List of Economic/ Financial Events that Move the Market: There is a multitude of Economic factors that determine the performance of financial markets. Throughout the economic calendar, new information becomes available at periodic intervals that provides insights to better understand the present and predict the future.
Today, we’ll look into the major financial events that move the market. This article gives a brief description of the various economic events that Indian investors keep a track to assess the overall health of the economy and its impact on their investments.
Must-Know Financial Events that Move the Market!
1. Economic Data
Some of the most important economic data releases that impact the Indian financial markets are:
A) Inflation
This is a measure of the change in prices of goods and services over a period of time. Various indices are used to measure inflation. An index tracks the changes in the prices of a basket of goods and services. The Consumer Price Index (CPI) is the primary index that measures retail prices of goods and services like food, transportation etc.
Another index is the Wholesale Price Index (WPI), which measures the prices at a wholesale level. The data for both – CPI and WPI is released by The Central Statistics Office. The percentage increase in the value of the index indicates the percentage change in the aggregate price level, i.e. inflation. The impact of inflation on the stock market can be both – positive or negative.
Most often, higher inflation causes the purchasing power of consumers and fall and reduces demand. Higher inflation could also lead to a rise in interest rates that increases borrowing costs and reduced valuations (due to higher discounting rates). These factors negatively impact the markets overall.
A positive aspect of rising inflation is that some inflation is essential for economic growth. For example, countries in Europe and Japan have been trying for years to revive inflation that would help spur economic growth. Inflation also impacts different sectors and companies differently. A company’s ability to pass on higher input costs to its customers will determine the impact of inflation on its profit margin.
B) Industrial activity
Growth in the industrial/manufacturing sector is considered as a leading indicator of the overall health of the economy. Increased industrial production signals a rise in demand, and since the industrial sector is closely linked to other sectors of the economy, higher industrial activity positively impacts other sectors.
An index that tracks the growth in manufacturing activity in the economy is the Index of Industrial Production (IIP). The IIP is calculated monthly and released by the Central Statistics Office. Low or negative growth in the IIP is bad for corporate sales and profits; thus, stock prices fall in reaction to it.
Another forward-looking measure of industrial activity is the Purchasing Managers Index (PMI). PMI ranges from 0 to 100. A value below 50 represents a contraction, whereas a value above 50 represents an expansion compared to the previous month. A separate PMI index is also calculated for the services sector.
C) Economic Growth
The most popular measure for the size of the economy is the Gross Domestic Product (GDP). It is the total value of all goods and services produced within a country in a particular time period. The growth rate of GDP indicates the health of the economy. The GDP data for India is calculated quarterly and is released by the Central Statistics Office.
High growth in GDP indicates growth in income and strong aggregate demand, and corporates are likely to perform better in such an environment. Thus high GDP growth coincides with an increase in stock prices and valuations.
Another measure of economic performance is the Unemployment rate, which is measures the number of people unemployed as a percentage of the total labour force. Higher unemployment indicates a poor state of the economy – companies less willing to hire, reduced aggregate demand and further layoffs.
It has been observed that the unemployment rate is negatively correlated to the prices in the stock market. In India, Center for Monitoring Indian Economy (CMIE), releases monthly estimates for the unemployment rate.
Monetary policy refers to the process through which the central bank (RBI) regulates and controls interest rates, money supply and credit in the economy in order to achieve its objective of price stability and economic growth.
Using various instruments at its disposal, the central bank regulates a plethora of interest rates and liquidity in the financial system. Markets prefer loose monetary policy, i.e. one where interest rates are reduced, and liquidity is increased. Lower interest rates reduce the cost of capital, increase borrowing and aggregate demand.
A fall in discount rates improves valuation in the equity markets; thus, a low interest rate environment is always bullish for stock prices. Furthermore, fixed income and money markets are very sensitive to interest rate changes; a fall in rates causes prices to rise. But there is always a risk of financial instability and high inflation that needs to be checked. The task of the Central bank is to balance and maintain interest rates that are neither too high nor too low.
Market participants pay close attention to the monetary policy decision taken by RBI’s monetary policy committee (MPC) that meets every two months. The minutes of the meeting, the RBI Governor’s speech, the stance of the policy etc. is scrutinized and have a material impact on market prices.
But the most important element of the monetary policy is the Repurchase Rate (Repo rate). It is the rate at which banks can borrow money from the RBI. Through the Repo rate, RBI tends to influence all other interest rates in the economy. A high repo rate would slow down economic growth; thus, stock markets react negatively to it.
3. Budget
The Union budget is an annual financial statement for the government’s estimated revenues and expenditures; it is a blueprint of the government’s fiscal policies, which includes the changes in taxation and economic reforms to be undertaken. The Budget has a wide-ranging impact on the economy, on companies across industries and individuals.
The Finance minister presents the Union budget to the nation every year in the month of February. It has been noted that the markets experience heightened volatility in stock prices during a few days before and after the Budget. Huge swings in prices become commonplace as market participants try to anticipate the Budget’s impact on company profitability and economy in general.
The Budget influences markets through the following channels:
A) Fiscal deficit
The fiscal deficit is the difference between total expenditure and revenue of the government. A high fiscal deficit means that the government would borrow more money from the financial markets. This increases interest rates and cost of borrowing for the corporates.
B) Tax rates
The personal disposable income of individuals is affected by personal income tax and various indirect taxes. An increase in these tax rates increases prices for consumers and reduces aggregate demand. Corporate tax rates directly affect the profitability of companies.
Through the Budget, the government provides a layout of its planned expenditure in the different sectors of the economy. If the policies are in favour of a particular sector, companies in that sector stand to gain and will experience growth. Consequently, their stock prices react positively.
Political activities also influence the performance of the stock markets. The result of elections determine which governments come to power and what kind of policies will it pursue. Political uncertainty can positively or negatively affect the stock markets.
Indian general elections are held every five years, and markets react positively to the prospect of a business-friendly political party coming to power. Research shows that volatility in stock prices generally increases during the election period in India.
State elections are conducted throughout the year and serve as an indicator for the next general elections’ results. Market participants pay attention to state elections as it determines the extent to which business-friendly economic reforms can be implemented.
Indian stocks are also influenced by political activities internationally. Policy changes bought by a new government in other countries can impact the profitability of those domestic companies who do business in these countries. A recent example would be the rise in India I.T. as a result of a less protectionist government coming into power in the United States.
Closing thoughts
The performance of Indian financial markets depends on many economic events. In this article, we covered the major Economical/ Financial events that move the Market. In general, markets react to economic data like inflation rates, industrial production, GDP, unemployment rate etc. These indicators help in assessing the overall economic health and impact on corporate profitability.
Monetary policy sets the interest rates and liquidity in the financial system. The annual Budget in which the government announces its fiscal policies sets the tax rates and allocates resources to the different sectors of the economy.
Political events like elections – both domestically and internationally have an effect on financial markets as the fate of businesses to some extent, is determined by the political environments they operate in.
Understanding Why the prices of Fuel are Rising in India: The retail petrol prices touched triple digits for the first time in a few areas across the country after the prices were hiked earlier this month. You too might have already noticed your monthly expenditure on fuel is increased.
In this article, we take a look at why the prices of fuel are rising in India. Here, we’ll try to give the reasons why the petrol/diesel prices have increased. Keep Reading to find out.
Why have petrol and diesel prices increased?
When the Union Petroleum and Natural Gas and Steel Minister Dharmendra Pradhan was asked this question he blamed it on the oil-producing countries. When it comes to crude oil India importsover 80% of its crude oil requirement. So any changes in the global prices will directly impact the fuel prices in India.
Pradhan stated that ”There are two main reasons for the fuel price rise. The international market has reduced fuel production and manufacturing countries are producing less fuel to gain more profit. This is making the consumer countries suffer,”. The minister also added that the government has also requested OPEC and OPEC+ countries to increase output.
The oil prices have been on a rise ever since Saudi Arabia along with the rest of the Oil Producing and Exporting Countries (OPEC), its allies the OPEC+ countries and Russia agreed to cut their production by 1 million barrels per day. This caused the oil prices to rise to $63 per barrel – the highest in a year.
But is this the only reason for the high prices in India? Oil prices in countries around the world have been reduced back to pre covid levels but quite the opposite has taken place in India. Prices in the US, China, and Brazil are 7.5%, 5.5%, and 20.6% lower than they were a year ago. A closer look at the price break up reveals some different answers.
Taxes on Petrol and Diesel
Both the central and the state governments have hiked the central excise duty and sales taxes to increase their revenues. In Delhi, the combined state and central taxes are 180% and 141% of the base price of petrol and diesel respectively. Over two-thirds of what we pay as fuel is tax to the government.
The main reasons for the increased taxes were the nationwide lockdown hurting the revenues of the government. In order to make up for this, fuel prices were taxed heavily. Last year the petrol prices were touched nil but this benefit was not passed on to the consumers in order to make up for the losses the government faced in other areas.
The last time any relief was provided was in 2018 when the excise duty was cut by Rs. 1.50 per litre. The crude oil priced however increased to $40 per barrel between June and October, and now have gone past $60.
When the lockdown was imposed the excise duty was increased byRs 13 per litre on petrol and Rs 16 per litre on diesel.Between April 1 and December 10, petrol prices were revised upward 67 times. Despite the huge increase in prices the Centre has refused to budge and still maintains the same excise duty.
Value Added Tax (VAT) too has been significantly increased to accommodate the needs of the state governments. After GST the only direct source of revenues that the state governments have is through liquor and fuel. Only a handful of state governments have taken action to control the prices.
Rajasthan reduced (VAT) from 38% to 36%, Assam withdrew the Rs.5 additional tax imposed during the COVID-19 crisis and West Bengal, cut VAT on petrol and diesel by Rs.1. Meghalaya gave the biggest relief by cutting Rs 7.4 per litre on petrol and Rs 7.1 on diesel.
In Closing
Consumers that directly spend on travel have already been affected due to the high fuel prices. But the concern due to increased fuel prices now extends to other products and services as well. Food inflation has reduced in the last few months but with the transport costs increasing they too may catch the inflationary trend.
Is the government’s position justified in the current scenario? Let us what you think about the increasing fuel prices below. Cheers!
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.
List of Regulatory Bodies in Indian Financial System: The regulators in the Indian Financial Market ensure that the market participants behave in a responsible manner so that the financial system continues to work as an important source of finance and credit for corporate, government, and the public at large. They take action against any misconduct and ensure that the interests of investors and consumers are protected.
The objective of all regulators is to maintain fairness and competition in the market and provide the necessary regulations and infrastructure. In this article, we’ll discuss the various Regulatory Bodies in Indian Financial System cover.
Regulatory Bodies in Indian Financial System
Briefs about various regulators who regulate and contribute towards the development of the financial market are as given below:
1. Securities and Exchange Board of India (SEBI)
The Securities and Exchange Board of India (SEBI) is a statutory body established under the SEBI act of 1992, as a response to prevent malpractices in the capital markets that were negatively impacting people’s confidence in the market. Its primary objective is to protect the interest of the investors, preventing malpractices, and ensuring the proper and fair functioning of the markets. SEBI has many functions, they can be categorized as:
Protective functions: To protect the interests of the investors and other market participants. It includes – preventing insider trading, spreading investor education and awareness, checking for price rigging, etc.
Regulatory functions: These are performed to ensure the proper functioning of various activities in the markets. It includes – formulating and implementing code of conduct and guidelines for all types of market participants, conducting an audit of the exchanges, registration of intermediaries like brokers, investment bankers, levying fees, and fines against misconduct.
Development functions: These are performed to promote the growth and development of the capital markets. It includes – Imparting training to various intermediaries, conducting research, promoting self-regulation of organizations, facilitating innovation, etc.
To perform its functions and achieve its objectives, SEBI has the following powers:
To change laws relating to the functioning of the stock exchange
To access record and financial statements of the exchanges
To conduct hearing and give judgments on cases of malpractices in the markets.
To approve the listing and force delisting of companies from any exchanges.
To take disciplinary actions like fines and penalties against participants who involve in malpractice.
To regulate various intermediaries and middlemen like brokers.
The Reserve Bank of India (RBI) is India’s central bank and was established under the Reserve Bank of India act in 1935. The primary purpose of RBI is to conduct the monetary policy and regulate and supervise the financial sector, most importantly the commercial banks and the non-banking financial companies. It is responsible to maintain price stability and the flow of credit to different sectors of the economy.
Some of the main functions of RBI are:
It issues the license for opening banks and authorizes bank branches.
It formulates, implements, and reviews the prudential norms like the Basel framework.
It maintains and regulates the reserves of the banking sector by stipulating reserve requirement ratios.
It inspects the financial accounts of the banks and keeps a track of the overall stress in the banking sector.
It oversees the liquidation, amalgamation or reconstruction on financial companies.
It regulates the payment and settlements systems and infrastructure.
It prints, issues and circulates the currency throughout the country.
The RBI is the banker to the government and manages its debt issuances, it is also responsible to maintain orderly conditions in the government securities markets (G-Sec). RBI manages the foreign exchange under the Foreign Exchange Management Act, 1999. It intervenes in the FX markets to stabilize volatility that facilitates international payments and trade, and development of the foreign exchange market in India.
The RBI also regulates and controls interest rates and liquidity in the money markets which have a profound impact on the functioning of other financial markets and the real economy.
3. Insurance Regulatory and Development Authority of India (IRDAI)
The Insurance Regulatory and Development Authority of India (IRDAI) is an independent statutory body that was set up under the IRDA Act,1999. Its purpose is to protect the interests of the insurance policyholders and to develop and regulates the insurance industry. It issues advisories regularly to insurance companies regarding the changes in rules and regulations.
It promotes the insurance industry but also controls the various charges and rates related to insurance. As pf 2020, there are about 31 general insurance and 24 life insurance companies in India, who are registered with IRDA.
The three main objectives of IRDA are:
To ensure fair treatment and protect the interests of the policyholder.
To regulate the insurance companies and ensuring the industry’s financial soundness.
To formulate standards and regulations so that there is no ambiguity.
Some important functions of IRDA are:
Granting, renewing, cancelling or modifying the registration of insurance companies.
Levying charges and fees as per the IRDA act.
Conducting investigation, inspection, audit, etc. of insurance companies and other organizations in the insurance industry.
Specifying the code of conduct and providing qualifications and training to intermediaries, insurance agents etc.
Regulating and controlling the insurance premium rates, terms and conditions and other benefits offered by insurers.
Provides a grievance redressal forum and protecting interests of the policyholder.
4. Pension Funds Regulatory and Development Authority (PFRDA)
The Pension Fund Regulatory and Development Authority (PFRDA) is a statutory body, which was established under the PFRDA act, 2013. It is the sole regulator of the pension industry in India. Initially, PFRDA covered only for employees in the government sector but later, its services were extended to all citizens of India including NRI’s. Its major objectives are – to provide income security to the old aged by regulating and developing pension funds and to protect the interest of subscribers to pension schemes.
The National Pension System (NPS) of the government is managed by the PFRDA. It is also responsible for regulating custodians and trustee banks. The Central Record Keeping Agency (CRA’s) of the PFRDA performs record keeping, accounting and provides administration and customer services to subscribers of the pension fund.
Some functions of PFRDA are:
Conducting enquiries and investigations on intermediaries and other particpants.
Increasing public awareness and training intermediaries about retirement savings, pension schemes etc.
Settlements of disputes between intermediaries and subscribers of pension funds.
Registering and regulating intermediaries.
Protecting the interest of pension fund users.
Stipulating guidelines for investment of pension funds.
Formulating code of conduct, standards of practice, terms and norms for the pension industry.
5. Association of Mutual Funds in India (AMFI)
The Association of Mutual Funds in India (AMFI) was set up in 1995. It is a non-profit organization that is self-regulatory and works for the development of mutual fund industry by improving professional and ethical standards, thus aiming to make the mutual funds more accessible and transparent to the public. It provides spreads awareness vital information about mutual funds to Indian investors.
AMFI ensures smooth functioning of the mutual fund industry by implementing high ethical standard and protects the interests of both – the fund houses and investors. Most asset management companies, brokers, fund houses, intermediaries etc in India are members of the AMFI. Registered AMC’s are required to follow the code of ethics set by the AMFI. These code of ethics are – integrity, due diligence, disclosures, professional selling and investment practice.
The AMFI updates the Net Asset Value of funds on a daily basis on its website for investors and potential investors. It has also streamlined the process of searching mutual fund distributors.
6. Ministry of Corporate Affairs (MCA)
The Ministry of Corporate Affairs (MCA) is a ministry within the government of India. It regulates the corporate sector and is primarily concerned with the administration of the Companies Act, 1956, 2013 and other legislations. It frames the rules and regulations to ensure the functioning of the corporate sector according to the law.
The objective of MCA is to protect the interest of all stakeholders, maintain a competitive and fair environment and facilitating the growth and development of companies. The Registrar of Companies (MCA), is a body under the MCA that has the authority to register companies and ensure their functioning as per the provisions of the law. The issuance of securities by the companies also comes under the purview of the Companies Act.
Closing thoughts
In this article, we discussed the Regulatory Bodies in Indian Financial System. There are many regulatory organizations in India that ensure the smooth functioning of the financial system.
RBI is the regulator of the banking sector, SEBI is the primary regulator of the stock markets, IRDA regulates the insurance industry, PFRDA regulates the pension fund industry. The AMFI sets ethical standards for the mutual fund’s industry and the MCA regulates the corporate sector according to the many legislations.
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
Gamestop and Reddit Saga: We all had fun watching series like scam 1992. These shows make it inspiring to watch as an underdog finally sticks it up to the rich guy( aka bears in the show) and at the same time sets a warning for greed. But can this be done in real life, that too in today’s day and age? Better yet, use the same investing strategies used by the ultra-rich in order to create a transfer of power and wealth.
Something similar has happened in the US but 1000 times more inspiring. As it includes lakhs of retail investors grouping and standing up to the Wall Street. In this article, we take a closer look at the Gamestop saga, the Redditors who inspired it, who won, and obviously who lost.
What is r/WallStreetBets?
r/WallStreetBets is a community on the social media platform Reddit. The community was created in 2012 by the then 30-year-old Jamie Rogozinski. The participants in this subreddit platform would discuss stock and options trading. Although the community only had a few thousand users for several years it grew to over 1 million during the crash of 2020.
This sudden growth can be attributed to job loss during the pandemic and the majority of the population stuck at home looking for an alternative source of income.
The revolution that is talked about today started off as a simple opinion posted by one user who went by the name of DeepF#@kingValue. DeepF#@kingValue aka Keith Gills (aka dada by his 2 y.o daughter) worked as a “financial-wellness education director” for Massachusetts Mutual Life Insurance Co. He began analyzing a company called Gamestock.
Gamestock had a business model where they would sell video games through their various physical store locations. But during recent times the business had taken a hit as fewer people would visit gaming stores as most games could be downloaded. In addition to this online stores like Amazon had taken away a significant portion of their business. The pandemic on the other hand had hit them hard as they dealt only through their physical stores.
Gamestop a Good stock?
But Gill had a different opinion. His analysis brought him to the conclusion that the company was undervalued. He arrived at this after going through their financial statements observing that the company had a lot of cash and could easily pay off their debts and with some better management he believed that they could even recover.
In addition to this, he also believed that technological advances threatening Gamestop were overstated. He further backed his analysis by pulling up articles showing that the move to digital was slower. In addition to this, he also noticed that new gaming consoles were soon to be released by Sony/ Xbox could bring Gamestop back on track. He released all his analysis on Youtube under the username ‘Roaring Kitty’. Many users disagreed with him but a few Redditors saw that he did have a point. In December Gill invested $53,566 into the stock.
Surprisingly Micheal Burry, an investor on whom the movie ‘The Big Short’ is based, also believed in Gamestock and invested in the company. These two however were unrelated. But what neither of them would have predicted is that the stock would increase 26 times from its lows in December.
Bankrupting Institutional Investors for Dummies
During the same period last year, r/WallStreetBets also noticed that over 84% of the Gamestock shares were held as short positions. This is very unusual for a stock. This meant that several hedge funds had colluded to bet that the share price would fall. Sadly for Gamestock, their shares fell further when they announced that they had failed to meet their estimates.
This in turn made these hedge funds millions. They could have sold after making their initial gains but they stayed put. The stock now had a 138% max short position. This was the single most shorted name in the U.S. stock market, according to FactSet. This showed that despite the stock having such high short interest the hedge funds were still greedy and awaited the shares of the company to hit the bottom. Sadly for them and luckily for armchair investors, some Redditors caught this.
In 2019 another investor had posted a 7 point document on Reddit Titled “Bankrupting Institutional Investors for dummies, ft. Gamestop.”. Redditors pointed out that this could now be used in the stock. If they all worked together they could create something called “Short Squeeze”.
What is a Short Squeeze?
A short squeeze occurs when the price of stock rapidly increases. The Redditors planned to do so by increasing the demand for the shares by purchasing available shares. This would force those who had bet against the stock i.e., in this case, the hedge funds to abandon their short positions. In addition to this, the hedge funds in order to cover their losses would be forced to buy the shares in the market further increasing the demand and hence the price too.
The Redditors realized that the hedge funds were exposed. In addition, most of the hedge funds had borrowed money to place these bets. There could be no telling to what extent of losses that the hedge funds could incur. On the other hand, the maximum losses the individual Redditors would face is to the extent of the fall in the share price. This had the potential to severely hurt wall street.
Gamestock price increase
On Jan 11, Gamestop appointed 3 new board members. The new directors all had extensive experience in e-commerce, online marketing, finance, and strategic planning. This news gave an opening to the Reddit army. By Jan 13 the shares of Gamestop surged by as much as 94%(intraday), its highest in 5 years. The price of the shares kept increasing.
On Jan 22nd the shares once again soared by nearly 70%. The prices touched $72.88( the price was at a low of $12.72 in Dec). Most media outlets associated this unprecedented increase in the price of new members joining the company’s board.
The hedge funds however stayed put and kept denouncing the stock on platforms like Twitter. By Jan 23rd it was clear that there was an angry mob rooted in Reddit that had driven the prices of Gamestop to new heights. The criticism posted by institutional investors was not taken lightly on Twitter. Andrew Left of Citron Research was forced to end his bearish commentary on the stock after he and his family were harassed by an angry online mob. He also stated that there were attempts to hack his Twitter account.
“What Citron has experienced in the past 48 hours is nothing short of shameful and a sad commentary on the state of the investment community,” Left opened up his letter which he posted on Twitter. Left posted his letter to a new Twitter account, @CitronResearch2, because “Twitter is working through multiple hack attempts,” Left said. He also clarified that he is stopping his commentary not because his views on the company had changed but because an “angry mob who owns this stock has spent the past 48 hours committing multiple crimes,”.
Prices Skyrocket
The shares of Gamestop had increased 400% to $93. By now it was clear that the rally was fueled by individual investors, encouraging each other on social media to buy GameStop shares and options. The short squeeze that the armchair investors had fought for had arrived and hedge funds were looking for an exit strategy.
Hedge Funds were now forced to buy back the shares they had sold short which further drove the prices even higher. Gamestop buy orders outnumbered sell orders by more than four-to-one. It was now the single most traded stock in the US – its volume matched that of the five biggest tech giants combined. The shares of the company were briefly worth more than $490 on the 28th of Jan. The company had gone from being worth $200 million to more than $28 billion.
Meme Stocks
It wouldn’t be fair to say that the shares were driven by r/WallStreetBets alone. Several investor celebrities like Elon Musk, C. Palihapitiya, Cathie Wood. tweeted in favor of the stock once they realized what was happening. Their motivations could vary.
Take Elon Musk for example who tweeted only one-word “Gamestonk!” — with a link to Wallstreetbets. Elon has always maintained a hate relationship with hedge funds as they have targeted Tesla stocks in the past. Conveniently for Elon, the same hedge funds are caught up in the fight against WallStreetBets.
Blockbuster
Soon other stocks too were targeted by armchair investors. These stocks soon came to be known as Meme stocks as they simply were agreed on online. This led to the bankrupt video-rental company called Blockbuster stocks to surge by 774% on 26 Jan and 302% on 27 Jan.
The company had filed for bankruptcy as early as 2010 and was subsequently destroyed by Netflix and Prime. There currently only exists one Blockbuster store today.
BlackBerry and AMC
Shares of BlackBerry Ltd. became meme stocks as they too began to rally. This was followed by shares of AMC Entertainment – a struggling movie theater chain quadrupled at the opening bell on Jan 27th. It was now clear that the WallStreetBets army was targeting Wall Street’s most shorted stocks in order to hurt the hedge funds.
The trading of these shares was halted multiple times a day due to their volatility. Shares of BlackBerry had posted gains for the seventh consecutive session. The management of the company was questioned over the sudden price increase but they told regulators they had no clue why its stock was surging. The stock of the once-popular smartphone maker has surged about 172% year-to-date.
Macerich
Another company Macerich, a real estate investment trust based in Santa Monica, was heavily hit with losses during the pandemic. The company owns 52 shopping centers across the U.S. The stock had lost 84% of its value over a three-year period ending Dec. 31, 2020, due to the shift towards online shopping. Macerich shares jumped 68% in four trading sessions thanks to r/WallStreetBets.
Cannabis Stocks
The Reddit army also targeted a series of cannabis stocks. Shares of cannabis stocks like Tilray soared 50%, Aurora Cannabis rose 20% and Aphria rose 10% on Feb 10. This however was short-lived as the shares tanked the next day as the retail investors lost momentum.
Wolfe Research began advising their institutional investor clients to avoid fighting the band of newbie day traders altogether and the stocks favored by them altogether. Yin Luo who headed the research wrote “Given the highly speculative nature of the Reddit buzz signal and retail investor behavior in general, we recommend using retail participation as a risk factor instead of an alpha signal.”
Losses suffered by hedge funds
On Jan 28th Melvin Capital and Citron finally gave up the fight against the armchair investors. Citron Research’s Andrew Left was vocal against GameStop. He predicted that GameStop shares would fall below $20. Citron Research covered its short with GameStop in the $90 range taking a 100% loss.
Melvin Capital too suffered the most losses. The company had begun the year with $12.5 billion but currently is valued at $8 billion. This recent valuation includes the emergency investment of $2.75 billion received from Citadel LLC, its partners, and Mr. Cohen’s Point72 Asset Management on Feb 1st. The company’s asset position had reached its lowest since the company’s start in 2014.
What were the profits?
DeepF#@kingValue aka Keith Gills who started the revolution had invested $53,566 in GameStop call options. He was able to turn this into $48 million. Most Redditors would say that it was well deserved as he was able to direct everyone’s attention towards Gamestop which eventually led to the shift of power in Wall Street. Keith Gill however stated that “This story is so much bigger than me … I support these retail investors, their ability to make a statement.”.
Many investors too have testified stating that it was Gill’s advocacy that helped turn them into a force powerful enough to cause big losses for established hedge funds. Reddit user reality_czech commented, “Your steady hand convinced many of us to not only buy but hold. Your example has literally changed the lives of thousands of ordinary normal people. Seriously thank you. You deserve every penny,”.
Several small investors who profited were able to pay off their student loans. Some even have decided to give back to the community by donating their earrings from the trades to charities. An inventor as young as 10 years old converted his/her investment to $3000.
Wall Street always wins!
However retail investors were not the only ones who had benefitted from Gamestop. Private Equity firm Silver lake cashed in AMC shares on Jan 31st for a $113 million gain during this week’s trading. California-based private equity firm Menlo Park sold its positions through several open-market transactions on Wednesday, raising $713 million.
AMC themselves too raised $304.8 million by selling their shares during the week. AMC Cheif Executive Adam Aron said in a statement “ …any talk of an imminent bankruptcy for AMC is completely off the table,”. AMC’s largest investor Ontario Teachers’ Pension Plan, sold its entire stake of 24.56 million Macerich shares at $20.25 each after shares soared more than 100%. Gamestop’s biggest shareholders became billionaires overnight.
Hedge funds like Senvest Management LLC, Messrs. Mashaal’s, and Gonick’s firm also made money from Gamestock shares. Investment firm Blackrock made a combined profit of $2.4 billion.
The downfall
The shift of power to the retail investors was short-lived. This was because soon various institutions began doing everything they could to limit these retail investors. Discord(social media platform) soon banned the WallStreetBets community. Facebook too banned the community group on its platform which had 157,000 members.
This however did little to stop their advance as the Reddit community grew from 5 million to 8 million in a few days.
The worst however was yet to come. Robinhood then banned the purchase of the stock. This further solidified doubts that the trading app was siding with the large hedge funds. This was ironic as the trading platform was named after a legendary outlaw who stole from the rich to give to the poor. Robinhood placed restrictions and halted the purchase of certain stocks.
The total stocks restricted amounted to 50. These included stocks like Gamestop, Nokia, Blackberry, Express, Koss, etc. Basically every stock that the WallStreetBets army had increased the price of. The restrictions include the ability to only buy one share of GameStop Corp. But the investors were still allowed to sell. This created a shift in the demand and supply of the stocks resulting in falling prices.
Investors believed that this was a means used by Wall Street cronies to cripple the individual investor. After all, Robinhood did receive funding from hedge funds like Citadel. In addition to this Robinhood also includes hedge funds in their business model. They relay information on trades made by individual investors to hedge funds. Robinhood has made $700 million by selling user data to hedge funds.
What was so far a profit motive would soon turn political? This was because it now seemed that the rich would do anything to ensure that the retail investors never win.
Papa Elon vs. Vlad the Impaler
In the midst of the turmoil, Elon Musk aka Papa Elon on Reddit made an appearance on Clubhouse along with Robinhood Co-founder and CEO Vladimir Tenev. Musk went on to grill Tenev over the restrictions put in place over retail investors by his company. Tenev went on to clarify that meme stocks had led to the app experiencing “unprecedented volume” and “load on the system.” as the net buys increased exponentially.
This led to the National Securities Clearing Corporation demanding $3 billion from the company during wee hours. This was due to the surge in trading volumes. The clearinghouses that help process and settle trades asked them for more cash to cover the transactions. Clearing firms, such as the Depository Trust & Clearing Corp., require brokerages to post more of their own money in riskier times to insure against losses. Tenev later clarified that this amount was later reduced to around $1 billion. The sequence of events also involved meme stocks being restricted.
In order to meet these cash demands, Robinhood was forced to raise more than $1 billion from its existing investors.
The Hate towards Robinhood
These restrictions placed by Robinhood affected their popularity immensely. The top free app in App stores in the US received 275,000 one-star ratings. Out of these Google removed nearly 100,000 in order to put the app back at a four-star rating. In addition, Robinhood was charged with multiple class-action by retail investors for market manipulation.
Sadly there was nothing much that these lawsuits can do as Robinhood is protected by its user agreements from potential lawsuits. The user agreement states that Robinhood “may at any time, in its sole discretion and without prior notice” prohibit or restrict users’ trades.
Billboards began to appear around the US encouraging investors to keep buying Gamestop and Redditors encouraged each other to not sell. Small protests were held in the streets and before you know it the news had reached the White House and Capitol Hill.
DeepF#@kingValue loses $13 million
DeepF#@kingValue came out and stated that he had lost $13 million but would still keep holding the shares. Gill stated that he had been holding 50,000 shares of GameStop as well as 500 call options. In the midst of all this, there were still some short-sellers who were not surrendering despite nearly $20 billion in one month. They could finally breathe a sigh of relief as the prices were made sure to fall. He also would be facing federal regulatory scrutiny for his involvement.
The employees trading app Robinhood too began expressing their unease with the events that transpired. This was expected as the app was created to support retail investors. Employees felt it went against Robinhood’s stated mission to “democratize finance” for individual investors.
Elon Musk once again came out in support of retail investors this time to back Rep. Alexandria Ocasio-Cortez spoke up against the trading restrictions placed.
AOC tweeted in part, “We now need to know more about @RobinhoodApp’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit. As a member of the Financial Services Cmte, I’d support a hearing if necessary.”
Musk replied: “Absolutely, u can’t sell houses u don’t own, u can’t sell cars u don’t own, but u *can* sell stock u don’t own!? this is bs – shorting is a scam legal only for vestigial reasons.
The Saga during Superbowl
Meanwhile, Robinhood CEO was called to testify on Capitol Hill over allegations put forward against the company. Friday last week the restrictions placed on Gamestop were removed. During the Superbowl, viewers were subject to cringy adverts placed by Robinhood celebrating amateur investors.
A similar advert placed by Reddit was more than welcomed. The restrictions were eventually lifted which led to an initial increase in the price of Gamestop before once again falling to $51 by Feb 11.
The Trial
Reddit celebrity Keith Gill appeared at a Congressional hearing along with the CEOs of Robinhood, Citadel, and Melvin Capital on 14 Feb. In the hearing, Gill made his investment motives clear. When asked about his investments in Gamestop he replied “I do find that it’s an attractive investment at this price point,”. Gamestop was trading at $42.88 at the time.
He also went on to say that his investment in Gamestop was based on fundamentals. He also stated that “… my particular approach to investing is rather aggressive and may not be suitable for anyone else. For me personally? Yes,”.
Vlad Tenev testified prior to Gill. In his prepared testimony, he stated that “any allegation” that Robinhood was helping hedge funds by limiting trades on certain volatile stocks was “ absolutely false.” He also went on to clarify why his company was forced to limit trading on securities due to clearing house requirements and also highlighted the steps taken to ensure that this does not happen again.
Melvin Capital founder Gabe Plotkin said that his firm was targeted by WallStreetBets in part due to anti-Semitism.
Later that week Keith Gill posted a screenshot on Reddit showing that he had increased his Gamestop holdings. The screenshot of his brokerage account showed that he bought an additional 50,000 shares of the stock.
The Movie
Despite the ugly outcomes for all sides, the movement has inspired a movie in the making. MGM has acquired the book proposal to be titled “The Antisocial Network” from author Ben Mezrich. This book will look to tell the story of “a ragtag group of amateur investors, gamers, and internet trolls who brought Wall Street to its knees.” In addition to this MGM also has acquired the rights to a film adaptation.
Closing Thoughts
The Gamestop Saga shows how a simple quest to make profits has now turned into a political statement. One thing that is sure to happen is hedge funds will henceforth take precautions before directly engaging against meme stocks. Robinhood however has been forced to postpone its IPO in the wake of a retail investor backlash.
This grudge poses a massive risk to Robinhood as retail investors could short the stocks in an attempt to exact revenge. The biggest winner through the Gamestop saga has been Reddit whose valuation has risen to $6 billion. But when it comes to our individual investments it is always best to rely on financial metrics over online memes in the future. Happy investing!
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.
List of Top Liquor Industry Stocks in India: India doesn’t rank too high on the list of countries with the highest per capita alcohol. But it is also true that Indians consume almost half of the whiskey produced in the world. This is mainly thanks to India’s huge population. India’s alcohol intake however has increased by 38% in the last 7 years.
Looking at the industry from a business perspective, we have prepared a list of the Top Liquor Industry Stocks in India. Here, we’ll discuss the top 8 alcohol players in the industry.
Top Liquor Industry Stocks in India
1. United Spirits
United Spirits Limited, is the world’s second-largest spirits company by volume. The company was originally founded by Scotsman Angus McDowell in Chennai. Currently, United Spirits are headquartered in Bangalore. The company has been around for almost 2 centuries and is currently the biggest in the country with a market cap of Rs. 40,332.08 cr.
United Spirits produces several famous brands like Antiquity, Bagpiper, McDowell’s Royal Challenge, Signature, Black Dog, Romanov, etc. They export their products to over 37 countries. In 2013 global players began acquiring a stake in the company and currently holds a 54.8% majority stake in United Spirits.
2. United Breweries
UB Group is another alcoholic beverage giant in India. The company was founded in 1857 by Vittal Mallya. It has a 40% market share in the Indian Brewing market. They are is headquartered in UB City, Bangalore. Although they come second in terms of size with a market cap of Rs. 32,168.85 cr they are India’s largest beer producers.
The company sells beer under the Kingfisher brand. Unfortunately, the company has faced difficulty in the recent past when its Chairman Vijay Mallya was accused of money laundering, misappropriation, and being a willful defaulter.
3. Radico Khaitan
Radico Khaitan Ltd. (RKL) manufactures industrial alcohol, Indian Made Foreign Liquor (IMFL), and country liquor. The company has a market cap of Rs.7,409.70 cr., making it the third-largest in the Indian industry.
It was founded in 1943 by Dr. Lalit Khaitan and is headquartered in Rampur, Uttar Pradesh. Their brands include Magic Moment, 8 PM whiskey, Contessa Rum, and Old Admiral Brandy. The company sells its brands in more than 85 countries.
4. Globus Spirits
Globus Spirits Ltd. was founded in 1992 and since then has come a long way in a short period of time. The company caters to four segments i.e. Indian Made Indian Liquor (IMIL), Indian Made Foreign Liquor (IMFL), IMFL Bottling, and Bulk Alcohol. It currently has a market cap of Rs.1,054.92 cr.
The company is famous in the segment of country liquor better known locally as ‘desi daru’. According to Globus, the Indian country liquor is about 242 million cases with a growth rate of about 7% per annum. Its famous brands include Officer’s Choice, White Lace, Samurai Rana Rajasthan No 1 Ghoomar Samalkha No 1, etc.
G.M.Breweries Limited (GMBL) was set up in 1981 by Shri Jimmy William Almeida. He created the company with the aim of providing the finest quality country liquor to the common man at the lowest possible price. It is headquartered in the state of Maharashtra. GM Breweries Ltd. currently has a market cap of Rs.752.67 cr.
The company manufactures Country Liquor (CL) and Indian-made Foreign Liquor (IMFL). Its top brands include Pioneer Doctor Brandy, Pioneer Special Doctor Brandy, Hot Shot Rum, and Reporter Choice Whisky.
6. Assoc Alcohol
Assoc Alcohol was set up in Calcutta in the year 1989. The company was promoted by B. P. Kedia and A. K. Kedia scions of the Kedia family. They began by producing IMIL (Indian Made Indian Liquor) and has grown over the years to also produce international brands.
It currently has a market cap of Rs.635 cr. Since its initial stages, the company has been a leading producer to the Government of Madhya Pradesh. Its leading brands include Royal Falcon Gold Seal Jamaican Magic (rum) Karapov Vodka etc.
7. Tilaknagar Ind
Tilaknagar Industries was Founded in 1933 by Shri Mahadev L. Dahanukar. It was initially incorporated as Maharashtra Sugar Mills. It was then engaged in the manufacture of sugar and allied products. They were forced to move out of the sugar business after the 1987 Indian legislation was introduced compelling all sugar production to be managed by co-operative schemes.
The group was then called Tilaknagar in honor of Dahanukar’s friend, the independence activist Bal Gangadhar Tilak. They then entered the liquor segment. The company today has a market cap of Rs. 373.17 cr. Its current portfolio of liquor includes brandy, whisky, vodka, gin, and rum. Its most popular brands are Madira Rum and Mansion House brandy, which are among the biggest-selling spirits in their respective categories. The company also produces Scotch whisky, ‘Seven Islands’ in collaboration with BenRiach distillery.
8. Som Distillerie
Som Distillerie was incorporated as a public limited company in 1993 by J K Arora and A K Arora. The company is currently located in Bhopal, Madhya Pradesh. Its current portfolio of liquor includes rum, vodka, beer, gin, scotch whiskey, and other distilled and blended liquor. The company currently has a Mcap of Rs. 373.17 cr.
Its popular brands include Hunter and Woodpecker in beers, Pentagon Gold Edition Whisky, Milestone Blue and Legend Premium Whisky, White Fox Vodka, Milestone Brandy, Pentagon Rum, and Black fort Rum.
Closing Thoughts
In this article, we discussed the top Liquor Industry Stocks in India. The Indian liquor industry has kept growing in leaps and bounds. Could this be an opportunity to try these companies … at least as investments. Let us know what you think of liquor stocks as an investment opportunity below. Cheers!
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.
How to open a demat and trading account at Zerodha? (Updated: Feb 2021): In this article, we’ll discuss the exact steps to open a demat and trading account at Zerodha. By the end of this article, you’ll have an active Demat account with Zerodha for you, provided you’ve got all the personal documents and follow the procedure discussed in this post correctly.
Anyways, before getting into the steps in this article, let me tell you how and why I opened my Demat and trading account at Zerodha. When I first started investing, I used ICICI direct as my stockbroker for opening my demat and trading account. Although I was happy with the facilities and platforms provided by it, I soon realized that ICICI Direct was very expensive.
Many times, profits were killed by the brokerages in ICICI direct. The worst part was paying too much of brokerage even when you were selling the stock at a loss. Then, I asked for feedback from my friends who were using SBI Smart and HDFC securities. They both were also paying high brokerages and suggested not to go with them. Finally, after researching a lot, I opened my second demat and trading account at ZERODHA.
Zerodha is the biggest discount broker in India with over 30+ lakhs customers. The charges offered by Zerodha are nominal and the trading platform provided by it is also fast and friendly. It charges a brokerage of 0.03% or Rs 20 per executed order, whichever is lower, irrespective of the number of shares or their prices.
This is way cheaper compared to ICICI direct which asked a brokerage of 0.55% on each transaction in equity. If you buy stocks for Rs 50,000 in ICICI direct, then you have to pay a brokerage of Rs 275 (on the other hand, Zerodha will ask for a maximum of Rs 20 any trade). Further, as this amount is charged on both sides of the transaction (buying & selling), hence you have to pay a total of Rs 550 for the complete transactions (which is way too expensive than Zerodha).
In short, if you are planning to enter the stock market world (or even an existing participant), I would recommend opening accounts in this discount broker “Zerodha” so that you can save lots of brokerages.
Why should you open a demat and trading account at Zerodha?
Zerodha is the biggest stockbroker in India in terms of daily trading volume, growth, and active customer base. It is one of the most technologically advanced and affordable stockbrokers. Zerodha has over +3 million clients and contributes to over 15% of daily retail trading volumes across NSE, BSE, MCX. Even in terms of Active clients trading just on NSE, it has outranked all the other new and traditional brokers.
Started by Nitin Kamath in 2010, as of Aug 2020, Zerodha has been awarded “Startup of the Year” by Economic Times (ET) Startup Awards 2020 and joined the list of distinguished winners that have displayed the potential to go on to become blue-chip corporations. You can read the complete story here. Ironically, Nithin Kamath was named one of the “Top 10 Businessmen to Watch Out for in 2016 in India” by The Economic Times for pioneering and scaling discount broking in India. Here are a few of the famous awards won by Zerodha recently:
— ET Startup of the Year (2020)
— National Stock Exchange (NSE) “Retail brokerage of the year 2019” (& 2018)
— Outlook Money “Retail broker of the year 2017”
— Ernst & Young “Entrepreneur of the year (Startup) 2017”
Benefits of Opening your demat account with Zerodha: If you are still confused about why you should open a demat and trading account at Zerodha, then here are top reasons:
Rs 0 (FREE) for equity delivery trades.
Rs 20 or 0.03% whichever is lower per executed order intraday trading and for everything else
Same pricing for across all exchanges
No upfront fee or turnover commitment
Z-Connect, interactive blog, and portal for all your queries
Over 1.5 million happy customers with a reputable brand name
300+ dedicated support team to ensure the fastest turnaround time for your queries via email or phone
Trading, charting, and analysis, all rolled into one next-generation desktop platform Pi.
How to open a demat and trading account at Zerodha?
Documents required to open a demat and trading account at Zerodha.
Here are the documents required to open a demat and trading account at Zerodha. I will recommend keeping soft copies of all these documents ready before you apply for opening the accounts as you’ve to upload them during the account opening process:
PAN CARD (Card not valid without a sign, check reference below).
Aadhar Card (with linked mobile number)
Bank Account Proof: Bank passbook front-page photo/ Scan copy or online statement or cancelled cheque. [If you are submitting cancelled, Your name should be PRINTED ON IT, then only it’s accepted]
Your Signature on a piece of paper (Photo or Scan copy).
*Income proof(Optional): Proof of Income is required if you wish to trade in F&O or commodity. Acceptable documents are the recent salary slip or the last six months’ bank statement or ITR.
Account opening charges at Zerodha
Here are the account opening charges at Zerodha
Demat and Trading Account: Rs 200
Commodity Account: Rs 100
If you want to trade in both equity and commodity, then you need to pay an account opening charge of Rs 200+Rs 100 = Rs 300. However, if you want to trade just in equity (stocks), then you need to pay the charge of Rs 200 only.
Now, there are two ways to open a demat and trading account at Zerodha:
Online method
Offline method
Using the online method, you can open your account with Zerodha within 15 minutes, if you have all the required documents.
However, in the online method, to complete the eSign process, you will have to authenticate it with an OTP. So, make sure you have the number is linked to your Aadhaar. If not, you will not be able to complete the process. If the number linked to your Aadhaar is inactive, or if you don’t have any number linked, then you can visit your nearest Aadhaar Seva Kendra to get it updated.
Anyways, if you don’t want to use your Aadhaar, you can still open your account via the offline route. However, I would recommend you to open online as it is fast and easier.
In the trading world, you need to be tech-savvy and comfortable with doing things online. All the transactions (buy/sell) etc that you’re going to perform in future, once your account is opened, will be online and through advanced trading platforms. They will require you to be technically smart. And therefore, start taking the online route as you can’t ignore the digital path in the future.
How to open your account with Zerodha Online?
Short Answer to Open Your Zerodha Account
First of all, let me give a short answer on how to open your account at Zerodha before my step-by-step explanation.
On this page, the first step is to signup using your 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.
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.
Besides, if you face any difficulties while opening an account online, you could contact Zerodha at – 080 4913 2020.
A Quick Intro to DigiLocker
While opening your account online with Zerodha, it will ask you to connect with your DigiLocker account. However, if you are new to DigiLocker, let me give you a quick introduction about it.
I was quickly impressed with DigiLocker concept when I first heard about it in early 2017. DigiLocker is an online service provided by the Ministry of Electronics and IT, Government of India under its Digital India initiative. I always keep this app on my mobile phone and let me tell you why.
If you live in a city, many times, you may face a similar situation like this. You went out to buy some groceries from a nearby shop or to drop someone. And because of a hurry, you forgot your wallet. This means that you don’t have your Driving license or vehicle registration doc with you. Next, if a traffic police stop you, then it might be a little trouble for you to explain to them why you traveling without docs.
However, if you have the DigiLocker app on your phone, you can show the driving license and vehicle registration from the app itself. Motorists can show docs in Digi locker during a traffic check as it is provided by the government of India. Moreover, it is more secure and acceptable by traffic police compared to the camera pic that you keep in your phone gallery.
Overall, if you don’t have a DigiLocker account yet, I’ll highly recommend you to open one and download the app on your phone. It will help you to keep all your docs secured.
Moreover, this account is required while performing Aadhar verification during your Zerodha Account opening.
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Detailed Zerodha Account Opening Process – Steps to Open your Account with Zerodha online
Now that you’ve got a basic idea of how to open your account at Zerodha online and what are the docs/things required, next, let me give you a detailed step-by-step explanation of the process:
Once you click on the above link, Zerodha’s account opening page will appear as shown below.
STEP 2: Enter your mobile number to Sign-up. You’ll receive an OTP to verify the mobile number.
The OTP will be valid to login for the next 30 mins. Please check your SMS and use the same OTP for you mobile number verification.
Quick Note: In this step, you can sign up with any mobile number that you prefer. However, you also need to have the Aadhar linked mobile number (that will be used in a later step for Aadhar based OTP verification process). Only then you’ll be able to complete the online account opening process.
STEP 3: Next, enter your PAN Card number along with date of birth (D.O.B) details in the field provided. Make sure to enter these properly. Below is the screenshot for your reference.
STEP 4: Now, you have to complete the account opening payment which is a one-time investment.
For equity– you’ve to pay Rs 200 and for commodity, the charge is Rs 100. (Commodity account is optional. If you wish to trade in the commodity, you can make this payment, else you can enable it later.)
You can complete the payment through UPI or Net-banking/Card payment (recommended). Below is the screenshot of this step for your reference.
STEP 5: After completing the payment, the next step is to connect your Aadhar details via Digilocker.
As already mentioned earlier, DigiLocker is a government initiative to share your aadhar details and highly secured. You need to create a ‘DigiLocker: Towards Paperless Governance’ account and link your Aadhar with it.
Below is the screenshot for your reference. Click on ‘Connect to DigiLocker’ and this will open a new page to sign up to Digilocker using your phone number. If you already have an account, click on ‘Sign in’ option in the bottom.
While connecting the Digilocker, you will be receiving the OTP to your AADHAR linked mobile number for your information. Once you get the OTP, enter it and hit continue. (Note: If you don’t have the security PIN, then click on the forgot my PIN and reset it.)
Next, click on allow so that you can share a copy of your Aadhar to Zerodha. Finally, your Aadhar details will appear on the screen. Make sure you are entering the details correctly. Note: This step will only come if you haven’t done KYC earlier.
STEP 6: Once your Aadhar verification is complete, next you need to enter your personal details like father’s name, mother’s name, your occupation, etc., Below is the Screenshot of this step for your reference. After entering the details, click ‘CONTINUE’
STEP 7: Next, you need to Link Bank Account. Here, you need to fill up more details starting by filling up Bank Details i.e. your bank account number, bank name, branch’s IFSC Code & MICR code
Make sure you choose all the options (checkboxes) and after reading the information, hit on the continue button.
Note: Please cross verify the bank account details with bank passbook or cancelled cheque or online statement (soft or hard copies) to avoid re-processing the forms again. Here is the Screenshot of this step for your reference.
STEP 8: Next is IPV Verification over webcam/phone.
IPV or In-person-verification is a process where a depository participant in personal verifies documents and other details as per the law by SEBI. It is compulsory for every investor to go through the in-person verification process before opening a demat and trading account.
First, you’ve to allow the Camera on your browser/phone to start to IPV process (check the below screenshot). You should click on the Allow button. If you click on the Block button, the camera will be disabled, and you may not be able to enable it easily.
STEP 9: Next, they’ll display an OTP on the screen. You need to clearly write down this OTP shown on a piece of paper or your smartphone. Then, hold the piece of paper/ mobile phone with the code in front of your mobile phone/ webcam.
Make sure to take the correct photo while holding the OPT written on Paper. You can take reference of how the person takes the photo in the below screenshot. Finally, click on the capture button.
Note: While taking the photo please don’t move here and there until it gets captured and hold the paper (OTP written paper) in front of the camera.
STEP 10: In this step, you have to upload the relevant documents that we mentioned in the beginning. You have to upload documents like Bank Details, PAN CARD, Signature and, Proof of Income(optional).
Income Proof is optional & only required if you want to trade Futures & Options, currency, and commodity. Then click on continue. It will be redirected to the equity eSign page.
STEP 11: Next, it’s time to eSign. Click on ‘eSign Equity’ button and proceed to the next step.
Once you click on the eSign button, the following screen will appear.
STEP 12: Once you click on the eSign equity, you’ve to verify your email. Here, two options will be available i.e. Google login or email login.
If you’re going with an email login, please enter your email address correctly as you’ll again receive an OTP to verify your email id. This is the same email where you’ll receive all your future correspondence from Zerodha.
Enter the OTP that you’ve received on your registered email and verify.
STEP 13: Once your email verification is complete, a new page with the “SIGN NOW” option will be opened. Here’s a screenshot for your reference. You should check the form.
Next, Click on the “Sign Now” button at the bottom of the page. It will redirect you to the NSDL page.
STEP 14: Once, you’re on the NSDL Page, Click on the check box top left stating “I hereby….”
Next, enter your AADHAR number at the bottom of the page and click on the Send OTP. Finally, enter the OTP and verify.
STEP 15: Once last step is complete, and it’s verified, the entire page will become with green background and a message appearing as “You have successfully signed the document”. This is a confirmation that your esign process is complete for the equity segment.
STEP 16: Next, you will be able to see the tick mark on the Equity segment which means that you’ve successfully signed up for this segment. You will also be able to download the eSigned Document on this page.
STEP 17: This step is applicable only for those who want to enable the commodity segment on their account. Here, they have to eSign again for the commodity segment.
Click on the commodity eSign. It will redirect you to the NSDL page. Next, click on the check box on the top left corner and enter the aadhar number. You will receive an OTP to the AADHAR linked mobile number. Once you enter the OTP and it is verified, the documents will be eSigned for the commodity segment too.
STEP 18: Congratulations, you have completed all the steps. A final Congratulations message will appear on your screen, once you’ve completed all the previous steps. Here’s the screenshot for your reference.
Quick Note: Once you complete all the steps, then the Zerodha document verification team will verify your documents. Once it’s verified, then you will get an email from the document verification team stating your documents are successfully verified. After receiving this email, you will get the login credentials within 24 hours.
Offline Account Opening Process
How to open your demat and trading account with Zerodha offline?
You can also open your account with Zerodha offline. However, the offline account opening charges are different than the online charges. Here are the charges for offline account opening:
Rs. 400 – for Trading & Demat Account
Rs. 600 – for Trading, Demat & Commodity account
In this approach, you will have to download application forms from Zerodha website, print out the forms, fill it up and sign it. If you need help at any point in filling out the application form you can call us on 080 4913 2020.
Here are the applications forms that you’ll need to fill and courier for account opening:
POA (Power Of Attorney) – Already included in the Application form above
ECN (Electronic Contract Note) for enabling Commodity segment – Already included in the application form 2
Nomination Form: In case you would like to appoint a nominee to your trading and DEMAT account like your wife, father, mother or any other.
The documents required for opening your account offline is the same as that of the online process. You need to get a photocopy of your PAN Card, Address proof (Aadhar Card, Driving License, Voter-Id etc), Cancelled Cheque/Bank statement, Income proof & Passport size photographs. You also have to cross sign as self-attest on all these docs. You can find the list of all acceptable docs for account opening here.
Once you fill it up and sign it, you have to send the application forms over to the Zerodha head office address:
Alternatively, you can schedule a meeting with a Zerodha representative at an address, date and time as per your convenience, by calling up the account opening helpline (080 4913 2020) or by placing a request with the sales manager assigned to you.
Here, a Zerodha representative will contact you and direct you to keep all such necessary documents ready at the decided time and place of the meeting. The representative would take all necessary signatures and self-attested documents/attachments as required to complete the account opening procedure.
I will recommend using the online method while opening your account. Zerodha is working towards the Digital India initiative and you should be a part of it too. Although online methods seem to have too many steps, they do not take too long. Once you’ve started the application form, you can build a flow and complete the form within 15-20 minutes.
The offline method is good if you do not have an Aadhar card and you want to provide another address proof like Driving license, Voter Id, etc. However, if you are living in a village/small city, it might be a little difficult for you to get a Zerodha executive. Moreover, the offline method can easily take 7-10 days to open a demat and trading account.
That’s all. These are the steps to open a demat and trading account at Zerodha, online and offline. I hope this post on ‘How to open a Demat and trading account at Zerodha?’ is useful to the readers. If you have any doubts, comment below.
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
Why are there two Stock Exchanges in India Explained: Before all experienced investors pounce in stating that there are more than two exchanges let’s clarify that we are only discussing the prominent national exchanges.
Ever wondered if the BSE was already existent what was the need for NSE? In this article, we answer the question of Why are there two Stock Exchanges in India i.e. BSE and NSE. Keep Reading!
Why are there two Stock Exchanges in India?
In order to understand this, it is first important to understand what the basic purpose of a stock exchange is. A common misconception is that a stock exchange is a government entity existing for the common good. Hence the question “How can there be more than one?”. The stock exchange is privately owned.
For a basic understanding of the stock exchange, we can look at them as one of our local agreed market places, where consumers find local vendors and vice versa. Similarly, a stock exchange also provides a platform where investors meet companies and other investors as well. At the end of the day, stock exchanges earn a profit too by levying charges for their services.
The Bombay Stock Exchange (BSE) too was formed with a similar purpose. It was founded by India’s first Big Bull – Premchand Roychand aka the Cotton King or the Bullion King. Roychand was one of the most influential businessmen in the 19th-century and made a fortune through stockbroking.
The story of BSE goes back to 1855 when 22 stockbrokers would meet under a banyan tree in front of Mumbai’s town hall. They would do so simply to buy and sell their securities. This made the BSE the oldest exchange in Asia. Hopefully, this makes it easier to understand why they existed in the first place. Similarly, there were other regional exchanges set up across the country.
The group called itself “The Native Share and Stock Brokers Association”. As the numbers of brokers grew their locations changed. Finally, they moved themselves to Dalal Street in 1874. The BSE grew and eventually was recognized by the government in 1957. The BSE however stood as the sole National exchange.
Why there was a need for a New Stock Exchange?
Now when we already have a good exchange in BSE what was the need for another one?
The answer to this can be seen in any sector which is dominated for too long by one company. Imagine if there was only one bank in the world. They would eventually begin charging their consumers with exorbitant rates. The consumers too would not have any option left.
On top of that as the only bank knows that it is the only player its services provided would only deteriorate and never keep up with technological advances. Dr. Ramachandra H Patil played a very important role in setting up the NSE in his words “Indian capital market around the early 1990s was akin to the Stone Age.”
On top of that, the BSE was controlled by a group of influential and powerful brokers. One could even say that the powerful broker lobby ruled the country’s largest bourse. The exchanges were riddled with bad delivery, fake certificates, and price manipulations. This was done to benefit the powerful at the expense of small investors. On top of all this, there were several barriers for one to join the brokerage community.
To become a broker one would have to be connected, related(nephew, son, etc) to existing brokers. Or pay a membership fee that would cost up to Rs. 1 crore in the BSE way back in the 90s. In the 1980s millions of households throughout the country began investing in the equity markets. But following are some of the crises that these small investors had to suffer in the 90s.
What Nudged the Government?
Harshad Mehta Scam. This was the first Indian stock market scam and involved banks and both the stock and bond markets. The fraud was said to amount to 4000 crores. The exchange also had several other crises caused by brokers like M. S. Shoes-1994, (share price manipulation) where the BSE had to be shut down for 3 days.
Other manipulation instances included shares of Sesa Goa, Rupangi Impex, and Magan Industries Ltd through 1994 and 1995. Out of all these the Harshad Mehta Scam however was just too big to ignore. The government finally began looking into this problem and approached several institutions like the IDBI to set-up a stock exchange.
According to a lecture given by Seth Shantaram Mangesh Kulkarni delivered in Mumbai and reported in the Economic and Political Weekly the Indian markets were regarded as one of the worst as it figured almost at the bottom of the league. Kulkarni too played an important role in setting up the NSE and served as its managing director and the CEO for the first seven-year.
He stated that “As we are all accustomed to finding India figuring in the bottom league in regard to so many other indicators of development such as per capita income, nutritional standards, health amenities to its citizens, literacy levels, etc, we did not seem worried that the capital market was also ranked at the bottom of the global ranking sheet.”
It did make sense for a government still battling so many issues in the country, the stock market which affected a minute percentage of the population would even be taken into consideration. Thankfully we have moved ahead in other parameters as well. And when it comes to the stock market 1992 was the final nudge that the government needed to do something.
Opposition towards a New Exchange
(Floor Trading – BSE)
As stated earlier the government gave its support to various institutions in order to set up a modern stock exchange. This move however was met with a lot of resistance according to Kulkarni. The powerful broker community immediately opposed this move as the oppression of their fundamental right to operate a stock exchange. This move opposed their right “to do business as they thought fit, although that may not always have been in the interests of the markets and the investor community.”
Unfortunately for the NSE, this idea could be easily sold to commoners as historically every exchange around the world is broker-owned and managed. The move to set up another exchange was not met with enthusiasm in several influential official circles. How could a newly set up institution stand up to BSE which has been around for over a century and at the same time take on its brokers? Other exchanges throughout India opposed this move too.
How did the NSE move ahead?
Once the NSE was set up and officially recognized in 1993 the views of the brokers shifted. They began worrying about the competitive threat posed by the NSE. Unlike the BSE where the trading took place on the floor on Dalal street, investors could now trade in real-time trading facilities from the nooks and corners of the country. When computerized trading was first implemented by the NSE the brokers looked at it with skepticism. It was assumed that as computer literacy was poor in India the idea would never take off. They however were proved wrong!
In addition to this, the NSE started picking on other limitations of BSE. They removed entry barriers that were present in order to become a broker. There was no 1 crore entrance fee. Interested parties now just had to maintain a non-interest bearing deposit. The NSE also gave importance to the settlement process. The BSE trading cycle would require 15 days for settlement. The NSE reduced this to a week. The management also played a role in the creation of National Securities and Depositories and the Clearing Corporation of India.
Initially, the trading turnover was quite modest, often less than Rs. 10 crore a day according to Kulkarni. But this was only because their new members were testing their systems. Once they noticed that the settlements were being completed on time they began building trust. Within a year the NSE became the first exchange to cross the turnover of an already set up exchange in its own country, i.e. BSE. This forced other exchanges to update themselves and put investor demands at the forefront. They were forced to do this if they wanted to survive.
Today the Indian markets are ranked as one of the most efficient in the world. Thanks to having two national exchanges.
Closing Thoughts
In this article, we tried to cover Why are there two Stock Exchanges in India i.e. BSE and NSE. Hopefully, this not only explains what caused us to have multiple stock exchanges and also why they were necessary. Over time it was important for the exchanges to also reduce the possibility of scams as this would also reduce people’s trust in them. By strengthening themselves, the NSE also forced others to adopt clean business practices eventually also strengthening the authorities.
What do you think of the ploy of competition used by the government in indirectly setting up another exchange to counter the BSE and the powerful brokers? What do you think the markets would have been like if the NSE was never formed? If you have any experiences trading in the early 1990s let us know below.
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.
Heranba Industries IPO Review 2021: The Heranba Ind. Ltd. IPO opens on 23rd Feb and closes on 25th Feb 2021. In this article, we cover the Heranba Industries IPO Review and look into important IPO information and find out the possible prospects of the company. Let’s get started.
Heranba Industries Review – About the Company
Heranba Industries Limited incorporated in 1996 is Gujarat based business engaged in the manufacturing and marketing of a range of crop protection chemicals, public health, and Animal Health solutions.
Heranba Industries Products
. Their product line also includes different types of pesticides, insecticides, fungicides, herbicides, and other pest control products. The company initially began by producing intermediate product cypermethrin acid chloride. Today the company is one of the leading domestic producers of synthetic pyrethroids like cypermethrin, deltamethrin, lambda-cyhalothrin, etc.
Their business verticals include
(a) Domestic Institutional sales of Technicals: manufacturing and selling of Technicals in bulk to domestic companies;
(b) Technicals Exports: Exports of Technicals in bulk to customers outside India;
(c) Branded Formulations: Manufacturing and selling of Formulations under their own brands through their own distribution network in India;
(d) Formulations Exports: Export of Formulations in bulk and customer-specified packaging outside India; and
(e) Public Health: Manufacturing and selling of general insect control chemicals by participating in public health tenders issued by governmental authorities and selling to pest management companies.
Heranba Industries Research & Development Unit
The mission of the company is to improve crop productivity and public health. They aim to provide innovative products to farmers that enhance farm efficiency and offer better crop solutions. This is achieved by its research and product development divisions. The company is well equipped with 3 of its own in-house R&D Unit for this purpose. Two of the units are recognized by the Department of Scientific and Industrial Research (DSIR).
They also have a fully equipped in-house laboratory with all the types of laboratory equipment such as HPLC, GC’s, Polarimeters, Particle size Analysers, Spectrophotometers, and other conventional lab equipment. The company’s products; Deltamethrin and Alphacypermethrin are now recommended and included in the WHO/FAO specifications.
Heranba Industries Manufacturing Unit
This company has 3 well-equipped manufacturing units in and around Vapi, Gujarat with an aggregate manufacturing capacity of 14,024 MTPA. Heranba is a manufacturer of Synthetic Pyrethroids and its intermediates in India.
Their products are created through advanced agro-chemical solutions based on specially developed technology. The company also has a well-balanced treatment system for the solid, liquid, and gaseous effluents and emissions generated by them.
Heranba Industries Domestic and Global Markets
It has a wide network of businesses in India. Domestically it caters to customers all over India with its extensive dealership, stockist network, and skilled field sales force. It has established registrations for 18 Technicals for manufacture and sale in India, 93 Technicals & Formulations for manufacture and sale in the export markets, and 167 Formulations registered for manufacturing and sale in India.The company has more than 8,600 dealers having access to 21 depots across 16 states and one union territory in India. Their products are supplied to both Government Tenders and to Pest control companies.
The company also has performed well in the global markets. The company exports its products to more than 60 countries through international distribution partners. The countries are spread across Latin America, CIS, Middle East, Africa, Asia, and southeast Asia. For this purpose, the company also has set up a separate registration department with qualified personnel and data support to meet each country’s regulatory requirements. This has helped its products to obtain registration in many countries.
Heranba Industries IPO Review – Key IPO Information
Sadashiv K. Shetty and Raghuram K. Shetty are the promoters of the company. The company has appointed Emkay Global Financial Services and Batlivala & Karani Securities India are appointed as book-running lead managers.
Important Heranba Industries IPO details
Particular
Details
IPO Size
₹625.24 Cr
Fresh Issue
₹60.00 Cr
Offer For Sale(OFS)
9,015,000 Eq Shares of ₹10
Opening Date
Feb 23, 2021
Closing Date
Feb 25, 2021
Face Value
₹10 per equity share
Price Band
₹626 to ₹627
Minimum Lot Size
1 (23 Shares)
Maximum Lot Size
13 (299 Shares)
Listing Date:
Mar 5, 2021
Equity shares of the company will be listed on the BSE and the NSE.
Heranba Industries Review – Purpose of the IPO
The IPO proceeds will be utilized for the following purposes:
To meet business working capital requirements. (Rs 50 crore )
To meet general corporate purposes.
To meet public issue expenses.
Closing Thoughts
The IPO opens on 23rd Feb and closes on 25th Feb 2021. For retail investors, it can be a good opportunity to look into the company’s future prospects and apply for the IPO if they believe in the products and growth prospects of Heranba Ind. Ltd.
That’s all for this post. Do let us know what you think of Heranba Ind. Ltd. IPO Review. Are you planning to apply for this IPO or not? Comment below. Cheers!
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.
List of Highest Paid CEOs in India: Leaders play a very important role in every organization. Sometimes they also manage to inspire millions around the world too. But how important are they their organization and how much are these organizations willing to pay them.
In this article, we take a look at the Highest Paid CEOs in India. You’ll be surprised as they beat Mukesh Ambani (15cr.) by crores when it comes to remunerations.
The Highest Paid CEOs in India
1. C.P. Gurnani – Rs 146.19 crores
C.P. Gurnani is the CEO of Tech Mahindra an Indian multinational technology company, providing IT and BPO services. He took home compensation of Rs. 146.19 crore (inc. benefits and bonuses) for the year 2018. This makes him the highest-paid CEO in India.
Gurnani, a Chemical Engineer has had a career spanning 32 years during which he held leading positions in HCL Hewlett Packard Limited, Perot Systems (India) Limited, and HCL Corporation Ltd.
2. Kalanithi Maran and Kavery Kalanithi- Rs 87.50 crore each
Also known as the “King of South India TV”, Kalanithi Maran is the President and CEO of Sun Group, Syriac and Red FM, Sun Cable Vision, and Sun Pictures. The group is headed by Maran and his wife Kavery, who holds the post of executive director in the company.
They both took home a compensation of ₹87.50 crore which includes ex-gratia/bonus. This makes Maran the 2nd highest paid CEO and his Kavery the highest-paid woman executive in India.
Maran the grandson of former Tamil Nadu Chief Minister, M. Karunanidhi started the business in 1993. Their leadership has expanded the TV network to have over 32 channels that reach over 95 million households in India.
3. Pawan Munjal – Rs 80.41 crores
Pawan Munjal is the Chairman, Managing Director, and CEO of Hero Motocorp. He took home a compensation of Rs. 80.41 crores in the financial year 2019. This made him one of the highest-paid CEOs in India. Son of Brigman Lal Mangal joined Hero Honda Motors in the early 1980s as director and took over as MD in 2001. He has been key for the growth, strategic planning, and transition of the group from Hero Honda to Hero Motocorp in 2011.
Pawan Munjal also heads several Committees of CCI, he’s part of the board of IIM, Lucknow, and also a member of the World Economic Forum.
4. N. Chandrasekaran – Rs. 65.52 crores
Natarajan Chandrasekaran is the chairman of Tata Sons. He was appointed as the CEO of Tata Consultancy Services (TCS) in 2009. He took home a salary of Rs. 65.52 crores in the Financial Year 2019.
Before serving as the chairman Chandrasekaran was also appointed as COO of TCS, chairman of Tata Motors, and Tata Global Beverages. He also was one of Tata’s youngest and the first non-Parsi CEO to take office in 2009.
5. S N Subrahmanyan – Rs. 48.45 crores
Sekharipuram Narayanan Subrahmanyan is the CEO & Managing Director of Larsen & Toubro. He had a pay package of Rs. 48.45 crores for the year 2019.
He received a bachelor’s in Civil Engineering and also has an MBA from Symbiosis and was part of an Executive Management Programme from the London Business School. He joined the company in 1984 after completing his education and has worked with them for 33 years before he was appointed CEO in 2017.
6. Salil Parekh – Rs 34.27 cores
Salil Parekh is the CEO of India’s second-largest IT company. He took home compensation of Rs. 34.27 crore (inc. benefits and bonuses) for the fiscal year 2019-20.
Before joining Infosys Parekh also worked for E&Y and served on the board for Capgemini. He was appointed CEO of Infosys in 2015 and was responsible for overseeing a business cluster comprising Application Services and Cloud Infrastructure Services among others.
7. Rajiv Bajaj – Rs. 32.31 crores
Rajiv Bajaj has been the managing director of Bajaj Auto since 2005. He took home a remuneration of Rs. 32.31 crores in 2019. He joined his family business after completing his studies as an engineer.
Vivek Bajaj is credited with reviving the ailing business. He also was responsible for introducing the Pulsar range of motorcycles into the Indian markets.
8. Sunil Mittal – Rs. 31 crores
Sunil Mittal is the founder and chairperson of Bharti Enterprises. He had a pay package of Rs. 31 crores for the financial year 2019. He was the son of MP Sat Paul Mittal. He founded his first company at the age of 18 with an investment of RS. 20,000.
Today he owns Bharti enterprise which has diversified interests in telecom, insurance, real estate, education, malls, hospitality, Agri, and food among other ventures.
9. Guenter Betschek – Rs 26.29 crores
Guenter Butschek is the CEO and Managing Director of Tata Motors worldwide till Jan 2021. He took home a package of Rs. 26.29 crores for the year 2019. This made him one of the highest-paid employees in India. The German worked with Daimler AG for 25 years and served as the COO of Airbus before being appointed as CEO for Tata motors.
10. Venu Srinivasan – Rs. 23.77 crores
Venu Srinivasan is the Chairman of TVS Group. He took home a package of Rs. 23.77 crores for the financial year 2019. He has come a long way as he started his career as a mechanic in his own garage during vacations. He completed his education as an engineer and also received an MBA from Purdue University (USA).
Closing Thoughts
In this article, we looked into the profiles of Highest Paid CEOs in India. This list clears those huge responsibilities also come huge paychecks. An average salaried employee would have to work for months for what they make in an hour. This makes the post all the more lucrative.
Let us know what you think about the list and also about your aspirations to be on it!
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.
Sensex Growth Timeline From 100 to 52000 Points: Today in the opening session of Indian stock market, Sensex opened at 52,455.82 points. In fact it’s only under 15 days since it crossed the 50k mark. The Indian stock market benchmark BSE Sensex index made a glorious history on 3rd February when it ended up over the 50,000 points mark for the first time.
In this article, we try to relive the 41-year journey of the Index which has handsomely rewarded investors who remained for the long term. Let us see if you can keep up with the number of times the Sensex has rebounded.
The Sensex Timeline to 52,000 points
1986: Sensex launched
The Sensex was launched in 1986, making it the oldest stock index in India. It was launched at a base value of 100 with the base year set at 1978-79. The term ‘Sensex’ was coined by Deepak Mohoni. It was derived from the words sensitivity and index. On launch, the Sensex was calculated using the market-capitalization-weighted methodology. It consisted of the 30 largest and most actively traded stocks on the BSE. Some of the stocks which were on the Sensex in 1986 and still remain are Hindalco Industries Ltd, ITC LTD, Mahindra and Mahindra Ltd, Reliance Industries Ltd, Tata Steel Ltd, Nestle India Ltd.
It also included other stocks like ACC Ltd, Crompton Greaves Consumer Electricals Ltd, GlaxoSmithKline Pharma Ltd, Grasim Industries Ltd, and Bombay Dyeing and Manufacturing Co. in 1986.
1990: Sensex crosses 1,000 points
The Sensex reached its first milestone of 1000 points on July 25, 1990. It took the Sensex 2,289 sessions to achieve this feat.
1991, May: Rajiv Gandhi assassinated and BOP crisis
Unfortunately despite touching the milestone the Sensex stood at 999 on January 1, 1991. What followed was one of the darkest periods in Indian history when our Prime Minister Rajiv Gandhi was assassinated. This coupled with the balance of payments (BoP) crisis India was facing further hindered the benchmark’s growth in 1991.
1991, July: Liberalisation of the Indian Economy
On 24 July 1991, FM Manmohan Singh presented the budget and along with that introduced a set of reforms that opened up the Indian economy to the rest of the world. These bold moves were taken in the wake of the balance of payments crisis and double-digit inflation. It is from here onwards that the Sensex rally began. Within 2 months the Sensex had rallied by 29% from1,488 to 1,916 pts.
1992: Harshad Mehta Bull run and Scam
Not even a year since liberalization the Indian markets would be shocked by one of India’s first financial frauds. Stock trader Harshad Mehta had managed to manipulate the markets into a bull run which touched a record high of 4,467 points by April 1992. This scam was worth Rs. 24,000 crores today. Once the fraud was exposed the markets crashed 43%. The Sensex reached 2595 points by August.
The city of Mumbai was targeted in a series of multiple blasts on March 12, 1993. One of the targets was the BSE building on Dalal Street. The attack affected the routine trading of the market. The Sensex loomed in between 2,300-2,400 points this year.
1999 July: Kargil War and the Dotcom bull run
India fought the Kargil War against Pakistan for 3 months. This reduced the foreign investment into Indian markets which further resulted in a dip in the Indian markets. Thanks to the Indian armed forces we defended the region successfully.
1999 Oct: Sensex crosses 5,000 points
Sensex touched 5,000 for the first time. This was fuelled by the National Democratic Alliance winning the election and Atal Bihari Vajpayee continuing as the Prime Minister signaling a stable government.
It was followed by the dot-com bull run. This was driven by internet-related companies and technology (IT) stocks.
2001: Ketan Parekh Scam, Natural Disasters and 9/11
2001 was yet another bad year for the stock markets. The Ketan Parekh scam has been uncovered. Ketan Parekh was a student of Harshad Mehta. In addition to the scam, India suffered from the Gujarat earthquake and was further hurt as US markets were affected by the 9/11 terrorist attacks. The benchmark fell below 5000 points and ended the year at 3,262.33.
The Sensex originally calculated using the market-capitalization-weighted methodology. From this year the Sensex began calculating based on the free-float capitalization method.
2004: NDA govt. falls
The NDA government unexpectedly lost the election. The UPA government won the Lok Sabha elections and appointed Manmohan Singh as the new prime minister. The Senex declined nearly 16% post the result but rebounded and ended the year at 6,602.69 points.
2006: Sensex Crosses 10,000
The Sensex crossed 10,000 points in 2006 due to a boom in commodity prices in the global markets.
2007: Sensex crosses 20,000 points
The Sensex crossed 20,000 points due to the increased liquidity in the global market.
2008: Recession
Global markets around the world crashed during the financial crisis of 2008. The Indian markets fell as foreign investors pulled out due to the crisis in their domestic markets. This was followed by the 2008 Mumbai terror attacks (26/11) This caused the Sensex to crash by over 50% from 21,000 points to 9,000 by the end of the year. This was the benchmark’s biggest fall since 1992.
2009: Satyam Scam
The Indian markets were once again hit by another scam. The Satyam scam came out in 2009 when CEO B Ramalinga Raju confessed to manipulating a company’s accounts to the tune of nearly Rs 7,100 crore. This came at the worst time as the markets were still struggling to recover from the 2008 Financial crisis.
2009, May: UPA wins 2nd term
The UPA winning the second time signaled stability in the Indian markets. The Sensex saw its biggest inter-day gain on May 18, 2009. For the first time trading was halted due to the markets hitting the upper circuit limit.
2010-12: Commonwealth and 2G Scam
The Indian markets don’t seem to be getting a break from scams. Late 2010 and 2011, scams were uncovered in the 2G spectrum sales and commonwealth games hosted in India. This further hurt the Indian market’s recovery from the financial crisis. Sensex fell 10.5% to 17404.20 in 2012 from 19,445.22 in 2011.
2014: NDA Wins Elections
The Sensex touched 25,000 following the NDA government winning the Lok Sabha elections. Narendra Modi was elected as the new Prime Minister.
2016: Demonetization
In a surprising move, the NDA government announced the demonetization of all ₹500 and ₹1,000 banknotes. This resulted in the Sensex falling 4.57% month-on-month and ended at 26,652.81 points.
2017: GST Implemented
FM Arun Jaitley announced the implementation of the goods and services tax (GST). Its introduction replaced indirect taxes with a unified tax structure. The Sensex gained by over 10% by the end of the year above 34,000 points.
2018: PNB and IL&FS crisis
Indias on and off relationship with scams continued as it was hit by 2 financial scams. The Punjab National Bank scam was uncovered in February and the Infrastructure Leasing & Financial Services (IL&FS) scam was uncovered in September. Despite the scams, the Sensex grew by 5.91% and ended 2018 at 36,068.33.
2019: NDA wins the 2nd term.
The NDA won the second time in a row continuing with Narendra Modi as Prime Minister. The positive sentiment that followed pushed the Sensex to touch 40,000.
2020: COVID-19
The Sensex fell to 25,638.90 after PM Narendra Modi announced a nationwide lockdown to curb the spread of coronavirus on March 24. The Sensex lost around 40% from its peak in mid-January. As the cases rose the Sensex kept getting further punished.
The subsequent re-opening post the lockdown, coupled with stimulus and potential of a vaccine saw the markets rebound and end at 47,751 points. Surprisingly still making positive gains despite covid-19.
2021, Feb: Sensex Crosses 50,000
The markets were volatile prior to the Budget presentation. But continued the winning streak post the budget and touched 50,000 points for the first time. A great comeback since its March lows of 25,638 points.
“Sensex touching 50,000 in 2021 is like an Indian cricket team winning a Test series in Australia against all odds. While economic data is about the past which is improving month on month, Sensex is reflecting the positivity about the future.” – “Nilesh Shah, Group President- MD, Kotak Mahindra AMC.
Closing Thoughts
Since recovering from the COVID-19 scare the markets keep scaling new heights. The Sensex ended at 52,154 points as of Feb 15 and shows no sign of slowing down. These bearish markets also helped the market capitalization (m-cap) of BSE listed companies to cross the Rs 200 lakh crore mark.
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.
Tata Motors Stock Study & Analysis: Tata Motors stocks have given a return of over 390% from March 2020 to Feb 2021 (till date). In fact, currently, Tata motors stocks are being considered more popular than Tesla in terms of returns. Nevertheless, looking at just the share price is the dumbest strategy while evaluating a company.
In this post, we’ll look into the fundamentals of TATA Motors focusing on both qualitative and quantitative aspects. Here, we’ll perform the SWOT Analysis of Tata Motors, Michael Porter’s 5 Force Analysis of Tata Motors, followed by looking into Tata Motors’ key financials. Let’s get started.
Disclaimer: This article is only for informational purposes and should not be considered any kind of advisory/advice. Please perform your independent analysis before investing in stocks, or take the help of your investment advisor. The data is collected from Trade Brains Portal.
Tata Motors Stock Study – About & Business Model
Incorporated in the year 1945 as TATA Engineering and Locomotive Company (TELCO), TATA Motors used to manufacture locomotive steam engines and other engineering products. It joined hands with Daimler Benz AG in 1954 to manufacture commercial vehicles which ended in 1969.
Understanding the technological trend, the company eventually discontinued this segment and set its foot into the commercial vehicle segment independently in 1977 in Pune. Currently, the company is a market leader in the commercial vehicle segment in India with a share of over 37%. TATA Motors entered the Passenger Vehicle segment in 1991 with the launch of TATA Sierra, and in 1998 Auto Expo, the company wrote history by launching TATA Indica which became the number one car in the respective segment within the next two years.
In 2008, the company acquired the Jaguar Land Rover segment from Ford Motors to enter foreign markets completely. Currently, the company has manufacturing and R&D facilities in the leading economies of the world viz. China, the UK, the USA, South Korea, etc. The Product Range of the company includes:
Passenger Cars
Utility Vehicles
Trucks
Commercial Passenger Vehicles
Luxury Cars
Defense Vehicles
Tata Motors’ Industry Analysis
By selling 3.99 million units of the vehicle in 2019, India surpassed Germany to become the 4th largest auto market of the world, and it is expected that by 2021, India will become the third-largest auto market displacing Japan. In the last four years, domestic automobile production has witnessed a growth of CAGR 2.36% with 26.36 million vehicles being manufactured and a 1.29% CAGR sales growth.
Considering Auto Industry as a whole, two-wheelers dominate the industry by 80.8%, followed by passenger vehicles at 12.9%. Mid seized and small cars grab maximum sales in the PV category.
According to the Society of Indian Automobile Manufacturers, PV wholesales in India saw a 26.45% YoY growth in September 2020. Automobile Export has grown with a CAGR of 6.94% during FY16-20, with the export of 4.77 million.
EV sales in India witnessed a 20% growth in FY20 with sales of 1.56 lakh units. And the EV industry in India is expected to be of Rs 50,000 crore by 2025.
The Indian Automobile industry is favored by several factors like cheap skilled labor, great R&D centers, and low-cost steel production. By 2026, the industry is expected to reach 16.16 -18.18 trillion Rs.
Tata Motors’ Michael Porter’s 5 Force Analysis
1. Rivalry Amongst Competitors
Auto Industry of any nation faces a stiff competition, that is why companies have to be price efficient and come up with new technologically advanced cars and features. The industry is very large and the exit cost is also very high as a lot of asset investment is being done, which intensifies the competition. Also, be it any range of car price, companies have to deeply focus on R&D.
2. A Threat by Substitutes
With the increasing fuel prices and online booking of tickets, people find cabs and other modes of transport as a substitute to a personal vehicle. Moreover, they do not have to spend on maintenance too. Still, owning a personal four-wheeler is a sign of prestige and convenience for the most.
In the commercial vehicle segment, road transport is still very much dominated (59%) as it can be connected to the mountains and to sea shores unlike trains, which makes substitutes for commercial vehicle highly unfavorable.
3. Barriers to Entry
Auto Industry requires continuous innovation, proper raw materials, skilled labor and huge initial capital investment which makes it very difficult for new entrants to step their foot in this industry.
Other barriers are government policies which have become very strict in the recent period especially focusing on environmental safety and high import taxation.
4. Bargaining Power of Suppliers
In Auto Industry, the bargaining power of supplier depends on the size of the supplier as few small suppliers are totally dependent on few auto players, so they have to play according to the rules and regulations set by the vehicle companies, and switching from one supplier to another is very easy for big players.
5. Bargaining Power of Customers
Customers are very price-sensitive and would switch to other brands that offer a better car at the cheapest price as there is no switching cost involved in this industry. So, customers enjoy a high bargaining power in the auto industry. However, companies try to increase customer loyalty by offering better quality and post service.
Tata Motors’ SWOT Analysis
1. Strengths
TATA Motors has a well-diversified portfolio of vehicles which includes right from economical passenger vehicles to luxury cars and the penetration of TATA Motors into the commercial vehicle segment is also very impressive. It creates a brand royalty for the company.
2. Weaknesses
The revenue of Tata Motors is heavily dependent on the JLR segment, which can hit the business and profitability if a slowdown occurs in this segment. In 2019 such situations occurred for the company when there was a massive decline in demand for JLR in Chinese and European markets and the rest was fueled by the pandemic in 2020.
3. Opportunities
With the advent of Electric Vehicles in India and other nations, TATA motors can take the advantage of its innovative legacy to increase its market share in the EV segment. Its sister companies like TATA Power can create the entire EV environment by installing more charging stations.
With the economy coming on track and industries coming out of recession, the purchasing power of people is expected to increase which TATA Motors can use to increase their revenues and market share in the PV segment.
4. Threats
The government’s increasing concern for the environment has posed various threats for the company as various policies (BS-VI) have been implemented in the past to reduce pollution which has caused an overall slowdown in the industry.
International issues like Brexit, Chinese Economy Slowdown, US import tariff, trade wars, and pandemic can severely affect the company in the future as it has also done in recent years.
With the advent of foreign PV companies like MG, Kia in India, the market share of existing companies will shrink severely and TATA Motors will be the one among them.
Tata Motors’ Management Study
Mr. N Chandrasekaran, the same personality who joined TCS in 2008 and made it India’s biggest company in 2018, is the Chairman and Non-Executive Director of the company. In the annual report of FY20, he has assured the shareholders that he will make the company debt-free in the next three years and since then the price of the stock did not look back.
In Feb 2021, Tata Motors announced the appointment of new CEO. Tata Motors’ new chief executive and managing director Marc Llistosella will take over the company’s India business. Llistosella’s experience in India, as the head of Daimler India Commercial Vehicles Ltd, will help Tata Motors increase its selling volumes in the premium vehicles.
One study shows that TATA only acquires those companies which have management structure similar to that of its own. Management has shown their concern for minority shareholders and the foundation was led by the respected Ratan Tata.
Tata Motors’ Financial Analysis
JLR segment contributes 77.76% of the company’s revenues majorly coming from China, Europe, and the USA.
19.09% of the total revenue constitutes of TATA Motors Standalone business out of which 11.61% is from Commercial Vehicle segment and 7.48% is from Passenger Vehicle segment. Recently, with the launch of new passenger vehicles, TATA Motors has succeeded in increasing its market share in the PV segment.
TATA Motors incurs around 2.01% of the total revenue from vehicle financing under the name TATA Motors Finance Limited (TMFL).
As of 2019-20, TATA Motors dominate the CV market share by 44.41% share coming out as a leader, followed by M&M (24.68%), Ashok Leyland (18.37%), and Eicher Motors (6.13%). Tata Motors has been continuously increasing its market share in the CV and PV segment for the last few years mainly due to the launching of new vehicles.
With the recent operational and leverage inefficiency, the NPM has dipped to -4.2 in FY20 making TATA Motors a loss-making company for two consecutive years. The fall is mainly due to the roller coaster commodity prices and disruption in sales.
Total Borrowing of the company has increased by Rs 12,498.12 Cr. (Rs 70,817.50 Cr. in FY19 to Rs 83,315.62 Cr. in FY20)
The net cash flow position for the company is in the negative region for the last few fiscal years. Although in FY19 it reported a net cash flow of Rs 8010.03 Cr., this was led by increasing huge long term and short-term debt (financing cash flow).
PARTICULAR
2016
2017
2018
2019
2020
Cash From Investing Activities
-37504.43
-38079.88
-26201.61
-19711.09
-34170.22
Cash From Operating Activities
37899.54
30199.25
23857.42
18890.75
26632.94
Cash From Financial Activities
-3795.12
6205.3
2011.71
8830.37
3389.61
Net Cash Flow
-3400.01
-1675.33
-332.48
8010.03
-4147.67
Tata Motors’ Financial Ratios Analysis
A. Profitability Ratios
EBITDA Margin has continuously fallen from 13.21% in FY16 to 6.78% in FY20 reaching almost lowest in the industry, which is an alarming sign for the company.
RoE for the company in FY 2016 was 16.42% but it slumped to -37.19% in FY 2019, mainly due to profitability getting severely hit because of disruptions in sales and increasing leverage. Although the current figure has shown improvement from the previous fiscal year, it is still at a fatal level of -17.94%.
Trend in RoCE has been more or less same as that of RoE, from the level of 16.42% in FY16 to mere critical -37.19% in FY19. The current RoCE for FY 20 stands at -1.92%.
B. Leverage Ratios
Current Ratio for the FY20 is 0.85% for the company. Although it has not shown any improvement, it has not deteriorated either since FY 2019. However, the current level is below the threshold level.
With a debt of around Rs1.1 Lakh crore, Tata Motors is a debt laden company and debt to equity ratio has been rising continuously for a lot of quarters, and at present, it is at an alarming level of 1.91.
Quick Ratio has always been a headache for the company. Being 0.72 in FY 16, it has fallen to 0.58 in the present fiscal year. Issues in the profitability and increasing leverage has dangerously affected the liquidity levels of the company.
The Interest Coverage Ratio is at a dangerous level of -0.46, which shows the inefficiency of the company in fetching EBIT income and deterioration in solvency levels of the company.
C. Efficiency Ratios
Currently, the asset turnover ratio for the company is 0.84, which is down from the previous year by 0.14 points.
Inventory turnover Ratio has seen a continuous fall since FY16 (8.97) without a single rise in between, currently at 6.83. Evident from the rise in inventory days to 53.46.
The number of receivable days has increased (17.19% in FY16 to 21.09% in FY20) and number of payable days has decreased (81.53% in FY16 to 94.20% in FY20), indicating that both the buyers’ and suppliers’ bargaining power has increased.
Tata Motors’s Shareholding Pattern
For the last 5 quarters promoter’s holding in TATA Motors has been at the same level of 42.39%. Also, 3.95% of the promoters’ share are pledged, which has not changed for the same period.
FIIs hold 15.61% of shares of the company as of December 2020 which is more or less same since June 2020 Quarter.
DIIs own nearly 12.71% shares of the company which was around 15% a year back.
From 24.245 in December 2019 to 29.27% in December 2020, public holding has surged.
Particular
Dec-19
Mar-20
Jun-20
Sep-20
Dec-20
Promoters
42.39
42.39
42.39
42.39
42.39
Shareholding Pledge
3.95
3.95
3.95
3.95
3.95
Public
13.7
16.8
18.21
18.1
17.81
FII
18.32
16.84
15.62
15.84
15.61
Total DII
15.05
13.58
13.39
13.22
12.73
Others
10.54
10.39
10.39
10.45
11.46
Closing Thoughts
In this post, we tried to perform a quick Tata Motors Stock Study. Although there are still many other prospects to look into, however, this guide would have given you a basic idea of Tata Motors Stocks. Do let us know what you think of Tata Motors stocks as an investment opportunity in the automobile industry by commenting below.
That’s all for today’s article. We hope it was useful for you. We’ll be back tomorrow with another interesting market news and analysis. Till then, Take care and Happy investing!
RailTel Corporation IPO Review 2021: The RailTel IPO opens on 16th Feb and closes on 18th Feb 2021. In this article, we cover the RailTel IPO Review and look into important IPO information and find out the possible prospects of the company. Let’s get started.
RailTel IPO Review – About the Company
RailTel Corporation is an Rs. 1,100 Cr public sector company, wholly owned by the Government of India (GOI) and administered by the Ministry of Railways. Incorporated in 2000, RailTel Corporation is one of the largest neutral telecom infrastructure providers in the country. It was set up objective of creating nationwide broadband, telecom and multimedia network, to modernize train control operation and safety systems of Indian Railways. The company has data centers in Haryana, Gurugram, Secunderabad, and Telangana.
RailTel, in collaboration with Google, provides free WiFi access at selected railway stations across India. Google chose railway stations to provide free WiFi because they have access to a reliable power supply and fiber provided by RailTel. In addition, the passengers at a station come from all demographics of India. The company uses the latest technology like high dense wavelength division multiplexing (DWDM) and multi-protocol label switching (MPLS) network.
RailTel IPO Review – Advantages of RailTel
1. Railtel is one of the largest neutral telecom infrastructure providers in India. As of June 30, 2020, the company had an exclusive right of way along 67,415 route kilometers connecting 7,321 railway stations for laying optical fiber cable. The company has over 55,000 route kilometers of optical fiber cable network and has connected 5,677 railway stations across towns and cities in India as of June 30, 2020.
2. Railtel is also an implementing partner for the Bharat Net project to create optical fiber cable-based broadband infrastructure in laying optical fiber cable across 36,000-gram panchayats in India.
As of June 30, 2020, they had completed laying 24,037 kilometers of optical fiber cables connecting over 6,500-gram panchayats.
3. The Company has also been awarded a number of projects which are in progress.
These include the Kerala Fiber Optic Network project. The aim of this project involves the provision of scalable and resilient optic fiber across Kerala.
4. Railtel serves as a key network for the Indian Railways and provides a variety of services to the Indian Railways. The company is working with Indian Railways to transform stations into digital hubs by providing free public Wi-Fi. As of June 30, 2020, 5,677 railway stations were live with ‘RailWire’ Wi-Fi. The company recorded over 14 million unique users per day in Fiscal 2020. RailWire recorded an average of 8200 TB of aggregated data consumption per month in Fiscal 2020.
5. Company is currently in the process of bidding for international projects. This includes one for supply, delivery, installation, testing, and commissioning of goods and services for digital literacy in public primary schools in Kenya. The company also has plans to use its expertise in working and developing projects for the Indian Railways, to modernize and digitize the existing networks in Bangladesh and Jordan.
RailTel IPO – Risks that the company faces
1. The telecommunications industry in India is highly regulated. Any changes in laws, regulations, or government policy could potentially adversely affect their business, prospects, financial condition, cash flows, and results of operations.
2. The company depends on and derives a substantial portion of its revenue from PSU customers. This includes the Indian Railways, and other GoI entities, as well as State Governments. This relationship with GoI and State entities expose them to the risks inherent in doing business with them. A substantial portion of their revenues is derived from three key customers:
National Informatics Centre Services Inc.
Indian Railways
Employees’ State Insurance Corporation of India.
Revenue generated from these three customers represented 42.13%,23.41%, and 25.09 %(Total – 90.63%) of their total revenue from operations as restated, in Fiscal 2018, 2019, and 2020, respectively.
3. The company has to keep up with the changes in the industry. This puts them at risk of not being competitive if they fail to keep up with the technological changes.
The company has stated that it may fail to successfully respond to technological advances and evolving industry standards. This is because upgrading their services in response to market demand may require the adoption of new technologies including 5G that could render many of the existing technologies in use, less competitive or obsolete.
4. The company is also involved in certain legal proceedings. Any adverse developments could materially and adversely affect our business, reputation, and cash flows.
5. The industry also suffers from Internet security concerns which could adversely affect their broadband internet access services.
6. The company generates a certain portion of their revenue from providing data services and a failure to successfully compete in providing data services could have an adverse effect on their business. In Fiscal 2018, 2019, and 2020, revenue generated from providing ISP services represented 14.48%, 15.63%, and 14.26% of their total income, respectively.
Various factors such as rising income levels, decline in prices of smartphones, increasing availability of mobile-based content, higher data demanding media including videos, games, and other applications on smartphones, and the rollout of long term evolution or LTE networks have led to the rapid growth of data usage in the telecom sector in India.
7. The company has experienced negative cash flows in the past. Future negative cash flows could affect their ability to operate a business and implement growth plans, thereby affecting our financial condition.
8. The company is wholly-owned and controlled by the GoI. This makes them susceptible to changes to its policies. The GoI will continue to retain a majority shareholding in Railtel after the Offer. This allows it to exercise significant influence over us. The GoI will require Railtel to take actions aimed at serving the public interest. This will not necessarily be profitable or financially feasible.
RailTel IPO Review – Key IPO Information
The company is wholly owned by the Government of India (GOI). ICICI Securities, IDBI Capital Markets & Securities, and SBI Capital Markets have been appointed as the book running lead managers to the issue.
Particular
Details
IPO Size
₹819.24 Cr
Fresh Issue
-
Offer For Sale(OFS)
₹819.24 Cr
Opening Date
Feb 16, 2021
Closing Date
Feb 18, 2021
Face Value
₹10 per equity share
Price Band
₹93 to ₹94 per equity share
Lot Size
155 Shares
Minimum Lot Size
1(₹14,570)
Maximum Lot Size
13(₹189,410)
Listing Date:
Feb 26, 2021
The government will remain as the majority shareholder post the IPO. An aggregate of 20% of the post–Offer Equity Share capital will be held by GOI as minimum promoters contribution. This portion will be locked-in for a period of three years from the date of allotment.
Purpose of the IPO
(i) to carry out the disinvestment of Equity Shares by the Selling Shareholder (government)
Their Company will not receive any proceeds from the Offer and all proceeds shall go to the Selling Shareholder.
(ii) to achieve the benefits of listing the Equity Shares on the Stock Exchanges.
Grey market information
The share prices of RailTel surgery in the grey market. The premium increased from Rs. 32 on Thursday to Rs. 47 on Saturday.
On Saturday the shares were seen trading at Rs.141 which implies a premium of 50% over the issue price of Rs. 94.
RailTel IPO Review: Key Competitors
Here are a few of the key competitors of RailTel
Bharti Airtel Limited,
Reliance Jio Infocomm Limited,
Power Grid Corporation of India Limited
Bharat Sanchar Nigam Limited
Mahanagar Telephone Nigam Limited
Closing Thoughts
In this post, we covered the RailTel IPO Review. The IPO opens on 16th Feb and closes on 18th Feb 2021. For retail investors, it can be a good opportunity to look into the company’s future prospects and apply for the IPO if they believe in the products and growth prospects of RailTel.
That’s all for this post. Do let us know what you think of RailTel IPO Review. Are you planning to apply for this IPO or not? Comment below. Cheers!
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.
List of 5 Best UPI Apps in India in 2021: With the return of PM Modi 2.0 in 2019, digital India has continued to make new progress. UPI payments have played a big role in this movement. Moreover, the nationwide lockdown due to COVID-19 in 2020, led to a massive increase in the number of people opting for online financial payments. In this time period, the value of UPI transactions soared by 105 percent in 2020. In this article, we will discuss the best UPI Apps in India for easy and fast transactions. But, before we start, let’s first understand what exactly is a UPI?
UPI means Unified Payments Interface. UPI payments have taken a substantial march ahead and nowadays, the mobile app store is flooded with new and innovative UPI apps in India. Briefing about UPI, it is an instant real-time payment system developed by NPCI which stands for National Payments Corporation of India which helps in inter-bank transactions by instantly transferring funds between two bank accounts on a mobile or web platform. Because of this advancement in UPI payments, money can now be sent to anyone across the nation within no time.
Anyways, not all apps listed on the play store are equally good for making UPI payments. Many times, the interface of some of these UPI apps in India may be hard to understand initially. Therefore, in this post, we have handpicked the best UPI apps in India that are easiest to use and definitely worth checking out.
Best 5 UPI apps in India:
1. PhonePe – UPI Payments, Recharges & Money Transfer
PhonePe stands first in our list of best UPI apps in India. It is a revolutionary app that made the Indian population start trusting and moreover making online mobile payments. PhonePe not only helps in making UPI payments but users can also recharge, make online bill payments, order food, shop, etc. all in just one app. As of November 2020, Phonepe has 868.40 million transactions in volume with Rs 1,75,453.85 Cr in transaction value.
PhonePe also provides various offers, rewards, and cashback to its customers. Having one of the simplest interfaces with the safest and fastest online payment experience in India, PhonePe is definitely better than most of the other UPI payment apps or internet banking services.
Google Play Store Rating: 4.4/5 with a total of 59,37,360 reviews
2. Google Pay (Tez) – A simple and secure payment app
Google Pay, formerly known as Tez App, stands the biggest and best app in our list of best UPI apps in India. This app has accumulated a huge customer base in India within a small time frame. And obviously, having a big brand name of ‘Google’ has helped this app to build trust among the new and existing customers.
As of November 2020, Google pay has 960.02 million transactions in volume with Rs 1,61,418.19 Cr in transaction value. Using Google Pay, users can send money to friends, pay their bills, shop online, recharge, or pay at the nearby café, etc. through secure payment by Google.
Another most enjoyable part of using Google Pay is the “Scratch cards”. Whenever the users make a new transaction, they are awarded a gift card in the form of a scratch card. After scratching the card, users can earn a gift in the form of money which directly gets credited into the registered bank account. Anyways, you won’t earn a Scratch card on every transaction as there are a minimum value and number of transactions predefined by the app. However, if you’re lucky, you may get a reward of up to Rs 1 lakh.
3. Paytm – BHIM UPI, Money Transfer & Mobile Recharge
Paytm is a quite well-known mobile payment app in India. Along with Paytm Mall, it also offers Paytm Wallet and Paytm UPI (which was introduced in the year 2017). In simple words, we can call it a mega store due to the variety of products and services provided by this app.
Paytm users can perform almost each and every activity related to online payments on its app. And that’s why it is certainly the most used payment app and is third in our list of best UPI apps in India. As of November 2020, Paytm has 260.09 million transactions in volume with Rs 28,986.93 Cr in transaction value.
From making online Payments to buying household items, groceries, IRCTC train ticket booking, bus & flight booking, movie tickets, LIC premium payment, metro card recharge, buying gold, making loan payments, paying e-challans & more, everything can be done on this app.
Google Play Store Rating: 4.4/5 with a total of 81,92,973 reviews
As of November 2020, Amazon pay is the fourth biggest app used for making UPI transactions. Amazon pay got 37.15 million transactions in volume with Rs 3,624.51 Cr in transaction value in this month.
Having the big brand of Amazon definitely helped Amazon Pay to scale at such a fast pace in India within a small time frame. Moreover, having integrated with most shopping and payment gateways, along with awesome cashback rewards, Amazon pay has become the darling of the UPI payers lately.
5. BHIM App
BHIM app is the fifth most popular UPI apps in India. It is launched and managed by National Payments Corporation of India (NPCI), BHIM (Bharat Interface for Money) is a UPI enabled the initiative to facilitate safe, easy & instant digital payments through your mobile phone.
As of November 2020, BHIM App has 0.31 million transactions in volume with Rs 13.87 Cr in transaction value.
Google Play Store Rating: 4.2/5 with a total of 8,26,155 reviews
Freecharge is another online payment mobile app in India that provides features like Mobile Recharges, bill payments, sending or receiving money through UPI– after creating BHIM UPI ID & linking the bank account. Moreover, because of its simple interface, everything seems quite easy for making UPI payments.
Besides, the Freecharge app also provides the facility to invest in Mutual Funds, making investments with SIPs, booking movie tickets, buying food, shopping, purchasing travel tickets, etc, and that too with an additional cashback and discounts.
Google Play Store Rating: 4.0/5 with a total of 1,159,488 reviews
HDFC Bank PayZapp is the fifth app in our list of best UPI payment apps in India. It is a complete payment solution giving you the power to pay in just One Click.
PayZapp is used to make online Recharge, Bill Payments, BharatQR Payments, booking travel tickets, Shopping, obtaining movie tickets, buy groceries, and more. It supports payment by mVisa QR, MasterPass QR, and Rupay QR and is available to customers of all banks. Overall, PayZapp is a convenient, fast, and secure UPI payments apps in India and definitely worth checking out.
Google Play Store Rating: 3.9/5 – with a total of 383,392 reviews
Other Notable UPI Apps in India
Here are a few other notable UPI apps in India that you can checkout:
MobiKwik – Recharge, Bill Payment, Instant Loan, UPI, Insurance
Google Play Store Rating: 4.2 With a total of 1,439,427 reviews
BHIM SBI Pay: UPI, Recharges, Bill Payments, Food
Google Play Store Rating: 4.2 With a total of 3,69,819 reviews
Kotak – 811 & Mobile Banking
Google Play Store Rating: 4.4 With a total of 4,58,209 reviews
Pockets ICICI -UPI, Wallet, Bharat QR
Google Play Store Rating: 4.1 With a total of 1,47,135 reviews
JioMoney Wallet
Whatsapp Pay
That’s all for this post. Let us know which one is your favorite UPI payment app in India in the comment section below. Have a great day. Cheers!
An overview to Cigar Butt Investing: Warren Edward Buffett goes down in history as one of the greatest investors. He can also be credited for popularising value investing which also turned him into a billionaire and also an investment guru. But did the same strategy make him a millionnaire as well? The answer is ‘No’.
Today we look at the approach Warren Buffett adopted in his early years popularly known as the Cigar Butt Investing.
What is the Cigar Butt Investing approach?
A person who does not have any money would go around picking discarded cigars on the street to enjoy a few puffs which would cost him nothing. Cigar butt investing too runs along the same lines. In Warren Buffetts’ words “Cigar Butt approach to investing is where you try and find a really kind of pathetic company but it sells so cheap that you think there is one good puff left in it”.” Though the stub might be ugly and soggy”, the bargain purchase would make “ the puff all free”.
Warren Buffett, however, adopted the approach from his mentor Benjamin Grahan, “ The father of value investing”. Graham, however, gave it a more respectable name i.e. the Net-Net approach or Deep Value investing.
In this approach the companies picked are those that are in their final stages. But a final surge in the prices occurs which is the free puff which allows you to take a puff i.e profit and discard the Cigar Butt i.e. sell the stock.
[Our net stocks strategy] gave such good results for us over a forty-year period of decision making that we eventually renounced all other common-stock choices based on the regular common stock procedures, and concentrated on these ‘sub-asset stocks.’ ” – Benjamin Graham
Benjamin Graham started out with the Cigar Butt approach during the onset of the great depression. During this time the shares of companies would trade at very low prices. At this point, the fact that the companies were making no profit did not matter as you could buy the companies for less than their net liquidating value. One would get both the Goodwill and factory for nothing like the discarded cigar.
Benjamin Graham unlike Warren Buffett believed that the past and the present were more important than the future. He also did not believe in giving the management of a company added weightage over the company’s value and hence came the Cigar Butt approach.
How to know if the discarded Cigar has a puff left?
Differentiating a Cigar Butt with the last puff from waste can be done by calculating the Net Current Asset Value (NCAV).
NCAV Formula
Benjamin Graham criterion for a Cigar Butt approach was to buy stocks that traded at below 2/3rd of the company’s NCAV. Hence even if the stock price returns to the NCAV, it would result in at least a 50% gain.
But what if the shares do not rise at all?
In a situation where the prices do not increase, the next step would be to keep buying the shares at the reduced value. This is done in order to increase ownership and finally liquidate the company. Here, after the debts are paid off the remaining amount would be paid off to shareholders which as calculated in NCAV would result in a profit as the shares were bought below NCAV.
The downside to this approach
It is important to note that even though Warren Buffett started off with this approach unlike his guru he gave it up. In “ Mistake of the first 25 years” in the annual letters he said that although the Cigar Butt strategy was rewarding, buying businesses with such kind of approach was foolish (unless you were a liquidator). Let’s go through the reason why this may be so.
1. Never is there just one cockroach in the kitchen
Often there is not just one but a couple of reasons due to which a company is on the verge of winding of up. And even though when we think the problem is solved another one surfaces.
2. Time is the friend of a good business and the enemy of the mediocre
The Cigar Butt approach is dependant on a temporary spike in the price or liquidation that may never occur. Say you purchase shares at Rs.60 and later are able to recover Rs. 100 from the sale or through liquidation. But if it takes you 10 years till you are able to get this return the investment would be poor. Also, there is a good possibility that during the course the company does everything to ensure business continuity. This may include the spending of its current assets or increasing the debt. Both would result in deteriorated NCAV. And also a waste of time as the shares even though bought below NCAV would reap higher returns elsewhere.
“ It is not much fun to buy a business where you really hope this sucker liquidates before it goes broke.” – Charlie Munger
Closing Thoughts
It is noteworthy that even though Warren Buffett stopped using the Cigarette Butt investment strategy he considers his purchase of Berkshire Hathaway a Cigar Butt. Warren Buffett regardless did not continue with this approach.
Unlike Benjamin Graham, Warren Buffett also gave importance to future prospects, growth potential, and management. As per the approach later adopted instead of us looking around for Cigar Butts it is better to look for unsmoked discarded cigars i.e. companies with high quality (good management and good prospect) that trade at below their intrinsic value. And then enjoy the next two hours patiently smoking through the cigar. I.e. holding the shares for a long period of time and reaping huge rewards.
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
A Beginner’s Guide on How to Trade Futures in India:Essentially, trading is nothing but an art to be able to foresee the future. There is joy (of profits) if we can foresee it right, and a sense of grief (losses) if our views and conviction go wrong. In simple terms, a trader is an individual or entity who buys or sells financial instruments like shares, bonds, derivatives, etc intending to make profits or to hedge the existing position.
In this post, we are going to discuss how to trade futures in India. However, before we dwell deeper into the world of futures trading, let us try and understand the mechanism of the Cash market and Forwards market, which builds the basic foundation of futures trading. Here, we try and draw their relevance to the futures market. Then, we’ll dig into the main topic of this article on the basics of how to trade futures in India. Let’s get started.
What is the cash market?
The cash market is an equity market where the buying and selling of the shares of the company listed on the exchange takes place. While trading via the cash market, the buyer of the shares of the company is essentially the part-owner of the company. He/she takes delivery of the shares of the company when they buy it from the cash market. These are regulated by exchanges.
Anyways, here, we can only buy that number of shares that our margin/capital in the trading account allows. There is no concept of leverage while trading via the cash market. The most import aspects of the cash market are delivery of the shares, ownership of the company, and no leverage allowed for delivery of the shares.
What are Forwards Market?
The concept of the forward market essentially came into the picture to protect the interest of farmers. Under this method, the agricultural produce of the farmers was pre-booked at a specified price to be delivered for a specified quantity and on a fixed date in the future.
Therefore, the forwards market is essentially a contract between two parties to buy the underlying asset at a specified price, in the specified quantity, and at a fixed price in the future. These instruments have lost their popularity because of certain glaring limitations, but are still used by banks and other financial institutions.
Some of the limitations of the Forward contracts include:
There is no third party (exchange or legal body) governing the forward contracts. So legality becomes a drawback while trading forward contracts.
Lack of liquidity is another major limitation that is plaguing the forward contracts. It can sometimes become difficult to find a counterparty willing to take opposite positions.
What are Futures Market?
The futures market are financial derivatives that derive their value from the underlying asset. The underlying asset here could be Shares, bonds, commodities, etc.
The futures market are a standardized contract that has a certain fixed quantity of shares (in the case of the equity market) per lot and they have a fixed expiry (three different expiry contracts run simultaneously) period. They are just like buying shares in the equity market but with a fundamental difference that in the case of futures contracts there is no delivery of the shares.
Another major difference between them is the leverage that one receives while trading futures contracts. In the case of the cash market, the leverage is to the tune of the amount of margin the trading account. But while trading futures, the amount of margin required varies between 20-60% of the total contract value in the case of shares and about 10-12% of the total contract value while trading index futures. So financial leverage becomes a major consideration for a futures trader.
In addition, one major advantage of trading via futures contracts is that these contracts are regulated via exchange (SEBI in India) and legality is never a factor with futures contracts. And the futures contracts are very liquid by nature i.e., it is very easy to find a counterparty willing to take opposite positions.
Now, having understood the basic premise of futures trading, let us try and understand how are futures contracts traded in India.
How to Trade Futures in India?
Futures trading in India is mainly in two forms – Stock futures and Index futures. All the futures contracts in India have three contracts running simultaneously – the near month, middle month, and the far month.
Whenever the near month expires, a new far month contract is added. The monthly contracts expire on the last working Thursday of the month. And if the last working Thursday is a holiday, then it expires the preceding day.
— Stock Futures
Stock futures are a financial derivative instrument that derives their value from the value of the underlying asset (shares of the company). The contracts have a specific size, fixed price, and specified date. Once the contract is entered, it will have to be honored. Following are some of the characteristics of Stock futures:
The size of the contract: All the stocks trading in the futures market, have a different number of shares in each lot. Partial lot trading is not permitted. A minimum of one lot has to be traded. For example, one lot of futures contract of Reliance industries has 250 shares, one lot of Maruti has 100 shares, one lot of ICICI bank has 1375 shares etc.
Expiry: All the stock futures contract has pre-decided fixed maturity. They expire on the last trading Thursday of the month. And if the last Thursday is a holiday, then they expire on the previous trading day. The stocks have three expiring contracts – near month (1-month), middle month (2-month), and far month (3-month).
Margin: The margin required to trade stock futures contract is very high to cover for Mark to Market (M2M) losses. This is basically done to protect the interest brokers and the exchange. And with the prevalence of margin, while trading futures in India, there is no chance of default in trading via futures contracts. Margin has two components – Exposure margin and SPAN margin. SPAN Margin is the minimum requisite margins required as per the exchange’s mandate and ‘Exposure Margin’ is the margin required over and above the SPAN to account for any MTM losses
— Index Futures
An index is a representation of the broader sector of the economy. In India, there are two major index which are actively traded in the futures market – Nifty Index and Bank Nifty Index. On Jan 12, 2021, SEBI also allowed trading of Nifty Financial services in the derivatives segment.
If one were to express their view on the economy then one should express their view views by trading Index futures as it shows the overall sentiment of the market. Trading Nifty futures would mean that one is expressing his views on the overall economy as Nifty 50 is a composition of the top 50 companies listed on NSE.
Total Active Contracts anytime : 3 (Near Month, Mid Month, Far Month)
Shares in 1 futures lot: 75
Expiry: Last Thursday of Every Month (Previous day if Thursday is a holiday)
For example, if the present value of one lot of Nifty futures for near month expiry is 14476, then the total value of the contract will be – Contract value = 14476 * 75 = Rs. 10,85,700
The margin required will be equal to:
— Bank Nifty Futures Trading
Underlying Asset: Bank Nifty
Total Stocks in the Bank Nifty Index: 12
Total Active Contracts anytime : 3 (Near Month, Mid Month, Far Month)
Shares in 1 futures lot: 25
Expiry: Last Thursday of Every Month (Previous day if Thursday is a holiday)
For example, if the present value of one lot of Bank Nifty futures for near month expiry is 331628.05, then the total value of the contract will be – Contract value = 31628.05 * 25 = Rs. 790701.25
Here, the margin required will be equal to:
— Nifty Financial Services Future Trading
Underlying Asset: Nifty Financial Services
Total Stocks in the Nifty Financial Services Index: 20
Total Active Contracts anytime: 4
Shares in 1 futures lot: 40
Expiry: Last Thursday of Every Month (Previous day if Thursday is a holiday)
For example, if the present value of one lot of Bank Nifty futures for near month expiry is 15308.30, then the total value of the contract will be – Contract value = 15308.30*40 = Rs. 612332
Here, the Margin required will be equal to:
How are Futures contracts Priced?
Futures contract derive their value from the value of the underlying assets. There is always a variation/difference in the prices of the cash segment and derivatives segment. There are basically two methods of pricing the futures contract: The Cost of Carry Method & The Expectancy Method.
— The Cost Of Carry Model
Under this method, the market is assumed to be perfectly efficient. So, the profit made by trading the cash segment or futures segment is the same, as the movement in the prices are aligned. Following is the process of calculating the prices under the Cost of Carry model
Futures Price = Cash Price + Cost of Carry
The cost of carry here refers to the cost of holding the futures contract till maturity.
— The Expectancy Method
Under this method, the futures prices are the expected cash price of the underlying asset in the Future. So, if the market is positive/conducive for the underlying asset, then the futures price will be higher than the cash price. If the market has a weak sentiment towards the underlying asset, then the futures price will be lower than the underlying asset.
Quick Note: If you want to learn more about futures trading, we have launched a FREE Futures Trading Course for Beginners on Trade Brains Academy. Enroll for FREE here.
Why Trade Futures?
The following are some of the benefits of futures trading:
The contracts are well regulated: As the futures market are well regulated, there is no risk of legality and all the contracts are settled at the time of expiry
Leverage: Leverage is perhaps one of the most important reasons for which futures trading is one of the most popular derivative instruments.
Highly liquid: Liquidity is never a factor while trading via futures as there are hordes of players who are willing to trade futures or hedge their existing position in the market.
Closing Thoughts
In this article, we discussed How to Trade Futures in India for beginners. Here are a few key takeaways from this post:
Futures contract derive their value from the value of the underlying assets.
Because of the low margin requirement, futures trading is very popular amongst traders
The futures contract are exchange regulated, there is never the question of trust amongst the traders
One can exit their existing futures contract position anytime from the market by taking an opposite position in the futures market.
The Index futures are cash-settled
There are two methods of calculating the futures contract value – The cost of carry method or the Expectancy method
That’s all for today’s article on How to Trade Futures in India. We hope it was useful for you. We’ll be back tomorrow with another interesting market news and analysis. Till then, Take care and Happy investing!
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!
Nureca IPO Review 2021: The Nureca IPO opens on 15th Feb and closes on 17th Feb 2021. In this article, we cover the Nureca IPO Review and look into important IPO information and find out the possible prospects of the company. Let’s get started.
Nureca IPO Review – About the Company
Founded in 2016, Nureca Ltd. is engaged in the distribution of healthcare and wellness products. Nureca which sells its products through the brand – Dr. Trust, Trumom, and Dr. Physio, was the first company to sell such products online through its website dr.trust.in.
The company aims to offer the best Premium quality healthcare and wellness products. It also believes in innovation and catering new products to the ever-growing Indian healthcare needs.
Orthopedic Products – wheelchairs, walkers, lumbar and tailbone supports, and physiotherapy electric massagers.
Mother and Child Products – breast pumps, bottle sterilizers, bottle warmers, car seats, and baby carrycots.
Nutrition Supplements – fish oil, multivitamins, probiotics, biotin, apple cider, and vinegar.
Lifestyle Products – smart scales, aroma diffusers, and fitness tracker.
Over the years the company has built a strong online presence and uses this channel to sell its products to retailers, and other distributor and retail players. The company also sells its products directly to consumers through its website.
In 2019, Nureca partnered with Tata Group’s Croma to become the first company to sell healthcare and wellness products in their retail stores. Its current market includes India and its neighboring countries.
Abhay Doshi, the founder of UnlistedArena.com associated the impressive growth in sales in the first six months of FY21 to the fear of the COVID-19 pandemic and patients avoiding visiting hospitals and clinics which led to an increase in sales. He also stated that as the situation normalizes the growth trajectory will return to its previous growth trajectory.
The health market in India and its neighboring countries stood at Rs.20,757 crore in 2019 and is expected to grow to Rs.38,920 crore by 2025 at a CAGR of 11.0%. This growth will be driven by rising awareness of Health and wellness, increasing spending power, the growing burden of chronic diseases, and the need for Healthcare stakeholders to reduce healthcare costs.
Nureca IPO Review – Key IPO Information
Saurabh Goyal is the promoter of the company. It has appointed ITI Capital as the sole book-running lead manager to the issue.
Important Nureca Ltd. IPO details
Particular
Details
IPO Size
₹100.00 Cr
Offer For Sale(OFS)
-
Opening Date
Feb 15, 2021
Closing Date
Feb 17, 2021
Face Value
₹10 per equity share
Price Band
₹396 to ₹400 per equity share
Lot Size
35 Shares
Minimum Lot Size
1(35 shares - ₹14,000)
Maximum Lot Size
14 (490 shares- ₹196,000)
Nureca Ltd IPO Review – Purpose of the IPO
The IPO proceeds will be utilized for the following purposes:
To meet the working capital requirements of the business.
To meet general corporate purposes.
The company also expects to enhance its visibility and brand image among existing and potential customers through the IPO
Closing Thoughts
Nureca Ltd that sells its products through the brand – Dr. Trust, Trumom, and Dr. Physio, aims to offer the best Premium quality healthcare and wellness products. The IPO opens on 15th Feb and closes on 17th Feb 2021. For retail investors, it can be a good opportunity to look into the company’s future prospects and apply for the IPO if they believe in the products and services offered by Nureca.
That’s all for this post. Do let us know what do you think of Nureca Ltd IPO Review. Are you planning to apply for this IPO or not? Comment below. Cheers!
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.
Everything to Know About What are Neo banks And what is its future: Technology is taking over! Every company today faces one of the biggest threats of keeping up with technology or being branded as outdated. The same goes for traditional banks.
In this article, we discuss the new tech-savvy type of banks called Neobanks and their possible role in our banking environment. Here, we’ll cover exactly what are Neo banks and how are they changing the financial systems. Let’s get started.
What are Neo banks?
A Neo bank is a 100% digital bank that operates only through online platforms and apps without having any physical branches like traditional banks. These banks attract customers who are tech-savvy and prefer managing their money through apps.
Neo banks are more flexible, inclusive, and accessible in comparison to traditional banks. Neo Bank services are usually limited compared to traditional banks to
Saving and checking account,
Payment and transfer of money and
Financial educational products
How does Neo Banks function?
Neo banks function differently than a traditional bank. These banks are customer-oriented with technology playing a major role in helping them achieve this. But this also means that several traditional means of revenue are no longer available to these banks. One of the revenue means through which Neo Banks maintain profitability is its subscriptions.
The business model allows Neo banks to provide customer-tailored requirements. This allows them to charge a subscription fee or a premium for various additional and advanced services.
Another means through which Neo banks could boost their profits in the future is if they increase their lending to customers. This however involves increased risk and could involve several challenges. Currently one of the most attractive models for Neo banks is offering their service to established financial institutions.
Partnering with traditional banks allows them a way around the restrictions placed by the RBI. Neo banks here provide back-end digital services to traditional banks. The near future could also see several acquisitions made by traditional banks of Neo banks.
How do Neo Banks operate in India?
As a customer, a Neo bank may only seem like an app that stores and facilitates the transfer of funds. But these offerings are limited in India in comparison to traditional banks. In India, Neo banks are not allowed to hold customer deposits as the RBI still requires a physical presence as per its 2014 guidelines. This forces Neo banks to partner with traditional banks.
Despite this, in the last year, we have seen several Neo banks thriving in the country. This can be attributed to a major shift due to the pandemic forcing digitization of services. Neobanks are further attractive in these aspects as they incur lower overheads further encouraging traditional banks to keep up. They are cost-effective as their operations do not require any costs related to a bank’s physical presence. This allows them to cut fees and expand services.
Different Neo Banks in India
Walrus Club
Niyo
InstantPay
RazorPayX
Advantages of Neo Banks
Following are some of the advantages over traditional banks:
1. Low Cost
Functioning as a Neo bank removes any costs associated with branches and staff associated with running these branches. These also allow these banks to offer other benefits to customers like higher interest rates and fewer fees. In addition, these banks around the world do not even offer credit facilities which reduce the risk with which these banks function and further drives down their costs.
2. Convenient
Neo Banks allows us to access the banking services without having to go through the hassle of visiting a physical branch. These banks also at times provide debit cards in order to suit the preference and make it more convenient for their customers.
3. Reduced Processing time
Neo banks allow users to skip the various time-consuming processes. In an episode of Fintech Podcast Founder of Built for Mars, Peter Ramsey experimented with opening bank accounts with different banks in the UK. The results are shown above in the number of working days taken to open a bank account.
Unsurprisingly the list includes several NeoBanks outperforming traditional banks.
Disadvantages of Neo banks
This new style of banking won’t be attractive to all mainly due to the following reasons:
1. No Physical Branches
This is one of the biggest challenges which these banks would face in India if regulators approved their independent presence. The majority of Indians prefer speaking to someone from the bank for their transactions face to face. This allows them to build trust with the respective bank. This is completely absent in the Neo bank model.
2. Only Tech Savvy customers
Since Neo banks mainly operate through online platforms and apps, they reduce their customer base to only those who are tech-savvy. This wipes out a major portion of the market who aren’t comfortable using banking services through apps and online platforms.
3. Less Regulated
These digital are less regulated and are not even considered fully functional banks in India. This also means they are allowed to offer fewer services. This further reduces a potential customer’s trust in them.
Neo banks and Budget 2021
Although a significant focus of the budget was placed on restructuring the ailing banking sector, the FM has also created room for Fintech growth in the near future. The FM announced the allocation of RS.1500 to boost digital payments. This recognizes the growth of fintech firms which also includes Neo banks in the last 5 years and also their potential.
This will further lead to increased adoption of digital payments. In addition to this, the FM also announced the move to set up GIFT City (Gujarat International Finance Tec-City). This further recognizes the importance of fintech like these digital Banks in the banking sector and the need for Fintech hubs throughout the country.
Closing Thoughts – Future of Neo banks
The future of a fully-fledged Neo bank seems steep. This is because it would involve several changes made to the regulation put in place by the RBI in order to recognize them with a banking license.
The next challenge would be gaining trust in an environment where clients find it hard to trust traditional banks as they too have been increasingly failing in the recent past. But their introduction would eradicate several barriers. The first being the physical and geographical challenges. The Indian population still remains severely under banked. These digital banks would lead to a rise in inclusion throughout the country to all areas with internet connectivity.
It is already evident that traditional big banks have realized the importance of Neo banks. This is primarily because Neo banks have exploited the cracks in a traditional banking system. This has forced them to develop partnerships with Neo banks as customers demand faster and better services online.
This demand from customers has only intensified during the Covid-19 era which promotes lesser contact. Further, the online segment offers huge growth prospects to a traditional-Neo partnership. So one can expect to see a greater role played by Neo banks in the near future.
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.
MRP Agro IPO Review 2021: With the Indian markets at an all-time high with the BSE crossing a market capitalization of Rs. 200 lakh crore we review another IPO set to be launched next week.
In this article, we cover the MRP Agro Ltd. Review and look into important IPO information and find out the possible prospects of the company. The IPO opens on 8th Feb 2021 and closes on Feb 10, 2021. Let’s get started.
MRP Agro IPO Review – About the Company
The Company was incorporated on April 13, 2018, as MRP Agro Private Limited. The name was later changed to “MRP Agro Limited” through a special resolution passed by the Shareholders in an Extra-Ordinary General Meeting held on August 27, 2020. The company is primarily engaged in trading and import/export of food grains, fly-ash, and coal products.
The business follows B2B (Business to Business) Model, in which it purchases products from the domestic market in bulk through auctions and sells it to wholesalers. Over the last few years, the company has built a strong market for the purchase of such products domestically and an extensive distribution network for supply to its consumers.
The company has a local mandi license to purchase food grains from the local market of Tikamgarh, Madhya Pradesh. The company is also a registered dealer with the Department of Mines & Geology, Government of Jharkhand to buy coal. Sales and marketing play a key role in ensuring that the corporate and product brands communicate and reach out to the customers in the proper way.
Due to this, the company ensures compliance with quality standards. The company also regularly communicates with the consumer on various platforms to increase awareness of our products.
( Total Assets – in lakhs)
Financials: The company has produced great profits in the first half of FY21 in comparison to F19 and FY20.
The company also issued rights shares at a price of Rs. 25 and Rs. 26.64 between October 2019 and May 2020. It has also issued bonus shares in the ratio of 4 for 10 in September 2020.
MRP Agro IPO Review – Key IPO Information
Beeline Broking Ltd. is the lead manager of the issue. Skyline Financial Services Pvt. Ltd. is the registrar of the issue and Nikunj Stock Brokers Ltd. is acting as a Market Maker.
Mr. Manish Kumar Jain, Mrs. Raksha Jain, and Manish Kumar Jain HUF are the company promoters. They bring with them extensive industry experience. Mr. Manish Kumar Jain the Chairman and Managing Director of the company has 10 years of experience in the trading industry. Together they have been instrumental towards the company.
Particular
Details
IPO Size
₹3.24 Cr
Fresh Issue
₹3.24 Cr
Offer For Sale(OFS)
-
Opening Date
Feb 8, 2021
Closing Date
Feb 10, 2021
Face Value
₹10 per equity share
Price Band
₹40 per equity share
Minimum Lot Size
1 Lot (3000 shares - Rs. 120,000)
Maximum Lot Size
1 Lot (3000 shares - Rs. 120,000)
Post issue, MAL’s current paid-up equity capital of Rs. 2.17 cr. will stand enhanced to Rs. 2.98 cr. With this IPO, the company is looking for a market cap of Rs. 11.92 cr.
MRP Agro IPO Review – Purpose of the IPO
The key objects of the MRP Agro IPO are as follows:
To meet working capital requirements (Rs. 2.50 cr.).
To meet general corporate purposes (Rs. 0.53 cr.).
To meet the issue expenditure. (Rs. 0.21cr.).
Closing Thoughts
The MRP Agro IPO is a rare SME IPO in recent times. Despite SMEs’ having great growth prospects and the ability to scale investors must keep in mind that the market includes big players and is extremely competitive with the company still being in its nascent stages.
That’s all for this post. Do let us know what do you think of MRP Agro IPO Review. Are you planning to apply for this IPO or not? Comment below. Cheers!!
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
A Beginners Guide to Basics Option Trading Strategies For Beginners: Imagine having the power to own something at a price you want and not worry about the future uncertainties. Options trading gives you this power. Before dwelling deeper into the Ocean of Option trading strategies, let us have a quick snapshot of the concept of Options and its types.
Basics of Options Trading
“Options can be defined as a derivative instrument whose value is derived from the value of some other underlying Asset or Security. Options give the Buyer the right to buy or sell the underlying asset, and the seller is obligated to bind/honor the contract.” And as mentioned above, there are two types of options – Call Options (right to buy) and Put Options (right to sell)
A call option gives the right to option buyer to buy the underlying security at a pre-decided price. The buyer of the option is expecting the price to increase in the future.
A put option gives the right to option buyer to sell the underlying security at a pre-decided price. The buyer of the option is expecting the price to decrease in future
Before understanding the options strategies, let us understand the concept of Moneyness of an option.
Moneyness of an Option
The Moneyness of an option simply means the amount of money the option contract would make if they were to be exercised today. Moneyness of options are of three types-
In the Money – An In the Money Option contract is one, which would make money if they were to be exercised today.
At the Money – An At the Money Option contract is one, whose strike price is the closest to the current/spot price.
Out of Money – An Out of Money Option contract is one, which would be worth nothing if they were to be exercised today.
Say, the spot price of Nifty is 10540, then the strike price of Call option 10400 would be called as In the money, the strike price of 10550 would be At the money and the strike price of 10650 would be an Out of Money Option.
Option Trading Strategies
Having understood the basics of options and various types of Options, let us try and understand some of the most basic and commonly used option trading strategies.
Basic Premise used while explaining these option strategies
We will be discussing strategies which work in both bullish and bearish markets
The strategies discussed here will have a minimum of two option position running simultaneously
The underlying asset which will be consistently used while discussing this strategy will be the Nifty Index
The strategies mentioned here does not guarantee to make money, nothing in the market guarantees to make money.
Option Trading Strategies – Bull Call Strategy:
Hypothesis while using this strategy:
Bull Call Spread is a two-legged strategy i.e., it has two option positions running simultaneously.
This strategy is used when one has a bullish view on the market.
The simple assumption while executing this strategy is that there will be an upside catalyst in the Underlying Asset and one is expecting strength in it, in near future. So, the overall sentiment is bullish in the market
Scenarios under which this strategy is used:
The Fundamental perspective – Say, if we are positive about the government announcing certain stimulus to boost the economy in these uncertain times of COVID-19 pandemic, but the previous announcements have not bought too much joy out of the market. So, any announcement made will be positive, but the uncertainty lingers in the market regarding the quantum of the impact of these announcements on the market
The Technical Perspective – Say, the market has been bearish and the weakness is expected to continue. But the market is coming near the technical supports of moving averages and is also nearing the all-time lows. So a relief rally is expected but again the extent of the up move is uncertain. So employing this strategy would make sense.
Quantitative Perspective – Say, if the stock price was trading at a certain range but due to some reason the market showed weakness and broke the range lows. But it is not making any fundamental and technical sense to break the range lows. So to play the pullback within the range again, this strategy can be employed and used.
Implementing Bull Call Spread:
So to implement this strategy, one has to buy One At the Money call option and sell/write one Out of money call option:
i.e., Buy One ATM call option and Sell One OTM call option.
The following are the assumptions under this strategy:
All the strikes belong to the same underlying
Both the options have the same expiry
And both the legs have the same number of contracts
Let us understand it with the help of an Example:
Say, the Spot price of Nifty is 9310
An At The Money call option bought = 9300 CE, Premium paid =75 units
An Out of Money call option sold = 9400 CE. Premium received = 20 units
So the net transfer of option units = 20-75 = -55 units.
So, in general, at the initiation of this trade, the P/L always shows negative as one has to buy ITM option and sell OTM option
Now, let us understand the impact on the P/L at various levels of expiry:
Say, if the Nifty expires at 9200, then –
So, the Net Payoff using this strategy is -55 units (-75+20)
Say, if the Nifty expires at 9300, then –
So, the Net Payoff using this strategy is -55 units (-75+20)
Say, if the Nifty expires at 9400, then –
So, the Net Payoff using this strategy is 45units (25+20)
Say, if the Market expires at 9500, then –
Graphical Representation of payoff:
Breakeven Point for this Strategy:
The Breakeven Point (BEP) for this strategy is the point when the spot price equals the summation of At the money strike price and the maximum loss (Net debit) in this strategy
i.e., BEP = Strike price of ATM + Maximum loss = 9300 + 55 = 9355. So, when the spot price reaches 9355, this strategy reaches its breakeven point.
Option Trading Strategies – Bear Put Strategy:
Hypothesis while using this strategy:
Bear Put Spread is a two-legged strategy i.e., it has two Put positions running simultaneously
This strategy is used when one has a moderately bearish view of the market
The simple assumption while executing this strategy is, there is negativity expected in the market, and selling in the market is due
Implementation of Bear Put Strategy:
To implement this strategy:
We have to buy One In the Money Put Option
Sell One Out of Money Put Option
Both the Options should have the same expiry date and same underlying Asset
The choice of option strikes depends on the aggressiveness of the trader.
Let us understand it with the help of an example:
Say the Nifty spot is trading at 10050 today.
So, any In the Money (ITM) Put Option will be 10200 PE.
And, an out of Money (OTM) Put Option will be 10000 PE.
The premium for 10200 PE is 180 units
The premium for 10000 PE is 60 units
So, this is a ‘Net Debit’ strategy
So, the P/L at the beginning of this strategy is -120 units(60-180)
Say, if the Nifty expires at 10400, then –
So, the total P/L (net payoff) in this case is -120 units (-180+60)
Say, if the Nifty expires at 10300, then –
So, the total P/L (net payoff) in this case is -120 units (-180+60)
Say, if the Nifty expires at 10080, then –
So, the total P/L (net payoff) in this case is 0 units (-60+60). This is also the BEP for this strategy
Say, if the Nifty expires at 10000, then –
So, the total P/L (net payoff) in this case is 80units (20+60)
Say, if the Nifty expires at 9800, then –
So, the total P/L (net payoff) in this case is 80units (220-140)
Graphical Representation of Payoff-
To Conclude the Option Trading Strategies…..
Options trading strategy is one of the most effective ways of hedging and having consistent return without taking too much risk
A Bull Call Strategy is best suited when one has a moderately bullish view on the market
A Bear Put Strategy is best suited when one has a moderately bearish view of the market
The two strategies are best suited if you are a risk-averse trader and don’t mind having a cap on the profit potential
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!
IPOs have always been popular and bring a lot of excitement to the markets. We have a number of IPOs lined up for the Indian markets this year. It almost seems as if we’re making up for all the lost time. In order to help investors in their understanding of IPOs, we have compiled a list of Frequently Asked Questions (FAQs) about IPOS’s:
1. What is an IPO?
An Initial Public Offer refers to the process where a company offers its shares to the public. In an IPO, the company offers shares to investors in exchange for capital. This is one of the means through which the company raises funds. Any company that fulfills the requirements of the SEBI can go public.
2. Do Companies list on stock exchanges without an IPO?
Yes. Companies can get listed on an exchange without an IPO as long as they meet the conditions set by SEBI.
3. What are the opening and closing dates?
It is between these dates that investors are allowed to apply for the IPO.
4. What is the price band?
This refers to the lower and upper limit of the share price within which the company will offer its shares to the public. The investors are allowed to bid equal to or in between these lower and upper limits.
5. What is ‘Market Lot Size’ (Minimum and Maximum)?
In an IPO the total shares offered to the public is divided into lots. In an IPO the investors are not allowed to purchase shares of any quantity. They have to do it in lots. In addition, a minimum and maximum lot size is set beforehand. For eg. say Company A going public sets a lot size of 10 shares for each lot with a minimum and maximum lot purchase set at 1 and 10 respectively. This basically means that the minimum number of shares an investor can purchase is 10 and the maximum a 100. If an investor wants 65 shares he will not be able to do so. But he can purchase 6 lots which is the closest denomination. This is one of most Frequently Asked Questions (FAQs) about IPOs
6. Does applying for an IPO guarantee investors a certain amount of shares?
No. Applying for shares does not guarantee allotment. Applying for shares means that you are bidding for the shares. The allotment depends on the number of bids received and the price at which these bids are made.
7. What is the life cycle of IPO?
The IPO process includes the following steps
The company approaches and appoints investment banks to act as the lead managers and registrar to the IPO issue. They then register with the SEC
The lead managers prepare a draft prospectus for the IPO and file the prospectus with the SEBI.
The SEBI reviews and approves the prospectus. If any changes are required they revert back to the company for the changes to be made.
The lead managers bring attention to the IPO.
The company along with the lead managers price the IPO and release dates for the issue.
The IPO is opened for public bidding.
Registrar processes IPO applications allocated them to respective DEMAT accounts and processes refunds.
Shares are listed on the stock exchange.
8. What are the primary & secondary markets?
The primary market is the part of the capital market where securities are first created and sold to investors. This market deals with IPO’s.
Secondary markets refer to the part of the capital market where they buy and sell securities which they already own. Shares can only be sold and bought here-after the listing of the company opting for IPO takes place.
9. What is Follow on public offering (FPO)?
A Follow on Public Offering(FPO) refers to when the company opts to offer shares to the public when it has already issued shares in an IPO in the past.
10. Who decides the date of the issue?
The most appropriate offering dates are decided by the company after their prospectus is approved by SEBI.
11. How many days will an IPO remain open for the public?
An IPO remains open for at least 3 working days, but not more than 10 working days.
12. What is the listing date?
IPO listing refers to the date when the shares will begin trading at the stock exchanges.
13. What is the role of the registrar of an IPO?
The registrar is appointed by the company. They are responsible for processing IPO applications and allocating the shares to the applicants. They also process refunds or transfer of shares to Demat accounts of IPO applicants. All this is done in accordance with SEBI guidelines.
14. What is the role of Lead Managers in an IPO?
These lead managers or underwriters are independent financial institutions appointed by the company. They are responsible for coordinating all the activities surrounding the issue. The activities include getting attention towards the IPO, creating draft documents, getting the draft approved by the SEBI, etc.
15. What is the difference between the Book Building Issue and the Fixed Price Issue?
These are methods through which the issue price is set in an IPO
In the Fixed Price Issue, the company fixes a price at which the shares are offered to the investors.
In the Book Building issue, the price band is set by the company. The investors then place their bids equal to or above the floor of the price. These bids are then sent to the lead manager who enters the bids in the book. This method helps in efficiently setting the price.
16. What is the difference between Floor Price and Cut-Off Price?
The floor price is the minimum price at which bids can be made.
The cut-off price is the offer price that is finalized by the company and the lead manager after receiving the bids. This can be any price in between the price band.
17. What is the difference between RII, NII, QIB, and Anchor Investor?
RII: Retail Institutional Investor refers to investors who apply for stocks below the value of Rs.200,000.
NII: Non-Institutional Investors refer to Investors who apply for more than Rs 2 lakhs worth of IPO shares.
QIB: SEBI has defined a Qualified Institutional Buyer as Institutional investors who are generally perceived to possess the expertise and the financial muscle to evaluate and invest in the capital markets. These include Public financial institutions, commercial banks, mutual funds, and Foreign Portfolio Investors, etc.
Anchor Investors: They are QIB’s who are the first investors in an IPO and can attract investors to the IPO. They invest an amount of Rs. 10 crores or more.
18. Is it mandatory to have a PAN number to apply in an IPO?
Yes. SEBI has made it mandatory since 2006.
19. What information should I keep after I submit the IPO application form?
-Application Number
-Copy of Payment
-Copy of Application form.
20. IPO’s are less riskier than directly investing in the stock market?
IPO’s come with their own set of risks:
– There is limited data available from the company for individual investors.
– IPO’s generally take place during bullish markets where investors are optimistic.
– It is hard to predict the price movement for listing gains. Flipping IPO’s is common if the shares make a profit on a listing day.
– Retail investors may not even be allotted shares if the IPO is oversubscribed.
21. Can I apply in an IPO through multiple applications of the same name?
No. Applying multiple times does not increase the chances of allocation. In fact, if the IPO receives multiple applications with the same PAN number then all your applications will be rejected.
22. What is the Basis of Allocation or Basis of Allotment?
In the case where bids do not exceed the offering, the investors will be allotted shares as long as they have provided accurate and appropriate applications. If the IPO is oversubscribed then the shares may be allotted on a pro-rata basis or through a draw of lots.
23. Can I revise or cancel my IPO application?
Yes. An investor can cancel his IPO application.
An investor may also change his bid using. This can be done using the form for changing /revising bids that comes along with the application form.
This however must be done before the IPO issue is closed.
24. Where do I get an IPO application form?
An investor can download the online ASBA form provided by the advisories or they can download it from the BSE/NSE website. These forms are made available 2 days before the IPO.
25. Can investors sell the stock allotted to them in an IPO before the stock gets listed?
No. An investor can place a sell order during the pre-opening time and sell when the IPO trading starts at 10 am on listing day.
26. What are the tax implications of selling IPO allocated shares on listing day?
If an investor sells his shares on listing day or within one year of listing he will be subject to pay ordinary income tax on the gains. Beneficial capital gains tax rates are applicable only in case the shares are sold after one year in the case of IPO. This is the most common concern amongst traders and investors when we talk about Frequently Asked Questions (FAQs) about IPOs
27. How many days issue takes to list in the market?
It takes 6 days for a stock to get listed on an exchange after the IPO is closed. This period is expected to be reduced to 3 days by market regulators in the coming future.
28. How is the listing price calculated?
The listing price is calculated based on the market forces of demand and supply for the company shares.
To Conclude…
We hope that the list above answers most of the questions which most of the investors have. That’s it from us in this write up about Frequently Asked Questions (FAQs) about IPOs. We will see you in our next meeting.
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.
