Friday, November 27, 2015


  1. SUNTV(389.8)
  2. TITAN(388.55)
  3. BATAINDIA(513.7)
  4. ENGINERSIN(218.4)
  5. M&MFIN(244.3)
  6. ZEEL(409)
  7. GRASIM(3729.9)
  8. MOTHERSUMI(296.35)
  9. CENTURYTEX(586.35)
  10. PTC(67.15)
  11. JUSTDIAL(962.65)

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  1. AMARAJABAT(868)
  2. MINDTREE(1430.35)
  3. DRREDDY(3100.75)
  4. AJANTPHARM(1326.9)

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Monday, November 2, 2015


The advent of discount brokers in the Indian market have revolutionized the way trading is done in India.
Discount brokerages have heavily brought down the cost of trading. This has proven to be a boon to the traders especially the intraday and the derivatives trades.
Discount brokerages like RKSV and Zerodha have already started hurting the broking industry. Full-service brokers had made a request to market regulator Securities and Exchange Board of India (SEBI) to impose a minimum slab on the brokerage being charged by discount brokers. This request was declined, clearing the way for more aggressive competition.
These brokers rely entirely on the online trading platform and technology to keep costs down, while traditional brokers typically operate in multiple cities through branch offices. The discount brokerages have been able to compete so much so that established brokerages like HSBC (InvestDirect) and India Infoline had to shut their retail broking operations.

Here are some advantages of trading with discount brokerages:
1. Getting more profits
Put simply, we are out there to make money in the stock markets. When one goes through the contract note of the regular brokers, there are huge costs spent on brokerages, taxes and duties. At a brokerage of Rs.30 on per lot of Option one has to pay a brokerage of around Rs.150 for 5 lots. There are also duties and taxes which increase it to Rs.200.When the same thing is done through a discount brokerage the brokerage cost is Rs.20 and adding the taxes and duties it come to Rs.40. There is saving of Rs.150.  It directly adds more money to the profits.
2. No need to sacrifice the quality of the execution.
There is no difference between trading through a regular broker and a discount broker. There is still the old facility of call and trade. There is the new facility of mobile trading and online trading.
3. More high frequency trades
The reduction of brokerage brings down the breakdown even. The intraday brokerage for discount brokerage is 0.01% or Rs.20, whichever is lower. So, in small trades, when a trader buys at 100.01 and sells at 100.05, he still makes profit. In large trades, the advantage is even more as the brokerage is even less due to the Rs.20 cap. This reduction of breakeven point enables a trader to do more frequency trades.
4. Advanced trading
The discount brokerages have come up with advanced algorithm trading. There are hundreds of other strategies which require frequent trading. Algorithm trading has narrowed the profit making ability of a trader who relied on buying and selling spreads. Under these circumstances low brokerage offers the best chance for a trader who trades on an intraday basis or trades very frequently.

Why is the brokerage so less?
Some people doubt the authenticity of discount brokerages.
The discount broker does not give advice on what and when to buy or sell. All he offers is a platform to trade. The client has to use his/her own trading or investing skills to make a decision on what to trade.
Because they don’t offer advice, discount brokers have no vested interest in trying to sell you any particular stock.
All brokerages in India are members of SEBI. So there is no need to worry about authenticity. The financial sector is India is highly regulated and as such there is no need to be afraid to choose a discount brokerage firm.
If you are still worried, open an account with a small amount of investment. Start trading with a small investment and as you keep getting confidence increase the

A lot at India’s top discount brokerages:
Raghu Kumar, his brother and co-founder Ravi Kumar along with Shrinivas Viswanath started RKSV as an only online broking house. Over the last two years, the company added 15,000 customers who are handled by 60 employees. The company has a high growth rate of 5 percent every month in terms of traded turnover. Currently, their turnover is about Rs 3,000 crore on the NSE—that is almost 2 percent of the total market turnover. Safe to say, if RKSV continues to grow at the same speed, it may well become the highest turnover player in the next five years. In this, Raghu’s role has been critical.

Zerodha is one of the first discount brokers in India. As per Kamath of Zerodha, the company been able to over 32,000 clients in the past few years and around 2,000 clients are joining them every month. The low cost model works with a team of around 85 people with two centralised offices in Bangalore. A traditional broker who does similar turnover would probably be working with 2,000 people and with over 200 branches, which would ultimate lead to higher brokerages for the retail customers. Zerodha offers same brokerage across segments i.e. Equity, F&O, Currency and Commodities. They offer a single brokerage plan of Rs. 20 per trade or 0.01% /0.1%, whichever is lower per executed order.
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Saturday, October 24, 2015


Opening a saving bank account is very easy.  These days, there is no such thing as minimum balance as the Reserve Bank of India has advised all banks to open saving accounts with “NIL” balance. This is called a Basic Savings Bank Deposit Account. One just needs to fill up the account opening form with a latest photograph and submitting documents to comply the “know your customer” (KYC) norms, i.e., proof of our identity and residence. The account can also be opened on the basis of the Aadhar Card. Persons not having above documents may open the account under relaxed KYC procedure based on the MGNREGA job card or self certification. Some of the other features are that banks will not charge fees for deposit of money any number of times.  Banks will also not charge for four withdrawals during a month. The account holder also gets a passbook and an ATM/smart card without any fee.

The latest benefit of saving account has been the deregulation of interest rates on Saving Accounts by the RBI. Till 24/10/2011, the interest on saving accounts was regulated by RBI and it was 4.00% per year on the daily balance basis. Since 25th October, 2011, RBI has deregulated the interest rates on Saving Accounts and banks have been given the freedom to decide the interest rates within certain conditions imposed by RBI. With this announcement of this policy a competition has begun between the banks to draw more deposits by offering higher interests on savings accounts. To avail full benefits of this facility one needs to choose the bank that offers the best interest rates.

Here are two ways to more benefits out of the saving bank account:
1. Sweep in Facility
Sweep in facility is a special feature of the savings bank account that not many are familiar with. Here, the account holder sets a threshold limit for the saving account. Any amount deposited in the savings bank account above the threshold automatically moves to a fixed deposit and earns a higher rate of interest prevailing on the fixed deposits for the tenure that it remains with the bank.
Another advantage of this facility is that in case your savings account balance is too low, this facility allows that to be taken care of by your fixed deposits. Let us say a person has set a threshold limit of Rs. 10,000 in your savings bank account and deposited Rs. 50,000 in the account. Now Rs. 10,000 will remain in your savings bank account, while Rs. 40,000 flows to the fixed deposit account which earns a higher rate of interest of about 8-9% p.a. After this, if the person issues a cheque of  Rs. 15,000 and the savings bank account has just Rs. 10,000, then the deficit of Rs. 5,000 will be recovered from the  fixed deposit.
Going by this example, one is able to earn an interest of 4% on Rs. 10,000 in the saving account and interest of 8-9% returns on Rs. 40,000, where there is an additional interest rate of about 4-5%. The deposit in the fixed deposit account also allows the person to meet liquidity requirement for any emergency situation.

2. Flexi -Deposit Sweep in Facility
To avail the flexi deposit facility one needs to have a savings bank account and a fixed deposit with a bank. The fixed deposit will be linked to the savings bank account. In case there is insufficient fund to clear a cheque from the saving bank account the deficit amount will automatically get transferred from your fixed deposit to the savings bank account.
For example, let us say a person has Rs. 10,000 in the savings bank account a fixed deposit with the bank of Rs. 1 lakh. In case of an insufficient balance in your savings bank account, the fund from this fixed deposit will be used. If the person draws a cheque of Rs. 25,000 and the savings bank account has just Rs. 10,000 then the deficit of additional Rs. 15,000 will be taken the linked fixed deposit.
In the above example, the person will earn savings bank account interest of 4% on Rs. 10,000 and 8-9% returns on Rs. 1,00,000 fixed deposit instead of earning 4-5% on the entire amount.

Saving Bank Account also provides some other benefits:
1.Promotional Offers
There are some some banks that offer discounts at restaurants or shopping places that are associated with them.
2. Insurance
Some banks provides over-the-counter insurance products like accident cover or life insurance with accident cover. Some banks also insure debit cards in case they are stolen or misused. In such a case that also provide a purchase protection clause which ensures that there is some reimbursement up to a certain limit in case the stolen or misplaced debit card is used for shopping.
3. International debit cards
Some banks provide International debit cards, which can be used for shopping and withdrawing cash from ATMs abroad at free of cost.
4. Locker discount
Some banks provides special discount on locker fee depending on the minimum average quarterly balance and the account type chosen.
5. Family schemes
Some banks offer special facilities to family members who have an account with them like clubbing of all family members' deposits. 
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Friday, October 9, 2015


The word portfolio is very common in the financial markets. We hear investors talking about portfolio and its constituents all the time. Let us have an understanding of what a portfolio is and how to have a stunning portfolio. Going by terminology, a portfolio is essentially an aggregation of the financial assets that is owned by an individual. It may have stocks, bonds, commodities and any other kind of financial instruments. A portfolio may also be owned by financial institutions. 
Here we will only look at a portfolio which contains stocks. The discussion will be about to have a stock portfolio that outperforms the benchmark indices from time to time. Just like the performance of a cricket team depends on the team performance rather than on individual performance, a booming portfolio cannot be achieved by having a few quality names. Building a portfolio is much like building a team. Having the best of players does not make a great team, but the balance of the team which decides its performance.  The role of each player should be according to the need of the team. Likewise a portfolio should be made of stocks which give a good balance to the portfolio, which can performance under all conditions.

Here are some features of a quality portfolio:
1. A portfolio should have a time horizon
Many investors do not have a clear understanding of investing or trading. An investment portfolio aims at getting medium to long term benefits while the trading portfolio aims to give returns in spans of days or weeks. It is a good idea to a have 2 separate portfolios - one for investment and one for trading. Using two different trading accounts can help a lot in achieving this objective.
2. A good strategy
A portfolio must be built according to a strategy. The stocks in the portfolio should fit into the strategy. For example, when building a long term portfolio, the long term prospects of the portfolio should be analysed. A portfolio can be built as per a theme. It may focus only on the stocks of a particular sector which which would see good prospects in the future. From time to time, the portfolio should be analyzed to see that the stocks are playing as per the strategy.  If not, then the stocks should be shuffled.
3. Cut down losers and add runners
It has been seen that investors have a general tendency of holding on loss making stocks and booking out on profitable stocks with minor profits. As such loses keep mounting while profits get locked down. It is advisable to cut down the loss making stocks as they are seen as weak investments. On the other hand, the weightage of profit making stock should be kept on increasing. The use of trailing stop loss can help in making this work as it would eliminate the bad positions and retain the good positions. Averaging profits can help to increase positions in profit making stocks.
4. Have Diversity
Investments should be distributed across a wide range of stocks to have variation. This would allow over dependency on a single stock which may lead to huge losses in case the stock faces huge declines. Such shocks can be averted by having a wide range of stocks across sectors and companies which add balance to the portfolio. On the other hand, too much of diversification creates confusion. The investor ends up in buying too many stocks and is not able to track them properly.
5. Cash- Carrying strategy 
 Cash should also be considered as a form of asset. Investors should choose to stay in case when situations are unfavorable. Cash helps the investor to avoid losing money in poor market conditions. Staying in cash is better than losing money by taking wrong trades which can result in losses. An investor should switch his investment in equity and cash, according to the market scenario. In risky situation there should be more of allocation in cash than stocks while in rewarding situation the allocation in stock should be high.
6. Regular investing 
The best way to build a portfolio, especially long term portfolio is to follow a systemic investment plan where there is regular investment. Rather than investing the entire sum of investment in one go the investor can keep adding the stocks at regular intervals. In this investment pattern the investor is able to buy a stock in a wide range of prices. Here again, one should add to the profit making position and not engage in averaging out losses. The investor thus buys good stocks and does not keep building positions in weaker counters. 
7. Monitor performance 
Just like the performance of mutual funds is measured by comparing their performance relative to the benchmark indices, the performance of a portfolio should also be measured so as to see whether it is performing well. The returns of the portfolio should be compared to the performance of the benchmark indices over a particular time frame to get a good measure of how the portfolio is doing. 
8. No profit booking on Time
Just like life, there has to be a satisfaction level in stock markets. When stock prices go up, investors should not get carried by the more greed and hesitate from booking profits. Profit booking or at least partial profit booking on opportunities is extremely important. As situations change in markets, there may be a sudden change of fortunes due to some news regarding the company and profits may get wiped out. However, here again one should have a logical and clear thinking about when to book out of stocks.
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Monday, September 14, 2015


Below are some of the biggest scams that took place in the Indian Stock Markets:

1. Ramalinga Raju
The biggest ever corporate scam in India came from Byrraju Ramalinga Raju, who was then one of the most respected businessmen. Ramalinga Raju was the founder of Satyam, one of the top IT companies of India. In January 2009, Raju confessed that Satyam's accounts had been falsified over the years and the company's balance sheet as of September 30,2006 carried an inflated (non-existent) cash and bank balances of Rs 5,040 crore as against the Rs 5,361 crore (Rs 53.61 billion) that was reflected in the books. Raju said that this was done largely due to the efforts in covering-up for a poor quarterly performance. On the day of his confession the Satyam shares got heavily sold off and fell down by 78 per cent to Rs 39.95 on the Bombay Stock Exchange. On the following day the share price fell as low as Rs. 11.50 rupees. The fraud involved about Rs 8,000 crore (Rs 80 billion).

2. Harshad Mehta
Harshad Mehta was once regarded as the 'Big Bull' of the Indian Stock Markets and was even to have started the Bull Run in the year 1992. Such was his buying phenomena that Associated Cement Company (ACC), which attracted his attention, was bid up to Rs. 10,000. He justified this by the replacement cost theory. On April 23, 1992, journalist Sucheta Dalal of The Times of India, exposed that Mehta was  using the banking system to finance his buying. She explained that the crucial mechanism through which the scam was affected was the ready forward (RF) deal. The RF was a secured short-term loan given by one bank to another. The Ready Forward deal was a mechanism in which a borrowing bank sold securities to a lending bank and brought them back at the end of the loan period at a slightly higher price. Mehta was using this for channelling money from the banking system. It was found out that the securities scam was involved in diverting funds to the tune of Rs 4000 crore from the banks to stockbrokers in between April 1991 to May 1992.When the scam got exposed, the stock markets crashed. Mehta was arrested and banned for life from trading in the stock markets. His brother Sudhir Mehta and 72 others were also charged with criminal charges. They were sentenced to rigorous imprisonment ranging from 1 year to 10 years.

3. Ketan Parekh
Ketan Parekh, a chartered accountant used to a run his family business, NH Securities. In 1999-2000 he was found to be involved in stock market manipulation. Ketan usually targeted smaller stock exchanges like the Calcutta Stock Exchange and the Allahabad Stock Exchange to carry out this illegal means. It was found out that he had borrowed Rs 250 crore from Global Trust Bank and Rs 1,000 crore from Madhavpura Mercantile Co-operative Bank to rig stock prices. He mostly dealt with ten scripts like Zee Telefilms, Himachal Futuristic, SSI Ltd, Global Tele-Systems, DSQ Software, Silverline, Pentamedia Graphics and Satyam Computer. These scripts were also known as the K-10 scripts. He used to buy the shares in fictitious names.  However, according to RBI regulations, a broker was allowed a loan of only Rs 15 crore. On account of this rigging the stock prices reached amazing higher levels. When the scam got exposed he was debarred from trading in the Indian stock exchanges till 2017.

4. C R Bhansali
C R Bhansali was born in Rajasthan and brought up in Kolkata. He launched a lot of companies, the first being CRB Capital Markets. This was followed by the CRB Mutual Fund and CRB Share Custodial Services. From 1992 to 1996 he had a dream run by collecting money from the public through various means like fixed deposits, bonds and debentures. He then floated around 133 subsidiaries and unlisted companies. CRB Capital Markets went for IPO in 1992 within the next three years raised Rs 176 crore. Over the next few years, the other companies of the CRB Group kept on raising money through IPOs. Between 1992 and 1995 Bhansal succeeded in raising about Rs 900 crore from the markets. After 1995 the stock markets did not play out to his advantage and his investments in the property market were also not paying off. Being caught in a financial trap, Bhansali also to do repeated borrowings from the stock markets to repay the interest rate on amounts he borrowed earlier. This created a huge bubble. When the Reserve Bank of India (RBI) refused to give banking status to CRB, things got totally messed up. When the scam got exposed it was found that it had resulted in a loss of over Rs 1,200 crore.

5. IPO Scam
The IPO scam was one of the biggest scams in the Indian Equity Markets. It involved 24 key operators like Indiabulls and Karvy Stock Broking who were alleged of using fictitious accounts to corner huge shares of companies during their IPO in order to keep high prices during the IPO.  Some of these companies were Suzlon Energy, Jet Airways, Patni Computer System and TCS.  Suzlon Energy Ltd's Rs 1,496.34 crore IPO was issued between the 23rd and 29th September, 2005. The retail portion was oversubscribed 6.04 times but the non-institutional portion was oversubscribed 40.27 times. This was due to mailicious activity of the key operators. Similar was the case with Jet Airways's Rs 1,899.3 crore IPO. Though the retail portion was subscribed 2.99 times the non-institutional portion by 12.5 times. The IPO of Patni Computer System Ltd was oversubscribed 9.36 times in the retail portoin, but the non-institutional portion by 39.22 times. When the scam got exposed the Securities and Exchange Board of India barred all the involved key operators from operating in the stock market. It also banned 85 financiers from capital market activities.
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Monday, August 24, 2015


There is a lot of interest in retail investors with regard to how FIIs are anticipating the markets. Many investors tend to make their investment decisions purely on the basis of the FIIs buying and selling figures in the markets. This article is aimed at exploring the behavioral impact of FIIs on the Indian Equities.

FII means Foreign Institutional Investors. Foreign Institutional Investors are investors who are from or registered outside the country. Institutional investors include hedge funds, insurance companies, pension funds and mutual funds.
The floodgates for the FIIs into the Indian Stock Markets were opened by the 1991 Economic Liberalization. This was further encouraged by the relaxation of cap on foreign investments in 2005. With the launch of these reforms, Foreign Institutional Investors were allowed to invest in the Indian Stock Market.

The entry of the FIIs into the Indian Stock Markets was seen as a major breakthrough in making India an economic giant. Devlopement in the infrastructure facilities such as Roads, Railways, seaports, warehouses banking services and insurance services required huge deal of investment. Such investments cannot be provided by the Government or the domestic funds. To meet these financial needs foreign capital is highly required.

FIIs also have another impact on the economy, but we will focus on how they impact the stock markets. Studies show that FIIs can start off a market rally. As they start a rally flows come from all classes of investors, which drive the markets. Once the markets enter this kind of a phrase FIIs do not have much of an impact. However the selling or profit booking activities of FII can hold a rally, but cannot reverse the trend at one go.

FIIs have a significant influence on the movement of Midcap & Small cap Indices. It has been seen that there an upward trend in FII flows generally lead to a rise in the Midcap & Small cap Indices and vice-versa.

There has been a wide variety of opinions regarding the impact of FIIs on Indian Stock Markets. In the year 2002 Stanley Morgan said that FIIs do influence the short-term market moves. This is more dominant in bear markets than in bull markets. In 2003, in another research report by two individuals Agarwal and Chakrabarti, it was said that equity returns have a direct correlation to the FII activity. They said that as the FIIs are investors of high volumes they tend to a play a major role of market makers. In falling markets FII buying helps in jacking up the stock prices, whereas in a rising market FII can dither the rise in stock markets. As such the impacts of FII have a lot to do with the equity returns. In 2008, P. Krishna Prasanna did a research on the factors on the basis of which FIIs picks their stocks. He found out that FII have more interest in companies in which there is more public holding rather than in those where the promoter holding is more. The fundamental indicators of a company’s prospects like share returns and earnings per share play a significant role. In 2009, Anand Bansal and J.S.Pasricha did an analysis of the behavior of India stocks before and after the entry of the FIIs.  The analysis revealed that even though volatility has gone down there has been no significant change as far as returns are concerned.

Many experts consider FIIs come in bulk when there is money to be made and leave abruptly at the first sign of impending trouble in the host country. As such, they induce undesirable risk and uncertainty in markets. FIIs bring in severe price fluctuations resulting in increasing volatility as they are always on the lookout for profits. As such FIIs bring in a lot of volatility in the markets. Volatility is often viewed as a negative in that it represents uncertainty and risk.

It is quite evident that FIIS do a key role in the stock markets. However, India continues to emerge an economic power it needs to reduce the dependency on FIIs. With savings to the tune of roughly 35% of GDP, India's need to increase the exposure of domestic funds like Pension Funds, Provident Funds & other Large Corpus Funds to the equity markets. There should be policies that keep a check on the volatility factor which arise from the Foreign Institutional Investments by encouraging long term funds. Sustained long term foreign investments help in curbing volatility, maintaining currency stability and creating an environment for inclusive economic development which would contribute to the country’s growth.
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Monday, January 12, 2015


High risk, high rewards… This is what penny stocks are about. Indeed the safe investor chooses to ignore the class of penny stocks, but the risky trader knows that there is a case for earning 100% in a penny stock in a short time but not in a blue chip like Reliance.  In simple terms a penny stock is a stock which trades at a very low price usually below Rs 10. The term originated in the US and was used for stocks below $5. About 25% of the stocks on BSE and 10% of the stocks in NSE trade below Rs.10 and can be considered as penny stocks. Most penny stocks have been put under the trade-to-trade category so as to avoid speculative activities. Many of the stocks are also included in the B group category on BSE. 

The Risks of Penny Stocks
Price manipulation is the biggest risk while investing in penny stocks. The low prices make manipulation easier as a small investment can easily trigger a spike.  As such manipulators can push prices and trap the retail investor. For example, a Rs 2 stock can be easily rigged to Rs 5 giving a 150 per cent return. Such a return draws the attentions of the retail investors. Once they start entering, the manipulators start selling. Thereby a crash occurs and the small investors are left in the lurch. Often the manipulator spread false rumors about the company to propel the prices and this too traps the small investors who are drawn to the stocks.
Another problem with penny stock is the difficulty in finding legitimate information about the company. Most brokerages do not research on penny stocks. Again, it is seen that many a time manipulators spread false rumors about these companies to rig the stock prices.
It has also been found that the companies whose stocks are considered as penny stocks often violate the rules of the exchanges. In order to avoid this, many a times the stock gets suspended from exchanges and the investors are left at nowhere.

The Returns on Penny Stocks
As penny stocks are available at low prices they entice many investors, particularly first-time investors to explore the markets, without risking an extensive amount of money. If the stock prices fall the investors are saved from losing excessive amounts of money.
Penny stocks can easily become multi-baggers by rising. A penny stock trading at Rs 5 can reach levels of Rs 50 in less than a year.  It is not uncommon for some penny stocks to double or triple in price in extremely short periods of time, but this is not possible in case of blue-chip stocks. One can find it difficult to believe that an ICICI Bank can give a 10 times return in even 5 years.

Tips for buying Penny Stocks
1. Fundamental factors like corporate governance, the potential of the business and the management of the company should be considered when investing in penny stock. It is recommended you to buy the stocks of those companies while have a high promoter stake.
2. While selecting penny stocks keep a watch on the trading volume. If you trade with stocks that are trading with low volumes, it could be difficult to get out of your position. As such, it is advisable to trade in penny stocks that have a good deal of liquidity.
3. Analyze the details of the companies well. If you think a company is good, but due to some temporary setback the stock has been hammered you can invest.  For example a few months ago stocks like GMR Infra, Suzlon and GVK Power were available at very low prices. Such prices offered good opportunities for the investors.
4. Do not invest in penny stocks on the basis of speculative actions.
5. Do not buy a penny stock on the basis of the stock prices in absolute term. You should access whether the stock is undervalued or overvalued on the basis of fundamental indicators like price to earnings the company is generating, growth, assets, dividends, etc. 
6. Like any investing venture, you must do your research and your homework before making any financial decisions. Stock price itself should not be the sole factor on which to make this decision. It is no indicator of past or future performance of a company.
7. Try to invest in penny stocks that have a long term growth story in them. In such cases you must hold the investment for years and allow the story to play out and the stock to appreciate in value. 
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Monday, November 24, 2014


Investors often believe that in the long run, stocks will definitely give them good returns. Even when their portfolio loses net worth by 50-60% they tend to carry the hope that in the long term there will be profits. However, in reality that does not turn to be true. Patience is crucial in the stock markets, but it does not guarantee success.
This article will explore how bear markets can last for decades.  20 years is what the Japanese bear market lasted.
The story of how it began was much like a dream and how it ended was nothing short of a nightmare.  After the World War II, Japan was completely devastated. The major cities lost their existence and there little existence of something called economy.
In this situation the Japanese people rose to the occasion and with their hard work took the nation into a new dimension. The economy rose like a phoenix out of the ashes and soon Japan was one of the strongest economies in the world.
The Japanese implemented stringent policies aimed at high savings. With this surplus money in banks Japan ran a large trade surplus. The Japanese currency, the yen appreciated against foreign currencies. This benefited the local companies as they could invest much more easily than their global competitors. This reduced the price of Japanese-made goods and widened the trade surplus further.
The United States government too provided useful help as the Marshall Plan helped Japan to rebuild and provided capital and military protection as well. Japan began to see quick growth of factories. The factory workers were offered lifetime employment so that they would remain loyal to their employers.
The Zaibatsu concept was perhaps the biggest factor in this direction. A Zaibatsu was a conglomerate of several industrial and banking companies. They had a competitive edge as they were involved in copying and improving Western products and export them back to the West for lower prices. This provided them a competitive advantage to the companies of the West due to the cost factor.
Very soon these Zaibatsu conglomerates were further integrated to form even larger business conglomerates called Keiretsu. With this concept the constituent units of the Keiretsu worked through cooperation where the business and government facets worked hand-in-hand. This brought greater prosperity to the Japanese economy.
Due to the oil crisis 1970s threatened the American cars which ran to the gas-guzzling engines proved expensive to use. Japanese car makers like Honda and Datsun (now called Nissan) however, began to take the market in its favor by mobilizing to small fuel-efficient cars. After the introduction of use, the assembly - line robot car manufacturing in Japan began seeing further increase in production rate. It did away with the concept of human errors in the manufacturing process. This took the flourishing automobile industry of America to Japan and the trend continued in many years that were to follow.
In years to come Japan entered the world of electronics and here too it brought in a revolution. Japanese Keiretsu corporations such as Hitachi and Sony copied and produced quality electronic hardware which was facing high demand because of the growing global computer industry. Japan had the advantage of cheap labor, which enabled it to take on the American companies head on. By the late 1980s, Japan was one of the best destinations in the world. The Japanese people had one of the highest standards of life in the world and also had the world’s longest life expectancy.
This economy too reflected a prosperous outlook. Japan became the world’s largest net creditor nation and had among the world’s highest GDP per capita. With high technology and a booming economy, Japan was rising like a giant.
However overconfidence and high euphoria about the economic prospects, and monetary policy easing by the Bank of Japan in the late 1980s resulted in aggressive speculation in the Tokyo Stock Exchange and the real estate market. Between 1986 and 1988, the price of commercial land in Tokyo approximately doubled. Such was rise in real estate prices that the land in Tokyo was worth more than all of the land in the United States. Land prices in Japan appreciated 70 times in 5 years and stocks increased 100 times over.
On Dec. 29, 1989, the Nikkie hit an all-time intra-day high of 38,957. From the start of 1988 to the end of 1989, the Nikkie showed a near-doubling in value from about 24,000 points to over 38,000. The Nikkie's average P/E soared past 100 in 1989.
However, soon it was realized that banks were increasingly granting risky loans. Policy makers became worried about asset bubbles. The Bank of Japan increased their interest rates. Within a year, the Nikkie plunged by around 50% from 39,000 to 20,000. It finally hit 15,000 by 1992. It was realized that the stock market was inflated by false hopes and hype instead of being based upon solid economics. As the economy driven by its high rates of reinvestment, the effect of this crash was even more severe. Investments were moving out of the country and the manufacturing firms lost some degree of their technological edge. Japanese products became less competitive compared to other countries. For two decades Japan’s government and corporations suffered under the weight of crushing debt loads that accumulated since the late 1980. On March 10, 2009, the Nikkie closed at 7,054.98 almost 81.9% below its peak twenty years earlier.
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Monday, October 27, 2014


The journey of the Indian Markets to being one of the most attractive destinations has been through several ups and downs. It has not been a joyride all the way. May 17, 2004, May 22, 2006 and October 17, 2007 will always be remembered as the darkest days in Indian stock market history. In these three days the markets hit the 10 per cent lower circuit.
This article is aimed at exploring at some of the phrases in the Indian Stock Markets has the strongest bear attacks.

In the early 2000s, the stock markets saw a phase of the bear run on account of the Dot-Com Bubble. On account of the euphoria surrounding the technology sector the stocks of IT sector saw a huge buying interest not only in the United States but across the globe. India was no exception. The technology companies had seen huge public interest whenever they made efforts to raise money for their venture. The investors were buying them at whatever price they were available.  However, the bubbles finally exploded. The NASDAQ crashed in April as the technology companies were found in a cash crunch scenario. Investor across the world began to panic and sold off the tech stocks. The Indian Stock markets too saw selling pressure. The Sensex fell to levels of 3943 in the May of 2000 from a high of 6150 in the month of February, 2000. The BSE IT index saw a bloodbath as the index fell by close to 70%. The correction ended in September 2001 with Sensex touching a low of 2,600.

In 2004 the BJP government lost in the central elections and the UPA led by Congress came to power. Investor panicked if the coalition-led UPA government would be able to address the economic concerns of the country. The political uncertainty brought trouble to the equity markets. Foreign institutional investors pulled out money from India stocks and the markets went into a sharp correction. On May 17, trading was halted twice in Sensex as the index fell by more than 10 per cent. The Sensex saw a fall of 842 points in Intraday and closed 565 points lower for the day after hitting lower-circuit.

On May 10, 2006, Sensex touched a new high of 12,612 as the UPA government settled in the center. However the bullishness did not last long. Soon trouble emerged metal prices across the globe faced correction as demand from China began to slow down. This also triggered a panic in equity markets worldwide and FIIs soon started pulling out cash from Indian equities too. Adding fuel to the fire was the Left Parties’ decision to pressurize the ruling government to rethink levying long-term capital gains tax on equity investments and scratching the double taxation avoidance agreement (DTAA) with Mauritius. This further dampened the investor sentiment. On May 22, the Sensex fell by 1,111 points Intraday and hit the lower circuit. The consumer durables and metal stocks were the worst hit. The BSE Metal index was down 7 per cent for the day.

On 16th October, 2007, the Securities & Exchange Board of India (SEBI) came up with proposals to put curbs on participatory notes. The participatory notes, then accounted for around 50% of FII investments in the Indian Markets. This led to a knee-jerk crash when the markets opened on the following day (October 17, 2007). The following day when the markets opened  the Sensex crashed by 1744 points a minute of opening trade. It was the biggest intra-day that the Indian stock-markets had ever seen in absolute terms. This led to automatic suspension of trade for 1 hour. After this the then Finance Minister P.Chidambaram issued clarifications that the government was not against FIIs and was not immediately banning PNs. After this, when the markets re-opened at 10:55 am, they made a remarkable comeback and ended the day at 18715.82, down just 336.04. The next day (October 18, 2007), the Sensex tumbled by 717.43 points  and the day following that the Sensex fell 438.41 points to settle at 17559.98 at the end of the week.
The SEBI soon made some positive announcements that funds investing through PNs were most welcome to register as FIIs, whose registration process would be made faster and more streamlined. In the next session, the markets welcomed the clarifications with an 879 point gain. Within the next few sessions the Sensex allied further and touched the 20,000 mark.

In January 2008 the markets saw another downturn, which was triggered by the row of bankruptcy filings by US' big mortgage banks on sub-prime losses. As a result of the extended period of easily available credit there was a bubble in the US mortgage-backed securities which were marketed around the world. This speculative bubble was spread across real estate and equities because of the risky lending practices. The speculations sparked by the easily available credit led to an exorbitant rise in asset prices and associated boom in economic demand. It is also believed that competition between lenders for revenue and market share contributed to declining underwriting standards and risky lending. However, soon losses mounting on US' big mortgage banks because of the bad loans. The fall of Lehman Brothers on September 15, 2008, led to a major panic and there were question marks on the other US' big mortgage banks. There were soon troubles for other US' big mortgage banks also. The housing market also suffered in some areas and also prolonged unemployment. On account of this equity markets throughout the world faced sharp corrections. The Indian benchmark Sensex was no exception. It also saw a long bear run hitting a low of 8160 in March 2009. To combat the recession, fiscal and monetary policies were significantly eased to stem the recession and financial risks.
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