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Some truths about stock markets by aniket on August 2nd, 10 Share

Hi there, From this post onwards, I am going to kick off the discussion on shares as an option to create wealth. Let me start by saying 7 straight truths about stock markets. First, nobody gets rich quickly in stock markets. Some of your friends might have blindly invested in some stocks which, to their luck, gave them exceptional profits. Yet, they never became rich. Did they? So thats the first truth about stock markets its not a place where you get rich quickly.It takes time to grow your money. Second, it isnt easy for beginners to make money on the stock exchange. If it was such a simple exercise, Mr. Warren buffet wouldnt have become so famous. It takes genuine effort to spot profitable investments. Third, your broker, friends, neighbor, colleagues et al would come up with sure shots everyday; there are too many stock analysts out there giving out fee based stock recommendations. Its easy to get tempted by all these people around you. After many years in the market, my thoughts keep wavering when somebody comes up with such sure shots. Should I explain the fate of a beginner? Its important to stay off from these temptations. It implies that you ought to have independent thought. Independent thought is something very hard to carry through. Fourth, most of the investors are a bit too casual with stock markets. They play in stock markets. Stock exchange is a wrong place to have fun, speculate and try luck. Stock market is a place dominated by heavy investment houses and financial experts. This is a place where the worlds brightest finance professionals put their best efforts to make right investment decisions. They do all this because its real business, with real money and real profits. Nobody is playing around. So, to be successful, you too, need to be serious. You have to view it as a business. When you buy shares, you are buying a company to that extent. Buying a company is no Fun!

Fifth, realise the fact that brokers income is the commissions you give. The more you trade, the more they get. When I was serving as the manager of a broker, I used to get monthly targets for the volume of brokerage that should be generated. If I dont do that, my salary payment gets delayed. Each branch was viewed as a profit center. Myself and my colleagues used to hit our targets but our investors rarely did! Most of the brokerage houses encourage their clients to do as many trades as possible whether its good for them or not, and keep doing it until you have used up all their money. If you get too many frequent Sure shot market tips thru sms, mails and phone calls think twice. Your broker may be interested only in generating commissions. Make sure you dont get into such traps. Do have faith in your broker, but dont blindly follow them. They can give you advice but they cant guarantee that you will make a return on any investment in the stock market. Sixth, as you begin to study the principles, youll hear about derivative instruments like futures and options. Things like options and futures are NOT for the beginner with limited resources. They are highly technical, involve the potential to lose all of your investment quickly and need constant monitoring. Playing Futures and options without adequate working knowledge is like gambling at Las Vegas. Finally, you have to keep on working on your stock picking skills. Keep following the market developments. Youll also need to study some basics on economics, accountancy, income tax and mathematics. So, # No quick riches in stock markets # its not the place to have fun with money # you shouldnt be blindly believing your brokers recommendations # never try your luck # and, learning is the only way -to make right choices in stock markets. So, lets begin from the roots. My next post would explain what shares are. Till then .. . Think about the above said 7 points and take a decision that Youll put maximum efforts to learn the game and be serious with investments. Youll not be tempted to make money quickly. Youll become a smart investor! May God help you to achieve your goals. Bye!!Stocks-explained by aniket on August 2nd,

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Hi there, The first step for anyone is to understand stocks. INTRODUCTION Share means a portion of anything. In our context, share means a portion of ownership of a company.Now, let me discuss the concept with the help of an example. This will help you to get a clear idea of what a share is. Lets look at a fictional company Say-it-with-flowers. SCENE 1- The beginning A young couple decides to start a business. Since they knew floral decorations, they decide to start a flower shop. They name their business as Say-it-with-flowers. They borrowed some money from the bank and started their shop in a small space. The business became successful. However, they made little profit because; all the earnings were invested back into business to buy more flowers to accommodate the increasing level of customers. SCENE 2- A decade after. Ten years later, the business has grown rapidly. The bank loan has been paid off. Profits are over Rs 10 lakhs per year. It also has a book value of Rs 50 lakhs. (Book value is the net value of what the company owns- machinery, furniture, building less any loans). Convinced that Say-it-with-flowers could do well in neighboring cities, the couple decides to open two new branches. They research their options and find out that its going to cost over Rs 52 Lakhs to open two outlets. To find this 52 lakhs, they had two optionsone, take out a loan from the bank. Two, sell part of their company. Since interest rates are high, they decide to take the second route. But how? What would be the cost of a share in say-it-with-flowers? Who will do the valuation? There were several questions to be answered. SCENE 3-The big leap To sell part of their company, the company has to be valued. The person who values a company is called an underwriter. The underwriter researches the past records, future prospects, background of the promoters etc and discovers that the company is worth 10 times its current profits. What does this mean? Simply, you would multiply the earnings of Rs 10,

00,000 by 10. In this companys case, the answer is Rs 1 Crore. Add book value, and you arrive at Rs 1crore and 50 Lakhs. This means, in the underwriters opinion, Say-it-with-flowers is worth Rs 150 lakhs. 40% of 150 is 60 lakhs. So, the couple decides to sell 40% of their company to the public. The underwriters find investors who are willing to buy the 40% share, and give a check for Rs 60 lakhs to the couple. Since the couple still has 60% share, the control of say-it-with-flowers is still with them. SCENE 4- The benefit Now the couple gets 60 lakhs by selling 40% stake in their business to the public. Using that money, Say-it-with-flowers successfully opens the two new outlets for Rs 52 lakhs.The balance 8 lakhs is used for day to day operations of the three shops. The two new stores both make around Rs 10, 00,000 a year in profit each.Between the three stores, Say-it-with-flowers now makes an annual profit of Rs 30 lakhs. The value of the business is now Rs. 450 lakhs (3 shops x 10 lakhs x 10 times + 50 lakhs x 3) and the couples 60% stake is worth Rs 270 lakhs.(450 x 60%) SCENE 5 At the stock market. Since the people who bought 40% of the share for 60 lakhs, is now worth 180 lakhs, the shares of say-it-with-flowers is in great demand. Since the company increased the wealth of shareholders 3 times, there are investors who are willing to purchase the shares even for an amount higher than 180 lakhs. Each day, shares of say-it-with-flowers are sold to the highest bidder. The place at which the bidding and buying process takes place is called the stock market. SCENE 6 You as an investor.. Lets assume that the total shares of the company are 50,000 shares. So, 40% available to the public is 20,000 shares. The issue price was Rs 300 (60 lakhs/20000) but, now the share is worth Rs 900(180 lakhs / 20000). Since a section of the public feels that this winning streak of the company would continue, there is heavy demand for the share and due to this, the price keeps moving up. Suppose the price is Rs 1250 now. Should you buy? The answer is no. Why? Because, the shares are trading above the real value of Rs 900. This real value is also called intrinsic value.

Price drops to Rs 750. Should you buy? Now, one day, due to some rumors, the stock market crashes, and consequent to that, the price of the share plummets to Rs 750 per share. Should you buy? May be, yes! Why? Because, now the share price is below the real value and some time later , you can expect the rumors to settle and that will result in the prices moving back to its original level of Rs 1250 or more. Where should you sell? Although the price may move back to Rs 1250, your selling point theoretically should be at Rs 900 . Why? Because thats the actual value point. The price rise above Rs 900 may be due to several reasons like investor sentiment which should be ignored. CONCLUSION. The good investors job is to identify companies like say-it-with-flowers that are selling below their true worth due to some illogical reason and invest in such stocks. Hope Ive made it clear. Bye for now !!Basic charcteristics of shares by aniket on August 2nd, 13 Share

SHARES OR STOCKS? Hi there, Let me clarify that point first. Shares and stocks mean the same thing. Shares are collectively called stocks. If someone says he owns stocks, what he means to say is that he has bought shares of different companies. If someone says he owns shares then, what he means to say is that he has bought shares of a particular company. CHARACTERISTICS OF SHARES

Shares have these following distinctive characteristics: Ownership When you buy stock, you are buying a piece of a company you become a part owner. This ownership gives you certain rights, including voting on important matters before the company and participating in the profits. Upside potential When you own stock, you participate in the growth of the company. As the value of the company increases, the share prices also move up. You benefit from capital appreciation. For example: Many of the early employees of Infosys are millionaires because their stock has gone up dramatically. Risk Along with the potential for extraordinary gain is the potential for loss. These two go hand in hand. If you are not careful, you can lose money by investing in stocks. Not only in stocks, in fact, even the safest savings deposits carry unseen risks. When you account for inflation and taxes , youll find that most of the so called risk free investments are not so safe. Source of Income Since share holders are part owners of the company, they are entitled to get a part of the annual profits of the company. Shareholders get income by way of dividends and bonus shares. KNOW IT Shares and stocks mean the same thing. Shares are collectively called stocks. Shares give you right to ownership, voting, decision making and profits in a company. Investment in shares can be risky if recklessly done. Share investments have the potential to make you millionaires.Should you invest or trade in stocks? by aniket on August 2nd, 4 Share

Hi there, Should you invest or trade in stocks? The answer to this question is entirely personal and it would depend on lot of factors. However, i will not recommend trading to anyone. In my opinion, Shares should be considered as a long term investment. The reason why I dont recommend trading is that, many people, especially beginners may feel that its quite easy to buy at lows and sell at highs. But, its not so. Trading is a highly technical activity. Newbies tend to underestimate the difficulties of day trading and overestimate their ability as a beginner. 90% of them lose money and get out of the markets in the first 2 years. What I can do is, Ill list out some suggestions based on which you can take a decision whether to trade or invest or do both. 1. People who cannot monitor the market regularly should not get into share trading. Share trading requires constant monitoring of price, volume, trend etc.. Most of us may not have the tools to analyze all these factors on a real time basis. 2. Young guns out there who cannot actively take part in share markets should start investing small amounts in shares. The idea is to accumulate small amounts of shares that will eventually grow into millions. Young investors can also consider trading in shares for short term profits to build up their capital initially. 3. Those who are planning to be active in share markets should allocate their available funds into two categories- one part for investing and the other part for trading. 4. If you are nearing retirement and havent started saving, heavily investing in the stock market is probably not a good idea. However, if you have enough funds to meet your financial requirements for next five years, you may enter into stock markets. 5. Markets are always risky in the short term. Hence trading involves more risk than investing. Markets will keep moving up and down and its easy to get emotionally disturbed when you keep watching those price fluctuations. 6. Investing, if done right, would result in huge results in the way of capital appreciation, dividends, bonus shares, rights issue etc. trading does not have such advantages. Trading results depends on the price movements and how

well you time the market. 7. Short term profits or trading profits are taxable income in India. Where as profits from long term investments are tax free. 8. Trading tends to become more speculative as you try to make profits from every price movement. Some of these price movements may be due to rumors or manipulations and its easy to get trapped in such situations. When you invest, you take a lot of time to study the fundamentals and about whats happening around. Hence its highly ulikely that you get into such traps. CONCLUSION To trade or to invest in stock markets would depend on ones age, nature of income and attitude. In any case, you should go by the fundamentals supported by the technical factors. Technical analysis and fundamental analysis are seen by many as polar opposites but many market participants have experienced great success by combining the two. Having both the fundamentals and technicals on your side would only have advantages. We will be discussing in detail about fundamental analysis and technical analysis later onThree ways to make money from stocks by aniket on August 2nd, Share

Hi there, In this article, Lets look at the possible ways to make money from stock markets. There are three ways to benefit from buying shares: 1. Selling the shares at a higher rate than what you bought them

As the company expands and grows, it acquires more assets and makes more profit. As a result, the value of its business increases. This, in turn, drives up the value of the stock. So when you sell, you will receive a premium over what you paid. This is known as capital gain and this is the main reason why people invest in stocks. They want to make money by selling the stock at a profit. 2. Earning a dividend

Usually, a company distributes the profit it earns in the form of dividends to shareholders. It is not mandatory for the companies to pay dividends. The company can use the profits for alternative uses like expansion. The decision to pay or not to pay dividends is taken at the annual meeting by the majority voting of the shareholders.

3. Getting bonus shares

For the time being, let us understand that bonus shares are Free shares are given to you .Later on we will discuss about bonus shares in detail. Apart from the above three benefits, there one more indirect benefit as mentioned below.

Rights issue
An indirect benefit is the rights issue. A company may need more funds to expand and for that it may need to issue more equity shares.A rights issue involves issuing of additional shares to the existing shareholders of the company. A company wishing to issue additional shares should first offer them to the existing shareholders so that it allows the existing shareholders to maintain the same degree of control of the company.Thus you can maintain the participation in the company profits. Capital appreciation or dividends? So what is more important, capital appreciation or dividends? Should you look for a company with big dividends or one that has potential for great surge in prices? Well, this depends on you investment strategy. Companies that pay out big dividends are usually blue chip shares . Great capital appreciation are usually associated with startups so therefore quite risky.Stock markets in india by aniket on August 2nd, Share

THE HISTORY OF BOMBAY STOCK EXCHANGE The Bombay stock exchange traces its history back to the 1850s, when 4 Gujarati and 1 Parsi stock broker would gather under a banyan tree in front of

mumbais Town hall.The location of these meetings changed many times, as the number of brokers constantly increased.The group eventually moved to Dalal Street in 1874 and in 1875 became an official organization known as The Native Share stock Brokers association. THE PRESENT SCENARIO There are 19 recognized stock exchanges in India. The Bombay stock exchange (popularly known as The BSE ) and The National stock exchange (popularly known as The NSE ) are the most prominent in terms of volume and popularity. The Bombay Stock Exchange Popularly called The BSE is the oldest stock exchange in Asia and has the third largest number of listed companies in the world, with 4900 listed as of Feb . It is located at Dalal Street , Mumbai , India . National Stock Exchange comes second to BSE in terms of popularity. Over the decades, the stock market in the country has passed through good and bad periods. Till the decade of eighties, there was no measure or scale that could precisely measure the various ups and downs in the Indian stock market. BSE, in 1986, came out with a Stock Index-SENSEX(SENSitive indEX) that subsequently became the barometer of the Indian stock market. WHAT IS A STOCK MARKET INDEX? Stock market indexes provide a consolidated view of how the market is performing. Stock indexes are updated constantly throughout the trading day to provide instant information. The SENSEX and other indexes The BSE SENSEX (SENSitive indEX)is a basket of 30 stocks representing a sample of large, liquid and representative companies. The base year of SENSEX is 1978-79 and the base value is 100. The index is widely followed by investors who are interested in Indian stock markets. During market hours, prices of the index scrip, at which trades are executed, are automatically used by the trading computer to calculate the SENSEX every 15 seconds and continuously updated on all trading workstations connected to the BSE trading computer in real time 30 stocks that represent SENSEX.(Updated on 7/7/) ACC Ltd. Bharat Heavy Electricals Ltd. Cipla Ltd.

Bharti Airtel Ltd. DLF Ltd.

Jindal Steel & Power Ltd.

HDFC HDFC Bank Ltd. Hero Honda Motors Ltd. Hindustan Unilever Ltd. Hindalco Industries Ltd. ICICI Bank Ltd.

Infosys Technologies Ltd. ITC Ltd. Jaiprakash Associates Ltd.Larsen & Toubro Limited Mahindra & Mahindra Ltd. Maruti Suzuki India Ltd. NTPC Ltd. ONGC Ltd. Reliance Industries Ltd.

Reliance Communications Limited Reliance Infrastructure Ltd. Sterlite Industries (India) Ltd. Tata Motors Ltd. Tata Steel Ltd.

State Bank of India Tata Consultancy Services Limited

Tata Power Company Ltd. Wipro Ltd.

The BSE Sensex is not the only stock market index in India. The NSE has The NSE S&P CNX Nifty 50 index a well diversified 50 stock index accounting for 24 sectors of the economy. While both SENSEX and NIFTY would give you an overall direction of the stock market there are other indices which track a particular sector. For example The NSE CNX IT Sector Index tracks companies that have more than 50% of their turnover (or revenues) from IT related activities like software development, hardware manufacture, vending, support and maintenance. So for those who are tracking the performance of IT Sector this index would become a benchmark for investing. Yet another example is the BSE BANKEX index which tracks the banking sector shares. WHATS GOOD ABOUT INDEXES Indexes provide useful information including: Trends and changes in investing patterns. Snapshots, even if they are out of focus. Yardstick for comparison. KNOW IT A stock market index is a statistical indicator which gives an idea about how

the stock market is performing. In India the main indexes to be tracked are The BSE SENSEX and The NSE NIFTY . The SENSEX comprises of 30 companies representing different sectors and the broader NIFTY comprises of 50 companies from 24 sectors. There are many other indexes that track particular sectors of the economy. These indexes would give you an idea about how that particular sector is performing. World over, there are a number of indexes as there are stock markets. DOW JONES INDUSTRIAL AVERAGE and NASDAQ COMPOSITE INDEX both track US stock markets. NIKKEI 225 is the stock market index of Japan, HANG SENG index for Hong Kong, FTSE 100 For UK, KOSPI for Korea, SHANGHAI for China etc. All these indexes serve the same purpose. It gives an idea about where the financial growth of a country is headed to. Next time you watch CNBC or NDTV Profit, watch these indexes flashing on the corner of your screen.What is a stock index? by aniket on August 2nd, 115 Share

STOCK INDEX. Till the decade of 80s there was no measure or scale that could precisely measure the various ups and downs in the Indian stock market. BSE, in 1986, came out with a stock index-SENSEX-(or SENSitve indEX)-that subsequently became the barometer of the Indian stock market. In January 1989, the BSE launched the BSE National Index (Base 1983-84 = 100).It comprised 100 stocks listed at five major stock exchanges in IndiaBombay, Calcutta, Delhi, Ahmadabad and Madras. The BSE National Index was renamed BSE-100 index from October 14,1996 and since then, it is being calculated taking into consideration only the prices of stocks listed at the BSE. BSE launched the dollar-linked version of BSE 100 index on May 22, 2006. HOW IS THE INDEX CONSTRUCTED? Stock market index consists of selected stocks and is supposed to reflect the overall market sentiment. The two most widely followed indexes in India are Sensex (consisting of 30 stocks) and the Nifty (50 stocks).

ITS EASY ! .. We will try the construction with a single stock. The base value is 100 points. The share in question is quoted at Rs 150. Suppose, tomorrow the price hits Rs 195 (30% increase), so the index will move up 30% at 130 points. Suppose on day 3, market price falls to Rs 156 (20% fall from Rs 195) the index too, will be reduced by 20 % to 104 points. The same logic will apply to two or more stocks except that now, the market capitalization of the stocks will be considered (market capitalization denotes the size of the company measured as- current market Price multiplied by number of outstanding shares- More about it in the fundamental lessons). WHY IS THE BASE VALUE SET TO 100 POINTS? The purpose of market index is to function as a benchmark to gauge the overall trend of the economy.At the time of constructing the index, there will be many companies listed in the stock exchange and not just a single company. So , the total value of shares in the market (or total market capitalization) at the time of index construction is assumed to be 100 in terms of points. Now, the index becomes easy to construct. Next day, if the market capitalization moves up 10%, the index also moves 10% to 110. Lets see one more exampleLets assume that there are two stocks- A Ltd with market price of Rs 120 and B Ltd with the market price of Rs 140.Let us further assume that A Ltd has 1 lakh shares outstanding and B Ltd has 2 lakh shares outstanding. Hence, the total market capitalization is (120 x 100000 + 140 x 200000) Rs 400 lakhs. This will be equivalent to 100 points. Suppose the next day market price of A Ltd decreases by 10% and that of B Ltd decreases by 4%. Their market capitalization then becomes (108 x 100000 + 134.4 x 200000) Rs 376.80 lakhs. The capitalization has fallen by 5.80% (400-376.80/400 x 100).so the index will be dropped by 5.80% to 94.20. what would happen if A Ltds and B Ltds price moves up 15% on the next day ? A Ltd moves up 15% to 124.20 (115% of 108) and B Ltd moves up to 154.56. The market capitalization is now Rs 433.76 Lakhs.( 124.20 x 100000 + 154.56 x 200000 ). The capitalization has increased by 15% and so, the index moves up 15% to 108.33 (94.20 x 115%) The market capitalization method automatically adjusts the index for bonus issue. In the case of rights issue, the previous days value will have to be adjusted for computing the post rights value.

THE PURPOSE OF STOCK INDICES The stock index function as an indicator of the general economic scenario of a country. If the stock market indexes are on the high, it reflects that the overall financial condition of the different companies in the country and the general economy of the country are stable. If, however, there is a plunge noticed in the stock market index, it is indicative of poor economic condition of the companies and therefore, the general economyMore about Sensex by aniket on August 2nd, Share

The Bombay Stock Exchange (BSE) is the oldest stock exchange in Asia. Bombay stock exchange was established in 1875 when 318 persons by paying a then princely amount of Re. 1, under the Securities Contract Regulation Act, 1956.BSE rose to prominence in the last 133 years. In the1850s, stock brokers met under a banyan tree. Some 25 years later, some of them found a permanent place for their activities and named it Dalal Street (Dalal means Broker). Until 2002, BSE was named The Stock Exchange, Mumbai. On August 19, 2005, the exchange changed into a corporate entity from an Association of Persons and was renamed Bombay Stock Exchange Limited. THE SENSEX BSE Sensitive Index or Sensex was launched on January 1, 1986. Being the oldest index in the country, it provides a fair time series data from 1979 onwards. Today, it has become one of the most prominent brands in the country.

It was calculated on a market capitalisationweighted methodology of 30 component stocks represented by large, well-established and financially sound companies across key sectors. The base year of the Sensex was taken as 1978-79.
SENSEX LISTING PARAMETERS Listed History: The scrip should have a listing history of at least 3 months at BSE. Exception may be considered if full market capitalization of a newly listed company ranks among top 10 in the list of BSE universe. In case, a company is listed on account of

merger/ demerger/ amalgamation, minimum listing history would not be required. Trading Frequency: The scrip should have been traded on each and every trading day in the last three months at BSE. Exceptions can be made for extreme reasons like scrip suspension etc. Final Rank: The scrip should figure in the top 100 companies listed by final rank. The final rank is arrived at by assigning 75% weightage to the rank on the basis of three-month average full market capitalization and 25% weightage to the liquidity rank based on three-month average daily turnover & three-month average impact cost. Market Capitalization Weightage: The weightage of each scrip in SENSEX based on three-month average free-float market capitalization should be at least 0.5% of the Index. Industry/Sector Representation: Scrip selection would generally take into account a balanced representation of the listed companies in the universe of BSE. Track Record: In the opinion of the BSE Index Committee, the company should have an acceptable track record.BSE stock classifications by aniket on August 2nd, Share

SIX HEADERS- A, B, T, S, TS and Z Hi there , Do you know that he BSE classifies stocks under six headers? The Bombay Stock Exchange classifies stocks under six grades A, B, T, S, TS and Z that scores stocks on the basis of their size, liquidity and exchange compliance and, in some cases, also the speculative interest in them. You can look up any stocks grade in the Stock Reach page in the BSE Web site, under the head Group. Alternately, you can also follow the link below: http://www.bseindia.com/about/list_comp.asp A GROUP HIGHLY LIQUID

These are the most liquid counters among the whole lot of stocks listed in the BSE. These are companies which are rated excellent in all aspects.

Volumes are high and trades are settled under the normal rolling settlement (i.e. to say intraday buy-sell deals are netted out).
These are best fit for a novice investors portfolio considering that information about them is extensively available. For instance, all the 30 stocks in Sensex are A grade stocks. T GROUP TRADE TO TRADE The stocks that fall under the trade-to-trade settlement system of the exchange come under this category. Each trade here is seen as a separate transaction and theres no netting-out of trades as in the normal rolling system. The trader needs to pay to take delivery for his/her buys and deliver shares for his/her sells, both on the second day following the trade day (T+2). For example, assume you bought 100 shares ofT grade scrip and sold another 100 of it on the same day. Then, for the shares you have bought, you would have to pay the exchange in two days. As for the other bunch that you sold, you should deliver the shares by T+2 days, for the exchange to deliver it to the one who bought it. Failure to produce delivery shares against the sale made would be considered as short sales. The exchange will, in that case, on the T+3rd day, debit an amount that is 20 per cent higher than the scrips closing price that day. This means unless the scrips price falls more than 20 per cent from the price of your sale transaction, you would have to pay a penalty for the short sale so made. Even so, there will be no credit made to you in the case of substantial fall in the share price. The exchange will, instead, credit the gain to its investor fund. Stocks are regularly moved in and out of trade-to-trade settlement depending on the speculative interest that governs them. S GROUP SMALL AND MEDIUM These are shares that fall under the BSEs Indonext segment.

The BSE Indonext comprises small and medium companies that are listed in the regional stock exchanges (RSE). S grade companies are small and typically ones with turnover of Rs 5 Crore and tangible assets of Rs 3 Crore. Some also have low free-float capital with the promoter holding as high as 75 per cent. Besides their smaller size, the other risk that comes with investing in them is low liquidity. Owing to lower volumes, these stocks may also see frenzied price movements. TS GROUP A MIX OF T AND S GROUPS Stocks under this category are but the S grade stocks that are settled on a trade-to-trade basis owing to surveillance requirements. This essentially means that these counters may not come with an easy exit option, as liquidity will be low and intraday netting of buy-sell trades isnt allowed either. Z GROUP CAUTION Z grade stocks are companies that have not complied with the exchanges listing requirements or ones that have failed to redress investor complaints. This grade also includes stocks of companies that have dematerialisation arrangement with only one of the two depositories, CDSL and NSDL. These stocks may perhaps be the riskiest in terms of various grades accorded. For one, not much information would be available in the public domain on these companies, making it tough to track them. Second, the low media coverage that keeps them relatively hidden from public scrutiny also makes them more vulnerable to insider trading. Third, these companies already have a poor score in redressing investor complaints. B GROUP LEFT BEHIND This category comprises stocks that dont fall in any of the other groups. These counters see normal volumes and are settled under the rolling system. In all respects these stocks resemble their counterparts in A but for their size. Typically, stocks of mid- and small market capitalisation come under this grade. SLB GROUP Securities Exchange Board of India, in 2007, has announced the introduction of Securities Lending & Borrowing Scheme (SLBS). Securities Lending &

Borrowing provides a platform for borrowing of securities to enable settlement of securities sold short. There are 207 companies in the SLB list. Investors can sell a stock which he/she does not own at the time of trade. All classes of investors, viz., retail and institutional investors, are permitted to short sell. OTHER CLASSIFICATIONS The F Group represents the Fixed Income Securities. Trading in Government Securities by the retail investors is done under the G group. Thats about stock classifications in BSE. When you invest, be aware of the category in which the stock falls. have a nice day !!How is Sensex calculated? by aniket on August 2nd, 12 Share

Hi there , Ever wondered how the index moves? Lets take Sensex as an example. Sensex consists of 30 different companies. All of them have different share prices, free-float adjustment factors, free-float market value and weightage in the index. With the top seven companies, in terms of weightage, occupying nearly 50 per cent index any movements in these seven in the same direction could move nearly half of the Sensex! SO WHAT DOES THE INDEX SHOW? The level of index at any point of time reflects the market value of its component stocks relative to a base period. Sensex value = Current free-float market value of constituents stocks/Index Divisor FREE FLOAT MARKET VALUE

The market value of a company is determined by multiplying the number of equity shares that it has issued by their market price. This market value is further multiplied by the free-float factor to determine the free-float market value. Free float is that part of the companys capital thats not held by promoters, governments or other strategic investors and is available to trade on the stock exchange freely. The free float market capitalization method simply means that the company with a higher free float will have a higher weight in the index. A company which has more public holding will have the highest free float factor in the Sensex. When you think about weight of a stock in the Sensex most of us think of it as a static value for example Reliance has 12%, ICICI Bank has 7% and so on, but that is not true because the weight changes every second as the price changes. You need not calculate the free float market capitalization since its available straight on the BSE website Click this link to get it. EXAMPLE: For example, letss assume that the market value of a company is Rs 100,000 Crore since it has 100 Crore shares having a value of Rs 1,000 each.Now, a free-float index such as the Sensex claims to reflect market trends more rationally as it takes into consideration only those shares that are available for trading in the market.In our example, the might have a total of 100 Crore shares but in reality only 20 Crore shares are available as the rest are treated as controlling/strategic holdings. This pegs the free-float factor of the company at 0.20 (20/100) and free-float market value at Rs 20,000 Crore.So, if you add up the current free-float market values of all the 30 companies, you will get the numerator for the Sensex formula. NOW, THE DENOMINATOR The Sensex is calculated using a methodology that focuses upon the base period. Since this base period of Sensex is taken as 1978-79 and the base value as 100 index points what the index divisor does is to adjust the original base period of the Sensex to its present level. This keeps the Sensex comparable over time. CALCULATE SENSEX ON YOUR OWN. Step 1: Find out the free-float market capitalisation of all the 30 companies

that make up the Sensex. Step 2: Then, add all them. Make all this relative to the Sensex base. For example, for a free-float market capitalisation of Rs 9,00,000 Crore, the Sensex value is 14,500 then, for a free-float market capitalisation of Rs 9,50,000 Crore, the Sensex value would be.. ?? (Those who cant find the answer may go back to the ratios and proportions chapter elsewhere in school text book) The answer is 15,306. Bye for now , Have a nice day!Why Sensex and Nifty wont tell you the right story. by aniket on August 2nd, 14 Share

Where will the markets go is the most asked and the least relevant question for a learned investor. Hi there, Recently my friend, who has invested some money in stock markets talked about his knowledge about Sensex and the logic he follows -he said, I invest when the Sensex is down, and sell when it goes up! Why? Because, he believes that when the Sensex is down in the dumps, his equity investments too will take a similar hit and when the Sensex is up, his equity investments too, will proportionately move up. Is he right? No. Heres why SENSEX AND NIFTY ARE JUST INDICATORS. The Sensex is an index that is composed of only 30 stocks from about 12 sectors. Similarly, Nifty comprises of 50 stocks from selected sectors. These stocks are the most liquid (most traded) and well-known ones. This means that, the so-called market barometer gives you a picture of only 30 or 50 large stocks from about 12 sectors. Not only Sensex and nifty, but any index you follow around the world represent only a small sample size selected based on certain parameters. If you would like to read in detail about how the Sensex works , heres the

link. WHY INDICES ARE UNIMPORTANT As an investor, you should be aware that though the Sensex and nifty are widely tracked barometer of the stock markets, the shares you hold might not behave like the indexes at all. Even the most skilled investors assume that when the Sensex tanks by 400 points in a day, the whole stock market reactsand that all stocks are affected in the same way. The sample of stocks selected to construct an index may not be a very good representation of the aggregate market because they are not selected in random, but are selected based on market size, liquidity, and industry group representation. Important sectors such as textiles, BPO services, niche service-oriented companies and segments such as auto ancillaries and consumer durables are not well represented in the Sensex.So, if you happen to have investments in such sectors, broader indices such as BSE 200 or even BSE 500, which represents more sectors and 200/500 companies, could be better benchmarks, as can the BSE Sectoral indices. USES OF AN INDEX Its worth mentioning here that the Nifty and the Sensex are representative samples, with the scrips and the weights given to them carefully chosen. The indexes are best designed to reflect the stock market as a whole and give an idea of investor sentiment on the state of the economy.(whether it would work for you or not is a different story ). In fact, its usefulness depends on what kind of users we are talking about. Technical analysts or technicians, who believe they can predict future prices by using the past stock prices, use indices to analyze market trends and price movements. The stock index is also used as a proxy for investor confidence in the capital markets.More specifically, tracking a stock index has the following advantages to the investor: First, Investors who do not know which individual stocks to invest in can use index as a method of choosing their stock investments. Investors can invest in index based mutual funds that track the performance of the indexes with which they are aligned. This form of investing gives investors the opportunity to do as good as the markets and not significantly under perform the markets. The second benefit of stock market indexes is that they provide a yardstick with which investors can compare the performance of their individual stock portfolios. The indices can also be used as a forecasting tool. By studying the historical

movement of the indices , you can try to forecast market trends. Indices can also be used to track how the market reacted to specific events like terrorists attacks and wars. By studying the historical data, you can forecast the way market would behave should an unforeseen event like war breaks out. CONCLUSION The Sensex captures the movement of just 30 stocks, against the 7,000 or so listed companies in India. If the Sensex is down, your investments in a particular companys shares can actually be UNaffected. Neither of the indices represents the whole of the respective stock exchange. Neither the full market capitalisation nor the entire range of stocks listed is captured by them. Bye for now .. have a nice day !Bulls, Bears and Stags by aniket on August 3rd, 6 Share

Hi there, Lets catch up with Bulls and bears. The two most commonly used terms in stock markets. A common story is that the terms Bull market and Bear market are derived from the way those animals attack. Bulls are supposed to be aggressive and attacking while bears would wait for the prey to come down. However, this is not the origin of the terms. Long ago, bear skin jobbers were known for selling bear skins that they did not own; i.e., Bear Trappers would set a price for a bearskin and then hope to catch one and make a profit. Because the item didnt yet exist at the time of the agreement it became synonymous with a market not based on readily available stock. This was the original source of the term bear. This term eventually was used to describe short sellers, speculators who sold shares that they did not own, bought after a price drop, and then delivered the shares.

Bulls was understood as the opposite of bears. The bull seemed a natural contrast, an animal that charges ahead, moves forward, and is strong and powerful (just like a strong stock market). The bulls were those people who bought in the expectation that a stock price would rise, not fall. BULL MARKETS When can you say its a bull market? The market shows confidence. The sentiment is positive. Prices are going up quickly. The market index keeps hitting highs and so are individual shares. The volume of shares being traded is high and the number of players entering the stock market is also more. If you see all this in a stock market, you may assume that its a bull market. If there is a continuous run of bullish days then you may hear that the market is having a bull market run. Technically a bull market is a rise in value of the market by at least 20%. BEAR MARKETS A bear market is the opposite of a bull market. If the markets fall by more than 20% then its understood that we have entered a bear market. A bear market is a market showing lack of confidence. Prices hover at the same price and then go down, indices fall and volumes are stagnant. In a bear market, players wait for the bulls to start driving the prices up again. You can also say that a bear is a tentative bull or a bull thats asleep. STAGS This is another category of market participant. The stags are not interested in a bull run or a bear run. Their aim is to buy and sell the shares in very short intervals and make a profit from the fluctuation. Its a daily tussle for stags in the stock market. MARKET TIMING The basic idea behind stock market investment is simple- Buy low, sell high and make money. So to make money, you buy stocks in a bear market when stock prices are low and sell stocks in a bull market when stock prices are high. However, knowing the exact time when a bear market would start or when a bull market run would come is not possible. Just when you thought the markets would go up, it may surprise you by trading low. Your strategy should be to pick up shares in the bear market and sell it when theres a bull market run. HERES THE CRUX..

Technically a bull market is a rise in value of the market by at least 20%.Anything less than 20% would be considered as a minor rally. A market launches into a bull phase when sentiment turns buoyant, which is usually because of a series of positive developments that beat expectations Reverse is also true. A 20% or more fall in value is considered as a bear market. Anything less than 20% would be considered as a correction. Bear markets occur when news flow tends to be worse than expectations, causing investors to sharply punish stocks or sectors. This has happened in the US where more bad news on the sub-prime front and US economy data has stifled even the briefest of market recoveries. To confirm a bear market, this weakness should persist for at least two months. In bear markets, liquidity is extremely tight, volumes tend to be low and market breadth tends to be poor Some experts believe that for emerging markets such as India, which tend to be more volatile, the correction needs to be steeper at 30-35 per cent. In every bear market, there tends to be bear market rallies or a bear market pullback, where the market rises 10-15 per cent only to decline yet again. The bounce-back usually occurs when some stocks or sectors are oversold, to borrow a term used by technical analysts. Worst bear market conditions are followed by great bounce backs. That covers Bulls, bears and stags. There is an old saying which would further give authenticity to our bear storyNever sell a bear skin unless you have one. Have a nice day!How much money should you invest in stock markets? by aniket on August 3rd, 13 Share

Hi there, People often end up investing majority of their savings into stock markets,

especially if they get a handsome profit on their first trade itself. Theres one more situation where people end up committing more money in stock markets-To recoup all the loses they made earlier. Both these situations are dangerous. More than 80% of the retail investors in India have this problem of committing more. In the first case, they do it because they are excited about making more money quickly and in the second case they do it out of despair to somehow recoup the losses and get out of the market. Ask any broker whom you know personally he will have a list of hundreds of clients who came in opened de-mat accounts and vanished in a years time. HOW MUCH ? IS THERE A FORMULA? Most of you would have traded more to get back what has been lost-and lost even more. Right? Investing is entirely personal. If you are a high risk taker, a dare devil type- who can block you from taking risks? So what i am trying to give you is a set of two tips that would help you have control over your money invested in stock markets: First of all never try the daily money making process in stock markets. I know quite few of them who has tried playing in stock markets to make a daily income-and lost all their money. Secondly, There is a limit to which you should expose your money in stock markets. Theres no hard and fast rule as to how much should be exposed. However to help you out, heres a formula which tells you what percentage of your long-term investment money should be invested in stocks. It simply is: 90 (minus) YOUR AGE = % of income to be exposed In stock markets. So, if you are 35 years old , you can expose a maximum of 50% of your income into stocks. Ok. Fine. so does that mean you can expose 15% of your income at 75? May be not. Investments in stock markets ideally should be stopped at the age of 65 or 70 maximum. Again , as I said earlier , investing is entirely personal. If you have the money, health and will to invest at 70 or even at 90 , Go ahead ! ! Sir Warren Buffet is 81 years old now, and he hasnt stopped investing ! This formula is straightforward and makes logical sense. When youre young, you have time on your side. If one of your investments goes in the tank, it may be upsetting at first. However, you have many years before your retirement to rebuild your fortune before you actually need to touch the

money. The main risk you have to overcome when you are young is not losing your fortune, but not growing your fortune fast enough. THIS FORMULA DOESNT LIE.. Clearly, when you grow older, more of your assets should be invested into conservative, income-producing investments such as bonds. Thats because when youre 50 years old you have a lot less time in the job market to rebuild your retirement fortune than when youre, say, 25 years old. Bye for now. Have a nice day !What drives the stock market ? by aniket on August 3rd, Share

WHAT DRIVES THE STOCK MARKETS? In the last few post we discussed how the index is constructed and how it moves. In this article well look at the factors that drive the index up and down. Earnings growth In the long term, the most important factor that drives the stock market is the direction of the corporate earnings. In other words, over the long term, stock markets are driven by the underlying fundamentals of the individual companies that make up the market and the economy in which these companies operate. The best time to buy the stocks is when earnings are declining, which means when the economy is moving into a recession. Thats the time when you get excellent stocks at throw away prices. Sentiments. In the short term however, financial markets are driven by sentiment. Market sentiment is the collective views of all market participants at a given point in time. Sentiment never remains static; it is always in a constant state of change. As the future economic outlook changes, so will market sentiment. Valuation Investors would purchase heavily when the stock market is under valued and

sell when the market is overvalued. One of the value measures is the P/E ratio. A high P/E ratio implies that the market is over valued , while a low P/E suggests an undervalued market. Monetary policies The monetary policy of the RBI has a major impact on stock prices. The stock market will be in an upbeat mood when the money flow into the economy is more. This is logical since increased money flow means more money can be invested in the stock market. Interest rates Interest rates affect the borrowing costs of corporates thereby influencing their earnings. Firstly, A rise in the borrowing cost affects the growth plans and earnings of corporates negatively. Changes in interest rates also affect the discounting of the stream of future earnings implicit in stock prices. Secondly, fixed interest bearing instruments such as bonds and fixed deposits pose a major competition to stock markets. Bond prices have an inverse relationship with interest rates. As bond prices rise, yields will fall. Typically this is bullish for stocks as investors move to the equity markets to look for better returns. In this situation the stocks and bond markets generally trend in line with one another. In a deflationary situation, this situation is reversed and stocks and bond prices move inversely. So a bullish bond market means rise in stock prices and a bearish bond market means declining stock prices. Inflation Inflation is another major factor that droves the stock markets. Inflation eats into a companys earnings. So, if a company reports 10% earnings when the inflation rate is 10% , that not an impressive show. Inflation also increases the cost of goods purchased. Therefore money moves from investment to consumption, in effect causing a downturn in demand for the stock. The economy. The economy also has a major impact on the stock market. If investors expect the economy to do well in the future, they will expect higher future earnings, leading to higher stock prices. Most people believe that a strong economy should mean a corresponding increase in stock prices. But, the relationship of stock market and the economy is not that simple. Stock market is a discounting mechanism where it discounts the future earnings to derive at current stock prices. The stock market does not the discount the present. The present has already been discounted by the market 6 or 12 months ago. If the economy is doing well at

the moment, it is very likely that the stock market expected it 6 or 12 months back and acted accordingly at that time.What are Blue-chip shares? by aniket on August 5th, 6 Share

Hi there, When I was a newbie to stock markets, the term Blue-chip was one little word that puzzled me a lot. Every investor around me seemed to inherently understand that word. But later, i found that most of them were not so clear about what the term actually meant.If you dont know what a blue-chip share is and the advantage of investing in such sharesHeres the answer: A blue chip is the nickname for a stock that is thought to be a safe investment. These companies would be considered as leaders in its field. Blue chips generally pay dividends and are favorably regarded by investors. Blue chip stocks are sometimes referred to as bellwethers. The term comes from the game called poker where the highest chip denomination is colored blue. Stock market History says that the phrase was coined by Oliver Gingold of Dow Jones sometime in 1923 or 1924. Company folklore recounts that the term apparently got its start when Gingold remarked that he intends to write about some blue-chip stocks that were then trading at a high price of USD 200 .Thus the phrase was born. It has been in use ever since, originally in reference to high-priced stocks, more commonly used today to refer to high-quality stocks. The exact criteria used to classify a companys stock as a blue chip is relatively subjective. Most professional investors agree that blue chips share several important characteristics including: An established record of stable earnings over several decades An equally long record of paying dividends to common stock holders A history of regular increases in the dividends payable to each share Strong balance sheet with moderate liabilities. High credit rating

Large size in terms of revenue and market capitalization Diversified product lines and / or geographic location. All the 30 stocks in Sensex index can be considered as blue-chip companies. You can also see the Dow Jones list of Indian blue chips at http://www.bluechiplist.com/indices/dow-jones-india-titans-30/ ARE THESE SHARES SAFE FOREVER? No. These shares may be assumed to be relatively safer than others, provided , the positive factors that drive the company remains intact. A blue chip today could become a dud tomorrow. Remember that Bombay Deying and Century textiles were once blue-chips.On the other hand, some of the insignificant ones of yesterday are todays blue-chips. For example, Infosys was not considered as a blue-chip a decade ago. But now , its one of the best blue-chip shares in India. SHOULD YOU INVEST IN BLUE-CHIPS? Of course, Yes !You must have some portion of your investments in Bluechips.They reduce the volatility of your portfolio.You may make less money from blue-chips and more money from mid-caps and small caps since these are low priced shares and has the potential to become tomorrows bluechips.But remember, mid-caps and small caps carry a higher risk than blue chips. Also, their earnings are much more volatile and lack liquidity. Deciding to invest in a blue chip company is definitely a good idea.But, thats only part of the game.Blue-chips,like any other shares, cannot be bought at whatever price its available.. You have to determine the appropriate price to buy blue-chip shares.For that, you need to do some homework. Thats about blue chips! Have a nice day!Invest for a long term or short term? by aniket on December 10th, 5 Share

Imagine the thrill when the stock you just invested in, zooms! What an easy way to make money! Are not good returns over a short period very tempting? Your next move: Identify other stocks that have this potential. From now on,

all your energy will be directed towards making that quick buck, daily. You will find yourself taking tips from every trader, reading every available material on the subject, spending hours studying charts and sighing at every small fall in the indices. Yet, with all the time and energy spent on it, you may end up burning your fingers. This is a reality that every newbie has faced, I am sure.Not only newbies- I have seen most of the investors trying the same. If you have decided to invest money in stock markets, its always better to remain invested for a long term. Heres why: BENEFITS OF LONG TERM INVESTING Short term investments may have the potential to give you quick bucks, but long term investment has several significant advantages. Advantage #1:Compounding: Time can be investors best friend because it gives compounding time to work its magic. Compounding is the mathematical process where interest on your money in turn earns interest and is added to your principal. Advantage #2: Dividends: Holding a stock to take advantage of payouts from dividends is another way to increase the value of an investment. Some companies offer the ability to reinvest dividends with additional share purchases thereby increasing the overall value of your investment. Consistent dividend payout is a reflection of a companys overall business strategy and success. Advantage #3: Reduction Of The Impact Of Price Fluctuations: When you invest for a long term, your investments are less affected by short term volatility. The market tends to address all factors that keep changing in the short term. So a person involved in long term investment will not be affected as much by short term instability due to factors such as liquidity, fancy of a particular sector or stock which may make the price of a stock over or undervalued. In the long term, good stocks which may have been affected due to some other factors (in the short term) will give better than average returns. Long-term investors can ride out down markets without dramatically affecting his or her ability to reach their goals. Advantage #4:Making Corrections: It is highly likely that you could achieve a constant return over a long period. The reality is that there will be times when your investments earn less and other times when you make a lot of money in short term. There may also be times when you lose money in short term but as you are in quality stocks and have long perspective of investment you will earn good returns over a period of time.

There are always times when some stocks do not perform and it is the wise choice to pull out of an investment. With a long term perspective based on quality stocks, it is easier to make decisions to change in a more timely manner without the urgency that accompanies short term and day trading strategies chasing volatile changes. Advantage #5: Less Time Spent Monitoring Stocks: day trading requires constant monitoring of stocks throughout the day to capitalize on intraday volatility. But, Long term trading can be carried out effectively using a weekly monitoring system. This approach is most often far less stressful than watching prices constantly on a daily basis. Moreover, long term investment strategy helps you to concentrate more on your job/profession. Advantage #6: Tax Effect: In India, short term capital gains (The profit you make by buying shares and selling it off anytime within a year) is taxable at 15% and there are no exemptions to it. Long term capital gains (The profit you make by buying shares and selling it off after a year) are totally tax free Advantage #7:Oppurtunity to average down: Suppose you invest in a blue chip like reliance at Rs.1000 and for some reason the stock falls unexpectedly to Rs 850. That gives you an opportunity to buy more shares and bring the average cost down. This can bring dramatic increase in profits in the long term. Advantage #8: Opportunity to make huge returns: Long term investments, if done after careful study of fundamentals, would give opportunity to create huge wealth over a period of time.Investors like Warren Buffet has followed this strategy to create wealth. Overall, investors that begin early and stay in the market have a much better chance of riding out the bad times and capitalizing on the periods when the market is rising. When you invest for a short term, you miss out all these advantages.Indices of the World. by aniket on January 2nd, 2011 Share

Almost Every country has stock exchanges and these stock exchanges have constructed indexes to serve as a barometer for economic growth. There are more than 350 indices world wide. TYPES OF INDICES World stock market index

Stock market indices may be classed in many ways. A world or global stock market index includes (typically large) companies without regard for where they are domiciled or traded. Main indexes in this category are: BBC Global 30- combines Europe, Asia and North America the three power centers of the global economy in a single index. BBC Global 30 a useful tool to see where the worlds most important companies are and thus, where the global economy are heading. No Indian company has found a place in the list. MSCI World- free-float weighted equity index. Index includes stocks of all the developed markets. Common benchmark for world stock funds. The index includes 6000 companies from the developed markets. MSCI emerging markets index- covers over 2,600 securities in 21 markets that are currently classified as Emerging Markets countries. S & P Global 1200- Global stocks index covering 31 countries and around 70 percent of global market capitalization. It is composed of 6 regional indices. NATIONAL INDICES A national index represents the performance of the stock market of a given nationand by proxy, reflects investor sentiment on the state of its economy. Main amount them are: Dow-Jones Industrial average- one of the most widely quoted of all the market indicators. Consists of 30 of the largest publicly traded firms in the U.S. NASDAQ Composite- broad market index of all of the common stocks and similar securities traded on the NASDAQ stock market S & P 500 - stock market index containing the stocks of 500 Large-Cap corporations. Comprises over 70% of the total market cap of all stocks traded in the U.S. Owned by Standard & Poors. Hang-Seng Index- record daily changes of the largest companies of the Hong Kong stock market (represent about 67% of capitalization of the Hong Kong Stock Exchange) BSE sensex 30- includes the 30 largest and most actively traded stocks on the Bombay Stock Exchange. S & P CNX Nifty -index for 50 large companies on the National Stock Exchange of India. Nikkei 225 stock market index for the Tokyo Stock Exchange.

KOSPI- index of all common shares on the Korean Stock Exchanges. SSE Composite- index of all listed stocks (A shares and B shares) at Shanghai Stock Exchange. FTSEurofirst 300 index- free-float capitalization-weighted price index. Measures the performance of Europes largest 300 companies by market capitalization. Covers 70% of Europes market cap. DAX - measures the performance of the Prime Standards 30 largest German companies in terms of order book volume and market capitalization. AEX index- index of Euronext Amsterdam, consists of the 25 most active securities in the Netherlands. FTSE 100- Financial times Stock exchange index- capitalization-weighted index of the 100 most highly capitalized companies traded on the London Stock Exchange. Bovespa index- index of about 50 stocks that are traded on the Sao Paulo Stock Exchange.Ethical Stock Investing by aniket on January 2nd, 2011 Share

ETHICAL INVESTING Ethical investing or socially responsible investing is also known as sustainable, socially conscious investing an investment strategy which seeks to maximize both financial return and social good. Some investors feel that there are no standards which can be created for ethical investing since each individual has their own set of values and morals. If no standards are created, however, then even the most harmful investments can be called ethical by some. Anyone who tries to invest responsibly faces the ethical investment dilemma. This dilemma really revolves around two simple questions. They are: What is or is not ethical? andWho decides? Fortunately, there are several basic values that most people share: Avoid Causing Illness, Disease & Death Avoid Destroying or Damaging the Environment Avoid Treating Honest People with Disrespect etc..

So, arms makers, polluters, tobacco companies, pesticides manufacturers, companies with poor management record such as Enron and satyam, oil companies are some examples of businesses which are generally excluded. In , the OIC announced the initiation of a stock index that complies with Islamic laws ban on alcohol, tobacco and gambling. The Dow Jones Islamic Market World Index is another example. Another important trend is strict mechanical criteria for inclusion and exclusion to prevent market manipulation. Ethical indices have a particular interest in mechanical criteria, seeking to avoid accusations of ideological bias in selection, and have pioneered techniques for inclusion and exclusion of stocks based on complex criteria. Another means of mechanical selection is mark-to-future methods that exploit scenarios produced by multiple analysts weighted according to probability, to determine which stocks have become too risky to hold in the index of concern. Critics of such initiatives argue that many firms satisfy mechanical ethical criteria, e.g. regarding board composition or hiring practices, but fail to perform ethically with respect to shareholders, e.g. Enron. Indeed, the seeming seal of approval of an ethical index may put investors more at ease, enabling scams. One response to these criticisms is that trust in the corporate management, index criteria, fund or index manager, and securities regulator, can never be replaced by mechanical means, so market transparency and disclosure are the only long-term-effective paths to fair markets. ETHICAL INVESTING ENTERS INDIA There is growing market demand for Socially Responsible Investment (SRI) and more investors are willing to invest over the longer term in the organisations that contribute positively to sustainable development, public benefit and environmental protection.ABN Amro launched Indias first SRI fund (called ABN Amro Sustainable Development Fund). Global index provider Dow Jones indexes and Dharma Investments, a private investment company, in Jan, 2008 announced the launch of Dow Jones Dharma index for measuring the performance of companies selected according to the value systems and principles of Dharmic religions, especially Hinduism and Buddhism. This index has been put together by Wallstreet. Stocks will be screened on industry, environmental and corporate governance parameters before being included in the Dharma indexes. The index constituents would be reviewed on a quarterly basis. CONCLUSION

Ethical investing depends on an investors views; some may choose to eliminate certain industries entirely or to over-allocate to industries that meet the individuals ethical guidelines. A good way to start with an ethical investing policy is to write down the areas you want to avoid as well as where you want to see your money invested. From there you can come up with an asset allocation plan and begin researching individual securities.Indirect way to invest in stocks Mutual funds. by aniket on January 7th, 2011 Share

What is it? The term itself gives some hint about its nature. Mutual means combined and Funds means money. So, mutual funds are the collective investment contributed by many investors and managed by professional individual or company (your fund manager). The fund manager invests this combined money in stocks, bonds, short-term money market instruments, and/or other securities Whats the advantage? You do not have to constantly keep an aye on the stock market. The fund manager will invest the funds wisely and in profitable companies. The funds are invested in various companies and that too by the professionals. So, you are not keeping all your money in one pocket. This minimizes the risk of huge loss investment loss. Even your Rs 5000 invested is diversified. You can plan and invest systematically. (That can be done in share markets to, but SIP process in mutual funds works well) Unlike companies, mutual funds will not close down. Rather they would be merged into another successful fund Normally the NAVs do not show a significant rise or crash Any Disadvantages? You dont have a say in deciding where your money is invested. The fund manager decides for you and he may be wrong, thus causing a loss You dont own shares directly, so you are not eligible for any rights due to the owner.

Dividend is optional and if chosen will affect the value of your investment by the amount of dividend declared Scheme philosophy Whenever a mutual fund scheme is launched there is a specific mandate (philosophy of investing) based on which investing is done by that mutual fund. This mandate outlines the debt-equity mix and the type of instruments that the fund would invest.For example, the prospectus of a mutual fund will always mention the stock universe that fund invests in viz, large cap, mid cap, small cap, sector funds etc.. or it will have a theme for example energy opportunities fund or emerging leaders fund etc.. From the name itself,you could get a basic idea of where your money will be invested. Since Mutual funds offer a whole bouquet of products , you must first decide on the types of funds that would suit your needs. Only then should you start selecting the best funds within those categories.

NAV and its importance. Net Asset Value, or NAV, is the sum total of the market value of all the shares held in the portfolio including cash, less the liabilities, divided by the total number of units outstanding. Thus, NAV of a mutual fund unit is nothing but the book value. The NAV of the fund has no impact on the returns it will deliver in the future. For example Lets assume you plan to invest in an index fund and you have two choices - Fund A is a new fund with an NAV of Rs. 10, which will mimic the Nifty and a Fund B, which is an existing Nifty index fund with an NAV of Rs. 200. Suppose you invest Rs. 10,000 in Fund A and Rs. 10,000 in Fund B. You will get 1000 units of Fund A and 20 units of Fund B. After 1 year, the Nifty has appreciated by 25%, which means that both funds would have also appreciated by 25%, as they are a replica of the Nifty. So after 1 year, the NAV of Fund A would become Rs. 12.50 and that of Fund B Rs. 250. But what is the value of your two investments? Fund A would now be Rs. 12,500 (1000 units * Rs. 12.50/unit) and Fund B also would be Rs. 12,500 (20 units * Rs. 250/unit). The bottom line is that dont bother about the NAV of a mutual fund, as you might do for the price of a share. Conclusion

As with any investment, there are risks involved in buying mutual funds. These investment vehicles can experience market fluctuations and sometimes provide returns below the overall market. You may consider investing in those companies belonging to the top performing mutual fund companies. This gives you some security that the company is able to increase your capital investment. To know if the company is performing well you can ask for feedbacks, past performances etc.The Only 2 ways to buy stocks Primary markets & Secondary markets. by aniket on November 30th, 2011 Share

Hi there, So far what I have discussed is about share markets or secondary markets. I havent talked about primary markets in detail. Thats a basic topic which I should have discussed earlier. So lets catch up with the topic. If you recall our story on shares, in scene 3, the couple raises 52 lakhs by selling 40% of their shares to the public. When they did that, they tapped money from the primary market. Basically the primary market is the place where the shares are issued for the first time.

So, theres only two ways you can buy a stock. 1. Through stock markets those gigantic auction houses where millions of shares are exchanged. ( Also called secondary market) 2. IPOs or initial public offers ( Also called primary market) WHATS THE DFFERENCE? Companies raise money for expansion through initial public offers. As the name suggests, IPOs are fresh issue of shares to the public. The money you pay by subscribing shares goes to the company for its expansion plans.So when a company is getting listed for the first time at the stock exchange and issues shares this process is undertaken at the primary market.Existing companies, who have already issued shares, ,may require additional money for further expansion. If they wish, they can tap if from the primary market . Such share issues will be called follow on issues.

When you buy shares in the secondary market ( stock markets) , the money which you pay goes to the seller of the shares and not to the company.Generally when we speak about investing or trading at the stock market we mean trading at the secondary stock market. It is the secondary market where we can invest and trade in the stocks to get the profit from our stock market investment. ISSUE OF SHARES: Face value vs Premium. When a company launches an IPO to the public, it can offer those shares at face value or at a Premium. Shares carry a fixed rate, as declared in the legal documents of the company. Its also called par value. For example, a company may issue 10 lakhs shares of Rs 10 each at par. Over and above the fixed rate, a company can issue shares at a premium from its subscribers if the management is able to justify the reason for such premium. For example, a company may issue 10 lakh shares of Rs 10 each at a premium of Rs 50. So the total cost of one share becomes Rs 60. WHY NOT AT DISCOUNT? Yes, theoretically speaking, shares can be issued at a discount also. Practically, nobody does that. Shares are either issued at par or at a premium. ITs NO EASY PROCESS To successfully complete the share issue process, a company will have to appoint a lot of intermediaries like Lead managers who would take care of all the paper work with SEBI and other regulatory authorities, with the stock exchanges, bankers, Underwriters, allotment of shares.. in short, everything from A to Z Bankers to the issue who would ensure the collection of funds from the public. Registrars to the issue who would scrutinize the applications, reject the disqualified ones and allot the shares to eligible allotees , transfer those shares to their demat accounts and refund the amount to unsuccessful applicants. Underwriters who would undertake to buy the shares that are not taken up by the public so that the IPO is complete. PRICING OF SHARE ISSUES.

Shares issued through an IPO can be priced in two ways. First method is straight forward The company can decide the price at which it will offer its shares. The second method is The Company, in consultation with the lead managers, would fix a price band for the issue. The price band is nothing but a range. For example If the issue document says that the shares are issued in a price band of Rs 50 to Rs 75. It means, that the investors willing to subscribe the shares are free to bid for any price between that range. The lower end of the band is called the floor price and the upper end of the band is called the cap. The highest price at which there are maximum numbers of subscribers is taken as the issue price. All bids at or above this price are valid bids and considered for allotment. INVESTORS WHO CAN INVEST IN AN IPO The total issue of shares is divided into three parts for three categories of investors. These categories are: Retail investors For You, me, residents, NRIs and Hindu undivided families, whose share application size is less than Rs 1 lakh, 35% of the issue is kept aside. Qualified institutional bidders: For mutual funds, banks, insurance companies, foreign institutional investors etc 50% of the issue is kept aside. Non-institutional bidders individuals, companies, NRIs, HUFs, societies, trusts whose share application size is more than 1 lakh, the balance 15% is given. This being an article In our primary section, Im keeping things simple in a laymans language. We will take up the IPO issue process in our advanced lessons series. Bye for now.. Have a nice time!Stock Market timings. by aniket on December 5th, 2011 9 Share

INDIAN MARKETS Trading on the Indian equities segment takes place on all weekdays. There is No trading on Saturday, Sunday and Published Indian Stock Market Holidays declared by the Indian Stock Exchange in advance. The Market Opens at: 09:15 hours and Closes at: 15:30 hours Pre open trade session will be from 09:00 ~ 09:15 hours Pre-open trade session is a 15 minute trade session from 9:00AM to 9:15AM on the 50 stocks of NIFTY index . Only 50 stocks of the NIFTY index can be traded during this time on both NSE and BSE. Normal trading for all other stocks will start at 9:15AM till 3:30PM. WHY PRE MARKET SESSION?

In case a major event or announcement comes overnight before market opens, such events are likely to bring heavy volatility on the next day when the market opens. Special events include merger and acquisition announcements, open offers, delistings, debt-restructurings, credit-rating downgrades etc which may have a deep impact on investors wealth. In order to stabilize this, pre open call auction is conducted to discover the right price and to reduce volatility. BREAK-UP OF 15 MINUTES The 15 minutes of pre open session is broken into 8 + 4 + 3. The first 8 minutes: During this session investors can place/ modify /cancel orders on the basis of which the exchanges would determine the rates at which trading would happen. Orders are not accepted after this initial 8 minutes. Limit orders will get priority over market orders at the time of execution of trades .All orders shall be disclosed in full quantity, i.e. orders where revealed quantity function is enabled, will not be allowed during the pre-open session In the next four minutes, orders are matched, executable price is discovered and trades are confirmed. The next 3 minutes is just a buffer period for transmission from pre-market session to normal market session. PRICE DISCOVERY

The equilibrium price shall be the price at which the maximum volume is executable. That is, the price at which there are maximum number of buy orders and sell orders. In case of more than one price meets the said criteria, the equilibrium price shall be the price at which there is minimum order imbalance quantity (unmatched qty). Further, in case more than one price has same minimum order imbalance quantity, the equilibrium price shall be the price closest to previous days closing price. In case the previous days closing price is the mid-value of a pair of prices which are closest to it, then the previous days closing price itself shall be taken as the equilibrium price. In case of corporate action, previous days closing price shall be the adjustable closing price or the base price. If the price is not discovered in pre-open session then the orders entered in the pre-open session will be shifted to the order book of the normal market following time priority. The price of the first trade in the normal market shall be the opening price. Price band of 20% shall be applicable on the securities during pre-open session. In case the index breaches the prescribed threshold limit upon the closure of pre-open session, the procedure as prescribed in SEBI Circular Ref. No.SMDRPD/Policy/Cir-37 /2001 dated June 28, 2001 shall be applicable from the time continuous normal market opens. what the circular says is about circuit limits. In case of 20% movement in the index, trading will be halted for reminder of the day. There is also a 15 minute video on this topic by Dr. Sayee Srinivasan , Head Product Strategy, at BSE. Watch it here. REGIONAL STOCK MARKETS Apart from the BSE and NSE, there are 21 regional exchanges which open at normal hours 9:15 to 15:30 hrs. WORLD MARKET TIMINGS Apart from this, global trends in stocks also affect the Indian market when it opens. Heres a list of opening time of stock markets around the world. WORLD STOCK MARKET TIME ACCORDING TO IST. Shanghai stock exchange Opens at 7.30 Am

Hong Kong stock exchange - Opens at 7.55 Am Tokyo stock exchange - Opens at 5.50 Am South Korea Opens at 5.50 Am NYSE, New York Opens at 8.30 Pm NASDAQ Opens at 8.30 Pm BOVESPA , Brazil Opens at 7 Pm Bogota, Columbia Opens at 7 Pm Dow Jones Opens at 7.30 Pm You can also get the market timing of any other stock or commodity exchange at marketclocks.com Bye for now .. have a nice day !