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

September 23, 2020 Aron Almeida Beginner's guide, Investment Basics No comments yet

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

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

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What are Preferred Stock/Preference Shares?

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

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

What are the benefits of Preferred Stocks?

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

1. Fixed Income

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

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

2. Security in the case of winding up

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

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

Hierarchy of Bonds, Preference shares, and Equity shareholders

— In terms of Returns

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

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

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

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

— In terms of Claim over Assets

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

— In terms of Risk

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

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

Types of Preferred stock

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

1. Cumulative Preference Shares

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

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

2. Convertible Preference Shares

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

3. Callable preference Shares

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

4. Perpetual Preferred Stock

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

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

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

Where are these Preference Shares available?

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

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

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

What to look before buying Preference Stocks?

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

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

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

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

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

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

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Reliance and Future group acquisition

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

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

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

Why did Reliance Choose Future?

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

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

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

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

Investing and Acquisition Spree of Reliance in Retail

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

Acquisitions and Investments

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

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

Other Acquisitions

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

Strategy for the Retail Sector

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

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

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

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

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

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

Challenges in the Unorganized Sector

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

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

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

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

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

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

Indian Electricity & Power Sector – Key Companies in 2020!

September 21, 2020 Aron Almeida Market, Stocks No comments yet

An analysis of a list of companies in Indian Electricity & Power Sector: The first electric street light in Asia was lit in Bangalore on 5th August 1905. Despite what seems like a headstart the electrification of India seemed like an uphill battle in the last for almost a century. However, in the last decade, India has begun to make strides not only in extending electrification throughout the country but also introducing greener alternatives.

Today, we take a look at the possible future prospect on the Indian electricity & power sector and top players that are present in the current environment.

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Indian Electricity & Power Sector

India is the third-largest producer and second-largest consumer of electricity in the world. India had an installed power capacity of 371.97 gigawatts (GW) as of July 2020. When we take a look at the growth opportunities in this sector their prospects can be viewed in the two plans already put forward by the government. The first being the governments’ vision of ensuring 24×7 affordable and quality power for all.

According to the Ministry of Power, the Saubhagya mission which had begun in 2017 where 100% of households in 25 states would be electrified has already been achieved. The only states left out were Assam, Rajasthan, Meghalaya, and Chhattisgarh.

100% electrification, however, does not mean that going forward there will be limited opportunities isolated only to the remaining four states. India’s energy demand is expected to double by 2040 and also has the potential to triple. This is mainly because of the rising Indian temperatures and increased appliance ownership among consumers. This would require India to add massive amounts of power generation capacity in order to meet the demand from the 1 billion airconditioning units the country is expected to have by 2050.

Another government initiative that offers growth potential in the sector is its plan to double the electricity generation capacity of renewable energy. As of 2018, India ranked fourth in wind power, fifth in solar power, and fifth in renewable power installed capacity. If government plans are successful the shared electricity generated through renewable would increase to 40% by 2030. Currently, the electricity sector is dominated by fossil fuels like coal. In the 2018-19 fiscal these fossil fuels produced about three-quarters of the country’s electricity.

Quick Fact: Did you know that Bhadla Solar Park is located in Bhadla village, in Rajasthan’s Jodhpur district is claimed to be the largest solar power plant in the world. Spanning 14,000 acres, the fully operational power plant has been installed with a capacity of nearly 2,250 megawatts (MW).

Top companies in Indian Electricity & Power Sector

1. Power Grid Corporation Of India Ltd.

Power Grid Corporation of India Limited (POWERGRID) was incorporated on 23 October 1989 as a public limited company, wholly owned by the Government of India. The company is engaged in the power transmission business with responsibility for planning, implementation, operation, and maintenance of inter-state transmission system and operation of national and regional load dispatch centers.

Its transmission network consists of roughly 164,511 ckm Transmission Lines and 243 EHVAC and HVDC substations, which provides a total transformation capacity of 3,67,097 MVA. POWERGRID transmits about 50% of the total power generated in India on its transmission network. The government of India currently holds a 51.34% stake in the company and the balance 48.66% is held by the public.

2. NTPC Ltd.

NTPC Limited is an Indian Public Sector Undertaking company, which is engaged in the generation and sale of electricity. The company generates electric power using coal-based thermal power plants and is headquartered in New Delhi. The company has also ventured into oil and gas exploration and coal mining activities. It is the largest power company in India with an electric power generating capacity of 62,086 MW. It contributes over 25% of the total power generation of the country.

The company has approximately nine joint venture stations, which are coal-based. It also holds approximately nine renewable energy projects. The company’s subsidiaries include NTPC Electric Supply Company Limited, NTPC Vidyut Vyapar Nigam Limited, Kanti Bijlee Utpadan Nigam Limited, Bhartiya Rail Bijlee Company Limited, and Patratu Vidyut Utpadan Nigam Limited.

3. Adani Transmission Ltd.

Adani Transmission Limited is a holding company. The Company operates as a power transmission company. It is engaged in the transmission of electric energy. Despite only being incorporated in just 2013 it is already one of the top companies in the sector. The company owns, operates, and maintains approximately 5,050 ckm of transmission lines.

4. NHPC Ltd.

NHPC Limited ( National Hydroelectric Power Corporation) is a Public Limited Company and was incorporated in the year 1975. It was created with the objective to generate hydroelectric power. The government of India and State Governments holds a 74.51% stake within the Company while the remaining 25.49% is public.

Over the years the company has diversified into other sources of energy like Solar, Geothermal, Tidal, Wind, etc.

5. Tata Power Company Ltd.

Tata Power Company Ltd is India`s largest private sector power utility with an installed generation capacity of over 10,577 MW. The core business of the company is to generate, transmit, and distribute electricity. Tata is one of the few companies that are present in all segments of the power sector viz Generation (thermal, hydro, solar, wind, and liquid fuel), transmission, and distribution.

6. Adani Green Energy Ltd.

Adani Green Energy Limited (AGEL) is one of the largest renewable companies in India. The company was incorporated in 2015 and is part of the Adani Group. In 2017, the company took complete control of the overall solar energy portfolio of Adani Enterprises.

The Company operates and maintains utility-scale grid-connected solar and wind farm projects. AGEL broke into the news in September 2020 when the stock price of the company grew 1300% in one year and they posted a profit in the year 2019-20.

Also read:

Closing Thoughts

The power sector has immense opportunities in a country like India. But before investing it is also important that the investors inspect other aspects of the industry. For a long, time the power sector has found itself debt-ridden. This was primarily because of the lack of trickle-down of payments from the DISCOMS( Power Distribution companies) to the GENCOMS( Power Generation Companies). Another aspect that the investors must take caution is the viability of renewable energy companies.

Although they are marketed as a safer future, it is important to note that they too come at environmental costs and significantly higher economic costs all the while producing only a fraction of the energy in comparison to other fossils fuels. This affects both the motive i.e greener earth and the profitability prospect of the company.

Indian Auto Ancillary Industry – Top Companies in 2020!

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

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

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

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The Auto Ancilliary Industry in India

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

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

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

Top Auto Ancilliary Companies in India

A. Tyre Segment

1. MRF Limited

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

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

2. Balkrishna Industries Limited (BKT)

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

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

3. Apollo Tyres

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

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

4. CEAT Ltd

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

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

5. Goodyear India

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

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

B. Battery Segment

1. Exide Industries

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

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

2. Amara Raja Batteries

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

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

3. HBL Power Systems LTD

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

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

C. Other Auto Ancillary Industry Companies

1. Bosch Ltd

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

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

2. Motherson Sumi Systems Limited (MSSL)

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

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

3. Endurance Technologies

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

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

4. WABCO India Limited

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

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

5. Sundram Fasteners

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

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

Also read:

Closing Thoughts

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

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

Indian Pharmaceutical Industry – Best Pharma Shares in India!

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

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

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

Table of Contents

Role Played by the Indian Pharmaceutical Industry

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

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

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

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

Growth prospects of the Indian Pharma Industry

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

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

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

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

Pharmaceutical Industry – Best Pharma Shares in India

1. Sun Pharma

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

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

2. Aurobindo

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

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

3. Lupin

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

4. Dr. Reddys Labratory

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

5. Cipla

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

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

Pharma Industry amidst COVID-19

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

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

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

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

Also read:

Closing Thoughts

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

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

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

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

Socially Responsible Investing (SRI): Why it matters?

September 14, 2020 Divya Premkumar Investment Basics, Market No comments yet

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

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

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

Table of Contents

What is Socially Responsible Investing?

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

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

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

Socially Responsible Investing History

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

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

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

Sustainability Indexes

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

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

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

How to be a Socially Responsible Investor?

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

— Know the difference

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

— Do your research

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

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

— Use your influence as a shareholder

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

— Invest in the community

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

— Lead by examples

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

How to get started with Socially Responsible Investing?

1. Decide what your social principles are

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

2. Decide what your financial goals are

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

3. Choose the fund that meets your needs and goals

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

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

Also read:

Conclusion

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

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

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

What is CAPM – Capital Asset Pricing Model?

September 11, 2020 Aron Almeida Valuations 1 comment

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

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

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

Table of Contents

What is CAPM?

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

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

How to Calculate returns using CAPM?

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

Where,

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

Simplifying the Expected Return Calculation Formula

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

1. Rf = Risk-Free Rate

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

2. Beta – Stock’s volatility Measure

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

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

3. Rm = Expected return of the market

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

After reading the above the formula simply becomes,

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

A Simple Example to Understand it further

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

Here, the expected return rate can be calculated as,

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

Assumptions of the CAPM

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

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

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

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

Closing Thoughts

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

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

‘The Magic Formula’ Investing Strategy by Joel Greenblatt!

September 10, 2020 Aron Almeida Invest Intelligently No comments yet

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

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

Table of Contents

Who is Joel Greenblatt?

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

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

What is Magic Formula Investing?

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

1. Return on capital (ROC)

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

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

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

2. Earnings Yield

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

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

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

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

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

How to use magic formula using the above ratios?

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

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

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

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

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

How to use the Magic Formula Investing Strategy efficiently?

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

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

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

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

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

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

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

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

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

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

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

Closing Thoughts

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

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

Mutual Fund Selection – Six Key Technical Factors to Consider!

September 9, 2020 Hitesh Singhi Mutual Funds No comments yet

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

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

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

Table of Contents

What is Mutual Fund?

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

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

Technical Factors to consider for Mutual Fund Selection

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

1) Expense Ratio

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

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

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

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

2) Fund’s Portfolio

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

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

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

3) Rating Agencies

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

4) AUM (Asset Under Management)

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

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

5) Category Returns

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

Again to take the example of Bluechip Funds:

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

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

6) Risk Ratios

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

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

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

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

Conclusion

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

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

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

Investing in Incredible India – Companies to Look Out!

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

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

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

Table of Contents

An Overview of the Tourism Sector in India

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

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

— What forms part of the tourism sector?

The sectors that form part of tourism include the following

1) Tours and Travel Agencies

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

2) Transportation

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

3) Accommodation and catering

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

4) Food and Beverages

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

5) Other Connected Sectors

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

Why should you invest in the Indian tourism sector?

— General Scenario while Investing in Incredible India

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

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

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

— Investing in Incredible India during COVID-19

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

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

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

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

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

Closing Thoughts

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

Nifty 50 Companies – List of Nifty50 Stocks by Weight [2020]

September 7, 2020 Aron Almeida Market, News 2 comments

An analysis of Nifty 50 Companies to learn Nifty Constituent Stocks by Weightage: Nifty 50 is the benchmark index of the National stock exchange (NSE) in India. Basically, an index is the stock exchange creating a portfolio of the top securities held by it based on market capitalization in the respective category (entire market or sector-wise).

These indexes are useful because they provide investors and companies with a reliable benchmark. They have also been used as an investment strategy. In these cases, Investment Managers just set up their fund portfolios to simply track the index. They use the same portfolio as the index in an attempt to gain similar market returns.

Indexes play an important role as they also stand in representation of a country’s market and economy. Today, we observe NSE’s benchmark index namely Nifty 50. We take a look at the companies they have included along with the weights assigned to each.

Nifty 50 – NSE Benchmark Index

The Nifty 50 index tracks the behavior of the top 50 blue-chip companies as per market capitalization that are traded on the National Stock Exchange. Although the index includes only 50 of the 1600 companies that trade on the NSE it captures 66% of its float-adjusted market capitalization. Therefore, it is considered a true reflection of the Indian stock market.

Here are a few top features of the Nifty 50 Index:

The base year is taken as 1995 and the base value is set to 1000.
Nifty is calculated using 50 large stocks that are actively traded on the NSE.
The 50 companies are selected on the basis of the free-float market capitalization.
Here, the 50 top stocks are selected from different sectors.
Nifty is owned and managed by India Index Services and Products (IISL)

Nifty 50 Companies – Constituents of Nifty 50 by Weights – 2020

	Name	Industry	Weight
1.	Reliance Industries Ltd.	Energy - Oil & Gas	14.00%
2.	HDFC Bank Ltd.	Banking	9.56%
3.	Infosys Ltd.	Information Technology	7.56%
4.	Housing Development Finance Corporation Ltd.	Financial Services	6.59%
5.	Tata Consultancy Services Ltd.	Information Technology	5.12%
6.	ICICI Bank Ltd.	Banking	4.80%
7.	Kotak Mahindra Bank Ltd.	Banking	4.27%
8.	Hindustan Unilever Ltd.	Consumer Goods	4.22%
9.	ITC Ltd.	Consumer Goods	3.62%
10.	Bharti Airtel Ltd.	Telecommunication	2.85%
11.	Larsen & Toubro Ltd.	Construction	2.38%
12.	AXIS Bank Ltd.	Banking	2.08%
13.	Bajaj Finance Ltd.	Financial Services	1.84%
14.	Maruti Suzuki India Ltd.	Automobile	1.78%
15.	Asian Paints Ltd.	Consumer Goods	1.65%
16.	HCL Technologies Ltd.	Information Technology	1.64%
17.	State Bank of India	Banking	1.57%
18.	Nestle India Ltd.	Consumer Goods	1.26%
19.	Mahindra & Mahindra Ltd.	Automobile	1.24%
20.	Sun Pharmaceutical Industries Ltd.	Pharmaceuticals	1.23%
21.	Dr. Reddy’s Laboratories Ltd.	Pharmaceuticals	1.17%
22.	UltraTech Cement Ltd.	Cement	1.02%
23.	Power Grid Corporation of India Ltd.	Energy - Power	0.98%
24.	HDFC Life	Insurance	0.97%
25.	Britannia Industries Ltd.	Consumer Goods	0.96%
26.	Titan Company Ltd.	Consumer Goods	0.93%
27.	Tech Mahindra Ltd.	Information Technology	0.90%
28.	NTPC Ltd.	Energy - Power	0.90%
29.	Wipro Ltd.	Information Technology	0.89%
30.	Bajaj Auto Ltd.	Automobile	0.84%
31.	Bajaj Finserv Ltd.	Financial Services	0.80%
32.	Cipla Ltd.	Pharmaceuticals	0.78%
33.	Hero MotoCorp Ltd.	Automobile	0.74%
34.	Bharat Petroleum Corp. Ltd.	Energy - Oil & Gas	0.71%
35.	IndusInd Bank Ltd.	Banking	0.68%
36.	Shree Cement Ltd.	Cement	0.62%
37.	Eicher Motors Ltd.	Automobile	0.61%
38.	Oil & Natural Gas Corporation Ltd.	Energy - Oil & Gas	0.61%
39.	Coal India Ltd.	Energy & Mining	0.58%
40.	Tata Steel Ltd.	Metals	0.58%
41.	UPL Ltd.	Chemicals	0.56%
42.	Grasim Industries Ltd.	Cement	0.53%
43.	Hindalco Industries Ltd.	Metals	0.51%
44.	Adani Port and Special Economic Zone	Infrastructure	0.51%
45.	JSW Steel Ltd.	Metals	0.48%
46.	Indian Oil Corporation Ltd.	Energy - Oil & Gas	0.48%
47.	Tata Motors Ltd.	Automobile	0.40%
48.	GAIL (India) Ltd.	Energy - Oil & Gas	0.38%
49.	Bharti Infratel Ltd.	Telecommunication	0.35%
50	Zee Entertainment Enterprises Ltd.	Media & Entertainment	0.27%

Quick Note: If you want to research more about the fundamentals of these companies, you can go our Stock research and analysis PORTAL here.

Bonus: BSE Sensex Constituent Stocks

The BSE Sensex or the Sensex 30 tracks the behavior of the top 30 companies as per market-cap registered on the Bombay Stock Exchange. BSE Sensex stands for S&P Bombay Stock Exchange Sensitive Index. Here are a few top facts about Sensex 30:

The 30 companies are selected on the basis of the free-float market capitalization.
These are different companies from different sectors representing a sample of large, liquid, and representative companies.
The base year of Sensex is 1978-79 and the base value is 100.
Sensex is an indicator of market movement. If the Sensex goes down, this tells you that the stock price of most of the major stocks on the BSE has gone down. If Sensex goes up, it means that most of the major stocks in BSE went up during the given period.

Sensex 30 Companies- Constituents of Sensex 30 by Weights – 2020

	Name	Industry	Weight
1.	Reliance Industries Ltd.	Integrated Oil & Gas	17.20%
2.	HDFC Bank Ltd.	Banks	10.41%
3.	Infosys Ltd.	IT Consulting & Software	8.87%
4.	Housing Development Finance Corporation Ltd.	Housing Finance	7.66%
5.	ICICI Bank Ltd.	Banks	5.57%
6.	Tata Consultancy Services Ltd.	IT Consulting & Software	5.52%
7.	Hindustan Unilever Ltd.	Personal Products	4.89%
8.	Kotak Mahindra Bank Ltd.	Banks	4.69%
9.	ITC Ltd.	Cigarettes,Tobacco Products	4.14%
10.	Bharti Airtel Ltd.	Telecom Services	2.77%
11.	Larsen & Toubro Ltd.	Construction & Engineering	2.76%
12.	AXIS Bank Ltd.	Banks	2.35%
13.	Maruti Suzuki India Ltd.	Cars & Utility Vehicles	2.06%
14.	Bajaj Finance Ltd.	Finance (including NBFCs)	1.99%
15.	Asian Paints Ltd.	Furniture,Furnishing,Paints	1.92%
16.	HCL Technologies Ltd.	IT Consulting & Software	1.90%
17.	State Bank of India	Banks	1.82%
18.	Nestle India Ltd.	Packaged Foods	1.46%
19.	Mahindra & Mahindra Ltd.	Cars & Utility Vehicles	1.46%
20.	Sun Pharmaceutical Industries Ltd.	Pharmaceuticals	1.45%
21.	UltraTech Cement Ltd.	Cement & Cement Products	1.12%
22.	Titan Company Ltd.	Other Apparels & Accessories	1.08%
23.	Tech Mahindra Ltd.	IT Consulting & Software	1.04%
24.	Bajaj Auto Ltd.	2/3 Wheelers	1.01%
25.	POWERGRID	Electric Utilities	1.00%
26.	Hero MotoCorp Ltd.	2/3 Wheelers	0.86%
27.	NTPC Ltd.	Electric Utilities	0.81%
28.	IndusInd Bank Ltd.	Banks	0.75%
29.	Tata Steel Ltd.	Iron & Steel/Interm.Products	0.72%
30.	Oil & Natural Gas Corporation Ltd.	Exploration & Production	0.71%

Also read: What is Nifty and Sensex? Stock Market Basics (For Beginners)

That’s all for this post. I hope it was useful for you. In case, if you have any queries related to Sense and Nifty 50 Companies or constituent stocks, let me know by commenting below. I’ll be happy to help. Happy Investing.

5 Top FMCG companies in India in 2020 – Best FMCG Shares

September 4, 2020 Aron Almeida Stocks 1 comment

List of the best FMCG companies in India 2020: All our lives depend on FMCG (Fast Moving Consumer Goods) products that satisfy our basic needs. FMCG products are those that have a short shelf life that is produced in high volumes with low cost and are made for rapid consumption.

This industry include household items, over the counter medicines, food, personal care items, and stationery and consumer electronics, etc. The fast-moving consumer goods (FMCG) sector is India’s fourth-largest sector and has created employment for more than three million people.

Today, we take a look at the top 5 FMCG companies in India that are responsible for keeping over 1.3 billion Indians on their feet every day.

Top 5 FMCG companies in India in 2020

1. Hindustan Unilever Limited (HUL)

Market cap: Rs 521,882 Cr / PE : 71.20

HUL is one of India’s oldest FMCG companies. It is a subsidiary of Unilever, a British-dutch company. The company was established in 1933 and has headquarters in Mumbai. HUL has served over 2 billion customers for over 87 years.

HUL has over 35 brands across 20 categories such as soaps, detergent, skincare, cosmetics, tea, toothpaste. The brand includes famous names like Surf, Excel, Dove, Lux, Lifebuoy, Clinic Plus, Wheel, Sunsilk, Knorr, Axe, etc.

2. ITC Limited

Market Cap: Rs 240,076 Cr/ PE : 15.84

ITC Ltd. has flourished in the Indian markets for over 110 years giving them a deep understanding of the Indian Consumer. The ITC is known to guarantee a certain standard in production and packaging. They have broad distribution channels in India. This has allowed them to penetrate into even the most rural areas through several retail shops.

Their products include Bingo, Sunfeast, Aashirvaad, Fiama Di Wills, Vivel, Savlon soaps and handwash, Papercraft, and Classmate. ITC sells 81% of the tobacco products in Asia including brands like Wills Navy Cut, Gold Flake Kings, Silk Cut, India Kings, Bristol, Gold Flake Super Star, Gold Flake Premium Lights, Classic Menthol, etc.

3. Nestlé India

Market Cap: Rs 159,330 Cr / PE : 80.90

Nestle is a transnational food and beverage company headquartered in Switzerland. Globally the company has been around for more than 150 years. In India, Nestle dates back to 1912 when it began operating as Nestle Anglo-Swiss Condensed Milk Company. They cater to the nutritional and wellness requirements of Indian consumers. In 2016, they were rated 33 in Forbes list of largest public companies.

Nestle sells a plethora of products including beverages, bottled water, milkshakes, breakfast cereals, instant foods, performance, and health care nutrition, etc. A few of the 2000 brands they currently own are Nescafe, Maggi, Milky Bar, Kit Kat, Bar One, Milkmaid, Nestea, etc.

Quick Note: If you want to look into the financials and fundamentals of these companies, you can find it on our stock research and analysis portal here.

4. Britannia Industries

Market cap: Rs 93,866 Cr / PE : 63.18

Britannia Industries is one of the oldest food-producing companies in the country. It was established in 1892 in Kolkata with an initial investment of merely Rs. 295. Their products are available in more than 5 million retail outlets. More than 50% of Indian households are proud users of their range of food items. The FMCG is known as the first Zero Trans Fat Business in the country. They have an extensive distribution network in India and 60 other countries.

Their products include Good Day, Tiger, Milk Bikis, Bourbon, Marie Gold, Cake, Cheese, Milk, and Yogurt. The company is the largest brand in the organized bread market.

5. Marico

Marketcap: Rs 46911 Cr / PE : 41.40

Marico was established in 1990 in Mumbai. It began as a brand for coconut and refined edible oil and later expanded into various kinds of consumer goods. It is currently operating in 25 countries in the emerging markets of Asia and Africa. They maintain their innovation in manufacturing and packaging to preserve the tagline “Make a difference”.

Marico’s household brand includes Parachute, Saffola, Nihar, Livon, Set Wet, Mediker. Its global products include Parachute, Haircode, Caivil, Black Chic, Isoplus, Code 10, and X-men.

Closing Thoughts

With the ever-growing needs and constantly improving standards of living the FMCG’s play an even larger role. In order to fulfill these requirements, there are several other FMCG’s too that compete for a significant spot in this market. They include Colgate Palmolive, Parle Agro, P&G, The Godrej Group, Amul, Patanjali, Dabur, etc.

In this highly competitive environment, the FMCG’s have managed to keep customers satisfied by reaching out to every nook and corner of the country making each and every FMCG an integral part of the economy.

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

September 3, 2020 Aron Almeida News No comments yet

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

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

(Image Credits: BusinessToday.in)

Why did the Indian GDP Shrunk by 23.9%?

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

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

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

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

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

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

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

What does the future hold for the Indian economy?

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

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

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

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

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

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

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

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

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

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

Quick link to open your FREE account with Angel Broking.

Table of Contents

Angel Broking History

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

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

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

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

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

Angel Broking Brokerage Charges & Other Charges

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

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

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

Angel Broking Brokerage Charges – Segment Wise

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

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

(Source: Angel Broking Brokerage Charges)

Other Charges With Angel Broking

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

Angel Broking Strengths – Special Features

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

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

Also read: Zerodha vs Angel Broking: Stockbroker Comparison

Angel Broking Review – Products & Services

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

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

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

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

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

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

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

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

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

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

Angel Broking Review: Pros and Cons of Angel Broking

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

— Pros of Angel Broking Stockbroker

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

— Cons of Angel Broking Stockbroker

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

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

How to open your Angel Broking Demat Account?

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

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

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

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

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

Closing Thoughts

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

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

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

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

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

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Open Interest Definition

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

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

What does the Increase/Decrease in Open Interest Imply?

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

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

Difference between Open Interest (OI) and Volumes

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

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

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

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

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

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

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

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

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

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

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

Figure 1: Open Interest data (Moneycontrol.com)

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

— Open Interest and Volume interpretation

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

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

— Interpreting Open Interest

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

Conclusion

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

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

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

Top Electric Vehicle Manufacturers in India – EVs Outlook & Future!

September 2, 2020 Aron Almeida Uncategorized No comments yet

List of the Top Electric Vehicle Manufacturers in India: When it comes to travel new technologies just keep popping up around the world. These alternative technologies in transport are mainly based around electronic vehicles with many companies jumping on the bandwagon to get some traction before the industry gets a radical shift away from traditional fossil fuels.

This change can also be seen as catchup that existing companies are trying to play in the electric vehicle (EV) segment with companies like Tesla and the bars set by them before its too late. Today, we take a look at the electric vehicle segment in India and the top manufacturing industries for investors to watch out for in this segment.

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Why electric and What is the plan ahead?

One of the major reasons why countries are forced into adopting an electric alternative is climate change. India according to Environmental Pollution Index (EPI) 2018 is ranked 178 out of 180 in terms of air quality. One of the strategies adopted to combat this has been the push for electric vehicles[EV]. This will not only improve the environment but also India’s overall economic health. India currently imports crude oil and which sets us back in a deficit of approx $60 billion.

The aim set by the government has been 100% electrification by 2030. This is a humungous target considering the early stages of adoption that we currently are in. The electric vehicle adoption rate in India is less than 1% according to a McKinsey&Company report. According to Bloomberg, in the six years leading up to October 2019, India has barely sold more than 8000 electric cars. If compared to countries like China these sales figured are achieved in less than 2 days.

Some state government realizing their role have tried to eradicate one of the major barriers to owning an EV i.e. the high initial cost. This can be seen in the example of Maharashtra where subsidies were announced amounting to 1 lakh for electric vehicles. Consequently, Maharashtra had the highest sales volume in 2017 in the Indian electric car market. The government has also realized that it is best to target their efforts towards the public transport system in the initial stages.

This is because the purchase of EV in the private sector will depend on major other factors like attractiveness etc. The public transport system being one of the most heavily used in a country like India will definitely offer a huge boost to the sector.

Top Electric Vehicle Manufacturers in India

The Indian EV industry being in its nascent stages does not have an established market leader in all vehicle types. There are 10+ major players existing in the 2 wheeler segment, 3-4 in Electric buses, and few in car manufacturing. The following are the top Electric Vehicle[EV] Manufacturers in India.

1. Mahindra Electric

Mahindra is the pioneer for EV in the Indian space. Being the first major EV manufacturer it launched Mahindra Reva, its first EV as early as 2001. The Mahindra Reva was India’s first electric car. Over the years Mahindra has gone ahead to set up a dedicated R&D center in Bengaluru.

Some of its other EV variants include the Mahindra E20 and eVerito. Mahindra however has not only focussed on the manufacture of EV’s but also battery packs and has partnered with various institutions in order to boost EV charging.

2. Tata Motors

Tata is Indias biggest automobile manufacturer It automobile segment ranges from the manufacture of cars, utility vehicles, buses, trucks, and defense vehicles. Its associate companies include Jaguar Land Rover and Tata Daewoo. But when it comes to the EV segment Tata is a new entrant when compared to Mahindra.

In India, Tata Motors has an industrial joint venture with Fiat. One of Tata’s major benefits has been its ability to use resources from around the world. Tata’s innovation efforts are focused on developing auto technologies that are sustainable as well as suited. With design and R&D centers located in India, the UK, Italy, and Korea. Tata Motors in collaboration with its subsidiary, the UK based Tata Motors European Technical Centre (TMETC), are looking to have a major play in the EVs market in India.

When it comes to EV’s, Tata has focussed on the Passenger Vehicles and Electric Buses market in India. When it comes to four-wheelers Tata offers 3 vehicles to pick from. The Tigor EV, Nano EV, and the Tiago electric variant. In the Electric bus segment, Tata expects its demand from State transport Unions. The expected demand is estimated to be around 400,000 buses in the long run.

Apart from EV’s, Tata has also focussed on setting up charging stations in its efforts to improve the industry infrastructure.

3. Hyundai

Hyundai burst into the Indian EV segment with its launch of the Hyundai Kona EV in India. The South Korean global giant in the world of automobiles has stated that Kona was specifically designed to suit Indian operating conditions. One of the USP’s of the vehicle is its 452km range in one charge. This suited perfectly with Indians ‘Kitna Deti hai’ demand when it comes to vehicles.

Just to put things in perspective the range difference of the Kona and other market leaders is in hundreds of kilometers. The Kona, however, has an Ex-showroom cost of Rs.23.8 lakhs making it extremely expensive for Indian markets. Addressing this Hyundai has however said that another EV is in developmental stages keeping affordability in mind in order to serve the mass market. This EV is expected to be ready to enter the market in the next 2-3 years.

4. Ashok Leyland

Ashok Leyland, the Hinduja Group’s flagship company, is the 4th largest bus manufacturer in the world and a market leader for trucks in India. The company has tied up with Sun Mobility in order to enhance its expertise in the vehicle domain.

Ashok Leyland designs electric variants specifically for Indian conditions and has also introduced battery swapping in electric buses to address e-mobility needs in the country. It has launched multiple electric bus variants like the Circuit, HYBUS, Electric Euro 6 Truck, and announced the iBUS. The immediate focus of the company, however, is currently in giving more thrusts to exports.

Other leading EV Manufacturers and associated industries

The Indian EV market being in its nascent stages is viewed as an opportunity waiting to be exploited. Other players that also have products in the EV market include MG Motors, Maruti Suzuki, Renault, Audi, Volvo, Hero, Ather, etc. An expansion in the EV industry will also see other associated industries catch on too. This includes the battery and EV chargers. Interests have been shown by many companies like Siemens, Schneider, Delta, etc.

But unfortunately, these companies will only move in once a significant demand arises in the public 4 wheeler segment. On the other hand, one of the major factors for the EV industry not expanding has been consumer concerns regarding the lack of Fast Chargers in India.

Unorganized and small players are dominating due to the limited scale of business. In order to combat this, the NITI Ayog is laying a key role in setting up EV chargers. There are currently 270 units of installed EV chargers in India. NITI Aayog has partnered with NTPC in order to set up 100,000 EV charging stations across India. Other government entities like BHEL have partnered with ISRO in order to develop batteries using Lithium technologies.

Most lithium requirements are currently imported from China, South Korea, Vietnam, Singapore, and Japan. Other players who have shown interest in the Lithium battery production business in India include Reliance, Suzuki, Toshiba, Denso Corp, JSW Group, Adani, Mahindra, Hero Electric, Panasonic, Exide Batteries, Amara Raja.

Closing Thoughts

In this article, we discussed the list of the top Electric Vehicle Manufacturers in India, their current work in EV segment, and future prospects. The Indian government had set up the aim of replacing all internal combustion engines with EV’s by 2030. A report from Mckinsey and Company from 2017 indicated that 40% of electrification was a more realistic picture of mobility in 2030. This report, however, was prior to the Pandemic. This, in turn, will further set back electrification in the industry for years to come.

In addition, the steps taken in order to enable acceptance of EV will not suit their main purpose if alternative means of electricity production are not implemented. Currently, up to 60% of the electricity is produced from coal. Although the government has set major aims to bolster the growth of EVs a lot more has to be done in order to ensure they are implemented.

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

September 1, 2020 Kritesh Abhishek Investment Basics, Stocks 18 comments

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

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

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

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A Quick Introductory Story

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

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

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

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

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

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

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

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

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

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

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

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

What are Blue Chip companies?

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

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

— Signature Characteristics of Blue Chip Companies

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

They are large reputed companies.
They have widely used products/services.
Most of these companies are listed in the market for a very long time.
Blue chip companies have survived a number of bear phases, market crises, financial troubles, etc. But they are still going strong.
Blue chip companies have a strong balance sheet (a large number of assets compared to liabilities) and a healthy income statement (revenues and profits continuously growing for the last few decades).
These companies have a good past track record of stable growth.

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

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

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

— Why are they called blue chips?

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

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

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

— Financial characteristics of blue chip stocks

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

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

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

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

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

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

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

10 Best Blue Chip Companies in India:

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

— Reliance Industries

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

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

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

— Hindustan Unilever (HUL)

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

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

— HDFC BANK

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

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

— Asian Paints

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

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

— Tata Consultancy Services (TCS)

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

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

— Infosys

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

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

— ITC

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

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

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

— Eicher Motors

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

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

— Bajaj Auto

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

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

— Nestle India

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

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

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

Closing Thoughts

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

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

Paytm Money Stockbroking Review – Demat & Trading Account Charges

August 31, 2020 Aron Almeida Online Brokers No comments yet

Paytm Money Review and it’s Demat & Trading Account Services: Recently Paytm announced its entry into stockbroking through the launch of Paytm Money. The discount broking segment which Paytm enters involves only executing orders on behalf of the clients has become synonymous with online broking.

Despite its widespread acceptance in the brokerage community it still can be debated if entering this segment was wise. This is because less than 5% of the population of the country is currently involved in the stock market. In addition, the segment already includes players like Zerodha, ET Money, Groww, Kuveram wealth, Angel Broking, Sharekhan, etc. Today we discuss this move and the features brought to the table by the new product.

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Why has Paytm entered stockbroking?

Paytm received the approval from the SEBI in 2019 in order to enter the stockbroking segment. Paytm over the years has tried to establish itself as the one-stop platform for anything money-related in the recent past. After gaining traction post demonetization the online payments platform offered banking services, mutual fund, SIP, pension products. They also have acquired Raheja QBE in its plans to enter the insurance segment before expanding into the discount broking.

Paytm’s plans to enter stock broking couldn’t have come to fruition at a better time. In the months of April and May, NDSL and CDSL saw an addition of 2 lac and 12 lac new Demat accounts respectively. The lockdown imposed due to the COVID-19 pandemic has forced the work from home model to be adopted. This has led to an increase in the first time investors flocking to the stock markets with the added disposable income, as they as they are forced to spend less on leisure due to the pandemic.

The markets too favored the entry of first-time traders as after the steady fall from Feb-March the markets rebounded gaining over 45%. This allowed new entrants to gain profits making trading all the more attractive. In addition, the added information availability in the new environment has made it easier for new entrants to learn the trade.

Paytm Money, however, has not set the existing trading community as the only probable consumer base. India is expected to have 44 crore smartphone users whereas there currently exist only 1.2 crore active traders in the market. Paytm predominantly functioning on smartphones will have multi-folds of unexplored markets available for them. Paytm Money which has investors from over 98% of the pin codes in India will have the added advantage due to this existing under penetration in the country.

— Zerodha on Paytm

Zerodha which currently dominates the market with 3 million customers and a 15% share last year made a profit of over Rs.1000 crores. Nithin Kamath, CEO of Zerodha, commented on its new competitor saying,

“The big problem in India to solve is to grow the capital market ecosystem. While it has increased over the last six months, there are 90 lakh Indians who invest in the stock market. There is another one crore more who can enter the market. For that one crore to come, you need platforms with great distribution capability Paytm is one of those who can. If anyone in the country can expand fast, I think Paytm can do that.”

Paytm Money Review – Delivery and Intraday Charges

— Paytm Money Delivery Charges

Charge	Delivery Rates
Brokerage	Rs. 0.01/- per executed order
Exchange Turnover Charges	0.00325% of turnover for NSE and 0.003% of turnover for BSE
GST	18% on Brokerage and Exchange Turnover Charges
Security Transaction Charges (STT)	0.1% of turnover on buy and sell orders
SEBI Turnover Fees	0.0005% of turnover
Stamp Duty	0.015% of turnover on buy orders

— Paytm Money Intraday Charges

Charge	Intraday Rates
Brokerage	0.05% of turnover or Rs. 10/-, whichever is lower
Exchange Turnover Charges	0.00325% of turnover for NSE and 0.003% of turnover for BSE
GST	18% on Brokerage and Exchange Turnover Charges
Security Transaction Charges (STT)	0.025% of turnover on sell orders
SEBI Turnover Fees	0.0005% of turnover
Stamp Duty	0.003% of turnover on buy orders

Source: Paytm Money Trading Charges

Paytm Money Review – Attractive features offered by Paytm Money

One of the most attractive features comes with the attractive prices offered by Paytm which even trump many market leaders. They offer the lowest charges on intraday trade which is at Rs. 10 per trade.
The app also provides in-depth financial and historical price data for every listed company which enables investors to research the stock market on their own.
Using the Smart Search and notification option the users can discover and set alerts for as many as 50 stocks and get notified when the price is reached.
The app also has the added advantage of offering not only stock and derivative trading options but also offers other mutual funds and National Pension Scheme products.
The app also includes a built-in calculator that enables users to find out the transaction charges and know the precise breakeven price to sell the stocks on profit.
Users can automate stock investing by setting buy orders on a weekly or monthly basis.
Advanced charts and other options like cover order and bracket order have been offered in order to make the experience more rewarding
The brokerage fees for the segment futures are the same as those for intraday. The options brokerage offers flat Rs 20 per trade regardless of the number of lots.
Delivery segments allow the transactions you are brokering shares today on another day. No additional charges are made for these, where no purchases and sale is made on the same day.
Another advantage that Paytm offers will be with respect to data security. Paytm being in the digital walled industry comes with absolute data privacy to keep investor data safe with bank-level security.

Opening a Demat Account with Paytm Money?

Opening a Demat or Trading Account using Paytm Money can be done within 24 hrs by the following steps:

Download the Paytm Money App
Click on complete your KYC by filling in the required information.
Upload the documents i.e. PAN, Aadhaar and bank details (Cancelled cheque/Account statement)
Submit and You can start trading/investing once your account is active

Pricing comparison between Paytm and Zerodha

Activity	Paytm	Zerodha
Account Opening	Rs. 200 - One time Digital KYC + Rs 300 Account Opening Charges	Rs. 300 ( Equity and Commodity)
Delivery Charges	Rs. 0.01/- per executed order	FREE
Intraday Charges	Rs. 10 or 0.05% of turnover	Rs. 20 or 0.03% per trade
AMC (Account Maintenance Charges)	Rs. 0 *	Rs. 300/ year + GST
Pledging Charges	Rs. 32 (including the depository transaction charges)	Rs. 60 + GST
DP (Depository participant) charges	Rs. 10/- per scrip per day	₹13.5 + GST per scrip
Payment Gateway ( Net Banking)	Rs. 10	Rs. 9
Payment Gateway (UPI)	Rs. 0	Rs. 0

*Paytm Charges Platform Fee of Rs 300 per annum

Also read: Zerodha Review 2020 – Should you trade with the biggest stockbroker in India?

Paytm Money Review – Limitations of Paytm Money

Paytm money stockbroking and it’s demat & trading accounts are still in the early phase and yet to be tested customer’s feedbacks and expectations. Anyways, here are a few limitations of Paytm Money that it is facing or will face in the future:

Paytm Money doesn’t offer to trade in derivatives i.e. futures and options trading yet.
Unlike the trading platforms like Zerodha ‘kite’ which has been in the market for years, Paytm’s trading platform is yet to test handling large volumes and market volatility.
Other Services like Commodity and currency trading is not available for customers.

Closing Thoughts

By venturing into stockbroking Paytm has now become one of the most comprehensive wealth management platforms in the country. Their extensive existing customer base acts as their biggest leverage as they have access to the market not penetrated by other platforms. This can also be seen in the app which has a UI that is friendly and minimalistic, enhancing its approach.

Comparing Paytm to market leader Zerodha, the former makes financial inclusion a priority to suit its customer base. Zerodha on the other hand according to CEO Nitin Kamath caters to people who are more than just investors by offering a more evolved product.

Investing in Foreign Stocks: Advantages and Risks

August 24, 2020 Aron Almeida Market, Stocks 2 comments

Understanding the pros and cons of Investing in Foreign Stocks: Indian investors have always been known to be inward-looking. That is, they would prefer to invest in the Indian markets over foreign ones. This has been the case even though it’s been over 15 years since they were first permitted to invest in foreign equities.

One of the major reasons for this has been the fact that India being a developing nation has an economy that grows faster than many developed countries. Today we discuss the possible benefits that an investor may receive while investing in foreign markets and also the limitations of doing so.

Table of Contents

Benefits of Investing in Foreign Stocks /International markets

1. Diversification

Generally, when we talk about diversification we generally refer to investing across various industries and different MCAP’s. But by investing in foreign markets we can receive the same benefits of diversification even if the companies that we include in our portfolio already exist in the same industry or MCAP. The main purpose of diversification is to protect the portfolio. By investing abroad the portfolio is safeguarded from any domestic risks that might affect the domestic markets as a whole.

2. Market rebound rate

We earlier mentioned that that Indian investors prefer to invest in Indian securities as they provide a better growth rate. Markets around the world at times undergo crises at the same time. Rare as this should be this has already occurred twice post 2000. Keeping the growth rate aside let us try and notice the performance of markets post such crisis.

The Recession of 2008 saw economies stagnating all around the world. Even though they were first triggered by problems in the US, the Indian economy too suffered from the crash. The Indian markets suffered a fall of 55% compared to the heights it touched at the end of 2007. It can be noticed that the period of December 2007 to December 2013 the Indian markets gained only 4.3% after rebounding. Let us compare this to the US markets. During the recession, the US markets fell by about 50%. But during the same period from December 2007 to December 2013, the US market provided close to 50% returns after rebounding to previous levels.

Let us also take the 2nd instance where we have seen markets all around the world contract. This has been due to the pandemic that we are still suffering through. If we notice the US markets since their heights in February we can see that the markets fell 30% by March but have already rebounded and touched new heights gaining 15% returns. The Indian markets, on the other hand, suffered a fall of over 35% and have still not previous levels.

3. Exposure

Another added advantage of investing in foreign markets is the exposure an investor will receive in terms of securities available to him. Let us dial back time to the early 2000s and observe the options available to Indian investors when it comes to technology-driven securities. They are limited to TCS, Infosys, and Wipro.

On the other hand, foreign markets provided the likes of Apple. Microsoft, Google. At times even legal jurisdictions bar from certain companies to operate in a country. Investors, however, have the option to simply invest in foreign countries.

Risks involved while Investing in Foreign Stocks

1. Currency Exchange

One of the major problems investors face is due to the changing exchange rates. International stocks are priced in the currency of the country they are based in. For an Indian investor, this causes is a problem because he is now not only exposed to the uncertainty of the stock but also the uncertainty of the currency.

Take for example the shares of ABC Ltd. in the US are worth $100. After the purchase is made the stock rises to $110. But at the same time, the dollar weakens by 15%. If a domestic investor sells off his position and converts it to rupees he would not only forgo the 10% gain but also suffer an additional 5% loss due to the exchange rate. But with the added risk there also exists the added opportunity of making gains during the exchange. If the rupee weakens in the above case, the investor would walk away with a 25% gain.

2. Taxability

The gains that an individual makes from foreign investments can be taxed twice. First when the shares are sold in a foreign country. And secondly in India. This, however, depends on whether the individual is considered as a resident or any other status. The rates applicable here will depend on whether the gains are considered as Long term capital gain or Short term capital gain depending on the period the asset was held. This is known as Double taxation.

This can be avoided if there exists a tax agreement between the foreign country and India. This tax agreement is known as the Double Tax Avoidance Agreement. India currently has DTAA with more than 80 countries, including the US, the UK, France, Greece, Brazil, Canada, Germany, Israel, Italy, Mauritius, Thailand, Spain, Malaysia, Russia, China, Bangladesh, and Australia.

3. Political Unrest

When investing in a foreign country the investor must be aware of the potential political risk. This makes it necessary that the investors follow up on major political events such as elections, trade agreements, tax changes, and civil unrest. A country with unfavorable factors makes investing there not worthwhile even if the company is a good performer.

4. Lack of regulation

Investors looking to invest in foreign markets must be aware that foreign governments may not have the same level of regulations that are followed in India. They may have different disclosure and accounting rules followed respectively. This makes it harder and time-consuming for investors to keep up with the inconsistencies that of regulations in different countries.

Also read: 3 Easy Ways to Invest in Foreign Stocks From India.

Closing Thoughts

There exist numerous advantages and risks that exist while investing in foreign stocks. The existence of risks does not mean one should turn a blind eye to over half of the investment opportunities available to an investor. This is because a majority of such opportunities exist in foreign markets.

Investors should, however, pick an opportunity where the risks are considered and assessed and still remains attractive as an investment.

Top 5 Stock Market Investors of All Time!

August 19, 2020 Aron Almeida AceInvestors, News No comments yet

A hand-picked list of the top 5 stock market investors in the world: Its been over 4 centuries since the inception of the world’s first stock exchange in Amsterdam. Since then there have been many investors- some known for their success and others for their ability to loose their massive wealth.

The list below includes investors that struggled through poverty, escaped the Nazi’s and even those that worked closely with spy agencies during the Cold War. An extremely interesting list to go through and even better footsteps to follow. Today we bring to you a comprehensive list of the top 5 investors of all time.

Top 5 Stock Market Investors of All-time!

Table of Contents

5. Benjamin Graham

There are very few investors who have not only succeeded in their investment pursuits but also have successfully influenced multiple generations of investors at the same time. Any investor on this list cannot deny being influenced by Benjamin Graham.

Benjamin Graham was born to Jewish parents in England in the year 1894. Despite experiencing poverty first hand he graduated from Columbia University on a scholarship and went on to work in Wall Street. By the age of 25, Graham was earning $500,000 annually in the 1920s.

— His transition into an Investment Guru

But he soon lost almost all of his investments during the stock market crash of 1929. It was after this that Graham took the time to put the observations he made for investing in a book called Security Analysis while working as a lecturer at the Columbia Business School. It was in this book that Graham brought forward the concept of value investing, where investments are made based on the intrinsic value of the stock and not that of the market price.

But it was Grahams’ next book “The Intelligent Investor’ which is considered mandatory in every investors’ home. It was in this book that he introduced Mr. Market. Mr. Market shows up at every investors’ door giving them an option to buy or sell. But Mr. Market is often irrational and his emotions are run by greed and fear. Graham emphasized that i is necessary for every investor to do their own research and not depend on Mr.Market. According to him, a successful investor makes Mr. Market his servant and not his friend.

— Notable Investments

Grahams’ most notable investments include his 50% purchase of GEICO in 1948 for $712,000. This position grew to $ 400 million by 1972. His teachings and work inspired many notable investors like Warren Buffet, Irving Kahn, Walter Schloss, and Bill Ackman.

His book ‘ The Intelligent Investor’ is considered the bible for investing. Although it has been over 4 decades since Benjamin Graham passed away, his contributions still remain relevant and will continue to do so for the years to come.

4. David Swensen

Yale University, an Ivy League college, the third-oldest institution of higher education in the US was founded in 1701. Its alumni list includes 5 US presidents. Ever considered who is the highest-paid at Yale? Is it the University President Peter Salovey who is paid $1.4 million in 2015. The answer is ‘No’. The highest-paid employee at the school is its Cheif Investment Officer David Swensen who makes over $4 million annually.

— Early Career

Swensen himself is an alumnus of Yale and pursued a Ph.D. in economics. Before joining Yale as a Fund Manager, Swensen spent 6 years working at Wall Street. Advising the Carnegie Corporation, the NYSE, and also worked for the Salomon and Lehman Brothers. It was in 1985 that Swensen received the offer to manage Yale’s Endowment Fund which was worth $1 billion. Swensen was only 31 years old at the time, had no experience in portfolio management, and taking the job would mean taking an 80% pay cut. Suicide if you would ask anyone at the time.

Swensen, however, took the job. It was here that he along with Dean Takahashi invented the Yale theory. Swensen succeeded in implementing the theory and now is commonly known as the Endowment Model.

— The Endowment Fund

One may think that Swensen hit the lottery by managing the Yale fund. But to provide returns of the scale he did is nothing short of herculean. Especially due to the nature of the fund was made up of donations received by the university and hence require secure investments. The fund is also used to provide scholarships. All this on top of student protests over the choice of investments made that do not fall in line with the changing social causes. This forced Swensen to move away from investing in the companies that have a large carbon footprint.

As of 2019, the endowment fund was worth $29.4 billion. Second to Harward whose endowment fund is worth $39.2billion. According to former Yale President, Richard Lenin Swensens contribution to Yale is greater than the sum of all the donations made in more than two decades.

3. Jim Simons

Jim Harris Simmons was known to be gifted in mathematics from a very early age. He joined MIT at the age of 17 and went on to receive his Ph.D. in mathematics from Berkely at the age of 23.

— Early Career

He began working at the Institute of Defence Analysis, which was a branch of the NSA in the US. It was set to break Russian codes during the cold war. Simons states that he loved the job because it paid well and he was allowed to work on his personal math projects for half of the time. The work he did here remain confidential.

He, however, was fired after he expressed his views against the Vietnam War in an interview. He later went on to work at Stony Brooke University. Jim Simmons is famous not only in the world of investing but is also a highly acclaimed mathematician. He is noted for the Chern-Simons form which contributed to the development of string theory.

— Transition into an Investment Manager

Jim Simons’s first investment was from the amount he received at his wedding in 1959. He invested this in stocks but found it boring and later invested it in Soy-beans. It was only in the 1970s that Simons began taking investing and trading seriously. He took out his investments from his friends firm in Columbia and began trading with foreign currencies. He founded his own hedge fund Rennaissance Technologies and decided to crack the market y applying his mathematical skills here. Due to this reason, both he and his fund are called Quantum Investors.

His fund did not make good returns which led to him closing it for a year in order to figure out what went wrong and to restrategize. After opening again the Medallion fund went on to become to most successful hedge fund of all time. The fund gave a staggering 66% per annum returns and a net return of 39.1% after the huge investor fees. This made the Simons a billionaire and currently has a net worth of $21.6 billion according to Forbes.

Even though the strategy used has been released in a book all employees are made to sign an NDA agreement. In addition, they are also asked to sign a non compete agreement later on in order to keep the means used to achieve these returns within the company.

2. George Soros

Soros was born in the 1930s to a Hungarian Jew family. A terrible time for the Jews in Europe. His teens were spent escaping persecution by the Nazi’s during WW2. His family did this by changing their names from Shwartz to Soros and by masquerading as Christians. Soros went on to study at the London School of Economics after which he did several odd jobs before entering Wall Street.

— The man who broke the Bank of England

In 1970, Soros founded Soros Management where he managed the Soros fund. But it was only on September 16, 1992, that Soros rose to fame. For months leading up to this date, Soros built a huge sort position of 10 billion Pounds. This day was termed as Black Wednesday in the UK. Soros, on the other hand, made a profit of $1 billion on a single day. This came at a cost of 3.4 billion pounds to the Bank of England. Hereafter he was known as the man who broke the bank of England.

— Is Soros still infamous today?

In recent times too, unfortunately, Soros is known for all the wrong reasons. He is often targeted by the rightwing politicians and has often been the center of many conspiracy theories. This has been particularly because of his economical support to the Left and his charitable organization ‘Open Society’.

The Open Society has been accused multiple times of attempting to topple governments that oppose illegal immigration and the influx of Muslim refugees in Europe. Soros, however, claims that he founded the society to ensure the building of vibrant and tolerant democracies. Soros and his NPO are currently banned in 6 countries.

1. Warren Buffett

The brilliant track record and wealth that Warren Buffet amassed from investing gives him the number one spot undisputably.

Warren Buffet was born in 1930 to a future US Congressman, Howard Buffet. Despite this Buffet spent his childhood in poverty and so the importance of money was instilled in him at a very young age. This drove him to set the aim of becoming a millionaire by the age of 30 or jumping off the tallest building in Omaha.

— Early Career

The entrepreneurship spark and his obsession with numbers were visible in him from a very young age. He adopted a paper route when young and learned the benefits of diversification as he realized that he could make more money by selling magazines as well and made $175 a month from this.

Apart from this Buffet sold CocaCola, chewing gum, golf ball, stamps, and also worked at his grandfathers grocery when young. Buffets’ infatuation with numbers got him interested in the stock market and made the first investment at the age of 11. Warren Buffet filed his first tax return at the age of 14. At around the same time he also bought a farm. Buffet went on to buy 3 shares of the Citi Service for himself.

Although Harward would have been his first choice Buffet was rejected. He then went on to study at Columbia Business School because one of the investing greats Benjamin Graham taught there. After graduating he went and achieved one of his most prized possessions a diploma for a course in Public Speaking under the legendary Dale Carnegie. Warren Buffet then went on to work under Benjamin Graham under whom he grew as an investor.

Warren Buffet retired at the age of 26 after buying a house and having $174,000 in savings. But his dream of becoming a millionnaire brought him out of retirement.

— The Berkshire Hathaway Story

His investment strategy in the initial days included Cigarette Butt Investing. In 1962 this strategy led him to invest in a textile manufacturing firm called Berkshire Hathaway. He held the shares for 3 years but later came to terms that this was the worst investment he ever made. In 1964 the company made him a tender offer at $11.50 per share.

However, when Buffet received the offer in writing 3 weeks later the price was quoted at $11.375 per share. This $0,125 reduction angered him and he bought Berkshire Hathaway and immediately fired its owner Seabury Stanton. But after this, he realized that the business would not improve. He shut down the core business of textiles in 1967 and expanded into the insurance industry and investing.

Some of the other notable investments by Buffet include Washington Post, Exxon, Geico, and CocaCola. In 1979, Warren Buffet had a net worth of $620 million due to Berkshire Hathaway. He then set a new goal of becoming a billionaire. Buffet reached the goal when the shares of Berkshire Hathaway closed at $7175 on May 29th, 1990. As of 2020, has a net worth of $69.6 billion. In the world of investing Warren Buffet is nothing short of a rock star.

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

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

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