8 Financial Ratio Analysis that Every Stock Investor Should Know cover

8 Financial Ratio Analysis that Every Stock Investor Should Know!

List of Must Know Financial Ratio Analysis for Stock Market Investors: Evaluating a company is a very tedious job. Judging the efficiency and true value of a company is not an easy task it demands rigorously reading the company financial statements like balance sheet, profit and loss statements, cash-flow statement, etc.

Since it is tough to go through all the information available on a company’s financial statements, the investors have found some shortcuts in the form of financial ratios. These financial ratios are available to make the life of a stock investor comparatively simple. Using these ratios, the stock market investors can choose the right companies to invest in or can compare the financials of two companies to find out which one is a better investment opportunity.

In this post, we are going to discuss eight of such Financial Ratio Analysis that Every Stock Investor Should Know.

This article is divided into two parts. In the first part, we’ll cover the definitions and examples of these eight must know financial ratios. In the second part, after the financial ratio analysis, we’ll discuss how and where to find these ratios. Therefore, be with us for the next 8-10 minutes to enhance your stock market analysis knowledge. Let’s get started.

Quick note: Do not worry much about calculations of these ratios or try to mug up the formulas by-heart. All these financial ratios are easily available on various financial websites. Nonetheless, we will recommend you to understand the basics of the financial ratio analysis as it will be helpful in building a good foundation for your stock research in future. 

PART A: 8 Financial Ratio Analysis For Stock Investor

1. Earnings Per Share (EPS)

EPS is the first most important ratio in our list. It is very important to understand Earnings per share (EPS) before we study any other ratios, as the value of EPS is also used in various other financial ratios for their calculation.

EPS is basically the net profit that a company has made in a given time period divided by the total outstanding shares of the company. Generally, EPS can be calculated on an Annual basis or Quarterly basis. Preferred shares are not included while calculating EPS.

Earnings Per Share (EPS) = (Net income – Dividends from preferred stock)/(Average outstanding shares)

From the perspective of an investor, it’s always better to invest in a company with higher and growing EPS as it means that the company is generating greater profits. Before investing in any company, you should always check past EPS for the last five years. If the EPS is growing for these years, it’s a good sign and if the EPS is regularly falling, stagnant or erratic, then you should start searching for another company.

2. Price to Earnings (PE) Ratio

The Price to Earnings ratio is one of the most widely used financial ratio analysis among investors for a very long time. A high PE ratio generally shows that the investor is paying more for the share. The PE ratio is calculated using this formula:

Price to Earnings Ratio= (Price Per Share)/( Earnings Per Share)

Now let us look at the components of the PE ratio. It’s easier to find the price of the share which is the current closing stock price. For the earnings per share, we can have either trailing EPS (earnings per share based on the past 12 months) or Forward EPS i.e. Estimated basic earnings per share based on a forward 12-month projection. It’s easier to find the trailing EPS as we already have the result of the past twelve month’s performance of the company.

For example, a company with the current share price of Rs 100 and EPS of Rs 20, will have a PE ratio of 5. As a thumb rule, a low PE ratio is preferred while buying a stock. However, the definition of ‘low’ varies from industries to industries.

Different industries (Ex Automobile, Banks, IT, Pharma, etc) have different PE ratios for the companies in their industry (Also known as Industry PE).  Comparing the PE ratio of the company of one sector with the PE ratio of the company of another sector will be insignificant. For example, it’s not much use to compare the PE of an automobile company with the PE of an IT company. However, you can use the PE ratio to compare the companies in the same industry, preferring one with low PE.

3. Price to Book (PBV) Ratio

Price to Book Ratio (PBV) is calculated by dividing the current price of the stock by the book value per share. Here, Book value can be considered as the net asset value of a company and is calculated as total assets minus intangible assets (patents, goodwill) and liabilities. Here’s the formula for PBV ratio:

Price to Book Ratio = (Price per Share)/( Book Value per Share)

PBV ratio is an indication of how much shareholders are paying for the net assets of a company. Generally, a lower PBV ratio could mean that the stock is undervalued.

However, again the definition of lower varies from industry to industry. There should be an apple to apple comparison while looking into PBV ratio. The price to book value ratio of an IT company should only be compared with PBV of another IT company, not any other industry.

4. Debt to Equity (DE) Ratio

The debt-to-equity ratio measures the relationship between the amount of capital that has been borrowed (i.e. debt) and the amount of capital contributed by shareholders (i.e. equity).

Debt to Equity Ratio =(Total Liabilities)/(Total Shareholder Equity)

Generally, as a firm’s debt-to-equity ratio increases, it becomes riskier as it means that a company is using more leverage and has a weaker equity position. As a thumb of rule, companies with a debt-to-equity ratio of more than one are risky and should be considered carefully before investing.

5. Return on Equity (ROE)

Return on equity (ROE) is the amount of net income returned as a percentage of shareholders’ equity. ROE measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested. In other words, ROE tells you how good a company is at rewarding its shareholders for their investment.

Return on Equity = (Net Income)/(Average Stockholder Equity)

As a thumb rule, always invest in a company with ROE greater than 20% for at least the last 3 years. Year-on-year growth in ROE is also a good sign.

6. Price to Sales Ratio (P/S)

The stock’s price/sales ratio (P/S) ratio measures the price of a company’s stock against its annual sales. P/S ratio is another stock valuation indicator similar to the P/E ratio.

Price to Sales Ratio = (Price per Share)/(Annual Sales Per Share)

The P/S ratio is a great tool because sales figures are considered to be relatively reliable while other income statement items, like earnings, can be easily manipulated by using different accounting rules.

7. Current Ratio

The current ratio is a key financial ratio for evaluating a company’s liquidity. It measures the proportion of current assets available to cover current liabilities. The current ratio can be calculated as:

Current Ratio = (Current Assets)/(Current Liabilities)

This ratio tells the company’s ability to pay its short-term liabilities with its short-term assets. If the ratio is over 1.0, the firm has more short-term assets than short-term debts. But if the current ratio is less than 1.0, the opposite is true and the company could be vulnerable. As a thumb rule, always invest in a company with a current ratio greater than 1.

8. Dividend Yield

A stock’s dividend yield is calculated as the company’s annual cash dividend per share divided by the current price of the stock and is expressed in annual percentage. Mathematically, it can be calculated as:

Dividend Yield = (Dividend per Share)/(Price per Share)*100

For Example, If the share price of a company is Rs 100 and it is giving a dividend of Rs 10, then the dividend yield will be 10%.

A lot of growing companies do not give dividends, rather reinvest their income in their growth. Therefore, it totally depends on the investor whether he wants to invest in a high or low dividend yielding company. Anyways, as a thumb rule, consistent or growing dividend yield is a good sign for dividend investors.

Also Read: 4 Must-Know Dates for a Dividend Stock Investor

PART B: Finding Financial Ratios

Now that we have understood the key financial ratio analysis, next we should move towards where and how to find these financial ratios.

For an Indian Investor, many big financial websites where you can find all the key ratios mentioned above along with other important financial information. For example –  Money Control, Yahoo Finance, Economic Time Markets, Screener, Investing[dot]com, Market Mojo, etc.

Further, you can also use our stock market analysis website “Trade Brains Portal“, to find these ratios. Let me show you how to find these key financial ratios on Trade Brains Portal. Let’s say, you want to look into all the above-mentioned financial ratios for “Reliance Industries”. Here’s what you need to do next.

Steps to find Key Ratios on Trade Brains Portal

1) Go to Trade Brains Portal at https://portal.tradebrains.in/ and search for ‘Reliance Industries’.

2) Select the company. This will take you to the “Reliance Industries” stock detail Page.

3) Scroll down to ‘5 Year Analysis & Factsheet’ and here you can find all the financial ratios for the last five years.

financial ratios 5 Year Analysis & Factsheet trade brains portal

You can find all the key financial ratio analysis discussed in this article on this section of stock details. In addition, you can also look into other popular financial ratios like Profitability ratio, Efficiency ratio, Valuation ratio, Liquidity ratio, and more.

Conclusion

In this article, we discussed the list of Must Know Financial Ratio Analysis for stock market investors. Now, let us give you a quick summary of all the key financial ratios mentioned in the post.

8 Financial Ratio Analysis that Every Stock Investor Should Know:

  1. Earnings Per Share (EPS) – Increasing for last 5 years
  2. Price to Earnings Ratio (P/E) – Low compared to companies in the same sector
  3. Price to Book Ratio (P/B) – Low compared to companies in the same sector
  4. Debt to Equity Ratio – Should be less than 1
  5. Return on Equity (ROE) – Should be greater than 20% 
  6. Price to Sales Ratio (P/S) – Smaller ratio (less than 1) is preferred
  7. Current Ratio – Should be greater than 1
  8. Dividend Yield – Consistent/ Increasing yield preferred

In addition, here is a checklist (that you should download), which can help you to select a fundamentally strong company based on the financial ratios. Also, feel free to share this image with those whom you think can get benefit from the checklist.

5 simple financial ratios for stock picking

That’s all for this post. Hope this article on ‘8 Financial Ratio Analysis that Every Stock Investor Should Know’ was useful for you. If you have any doubt or need any further clarification, feel free to comment below. We will be happy to help you. Take care and happy investing.

October 19, 2020 Investment Basics, Valuations 31 comments
5 Common Behavioral Biases That Every Investor Should Know cover

5 Common Behavioral Biases That Every Investor Should Know

Common Behavioral Biases For Investor: Ever heard of Tech gender problem? It is a situation where the employer favors male candidates over female thinking women are no good at tech because they are women. Even one of the biggest companies in the world, Amazon, faced this bias. (Read more here: Amazon’s machine-learning specialists uncovered a big problem: their new recruiting engine did not like women — The Guardian.)

Anyways, gender bias is nothing new. Throughout history, when jobs are seen as more important or are better paid, women are squeezed out. And similar to this one, there are multiple common biases that we can notice in our day to day life. But, what actually is a bias?

According to Wikipedia– “Bias is disproportionate weight in favor of or against one thing, person, or group compared with another, usually in a way considered to be unfair.”

In other words, it is an inclination or preference that influences judgment from being balanced. Biases lead to a tendency to lean in a certain direction, often to the detriment of an open mind.

Behavioral Biases in Investing:

Investors are also ordinary people and hence they are subjected to many biases that influence their investment decisions. Although it takes time to control the behavioral biases, however, knowing what are these biases and how they work — can help individuals to make rational decisions when they are susceptible to these situations.

In this post, we are going to discuss five common investing biases that every investor should know.

— Confirmation Bias

When a human mind is determined towards one particular behavior, it subconsciously rejects the pieces of evidence against it while confirming the ones that go in its favor. This is known as confirmation bias.

Psychologically speaking, an investor would be more inclined towards his pre-occupied information and knowledge about certain kinds of investing. While considering the pros and cons of a certain kind of investment, the buyer would most likely go with what he used to believe until now.

For example: Making an investment in Bitcoin is dangerous and pointless. If this is an investor’s pre-occupied notion then he would most likely not invest in bitcoins in future.

— Gambler’s Fallacy

Gambler’s Fallacy is one such proof which states that a human mind often interprets the outcomes of a future event judging by its corresponding past events even if the two are completely independent of each other. It is inspired by the “failures of gamblers” due to their probabilistic illusions to make decisions in casino games.

Gambler’s Fallacy can be very well explained with the help of a basic example involving a coin. For future reference, let’s suppose that the coin is fair with both sides (heads & tails) having an equal probability of landing on top.

Suppose a coin is flipped 10 times and the result of each event was “Heads”. What would you bet for the next coin flip?

Now, if a human bet on the outcome of the 11th flip of the coin to be “Head” seeing the past events, then it can be considered a bias.

The above context does only imply a simple rule: The occurrence of an independent event is not dependent on past events. In this example, the 11th flip of a coin would result in both heads and tails with a 50% chance of being associated with each one of them.

— Buyer’s Remorse

The regret after purchasing a product is called a buyer’s remorse. Here, the buyers may regret that either they overpaid for the product or they didn’t actually need that product.

Nevertheless, purchasing commodities are not the only thing where people feel “buyer’s remorse”. Stock investors are also like ordinary people, and they too feel this remorse after purchasing equities.

“Was buying this stock a mistake?”

“Was my timing right?”

“Did I just buy a lemon of a stock?”

“Is the market going to collapse?”

“What if I lose money?”

In general, investors feel remorse when they make investment decisions that do not immediately produce results.

— Herd Mentality

An investor’s natural instinct goes with the ones of masses, which means that he/she doesn’t seem to have a rational view on a certain investment but is more likely to deviate where the majority mass is moving — this little phenomenon is known as the “Herd Mentality”.

The term has been derived from the natural instinct of a number of sheep walking together in a herd so as to avoid falling into the pitfalls of danger.

Interestingly, you can also find a large population of investing community following herd mentality psychology in making various financial decisions like buying a new property or investing in the stock market. Seeing others getting profited with an investment, our brain tells us to go for it without a second thought.

herd mentality

— Winner’s Curse

A bidder sitting in an auction and trying to repeatedly bid on an asset often gets intimidated to continue his bidding even if it is not profitable.

As obvious, in such scenarios, the last one to bid gets the asset and hence gets the title of “the winner”. But has he actually won? What do you think? The inference can be a bit deeper than you are assessing it to be.

Such scenarios are quite noticeable everywhere, including investing.

In the stock market, every now and then, you may come across a storyline where people are buying expensive stocks because they don’t wanna lose the opportunity. Here, they are ready to bid a huge price to win that stock. However, purchasing an overvalued stock (only for the sake of winning) is most of the time disadvantageous for the investors. Another example of the winner’s curse is bidding in expensive IPOs.

Closing Thoughts

Most biases are pre-programmed in human nature and hence it might be a little difficult to notice them by the individuals. These biases can adversely affect your investment decisions and your ability to make profitable choices.

Anyways, knowing these biases can help you to avoid them causing any serious damage. Moreover, a good thing regarding these biases is that — like any habit, you can change or get over them by practice and efforts.

October 16, 2020 Investing Psychology 5 comments
What is Sunk Cost Fallacy? And how it Can Affect Your Decisions? cover

What is Sunk Cost Fallacy? And How it Can Affect Your Decisions?

Demystifying Sunk Cost Fallacy: Have you ever been in a situation where you went to watch a movie in the theatre thinking it would be great, however, it turned out to be terrible? What did you do next? Did you walked out of the theater or continued watching it till the end because you were afraid that you have already paid for the ticket? If you choose the latter, you have fallen for the sunk cost fallacy.

In this post, we are going to discuss what exactly is a sunk cost fallacy and how it can affect your investment decisions. But first, let us understand what are sunk costs.

What are sunk costs?

Sunk costs are those irrevocable costs that have already been occurred and cannot be retrieved. Here, the costs can be in terms of your money, time, or any other resource.

For example- Let’s suppose that you bought a brand new machine. However, after using it for three months, you realize that the machine is not actually working as you desired. And obviously, the return period of the machine has surpassed. Here, even if you sell the machine, you will get a depreciated value compared to what you originally bought. This cost is called the sunk cost.

In general, people should not consider sunk costs while making their decisions as these costs are independent of any happenings in the future. However, humans are emotional beings and unlike robots, we do not always make rational decisions.

Examples of Sunk Cost Fallacy

Sunk cost fallacy, also known as Concorde fallacy, is an emotional situation where the individuals take sunk costs into consideration while making the decisions.

We have already discussed the example of watching the entire movie (even if it is terrible) just because you, as a consumer, won’t get back the money for your ticket. This is a classic example of the sunk cost fallacy.

Another example can be when you eat foods that you do not like because you have already bought that food and cannot revoke that sunk cost. Similarly, overeating after ordering foods in restaurants because food has been already ordered is also an example of sunk cost fallacy.

Further, a typical example of the same fallacy is when you keep attending the miserable classes of your college (that you do not enjoy) because you have already invested a lot of time in that course and also have paid the tuition fee. Besides, salaries, loan payments, etc are also considered as sunk costs as you cannot prevent these costs.

A quick point to mention here is that not all past costs are sunk costs. For example, let’s suppose you bought a shoe and you didn’t like it after reaching home. However, as the shoe is still in the return period of 30 days, here, you can return the shoe and get back your purchase price. This is not a case of ‘sunk cost’.

Sunk Cost Dilemma

what is sunk cost fallacy and how to handle it

Sunk cost dilemma is an emotional difficulty to decide whether to continue with the project/deal where you have already spend a lot of money and time (i.e. sunk cost) or to quit because the desired result has not been achieved or because the project has an obscure future.

Here, the dilemma is that the person cannot easily walk away from the project as he has already spent a lot of time and energy. On the other hand, continuously pouring more money, time, and resources into the project also does not seem a good idea because the outcomes are uncertain. This dilemma of deciding whether to proceed further or to quit is called the sunk cost dilemma.

For example- Let’s say you started a business and invested $200,000 over the last three years. However, you haven’t achieved any wanted results so far. Moreover, you cannot see the business working out in the future. Here, the dilemma is ‘what to do next?’. Should you bear the losses and move on, or should you invest more resources in that uncertain business?

Another common example of a sunk cost dilemma can be a bad marriage. Here, the couples find it difficult to decide whether to save themselves (and their spouse) by splitting up when they are sure that things are not going to work out. Or should they hold on to the marriage just because they have already spend a lot of time together and breaking up will make them look bad?

Sunk cost dilemma in Investing

Even investors are common people and they face the sunk cost dilemma while making their investment decisions.

For example, let’s say that an investor bought a stock at Rs 100. Later, the price of that stock starts declining. In order to minimize the losses, the investor averages out the purchase price by buying more stocks when the price kept falling (also known as Rupee cost averaging). Here, the dilemma happens when the stock keeps underperforming for a stretched period of time. Here, the investors are uncertain whether they should book the loss by selling their stocks, or should they continue averaging out with the hope that they may recover the losses in the future.

Another example of the sunk cost dilemma is people buying/selling aggressively in risky stocks once they have incurred a few major losses in the past to ‘break-even’ those losses. However, the losses have already been incurred, and investing in risky stocks to cover those losses won’t do any good to such investors.

The better approach would be to choose those stocks that can give the best possible returns in the future, not the imaginary aggressive returns that they expect to match up the sunk cost. As an intelligent investor, people should ‘not’ consider the sunk costs while making their decision. However, this is rarely the case.

Also read:

Closing Thoughts

It is no denying the fact that nobody likes losing and hence the past losses can influence the future decisions made by the individuals. However, one must not consider sunk costs while making their investment decisions.

As sunk costs cannot be changed (recovered), a rational person should ignore them while making their judgments. Here, if you want to proceed, first you should logically assess whether the project/deal is profitable for the future. If not, then discontinue the project. In other words, try to forecast the future and react accordingly.

Anyways, a few methods of solving the sunk cost dilemma is by opting for incremental wins over the big ones, increasing your options (not just to completely quit or go all-in), and in the terminal case, cutting your losses. When stuck in this dilemma, try to make minimum losses by looking at the mitigating options.

October 15, 2020 Investing Psychology 3 comments
#12 Companies with Highest Share Price in India (Updated 2020))

#12 Companies with Highest Share Price in India (Updated)

List of Companies with highest share price in India (Updated- October 2020): The majority of shares in India trade at the share price below Rs 1,000 per share on Indian stock exchanges. Howere, there are a few stocks that trade at a price in the mutiples of thousands of rupees. Although, share price of a company has nothing to do with the companies valuation and even a company with a share price of Rs 2,000 can be undervalued compared to it’s peers. Anyways, for the small retail investors, it might be a little difficult to enter those stocks which trade at a very high share prices.

In this article, we are going to discuss the most expensive shares in India i.e. the companies with the highest share price in India. Here, we’ll look at 12 of the costliest shares in India based on the current share price at which they are trading in the market.

Note: Please study the companies carefully if you want to invest in any of the stocks mentioned in the list here. A high stock price doesn’t guarantee a fundamentally strong company or a good investment. And vice versa. Let’s get started.

#12 Companies with Highest Share Price in India

1. MRF (Rs 60,269)

mrf-tyres Companies with Highest Share Price in India

Market Capitalisation = Rs 25,554 Cr

Madras Rubber Factory (MRF) is a Tyre manufacturer that produces a wide range of tyres. It specializes in Car & bike tyres, trucks/buses tires etc.

 Currently, MRF has the highest share price in India among all the listed companies on BSE/NSE. The all-time high share price of MRF is Rs 81,426. The stock is currently trading at a standalone PE of 70.

MRF has never split its share and has a face value of Rs 1o. Noticeably, this company was trading at a price of Rs 10,000, in November 2012.

Also read: Why Do Companies Like MRF Don’t Split the Stock?

2. Honeywell Automation (Rs 32,198)

honeywell

Market Capitalisation = Rs 28,463 Cr

Honeywell Automation India Ltd, a part of Honeywell group, USA and is a leader in providing integrated automation and software solutions. It has a wide product portfolio in environmental and combustion controls, and sensing and control, etc. This stock has given a return of over +235% in the last 5 years. It is currently trading at a PE of 60.03.

3. Page Industries (Rs 20,627)

page industries

Market Capitalisation = Rs 23,001 Cr

Page Industries is an Indian manufacturer and retailer of innerwear, loungewear and socks. One of the fpopular brand under Page Industries is Jockey (Underwear and inner wears company). .This stock has turned out to be a multi-bagger stock in the last couple of years and has given a return of over +2,000% in the last ten years.

Page industries is currently trading at a PE of 119.05.

4. Shree Cements (Rs 20,296)

shree cements

Market Capitalisation = Rs 73,272 Cr

Shree Cement is an Indian cement manufacturer headquartered in Kolkata. This Indian cement manufacturer company was founded in Beawar, Ajmer district, Rajasthan, in 1979. Shree cement is the biggest cement maker in northern India and also produces and sells power under the name Shree Power and Shree Mega Power. 
Shree cements is currently trading at a PE of 49.08.

5. 3M India (Rs 18,795)

3m india

Market Capitalisation = Rs 21,182 Cr

3M India Ltd is the subsidiary listed company of 3M Company USA in India. 3M Company USA holds 75% equity stake in the company. It has a diversified portfolio of products in dental cement, health care, cleaning, etc. This stock is currently trading at a PE of 117.77.

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

6. Abbott India (Rs 15,975)

abbott india share

Market Capitalisation = Rs 33,947 Cr

Headquartered in Mumbai, Abbott India Limited, a publicly listed company and a subsidiary of Abbott Laboratories, takes pride in offering high-quality trusted medicines in multiple therapeutic categories such as women’s health, gastroenterology, cardiology, metabolic disorders, and primary care. It is currently trading at a PE of 51.72. This stock has given a return of over 179% in the last 5 years.

7. Nestle India (Rs 15,851)

Nestle Products

Market Capitalisation = Rs 153,377 Cr

Nestle India is in the food processing industry with a wide variety of products like Maggi, Kit-Kat, Nescafe, Every day, etc.

 It is the Indian subsidiary of Nestlé which is a Swiss multinational company.This stock is currently trading at a PE of 73.59.

8. Bosch (Rs 13,291)

bosch

Market Capitalisation = Rs 39,202 Cr

Bosch ranks eighth in the list of companies with highest share price in India. It is a part of the German multinational company Robert Bosch (or just Bosch), headquartered in Germany. Bosch belongs to the automobile ancillaries industry and currently trading at a PE of 78.23 (52-week high- Rs 17,273).

9. Tasty Bite Eatables (Rs 10,598)

tasty bytes

Market Capitalisation = Rs 2,592 Cr

This company operates in the food processing industry with products like tasty bite rice, noodles, entrees, etc. The Company offers a range of ready-to-serve (RTS) ethnic food products under the brand name Tasty Bite and Frozen Formed Products (FFP). This stock is currently trading at a PE of 78.62.

10. Bombay Oxygen (Rs 10,350)

Market Capitalisation = Rs 155 Cr

This is one of the lesser-known companies on the list of companies with highest share price in India and a smallcap company by marketcap. Incorporated in 1960, Bombay Oxygen is an Industrial gases company. The Company’s name has been changed to BOMBAY OXYGEN INVESTMENTS LIMITED w.e.f 03 October, 2018.

Also read: How To Invest Rs 10,000 In India for High Returns?

11. Procter & Gamble (Rs 9,872)

procter and gamble

Market Capitalisation = Rs 32,598 Cr

P & G is in the personal care industry with products in hygiene and health care. The Company is involved in manufacturing, trading and marketing of health and hygiene products. The Company’s brands include Ambi Pur, Ariel, Duracell, Gillette, Head & Shoulders, Olay, Oral-B, Pampers, Pantene, Tide, Vicks, Wella and Whisper. This stock is currently trading at a PE of 74.

12. Bharat Rasayan (Rs 9,176)

Bharat Rasayan Logo

Market Capitalisation = Rs 3,900 Cr

Bharat Rasayan Limited is a smallcap company based in India and engaged in manufacturing of pesticides-technical, formulations and its intermediates. The Company primarily offers Metaphenoxy Benzaldehyde. The Company’s products are Insecticides, which include Acetamiprid, Bifenthrin, Chlorpyrifos, Cypermethrin etc.

This stock is currently trading at a share price of PE of 24.

Also read: 8 Best Discount Brokers in India – Stockbrokers List 2019

Summary

Here is the list of Companies with Highest Share Price in India along with a few other popular stocks added:

S.No.Company NameShare Price (Rs)MarketCap (Rs Cr)Current PE
1MRF60269.9525554.4621.98
2Honeywell Auto32198.4528463.4360.03
3Page Industries20627.2522999.38119.17
4Shree Cement20296.9573232.9149.08
53M India18795.821182.87111.77
6Abbott India15975.3533947.6251.72
7Nestle India15876.85153077.7973.59
8Bosch13291.7539202.2178.23
9Tasty Bite Eat.10598.152719.4978.62
10Bombay Oxygen10350.05155.25---
11P & G Hygiene9872.2532046.0574
12Bharat Rasayan9176.83900.1424.07
13Sanofi India8748.420147.5739.07
14Dixon Technolog.8719.710088.82102.4
15Yamuna Syndicate8644265.693.5
16Polson8028.896.3519.39
17Maruti Suzuki6892.4208205.6251.63

Disclaimer: The list of 12 Companies with Highest Share Price in India is till date October 2020. The stock market is dynamic and the stock prices will change in the future, which may change the list or the order of the companies listed here.

That’s all for this post on ‘#12 companies with the highest share price in India’. Most of the companies on this list are trading at a high PE. If you want to buy any one of them, then please study the company carefully. Just being the costliest shares in India doesn’t make them a good pick for investment. Moreover, past performance does not guarantee future returns.

Further, do comment below which other stocks can find a place in this list of companies with highest share price in India by next year (October 2021)? And which ones will be thrown out of the list, according to you? Happy Investing!

October 7, 2020 Market, Stocks 19 comments
3 Easy Ways to Invest in Foreign Stocks From India cover

3 Easy Ways to Invest in Foreign Stocks From India!

A Quick Guide on how to invest in Foreign Stocks from India: Apple, Google, Facebook, Amazon, Microsoft, Samsung, Tesla, Twitter… These are some well-known companies in the world. We all have grown up using the products/services offered by these companies. Moreover, these companies are global leaders in their respective businesses, as well as innovators, who are likely to benefit in the future. But along with using their products, can we also own some shares of these companies?

Wait, these are not Indian companies, right? Therefore, they won’t be listed on the Indian stock exchanges. Even if you’ve a demat and trading account in India, you can trade/invest only in companies listed on Indian stock exchanges (BSE/NSE). But these companies will be listed in their respective country’s stock exchanges like US stock exchanges. Then, how to buy shares of a company that are not registered in India, but trades in the foreign stock exchanges?

Don’t worry, if you really want to buy these stocks- you’ll get it. In this post, we are going to discuss three simple ways through which you can invest in foreign stocks. Let’s get started.

Why should you invest in foreign stocks?

Before we start this post, let us first discuss why should you invest in foreign stocks? Are they better than Indian companies? Here, you need to make up your mind why you want to invest in foreign companies. There are over 5,500 listed companies in the Indian stock market. Aren’t they enough? Why do you need to invest alternative stocks?

Further, which one is better to invest in- Indian companies or foreign companies?

Well, I’m really not in a position to answer the second question. It won’t do justice if a guy in his 20s sitting on the comfort of his couch judges these companies. These are giant multi-billionaire companies that we are talking about here. Google, Apple, Facebook, Amazon, Samsung, Cisco, Tesla, etc are too big companies to comment upon. These companies have lots of cash, highly qualified professionals, employees in their management team and they are big innovators in their industry. Anyways, there are even many big Indian companies that can give competitions to many foreign companies.

Now, let me answer the first question i.e. why to invest in foreign stocks. Here are my personal learnings on this question.

Top reasons why many Indian invests in the US

Here are my top reasons why many Indian invests in the US or other foreign stock exchanges:

1. People want to invest in their favorite companies

Apple, Google, Twitter, Facebook, Amazon, Tesla etc. are the darlings of this generation. And of course, many people want to invest in these companies.

Invest in Foreign Stocks From India

2. Diversification with Global Investments

Investing in foreign stocks helps in diversification. Let’s assume that the Indian equity market starts falling due to some local region. However, investing in foreign stocks can mitigate the risk in your portfolio as the local reason may not have a significant effect on the international markets.

3. To seize bigger opportunities

Once you start to invest in foreign stocks, there are no boundaries anymore. You can hunt for better (profitable) opportunities in the international markets.

Besides the above-mentioned points, few investors believe that foreign companies have better resources, facilities, government cooperation, and standards. That’s why they invest in these foreign companies, compared to Indian companies. Nevertheless, while deciding to invest in foreign stocks, you should also remember that India is one of the fastest-growing economies in the world. On the other hand, most of the international markets are a little saturated. Therefore, growth-wise, India has better potential.

Overall, it totally depends on your preference regarding where and how much to invest. As already discussed, there are both pros and cons to trade in international stocks.

Cons of Investing in Foreign Stocks

There are two sides to every coin. Here are a few critical points to know before you invest in foreign stocks:

1. Be ready for the high charges

While investing in international stocks, you’ll be transacting in foreign currencies. For example, if you are trading in the US stock market, you have to pay the brokerages in the US dollar. And hence, the stock brokerages may be a little higher compared to the charges in the Indian stock market. Similarly, the annual/monthly maintenance charges may also be higher compared to domestic accounts.

2. Profits are subjected to the currency exchange rate

Let’s assume that you are investing in the US stock market. When you bought the US stock, the currency exchange rate was $1= Rs 68. However, next year- when you sold the US stock, let say the Indian currency got stronger, and the currency exchange rate becomes $1 = Rs 62. In such a case, you have already lost 8.8% due to the change in the exchange rate. That’s why when you invest in foreign stocks, profits are always subjected to the currency exchange rate.

3. Up to $250,000 can be invested overseas by the Indian residents

As per the RBI notification in the Liberalised Remittance Scheme (LRS), an Indian resident individual can only invest up to $250,000 overseas per year. With the current exchange rate of ($1= Rs 68), this amount turns out to be over 1.7 Crores. Anyways, if you have a family of four, you can invest 4 x $250,000 = $ 1 Million. That’s enough money to invest, right?

Quick Note: Besides the above factors, you also need to keep in mind the foreign stock risks. As these stocks will be listed on foreign stock exchanges – the environment and the factors (like local government policies, local trends, etc) will affect the share price of those companies.

How to invest in foreign stocks?

Now that you have learned the basic concept of investing in the international stock exchanges, here are three simple ways to invest in foreign stocks—

1. An account with Indian Brokers having a tie-up with a foreign broker

Many full-service Indian brokers like ICICI Direct, HDFC Securities, Kotak Sec, Axis Securities, Reliance money, etc has a tie-up with the foreign brokers. They have made it very simple to open your overseas trading account with their partner (foreign) brokers. You can invest in foreign stocks using these full-service brokers. 

For example, if you’ve an account with ICICI direct, you can invest in global markets using their broker partner Interactive Brokers LLC.

ICICI direct - invest in foreign stocks from India

(Source: ICICI Direct)

2. Open an account with the foreign brokers

A few international brokerage firms like Interactive Brokers, TD Ameritrade, Charles Schwab International Account, etc permits Indian citizens to set up an account and trade in US stocks, mutual funds, etc. In fact, US-based brokerage like ‘Interactive brokers’ also has an office in India where you can visit, get your queries answered, and open your overseas trading account.

3. Investing in Foreign stocks through new startups Apps

In the past few years, many new starts have been launched in India and abroad than helps Indians to invest in foreign stocks. For example, recently launched startup Vested Finance, helps Indians to invest in US stocks. They are a US Securities and Exchange Commission (SEC) registered investment advisor. Similarly, you can also invest in foreign stocks using the Webull app, another popular startup company that is also committed to building the best investing and trading experience for India and Global stock markets.

Extra: Buying Indian MF/ETFs with global equities

There are a number of mutual funds/ETFs who invest in international markets (global market, emerging market, etc). You can invest in those mutual funds/ETFs to indirectly invest in foreign equities. 

This is the easiest approach to invest in foreign stocks. An advantage of investing through mutual funds is that you won’t need to open any overseas trading account. Further, you won’t also require to invest a hefty amount. Compared to direct investing in foreign stocks (where you might be asked to maintain a minimum of $10,000 deposit), investing in mutual funds/ETFs are cheap.

For example, Motilal Oswal recently started their subscription for its Motilal Oswal S&P 500 Index Fund. It is an open-ended scheme replicating the S&P 500 Index, which consists of leading 500 companies listed in the US. A few of the popular of popular mutual funds who trade in global equities are—

(Source: Moneycontrol)

Quick Note: Many other Indian stockbrokers are also planning to offer their clients a facility to invest in the US and foreign stocks. For example, Zerodha is planning to offer option to invest in US stocks with no minimum investment. However, these features are yet to be launched. Nevertheless, these stockbrokers internally working on these features is a good sign for the Indian retail investors who are enthusiastic about investing in foreign companies.

Closing Thoughts

In this article, we discussed three easy ways to invest in foreign stocks from India, along with the forth way of mutual funds route. We also covered the advantages and disadvantages of investing in foreign stocks.

Investing in the foreign market will help you widen your investment horizon. Here, you can invest without boundaries in your favorite companies. Moreover, in the era of the internet- it’s not much difficult to invest in the international market. The most significant advantage is that it helps in diversifying your portfolio. However, the obstacles are higher expense charges and currency exchange rates.

That’s all for this article on different ways to invest in foreign stocks. Let me know what you think about investing in international stocks in the comment section below. Further, if you’ve got any questions on this topic, feel free to mention below. Have a great day and Happy investing.

October 5, 2020 Investment Basics 32 comments
Why do companies like MRF don’t split the stock

Why Do Companies Like MRF Don’t Split the Stock?

Ever wondered why do companies like MRF don’t split the stock? If you check the current market price of MRF Share, it’s hovering at a whopping price of Rs 60,499 per share. It’s all time high for the last 52 weeks is 73,565.70. Even though the price of one share is too high for this company, the interesting question here is why the MRF’s management/promoters are not splitting its shares? After all, buying a stock at Rs 60,499 per share is not financially viable for most of the retail investors.

In this article, we are going to answer the same. Here, we are going to discuss why companies like MRF don’t split the stock. However, before we discuss these expensive stocks, let’s first study why companies split their stocks?

mrf share price last 5 years

Quick Note: If you are do not know what is stock split and bonus shares, then check out this post first- Stock split vs bonus share – Basics of stock market

An Interesting study on companies that Rapidly Split Stocks in Past

You might have heard about the wealth creation story of Infosys. A small investment in the 100 shares of Infosys in 1993 would be worth over Rs 6.04 crores by now. (Also read: How to Earn Rs 13,08,672 From Just One Stock?)

In the last 25 years, Infosys has given multiple bonuses and stock splits to its shareholders. And, that’s why the share price of Infosys is still in the affordable purchase rate for the average investors. In fact, if Infosys has not given so many bonuses and splits, the price of one share of Infosys might have been over multiple lacks by now. Here is the bonus and split history of Infosys since 1993 till 2018:

infosys split

(Source: Moneycontrol)

Besides, Wipro is another common stock with a similar story. Because of its consistent bonuses and splits, the Wipro share is still in the purchase range for the retail investors. Else, if the management had decided not to give any split or bonus, then the share of Wipro might also have been over multiple lakhs and maybe over crores by now. (Also read: Case Study: How 100 shares of WIPRO grew to be over Rs 3.28 crores in 27 years?)

The big question – Why do companies split a share?

Here are four common reasons why companies split their shares-

  1. Stock splits help to make the share price affordable for retail investors. For example,  if a company is trading at a share price of Rs 3000 and it offers a stock split of 10:1, then it means that its price will drop to Rs 300 per share after the split. Now, which price is more affordable to the public- Rs 3,000 or Rs 300? Obviously, Rs 300.
  2. The stock split makes the stock more liquid and hence increases its trading volume. This is because the total number of outstanding shares increases after the stock split.
  3. Splitting a stock does not affect the financials of a company. Although the outstanding shares of the company will increase after the split, however, the face value will decrease in the same proportion. Overall, stock splits don’t affect the financials and hence the companies are willing to go for it.
  4. As small and retail investors are more interested in affordable shares, stock splits help in increasing their participation and overall helps the companies to build a broadly diversified investor base for their stock.

Overall, in terms of value, the stock split doesn’t matters much as the financials of the company remains the same. However, by splitting the shares- the company is able to keep the shares affordable to the public and hence maintains a wide ownership base.

Companies that do not split their shares – List of few Costliest Shares!

The reasons to split shares might be clear by reading the above paragraph. However, the next big question is why few companies do not split their shares? Why the share price of many stocks in the share market is still in the 5 figures if they have an option to split their stocks.

If you check the current market price of the companies listed on the Indian stock exchange, you can find out that there are many companies whose share price is above Rs 10,000. Here are a few of the top ones:

S.No.Company NameShare Price (Rs)MarketCap (Rs Cr)Current PE
1MRF60269.9525554.4621.98
2Honeywell Auto32198.4528463.4360.03
3Page Industries20627.2522999.38119.17
4Shree Cement20296.9573232.9149.08
53M India18795.821182.87111.77
6Abbott India15975.3533947.6251.72
7Nestle India15876.85153077.7973.59
8Bosch13291.7539202.2178.23
9Tasty Bite Eat.10598.152719.4978.62
10Bombay Oxygen10350.05155.25---
11P & G Hygiene9872.2532046.0574
12Bharat Rasayan9176.83900.1424.07
13Sanofi India8748.420147.5739.07
14Dixon Technolog.8719.710088.82102.4
15Yamuna Syndicate8644265.693.5
16Polson8028.896.3519.39
17Maruti Suzuki6892.4208205.6251.63

Quick Note: The above prices and values are updated till Oct 2020!

All these shares are not easily affordable for the average retail investor. Even the shares of Maruti is trading at a current price of above Rs 6,800. 

Why Do Companies Like MRF Don’t Split the Stock?

Here are a few common reasons why few companies do not split their shares:

1. They are already doing good. Why bother to split?

Many of these companies are already good. Then, why should they bother to split the share and make it cheap?

For example- MRF was trading at a share price of Rs 8,786 in October 2010. Currently, as of October 2020, it is trading at Rs 60,499. The people might have argued that the stock was expensive and not affordable even in 2010. However, it has done pretty well in the last 10 years and given a return of over 588% to its shareholders.

MRF share price all time - why Companies Like MRF Don’t Split the Stock

In short, if a company is doing good, they why it should bother to go through the splitting process. It’s already making money for itself and its investor, even when the share price is expensive.

2. Fewer public shareholding

The high share price of a company results in low public shareholding. Retail investors and traders can’t easily enter such stocks. Sometimes, this also helps in decreasing the volatility in the share price. Moreover, by allowing the high share price, the promoters tend to keep the voting right in their hands. This helps in maintaining a static voting right which allows the owners to make key decisions without much interference.

Besides, fewer public shareholding also helps in avoiding scenarios like creeping acquisition or in worst case hostile takeovers. Expensive stocks discourage acquisition.

3. No financial benefits

There are no financial benefits while splitting the shares. The value of the stock remains the same after stock splitting (the financial statements and ratios don’t change). That’s why until and unless the promoters have any good enough reason, the share splitting does not appeal much to the management and promoters.

4. Keeps traders and speculators away:

The stock split increases liquidity and makes the stock affordable. This results in an increase in the participation of retail investors and traders. And with an increase in participation, speculation also increases. On the other hand, a high share price helps to keep the traders and speculators away from the stock. Only serious investors are the ones who can find these companies appealing and might want to enter these stocks.

Another benefit of the high share price is that it keeps the newbie investors away from them. As the new investors are mostly attracted to the affordable companies and are not willing to invest a high amount, therefore their participation in quite low in these companies.

5. Symbol of Status and Uniqueness

Do you know that one share of Warren Buffett’s company- Berkshire Hathaway costs around Rs 2.3 crores? Yes, that’s true. The current share price of Berkshire Hathaway Inc. Class A is $3,15,350.00

A high share price can be sometimes regarded as a symbol of status. Splitting that share means losing this exclusiveness.

Closing Thoughts

There are no specific guidelines or rules from SEBI or any stock exchange about a stock split. Therefore, the prices of the shares can go as high as it can and the company is not obliged to offer any split.

As we discussed in this article, there are both pros and cons of a high share price. The biggest advantage of a high share price is that it helps to keep the traders and speculators away from that share. Anyways, a company might choose whether it wants to split a share or not- depending on what suits them best for their interests.

That’s all for this post on Why Do Companies Like MRF Don’t Split the Stock.. I hope it was helpful to you. If you still have any doubts/queries on this topic, feel free to comment below. I’ll be happy to help. Take care and Happy Investing!

October 4, 2020 Market, Stocks 2 comments
best stock market apps

7 Best Stock Market Apps that Makes Stock Research 10x Easier.

List of Best Stock Market Apps in India 2020: Now a day, if you are a stock market trader, then it’s essential for you to stay updated with every minute market movements. The modern stock market traders keep tabs on the rising and fall of the stocks on daily basis and sometimes that too hourly. The high-speed internet and handy mobile apps have made the life of traders simple, faster, and efficient. These financial apps help the traders to stay informed and ready all the time.

From checking the real-time streaming market price of the stock, making a virtual portfolio, drawing stocks charts, following market trends to tracking your portfolio; everything is now accessible from your smartphone or tablet.

Therefore, today I am going to present to you the 7 Best Stock Market Apps that will make your stock research easier in India. Moreover, all the apps listed here are free. In short, be with me for the next 5-8 minutes to learn the best stock market apps for Indian stock research.

7 Best Stock Market Apps in India 2020

1. MoneyControl

best stock market apps money control

Play store rating: 4.0/5 Stars (335k Reviews)
Downloads: +10 Million
Available on: Android, IoS, Windows

This is my personal favorite mobile app for stock market news and updates. If you are planning to keep only one stock market app on your smartphone, then I will highly recommend you to have this one. The money control app is simple, yet have tons of information and news.

You can track the latest updates on Indian and Global financial markets on your smartphone with the Moneycontrol App. It covers multiple assets from BSE, NSE, MCX and NCDEX exchanges, so you can track Indices (Sensex & Nifty), Stocks, Futures, Options, Mutual Funds, Commodities and Currencies with ease.

Key Features:

  • Ease of Use: Easy navigation to all financial data, portfolio, watchlist and message board. Single search bar with voice search for stocks, indices, mutual funds, commodities, news, etc
  • Latest Market Data: Latest quotes of stocks, F&O, mutual funds, commodities and currencies from BSE, NSE, MCX, and NCDEX
  • News: All-day coverage of news related to markets, business and economy; plus interviews of senior management
  • Portfolio: Easy monitoring your portfolio across Stocks, Mutual Funds, ULIPs, and Bullion. Timely updates on the performance of your portfolio, and news & alerts relating to stocks you hold
  • Personalized Watchlist: Adding your favorite stocks, mutual funds, commodities, futures, and currencies to monitor. Get timely alerts in form of news and corporate action
  • Message Board: Follow your favorite topics and the top borders to get recommendations. Engage and participate in conversations relating to your portfolio or interest

You can download from google playstore here

(Source: Money Control)

2. Stock Edge

stock edge

Play store rating: 4.3/5 Stars (28k Reviews)
Downloads: +1 Million
Available on: Android, iOS

Stock Edge helps Indian Stock market traders and investors do their own research and make better decisions by providing them with end-of-day analytics and visualizations and alerts.

Key Features

  • Daily Updates Section for filtered major market tracking with News, NSE & BSE Corporate Announcements, Forthcoming events, & Corporate Actions and more.
  • FII/ FPI & DII Cash and Derivatives with strong historical data visualization Daily, Monthly & Yearly.
  • Opportunity Scans: Price Scans, Last week high/ low, Last Month high/ low, 52 weeks high/low, 3 days price behavior, etc
  • Track what Big Indian Investors are doing. Use MyInvestorGroup section to create your own group of Investors with their multiple names/entities etc
  • Sector Research: Sector List, Industries in a sector, Companies in a sector/Industry, Price Movement of last 30 days presented in a simple graph, Gainers, Losers etc.

You can download StockEdge App here!

3. Economic Times(ET) Markets

best stock market apps et market

Play store rating: 4.7/5 Stars (37k Stars)
Downloads: +1 Million
Available on: Android, IoS, Windows

This is another of the best stock market apps. I regularly use ET Markets app for reading market news and updates as they provide the best latest news. Moreover, the stock details feature on this app is always very well organized.

Key Features:

  • To track BSE Sensex, NSE Nifty charts live and get share prices with advanced technical charting.
  • Follow stock quotes real time, get tips on intraday trading, stock futures, commodities, forex market, ETFs on the go.
  • One-stop destination for mutual fund news, NAVs, portfolio updates, fund analysis, SIP calculator
  • Simple swipe to build, manage and access your portfolio; get customized news, analysis and data of the Indian stock market
  • To create your watchlist and track them regularly
  • Get analyses/expert views delivered to you, participate in discussions/conversations through comments

You can download ET Markets app here

4. Tickertape

tickertape app android

Play store rating: 4.2/5 Stars (2.8k reviews)
Downloads: +500k
Available on: Android, IoS,

This app has become quite popular in the best stock market apps in India in recent months and relatively newer when compared to other apps in this list. Tickertape is a modern stock analysis platform that is designed for keeping you at the center of the process. It focuses on salient metric analysis with powerful tools and robust ecosystem support that can be a catalyst to improve your knowledge about the market and their participation in the same.

Key Features:

  • Detailed stock analysis for all the publically listed companies in India.
  • Advanced Screener with 130 filters for you to analyze any Indian stocks.
  • Market mood Index (MMI) which is the market sentiment indicator trusted to correctly time their trades.
  • Peer comparisons, news, and events are presented in such a way that will help in your investment decisions.
  • Finally, Broker Connect to help you log in and connect your broker account to the Tickertape account.

You can download Tickertape app here

5. Yahoo Finance

best stock market apps yahoo finance

Play store rating: 4.2/5 Stars (168k reviews)
Downloads: +5 Million
Available on: Android, IoS, Windows

First of all, after downloading this app, you need to change the settings. In the region settings, select ‘India (English)’ for getting the updates about the Indian stock market. The simple yet dynamic user interface makes it one of the best stock market apps for stock research.

Key Features:

  • Follow the stocks you care about most and get personalized news and alerts.
  • Access real-time stock information and investment updates to stay on top of the market.
  • Add stocks to watchlists to get real-time stock quotes and personalized news
  • Track the performance of your personal portfolio.
  • Find all the financial information you need with sleek, intuitive navigation
  • Go beyond stocks and track currencies, bonds, commodities, equities, world indices, futures, and more
  • Compare stocks with interactive full-screen charts

You can download Yahoo Finance app here!

Also read: 7 Best Mutual Fund Apps for Direct Investment

6. Market Mojo

best stock market apps market mojo

Play store rating: 4.4/5 Stars (1.9k Reviews)
Downloads: +100,000
Available on: Android

This is a new yet powerful app for stock market research. Market Mojo is great for the fundamental analysis of stocks. It offers pre-analyzed information on all stocks, all financials, all news, all price movement, all broker recommendations, all technicals and everything that matters in the Indian stock markets.

Key Features:

  • The Mojo Quality rank reflects the company’s long-term performance vs its peers.
  • Its Valuation determines how the stock is valued at its current price
  • The current financial trend indicates if the company is currently on a growth path and its ability to generate profits.
  • The Portfolio Analyser evaluates every hidden opportunity and risk in the portfolio and tells the investor what he should be doing rather than what he should be just tracking. Every portfolio goes through our test of seven parameters-Returns, Risk, Diversification, Liquidity, Quality, Valuation & Financial Trend

You can download Marketsmojo app here!

7. Investing.com

investing com mobile app

Play store rating: 4.6/5 Stars (355k Reviews)
Downloads: +10 Million Downloads
Available on: Android, iOS

Investing.com is a popular stock market app uses worldwide. Along with Indian stock details, you can also find the details about the world indexes and foreign stock exchanges. It offers a set of financial informational tools covering a wide variety of global and local financial instruments.

Key Features:

  • Live quotes and charts for over 100,000 financial instruments, traded on over 70 global exchanges.
  • Live updates on global economic events customized to your personal interests.
  • Build your own customized watchlist and keep track of stock quotes, commodities, indices, ETFs and bonds – all synced with your Investing.com account.
  • Breaking news, videos, updates and analysis on global financial markets, as well as technology, politics and business.
  • Quick access to all of our world-class tools, including: Economic Calendar, Earnings Calendar, Technical Summary, Currency Converter, Market Quotes, advanced charts and more.

You can download Investing.com app here!

BONUS App to Check: Best Stock Market Apps in India

1. Trade Brains -Learn to Invest

trade brains learning app Feature Page 2

Play store rating: 4.4/5 Stars (344 Reviews)
Available on: Android

Trade brains is a FREE financial education app focused on teaching stock market investing and personal finance to the DIY (do-it-yourself) Investors. Trade Brains app will guide you on how to invest in the Indian stock market with simple, easy-to-understand, and original content.

Key Features:

  • Pocket guide for stock market Investment.
  • LEARN- Step-by-step stock investing lessons.
  • Easy to understand contents on various investment concepts and strategies.
  • Financial Calculators to Simplify your investment planning
  • Stockbrokers section to compare the best Online Stockbrokers in India.
  • Investing quizzes to test your knowledge.

You can DOWNLOAD TradeBrains App here!

2. Intrinsic Value Calculator

trade brains learning app Feature Page 2

Play store rating: 4.0/5 Stars
Available on: Android

Want to find the undervalue valued stocks? Then, download this app!! The intrinsic value calculator App helps the users to calculate the true value of stocks by offering different IV calculators like a Discounted cashflow calculator or DCF Calculator, Return on Equity Valuation or ROE Valuation calculator, Graham number valuation or Graham Calculator, Price to Earnings valuation, PE Valuation calculator and more.

Key Calculators and Features:

  • Discounted Cashflow (DCF) Calculator: DCF analysis is a method of valuing a company using the concepts of the time value of money.
  • Fair Value Calculator: This is a simple discounted model calculator to help you find the fair value of a company using Earnings per share (EPS) forecast. With a few simple values, you can estimate the intrinsic value of a company.
  • Graham Calculator: This calculator is a good tool to find a rough estimate of the intrinsic value. It is simple and very easy to use.
  • Future Value Calculator: This is a basic compound interest calculator. It will give the future value of one time lump-sum investment.

You can DOWNLOAD IV Calculator App here!

That’s all. I hope this blog post ‘7 Best Stock Market Apps that makes Stock Research 10x Easier’ is useful to the readers. If I missed any amazing app that you believe should be mentioned here, feel free to comment below.

Further, please comment below which Stock market app is your favorite? Happy Investing!

October 2, 2020 Investment Basics, Trading 61 comments
Stock Market Timings in India cover

Stock Market Timings in India – NSE/BSE Trading Timings

Stock Market Timings in India: There are two major stock exchanges in India- the Bombay stock exchange (BSE) and the National stock exchange (NSE). However, the timing of both BSE & NSE is the same.

For a quick answer, the stock market timings in India for normal trading in the equity market is between 9:15 am to 03:30 pm, Monday to Friday, without any lunch or tea break. This means that you can buy or sell your stocks on BSE or NSE at any time between this time period.

Anyways, the trading timing for the commodity market is different and longer. Moreover, this stock market timings in India is also divided into different segments that we’ll discuss in detail in this post. Let’s get started

Stock Market Timings in India

First of all, you need to know that the stock market in India works only five days and is closed on weekends i.e. Saturday and Sunday.

Further, the markets are also closed on national holidays like Republic Day, Independence Day, Gandhi Jayanti, etc. You can find the list of the holidays of the stock exchange here: NSE India

The normal trading time for equity market is between 9:15 am to 03:30 pm, Monday to Friday.

The trading time for commodity (MCX) market is between 10:00 AM to 11:30 PM, Monday to Friday.

The normal trading time for Agri-community (NCDEX) market is between 10:00 AM to 05:00 PM, Monday to Friday. (Source: McxIndia)

Now, there is continuous trading by the traders/investors in this time period. This means that there is no lunch break or tea break in the Indian stock market timings, unlike banks or other government/private offices.

Different Segments of Stock Market Timings in India

The timings of the Indian stock market are divided into three sessions:

  1. Normal session (also called a continuous session)
  2. Pre-opening session
  3. Post-closing session

Now, let us discuss all these sessions to further understand their importance in the stock market timings in India.

— Normal Trading Session

Basically, this is the trading session or stock market timings that everyone should know.

  1. The normal trading session is the actual time where most of the trading takes place.
  2. Its duration is between 9:15 AM to 3:30 PM.
  3. You can buy and sell stocks in this session.
  4. The normal trading session follows a bilateral matching session i.e. whenever the buying price is equal to the selling price, the transaction is complete. Here transactions are as per price and time priority.

— Pre-Opening Session

The duration of the Pre-opening session is between 9:00 AM to 9:15 AM i.e. before the Normal trading session. This is further divided into three sub-sessions.

  1. 9:00 AM to 9:08 AM:
    1. This is the order entry session.
    2. You can place an order to buy and sell stocks in this duration.
    3. One can also modify or cancel his orders during this period.
  2. 9:08 AM to 9:12 AM:
    1. This session is used for order matching and for calculating the opening price of the normal session.
    2. You cannot modify or cancel the buy/sell order during this time.
  3. 9:12 AM to 9:15 AM:
    1. This session is used as a buffer period.
    2. It is used for the smooth translation of the pre-opening session to the normal session.

The opening price of the normal session is calculated using a multilateral order matching system.

Earlier, a bilateral matching system was used which caused a lot of volatility when the market opened. Later, this was changed to a multilateral order matching system to reduce the volatility in the market. You can read more on how Pre-Opening prices of stocks are calculated here.

Anyways, most traders do not use the pre-opening session and only use the normal session for trading. That’s why there is still huge volatility even in the normal session after the pre-opening session.

— Closing Session/ Closing Price Calculation Session

The time between 3:30 PM to 3:40 PM is used for closing price calculation.

  1. The closing price of a stock is the weighted average of the prices between 3:00 PM to 3:30 PM.
  2. For the indexes like Sensex & nifty, its closing price is the weighted average of the constituent stocks for the last 30 minutes i.e. Between 3:00 PM to 3:30 PM.

— Post-Closing Session

Finally comes the 20 minutes session of the post-closing session.

  1. The duration of the Post-closing session is between 3:40 PM to 4:00 PM.
  2. You can place orders to buy or sell stocks in the post-closing session at the closing price. If buyers/sellers are available then your trade will be confirmed at the closing price.

NOTE: Pre-opening session and the Post-closing session is only for the cash market. There are no such sessions for future & options.

Summary of Different Session of Stock Market Timings in India

Overall, the stock market timings in India and its different sessions can be briefed as:

TimingsParticular
9:00 AM to 9:15 AMPre-Opening Session
9:15 AM to 3:30 PMNormal Trading Session
3:30 PM to 3:40 PMClosing Price Calculation Session
3:40 PM to 4:00 PMPost-Closing Session

Stock Market Timings in India

(Pic credit: BSE India)

In addition, if you are unable to trade between these time periods, you can place an AMO (Aftermarket order). There is no actual trading here but you can place your buy or sell order.

Special Trading Session – Muhurat Trading

Further, the Indian stock market also opens a special trading session during Diwali, the festival of light. This is known as ‘Mahurat Trading’. Its trading time is declared a few days before Diwali.

However, generally, Mahurat Trading timings is not similar to normal trading and is traded in the evening. You can find more details about mahurat trading here: 60-minute ‘Muhurat Trading’ on BSE, NSE this Diwali  

Bonus Section for Stock Market Beginners

By the way, if you are new to investing and want to learn how to start investing in the Indian stock market, check out this video for beginners. Here I have explained the step-by-step process for beginners to start investing in stocks. And I’m sure it will be helpful to you!

Quick Note: Looking for the best Demat and Trading account to start your investing journey? Click here to open your account with the No 1 Stockbroker in India — Zero Brokerage on Equity Delivery/ Long term investments in stocks and mutual funds, Paperless online account opening. Start Now!!

That’s all. I hope this post on the ‘Stock Market Timings in India‘ is helpful to the readers.

If you have any doubts regarding the Indian stock market timings, feel free to comment below. I will be happy to help you. Happy Trading & Investing!

September 29, 2020 Investment Basics 36 comments
Zerodha Product Codes Explained- CNC, MIS meaning, SL & More cover

Zerodha Product Codes Explained- CNC, MIS, SL & More!

Understanding Zerodha Product Codes- CNC, MIS, SL & More: Zerodha is one of the biggest stock brokers in India with over 30+ lakh clients. And with this huge client base, obviously Zerodha products and trading platforms are quite widely used.  One such popular product offered by Zerodha is its Kite Trading platform.

Anyways, the client is net to trading or investing, a few of the acronym used on this platform may be difficult to understand. For example, terms like CNC, MIS, SL etc might not make much sense to you if you do not know what they stand for and what’s their use. Nonetheless, the different Zerodha product codes will be simple to use once you understand it.

In this post, we’ll discuss the different Zerodha product codes and will try to simplify them. Let’s get started.

Also read: How to Open a Demat and Trading Account at Zerodha?

What are Zerodha Product Codes?

Zerodha product codes are basically short forms for different codes to perform different actions. For example CNC, MIS, QTY, PRICE, SL, etc. Here is a screenshot of the KITE app while placing a buy order by showing different codes.

Zerodha Product Codes Explained- CNC, MIS, SL meaning 2

You can note the different Zerodha product codes in the above image. Understanding what these quotes mean is really important if you want to place your buy/sell order correctly. Let’s start with the two easily understandable codes are QTY and PRICE.

Here, QTY means the number of quantities of stock that you want to buy. PRICE is the cost at which you want to buy the share.

Next, here are the abbreviations of the other codes are that we are going to discuss in this article:

  • CNC: Cash N Carry
  • MIS: Margin Intraday Square-off
  • MKT: Market Order
  • LMT: Limit Order
  • SL: Stop Loss
  • SL-M: Stop loss market
  • Trigger Point
  • Disclosed quantity

Now, before we discuss the other Zerodha product codes, here are a few frequently used terms that you need to know first.

— Market order (Market): When you want to buy/sell a share at the current market price, then you need to place a market order. For example, if the market price (current trading price) of a stock is Rs 100 and you are ready to buy the share at the same price or the price of the market, then you can place a market order. Here, the order is executed instantaneously at the market price.

However, please note that the market price keeps fluctuating second-by-second. Therefore, your purchase price might be little different than what you may have noticed before placing the order.

— Limit order (Limit): A limit order means to buy/sell a share at a limit price. If you want to buy/sell a share at a given price, then you place a limit order. For example, if the current market price of a company is Rs 200, however you want to buy it at Rs 195. Then you need to place a limit order. When the market price of ABC falls to Rs 195, then the order is executed.

— Stop-loss (SL): STOP LOSS is used to limit the losses when the price of a stock starts falling. For example, let’s say that you are entering stock at Rs 300. However, the price of that stock starts falling and you fear to book losses. In such a scenario, you can place an order to limit the loss to Rs 295. It specifies that you want to execute a trade but only if the specified price is met. Stop-loss is a very good tool to limit risks.

Here’s a video on how to use Stop-Loss in Zerodha efficiently.

Common Zerodha product codes (SL, MIS, CNC, etc)

  • LMT: This is used for placing a limit order.
  • MKT: This is used for placing a market order.
  • Trigger Price: This is used in stop loss orders. It is the price at which you want ‘stop-loss’ to be triggered.
  • Stop Loss (SL): This is used to place a stop loss at the limit price. Here you need to specify a Limit price and a trigger price. When the trigger price is reached, then the stop loss order is sent to the exchange at a limit order mentioned by you.
  • Stop loss market (SL-M): This is used to place a stop loss at market price. Here you just have to specify the trigger price. When the trigger price is reached, then the stop loss order is sent to the exchange at market price.
  • MIS in Zerodha: MIS stands for Margin Intraday square off. It is used for Intraday trading with leverage. All MIS position is auto squared off at the end of the day session.
  • CNC: It stands for Cash n carry. CNC is used in delivery based equity. There is no leverage provided in CNC. However, there is also no auto square off at the end of the session.
  • Disclosed quantity: This allows traders to disclose only a part of the actual quantity of the stocks that he bought or sold. This disclosed quantity should be more than 10% of the order quantity. For example, let’s say you bought 1000 stocks. However, you can disclose only 400 stocks (if you want). Only the discloses quantity will be shown on the market screen.

Quick Note: What is the use of disclosed quantity? The order book is open to all active people on the exchanges. Therefore, all these people can see what quantity of stocks you have ordered. However, the problem here is that once they know your quantity and price, they can change their own order (increase/decrease their order amount/quantity). This might affect your orders adversely. Disclosed quantity is beneficial for those people who trade in large quantities.

Now, these were the common terms that are shown in the marketplace section while placing buy/sell order in Zerodha.

However, there are also a few other Advanced Zerodha product codes. Although you can execute all your buy/sell orders without changing the advanced order, however, it’s better to have full knowledge of these product codes. 

Zerodha Product Codes Explained- CNC, MIS, SL meaning

Advanced Zerodha Product Codes (BO, CO, IOC, etc)

Here are the advanced Zerodha product codes:

  • REGULAR: Regular orders
  • BO: Bracket order
  • CO: Cover order
  • AMO: Aftermarket order
  • DAY: Day validity
  • IOC: Immediate or Cancel

AMO: It stands for aftermarket orders. You can use this facility to place an order when you can’t buy/sell during the trading time. You can place your order between 4:00 PM to 08:59 AM i.e. after the post-closing session and before the pre-opening session.

Brackte Order (BO): Bracket order is used for higher leverages (than that of MIS). Here, you place an Intraday buy or sell at limit order with a target price and a compulsory stop loss. All the orders are squared off before the end of the day.

Cover Order (CO): Cover order is used for placing intraday buy or sell at the market order for high leverage (that trading using MIS). Here you just have to specify the stop loss. All the orders will be squared off before the end of the day.

IOC: It stands for ‘Immediate or cancel’. Here the order is executed as soon as it is released. If the order fails to execute, then it is immediately canceled. In the case of part execution, the remaining quantity (which is not executed) will be canceled.

Summary

Let’s quickly summarise a few of the most frequently used Zerodha product codes discussed in this post.

  • LMT: This is used for placing a limit order.
  • MKT: This is used for placing a market order.
  • Stop Loss (SL): This is used to place a stop loss at the limit price.
  • MIS in Zerodha: MIS stands for Margin Intraday square off.
  • CNC: It stands for Cash n carry. CNC is used in delivery based equity.

That’s all for this post. I hope the article is useful to the new traders and investors. If you have any questions regarding any Zerodha product codes, feel free to comment below. I will be glad to help. Happy Investing!!

September 29, 2020 Online Brokers 33 comments
Different Charges on Share Trading Explained- Brokerage, STT & More cover

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

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

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

1. Intraday Trading and Delivery

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

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

 2. Full-Service Brokers and Discount Brokers:

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

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

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

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

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

 Intraday TradingDelivery Trading
Brokerage0.275% of total turnover0.55% of total turnover
TurnoverIf you buy 100 stocks at Rs 120 and sell at Rs 125, total turnover is (120*100+ 125*100=) Rs 24,500If you buy 100 stocks at Rs 120 and sell at Rs 125, total turnover is (120*100+ 125*100=) Rs 24,500
Total Brokerage CostTotal brokerage charge on Intraday trading (for both buying and selling) = 24,500 * 0.00275 = Rs 67.38Total brokerage charge on Delivery (for both buying and selling) = 24,500 * 0.0055 = Rs 134.75

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

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

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

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

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

Different Charges on Share Trading

– Security Transaction Tax (STT)

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

– Stamp Duty

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

Type of tradeNew stamp duty rate
Delivery equity trades0.015% or Rs 1500 per crore on buy-side
Intraday equity trades0.003% or Rs 300 per crore on buy-side
Futures (equity and commodity)0.002% or Rs 200 per crore on buy-side
Options (equity and commodity)0.003% or Rs 300 per crore on buy-side
Currency0.0001% or Rs 10 per crore on buy-side
Mutual funds0.005% or Rs 500 per crore on buy-side
Bonds0.0001% or Rs 10 per crore on buy-side

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

– Transaction Charges

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

– SEBI Turnover Charges

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

– Depository Participant (DP) Charges

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

– Goods & Service Taxes (GST)

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

– Capital Gain Taxes

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

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

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

Example of Different Charges on Share Trading

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

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

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

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

 Prasad (Intraday Trader)Rajat (Delivery Trader)
Buy Price120120
Sell Price125125
Quantity400400
Total TurnoverRs 98000Rs 98000
ExchangeNSENSE
StateMaharashtraMaharashtra
Brokerage ChargeRs 40 (Flat Rs 20 Per trade i.e. Buying & Sellling)Rs 0 (FREE Delivery Trades)
STT0.025% of sell side = 0.025 % of Rs 50,000 = Rs 12.50.1% on buy & sell = 0.1% of 98000 = Rs 98
Stamp Duty0.003% of buy-side = 0.003% of 48,000 = Rs 1.440.015% of buy-side= 0.015% of 48,000 = Rs 7.2
Transaction Charges0.00325% of total turnover = 0.00325% of Rs 10,000= Rs 3.180.00325% of total turnover = 0.00325% of Rs 10,000= Rs 3.18
SEBI Turnover ChargesRs 10 / Crore of Total Turnover= Rs 0.10Rs 10 / Crore of Total Turnover= Rs 0.10
GST18% on (brokerage + transaction charges) = 0.18 * (40+ 3.18)= Rs 7.7718% on (brokerage + transaction charges) = 0.18 * (0+ 3.18) = 0.57
Total Brokerage And Taxes64.99109.05
Total Profit or Loss1935.011890.95
Capital Gain TaxDepends on the tax SlabDepends on Short/long term holding period

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

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

Zerodha Brokerage Calculator

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

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

































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


 September 25, 2020  Investment Basics, Online Brokers 81 comments

15 Biggest Stockbrokers in India With Highest Active Clients

15 Biggest Stockbrokers in India With Highest Active Clients!




List of Biggest Stockbrokers in India (Updated: Aug 2020) In this article, we are going to look at the 15 Biggest Stockbrokers in India based on their total number of unique active clients.


There are over three hundred stockbrokers in India registered with SEBI and different stock exchanges. Even on National Stock Exchange (NSE), there are 225 registered stockbrokers in India as of 30th August 2020. When you are looking for the best stock broker to open your demat and trading account, one of the most straightforward factors to look into is its total number of active clients. Although a large client base doesn’t guarantee a better service, however, being a big firm, it reduces the possibility of the brokerage firm disappearing or running out of the service soon enough. 


These days, one and all stockbrokers will argue that they are trustworthy as they are registered with SEBI. However, just because they are registered with SEBI doesn’t make them reliable for the long term. Time and again, a lot of such small brokers are either expelled out of the exchange or simply go out of the business and files for bankruptcy. And this leads to a lot of trouble for their current clients.


Therefore, a safer option for the customers to avoid any such kind of inconvenience is by opening their trading account with the biggest stockbrokers in the Industry.


15 Biggest Stockbrokers in India with Highest Active Clients


Several websites rank stockbrokers in India based on different factors like their brand value, trading platforms, customer services, facilities offered, complaint ratio, etc. However, in this article, we are not going to look into these factors. 


Here, we are going to look at just one factor, i.e. the total number of unique active clients for that stockbroker. In this post, the stockbroker with the highest number of clients is ranked first, followed by the subsequent stockbrokers with top active clients. 


For this approach, we are going to use the data available on the NSE India website. The national stock exchange website provides the details of the monthly total number of unique clients of the different stockbrokers registered with it. Here’s a quick link to the page. You can also download the spreadsheet available on this page to analyze the stockbrokers further. 


Here are the 15 Biggest Stockbrokers in India based on the total number of unique active clients:






S. NoName of Stockbroker# of Active Clients% Market Share






1ZERODHA BROKING LIMITED230379917.09%




2ICICI SECURITIES LIMITED11658878.65%




3RKSV SECURITIES INDIA PRIVATE LIMITED10111177.50%




4ANGEL BROKING LIMITED9331286.92%




5HDFC SECURITIES LTD.7864155.83%




6KOTAK SECURITIES LTD.6756205.01%




75PAISA CAPITAL LIMITED6315144.69%




8SHAREKHAN LTD.5871214.36%




9MOTILAL OSWAL FINANCIAL SERVICES LIMITED4385363.25%




10AXIS SECURITIES LIMITED3188492.37%




11SBICAP SECURITIES LIMITED2803202.08%




12IIFL SECURITIES LIMITED2430341.80%




13GEOJIT FINANCIAL SERVICES LIMITED1755331.30%




14NEXTBILLION TECHNOLOGY PRIVATE LIMITED1680481.25%




15KARVY STOCK BROKING LTD.1543761.15%






Please note that the total number of active clients of all stockbrokers is 1,34,78,848 (1.34 Cr) as of Aug 2020, mentioned on the NSE India website.


From the above table, you can quickly notice that Zerodha is the biggest stockbroker with the highest numbers of unique clients registered on the National stock exchange in India. 


As of August 2020, Zerodha constitutes around 17.09% of the total market share of the active clients registered on the National Stock Exchange. It has over 23 lakh active customers compared to a total of over 1.34 Crore active clients of all stockbrokers on the NSE.


What makes this list even more interesting is that Zerodha was just founded in 2010 and still has been able to outrank all the old and well-matured traditional brokers. It is the only broker with a discount brokerage business model in the top ten list. Anyways, Angel broking has also started a similar discount brokerage model recently, along with its full-service model. 


Also read: Zerodha Review –Discount Broker in India | Brokerage, Trading Platform & More


According to the above table, Zerodha is closely followed by ICICI securities, which ranks second and has over 11.16 lakhs unique clients. 


The other most prominent stockbrokers in this list are Upstox aka RKSV Securities (10.1 Lakh Clients), Angel Broking (9.33 lakh clients), HDFC Securities (7.86 Lakh clients), Kotak Securities (6.75 lakh clients), 5Paisa (6.31 lakh clients), Sharekhan (5.87 lakh clients), Motilal Oswal Group (4.38 lakh clients) and Axis Securities (3.18 lakh clients). Together these 15 biggest stockbrokers constitute over 73.25% of the total share of the unique clients registered on NSE.


Also read: Compare Online broker in India – Stockbrokers list


Bonus: Additional Top Stockbrokers


Here is a list of the ‘Next’ 15 biggest stockbrokers in India with the highest active clients registered on the National stock exchange as of 30th April 2020. 






S. NoName of Stockbroker# of Active Clients% Market Share






16EDELWEISS BROKING LIMITED1412581.05%




17SMC GLOBAL SECURITIES LTD.1229480.91%




18RELIANCE SECURITIES LIMITED1202610.89%




19RELIGARE BROKING LIMITED1192230.88%




20NIRMAL BANG SECURITIES PVT. LTD.1097320.81%




21MARWADI SHARES AND FINANCE LIMITED908860.67%




22VENTURA SECURITIES LTD.825550.61%




23ALICE BLUE FIN SVCS P LTD800760.59%




24ANAND RATHI SHARE AND STOCK BROKERS LIMITED762220.57%




25SAMCO SECURITIES LIMITED664190.49%




26TRADEBULLS SECURITIES (P) LTD.636780.47%




27JAINAM SHARE CONSULTANTS PRIVATE LIMITED615330.46%




28MONARCH NETWORTH CAPITAL LIMITED507870.38%




29IDBI CAPITAL MARKETS & SECURITIES LTD.506500.38%




30ADITYA BIRLA MONEY LIMITED492530.37%






That’s all for this article. I hope this list of 15 Biggest Stockbrokers in India with highest Active Clients was helpful to you. Further, please comment below which brokerage firm you’re using for trading in the Indian stock market and your review for the same. Happy investing!


 September 25, 2020  Online Brokers 4 comments

Zerodha Review 2020 Is Free Investing Legit Pros Cons

Zerodha Review 2020 – Is Free Investing Legit? [Pros and Cons]




A complete Zerodha Review 2020– Brokerage, Trading Platform & More: Zerodha is the biggest discount broker in India and perfect for traders & investors looking for low brokerage, easy interface, and reliable trading platform. It offers a zero brokerage for delivery equity & direct mutual fund investments.


For all intraday, Futures & Options, currency, and commodity trades across NSE, BSE, MCX, it offers a brokerage of Flat ₹20 irrespective of the trading volume. It doesn’t matter whether you trade for Rs 1 lakh or 1 crore, you have to pay a flat low brokerage of Rs 20 per trade. Therefore, you can save a lot of brokerage charges on your trades using Zerodha as your broker.


In this Zerodha review, we will discuss the brokerage charges, account opening charges, maintenance charges, trading platforms, products, my personal experience of using Zerodha & more. By the end of this post, you’ll have a complete understanding of Zerodha trading services and whether this broker is right for you or not. Let’s get started.


Quick link to open a demat account with Zerodha.


Zerodha Review –Brokerage, Charges, Trading Platforms & More


1. Introduction


There are two types of stockbrokers in India. Full-Service brokers and Discount brokers. The full-service brokers offer a trading platform along with advisory. However, their brokerage charges are high. A few major full-service brokers in India are HDFC Securities, ICICI Direct, Motilal Oswal, etc.


On the other hand, discount brokers offer trading platforms with minimum brokerage charges. Nonetheless, they do not provide advisory services. The biggest advantage of a discount broker is that it saves a lot of brokerages for the traders/investors. On all other prospects, like performance, computerized trading systems etc- both offer similar facilities.


An important point to know here is that all the brokers- Full service or discount brokers are licensed and regulated in India by regulating bodies like SEBI.


Zerodha is a leading discount broker in India in terms of daily trading volume, growth and customer base. It is one of the most technologically advanced and cheap stockbrokers. Zerodha has over +1 million clients and contributes to over 10% of daily retail trading volumes across NSE, BSE, MCX.


Ironically, the term ‘Zerodha’ is derived from the fusion of an English and Sanskrit word. ‘Zero’+’Rodha’ where ‘Rodha’ means barrier. Overall, Zerodha means ‘Zero Barrier’.


It was started by Nitin Kamath, an Engineer by qualification, in 2010. Nithin bootstrapped and founded Zerodha in 2010 to overcome the hurdles he faced during his decade long stint as a trader. He 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”


2. Zerodha Brokerage Charges 


Zerodha offers trading services to buy and sell stocks, futures & options in equities, commodities, and currency segment. Here are the Zerodha brokerage charges:


– Free equity delivery


All your equity delivery investments (NSE, BSE), absolutely free — ₹0 brokerage.


– ₹20 intraday equity and F&O trades


₹20 or 0.03% (whichever is lower) per executed order on intraday trades across equity, currency, and commodity trades across NSE, BSE, and MCX.






TypeBrokerage Charges






Equity DeliveryRs. 0 (FREE)




Equity IntradayLower of Rs. 20 per executed order or 0.03%




Equity FuturesLower of Rs. 20 per executed order or 0.03%




Equity OptionsFlat Rs. 20 per executed order




Currency F&O	Lower of Rs. 20 per executed order or 0.03%




CommodityLower of Rs. 20 per executed order or 0.03%






Quick note:


1. You can use this Zerodha Brokerage Calculator to get more ideas.


updated zerodha brokerage stocks


(Zerodha Brokerage Calculator)


2. Apart from brokerages, there are also a few other charges that you have to mandatorily pay on your transactions like Exchange transaction charge, STT, SEBI turnover charges, GST, etc. 


You have to pay these charges no matter which stockbroker you prefer to trade in stocks and that too on both sides of transactions i.e. while buying and selling. However, the brokerage cost can be controlled by choosing a discount broker. For example, in the case of Zerodha, you can notice the total brokerage of Rs 40 for both sides of Intraday equity trading, even though the total turnover is Rs 8.4 Lakhs.


You can have read this blog post to understand the different charges while trading in stocks.


3. Zerodha Account Opening Charges & AMC


Here are the account opening charges for Zerodha


    

  1. Equity Trading Account: ₹200
    2. 

  2. Commodity Account:₹100
    3. 



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. Anyways, if you are just interested in trading in stocks i.e. equities, you can open demat and trading for equity account at Rs 200. The demat account annual maintenance (AMC) charge is Rs 300 per year.


 4. Zerodha Products & Features


 Zerodha has built its own trading applications for the customers. It offers different trading terminals, websites, and mobile apps (Android/iOS) which are free for the customers.


— Kite 3.0


zerodha kite dashboard


Kite 3.0 is a modern technology-based trading platform with streaming market data, advanced charts, an elegant UI, and more. It is a minimalistic, intuitive, responsive, light, yet powerful web and mobile trading application offered by Zerodha. Kite provides Bandwidth consumption of fewer than 0.5 Kbps for a full market watch, extensive charting with over 100 indicators and 6 chart types, advanced order types like Brackets and cover, millisecond order placements, and more.


Overall, Kite provides an excellent experience to the users through its groundbreaking innovations presented with hassle-free usability.


— Kite mobile


zerodha mobile app


This is a mobile version of KITE for a seamless experience for mobile-users and available in both Android and iOS devices.


— Coin


Zerodha Coin is a platform that lets you buy mutual funds online directly from asset management companies. This platform is absolutely free since August 24, 2018. Here, you can make your investments without any commissions.


With the help of Zerodha Coin, you can have Direct mutual funds in DEMAT form, with the convenience of one portfolio across equity, MF, currency, etc. Moreover, it also provides a Single capital gain statement, P&L visualizations, and more. This Coin by Zerodha has made investments through SIPs really simple and flexible.


Other Partner Products


Apart from the above products, Zerodha also offers a few other partner programs:


    

  1. Smallcase: This thematic investment platform is powered by Kite Connect APIs. Smallcase helps users to invest in different themes by intelligently providing weighted baskets of stocks in each theme.
    2. 

  2. Sensibull: This is an options trading platform which offers simplified options trading for new investors by providing powerful trading tools. Sensibull aims to make options trading safe, accessible, and most importantly, profitable for all.
    3. 



Besides, Zerodha has also started a few educational initiatives to improve financial literacy and increase the participation of the common people in the financial world. Here are a few other products offered by Zerodha


    

  1. Zerodha Varsity: An educational platform to educate people about investing and trading. Zerodha Varsity offers free modules on Technical analysis, fundamental analysis, futures, options, risk management, trading psychology & more. Recently, Zerodha Varsity also launched its Varsity mobile app.
    2. 

  2. Trading Q&A: An online forum powered by Zerodha to answer people’s most troublesome investing and trading questions.
    3. 



5. Pros and cons of Zerodha Discount broker


Here are a few advantages and disadvantages of using Zerodha trading platforms:


Pros of Opening Account with Zerodha


    

  1. Zero Brokerage Charges for Delivery
    2. 

  2. Flat Charge for Intraday (Rs 20 or 0.03% whichever is lower per executed order for everything else)
    3. 

  3. Same pricing for across all exchanges
    4. 

  4. No upfront fee or turnover commitment
    5. 

  5. Z-Connect, interactive blog, and portal for all your queries
    6. 

  6. Trading, charting, and analysis, all rolled into one next-generation desktop platform Pi.
    7. 

  7. Minimalistic, intuitive, responsive web-based trading platform Kite
    8. 

  8. No minimum balance required to open Zerodha trading account
    9. 

  9. Invest in direct mutual funds with same demat account through coin
    10. 



Cons of Opening Account with Zerodha


    

  1. No advisory services or research report.
    2. 

  2. 3-in-1 account (Saving+Demat+Trading) not available.
    3. 

  3. Online IPO investment not available. (Now, Zerodha customers can invest in IPO’s through UPI payment. Read more about Zerodha IPO applying process here)
    4. 



Note: Zerodha has recently started offering Zerodha IDFC FIRST Bank 3-in-1 account. However, to open a 3in1 account at Zerodha, you need to have an existing account with IDFC FIRST Bank. Accounts can only be opened online. Read more here.


6. Is Zerodha a Reliable Stockbroker? And is Free investing legit?


Is Zerodha safe for long-term investments? This is one of the biggest questions that come in the mind of first-time investors. Obviously, HDFC Securities, ICICI Direct, SBI cap, Kotak securities, etc are big brands in the name of the broking industry and been in the market for decades. Hence, they have built greater trust compared to Zerodha, especially for the ones who have never heard its name before.


Anyways, Zerodha, the discount broker, originated only in 2010. Therefore, if you’re not involved in the share market investments/tradings in the last decade, it’s no surprise to say that you might have not known this broker. However, in the short span of around 10 years, this broker has been able to beat all the big traditional brokers. Currently, Zerodha is the biggest stockbroker in India, based on the number of clients (over 15 lakh users), followed by ICICI Direct and HDFC securities ranking second and third.


Now, answering your question, Yes, Zerodha is safe and reliable. In fact, since origin, Zerodha has never faced any case of major violations from SEBI or any of the other exchanges. It is a profitable private company with no debts or liabilities. Here are a few points why Zerodha is safe and reliable for investors and traders.


    

  1. Zerodha is a zero-debt financial services company. There is no borrowing of any kind.
    2. 

  2. There is no credit risk, less than 5% of Zerodha’s own capital is lent to customers in any form.
    3. 

  3. Zerodha own funds in the business are greater than 25% of all client funds put together.
    4. 

  4. Their ratio of ‘complaints to active clients’ is among the least on the exchange.
    5. 

  5. Zerodha is profitable as a business and has enough reserves to sustain, even if there was an extended downturn in the economy.
    6. 



Moreover, Zerodha is partnered with Central Depository Services Limited. CDSL’s main function is the holding securities either in certificated or uncertificated form, to enable the book-entry transfer of securities. Therefore, when it comes to the security of the shares in your demat account with Zerodha, you do not need to worry at all. The stockbrokers are just the agents of depositories.


Your stocks are actually held by central depositories and not by the depository participants (brokers). Therefore, even if something didn’t work out well with Zerodha, your stocks in the demat account are safely intact with CDSL. In short, Zerodha is completely legit and reliable for your trading or long-term investments in the Share market.


7. My experience of using Zerodha


It’s been over three years since I’m using Zerodha and I’m satisfied with the trading services provided by Zerodha.


Initially, I started with ICICI direct as my broker, but later I switched to Zerodha when I realized that I was paying way too much brokerages for my trading transactions.


Most beginners do not consider the brokerage charges while calculating the profits. I use to make the same mistake. And that’s why many times the final profits in my bank account (after deducting the brokerage and other charges) disappointed me as it was considerably lower than what I calculated in my head. I wish I had switched to a discount broker earlier as it could have saved me a lot of ‘unnecessary’ brokerages and moreover trading experience is even better on Zerodah. Nonetheless, I use Zerodha for making all my stock investments now.


Besides, there was one ‘cons’ of using Zerodha as a broker which bugged me in the past. And it was not having the facility for the customers to directly invest in Initial public offerings (IPOs) through the Zerodha dashboard. But this issue is also solved by Zerodha. Investors can now apply for IPOs directly within the Zerodha console. And the best part is that the process is really simple.


Finally, a lot of people complain that Zerodha doesn’t provide advisory services or buy/sell calls. I believe that one should never invest or trade based on the broker’s recommendation. There’s a conflict of interest here as the brokers will always make money when you trade and doesn’t matter whether you win or lose. Therefore, they might always motivate investors to trade frequently. Overall, Zerodha not giving advisory services doesn’t bother me. Moreover, they make us for these cons by providing educational initiates like Varsity.


8. How to open your trading & demat account with Zerodha?


Opening a demat and trading account with Zerodha is really fast and hassle-free. In fact, if you’ve all the documents, you can open your account and start trading within an hour.


Here are the documents required to open a demat and trading account at Zerodha: PAN CARD, Aadhar Card, 2 Passport size photos, Canceled cheque/ Saving bank account passbook. I will recommend keeping photocopies of all these documents ready before you apply for opening the accounts.


To open your trading & demat account at Zerodha, go to Zerodha website and click on ‘OPEN AN ACCOUNT’. Here is the direct link.


open demat at trading account at 5paisa


Note: You can find the detailed explanation on how to open your demat and trading account at Zerodha here.


9. Closing Thoughts


In the last decade, Zerodha has earned trust and respect among the trading population by providing reliable and technologically advanced trading services. It is definitely the largest discount broker in India. If you are looking to open your brokerage account with a reputable brand that offers low brokerages, and have a fast trading platform, Zerodha is definitely one of the best options.


That’s all for this post. I hope this Zerodha review is useful to you. If you have any additional queries regarding Zerodha or if you want to share your review of Zerodha, you can post it in our forum. I’ll be happy to answer your questions. Have a great day!


 September 7, 2020  Online Brokers 30 comments

10 Best Blue Chip Companies in India that You Should Know

10 Best Blue Chip Companies in India that You Should Know!




List of Best Blue Chip Companies in India: If you start counting the numbers, you’ll find that the stocks can be categorized into many groups. Based on market capitalization, they can be defined as small-cap, mid-cap, and large-cap companies. Based on the stock characteristics, there are categorized as growth stocks, value stocks, and dividends (income) stocks.


However, there is one particular type of stock that gets a lot of attention from every kind of investor (beginners to the seasoned players)- and they are the BLUE CHIP stocks. Moreover, when most newbies enter the exciting world of the stock market, they are suggested to look into blue chip stocks as safer investment options. However, being new to investing, most of them are simply confused and are not able to understand what other means when they say blue chip companies.


In this post, we are going to look into what exactly are blue chip stocks and then cover ten of the best blue chip companies in India that every investor should know. Please note that this is going to be a long post, but I promise that it will be worth reading. Therefore, without wasting any further time, let us understand the blue chip companies in India.


A Quick Introductory Story


“… but blue chip companies are boring. It’s better to invest in growth stocks with huge upside potentials.”, Gaurav argued energetically.


“Yes, blue chips are not the ‘hot’ stocks in the market. However, they are a good option for the investors who are looking for low-risk investments with decent returns.”, I replied.


Gaurav has been investing in the stock market for the last two years and he likes to discuss his investment strategies with me. Nevertheless, his investment style is totally different from that of mine. Gaurav loves to invest majorly in mid-caps and small-cap companies (including penny stocks) which can grow at a fast pace. On the other hand, I like investing in a diversified portfolio.


“That’s true, dude. But most of these blue chip companies have already reached a saturation point. They can not continue to grow at the same pace and hence can’t similar returns as they used to give in the past. Once a company has sold a billion products, it’s difficult to find the next billion customers.”, Gaurav challenged me with his witty reply. 


“I know the rule of large numbers, Gaurav. Thank you for reminding me. Moreover, I agree that the large-cap companies cannot maintain the same pace of growth forever. But bro, it doesn’t mean that they won’t be profitable in future or can’t give good returns to their shareholders… They have already established their brand. If they use their resources efficiently, they can make huge fortunes for themselves as well as for their shareholders… 


For example- take the case of Reliance Industries. Reliance is a market leader in its industry and has a lot of customers. But they are also using their capital efficiently to grow their business. Two years back, they entered a new market- Telecommunication Industries, and now they are also a leader in that industry.


 Because of their strong financials- they were able to bring the latest 4G technology to the Indian market and hence were able to quickly acquire a lot of customers. As the initial set-up cost in this industry is very high, they have created an entry barrier for the small and mid-cap companies. This is what a blue-chip company can do if they use their resources properly.“


Gaurav looked a little mind-boggled. That’s why I thought better to give him another example to make him understand the capabilities of blue chip companies.


“Let’s discuss another example- Hindustan Unilever. If you think that HUL cannot grow any further because it is a large-cap company, then you might need to reconsider it. HUL already have popular products in the market like Lux, Lifebuoy, Surf Excel etc which are generating them a good revenue from those products. But, they still have a large rural area to cover. They are not so popular in the village areas, are they? So, they can definitely grow in the rural areas…”


…besides, as they have enough resources and financials, they are also continuously working on new product development in their Research & development (R&D) department. If they can make another great product, their profits will add-up in the future….“


Finally, when Gaurav didn’t argue further, I concluded-


“…a good blue chip company is like Rahul Dravid. If you want fast scorers (or T-20 players), then you may not like his batting style. However, if you are looking for dependable players, then you will definitely appreciate Rahul Dravid’s consistency.”


What are Blue Chip companies?


Blue chip companies are large and well-established companies with a history of consistent performance.  These companies are financially strong (usually debt-free or very low debts) and are capable to survive in tough market situations.


Most of the blue chip companies are the market leaders in their industry. A few of the common examples of blue chip companies in India are HDFC Bank, HUL, ITC, Asian Paints, Maruti Suzuki etc.


best blue chip stocks for long term investment


— Signature Characteristics of Blue Chip Companies


Here are a few signature characteristics which you can look forward while researching blue chip companies—


    

  1. They are large reputed companies.
    2. 

  2. They have widely used products/services.
    3. 

  3. Most of these companies are listed in the market for a very long time.
    4. 

  4. Blue chip companies have survived a number of bear phases, market crises, financial troubles, etc. But they are still going strong.
    5. 

  5. Blue chip companies have a strong balance sheet (a large number of assets compared to liabilities) and a healthy income statement (revenues and profits continuously growing for the last few decades).
    6. 

  6. These companies have a good past track record of stable growth.
    7. 



Almost all blue chip stocks are older companies. You might already know many of the blue chip companies in India and have been using their products/services in your day-to-day life. 


For example-  Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair & Lovely, Pond’s, Vaseline, Lakmé, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Wall’s and Pureit —- all these products are offered by the same blue chip company in India – Hindustan Unilever (HUL).


New to stocks? Confused where to begin?  Here’s an amazing online course for beginners: ‘HOW TO PICK WINNING STOCKS?‘ This course is currently available at a discount. 


— Why are they called blue chips?


Oliver Gingold- who worked at Dow Jones, is credited to name the phrase ‘Blue Chip’ in 1923. The term ‘blue chips’ became popular after he wrote an article where he used ‘Blue chips’ to refer the stocks trading at a price of $200 or more.  


Quick Note: There are other sets of investors who believe that blue chip companies got its name from the Poker game, as in that game- blue chips are relatively more valuable. Similar to the game, the stocks which are more valuable in the market are termed blue chip stocks.


Although Oliver Gingold used the term ‘blue chips’ for high priced stocks, however, later people started using this word more often to define high-quality stocks (instead of high priced stocks).


— Financial characteristics of blue chip stocks


Apart from the signature characteristics discussed above, here are few key financial characteristics of blue chip companies –


1. Blue chip companies have a large market capitalization -As a thumb rule, the market cap of most of the blue chip companies in India is greater than Rs 20,000 Crores.


2. Good past performance: Blue chip companies have a track record of good past performance (like consistently increasing annual revenue over a long-term).


3. Low debt to equity ratio: The bluest of the blue chips are (generally) debt free stocks. However, a lower and stable debt to equity ratio can also be considered as a significant characteristic of blue chip companies.


4. Good dividend history: Blue chip companies are known to reward decent dividends to their loyal shareholders.


5. Other characteristics: Apart from the above four- few other key characteristics of blue chip companies are a high return on equity (ROE), high-interest coverage ratio, low price to sales ratio etc.


Also read: How To Select A Stock To Invest In Indian Stock Market For Consistent Returns?


10 Best Blue Chip Companies in India: 


Now that you have understood the basic concept, here is the list of top 10 best blue chip companies in India. (Disclaimer- Please note that the companies mentioned below are based on the author’s research and personal opinion. It should not be considered as a stock recommendation.) 


— Reliance Industries


reliance industriesThis company needs no introduction. Reliance Industries is an Indian conglomerate holding company and owns businesses across India engaged in energy, petrochemicals, textiles, natural resources, retail, and telecommunications.


In December 2015, Reliance Industries soft-launched Jio (Reliance Jio Infocomm Limited) and it crossed 8.3 million users as of January 2018.


Reliance is one of the most profitable companies in India and the second-largest publicly traded company in India by market capitalization. On 18 October 2007, Reliance Industries became the first Indian company to reach $100 billion market capitalization. It is also the highest income tax payer in the private sector in India.


how reliance industries makes money 2020


— Hindustan Unilever (HUL)


hulHUL is one of the largest Fast Moving Consumer Goods (FMCG) Company in India with a heritage of over 80 years. It is a subsidiary of Unilever, a British Dutch Company. HUL’s products include foods, beverages, cleaning agents, personal care products, and water purifiers.


Few famous products of HUL are Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair & Lovely, Pond’s, Vaseline, Lakmé, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Walls and Pureit.


hul company infographic


— HDFC BANK


hdfc bankHDFC Bank is India’s leading banking and financial service company. It is India’s largest private sector lender by assets and has 84,325 employees (as of March 2017).


HDFC Bank provides a number of products and services which includes Wholesale banking, Retail banking, Treasury, Auto (car) Loans, Two Wheeler Loans, Personal Loans, Loan Against Property and Credit Cards. It is also the largest bank in India by market capitalization and was ranked 69th in 2016 BrandZ Top 100 Most Valuable Global Brands.


— Asian Paints


Asian paint is one of the largest Indian paint company and manufacturer. Since its foundation in 1942, Asian paint has come a long way to become India’s leading and Asia’s fourth-largest paint company, with a turnover of Rs 170.85 billion. It operates in 19 countries and has 26 paint manufacturing facilities in the world, servicing consumers in over 65 countries. 


Asian Paints is engaged in the business of manufacturing, selling and distribution of paints, coatings, products related to home decor, bath fittings and providing of related services.


— Tata Consultancy Services (TCS)




Tata Consultancy Services Limited (TCS) is an Indian multinational information technology (IT) service, consulting and business solutions company. It was established in 1968 as a division of Tata Sons Limited. As of March 31, 2018, TCS employed 394,998 professionals.


TCS is one of the largest Indian companies by market capitalization (Rs 722,700 Crores as of June 2018). It is now placed among the most valuable IT services brands worldwide. TCS alone generates 70% dividends of its parent company, Tata Sons.


— Infosys


infosysInfosys Limited is an Indian multinational corporation that provides business consulting, information technology and outsourcing services. It has its headquarters in Bengaluru, Karnataka, India. Infosys is the second-largest Indian IT company by 2017 and 596th largest public company in the world in terms of revenue. On April 19, 2018, its market capitalization was $37.32 billion.


Infosys main business includes software development, maintenance, and independent validation services to companies in finance, insurance, manufacturing and other domains. It had a total of 200,364 employees at the end of March 2017.


— ITC


itcIndian Tobacco Company (ITC) is one of the biggest conglomerate company in India. ITC was formed in August 1910 under the name of Imperial Tobacco Company of India Limited. It has a diversified business which includes five segments: Fast-Moving Consumer Goods (FMCG), Hotels, Paperboards & Packaging, Agri-Business & Information Technology. Currently, ITC has over 25,000 employees. 


As of 2016, ITC Ltd sells 81 percent of the cigarettes in India. Few of the major cigarette brands of ITC include Wills Navy Cut, Gold Flake Kings, Gold Flake Premium lights, Gold Flake Super Star, Insignia, India Kings etc. 


Apart for the cigarette industry, few other well-known businesses of ITC are Aashirvaad, Mint-o, gum-o, B natural, Sunfeast, Candyman, Bingo!, Yippee!, Wills Lifestyle, John Players, Fiama Di Wills, Vivel, Essenza Di Wills, Superia, Engage, Classmate, PaperKraft etc.


ITC company infographic


— Eicher Motors


Eicher Motors is an automobile manufacturer and parent company of Royal Enfield, a manufacturer of luxury motorcycles. Royal Enfield has made its distinctive motorcycles since 1901 which makes it the world’s oldest motorcycle brand in continuous production. Royal Enfield operates in over 40 countries around the world. 


The Eicher Group has diversified business interests in design and development, manufacturing, and local and international marketing of trucks, buses, motorcycles, automotive gears, and components.


— Bajaj Auto


bajaj autoBajaj Auto is a global two-wheeler and three-wheeler Indian manufacturing company. It manufactures and sells motorcycles, scooters and auto rickshaws. Bajaj Auto was founded by Jamnalal Bajaj in Rajasthan in the 1940s. It is the world’s sixth-largest manufacturer of motorcycles and the second-largest in India. 


A few of the popular motorcycle products of Bajaj Auto are Platina, Discover, Pulsar and Avenger and CT 100. In the three-wheeler segment, it is the world’s largest manufacturer and accounts for almost 84% of India’s three-wheeler exports.


— Nestle India


nestleNestle India is a subsidiary of Nestle SA of Switzerland- which is the world’s largest food and beverage company. It was incorporated in the year 1956. Nestle India Ltd has 8 manufacturing facilities and 4 branch offices in India.  The Company has continuously focused its efforts to better understand the changing lifestyles of India and anticipate consumer needs in order to provide Taste, Nutrition, Health and Wellness through its product offerings.


Few famous products of Nestle India are Maggi, Nescafe, KitKat, MUNCH, MILKY BAR, BARONE, NESTLE CLASSIC, ALPINO etc. (On 8 March 2018, Nestle Indias food brand MAGGI completed 35 years of existence in India.)


Also read: Market Capitalization Basics: Large cap, Mid cap & Small cap companies


Closing Thoughts


Most people invest in blue chip companies become of their long history of consistent performance and a similar expectation of standard performance in the future. Blue chip companies are low-risk high return bet for the long term.


 Many blue chip companies in India like Tata, Reliance, Infosys etc are considered as ‘Too-big-to-fail’ companies as they have survived and remained profitable for a very long time. Nevertheless, this is not always true!!


 September 1, 2020  Investment Basics, Stocks 18 comments

7 Things to do Before You Start Investing cover

7 Things to do Before You Start Investing




A guide on things to do before you start investing for Newbie Investors: So, you’re thinking to start investing. But before you enter, are you prepared? Do you actually meet all the requirements that will make your investment journey smoother? In this post, we’ll discuss seven such things that you should do before you start investing.


7 Things to do Before You Start Investing


1. Build an Emergency Fund


As the name suggests, an emergency fund is money that you put aside for emergencies. It is the money that you can reach out to during your hour of need and pay for those unforeseen and unexpected expenses such loss of a primary job, medical emergency, personal emergencies or even a car breakdown.


As a thumb rule, before you start making investments for your long-term goals, first you should build an emergency fund which should be greater than at least three times your monthly expenses. Keep this money aside in a separate account. You can read more about how to build an emergency fund here.


2. Have a budget & know your cash-flows


If you want to enjoy a healthy financial life, it’s really important to have a balance between your savings and your expenses. Budgeting your monthly finances and knowing your ‘cash’ inflow and outflow can help you plan how much you can afford to invest per month.


A simple profit and loss formula that you can use in your day-to-day life to understand your cash position is ‘Revenue — Expenses = Profit”.


Here, your total revenue (inflow) is the sum of all the income that you make from different sources like your job, business, interests on savings/fixed deposits, dividends, rental income, etc. And your total expenses (outflow) include your rent, groceries, transportation, bills, EMI’s, household expenses, etc.


When you deduct the total expenses from your net revenue, you’ll be able to find out how much you keep per month or year. And after calculating this, you can plan where to allocate this money and how much to invest in different investment options.


Note: If you are struggling with your personal budgeting, one of the easiest strategies that you can use to figure out how much should you save is the 50/20/30 Strategy.


50/20/30 is a really simple and straightforward budgeting strategy that can help you to define how much should you spend on your essential spendings (needs), savings and finally on your preferences (wants and choices). According to 50/20/30 strategy, you should allocate:


    

  • 50% of your monthly income on ‘Needs’ (like rent, food, etc)
    • 

  • 20% of your monthly income on ‘Savings’ (like your retirement fund, investments, etc)
    • 

  • And the remaining 30% of your monthly income on your ‘Wants’ (like traveling, dining out, etc)
    • 



50-30-20 rule


You can read more about the 50/20/30 budgeting strategy here.


3. Pay down high-interest debt


First of all, please note that not all loans or debts are bad. Here, we are talking about high-interest debts. For example, if you have taken a personal loan, it’s interest rate may vary from 13–18%. Similarly, a credit card company may charge you even higher interest on the outstanding amounts.


It doesn’t make much sense to invest if the profits that you make on your investments are lesser than the interests that you pay on your debts. For example, if your returns are 12% and you’re paying 14% as interest on your previous debt, then overall you’re in a loss. Here, instead of investing, it will be better to use that money to pay back and become debt-free.


Before you start investing, try to minimize or eliminate debt, especially high-interest debts and your credit card debt. These interests can kill your investment profits.


4. Take a health Insurance


When people are in the best of their physical health, an obvious question among them is why should they invest in health insurance? Paying a premium plan for ensuring health may seem an unnecessary expenditure.


However, accidents or health issues may come up anytime unexpectedly which can put a lot of financial and mental pressure. Further, it is a fact that, as you grow older, health issues come along with it. And hence, it is highly necessary to incorporate healthcare planning within the budget of your family financial planning.


Before you start investing, make sure to take health insurance first. Being medically insured can help you avoid facing financial instability in the future and enables you to get the best health treatment.




Also read: 6 Reasons Why You Should Get Health Insurance




5. Define your goals and make plans


One of the most critical things to do before you start investing is to define your investment goals/priorities and making plans to reach them. Here, you need to know why you are investing. It will keep you motivated and ‘on-track’ to achieve your goals.


Now, by definition, an investment goal is a realistic expectation to meet the returns by investing predefined money for a fixed time frame. The keywords to note here are ‘realistic expectations’ and ‘timeframe’.


Before you put your money in any investment options, set your short-term and long term goals and make plans for how you’re gonna achieve them. The goal can be person-specific like planning for children education, retirement fund, buying a new house or even financial independence. Once you’ve set your goal, you can choose the best investment options that can help you reach these goals in your defined time horizon.




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




6. Evaluate your risk tolerance profile


Everyone has a different risk tolerance level depending on their age, financial situation, priorities, etc.


If you are young and have a stable job, you might be willing to invest in more unusual ‘high risk, high return’ options. However, as you grow old/retire, you might not have a job or primary source of income and hence you might depend on your retirement fund for meeting your expenses. Here, you may not be willing to take a higher risk and choose safer investment options.


Before investing, you need to define your risk sensitivity i.e. whether you’ve are high, moderate or low-risk tolerance profile.


As different investment options have different degrees of risks, you can choose your investment options depending on your profile. For example, if you have a high-risk tolerance, you may invest in stocks, mutual funds, real estate, etc. On the other hand, if risky investments keep you sleepless at nights, better to choose low-risk investment options like fixed deposits, PPF, bonds, etc.


Also read:



7. Understand the investing basics


Don’t dive in deep water if you don’t know swimming basics. Similarly, do not start investing your money, if you do not understand the elementary concepts.


Before starting your investment journey, make sure that you understand what is meant by stocks, bonds, mutual funds, diversification, liquidity, volatility, and other investing basics. Here, you do not need to become a finance geek or an accountant. However, you should have good enough knowledge of the industry to make intelligent decisions.


Closing Thoughts


These days, anyone can open their demat and trading account with minutes and start investing in stocks, mutual funds, etc. However, it is not advised to do so until you have met the basic requirements and completed a few other essential tasks. In this post, we discussed how 7 must things to do before you start investing. This included budgeting, planning, knowing your risk tolerance, and moreover, learning the basics.


That’s all for this post. I hope it was useful for you. Besides, if you are ready to get an education, here’s an amazing course on stock market investing for beginners that you should check out. Happy Investing.


 July 13, 2020  Investment Basics, Personal Finance 7 comments

How to read Financial Statements of a Company cover

How to read Financial Statements of a Company?




A Beginner’s Guide on How to read financial statements of a company:  If you want to invest successfully in the stock market, you need to learn how to read and understand the financial reports of a company. Financial statements are tools to evaluate the financial health of the company. In this post, we are going to discuss the basics of how to read financial statements of a company. Here you’ll learn how to read the balance sheet, income statement, and cashflow statement of a company.


To be honest, you won’t find this post very interesting. Many of the points might sound complex and boring. However, it’s really important that you learn how to read financial statements of a company for achieving success in your investing journey. Reading and understanding the financials of a company is what differentiates an investor from a speculator.


As Warren Buffett used to say “Risk comes from not knowing what you are doing.”. And you can find the risk and potentials of a company through its financial reports. Without wasting any further time, Let’s get started.


How to get the financial statements of a company?


Before we start analyzing the financial statements of a company, the first thing that you need to know is where exactly to find them. Where can you see or download the financial statements of a company that you’re researching?


Well, you can find the financial statements of a company in any of the following sites: 1) BSE/NSE Website, 2) Investor relation page on Company’s website 3) Financial websites (like screener, money control, investing, etc)


In India, Securities exchange board of India (SEBI) regulates the financials announced by the company and try to keep it as fair as possible. Further, if you are using any other non-reputed website, make sure that the reports are correct and not tempered.


Quick Note: We recently launched our stock research and analysis portal, where you can also get the details about the financials of the +4,000 publically listed company in India. You can check out our portal here.


Three Core Financial Statements of A Company


Now, let us understand the different financial statements of a company. The financials of a company are split into three key sections. They are:


    

  1. Balance sheet
    2. 

  2. Income statement (Or Profit & loss statement)
    3. 

  3. Cash flow statement.
    4. 



The balance sheet shows the assets and liabilities of a company i.e. what it owns and owes. Second, the income statement shows how much profit/loss the company has generated from its revenues and expenses. And finally, the Cash flow statement shows the inflows and outflows of cash from the company.


It’s essential that you know how to read all of these financial statements. Let’s understand each statement one-by-one.


How to read financial statements of a company?


1. Balance Sheet


A balance sheet is a financial statement that compares the assets and liabilities of a company to find the shareholder’s equity at a specific time. The balance sheet adheres to the following formula:


Assets = Liabilities + Shareholders’ Equity


Here, do not get confused by the term ‘shareholder’s equity’. It is just another name for ‘net worth’ of the company.  In other way, the above formula can be also written as:


Shareholder’s Equity = Assets – Liabilities 


Quick Note: You can easily understand this with an example from day to day life. If you own a computer, car, house, etc then it can be considered as your asset. Now your personal loans, credit card dues, etc are your liabilities. When you subtract your liabilities from your assets, you will get your net worth. The same concept is applicable to companies. However, here we define net worth as the shareholder’s equity.


Why are balance sheets important?


The balance sheet helps an investor to judge how a company is managing its financials. The three balance sheet segments- Assets, liabilities, and equity, give investors an idea as to what the company owns and owes, as well as the amount invested by shareholders.


balance sheet meaning


Key elements of a Balance Sheet


Assets and liabilities are two key elements of a balance sheet. However, both assets and liabilities further comprise of different elements. Let’s define both of these to understand them in details:


1) Assets: It is an economic value that a company controls with an expectation that it will provide a future benefit. Assets can be cash, land, property, inventories, etc. Further, assets can be broadly categorized into:


    

  • Current (short-term) assets: These are those assets that can be quickly liquidated into cash (within 12 months). For example cash and cash equivalents, inventories, account receivables, etc.
    • 

  • Non-Current (Fixed) assets: Those assets which take more than 12 months to convert into cash. For example- Land, property, equipment, long-term investments, Intangible assets (like patents, copyrights, trademarks), etc.
    • 



The sum of these assets is called the total assets of a company.


2) Liabilities: It is an obligation that a company has to pay in the future due to its past actions like borrowing money in terms of loans for business expansion purposes etc. Like assets, it can also be broadly divided into two segments:


    

  • Current liabilities: These are the obligations that need to be paid within 12 months. For example payroll, account payable, taxes, short-term debts, etc.
    • 

  • Non-current (Long-term) liabilities- There are those liabilities that need to be paid after 12 months. For example long-term borrowings like term loans, debentures, deferred tax liabilities, mortgage liabilities (payable after 1 year), lease payments, trade payable, etc.
    • 



Now, let us understand these segments with the help of the balance sheet of a company from the Indian stock market. Here is the balance sheet of ASIAN PAINTS for the fiscal year 2016-17. I have downloaded this report from the company’s website here.


Please note that there are always at least 2 columns on the balance sheet for consecutive fiscal years. It helps the readers to monitor the year-on-year progress.


balance sheet asian paints 201617


Source: https://www.asianpaints.com/more/investors/annual-reports.html


Although the balance sheet looks complicated, however, once you learn the basic structure, it’s easy to understand how to read the financial statements of a company. A few points to note from the balance sheet of Asian Paints:


    

  1. There are three segments in the balance sheet of Asian paints: Assets, equity, and liability.
    2. 

  2. It adheres to the basic formula of the balance sheet: Assets = Liabilities + Shareholder’s equity. Please note that the first column of asset (TOTAL ASSETS = 9335.60) is equal to the second & third column of equity and liabilities (TOTAL EQUITY & LIABILITY = 9335.60).
    3. 



Now, let us move to the second important financial statement of a company.


2. Income Statement


This is also called the Profit and loss statement. An income statement summarizes the revenues, costs, and expenses incurred during a specific period of time (usually a fiscal quarter or year). The basic equation on which a profit & loss statement is based is:


Revenues – Expenses = Profit


In simple words, what a company ‘takes in’ is called revenue and what a company ‘takes out’ is called expenses. The difference in the revenues and expenses is net profit or loss.


The fundamental structure of an income statement:


Revenue

– Cost of goods sold (COGS)

——————————————-

= Gross Profit

– Operating expenses

——————————————-

= Operating Income

– Interest expense

– Income taxes

——————————————–

= Net Income


Note: The revenue is called TOPLINE and net income is called the bottom line in the income statement.


Most of the investors check the income statement of a company to find its earning. Moreover, they look for growth in their earnings. It’s preferable to invest in a profit-making company. A company cannot grow if the underlying business is not making money.


Here is the Income statement of Asian paints for the Year 2016-17:


profit and loss statments asian paints 201617


Here are a few points that you should note form the income statement of Asian Paints:


    

  1. The top line (revenue) increased by 8.04% in the fiscal year 2016-17.
    2. 

  2. On the other hand, the bottom line (net profit) increased by 11.84% (Rs 1802.76 Cr –> Rs 2016.24 Cr) in the from the fiscal year 2015-16 to the fiscal year 2016-17.
    3. 

  3. This shows that the management has been able to increase the profits are a better pace compared to the sales. This is a healthy sign for the company.
    4. 



For Asian paints, the diluted EPS also increased from Rs 18.19 in the year 2015-16 to Rs 20.22 in year 2016.17. This is again a positive sign for the company.


Also read: #19 Most Important Financial Ratios for Investors


3. Cashflow statement


This is the third key part of a company’s finances. Cash flow statement (also known as statements of cash flow) shows the flow of cash and cash equivalents during the period under report and breaks the analysis down to operating, investing, and financing activities. It helps in assessing the liquidity and solvency of a company and to check efficient cash management.


Three key components of Cash flow statements


    

  1. Cash from operating activities: This includes all the cash inflows and outflows generated by the revenue-generating activities of an enterprise like sale & purchase of raw materials, goods, labor cost, building inventory, advertising, and shipping the product, etc.
    2. 

  2. Cash from investing activities: These activities include all cash inflows and outflows involving the investments that the company made in a specific time period such as the purchase of new plant, property, equipment, improvements capital expenditures, the cash involved in purchasing other businesses or investments.
    3. 

  3. Cash from financial activities: This activity includes inflow of cash from investors such as banks and shareholders by getting loans, offering new shares, etc, as well as the outflow of cash to shareholders as dividends as the company generates income. They reflect the change in capital & borrowings of the business.
    4. 



In simple words, there can be cash inflow or cash outflow from all three activities i.e. operation, investing, and finance of a company. The sum of the total cash flows from all these activities can tell you how much is the company’s total cash inflow/outflow in a specific period of time.


Here is the Cash flow statement of Asian paints for the fiscal year 2016-17.


Asian Paints Annual Report 2016-17 cash flow statement1


Asian Paints Annual Report 2016-17 cash flow statement 2


From the Asian paints cashflow statement, we can notice that the net cash from operating activities has declined from Rs 2,242.95 Crores to Rs 1,527.33. This may be little troublesome for the company as the net cash from operating activities shows how much profit the company is generating from its basic operations.


As a thumb rule, an increase in the net cash from operating activities year over year is considered a healthy sign for the company. However, while comparing also look at the data for multiple years.


Quick note: In financial statements, generally accountants do not use the negative sign. For example, if the expense is to be deducted, it is not written as -40. When writing minus sign, accountants use parentheses (—). For the same example, it will be written as (40), not -40.


Summary


Through this post, we tried to explain the three core financial statements of a company. It is important to read and understand all the three financial statements of a company as they show the health of a company from different aspects.


    

  1. The balance sheet shows the assets and liabilities of a company.
    2. 

  2. The income statement shows how much profit/loss the company has generated from its revenues and expenses.
    3. 

  3. Cash flow statement shows the inflows and outflows of cash from the company.
    4. 



While investing in a company, you should pay special attention to all these financial aspects of a company. As a thumb rule, invest in a company with high-income growth, large assets compared to its liabilities and a high cash flow.


That’s all! This is how to read financial statements of a company. Although it’s not enough, however, this post aims to give a basic idea to the beginners about the financial statements of a company.


If you want to learn (in details) about where to find the financial statements of an Indian company and how to effectively study the reports, feel free to check out my online course on HOW TO PICK WINNING STOCKS here. I have explained everything about financial statements in this course.


Further please comment if you have any questions. I’ll be happy to help you out. Happy Investing!


 July 9, 2020  Valuations 3 comments

DMart Owner RK Damani Success Story cover

D-Mart Founder- RK Damani Success Story [Bio, Facts, Net worth & More]




D-Mart Owner RK Damani Success Story: Radha Kishan Damani or RK Dami is a Mumbai based billionaire investor, businessman, and owner of the mega-retail chain stores “D-Mart” in India. The veteran investor Rakesh Jhunjhunwala considers him as his guru (mentor) in the Indian share market. Here are some interesting facts about RK Damani


    

  • Current Age: 66 (Born 1954)
    • 

  • Net worth: $15.5 Billion
    • 

  • Occupation: Trader, Investor, Businessman
    • 

  • Status: Self-Made Billionaire
    • 



According to Forbes’s latest Richest Indian’s list, RK Damani is the 7th richest person in India, with a net worth of over $15.5 Billion, which is equivalent to over Rs 116,200 Crores.


RK Damani Success Story


— Background


RK Damani does not consider himself as a highly educated person. He dropped out of college while pursuing B Com from the University of Mumbai. Before entering the stock market, RK Damani had a small ‘ball-bearing’ business. However, after the death of his father, he started working as a stockbroker in his family business. He was 32 at that time.


Therefore, unlike most tech entrepreneurs who start their startup journey in their 20s, RK Damani was a little late to join this journey, still was able to make it big.


— Stock Market Career


Although RK Damani started his career as a stockbroker, he soon understood that if he wants to make real money from the market, then he needed to trade his own money in the market, instead of being just a broker. And soon he started trading his in the Indian stock market.


RK Damani made a lot of profits from his trading in stocks. He was a very flexible trader and believed in making profits using different market swings. For example, during the Harshad Mehta scam, he made a lot of money by ‘Short-selling’ the stocks, which was not common at that time. However, after getting influenced by value investor Chandrakant Sampat, later RK Damini changed his approach. He shifted to long-term value investing.


RK Damani made a lot of money by investing and holding multi-baggers stocks. A few best-performing stocks from his portfolio are VST Industries, Sundaram Finance, Indian Cement, and Blue Dart. He also invested in VST Industries at an average of Rs 85 and it is currently trading at Rs 3,400. Further, India cement gave a return of +115% to his porfolio.


Some other companies in his portfolio are Food & Inns Ltd, Simplex Infrastructure Ltd, Mangalam Organics, Spencer’s Retail, BF Utilities, Prozone Inty Properties, Kava Ltd, Astra Microwave products, etc.


RK Damani latest stock portfolio 2020 june tradebrains


— D’Mart Owner – The career as a Businessman


RK Damani has been very interested in consumer retails for a long time. That’s why he opened D-mart in 2002 with one store in suburban Mumbai. Nevertheless, being a value investor, this was a very planned move by him.


In March 2017, D-Mart went public by offering its IPO, under the name of the parent company- ‘Avenue Supermarts’. The IPO was a big hit. Avenue supermart offered its shares to the public at a  price of Rs 299 and got listed at Rs 604 after over-subscription. (Also read: 10 secrets behind the stunning success of D-Mart’s Radhakishan Damani). Currently, the shares of Avenue Supermarts are trading at Rs 2,372 per share, as of 30 April 2020.


d mart


Further, by 2019, D-Mart has over 176 stores spread across Maharashtra, Andhra Pradesh, Telangana, Gujarat, Madhya Pradesh, Chhattisgarh, Rajasthan, National Capital Region, Tamil Nadu, Karnataka, Daman and Diu, and Punjab. Dmart stores generated a total revenue of Rs 19,916 Crores in the year ending March 2019.


dmart success story rk damani


(Fig: Dmart Stores Success Story)


— Other Facts about RK Damani


RK Damani considers himself as both a trader and an Investor. He trades in market swing and invests when he’s getting long-term value.


Personally, Mr. Damani lives a very simple life. He is known as ‘Mr. White and White’ because most of the time he wears a simple white shirt and white trousers. Besides, he avoids media and public gatherings.


(Video Credits: FinnovationZ)


That’s all for this RK Damani success story. I hope this article will motivate you towards your own success journey. Let me know whose story should we cover in the next article by commenting below. Happy Investing.


 July 1, 2020  AceInvestors, INDIAN BULLS 8 comments

What is Free Cash Flow (FCF)? And How to Calculate it?

What is Free Cash Flow (FCF)? And How to Calculate it?




Understanding Free Cash Flow (FCF) Meaning & Calculations: Hi Investors. One of the most popular topics in company valuation is the Free cash flow. If you are involved in the fundamental analysis of stocks, you definitely have heard about this term. Nevertheless, for beginners, free cash flow can be a mystery. 


In this post, we are going to discuss what exactly is a free cash flow and why it is important to evaluate while researching a company. This might be one of the most important articles for the people interested to learn stock valuations. Therefore, read this post completely. Let’s get started. 


1. What is a Free Cash Flow (FCF)?


Free cash flow is the excess cash that a company is able to generate after spending the money required for its operation or to expand its asset base. It represents the cash that is available for all the investors of the company.  Now, you might be wondering what is so ‘FREE’ about this cash flow and how it is different from the earnings of the company?


Here you need to understand that not all income is equal to cash. If a company is making earnings, it doesn’t mean that it can spend all the income directly. The company can only spend free cash. There is a crucial difference between ‘cash’ versus ‘cash that can be taken out of a business’, or in accounting terms: cash from operating activities and free cash flow (FCF).


The cash from operating activities is the amount of cash generated by the business operations of a company. However, not all of the cash from operating activities can be taken out of the business because some of it is required to keep the company operational. These expenses are called capital expenditures (CAPEX).


On the other hand, free cash flow is the cash that a company is able to generate after spending the money required to stay in business. This is the cash at the end of the year, after deducting all operating expenses, expenditures, investments etc and is available for distribution to all stakeholders of a company (Stakeholders include both equity and debt investors.)


Also read: 8 Financial Ratio Analysis that Every Stock Investor Should Know


2. Why is free cash flow important?


It’s important for an investor to look into the free cash flow of a company carefully because it is a relatively more accurate method to find the profitability of a company than the company’s earnings. 


This is because earnings show the current profitability of the company. On the other hand, the free cash flow signals the future growth prospects of the company as this is the cash that allows the company to pursue opportunities to enhance shareholder’s value. Free cash flow reflects the ease with which businesses can grow or pay dividends to the shareholder. 


The excess cash can be utilized by the company in expanding their portfolio, developing new products, making useful acquisitions, paying dividends, reducing debt or to pursue any other growth opportunity. 


Further, free cash flow is also used as the input while calculating the intrinsic value of a company using the popular valuation technique- Discounted cash flow (DCF) Model.


(Besides, as free cash flow is the additional money that can be taken out of the company without affecting the running of the business, it is also called the “Owner’s Earnings”.)


3. How to calculate free cash flow of a stock?


Companies in the stock market are not obliged to publish their free cash flow. That’s why you can’t find FCF directly in the financial statements of the companies. However, the good point is that it is easy to calculate them.


To calculate the free cash flow of a stock, you’ll require its financial statements i.e income statement, balance sheet, and cash flow statements. There are two calculation methods to find Free cash flow of a company.


Method 1: From the Income statement & Balance sheet


FCF = EBIT (1-tax rate) +(depreciation & amortisation) -(change in net working capital) – (capital expenditure)


Method 2: From the cash flow statement


This is the more popular approach to calculate FCF of a company. Here, Free cash flow is calculated as cash from operations minus capital expenditures (from the cash flow from investing activities).


FCF = Cash flow from operating activities – capital expenditures 


Quick Note: To make things simpler, Yahoo Finance has already made the free cash flow of the companies available on their website. Just go to the Stock page –> Financials –> Cashflow statement, and you can find the Free cashflow of the company for last multiple years. 


How to calculate Free cashflow FCF using yahoo finance


(Source: Yahoo Finance)


In addition, you can also find the free cash flow of companies on other financial websites like Screener.in, Tickertape, etc. Nevertheless, we advise our readers to do the calculations themselves to avoid any computer-based miscalculations. 


tickertape free cashflow calculation


Also read: What’s the formula for calculating free cash flow? -Investopedia


4. How to analyze the free cash flow of a company?


While studying the cash flow of a company, it is important to find out where the cash is coming from. The cash can be generated either from the earnings or debts. While an increase in cash flow because of the increase in earnings is a good sign. However, the same is not true with debts.


Moreover, if two companies have the same free cash flow, it doesn’t mean that they have a similar future prospect. Few industries have a higher capital expenditure compared to other industries. Further, if the Capex is high, you need to investigate whether the reason for the high capital expenditure is due to expenses in growth or expenditure. In order to learn these, you have to read the quarterly/annual reports of the companies carefully.


Also check out: Online Discounted Cashflow (DCF) Calculator


Negative FCF of a company.


A consistently declining or negative free cash flow of a can be a warning sign for the investors. Negative free cash flow is dangerous because it may lead to slow down in the business. Further, if the company didn’t improve its free cash flow, it might face insufficient liquidity to stay in the business.


Quick Note: If you want to learn free cash flow and discounted cash flow (DCF) model in depth, feel free to check out this online course: HOW TO PICK WINNING STOCKS? Enroll now and learn stock valuation techniques today.


5. Conclusion


In this post, we discussed the Free cash flow (FCF). It is a measure of a company’s financial performance. Free cash flow represents how much cash a company has left from its operations i.e. the cash that could be used to pursue opportunities that improve shareholder value. 


However, the absolute value of the free cash value doesn’t tell you the whole story. You have to find out where this cash is coming from and how the company is using it. Whether they are spending this money effectively on operations like giving healthy dividends, buybacks, acquisitions etc- or not. And finally, a consistent negative free cash flow of a company might be a warning sign for the investors.


That’s all for this post. I hope it was useful to you. If you’ve got any doubts related to finding the free cash flow of a company, comment below. I’ll be happy to help. Happy Investing!!


 May 21, 2020  Valuations 8 comments

10 Questions to Ask Before Purchasing a Stock - Investment Checklist cover

10 Questions to Ask Before Purchasing a Stock - Investment Checklist!




Most Important questions to ask before purchasing a stock: Picking a winning stock that can give consistent returns for many years requires a lot of analysis and research. However, you can simplify the research process if you have an investment checklist.


Having a reliable checklist for picking stocks can reduce the chances of missing an important detail that you should have studied before investing in the stock. As Charlie Munger, Vice-Chairman of Berkshire Hathaway has famously quoted:


“No wise pilot, no matter how great his talent and experience, fails to use a checklist.” — Charlie Munger


In this post, we are going to discuss ten key questions to ask before purchasing a stock by every stock investor. Let’s get started.




Quick Note: Although there are hundreds of points to check while picking a stock to invest, however, most of them can be categorized among the ten questions listed below. Anyways, by no means, I claim that this is the best checklist for picking stocks. My suggestion would be to study the investment checklist given below, improvise and make your own list of questions. Further, for simplicity, I’ve not included financial ratios.




10 Questions to ask before purchasing a stock.


Here are the ten key questions that every investor should ask before investing in a stock.


1. What does the company do?


What are the products/services that the company offers? Do you understand the company’s business model? How does the company actually make money? What are the top/best-selling products of the company?


2. Who runs the company?


Who are the promoters/owners of the company? It the company a family-owned or professionally managed one? Who is managing the company? What are the credentials/background of CEO, MD, Board of directors and the management team? What is the shareholding pattern of the company?


3. Is the company profitable?


How much profits did the company generated in the last few years? How are the company’s gross, operating and net profit and what is the profit margin at each level? Is the profit of the company growing over time or stagnant/declining?


4. Does the company have a sustainable competitive advantage?


Does the company have a moat like intangible assets, customer switching cost, network effect, cost advantages or any other sustainable competitive advantage that can keep the competitors away from eating their profits?


5. How was the past performance of the company?


How is the company’s financials in the past few years? What’s the trend in the company’s income statement and cash flow statement? How are the sales, EBITDA, Cash from operating activities, free cash flow and other financial metrics over the past few years?


6. How strong is the company’s balance sheet?


Are the assets of the company growing over time? How much is the liability of the company? Is the company’s shareholder equity increasing? How much cash does the company have on the asset side? How much is the company’s Intangible assets, Inventories, Receivables, Payables and more? Does the company invest in its Research & Development, especially in a few sectors like Technology, Pharmaceutical, etc?


7. Was the management involved in past fraud or scams?


Was the company’s promoters or management involved in any past scam? Does the company has any history of cheating the shareholders or any past penalty by SEBI?


8. Who are the key competitors?


Who are the direct and indirect competitors of the company? What is the market share of the company vs the competitors in the industry? What this company is doing differently compared to its competitors? Are there any global competitors or the possibility of global leaders entering the same market anytime soon?


9. How much debt the company has?


How much short-term and long-term debt the company has? Does the company generate enough profits or Free cash flow to cover the debt in the upcoming years? Have the promoters pledged any of their shares?


10. How is the stock valued?


What is the true intrinsic value of the company? Is the company currently over-valued, under-valued or decently valued? Is the company relatively undervalued compared to the competitors and industry? What is the calculated intrinsic value by different valuation method? How much is the margin of safety? Will you be overpaying if you buy the stock right now?


Also read: How To Select A Stock To Invest In Indian Stock Market For Consistent Returns?


Closing Thoughts:


Although getting a recommendation or investing where friend/colleague suggested may land you into a few profitable deals. But if you want to make consistent returns from the market (and not just being lucky), you need to build your own trustable investing strategy.


It’s true that picking a winning stock required a tremendous amount of research. However, having an investment checklist of questions to ask before investing in stock significantly reduce the chances of investing in fundamentally weak stocks. Moreover, you can easily eliminate over 90% of the companies that don’t meet your checklist.


I hope the questions discussed in this post is helpful to you. If I missed any additional important to ask before purchasing stock in this investment checklist, feel free to mention below in the comment box.


That’s all. Have a great day and Happy Investing!


 May 8, 2020  Investment Basics 5 comments

How to Invest Your First Rs 1,000 in The Stock Market

How to Invest Your First Rs 1,000 in The Stock Market?




A beginner’s guide on how to invest your first Rs 1,000 in Stock Market (Updated): Learning how to invest your first Rs 1,000 in the stock market is a significant step towards starting your financial journey and future investments. You might be surprised to know that even less than 2.5% population of India participates in the Indian stock market, even when the Indian economy is one of the fastest growing economies in the world. Nevertheless, investing your first Rs 1,000 will help you to get prepared for your journey ahead.


In this post, I’m going to tell you the simplest answer to how to invest your first Rs 1,000 in the stock market. It’s a no-brainer way. Further, for the method described here, you don’t need to be an expert or any help from the financial advisors to invest your first Rs 1,000 in the stock market.


Quick Note: Here, I’m not going to discuss how to open brokerage accounts. I’m assuming that you have already had set up your demat and trading accounts. If you haven’t, then read this post to learn where to open your demat and trading account.


A little advice before we start


While interacting with my blog readers and subscribers who are new to the stock market, I learned that most of the first-time investors like to wait until they have amassed thousands of rupees to invest. However, that’s a mistake. You can start investing with as little amount as Rs 1,000. Further, you can increase the investment amount in the future when you have increased your savings. By following this strategy, you can utilize the time efficiently to learn the stock market so that you will be prepared when you invest a big amount in future.


Second, you do not need to be an expert to invest your first Rs 1,000 in the market. You can invest this money while you are learning or even if you started just a few weeks ago.


Third, the point here is to learn, not to earn. Rs 1,000 is not a very large money that will get you bankrupt if you lose this amount. However, Rs 1,000 is more than enough to make you enter the exciting world of stock market and enhance your financial knowledge.


In addition, do not worry about the technicalities like how to buy/sell using your trading account initially. Once you are ready to invest, you can learn all these within 15-20 minutes using different sources on the internet. These days, purchasing stock is even a lot easier compared to booking an online train ticket on IRCTC. All you need is a phone/laptop, internet connection, brokerage accounts, and some cash in your savings account.


Now that I’ve cleared the basics, let’s learn how to invest your first Rs 1,000 in the stock market. Further, please read this post till the end as there is a bonus in the last section of this article.


How to invest your first Rs 1,000 in the stock market?


1. Invest in Just One Stock 


Rs 1,000 is not a big amount. If you are buying a stock worth Rs 300, then you will be able to buy just three units (quantity) of that stock. Moreover, those stocks which are trading at a market price above Rs 1,000 are already ruled out here. Therefore, if you are planning to invest your first Rs 1000 in the stock market, then you need to widen your selection criteria to the stock pricing between Rs 1 to Rs 1,000. Otherwise, you might have to reject many good stocks whose market price is high (Say 800-900), in case you are planning to purchase multiple stocks.


Further, for such an investment amount, you do not need to waste time diversifying your portfolio. Selecting multiple stocks takes time and it’s not worth the value.


Also read: How Many Stocks Should you own for a Diversified Portfolio?


2. Invest in what you already know


The easiest approach of stock selection for the beginners is to invest in what you know. There are a number of companies that you might have heard from childhood and might already know a lot about it. For example- Maruti Suzuki, HDFC Bank, ITC, Yes Bank, HPCL, Bata, Coal India, Colgate India, Hindustan Unilever, etc.


There are tons of companies whose products/services you already have been using and might be more than happy with them. Find out those companies and investigate them. Visit the company website, check its portfolio (product/services), know who is the boss of the company, it’s future products/plans, etc.


nifty50 constituents april 2020


You’ll be surprised to know how many common companies have given uncommon profits.


For example Eicher Motors- Royal Enfield bikes parent company (over 80 times returns in last 10 years), MRF Tyres (over 17 times return in last 10 years), Symphony- coolers (over 12 times return in last 5 Years), etc. The bottom line is to look around yourself and find some popular companies worth investing in.


Search for the companies that you already know that they are doing great (like expanding at a fast rate) for the last couple of years or provide excellent product/services or has an amazing business model (easy to scale).


If you are a working guy/girl, it will be quite easy for you to find such companies. Just look in your industry and find which one is leading. For example, if you are in the banking sector, you might already know which bank is expanding fast in urban and rural areas, opening new branches every week, and has low non-performing assets (NPA), etc.


If you are a doctor, you might already know a few good pharmaceutical companies which are producing the best medicines at a cheap price or are working on the medicines for a rare disease. Even if you are a housewife, you can find a number of good companies that manufacture day-to-day life products like soap, shampoo, towels, edible oils, etc.


In short, the idea here is to invest in what you already know rather than wasting too much time reading financial magazines to search for hidden companies.


everyday stocks that you can also invest in


3. Don’t spend weeks researching your first stock 


Although I’m confident that you find a good company using step 2, however, if you are unable to find any company that you have good knowledge, then invest in blue-chip stocks.


Blue chips are the stocks of those reputed companies who are in the market for a very long time, financially strong and have a good track record of consistent growth and returns in the past many years.


For example- HDFC bank (leader in the banking sector), Larsen and turbo (leader in the construction sector), TCS (leader in the software company), etc. A few other examples of blue-chip stocks are Reliance Industries, Sun Pharma, State bank of India, etc. Here is the list of few top blue chips stocks in the Indian stock market:


best blue chip stocks for long term investment


The idea here is to ‘not’ waste too much time researching for stocks. This is your first investment and the investment amount is also small. It’s not worth your time spending weeks researching a stock just to invest Rs 1,000.


Also read: Why Warren Buffet Suggests- ‘Price Is What You Pay, Value Is What You Get’?


4. Don’t make it a very big deal


To be frank, do not make this investment a very big deal of your life. The investment amount is too small to hurt you financially. Even if you lose 50% of your investment amount, you won’t go broke. Don’t worry too much thinking about what if the stock price goes down. IT’S NOT A BIG DEAL!


Here your motive should be to learn, not to earn. If you are able to learn today, you can make tons of money in the future. However, if you want to ‘save’ Rs 1,000 today and are not willing to take any risk, you might save this 1,000 rupee, but miss opportunities to earn lakhs in the future. Stay calm and enjoy the ride.


Also read: #9 Things I Wish I had Avoided During my Initial Days in Stock Market.


warren buffett quote its not necessary to do extraordinary


Additional lessons for Newbies


1. Stay away from penny stocks


Penny stocks are those stocks which trade at a very low market price (less than Rs 10) and have a very low market capitalization (typically under 100 crores) are called penny stocks in Indian stock market. These are the darlings of the new investors. The low market price of these stocks makes them quite attractive to the beginners.


However, these stocks are very risky. You might have never heard the names of most of these companies and very limited information about the company is available to the public. The stock prices of these companies are easy to manipulate. Overall, penny stocks are difficult to investigate for a newbie investor. My advice, stay away from penny stocks until you have got good knowledge and experience in the stock market.


Also read: What are Penny stocks? And should you buy it?


2. Don’t expect extraordinary returns


This is my final advice. Do not expect high returns while investing your first Rs 1,000 in stocks. Stocks are not ‘lottery’ tickets. Even if you get a return of 100% in 6 months, still you will make a profit of only Rs 1000 (Rs 166 per month on an average).


This isn’t going to affect your life financially. Until the investment amount is large or the principal is invested for a long duration (power of compounding), the returns won’t be too big to affect you financially.


That’s why mark my words and set a realistic expectation for your first Rs 1,000 investment.


New to stocks? Confused where to start? Check out my amazing online course: HOW TO PICK WINNING PICKS? #HappyLearning


Bonus: Stock Market Investing Quiz


Before you invest your first Rs 1,000 in the stock market, why not find out how good is your investing instincts? Try it out with this FREE Quiz NOW…!!






Do you consider yourself a ‘Smart Investor’?


Well, your success in the stock market depends on how you invest and react to different market situations.
Here are 10 questions to put your 'Investing Instincts' to test.
Answer Wisely!!



Conclusion


One thing I can take guarantee is that your experience after buying your first stock will be amazing! Trust me, you’ll get more involved in the market if you have some money is invested in it, no matter how small it is. By investing your first Rs 1,000 in the market, you will learn ‘fast’ and learn ‘efficiently’.


Moreover, as discussed in the post, investing is not rocket science, rather it’s quite simple to invest your first Rs 1,000 in the stock market if you follow the steps described above.


I hope this post on how to invest your first Rs 1,000 in the stock market? is useful to you. If you have any questions or doubts, feel free to comment below. I’ll be happy to help you out. Happy learning and investing.


 May 3, 2020  Essential Reading, Investment Basics 28 comments


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