Archive for the ‘Brokerage’ Category

HOW IMPORTANT IS INTEREST RATE?

Essentially, interest is nothing more than the cost someone pays for the use of someone else’s money. In India, an individual willing to purchase a home uses bank’s money (through a mortgage) and in return pays interest to the bank for the privilege or the credit card user borrows money for the short term in order to buy something right away. But the very question that comes to everyone’s mind is how to determine where the rates are heading & what impact will it have?

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So in order to find where the interest rates are heading all one needs to do is to look at the deposits & loans advances of the banks. If banks credit growth is more than its deposits then banks may raise the deposit rates or may increase the lending rates in order to match the asset & liability mismatch. When the Central Bank (RBI) feels that the credit growth has started picking up & is higher than its target levels, RBI tinkers with its policy rates gives signals to the commercial banks to review the interest rates be it on the deposit front or on the lending front.

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Effects of the rising interest rates On individuals

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The first indirect effect of an increased rate is that banks increase the rates that they charge their customers to borrow money. Individuals are affected through increases to credit card and mortgage interest rates, especially if they carry a floating interest rate. This has the effect of decreasing the amount of money consumers can spend. After all, people still have to pay their EMI’s, and when these installments become more expensive, households are left with less disposable income.

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On the Corporates financials

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Corporates too borrow money from banks to run and expand their operations. When the banks make borrowing more expensive, corporates may  not borrow at all or may not borrow at the same pace that they were doing when the rates were lower. Less business spending can slow down the growth of a company, resulting in decreases in profit.

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Even businesses are also indirectly affected as a result of the actions of the individual consumers as individuals are left with less disposable income which affects the company’s top & bottom lines (that is, revenue and profits). Apart from having an indirect affect businesses are affected in a more direct way as well.

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On GDP Growth

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The government essentially has two weapons in its arsenal to help guide the economy towards a path of stable growth without excessive inflation; monetary policy and fiscal policy. Fiscal policy comes from the government in the form of taxation and federal budgeting policies. While fiscal policy can be very effective in specific cases to spur growth in the economy, most market watchers look to monetary policy to do most of the heavy lifting in keeping the economy in a stable growth pattern. Monetary policy is defined as any action to limit or increase the amount of money that is circulating in the economy. That means the central bank (RBI) can make money easier or harder to come by, thereby encouraging spending to spur the economy and constricting access to capital when growth rates seem to be approaching unsustainable levels.

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Stock Price Effects

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Clearly, changes in the rates affect the behavior of consumers and business; hence the stock market is also affected. Remember that one method of valuing a company is to take the sum of all the expected future cash flows from that company discounted back to the present. To arrive at a stock’s price, take the sum of the future discounted cash flow and divide it by the number of shares available. This price fluctuates as a result of the different expectations that people have about the company at different times and are willing to buy or sell shares at different prices. If the company is seen as cutting back on its growth spending or is making less profit – either through higher debt expenses or less revenue from consumers then, the estimated amount of future cash flows will drop. All else being equal, this will lower the price of the company’s stock.

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Investment Effects

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With a lowered expectation in the growth and future cash flows of the company, investors will not get as much growth from stock price appreciation, making stock ownership less desirable. Furthermore, investing in stocks can be viewed as too risky as compared to other investments. When the central bank raises its rate, newly offered government securities, such T- bills and bonds, are often viewed as the safest investments and will usually experience a corresponding increase in interest rates. In other words, the “risk-free” rate of return goes up, making these investments more desirable.

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Conclusion

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We should keep in mind, however, that these factors and results are all interrelated. What we described above are very broad interactions, which can play out in innumerable ways. Interest rates are not the only determinant of stock prices and there are many considerations that go into stock prices and the general trend of the market – an increased interest rate is only one of them. Therefore, one can never say with confidence that an interest rate hike will have an overall negative effect on stock prices.

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Stay Tuned for More Updates :)

How To Get Started in Online Investing? Final Part

Hello Friends here we come up with an extension of our previous blog “How To Get Started in Online Investing?” Part 1.

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How To Get Started in Online Investing?

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In previous blog, we have touched upon the questions, any beginner investors do have in their mind while going for investing.

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At the same time we had also tried to look in previous blog that what is Online Trading, resources needed first of all to invest online, few steps to start investing online and how SMC ONLINE helps investors in reaping the benefits of online trading.

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In this Blog, we would try to discuss about what are the further steps an investors need to take once the initial registrations are done with.

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🙂

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Once the registration formalities are done with, you would be required to load your online investing trading account with funds.

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Once Funds would be deposited you would need to look out for the stocks on which you would like to invest prima facie.

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One thing you should bear in mind that before investing, you should do the in-depth research about the company’s profile, performances and services.

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In this respect investing firms like SMC ONLINE comes to your rescue usually by helping you with their excellent research support, stocks recommendations and quality statistics.

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These things are really very important while you invest in buying the shares of any company.

As a wise investor you should keep your eyes open, and don’t blindly trust anyone.

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Another very important thing is RISK FACTOR.

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You’ll have to take the risk in terms of investing your money in the stock market.

Stock market is a bit similar to gambling.

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But there is a big difference between the risk and calculated risk.

For a beginner, you should only go for calculated risk.

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Don’t put your entire money in terms of buying the shares of a new company, even if the future potential of that company seems very high.

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Start slowly, understand the market, earn some decent amount of money first of all and then go for big trading.

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Once you have gotten started, you should start by learning a little bit about chart reading.

If you can read the charts you will have a good idea what is going on.

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And as I said earlier, I would conclude this topic by saying that any beginner investor should look for a broker firm that gives good value for money with their commission fees.

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🙂

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Stay Tuned for more and more on this 🙂

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However For More latest Industry,Stock Market and Economy News Updates, Click Here

Wise Money Weekly Update of The Market (Week: 25th – 29th January)

Hello Friends, here, we bring you the weekly view of the Indian as well as of the Global markets and latest global business and industry updates..

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Wise Money Weekly Update of The Market (Week: 25th - 29th January)

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A sell-off in global stocks, disappointment from key corporate earnings like L&T, possibilities of further monetary tightening by China and US president‘s proposal to put new restrictions on big banks weighed heavily on the domestic markets.

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In the forthcoming week, domestic markets are expected to remain volatile as traders roll positions in the derivative segment from January 2010 series to February 2010 series.

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Markets will also take cue from monetary policy which is scheduled to come out on January 29.

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Though tightening is largely expected by way of Cash Reserve Ratio hike as RBI has already started the first phase of ‘exit’ in its October 2009 policy statement but there is a belief if the RBI sucks out some liquidity, it may not raise interest rates, since liquidity is excess in the system.

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The Indian food price inflation is largely due to supply constraints.

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But going ahead anticipation of decline in food price inflation & lower borrowing from government in future because of huge money raising plans through disinvestment are some of the factors that are likely to determine RBI stance on increasing policy rates.

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The widely watched wholesale price index rose an annual 7.3% in December 2009, its highest since November 2008 and accelerating from a 4.8 % rise in November 2009.

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Food prices rose 16.81 % in the 12 months to 9 January 2010, easing from nearly 20 % in early December.

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On the Global economic front, GDP of China returned to double-digit growth in the fourth quarter of 2009 at 10.7 percent, and over the full year GDP surpassed the government’s target of eight percent.

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Back at home, domestic economy, which grew at 7.9% in the September quarter, is expected to grow 6-6.5% in the December quarter.

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The World Bank has raised its forecast at 2.7% for global growth in 2010.

Moreover it has raised its forecast for US growth in 2010 to 2.5% growth, after predicting 1.8% in June.

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Japan’s gross domestic product will expand 1.3% this year, more than the 1% predicted in June.

The euro area’s economy is forecasted to grow 1%, compared with the earlier estimate of 0.5% expansion.

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🙂

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Stay Tuned for More on this..

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Note : For More Latest Industry, Stock Market and Economy News and Updates, please click here

Hello Friends, here, we bring you the weekly view of the Indian as well as of the Global markets and latest global business and industry updates.

Market Experts Expect IT Stocks to Do Well During 3rd Quarter

Market Experts Expects IT Stocks to Do Well During 3rd Quarter

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With IT Biggy Infosys showing up with better-than-expected results and revenue guidance, IT stocks have turn out to be hot picks.

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This is owing to the factor that market participants are now anticipating good third quarter results on improved global demand scenario.

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Month-to-date, the BSE IT index has returned 4.16 per cent against a marginal 0.51 per cent advance in the BSE Sensex.

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Where IT biggies have climbed as much as 5 per cent during the period, mid-cap and small-cap IT stocks have followed the cues even better.

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“The Infosys numbers have set the tone for the IT sector. The numbers posted by the sector for the third quarter of financial year 2009-10 are encouraging and even the guidance is optimistic.

The analysis shows that revenue visibility has gone up,” said Jagannadham Thunuguntla, head of research at SMC Capitals.

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Financial Technologies shot up 20.55 per cent. Tech Mahindra climbed 14.77 per cent.

Patni Computer jumped 7.20 per cent followed by Polaris Software, Rolta India, MindTree and MphasiS, which climbed 4.67 per cent, 4.11 per cent and 0.33 per cent respectively.

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However, MphasiS and Redington India inched down 0.41 per cent and 0.45 per cent respectively.

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“We expect IT service companies to be more optimistic regarding the macro environment compared with the stance in the previous few quarters.

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While 2010 IT budgets are likely to be flat with a positive bias, managements might not provide significant clarity on them,” the brokerage added.

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The years 2009 and 2010 underline a significant recovery in business optimism and economic conditions.

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Thunuguntla feels signs of recovery have also started appearing in the US and in the global financial sector, which was the genesis of the financial crisis.

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In such a situation, there is no reason why the Indian IT sector shouldn’t do well during the third quarter.

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Understandably, the sector’s fortunes are linked to the value and fluctuation in the dollar.

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A strengthening dollar can put pressure on the profitability margins of IT companies.

But, IT volumes still remain strong, and sector should see healthy performance.

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🙂

Indian Stock Traders To Contend With Fewer Holidays in 2010 !

Indian Stock Traders To Contend With Fewer Holidays in 2010

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Indian brokerages and traders would have to contend with fewer trading holidays in 2010, going by the list of weekdays on which the markets will remain closed in 2010.

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Moreover, they would have to put in longer hours this year owing to the decision of stock exchanges to increase the trading hours.

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In comparison to 2009, when there were 19 holidays throughout the year, the projected number of public holidays in 2010 has dropped to just 11, including the first day of the year.

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As per the official of Bombay Stock Exchange (BSE), this is certainly not by design.

Eight holidays this year — including Dussehra, Guru Nanak’s birthday, Christmas, Independence Day — fall either on a Saturday or Sunday,” he said.

“It’s only that we have mentioned them on our holiday list.”

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According to SMC Capital’s Jagannadham Thunuguntla, the Securities and Exchange Board of India was already contemplating a cut in the number of holidays to align the Indian markets with other peers, where trading holidays are restricted to six-seven a year.

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“This year, coincidentally, this has fallen in place. Many festivals and events are on weekends. That’s why, if you notice, today has been declared a holiday as a consolation to us,” Thunuguntla told.

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The authorities at the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) have not only increased the trading hours by 55 minutes but have also decided not to advance the opening bell this year .

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From Jan 4 onwards, trading will commence at 9 a.m., while the closing bell will ring at 3.30 p.m. in a move intended to woo foreign funds from other major Asian markets like Singapore and Hong Kong.

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Corporate India set to prefer QIPs for Funds Raising in 2010

Corporate India set to prefer QIPs for Funds Raising in 2010

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Merchant bankers are of view that Qualified institutional placements (QIPs) are expected to still be the preferred route to raise money in 2010.

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Earlier, QIPs  had gained traction during the middle of the year but ran into valuation headwinds in the last quarter of 2009.

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In 2009, Indian companies had raised close to Rs 33,000 crore by way of 45 QIP issuances.

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Also, about 33 QIP issuances are trading above the issue price, while 12 issuances are trading below the issue price.

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2009 was the year of the QIPs.

QIPs are expected to rule the roost, as there is serious interest and appetite in the overseas markets for instruments like converts/ADRs/GDRs.

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QIP, which was introduced in May 2006, picked up momentum in 2007 and then stagnated in 2008 when the market was in a bear grip.

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Delhi-based real estate company Unitech successfully raised $325 million through a QIP in mid-April 2009.

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Later, Indiabulls Real Estate and PTC India raised Rs 2,657 crore and Rs 500 crore, respectively, through such placements.

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QIP is a private placement by which a company sells its shares to qualified institutional buyers (QIBs) on a discretionary basis with the two-week average price being the floor.

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In a QIP, unlike an IPO or PE investment, the window is shorter (four weeks) and money can be raised quickly.

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According to a study by SMC Capital, the 45 QIP issuances have resulted into a mark-to-market (MTM) return of about more than 21.60 per cent, amounting to a profit of about Rs 7,050 crore.

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Some of the QIP issuances trading significantly above the issue price are Unitech (first round of QIP issuance), Emami, Shree Renuka Sugars, HCC , United Spirits, Dewan Housing, etc.

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Those trading below the issue price are Network 18 Fincap, REI Agro, Indiabulls Financial Services, Punj Lloyd, Delta Corp.

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“The overall positive listing performance of QIPs in 2009 will encourage investors as well as Indian corporates to access this route for fund-rising in an aggressive manner,” says Jagannadham Thunuguntla, equity head, SMC Capitals.

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QIPs had hit a pause button when a large percentage of them ran into valuation headwinds, resulting in companies raising a much smaller amount than what was initially proposed.

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🙂

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FLASHBACK 2009


For India, 2009, been a great year with the return of a stable government at centre, good FII inflow, 80% increase in the Indian stock market and less terror attacks. But globally, H1N1 influenza and a series of bankruptcy by some big international giants are some events, which we never want to happen again.

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Putting behind the worst annual performance ever, Indian equities were on a roll in 2009, catapulting a key index by more than 80 percent, to close the year with one of the best gains among emerging markets.

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At closing bell Thursday, the 30-share benchmark sensitive index (Sensex) of the Bombay Stock Exchange (BSE) was ruling at 17,464.81 points with an impressive gain of 7,817.5 points, or 81.03 percent, over the previous year’s close at 9,647.31 points.

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This was the best annual performance since 1999 and was in sharp contrast to 2008, when the Sensex ended with a hefty loss of 10,639.68 points or 52.45 percent making it the third-worst performing equities index among emerging markets.

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The story was no different at the National Stock Exchange (NSE), the other major bourse in the country, where the broader 50-scrip S&P CNX Nifty gained a hefty 2,241.9 points or 75.76 percent when it closed at 5,201.05 points Thursday.

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The main factors that made key indices rise like a Phoenix was resilience of the Indian economy and impressive growth despite global slowdown that also reflected in corporate earnings and the return of the foreign institutional funds.

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According to markets watchdog, the Securities and Exchange Board of India, such overseas funds pumped about $17.46 billion into the Indian stock markets in 2009, as opposed to a net sale worth $13.135 billion for the first time in over a decade..

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‘The performance in 2009 surpassed the expectations of even the most optimistic person. There were not many places left for foreign funds to invest and India was among the few attractive destinations,’ said Jagannadham Thunuguntla, equity head at SMC Capitals.

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Even as the Sensex gained 7,817.5 points, some of the 13 sector-specific indices stood out because of their performance — the metals index appreciated the most, up 233.68 percent, while auto followed with a gain of 204.16 points..

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Similarly, the indices for information technology was up 132.78 percent, capital goods gained 104.26 percent, consumer durables rose 97.8 percent, banking gained 83.9 percent, state-run enterprises inflated 80.54 percent, power moved up by 74.3 percent.

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On the whole, the year started on a promising note with the government unveiling a second dose of fiscal stimulus to help the economy weather the adverse impact of a slowdown in the global economy — touted as the worst in eight decades.

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As a result, the Sensex rallied till Jan 6 and gained 7.13 percent in just three days of trading. But then came the confession of a multi-million dollar fraud by Satyam Computer founder B. Ramalinga Raju, triggering a 7.25 percent fall in just one session.

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Till February, the barometer index was oscillating between 9,000-odd points and 10,300-levels. But as signs of a prolonged economic recession receded the world over, Indian equities found more takers and reflected in steady rise in the index.

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By the beginning of May it was trading comfortably around the 12,000-point mark and gave a thumping welcome to the electoral victory of the Congress party-led United Progressive Alliance — that even saw suspension of trading as indices hit the upper circuit twice.

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On that eventful day of May 18, the Sensex stood at 14,284.21 points, gaining 2,110.79 points, or 17.33 percent, over the previous close, while Nifty also rose 17.3 percent, or 636.4 points, to close at 4,308.05 points.

The remaining months of the year saw a steady rise in the index with interim corrections even as events like the presentation of an industry-friendly national budget and a high growth for the economy during the second quarter boosted investor sentiments.

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Looking at individual stocks that go into the Sensex basket, the top five gainers during 2009 were Tata Motors, up 398.33 percent at Rs.792.60; Mahindra and Mahindra, up 293.23 percent at Rs.1,080.80; Sterlite Industries, up 230.45 percent at Rs.861.65; Hindalco, up 211.23 percent at Rs.160.75; and Maruti Suzuki, up 199.88 percent at Rs.1,559.65.

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Only three stocks ended lower — Bharti Airtel was down 54.02 percent at Rs.328.80; Reliance Communications was down 23.92 percent at Rs.172.90; and Reliance Industries which ended lower since the company declared a 1:1 bonus.

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Looking ahead, the markets expect some more action once the government’s divestment programme gets underway even as investors have their fingers crossed on when the Sensex will breach the magical 21,000 mark.

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So, overall, the year 2009 has been one of the most significant chapters in the stock market growth with an increase of 80% in its value. Further, we keep our spirits high on FM’s comment that Indian economy can grow at 7.75% in FY10.

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INDEX – The Measuring Barometer

Hello Friends here we come up with another write up on “SMC Gyan Series”.

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INDEX - The Measuring Barometer

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Topic is  INDEX – The Measuring Barometer.

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Here, we would read that what is MCX Comdex and what are the advantages of Index.

MCX COMDEX captures diversified sectors encompassing futures contracts drawn on metals, energy and agricultural commodities that are traded on MCX.

It is the significant barometer for the performance of commodities market and would be an ideal investment tool in commodities market over a period of time.

The MCX COMDEX futures give users the ability to efficiently hedge commodity and inflation exposure and lay off residual risk.

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Protection can be established regardless of overall market direction.

MCX COMDEX, India’s first composite commodity futures index was launched on June 7, 2005.

Advantage:

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Investors who own stocks of companies having exposure to primary commodities

could use the COMDEX as a guide to hedge their risk in the commodity exchange,

thereby bringing stability to the financial markets and strengthening linkages.

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Weight age (%) of Commodities in MCX COMDEX:

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On the MCX-COMDEX, Agricultural sub-group carries 20% weighting.

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It includes ref. soy oil, potato, chana, crude palm oil, kapaskhali & mentha oil.

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Metals also carry 40% weighting and comprise gold, silver, copper, zinc, aluminium, nickel & lead.

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The energy sub-group consists of crude oil & natural gas and carries 40% weighting.

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Weight age (%) of Commodities in MCX COMDEX:

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Performance 2009:

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The chart above depicts that with the bull-run in commodities,

this index has outperformed throughout in the year 2009,

as compared to other years, where they had shown a sideways movement.

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Also Group Indices for MCX AGRI, MCX METAL & MCX ENERGY on commodity futures prices have been developed

to represent different commodity segments as traded on the exchange.

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Performance 2009

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Retail Investors Turn Cautious Towards IPOs

Retail Investors Turn Cautious Towards IPOs

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Aggressive IPO pricing and poor post-listing performances have made retail investors extremely cautious this year.

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😦

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Of the Rs 18,407 crore collected through IPOs, the retail investor portion was subscribed 1.86 times on an average, according to a research report by SMC Capital.

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Qualified institutional buyers‘ portion was subscribed by 11.42 times and high net worth individuals’ portion by 8.49 times.

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IPOs this year were subscribed 7.64 times.

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Of the 19 IPOs, the retail portions of five issues were not even fully subscribed, while five just about managed to get subscribed.

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Many retail Investors have decided against putting money into recent IPOs after looking at the post-listing performances of stocks that were listed earlier.

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Only shares of six companies are trading above their issue prices – these include Mahindra Holidays, Oil India and Cox and Kings (India).

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A lot of investors had saved up, especially for the NHPC IPO.  But when it listed poorly these investor must have suffered hugely.

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As per the market experts , a lot of the IPOs that came out this year have been highly priced, which has made the already skeptical retail investor stay away from the primary market.

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Bunch of retail investors are looking at “short-term gains”, so they now prefer to invest their money in the secondary markets rather than in IPOs, market experts feel.

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If one goes by the DRHPs filed with SEBI, there are approximately Rs 29,000 crore worth of IPOs in the pipeline, said Mr Jagannadham Thunuguntla, Equity Head at SMC Capital.

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🙂