Nifty 18210.95 (-0.31%)
Sensex 61143.33 (-0.34%)
Nifty Bank 40874.35 (-0.88%)
Nifty IT 35503.9 (0.97%)
Nifty Financial Services 19504.75 (-0.74%)
Adani Ports 745.85 (-0.54%)
Asian Paints 3094.65 (4.20%)
Axis Bank 787.50 (-6.46%)
B P C L 427.70 (-0.78%)
Bajaj Auto 3776.50 (-0.40%)
Bajaj Finance 7482.15 (-4.75%)
Bajaj Finserv 18012.00 (-1.86%)
Bharti Airtel 702.35 (0.88%)
Britannia Inds. 3697.85 (0.14%)
Cipla 922.50 (1.65%)
Coal India 173.60 (-0.83%)
Divis Lab. 5149.35 (2.60%)
Dr Reddys Labs 4662.70 (-0.08%)
Eicher Motors 2583.90 (-0.25%)
Grasim Inds 1728.40 (-0.63%)
H D F C 2915.00 (0.12%)
HCL Technologies 1177.15 (0.89%)
HDFC Bank 1642.80 (-0.60%)
HDFC Life Insur. 693.85 (0.55%)
Hero Motocorp 2690.15 (-0.38%)
Hind. Unilever 2396.60 (-1.65%)
Hindalco Inds. 479.85 (-1.28%)
I O C L 130.80 (-0.53%)
ICICI Bank 835.00 (0.68%)
IndusInd Bank 1142.55 (-1.07%)
Infosys 1728.95 (1.48%)
ITC 238.45 (0.74%)
JSW Steel 684.90 (-1.36%)
Kotak Mah. Bank 2188.25 (-1.03%)
Larsen & Toubro 1784.55 (-0.65%)
M & M 886.80 (-0.87%)
Maruti Suzuki 7356.25 (0.81%)
Nestle India 19004.60 (-1.11%)
NTPC 141.30 (-1.33%)
O N G C 157.90 (-3.19%)
Power Grid Corpn 190.25 (-0.08%)
Reliance Industr 2627.40 (-1.26%)
SBI Life Insuran 1186.00 (1.19%)
Shree Cement 28107.75 (1.19%)
St Bk of India 519.15 (1.29%)
Sun Pharma.Inds. 825.10 (1.43%)
Tata Consumer 818.75 (1.22%)
Tata Motors 497.90 (-2.11%)
Tata Steel 1326.15 (-1.30%)
TCS 3489.75 (0.21%)
Tech Mahindra 1567.85 (0.29%)
Titan Company 2460.10 (0.22%)
UltraTech Cem. 7354.20 (1.17%)
UPL 741.50 (3.96%)
Wipro 671.10 (0.44%)

5 Questions You Ask Yourself While Purchasing A New Share

5 Questions You Ask Yourself While Purchasing A New Share
by Nutan Gupta 10/04/2017

Whether you are a young guy in college, wishing to earn some money to reduce dependency on pocket money or a person who has just started his career and are not satisfied with salary and so forth, you can venture into share market and make smart investments.

We present you with five things to check before you go out into the stock market and start investing in stocks:

5 Questions

What returns do you want?

Ask yourself this question that how much money do you want to make out of the investment and for how long you want to invest. Also, you should know why are you investing?

If you want to invest for buying a car worth ten lakhs after five years, then your investment needs to be different from a person who wants to spend money for his post-retirement expenses.

How much risk can you take?

When we see an advertisement for a mutual fund on TV, something is blurted out rapidly which rarely people notice or understand, i.e., “Mutual Fund investments are subject to market risk. Please read the offer documents carefully before investing”. The same thing also applies to any investment instrument. You should know that with the opportunity to grow your money comes the risk of losing it as well. One should never invest all of their money in one single scheme / instrument because this makes it riskier.

Big or Small?

There are some famous and large enterprises which are listed on stock exchange and many small ones also. Both of them have pros and cons of their own. Big blue-chip companies can promise a stable but slow growth. Small caps can be surprising at times and can give out double-digit growth in a single trading session. However, along with these surprise elements also comes the risk, such companies’ share may have a debacle if even one significant shareholder pulls out of the company, thus wiping out a big share of your investment.

Did you do the homework?

Warren Buffet says "Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble".One should have done a good amount of research about the company, and also the sector company belongs. It is important to know what the company does exactly. If you have an understanding of annual reports and balance sheets, then it is advisable to go through it and have an idea about company’s recent performance, and its ranking in the sector.

Do you love it?

When you are investing in any company’s shares, don’t buy them because you like the company or its product, or be it that your father held the shares of same company so you too should have it. It is strictly advised to keep emotions out of stock market as the market works on Greed and Fears; you know two fluctuating things should not stay together.

Now we hope you are ready to take your first steps to share marketing so ahead and make the leap.

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3 Words Every 20-Year Old Must Know While Investing

3 Words Every 20-Year Old Must Know While Investing
by Priyanka Sharma 10/04/2017

There’s nothing more demarcating than the decade which starts when one turns 20. Most of you would agree that 20s acts as the pivot of anyone’s life! Also, there isno running away from the fact that this period can make or break your financial success.

Things that you do during this span will invariably influence the future. It stands true for finances as well. This makes it very important to cultivate a sound financial habit, and the apt time to do so is the when-you-turn-20 decade! Well, better late than never; even if you have seen through your 20s, you stilldo this exercise.

3 words

Budget

Althoughit is a cliché, it still makes the point that one should have a predefinedbudget. It might seem that you are being restricted to use your hard-earnedmoney in a certain way. However, it only helps you keep a tab on your spendingpattern. The budget makes your money go, where you want it to go. This is thetime to have a budget for you and to save a portion of the income. This bringsus to the next point – Save!

Save

Whatmost people do is that they earn, they spend it, and the residual is their savings.It should be the other way round, earn – keep aside your savings – spend! Borrowingfrom the idea of budgeting, make sure you have a separated the savings fromyour income. Try to minimise your expenses too. That way, you will be able toadd more to the savings kept aside initially. Keep building upon your savings.However, will savings suffice your future needs? The answer is plain no! andhence, the third habit you want to develop is to invest.

Invest

Meresavings are not going to help you in the long term. Have a broad outlook, investyour savings. Mobilising your money helps your money to grow. There are manyfinancial instruments to invest in. You probably can start with investing inmutual funds, or you can start by SIPs. In fact, SIPs work inlines with your savings (which is the second habit learned). Gradually you canexplore equity market, derivatives, etc. Consult a financial planner,have an investment plan.

Keepfollowing up on these habits, wishing you a happy decade.

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How to Read the Mutual Fund Offer Documents?

How to Read the Mutual Fund Offer Documents?
by Nutan Gupta 13/04/2017

It is very difficult to not notice the words of caution after every mutual fund commercial - “Mutual Fund investments are subject to market risks. Please read the offer documents carefully before investing.” How many of us actually read the offer documents? 5 investors in every 100 investors might be going through the documents. Rest 95 either do not know how to read the offer documents or do not consider it important enough to go through the documents.

Here are some important aspects you should consider while reading offer documents:

Investment Objective

This is one of the most important things to look at in an offer document. It gives a fair idea about the thought process of the fund manager and the strategies that he will use in order to achieve the fund’s objectives. An individual can compare these objectives with his own expectations as per his risk appetite.

Past Performance

The past performance of the fund can be looked at to know if the fund has given consistent returns or not. Investors can also look at the launch date if the fund, its total assets under management and compare it with other funds in the similar space. However, this cannot be used to predict future returns, as one cannot determine future returns on the basis of past performance.

Fund Managers

Fund manager is an experienced professional who has an expertise is managing funds. The offer document clearly states who the fund manager to a particular fund is. This gives the investor an insight about the investment style of the fund manager.

Loads and Taxes

The offer document also states all the charges applicable like the entry and exit load, transaction charges and other charges applicable for managing a fund. All mutual funds do not have same charges as the charges vary according to the type of mutual fund.

Expense Ratio

Expense ratio is the ratio which is charged by AMCs to manage an investors’ money. It is charged in percentage terms. Different funds have different expense ratios. However, SEBI has restricted the limit for expense ratios that a fund can charge. Equity funds can charge a maximum of 2.5% and debt funds can charge a maximum of 2.25%.

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All You Need To Know About the Upcoming IPOs

All You Need To Know About the Upcoming IPOs
by Prasanth Menon 17/04/2017

The IPO pipeline remains robust as more upcoming IPOs in India are added by Securities and Exchange Board of India (SEBI) on a regular basis post evaluation. After getting SEBI approvals, companies can bring their IPOs anytime in the next 12 months.

Recently Indian markets witnessed, Avenue Supermarts, the owner of D-Mart supermarket chain, Shankara Building Products and CL Educate, were some of the companies that floated IPOs in the first quarter of 2017. Avenue Supermarts was the biggest IPO of the quarter, and as of today the company has a market cap of over Rs 50K Cr post its listing. It was the biggest listing since PNB Housing’s Rs 3,000 crore IPO in November 2016.

Hudco, NSE, Central Depository Services, Nakshatra World and Cochin Shipyard are among the names that aspire to launch share sale offers in coming months. From the huge list of companies awaiting SEBI approval for listing, at present, five companies—Hudco, Central Depository Services, S Chand and Company, Genesis Colors and Security & Intelligence Services (India)—have secured Sebi’s go-ahead to float their respective public offers. The companies intend to utilise the earnings to fund its business expansion, and to meet working capital requirements of the companies.

State-run Housing and Urban Development Corp. Ltd (Hudco)’s IPO will take an offer for sale (OFS) route through which the company will sale 200,190,000 equity shares that will be 10% stake of the company. Retail investors and Hudco employees can avail a discount of up to 5% on the issue price. As on March, 2016, the paid up capital of Hudco is Rs 2,001 Cr. Indian government holds 100% stake in this company. SBI Capital Markets, IDBI Capital, ICICI Securities, and Nomura Financial Advisory and Securities will manage the company’s public issue. Through minority stake sale and strategic sale in PSUs this fiscal the government expects to raise Rs 56,500 Cr, wherein Rs 36,000 Cr is to come from minority stake sale in PSUs and Rs 20,500 Cr is to come from strategic stake sale.

Apart from the aforementioned, there are 11 companies including NSE, Eris Lifesciences, GTPL Hathway, Bharat Road Network, Tejas Networks, Salasar Techno Engineering, Au Financiers, Prataap Snacks, PSP Projects that are awaiting approval from SEBI to rollout IPOs. Combined these companies are expected to acquire approximately Rs 20,000 crore.

The government cabinet has given an approval to the listing of five state-run general insurance companies including New India Assurance Company, National Insurance Company, Oriental Insurance Company, United India Insurance Company and a re-insurance firm General Insurance Corporation - apart from other big issues like that of SBI Life Insurance, which is also expected to file IPO papers in the near future.

The most recent additions to the ever growing list of companies aspiring to float IPO are the Railway PSUs. Government official cabinet has approved the listing of 9 Railway PSUs including IRCTC, Rail Vikas Nigam.

Here is the list of upcoming IPOs in India in the pipeline.

No. Forthcoming IPOs Tentative Dates
1 S Chand & Company Apr-17
2 HUDCO May-17
3 CDSL 2017
4 Continental Warehousing 2017
5 Prataap Snacks 2017
6 NSE 2017
7 GVR Infra Projects Limited 2017
8 Matrimony.com 2017
9 Mas Financial Services 2017
10 SIS Limited 2017
11 Vodafone India 2017
12 SBI Life Insurance 2017
13 Go Airlines 2017
14 Security & Intelligence Services India 2017
15 Genesis Colors 2017
16 G R Infraprojects 2017
17 Cent Bank Home Finance Limited (CBHFL) 2017
18 VLCC Health Care 2017
19 Salasar Techno Engineering -
20 Eris Lifesciences -
21 Bharat Road Network -
22 Tejas Networks -
23 Au Financiers -
24 GTPL Hathway -
25 PSP Projects -

 

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Long Iron Butterfly Options Strategy

Long Iron Butterfly Options Strategy
by Nilesh Jain 17/04/2017

A Long Iron Butterfly is implemented when an investor is expecting volatility in the underlying assets. This strategy is initiated to capture the movement outside the wings of options at expiration. It is a limited risk and a limited reward strategy. A Long Iron Butterfly could also be considered as a combination of bull call spread and bear put spread.

When to initiate a Long Iron Butterfly

A Long Iron Butterfly spread is best to use when you expect the underlying assets to move sharply higher or lower but you are uncertain about direction. Also, when the implied volatility of the underlying assets falls unexpectedly and you expect volatility to shoot up, then you can apply Long Iron Butterfly strategy.

How to construct a Long Iron Butterfly?

A Long Iron Butterfly can be created by buying 1 ATM call, Selling 1 OTM call, buying 1 ATM put and selling 1 OTM put of the same underlying security with the same expiry. Strike price can be customized as per the convenience of the trader; however, the upper and lower strike must be equidistant from the middle strike.

Strategy

Buy 1 ATM Call, Sell 1 OTM Call, Buy 1 ATM Put and Sell 1 OTM Put

Market Outlook

Movement above the highest or lowest strike

Motive

Profit from movement in either direction

Upper Breakeven

Long Option (Middle) Strike price + Net Premium Paid

Lower Breakeven

Long Option (Middle) Strike price - Net Premium Paid

Risk

Limited to Net Premium Paid

Reward

Higher strike-middle strike-net premium paid

Margin required

Yes

Let’s try to understand with an example:

Nifty Current spot price (Rs)

9200

Buy 1 ATM call of strike price (Rs)

9200

Premium paid (Rs)

70

Sell 1 OTM call of strike price (Rs)

9300

Premium received (Rs)

30

Buy 1 ATM put of strike price (Rs)

9200

Premium paid (Rs)

105

Sell 1 OTM put of strike price (Rs)

9100

Premium received (Rs)

65

Upper breakeven

9280

Lower breakeven

9120

Lot Size

75

Net Premium Paid (Rs)

80

Suppose Nifty is trading at 9200. An investor Mr A thinks that Nifty will move drastically in either direction, below lower strike or above higher strike by expiration. So he enters a Long Iron Butterfly by buying a 9200 call strike price at Rs 70, selling 9300 call for Rs 30 and simultaneously buying 9200 put for Rs 105, selling 9100 put for Rs 65. The net premium paid to initiate this trade is Rs 80, which is also the maximum possible loss.

This strategy is initiated with a view of movement in the underlying security outside the wings of higher and lower strike price in Nifty. Maximum profit from the above example would be Rs 1500 (20*75). Maximum loss will also be limited up to Rs 6000 (80*75).

For the ease of understanding of the payoff, we did not take in to account commission charges. Following is the payoff chart and payoff schedule assuming different scenarios of expiry.

The Payoff chart:

The Payoff Schedule:

 

On Expiry NIFTY closes at

Net Payoff from 1 ITM Call Bought (Rs) 9200

Net Payoff from 1 OTM Call Sold (Rs) 9300

Net Payoff from 1 ATM Put bought (Rs) 9200

Net Payoff from 1 OTM Put sold (Rs.) 9100

Net Payoff (Rs)

8800

-70

30

295

-235

20

8900

-70

30

195

-135

20

9000

-70

30

95

-35

20

9100

-70

30

-5

65

20

9120

-70

30

-25

65

0

9200

-70

30

-105

65

-80

9280

10

30

-105

65

0

9300

30

30

-105

65

20

9400

130

-70

-105

65

20

9500

230

-170

-105

65

20

9600

330

-270

-105

65

20

 

Impact of Options Greeks before expiry:

Delta: The net Delta of a Long Iron Butterfly spread remains close to zero if underlying assets remain at middle strike. Delta will move towards 1 if underlying expires above higher strike price and Delta will move towards -1 if underlying expires below the lower strike price.

Vega: Long Iron Butterfly has a positive Vega. Therefore, one should buy Long Iron Butterfly spread when the volatility is low and expect to rise.

Theta: With the passage of time, if other factors remain same, Theta will have a negative impact on the strategy.

Gamma: This strategy will have a long Gamma position, so the change in underline assets will have a positive impact on the strategy.

How to manage Risk?

A Long Iron Butterfly is exposed to limited risk but risk involved is higher than the net reward from the strategy, one can keep stop loss to further limit the losses.

Analysis of Long Iron Butterfly strategy:

A Long Iron Butterfly spread is best to use when you are confident that an underlying security will move significantly. Another way by which this strategy can give profit is when there is an increase in implied volatility. However, this strategy should be used by advanced traders as the risk to reward ratio is high.

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5 Things to Know About Asset Allocation in Mutual Funds

5 Things to Know About Asset Allocation in Mutual Funds
by Nutan Gupta 17/04/2017
New Page 1

Asset allocation is putting your money across different asset classes - stocks, bonds, real estate, cash and commodities. Asset allocation ensures that you get the best returns out of your savings. Here are five things that an individual must know about asset allocation.

Asset allocation is not diversification

A lot of times people use the words asset allocation and diversification interchangeably. However, one needs to understand that these are two different terms. Asset allocation is the process of deciding the amount of exposure one needs to have in different asset classes. On the other hand, diversification is what you invest within these asset classes.

Asset allocation could be tactical

An investment strategy is planned to achieve long-term goals. A mutual fund invests in stocks which the fund manager believes will give higher returns in the future. Sometimes, a fund manager thinks that a particular fund will give good returns in the short-term but also has the potential to give superior returns in the long-term. Investment moves are based on what the fund manager thinks and this is known as tactical approach.

Asset allocation is not standard

Asset allocation differs based on the age and risk appetite of an investor. An individual who plans to retire next year will have a different asset allocation than a person who is a young entrepreneur. Asset allocation also differs depending upon the income stream of an individual. An individual with a fixed and regular income stream can have a more aggressive asset allocation than a person whose income is not regular.

Asset allocation could be dynamic

A dynamic asset allocation model is the one when a fund manager makes changes in the portfolio which reflects the most recent changes. These changes should be made keeping the long-term performance of the asset in mind. The riskiness of assets change with time.

Asset allocation needs periodic rebalancing

The asset allocations in our portfolio fluctuate every year depending on market fluctuations. Some assets may have performed extremely well in one year, while some may have underperformed in that period. Periodic rebalancing is required as it reduces volatility in the portfolio.