Shares & Stock Markets
Trading on the Indian equities segment takes place on all weekdays.
There is No trading on Saturday, Sunday and Published Indian Stock Market Holidays declared by the Indian Stock Exchange in advance.
- The Market Opens at: 09:15 hours and Closes at: 15:30 hours
- Pre open trade session will be from 09:00 ~ 09:15 hours
Pre-open trade session is a 15 minute trade session from 9:00AM to 9:15AM on the 50 stocks of NIFTY index .
Only 50 stocks of the NIFTY index can be traded during this time on both NSE and BSE. Normal trading for all other stocks will start at 9:15AM till 3:30PM.
So far what I have discussed is about share markets or secondary markets. I haven’t talked about primary markets in detail. That’s a basic topic which I should have discussed earlier. So let’s catch up with the topic.
If you recall our story on shares, in scene 3, the couple raises 52 lakhs by selling 40% of their shares to the public. When they did that, they tapped money from the primary market. Basically the primary market is the place where the shares are issued for the first time.
What is it?
The term itself gives some hint about its nature. “Mutual” means combined and “Funds” means money. So, mutual funds are the collective investment contributed by many investors and managed by professional individual or company (your fund manager). The fund manager invests this combined money in stocks, bonds, short-term money market instruments, and/or other securities
What’s the advantage?
- You do not have to constantly keep an aye on the stock market. The fund manager will invest the funds wisely and in profitable companies.
- The funds are invested in various companies and that too by the professionals. So, you are not keeping all your money in one pocket. This minimizes the risk of huge loss investment loss. Even your Rs 5000 invested is diversified.
- You can plan and invest systematically. (That can be done in share markets to, but SIP process in mutual funds works well)
- Unlike companies, mutual funds will not close down. Rather they would be merged into another successful fund
- Normally the NAVs do not show a significant rise or crash
- You don’t have a say in deciding where your money is invested. The fund manager decides for you and he may be wrong, thus causing a loss
- You don’t own shares directly, so you are not eligible for any rights due to the owner.
- Dividend is optional and if chosen will affect the value of your investment by the amount of dividend declared
Whenever a mutual fund scheme is launched there is a specific mandate (philosophy of investing) based on which investing is done by that mutual fund. This mandate outlines the debt-equity mix and the type of instruments that the fund would invest.For example, the prospectus of a mutual fund will always mention the stock universe that fund invests in viz, large cap, mid cap, small cap, sector funds etc.. or it will have a ‘theme’ for example – ‘energy opportunities fund’ or ‘emerging leaders fund’ etc.. From the name itself,you could get a basic idea of where your money will be invested. Since Mutual funds offer a whole bouquet of products , you must first decide on the types of funds that would suit your needs. Only then should you start selecting the best funds within those categories.
NAV and it’s importance.
Net Asset Value, or NAV, is the sum total of the market value of all the shares held in the portfolio including cash, less the liabilities, divided by the total number of units outstanding. Thus, NAV of a mutual fund unit is nothing but the ‘book value.’
The NAV of the fund has no impact on the returns it will deliver in the future.
- For example – Let’s assume you plan to invest in an index fund and you have two choices - Fund A is a new fund with an NAV of Rs. 10, which will mimic the Nifty and a Fund B, which is an existing Nifty index fund with an NAV of Rs. 200.
- Suppose you invest Rs. 10,000 in Fund A and Rs. 10,000 in Fund B. You will get 1000 units of Fund A and 50 units of Fund B. After 1 year, if the Nifty has appreciated by 25%, it means that both funds would have also appreciated by 25%, as they are a replica of the Nifty.
- So after 1 year, the NAV of Fund A would become Rs. 12.50 and that of Fund B Rs. 250. But what is the value of your two investments? Fund A would now be Rs. 12,500 (1000 units * Rs. 12.50/unit) and Fund B also would be Rs. 12,500 (50 units * Rs. 250/unit).
The bottom line is that don’t bother about the NAV of a mutual fund, as you might do for the price of a share.
As with any investment, there are risks involved in buying mutual funds. These investment vehicles can experience market fluctuations and sometimes provide returns below the overall market. You may consider investing in those companies belonging to the top performing mutual fund companies. This gives you some security that the company is able to increase your capital investment. To know if the company is performing well you can ask for feedbacks, past performances etc.
Ethical investing or socially responsible investing is also known as sustainable, socially conscious investing – an investment strategy which seeks to maximize both financial return and social good.
Some investors feel that there are no standards which can be created for ethical investing since each individual has their own set of values and morals. If no standards are created, however, then even the most harmful investments can be called “ethical” by some. Anyone who tries to invest responsibly faces the ethical investment dilemma. This dilemma really revolves around two simple questions. They are: ‘What is or is not ethical?’ and’Who decides?’
Fortunately, there are several basic values that most people share:
- Avoid Causing Illness, Disease & Death
- Avoid Destroying or Damaging the Environment
- Avoid Treating Honest People with Disrespect etc..
So, arms makers, polluters, tobacco companies, pesticides manufacturers, companies with poor management record such as Enron and satyam, oil companies are some examples of businesses which are generally excluded.
In 2010, the OIC announced the initiation of a stock index that complies with Islamic law’s ban on alcohol, tobacco and gambling. The Dow Jones Islamic Market World Index is another example.
Another important trend is strict mechanical criteria for inclusion and exclusion to prevent market manipulation. Ethical indices have a particular interest in mechanical criteria, seeking to avoid accusations of ideological bias in selection, and have pioneered techniques for inclusion and exclusion of stocks based on complex criteria. Another means of mechanical selection is mark-to-future methods that exploit scenarios produced by multiple analysts weighted according to probability, to determine which stocks have become too risky to hold in the index of concern.
Critics of such initiatives argue that many firms satisfy mechanical “ethical criteria”, e.g. regarding board composition or hiring practices, but fail to perform ethically with respect to shareholders, e.g. Enron. Indeed, the seeming “seal of approval” of an ethical index may put investors more at ease, enabling scams. One response to these criticisms is that trust in the corporate management, index criteria, fund or index manager, and securities regulator, can never be replaced by mechanical means, so “market transparency” and “disclosure” are the only long-term-effective paths to fair markets.
ETHICAL INVESTING ENTERS INDIA
There is growing market demand for Socially Responsible Investment (SRI) and more investors are willing to invest over the longer term in the organisations that contribute positively to sustainable development, public benefit and environmental protection.ABN Amro launched India’s first SRI fund (called ABN Amro Sustainable Development Fund).
Global index provider Dow Jones indexes and Dharma Investments, a private investment company, in Jan, 2008 announced the launch of Dow Jones Dharma index for measuring the performance of companies selected according to the value systems and principles of Dharmic religions, especially Hinduism and Buddhism. This index has been put together by Wallstreet. Stocks will be screened on industry, environmental and corporate governance parameters before being included in the Dharma indexes. The index constituents would be reviewed on a quarterly basis.
Ethical investing depends on an investor’s views; some may choose to eliminate certain industries entirely or to over-allocate to industries that meet the individual’s ethical guidelines. A good way to start with an ethical investing policy is to write down the areas you want to avoid as well as where you want to see your money invested. From there you can come up with an asset allocation plan and begin researching individual securities.
- Point Blank
- Financial Discipline for all.
- Investing Basics
- Shares & Stock Markets
- Introduction to Financial Statements
- Financial ratios.
- Stock investing strategies
- Technical Analysis I
- Technical analysis II
- Before Picking up stocks..
- Choosing a Broker and opening Demat Accounts
- Make your debut !!
- More ... from stock markets.
- Valuation of shares
- Futures and Options - The basics.
You can get the latest posts delivered to you for free via Email or RSS