21 Day Lockdown (COVID-19) - Are We Headed in Right Direction cover

21 Day Lockdown (COVID-19) – Are We Headed in Right Direction?

21 Day Lockdown (COVID-19): Due to the outbreak of coronavirus, last week, the world witnessed the largest democratic lockdown of 21 days as announced by PM Narendra Modi on March 24th, 2020. As we enjoy the privileges at our homes for social distancing and take measures to avoid Coronavirus, a greater portion of Indian population struggles to take measures to ensure their survival. Today we take a look at the cost of such a lockdown and the possible future we are looking at.

There have been many views regarding the lockdown including the one put forward by Dr. Deepak Natrajan. He took estimates based on comparison with the cases in China and the respective death rate and after periodically adjusting for one year. Later, he arrived at the conclusion that the maximum of 25000-30000 estimated deaths in India due to COVID-19. This was done to bring up the comparison of the cost of the Lockdown.

Whether this 21-day lockdown would result in smashing the economy where a hundred thousand may lose their jobs is still a point of discussion. However, most economists are estimating this pandemic resulting in many more being affected by starvation in a country already facing poverty and malnutrition.

Dr. Deepak Natrajan went on to explain how the estimated deaths due to COVID-19 are a blip in comparison to the deaths caused in a year. The deaths in India currently stands at ten lacs per year. This also sheds a light on the dilemma faced by the government over imposition a lockdown. However, it didn’t mean that he encouraged the government to do nothing but instead opt for a different route which involved aggressive testing.

Immediate effects due to the 21-day lockdown

– Hoarding

This was the first problem noticed after the lockdown was announced as people immediately resorted to the hoarding of commodities. It was done to cover the next 21 days as it was unclear from the PM address over availability of essentials and the lockdown was mistaken as a curfew.

As always, hoarding causes problems of availability. The reduced commodity results in businesses trying to benefit from the added demand by hiking up the prices which further alleviates the problem. This further reduces the purchasing power of large sections of the economy for commodity at higher prices.

– Exodus of Daily Wage Workers

The 21-day lockdown eliminated all job opportunities available to the daily wage workers and other workers in the unorganized sector. Their situation got worse with no savings to fall back on and added hostility from the landlords who viewed them as a COVID-19 threat. This inability to pay rent also lead to the exodus where workers started their journey home hundreds of kilometers away on foot.

( Migrant Workers trying to find a way out in Delhi)

Although they were further portrayed by the media as an addition to the existing problem, this was the only way out for these bread earners to escape the problems caused by the 21-day lockdown. They started this march to avail government relief in the form of deposits in Jan Dhan saving accounts and foodgrains available to their families in their hometowns. Moreover, any attention given by the state government arrived only after the exodus had already begun.

Announced Relief Packages

A relief package of 22 billion was announced by the finance minister 36 hours after the lockdown. It involved 50 Lac insurance coverage to the healthcare workers, a move in the right direction. However, there were a few schemes part of the relief that raised a few eyebrows.

– Increased wages – MGNREGA

The Finance minister announced increased MGNREGA wage by Rs.20 to Rs. 202 per day effective from April 1st. The wage increase is said to provide additional benefits to the workers. The logic to announce this as part of the relief is hard to understand as during a 21-day lockdown the work provided through MGNREGA is non-existent. The benefit of can only be availed after April 14th provided it is not too late. Moreover, the Finance Minister added that the workers will have a benefit of Rs 2000. However, this will only be available considering that that MGNREGA worker is employed for 100 days in a year.

The added benefit also seems to be unsuitable as the weighted average for the 2019-2020 record is already Rs.221 in the MGNREGA scheme. The unweighted average in major states is Rs.226 per day. The additional benefit on a closer look does not offer any relief to daily wage workers during a lockdown and also depends on the availability of work after the lockdown. The period after this 21-day lockdown is stated by many economists as a period of recession. This is arrived at after taking into consideration of the rise in unemployment as one of its factors.

– Food and Cash in hands of people.

The Finance Minister announced that Rs 2,000 will be deposited into the Jan Dhan Yojana Accounts of Farmers. Further, Rs. 1,000 will also be deposited into the Jan Dhan Accounts of pensioners, widows and the disabled. The Government is also to provide 5 kg of rice and 1 kg of pulses in addition to the existing amount received for the next three months.

In 2017 the Pradhan Mantri Jan Dhan Yojana saw the women ownership of bank accounts rise from 43% to 77%. This indicated that most of the accounts in the PMJDY were those of the spouses of the workers in the cities. To benefit from the relief provided, the individuals will have to travel back home which adds to the exodus.

(Pronab Sen-Chairman of the Standing Committee on Economic Statistics.)

Apart from this, the government also announced a hike on the withdrawal limit of EPFO to transfer cash into the hands of unemployed individuals. The Finance Minister also announced that the center will pay the PF requirements of both the employee and the employer for 90% of the employees (for the firms with less than 100 employees of salaries less than Rs.15000).

– Moratorium on Loans

The RBI allowed lending institutions to offer a moratorium to borrowers on repayment of all loans for 3 months. The banks that have approved this includes Punjab National Bank, Union Bank of India, Bank of Baroda, Canara Bank, IDBI, State Bank of India (SBI), Indian Bank & Central Bank of India.

This move will reduce the burden on the individuals and also provide them the purchasing power for necessities.

– Reduction of Rates

The RBI cut the repo rate and the reserve repo rate by 75 bps and 90 bps. The repo rate now stands at 4.4% and 4% respectively. This will result in a fall in interest on deposits and make loans cheaper. This is aimed to increase the spending and hopefully stimulate the economy. However, this was also done to ensure the enterprises that are affected by the pandemic can get back on their feet and avail cheaper loans.

(Prem Shankar Jha – Economist )

If we take a step back from this very welcome rate cut and consider the state of the baking sector and their struggles with NPA’s, Non-Performing Assets (as in Yes Bank), it is hard to foresee banks lending to businesses that have been financially weakened due to the pandemic. Any loans given out would be a leap of faith and RBI must ensure that the benefit from rate cuts is transferred from the banks.

Lockdowns around the globe

Countries like Italy, Spain, and France have implemented a national quarantine. The total count of cases in Italy and Spain are currently over 100,000 and France over 50,000. The United States, having the most number of cases (over 210,000) has still not imposed a nationwide lockdown taking a different pill than that taken by India. The US has primarily focussed only on hotspots and 24 states have asked their residents to shelter at home.

China, which only a few months ago was one of the hotspots for Corona, imposed a lockdown but only in the hotspots i.e. Wuhan and Hubai (60 million people) which could also be one of the reasons why the stock market in China was not as badly hit as that of other regions. (Also read: Coronavirus Impact on Global Indexes (2020) – US, Europe & More)

However, these countries have followed aggressive testing measures. India, on the other hand, has one of the worst testing rates in the world with only around 43,000 tests conducted so far. This was despite having the capacity to conduct 12,000 tests per day. So far there have been 2000 confirmed cases in India. Countries like Korea have used rampant testing measures like ‘Drive-Thru Coronavirus testing centers’ to flatten the curve to total cases. This has enabled them to catch up with the spread and quarantine effectively.

Also read: What we can learn from South Korea and Singapore’s efforts to stop coronavirus?

Relief Package Comparison with GDP

The relief package announced by the US is at 2 trillion dollars to fight the coronavirus. A comparison of the $22 billion relief package in India would be unfair. When the relief packages are compared to the respective GDP’s, it showed that $2 Trillion is roughly 10% of the US GDP. Other countries like Canada, Singapore have roughly invested around 5% of their GDP’s. However, India has rolled out a package of just 0.8% of its GDP to fight coronavirus outbreak.

This comes after former Finance Minister P. Chidambaram mentioning in his ten-point plan of action that a minimum relief package of Rs 5-6 Lac Crore was required. Despite that, he didn’t see an economic recovery on the horizon and also termed the COVID-19 lockdown as the biggest crisis the country has faced. Even after the migration crisis post-independence, every famine since independence, the tsunami of 2004, the 2008 financial crash are all put together. This further puts doubt on the capabilities of the relief package.

Is the Indian economy headed towards a recession?

The IMF has already stated that the situation worldwide is worse than the crisis of 2009. They also mentioned that we have already entered a recession and a possibility that the global GDP will shrink by $2.3 trillion. So far 80 countries have already asked for the emergency fund from the IMF. Kristalina Ivanova Georgieva said there is a possibility that $2.5 trillion will be topped for the financial needs of emerging markets.

Subash Chandra Garg, the former Finance Secretary, and former Economic Affairs Secretary has stated that the Indian growth will likely be negative next year unless the government takes measures to prevent it. He also commented that the two-thirds of the economy has been severely hit and the GDP after the lockdown will be reduced by 5-6%. Economist Arun Kumar has also gone ahead to say that the current situation is worse than those faced during a war.

The GDP does not represent all the sections of the society accurately as those with high incomes though few pull the average towards rearer ends. Hence in a situation with a possible negative GDP in the coming quarter will mean that those in the lower-income sections are devastated.

Closing Thoughts

— Extended Lockdown?

Despite having the worlds largest lockdown, researchers from the Cambridge university released a paper that suggests adding length to the lockdown to properly contain the virus. The paper suggested a three phase lockdown (21 days – 5 days rest – 28 days – 5 days rest – 18 days) or a continuous 49-day lockdown for the Indian region. Based on the observations of the current lockdown, the economy is operating at -50% of the GDP as per Arun Kumar. In addition to the effect on daily wage and unorganized sector workers, India cannot afford another extended lockdown without much more serious consequences.

There is a need to ramp up the testing done in India to catch up with the curve and hopefully flatten it. This is a necessity because the current scenario has exposed the cracks in the Indian infrastructure and its ability to cope with a crisis. India has one doctor per 10,000 people in comparison to 41 in Italy and 71 in South Korea.

— Inadequate relief measures

The current policies aimed at the poor in the form of increased income offer is just a mirage of actual help. A lot more has to be done to ease the suffering due to the lockdown t0 the poor. Any success in the relief package or hopefully a stronger revised relief package will require involvement and coordination with the state governments. The current exodus of workers could have been prevented if state governments were kept in the loop. The lockdown too would have been better implemented. Hoarding and police brutality are attributed to the lack of communication and direction from the government.

Subash Garg mentioned how over the last 70 years of our history there are no measures taken specifically to save and push businesses. The government has to roll out new policies to ensure this, especially in the current situation. Else these businesses will find it hard to start again. The severe times of 1990-91 bought forward reforms. Similarly to stimulate the economy, revised relief packages and new reforms are in need. It is already certain that the Corona Recession of 2020 (hopefully not depression) will replace all comparisons in the future that were earlier made with the 2009 crisis.

Why did Indian Stock Market crash in 2020? Causes & Effects

Why did Indian Stock Market Crash in 2020? Causes & Effects!

Indian Stock Market Crash in 2020: After making a peak of 42,273.87 points in Feb 2020, Sensex crashed over -38% by 23 March 2020 to 25,638.90 points. We are currently witnessing one of the fastest crashes in stock market history, even worse than the 2008 market crash as quoted by many leading market analysts. In this article, we are going to discuss the reason behind this stock market crash in 2020.

Here you’ll find everything that you want to learn regarding the Indian stock market crash in 2020. We’ll look into leading causes, facts, effects and what do economists have to say about the crisis. However, before we start the article, let’s first understand what exactly is a stock market crash so that everyone is on the same page. Let’s get started.

What is a stock market crash?

A stock market crash is when a market index faces a rapid and unanticipated severe drop in a day or a few days of trading. A double-digit percentage drop over a few days in the market index generally constitutes a stock market crash. A stock market crash may be caused due to economic bubbles, wars, large corporation hacks, changes in federal laws & regulations and natural disasters. They are generally followed by panic selling and can lead to bear markets, recessions and even depressions.

There have been a  few measures to stop a crash. One being large entities purchasing massive quantities of stocks in order to curb panic selling. Trading halts have also been introduced but both these measures have not been proved to be actually effective in pausing a crash.

(The stock market crash of 1924 was one of the most unfortunate crashes where the Dow Jones Index lost 23% in two days and eventually led to ‘The Great Depression’.)

Do Stock Market crashes lead to Recession?

A stock market crash reduces the investors’ confidence in the economy and as the falling shares slowly wipe out investor wealth. Investors resort to selling off their holding at minimal costs. Due to lack of confidence investors also refuse to partake in the purchase of shares.

With the diminished wealth of investors and the valuations of companies dropping, it makes harder for companies to raise capital and secure debt. Companies in bad financial shape lead to layoffs resulting in a fall in demand in the economy. As the decline continues the economy contracts resulting in a recession. A stock market crash does not necessarily result in recession but a recession always results in a stock market crash.

Also read: How Does The Stock Market Affect The Economy?

Why did Indian Stock Market crash in 2020?

The period between 17th January 2020 to 27th March 2020 saw the SENSEX lose 12,129.75 points. Multiple events were involved which led to a negative impact on the market.

Why did Indian Stock Market crash in 2020

The presentation of the Union Budget on 1st February 2020 coupled with the coronavirus panic led to the SENSEX falling by 2%. Later, WHO classified Coronavirus as a potential pandemic on February 28th, 2020 which led to both the Nifty and the Sensex ending with the worst weekly fall since 2009.

This was further followed by the shares of Yes Bank falling on March 6th due to bad loans and one of the worst NPA in the country. One of the founders of Yes Bank was also arrested on corruption charges. The fall after Yes Bank coupled with the effects of Coronavirus in Europe and the US resulted in the markets touching 35,636 points. (Read More: The Unravelling of Yes Bank – Fiasco Explained)

On 12th March the Sensex fell by 8.18% as a result of WHO declaring corona a pandemic. As the pandemic further spread and the number of cases in India worsened the stock Market plunged 13.5% on March 23rd. Besides, a countrywide lockdown of 21 days was announced by Prime Minister Narendra Modi starting from midnight March 24th. The lockdown was a necessity to curb the spread but it was the last thing the Indian economy required in its efforts to make a recovery.

Also read: Indian Markets: A Week Against Coronavirus & Crude Oil Fall

Is India headed towards a recession?

A recession is typically described as 2 consecutive quarters of negative growth. However, a few more factors are also in play.

The NBER ( National Bureau of Economic Research)  defines a recession as “ a significant decline in economic activity spread across the country lasting more than a few months visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.

With several predictions by notable economists indicating India having a negative GDP, the lockdown has further intensified all the other factors possibly directing the economy towards a recession due to lack of income to major portions of the sector, with tourism industry already facing unemployment, the other industries will definitely face the heat. The lockdown also guarantees a drop in production and a drop in wholesale retail and sales.

What has the Government done so far?

All efforts by the government began after the lockdown was announced. The Finance Minister Nirmala Sitharaman announced a financial relief package of Rs 170,000 crores. The package included hugely appreciated Rs 50 Lac insurance cover to every individual in the health sector. The finance minister also announced 5kg of wheat and 1kg of pulses in addition to the existing scheme to over 80 crore individuals.

This too was appreciated as the 21-day lockdown would rid the daily wage workers of any source of income. The withdrawal limit of the EPFO was hiked. This was done to transfer cash into the hands of individuals. This would also provide support to unemployed workers.

In addition, the Finance Minister also announced that the center will pay the Provident Fund requirements on behalf of both the employer and also the employee for 90% of the employees. This will further reduce the burden on small businesses as it is targeted towards firms with less than 100 employees and those that have salaries less than Rs 15,000.

(RBI Governor Shaktikanta Das in talks with the Finance Minister Nirmala Sitharaman)

The RBI announced a moratorium on EMI for the next 3 months and also cut the Repo rate by 0.75% to 4.4%. The Moratorium on EMI’s will reduce the burden on individuals.

The repo rate, on the other hand, will make it cheaper for individuals to avail loans, however, deposits will receive reduced interest. This is aimed at increasing cash in the hand of an individual resulting in an increased demand which in turn may lead to stimulating the economy.

What do economists have to say about the crisis?

— Raghuram Rajan

(Raghuram Rajan- Former RBI Governor)

Former governor of the RBI, Raghuram Rajan, known for predicting the 2008 financial crisis and recession in 2005, said in an interview that the most important requirement right now is to prioritize targets such as fulfilling supplies and physical resource requirements of the healthcare sector followed by reaching out to the poor and only then should the question of reduction of taxes and temporary income support should come into the picture.

On questioned about the impact coronavirus may have on the global economy he answered that due to the unprecedented situation we should first look into the Chinese economy and observe the relaxation placed in China and the response COVID-19 has to it and accordingly take an action depending on if the virus spread begins again after the relaxation.

This would mean that the lockdown would be required to be implemented for longer periods. He also said in the interview that it may be a little too early to predict if the COVID-19 pandemic will lead us towards depression. In addition, he further added that with a recession almost certainly on the cards we still can focus on avoiding a depression based on measures taken

— P. Chidambaram

( P. Chidambaram – Former Finance Minister)

The former finance minister advocated the lockdown but mentioned that a lockdown alone was not sufficient. He mentioned that a relief package of 5-6 Lac Rupees is the absolute minimum which is required. He also provided a 10 point action plan which included the direction of cash and food towards the urban poor, assurance that the employer will be reimbursed for any wages paid during the lockdown and also proposed cuts on the GST.

On being questioned about future economic recovery he answered saying that there is no economic recovery on the horizon. Although the growth for the last quarter stood at 4.7% due to corona as per global economic loss prediction of 2% percent the same may be applied to the Indian markets.

He also added that the situation the country is put in now is worse than the migration crisis post-independence, famines to date, the tsunami of 2004 and even bigger than the 2008 financial crash and in fact even bigger than all of them put together.

— Jayati Ghosh

(Jayati Ghosh – Indian Economist)

Jayati Ghost one of India’s foremost economists and also a Professor at JNU, Jayati Ghosh, took a much more critical stance to highlight the magnitude of the problem the lockdown will create.

According to Jayati Ghosh in a country like India, a lockdown of more than a week will have severe disruptions. The damage done by the lockdown is already greater than the damage caused by demonetization due to which the economy has still not recovered. A massive shock such as this will have a negative multiplier effect and will continue to permeate.

She added that lockdown which has already disrupted the demand within the economy, with the supply chain broken down will force farmers to get rid of their stock as they will not be able to sell their produce and any bulk buying or hoarding engaged in the consumer end will only lead to shortages in the economy.

On being asked on what effect this will have on the GDP she made it clear that she has reservations already of the GDP figures being fudged and are actually lower than that reported by the government due to which we may see negative GDP in the coming quarters. 

Closing Thoughts

Prime Minister Narendra Modi announced that if the nation does not impose the lockdown, the country and our families will be set back by 21 years.

After taking a closer look which makes it clear that a lot more has to be done before it further devastates the country if poorly implemented and makes one wonder that if so, by how many years is the economy going to fall behind due to the lockdown. The government has to have a plan in place instead of abrupt decisions followed by a plan that may fall in line with such decisions. This is required to keep the economy from falling into a depression at all costs.

While looking into the Indian stock market crash in 2020, we should also not forget that it took the Dow Jones Index almost 25 years to recover from the crash that had led to The Great Depression. The financial package announced which currently makes up 0.8% of the GDP does not even reach the bare minimum set by former Finance Minister P. Chidambaram at 5 lac to 6 lac crore, let alone be compared to Western countries where they are set at 5- 15% of the GDP. The government still has to roll out policies swiftly to make the necessary yet draconian lockdown a success. 

Coronavirus Impact on Global Indexes (2020) – US, Europe & More

Coronavirus impact on Global Indexes (2020) – US, Europe, Russia, India & More: India, currently in stage II of the novel coronavirus with over 500 cases reported throughout the country. This has resulted in an entire country imposing a lockdown. The center is still caught up in its efforts to make the gravity of the situation heard with the PM himself addressing the nation. The PM also had requested the nation to take part in a self-imposed curfew along with a noteworthy attempt at a show of admiration for all the essential services.

Indians today are going through a phase never experienced before at any of the earlier outbreaks. However, this turbulent phase has not only been limited to our personal lives but also as investors we are breaking into bearish conditions. These conditions were not foreseen at the initial stages of the outbreak.

With the Sensex falling over 36.54% since January 31st we take a look at how some other notable indexes around the world have fared against COVID-19 and also look into the respective government responses in such economies. The table below shows how the following global Indexes have performed since January 31:

CountryIndex% Change: Jan 31 - March 23, 2020
RussiaRTS41.74%
BrazilBOVESPA41.04%
IndiaSENSEX36.20%
ItalyFTSE MIB32.30%
USADOW JONES32.14%
GermanyDAX31.22%
FranceCAC30.27%
UKFTSE28.76%
ChinaSSE COMPOSITE3.15%

Quick Start: What is an Index?

Indices are used as a benchmark to measure performance. An index consists of major companies listed in the stock exchange which are measured together to arrive at a value representative of the entire market over a period of time. The stocks involved are weighted based on the capitalization of the respective company.

Country-based indexes track how the national stock exchange is performing. The NIFTY in India consists of the top 50 stocks listed in the NSE. The Sensex in India is representative of the top 30 stocks listed in the BSE. Further, an index is also a market sentiment indicator.

Coronavirus impact on Global Indexes

— Coronavirus effect on Russian Markets  (RTS – 41.74%)

Coronavirus effect on Russian Markets

The Russian Trading System (RTS) Index faced an overall drop of 41.74% since January 31st. However, the problems faced by the RTS were not limited to the coronavirus panic but also due to the oil price crash. The crash was caused due to the Russian fallout with OPEC. This had a critical effect on the Russian economy due to its main export being oil.

Coronavirus affected the market once it further spread through the European region. This further led to the Foreign Investors engaging in panic selling. Russian Sberbank which declared a $3.2 billion in profit still suffered a fall of 5% in its stock price.

CEBR a leading economic consultancy from the UK forecasted the Russian economy to sink by 4% in 2020. The forecast also included little expectation of a short term rebound. Although the central bank remains uncertain about rate cuts, Russia will create a $4 billion anti-crisis fund to protect its economy from the coronavirus shock.

— Coronavirus against the Brazilian market  (BOVESPA – 41.04%)

Coronavirus against the Brazilian market

It may seem surprising to find a South American country to have a market hit as hard as the BOVESPA Index. The BOVESPA Index suffers a 41.04% market fall even though it is not considered a hotspot for coronavirus. This was because of the dependence of Brazilian exports on the Chinese markets.

In 2018, almost 25% of Brazilian exports and almost half of the commodity exports were directed towards China. These suffered a hit during the demand slump China faced due to the outbreak. This added to the roadblocks created by their business-minded President Jair Bolsonaro over the development of the Amazon Rainforest. This has led to investors avoiding the Brazilian market particularly after his unfavorable stance towards the environment after the Amazon fires.

amazon fire brazil

The outbreak indirectly led to foreign investors further exiting the market in the crisis. The Brazilian market faces a situation where it fails to attract dip buyers as well. Furthermore, even the 30 billion package unveiled by the government has been criticized over its failure too adequately apprehend the magnitude of the problem.

— Coronavirus against European Markets

Coronavirus against European Markets DAX CAC FTSE

The problems in Europe can be attributed to most of the countries considering Corona an East Asian issue. Europe is currently a hotspot for the COVID-19 with Italy, Spain, Germany, and France being hit the worst. All of their markets fell at around 30% with further lockdowns imposed. The stock markets in Europe were further impacted after Trump announced a ban of all flights headed from Europe to the US.

( The famous painting ‘Mona Lisa’ by Italian artist Leonardo Da Vinci depicted with a medical mask over the coronavirus outbreak)

France also threatened to close its borders to the UK over its inadequate action taken towards containment of the virus. Over 6,000 people are suffering from the virus in the UK. The turmoil in Europe was further intensified with the German Chancellor Angela Merkel going into quarantine after one of her doctors was tested positive for coronavirus.

The European Central Bank is expected to cut interest rates into the negative territory. The Central Bank is to also extend long term loans to banks in an attempt to provide relief to Italy and the other European countries where coronavirus has a devastating effect.

The following packages were announced by the European governments to combat coronavirus:

CountryRescue Package(Billion)Directed towards
Italy$28Employment, Healthcare, Bonuses for Emergency Services and loans to Small and Medium businesses
Germany$610Companies hit by Corona in addition to relaxed tax norms
France$335Loans to Businesses, in addition, to pay to workers who lost jobs.
Spain$200To fight Corona Epidemic
Spain$100Small and Medium Businesses
UK$424Health services and Loan guarantee to Businesses

Britain’s Financial Conduct Authority has also directed companies to not release preliminary financial statements for at least another two weeks due to coronavirus.

— Coronavirus against the US Markets ( Dow Jones – 32.14%)

The US also suffered from the ignorance and underestimation of the virus. The virus has currently affected over 45,000 people in the US. Stock markets in the US were initially affected due to the crude oil price crash. This was due to the high marginal cost of production prevalent in the US which stands at 40$ per barrel whereas the barrel prices were slashed to around 30$ per barrel.

This was followed by the coronavirus panic and Trump travel ban against 26 European countries further impacting the Airline Industry. The number of coronavirus cases has exploded in the US since then.

(The ‘V-J Day in Times Square – New York’ iconic photograph depicted with medical masks over Coronavirus)

Measures taken by the US government include unemployment benefits, sick leave benefits, free coronavirus treatment including food and medical aid to people affected. Also, $50 billion has been announced as an immediate relief for the airline industry and $50 billion in further secured loans to other parts of the economy.

Congress is also further negotiating a 1 Trillion dollar rescue plan along with sharp rate cuts by the Federal Reserve. These measures have also led to corporations postponing layoffs in return for a big bailout.

— Coronavirus against the Indian Markets (Sensex – 36.20%)

Coronavirus against the Indian Markets (Sensex - 36.20%)

With the Sensex falling 26.54% since January 31st and the Nifty 50 falling 31.85% in the last 30 days. Trouble began with the crude oil price fall which would have been welcome in any other situation as India relies heavily on import of crude oil. Any benefits due to the price fall were put to a halt due to the effects of coronavirus on the airline and tourism industry and eventual lockdowns which resulted in a drop in demand. With the officially reported cases within the country touching 500, the question remains if the healthcare infrastructure can bear the burden of an increase in cases.

The RBI announced that it will conduct an open market purchase of bonds worth up to Rs 15,000 crore besides announcing a fresh round of fund infusion from variable-rate repos. With the cases in India increasing the government has called for lockdown in multiple states which will further affect the volatility of the market.

However, the RBI has also created a unique Business Contingency Plan(BCP) by setting up a team of 90 process critical members from the RBI of which only half will work at any given time whereas the remaining half will wait on stand-by, 60 key personnel from their external vendors and 69 additional support staff, all to work in a War Room during the outbreak. A facility has been hired where the 219 members will be hosted.

Precautions are taken to an extent where all personnel will also be donning hazmat suits. This also includes the support staff involved in maintenance, security, kitchen, front desk, and the administration. The BCP also involves maintaining isolation and social distancing of the 219 members.

In addition to the actions taken by the RBI, the state governments are also resorting to providing financial relief to those affected by the respective lockdowns imposed.

Also read: Nifty 50 Stocks – 7 Stocks crashed over 50% since Coronavirus Outbreak

— Coronavirus against the Chinese Markets ( SSE Composite Index – 3.15%)

Coronavirus against the Chinese Markets ( SSE Composite Index - 3.15%)

The Chinese Shanghai Composite Index (SSE) has fallen 0.04% since 3rd February. These figures would not form a fair comparison as the epidemic hit China first in December, whereas all the other regions faced the pandemic in the other European countries increasing in February and March itself.

However, even when the fall is measured since December the net impact on the Chinese market lies at 4.53%. Then how is it possible that of all the countries China has one of the least impacted stock markets even after being the worst-hit place by a coronavirus and also being the point of origination.

The Chinese government imposed stringent lockdowns and also suffered a 10% fall between 22 January to 3rd February. This was followed by the central bank announcing that it would inject $174 billion worth of liquidity into the market through reverse repo operations in addition to rate cuts.

The Chinese policymakers found ways to reach vulnerable households of Social Security Fees, Utility bills and provided them with other immediate requirements during the lockdown. Also, the most important economic effect against the virus would be the aggressive stand taken by the authorities by doing everything necessary particularly by ramping up its healthcare needs, stringent lockdowns which gave a brighter outlook in terms of economic prospects as life slowly resumes in China.

However, Goldmann has forecasted that the Chinese economy instead of growing by 2.5% will contract by 9% in 2020.

The Road Ahead

(The Bullish Markets enjoyed previously by investors have come to a full stop. Interestingly stocks of  gaming companies like Ubisoft are expected to be on the rise after lockdown and quarantine measures taken by the governments worldwide)

Lockdowns are now becoming a necessity. Rate cuts and infusion of cash into the economy seem to be the only way out to protect economies from the COVID-19 quicksand. However, we have currently seen countries that are facing coronavirus in the 3rd stage generally have a stronger infrastructure and better healthcare facilities but are still not able to cope.

Nations with a poorer infrastructure will face an impossible task if the spread of the virus spirals out of control. This calls for aggressive measures to the taken to prevent the spread of the virus in these countries until a suitable vaccine is officially declared by the WHO.

Pertaining to the current scenario banks like JP Morgan have forecasted a coronavirus driven recession that will rock the US and Europe by July. Deutsche Bank has also warned that based on current trends we could be facing a severe global recession over time.

Life During Coronavirus Times Changes & Effects

Life During Coronavirus Times: Changes & Effects

Life During Coronavirus Times: In the last few weeks, if you’ve been living in a metropolitan city in India, you might have noticed several changes. A lot of usual day-to-day activities that you used to easily perform in previous months, might not be accessible to you now. For example, going out for dining with friends, attending the gym, relaxing at parks, partying, etc.

The reason behind all these changes is the pandemic coronavirus, an infectious disease caused by a new virus, that was originally found in China, and which later spread throughout the world. As of 22nd March 2020, this virus has affected over 340,000 people worldwide and resulted in the death of over 14,000 people. Here’s a live counter of coronavirus pandemic with real-time counts and world news:

As Coronavirus disease spreads primarily through contact with an infected person (when they cough or sneeze) and its vaccine has not been found yet, the government has taken various steps to tackle the situation and to limit its spread. In this post, we are going to discuss such changes that have already been made in India and its effects in the short and long-term. Let’s get started.

Changes Made to Tackle Coronavirus

Here are a few of the big and necessary changes that the government and the Indian population have implemented to fight back with coronavirus. Although these changes are temporary, however, they may last even for months:

1. Social Distancing

Although not a new concept, nonetheless, a lot many people are not familiar with social distancing. It is a set of non-pharmaceutical infection control actions intended to stop or slow down the spread of a contagious disease.

As this virus is contagious and spread by touch or when people come in contact, it is suggested to maintain a minimum distance of 1 m (or 3 ft) with others and not to indulge in groups bigger than five. Social/Physical distancing is the most common change seen in this coronavirus days.

2. Work from Home

A lot many corporate employees are mandatorily offered work from home for a sustained longer period for the first time in their career. Almost all big and small companies in the metropolitan cities have now given work from home to their employees. Although this might have resulted in lower productivity. However, work from home means less physical interaction, less traveling and minimal spread of the virus among colleagues at the workplace.

3. Lock-down/Curfew

After the success of ‘Janata Curfew’ started by PM Narendra Modi on 22nd March 2020, over 75 districts in India have now imposed a complete lock-down. As a lock-down is the only noticeable successful strategy that been followed by other big countries infected by the coronavirus, Indian states have also started implementing a similar lock-down/curfew strategy.

4. Travel Ban/Restrictions

As of 22nd March 2020, all the international flights are banned. Moreover, on the same day, Indian Railways also announced to cancel all passenger trains, and reduce suburban trains. By passenger trains, the ministry of railways means all mail, express trains, suburban trains, passenger trains, Kolkata Metro Rail, Konkan Railways, etc.

Effects of Coronavirus Spread

If the spread of coronavirus is not contained, the number of cases and casualties in India is expected to increase in the upcoming weeks. The total number of affected cases has already crossed +400 in India. The above-mentioned changes may help to fight back the virus. Nonetheless, here is a few common effects that may be noticed among the people because of coronavirus changes:

1. Dealing with Fear, Social (& Mental) Anxiety

Fear and anxiety are quite common during a pandemic. As the number of cases with coronavirus casualties in India will increase, it may increase the fear and anxiety among the population.

2. Personal cleanliness & hygiene

To control the spread of this contagious virus, washing hands frequently and cleanliness are a few of the key steps. Indians have now started taking care of their hygiene and cleanliness.

3. New kind of patriotism

Because of different changes made in the country like International travel ban, lock-down, and country first approach, it is expected to see a rise of new kind of patriotism among people. During Janata Curfew (22nd March 2020), we’ve already seen how the people of India appreciated the work done by Doctors, and servicemen by banging thalis, ringing bells and clapping hands for five minutes at 5 pm.

Financial and economical Effects

Now, let us talk about the stock market, finance and economy. How coronavirus days may impact us financially and economically:

1. Continued Bear Market

During the coronavirus days, the share prices and market have already witnessed a sharp crash. Within less than one month, all the major market indexes have fallen over 30%. Nonetheless, it is expected that the market will continue to run in a bear market for a continued longer duration. This is because the aftermath of this pandemic virus will take a lot more time to make things normal, both in the personal and professional lives of people.

2. Pay-cut or lay-offs

Due to the spread of the virus, a lot of companies are not able to perform well and their revenues are continuously tanking. And in order to avoid bankruptcy or financial stress, these companies may have to cut salaries, delay new hirings or even lay-off some employees. Moreover, the lay-off scenario may be worse in some highly affected industries like travel, tourism, hotels, airlines, bars, malls, etc that are heavily affected by the lockdown.

3. Rise of online businesses

Although the market and economy are continuously falling during the coronavirus days, however, there may be a silver lining for a few sectors during this time. A few industries like online learning (Byju’s, Unacademy, etc), online payment (Phonepe, Paytm), Online Grocery (Bigbasket, Amazon), E-commerce, etc are performing quite well as people are opting for their product/services from their homes. These industries are expected to boom during the coronavirus days.

Also read: Coronavirus- How it Infected Stock Market & Indian Economy!

Closing Thoughts

In this post, we tried to discuss a few common changes and their effects in India during the coronavirus days. Nonetheless, these are just assumptions and it might be a little early to say what will exactly happen.

The next two weeks are quite crucial for India in its fight towards coronavirus and they may be the deciding factor. In these times, how the government of India and its people handles the situation will play a major role among the changes, effects, and aftermath that we may see in the future. Take Care and till next time…!

The Equilibrium of Duopolies in Indian Market cover

The Equilibrium of Duopolies in Indian Market

Duopolies in Indian Market: Visa vs MasterCard, Boeing vs Airbus, Coke vs Pepsi, Netflix vs Amazon prime, etc are some of the companies that have already been etched most notable duopolies throughout the world. Be it a boon or a bane, these mega-corporations cannot be named individually without mentioning the other. Such has been the tale of Duopolies, their fierce competition, and respectful cooperation eventually forming an interdependence where each has scaled summits.

(Rivalry noticed through Advertisements)

(Pepsi responded to the above-attempted sale of Coke’s secret ingredients by notifying Coka-Cola)

In this article, we further look at Duopolies that have shaped and extended their segments, particularly in the Indian markets.

Duopolies in Indian Market

— Zomato vs. Swiggy – Food tech

zomato vs swiggy - Duopolies in indian market

A decade ago Dominoes and their ’30 minutes or free’ scheme stood for food delivery in India. However, the real credit has to be given to Zomato and Swiggy for the development of the Food tech industry in India. They have now formed an integral part of our lives and also sets the perfect example of a duopoly in the Indian context in the food tech/delivery industry.

Zomato was founded in 2008 initially as a website that provided information on restaurants, access to their menus, the ability to view and provide reviews. However, they eventually ventured into the food delivery segment. On the other hand, Swiggy was set up as a food delivery platform from the beginning in 2014. Both competitors have used a strategic discounting model to attract and keep customers. Moreover, advertisements through social media have played a significant role in their growth and competition.

Strategies used by Zomato

Each of these corporations has strategically acquired other new entrants to enhance their growth to gain an upper hand. This was also done to use them as a doorway into new markets. Zomato has made 12 acquisitions which include companies throughout the globe. The acquisitions are involved in restaurant search service, table reservation, restaurant management platforms, logistic tech startups, food delivery startups with their most notable recent acquisition being UberEats. Zomato has also acquired companies involved in drone technology focusing on the possibility of a future with drone-based food delivery.

Strategies used by Swiggy

Swiggy also has made notable acquisitions like 48 east, Scootsy logistics and also invested in Fingerlix- a ready to eat food brand. They also enhanced its customer base by easing the payment systems for working customers by partnering with Sodexo. In addition, Swiggy has also partnered with Indifi technologies, a financing program for partner restaurants. 

The strategies used by Zomato and Swiggy show how the food tech duopoly in India has competed using the technique of an acquisition. As mentioned earlier, this was also used as a medium to enter new markets and build on the structure already set up by the company taken over.

But when the pages are flipped over it also shows the difficulty a startup could face when competing with companies having greater control over the market. This is because they have already built resources over the years and are ready to burn through cash even after going through losses. They will eventually have to give in to the offer placed by either of the duopolies as it would be an uphill battle to compete with strategic discounting employed by either of the companies.

Also read: Online Grocery Market: Overview & Future in India (2020)

— Ola vs. Uber – Ride Booking/Sharing

uber vs ola - zomato vs swiggy - Duopolies in indian market

The ride-hailing segment in India is dominated by Ola and Uber. Uber a globally recognized corporation known for its ride-hailing service in 785 metro cities worldwide. They entered the Indian market in 2013 and currently boasts 14 million rides a week in India. Ola, on the other hand, had a three-year head start and currently boasts a reach of over 250 cities with 28 million weekly bookings.

Strategies used by Ola vs Uber

Ola and Uber too have used the strategies of acquisition and investment. Uber acquired Kareem particularly known for its service in the middle east and Ola has invested in VOGO to further its reach in the two-wheeler ride-hailing segment. Both Uber and Ola have competed aggressively in all road transport segments ( inc. two-wheeler, three-wheeler).

They have also entered other segments namely the food tech industry with Uber initiating UberEats and Ola acquiring Foodpanda. Uber has also extended its service to other means of transport through UberAir which uses VTOL aircraft in the US and also UberBoat in Mumbai at the jetty from Gateway of India to Alibaug. In addition, they are particularly keen on developing self-driving cars to be introduced in the ride-hailing segment.

However, in the case of Ola and Uber, we also see another side of the duopoly segment. Ola had been earlier accused of attempting to eliminate competition by lowering prices. This makes it impossible for new entrants to survive and then hiking prices when convenient.

Besides, both Ola and Uber have been accused of overcharging in situations where the same ride is charged different amounts based on the day, time, profile, history, rating of both the rider and the driver. This was opposed as both attempt to show a front of transparency to attract customers to their reasonable pricing. The same surge in pricing would not be acceptable when applied by local players.

They have also been accused of baiting riders with discounts and bonuses and then hiking fares without passing the gain from the price hike to the drivers. One of the main reasons that Uber and Ola have been in controversy is the fact the drivers are not considered employees of these corporations. They are instead considered as ‘contractors’ as this allows them to skirt legal obligations mandated towards employees.

If we look into the strategies used by Uber at a global stage to remain market heads they would seem to be straight out of a conspiracy novel. Uber to compete with Lyft in new York had formed a street team to gather information on Lyft’s expansion plans and lure their drivers into Uber. In 2014, 177 employees of Uber were accused to have intentionally ordering and canceling 5560 rides.

Uber also has been criticized for the development and implementation of the software tool ‘Greyball’ which was used to gather user data from their phones and avoid giving rides to law enforcement officers and those involved in sting operations. Uber also used the Ripley a panic button 24 times at the times of raids. Ripley would shut off and change the passwords of the staff computers when initiated. The controversy with Uber gets worse as they have been accused of implementing ‘God View’ a function used to track journalists and politicians.

Also read: The On-going Oil War (2020) – Causes & Effects

— Flipkart vs. Amazon – Indian eCommerce

When it comes to E-commerce the duopoly Flipkart and Amazon are said to have a combined market share of over 90% in the Indian market. Flipkart was founded in India in the year 2007 whereas Amazon had been launched in India in the year 2012.

Strategies used by Flipkart and Amazon

In comparison, the homegrown company ‘Flipkart’ has been a market leader even when facing Amazon. Flipkart being an Indian company has used this to its advantage by spreading its reach even to rural areas whereas Amazon had initially limited itself only to metro cities. Almost 45% of Flipkart’s sales currently come from smaller towns and cities giving them an edge over Amazon in India. Amazon, on the other hand, has targeted metro cities which formed 65% of its sales.

Flipkart too as noticed in the earlier examples has used similar strategies of acquisition ( Myntra, Jabong, PhonePe, and eBay). Amazon, on the other hand, has relied less on acquisition and more on forming partnership with local logistic companies to bolster business.

The entry of Walmart into India through the purchase of Flipkart gives an insight of means used by MNCs to enter new markets. This was also used by Zomato and Uber in the previous examples.

Disrupting a Duopoly

The duopoly held by MasterCard and Visa in the international payment segment was disrupted by the introduction of RuPay in India. After noticing multiple examples of new entrants not being able to compete with already set Duopolies eventually leading them to being acquired, the question arises on how RuPay was able to achieve this in India. 

RuPay belonging to the domestic payment system was set up in India in the year 2005 by the Board of payment and Settlement systems by the Reserve Bank of India. The RuPay card was introduced in 2012. As the processing of the transaction in RuPay is within India they are lower than that of MasterCard and Visa. This is because the processing in MasterCard and Visa take place abroad resulting in a higher processing fee along with their higher fee structure.

The rise of RuPay can also be attributed to Prime Minister Narendra Modi who had publicly endorsed it. One of Modi’s schemes namely the PM Jan Dhan Yojana helped RuPay contend with global players. Here, financial services, bank accounts, and a RuPay card were made available to most of the rural population free of cost.

Government support, Deep Pockets and a focus on the local problems that MNCs overlook seem to have worked for RuPay to become the top player in India. However, this led to the government facing a lot of backlash on the global stage with Visa and MasterCard crying foul and alleging that Modi used patriotism which they viewed as a way of protectionism against them.

Closing Thoughts

After considering three of the most notable duopolies in India we can note that for the successful functioning of a company a certain degree of cooperation is required to maximize the profits. With both companies acting as a check on each other the greatest benefit reaches the consumer.

Example – strategic discounting used by Zomato and Swiggy. These benefits are not available in a monopoly. It is also important for the government to maintain stringent checks to avoid the formation of cartels. The best comparison can be seen in Uber. The management has been termed as a ‘ Group of Thugs’ in the US ( where it has a market share of over 65%) due to its unethical practices. In India however due to a stronghold by its competitor Ola it has had to forego its ‘win at all costs’ attitude which was also later forgone in its operation in the US.

Another disadvantage a duopoly may have is on the stakeholders in the operating region, particularly its employees. All the companies taken as an example burn through cash without achieving profitability for a considerable period of time. This is done to survive the competition and eliminate new entrants. Failure of any of the companies will result in mass layoffs. Even if they enter a position of being acquired, employees that may increase duplication of jobs will not be hired. 

Acquiring a major market share does not then limit the competition in the Duopoly to each other. In the future, we will see many new entrants ready with deep pockets to take on these duopolies.

Amazon seems to be keen to make an entry into the food-tech segment. Also the Mukesh Ambani backed Jiomart has just made an entry into the eCommerce platform offering attractive incentives to users like savings of Rs. 3,000 on pre-registration.

The telecom sector, on the other hand, seems to be headed towards a duopoly with the supreme court taking a strong stand against Vodafone-Idea which owes the government $3.9 billion in dues interest and penalties. In the coming years, India will see Duopolies entering other segments and at the same time disrupt those that are currently in play.

Indian Markets - A Week Against Coronavirus & Crude Oil Fall

Indian Markets: A Week Against Coronavirus & Crude Oil Fall

Indian Markets Weekly Wrapup: As investors searched desperately for sightings of a leeway from the slumping market, last Thursday provided a worse off trajectory with WHO declaring coronavirus a pandemic. This led to the chokehold on various industries being tightened as it seemed to have contributed to the perfect two-punch combo to knock the Indian markets into a bearish slump.

Investors watched on as 11 lakh crore worth of wealth vanished with Sensex crashing by 2929.26 points. It was accompanied by the Bank Nifty falling 2951.45 points along with Nifty 50 which continued slipping further with a 950.40 points loss as Foreign Portfolio Investors sold off their holdings in the Indian markets. All closing at a two year low on Thursday.

The Wreckage through the week

The Indian market has already been suffering from the jabs from the economic slowdown, with added political tremors felt throughout the country due to riots, followed by the Yes Bank fiasco. Here we look at some other major events throughout the week.

— The Oil price hook

Last week, the crude oil prices were slashed to $30 a barrel. The cause was rooted in the Russian refusal to corroborate with Saudi Arabia in their plans to increase the crude oil output due to supply chain disruptions caused by the coronavirus scare. The scare had resulted in a worldwide demand slump.

This news only added to the Monday Blues in the US where the marginal cost of production touches $40 per barrel. Also globally, as this was the biggest drop in crude oil prices since the Gulf War.

However, this came as a relief to the Indian markets. Being the third-largest oil importer even a dollar drop per barrel would eventually result in an annual reduction in the import bill by Rs 10,700 crores. The benefits are still doubted due to the impact of the falling rupee against the dollar which currently stands at over Rs 74.

Also read: The On-going Oil War (2020) – Causes & Effects

— The COVID-19 Overhand Punch

The novel coronavirus outbreak had a devastating impact on any industry based in China or majorly dependant on China. By March 2020, the novel virus spread out to 119 countries. This was followed by the existing panic being materialized which already had investors all around the world bracing themselves for further impact on the market.

On Wednesday 11th, March 2020 with cases touching over 118,000, World Health Organisation (WHO) declared COVID-19 a pandemic. This was followed by a bloodbath the following day which wiped out most of the bullish movement achieved by the Sensex and the Nifty in the last two years confirming investments in India to be locked in a bearish state. This also led to a global turmoil with Dow Jones(US) posting a 10% fall, its largest loss in history and the FTSE ( London) losing 11%.

Also read: Coronavirus- How it Infected Stock Market & Indian Economy!

Indian Stock hits after Coronavirus being declared a Pandemic

The following notable stocks touched their lowest in 52 weeks on 12th, March 2020: 

  • Reliance Industries (RIL)
  • Tata Consultancy Services (TCS)
  • HDFC Bank
  • Hero Motocorp
  • GAIL
  • Gillette

Notable Industry-wise effects

— Corona vs Healthcare Industry  

Other significant effects are also to be faced by the Healthcare industry in India as over 90% of the medical supply is sourced from China. Supply disruptions are already faced in sourcing Active Pharmaceutical Ingredients(APV) from China which are used in the manufacturing of antiretrovirals used in the treatment of HIV. These are crucial as they are also currently being tested on patients infected with COVID-19. 

— Corona vs. Airline and Tourism Industry  

With WHO declaring coronavirus a pandemic, countries affected entered a lockdown. US banned travel from Europe and travel has been discouraged by the government.

This has led to the airline industry being affected by IndiGo airlines announcing an expected fall in the quarterly earnings after noticing a 15-20% fall in their bookings on a day to day basis. The shares of Indigo fell over 12% while Spicejet fell by nearly 20%. An even more severe impact expected in the tourism industry.

— Corona vs. Agriculture Industry

The effects of COVID-19 are now being experienced even in the agriculture industry due to its dependency on pesticides. The raw materials required are imported from China. The imports range from 40%- 90% depending on the chemicals required. If the current scenario persists this will eventually affect the food industry due to a reduction in the availability of pesticides which has already been plagued by rumors on a variety of foods that may aid the spread of the virus.

— Corona vs. Sports 

Any action taken specifically to prevent the spread of the COVID-19 is laudable, but we can still note and relate to the impact that has been on entertainment and sports. 

With multiple sporting leagues being canceled or played with closed doors the 13th edition of IPL has been suspended till April 15th. Estimated losses touching Rs.10,000 crores if canceled.   

Effect of Coronavirus on Sectoral Indices 

Last week, every Indian sectoral indices faced major losses (with only BSE Telecom facing a loss at 1.35%). All the remaining sectoral indices facing losses from 7.5% to 16.03%

Biggest Losers – Nifty Indexes
Nifty Media 16.03%
Nifty IT 13.56%
Nifty Metal 12.85%
Nifty Realty 12.57%
Nifty CPSE 12.57%

Outlook by End of the Week

With Friday, 13 March 2020, came the silver lining where market movements of Thursday were not repeated. Due to the effects of COVID-19 bearish markets were realized which were also noticed during the outbreak of SARS in 2003, Bird Flu in 2004, Ebola in 2014, and Zika in 2016. Here we can learn that the markets have always recovered into bullish positions and eventually performed better than ever.

Indians have already witnessed several decisions taken by the government that have led to being financial disasters, resulting in the eventual economic slowdown in the recent past. However, when the future of India is considered, there is little that can be done by a government in such market scenarios where it is trying to make up for the lead already gained by an outbreak.

Best option being to direct its focus on the root causes which involve the prevention of the virus spread and finding a cure before its too late. We have already learned from the effects on China and Italy where such outbreaks entering a lockdown phase result in graver consequences on the economy.

UNRAVELLING YES BANK cover 2

The Unravelling of Yes Bank – Fiasco Explained

The Unravelling of Yes Bank: With news of Yes Bank shares tumbling with over 85% downfall (since 1st July 2019 till 6th March 2020) and founders accused of money laundering, it made Yes Bank hard to be recognized as the same bank that once attracted so many retail and veteran investors. Even big players such as Rakesh Jhunjhunwala made investments of over one crore in Yes Bank shares in the past.

Yes Bank Share Price March 2020

In this post, we are going to cover the Yes Bank fiasco story in order to understand what exactly went wrong with Yes Bank. We are going to discuss how this stock (that was once the darling of the investing community) turned out to be one of the worst wealth destructors in recent years.

Yes Bank History

(Rana Kapoor: Co-founder, Yes Bank)

Incorporated in 2004, Yes Bank was founded by Rana Kapoor who headed the bank till 2018. His other co-founder – Ashok Kapur suffered demise during the 26/11 attacks in Mumbai which eventually led to an internal feud between his next of kin and Rana Kapoor.

Despite all these, Yes Bank also withstood many obstacles including the demonetization cash crunch which eventually worked out in their favor. It helped them rising up to become one of the digital transaction leaders having over 1,000 branches, 1,800 ATMs and over 1,8000 employees throughout the country by 2019.

What led to Yes Bank losing +85% in market value?

On 5 March 2020, the Reserve Bank of India (RBI) announced taking control of Yes Bank in an attempt to avoid the collapse of the bank. Although the stock crash may come as a surprise to many, there seem to evidently be many red flags placed by Yes Bank on the road to this date – 5th March 2020.

— Bad Investments

This began with Global financial services firm UBS flagging serious concerns in 2015 over the loans given out by the bank which included debt-ridden Cafe Coffee Day, DHFL, Anil Ambani led Reliance and also currently bankrupt and grounded airline Jet Airways.

— Manipulated NPA

Due to multiple bad loans Yes Bank started gaining undue attention from the RBI over their Non-Performing Assets (NPA). This was because Yes Bank was avoiding recognition of these bad loans as NPA, but instead resorting to providing these borrowers with extended new loans or having their existing loans restructured. This led to a wrong portrayal of NPA’s that shows the percentage of total loans or advances that are in default or in arrears.

Anyways, it was promptly caught by the RBI in 2015, 2016 and also in 2017 which involved the RBI directing Yes bank along with several other banks to report transparently. The stressed loans given out by Yes Bank stood at Rs 50,396 crores as of September 2019.

— Founders Dumping stock

In January 2019 Yes Bank announced that Rana Kapoor would step down from his CEO position due to restrictions placed by the RBI over the extension of his tenure. This was also followed by Kapoor along with other investors dumping their stake from Yes Bank in November 2019 which also led to a severe fall in the stock prices.

This came as a surprise as Kapoor’s earlier twitter handle claimed otherwise.

Also read: Promoter Rana Kapoor sells all but 900 YES Bank shares, worth Rs 60,000

Aftermath

Within a month of Ravneet Gill taking over as head of Yes Bank on March 2019, Moody’s estimated their NPA to stand at 8% (which is an extremely high rate). This gave the picture that eight percent of all loans given out by Yes bank were Bad loans and hence they also downgraded them.

The gravity of the situation was realized when the rating was compared to that of countries like the United Kingdom, Australia and Canada having an NPA of less than 1% followed by countries like China, Germany, Japan and the USA having an NPA of less than 2%.

(Ravneet Gill, Former CEO)

Due to multiple factors that involved bad investments, manipulation of the balance sheet, dumping of holdings by the founders and a high NPA eventually led to the RBI imposing a moratorium on the bank on March 5th, 2020, due to which individuals were allowed an aggregate withdrawal of only Rs.50,000 till April 3rd, 2020 initially.

This action was taken by the RBI to avoid a situation of a bank run where all the depositors demand their deposits be withdrawn in full, particularly in cases where the stakeholders have lost their trust in their bank (a scenario of which Yes Bank has become a prime example). 

Also read: Coronavirus- How it Infected Stock Market & Indian Economy!

Next Steps: Saving Yes Bank

The ailing banking sector in India which has relied on government intervention time and again has held State Bank of India (SBI) the Indian government bank to step up for the rescue of Yes Bank. SBI announced that it will purchase ownership of 49% with a Rs 7250 crore investment. Along with this, HDFC and ICICI are investing Rs.1000 crore each, Axis Bank investing 600 crores, Kotak Mahindra Bank investing 500 crores, Bandhan Bank investing 300 crores forming the dream team along with Jhunjhunwala, Damani and Azim Premji Foundation altogether making up an investment of over 12000 crores

The SBI rescue does not only aim at providing financial relief to Yes Bank but also aims at avoiding any further panic among the depositors of Yes Bank and possibly avoid a bank run. Steps were further taken with the initial moratorium which was capped with a withdrawal limit of Rs.50,000 till April 3rd will now be lifted on March 18th at 6 p.m.

SBI has also appointed Prashant Kumar as the new CEO who had earlier worked in SBI and has an experience of over 30 years in the Banking sector. The SBI is also to nominate two officers as directors in the additional new board with RBI to appoint more directors if necessary.

(Prashant Kumar, Newly Appointed CEO)

Closing Thoughts

Ravneet Gill who had earlier helped Deutsche Bank achieve one of the lowest NPA as the CEO failed to steer Yes Bank away from the course set by Rana Kapoor. The former CEO and founder currently face allegations over his involvement in money laundering and corruption but the dream bailout team has somehow managed to shine a light at the end of the tunnel.

While the government plays the blame game with the opposition, we should take into consideration that the rising NPA involves multiple Indian banks having NPA’s higher than that reported by Yes Bank. As reported by CARE Ratings, it has put India in a ranking bracket which includes countries infamously known as PIIGS ( Portugal, Ireland, Italy, Greece, and Spain) who have faced severe debt crises in the recent past.

Moreover, with the economic slowdown already faced by India along with the recent Coronavirus scare and Oil price crash, the road doesn’t look bright for the government to take on added responsibilities of rescuing private banks.

The On-going Oil War (2020) - Causes & Effects

The On-going Oil War (2020) – Causes & Effects

The On-going Oil War (2020)- Causes & Effects: Global demand for energy is an upward moving trend-line majorly due to the growing and developing economies. As per EIA (U.S. Energy Information Administration), there would be an almost 50% increase in the world’s energy usage by 2050, which will be led by growth in Asia. Crude Oil contributes the maximum in energy production worldwide.

oil war global energy demand

Oil isn’t just an energy source but a highly valuable commodity of the global economy. It has always been the most sensitive and influencing element when it comes to global trades, deals, and even wars. But the question is why so, what gives oil such immense governing power? Let’s find out in this piece of article.

The Global Oil Market Explained Briefly

Energy is one of the major underlying factors, which is running the economic activities. Brent Crude Oil contributes the maximum to the world’s energy production and consumption. Additionally ‘Crude Oil’ is the world’s largest traded commodity. This gives the oil an immense power to rule the global economy.

USA, Saudi Arabia, and Russia are the top three oil producers respectively, hence top oil-exporting countries followed by other Organization of the Petroleum Exporting Countries (OPEC). On the other hand, the world’s major oil consumers are the USA, China, Japan, and India. Both, the top producers as well as consumers of crude oil hold the maximum influential power on the global oil markets due to their high market shares.

oil war - crude oil production

(Source- Baker Hughes)

Why is the Global Oil Market in Crisis?

A recent outbreak of the pandemic ‘Coronavirus’, which started in China, has not just emerged as a threat to human life but has also turned out to be the root cause of unhealthy and unstable global economy.

oil war biggest one day decline

China happens to be the major source of the global supply chain. Being the epicenter of the virus outbreak, China’s economic activities slowed down which hampered the global demand and supply scenario. Furthermore, other infected countries like Italy, America, Japan, etc. are on a lockdown in order to contain the virus.

The demand for oil fell in the last few months due to contracting economic activities around the globe and especially in China, which is the largest oil importer, subsequently this led price drop of oil in the global market. But the falling prices of the commodity fell even steeply than estimated as Saudi Arabia and Russia, two largest oil producers locked horns with each other. 

The Beginning of ‘Oil-War’ in 2020

‘OPEC+’ (OPEC countries & Russia) recently held a conference in Vienna to come up with a contingency plan on the falling oil demand and subsequently falling oil prices. As per the International Energy Agency, the demand for oil will fall by 90,000 barrels per day accounting for the recent outbreak of ‘Coronavirus’.

As a solution, OPEC suggested a production cut in oil in response to falling oil demand, and stabilize the subsequently falling oil prices. But OPEC’s failed effort to convince Russia on the same led to the ‘Oil-War’.

On Russia’s disagreement to cut the oil production, Saudi Arabia member country of OPEC announced to increase its oil production followed by cutting its export prices of oil by $11, making the price $34 per barrel. This move by Saudi Arabia hurt all the other oil-producing countries.

Why did Russia refuse to cut Oil production?

Russia’s refusal to cut oil production and stabilize the price is explained as its way to hurt the USA’s Shale Oil Industry, which is one of the largest oil producers. Lower price per barrel will impact the USA’s Shale Oil margins. The oil extracting cost for USA is high, hence falling oil prices would further impact the profits for US Shale Oil companies.

How is Oil-War impacting oil-producing countries?

A beaten oil price, which is down by almost 25% due to on-going ‘Oil-War’, has some major implications. Being the most highly traded commodity, tanking oil prices is going to impact the revenues of the oil-run economies heavily. It is too soon to analyze the measure of the impact but, since the world’s economy is highly correlated to oil-prices and its demand, we can only imagine the impact if it gets worse.

What will be the impact on oil-importing countries?

 While it only seems logical to say that tanking oil price is an opportunity of biggest oil importers like China, India, etc. but it isn’t that simple.

China, which is the largest oil importer and accounted for more than 80% of global oil demand growth in 2019, has already cut its oil demand 20% in February 2020 due to ‘Coronavirus’ impact. As a chain event similar fall in demand is seen worldwide. (Source- IEABusiness Insider)

Tanking oil price seems attractive to oil-importing countries, as it contributes to huge savings. But the scenario is a little different. Buying cheaper is profitable but with less demand, the benefit will not be passed over to a great extent. 

Also read: Coronavirus- How it Infected Stock Market & Indian Economy!

On-going Oil-War, will it continue for long?

The current scenario of the global oil market is dicey and uncertain. The extent of domination that oil has on the economies worldwide only points towards one direction that longer the war continues higher will be the impact.

Saudi Arabia and Russia both are oil-driven economies and hence affording a tanking oil-price for a longer duration will only hurt their economies in the long run.

On the other hand, USA’s influence on the global output of oil is not nothing. It is the largest oil-producing country, thus it can also influence majorly. However Trump hasn’t announced any move to secure USA from the current oil-war scenario, but that doesn’t make America vulnerable. If the oil-war continues sooner or later we might witness a power play by America.

It is evident from history that geopolitical tensions like the ‘US-China Trade War’, have only resulted in damages. However, where few suffer some others might take advantage. Only time will tell what turn will this ‘Oil-War’ take.

impact of coronavirus on stock market

Coronavirus- How it Infected Stock Market & Indian Economy!

Impact of Coronavirus on Stock market and Indian Economy: The Indian stock markets have been in turmoil over the past few months due to slow economic growth. The market was only recovering with government taking some major initiatives like rate cut in corporate tax, infusing money in the economy, disinvestments, lowering repo-rate, etc., until another crisis hit a new wave of major economic slowdown pushing the indices (SENSEX and NIFTY) to their decades low.

In this article, we’ll discuss what exactly is ‘Coronavirus’ crisis and what are the impacts of coronavirus on stock market & Indian economy. Let’s get started.

What is the ‘Coronavirus’ crisis?

COVID-19 a pandemic most commonly known as ‘Coronavirus’, which started in China has now breached the international borders and has spread to nations across the globe. Among the infected nations some of the major economies that are facing severe damages are South Korea, Iran, Japan, Italy and now India has been added to the list.

The nations are not only facing a loss of life or an exponential increase in the number of infected individuals, but the economic growth has also been dented by this pandemic.

The global economy is facing a rough time due to the outbreak of the ‘Coronavirus’, which started in China. ‘China’ is the worlds’ largest manufacturing hub and one of the largest exporters of goods. China accounts for almost 16% of global exports.

Being the epicenter of the virus the economic activities in China contracted as the health emergency called for shut down of offices, factories, schools, etc. This contraction had a dominos effect on the economies across the globe as a majority of ‘supply chains’ globally are sourced from China.

How is the exposure of ‘Coronavirus’ impacting the Indian Economy?

India is China’s second-largest trade partner making the trading roots even deeper and hence the impact on Indian markets is huge. India happens to be a net-importer from China. India’s merchandise import from China accounts for almost 18% of its total imports from around the world, while the exports account for almost 9% of the total exports around the world, as of CY2019.

Due to the economic activity contraction in China, industries and companies directly related to imports and exports from and to China are facing a crisis. Some of the major sectors affected in India are-

  • Auto-ancillaries imports constitute 18% of total imports from China, whereas tyre imports include approximately 30% of imports from China, resulting in a shortfall of raw materials and auto-parts for OEMs and automobile manufacturers.
  • Consumer Durables industry imports constitute almost 45% of total imports from China making it highly reliable on Chinese manufacturers.
  • 67% of electronics (mobile phones, laptops, etc.) are imported from China. Due to a high dependency on Chinese imports, the domestic contract manufacturers will only be benefited marginally as the manufacturing capacity in India is quite low in comparison to China. Hence domestic industry players cannot fill the supply gap.
  • India exports around 34% of its total ‘Petrochemicals’ to China. As a result of the contraction in the economy, the demand will fall and the prices of petrochemicals will take a hit and margins will be under pressure.
  • Pharmaceutical Industry imports around 69% of its pharma drugs and intermediates from China. However, the companies have maintained enough stock for 2-3 months promising a less affected Q4FY20.
  • Others- Gems and Jewellery (India exports 36% of diamonds to China); Seafood (India’s exports to China accounts for ~22% of its overall seafood export); Solar Panels (India imports ~70% of solar modules from China); Shipping & Logistics (China is the largest consumer of Iron Ore, Coal, Oil & Gas hence affecting the demand and trade via sea-routes); Textiles (India exports 27% of total cotton yarn to China)

(Source- CRISIL February 2020 Report)

Market discounts information on a real-time basis, thus the aftereffect of the virus outbreak on the Chinese economy and on the above-listed industries and sectors can be seen evidently as the stock prices of related companies and sectoral indices fell in the past one week. Negative investor sentiment can be directly witnessed with the market breaking down to new lows with every passing day.

Further, the sectors and commodities, which are indirectly connected to the above-listed industries, will have a subsequent impact like the Oil prices falling, etc.

The weight of the above-listed Industries in the contribution of India’s GDP growth is high thereby affecting the economy at large.

India – Q4FY20 Outlook

The performance of Q4FY20 is still in question as many sectors like ‘Pharma’, sourcing supply chains from China have already stocked their inventories for almost 2-3 months absorbing the losses that could have occurred due to shortage of raw material supply. While on the other hand, the electronics market might take a major hit due to the shortfall of supply. Some of the top mobile phone companies like ‘Apple’, ‘One Plus’, ‘Xiaomi’ etc. have there manufacturing hubs in China, additionally among the top mobile phone companies majority are Chinese brands.

The uncertainty isn’t much as one can easily do the math of India’s dependency on China. Hence the answer is crystal clear. What needs to be addressed is to what extent can Indian economy be damaged and what will be the governments’ contingent plan to the bailout the Indian economy.

Though it is too soon to say the measure of impact, as Q4FY20 numbers are yet to come out.

Also read: Revisiting 2008-09 Economic Crisis – Causes & Aftermath!

Is the falling Chinese Economy a Silver Lining for India?

India has been running its own race to achieve a target of becoming a $5 Trillion economy. The economy has been thriving with the government taking some important measures to make India self-sufficient and attractive for foreign investors.

China is a world manufacturing hub and a net-export country. The dependency of the world economy on China is too high and hence, concluding that the current economic contraction in China is an opportunity for India is too soon and illusionary. Further, the manufacturing capacity in India is far too less than China and cannot be sufficient for an instant shift. A business shift takes immense time due to strategy and cost-effectiveness. Thus India might be a good substitute for China, but in order to replace China, it has a long way to go.

Future Outlook on the Dalal-Street

The root cause of the falling stock prices and indices is the uncontrollably spreading ‘Coronavirus’. The cure for the virus has not been found yet and the number of infected individuals has been increasing with every passing day.

The investors have become so pessimistic about the future outlook of the Indian economy, that pulling out money from investments looks much safer and promising to avoid further after-effects of the virus on the industries and economy.

The fall will continue until the virus is not controlled and continues to spread contagiously affecting the economies. Some positive outlook on the vaccination or control of this pandemic seems to be the only solution that can rest the fear of the investors.

trade brains learning app Feature Page 2

Meet the Newer Version of Trade Brains Learning App

Hi Friends. You have got a great taste of learning finance in a fun and easy way. Sure, you do. That’s why you’re a loyal reader of the Trade Brains’ website and our Newsletters.

But sometimes, blogs and newsletters are not enough to learn. Well, we understand. And therefore we just relaunched the newer version of Trade brains stock market learning app on google play store and wanted you to be the first to know.

Quick note: Here’s a direct link to download trade brains learning app from playstore.

trade brains learning app-screen

Trade Brains- The Stock Market Learning App

Just to reintroduce, Trade Brains is a comprehensive stock market learning app focused to simplify investing and finances for beginners and intermediate investors and traders. This app is designed to ensure that newbies can learn to invest by grasping all the essential concepts regarding the financial market step-by-step.

Some of the key interactive features that we added in this new app are:

  • Interactive Learning: We have made the app more interactive to offer a fun and easy way to learn to trade and invest in the share market anytime, anywhere.
  • Structured Courses: Now, you can explore and enroll in our factory of Guided Courses specially categorized for beginner, intermediate and seasoned learners.
  • Build Your Profile: In order to make your learning more dynamic, the users can win points & badges after successfully completing every lesson to build their profile, track their achievements and grow.
  • Biggest Ever Resources: We have added all the essentials tools for stock market learners to make their journey easy like Financial Glossary, Financial Calculators, Quizzes, AI-Based chatbot & more, all at one place.
trade brains learning app tools

Some key tools offered in our Learning App:

AI-BASED FINANCIAL CHATBOT

Trained with over five hundred intents on financial concepts, our artificial intelligence-based financial chatbot will answer most of your troublesome queries. Simply ask your question in our chatbot and it will give the relevant answer.

FINANCIAL CALCULATORS

Our simple financial calculators will help you simplify your investments. Whether you are planning to start an SIP or want to calculate the target investment amount for your desired corpus for a goal-based investing, our simple calculators will make your calculations easy and fast. In addition, you can find all the essential intrinsic value calculators like DCF calculator, Graham calculator, etc inside the app.

trade brains learning app calculator

INVESTING QUIZZES

Hey, do you think you know the investing world good enough? Then prove it! Through the specially designed quizzes, you can test your knowledge of stock market and mutual funds. We offer FREE specialized quizzes on the stock market, mutual funds, financial market and more in our learning app.

READ LATEST FINANCIAL NEWS

Read the latest news and headlines from leading Indian business websites like Business Standard, Livemint, Bloomberg Quint, etc in real-time to keep yourself updated with the market efficiently. This app provides a smarter way to read all important financial news in one place.

Overall, the Trade brains learning app is a Fun & Easy Pocket guide for stock market investors and learners. And that’s why, I would like to invite you to try the app.

Here’s a link to download the app from the Google playstore.

trade brains learning app

In addition, if you’ve any feedback or suggestions regarding the app, feel free to comment below. I and my team will be happy to implement them on the app.

Have a great day.

Warm Regards,
Kritesh Abhishek
Founder, Trade Brains

What are the Different Career Options in the Stock Market in India cover

What are the Different Career Options in Indian Stock Market?

Different Career Options in Indian Stock Market: The equity market has opened a lot of career opportunities in recent years. This market is getting bigger day by day and the opportunities for employment in the Stock Market are growing every day. People from all backgrounds whether science, commerce or humanities, are showing more and more interest to pursue their careers in Stock Market today.

On one hand, many people are opting to become a financial market participant and work independently. On the other, a significant number of Startups are establishing innovative ideas to create disruption in the Indian Securities Market.

In this post, we are going to discuss a few excellent share market career opportunities in India. Let’s get started.

Different Career Options in Indian Stock Market-

— Stock Broker

As you might already know, if you want to trade or invest in the Stock Market, you must open a trading and Demat Account. These two accounts are offered by stockbrokers. So, given the largely growing investing population of India, you can easily guess how prospective the career as a Stock Broker could be.

For example, If we take of Mr. Nithin Kamath, the founder of Zerodha (discount broker), he started off his career as an Engineer and subsequently started taking interest in the Stock Market. Later, he found the financial market so fascinating that he switched his profession as an engineer to a Stock Broker. In the year 2018, Zerodha, his stockbroking company was awarded the best discount broker entity in India by NSE.

nitin kamath zerodha founder

(Image: Nithin Kamath & Nikhil Kamath – Zerodha Co-founders)

Further, in order to become a Stock Broker or open a stockbroking entity, you don’t require a strict eligibility criterion in terms of academics. Nonetheless, you need to clear NISM exams and get your license from the SEBI. Anyways, if you plan to be a Stock Broker, it is important to gain a practical understanding of the Market. So, it is better to work with a Securities Broker for at least 5 years to gain requisite experience if you are willing to start your own venture.

Next, if you want to get employed in a Stock Broking Firm, you will need to clear 12th standard at the minimum. Graduating in Accounting, Economics or Finance will help you start your career from a decent level. Qualifying Post Graduation is not necessary but it might help in fast promotion in the industry. In case you have qualified professional courses like CFA, CA or FRM, no doubt your career path would become really smooth.

(Note: You can read detailed information regarding making a career as a Stock Market Broker here.)

— Financial or Investment Advisor

If you want to start your own consultancy business in the Financial Market, becoming a Financial Advisor or an Investment Advisor is a perspective option.

In recent years, AMFI has been trying hard to bring the income earners in our country to invest in the Mutual Fund industry through their campaign “Mutual fund Sahi hai!”. However, just AMFI is not big enough to educate and convince billions of people in our nation to invest their money in the financial market. As an Investment Advisor, you can reach a plethora of prospective clients.

Preparing customized financial plans, providing consultancy services on wealth management and educating people on financial products can assuredly help you to build a career and make good money in this industry.

To become a Registered Investment Advisor, you will require an education and certification criterion. If you have a graduate degree in Finance/Commerce or at least 5 years of work experience with a financial company, you meet the educational criteria. Note that if you are an engineer with just a B.Tech degree, you do not meet the educational criteria by SEBI. Here, you need work experience in the finance field for at least 5 years or a post-graduate degree in finance.

Anyways, if you are a Post Graduate degree in finance, you won’t require any work experience to apply for your license from SEBI. Further, whether you are a Graduate or a Post Graduate, you mandatorily need to clear the NISM Investment Advisory Certification exam to apply for the SEBI registered Investment advisor. Once you meet all the educational and certification criteria, you can apply to SEBI and get your license. (Note: You can read this post to learn further on how to become an Investment advisor in India.)

Besides, completing CA, CFA or CFP will also help you get the required knowledge you need to render professional services to your clients.

Also read: What is SEBI? And What is its role in Financial Market?

— Research Analyst

Apart from becoming an investment advisor, Equity Research Analyst is also a lucrative career option nowadays. Let us have a brief understanding of this.

Equity Research includes Buy-Side Research and Sell-Side Research. In the case of the former, the researcher work with a financial service organization that directly invests people’s money in the Stock Market. Here, you need to research the stocks to help the Fund Managers make decisions with respect to managing the available financial assets. In the case of Sell-Side Research, the researchers analyze equities and equity derivatives for the clients who are retail traders and investors.

If you want to start your own business as an independent Research Analyst, the eligibility criteria are similar to Investment Advisory option. Further, if you want to take a job as a Research Analyst, the top financial service entities in India look for candidates who are MBA graduates from Tier 1 institutes. Nonetheless, you can also make a career as a Research Analyst if you have completed CFA or CA. (Note: You can read further regarding Equity Research Analyst profession here.)

— Portfolio Management Services (PMS)

If you are a Mutual Fund investor, you might know that your investments are managed by experienced and skilled Portfolio Managers. The Wealth Management firms operating in India handle clients’ money via professionally qualified Fund Managers. Portfolio Management could be an extremely rewarding career if you are good at managing money and have a strong understanding of the Financial Market.

In order to enter this field, you will require professional qualifications like CA, CFA or MBA (Finance). Moreover, if you are a fresher, it is extremely hard to get into this field. Here, you may need experience of at least a decade of working in the Finance domain as you need to grasp the level of maturity of handling assets which amount in crores. Therefore, if you are considering to become a Portfolio Manager, you may first start working in the marketing and research for 5 to 10 years. (Note: Here is a blog that can answer your additional questions on the career as a Portfolio Manager)

Conclusion

In this article, we tried to cover different career options in Indian stock market. Parting advice- if you are planning to make a living from the Stock Market, you need to have an in-depth understanding of the financial world.

Although possessing academics and professional qualifications are necessary but having practical exposure to how the market exactly works is more important. Besides, whichever stock market career option you choose, having strong communication and analytical skills are always add-on advantages.

Corporate Social Responsibility (CSR) - What does it actually mean cover

Corporate Social Responsibility (CSR) – What does it actually mean?

Corporate social responsibility, which is known as CSR, is a type of mechanical business model that can help a company to be socially accountable and responsible to all the stakeholders and the public related to the interests of the company. With the help of corporate social responsibility, a company can be socially accountable to the people, and it means that it owes something to them. It is a type of corporate citizenship that a company has over time.

First of all, CSR helps in image building formation. 

With the help of the corporate social responsibility, a company can be conscious of the type of image that it creates to the society and impacts on the well-being of the people, directly and indirectly. There is a lot of impacts that the company can source out to the public. This can be done with the help of the economic, social, and environmental kind of ways.

If your company wants to engage in the work of corporate social responsibility, then they have to socially responsible for the well-being of the public whose interest lies in the company. It has to operate in such a way that it can be good and enhance the presence of the company, socially or culturally.  

Corporate social responsibility in India

When it comes to India, then it is the leading source of business from all around the world. It is the first country that has made corporate social responsibility CSR mandatory, which the help of passing a law in the amendment in April 2014. With the help of these companies act passed onto by India, now businesses can directly invest their profit into the area of the society, they can help the community to have a better formation for the further source, and in the best way, CSR becomes a hunger for every company out there in the market.  

tata trusts Corporate social responsibility

Company’s Act passed for maintaining CSR by Indian Companies

According to the whole of the company’s act, which was passed onto by India, it was sourced that the net worth of any business will now be a part of the CSR here. To the net profit of about 5 crores made by any company, around 2% of the same target is to be spend around for the well-being and management of the society as a whole so that the community can profit from the revenue which is managed by these companies.  

Before the same, India made it mandatory for the companies to disclose all their corporate social responsibility reports to the stakeholders and the shareholders of the company. 

They should be liable and should be a part of the company’s profit-earning capacity as well. These were included for the projects related to the company’s activities and the projects that were related to the activities taken by the company on-board.  

It was recommended all by the CSR committee as a whole to cover all the items listed in the source of the Companies Act, which was stated during the time of amendment. 

Also read: What is Corporate Governance? Principles, Examples & More

What is the whole methodology of the CSR Technique?

With the help and including CSR for companies out there, it can help them to profit and earn them for the scope of the long run. It is the procedure of assessing all the impact of the organization on society and then slowly evaluating all their responsibilities. These responsibilities, which are managed by the group of organizations that uses CSR is to help the community become a better place by distributing the part of the revenue which is made and even sourcing out the following aspects which are presented below.

1. Channeling the needs of the customers

The customers are the central part of it. With the help of the customers, an organization can run smoothly. With the use of corporate social responsibility, a business can go in for the long drive of run with the source of the customer that they have. It can help them to the pan and rule out the odds.

2. Helping the suppliers to earn

Another one which comes on the second lot is the suppliers of the business. A business can only profit when the suppliers are pleased. These are done with the help of corporate social responsibility. When the part revenue is distributed, the suppliers can be happy and supply more for the business and include their service for a longer time.

3. Creating a proper work environment

The environment where the business is incorporating should be steady, as well. If the climate is not stable, then a company cannot lead its growth and go towards the best. This is why corporate social responsibility can help to enhance the working environment, inside and out of the organization.  

4. Helping the communities

The communities are a huge part of society. These are the forums and groups through which the whole nation is based. If the business has to go for a longer duration, then they have to please the community members. This is done with the source of CSR and maintaining a cordial relationship with the communities of the society for a better outcome of results from altogether. The cities are the prime, and any organization should know it.

5. Providing comfort to the employees

The last one who lies here is the employees of the organization. If the working members of the organization are pleased, then only a business can run. Labor is what every organization needs out there and especially if they are skilled enough to do the job. CSR helps to have a proper relationship between the business and the labor.

Also read: Top 10 Companies in India by Market Capitalization

Legislation management for CSR

The most effective plan of corporate social responsibility for any business is to create legislation and to comply with it. Their investment for the source of the company should be a part of the whole society, and every decision that a company takes, the community should be a wholesome concern. The investments are a part of growth for any type of business out there, and only when the growth helps the community to lean towards the work of a company, the organization can have a more profitable revenue for the working years.  

Organizations in India always thrives for corporate social responsibility

There are a lot of organizations located in India which thrives on the source of corporate social responsibility and have benefitted from the whole idea. They have to take special CSR initiatives altogether, which can help them to integrate the cause and to work on the entire business process on the run. With the upcoming years in the market, all these have become an endless source of income for the business as a whole, and it has helped them to gain revenue.  

Besides growing your business, you should respect the culture and the beliefs of the people who are around you. With the help of respect, it creates a massive value of the business in the eyes of the public. It can help them to shape the business, which can be sourced out to a higher chance of collecting more revenue.

Businesses tend to profit more

With the help of CSR, an industry can source out their impending management and shape their responsibilities altogether. It can help them to understand the community at a large and also tend, adhere to the needs of the city. Companies do have a specific source and type of demand, which can help the department and the teamwork towards the development of particular purposes.

CSR management in Indian companies

CSR programs help the whole business to work for separate budgets and then support them in a wholesome way. It can improve the business to scope out the primary source of profit by looking after the well-being of society. When it comes to managing the source of work, then companies do have a specific source of the department which handles the work of corporate social responsibility. These are the departments that set up the policies of the CSR and then come up with freshly integrated ideas.

Are you ready for ‘Muhurat Trading’ this Diwali?

Muhurat Trading 2019: First of all, a very happy and prosperous Diwali to you and your family in advance. May this Diwali and the upcoming new years fulfills all the wishes that you wished for. Have a blast!

You might be ready for the Diwali- cleaned your house; bought diyas, candles, sweets & crackers, etc. But are you ready for trading this Diwali?

Don’t be confused. Yes, the stock market will remain closed on Diwali, i.e. 27th October 2019, during the normal stock market trading timings. However, stock exchanges will open for an hour in the evening for trading. This period of trading called ‘Muhurat Trading’ and this tradition has been followed in India since 1979.

As this trading is conducted on the day of Diwali, Muhurat Trading is considered auspicious and any trades conducted in these sixty minutes are believed to bring good fortune and prosperity. Moreover, this mahurat trading period is considered propitious for the upcoming year.

BSE and NSE will organize Muhurat Trading session between 6.15 PM and 7.15 PM. The pre-opening session will be held between 6:00 Pm to 6.08 Pm. Hence a normal trading will be conducted between these 60 minutes.

Pre-Open Session 6:00 to 6:08 PM
Muhurat Trading Session 6:15 to 7:15 PM
Duration 1 Hour

*Note: All trades executed in this Diwali Muhurat trading session would result in settlement obligations

Further, the exchanges will remain closed on October 28 on the occasion of Diwali Balipratipada.

Why Muhurat Trading?

Muhurat trading refers to the trading done on this auspicious day of Diwali. According to Indian tradition, Diwali marks the starting of the new year, and the trading done on this day is considered to bring prosperity and wealth throughout the year.

Further, it’s a very promising time to plan your investment for the upcoming year with your advisors/brokers to achieve your financial goals.

diwali sensex

Here are a few quick links to read more:

Once again, a very happy Diwali. And HAPPY INVESTING.

interim budget 2019 20 cover

Interim Budget 2019-20: The Talk of the Town

On the 1st of February, 2019, the Interim Budget of India, for the financial year 2019-20 was announced in the Union Legislature. Our honorable Finance Minister, Mr. Piyush Goyal, who is a Chartered Accountant by qualification, gave the budget speech, which lasted for around two hours, where a plethora of points were covered.

If you were at home while the budget was announced, you might have got the privilege to watch it live on television. Anyways, I was out on the street when the budget was broadcasted live. And therefore, unfortunately, I missed it. But subsequently, I watched the same on YouTube.

A Union Budget does cover plenty of pointers out of which only a few are those which we, as an individual, can relate with ourselves. This year budget has famously talked about taxation, agriculture, health industry and many other key aspects of our country’s economy.

In this article, we are certainly not going to discuss the entire budget as a whole. Rather, we shall talk a few selective crucial points which you, as an investor, need to know in order to manage your personal finance in the upcoming fiscal year for which this budget will be applicable.

Personal Taxation and Union Budget 2019-20

Income Tax

Firstly, let me tell you that the Income Tax slabs which were for the earlier financial year will remain the same for the FY 2019-20. In other words, there is no change in the tax slab for the people. However, the tax rebate under section 87A has been made applicable for an individual having total income up to Rs. 5 lakhs, (where the previously applicable limit was Rs. 3.5 lakhs).

The tax rebate limit for the ongoing financial year is Rs. 2,500. Nonetheless, the maximum limit of this tax rebate has been raised to Rs 12,500. Therefore, as an individual taxpayer, if you have annual taxable income up to Rs 5 lakh, it won’t attract any income tax.

Note: Currently, the net income falling within Rs 2.5 lakh and Rs 5 lakh is taxed by the Indian Government at the rate of 5%.

Considering this tax rebate, even if your annual gross income goes up to an amount of Rs 6.5 lakh, you won’t require to pay any tax on the same, provided you have made investments in the instruments prescribed u/s Section 80C of the said Act.

Quick Note: Under section 80C, a deduction of Rs 1,50,000 can be claimed from your total income by investing in a few tax-deductable investment options like LIC, PPF, Mediclaim, incurred towards tuition fees etc. This can help you to reduce your total taxable income by up to 1.5 lakhs.

However, if your taxable income exceeds Rs 5 lakh (and you have not made any investment in tax saving instruments u/s 80c), then, unfortunately, you won’t get any rebate in Income Tax.

The table shared below is an example which can help you understand what our honorable Finance Minister has tried to say with respect to the new income tax rebate clause.

income tax rebate

Capital Gains Taxes of Houses

As announced in the interim budget, you will not be taxed by the Indian Government on the notional rent of the second self-occupied house property. Therefore, here the key takeaway is that exemption is made allowable up to two self-occupied house properties.

This exemption u/s Section 54 of the Income Tax Act, 1961 will now be available on your second house property but it has come with a proviso. Your capital gains should either be less than or equal to Rs. 2 crores. Anyways, this benefit can to be availed by you only once in your lifetime. (Read more here).

TDS Relief

Presently, if your interest earning on Post Office Savings and Bank Deposits used to cross Rs 10,000, TDS u/s 194A used to get attracted.

However, the proposed budget has raised the limit from Rs 10,000 to Rs 40,000. In case of senior citizens, the limit has been increased to Rs 50,000. This proposal will surely benefit the individuals who are highly dependent on the interest income from their deposits interest earned on savings deposits, fixed deposits, as well as other deposit schemes in banks and post offices.

Standard deduction and other taxes

In case you are a salaried person, previously you used to get Standard Deduction of Rs 40,000. Now, this figure has been increased to Rs 50,000 which is, of course, going to benefit you financially.

Also read: What are the capital gain taxes on share in India?

Closing thoughts

This Interim Budget will become final unless a new Government comes into power after the Lok Sabha election which is to take place in a few months. However, if indeed a new Government comes into the picture, then this Interim Budget will cease to exist. Such new Government will frame a different Union Budget which will govern the Financial Year 2019-20 in India.

Since the day this Interim Budget was announced, it has created a plethora of confusions on some specific aspects of the budget among the residents in our nation. Out of all such confusions the clause related to rebate u/s 87A has so far seemed to be the most difficult and weird for the majority of the Indians to decode. This is again needed to be said that the tax slab has not been changed at all.

Every February, the new Finance Act (i.e. Union Budget) is declared by the Central Government of India. In every occasion, the budget brings new and/or amended clauses with it which subsequently makes the Indian taxpayers feel puzzled. Therefore, it is expected that even this budget will become clear among the people in India within the next few weeks.

There are people who have shared their negative feedbacks with respect to this budget. On the other side, many people are saying that this is one of the best budgets that India has witnessed since its independence. They have also added that this budget is probably the best budget that our current Government, formed by BJP (Bharatiya Janata Party), has come up with within its current five years tenure.

indian stock market holidays 2019

Indian Stock Market Holidays 2019

The Indian stock market holidays 2019 has been announced by the stock exchanges. There’s going to be 15 holidays throughout the year (apart from regular holidays on Saturdays and Sundays).

Here are the trading holidays for Equity Segment, Equity Derivative Segment, and SLB Segment:

Indian Stock Market Holidays 2019

S. No Holidays Date Day
1 Mahashivratri March 04,2019 Monday
2 Holi March 21,2019 Thursday
3 Mahavir Jayanti April 17,2019 Wednesday
4 Good Friday April 19,2019 Friday
5 Maharashtra Day May 01,2019 Wednesday
6 Id-Ul-Fitr (Ramzan Id) June 05,2019 Wednesday
7 Bakri Id August 12,2019 Monday
8 Independence Day August 15,2019 Thursday
9 Ganesh Chaturthi September 02,2019 Monday
10 Muharram September 10,2019 Tuesday
11 Mahatma Gandhi Jayanti October 02,2019 Wednesday
12 Dussehra October 08,2019 Tuesday
13 Diwali Balipratipada October 28,2019 Monday
14 Gurunanak Jayanti November 12,2019 Tuesday
15 Christmas December 25,2019 Wednesday

(Source: BSE India)

Quick Note:

  1. Muhurat trading, the traditional trading on the day of Diwali, will be held on Sunday, October 27, 2019 (Diwali – Laxmi Pujan). The timings will be announced subsequently in the month of Diwali.
  2. The holidays falling on Saturday/Sunday are not listed above.
  3. The Exchange may alter/change any of the above holidays, for which a separate circular shall be issued in advance.

Also read: Stock Market Timings in India.

wealth creators 2018 cover

Top 20 Wealth Creator (& Destroyer) Stocks of 2018

The calendar year 2018 was full of ups and downs for the Indian stock market investors. While Sensex made its all-time high in August 2018, the net return in this year is still just 4.90% (YTD). Sensex started with 33,812 points in January 2018 and as of December 2018, it is currently hovering around 35,470 points.

nifty 2018

On the other hand, if we look into the NSE benchmark index Nifty 50, it started at 10,435 points in January 2018 and currently trading at 10,663 points, with an overall return of merely 2.18% this year.

nifty 2018If we compare the returns on Nifty in 2018 with that of last year (2017- when it gave a return of around 28.6%), we can easily notice that the index has comparatively underperformed in 2018. Nonetheless, ups and downs are the characteristics of the market and the stock market investors should be not be haunted by it.

As the year 2018 is fastly approaching to its end, we performed a short analysis to find the winning and losing stocks of 2018. Here is a list of 20 large cap companies in India with a market capitalization greater than Rs 100 Billion, which either grew over +30% or fell over -35% within the year 2018.

If you are interested in large-cap companies, this list might give you a rough idea of the stocks that you missed or can add in your watchlist for the upcoming year.

Top 20 Wealth CREATORS of 2018

S. No Name Symbol Industry Last Price Market Cap 1-Yr Chg (%)
1 HEG HEGL Electronic Instr. & Controls 3675.35 155.86B 83.82
2 L&T Technology Services LTEH Construction Services 1687.05 171.74B 71.22
3 Larsen & Toubro Infotech LRTI Software & Programming 1695 291.26B 57.67
4 Adani Enterprises ADEL Coal 158.55 175.67B 53.92
5 Bata India BATA Footwear 1109 144.13B 47.74
6 Tata Consultancy TCS Software & Programming 1918.5 7130.75B 44.97
7 Bajaj Finance BJFN Consumer Financial Services 2564.9 1497.28B 43.9
8 Tech Mahindra TEML Software & Programming 697.9 684.05B 41.43
9 Indiabulls Ventures INDB Investment Services 379.85 235.61B 41.22
10 MindTree MINT Computer Services 837.7 139.19B 39.69
11 Nestle India NEST Food Processing 10923.35 1064.11B 38.56
12 Mphasis MBFL Software & Programming 1018.15 187.77B 38.52
13 Jubilant Foodworks JUBI Restaurants 1218.95 173.76B 38.14
14 Abbott India ABOT Biotechnology & Drugs 7466.25 157.83B 34.82
15 Avenue Supermarts AVEU Retail (Grocery) 1545.75 1031.01B 34.28
16 Ipca Laboratories IPCA Biotechnology & Drugs 801.85 101.97B 33.6
17 Divi’s Labs DIVI Biotechnology & Drugs 1447.15 392.45B 32.77
18 Hindustan Unilever HLL Personal & Household Prods. 1784.65 4009.29B 31.56
19 Adani Power ADAN Electric Utilities 50.8 194.66B 31.27
20 Britannia Industries BRIT Food Processing 3100.55 751.53B 30.64

 

HEG was the biggest wealth creator in the large-cap segment this year. This stock gave a return of over 83% in 2018. Currently, HEG is trading at a share price of Rs 3,675. Surprisingly, this stock was also one of the biggest winners in 2017. (Quick Note: The stock of HEG was hovering at just Rs 160 during the start of January 2017).

Next, L&T Technology services (+71%) and Infotech (+57%) –both have performed well followed by Adani Enterprises and Bata India. TCS has also given a return of over 44% this year.

A few other popular winners in this list are Bajaj Finance, Tech Mahindra, India bull ventures, MindTree, NESTLE and Avenue Supermart (DMart).

Top 20 Wealth Destroyers of 2018

S. No Name Symbol Industry Last Price Market Cap 1-Yr Chg (%)
1 Vodafone Idea VODA Communications Services 37.35 335.36B -62.89
2 Tata Motors DV Ltd TAMdv Auto & Truck Manufacturers 94.15 559.20B -60.83
3 Tata Motors TAMO Auto & Truck Manufacturers 172.5 559.20B -59.12
4 NBCC India NBCC Construction Services 54.15 100.86B -57.36
5 Motherson Sumi Systems MOSS Auto & Truck Parts 161.55 534.49B -57.13
6 Punjab National Bank PNBK Regional Banks 76.7 284.07B -56.41
7 CBI CBI Regional Banks 35.15 106.22B -53.54
8 Bharat Electronics BAJE Aerospace & Defense 87.95 215.91B -53.34
9 Aditya Birla Capital ADTB Consumer Financial Services 97.05 216.36B -48.12
10 Mangalore MRPL Oil & Gas Operations 72.8 131.23B -43.24
11 Hindustan Petroleum HPCL Oil & Gas Operations 246.3 381.94B -42.63
12 Sun TV Network Ltd SUTV Broadcasting & Cable TV 576.95 233.42B -42.28
13 Bharti Airtel BRTI Communications Services 309.1 1233.18B -41.52
14 Yes Bank YESB Regional Banks 182.3 424.05B -41.22
15 Bank of India BOI Regional Banks 100.9 171.04B -41.05
16 New India Assurance THEE Insurance (Miscellaneous) 183.9 306.93B -40.15
17 Steel Authority SAIL Iron & Steel 51.95 218.50B -39.2
18 Indian Bank INBA Regional Banks 238.4 115.26B -39.15
19 Emami EMAM Personal & Household Prods. 401.85 187.63B -38.67
20 Vedanta VDAN Metal Mining 196.4 745.40B -37.96

 

Interestingly, Vodafone Idea is the biggest loser in this list and has lost a market price of over 62% in this year. The stock was trading at a market price of Rs 104.60 at the start of the year, and currently, its share price is fluctuating at Rs 37.35.

Tata Motors is yet another beaten company on the street. Both fully paid ordinary shares and DVR are down by around 60% in this year. This stock is continuously declining for around two years, since it made its high of Rs 578.70 in September 2016. Currently, Tata motors ordinary shares are trading at a price of Rs 172.5.

A few of the other popular losing stocks in this list are NBCC, Motherson Sumi Systems, PNB, CBI, Bharat Electronics, Aditya Birla Capital, Mangalore Petronet, HPCL, Bharti Airtel and YES BANK.

Also read:

Closing Thoughts

Although it’s good to monitor the yearly returns of the companies, however, looking at the performance of stocks just for a year is not enough. It is the long-term returns of the stocks that matter the most for the wealth creation of shareholders.

Besides, a lot many big companies on the list are trading at a decent discount currently. Whether the losing companies mentioned above will continue to decline further or bounce back will depend on their future performances.

The share investors should consider these as opportunities to invest in amazing businesses at a fair value. Happy Investing.

Disclaimer: The stocks listed in this post should not be considered as recommendations. Please study the companies carefully or take the help of a financial advisor before investing.

Long-Term Capital Gain Tax- Simplified [Budget 2018-19]

Long-term capital gain tax- Simplified [Budget 2018-19]:

For the last couple of days, I was on a long family vacation for my birthday which is on 2nd February. I received a number of gifts. However, there are few major ones that are worth discussing here.

First, just a day before my bday (1st Feb), I got a huge gift from our finance minister Mr Arun Jaitely. It was the re-introduction of the long-term capital gain (LTCG) tax @10% after 14 long years through the union budget 2018-19.

Second, on my bday (2nd Feb), the market gave another amazing gift. The Sensex declined by over 800 points due to the announcement of LTCG tax. It was the first big dip of the year after an immense bull rally in January’18.

Overall, my birthday turned out to be quite happening with lots of news to discuss.

Nevertheless, enough talk about me. Now, let’s discuss one of the biggest topic which every Indian investor is talking right now- the Long-term capital gain tax on equity. And how to calculate it?

Long-term capital Gain tax:

As you all might already know that the long-term capital gain tax is now applicable in Indian stock market, which means that even if you sell the stock after holding it for over 1 year, you have to pay tax for the capital gains.

Earlier, the LTCG tax was NIL. Investors need not pay any tax on the capital gains if they hold the share for more than 1 years.

Here are few of the top points that you need to know regarding the Long-term capital gain tax discussed in the union budget 2018-19:

  • Up to Rs 1 lakhs, the long-term capital gain is exempted from taxation.
  • The LTCG tax on the sale of shares listed on the stock exchange after long-term holding is taxable at 10% of the capital gain (exceeding Rs 1 lakh).
  • The long-term capital gain tax will be applicable only when you sell the long-term capital asset on/after 1st April 2018. All the equity assets sold before 1st April 2018 will be exempted from the long-term capital gain tax.

In the budget 2018 speech, the FM stated that any notational long-term gains until January 31st, 2018 will be grandfathered (exempted from taxation).

‘Grandfather’ simply means ‘exempted from tax’.

However, according to the newly released Frequently Asked Questions (FAQs) regarding taxation of long-term capital gains proposed in finance bill, the long-term capital gain tax will be applicable on the shares sold only on or after 1st April 2018.

This means that even if you sell the stock between 1st Feb’2018 to 1st April’2018, you won’t have to pay any tax on the long-term capital gains.

Source: http://www.incometaxindia.gov.in/Lists/Latest%20News/Attachments/216/FAQ-on-LTCG.pdf

Further, the new cost of holding of shares i.e. purchase price can be (in general) considered as the highest price on January 31st, 2018. This clause has been introduced in order to safeguard the capital gains of the past loyal long-term investors in the Indian market.

In short, this means that you do not need to worry about the huge long-term capital gain tax if you have bought a stock 10 years back at a very cheap price. Your cost of acquisition will not be considered same as the purchase price (10 years back) while calculating the long-term capital gains.  The gains will be calculated only after 31st January 2018.

For example, let’s say you bought a stock XYZ 10 years back at Rs 15. On January 31st, 2018 its price was Rs 1000. Then this capital gain of Rs 1000- Rs 15 = Rs 985 is exempted from the LTCG tax. Further, if you sell this stock after 1st April 2018 at Rs 1080, then the capital gain will be considered only as Rs 1080- Rs 1000= Rs 80. Rest gain is ‘Grandfathered’.

In addition, do not forget the tax exemption on Rs 1 lakh on the long-term capital gain that every long-term investor is getting.

Also read: Different Charges on Share Trading Explained- Brokerage, STT & More

Calculation of long-term capital gain:

The calculation of the long-term capital gain depends on new acquisition cost (i.e. revised purchase price) for the shares.

This calculation of the acquisition cost for the purpose of the computing the capital gains requires three prices- actual purchase price, highest trading price as on 31st Jan 2018 and the actual selling price.

The acquisition cost will be the higher of the actual purchase price or the lower of maximum traded price on Jan 31st, 2018 and actual selling price.

Sounds complicated? Right? But, it isn’t.

Let’s understand this with an example.

Assume that you bought a stock at Rs 100. The highest trading price of that stock on 31st January 2018 is Rs 200. And the actual selling price (after 1st April 2018) for long-term holding is Rs 150.

Here, the cost of acquisition is higher of:

A. Actual cost (Rs 100)
B. Lower of

  1. Highest price on Jan 31st Jan 2018 (200)
  2. Actual selling price (Rs 150)

Let’s simplify the part B first.

Here, the lower value of {trading price on 31st Jan, 2008—> Rs 200} and {actual selling price—> Rs 150} is Rs 150.

Now the higher value of {part A (actual cost)—> Rs 100} and {part B—> Rs 150} is Rs 150.

Therefore, in this scenario, the cost of acquisition (purchase price) will be considered as Rs 150.

Further, the actual selling price is also Rs 150.

Overall, capital gain= Rs 150- Rs 150 = 0 (NIL).

Here are the four different scenarios to explain the situation of long-term assets and their capital gains (as described in Income tax departments latest release on LTCG tax)

In all the given scenarios,

Date of Purchase = 1st January 2017
Date of selling > 31st March, 2018 (holding period > 365 days)

S.No Purchase Price
(Rs)
Highest price on
31/1/2018 (Rs)
Selling Price
(After 31/3/2018) (Rs)
Capital Gain
(Rs)
Scenario 1 100 200 250 250-200 = 50
Scenario 2 100 200 150 NIL
Scenario 3 100 50 150 150-100 = 50
Scenario 4 100 200 50 Loss

Long-Term Capital Gain Tax - Simplified

 

Detailed explanation of the scenario:

Although the table given above explains the capital gain, however, here is a detailed explanation for the long-term capital gains tax:

1) Shares bought after 31st January, 2018:

Let the buyer bought 10,000 shares of a stock ABC
Purchase price of 1 share = Rs 100
Total purchase price = Rs 100 * 10,000 shares = Rs 10 lakh

For short term (holding period < 365 days)
Selling price of 1 share= Rs 140
Total selling price= Rs 140 * 10,000 share= 14 lakhs
Short term capital gain (STCG)= Rs 14 lakhs – 10 lakhs = 4 lakhs
STCG Tax = 15% of STCG = 15% of 4 lakhs= Rs 60,000

For long term (holding period > 365 days)
Selling price of 1 share = Rs 180
Total selling price= Rs 180 * 10,000 shares= 18 lakhs
Long term capital gain(LTCG) – Rs 18 lakhs- 10 lakhs= Rs 8 lakhs
Taxable LTCG= 8 lakhs- 1 lakhs= 7 lakhs
(Rs 1 lakh is exempted from long term capital gain tax)
LTCG Tax= 10% of Taxable LTCG= 10% of 7 lakhs= Rs 70,000

2) Shares bought before 31st January 2018:

Let the buyer bought 10,000 shares of a stock ABC
Purchase price of 1 share = Rs 100
Total purchase price = Rs 100 * 10,000 shares = Rs 10 lakh

For short term (holding period < 365 days);
Tax will be same as earlier i.e. 15% of short term gain.

For long term (holding period > 365 days)
Highest price on 31st January, 2018= Rs 150
Selling price of 1 share = Rs 180
Long term capital gain (LTCG) per share exempted from tax = Rs 150- Rs 100 = Rs 50
For computing taxes, LTCG per share = Rs 180- Rs 150= Rs 30
Total LTCG= Rs 30 * 10,000 shares= Rs 3 lakhs
Taxable LTCG= Rs 3 lakhs- Rs 1 lakhs = 2 lakhs
(Rs 1 lakh is exempted from long term capital gain tax)
Tax on LTCG= 10% of 2 lakhs= Rs 20,000

Also read: How Much Can a Share Price Rise or Fall in a Day?

Conclusion:

Here are the key takeaways from this post:

  • The Long-term capital gain tax will be applicable from 1st April 2018 for the financial year 2018-19.
  • Up to Rs 1 lakhs, the long-term capital gains are exempted from LTCG tax.
  • The capital gains exceeding Rs 1 lakhs will be taxed 10% as LTCG tax if you sell the stocks after 1st Ap l, 2017 for the long-term asset.

Further, although the long-term capital gain tax calculation seems complicated, however, it’s quite simple and you can easily calculate it within minutes.

Here is a quick summary of the LTCG Tax for different scenarios:

  1. Shares sold on or before 31st March 2018 —> NIL
  2. Shares purchased on/before 31st January 2018 hold for long-term (over 1 year) and sold after 31st March 2018:
    • Purchase (Buying) Price= Rs 200
    • Highest price on 31st Jan 2018 = Rs 250
    • Selling Price= Rs 280
    • Then taxable LTCG = (Rs 280 – Rs 250) = Rs 30

3. Share purchased after 31st January 2018 —> LTCG Tax@ 10% (when gain exceeds Rs 1 lakhs)

(Image source: CharlesNGO)

That’s all. I hope this post on the long-term capital gain tax is useful to the readers.

Also read: What are the capital gain taxes on share in India?

If you have any questions regards LTCG Tax, feel free to comment below. #HappyInvesting

Indian Stock Market Holidays 2018

Indian Stock Market Holidays 2018

Indian stock market holidays 2018:

The Indian stock market holidays 2018 has been announced. There’s going to be 16 holidays throughout the year (apart from regular holidays on Saturdays and Sundays).

Here are the trading holidays for Equity Segment, Equity Derivative Segment and SLB Segment:

S.NO. Holidays Date Day
1 Republic Day January 26, 2018 Friday
2 Mahashivratri February 13, 2018 Tuesday
3 Holi March 02, 2018 Friday
4 Mahavir Jayanti March 29,2018 Thursday
5 Good Friday March 30,2018 Friday
6 Maharashtra Day May 01,2018 Tuesday
7 Independence Day August 15,2018 Wednesday
8 Bakri Id August 22,2018 Wednesday
9 Ganesh Chaturthi September 13,2018 Thursday
10 Muharram September 20,2018 Thursday
11 Mahatma Gandhi Jayanti October 02,2018 Tuesday
12 Dussehra October 18,2018 Thursday
13 Diwali  Laxmi Pujan* November 07,2018 Wednesday
14 Diwali Balipratipada November 08,2018 Thursday
15 Gurunanak Jayanti November 23,2018 Friday
16 Christmas December 25,2018 Tuesday

Source: BSE India

Muhurat trading, the traditional trading on the day of Diwali, timings will be announced in the month of Diwali. It will be held on Wednesday, November 07, 2018 (Diwali – Laxmi Pujan).

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

Tags: Indian stock market holidays 2018, stock market holidays 2018, trading holidays 2018, bse holidays 2018, NSE holidays 2018,  stock market holidays 2018 India
Best seller author Prasenjit Paul on stock investing

Exclusive Interview: Best seller author Prasenjit Paul on stock investing

Exclusive Interview: Best seller author Prasenjit Paul on stock investing

Hello investors. Today we have a very special guest with us.

He is an investor, entrepreneur, and a best-selling author. His book ‘How to avoid loss and earn consistently in the stock market?’ is currently the best-selling book on Amazon.

I would like to welcome- Prasenjit Paul!!

Let me give you a brief introduction about Prasenjit. He is a software engineer by qualification with bachelors of engineering degree from IIEST, Shibpur.

He started investing from an age of 18. Due to his passion for stock market, he left his job at IBM on the first day to pursue his dreams in the investing world. Fast forward few years, and today he is running a successful equity advisory firm- Paul asset with clients from over 18 countries.

Guys, I would like you to join in the inspiring journey of Prasenjit Paul.

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

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

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

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

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

I had accepted the offer from IBM just to gather an idea of the working culture of the corporate world.

Once I interacted with few employees and visiting the office I was sure that I couldn’t give my 100% to an IT job. Moreover, even after spending in an IT job for 5-10 years, I didn’t foresee financial freedom or any meaningful reward.

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

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

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

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

I had an edge because I started Paul Asset during my college days and during those days I have no such compulsion of paying myself.

Even after leaving college I had no liabilities like EMIs, paying to parents, rent etc. So, even with any amount of money, my target was to just stick to the target.

I was confident that with true dedication sooner or later your hard work pays off. So, the point is the earlier you start, the higher would be the reward.

Every aspiring entrepreneur should begin the journey during their teenage or during the early twenties. With the growing age, it becomes difficult.

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

Actually, I had started the journey much before quitting my job.

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

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

Sooner or later Success will be yours.

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

I had purchased the domain www.paulasset.com in the year of 2011 while I was in the 2nd year of my Engineering. Initially, the target was to write blogs on the Stock Market and monetise via Google Adwords.

Fortunately, Google rejected few times while I submitted my blog and that inspired for starting subscription-based advisory service.

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

It took me more than two years to complete the book “How to Avoid Loss and Earn Consistently in the Stock Market”. The way people liked the book was also beyond my imagination.

Since the last few years daily on average 50+ copies are being sold!

Writing a book is very difficult because you need months-long concentration and patience, unlike a blog post that can be completed in one day itself.

After the massive success of my first book, I am also working on the second book (not directly related to the stock market but related to the Money). However, due to my current schedule, I can rarely concentrate over a very long duration of few weeks and be realising the real challenge of writing books!

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

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

I have a relaxed work schedule.

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

Daily price fluctuation doesn’t affect me at all.

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

Every day you will come across so many news, so many contradicting views. Many times your stocks won’t perform, you would stare at loss. In spite of all those, you have to keep your basics intact.

I also idolise MS Dhoni and try learning a lot from his temperament.

Q. What’s your investment strategy?

I prefer growth over value. While you are investing in one of the world’s fastest-growing major economy like India, you must have to put higher focus on the growth over value.

I generally prefer bottom-up analysis with long-term investing approach. I like companies where market size is huge enough to maintain the high growth rate with free cash flow generation while keeping light balance sheet.

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

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

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

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

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

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

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

Q. What are your favourite books on stock market?

Again, I can’t name any single book. I try to keep learning from many books, magazines, websites etc.

Few of my favourites books are, “One Up on Wall Street“, “The Intelligent Investor“, “The Little Book of Valuation“, “Dhando Investor” etc.

Although not directly related to the stock market but the book “Rich Dad Poor Dad” motivated me a lot for starting my investment journey during college days. I strongly recommend the book “Rich Dad Poor Dad” to all youths.

Even outside stock market, I owe much of my success to the authors like Robin Sharma, Shiv Khera, Robert Kiyosaki and many others.

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

Q. What is still your biggest challenge?

The biggest challenge is to maintain the performance and reputation.

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

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

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

Practice, Practice and Practice.

You can’t be a successful investor just by reading 2-3 books. If you do, then it is only you are lucky in few particular instances, and it can’t be repeated, i.e. you can’t maintain the consistency.

Remember from Nursery to Graduation you have spent 18+ years to become successful in your current profession. So, there is no shortcut. With the advent of internet, everything at your fingertips but you have to work hard and give time to master any art.

Q. What’s next for you?

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

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

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

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

———————————————————

Thank you so much Prasenjit for sharing your time. Your journey is truly inspiring for all the new and old investors.

Let me quickly summarize few of the learnings from Prasenjit Paul:

On life and goals:

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

On investing:

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

That’s all. I hope this interview is encouraging for all our readers to take their next step in the investment world.

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

Do comment below if you have any questions. Will love to answer. 

#Happy Investing.

Tags: Prasenjit paul, how to avoid loss and earn consistently in stock market, interview with Prasenjit Paul, Paul asset, Prasenjit paul asset advisory firm
SENSEX IN LAST 30 YEARS

75x Returns by Sensex in last 30 Years of Performance.

75x Returns by Sensex in last 30 Years of Performance:

Hi Investors. Today I have brought an interesting insight for the investors. We are going to discuss the Sensex performance in the last 30 years. So, let’s get started.

SENSEX IN LAST 30 YEARS:

Here is the data of Sensex for the last 30 years.

YEAR SENSEX (Closing Pts) 
1987 442
1997 3,658
2007 20,286
2017 33,573

You can get this data from BSE India website using this link.

Here is the chart of Sensex in last 30 years till date.

Sensex in last 30 years of performance

Chart Source: https://tradingeconomics.com/india/stock-market

From the above data, you can notice that Sensex has given multifold returns in the last 30 years. From a mark of 442 in 1987, Sensex is currently at an all-time high with 33,573 points (November 2017).

The BSE index has given an astonishing return of 75 times in its last 30 years.

In short, an investment of 10 lakhs in the BSE Index fund 30 years back, would have turned out to be 7.5 crores by now.

Note: If we compare this return with 4% p.a. returns from the savings account, we will get just 22 lakhs net amount in 30 years.

Overall, Sensex has turned out to be a wealth creator for those who invested in the market in time. Those who invested even in the index fund of Sensex in last 30 years, would have been sitting on a huge pile of wealth in the age of their retirement.

Nevertheless, those who missed this rally should not be disappointed and should invest in the market on suitable opportunities.

Moreover, they should invest actively by becoming an investor rather than a trader or side walker (short-term investor).

Currently, the market is at an all-time high. However, this should not stop the investors from investing in SIPs even if there might be a correction in the market in near future.

Also read: SIP or Lump sum – Which one is better?

Invest for the long term as it has always turned out to be a wealth creator for most of the investors. Long-term investments tend to reward its investors eventually.

For a short term, there will always be fluctuations in the market. If we study the last financial year 2016-17, we can notice that there were a couple of swings in the market due to multiple reasons like demonetization, US Presidential election, Implementation of GST etc.

If you invest for the short term, there will be volatility due to the domestic or global factors.

However, for the long term, bulls become in charge if you have invested in the fundamentally right stock.

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

India is growing at a very decent pace and in the next 3-5 years it will turn out to be a rising star in the world. I am highly optimistic about the growth of the Indian economy and suggests the investors remain invested in the market for long term.

There is a famous quote used by Motilal Oswal Group that I would like to quote here:

Buy Right, Sit Tight.

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

That’s all for this post about past performance of Sensex in last 30 years. I hope this insight is helpful to the investors.

Do comment below what are your expectations from Sensex in the upcoming year of 2018?

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