MEGHA CAPITAL'S Blog

Aug 25, 2013

THIS IS IMPORTANT FOR YOU...create side income from trading and build long term wealth and future financial requirements from investing

Aug 23, 2013

How handful of people ate the cream of Indian Economic Growth! Ajim Premji, A Case Study: And Why You Are Responsible For Your Own Financial Good and Bad In This Age:

How handful of people ate the cream of Indian Economic Growth! Ajim Premji, A Case Study: And Why You Are Responsible For Your Own Financial Good and Bad In This Age:

If you are reading this than you must be aware that stock market/capital market is the barometer of the economy and it is the place where you trade the growth of the economy. But how many out of the entire population eligible to invest has invested in this growth of the country? Have you ever wondered that there are only 3-4% population of the country that is invested into stock markets right now (including mutual funds) and why so? The ratio of entire country’s population invested into stock markets run somewhere between 20-50% in China, USA and other such economy. The lower equity participation is also one of the reasons why India, after 20 years of liberalization has not been able to come on the fast track of sustained growth rate like China and other Asian peers.

The point we are discussing here is however distinct.

What we want to throw light is here that how handful of promoters have ate the cream of privatization and benefited from the liberalization of the economy.

We will take only one example or case study here. The IT sector is one of the major beneficiary of the liberalization process. Wipro has been among the top 5 IT companies among Infosys, TCS, Patni, Satyam, Tech Mahindra and a couple others.

Aug 22, 2013

Quote on 'Discounting' in market

Aug 21, 2013

13 Cognitive Biases to be aware of by traders and investors

Here are 12 Cognitive Biases that prevent human beings from behaving rationally. As perception is reality in the financial markets, I thought it might be useful to address those issues through the lens of a trader.

1. Confirmation Bias

This is a fatal flaw of trading; we tend to surround ourselves with information that validates our own point of view and dismiss input that conflicts with our reasoning (also known as cognitive dissonance). This is the primary reason why we always strive to see “both sides of every trade” as the residual grist between variant views is where education—and profitability—resides.

2. In-Group Bias

This is a manifestation of confirmation bias, or the tendency to surround ourselves with those who share similar takes on the tape. This could pertain to our physical environment or a virtual experience, such as Twitter. Not only does this provide a false sense of security in our individual viewpoints, it makes us suspicious—or angry—with outsiders who dare to question how we feel.

Aug 13, 2013

Daily Mental Conditioning For Becoming a Successful Trader

Daily Mental Conditioning For Becoming a Successful Trader

Deciding to be a profitable financial trader is the first step in becoming one. Trite you say? Not really. Missing this one step or doing it out of order xplains why 90% of brokerage accounts go to zero within the first year, many doing so in the first 4 months!

In addition to arbitrarily deciding to be a profitable financial trader, a more powerful and lasting way is to use psychological conditioning on yourself so that you CONSISTENTLY decide that you are a profitable trader Here’s my interpretation of the method for doing this that I learned from the famous success guru I alluded to in my comments two blogs back.

First, write out the sentence below on a piece of paper.

“FROM THIS MOMENT FORWARD, I AM A PROFITABLE TRADER”.

Second, consider the pain you have experienced before because you have not consistently thought of yourself as a profitable trader. Imagine experiencing that again in the present and future. Do this for 30 seconds. Notice how you feel as you do that.

Third, consider the pleasure you would experience in the present and the future if you did make this decision. Do this for 30 seconds or longer. Imagine yourself getting a string of winning trades in your brokerage account (stocks, options, emini market average futures, pork belly futures, orange juice futures… whatever). Notice how you feel as you do that.

Aug 9, 2013

New Companies Act, 2013 HIGHLIGHTS: Bill passed in RS, To be approved and notified by The President

Aug 4, 2013

LESS RECOMMENDATIONS BUT BIG GAINS

FEWER RECOMMENDATIONS-BIGGER GAINS.----
CHECK OUT HOW MOST OF OUR RECENT UPDATES WENT SUCCESSFUL ON BELOW LINKS…--------

Aug 3, 2013

SOME VALUABLE EXCERPTS FROM PARAG PARIKH'S BOOK VALUE INVESTING AND BEHAVIOURAL FINANCE.

· …is it because of the inconsistent performance of business behind the stocks of is it because of the behavior of the market participants, who as a result of greed and fear get excessively optimistic and pessimistic about the future resulting in bull nd bear phase?

· …a conclusive study done on Sensex which highlights that it is not the inconsistent performance of companies constituting Sensex but the follies of crowd behavior which make investing risky.

· IPO investing is not for a value or a contrarian investor. Value found in bear market and IPOs are a product of bull market.

· …we have created financial markets where such insanity works.

· Research on the Indian indices high lights some important drawbacks of passive investing.

· Failure is as predictable as success because it is the strength of characters which separates the winner from the loser.

· Economists say that the inability to delay gratification is the primary reason for economic failure in life.

· Ninety percent of what we do is dictated b habits.

Aug 1, 2013

NIFTY SPOT CHART DAILY AND WEEKLY: WHERE THE MARKET IS HEADING IN NEXT 1 WEEK?

IF MARKET IS DOWN TODAY THEN NOT GOOD. IF MARKET RISES IN COUPLE OF DAYS THEN GET LONG. IF MARKET CONSOLIDATES, THEN BUY IN STRONG AND SELL IN WEAKNESS.
CLICK ON CHART TO ENLARGE.
DAILY MARKET UPDATE AND TRADING CALLS TO MEMBERS ONLY.

Jul 30, 2013

RBI's monetary policy review of 30 july 2013

The Reserve Bank of India today maintained a status quo by not revising the repo rate or the cash reserve ratio but turned unexpectedly dovish which made the slide below the psychological level of 60/dollar, for the first time since July 9.

The liquidity tightening steps of the central bank which were unleashed a fortnight back were able to halt the sharp depreciation of the currency.

The central bank kept the March end inflation forecast unchanged at 5%, while cut GDP growth forecast for 2013-14 to 5.5% from 5.7% projected in May.

In the post policy press meet RBI governor Subbarao acknowledged that while there was a strong case for further policy easing as growth has moderated more than expected but an uncertain external sector prevented in taking such a step. After cutting the key policy rate by 75 bps cumulatively on three consecutive occasions, RBI held the rate in the June policy.

Jul 19, 2013

You Can Earn Entire Year's Money in ONGC

LOSERS KEEP TRADING DAILY. AND WINNERS TRADE IN BIG MOVEMENT STOCKS AND MAKE MONEY AND SIT TIGHT FOR ANOTHER BIG MOVE.

You Can Earn Entire Year's Money in ONGC
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CONTACT 09377008708 OR INFO@MEGHAINVESTMENTS.COM

Jul 18, 2013

GLOBAL EXCHANGE GROUPS IN WORLD

Jul 17, 2013

Government announces changes in FDI caps: Highlights

Government announces changes in FDI caps: Highlights

FDI cap in telecom raised to 100% from 74%; up to 49% through automatic route and beyond via FIPB
No change in 49% FDI limit in civil aviation
FDI cap in defence production to stay at 26%, higher investment may be considered in state-of-the-art technology production by CCS
100% FDI allowed in single brand retail; 49% through automatic, 49-100% through FIPB
FDI limit in insurance sector raised to 49% from present 26%, subject to Parliament approval
FDI up to 49% in petroleum refining allowed under automatic route, from earlier approval route
In power exchanges 49% FDI allowed through automatic route, from earlier FIPB route
Raised FDI in asset reconstruction companies to 100% from 74%; of this up to 49% will be under automatic route
FDI limit increased in credit information companies to 74% from 49%
FDI up to 49% in stock exchanges, depositories allowed under automatic route
FDI up to 100% through automatic route allowed in courier services
FDI in tea plantation up to 49% through automatic route; 49-100% through FIPB route
No decision taken on FDI cap in airports, media, brownfield pharma and multi-brand retail

Jul 11, 2013

Government decides to release economic data after market hours

Key macroeconomic data including GDP and IIP numbers will now be released after market hours, in an apparent bid by the Government to prevent any knee-jerk reaction to such information.

According to a statement available on the Ministry of Statistics and Programme Implementation website, Gross Domestic Product (GDP), Consumer Price Index (CPI) and Index of Industrial Production (IIP) will now be released at 5.30 PM in the evening.

A source said the government has taken this decision in view of deteriorating markets and depreciating rupee.

Financial markets have in the past reacted sharply to release of IIP, GDP and CPI numbers at the scheduled time of around 1100 hours.Starting this Friday, the two key data indicating health of the economy, i.E.

IIP measuring factory output and CPI reflecting price rise on retail level, will be released in the evening.

The factory output growth has slipped to 2 per cent in April on account of dismal performance of manufacturing, mining and power sectors coupled with lower output of capital goods as the official data released last month on June 12.

Falling for the third straight month, CPI or retail inflation stood at 9.31 per cent in May due to easing of prices of edible oil and protein-based items.

Jun 27, 2013

SEBI changes norms for FII and Buyback of Shares

Sebi, India’s capital market regulator on Tuesday tightened the norms for share buybacks, moving to arrest suspected misuse of stock repurchases by listed companies in recent years.

Companies would have to ensure they spend at least 50% of the money earmarked for buybacks, the Securities and Exchange Board of India (Sebi) said after a board meeting. That doubles the current minimum of 25%.

Sebi’s new rules will require companies opting to buy back shares to create an escrow account in which they would need to keep at least 25% of the amount earmarked for the repurchases.

Should they fail to meet the 50% target, they would forfeit a sum equivalent to 2.5% of the amount allotted for the buybacks.

In a buyback, a company repurchases shares from securities holders, employees or on the open market, primarily to return surplus cash to shareholders, support the stock price during market weakness, or increase the value of underlying shares.

On 2 January, Sebi issued a discussion paper on tightening buyback norms to prevent misuse of the route.

Of the 75 buybacks through open market purchases in the three financial years to 2010, companies spent an average 49.91% of the money they had allocated. According to Mint research in January, during 2011 and 2012, out of 54 buyback announcements by listed firms, only 18 actually took place.

Typically, when a company announces a share buyback, investors tend to push up its stock to get a higher price. Sebi suspected that some companies were announcing share repurchases merely to push up their market value.

What is Asset/Instrument? What is Asset Allocation ? Ideal Asset Allocation:

What is the meaning of asset/instrument?

While talking of investments we will use word asset and instrument almost in similar sense. Suppose, I want to invest in equity share of ABC LTD, then I will purchase it’s shares from stock exchange. Here equity share is an asset, an equity asset class, while similarly the listed equity share is instrument as well. Many times instrument are multiple then the asset class. For e.g. I want to invest into gold, so here gold is asset class (we will include gold into a broader commodities asset class, then say gold as an independent non-umbrella standalone asset). But there I can invest in gold via, gold futures, gold etf, gold mutual fund and physical as well; so here all these four are instrument, different instruments. However we will not complicate and use both words as mostly meaning same, as it is not of much importance for our fundamental understanding.

Main types of asset classes:

Main Head	Equities	Debt	Commodities/Real Assets	Real Estate
Includes	Equity shares, DVRs, Warrants, Depository Receipts, Equities of Foreign Country listed cos, Equity index etfs, Equity mutual funds.	Bond, Bank FD, Company FD, Government bonds, Corporate Papers, mortgage backed securities, debt mutual funds	Metals like gold silver copper etc. Energy commodities like crude oil, natural gas etc. Livestock like cattle etc. Agricultural commodities.	Real Estate Land, Rental property, listed real estate investment trusts REITs

IMPORTANT NOTE:

We have not included derivatives. So weather derivatives, carbon trading, and power/electricity trading are not included. Derivatives are not an asset class. They are hedging, arbitraging and speculating instruments.

Cash can also be an asset; however it does not incur any return and does not fall into any of 4 investment objective criteria, so not included.

It is not possible to write all possible asset names. We have put some names. There are hundreds of commodities trades. And variety of instruments in debt asset class as well (However one should beware and make strong distinction between actual debt instrument and a derivative of debt instrument).

Also if some mutual fund says it is investing in only ‘real estate companies’ then also it is an equity asset instrument. Similarly if any mutual fund/investment vehicle says it invests only in ‘commodities companies’, then it is also an equity asset instrument.

What is asset allocation?

Now, as we have understood what an asset is and also known different asset classes; we will go ahead.

Basic: Asset allocation is nothing but answering the question to: “What % of investible amount you will invest in each asset class?”

Advance: After answering the question no.1. You will decide which instrument to select in each asset class. You will also decide on monitoring these asset allocated portfolio and make changes to allocations as per your strategy based on pre-determined strategy or based on light of new facts and so on.

IDEAL ASSET ALLOCATION across all asset classes: (Ideally what % of investible should you invest in each asset class)

EQUITIES	DEBT	COMMODITIES	REAL ESTATE	Total
50%	25%	25%	0	100%

*Here we have assumed the investor to be of age 25 and so investment in debt is kept at 25%. We advise investment in debt as much as the age. I.e if you age is 30 you should invest 30% in debt and 70% in equities and so on.

*This allocation strategy is for average investors.

*For large sized portfolios mandated to be managed with asset allocation strategy and diversification (running into several crores and millions) we advocate investment into real estate at 20% which will be reduced from equities investment part.

*Many times the benefit of investing in commodities is inherent in investing in equities. However, direct investment in commodities are increasing and the return on commodities are decoupling day by day as has been emerging as a standalone and sustained long term asset class. Before one decade there was no such thing as commodities investment.

IDEAL ASSET ALLOCATION in Equities Only: (Ideally what % of investible should you invest in Equity Market Classification?)

Large cap, Front line	Midcap	Smallcap	Penny stock	Sectoral classification	International Equities
· Top 100 market capitalization stocks	· Top 201-300^th list market capitalization stocks	· Stocks in market capitalization list of 300^th and above	· Stocks having market price of rupees 10 and less.	· For e.g., if you have provided for certain % to be invested in real estate stocks only then you are said to be investing in a sectoral classification.	· Investment into foreign stock market must be classified separately as we are addressing average indigenous investor here
50%	20%	10%	10%	None	10%

*You will find many other classifications such as micro cap,

*Please find different article explaining better all these classification within Equities.

*There are at least more than 3 different definitions of large cap, mid cap and small cap stocks. According to one definition large cap=those stocks which are in the top 100 market cap list (market cap/market capitalisation= no of paid up equity shares x current market price of the share); while mid cap is those stocks which comes in 101 to 300^th list in terms of market capitalization, while all other i.e stocks that come in list of 301^st and ahead comes under list of small cap group of stocks. This is not a universal definition. Many people define differently. However we will go with this definition and classify stocks in this fashion for our purpose.

*Some people also put classification of ‘micro cap’. These companies are those whose market cap is very very low. However, we have let it out purposefully as it is not necessary to separately classify and increase complexity.

*Classification of Stocks into further any classifications will add only into complexity than utility.

*Separate provision for sectoral is not required due to the fact that when one is focusing on sectoral specific investing, one is indeed making a saperat portfolio itself. Also, the stocks in this sectoral portfolio will be included in calculating weightage under large cap, mid cap, small cap and penny stocks genres.

At this point it is important to note that ACROSS ASSET CLASS CLASSIFICATION includes Debt, Commodities and Real Estate separately while ACROSS EQUITIES CLASS CLASSIFICATION does not include them.

So, the point is that you have to decide while allocating (1) lump sum money, or (2) SIP money, that you are investing for which type.

We will emphasize mainly on ACROSS EQUITIES CLASS ALLOCATION, however if any investor want to include Debt, and Commodities also then we will devise portfolio accordingly.

Jun 12, 2013

What is Investment? Why Invest? Why Invest in Stocks ?

WHAT IS INVESTMENT?

Investment is nothing but parking your income/cash somewhere with an expectation or assurance of interest/dividend or capital appreciation or both (an instrument, of asset class). If you have cash piled up in a locker it is not an investment, it is merely currency or cash amount. Your bank savings account also doesn't come under instruments as it gives only 3-4% return and meant for primarily parking your cash rather than investment.
(However recently some banks have started giving 5-6% interest on savings bank account as well however their minimum criterion is to keep a minimum balance of 1 lack and above)

INVESTMENT OBJECTIVES:

Investment is done for following objectives,

1. Beating rate of inflation
2. Gaining return on money in access of over and above rate of inflation
3. Gaining capital gains
4. Specific Goals (fulfillment of financial planning goals etc.)

DEVASTATING EFFECT OF INFLATION ON YOUR MONEY:

This is how increases your expenses every year and how value of your money declines every year. You can see in the image how inflation rate of 5% increases the amount of your same expenses every year and decreases the value/purchasing power of your savings if not invested.

We have calculated only 5% rate of inflation but as you know the inflation rates are soaring above 7% to 10% many times in this globalized world and due to rising crude oil and commodities prices.

WHY INVEST? AND WHY INVEST IN STOCKS?

So, from the above image you can clearly see how Sensex/Stocks have outperformed inflation, which is the first objective of any investment, and given higher return over and above inflation and Bank Fixed Deposite or so called risk free investment instrument as well. This calculation is for over 30 years. But if you look at the history of entire stock market all over the world, equities have always outperformed inflation and debt instruments.

So, it is clear now that one must have investments into equities.

THE POWER OF COMPOUNDING RATE OF RETURN:

Just see the difference of investing 5 years more and 3 lakhs rupees more. It is a whopping 71.04 lakh rupees. You can calculate yourself to make sure!

You can also relate this to understand that Mr. B started investing 5 years earlier than Mr. A and look at the difference. So this also signifies the important of starting investing as early as possible.

Below you can see, the same calculation showing power of compounding rate of interest if rate of interest is 15%.