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

Tips for Beginners to Learn How to Invest in Share Market in India: Hello Investors. Today we are going to discuss one of the most elementary topics for a newbie- How to invest in share market? I have been planning to write this post for a number of days as there are many people who are willing to invest, however, do not know how to invest in share market. Through this article, they will get the answers to their question and learn the step-by-step process of how a beginner can start investing in indian share market.

Please note that this post might be a little longer as I am trying to cover all the basics that a beginner should know before entering the stock investment world. Make sure that you read the article till the end, cause it will be definitely worthwhile reading it. Let’s get started.

Pre-requisites before you start investing

For investing in the Indian stock market, there are a few pre-requisites that I would like to mention first. Here are the few things that you will need to invest in share market:

  1. Bank Savings account
  2. Trading and Demat account
  3. Computer/laptop/mobile
  4. Internet connection

(Thanks to Reliance Jio, everyone has 4G internet connection now.. 😀 )

For opening a demat and trading account (usually opened altogether and called 2-in-1 account), the following documents are required:

  1. PAN Card
  2. Aadhar card (for address proof)
  3. Canceled cheque/Bank Statement/Passbook
  4. Passport size photos

You can have your savings account in any private/public Indian bank.

Where to open your trading and demat account?– This will be discussed later in this post on the section ‘choose your stock broker’ (STEP 4).

Get your documents ready. If you do not have a PAN card, then apply as soon as possible (if you are 18 years old or above).

3 Basic Advice before you start investing

When you are new to the stock market, you enter with lots of dreams and expectations. You might be planning to invest your savings and make lakhs in return.

Although there are hundreds of examples of people who had created huge wealth from the stock market, however, there are also thousands who didn’t.

Here are a few cautionary points for people who are just entering the world of investing.

— Pay down your ‘High-Interest’ debts first

If you have any kind of high-interest paying debts like personal loans, credit card dues debts, etc, then pay them first. The interests of these loans can be even as high as your returns from the market. There is no point in wasting your energy to give all the returns you made from the market as interests of your debts. Pay down these debts before entering the market.

— Invest only your additional/ surplus fund

Stop right there if you are planning to invest your next semester tuition fee, next month flat rent, savings for your daughter’s marriage which is going to happen next year or any similar reasons.

Only invest the amount that won’t affect your daily life. In addition, investing in debts/loans is really a bad idea, especially when you are new and learning how to invest in the share market.

— Keep some cash in hand

The cash in hand doesn’t just serve as your emergency fund. It also serves as your key to freedom. You can take big steps like changing your little flat, or quit your annoying job or simply shifting to a new city, only when you have cash in hand.

Do not get trapped by investing all your money and later losing your freedom. Do not sacrifice your personal freedom in the name of financial freedom.

Also read: 7 Things to do Before You Start Investing

Now that you have understood the pre-requisites and the basics, here are the seven steps to learn how to invest in share market on your own. Do follow the step sequences for an easy approach to enter the stock market world.

How to Invest in Share Market?

Step 1: Define your investment goals

11 Key Difference Between Stock and Mutual Fund Investing cover

It’s important to start with defining your investment goals. Start with end goals in mind. Know what you want.

Do you want to grow your saved money (capital appreciation) to beat inflation and get higher returns? Do you want to build a passive income from your investments through dividends? Are you investing for a specific goal? Or do you just want to have fun in the market along with creating wealth?

If you want to just have fun and want to learn, that’s okay. But make sure that you do not over-invest or get too much attracted to the market? Moreover, most people start the same way and define their goals later.

Anyways, if you are starting for Goal-Based Investing, do remember that the time frame for different investment goals will be different. Your goal can be anything like buying a new house, new car, funding your higher education, children’s marriage, retirement, etc. However, if you are investing in your retirement, then you have a bigger time frame compared to if you are investing in buying your first house.

When you know your goals, you can decide how much you want and for how long you have to remain invested.

Step 2: Create a plan/strategy

Now that you know your goals, you need to define your strategies. You might need to figure out whether you want to invest in the lump sum (a large amount at a time) or by SIP (systematic investment plan) approach. If you are planning small periodic investments, analyze how much you want to invest monthly.

There’s a common misconception among our society that you need large savings to get started. Say, one lakh or above. But that’s not true.  As a thumb rule, first, build an emergency fund, and next start allocating a fixed amount let’s say 10-20% of your monthly income to save and invest. You can use the remaining portion of your earnings for paying your bills, mortgages, etc. Nevertheless, even if your allocated amount turns out to be Rs 3-5k or more, it’s good enough to build an investing habit.

Quick Note: Stockbrokers like Zerodha allow investors to schedule their investments via Systematic Investment plans for stocks.

Step 3: Read some investing books.

7 Best Value Investing Books That You Cannot Afford to MissThere are a number of decent books on stock market investing that you can read to brush up on the basics. Few good books that I will suggest the beginners should read are:

Besides, there are a couple of more books that you can read to build good basics of the stock market. You can find the list of ten must-read books for Indian stock investors here.

Step 4: Choose your stock broker

Deciding on an online broker is one of the biggest steps that you need to take. There are two types of stockbrokers in India:

  1. Full-service brokers
  2. Discount brokers

— Full-Service Brokers (Traditional Brokers)

They are traditional brokers who provide trading, research, and advisory facility for stocks, commodities, and currency. These brokers charge commissions on every trade their clients execute. They also facilitate investing in Forex, Mutual Funds, IPOs, FDs, Bonds, and Insurance.

Few examples of full-time brokers are ICICIDirect, Kotak Security, HDFC Sec, Sharekhan, Motilal Oswal, etc

— Discount Brokers (Budget Brokers)

Discount brokers just provide the trading facility for their clients. They do not offer advisory and hence suitable for a ‘do-it-yourself’ type of clients. They offer low brokerage, high speed and a decent platform for trading in stocks, commodities, and currency derivatives.

A few examples of discount brokers are Zerodha, Upstocs, 5 Paisa, Trade Smart Online, Paytm Money, Groww, etc.

Read more here: Full service brokers vs discount brokers: Which one to choose?

I will highly recommend you to choose discount brokers (like Zerodha) as it will save you a lot of brokerage charges.

Initially, I started trading with ICICI direct (which is a full-service broker), but soon realized that it was too expensive when compared to discount brokers. It doesn’t make sense to pay extra brokerage charges even if you get similar benefits. And that’s why I shifted to Zerodha as my broker. (Related Post: Different Charges on Share Trading Explained- Brokerage, STT & More)

Zerodha (a discount broker) charges a brokerage of 0.01% or Rs 20 (whichever is lower) per executed order on Intraday, irrespective of the number of shares or their prices. For delivery, there is a zero brokerage charge in Zerodha. Therefore, the maximum brokerage that you’ve to pay per trade while using the Zerodha platform is Rs 20 and it doesn’t depend on the volume of trading.

open account with zerodha

This is way cheaper compared to ICICI direct (full-service broker) which asks a brokerage of 0.55% on each transaction. If you buy stocks for Rs 50,000 in ICICI direct, then you have to pay a brokerage of Rs 275 for delivery trading i.e. when you hold the stock for more than one day in your demat account.

Further, as this amount is charged on both sides of the delivery transaction (buying & selling), hence you have to pay a total of Rs 550 for the complete transactions in ICICI direct (way too expensive than Zerodha).

In short, if you are planning to open a new trading account, I would recommend opening accounts in a discount broker so that you can save lots of brokerages. If you’re interested to open your account with Zerodha, here’s the direct link to fill account opening application!

Zerodha-open-an-account

Related Posts:

Step 5: Start researching common stocks and invest.

Start noticing the companies around you. If you like the product or services of any company, dig deeper to find out more about its parent company, like whether it is listed on the stock exchange or not, what is its current share price, etc.

Most of the products or services that you use in day to day life — From soap, shampoo, cigarettes, bank, petrol pump, SIM card or even your inner wears, there is a company behind everyone. Start researching about them.

For example- if you’ve been using HDFC debit/credit card for a long time and satisfied with the experience, then investigate further about HDFC Bank. The information of all the listed companies in India is publicly available. Just a simple ‘Google search’ of ‘HDFC share price’ will give you a lot of important pieces of information. (Try it now!)

Similarly, if your neighbor bought a new Baleno car lately, they try to find out more about the parent company, i.e. Maruti Suzuki. What other products it offers and how is the company performing recently- like how are its sales, profits, etc.

You do not need to start investing in stocks with hidden gems. Start with the popular large-cap companies. And once you are comfortable in the market, invest in mid and small caps.

Also read:

Step 6: Select a platform to track your performance

You can simply use an excel or google spreadsheet to track your stocks. Make a spreadsheet with three tables containing:

  1. The stocks that you are interested in and need to study/investigate,
  2. Those stocks that you have already studied and found decent,
  3. Miscellaneous stock- for the other stocks that you want to track.

Else, you can do this by creating multiple watchlists on our Trade Brains Portal. Our Research and Analysis Portal offers users to make up to 5 watchlists and create portfolios. You can sign up on Trade Brains Portal for free to track your stock performance.

This way, you can easily follow the stocks. In addition, there are also a number of financial websites and mobile apps that you can use to keep track of the stocks. However, I would suggest you track your stocks on Trade Brains Portal.

Step 7: Have an exit plan

It’s always good to have an exit plan. There are two ways to exit a stock. Either by booking profit or by cutting a loss. Let’s discuss both these scenarios. Basically, there are only four scenarios when you should sell a good stock in your portfolio:

  1. When you badly need money
  2. When the stock fundamentals have changed
  3. When you find a better investment opportunity and
  4. When you have reached your investment goals.

If your investment goals are met, then you can exit the stocks happily. Or at least, book a portion of the profit from your stock portfolio and shift it to other more safer investment options. On the other hand, if the stock has fallen under your risk appetite level, then again exit the stock. In short, always know your exit options before entering.

That’s all. There were seven steps that will help you learn how to invest in the share market. Now, here are a few other important points that every stock market beginner should know:

10 Additional points to take care

1. Start small

Do not put all your money on the market in the beginning. Start small and test what you have learned. You can start even with an amount of Rs 500 or 1000. For beginners, it’s more important to learn than to earn. You can invest in a large amount once you have more confidence and experience.

2. Diversify your portfolio

It’s really important that you diversify your portfolio. Do not invest all in just one stock. Buy stocks from companies in different industries.

For example, two stocks of Apollo Tyres and JK Tyres in your portfolio won’t be called a diversified portfolio. Although the companies are different, however, both companies belong to the same industry. If there is a recession/crisis in tyre sector, then your entire portfolio might be in RED.

A diversified portfolio can be something like Apollo tyres and Hindustan Unilever stocks in your portfolio. Here, Apollo Tyres is from Tyre industry and Hindustan Unilever is from FMCG industry. Both the stocks are from different industry in this portfolio and hence is diversified.

Also read: How to create your Stock Portfolio?

3. Invest in blue-chip stocks (for beginners)

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 banks (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.

These companies have stable performance and are very less volatile. That’s why blue-chip stocks are considered safe to invest in compared to other companies. It’s recommendable for beginners to start investing in blue chips stocks. As you gain knowledge and experience, you can start investing in mid-cap and small-cap companies.

Also read: What are large-cap, mid-cap and small-cap stocks?

4. Never invest in ‘FREE’ tips/advice

This is the biggest reason why people lose money in the stock market. They do not carry enough research on the stocks and blindly follow their friends/colleague’s tips and advice.

The stock market is very dynamic and it’s stock price and circumstances change every second. Maybe your friend has bought that stock when it was underpriced, however now it’s trading at a higher price range. Maybe, your friend has a different exit strategy than yours. There are a number of factors involved here, which may end up with you losing the money.

Avoid investing in tips/advice and do your own study.

5. Avoid blindly following the crowd

I know a number of people who have lost money by blindly following the crowd. One of my colleagues invested in a stock just because the stock has given a double return to another of my college in 3 months. He ended up losing Rs 20,000 in the market just because of his blind investing.

Related post: 6 Reasons Why Most People Lose Money in Stock Market

6. Invest in what you know and understand

Will you buy ABC company which produces Vinyl sulphone easter and dye intermediates even though you have zero knowledge of the chemical industry?

If you will, then it’s like giving some stranger a one lakh rupee and expecting him to return the money with interests. If you are lending money to someone, you ask a number of questions like what he does, what is his salary, what is his background, etc. However, while investing Rs one lakh in a company that people do not understand, they forget this common logic.

7. Know what to expect from the market

Do not set unrealistic expectations for the stock market. If you want to make your money double in one month, from the stock market, then you have set your expectations wrong. Have a logical expectation from the market.

People are happy with 4% simple interest from the savings account, but a return of 20% in a year sounds underperformance for them.

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

8. Have discipline and follow your plan/strategy

Do not get distracted if your portfolio starts performing too well or too bad in the first few months of investing. Many people increase their investment amount just in few weeks if they see their stock doing too well, and end up losing in the long run.

Similarly, many people exit the market soon and are not able to get profits when their stocks start performing.

 Have discipline and follow your strategy.

9. Invest regularly and continuously increase your investment amount

The stock investment gives the best returns when you invest for the long term. Do not invest in lump sump at just one time and wait for the next 10 years to see how much returns you got. Invest regularly whenever you get a good opportunity. 

Further, increase the investment amount as your savings increase.

10. Continue your education

Keep learning and keep growing. The stock market is a dynamic place and changes continuously. You can only keep up with the stock market if you also continue your education.

Besides, there are a number of more lessons which you will learn with time and experience.

Ready to start your journey to become a succesful stock market investor? If yes, then here’s an amazing course for newbie investors: HOW TO PICK WINNING STOCKS?

That’s all for this post on how to invest in the share market. I hope this is helpful to the readers. If you still have any doubt on this topic of how to invest in share market, feel free to comment below. I’ll be glad to help. Take care and happy investing.

January 15, 2021 Beginner's guide, Investment Basics 92 comments
What is the Process of IPO Share Allotment to Retail Investors cover stocks

What is the Process of IPO Share Allotment to Retail Investors?

Understanding the process of IPO share allotment to retail investors:  The year 2020 was a mixed year for the Indian IPO’s. As many as 14 popular IPOs hit the market last year. A few of the big names that offered their initial public offering last year were Burger King, Happiest Minds, CAMS, Angel Broking, SBI cards, and more. (You can read the Indian IPOs performance for 2020 here).

Now, the seasoned investors may already know what is an IPO and how its allotment process works. However, for the newbie investors, many a time allotment process may look like a mystery, especially when they are not allotted any shares even if applying for multiple IPOs.

In this post, we are going to discuss the process of IPO share allotment to retail investors i.e. the common investors. Let’s get started.

Introduction to IPO Details

Let us first understand the IPO details with the help of an example. Here are the issue details of the Burger King IPO that closed last year.

  • IPO Dates: Dec 2 – Dec 4, 2020
  • Type of Issue: Book Built Issue IPO
  • Issue Size: 135,000,000 Eq Shares of ₹10 (aggregating up to ₹810.00 Cr)
  • Face Value: Rs 10 Per Equity Share
  • IPO Price Band: ₹59 to ₹60 per equity share
  • Market Lot: 250 Shares
  • Minimum Order Quantity: 250 Shares
  • Listing At: BSE, NSE

Although most of the points mentioned above can be understood logically, let me explain a few of the important ones in the IPO issue in detail.

From the term IPO date (or Issue date), you can understand that you have to apply for that IPO between those time periods to be eligible for getting the shares.

Next, the minimum order quantity is 250 shares, which is the same as the market lot. This means that you cannot apply for less than 250 shares for this IPO. If you apply for 30 shares, then your application will be rejected. Further, you can buy the shares only in a lot of 250. This means that you can buy the shares in the numbers of 250, 500, 750, 1,000… which is basically 1 lot, 2 lot, 3 lot, 4 lot… etc.

Further, from the IPO price band, you can understand that you have to place the bid between Rs 59 to 60, for each share. The upper level of the issue price is called the cut-off price (here Rs 60). To increase the chances of getting allotted to the shares, it is recommended to bid at the cut-off price of the IPO.

All these points you can easily understand just by reading the IPO details. But what about the allotment? What is the process of IPO share allotment to retail investors? Why some people receive allotment and others don’t? How exactly are the stocks allotted to the retail investors? This is what we are going to next in this article.

Nevertheless, before we learn the process of IPO share allotment to retail investors, there are a few more things that you need to understand first.

What does the Over-Subscription of an IPO mean?

The over-subscription of an IPO means that the demand for the IPO exceeds the total number of shares offered by the company.

For example, Burger King IPO (which is discussed above), evoked a huge oversubscription of 157 times. Burger King IPO received over 1,100 crore bids for its shares compared with 7.45 crore shares on the offer, data compiled by the National Stock Exchange showed.

As the Subscribers for Burger King IPO consisted of Retail investors, qualified institutional buyers, and non-institutional investors, the subscription differed for each segment. The retail individual investor’s segment of the IPO was subscribed over 68 times while the portion meant for qualified institutional buyers (QIBs) was subscribed close to 87 times and non-institutional investors 354 times.

If you’re a common investor, you’ve to look into the retail segment over-subscription, which in the case of Burger King’s IPO was 68 times. The higher the over-subscription, the lower are the chances for getting allotted to the shares of that IPO.

Who can apply for the IPOs?

The IPO applications are divided into three categories:

  1. Institutional or qualified institutional buyers (QIB)
  2. Non- Institutional Investors (NII) or High net worth investors (HNI)
  3. Retail institutional investors (RII)

Each category has a fixed division of share allocation. For example, Burger King IPO is a public issue of 7,44,91,524 equity shares. The issue offers 1,36,27,118 (18.29%) shares to retail individual investors, 4,04,23,729 (54.26%) shares to qualified institutional buyers, 2,04,40,677 (27.45%) shares to non-institutional investors.

This means that 54.26% of the total share was reserved for the QIB, 27.45% of the total share was reserved for NII, and 18.29% of the total share was reserved for the RII. This ISSUE STRUCTURE can change for different IPOs. However, the company has to specify the issue allocation in the IPO details.

initial public offering offer retail investors

IPO Share Allotment Process

1. The Process of IPO Share Allotment to QIB

For QIBs, the discretion of IPO shares allotment is done by merchant bankers. Further, in the case of over-subscription, the shares are allotted proportionately to the QIBs. For example, if a QIB applied for 10 lakh shares and the IPO got 5 times over-subscribed, then it will get only 2 lakh shares.

2. The process of IPO Share Allotment to Retail Investors

For the IPO application, retail investors are allowed to apply with a smaller worth between Rs 12-18k to Rs 2 lakhs. For example, in the case of Burge King IPO

  • Issue Price: Rs 59-60
  • Minimum order quantity: 250.

Therefore, if a retail investor wanted to apply for the Burger King shares at a bid of Rs 60 (Cut-off price), then the total application amount will be= Rs 60 * 250 = Rs 15,000. Further, he/she can apply for a maximum of Rs 2 lakhs. This means that for Burger King IPO, the RII can get a maximum of 13 lots (Each lot of 250 shares).

Now, let us understand how the process of IPO share allotment to retails investors actually happens. First of all, the host calculates the total number of demands. After calculating the demands, here are the two possible scenarios:

1. Demand is less than or equal to the shares offered

If demand is less than or equal to the offered retail proportion of the IPO shares, then full allotment will be made to the RII’s for all the valid bids.

2. Demand is more than the shares offered

If demand is greater than the allocation to the retail proportion of shares offered, then the maximum number of RII’s will be allotted a minimum bid lot. These are called maximum RII allottees and is calculated by dividing the total number of equity share available for the allotment to RII by the minimum bid lot.

Let us understand this with the help of a simple example:

Suppose there are 10 lakh shares offered to the retail investors and the minimum lot size is 50. Then, the maximum retail investors will receive the minimum bid lot = 10 lakhs/50 = 20,000. This means that 20,000 participants will receive at least 1 lot.

Quick Note: In the case of over-subscription, allocation lower than a minimum lot is not possible. If the minimum lot size is 50, you will not be allotted 30 shares. Anyone who is allotted the share will receive at least 50 shares.

In the case of over-subscription, again there are two possibilities:

A) In the case of a small over-subscription, the minimum lot is distributed among all participants. Then, the rest available shares in the retail portion will be distributed proportionately to the RIIs, who have bid for more than 1 lot.

Let’s say for the above example, 18,000 people applied for the allotment. However, among all the applicants, 5000 people applied for 2 lots (1 lot consists of 50 shares).

Hence, total no of shares applied = (13,000* 1lot) + (5,000* 2lot) = (13,000* 50) + (5,000* 100) = 11.5 lakhs

Here, we have oversubscription as the total shares offered to the retail investors is 10 lakhs. In such scenarios, the first 1 lot of 50 shares will be allotted to all 18,000 applicants. Then the remaining 1 lakh shares are allotted proportionately to all those who have applied for more than 1 lot.

Also read: Is it worth investing in IPOs?

B) In case the RII applications are greater than the maximum RII allottees (big over-subscription), then the allotted bid lot shall be determined on the basis of the draw of the lot i.e lottery.

Let’s say for the same example discussed above, 1 lakh people applied for the allotment. In such a scenario, who will get the allotment will be decided by the lottery. Nevertheless, the draw of lots is computerized and hence, there is no provision for cheating or partiality. Everyone has an equal chance to get the allotment.

Overall, in the case of oversubscription, the allotment totally depends on your luck.

3. Process of IPO Share Allotment to HNI

High net worth investors are those people who invest a large amount of money (greater than 2 lakhs) in an IPO. In case of oversubscription, HNIs are also allotted the shares proportionately. Further, many a time, the financial institutions provide funding to HNIs in order to invest it in IPOs.

That’s all. This is the process of IPO share allotment to retail investors, QIBs, and HNIs.

BONUS: How to maximize the chances of getting an IPO?

How to maximize the chances of getting an IPO

Many a time, the IPO you’ll be applying for will be over-subscribed. In such cases, even if you applied for a full quota of Rs 2 lakhs, still, there’s no guarantee that you’ll get even a single lot. Even in the same example of Burger King discussed above, it got over-subscribed 157 times.

Then what to do in such cases? Here are two basic pieces of advice to maximize the chance of IPO share allotment to retail investors. First, fill the application correctly, and second, apply at the cutoff price.

That’s all. I hope this post about the process of IPO share allotment to retail investors, QIBs, and HNIs is useful to you. If you have any questions regarding the allotment process, please comment below. I’ll be happy to help you out. Happy Investing.

January 13, 2021 Investment Basics, IPO 16 comments
What are Penny Stocks in India - Pros cons how to trade

What are Penny Stocks in India? High Risk, Explosive Returns!

A complete overview of Penny stocks in India: Hello Investors! Penny stocks are the darlings of new investors. The low market price of these stocks makes them quite attractive to beginners. However, there are a number of things that an investor should know before investing in penny stocks. In this post, we are going to discuss penny stocks, their pros and cons, and whether an investor should buy it or not. Let’s get started.

What are Penny stocks in India?

Penny stocks are those stocks that trade at a very low market price, generally with a share price less than Rs 10. These stocks have a very low market capitalization and typically under Rs 500 crores.  Further, penny stocks in the Indian stock market have low liquidity and are speculative in nature.

Being smaller than Small-cap companies, these stocks belong to the microcap category. However, you can find a number of penny stocks in India listed on both the Bombay stock exchange (BSE) and the National stock exchange (NSE).

Note: If we look into history, the term Penny Stocks came from US markets.  In the United States, penny stocks used to be those stocks who trade below one dollar ($1) i.e. the stock worth pennies. However, nowadays, even the stocks trading below two to five dollar are even considered penny stocks there.

Here are a few examples of penny stocks in India (Source: Trade Brains Screener):

CompanyIndustryMarket CapPE Ratio TTMCurrent PriceROE 3 YrDebt/Equity
Aditya Spinners Ltd.Textile - Spinning10.03 Cr4.2311Rs 5.9912.110.75
Advance Multitech Ltd.Rubber Products1.66 Cr14.5906Rs 4.086.730.59
Anupam Finserv Ltd.Finance - NBFC8.89 Cr16.5616Rs 8.466.080.58
Ashirwad Capital Ltd.Finance - Investment11.56 Cr24.8069Rs 2.8911.630
Asian Fertilizers Ltd.Fertilizers0.91 Cr1.3112Rs 1.156.790.64
ATV Projects India Ltd.Engineering - Industrial Equipments36.12 Cr5.2401Rs 6.808.660.35
AVI Polymers Ltd.Trading1.98 Cr10.071Rs 4.855.60
Baba Arts Ltd.Film Production, Distribution & Entertainment52.45 Cr19.5554Rs 9.995.290
Balurghat Technologies Ltd.Logistics14.56 Cr22.1951Rs 8.0013.080.88
Basant Agro Tech (India) Ltd.Fertilizers68.15 Cr8.1278Rs 7.526.140.48
Bervin Investment & Leasing Ltd.Finance - Investment4.46 Cr1.56Rs 7.5728.280.83
Beryl Securities Ltd.Finance - NBFC2.60 Cr7.9983Rs 5.365.950
Capital Trade Links Ltd.Finance - NBFC25.82 Cr24.5419Rs 4.797.010.03
Century Extrusions Ltd.Aluminium & Aluminium Products42.64 Cr67.6825Rs 5.338.540.85
CES Ltd.BPO/ITeS29.78 Cr3.0272Rs 8.1812.830.02
Chandni Machines Ltd.Retailing2.01 Cr3.8009Rs 6.2331.450.11
Corporate Courier & Cargo Ltd.Courier Services2.38 Cr16.9714Rs 3.3030.960.01
Cybermate Infotek Ltd.IT - Software14.35 Cr3.1045Rs 1.4515.020.05
Ekam Leasing & Finance Company Ltd.Finance - NBFC2.34 Cr3.083Rs 3.906.350.79
Enterprise International Ltd.Textile2.54 Cr3.3513Rs 8.505.360.13
Gagan Gases Ltd.Industrial Gases & Fuels3.16 Cr35.1439Rs 7.008.010.02
Golkonda Aluminium Extrusions Ltd.Aluminium & Aluminium Products1.60 Cr18.1326Rs 4.2935.490
Gratex Industries Ltd.Paper & Paper Products2.73 Cr29.369Rs 9.005.960.05
GSL Securities Ltd.Finance - NBFC1.43 Cr38.6486Rs 4.4022.080
Haria Exports Ltd.Trading1.28 Cr3.9448Rs 1.116.530
Intellivate Capital Advisors Ltd.Miscellaneous14.41 Cr65.201Rs 4.645.810
Interactive Financial Services Ltd.IT - Software2.72 Cr13.0809Rs 9.038.520
Jai Mata Glass Ltd.Glass1.90 Cr3.8076Rs 0.1910.40
JJ Finance Corporation Ltd.Finance - NBFC1.68 Cr14.1237Rs 5.968.320
Kabsons Industries Ltd.Industrial Gases & Fuels8.40 Cr8.0534Rs 4.8123.20
Krishna Capital And Securities Ltd.Finance - NBFC1.47 Cr6.831Rs 4.656.570
LKP Securities Ltd.Finance - Stock Broking56.93 Cr7.7741Rs 7.7011.630.4
Modex International Securities Ltd.Finance - Stock Broking4.43 Cr7.4295Rs 3.695.150.46
Moongipa Capital Finance Ltd.Finance - NBFC0.81 Cr1.1402Rs 2.659.720.07
NCC Blue Water Products Ltd.Aquaculture3.76 Cr10.7701Rs 4.8530.060
NHC Foods Ltd.Consumer Food9.13 Cr6.4511Rs 7.705.060.94
North Eastern Carrying Corporation Ltd.Logistics49.80 Cr40.7161Rs 9.925.860.83
NR International Ltd.Steel & Iron Products5.34 Cr82.1107Rs 5.006.210
One Global Service Provider Ltd.Textile1.28 Cr4.3351Rs 1.805.580.06
Orient Tradelink Ltd.Film Production, Distribution & Entertainment8.94 Cr85.9276Rs 1.635.830.23
Peeti Securities Ltd.Trading2.72 Cr7.8477Rs 7.2412.510
Pervasive Commodities Ltd.Electric Equipment0.09 Cr18.2822Rs 9.6036.760.93
Pioneer Agro Extracts Ltd.Solvent Extraction3.47 Cr11.5144Rs 8.0023.70
RTCL Ltd.Construction - Real Estate5.90 Cr36.2244Rs 4.92110.06
Sagar Productions Ltd.Finance - Investment31.99 Cr81.4078Rs 7.9713.750.01
Sakuma Exports Ltd.Trading160.67 Cr18.2459Rs 6.8512.740.02
Salem Erode Investments Ltd.Finance - NBFC2.17 Cr9.8499Rs 1.8912.520
Sarthak Industries Ltd.Diversified6.77 Cr1.6676Rs 9.725.030.01
Shailja Commercial Trade Frenzy Ltd.Trading2.05 Cr7.0806Rs 6.3222.180.05
Shyam Century Ferrous Ltd.Ferro & Silica Manganese146.63 Cr20.1365Rs 6.606.670.02
Speedage Commercials Ltd.Trading0.93 Cr2.6374Rs 9.507.230
Sri Krishna Constructions (India) Ltd.Construction - Real Estate6.88 Cr8.5255Rs 6.579.10.24
Sugal & Damani Share Brokers Ltd.Finance - Stock Broking5.43 Cr2.8463Rs 8.6814.940
Super Bakers (India) Ltd.Consumer Food1.94 Cr8.9809Rs 6.426.240
Surana Telecom & Power Ltd.Cable75.48 Cr15.841Rs 5.565.180.35
Surat Textile Mills Ltd.Textile - Manmade Fibres100.13 Cr19.2712Rs 4.518.120
Swasti Vinayaka Art & Heritage Corporation Ltd.Miscellaneous17.60 Cr27.7603Rs 4.4022.070.64
Syncom Formulations (India) Ltd.Pharmaceuticals & Drugs306.80 Cr15.9723Rs 3.938.760.01
Talwalkars Better Value Fitness Ltd.Miscellaneous6.82 Cr2.799Rs 2.207.990.83
Tirupati Sarjan Ltd.Construction - Real Estate27.11 Cr18.6328Rs 8.246.920.66
Umiya Tubes Ltd.Steel & Iron Products8.27 Cr98.3989Rs 8.266.680.25
Uniply Industries Ltd.Wood & Wood Products72.59 Cr3.4686Rs 4.338.040.22
Unjha Formulations Ltd.Pharmaceuticals & Drugs4.05 Cr25.6069Rs 9.0324.650
Viji Finance Ltd.Finance - NBFC6.43 Cr90.6338Rs 0.786.410.36
Vikas Proppant & Granite Ltd.Chemicals179.11 Cr30.6428Rs 3.4811.110.29

PROS of Penny stocks in India

Penny stocks have a high potential of rewarding its shareholder. The returns are quite high if you are able to get a good penny stock. Many penny stocks have turned out to be multi-baggers for their investors.

These stocks are able to make explosive moves. There are a number of penny stocks that have given multiple times returns in just a few months. Moreover, due to the low market price of these stocks, investors are able to buy large quantities of penny stocks.

Generally, penny stocks are not known to many as retail investors do not have information about these stocks, and institutional investors do not invest in these companies because of their low market capitalization. Therefore, if you are able to find one such stock before the market does, then it can turn out to be a great wealth creator for you.

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

CONS of Penny stocks in India

The cons list of penny stocks is too large compared to its pros. Here are a few of the common disadvantages of buying penny stocks:

  1. High Risk: These stocks are quite risky as the percentage of a number of penny stocks outperforming the market is quite less. Many of the penny stocks become bankrupt and go out of business.
  2. These stocks have very low liquidity. Therefore there will be troubles on both ends of transactions i.e. buying and selling. While buying these stocks, you might not be able to find a seller. In case you bought the stock, and the stock price starts falling, then you won’t be able to find a buyer to sell the stock.
  3. There is a large bid-ask spread in these stocks.
  4. Limited information is available to the public about the company.
  5. Price manipulations: There have been a number of cases of price manipulations in penny stocks where the insiders try to inflate the share price. Further, one can easily manipulate the penny stocks by buying large quantities of these stocks.
  6. Sudden delisting and regulatory scrutiny: There are multiple cases where penny stocks have been delisted from the stock exchanges. Further, these stocks are regularly under scrutiny by SEBI.
  7. Prone to scams: There are a number of past scams in penny stocks (Ex- pump and dump).

Related post: Market Capitalization Basics: Large cap, Mid cap & Small cap companies

Who should buy penny stocks?

Penny stocks are suitable for those investors who are ready to take high risks in expectations to get high returns. If you have a low-risk appetite, do not invest in these stocks.

Rules for investing in Penny stocks in India

Here are a few guidelines that can help you to invest in penny stocks.

  1. Look for value, not just the price: Even for penny stocks, you need to look at the value the company is giving. Understand the company’s business, product, services, etc. Investing in penny stock is not buying a lottery ticket.
  2. Study the company’s fundamentals: Look at the company’s financials, management, debt, growth rate, etc
  3. Check the liquidity: Buy stocks that have reasonably high trading volumes so that there is ample liquidity.
  4. Promoter’s share and pledge: Check the promoter’s shareholding patterns and stock pledge if any.
  5. Technical factors: If you know technical analysis, then also check the penny stock’s technicals. Moreover, if you’re purchasing penny stocks just for quick returns, do not ignore looking into factors like momentum, technical indicators like moving averages, RSI, etc.
  6. Invest only a small portion of your investment in penny stocks: As these stocks have a high risk, you should only invest a small amount, less than 10% of your total investment amount in penny stocks.
  7. Monitor continuously: Penny stocks are very volatile. As these stocks are known to make explosive moves, therefore monitor these stocks continuously. If the stocks are performing well, buy more. If they are continuously performing poorly, get rid of it.
  8. Do not diversify: As you are only investing a small proportion of the amount in these stocks, diversifying will make the net investment even smaller. Select only 2 or 3 penny stocks and invest in them.
  9. Be disciplined: Do not invest all in if your penny stocks start performing tremendously good. Similarly, do not quit if one or two of your penny stocks failed to give satisfactory returns.
  10. Do not believe the ‘It cannot go down any further’ myth. If the prices of the stock are falling, try to find the reason behind it.

Conclusion

While there are a number of peoples who have created huge wealth by investing in penny stocks, however for many penny stocks are wealth destroyers. If you are going to invest in penny stocks, do your research carefully and do not speculate about the stock. Moreover, there are high risks involved in these stocks. So, be ready for it.

Finally, here’s a short video to summarize what are penny stocks in India and how to research and analyze them.

 

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

That’s all for today on penny stocks. I hope this post was useful to you. If you have any doubts/queries, feel free to comment below. I’ll be glad to help. Happy Investing and Trading. Take care!

January 12, 2021 Investment Basics, Stocks 3 comments
Exclusive Interview Best Seller Author Prasenjit Paul on Stock Investing

Exclusive Interview: Best Seller Author Prasenjit Paul on Stock Investing!

Meeting Best seller author Prasenjit Paul in an Exclusive Interview on Stock Investing: Hello investors. Recently, we interviewed the author of the best-selling book ‘How to avoid loss and earn consistently in the stock market?’  – PRASENJIT PAUL. This book is to date the highest rated book written by an Indian on Stock Market Investing in Amazon.

This interview will give a great insight to the beginners who are planning to start their journey in the exciting world of the stock market and even to the matured investors. Therefore, make sure to follow this interview closely.

Brief Introduction About Prasenjit Paul

Prasenjit Paul is an Equity investor, Entrepreneur, and as mentioned earlier, the author of the book ‘How to avoid loss and earn consistently in the stock market?’. This book was first published on 14 July 2015 (First Edition).

If we look into Prasenjit’s Background, he is a software engineer by qualification with a bachelor of engineering degree from IIEST, Shibpur. Prasenjit started investing at an age of 18. Due to his passion for the stock market, he left his job at IBM on the first day to pursue his dreams in the investing world. Fast forward a few years, currently, he works as an Equity Analyst and is running a successful Equity advisory firm- Paul Asset Consultant Private Limited, with clients from over 18 countries.

Meeting Prasenjit Paul: Best-Selling Stock Market Book “Author”! (2020)

Here’s our latest interview with Prasenjit Paul and is a MUST-WATCH video for all the aspiring stock market investors. Do watch this video till the very end because Prasenjit has got a lot of informative things to tell and share with you.

Topics discussed with Prasenjit in this Interview:

  1. Brief Introduction & how Prasenjit started his investment journey
  2. His inspiration to write a book?
  3. A few best concepts/chapters covered in his book
  4. Prasenjit’s advice to newbie investors on how to start stock investing!

 

(Video: Meeting Prasenjit Paul: Best-Selling Stock Market Book “Author”!)

Archive Interview – Conversation with Prasenjit Paul (Nov 2017)

Below is an archive interview with Prasenjit Paul which was originally published in Nov 2017. Along with the above video, the questions and answers will also help you to know his journey better and learn stock investing tricks and secrets from him.

Q. Hi Prasenjit. My first question to you is an obvious one- How did you enter the world of investing?

While I was 18, my father told me about the stock market. After that reading books like “Rich Dad Poor Dad” and few others made me determined for taking the stock market very seriously.

Since then, I had spent my entire college life learning various aspects of the stock market. Although I was pursuing B. Tech in Information Technology, still I had completed around 25-30 books and countless websites related to the stock market.

Even I had started offering equity advisory service on a Trial basis while I was in the final year. Thus even before my career took off in the IT field, I was ready for a career in the stock market solely through self-learning.

Q. Why did you quit IBM on your first day?

I had accepted the offer from IBM just to gather an idea of the working culture of the corporate world. Once I interacted with few employees and visiting the office I was sure that I couldn’t give my 100% to an IT job. Moreover, even after spending in an IT job for 5-10 years, I didn’t foresee financial freedom or any meaningful reward.

Thus, I made my mind to take the risk of quitting a fixed salary routine.

It was a very tough choice because of two reasons. Firstly, my parents, relatives, and others were never in support of business instead all of them favored corporate jobs. Secondly, during that time, I was not earning even fraction of the amount that IBM was offered.

However, I took that risk, and later it paid off very well!

Q. When did you start ‘Paul Asset’ and how long were you running the business before you started paying yourself?

I had an edge because I started Paul Asset during my college days and during those days I have no such compulsion of paying myself. Even after leaving college I had no liabilities like EMIs, paying to parents, rent etc. So, even with any amount of money, my target was to just stick to the target.

I was confident that with true dedication sooner or later your hard work pays off. So, the point is the earlier you start, the higher would be the reward. Every aspiring entrepreneur should begin the journey during their teenage or during early twenties. With the growing age, it becomes difficult.

Q. Walk me through the step-by-step process that you went through after quitting your job, to get to where you are today?

Actually, I had started the journey much before quitting my job. Apart from Paul Asset, I had even attempted two other business ventures during college days and failed badly. My target was to become an entrepreneur so within college life itself I had attempted various ventures and later Paul Asset clicked while the rest of others failed.

So, the point is to keep trying. No matter how talented you are, you can’t be successful in business with just one attempt. I just stick to the basics. Irrespective of failures, setbacks, depression, monetary loss, you have to keep trying with full dedication while keeping morals intact. Sooner or later Success will be yours.

Q. When did you decide to write a book? Tell us about your journey from a novice to the author of the best-selling book on stock market investing.

I had purchased the domain www.paulasset.com in the year 2011 while I was in the 2nd year of my Engineering. Initially, the target was to write blogs on the Stock Market and monetise via Google Adwords. Fortunately, Google rejected few times while I submitted my blog and that inspired for starting subscription-based advisory service.

Today, the advisory revenue is so big that I can’t even consider Google Adwords. In spite of rejection from Google, I noticed that almost all of my readers liked my writing style. That inspired me writing a book to reach the larger audience.

It took me more than two years to complete the book “How to Avoid Loss and Earn Consistently in the Stock Market”. The way people liked the book was also beyond my imagination. Since the last few years daily on average 50+ copies are being sold!

Writing a book is very difficult because you need months-long concentration and patience, unlike a blog post that can be completed in one day itself. After the massive success of my first book, I am also working on the second book (not directly related to the stock market but related to the Money). However, due to my current schedule, I can rarely concentrate over a very long duration of few weeks and be realising the real challenge of writing books!

If you haven’t checked out his book ‘How to avoid loss and earn consistently in stock market’ yet, here is a link on amazon. I personally recommend you to read this book if you want to learn investing in Indian stock market from scratch. – Kritesh Abhishek

Q. How do you start your workday? What’s like a day in the world of an investor?

I have a relaxed work schedule. Although with the growing business, I have to look after so many things, work on multiple things simultaneously still it never created pressure on me. I never keep sitting in front of trading terminal.

Daily price fluctuation doesn’t affect me at all.

I start my day with reading newspaper or magazines and then as usual. What I learned from my own experience is that to become a successful investor you must have a calm and cool head.

Every day you will come across so many news, so many contradicting views. Many times your stocks won’t perform, you would stare at a loss. In spite of all those, you have to keep your basics intact. I also idolize MS Dhoni and try learning a lot from his temperament.

Q. What’s your investment strategy?

I prefer growth over value. While you are investing in one of the world’s fastest-growing major economy like India, you must have to put higher focus on the growth over value. I generally prefer bottom-up analysis with a long-term investing approach. I like companies where the market size is huge enough to maintain a high growth rate with free cash flow generation while keeping a light balance sheet.

And I never attempted short-term, intraday trading, Futures, and Options, etc. The reward and peace of mind from long-term investing is sufficient enough to ignore any short term options.

Q. Who do you admire the most in the stock market world?

I can’t take one or two names. I admire and try to learn a little bit from many renowned personalities including sports person, businessman, authors and even politicians. There is something to learn from any successful person in any field.

Among Indian investors, I admire Ramdeo Agarwal, Vijay Kedia, Porinju Veliyath, and Basant Maheswari.

Outside India, I have deep respect for Warren Buffet, Charlie Munger, Peter Lynch and many others.

Having said that I never attempted following any particular investor’s principles because I know I can’t be another Warren Buffet or Ramdeo Agarwal. So, I must have to be myself, and that is very important. Thus, I admire many successful personalities, try learning a little bit from all of them and finally be myself.

Related post: 3 Insanely Successful Stock Market Investors in India that you need to Know.

Q. What are your favorite books on the stock market?

Again, I can’t name any single book. I try to keep learning from many books, magazines, websites, etc. A few of my favorites books are, “One Up on Wall Street“, “The Intelligent Investor“, “The Little Book of Valuation“, “Dhando Investor” etc.

Although not directly related to the stock market but the book “Rich Dad Poor Dad” motivated me a lot for starting my investment journey during my college days. I strongly recommend the book “Rich Dad Poor Dad” to all youths. Even outside stock market, I owe much of my success to the authors like Robin Sharma, Shiv Khera, Robert Kiyosaki and many others.

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

Q. What is still your biggest challenge?

The biggest challenge is to maintain performance and reputation. Since 2012, the brand Paul Asset helped many retail investors for wealth creation. It makes me happy while I come to know that we helped many investors in reaching their personal goals like house, car, child’s education, marriage, etc.

The biggest challenge is to maintain our own past performance for the next many decades. It is easy to score a century on three consecutive matches but very difficult to maintain a 50+ batting average over few decades-long Cricket career. Success is a journey, not a destination.

Q. If a newbie investor walked up to asking for your advice and you only had a few minutes to give ‘em your best tip, what would it be?

Practice, Practice and Practice.

You can’t be a successful investor just by reading 2-3 books. If you do, then it is only you are lucky in a few particular instances, and it can’t be repeated, i.e. you can’t maintain the consistency. Remember from Nursery to Graduation you have spent 18+ years to become successful in your current profession. So, there is no shortcut. With the advent of the internet, everything at your fingertips but you have to work hard and give time to master any art.

Q. What’s next for you?

From the beginning, my target was to add values while keeping morals intact. Name, fame and money would automatically follow. So, the next is also value creation keeping the morals intact. Everything else would automatically follow.

Q. Thank you so much Prasenjit, for sharing your valuable time and knowledge. Anything else that you would like to share with our readers?

Keep doing whatever you believe for yourself. Successful journeys are always filled with obstacles. Successful peoples are not Lucky. Instead, Luck is attracted towards them for their honest dedication and hard work.

Whatever you are today is the result of your last 5-10 years. So, if you really want a better future for yourself in any field, make sure to dedicate at least 5-10 years while keeping morals intact. Good Luck!

ALSO READ

10 Must Read Books For Stock Market Investors.

Thank you so much Prasenjit for sharing your time. Your journey is truly inspiring for all the new and old investors. Let me quickly summarize a few of the learnings from Prasenjit Paul:

Prasenjit’s View on life and goals

  • Follow your dream.
  • Start as early as possible.

Prasenjit’s View on investing:

  • Many times your stocks won’t perform, you would stare at loss. In spite of all those, you have to keep your basics intact.
  • Prefer growth over value. While you are investing in one of the world’s fastest-growing major economies like India, you must have to put higher focus on growth over value.
  • Avoid short-term, intraday trading, Futures, and Options, etc. The reward and peace of mind from long-term investing is sufficient enough to ignore any short term options.
  • Finally, Practice, Practice, and Practice.

That’s all. I hope this interview is encouraging for all our readers to take their next step in the investment world. Do comment below if you have any other questions that you’ll like to ask him. We’ll forward your questions to him. #Happy Investing.

December 24, 2020 Books, News 11 comments
11 Most Frequently Used Trading Animals in the Share Market

11 Most Frequently Used Trading Animals in the Share Market.

List of Most Frequently Used Trading Animals in the Share Market (Bull, Bear, Stags, Wolves & More): Have you watched the movie ‘The Wolf of Wall Street” starring Leonardo DiCaprio as Jordan Belfort? If yes, then have you wondered why he has been referred to as a wolf in the movie? What’s an animal doing in the stock market-based movie?

Well, Animals in the Stock Market are commonly used terminology to define specific characteristics of the type of traders or investors or market scenario. In this article, we are going to discuss 11 of such most commonly used animals in the stock market. Please read the article till the end as there are some bonuses in the last section of this post.

11 Most Frequently Used Trading Animals in the Share market:

Here are the eleven most frequently used animals in the share market by stock analysts or the authors of investing books.

1. Bulls – The Optimistic

bulls and bears - Trading Animals in the Share Market

The bulls represent the investors or traders who are optimistic about the future prospects of the share market. They believe that the market will continue its upward trend. Bulls are the ones who drive the share price of companies higher.

2. Bears – The Pessimistic

Bears are the investors or traders who are totally opposite of the bulls. They are convinced that the market is headed for a fall. Bears are pessimistic about the future aspects of the share market and believe that the market is going to be in RED. Mostly, bears are the reasons for getting the share prices lower.

Quick note: The bulls and bears are often used to describe the market condition. A bull market is a scenario when the market appears to be optimistic and climbing new highs. On the other hand, a bear market describes a market where things are not good and appears to be a long-term decline.

3. Rabbits

rabbit and turtle - Trading Animals in the Share Market

The term rabbits are used to describe those traders or investors who take a position for a very short period of time. The trading time of these traders is typically in minutes.

These types of traders are scalpers and trying to scalp profits during the day. They do not want overnight (or long-term) risk and just looking for an opportunity to make some quick bucks for the market during the day.

4. Turtles

The turtles are typically those investors who are slow to buy, slow to sell, and trades for the long-term time frame. They look at the long-term frame and try to make the least possible number of traders. This kind of investor does not care about the short-term fluctuations and most concerned with long-term returns.

Trading animals in Share Market

5. Pigs

“Bulls make money, bears make money, pigs get slaughtered”

pigs

These investors or traders are impatient, willing to take high risk, greedy, and emotional. The Pigs don’t do any kind of analysis and always look out for hot tips and want to make some quick bucks from the share market. Pigs are the biggest losers in the stock market.

6. Ostrich

ostrich

Ostriches are those kinds of investors who bury their heads in the sand during bad markets hoping that their portfolio won’t get severely affected.

These kinds of investors ignore negative news with an expectation that it will eventually go away and will not impact their investments. Ostrich investors believe that if they do not know how their portfolio is doing, it might somehow survive and come out alright.

7. Chickens

Chicken refers to those investors who are fearful of the stock market and hence do not take risks. They stay away from the market risks by sticking to conservative instruments such as bonds, bank deposits, or government securities.

8. Sheeps

sheep

Sheep are those kinds of investors who stick to one investing style and do not change according to the market conditions.

They are usually the last ones to enter an uptrend and the last one to get out of a downtrend. The sheep like to be on the side of the majority (herd) and follow a guru. They are not interested to develop their own investing/trading method.

ALSO READ

The First Golden Rule of Investing -Avoid Herd Mentality.

9. Dogs

Dogs are those stocks that have been beaten down by the market due to their poor performance. Many financial analysts look into the dog stocks closely as they expect these stocks to recover in the upcoming days.

10. Stags – The Opportunistic

stags - Trading Animals in the Share Market

This kind of investors or traders are not really interested in a bull or bear market. They just lookout for opportunities. They are neither bullish nor bearish.

For example, Stags can be the traders who buy the share of a company during its initial public offering (IPO) and sell them when the stock is listed and trading commences. They do stagging with the hope to get listing gains and hence these individuals are called stags.

11. Wolves

wolves

Wolves are powerful investors/traders who use unethical means to make money from the share market. Mostly, these wolves are involved behind the scams that move the share market when it comes to light.

For example- Harshad Mehta can be considered as the wolf of Dalal Street. He was charged with numerous financial crimes that took place in the Securities Scam of 1992. Similarly, the famous Hollywood movie ‘The Wolf of Wall Street’  depicted Jordan Belfort, who was convicted on charges of stock fraud in his penny stock operation and stock market manipulation.

ALSO READ

Harshad Mehta Scam- How one man deceived entire Dalal Street?

Bonus: Few More Trading Animals

12. Lame ducks

A lame-duck is a type of trade or investor who trades and ends up with a huge loss. Lame ducks have either defaulted on their debts or gone bankrupt due to the inability to cover trading losses. The phrase can be traced to the early years of commodity trading and the development of the London Stock Exchange during the mid-1700s.

13. Hawk & Dove

Hawks and doves are terms used to describe the types of policymakers who take critical stances on different economic situations. It basically suggests the sensitivity of a policymaker is towards an economic situation.  A ‘hawk’ wants a tough stance in an economic situation, whereas a ‘dove’ wants to be easy with it.

14. Whales

These are the big investors who can move the stock price when they buy or sell in the market. You can make a lot of money if you trade alongside the right whale.

15. Sharks

Shares are those traders who are just concerned about making money. They get into the trades, make money, and exits the share market. The sharks have very little interest in big complicated methods of making money from the market.

16. Dead Cat Bounce

The dead cat bounce slang is used to refer to a temporary recovery during the bear run. Either it could mean a temporary upswing of the market in the midst of a bear run or it could refer to the particular stock behavior.

Interestingly, this phrase has been employed from the explanation that if you throw a dead cat against a wall at a high rate of speed, it will bounce – but it is still dead.

17. Dogs of the Dow

This is a popular investing strategy where the investors select the 10 highest dividend-yielding blue-chip stocks from the Dow Jones Industrial Average (DJIA) every year. The main reason to follow the Dogs is that it presents a straightforward formula designed to perform roughly in line with the Dow. This concept was originally published by Michael O’Higgins’ in his book, “Beating the Dow,” in which he also coined the name “Dogs of the Dow.” Similar to this concept, Dogs of the Sensex is used in India.

That’s all. I hope this post on trading animals in the share market is helpful to you. Let me know what kind of trading animal you are- in the comment box. #HappyInvesting.

December 21, 2020 Investing Psychology, Investment Basics 10 comments
what to do when market goes up sensex cover

What to do when the Market Goes Up?

A Guide on what to do when the market goes up or makes new highs: Yesterday, Sensex closed at a record all-time high. It went up 446 points higher to its record closing high of 44,523 while the Nifty rose 129 points to its record close at 13,055. Most of the sectoral indices also ended the day in the green. Although the market was all-time high yesterday, however, as a matter of fact, it was considered to be in a bull phase when the market declined over 37% in March 2020 after the arrival of COVID19.

sensex chart what to do when market goes upA lot of first-time investors are wondering what to do next? What to do when the market goes up? Should we enjoy or should we become conscious that the market may fall in the upcoming days? In this post, We are going to answer the same question. What should an average investor actually do when the stock market goes up or makes a new high? Let’s get started.

First of all, CELEBRATE – Market is HIGH!

Isn’t this something which everyone wishes for when the invest- Market going higher and higher?

If you have invested intelligently, then your portfolio would also have gone up along with the rise in the market. And hence it a reason to celebrate. All the hard work that you did in researching, picking stocks, and investing is finally giving sugary fruits. In short, this moment something that you might be waiting for a long time to occur and it finally happened. Therefore, ENJOY.

Nevertheless, when the market goes up, there may be few behavioral issues associated with it that you can notice in your day-to-day lifestyle. It’s important to understand them as these behavior changes might hurt your investment strategy. Here are a few of the observable behavioral issues when the market goes up.

Behavioral Issues when the market goes up

1. You’ll feel richer which may lead to increased personal expenses.

I remember the days when I used to order food and enjoy with friends whenever my portfolio rises over Rs 1,000 in a single day. I know it was stupid. Nevertheless, I and my friends were insanely involved in market movements. The whole discussion during the dinner was regarding the same topic- which stocks went up and why I bought that stock. At that time, I was a recent college graduate who was making money from stocks alongside his regular job. Moreover, I enjoyed the fact that I’m making a passive income.

Now when I look back, I understand why this strategy was really stupid? The rise in my portfolio doesn’t mean an extra profit until and unless I sold those stocks. That was just the unrealized gains (I didn’t sell any stock). And in most cases, the profits kept fluctuating from the next day.

Overall, whenever the market goes up- you might notice increased personal expenses in your day-to-day activity. However, you should remember that this profit is a non-realized gain and hence, you must re-think before increasing your personal expenses.

2. You might become over-confident

When your portfolio is high and everything is working great, over-confidence is an obvious behavioral issue. During such times, you will get the feeling that you’re awesome. Your strategies are working and hence you have mastered the art of investing. However, this might not always be true. Sometimes, your stock might go high along with the market and not because of its fundamentals. An important lesson to learn here is that don’t become overconfident when your stock goes up in the bull phase. 

3. Your risk-taking ability might increase

Increased risk-taking ability is the byproduct of over-confidence. People generally research a lot before investing in any stock when the market is not doing well. Although the stocks might be trading at a discount during that time, they are afraid that the market might go even lower.

However, when the market goes up and everyone you know is making money- you might be inclined to take more risks. During the bullish phase, people tend to invest more as they do not want to miss the opportunity.

4. You might lose focus on your investment discipline

It’s really common for investors to lose sight of the investment decisions when the market is high. Maybe you started investing with a strategy to build a diversified portfolio with an equal investment in different sectors. However, as one of your stocks is doing exceptionally well, you might be willing to sell all the other stocks and invest in your winning stock.

Or maybe, you might be planning to change your strategy from a diversified portfolio to investing intensely in the mid-caps as they are performing the best during that market. Overall, it’s difficult to follow a disciplined investing strategy market is high. Most people easily lose focus on their investment discipline when the market goes up.

The Golden Rule to Follow When the Market Goes Up

— Get Rid of Your Fundamentally Weak Stocks

When the market is at its all-time high, it’s the best time to get rid of your fundamentally weak yet good performing stocks and book the profits. There may be some stocks in your portfolio that might be performing very well in terms of returns, however, it’s not fundamentally very strong and hence might not deserve to remain in your long-term (5-10 Yrs or more) portfolio.

These companies might not have any competitive advantage or any edge to keep them performing even after the bull run. Better to book profits in these cases. After all, these stocks have completed their purpose and make profits for you.

— Ignore Market Emotions & Stick to your Strategy

This is the golden rule to follow when the stock market goes up. As discussed above, when the market is high, you will notice many behavioral issues in your daily lifestyle. You will start feeling richer and might plan to buy your favorite automobile. Or, you might plan to invest more and more in the market to ripe extra profits.

But sticking to your original plan with which you started investing in the best approach here. If you are investing for your retirement fund, then let your investment continue to run. Moreover, invest regularly in the market with the amount that you initially planned. Don’t sell off your stocks just to keep that money in your bank account – if your targets has not been achieved. You might have made some good profits when the market goes up. But it has the potential to give even better returns. Overall, Ignore the short term market profits and focus on your long-term goal.

— Rebalance your portfolio

Rebalancing your portfolio is also a good strategy to follow when the market goes up. For example- let’s assume that you initially planned to invest 70% in equity and 30% in debt funds. However, when the market is high (and your stock portfolio is in profit), this allocation might change to 85% in equity and 15% in debt funds. Here, you should rebalance your portfolio to the original ratio of 70:30.

Quick Note: Rebalancing works similar to averaging your portfolio. For example, here when the market is high and you purchase debt funds to rebalance your portfolio- you might also be averaging your debt funds. You are purchasing debt funds when they might be down (contrary to the market which is high).

ALSO READ

What is Portfolio Rebalancing? And Why is it important?

Closing Thoughts

When the market goes up, it’s a definite reason to celebrate. However, during these times, you can also expect some general behavioral changes. You might feel a little richer when your portfolio is high.

However, remember that these are non-realized profits and hence, you might not be as rich as you think. You only have the money on paper and not credited to your account. Lastly, ignore the highs and stick to your investment strategy & your long-term goals.

November 25, 2020 Investment Basics 5 comments
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 36 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 8 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
3 Best Ever Stock Screeners For Indian Investors cover

3 Best Ever Stock Screeners For Indian Investors!

List of Best Stock Screeners For Indian Stocks: There are over 5,500 companies listed on Indian stock market. While investigating for good companies to invest, if you start reading the financials of each and every single stock, then it might take years.

Moreover, it doesn’t make sense to read the balance sheet, profit & loss statements or cash-flow statements of all the listed companies, if you can filter them out based on just a few preliminary filters like debt or growth rate. And that why stock screeners can be a very useful tool for the investors (and traders) to reduce lots of hassle.

In this post, we are going to discuss 3 best stock screeners that every Indian stock investors should know.

What is a Stock Screener?

A stock screener is a tool to shortlist few companies from a pool of all the listed companies on a stock exchange using filters. The investors specify the filters and the stock screener gives the results accordingly.

For example, if you want to find a list of companies whose

  • Market capitalization is greater than 10,000 Cr
  • The price to earnings is between 10 to 25.
  • Last 3 years average return on equity is 20%
  • And the debt to equity ratio is less than 1

Then, you can apply all these filters in a stock screener to get the list of the companies which fulfill the above criteria.

Stock screeners are very useful as it can save you a lot of time. You do not need to go through all the listed companies to shortlist a few good ones. You can just apply the basic filter to get the list of a few good ones that you want to investigate further.

Overall, the stock screener will help you to find good performing stocks according to your specifications with a single click.

Here is the list of the 3 best stock screeners for Indian stocks that every Indian investor should know. Further, please read this post until the end, as there is a bonus in the last section.

3 Best Stock Screener That You Should Know

Here is the list of the 3 best stock screeners for Indian stocks that you should know and bookmark on your browser. All these best stock screeners are powerful are simple to use:

1. Trade Brains Screener

trade brains portal stock screener

Website: https://portal.tradebrains.in/screener/

Through Trade Brains “Stock Screener”, you can scan and shortlist the stocks that fit your investment style by applying various parameters you choose while making an investment decision. Trade Brains Portal offers over sixty frequently used parameters to screen stocks. Using this portal, you can screen winning stocks based on different filters. Apply different parameters to shortlist the best ones among over 5,000 publically listed companies in India.

The biggest advantage of this feature is that rather than going through each and every share and testing the set of parameters, you can simply adjust it one time and the rest of the work will be done by our screener with the help of designed filters.

Here’s a quick demo on how you can screen stocks using the Stock screener feature offered by Trade Brains Portal:

2. Screener.in

Screener.in - best stock screeners

Website: https://www.screener.in/

The screener is a very simple yet powerful website for stock screening. The query builder of Screener allows the user to apply a number of filters to shortlist stocks based on PE ratio, market capitalization, book value, ROE, profit, sales etc.

The results of the stock screener can be powerfully customized and moreover, the screen can be saved for future use.

Also read: If you want to learn how to use the screener website efficiently for stock screening, you can find this post useful: How to use SCREENER.IN like an Expert

 

3. Tickertape

Website: https://www.tickertape.in/screener/

Tickertape Screener is yet another simple stock screener that has a lot more criteria to filter companies based on market cap, sector, close price, PE ratio, and other financial ratios.  What makes this website stand out from the rest is it’s easy to use interface and feature to apply all these filters on the same tab to find specific stocks.

The filters are fast to use and the results are easily customizable.

tickertape stock screener

Bonus: A few other useful stock screeners

4. Investing.com Stock Screener

investing stock screener

Website: https://in.investing.com/stock-screener/

Investing is also a very powerful website for stock screening. You can find the list of all the companies trading on NSE and BSE here.

There are a number of filters available on INVESTING for screening the stocks like ratios, price, volume & volatility, fundamentals, dividends, and technical indicators. Moreover, it’s a very useful site if you follow the top-down approach. You can select the industry which you want to research and then apply a number of filters like PE, P/Book value, ROCE, etc for shortlisting the best stock in that industry.

For example, if you are studying the chemical industry, then simply select this industry option. You will get the list of the companies in this industry. Next, you can apply different filters for screening the best one, according to your preference.

Other Useful Indian Stock Screeners

As always, I never end a post without some bonuses. Here is the list of few other useful stock screeners that you should also know.

That’s all. I hope that this list of the best stock screeners for Indian stocks is useful to you. If I missed the name of any other useful stock screener that deserves to be on this list, feel free to comment below. I’ll add them to the bonus section above so that the readers can get more benefits. #Happy Investing.

Also read: 3 Simple Tricks to Stock Research in India for Beginners.

Tags: stock screener, best stock screeners, stock screeners in India, best stock screeners for Indian stocks, best stock screeners India
October 12, 2020 Investment Basics 16 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 20 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 36 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 3 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 62 comments
#19 Most Important Financial Ratios for Investors cover

#19 Most Important Financial Ratios for Investors!

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

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

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

19 Most Important Financial ratios for Investors

A) Valuation Ratios

valuation ratios

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

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

1. Price to Earnings (PE) ratio

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

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

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

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

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

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

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

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

3. PEG ratio

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

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

A company with PEG < 1 is good for investment.

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

4. EV/EBITDA

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

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

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

5. Price to Sales (P/S) ratio

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

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

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

6. Dividend yield

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

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

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

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

7. Dividend Payout

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

Dividend payout = (Dividend/ net income)

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

B) Profitability ratio

liquidity ratio

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

8. Return on assets (ROA)

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

ROA = (Net income/ Average total assets)

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

9. Earnings per share (EPS)

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

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

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

10. Return on equity (ROE)

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

ROE= (Net income/ average stockholder equity)

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

11. Net Profit Margin (NPM)

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

Profit margin = (Net income/sales)

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

12. Return on capital employed (ROCE)

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

ROCE= (EBIT/Capital Employed)

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

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

C) Liquidity ratio

liquidity ratio

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

13. Current Ratio

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

Current ratio = (Current assets / current liabilities)

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

14. Quick ratio

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

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

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

D) Efficiency ratio

Efficiency ratios

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

15. Asset Turnover Ratio

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

Asset turnover ratio = (Sales/ Average total assets)

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

16. Inventory Turnover Ratio

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

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

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

17. Average collection period:

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

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

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

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

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

E) Debt Ratio

debt ratio

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

18. Debt/equity ratio

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

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

19. Interest coverage ratio

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

Interest coverage ratio = (EBIT/ Interest expense)

Where EBIT = Earnings before interest and taxes

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

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

Closing Things

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

financial ratios 5 Year Analysis & Factsheet trade brains portal

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

September 29, 2020 Investment Basics, Valuations 13 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 36 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 82 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 9 comments


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