

Google: http://www.google.com
Money control: http://www.moneycontrol.com
Screener: https://www.screener.in
Economic Times market: http://economictimes.indiatimes.com/markets
Yahoo Finance: https://in.finance.yahoo.com

That’s all for this post. If you think we missed any big website that needs to be mentioned in our post on how to follow stock market, please comment below. We will be happy to get feedback. Have a great day and happy investing!

Kritesh Abhishek

www.linkedin.com/in/kriteshrules/

September 4, 2020 Kritesh Abhishek Investment Basics, Portfolio 43 comments

Indian GDP Shrunk by 23.9% in First Quarter 2020 – But Why?

A study on why Indian GDP Shrunk by 23.9% in the first quarter of 2020: Hit by the Covid-19 pandemic, India, the world’s fifth-largest economy has been turned into the second-worst performer in the Covid-19 hit the quarter of the financial year 2020-21. India’s Gross Domestic Product (GDP) has shrunk by 23.9% in the first quarter of the financial year 2020-21.

Generally in forecasts, it is of rare occurrence to find the negative performances beating the downward trends. But that is exactly what has happened in the first quarter as although a negative GDP was predicted but nothing close to wiping out 1/4th of the GDP. Today, we take a look at the reasons behind the decline and the possible future.

(Image Credits: BusinessToday.in)

Why did the Indian GDP Shrunk by 23.9%?

Earlier, when this issue of the state of the economy came up at the 41st GST Council Meeting on Friday, Finance Minister Nirmala Sitharaman looked into the celestial factor and stated:

“This year we are facing an extraordinary situation…we are facing an act of God which might even result in the contraction of the economy.” – Nirmala Sitharaman, Finance Minister

Now, let us look into some of the hard facts. The Indian economy suffered due to the nationwide lockdown imposed. This was during the April- June quarter of which the lockdown covered a major portion. India had one of the longest and strictest Covid-19 lockdowns in the world. And unfortunately enough also suffered is suffering through the worst economic consequences. In comparison to other countries around the globe, India has been one of the worst-hit.

In order to understand how exactly the GDP was affected and how it can recover, we must first take a look at the components that form a part of the growth. These are consumption, government expenditure, investment, and the nation’s current account deficit (imports – exports).

Consumption generally has the greatest impact on GDP. In the last quarter, consumption accounted for 56.4 percent of the country’s GDP. But when compared to figures from 2019 there is a drop of Rs 5,31,803 crore in private consumption or 27 percent. This has been one of the major reasons as to why the GDP has contracted. This is because people simply are not willing to consume more as most expect tougher times ahead.
The Investment portion made up 32 percent of India’s GDP. This portion too fell by Rs 5,33,003 crore in comparison to last year. When coupled consumption these two components made up for 88 percent of the total GDP shrinkage
The government expenditure share of the GDP stood at 11 percent. This component rose by 16% due to the relief measures provided by the government. This increase in expenditure, unfortunately, could not make up for the total decline from the consumption and investment portion.
The current account deficit which historically has always been in negative recorded positive rates. But this too was not due to exports exceeding regular imports. It was simply due to the lack of imports due to a lack of demand.

Image: P. Chidambaram (Member of Parliament, Rajya Sabha)

The National Statistical Office (NSO) in an official statement released that “The GDP has shrunk from Rs 35.35 lakh crore in Q1 of 2019-20 to Rs 26.90 lakh crore in the first quarter of Q1 of 2020-21, showing a contraction of 23.9 percent as compared to 5.2 percent growth in Q1 2019-20,”.

What does the future hold for the Indian economy?

The future of the Indian economy depends on how well is the purchasing capacity distributed among the general public. This is generally spread out by the income earned by the citizens.

But the pandemic has rendered millions jobless forcing them to cut back on their spending habits. This reduces the consumption portion. When there is a fall in consumption businesses avoid making investments as they already are aware of the lack of demand. These two portions, unfortunately, depend on individuals as they cannot be forced to spend. One factor that can be controlled is government expenditure in order to boost the GDP.

But unfortunately, enough even prior to the pandemic the government had already exceeded their resources by borrowing. The only option remains is to keep borrow from the RBI which has maintained amounts close to 18% of the GDP as a reserve. An infusion will provide some relief and may get the consumption portion moving as long as inflation is kept on check.

For the remaining quarters to come analysts have predicted that even though the GDP will improve but will still keep performing negatively. This recovery phase is expected to also likely extend into the first half of 2022. But these estimates depend on current figures and will change depending on how deeply COVID-19 outbreaks occur throughout the country

Aron Almeida

September 3, 2020 Aron Almeida News No comments yet

Angel Broking Review – Demat & Trading Account Review [2020]

A complete Angel Broking Review 2020: One of the leading broking service providers, Angel Broking is the largest full-service retail broker of India. Covering over one million customer base, the full-service stockbroker recently changed its business model in November 2019 to offer a flat brokerage charge on all services and equity delivery as free of cost which is indeed an impressive move. Earlier they used to charge some percentage of the transaction amount on each trading.

With over two decades of broking experience, Angel Broking has successfully managed to have a pan-India presence in over 1800 cities and towns. With modern and functional trading platforms, angel broking serves their best when it comes to investment and trading advisory services.

It is also known for its transparent working policies and ethical practices. The firm has trading strategies that are considered best among all other retail brokers of the country. Their studies of economic and corporate parameters are so well-researched that the firm is considered as a synonym to the best service practices in the stock-broking industry serving investors interest to the fullest.

Today’s article is a beginner’s manual to understand what Angel Broking offers. This Angel Broking review article will highlight the history of the broking firm, brokerage and other charges they charge, what are their key features, what range of products and services they offer and what are the advantages and disadvantages of investing and trading with this firm.

Quick link to open your FREE account with Angel Broking.

Angel Broking History

Angel Broking was incorporated in 1987 by Mr Dinesh Thakkar with a capital of Rs. five lakhs, half of which he lost in just eight months. Mr Dinesh comes from a textile business family in Mumbai with a very high reputation. Since he came from a family business background, he already had a flair of business ownership cum entrepreneurship running in his blood. He had his basic studies in Mumbai itself. He had a deep interest in technological innovations which is why he was able to bring innovations in his business – angel broking that boasts some of the best technological and digital advancements.

Mr Dinesh took an opportunity when other stockbrokers of that time were not too much concerned about the customer services. And amongst all other brokers, Mr Dinesh’s stock recommendations were quite accurate and which is why he was able to grow more quickly as the best stockbroker. He considered his clients’ interests as a priority and focused on providing personalized services based on their specific needs. He believes trading as a zero-sum game and that is the reason he studied market volatility by reading books on fundamental and technical analysis. Today, the firm is very well-known for its straightforward advice and stock recommendations.

The company enjoys his memberships across BSE, NSE, NCDEX and MCX and registered with CDSL as a Depository Participant. The vast range of the services offered by Angel Broking includes stock and commodity broking, wealth management services, investment advisory and recommendation services, loans against shares, margin funding and financial products distribution.

To stay competitive in the market, Angel Broking started providing discount broking services under which the delivery trading is free of cost and other trading segments such as Futures, Options, Commodities, Currencies and Intraday trading services are charged at a flat rate of Rs. 20 per trade. It is applicable for trading through all exchanges.

They also provide investment advisory services that suggest which stocks to trade, where to invest, and why you should invest or trade in a particular stock and this is the main reason why it has such a huge client base serving in more than 8500 cities and towns. The trading software launched by this firm is also quite comfortable to use for any investor as it is user friendly which is why it is famous. You can read the detailed Angel iTrade Prime Plan review and get more insights.

Angel Broking Brokerage Charges & Other Charges

Here is a list of the different charges by Angel broking in terms of brokerage and transaction charges, account opening charges, and other related charges.

Account Opening Charges: FREE (Current Rs 699 Waived)
Account Maintenance Charges (AMC): Rs 450 + GST / Year

Special Offer: Right now, Angel Broking is offering a 100% waiver on the account opening charges. Hence, you can open your demat account with Angel Broking for FREE. Here’s a quick link to open your FREE account with Angel Broking.

Angel Broking Brokerage Charges – Segment Wise

Angel Broking offers ZERO brokerage for long-term delivery trades and maximum Rs 20 per trade for Intraday, F&O, and all other traders. Here are the segment-wise brokerage charges while trading with Angel Broking account.

Angel Broking Charges	Brokerage
Equity Delivery	Zero brokerage
Equity Intraday	₹ 20 / executed order or 0.25% (whichever is lower)
Equity Futures	₹ 20 / executed order or 0.25% (whichever is lower)
Equity Options	₹ 20 / executed order or 0.25% (whichever is lower)
Currency Futures	₹ 20 per executed order or 0.25% (whichever is lower)
Currency Options	₹ 20 per executed order or 0.25% (whichever is lower)
Commodity Futures	₹ 20 per executed order or 0.25% (whichever is lower)
Commodity Options	₹ 20 per executed order or 0.25% (whichever is lower)

(Source: Angel Broking Brokerage Charges)

Other Charges With Angel Broking

Nature Of Charges	Rate
AMC (Annual Maintenance Charges)	Non-BSDA Clients ₹ 450 + Tax / Year For BSDA (Basic Services Demat Account) Clients: - Holding Value Less Than 50,000 : NIL - Holding Value Between 50,000 To 2,00,000 : ₹ 100 + Tax / Year
Call & Trade / Offline Trade	Additional Charges Of ₹ 20 / Order
Franking, KRA, CKYC, ESignature Charges	Free
Email Statements / Contract Notes	Free
DP Charges	₹ 20 Per Debit Transaction ₹ 50 Per Debit Transaction For BSDA Clients
Pledge Creation / Closure	₹ 20 Per ISIN ₹ 50 Per ISIN For BSDA Clients
Demat	₹ 50 Per Certificate
Remat	₹ 50 Per Certificate + Actual CDSL Charges
Physical Statements / DIS Request / Physical Contract Notes	₹ 50
Cheque Bounce Charges	₹ 350
Delay Payment Charges On Outstanding Bill Amount If Not Paid Within Due Date	1.5 % Per Month (Levied Every 15 Days)

Angel Broking Strengths – Special Features

Here are some of the biggest strengths of Angel Broking compared to other discount brokers and competitors:

Implementation of advanced technology and digital platforms makes the firm the leading independent largest full-service retail broking house.
Thanks to a market share of 6.3%, Angel Broking is currently India’s fourth-largest retail broking house in terms of the number of active clients in the NSE platform.
With more than 2 decades of experience and presence in the stockbroking industry, ‘Angel Broking’ as a brand has garnered a significant amount of respect and brand equity.
Their huge sub-broker network and the presence in many cities have enabled them to provide quality services leading to client satisfaction.
They also share videos and podcasts to educate their customers and investors in terms of making the best investment and trading decisions.
The personalized services to the clients based on their requirements make them stand out in the market.
The involvement of technological advancements into their trading platforms makes trading and investing activities very comfortable.
The AI-based ARQ platform is considered a world-class Robot-assisted service.
Angel Broking pioneer in new client activation, with the ‘Trade in One Hour’ service facilitating client activation in record time.

Also read: Zerodha vs Angel Broking: Stockbroker Comparison

Angel Broking Review – Products & Services

The Angel Broking provides a wide range of products and services for their clients trading in the equity and other segments. Let’s continue our Angel Broking review by looking into the details of different products and services offered by Angel Broking which are provided as follows:

Products of Angel Broking: The mainstays of all the products offered by Angel Broking are Equity Trading, Derivatives, Commodity, Currency, Mutual Funds and Insurance. The products not only enable customers to trade and invest but also provide news alerts, advisory and a huge range of insurance plans. Investors are enabled commodity derivatives interface as well as various insurance products with term plans, endowment plans, money-back plans, and so on.

Services by Angel Broking: The services provided by the Angel Broking include Demat Account, Trading Account, Intraday Trading, Advisory Services, Efficient Customer Support, Depository Service, Portfolio Health Score, ARQ – AI-Powered Robo Advisory, NRI Services and Loan against Shares. They also provide High Net Worth Individuals with best Portfolio Management Services. The technical assistance and detailed analytics services are also the foundation of the stock-broking firm.

Research, Advisory, and Stock Tips: The Full-Service broker presents regularly various research reports, advisory and recommendations and stock tips from experts to the clients so that they do not need to go out for such tips and services. The all-in-one stockbroker is equipped with advanced technologies that help investors make well-researched decisions.

ARQ: The highly efficient Artificial Intelligence-based Robo Advisory platform provides stock and mutual fund suggestions to investors based on the future predictions of various stocks and not from the past records. The service does not involve any special fee or a charge from the investor and it provides personalized fund management suggestions and tips. It is an integrated trading software that has an inclusion of the latest technologies.

Angel Broking App: The app serves as a multi-purpose platform where investors can trade online, receive news alerts and tips with real-time updates, reports and ledgers without any difficulty. Suitable for both regular investors and frequent traders, the app also includes easy and quick online fund transfer, charts and quotes, multi-asset trading, margin statements, limits, orders and much more.

Angel Eye: This web-based training platform provides users with services to manage the portfolio, online trading and latest updates of the stock market.

Angel Speedpro: The desktop-based trading terminal enables investors with 30-day intraday and 20 years of historical data for the high-level analysis for better investment decisions.

Angle Swift: This is a mobile web-based trading platform that allows trading from your smartphones and tablets.

Angel Lite: This mobile browser-based trading platform is exclusively prepared for the users having slow GPRS connections and it does not require any download or installation procedure.

Angel Broking Review: Pros and Cons of Angel Broking

The unique selling price for Angel Broking can be their investment advisory service, stock tips, regular research reports and ledgers from the panel of highly talented experts in the field. Let us discuss what are other benefits and drawbacks the firm is having.

— Pros of Angel Broking Stockbroker

Angel Broking is the largest full-service broker with flat brokerage charges while delivery trades are provided for free.
It is a one-stop solution for a wide range of trading and investment-related products and services.
They use advanced technologies for investors to trade and invest on the go with the ease of access to many real-time updates and alerts.
AI-based Robo Advisory app – ARQ provides invaluable services.
The firm enjoys the pan-India presence in many cities with a great connection with sub-brokers.
They also provide the best research reports and stock tips to their customers which any other discount broker would barely provide at free of cost.

— Cons of Angel Broking Stockbroker

Angle broking does not offer Trading, Demat and Banking accounts – a 3-in-1 account which is why many investors are reluctant to trade with them.
Trades that need brokers assistance are charged extra Rs. 20 per executed order.
Their AMC charges are a bit higher than the other competitors.

Also read: 8 Best Discount Brokers in India – Stockbrokers List 2020

How to open your Angel Broking Demat Account?

To get started, here is the direct link to the account opening page at Angel Broking.

On this page, the first step is to signup by entering your full name, your city, mobile number, and verifying the OTP. Then, you’ll be required to enter your PAN, bank account, Aadhar verification, and personal details to continue with the signup. Finally, you’ll need to eSign and online self-verification to complete the procedure.

All the instructions are clearly mentioned in the each-step of the account opening page. If you are good at reading and following instructions efficiently, then you do not need to read this entire post. Just go to the account opening page, follow the instructions, upload the documents and your account will be opened.

Moreover, you’ll be assigned an angel broking executive once you sign up on the first step. Their details will be sent to you via message. He/She will help you out in the entire account opening process. If you face any difficulties while opening an account online, you can directly reach them out.

Read detailed step-by-step process here: How to Open Demat Account at Angel Broking?

Closing Thoughts

Through this article, we tried to cover the Angel Broking review for our readers. Let’s quickly summarize what we discussed.

Angel broking is one of the leading full-service brokers in India which offer flat brokerage charge to its clients. It provides fast, modern, and easy to use trading platforms as well as expert advisory services to its customer base. Moreover, because of the simple and fast process, you can open your Demat account at Angel broking within an hour if you’ve already got all the required documents.

September 3, 2020 Team Trade Brains Online Brokers No comments yet

What is Open Interest (OI)? How to interpret it?

Understanding Open Interest: The term open interest (OI) is one of the most popular terminologies used among stock market traders. In this article, we are going to discuss what exactly is Open Interest. Here, we’ll discuss it’s definition, what does an increase or decrease in open interest implies, the difference between open interest vs volumes, and how one should interpret open interest. Let’s get started.

Open Interest Definition

Open Interest is the total number of the futures contracts (or Options) held by market participants at any given point of time. The total number of open interest contracts keeps on changing with every transaction executed. The open interest is said to be the best indicator to gauge the market sentiment and understand the reliability of the price movements.

Therefore, for an open interest to exist, there must be a buyer for every seller and vise-versa. Here, the relationship between buyer and seller creates one open interest. So, when buyers and sellers come together and initiate one new position, then open interest is increased by one unit. And when the same buyer and seller decrease their position, an open interest is reduced. But, if a buyer and seller passes their position to a new buyer and seller, then the Open interest remains unchanged, its just a transfer of position.

What does the Increase/Decrease in Open Interest Imply?

An increase in Open Interest means that new money is flowing in the market. And it generally indicates that the present trend (Bullish, Bearish, or sideways) is expected to continue.

A decline is an open interest usually implies, that the current trend is expected to halt and we could see a reversal in the market. To know the current open Interest, we just need to know the total from the buyer or seller side and not both.

Difference between Open Interest (OI) and Volumes

There is generally a common misconception that both OI and volumes mean one and the same thing. However, they are two different concepts, giving out two different sets of data. But, both the data can be used in conjuncture. Let us understand the concept of Open Interest with the help of an example.

Say, there are five traders (A, B, C, D, E) trading the Nifty futures contract. Let us understand, as to how their trading has an impact on the open interest and its calculation.

On Monday: ‘A’ buys 20 Nifty futures contract and ‘B’ also buys 10 Nifty futures contract. While ‘C’ sells 30 Nifty futures contract in the market. Therefore, we have a buying activity of 30 futures contracts and a selling activity of 30 futures contracts. Hence, the total Open Interest is 30.

Trader	Buy (L = Long)	Sell (S = Short)	Contract held
A	20		20L
B	10		10L
C		30	30S
D
E
Total			30

On Tuesday: C wants to get rid of half the position and ‘D’ comes into the market and takes 15 short contacts from C. Here just the mere transfer of position happened and no new contracts were added. So, the open Interest will still stand at 30.

Trader	Buy (L = Long)	Sell (S = Short)	Contract held
A
B
C	15		15L
D		15	15S
E
Total			30

On Wednesday: D wants to add 15 more short contracts. And both A & B want to add 5 long contracts each, to their existing long positions. And C wants to exit 5 more short contract position form here existing position of 15 short contracts. Therefore, 10 more long contracts (both A & B) are added in the market. And the contract between C and D would be just a mere transfer of positions. In short, the table on Wednesday would look like this:

Trader	Buy (L = Long)	Sell (S = Short)	Contract held
A	5		5L
B	5		5L
C	5		5L
D		15	15S
E
Total			30

On Thursday: Trader E decides to enter the market. And wants to sell 50 Nifty futures contracts. Therefore, trader D decides to exit his 30 lots position and transfers his position to E. While trader A & B add position so 10 lots each to their existing positions. Overall, 20 new lots get added to the system and the final table at the end of Thursday looks like:

Trader	L	S	Contracts	L	S	Contracts	L	S	Contracts	L	S	Contracts
A	20		20L			20L	5		25L	10		35L
B	10		10L			10L	5		15L	10		25L
C		30	30S	15		15S	5		10S			10S
D					15	15S		15	30S	30		0
E											50	50S

If we carefully analyze and look at the table above, it gives us a fair sense that open interest is eventually a zero-sum game. If we add all the longs and subtract them with all the shorts in the market. The end result is eventually zero.

Figure 1: Open Interest data (Moneycontrol.com)

Now, if we look at the snapshot above (Fig 1), it is the data showing the shares with the highest change in the open interest for the day. With the change in the open interest, the share price has also gone up and which is usually an indication that the buying momentum is expected to continue in these ten shares.

— Open Interest and Volume interpretation

From the discussion above it is clear that OI tells us information about the contract which are open and live in the market. But, the volume gives us information about the number of trades executed in the market.

The volume data is reset at the end of the day and the new counter starts at the beginning of the next day, but the data of the OI is a continuation from the previous day. 10 lots bought and 10 lots amount to 10 volume and 10 OI for the day.

— Interpreting Open Interest

Price	Open Interest (OI)	Expectation from market
Increase	Increase	The buying momentum is most likely expected to continue
Decrease	Decrease	Long unwinding can be seen i.e., buyers are exiting from the market
Increase	Decrease	Short covering can be seen in the market.
Decrease	Increase	We could be a reversal in buying momentum as we can see more shorts than longs in the Market.

Conclusion

In this article, we tried to simplify the concept of open interest in share market and what it interprets. Here are a few of the top takeaways from this post:

Open interest gives you information about the total number of contracts which are outstanding in the market.
It is an excellent indicator to understand the market sentiment and expected momentum in the market.
When the contract switches hands, it’s just a transfer of positions and Open interest does not change.
The data of volume refreshes every day but Open Interest is a continuous data.

That’s all for this post. I hope it was useful for you. If you still have any queries related to open interest in the share market, please comment below. I’ll be glad to help you out. Happy trading.

Hitesh Singhi

www.linkedin.com/in/hitesh-singhi-46564a11/

September 2, 2020 Hitesh Singhi Technical Analysis, Trading No comments yet

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Trader	L	S	Contracts	L	S	Contracts	L	S	Contracts	L	S	Contracts
A	20		20L			20L	5		25L	10		35L
B	10		10L			10L	5		15L	10		25L
C		30	30S	15		15S	5		10S			10S
D					15	15S		15	30S	30		0
E											50	50S

Trader	L	S	Contracts	L	S	Contracts	L	S	Contracts	L	S	Contracts
A	20		20L			20L	5		25L	10		35L
B	10		10L			10L	5		15L	10		25L
C		30	30S	15		15S	5		10S			10S
D					15	15S		15	30S	30		0
E											50	50S

Trader	L	S	Contracts	L	S	Contracts	L	S	Contracts	L	S	Contracts
A	20		20L			20L	5		25L	10		35L
B	10		10L			10L	5		15L	10		25L
C		30	30S	15		15S	5		10S			10S
D					15	15S		15	30S	30		0
E											50	50S