IBS TIMES 222nd ISSUE

TEAM IBS TIMES

Finstreet IBS Times is an ICFAI Business School, Hyderabad affiliated official Capital Market Club which aims to research on capital market as a whole. We as IBS Times serve our readers with information from in and around the world and keep them up-to-date. We try to aid readers with information and gauge knowledge with better investment solutions. IBS Times encompasses independent writers club with unbiased thoughts and wholesome views, fairness and honesty. We have recognised that our work can influence decisions or perception of our readers’ towards capital market, therefore, commit to publish our magazines and journals with the highest level of accuracy and impartiality. We strive to be humble and subtle in carrying out this work. Our team realizes that accuracy in the content provided to readers is imperative, thus we always strive to reach that level.

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Email id: editors.ibstimes@gmail.com Mohit Agrawal (Senior Editor Magazine) PoC, Team IBS Times

INTRODUCTION TO THE

of

securities.

It

is

necessary

to

remember that an individual can only

STOCK MARKET –Satya Sree

invest in the stock market through a stockbroker,

who

is

a

licensed

intermediary. Electronic mediums are STOCK

used to buy and sell shares.

A stock (also called equity) is a financial instrument

that

represents

the

Major Stock Exchanges in India –

ownership of a company. This entitles

•Bombay Stock Exchange (BSE)

the stockholder to a share of the

The Bombay Stock Exchange (BSE) was

company's assets and profits equal to

established in 1875. The BSE is Asia's

the amount of stock they own.

first and India's oldest stock exchange.

Stocks are financial instruments that

The BSE Sensex is the company's

reflect a company's equity stake.

flagship index, and it tracks the success

For companies, issuing stock means

of the 30 biggest, most liquid, and

businesses collect funds to expand and

financially stable firms across key

invest in their operations.

industries.

For investors, stocks are a way to expand their wealth and outpace

•National Stock Exchange (NSE)

inflation over time.

The National Stock Exchange (NSE) was

When you own stock in a company, you

Established in 1992. NIFTY50 is the

are called a shareholder because you

flagship index of the NSE consisting of

share in the company's profits.

top 50 companies based on its trading

"Shares" are the units of stock.

volume and market capitalization. This index is widely used as a barometer of

STOCK MARKET

the Indian capital markets by investors

A stock exchange is a marketplace

in India as well as globally.

where investors can purchase and sell publicly traded company shares. It provides a forum for the smooth trading

•India International Exchange (India

•Domestic Institutions-large corporate

INX)

entities based in India (for example LIC

India INX was established in 2017.

of India).

Founded to provide a replacement for

•Domestic

Indian companies' offshore banking

Companies (AMC)- Mutual fund firms

activities. It is the process of raising

such as HDFC AMC, SBI Mutual Fund,

public investments and ensuring that

DSP Black Rock, and others will be

domestic investments remain in the

industry entrants in this segment.

country.

•Foreign Institutional Investors- Non-

•Other Stock Exchanges in India

Indian corporate bodies such as foreign

National Stock Exchange IFSC (NSE

wealth

IFSC). NSE IFSC was established in

funds, and other investors.

Asset

Management

management

firms,

hedge

2016. It is a subsidiary of NSE. The launch aims to expand India’s financial

Listing of Securities

market

The

and

enhance

the

capital

admission

of

a

company's

brought to the Indian markets. It allows

securities to trade on a stock exchange

trade in all currencies.

is known as listing. The listing is not mandatory under the Companies Act.

Different Market Participants

But it is necessary when a public limited

The stock market attracts a large

company is desired to issue the shares

number

or

of

individuals

and

debentures are

to

the public. As

corporations. A market participant is

securities

listed

on

a

stock

someone who buys and sells stocks on

exchange, the company must comply

a stock exchange. The below are few

with the requirements of the exchange.

examples of industry participants: •

Domestic

Retail

Participants-

Listing requirements

Individuals that trade in the markets.

A company that wants to list its shares

•

in a stock exchange must meet the

NRI and Overseas Citizen of

India (OCI)- people of Indian origin who reside outside India.

following requirements:

1. The Memorandum of Association and

Articles

should

of

Listing Procedure

Association

The following are the steps to be taken

included

in the listing of a company’s securities

have

permission for listing.

in stock exchange:

2. At least the minimum specified

1. The promoters must first choose

percentage of the company's

the

share capital should have been

exchanges where the shares will

made

be listed.

available

for

public

subscription (49 percent).

stock

exchange

or

2. They should get in contact with

3. The prospectus should include

the authorities at the stock

all necessary information about

exchange or exchanges where

the opening of the subscription

they intend to list.

list, receipt of share application, and so on.

3. They

should

discuss

the

requirements and eligibility for

4. The allocation of shares should be equal and equitable. In the circumstance

of

an

listing with the stock exchange authorities.

4. The proposed Memorandum of

oversubscription, the company

Association,

should determine the basis of

Association,

allotment in consultation with the

should be submitted to the stock

recognized

exchange

exchange authorities for review.

where the shares are to be listed.

5. The Memorandum, Papers, and

5. The

stock

conclude

stock

exchange into

a

must listing

agreement with the company.

The terms and conditions of the listing are outlined in the listing agreement. It also contains the continuous disclosures that the company is required to make.

Articles and

of

Prospectus

Prospectus are then finalized by the company.

WHY STOCK MARKET? Maximize Your Wealth Mitigating the Overall

and one should look into your tolerance towards risk.

Build From a historical perspective, long-

Risk – Anish Das

term investment always fetches you better returns rather than investing in bonds. There have been fluctuations in

The Stock Market is one of the most

the market now and then. So, investors

effective aspects of a free market

should

economy. It helps organizations to raise

perspectives

capital

fluctuations tend to streamline over a

through

stock

shares

and

corporate bonds. Through this, it allows

think

about

long-term

because

these

subsequent period.

various investors to participate, invest in shares, earn money using capital

Protect

gains, and dividends. However, there is

Taxes and inflation have a direct or

a possibility of loss. Certain institutional

indirect effect on your wealth. Equity

investors can enjoy a lot of privileges

investments

because of their higher risk-taking

benefits over a longer period. This can

ability. Stock Market provides a stage

eradicate the adverse effects of both

where

taxes and inflation.

you

can

pour

in

your

can

fetch

better

tax

investments and channelize them into Maximize

an investment proposal.

Certain

organizations

can

provide

Key Attributes

dividends to the shareholders. These

It is important to understand that there

payments can fetch regular returns

are

along with an increase in return.

certain

risks

involved

while

investing in the stock market. Similar to other investments, it also comes with

Cumulative Gain or Return

various types of risk-return parameters

A Cumulative return or gain is the amount that the investor has achieved

over a considerable period. It doesn’t

and the most important thing over a

depend directly on the amount of time.

while is that equity can fetch higher

Generally, it is represented as a

inflated returns in comparison to all

percentage

other assets. On the other hand, there is

and

comes

with

an

equation

a risk of losing a substantial portion of money if one doesn't opt for stop-loss.

INVESTMENT OPTIONS There are certain factors that one

Equity Mutual Fund

should think of before investing in the

As per SEBI guidelines, an equity

stock market. They think of procuring

Mutual fund must invest a minimum of

as high returns as possible without

65% of assets in equity and similar

losing too much money. Investment and

kinds of instruments. In an actively

return go hand in hand i.e. higher

traded fund, return depends on the

return is coupled with higher risk.

ability of the fund manager to generate returns. Exchange-Traded Funds and Index Funds are managed to keep in mind the underlying index. Equity schemes are broadly segregated as per the market capitalization as well as the sectors in which they invest.

Debt Mutual Funds These

schemes

are

perfect

for

investors who are looking for steady returns. Most importantly they are less volatile Direct Equity Investing in stocks doesn't guarantee a higher return. But finding the right stock to pick from is not an easy task

and

are

less

risky

in

comparison with equity funds. Debt mutual funds are those securities that can fetch fixed interests such as

government securities, treasury bills,

market closes. Also, there is no

bonds, etc.

possibility of ownership of shares held owing to trades. Day traders are quite

Public Provident Fund (PPF) Many

people

always

seek

educated and well-financed i.e., they those

have a good amount of funds with them.

investment opportunities that are there

Illustration of what an intraday

for the long term. PPF has a tenure of

trading strategy looks like

almost 15 years. This is beneficial since the entire amount yields a tax-free

Pros and Cons of Intraday Trading

return, mostly in the subsequent years.

Moreover, the principal invested and interest accrued is covered with a sovereign guarantee making it a safer investment.

Derivatives A Derivative is defined as financial security that derives its value from the Intraday/Delivery Trading

underlying assets. It is a contract

Day trading is a kind of speculation or

between

prediction in securities in which traders

Derivatives derive their value owing to

can buy as well as sell shares. In other

certain fluctuations present in the

words, you can simply say that all

underlying assets. So, most of the

positions are squared off before the

common derivatives

two

or

underlying include

more

parties.

assets

for

commodities,

Short Trades While you short trade, it seems to be quite problematic since ideally, you need to buy something before selling it. Day traders in the short term sell assets before buying with the hope that the price will go down drastically. bonds, currencies, interest rates, etc.

Trading in derivatives can be done via over-the-counter (OTC) or through the

Traders sometimes make the statement "going short" which signifies their interest in shorting a particular asset.

exchange.

Long Trade Potential

Convenience to the Traders with

When a day trader enters into a long

Growing age of Digitalization

trade, they purchase an asset and thereby waits for the seller to surge up.

Traders used to make a statement of "going long" which essentially signifies the interest in purchasing a particular asset. If you are looking to buy 1000 shares of ABC organization for $10 per share, the entire buying cost is $10,000.

But when you like to sell the share at $11 per share, the selling price becomes $11000. Therefore, you make a net profit of $1000 minus the commission amount charged by the brokers. This is the desired figure while going long.

We are slowly moving towards an age where data is going to the cloud. Stock exchanges are coming up with new technical approaches to making the process faster giving convenience to traders.

All

the

trading-related

activities are carried out on an online platform

to

make

sure

the

best

investment opportunities are available for investors. Although, investing in the stock market comes with lots of benefits, but traders need to be cautious

while

making

decisions.

Going through the basics of the stock market and getting hold of the financial instruments is required to reduce risk and maximize return.

2. Put some money to the side

HOW TO INVEST INTO STOCK MARKET? – Anjali Arun

Before putting some of your money at risk, make sure you have some, put aside that will not be harmed in any way. A cash balance of at least three

It can be intimidating to invest in the

months' worth of

stock market if you've never done so

should be kept at all times, and it

before. Stocks are not like savings

should be kept in safe places like

accounts, money market funds, and

certificates of deposit or money market

certificates of deposit, in that their

accounts.

living expenses

principal value can fluctuate. You can lose most or even all of your investment

3. Choose an investing account

capital if you don't have enough

The foremost thing to enter into a stock

investing experience, knowledge — or

market or to start trading is choosing a

emotional power.

Demat

All you need to know for starting

Account is now needed if you want to

investing in the stock market. So, here’s

trade/invest in the stock market (NSE &

how to invest in stock-

BSE) or other securities.

account.

Having

a

Demat

Just like a bank account holds your 1. Determine Your Goals

money, a Demat account holds your

Before you engage in some form of

shares or securities. When you want to

investing, you must first ensure that

trade or hold shares on a delivery

your overall financial condition is

basis, you'll need a Demat account.

capable of accommodating the new

A

operation. Anything from your salary to

account") is an electronic holding

your mortgage to your household

account for financial securities (equity

budget

financial

or debt). In 1996, India implemented

luggage. Personal Capital, our favorite

the Demat Account scheme for trades

personal finance app, allows you to

on the NSE (India’s first and largest

organize your finances for free.

depository system) to eliminate the

is

part

of

your

Demat

account

("dematerialized

paperwork. Physical certificates are no

costly

longer

no

account. You may open an individual

Central

retirement account, also known as an

Depository Services (India) Ltd came

IRA, or a taxable brokerage account

into existence in February 1999, which

with a broker if you're not saving

was supported by the Bombay Stock

enough for retirement in a 401(k) or

Exchange.

other plans at work.

issued,

paperwork

Securities

and

involved.

there The

Presently Depository

is

National

Limited

and

Central Depository Services Limited

with

an

online

brokerage

The top 5 brokerage company offering Demat account are-:

are the two depository organizations in India that manage Demat accounts. A

i.

Zerodha

depository participant, such as a bank, serves as an intermediary between the lender and the depository.

The Demat account number is quoted

With over 30 lakh users, Zerodha is the

for all transactions to enable electronic

largest and most trusted discount

settlements of trades to take place. An

broker. The main reason for Zerodha's

internet password and a transaction

popularity is its superior customer

password are needed to access the

service to all other discount brokers.

dematerialized account. Then you can

Zerodha charges a lower brokerage

start transferring or buying securities.

fee of 0.03 percent per executed order

When transactions are verified and

or

completed, automatic purchases and

whichever is lower. If you deal in large

sales of securities are made on the

quantities, you can save up to 90%

dematerialized account. There are so

compared

many brokerage companies offering

stockbrokers.

the Demat account facility in India.

delivery is completely free.

Buying stocks, funds, and several other assets is likely to be easier and less

Rs.

20

per

to

executed

other At

order,

full-service

Zerodha,

stock

ii.

Upstox

the 5Paisa mobile app is the best in India. iv.

IIFL

Due to low brokerage fees, advanced technology systems, and high margins, Upstox is one of the best discount

With over 40 lakh customers, IIFL

brokers in India. Upstox charges a

Securities Ltd (IIFL) is one of the largest

fixed intraday brokerage of Rs. 20 per

full-service

sale, regardless of the trading volume,

who need guidance and research

and offers free stock delivery. When

assistance when making investment

opposed to other full brokers, you can

decisions should consider an IIFL

save a lot of money on brokerages.

Demat account.

iii.

5 paisa

v.

stockbrokers.

Investors

Angel broking

Under the addon Ultra Trader kit, 5Paisa charges the lowest brokerage

Angel Broking is one of India's oldest

fees of flat Rs 10 per trade. You can

brokerage firms, with 2.15 million

make a single trade worth crore and

brokerage accounts. The customer

pay just Rs 10 in brokerage. The Ultra

support provided by Angel Broking is

Trader pack is available for Rs. 999 per

excellent.

month. 5Paisa charges a flat brokerage

Apart from that, there are Motilal, ICICI

fee of Rs. 20 per executed order without

Direct, Karvy, Share khan, Edelweiss,

the pack. You can trade using the

etc. which provide a Demat account.

5Paisa mobile trading app. In terms of ease of use, user interface, and speed,

4. After

opening

a

Demat

account, Set a budget for your

portfolio and bond for the remaining 20%.

stock investment

5. Focus on the long term

In this step of the process, new

Stock investing is rife with complex

investors often have two questions:

strategies and methods, but some of the

How much money do I need to begin

most active investors have done little

stock investing?

more than stuck to stock market

The amount of money required to

fundamentals.

purchase a single stock is determined

putting the majority of your money into

by the price of the shares. (Shares can

mutual

be purchased for as little as a few

famously said that a low-cost S&P 500

dollars or as much as a few thousand

index fund is the best investment most

dollars.) If you want mutual funds but

Americans would make — and picking

don't have a lot of money, an exchange-

individual stocks only if you believe in

traded fund (ETF) may be the way to go.

the

Mutual funds also have $1,000 or more

prospects.

minimums, but ETFs trade like stocks

The best thing you can do after you start

which means you purchase them for a

investing in stocks or mutual funds may

share price — (in some cases, less than

be the hardest: Don’t look at them. It's

$100).

best to stop the practice of checking

How much money I can put into

how your stocks are doing many times

stocks?

a day, every day unless you're trying to

If you're investing through funds that

beat the odds and succeed at day

most financial advisors prefer. You can

trading.

allocate a significant portion of your

That

funds

company's

—

usually Warren

long-term

means Buffett

growth

6. Manage your stock portfolio

portfolio to equity funds if you have a

Although fretting over daily fluctuations

long-time

30-year-old

isn't good for your portfolio or your

investing for retirement could invest in

wellbeing, you'll need to check in on

stock funds for 80% of his or her

your stocks or other investments from

horizon.

A

time to time. If you use the measures

above

to

buy

mutual

funds

and

individual stocks over time, you can review your portfolio at least once a year to ensure it still meets your investment objectives.

Consider purchasing stocks or funds in a different sector to diversify the portfolio if it is too heavily weighted in one sector or industry. Finally, regional diversification should be considered.

International stocks can account for up to 40% of your portfolio. To get this exposure, you can buy foreign stock mutual funds.

This is all you need if you want to start investing in a stock market. Many people put off investing because they believe it takes a lot of money to get started in the stock market. But this is not the case. You can begin investing as little as Rs. 500 per month. The key to acquiring wealth is to form healthy habits, such as investing a small amount of money in the stock market every month. If you make it a habit to save regularly, you would be in a much better position.

COMMODITY MARKET – Dishant Mehta “Stock Prices Can Go to Zero.

Commodities Cannot. Unlike Shares in a Company, Commodities Are Real Things That Are Always Likely to Be Worth Something to Somebody.”

both perishable and non-perishable items, in this manner moderating the risk factor, yet additionally giving support against inflation rates in an economy. There are currently around 50

significant

commodity

markets

worldwide that work with trade-in around 100 primary commodities.

Commodities are often split into two general

classes:

commodities. incorporate

hard

Hard natural

and

soft

commodities resources

that

should be mined or extracted like gold, rubber, and oil, while soft commodities are agricultural items or livestock like corn, wheat, coffee, sugar, soybeans, and pork.

HOW COMMODITY MARKET –

Jim Rogers

WORKS? The

producers

INTRODUCTION A commodity market is a marketplace for buying, selling, and trading raw materials or primary items. It works with an exchange of physical goods among

residents

commodity

in

a

country.

Individuals planning to diversify their portfolio can attempt investments in

and

market

allows

consumers

of

commodity products to gain access to them in a centralized and liquid marketplace. These market actors can also utilize commodities derivatives to hedge

future

consumption

or

production. Speculators, investors, and arbitrageurs also play an active part in these markets. Certain commodities,

like

precious

metals,

have

been

considered to be a decent hedge against

inflation,

and

a

broad

arrangement of commodities as an alternative

asset

class

Fiber

can

Energy

Cotton Yarn Crude Oil, Furnace Oil, Natural Gas

diversify a portfolio. Because the costs

Cardamom, Jeera, Spices

Pepper, Red Chilli,

contrary to stocks, a few investors also

Turmeric

depend

Cashew

on

commodities

during

periods of market volatility. In the past, commodities

trading

Plantations

required

significant amounts of time, money, and expertise, and was primarily restricted

Coffee

Kernel, (Robusta),

Rubber Pulses

to professional traders. Today, there are more alternatives for participating

Staple,

Brent Crude Oil,

help

of commodities will in a general move

Cotton

Chana,

Masur,

Yellow Peas HDPE,

Petrochemicals

in the commodity markets.

Polypropylene (PP), PVC Castor Oil, Castor

TYPES OF COMMODITY

Seeds,

MARKET

Cake, Coconut Oil,

Types of Commodities in the market,

Cotton Seed, Crude

accessible for trading are arranged

Palm

Oil,

Groundnut

Oil,

Mustard

Oil,

Mustard

Seed,

into the following classes, given their

Oil & Oil Seeds

natural nature.

Aluminum, Metal

Bullion

Copper,

Refined

Lead,

Coconut

Soy

Oil,

Sponge

Refined Sunflower

Iron, Steel, Tin, Zinc

Oil, Rice Bran DOC

Nickel,

Gold, Silver

Maize, Guar Seed, Cereals

Mentha Oil, Potato, Sugar

 A few instances of commodities in the market that were most regularly traded in significant commodity exchanges in India included crude oil and silver.

While crude oil goes about as quite possibly the main energy source needed for practically every industry, silver is perhaps the most precious metal other than gold with consistent demand.

As crude oil is not locally accessible in wealth, practically 82% of it is imported from

OPEC

and

Middle

Eastern

countries. Also, silver is traded in broad amounts from countries such as Mexico, Peru, etc.

National

Multi

Commodity

Exchange (NMCE) All

activities

of

such

nationwide

exchanges come under the regulation of

Commodity

Derivatives

Market

Regulation (CDMRD) of the Securities and Exchange Board of India, which converged with the Forward Market Commission

in

2015.

Commodity

markets work with an exchange of both physical

goods

and

derivative

contracts while the physical exchange is embraced by institutional investors and commodity brokers intending to realize gains through the resale of the products in the retail sector of the country.

On the other hand, a derivative contract

HOW TO INVEST IN

does not need a physical store of the

COMMODITY MARKET?

goods obtained, as individuals can exchange products online through

Commodity trading is managed by four

digitized

significant commodity exchanges in

transaction hassle-free and helpful.

India:

Investors can work on investing in



Multi Commodity Exchange (MCX)

commodity markets through a futures



Indian

Commodity

Exchange

National

making

the

or options contract. While a futures contract directs individuals to sign a

(ICEX) 

contracts,

Commodity

Derivatives Exchange (NCDEX)

and

deed specifying delivery of a product sometime in the future concerning a fixed price, an options contract goes

about as an agreement however not a

forecast, positive or negative returns

liability of the equivalent.

can be realized, subject to spot prices.

TRADERS

BENEFITS OF COMMODITY

IN

COMMODITY

FUTURES MARKET

MARKET The

commodity

markets

hold



Price Discovery: Based on data

importance for two sorts of individuals

sources in regards to explicit

dependent on the commodity market

market data, buyers and sellers

activities they participate in-

lead

investors

at

futures

exchanges. This outcome is a

1. HEDGERS Such

exchanges

intend

to

continuous

reduce

discovery

mechanism.

exposure to market volatility by going into a futures contract with traders. Any

price



Hedging: It is the procedure of

adjustment in the price level does not

managing price risk that is

influence the rate at which particular

inherent in the spot market by

commodities are traded in the market.

taking an equal however inverse

Most hedgers trade physical goods in

position in the futures market to

the

shield their business from an

commodities

require

the

market,

specified

as

goods

they 

production or resale purposes. aiming

Import-Export competitiveness:

2. SPECULATORS Investors

unfavorable price change.

or

to

generate

The

exporters can hedge their price

substantial profits from trade in the

risk

commodity

named

competitiveness by utilizing the

speculators. An expectation regarding

futures market. A dominant part

the direction of movement of market

of traders who are associated

prices is assumed by such individuals

with

before signing a futures contract, and

internationally intend to buy

relying on the accuracy of the market

forwards. The presence of a

market

are

futures

and

improve

physical

market

permits

their

trade

the

exporters



to

hedge

their

the two, the order gets executed.

proposed

purchase

by

Price discovery of commodities

temporarily

substituting

for

is possible with no control and

genuine purchase till now is the

this is the major benefit of using

ideal opportunity to buy in the

progressed

physical market.

platforms. Lower margins in

Portfolio

commodity futures urge small

Diversification:

traders to utilize this segment to

investment options which are

support their risk and get higher

generally negatively correlated

leverage.

offers

with equity and currency and accordingly

could

extraordinary

offer portfolio

diversification.

Risk Management: As trading happens on exchanges, there is no fear of counterparty risk.

Proper

risk

management

procedures are maintained by the exchanges to protect the Transparency transactions: trading

LIMITATIONS OF COMMODITY MARKET 

High Risk: The commodity market is volatile, as any fluctuations in the productive

limit,

changing

social

promptly

influence

in As

occurs

trading commodity over

the

exchange, there is no control of prices neither by buyers or sellers. The buyer provides a cost estimate and similarly, a seller provides a cost estimate and if there is a match between

demand,

or

circumstances the

prices.

Because of such high volatility, predicting

the

commodity

investors. 

trading

other

Commodity



online

development

prices

may

of be

challenging, causing investors to miss out on substantial returns because

of

unexpected

market

events. Subsequently, individuals should be exceptional with both the internal working of an economy as well

as

external

factors

like

international trade before choosing to trade in commodities. Moreover, the demand and supply patterns

ought to be remembered to mitigate 



Market

demand

and

supply:

the risk further.

Market demand and subsequent

Limited Returns: While stock and

supply of goods exchanged on a

bond markets have periodic pay-

commodity

outs, for example, dividend yields,

impact the market price. A rising

coupon

on

demand (under any circumstance)

just

can make prices rise in the short

While

run, as supply cannot be increased

commodity market investments can

immediately to make up for the

harvest

returns,

higher demand in the market.

substantial expertise is needed for

Generally, such a rise in demand

something very similar. However,

can be ascribed

individuals can trade in goods

presentation viewpoint towards the

through any recognized commodity

stock market, consequently making

exchange by registering with a

investors move towards generally

commodities broker.

safer investment avenues.

payments,

commodity produce

and

investment capital

so can

gains.

significant



HOW PRICES ARE

deeply dependent on the market demand and supply of commodities, both locally and from foreign sources.

Speculative news

also affects

the

commodity prices intensely, as socioeconomic

conditions

profoundly

impact the profitable limit of respective companies.

The elements influencing commodity prices in an economy are discussed below:

a

determining

The prices of commodity markets are

deeply

to a critical

Global Scenario: Global indicators assume

DETERMINED?

exchange

significant the

part

prices

in of

commodities accessible internally in a country. For instance, any turmoil

in

the

Middle

Eastern

countries can influence the prices at which crude oil is exported, thereby affecting the prices at which it is traded locally. A critical example can be referred to in this regard when a supply shock was capable by all significant countries on the



world triggered by Iraq-Kuwait

aim to close the contract before the

tensions in the 1990s.

termination date to acknowledge

External factors: Any condition

capital

influencing the total production of

Individuals

specified

an

physical delivery of the goods can

exchange can cause price changes

decide on cash settlement contracts,

accordingly. For instance, a rise in

an endless supply of the tenure of

the cost of production can drive up

the futures contract, the difference

the prices at which a product is sold

between the price in spot trading

in the market, thus influencing the

and the price expressed in the

equilibrium

futures contract must be paid.

goods

rate.

in

Also,

the

on

total

unwilling

market

of

assumptions, individuals can accept

negative

either a short or a long position in a

the as

prices a

the

take

Depending

affects

upon

to

gains.

performance of the stock and bond commodities,

futures

performances

divert

expecting the price to drop in the

commodity

future can attempt a short position

market securities. Individuals often

(sell the security at a fixed price on

trade commodity derivatives to

a specified date) to acknowledge

make up for stock market risks, or to

profits through a fall in the market

shield their portfolio from stock

price. Then again, if individuals

market downturns.

expect the price of a commodity

Speculative Demand: Demand for

future contract to rise in the future,

derivative investing in commodities

they can pick to go long (purchase

online can arise from speculative

the security at a fixed price on a

investors, who aim to acknowledge

specified date) to sell something

profits

very similar at higher prices in the

tends

towards

through

to

market

price

regarding

the

direction of movement of prices and

Investors

future.

variances. Speculators often make expectations

contract.

market

perspective in regards to their investors



traded

gains



Market

Outlook:

Any

unanticipated fluctuations in the

stock market can make investors shift towards commodity trade, as odds of extreme fluctuations in prices of certain commodities, for example, precious metals are low.

Thus,

commodity

market

investments are secure and act as a hedge against inflation for riskunwilling individuals.

CONCLUSION India is one of the top producers of an enormous number of commodities and has a long history of trading in commodities and related derivatives.

Regardless of this fact, commodity futures

markets

are

generally

underdeveloped. The explanation has something to do with the broad government

intervention

in

the

agriculture sector. The fact is that the production and distribution of a few agricultural commodities are as yet governed by the state and futures trading has just been specifically presented

with

tough

regulatory

controls. If the futures market needs to prosper, market forces should be permitted to assume their part instead of attempting to control the prices.

BOND MARKET

invested, the issuer pays interest to the

– L.H. Vadiraj The word Bond does not comply with the relations you have with your friends, family, or close ones. Here Bond refers to the debt market which involves

trading

of

fixed

income

instruments. As per Section 2(h) of the Securities Contract Regulation Act, 1956

Bonds

Securities.

are

referred

Talking

from

to

as the

perspective of our country it's typically the Government that issues bonds to raise the capital to put a stop to their debts or reduce them or maybe to fund various infrastructural projects.

The key terms which are important to be understood by the reader before moving forward areFace Value - Bond’s Value at the maturity Yield - Effective rate of interest Coupon - Rate of interest paid Coupon Payment - The frequency can be annual, semi-annually, or quarterly In simple words, bonds can be defined as the loan where the investor is the lender. In return for the amount

investor. The interest is termed as “Coupons”.

Various factors are influencing the growth of the bond market: ● The

introduction

of

new

instruments ● Improvements in the settlements systems ● Increase in the liquidity Sometimes people have differences of opinion about the investment in stocks and bonds, which involves the risk appetite. In bonds, you don’t have to face the risk but stocks come with the element of risk. Along with the risk element,

the

stocks

are

growth-

oriented and are suitable for those who are interested in long-term investment whereas

the

bonds

are

income-

oriented investment options and are suitable for those who are interested in short-term investment. Along with the above key benefits mentioned, bonds provide tax advantages to the investor.

The bonds are for a fixed period as it may be from 7 days to 30 years and it comes with fixed income. Each and everything in this world has both pros and

cons.

So,

some

of

the

disadvantages that bonds hold are the

they use the funds to finance

risk involved in credit, liquidity, call,

necessary things, any social

and reinvestment.

programs, or other important aspects. Whereas Corporates

The Key Players involved in the Bond

issue bonds so that the fund

Market are -

could

1. Bond

Issuers

Governments, Corporations

-

They

Banks, whose

be

used

in

various

are

diversified portfolios like for

and

current

main

operations,

maybe

opening a new facility, etc.

concern is to sell the bonds or

2. Bond Underwriters - They are

any other debt instruments in the

composed of Investment Banks

market to fund the operations of

and other financial institutions

other

or

which does the work of guiding

organizations. The government

or helping the issuer to sell

being the biggest issuers of the

bonds in the market to fulfill the

bonds as

issuer’s objectives.

businesses

3. Bond Purchasers - They are the

Financial

institutions,

Banks,

investors who want debt that is

Provident Funds, Mutual Funds,

being available in the market.

Corporates

&

Insurance

Companies.

DEBT/

BOND

MARKET

IN

Securities

Market - It is the largest

INDIA It was the East India Company which has a major role in bringing the public borrowing concept to India. During the 18th century, they borrowed funds from the public to finance their campaigns for railway construction. The interest rates varied from time to time.

Well, the Indian Debt Market is considered one of the largest Debt Markets in Asia with Banks, FIIs, Financial

2. Government

Institutions,

Insurance

Companies & Mutual Funds being the major players in this market. In India, the bond market or the debt market comprises of mainly two segments –

less

compared

to

Securities

liquid

as

Government

Market.

The

Corporate Debt Market has been showing

tremendous

The latter classification for Market is 1. Private Sector Bonds 2. PSU Bonds With LPG coming into force in 1991 in India, there have been significant changes in the bond market. There are almost 20 types of bonds available to investors. Only a few of them are discussed below.

1. Plain Vanilla Bond - It’s the most basic and simplest form of bonds available. It comes up

1. Corporate Debt Market - It is relatively

segment of our Debt Market.

growth

over time so we have seen increased participation from the

with paying the principal amount at the bond maturity. Here fixed coupon

payment

intervals

that

at

fixed are

predetermined.

2. Zero-Coupon Bond - It is issued at the discount price and is redeemed at the face value. The

investor earns the yield as the difference

between

the

two

values mentioned above. Here no coupon payments are made.

3. Floating

Rate

Bond

-

The

interest rate is not fixed here.

The bonds where the coupon is not fixed but are linked to the benchmark.

4. Callable Bonds - The bonds where the issuer can redeem the bonds at a pre-agreed price before the maturity kicks in.

5. Puttable Bonds - The opposite of Callable bonds where the investor can redeem the bonds before the actual redemption date.

FOREX Market- The Right Way of Currency Trading – Mohammed Abdullah Afridi

currency conversions or Forex deals take place directly over the counter, thus thereby removing the need for an exchange. The Forex market is run by a global network of banks that are spread across different time zones: London,

In this era of modern trading, there are

New York, Sydney, and Tokyo. There is

many instruments in which trading can

no central location for Forex traders

be done. Some of the instruments are

and it can be done 24 hours a day. In

stocks, commodities, bonds, etc. one

this type of trade, the amount of

more such instrument that has gained

currency converted each day can

popularity in past few years is foreign currency exchange trading. Unlike regular trading, this type of trading is not done in exchanges. These are done in markets called FOREX markets also known as foreign exchange markets.

Forex or foreign exchange can be interpreted as a network of buyers and

trigger

the

price

movement

of

sellers who are willing to transfer

currency, thus making them highly

currency between them at a mutually

volatile. This volatility makes Forex

agreed price. In this way individuals,

trade attractive to traders. Thereby

companies, and central banks convert

giving them a better chance of high

one currency to other. For example, if

profits and also increasing the risk.

you have traveled abroad, then you will change your native currency to local

There are three different types of Forex

currency.

markets:

This

transaction.

is

also

Practically,

currency

conversions

intending

to

earn

a a

Forex lot

of

1.

Spot forex market: This type of

take

place

market

involves

physically

profit.

These

exchanging the currency and this takes place at the same time

the trade is settled. I.e., on-the-

advantage of price movements in the

spot settlement or within a short

market.

period.

2.

3.

Forward forex market: In this

Forex currencies are always listed in

market, a contract is made to buy

pairs. The first currency in the forex

or

of

pair is called the base currency, while

currency at a specified price and

the second currency is called quote

this can be settled at any date in

currency. As forex trade involves the

the future or within any specified

selling of one currency to buy another

dates.

currency, it is always quoted in pairs.

Future forex market: In this

The

type of market, a contract is

determined by how much one unit of

made to buy or sell a set amount

the base currency is worth in quote

of given currency at a set price

currency. The currency pair is marked

on any day in the future. Here,

as a three-letter code. Here the first two

the contract made is legally

letters stand for the country and the

binding,

third letter stands for the currency

sell

a

fixed

unlike

amount

that

of

the

forward forex market.

Here the majority of traders that are speculating forex prices do not plan to take delivery of currency itself; instead, they predict the exchange rate and take

price

of

the

forex

pair

is

itself. For example, in pair GBP/USD, we are buying Great British Pounds and selling United States Dollars. Here GBP is known as base currency and USD is known as the quote currency. If GBP/USD will be trading at 1.35361 then one pound is equal to 1.35361 dollars. In this pair, if the pound increases against the dollar, then the price of the pair will increase and in other cases, if the pound decreases against the dollar, then the price of the pair will decrease.

You just need to get started by Basic terminologies used in forex

following simple steps

trading:

1) Get a good internet connection.



Bid & Ask: The price at which currency is being bought is

3) Open a trading account with the

the price at which currency is

broker and deposit the initial

being sold is called the "ask"

amount.

4) Get access to the broker's forex

Spread:

The

difference

between the bid price and ask price is known as the spread. 

Pip: also known as the point in price, is the smallest movement (change) in exchange rates of the currency pair.



brokers.

known as the "bid" price and

price. 

2) Find authorized and real forex

Lots: In forex markets, the deals are always done in lots, unlike that of share market

trading platform.

5) Place your first trade and you are done.

Different strategies of forex trading: There is no single strategy for all traders. Every trader has their unique trading

positions

against

basis

of

their

forex trading strategies are: 

Price

action

trading:

This

strategy involves seeing the

Leverage: It helps you to take big

on

investment approach. Some of the used

where you can buy 1 share. 

style

historical price movement of

small

currencies and deciding the

collateral.

support and resistance level.

This strategy can work in all

HOW

TO

START

market conditions and across all

FOREX

TRADING? As currency contracts are always cashsettled, there is no physical delivery of currency and there is no need for a Demat account for currency trading.

time frames. 

Position trading: This is a longterm strategy. It requires the trader to take a position to benefit from shifts in currency



rates. Getting returns through

If you are a beginner, it is always

this strategy may take months

advised to start with demo accounts

and requires a high amount of

before actual trading as these markets

patience and discipline from the

are highly volatile and a wrong move

trader.

can lead you to high losses.

Day trading: This strategy is also known as the intraday trading strategy. It is a shortterm technical strategy in which positions are closed by end of the trading day. This strategy does not involve fundamental analysis.



Scalping:

Scalp

trading

is

buying and selling currency pairs for the smallest pips. This type of trade lasts between 30 seconds to 1 minute. Here trader needs to be cautious and alert to take

advantage

of

smallest

currency movements.

CONCLUSION Forex market is a type of market where all kinds of investors can make money.

It just takes a lot of discipline, patience, and practice. In India, forex trading has certain restrictions like there should be compulsory

involvement

of

Indian

rupee while trading; So Indian traders cannot trade in third party currencies.

TIME AND PSYCHOLOGY – Mohit Agrawal Knowing

own

self

and

the

sentimentalities will take anyone a long way in the field of the stock market. The Ego and sentiment are more sensitive to investor decisions in the stock market than many would be willing to admit. For years, people who have worked with trained finance managers and committees have found that they were less likely to follow the crowd and other irrational emotional mistakes than any young investor. For the most

very high. Inflation is initially seen as a good

opportunity

to

sell

them

ultimately led to the purchase of greed caused at very high levels. The reason is

replaced

by

emotions

and

adjustments with such familiarity, that those who see the signs and changes in the charts can benefit greatly from this knowledge. Investors who engage in anti-social and anti-sentiment behavior are prepared to make money in the financial

markets.

Financial

and

emotional risks are not the same.

OPTIMISM,

PESSIMISM,

part, they had better knowledge, but

GREED & FEAR

the facts alone are not enough to make

Why aren´t more people making more

beneficial decisions. The human factor,

money

which includes

wide range of

Because, as we have seen, people are

emotions from fear to greed, plays a

motivated by greed (optimism) when

much bigger role in decision-making

buying and by fear (pessimism) when

than most investors realize. In a

selling. People are motivated to buy

practical sense, many investors are

and sell by changes in emotion from

doing

the

optimism to pessimism and vice versa.

reasonable rationale for low and high

They formulate fundamental scenarios

prices

emotional

based on their emotional state (a

responses that can be expected to rise

rationalization of the emotions), which

or fall. Inflation initially seen as a

prevents them from realizing that the

transaction creates fears of losing at

main drive is emotion. Investors must

very low prices when the chances are

learn to buy when they are fearful

the

a

exact

based

on

opposite the

of

in

the

financial

markets?

(pessimistic) and sell when they feel

what is happening will continue until

euphoric (optimistic). This may sound

the next morning, which is a common

easy (simple contrary opinion), but

psychological choice. In the world of

without Technical Analysis it is hard to

financial trading, every minute on the

achieve.

market is different and anything can

The

main

purpose

of

technical

happen at any time.

analysis is to help investors identify turning points which they cannot see

Trading with FOMO shows that our

because of individual and group

greed and our predominant jealousy -

psychological factors.

we wish to get the same profit those

In trading, FOMO is a situation in which

who

a trader fears losing a great opportunity

regardless

of

to trade in the market. FOMO is a

movement

may

common problem in financial trading

Unfortunately, the feeling of FOMO

and can affect anyone - both new

becomes

traders with trading accounts and

continues to move in that direction.

professional traders working for large

However, as the price moves, there is a

institutions may be afraid to miss out.

good chance that it will convert or make

That feeling of missing trading occurs

a reversal. From experience, most

when you see a sharp rally in stock and

trades placed outside of FOMO often

feel like “I should have ridden this ride;

end up as a loss, which could have been

I can’t let this opportunity pass me by.”

avoided with a little discipline.

already

do

trading

whether

greater

have as

receive,

the

price

continued. the

market

The desire to join a price movement undermines your judgment, making it

FOMO has become a very common

difficult

the

thing in today's world where social

before

media makes it easier to know what

for

necessary

you stock

to

perform

analysis

placing a trade.

others are doing. It seems that there is a kind of cattle concept in FOMO,

Putting trade into FOMO results from

which, analysts believe, is holding

our natural tendency to believe that

irrational market meetings in the post-

epidemic period. In addition to the

impatience, and then you are tempted

effects of the Coronavirus epidemic,

to buy again when the market goes up.

the U.S. stock market keeps pulling out the top recording cord. It seems that social media is growing a huge FOMO,

Features of a FOMO trader?

–

Greed: The FOMO trader wants

with investors stepping into the market

it all and wants it NOW resulting

so as not to miss out, making the

to think about how much you can

markets move forward. At each level,

do with trading rather than

FOMO is caused by the feeling that

focusing on doing your job well.

some merchants are making money

–

Thinking about the herd: A

while you are left out, so you also want

FOMO trader often likes to do

to get a piece of the pie. However, it

things because others do them

leads to a lack of long-term vision, a

and not because he understands

reluctance to wait, high self-esteem or

why they are doing them. In

very low self-esteem, and extremely

trading, following the crowd can

high expectations. FOMO is basically

lead to immoral trading and

about emotional trading, and if left

disastrous results.

unchecked, you can end up ignoring

–

Impatience: FOMO vendors are

your trading plans and taking a very

often impatient. They don’t want

serious risk.

to wait for a setup; they simply want to get into the business

To win FOMO in trading, you need to

because they are afraid that the

overcome your trading emotions, such

price will run out.

as greed, envy, envy, patience, fear,

–

High

expectations:

joy, and anxiety. These feelings keep

sellers

you in the FOMO cycle, where you shop

expectations.

high in the market for greed, envy,

double their accounts in months,

envy, and happiness and sell below the

so they trade unreasonably.

market

for

fear,

anxiety,

and

–

have

Some

very They

high

want

to

Lack of confidence: For some traders, after losing a few skills,

they try to play. They engage in

–

Winner prediction: The FOMO

random trading just to make a

trader often believes he knows

quick profit and make up for

what will happen next in the

their losses. Unfortunately, they

market. There is a belief that as

put

long as it is in trade, the market

themselves

at

a

great

disadvantage.

will continue to move forward.

– Decision: Some traders are not

–

Analytical impairment: Some

only bad at making decisions but

traders affected by FOMO see

making good decisions is the

the trading set up early enough

key to trading. The trader always

but are disabled in their analysis

makes one or the other decision

that they can pull the trigger at

- when to enter the trade, the size

that moment. When the price

of the position, where to place

finally starts to rise on the

the loss of position and profit

expected side, they try to chase

margin, etc. Those who are

the trade even though it has gone

unable to make decisions tend to

from the right entry-level.

–

form.

No risk management system:

– No trading strategy: FOMO

Those who trade for fear of

traders often have no trading

losing usually do not plan how to

strategies. They sell just the way

manage risk in trading. Many

they feel. When the price goes

times, when they enter a trade,

one way, they think it will go that

the price is already extended

way forever.

that it becomes difficult to find

– No long-term vision: FOMO traders often approach trading with a long-term vision. If they do, they will know that there are thousands

of

new

markets

expected and will not put much value on just one trade.

the right place to place a stoploss order.

DERIVATIVES – Ankush Kapoor “Derivatives are financial weapons of mass destruction” –

Warren Buffett

of

national

currencies,

international/global traders wanted a system to account for the differences.

You would be surprised to know that there are also derivatives based on weather data, like the amount of rain or the number of sunny days in an area.

What Is a Derivative?

A derivative is a contract between two

For

or more parties, and the derivative

investor, whose investment accounts

derives its price from moderations in

are all denominated in Indian Rupees

the underlying asset. Common types of

(INR). This investor purchases shares of

underlying assets for derivatives are

a

equity,

commodities,

exchange using U.S. dollars (USD). Now

currencies, market indexes, etc. These

in this example, the investor has the

assets

risk of exchange-rate fluctuations while

bonds, are

commonly

purchased

through brokerages.

example,

U.S.

imagine

company

an

through

Indian

a

U.S.

holding that stock. Exchange-rate risk the threat that the value of the rupee will increase in relation to the USD. If the value of the rupee rises, any profits the investor realizes upon selling the stock become less valuable when they are converted into rupees.

The Basics of a Derivative The value of the derivatives comes from the moderations of the values of the underlying

assets.

Historically,

derivatives were marketed to ensure balanced exchange rates for goods traded globally. With different values

To hedge this risk, the investor can purchase a currency derivative to lock at a specific exchange rate. Derivatives that could be used to hedge such a kind of risk mainly include currency futures and currency swaps.

The derivatives market can be a world

dollar but short on the Rupee. Similarly,

of itself. The market is so large and so

if you agree to deliver 100kg of wheat

different from the other markets that it

to someone at a later date for a fixed

has its terminologies. A person with a

price, you are going short on the wheat.

new interest in this market, trying to even

Spot Contract: A Spot is a contract for

understand the information that is

immediate delivery. Since derivatives

being offered to him/her. It is therefore

include delivery at a future date, spot

important to know the vocabulary of

contracts

this market before indulging in any

derivatives market. However, they are

trades.

the basis for the price fluctuations of

trade

derivatives

may

not

Long Position: When we trade in stocks or bonds, we are either buy or sell. However, this terminology is used differently in the derivatives market. In the derivatives market, if you are the

are

not

a

part

of

the

futures, forwards, and options. If a certain financial asset is being sold for “A” amount in the spot market and the future expectations can be determined, then the price of the derivative can be derived.

person buying a contract, then you are on the long side of the contract. This is simply referred to as going long.

For example, if you buy a contract wherein you agree to exchange $1000 for 900 Indian Rupees, you are going long on the Dollar.

Short Position: The opposite of Long is called Short. In simple words, this means that you are selling a derivative contract. In the same example, if you agree to exchange $1000 for 900 Indian Rupees, then you are going long on the

Expiration: bound

Derivatives

financial

are

time-

instruments

which

means they come with an expiration date. They have an intrinsic worth only to that date and post that date they are worthless.

Market Maker (MM): MM provides both buy and sell for financial assets. In the case of the derivatives market, such assets are derivatives. The motive of the market maker is to deliver enough

liquidity to the market. Let’s assume

Bid Price: It is the highest price that the

you wanted to sell derivative security

bidder would agree to pay to you.

that you had and you go to the market

Therefore, for you, this would be a

to find a buyer. Now, this is a really

selling price.

difficult task. There is one party that is always willing to buy as well as sell.

Ask Price: The minimum price which

Hence, if you want to sell you go to the

the MM expects you to pay when they

MM, and also if you want to guy to buy,

transact with you is called the Ask Price.

you go to the same MM. The MM never

This can be considered as the buying

holds the other side of the bet. If they

price for you.

go long on a certain trade with you,

There is always a negligible difference

they will simultaneously find someone

between the bid and ask price. This

with

might

whom

they

can

go

short

seem

like

an

arbitrage

immediately. This cuts them out of the

opportunity for the MM since they can

trade and in the end, you are holding

make a risk-free profit from the price

the long end of the deal whereas the

difference. However, that isn’t the case.

other party is holding the short end.

The MM has to hold the derivative

This generates liquidity in the market

security for a few minutes before they

as the MM is always available to take

can make an opposite bet. And since

the other side of the trade with you.

securities are highly volatile, they drastically change values within this

Bid-Ask

Spread:

In

derivatives

time.

The

bid-ask

spread

is

markets, MMs will always give you two

compensation provided to the MM to

different sets of prices. One set is called

help them offset the risk that they

the bid price whereas the other is

undertake when they enter into open-

called the ask price. The difference

ended transactions.

between both is known as the Bid-Ask Spread.

Common Forms of Derivatives There are various types of derivatives that are used for risk management,

speculation, leverage a position, etc.

such contracts are standardized and the

The types are discussed below:

agreement cannot be altered in any

Forward

Contracts

-

Forward

contracts are the simplest and the oldest form of derivatives available today.

A

forward

contract

is

an

agreement to sell something at a future date,

though

the

price

of

this

transaction is decided in the present. A forward contract takes place between two parties which means that the exchange is not an intermediary to these transactions. Hence, there is a chance of counterparty credit risk in such transactions. A point that needs to

way. Exchange contracts come in a fixed format, fixed sizes, and have fixed expirations. Since such contracts are traded on an exchange, they have to follow the daily settlement procedure meaning that any gains or losses incurred on this contract on a given day have to be settled on that day itself. This is

mandatory

to

negate

the

counterparty credit risk. An important point that needs to be noted is that in a case of a futures contract, the buyer and seller do not agree with one another, they agree with the exchange.

be noted is that if such contracts have to be reversed before their expiration date, the terms might not be favorable since each party has only one option i.e., to deal with the other party.

Futures Contracts - Futures contract is similar to a forward’s contract. The similarity is that futures contracts also warrant the sale of the commodity at a future date but at the price which is decided in the present. The futures contracts are listed on the exchange which means that the exchange is an intermediary to the transaction. Hence,

Options Contracts - The third type of derivative is an option. It is significantly different from the first two types discussed above. Options contract binds one party although it lets the other party decide at a future date i.e., at the expiration of the option. So, one party must buy or sell at a future date whereas the other party has a choice to make. The party that makes a choice has to pay a certain premium for this privilege. There are two types of options, Call Option and Put Option.

The call option gives the right but not

Usually, it is the investment bankers

the obligation to buy something at a

who act as middlemen for these

later date at a given price whereas the

contracts.

put option gives the right but not the obligation to sell something at a later date at a given pre-decided price. Any individual, therefore, has 4 options when they buy an options contract.

They can be on the long side or the short side of either the put or call option. Options are also traded on the exchange just like a futures contract.

Swaps

-

Swaps

are

the

most

complicated derivatives. Swaps permit the participants to exchange their cash flows. For example, at a future date, one party may switch a cash flow which it thinks is uncertain for a certain one. The most common instance of swaps is swapping a fixed interest rate for a floating one. Participants of swaps can also decide to swap the interest rates or the underlying currency. Swaps enable companies to avoid foreign exchange risks amongst other prevailing or uncertain risks. Swap contracts are usually not traded on the exchange, rather these are private contracts that are worked out between two parties.

THE

FORMULA

FOR

A

PERFECT ANALYSIS -

PRADEEP GUPTA

A Balance Sheet is a type of financial statement that consists of detailed data and a report of a particular company’s assets and liabilities pairing up with shareholders’ equity. The main concept of a balance sheet is nothing but providing a basis for computing rates and returns for calculating and getting the company’s capital structure. In short, it can be defined as a snapshot of what a company owns and owes,

including the money flowed in via the shareholders.

A financial statement alongside a balance sheet comprises of income statement and cash flow statement of the company which is counted as essential for analyzing the firm’s major financial ratios and also for one of the most important things which is the fundamental analysis.

Asset, liabilities, and equity value each comprise a few more modest records that separate the particulars of an organization's funds. These records change generally by industry, and

similar

terms

can

have

various

Fundamental Analysis is a strategy for

ramifications relying upon the idea of

estimating a security's characteristic

the

worth by inspecting related monetary

business.

Extensively,

notwithstanding, there are a couple of

and

monetary

components.

basic segments financial investors are

examiners

probably going to go over.

influence the security's worth, from

study

Major

whatever

can

macroeconomic factors, for example, The balance sheet, similar to every financial statement, will have minor contrasts

among

associations

and

enterprises. Nonetheless, there are a few

details

that

are

quite

often

remembered for normal accounting reports. We momentarily go through regularly discovered details under Current Assets, Long-Term Assets, Current

Liabilities,

the condition of the economy and industry conditions to microeconomic components like the viability of the organization's

administration.

The

ultimate objective is to show up at a number that a financial investor can contrast and a security's present cost to see

whether

the

security

is

undervalued or overvalued.

Long-term

Liabilities, and Equity.

This technique for stock investigation is viewed as rather than a specialized

Another intriguing part of the asset report is how it is coordinated. The resources and liabilities segments of the balance sheet are coordinated by how current the record is. So, for the resource

side,

the

records

are

arranged ordinarily from generally liquid to least liquid. For the liabilities side, the records are coordinated from short to long haul borrowings and different obligations.

examination, which conjectures the heading

of

costs

through

an

investigation of chronicled market information like cost and volume. All stock examination attempts to decide if security is accurately esteemed inside the more extensive market. The basic study is typically done from a full scale to a miniature viewpoint to recognize protections that are not effectively evaluated by the market.

Investigators

all

An analyst attempts to make a model for

together, the general condition of the

deciding the assessed worth of an

economy and afterward the strength of

organization's offer cost dependent on

the particular business before focusing

freely accessible information. This

on singular organization execution to

worth is just a gauge, the examiner's

show up at an honest evaluation for the

informed assessment, of what the

stock. Basic examination utilizes public

organization's offer cost ought to be

information to assess the worth of a

worth contrasted with the current

stock or some other sort of safety. For

market cost. A few investigators may

instance,

allude to their assessed cost as the

a

commonly

financial

study,

investor

can

perform fundamental analysis on a bond's value at monetary factors, for example, interest rates and the general condition of the economy, at that point, examining investor.

data For

about

stocks,

the

bond

fundamental

analysis utilizes incomes, profit, future development, return on value, net revenues, and other information to decide an organization's hidden worth and potential for future development.

organization's characteristic worth.

If an expert figure that the stock's worth ought to be altogether higher than the stock's present market value, they may distribute a purchase or overweight rating for the stock. This goes about as a suggestion to financial investors who follow that expert. On the off chance that the expert computes a lower characteristic worth than the current market value, the stock is viewed as exaggerated and a sell or underweight proposal is given.

Financial investors who follow these proposals will expect that they can purchase stocks with great suggestions because such stocks ought to have a higher likelihood of ascending after some time. Similarly, stocks

with

horrible evaluations are required to

variables can be assembled into two

have a higher likelihood of falling in

classes: quantitative and subjective.

cost. Such stocks are a contender for

The monetary significance of these

being taken out from existing portfolios

terms isn't vastly different from their

or added as "short" positions. This

standard definitions. Here is how a

strategy

word

for

stock

examination

is

reference

characterizes

the

viewed as something contrary to the

terms: Quantitative – "identified with

specialized

which

data that can be appeared in numbers

costs

and sums." Subjective / Qualitative –

through an examination of chronicled

"identifying with the nature or standard

market

of

conjectures

investigation, the

heading

information

like

of cost

and

volume.

something,

as

opposed

to

its

amount."

In

this

quantitative

specific

circumstance,

essentials

are

hard

numbers. They are the quantifiable attributes of a business. That is the reason the greatest wellspring of quantitative

information

summaries.

Income,

is

budget benefits,

resources, and more can be estimated with

incredible

accuracy.

The

The issue with characterizing the word

subjective

essentials is that it can cover anything

unmistakable. They may incorporate

identified with the monetary prosperity

the nature of an organization's key

of an organization. They incorporate

heads,

numbers like income and benefit;

acknowledgment,

however, they can likewise incorporate

exclusive

anything from an organization's piece

subjective nor quantitative examination

of the overall industry to the nature of

is

its administration. The different crucial

experts think of them as together.

essentials

its

less

image

name

licenses,

innovation.

intrinsically

are

better.

and Neither

Numerous

CANDLESTICKS AND ITS

Candlesticks can be utilized by traders searching for graph designs.

PATTERNS – Supriya Reddy

There are different candlestick designs used to decide value course and force,

INTRODUCTION

including three-line strike, two black

So, what is a candlestick not the one

gapping, three black crows, evening

which we usually use for lighting so

star, and an abandoned baby. Not all

what does it mean? A candlestick is a

candlestick

type of value graph utilized in technical

admirably. Their gigantic prominence

analysis that shows the high, low, open,

has brought down unwavering quality

and shutting costs of security for a

since

particular period. Candlestick graphs

flexible

are

packs

calculations. These all-around financed

information for various periods into

players depend on lightning-speed

single value bars. This makes them

execution to exchange against retail

more helpful than conventional open-

financial backers and customary asset

high, low-close bars or basic lines that

administrators who execute technical

come to an obvious conclusion of

analysis systems found in famous

shutting costs. Candlesticks fabricate

writings.

a

technical

tool

that

they've

designs

been

function

examined

investments

and

by their

designs that anticipate value bearing once finished. Appropriate shading

All in all, multifaceted investments

coding adds profundity to this vivid

administrators use programming to

technical tool, which traces back to

trap members searching for high-

eighteenth-century

rice

chances bullish or bearish results.

dealers. Candlesticks started from

Nonetheless, dependable examples

Japanese rice dealers and brokers to

keep on showing up, taking into

follow market costs and everyday

consideration

momentum many years before getting

benefit openings.

advocated

in

the

Japanese

United

States.

short-and

long-haul

BASIC CANDLESTICK The five candlestick patterns are -

PATTERN

1. THREE LINE STRIKE PATTERNS OF CANDLESTICK

The

Here are five candlestick designs that

reversal design cuts out three dark

perform especially well as antecedents

candles inside a downtrend. Each

of value bearing and momentum. Each

bar posts a lower low and closes

works

inside

encompassing

bullish

three-line

strike

the

setting

of

close to the intraday low. The fourth

value

bars

in

bar opens even lower however

anticipating sequential costs. They are

turns

likewise time-sensitive in two ways:

outside bar that closes over the high

1. They

just

work

inside

around

in

a

wide-range

the

of the principal candle in the

constraints of the diagram being

arrangement. The opening print

surveyed, regardless of whether

additionally denotes the low of the

intraday, day by day, week after

fourth

week, or month to month.

Bukowski, this inversion predicts

2. Their power diminishes quickly three to five bars after the

bar.

As

indicated

by

more exorbitant costs with an 83% accuracy rate.

pattern has finished.

2. TWO BLACK GAPPING The bearish two dark gapping continuation design shows up after a

prominent top in an upswing, with a hole down that yields two dark bars posting lower lows. This example predicts that the decrease will keep on evening lower lows, maybe setting off a more extensive scale downtrend.

As

indicated

by

Bukowski, this example predicts

plays. As per Bukowski, this example

lower costs with a 68% precision

predicts lower costs with a 78%

rate.

precision rate. The bearish evening star inversion design begins with a tall white bar that conveys an upturn to another high. The market holes higher on

the

following

purchasers

neglect

bar,

yet

new

to

show

up,

yielding a thin reach candlestick. A hole down on the third bar finishes the example, which predicts that the decay 3. THREE BLACK CROWS The

bearish

three

dark

will keep on evening lower lows, crow’s

maybe setting off a more extensive

inversion design begins at or close to

scale downtrend. As per Bulkowski,

the high of an upswing, with three dark

this example predicts lower costs with

bars posting lower lows that nearby

a 72% precision rate.

close to intraday lows. This example predicts that the decrease will keep on evening lower lows, maybe setting off a more extensive scale downtrend. The most

bearish

rendition

begins

at

another high since it traps purchasers entering energy

CONCLUSION

4. ABANDONED BABY The bullish deserted child inversion design shows up at the low of a

Candlestick patterns catch the attention

downtrend after a progression of dark

of

candles prints lower lows. The market

inversion

holes lower on the following bar,

radiated by these patterns don't work

however, new dealers neglect to show

dependably

up, yielding a thin reach candlestick

electronic

with opening and shutting prints at a

measurements by Thomas Bukowski

similar cost. A bullish hole on the third

show strange precision for a restricted

bar

which

choice of these patterns, offering

predicts that the recuperation will keep

merchants noteworthy purchase and

on

sell

finishes evening

the

example,

higher

highs,

maybe

market

players, and

signals.

yet

numerous

continuation

in

the

cutting-edge

climate.

Putting

signals

Luckily,

the

bits

of

setting off a more extensive scale

knowledge

upturn. As per Bukowski, this example

candlestick patterns to utilize and

acquired

from

seeing

putting resources into a resourcedependent on them would require a money market fund.

predicts more exorbitant costs with a 49.73% exactness rate.

TECHNICAL INDICATORS –

P Yamini Apoorva

Why

should

we

use

technical

indicators?

What are technical indicators?

Traders use price, volume, and/or interest of security to calculate patternbased signals, and such signals are known as technical indicators. In simpler terms, they use historic data to predict future price movements, which is

ultimately

done

to

evaluate

investment opportunities and make trading decisions.

Unlike fundamental analysis where a security’s intrinsic value is estimated based on financial and/or economic data, traders focus on patterns, trade signals, and many other analytical chart tools to evaluate the potential of security in any form - stocks, futures, options, commodities, and any security with historic data. These indicators are primarily

implemented

to

analyze

short-term movement which is why they are used by active traders and are also popular in commodities and forex markets (short-term trading markets).

However, this does not imply that longterm

investors

cannot

use

aforementioned indicators at all.

the

Well, traders state that these indicators aid them in alerting, confirming, and predicting. Technical indicators can be computed to alert traders of a possible break

for

support

or

resistance

breakouts and signal them to take necessary actions. They may also be used to confirm the results of other indicators and analysis tools. And certain traders believe indicators can be tactfully utilized to predict future movements.

Types of indicators: Instead of blindly following the herd, novice traders can break down the data they want to track into the market day, week, and month information. Such information can further be divided into leading

and

lagging

indicators.

Leading indicators offer predictions for price movements and other patterns i.e., futuristic. On the other hand, lagging indicators offer perspective about historic data or in simpler words breaks down the past patterns that lead to the current position as a result.

Another approach is identifying them as a trend, volume, momentum, or volatility indicator. Trend indicators enable traders in identifying any trends in the market. Momentum indicators allow the traders to understand the degree of intensity of the trends and if there is a possibility for a reverse scenario

in

the

market.

Volume

indicators convey the changes in volume over time, for instance, the number of units of a cryptocurrency being bought and sold in a period.

Oscillators are indicators that swing between two extremes during a time frame, signaling when to enter and/ or exit, many of which are explained below. Finally, the Volatility indicators convey how much

Moving Averages (MA / SMA): Moving averages is the simplest and the most popular indicator used by traders and is also a lagging indicator.

A Moving Average (MA) produces a series of averages of different subsets of the same whole data set. For example,

to

understand

the

performance of a cricketer, one may take a simple average of the runs he scored in the last 10 matches before every match, this is nothing but MA. Similarly, one may quickly compute the

the price is changing in a certain period.

Most used indicators: New indicators are formulated almost every

week,

impossible

and

to

it

study

is all

humanly at

once.

However, the following are some of the

average of certain security’s closing

most

price for 5 days to gauge its average for

popularly

indicators.

used

and

known

that period and repeat the same for the upcoming days.

So, the data points keep changing as

most suitable for ones’ strategy

one

is found.

progresses

by

dropping

the

earliest data point and adding in the

● The simplest use of this tool is to

latest one, consequently changing the

identify if a security price has an

average.

uptrend or downtrend. ● A slightly complex method to

Key points about SMA:

use

could

be

through

● MA is extremely customizable

comparison between averages

and can be calculated for any

of different time frames. When a

time frame. The most popular

shorter-term SMA crosses below

periods are the 50 days MA and

a longer-term day SMA, it is

200 days MA.

known as a death cross, a

● The time frame may be decided

bearish signal. On the other

based on the trading objectives.

hand, when a short-term SMA

A shorter time frame implies

crosses above a long-term SMA,

relatively less lag and is relevant

it is known as a golden cross,

to

bullish signal!

analyze

short-term

movements. A longer time frame implies

greater

relevant

for

lag

and

is

long-term

Exponential Moving Averages: The exponential moving average is a type of moving average where greater weightage and significance are given to most recent data, to make the results sensitive to new information.

The formula to calculate EMA is as

movements.

follows:

● Like most trading, there is no single best time frame to select.

The smoothing factor can be any value,

One can figure this out only

but the most common value given is 2.

through experimenting until the

It is to be noted that the greater the

smoothing value, the greater will be the

● EMA may be preferred over

influence of recent data on the average.

SMA for the simple reason that it mitigates the “lag” to an extent

Key points about EMA:

by using weights.

● Similar to SMA, the 50 days EMA and 200 days EMA are most

Bollinger Band:

commonly used for long-term

John

patterns. And 12 days EMA and

copyrighted the Bollinger BandsⓇ to

26 days EMA are used quite

help investors find openings that give

frequently

them a better chance of correctly

for

short-term

movements.

Bollinger

determining

developed

whether

an

asset

and

is

● EMAs are highly suitable for

oversold or overbought. This tool is

trending markets. This indicator

defined by trendlines - 2 standard

can be extremely helpful when

deviations,

used correctly but may also lead

plotted away from the SMA of a

to

misinterpreted.

security’s price. The trend line above

Therefore, it is suggested that

SMA is known as the upper band and

EMA be used to confirm the

the one below is known as the lower

result of other indicators or a

band.

chaos

if

negative

and

positive,

market move rather than be led by them. ● When the price is trading over the EMA, it is a good time to buy, and the amount below this line should be seen as a stop loss for this transaction. Similarly, if the stock is trading below the EMA, it can be used as a signal to short in the market, with the amount above it serving as a stop loss.

Steps to calculate Bollinger Band: 1. Compute the SMA of security’s price, let’s say 20-day SMA.

2. Compute the standard deviation

● However, these bands are no

of the security’s price.

signals to trading decisions, they

SD = √variance

are merely volume indicators.

3. Multiply the SD with the number of

standard

deviations,

conventionally it is 2.

4. BOL upper band = SMA + 2*(SD) 5. BOL lower band = SMA - 2*(SD) Key points about Bollinger Band: ● If the market is trading close to

● An interesting phenomenon to

BOL's upper limit it is time to sell

discuss is the breakout. Most of

/ short the security. And if the

the

market is trading close to BOL's

between the bands but on the off

trade

does

take

place

lower limit it is the signal to buy the security. ● While Bollinger Bands can be used in any market it is apt for

chance that trade moves above

rangy markets.

or below the bands it is known as

● When markets turn volatile the

a breakout.

bands widen, implying a lower

Relative Strength Index (RSI):

volatile market in near future and

The Relative Strength Index (RSI) was

signaling

by

originally developed by J. Welles

traders. And when they turn less

Wilder Jr. It is a momentum indicator

volatile, they come closer and

i.e., calculates the magnitude of recent

contract towards the SMA line.

price changes of the asset to estimate

This contraction is known as

the overbought or oversold situation

squeeze which is signaling that

and

the market is bound to turn more

decisions. RSI is a line graph that

volatile in near future.

oscillates between 2 extreme readings,

potential

exit

then

0 and 100.

take

necessary

trading

undervalued/oversold, a bullish Steps to calculate RSI:

sign.

1. RSI calculation involves 2 parts and the first step is to compute the

following

by

using

the

average gain percentage and average loss percentage from the lookback period. (Use the positive value of average loss).

2. The 2nd step smooths the RSI results and is done with the following formula.

Key points about RSI: ● The RSI rises as the number and size of positive closes rises, and it falls as the number and size of losses rises. The RSI is just close to 100 or 0 in a highly trending market since the second part of the equation smooths the effect. ● If the RSI line reads at 70 or above it implies that the security is being overvalued/overbought with

a

high

chance

of

a

● New

analysts

may

find

it

corrective price pullback in near

confusing to see that the stock

future, a bearish sign.

can sustain in overbought or

● On the contrary, if the reading is

oversold regions for extended

at 30 or below it quite obviously

periods. Therefore, it is key to

implies

understand the context of the

the

security

being

prevailing transactions to avoid

Moving

Average

such confusion.

Divergence (MACD):

Convergence

● Another scenario to keep in

MACD is a tool that allows traders to

mind is when the peak of a price

analyze the rapid price changes by

during its downward trend is

using a fast line, slow line, and

below 70 and/or the lowest point

histogram. This indicator may be

during the upward trend of

complicated for a novice trader but is

security falls above 30. To help

an extremely useful tool. For easier

identify

during

understanding, let us take an example

strong trends, traders draw a

of the most commonly used MACD, “12,

horizontal line between 30 and

26, and 9”. Let us break it down into

70.

simple steps:

extremities

1. Compute 12 and 26-day moving ● RSI offers traders 2 choices, one

averages.

to enter early and earn high

2. Calculate

the

difference

returns but always have the

between the 12 and 26-day

chance of making losses before

moving averages.

the win. Another is by waiting for

3. Now,

find

out

the

moving

results to be confirmed and then

average of the results of step 2.

make safe but small profits. This

This is the MACD fast line.

choice is to be made depending

4. MACD slow line is simply the 9-

on the risk appetite of the

day moving average of the

investor.

MACD fast line.

● The best way to use RSI is to see

5. The histogram is the difference

if other tools conform with the

between MACD fast line and

trends that have been plotted

MACD slow line.

through RSI.

Though this method comes off as a complicated indicator compared to previously

discussed

tools,

grasped can be highly useful.

once

CONCLUSION A novice trader must understand that there is no single best indicator or tool to

win

in

the

market.

Technical

indicators envelope large numbers of simple, and complicated indicators but they all offer a unique perspective to be able to make educated decisions. It is the traders themselves who must choose the indicators that are most suitable for their trading objectives and strategies.

Key terms in MACD: ● Convergence is when both the MACD lines come close to each other and Divergence is when the difference between the two is increasing. These are the terms that offer signals to traders. ● A new trend will bring the lines together (converge), eventually, cross and then move apart (diverge) as reversal occurs. ● It is worthy to note that MACD involves moving averages of other

moving

averages,

therefore lagging quite a bit.

Therefore, it is a great tool to confirm trends but not the best to get early signals.

Because

ultimately,

indicators exist to cut through the noise and chaos of the market through simple outputs.

MONEY FOR THOUGHT: A record-breaking number of retail investors debuted the stock markets when the world was battling a pandemic. The steep market fall in March 2020 paired with many being stuck at home drew immense attention. This led to records like over 10 million new investors entering in 2020, SENSEX rising 16%, incredibly well-performing IPOs, and so on. Though it makes one wonder if the novice investors are equipped enough with knowledge and strategies to face the volatility of markets in the upcoming sessions. Especially considering that many new investors were recorded to be under 20 years. Will the millennium and Gen Z investors survive the market by going head-on and learning from experience, or will they equip themselves with tried and tested techniques to reign the market? Only time will tell.

The IBS Times is an academic print and is not for any commercial sale. Reliability and responsibility of sources for data for the article’s vest with the respective authors. Please feel free to drop any suggestions or any feedback at editor.ibstimes@gmail.com IBS Times – Finstreet, the official capital markets club of IBS Hyderabad All rights reserved