DEMAT Account : Know How It Works (Part 2)

Hello Friends here we come up with an extension of our previous blog “DEMAT ACCOUNT – Know how it really works”

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DEMAT Account : Know How It Works 🙂

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In first Blog, we tried to discuss about the importance of Demat account.

In this Blog we would throw some light on aspects like what are the features and benefits of a Demat account!

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Why Demat?

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The demat account in short helps in certain factors as given below:

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– reduces brokerage charges,

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– makes pledging/hypothecation of shares easier,

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– avoids confusion in the ownership title of securities, and

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– provides easy receipt of public issue allotments.

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What are the features and benefits of Demat account ?

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As opposed to the earlier form of dealing in physical certificates with delays in transaction, holding and trading in Demat form has the following benefits:

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1.  It eliminates risks associated with forgery, counterfeiting and loss due to fire, theft or mutilation and reduces brokerage charges,

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2.  Settlement of Securities traded on the exchanges as well as off market transactions,

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3.  Reduces time taken to stock trading drastically avoiding problems encountered in case of physical shares like signature mismatch, postal delays and loss of certificates in transit,

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4.  Enables quick ownership of securities resulting in increased liquidity,

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5.  Easy settlement of the ownership title of securities, and provides easy receipt of public issue allotments,

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6.  Pledging of Securities,

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7.  Auto Credit of Rights / Bonus / Public Issues / Dividend credit through ECS,

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8.  Auto Credit of Public Issue refunds to the bank account,

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9.  No stamp duty on transfer of securities held in Demat form (as against 0.5 per cent payable on physical shares),

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10.  Increased liquidity, as securities can be sold at any time during the trading hours (between 9:55 AM to 3:30 PM on all working days), and payment can be received in a very short period of time,

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11.  It do away the requirements of filling up of transfer deeds,

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12. Change of address, Signature, Dividend Mandate, registration of power of attorney, transmission etc. can be effected across companies held in Demat form by a single instruction to the Depository Participant (DP),

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13.  Holding / Transaction details through Internet/email.

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🙂

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Next Blog (final part), we would try to know about the Steps for opening a Demat account and Documents Requirement for opening a Demat account.

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Stay Tuned for more on this.

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

Lets Know About DEMAT ACCOUNT – Part 1

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

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Lets Know About DEMAT ACCOUNT - Part 1

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Topic is DEMAT ACCOUNT – Know how it really works !

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In this First part of Blog, we would try to discuss about the importance of Demat account and would like to share the fact that why demat account is must.

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With growing financial awareness, more and more people now want to dabble in the share market.

To do this, one should understand the basic requirements to trade in shares.

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A company enlisted in a stock exchange, is under obligation to offer the securities in both physical and dematerialized mode.

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Physical securities mean actual certificates giving information about the shares of a company owned by a person.

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In the same manner, Dematerialization is the process of converting physical shares (share certificates) into an electronic form.

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Shares once converted into dematerialized form are held in a Demat account.

Today, almost all of the shares trading happens using the Demat mode of shares.

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What is a Demat account?

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Demat account allows you to buy, sell and transact shares without the endless paperwork and delays.

It is also safe, secure and convenient.

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Just as you have to open an account with a bank if you want to save your money, make cheque payments etc, you need to open a demat account if you want to buy or sell stocks.

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So it is just like a bank account where actual money is replaced by shares.

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You have to approach the DPs (remember, they are like bank branches), to open your demat account.

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Let’s say your portfolio has 100 of Satyam, 200 of IBM and 120 of TCS shares.

All these will show in your demat account.

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So you don’t have to possess any physical certificates showing that you own these shares.

They are all held electronically in your account.

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As you buy and sell the shares, they are adjusted in your account.

Just like a bank passbook or statement, the DP will provide you with periodic statements of holdings and transactions.

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Is a Demat account must?

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Nowadays, practically all trades have to be settled in dematerialized form.

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Although the market regulator, the Securities and Exchange Board of India (SEBI), has allowed trades of upto 500 shares to be settled in physical form, nobody wants physical shares any more.

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So a demat account is a must for trading and investing. 🙂

It is a safe and convenient means of holding securities just like a bank account is for funds.

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🙂

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Next Blog we would try to touch upon the aspects like why demat account as well as features and benefits of Demat account.

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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

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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Know The Simple Steps to Open an Online Trading Account :)

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There are definite advantages to opening an online stock trading account.

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Know what all you need to do for opening an online trading account

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Unlike traditional brokers, online firms don’t require confusing brokerage fees and sky-high commissions.

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And as for convenience, it’s hard to beat the ease of researching companies, viewing your portfolio and placing orders at the click of a mouse.

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With all the ease the Internet brings to the Information Age, opening an online trading account could not be made any easier than it already is.

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All you need to do is:

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1. Pick an online stock broker

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Essentially, online stock brokers come in two forms

– discount stock brokers, and

– discounted discount stock brokers.

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The primary difference between these two different types of online stock brokers is the commission they charge.

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Nonetheless, most online stock brokers do not provide their clients with research information about which stock to buy and sell (which is one reason why their commissions can be so low).

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But, one of the most important aspects you have to consider before opening an online trading account is to find out whether or not they have instant ‘real time’ access to stock trading prices.

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If not, and there is a time-lag between the quoted price and your buy/sell price, you could find that this ends up costing you far more than the commission would otherwise have cost.

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Therefore, be prepared to pay a higher commission for a more instantaneous stock quote price.

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2. Completing the online application

Having decided on which online stock broker to open your trading account with, you then need to complete the online application form.

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3. Joining Fees

In addition to a per trade commission fee, some online stock brokers will charge you an introductory new member fee when opening your online trading account.

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However, competition among online stock brokers being intense these days, they offer very attractive joining promotions.

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It is advisable that you do not base your whole decision of opening an online trading account on just the aspect of the value of joining fees.

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4. Deposit your money

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When opening the online trading account, you’ll be instructed as to how to deposit your money with the broker.

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In some cases you can make your deposit via credit card, in others you’ll need to make a physical payment into a bank account.

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Once you have completed the online application form and deposited your money, you’ll be free to start trading.

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To know more about the state-of-the-art Online Trading facility, click here.

Global Slowdown Caused Slump in Growth Rate of the Demat Accounts

Global Slowdown Caused Slump in Growth Rate of the Demat Accounts

 

Despite the blistering pace kept by the equities market in the past 10 months, the rise in the number of new retail investors has slowed down.

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According to the data from National Securities and Depositories Limited, the growth rate of demat accounts has declined to 6 per cent, compared with 13 per cent last year.

Experts attribute this to the overall slowdown in the economy.

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As per experts a prolonged, dull phase in 2008 made investors jittery about investing in the equities market.

Also, as many individuals were scared of losing their jobs, so they did not intend to invest more.

There has been an average growth of 14.75 per cent in investors opening demat accounts till 2008.

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Financial intermediaries such as broking companies, whose fortunes are directly linked to the markets, have witnessed subdued sentiments in the equity space from retail investors.

Experts cited 2008 market crash and the global financial meltdown as the reason for this negative development.

Moreover recession of last year had demotivated and scared the retail investors good enough to drive them away from the further investing.

This caused enormous loss for Financial intermediaries and most of the brokerage houses had to shut shop and retrench many staff too.

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“The confidence of the retail investors is yet to be restored. Even in the case of new initial public offerings, only the institutional part is getting oversubscribed,” said Jagannadham Thunuguntla, head of research at SMC Capitals.

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SEBI Allows Auctions for QIBs in FPOs :)

SEBI Allows Auctions for QIBs in FPOs

Market regulator, SEBI has introduced a significant change in the way institutional bidders invest in follow-on public offers by allowing allotments through auctions.

 

The Securities and Exchange Board of India (Sebi) has amended the Issue of Capital and Disclosure Requirements Regulations (ICDR) to allow pure auctions for qualified institutional investors (QIBs) in follow-on public offerings to begin with.

The method may be later extended to initial public offerings.

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Under the new method, bidders will be free to bid at any price above the floor price.

At present, allotments are made at the floor price.

Retail investors, however , will be allotted shares at the floor price.

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The board also decided that the issuer is free to place a cap either in terms of the number of shares or percentage to issued capital of the company so that a single bidder does not garner all the shares on offer, ensuring a wider distribution of shareholding.

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Jagannadham Thunuguntla, Equity Head,  SMC Capitals, said this means an institutional investor can continue to bid above the floor price and the QIB allotment will be made to the highest bidder.

“The intent is to enable companies to mop up more funds. Earlier, even when there were huge subscriptions and huge demand for an issue, the company could not get more money. This becomes more relevant in the context of the recently announced divestment plans and FPOs by the government for public sector units,” he said.

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Auction for QIBs is welcome as it would allow risk-taking entities and not just the promoters to be a part of the price discovery process, other analyst said.

A SEBI release issued after the board meeting also said the minimum market capitalisation required by listed firms to sell shares in follow-on offerings has been halved to Rs.5,000 crores  from Rs 10,000 crore.

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Moreover, the market regulator has also made it a mandatory that all listed companies would have to furnish audited or un-audited balance sheets on a half-yearly basis within 45 days from the end of the quarter instead of the current yearly basis.

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This would imply that Indian companies will be required to disclose balance sheet items.

Shareholders would be able to access the statement of assets and liabilities of the company and its solvency position on a half-yearly basis.

Shareholders would receive immense help in making informed investment decisions now and would be in better position to assess the financial health of the companies, with the implementation of this SEBI regulation of mandating frequent disclosure of the asset-liability position of companies by companies.

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Govt Not to Impose Restrictions on Foreign Borrowings

 

The government ruled out limiting companies from borrowing money from overseas market stating that the rise in foreign money is not a matter of concern at present and there is no such proposal.

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However, companies are permitted to raise $500 million annually under the automatic route while infrastructure firms under the approval route can remit up to $100 million for rupee expenditure and for other companies the cap on approval route remittance is set at $50 million.

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Meanwhile, capital inflows reached record levels as investors borrow cheap from advanced countries and invest in high-yielding assets in developing countries while this led to speculations that government may put in place a system of auctioning ECBs.

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In India, foreign inflows through foreign institutional investors (FIIs), ECBs and foreign currency convertible bonds (FCCBs) have been on the rise, while FDI is not picking up as fast.

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On the other hand, on a quarterly basis, the funds raised through ECBs and FCCBs increased by 70% in the September quarter to $4.61 billion while FIIs have put in a record over Rs 71,900 crore in the equities market.

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BSE and NSE all Set to Improve Arbitration and Appeal Mechanism

BSE and NSE all Set to Improve Arbitration and Appeal Mechanism

Both the BSE and NSE will soon be adopting the best practices in the other to improve the investor grievance redressal mechanism where the NSE is considering putting in place an appeal mechanism similar to the one at BSE.

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However, BSE is looking at scrapping the arbitration fees to be paid by the investor for claims below Rs 10 lakh while efforts are on to provide investors with help from a representative of Investor Associations (IA).

Meanwhile, at present, there is a two-level arbitration process in BSE whereas, in NSE, there is a single-level arbitration meaning if you lose your case in arbitration in NSE you shall have to appeal in the High Court.

Further, in BSE, you can appeal against an unsatisfactory verdict to an appellate panel of 5 arbitrators before taking the matter to court while if the arbitration claim amount is less than Rs 25 lakh on the NSE and less than Rs 10 lakh in case of the BSE, a single arbitrator hears the case.

But, if the arbitration claims are higher than this amount then a panel of 3 arbitrators will decide the case while NSE agreed to the appeal mechanism subject to the Arbitration Act.

In addition, on the BSE, an investor seeking redressal has to file an application with the exchange at Investors’ Grievance Redressal Committee (IGRC) comprising of a former justice of high court and a broker member trying to resolve the dispute at the IGRC level itself.

However, if no mutually agreeable settlement is reached, the parties are advised to go in for arbitration while another proposal, when executed, will be beneficial to investors like the BSE levies arbitration fees of approximately Rs 4,000 whereas on the NSE, for claims of up to Rs 10 lakh, only the brokers have to pay the arbitration fees.

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Points to Remember while Selling Stocks – Part 2

Hello Friends here we come up with an extension of our previous blog, “Points to Remember while Selling Stocks Part 1”.

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Points to Remember while Selling Stocks

In previous Blog we had touched upon few points related to selling stock tips.

In this blog lets get to know more of valuable points in this regard.:)

Major points when to sell your stocks ( starting from 4th..three already being discussed in Blog 1)

4. Stock is Over Valued:

During bull market, high quality stocks appreciate value.

But more importantly, with so much hype around the stock, they are often set up for a fall.

Therefore, investor may use the strategy of selling them first and buy at lower price.

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5. Need Some Cash-

Certain unexpected circumstances may affect the time when to sell stock.

It is not wrong to sell stock to solve your financial emergency, especially the underperforming one.

However, it is advisable to have some emergency cash funds.

After all, basic investing rules is to start investing if you have enough money.

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6. A Change in Monetary Policy-

The Central Bank, RBI changes monetary policy if it perceives that inflation is heating up.

By raising interest rates, it contracts the money supply and slows down the financial system.

It is generally seen that stocks normally react negatively against the action, and some time markets become more volatile.

If you are not happy with this type of risk then you should move a portion of your portfolio into stocks that will not be as affected with such changes.

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7. A Company Suddenly Cuts Dividends or Lower Income Estimates-

This event should be investigated carefully before making any judgment to sell.

For good reason, the board of directors might want to retain more of their earnings for internal growth, rather than paying them out in dividends.

Sell a company’s stock if the performance is down.

Investors must never sell the stock of a fine company if its price goes either ways significantly – up or down.

Falling earnings margins and slowing earnings must be treated as a warning signal.

Lastly, I would like to say that always do your homework (Research) well while selling a company’s stock; you can use either the top-down approach or the bottom-up approach.

Markets are often full of rumors. You cannot make money in the market by acting on market rumors.

Always listen to the stories, but remember you should do your own research–and do it thoroughly.

Make your buy or sell decision based on your analysis of the company, not on what others tell you to do.

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RBI’s Monetary Policy – Analyst View

Hello Friends, last month we witnessed loads of action with the RBI’s monetary policy being laid down.

Just an extension of our previous blog “RBI’s Monetary Policy Stance – Part 3”.

 

 

RBI Monetary Policies and Projections Part 4

 

In this Blog we would read the Analyst views with respect to the monetary point of view.

Analysis from the Analyst from monetary point of view:

Though there is a hike in SLR to 25 % but we think it will not have much more impact because the total investment book of commercial banks is already at 30.4% of total NDTL.

Although key rates of CRR, reverse repo and repo rates have been left unchanged, special repo facilities have been withdrawn.

Real estate loans provisioning are set to become more expensive.

NPA norms for banks have been tightened while liabilities of scheduled banks arising from transactions in CBLO with Clearing Corporation of India Ltd. (CCIL) will be subject to maintenance of CRR.

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The RBI is thus attempting to withdraw liquidity from areas where excess liquidity had reached a point it was more than comfortable with, while also targeting better quality management of credit.

Another point is that in the policy stance, RBI has given first priority to keep a vigil on trends in inflation and to be prepared to respond swiftly and effectively through policy adjustments to stabilize inflation expectations.

Second, it will monitor the liquidity situation closely and manage it actively to ensure that credit demands of productive sectors are adequately met while also securing price stability and financial stability.

Lastly, RBI will maintain a monetary and interest rate regime consistent with price stability and financial stability, and supportive of the growth process.

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In conclusion, it bears emphasis that the Reserve Bank is mindful of its fundamental commitment to price stability.

It will continue to monitor the price situation in its entirety and will take measures as warranted by the evolving macroeconomic conditions swiftly and effectively.

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To conclude all the factors it seems that with the withdrawal of special liquidity measures together with an imposition of CRR in borrowing in CBLO market, RBI has taken a first to step towards controlling liquidity.

 

With prioritizing inflation it is expected that the next step of RBI could hike in CRR as it has also reduced the indicative growth of Broad money to 17% from 18%.

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