Yes Bank Sets Off Contagion Selling in the Stock Markets

Yes Bank Sets Off Contagion Selling in the Stock Markets
03/06/2020

The news flows that came from Yes Bank on the morning of 05th March were drastically different from the news flows in late evening. In the morning, the Yes Bank stock rallied by over 25% after it was reported that SBI was expected to come in and support the bank with capital infusion. However, things took a turn when the RBI imposed a moratorium on Yes Bank at 8 pm on 05th March. Under the moratorium order, the Yes Bank board was superseded by an RBI appointed administrator and there were limits of Rs.50,000 withdrawal placed till April 03rd.

Why this move is impacting the stock markets?

Yes Bank is still a part of the Nifty 50 and also a player in the futures segment. The pressure is visible from the fact that as of 10.40 am there are more than 24 crore shares on offer but volumes have been just 1.30 crore shares as there are no buyers even at lower levels. Here is the impact.

  • UBS, a leading brokerage, has pegged the fair value of Yes Bank at around Rs.1, which effectively means it is worth nothing. That explains why there are no buyers in the counter despite the stock being nearly 45% down on 06th March.
  • Most people are worried about the impact that Yes Bank could cause to the markets considering the size of its balance sheet. As of March 2019, Yes Bank had total deposits of Rs.228,000 crore and now all that comes under moratorium. Yes Bank has borrowings of Rs.108,000 crore and that also creates a systemic risk.
  • The next problem could be at a brokerage level. Brokers and other investors who have borrowed against Yes Bank shares could face immediate margin calls. In addition, brokers have already been instructed to close out all outstanding positions in Yes Bank to avoid any market panic.
  • Then there is the collateral damage at two levels. Depositors may be forced to sell out other assets and shares to make up for the deposit locking of Yes Bank. This maybe evident in the next few days. Secondly, borrowers with loan sanctions fromYes Bank may have to look for alternative sources of finance.
  • The moratorium on Yes Bank raises some questions over other private banks that have been facing NPA problems in the past. For example IndusInd Bank, RBL Bank and Bandhan Bank have taken deep cuts in trading on 06th March. Other banks in the midst of a liquidity crunch like Lakshmi Vilas Bank are also on lower circuit.
  • Yes Bank was quite active in funding real estate projects and even NBFCs. Both these sectors will immediately feel the crunch as the funding sources dry up and that could also have a cascading effect. That is also evident in the stock prices.
  • Lastly, don’t forget the retail borrowing effect. As per the RBI announcement, any deposit made by an individual will only be paid after adjusting against the loans outstanding. This could create a major liquidity crunch among retail investors. In fact, the weak consumption that has been a major bugbear for the Indian economy could get worse if the situation is not handled quickly and effectively.

Yes Bank has already lost over 90% of its market value in the last one year and the sharp fall on 06th March only exacerbates the problem. The impact of Yes Bank on the Indian economy is likely to be much deeper than originally anticipated. A lot will depend on how quickly the administrator is able to put the house in order, infuse capital and bring stability back to the markets. The crisis is in the open; it is now about how it is handled!

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5 Well Known Stocks that Outperformed Benchmarks in FY20

Growth Stocks
by Nikita Bhoota 08/06/2020

From the general election to the slowing economy to coronavirus pandemic, FY20 witnessed it all. Share markets have been is under pressure since the coronavirus (COVID-19) pandemic broke in the country and all over the world. Domestic stock market benchmarks Sensex and Nifty slumped 24% and 26% respectively from 1st April 2019- 31st March 2020, posting their worst performance in over a decade. In 2008-09, the Sensex had declined 37.9%, while the Nifty50 cracked 36.2% on account of global financial crisis. Apart from these, factors such as massive corporate tax rate cuts, tussle between the RBI and the government, Union Budget, repo rate cuts, Ayodhya verdict, abrogation of Article 370, US-China trade deal were among the major triggers in FY20. However, even during this fall in markets, there are certain shares that not only outperformed the benchmark, but also gave investors stellar returns during the year. 5paisa have picked five such stocks that have outperformed the Nifty50 in the past financial year and have been strong despite tough economic conditions.

Company Name

1-Apr-19

31-Mar-20

Gain

Abbott India Ltd.

7,256.2

15,455.5

113.0%

Gujarat Gas Ltd.

147.1

232.6

58.1%

Berger Paints India Ltd.

329.6

497.4

50.9%

Nestlé India Ltd.

10,895.6

16,302.4

49.6%

Avenue Supermarts Ltd. (DMart)

1,493.9

2,200.7

47.3%

Source: Ace Equity

Abbott India

Abbott India has given stellar returns, gained 113% in FY20.  This stock is not deterred by the current pandemic. The Pharma MNC stood strong despite the crash in markets. The company’s 9 out of top 10 brands are leaders in their respective participating markets and their rigorous restructuring measures have aided to achieve this market-beating performance. Over the years, the company has also operated with a net debt-free structure having more than sufficient cushion of cash.

Gujarat Gas

Gujarat Gas share price gained 58.1% in FY20. Gujarat Gas (GGL) is an amalgamation of Gujarat Gas Company and GSPC Gas. Gujarat Gas is India's largest city gas distribution player, with a total sales volume of 6.2mmscmd and presence across 24 districts in the states of Gujarat and Maharashtra and the Union Territory of Dadra Nagar Haveli. It has a network of a 15,000 km-long gas pipeline and 291 CNG stations, constituting 25% of all CNG stations in the country.

Berger Paints

The stock gave magnificent return of 50.9% in FY20. It has not only managed to outperform Nifty 50 but also the country’s largest paint company Asian Paints. Berger has presence in the decorative paints and industrial coatings segments in domestic and international markets. Further, it has a presence in external insulation finishing systems. In the industrial coatings segment, Berger caters for the protective coatings, automotive (primarily two-wheeler and three-wheeler, and commercial vehicles) and general industrial segments. In the international segment, Berger has a presence in the decorative paints segment in Nepal and has presence in the external insulation system in Poland (where it is the second largest player, with 11-12% market share through Bolix SA, which it acquired in 2008 for US$39m. It has the second-largest distribution network, with more than 23,000 dealers.

Nestlé India Ltd

Nestlé India, the Maggi maker, has also gained over 49.6% in FY20. The company primarily operates in four segments, viz. Milk Foods & Nutrition, Chocolates & Confectionery, Prepared Dishes & Beverages.

Nestlé India has strong brands like Cerelac, Lactogen Nestlé Dahi and Slim milk (Milk food and nutrition), Maggi (Prepared dishes), KitKat (Chocolates) and Nescafé (Beverages) under its fold. Company has seen strong growth in its Maggi and chocolate brands during the CY19.

Avenue Supermart (DMart)

Avenue Supermarts (DMart) shares were up 47.3% in FY 20. DMart is an emerging supermarket chain, with major presence is in the states of Maharashtra, Gujarat, Telangana and Karnataka. DMart operates most of its stores in densely located areas and focuses on customers in the lower and middle class segments of society. DMart provides lower prices for its products across various categories and sub-categories, which is appealing to the price-sensitive customers. In order to minimise operational costs, the company follows an ownership model (including long-term lease contracts, where lease period is over 30 years), rather than a rental model.

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5 Stocks to BUY in 2020

5 Stocks to BUY in 2020
01/09/2020

The Indian stock market continued to rally and gave a positive return for the straight fourth year in the CY2019. For year 2019, Nifty and Sensex climbed 11.5% and 13.8% respectively. The indices touched the historic closing high of 12271.80 (Nifty) and 41681.54 (Sensex) despite the slowdown in the economy. Slashing of corporate tax, the six years high FII flows of Rs1 lakh crore in 2019, significant progress on bankruptcy resolutions, and Govt.’s efforts to address liquidity issues of Real Estate and Infrastructure sector guided the market performance in 2019. On the international front, easing trade war tensions also acted as positive for the Indian markets.

Going forward, market performance will be driven by benefits of low corporate tax, macro- economic tailwinds, implementation of Government policies, interest rate scenario and good monsoon. Hence, based on historical performance, management outlook and earnings growth, we have picked the below mentioned stocks that are likely to offer decent returns in 2020.

Hero Motocorp (Hero)

CMP: Rs2,349
Target Price: Rs3100 (1-year)
Upside: 32%

Hero is the largest 2W company in India. The company currently has ~52% share in the Indian domestic motorcycle market and ~37% share in the domestic 2W market (including scooters). We expect revenue CAGR of over FY19-21E as retail demand has started improving across rural and urban markets from second half of September 19. We expect recovery in rural demand to continue following a good monsoon and expectations of a strong Rabi crop output. Additionally, the recent launches of Xtreme and XPulse are gaining good market share and are expected to do well hereon too. We expect margins to remain under pressure over FY19-21E due to higher promotional expenses related with BS IV inventory. With volume growth in FY21E expected, margins may see an up move on better operating leverage. We expect PAT CAGR of over FY19-21E. The stock trades at 13.3x FY21E EPS

Year

Net Sales (Rs Cr)

OPM (%)

Net Profit (Rs Cr)

EPS (Rs)

PE (x)

FY19

33,650

0.0%

3,384

169.5

13.9

FY20E

31,540

0.0%

3,232

161.8

14.5

FY21E

37,023

0.0%

3,514

176.0

13.3

Source: 5paisa research

ICICI Bank

CMP: Rs525
Target Price: Rs 570 (1-year)
Upside: 8%

ICICI Bank is India’s second-largest private bank with a loan book size of Rs5.9tn in FY19. It enjoyed a ~6.0% market share in system loans as of FY18. ICICI Bank is looking to tap the growth opportunity, through market-share gains across products, fast credit delivery to retail and SME customers by using data analytics and rule-based engines for pre-approved loan offerings, relentless focus on cross-sell to affluent/own customers, partnership with Fintechs to add innovative products, adoption of an eco-system based approach with targeted product offerings, and making relationship managers responsible for cross-selling liabilities and fees. Strong growth opportunity, potential reduction in credit costs and improving profitability would keep stock performance robust, in our view. The stock trades at 2.5x P/BV FY21E.

Year

Net Sales (Rs Cr)

Net Profit (Rs Cr)

EPS (Rs)

PBV (x)

FY19

27,010

3,360

5.2

3.1

FY20E

33,030

9,890

15.3

2.9

FY21E

37,980

18,570

28.8

2.5

Source: 5Paisa Research

Larsen & Toubro (L&T)

CMP: Rs1,291 
Target Price: Rs1,778 (1-year)
Upside:38%

L&T is India’s largest engineering and construction company and is well placed to leverage the uptick in the investment cycle. We believe that the government’s push on infrastructure and widening base of mid-size orders will aid faster execution. L&T's strong order book of Rs303,222cr (2.8x TTM sales) at Q2FY20-end provides healthy revenue visibility for the next 2 years. Further, monetisation of non-core assets will help release capital and improve return ratios. We estimate the company to report revenue CAGR of 19% over FY19-21E with a flat EBITDA margin. PAT CAGR is estimated at 17% over the same period. ROE has been continuously improving from 9.9% in FY16 to 15.8% in H1FY20. Management is confident of achieving ROE target of 18% by FY21E. The stock trades at 14.2x FY21E EPS

Year

Net Sales (Rs cr)

OPM (%)

PAT (Rs cr)

EPS (Rs)

PE (x)

FY19

50,569

19.9%

8779

63.2

20.3

FY20E

56,815

20.2%

9,773

70.3

17.6

FY21E

61,894

20.4%

10723

77.1

14.2

Source: 5Paisa Research

SBI Life Insurance (SBI Life)

CMP: Rs984
Target Price: Rs1180 (1-year)
Upside: 20%

SBI Life is India’s largest private life insurer, with an overall market share of 12.2% on a retail APE basis. The company has a product mix of participating, non-participating and linked policies, with the mix skewed towards linked products. Unlike peers, for which growth is largely driven by one or two product segments, SBI Life has delivered industry leading growth across protection, non-par annuity and guaranteed return products as well as ULIPs, defying the weak sentiment in the capital markets. We believe that it could continue to surprise the street positively via resilient growth in uncertain times driven by a strong distribution franchise and mass customer base. We expect 17.3%/25% EV/VNB CAGR over FY19-21E. The stock trades at 3.2x FY21E P/EV.

Year

New Premuim Income

VNB

VNB margin (%)

PAT

P/EV

FY19

32,890

1,720

17.7%

1,326

4.4

FY20E

43,076

2,169

19.0%

1,659

3.8

FY21E

52,550

2,695

20.0%

2,102

3.2

Source: 5Paisa Research

Quess Corp

CMP: Rs512
Target Price: Rs740 (1-year)
Upside: 44%

Quess Corp is one of India’s leading integrated providers of business services. Quess’ service and product offerings are currently grouped under five operating segments i.e. People and Services, Technology, Facility Management, Industrials and Internet. We expect revenue CAGR of 21.1% over FY19-21E on account of strong outlook in staffing business, consistent client additions and entrance into new service platforms. The company enjoys huge advantage of scale in general staffing in India (largest in India with 240,000 associates & ~41% of group sales). Further, the blend of recently acquired Allsec and Conneqt will make Quess a challenging play in BPM platforms. We expect margins to improve by 110bps over the same period on account of presence in specialized staffing and focus on ramping up high growth sector viz. Facility Management. Expansion of Allsec in newer geographies will also support the margin growth.  We project PAT CAGR of 23.7% over FY19-21E. The stock is currently trading at 19.1x FY21EPS.

Year

Revenue (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY19

8,527

5.4

256

17.5

29.2

FY20E

10,706

6.4

287

19.7

26.0

FY21E

12,495

6.5

392

26.8

19.1

Source: 5Paisa Research

Research Disclaimer
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Which mid cap and small cap stocks to invest in for expected Multi-Cap rebalancing?

best multi cap mutual funds
by Nikita Bhoota 17/09/2020

Market regulator SEBI on Friday i.e September 11, 2020 has revised asset allocation norms for multi-cap equity mutual fund schemes. According to the revised rules, multi-cap mutual funds will have to invest at least 75% of their total asset under management (AUM) in equity & equity related instruments versus the earlier threshold of 65% of the total AUM. The market regulator also mandated multi-cap funds to invest at least 25% in each small-cap, mid-cap and large-cap stocks. So, if a multi-cap scheme of a fund house has an AUM of Rs 10,000 crore, it will have to invest at least Rs 2,500 crore each in the three categories of stocks. According to earlier rule, multi-cap funds had freedom to invest across sectors and market capitalizations. SEBI has directed to abide by the revised rules by January 2021.

Data sourced from media reports shows at present the multi-cap fund (AUM of ~Rs1.5tn) holdings are tilted towards large cap stocks (~73% of AUM as of Aug-2020), So it is widely projected that the mutual funds would have to rebalance the portfolios by increasing allocation to midcap stocks (~17% of AUM as of Aug-2020) and small cap stocks (~6% of AUM as on Aug-2020). However, the clarification issued by SEBI (SEBI Clarification Circular) on Sunday evening also points out that portfolio rebalancing is one of the options available to mutual funds and the MF could consider options like merging with existing schemes. The clarification also suggests that SEBI is open to inputs from MF industry on the revised rules for multi-cap funds. 
We have shortlisted some of the 5 mid cap and small cap stocks that can benefit if the portfolio rebalancing was to happen. 

5 Mid Cap Stock Recommendations

Company Sector ~Market Cap
(Rs Cr)
EPS CAGR (%)
FY20-22E
PE FY21E
Godrej Agrovet Ltd. Agriculture 10,190 31 30.1
Coromandel International Ltd. Agriculture 23,727 14 18.7
Ashok Leyland Auto 22,853 49 NA
Kajaria Ceramics Ltd. Building Material 8,270 8 45.2
Ipca Laboratories Ltd. Healthcare 27,214 27 25.1

Source:5paisa Research, BSE

Godrej Agrovet Ltd:
Godrej Agrovet (GAVL) is a diversified, research & development-focused agri-business company. It is one of the leading companies in the animal feed business and the market leader in the oil palm plantation industry in India. Additionally, it has a sizeable presence in agri-inputs (i.e. agrochemicals), dairy products, and processed poultry.

Coromandel International Ltd.
Coromandel is the flagship company of the Murugappa Group and operates in fertilisers and other agri-input segments. It is India's second-largest producer of phosphatic fertilisers and is particularly strong in the South-Indian states of Andhra Pradesh and Telangana. Coromandel has an installed capacity of nearly 3.5m tonne of fertilisers (22% of domestic production capacity) and also operates in the agrochemical, specialty nutrient and organic compost verticals.

Ashok Leyland:
Ashok Leyland (AL), part of the Hinduja Group, is one of India's leading manufacturers of commercial vehicles such as trucks, buses, tippers, trailers and Defence vehicles. It is the second-largest player in the medium & heavy trucks segment in India, with market share of ~33%. AL is one of the leading players in heavy buses with market share of ~43%. The company also manufactures and sells engines for industrial and marine applications, spare parts and special alloy castings.

Kajaria Ceramics Ltd.
Kajaria Ceramics is the largest manufacturer of ceramic and vitrified tiles in India. The company manufactures ceramic wall & floor tiles as well as glazed & polished vitrified tiles. It has also ventured into some allied segments (like bathware, plywood); albeit, these segments are still quite small at present, in terms of contribution to revenues and profits.

Ipca Laboratories Ltd.
Ipca Labs is a fully integrated pharmaceutical company producing branded and generic formulations, APIs and intermediates. The company has a strong position in the domestic market, mainly in cardiology, pain, anti-malarial/bacterial and anti-diabetics products. The company exports to 110 countries and is the ninth-largest pharma exporter from India, in terms of volume.

5 Small Cap Stock Recommendations

Company Sector ~Market Cap
(Rs Cr)
EPS CAGR (%)
FY20-22E
PE FY21E
Kaveri Seeds Agriculture 3467 17 10.9
Quess Corp Industrials 6,470 14 33.6
Sudarshan Chemical Industries Chemicals 3,258 26 27.2
Heidelberg cement India Ltd. Cement 4,268 13 14.9
Persistent Systems Ltd. IT 8,949 23 21.4

Kaveri Seeds:
Kaveri Seeds is one of India's leading seed producers, with a broad product portfolio that includes hybrids for cotton, corn, paddy, bajra, sunflower, sorghum and various vegetables. In addition, in its Microteck division, Kaveri markets micronutrients and organic biopesticides.

Quess Corp:
Quess Corp (erstwhile IKYA Human Capital Solutions) is one of India’s leading integrated providers of business services. Quess is focussed on emerging as the preferred business function outsourcing partner for enterprise customers across a wide range of industries. Quess’ service & product offerings are currently grouped under three operating segments: Work Force Management, Operating Asset Management and Global Technology Solutions. 

Sudarshan Chemical Industries:
Sudarshan Chemical Industries (SCIL) has grown to become India’s largest and the world’s fourth-largest manufacturer of colour pigments. Its estimated market share in India stands at ~35%. The company’s product portfolio comprises organic, inorganic and effect pigments serving four main end-uses: coatings, plastics, inks and cosmetics.

Heidelberg cement India Ltd.
Heidelberg cement India Ltd (HCIL) is a subsidiary of Germany based Heidelberg Cement, the world’s third largest cement producer. HCIL’s clinker plants are located in Madhya Pradesh and Karnataka and its cement grinding units are located in Madhya Pradesh, Uttar Pradesh and Karnataka. Current cement grinding capacity of HCIL is 5.4mtpa (2.1mtpa in Damoh, 2.7mtpa in Jhansi and 0.6mtpa in Ammasandra).

Persistent Systems Ltd.
Persistent Systems is a technology services company. The company’s focus is on helping clients build and manage software-driven businesses. Its business strategy is aligned around four key areas: 1) Digital: Bringing together their technology partner ecosystem, solutions and a unique architecture to enable enterprises with digital transformation; 2) Alliance: Focus on the long-standing and multi-dimensional relationship between PSYS and IBM; 3) Services: Focus on services for software and product development including an agile and experience design; 4) Accelerite: Focus on products that include business-critical infrastructure software for enterprises, telecom operators and the public sector.

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A Beginner’s Guide to Investing Internationally from India

International Investment
by Vested Team 20/09/2020

Ace investor & co-founder of First Global, Shankar Sharma’s global portfolio was up 70% in 2019. His Indian portfolio, by his own admission, didn’t do nearly as well. He attributed this performance to this strategy of diversifying across countries. “If you have single-country, single-asset exposure, you are fated to lose sooner or later, irrespective of what the government or fund managers tell you,” he says. In the post-Covid era, he’s gone to highlight how Indians must expand their horizons beyond domestic shores. “The Indian market has delivered zero, in fact, negative returns in dollar terms,” Sharma adds.

In 2020, Indians are now eyeing international investments in larger numbers than ever before. There are several factors fueling this interest. A number of US stocks, including Apple, Amazon, and Facebook, have exhibited steady upward growth, making them attractive alternatives to Indian stocks. In contrast, investing in the Indian economy has been a mixed experience in 2020 and prior. Even before the coronavirus pandemic, the International Monetary Fund (IMF) lowered India’s economic growth forecast from 6.1% to 4.8% for 2019-20. Naturally, the numbers became more concerning as markets tanked March onwards. Such developments, coupled with a broad increase in interest, are paving the way for international investments from the Indian investor community. If you’re looking to get started with investing internationally from India, here’s a handy guide covering the what, the why, and the how.

Why should you invest in US Stocks?
“What’s interesting about US stocks is that you not only get exposure to the United States but also to the world, as many companies have global operations but are listed there.”This statement from Viram Shah, co-founder and CEO of Vested Finance, highlights one of the major advantages provided by investment opportunities in the US market. Portfolio diversification is one of the many reasons why investing in US stocks is a helpful addition to your portfolio. US indices such as the NASDAQ and S&P 500 have very little correlation with Indian indices such as the Sensex – 0.36 over the past decade, to be precise. From a diversification perspective, this makes investing internationally an essential task for Indian investors.

vested graph 1

Figure 1: Dow Jones Industrial Index vs Sensex. Annual returns 2010-2019. Source: ET

Another advantage that the US stocks have over Indian stocks is the currency in which they trade. The US dollar is up 6% against the rupee this year alone. The US markets have also proved to be more stable than Indian markets in the long run.

And when you focus on returns, international investments typically outperforms domestic stocks investments. The DJIA has beaten the Sensex over 3-year, 5-year, and even 10-year periods.

Perhaps more importantly, despite this performance, the Dow Jones is at a lower price-to-earnings value (20.53) than the Sensex (25.01) as of Feb 2020. At the same time, dividend yield remains higher in US markets.

vested graph 2

Figure 2: Returns comparison between Dow Jones and Sensex (INR based), from January 2009 – Dec 2019

So, how can you get started?
How to start investing internationally from India
Investing in international markets may seem overwhelming at first. But it is 2020, and fortunately, the process has been significantly simplified for those who are keen on diversifying their portfolios. There are many ways by which you can go about investing internationally:

  • You can purchase mutual funds that invest in international stocks
  • You can invest in Exchange Traded Funds (ETFs) using an investing account. ETFs are different from mutual funds as they are listed and traded just like stocks and tend to have lower expense ratios
  • Or, you can directly invest in international stocks listed on international exchanges using dedicated platforms.

How to invest in US stocks with 5paisa
5paisa through Vested platform facilitates international investing by offering both direct investments in stocks and ETFs and investments through curated portfolios. Investors can open an account through a paperless process with no minimum balance and take advantage of commission-free investing. All they need to provide is their:

  1. PAN card number and copy, and
  2. Proof of address

Here’s how the two investment options work:

  • Direct investments by opening a US brokerage account: To facilitate direct investments, we offer a dedicated platform where Indian investors can directly purchase stocks and ETFs in the US markets. This method lowers overall costs for the investor, but funds must be wired to the US. The Liberalisation Remittance Scheme (LRS) allows this, with the annual upper limit capped at $250,000 per person. We also offer fractional investing capabilities, lowering the barrier of entry for many
  • Diversified investments into curated portfolios for varying risk profiles: Our platform, investors that want more advice on what to invest, can also invest in Vested’s proprietary curated portfolios. These portfolios are called Vests. Vests are curated for different risk profiles and are constructed with different themes in mind. Vests might be a great option for investors looking to expand their investments to international shores but wishing to retain a narrow focus on specific sectors or industries
vested 5paisa

How does Taxation work

International Exchange Traded Funds (ETFs) are treated as debt funds for taxation purposes. This means that to qualify as long-term holdings, you must keep them for three years. While the short-term capital gains tax rate is as per your applicable income tax slab, long-term capital gains tax is charged at 20% with indexation benefits.
For investors making direct investments in US markets, they are liable to pay taxes on both investment gains and dividend gains. Investment gains will be taxed in India only – where the tax liability is determined by the duration of their holdings. 24 months is the long-term capital gain threshold, with the rate of 20% with indexation benefit. Investments held less than 24 months will incur short-term capital gains tax, calculated according to applicable individual income tax slabs.

Dividends are taxed in the US at a flat rate of 25%. Thanks to the US and India’s Double Taxation Avoidance Agreement (DTAA) though, taxpayers can offset the income tax they’ve already paid in the US. Learn more about this topic here: how taxation works for Indians investing in US markets.

Investing Internationally from India: Closing Thoughts

International investments help you gain exposure to other markets. Geographical diversification can reduce country risk, including risk from negative events that might impact India’s domestic economy. Moreover, as mentioned earlier in this post, when you compare investing in Indian markets vs US markets, US stocks have historically exhibited lower volatility, higher returns, and higher international exposure.

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Here’s all You Need to Know About IPO Application Process

IPO
22/09/2020

Initial Public Offering (IPO) is the first time issue of shares to the public and listing of stock exchanges. It can be a Fresh Issue of shares, Offer for Sale by existing shareholders or a mixture of both. Application for subscribing for an IPO can be done through both Online & Offline modes.

How to apply for IPOs online?

If you want to apply for an IPO, you need the below:

* Demat account - To hold your shares

* Trading account - To sell your shares

* UPI ID - To block funds in your bank account

You can open demat account with any SEBI registered Depository Participant (DP). These DPs can be banks or brokers.

Key Steps to Apply for an IPO Online.

* Login to your trading platform and select the desired issue (company) in the Current IPO section.

* Enter the Number of lots and price at which you wish to apply for.

* Enter your UPI ID and click on submit. With this your bid will be placed with the exchange.

* You will receive a notification to block funds in your UPI app. Approve the block request.

* Upon the successful approval, the required amount will be blocked in your bank account.

* On allotment, the blocked amount will be deducted from your bank account and shares are credited into your Demat account. Any extra amount to the extent of shares applied but not allotted, will be unblocked by your bank.

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Check Glenmark Life Sciences IPO & Rolex Rings IPO and apply online through 5paisa

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How to apply for IPOs offline?

An offline application is made by submitting the filled-up application to the designated collection centre.

Fill in details like Name, PAN, Demat number, bid quantity, bid price and submit the ASBA application to the Self Certified Syndicate Banks (SCSB). The bank will upload the details of the application in the bidding platform. The onus is on you to ensure accurate details to avoid chances of rejection.

 

Check Out the List of Upcoming IPOs in 2021

 

Tips for making money in IPOs:

1. For retail Investors, in case of over subscription, allotment is done on a lottery basis. So, it is advisable to apply from multiple family accounts instead of more lots from single account.

2. In order to increase allotment chance, instead of select a lower price, it is advisable to place the IPO bid price at cut off, which signifies that you are ready to buy the stock at final decided price.

3. Grey market premium (GMP) is the premium for which people are ready to pay for buying the shares before even stock is listed on the exchange. High GMP signifies higher demand in the market and hence can give more listing gains.

All the required details are available in the Red herring prospectus. You are advised to read the risk factors thoroughly before applying.