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Finibrain Sip Report
Finibrain Sip Report
ON
ANALYSIS ON FOREX AND STOCK MARKET
AT
Puppala Aruna
REG.NO. 181238
BATCH 2018-20
July 2019
They seek to create positive economic impact and long term value for the
investors, companies we invest in and the people associated with us. They focus
on delivering attractive risk adjusted returns along with capital preservation. They
deliver solutions which unlock value and propel growth of an investor.
FINIBRAIN is founded by Thasleem Basha Shaik in the year 2016. They have
built the firm on a strong foundation of intellectual capital and integrity ensuring
substantial growth for investors.
They provide a client- oriented approach to articulate goals and priorities. Their
strategy is to understand the companies and their operations with in-depth
analysis and they critically evaluate company’s potential in generating positive
total returns.
They focus on diversification of investments reducing the overall risk of a
portfolio by managing funds focussed on high yield bonds, distressed debt.
Their intellectual team of experts serve on a broad range of financial issues and
structured solutions.
Investment Services
They analyse the financial report of a company and employ accounting ratios to
identify an undervalued security. They work on the basis of value investing,
where assets believed to be undervalued are bought and overvalued assets are
sold. Investments cycles are always supported with market leading research &
analytics. They provide broad range of wealth management services and portfolio
decisions are always guided by timely and strategic perspectives. They offer
service of share transfer agent, stock broking, commodity trading and mutual fund
investments. Investors, particularly novices are trained well and advised to adopt
a definite investment strategy to diversify their portfolio.
Insurance Services
Their insurance solutions are designed by a team of insurance experts who
understand the need of insurer’s financial strength to with stand events that may
be either anticipated or unforeseen. They seek to deliver bespoke, customised
investments solutions tailored to each client based on their unique need and risk
profile.
VISION
They consistently strive to achieve superior performance through innovation,
uniqueness and excellence. Their core belief is to create exciting exploration in
the financial market being the most reliable financial service facilitator meeting
the expectations of the investor.
INDUSTRY PROFILE
INTRODUCTION
A financial market is a market in which people trade financial securities and
derivatives such as futures and options at low transaction costs. Securities include
stocks and bonds, and precious metals. Financial Market refers to a marketplace,
where creation and trading of financial assets, such as shares, debentures, bonds,
derivatives, currencies, etc. take place. It plays a crucial role in allocating limited
resources, in the country’s economy. It acts as an intermediary between the savers
and investors by mobilising funds between them. It facilitates mobilisation of
savings and puts it to the most productive uses.
It helps in determining the price of the securities. The frequent interaction
between investors helps in fixing the price of securities, on the basis of their
demand and supply in the market. It provides liquidity to tradable assets, by
facilitating the exchange, as the investors can readily sell their securities and
convert assets into cash.
ISE has prepared the details business plans and installation of hardware and
software system. The promotion for NSE were financial institutions, insurances
companies, banks and SEBI capital markets Ltd, infrastructure leasing and
financial services Ltd and stock holding corporation Ltd. It has been set up to
strengthen the move towards professionalization of the capital market as well as
provide nation wide securities trading facilities to investors.
NSE is not an exchange in the traditional sense where broker own and manage
the exchanges. A two tier administrative set up involving a company board and a
The stock exchanges in India, under the overall supervision of the regulatory
authority, the Securities and Exchange Board of India (SEBI), provide a trading
platform, where buyers and sellers can meet to transact in securities. The trading
platform provided by NSE is an electronic one and there is no need for buyers
and sellers to meet at a physical location to trade. They can trade through the
computerized trading screens available with the NSE trading members or the
internet based trading facility provided by the trading members of NSE
PRIMARY MARKET
The Primary Market, also known as a New Issue Market, is where new securities
are issued – it is part of the capital market. Corporations, national and local
governments, and other public sector institutions can get financing through the
sale of new stock or bond issues through the primary market. Put simply, the
primary market creates new securities and offers them for sale to the public.
All companies require capital for their operations. This capital (money) can be in
the form of equity or debt. Equity is the stock capital (share capital) of a company.
Debt consists of all the loans taken by the business. In an initial public offering
(IPO) and follow-on public offering (FPO), shares are sold in the primary market.
SECONDARY MARKET
The secondary market is where investors buy and sell securities they already own.
It is what most people typically think of as the "stock market," though stocks are
also sold on the primary market when they are first issued.
SECONDARY AND PRIMARY MARKET – DIFFERENCE
When a company issues IPO, it sells its stock in the primary market. After the
IPO, the shares start to trade in the stock markets .Proceeds from the sale of shares
in the primary market go to the issuing company. In the secondary market,
proceeds go the investors selling the security.
Small investors, usually, don’t buy the securities in the primary market because
issuing company sells in lots, which requires a big investment. In the secondary
market, however, investors can buy any number of stocks they want.
Price of securities doesn’t fluctuate in the primary market, unlike in the stock
market. Issuing company hire investment banks to manage their IPO in the
primary market. In the secondary market, investors hire brokers to carry their
trade.
TRADEABLE INSTRUMENTS
Next on the list of major differences between Forex and stocks is the number of
tradeable instruments. There are only eight major currencies on Forex: the US
dollar, the euro, the British pound, the Swiss franc, the Japanese yen, the
Canadian dollar, the Australian dollar, and the New Zealand dollar. Even if we
expand this list to cover all G10 currencies, including the Norwegian and Swedish
krona, there are still significantly fewer currencies on the Forex market compared
to the stock market.
This means traders can focus on a few currencies instead of hundreds of stocks.
Obviously, it’s far easier to follow a few currencies compared to dozens of
hundreds of stocks. While stock traders in this case could have more trading
opportunities as they have more instruments at their disposal, it’s almost
impossible to keep track of so many stocks at thje same time. That’s why stock
The growing competition between Forex brokers has reduced transaction costs to
record lows. To open a position on Forex, you’ll have to pay the so-called spread,
which represents the difference between the buying and selling rate of a currency
pair. Major currencies, like the one listed above, are usually very tight spreads in
the range of 1-3 pips (the fourth decimal place of an exchange rate), while less
liquid pairs and exotic currencies can have significantly higher spreads. However,
major currencies are the most traded currencies on the Forex market.
To put the spread into perspective, if we’re trading 100,000 units of the base
currency (one standard lot), we’ll usually have to pay around $10 of transaction
costs on the EUR/USD pair if our broker’s spread is 1 pip. If we open one mini
lot (10,000 units of the base currency), our transaction cost will equal to only $1.
With most brokers, there are no commission fees involved in Forex trading.
The stock market, on the other hand, has substantially higher transaction costs
compared to Forex. Brokers usually charge a fixed commission to open a trade.
However, if we’re trading CFDs on stocks, our transaction costs would be
significantly lower and comparable to Forex trading. Still, a stock day trader vs
Forex trader could pay way more in transaction costs.
There’ll always be a group of people who know something that the ordinary retail
trader doesn’t, whether it’s the financial standing of a company, plans for a new
product line, or pending changes in the top management.
The Forex market, the largest financial market in the world with an average daily
turnover of around $5 trillion, makes insider trading almost impossible. While
there is no such thing as a “Forex stock”, currencies are for countries what stocks
are for companies. Forex, stocks, and currencies all behave differently due to the
size and liquidity of their respective market.
Exchange rates of liquid major currency pairs would probably not be impacted
at all, which puts the retail Forex trader into an advantageous position compared
to their stock trading peer.
Exchange rates usually fluctuate less than one percent a day. For retail Forex
traders to make a profit on the market, brokers lend them money to open a
significantly larger position size than their initial trading account sizes would
otherwise allow. This is called trading on leverage.
However, trading on extremely high leverage can also lead to large losses if our
analysis shows to be incorrect. Leverage increases both our profits and losses, so
make sure we fully understand the concept of leverage and the risks associated
with it before trading on high leverage ratios.
It’s no secret that trend following strategies are very profitable. we only have to
catch a trend early in its development, open a position in the direction of the trend,
and ride it as long as it lasts.
Technical analysis also works on the stock market. Tools such as chart patterns,
moving averages, and trend lines are regularly used by technical stock traders to
find profitable trading opportunities.
Forex has a significant advantage with regard to trading times, leverage, absence
of insider trading, and intermediaries, and the lower number of currencies
compared with stocks. Both Forex and stocks have their own advantages and
disadvantages.
FACTORS AFFECTING FOREIGN EXCHANGE RATE
FLUCTUATIONS
1. Inflation Rates
Changes in market inflation cause changes in currency exchange rates. A country
with a lower inflation rate than another's will see an appreciation in the value of
its currency. The prices of goods and services increase at a slower rate where the
inflation is low. A country with a consistently lower inflation rate exhibits a rising
currency value while a country with higher inflation typically sees depreciation
in its currency and is usually accompanied by higher interest rates
4. Government Debt
Government debt is public debt or national debt owned by the central
government. A country with government debt is less likely to acquire foreign
capital, leading to inflation. Foreign investors will sell their bonds in the open
market if the market predicts government debt within a certain country. As a
result, a decrease in the value of its exchange rate will follow.
5. Terms of Trade
Related to current accounts and balance of payments, the terms of trade is the
ratio of export prices to import prices. A country's terms of trade improves if its
7. Recession
When a country experiences a recession, its interest rates are likely to fall,
decreasing its chances to acquire foreign capital. As a result, its currency weakens
in comparison to that of other countries, therefore lowering the exchange rate.
8. Speculation
If a country's currency value is expected to rise, investors will demand more of
that currency in order to make a profit in the near future. As a result, the value of
the currency will rise due to the increase in demand. With this increase in
currency value comes a rise in the exchange rate as well.
For instance, an upcoming election is always a major event for currency markets,
as exchange rates will often react more favourably to parties with fiscally
responsible platforms and governments willing to pursue economic growth. A
good example is the Brexit vote, which had a major impact on the British pound
(GBP) when the UK voted to leave the EU. The currency reached its lowest levels
since 1985 after the vote because the UK's economical prospects were suddenly
highly uncertain.
The fiscal and monetary policies of any government are the most important
factors in its economic decision making. Central bank decisions that impact
interest rates are keenly watched by the forex market for any changes in key rates
or future outlooks.
SEBI
Securities and Exchange Board of India (SEBI) regulates all the entities of Indian
stock market including the stock exchanges and financial intermediaries. Stock
market is also seen as the economic barometer of a country thus the importance
of stock market in the economy cannot be ignored. It is the main reason that SEBI
with its 20 SEBI departments, keeps a close watch to every action in the stock
market eco-system and introduces various bye-laws to bring more transparency
and build the trust of investors as well as of corporates.
Regulatory Actions
SEBI, since its inception, has brought transparency and built investor’s trust in
the stock market eco-system. It also introduced the discount brokerage and
several other initiatives to increase the active participants in the stock market.
One of the main objectives of SEBI
To protect the rights of investors and ensure the safety of their investment”.
To achieve this objective, SEBI introduces various bye-laws from time to time.
One of the most important bye-laws was introducing the circuit and circuit
breaker in Indian stock market. The circuit breaker was introduced to save
investor’s money and stock market crash. The threshold set for stock fluctuation
in both positive and negative direction called circuit. If any day, a stock fluctuates
more than the threshold, the circuit is hit and the circuit breaker kicks in. This
circuit breaker halts that specific stock for the pre-assigned time period or for the
Thus an increase in repo and reverse repo rates may adversely affect the capital-
intensive industries while a decrease may raise their stocks.
Market Sentiments
Most participants don’t follow the basic rule of delivery trades in the stock market
“be greedy when the market is fearful and be fearful when the market is greedy”.
They just follow the herd. If the price is going down there will be huge selling
There are three types of participants in the stock market viz. speculator, trader
and investor. A speculator has no rationale behind his decision to enter a trade.
These are either very new or just want to make quick money in the stock market.
They follow the price movements in intra-day trades and act accordingly. For
some stocks, these participants move the prices heavily.
Tips provider
There are several speculators/traders who solely rely on the tips by their stock
brokers, news experts and analysts. There are several whatsapp groups and sms
services also mushrooming to provide trading tips. SEBI is already dealing with
non-registered groups and tips providers. Such tips providers and groups hugely
affect the market sentiments. Usually, if a tip provider initiates a buy/sell call, it
is followed blindly by its subscribers and fluctuates the price movement.
News
Apart from experts giving advice and tips all day, news channels are one of the
best medium for updates in any industry or company. For traders, this medium
becomes the primary source for the next pick. No need to mention the access of
these news channels to the traders. A news about a company can hugely fluctuate
its prices.
Global incidents
Any global incident which affects the cost of manufacturing, transportation,
import-export of goods in a country, affects the stock market. Any war-like
situation (either on-ground or cold war) or end of this situation also do the same
thing.
Weather
Not only commodity market but the equity market is also fluctuated by a forecast
of a good/bad weather like rain, high/low temperature by the meteorological
department. Exempli Gratia, a good rain means good crop leading to more income
by farmers. More income means more money to buy things necessary for a
farmer. There may be a good time ahead for the tractor industry. A colder winter
this year may be a good time for the woollen clothes and heater industry. ⇯
Natural Disasters
Natural disasters (e.g. earthquake, drought, flood, cyclones etc) bring chaos to the
real life of humans. Maybe its just the way of nature telling human, who is the
boss!
Also, as a result of these disasters, market participants don’t have the time and
interest to trade/invest in stock market because they are busy to recover from the
disaster.
On practical grounds politicians are also humans and they do have their own
judgements. A rise of a particular political party can be hugely beneficial/lossy
due to the party’s own judgement regarding the industry. A tug of war ending
between two political parties after election results may also fluctuate the market
either up/downside.
Government policies
Every industry runs highly on the government policies. A government’s new
policy may be hugely profitable to one industry but at the same time, the same
policy may be disastrous for another industry. It’s also possible that a policy may
be profitable to all the industries or may be disastrous to all of them as well.
Line Charts
This chart is the simplest chart and doesn’t give much detail. A line chart just has
a line drawn from one closing price to the next closing price. So, all you see in a
line chart is a series of closing prices.
Even though they are not popular, sometimes traders use these charts if they want
to have a quick look at the least amount of data without all the cluttering
information.
A bar chart reveals slightly more information than the line chart. You see both
closing and opening prices in a bar chart. So, if you look at a 1-hour chart, each
bar represents 1 hour. A bar in a 1-hour bar chart shows the price it opened within
that hour and the closing price of that hour. In addition to that, it also shows the
highest and the lowest prices of that hour.
In a one hour chart, The top of a bar shows the highest price of the hour and the
bottom of the bar shows the lowest price. The little horizontal hash on the left
side shows the opening price of the hour and the horizontal hash on the right side
of the bar shows the closing price of the hour.
Candlestick Charts
This is the most popular and widely used type among all the three types of Forex
charts. Both bar charts and candlestick charts reveal the same information: open,
close, high and low prices for a particular time period of a specific currency. But
The area between the open and the close prices of a time period is known as the
body. The projections outside the body of the candle at the top and at the bottom
are called ‘shadows’.
With default settings, a candle may be either filled with a white colour or unfilled
and hollow.
Bearish Candle
A filled candle, just means that that the opening price is higher than the closing
price. In other words, the price has come down in that specific time period. This
is also known as a bearish candle. A downward movement in the Forex is also
known as a bearish move.
Bullish candle
A hollow, unfilled candle means that the closing price is higher than the opening
price. In other words, the price has gone up in that specific period. This is also
known as the bullish candle. An upward movement in the Forex is known as a
bullish move.
You can change the default settings to make the charts look a little bit better. It is
a common practice to change the colour of the filled candles to red and the color
of the hollow candles to green.
It is very helpful to use candlestick charts, especially with red and green candles.
They give you a quick picture of the trend and are very easy to interpret. Also,
certain type of candlesticks has names like ‘Doji’, ‘Shooting star’ etc., which may
indicate some specific changes in the market.
TECHNICAL INDICATORS
Moving averages are among the best technical indicators for Forex trading. As
their name suggests, moving averages show the average price over a pre-specified
number of trading sessions and plot it directly on the chart. For example, a 10-
day moving average would plot the average price over the last ten trading days,
while a 20-period moving average on a 4-hour timeframe would plot the average
price of the last twenty 4-hour bars. Given their simplicity, moving averages are
probably the best Forex chart indicators for day traders.
Moving averages also form one of the basic technical trading strategies in Forex,
called the Moving Average Crossover. In this strategy, traders apply two MAs to
their chart, one slower MA (higher period-setting) and one faster MA (shorter
period-setting). A bug signal occurs when the faster MA crosses the slower MA
from below, while a sell signal occurs when the faster MA crosses the slower MA
from above. This is shown on the following chart, using two EMAs – one with a
5-period setting (the fast EMA), and one with a 50-period setting (the slow EMA).
Fibonacci tools
Fibonacci tools are also some of the best technical indicators for Forex. Named
after famous Italian mathematician Leonardo Fibonacci, who discovered the
Fibonacci sequence of numbers (1,1,2,3,5,8,13…), Fibonacci tools are used to
measure the extent of a correction during an uptrend or downtrend.
Once the price shows to respect a Fibonacci retracement level, another tool called
Fibonacci extension levels is used to determine where the price might go in the
future. By combining these two Fibonacci indicators, traders get one of the most
reliable technical indicators in Forex and one of the best Forex indicators to use
together.Fibonacci levels are one of the top indicators for Forex trading, and
many trend-following strategies can be built around them making it one of the
best Forex trading strategy indicator.
The Relative Strength Index (RSI) measures the momentum of a price move
relative to time, and can return a value between 0 and 100. Developed by Mr.
Wilders, the RSI is popularly used to determine overbought and oversold market
conditions. An RSI value above 70 signals an overbought market where the price
may soon reverse and fall down, while an RSI value below 30 signals an oversold
market where the price may soon go up.
However, we should note that markets can stay oversold and overbought for a
long period of time, so you shouldn’t base your trading decisions solely on the
value of the RSI indicator. Also, trading oversold and overbought market
conditions is generally considered as a counter-trend trading approach, which can
be riskier than a trend-following approach. Trading RSI levels that are
overbought and oversold is shown on the following chart. Pay attention to the
fake signals that the indicator may generate from time to time.
Picking the best indicator for Forex trading is not an easy task. All of the
mentioned indicators are good indicators for Forex trading, and they’re used in
different market conditions and cater to different trading styles. Since all
indicators lag the current price, we should be cautious when using them as Forex
trading forecasting indicators. Alternatively, try to avoid placing trades based
solely on technical indicators, and try to use them as confirmation tools instead.
SENTIMENTAL ANALYSIS
Forex sentiment refers to the overall feeling the market participants have about
the performance of a currency pair. It is a useful way of gauging the feeling or
tone of the market and then making appropriate trade decisions.
Every trader participating in the forex market has his or her own opinion about
the direction the market is likely to take. And, the decisions they make—whether
to place buy or sell orders—is based on these views.
Ultimately, the predominant direction the market is going to take is based on the
combination of the opinions of all the market participants.
For example, if the dominating sentiment is bullish for a currency pair, it will rise
in value. Note that using sentiment analysis will not provide you with specific
entry and exit places for every trade—but it will assist you to know whether to
ride with the flow or not.