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%)

Demat & Trading Accounts - Types of charges applicable & how to save on those

Demat & Trading Account
22/11/2019

A free demand account normally refers to an account that has zero account opening charges, which is mandated by SEBI. When you open a demat account, there are a number of costs you commit, including when the demat account is idle. Demat account charges apply to a plethora of services offered by the DP.

The demat account is typically linked to a trading account on one side and a bank account on the other. Just like your demat account has certain in-built costs, your trading account also has costs. The only difference is that trading account costs nothing if the account is idle but costs only apply to actual transactions on the stock exchange. On the other hand, demat account attracts charges when it is idle and also when there are transactions.

Demat account charges you commit when you open demat account

Investors open their demat account with a depository participant (DP). The DP is affiliated either to NSDL or CDSL or both. There are a number of costs in operating a demat account.

  1. As per SEBI regulations, the DP cannot charge you for demat account opening. Similarly, the DP cannot charge you for any credits into your demat account. These were chargeable services in the past.

  2. The key operating cost of a demat account is the annual maintenance charge (AMC). There is no fixed rate but typically it varies from Rs.400 to Rs.900 per year. These charges automatically get debited to your linked bank account on an annual basis. This AMC is payable even if the account is idle. However, if your holdings are below Rs.2 lakhs in value, you can opt for a BSDA (Basic Services Demat Account), which entails a nominal AMC cost.

  3. DPs are charged by NSDL and CDSL for each debit to the DP account and that cost gets passed on to the demat account holder. In case the broker is also the DP, this amount gets charged to your trading ledger.

  4. In addition, the DP also charges for dematerializing physical certificates on a per folio basis. DPs also charge a nominal charge for physical transaction statements.

  5. Be cautious that the DP does impose penal charges on you. For example, rejection of DIS, discrepancy in DRF (demat request form), cheque bounce, ECS bounce can all attract heavy penalties.

The moral of the story is to reduce your debits to the demat account, avoid penal charges and opt for BSDA account when your holdings are below Rs.2 lakhs.

Trading account has costs when you execute transactions

While demat account is the bank for securities, the trading account executes transactions for buy and sell. Trading account only entails transaction charges; nothing is charged if the trading account is idle. Here are some of the transaction charges.

  • When you buy or sell securities, the broker charges commission for the service. There are various models for brokerage and these are clearly mentioned in the trading agreement that you sign with the broker. Make it a point to read the fine print. Brokerage can be fixed, flexible, variable or even on a per lot basis.

  • An important component of trading cost is the Securities transaction tax (STT). The STT is higher for delivery trades and lower for intraday and F&O trades. STT is levied on value traded so you pay STT even on zero brokerage transactions. In addition, the exchange charges a nominal transaction charge on every transaction while SEBI charges turnover fees on a fixed slab basis.

  • Since broking is a service the goods and services tax (GST) is applicable at the rate of 18% on the value of the brokerage plus transaction charges. In addition, there is also the stamp duty payable at the rate applicable in that particular state.

  • It costs to transfer funds to your trading account. While NEFT and RTGS don’t entail any cost, IMPS transactions entail a cost and payment gateways charge for use of the gateway. These are debited to your trading ledger.

Check: Difference between Demat Account and Trading Account

Focus on low cost broking, don’t churn too often and fund your trading account using NEFT or UPI. The reason to know these costs is that they jointly determine your trading break-even point. What you earn on a net basis matters more than what you earn on a gross basis!

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What is ELSS Funds and How they are Helpful for Tax Savings?

What is ELSS Funds and How they are Helpful for Tax Savings?
03/12/2019

ELSS fund or Equity Linked Savings Scheme fund is a tax-saving scheme that derives their returns from the equity market. The ELSS funds come with a lock-in period of three years. The investor cannot withdraw from the ELSS scheme during this duration. The ELSS fund gives twin advantage of capital appreciation and tax benefits.

The ELSS funds are mostly open-ended mutual funds. They help the investor to save tax under the Section 80C, and the taxable deduction available for this investment is upto Rs.1,50,000. The ELSS funds are suitable to inculcate the habit of saving among investors as the lock-in period prohibits the withdrawal of the investment for three years.

The ELSS comes with a low investment threshold of Rs.500 and the investor need not make a one-time investment for ELSS.  They can opt for the Systematic Investment Plan(SIP) method where they will invest a pre-set amount on a specified date of every month or six months. Through the SIP method, the investor has the option to spread their investments over the year, and this saves the last minute rush for searching for investments that help in tax savings.

However, when the investors opt the method of SIP payment, they should be aware of the fact that every SIP payment is considered as a fresh investment and it has an individual locking period of three years. The ELSS funds are the only investment with a low lock-in period of three years when compared to other tax saving investments.

When calculating SIP for the ELSS investment, the investor has to make sure that their investments are spread over the year. The investor has to use this simple formula to arrive at their SIP calculation

The ELSS funds come with two options for Growth and Dividend. The investor can choose the option that aligns with financial goals.

Growth option:

In this option, the investment along with its profit is accumulated, and the total amount is paid to the investor at the end of the lock-in period with an option of reinvestment.

Dividend Option:

The dividend option comes with two choices of dividend payout and dividend reinvestment. In dividend payout, the investor will receive the payment of a dividend from time to time. In dividend reinvestment, the payout is reinvested, and it will be treated as a fresh investment with the benefit of a tax deduction

The tax saving feature of ELSS funds:

Under Section 80C of the Income Tax Act,1961 a tax payer can claim up to Rs.1,50,000 as relief against their investments. Under the new budget rules, the long-term capital gains (for investments held more than one year) exceeding more than Rs.1,00,000 are subject to 10% tax without benefit of indexation.

The ELSS funds are the best option as tax saving investments as they have the power to give benefits of high returns with the flexibility of investment and the lowest lock-in period when compared to other investments.

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How to Prepare for Next Bear Phase in Stock Market?

How to Prepare for Next Bear Phase in Stock Market?
04/12/2019

What exactly do we understand by a bear phase in the stock market? While there is no hard and fast definition of a bear market, the accepted standard definition is a correction of 20% from the peak of stock market. It is normal for stock broker and investors to panic in the face of a bear market and act instinctively. The result is that you end up losing opportunities which the bear market offers. Bear markets are not about jumping in and buying every stock that has corrected. Here is how you can prepare for a bear market.

Remember, bear markets are always more severe on some sectors

If you look back at the bull markets of the last 25 years, then the bear markets subsequent to such rallies have followed a similar pattern. The maximum damage has happened in stocks that triggered the rally in the first place. Post 1992, it was the cement pack that corrected the sharpest. Post the technology rally in 1999 even frontline stocks like Wipro and Infosys corrected more than 75%. Much worse was the damage to realty and infrastructure stocks post 2008. Most of the stocks lost over 95% of their peak value. As a strategy, prepare to exit the drivers of the bull rally first in any bear market. Such stocks are not meant to be bought on dips. This is the basic rule that should guide stock broker strategy in the bear phase of stock market.

Stay low on leveraged positions in the market

The problem with bear markets is that they are also accompanied by a rise in volatility and a fall in buying demand. This widens the spreads on stocks. In the markets, you can be leveraged in two ways. You can either borrow to invest or you can trade on margin. In both cases, bear markets are the time to cut down on your leveraged positions. Even if your view is right, the spurt in volatility may trigger stop losses. Minimize your leveraged positions in a bear market as it can draw you into a vicious cycle of trading losses.

Look for asset classes beyond equity

More often than not, we end up believing that equities are the only place to invest and end up making wrong decisions. There are asset classes beyond equity that can protect value in bad times. For example, gold has typically done very well when equity markets have fallen. Similarly, liquid funds and debt funds can also give much more stability to your portfolio. Even within your equity portfolio, look to diversify across themes. If you spread your portfolio across themes and sectors, you stand a very good chance of doing well compared to putting all your eggs in one basket.

Bear market is the time to restructure and rebalance your portfolio

If you were waiting for the right time to change your portfolio mix, then for stock broker the bear stock market is the right time to rebalance and restructure your portfolio . As we said earlier, first get out of the stocks and themes that triggered the bull market in the first place. Shift your stocks from high beta names to low beta names. They will hold value much better. In any bear market, the mid caps and small caps face the maximum damage. You can prepare yourself by shifting out of such stocks well in advance. Focus more on companies that follow relatively higher standards of corporate governance and disclosure practices. They are likely to give fewer negative surprises in a bear market.

If we can just focus on these defences, bear markets can be easily and methodically handled!

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How to Secure your Portfolio Against Fall in Nifty?

How to Secure your Portfolio Against Fall in Nifty?
06/12/2019

The Nifty chart over the last 18 years shows a secular up move in the index. However, within the overall trend, there have been bouts of severe volatility and sharp corrections. We have seen big corrections in the market in 2000, 2008 and 2013. The corrections have ranged from 20% in 2013 to as high as 62% in 2008. As an investor, it is not always possible to enter at the bottom and exit at the top because markets tend to be counter-intuitive. How do you adopt a systematic approach to securing your portfolio against a fall in the Nifty? There are some proactive solutions and some reactive ones.

Chart Source: Google Finance

It would be very simple to say that over the long run the Nifty has made profits. The bigger question is how to shield against short term volatility.

1. Time to reallocate – Buy into strength and sell into weakness

This is a cardinal approach to handling a correction. Even when the NBFC crisis broke out in late 2018, Dewan Housing corrected more than LIC Housing or Bajaj Finance. That is why, it is always essential to buy into strength and sell into weakness in a falling market because weak stocks become vulnerable. When you reallocate your portfolio, it has a cost but it would be smarter than just watching your portfolio depreciate. Quite often, investors use discrete options like averaging or exiting altogether. There is a mid-way approach.

Why are we talking about buying into strength? When the Nifty corrects, it separates the men from the boys. In 2000, technology stocks caused the crash. Over the last 18 years stocks like Satyam, Pentamedia, DSQ and many more vanished. But stocks like Infosys, TCS and Wipro have only emerged stronger. The rule is to exit frothy stocks immediately.

2. Seriously consider farming your losses for tax purposes

In India, tax farming is quite popular among HNI investors. If you are holding on to stocks and it is down in the last 6 months, you can book a loss and write it off against other gains. This reduces your capital gains tax liability. Now that LTCG is also taxed on equity, this can be applied to LTCG and to STCG. By farming losses, you don’t lose anything but the notional loss is converted into a real loss and reduces your overall tax liability. Even if you don’t have gains in this year, you can still farm these losses and carry forward for a period of 8 years.

3. Make the best use of hedging tools

The stock market offers you a variety of hedging tools. You can sell futures against your stock to lock in profits and keep rolling over. Alternatively, you can buy lower put options to limit you risk in a falling market; either in the stock or the index. You can even sell higher call options to reduce your cost of holding. In short, F&O offers you a plethora of opportunities to protect and also benefit from a falling Nifty.

4. A phased approach will be a good shield against a falling Nifty

The best of traders are not able to call tops and bottoms of the market consistently. When the market is falling, you normally believe that you have a choice between staying out and catching a falling knife. But there is a third option. You can adopt a phased and systematic approach to investing, at least till the time the volatility normalizes. Focus on managing your risk. One of the basic rules you must follow is to be true to your long term goals. They don’t need to be impacted by Nifty volatility and SIPs tagged to these goals must go on.

5. Keep liquidity handy to buy stocks at lower levels

A sharp correction in the Nifty can also offer bargains. But the trick is to ensure that you have liquidity in your hand when it matters. So, it is time to selectively roll your shopping trolleys out. You were happy to purchase HUVR at 1900 then why not at Rs.1500? A lot of quality stocks also correct in sympathy. Look for bargains and buy quality at cheap prices.

A falling Nifty calls for a mix of proactive and reactive actions to protect the value of your portfolio and make the best of opportunities. It is not too complicated!

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Everything you need to know about Burger King IPO

Everything you need to know about Burger King IPO
by Mrinmai Shinde 12/01/2020
Quick service restaurant chain, Burger King India is launching its three-days long IPO from 2nd December to 4th December. The company has set the price band at ?59-?60 per share for its IPO.

Through the IPO the company aims at raising ?810 crore. Of the total amount the promoter entity QSR Asia Pte Ltd will sell up to 60 million shares, which would amount to ?360 crore while a fresh issue of shares will aggregate to ?450 crore. The company has also raised a pre-IPO funding of ?92 crore from public markets investor Amansa Investments Ltd at ?58.5 per share.

Burger King IPO details at a glance

IPO Date

Dec 2, 2020 - Dec 4, 2020

Finalisation of Basis of Allotment

Dec 9, 2020

Initiation of refunds

Dec 10, 2020

Transfer of shares to demat accounts

Dec 11, 2020

Listing Date

Dec 14, 2020

Issue Size

?810.00 Cr

Fresh Issue

?450.00 Cr

Offer for Sale

?360.00 Cr

Face Value

?10 per equity share

IPO Price

?59 to ?60 per equity share

Min Order Quantity (each lot)

250 Equity Shares

Min Amount Cut off

?15,000

Maximum Lots allowed

3250 Shares (13 lots)


Want to know our suggestion? Read here - Burger King IPO Note.

Things you need to know:

Burger King India Limited is one of the fastest growing international QSR chains in India during the first five years of operations based on the number of restaurants. Talking about the global presence, when measured by the number of restaurants, with a network of 18,675 restaurants in over 100 countries, Burger King is the second-largest fast food burger brand globally. In India, the company owns 261 restaurants which include eight Sub-Franchised Burger King Restaurants, across 17 states and union territories and 57 cities across India.

Burger King India has exclusive franchise rights in India and a strong customer value preposition. Apart from the customer loyalty and brand value, strong management and a vertically scalable supply chain are the company’s key strengths. The company will use the funds raised through the IPO to finance the roll-out of new company-owned Burger King Restaurants, repayment or prepayment of outstanding borrowings and to meet the general corporate purposes.

If you are looking for the short-term gains through the IPO, you need to bear in mind that if there is a spike in the Covid cases and there is another round of lockdown, then the business might take a hit. The termination of the Master Franchise and Development Agreement could also pose a threat to the business. Lack of identification of the locations when expanding in new regions, and deteriorating relations with third party delivery aggregators apart from perceived and real health concerns along with shifting food preferences and habits are a few things to look for. Having said that, the investment would turn out to be promising in long term.

This year has seen a lot of good IPOs, which has encouraged a lot of new investors to enter the markets. Apart from Burger King, the other companies that issued IPOs this year include SBI Card, Rossari Biotech, Mindspace Business Parks REIT, Route Mobile, Happiest Minds Technologies, Angel Broking, Chemcon Speciality Chemicals, Computer Age Management Services, Mazagon Dock Shipbuilders, UTI AMC, Likhitha Infrastructure, Equitas Small Finance Bank and Gland Pharma.

How to apply for Burger King IPO?
  • In 5paisa Trading App, go to IPO Section reflected on the home screen
  • Click on Apply IPO
  • Enter Quantity and Price to bid for
  • Enter UPI id to block funds on
  • Later in the day you will receive funds block confirmation in your UPI app, which needs to be approved

If you are not a 5pasia customer, you can apply for the IPO using any supported UPI apps. Click here to find the list of UPI apps and banks supporting the IPO application.

Watch the video below to know more about the Burger King IPO

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Union Budget 2020 – What’s It All About?

Union Budget 2020
01/02/2020

Budget 2020 was rich on expectations but the exemptions in the budget were much lower than what the market desired. The impact was visible in the performance of the stock market indices which cracked in response. While a detailed analysis is still due, the immediate reaction of the market appears to be that there was no big bang announcement in the Union Budget despite the tough macro conditions. Here are some of the major announcements in the Union Budget 2020.

Response to macro pressures

  • Nominal growth for fiscal year 2020-21 has been pegged at 10%. The real rate of GDP growth could be in the range of 5.5% to 6% depending on the nominal growth actually achieved as even 10% does look quite steep at this point in time.

  • The budget 2020 has fully utilised the 50 bps leeway on fiscal deficit offered by the N K Singh Committee. For 2019-20, the fiscal deficit has been pegged at 3.8% instead of 3.3% while for the fiscal year 2020-21 it is pegged at 3.5% instead of 3%.

  • There is some positive impact on post-harvest infrastructure. To improve post harvest infrastructure, including cold storage, the budget has announced viability funding based on public-private-partnership. Indian Railways will run dedicated trains to support the cold chain plan.

Some cheer for Corporates and MSMEs

  • Despite the lack of any cost advantage, the Budget 2020 has outlined big plans for manufacture of mobile phones and electronic equipment and semiconductor packaging. In addition, the 15% concessional tax will be extended to the power sector too.

  • Finally, MSMEs have something to be really pleased about. Invoice financing via the factoring method will be extended to MSME as will be the issue of subordinated debt to MSMEs and handholding in the early stages.

No cheer for markets and that was evident

  • LTCG on equity stocks and equity funds was not scrapped, despite the STT being introduced in 2004 in lieu of LTCG tax. This is resulting in the cascading effect of STT plus LTCG tax and that is adding to the costs of traders and investors.

  • While DDT has been scrapped on equity and on equity funds, it comes back in another form. At the same time, the dividend distribution tax on debt funds will continue as before. There will be a single point of taxing dividends as other income at the applicable peak rates of tax for individuals.

  • Efforts are being made to reduce tax burden on middle class. People earning in the range of Rs.5 lakh to Rs.15 lakhs will see reduction in taxes.

Direct tax; more complicated than effective

  • Direct tax regime has suddenly become a lot more complicated. There will be two regimes; first regime will focus on status quo with all exemptions and rebates. The new regime with lower rates applicable will be devoid of exemptions and rebates. Loss of exemptions could be a big cost as many exemptions are virtually mandatory or inevitable like life premiums, provident fund, tuition fees, home principal etc.

  • Under the new tax regime, direct taxes will be as under:

Income bracket

Below 5l

5l to 7.5l

7.5l to 10l

10l to 12.5l

12.5l to 15l

Above 15l

Tax Rate (%)

Zero

10

15

20

25

30

Above table represents the new regime. If you opt for the second option, then your IT form will be auto-filled. That simplicity appears to be the only visible advantage.