Author Archives: Phyllis Carpenter

Fibonacci Retracements: Technical Analysis?

The concept of Fibonacci was introduced by Italian Mathematician called Fibonacci (also known as Leonardo Bonacci or Leonardo of Pisa). This concept was primarily introduced to solve the problem of understanding the population growth of Rabbits. And it has now become one of the most interesting and sought after concepts in Mathematics and Trading.

Fibonacci

In this article, we’ll cover what is a Fibonacci Series, the implication of Fibonacci on trading, and how exactly to use Fibonacci while Trading.

What is Fibonacci Series?

The Fibonacci is a series of numbers starting from zero and arranged in such a way that the next number is a summation of the previous two numbers.

Therefore, the Fibonacci series is as follows: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377………

Here are the calculation involved while finding the numbers in the Fibonacci series:

  • 0 + 1 = 1
  • 1 + 1 = 2
  • 1 + 2 = 3
  • 3 + 5 = 8
  • 5 + 8 = 13
  • 8 + 13 = 21
  • 13 + 21 = 34 and so on.

A Few Fun Facts about Fibonacci series

Before moving forward, here are a few fun facts about Fibonacci series that you should know:

  • If we divide any number by the previous number, then the ratio is always equal to 1.618 (233/144 or 144/89 or 89/55 or 55/34, etc.)
  • Second, if we divide the number by the next number, then the ratio is always equal to 0.618 (21/34 or 34/55 or 55/89 etc.)

Needless to that the number 0.618 (or 61.8%) holds a lot of significance while calculating Fibonacci.

  • If we divid any number in the series by a number which is two places higher, then the ratio is always equal to 0.382 (21/55 or 34/89 or 55/ 144, etc.)
  • And if we divide any number in the series by a number which is three places higher, then the ratio is always equal to 0.236 (21/89 or 34/144 or 55/233, etc.)

From the above facts, we get the percentage series for Fibonacci to be 61.8%, 38.2%, 23.6%

The implication of Fibonacci on trading

The Fibonacci series of 61.8%, 38.25, and 23.6% have a very impactful presence in all the charts of the share price of any company. It is applied regularly when we see movement in the prices of the shares. And it can be applied in all the time frames.

It is a known fact that the share price of the company does not move in one direction. The prices always have a zig-zag pattern. If the share price of the company has gone up from 100 to 150, then before having another leg up, it is most likely to retrace back. But to find the level of retracement, Fibonacci retracement levels come in very handy.

For example, if the share price of the company before going up = Rs. 100. In, the first leg of the move, the share price goes up to = Rs. 150

Therefore, if the share price retraces to 38.2% then it will fall to = 150 – 38% of 50 = 131. And if the share price retraces to 61%, then it will fall to = 150 – 61 % of 50 = 119 (approx.)

Uses of Fibonacci while Trading

Assume, if we are looking to buy the stocks of a particular company but because of the strong momentum in the price, the share price has gone up substantially and it is very expensive to buy the shares at the current price. Here, we wait for a correction in the share price of the company and wait for it to retrace around 61.8%, 38.2%, or 23.6% levels.

Anyways, before picking the right retracement levels, the following factors also need to be considered: The candlesticks formation near the retracement levels, The price action around the level, The support and resistances around it, The volume at these retracement levels, And the overall fundamental picture.

Conclusion

In this article, we tried to explain what are Fibonacci Retracements and how to use it while trading. Here are a few conclusions from this post to take away:

  • The Fibonacci should be used when one is looking to plot the retracement or projection levels.
  • Then Fibonacci is useful when one has missed the entry at first instance but is still interested in buying the shares of a particular company.
  • The important levels of Fibonacci are 61.8%, 38.2%, and 23.6%
  • Just the Retracement levels of Fibonacci should not be the only basis of entering the trade. Overall, fundamental and technical factors should also be considered.

How Electroneum is Changing the Cryptocurrency Industry

Electroneum was started in 2017 by CEO, Richard Ells, who wanted to see blockchain and cryptocurrency put to good use. So Electroneum set out to build products and a cryptocurrency that would help all entrepreneurs build their businesses easily and affordably.

In September 2017, they launched the ETN ICO campaign. It was so successful that it closed early, after achieving their Bitcoin and Ethereum target purchase of $40 million!

Electroneum

As a result of the success of their ICO and their rollout of savvy apps for digital purchases, Electoneum has maintained a flush treasury. The company continues to grow its outreach, and help users to build successful eCommerce. This means that the company is poised to have a strong return for ETN investors and users, as well as maintain a strong treasury to help secure the future of the company.

ETN Payment Systems

ETN is designed as a payment system that can be used for everyday payments, with very little cost to the seller. The cost of a single transaction is a fraction of the USD cent. This is much lower than many other cryptocurrencies such as Bitcoin. Low transaction costs make small, everyday purchases possible with ETN’s digital payment and native cryptocurrency.

Electroneum has exploded since 2017 with over 3.8 million users as of June 2020. They have over 2 million app installations, as well as nearly 300,000 app-to-app ETN transfers. Electroneum does it all; it is a payment processing system and has its own native token, ETN.

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AnyTask App

By using AnyTask, users are able to sell personal services and products will no service costs, and it is VERY user friendly. Because they are a full-service payment processing app, there are no extra or expensive fees for users.

The ETN token and the app have been particularly successful in Brazil, Turkey, and Nigeria. AnyTask makes organizing payment processing for any kind of business easy, accessible, and affordable. With AnyTask, users can send and receive payments in ETN, and with fast-growing popularity, that makes paying for many services a lot more accessible for millions of people around the world.

ETN has put the efficiency of cryptocurrency and the security of blockchain into action. Over the three years that ETN has been in full swing over 1900 eCommerce and brick-and-mortar businesses, in 170 countries have registered easily with ETNEverywhere, and the numbers just keep growing.

Growing Partnerships – CellCard Cambodia 

Accessibility and affordability are a top priority for Electroneum’s digital payment ecosystem. In order to make this possible, they have even made an affordable smartphone that can be purchased through CellCard, a Cambodian mobile provider that they have partnered with.

Electroneum believes in making digital payment systems accessible for everyone, especially those who are currently unbanked. South East Asia is a particularly important area for digital payment systems. Cambodia has a population of around 650 million, with about half of that population under 30 years of age.

Cambodia is also the sixth fastest growing economy in the world, with a largely low-income and unbanked population. With a digital-savvy youth and entrepreneurial spirit, Cambodia is an important region to watch as far as Electroneum’s service offering.

In order to help grow digital payments in Cambodia, Electroneum started a direct partnership with CellCard, so it is even easier for Cambodians to top up ETN and data payments.

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Under the Hood – Everything You Need to Know about ETN

Over the past 3 years, Electoneum has done everything it can in order to make it a product worth using. They started off strong with a successful ICO campaign. But since then they have also held other promotions, including airdrops of ETN.

Now that the company is fully rolling, they will no longer be giving their cryptocurrency away. Although this is disappointing to those who love free things, it’s very good news for ETN’s strength. Recently the airdrops of ETN have stopped. This is an important next step to ensure the value of ETN increases; inflation has dropped to about 4%, which is a promising next step.

Along with an array of apps and products, Electroneum is one of the first fully KYC/AML compliant cryptocurrency. Working transparently with governments and corporations is a crucial step to ensure that Electroneum has a fast adoption rate. Such partnerships have been possible because they readily embraced the 2018 EU Anti-Money Laundering Directive.

The cryptocurrency is also incredibly secure and is one of the few blockchain networks that is invulnerable to a 51% attack. It is also the greenest cryptocurrency out there. Cryptocurrencies like Bitcoin and Ethereum use an incredible amount of energy to mine and use in transactions.

And as already mentioned, they have even built their own affordable smartphone designed for the needs of people in developing regions, which runs for about $40 USD.

Electroneum also works directly with multiple NGOs in developing nations and is a trusted blockchain transaction validator. Check out their NGOs page if you are interested in donating to any of their projects.

Bottom Line 

  • Electroneum: Electroneum LTD is registered in the UK, providing multiple digital payment services.
  • ETN: ETN is Electroneum’s native coin, and now a top 100 cryptocurrency overall.
  • AnyTask: AnyTask is the main payment application that makes it possible for companies to build an online marketplace.
  • Primary focus: To build an easy and affordable payment application. A global network allows individuals and small businesses to make transactions easy and affordable.
  • How: Electroneum can be used as an app-to-app payment system with only a smartphone.
  • Goals: With AnyTask and ETN digital payments, Electroneum aims to bridge the gap between individuals all around the world, especially those small businesses in developing countries.

COVID-19 Vaccine: When can we expect it to be ready?

The same question has been lurking in all our minds, “When will the pandemic end?”. The virus has contracted to over 17 million people, leading to the death of 656,000+ people and has affected all of us.

The cry for this ‘Pandemic of Fear’ to end is also mainly due to the mental desperation arrived at after being cooped up in our houses all day. Never has the world had to shut down at such a massive scale. This has baffled not only us but also scientists with every modern development trying to catch up.

vaccine

Experts have never seen a virus with such varied symptoms where few are ill with minor symptoms. Some with enough to be in bed for a few weeks while others need to get hospitalized with intensive care requiring ventilators to breathe at times even leading to death. After noticing these symptoms Dr. Fauci (Director of the National Institute of Allergy and Infectious Diseases) went ahead and termed the virus as the Perfect Storm.

In a desperate attempt to buy time countries all around the world resorted to closing down the economy. But soon were forced to open up after noticing the social but mainly economic damages. Studies from Oxford University predicted that the virus may just simply disappear by itself. The government soon realized that the only thing much worse off than the lockdown was sitting in hopes that it would simply disappear.

Different Routes Out for COVID-19 Pandemic

Experts have identified three ways out of this mess. They are:

1. Developing a vaccine

Where people who are vaccinated are immune and do not get ill even if they are exposed

2. Herd immunity

Here 60% of the population gets affected by the virus in order to recover and develop immunity so that the virus can no longer cause an outbreak.

3. Permanently change our behavior/society to adapt to functioning in the midst of COVID-19

Every route shown above helps in reducing the transmission of the virus. But when we focus on what can be controlled a behavioral change has already been initiated and vaccines are already in development and are being viewed as the most optimal solution to the pandemic. The question that comes with developing a vaccine is ‘By When?’.

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Lets Talk COVID-19 Vaccines

Vaccines were first discovered in 1796 in order to put a stop to Smallpox. Vaccines use weaker strains of weaker viruses to fight off a virus. In the case of Smallpox, it was observed that those affected by Cowpox would remain immune to Smallpox, and hence safer variants were used as vaccines to prevent Smallpox.

The procedure that goes into testing a vaccine

The testing process is divided into the following phases:

Phase 1: Here normal people of a small sample size receive the vaccine. The aim at this stage is to find out if the vaccine produces any adverse side-effects or reactions. The failure rate for vaccines at this stage is about 37 percent.

Phase 2: In the second stage, hundreds of healthy volunteers get tested for immunogenic and adverse effects. Here, the failure rate is about 69 percent. Phase one and Phase 2 put together are to take a minimum of 5 months. 

Phase 3: the scientists continue to monitor toxicity, immunogenicity, and severe adverse events (SAEs) on a much larger scale, and here in all probability, the failure rate is 42 percent and the phase generally takes 6 months.

It is hard to predict the time the current vaccine may take. If we observe vaccines that were created historically, the total time taken varied depending on the virus and technology available at disposal. Chickenpox vaccine took 28 years and the Rotavirus vaccine that led to millions of deaths in Africa and Asia( particularly in India) took over 15 years for development. Hence pinning all our hopes on a vaccine may not be the best idea after all!

Although there have been significant technological advancement and the fact that many countries around the world are in a race to develop a vaccine may just speed up the process. A WHO official stated that after taking into account the speedy development on a global front a vaccine ready for public deployment may take 4-5 years. This puts the estimated date for the vaccine to be rolled out for the public by 2025.

Where is India with regard to COVID-19 Vaccine?

Even though there are multiple countries around the world developing vaccines India caught everyone’s attention when a letter from Director General of the Indian Council of Medical Research(ICMR) Dr. Balram Bhargava got leaked which suggested that the first vaccines be rolled out by August 15. This received significant flak from around the world for its rushed timeline. The letter said “It is envisaged to launch the vaccine for public health use latest by 15th August 2020 after completion of all clinical trials. BBIL is working expeditiously to meet the target, the however final outcome will depend on the cooperation of all clinical trial sites involved in this project.”

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How will COVID-19 Vaccine be made available to all?

If and when the vaccine gets delivered it has already been made clear by PM Modi that the first recipients would be those working in Healthcare to protect us.

It is logical that those next in line would be those most vulnerable. These include the elderly, women dealing with pregnancies, and infants then followed by others. Bharat Biotech, however, has said that if their Covax vaccine is approved it will be made available at Rs. 1000.

But let us take the case of vaccines developed for other viruses like HIV. This may help us better understand why multiple countries and organizations are racing to create a vaccine apart from the obvious ‘ Save the World’. Along with credits for the creation, the owner of the vaccine receives Global Intellectual Property rights. The patent rights are granted for up to 20 years. During this period the owner has a monopoly over the product and can set the price they feel fit. This, unfortunately, has been used to limit access to such essential goods.

The HIV virus affected over 40 million people around the world with South Africa being one of the worst affected. In order to combat this South Africa started to manufacture low-cost generic antiretroviral medicines to treat HIV. One would expect such a thing to be allowed on Humanitarian grounds but if we have learned anything fro the Martin Shkreli case, such a thing doesn’t happen.

40 US pharmaceutical firms with the South African government that started in February 1998 to prevent the country from manufacturing low-cost generic antiretroviral medicines used to treat HIV. Such information just makes us hope that the first to manufacture the vaccine is simply a country or organization that believes in making the vaccine affordable if not free and accessible to all.

Best Blue Chip Companies in India that You Should Know

Blue chip companies are large and well-established companies with a history of consistent performance.  These companies are financially strong (usually debt-free or very low debts) and are capable to survive in tough market situations.

Blue chip

Most of the blue chip companies are the market leaders in their industry. A few of the common examples of blue chip companies in India are HDFC Bank, HUL, ITC, Asian Paints, Maruti Suzuki etc.

Signature Characteristics of Blue Chip Companies

Here are a few signature characteristics which you can look forward while researching blue chip companies—

  1. They are large reputed companies.
  2. They have widely used products/services.
  3. Most of these companies are listed in the market for a very long time.
  4. Blue chip companies have survived a number of bear phases, market crises, financial troubles, etc. But they are still going strong.
  5. Blue chip companies have a strong balance sheet (a large number of assets compared to liabilities) and a healthy income statement (revenues and profits continuously growing for the last few decades).
  6. These companies have a good past track record of stable growth.

Almost all blue chip stocks are older companies. You might already know many of the blue chip companies in India and have been using their products/services in your day-to-day life.

Why are they called blue chips?

Oliver Gingold- who worked at Dow Jones, is credited to name the phrase ‘Blue Chip’ in 1923. The term ‘blue chips’ became popular after he wrote an article where he used ‘Blue chips’ to refer the stocks trading at a price of $200 or more.  

Quick Note: There are other sets of investors who believe that blue chip companies got its name from the Poker game, as in that game- blue chips are relatively more valuable. Similar to the game, the stocks which are more valuable in the market are termed blue chip stocks.

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Financial characteristics of blue chip stocks

Apart from the signature characteristics discussed above, here are few key financial characteristics of blue chip companies –

1. Blue chip companies have a large market capitalization -As a thumb rule, the market cap of most of the blue chip companies in India is greater than Rs 20,000 Crores.

2. Good past performance: Blue chip companies have a track record of good past performance (like consistently increasing annual revenue over a long-term).

3. Low debt to equity ratio: The bluest of the blue chips are (generally) debt free stocks. However, a lower and stable debt to equity ratio can also be considered as a significant characteristic of blue chip companies.

4. Good dividend history: Blue chip companies are known to reward decent dividends to their loyal shareholders.

5. Other characteristics: Apart from the above four- few other key characteristics of blue chip companies are a high return on equity (ROE), high-interest coverage ratio, low price to sales ratio etc.

10 Best Blue Chip Companies in India:

Now that you have understood the basic concept, here is the list of top 10 best blue chip companies in India. (Disclaimer- Please note that the companies mentioned below are based on the author’s research and personal opinion. It should not be considered as a stock recommendation.) 

— Reliance Industries

This company needs no introduction. Reliance Industries is an Indian conglomerate holding company and owns businesses across India engaged in energy, petrochemicals, textiles, natural resources, retail, and telecommunications.

In December 2015, Reliance Industries soft-launched Jio (Reliance Jio Infocomm Limited) and it crossed 8.3 million users as of January 2018.

Reliance is one of the most profitable companies in India and the second-largest publicly traded company in India by market capitalization. On 18 October 2007, Reliance Industries became the first Indian company to reach $100 billion market capitalization. It is also the highest income tax payer in the private sector in India.

— ITC

Indian Tobacco Company (ITC) is one of the biggest conglomerate company in India. ITC was formed in August 1910 under the name of Imperial Tobacco Company of India Limited. It has a diversified business which includes five segments: Fast-Moving Consumer Goods (FMCG), Hotels, Paperboards & Packaging, Agri-Business & Information Technology. Currently, ITC has over 25,000 employees.

As of 2016, ITC Ltd sells 81 percent of the cigarettes in India. Few of the major cigarette brands of ITC include Wills Navy Cut, Gold Flake Kings, Gold Flake Premium lights, Gold Flake Super Star, Insignia, India Kings etc.

Apart for the cigarette industry, few other well-known businesses of ITC are Aashirvaad, Mint-o, gum-o, B natural, Sunfeast, Candyman, Bingo!, Yippee!, Wills Lifestyle, John Players, Fiama Di Wills, Vivel, Essenza Di Wills, Superia, Engage, Classmate, PaperKraft etc.

— HDFC BANK

HDFC Bank is India’s leading banking and financial service company. It is India’s largest private sector lender by assets and has 84,325 employees (as of March 2017).

HDFC Bank provides a number of products and services which includes Wholesale banking, Retail banking, Treasury, Auto (car) Loans, Two Wheeler Loans, Personal Loans, Loan Against Property and Credit Cards. It is also the largest bank in India by market capitalization and was ranked 69th in 2016 BrandZ Top 100 Most Valuable Global Brands.

— Asian Paints

Asian paint is one of the largest Indian paint company and manufacturer. Since its foundation in 1942, Asian paint has come a long way to become India’s leading and Asia’s fourth-largest paint company, with a turnover of Rs 170.85 billion. It operates in 19 countries and has 26 paint manufacturing facilities in the world, servicing consumers in over 65 countries.

Asian Paints is engaged in the business of manufacturing, selling and distribution of paints, coatings, products related to home decor, bath fittings and providing of related services.

— TCS

Tata Consultancy Services Limited (TCS) is an Indian multinational information technology (IT) service, consulting and business solutions company. It was established in 1968 as a division of Tata Sons Limited. As of March 31, 2018, TCS employed 394,998 professionals.

TCS is one of the largest Indian companies by market capitalization (Rs 722,700 Crores as of June 2018). It is now placed among the most valuable IT services brands worldwide. TCS alone generates 70% dividends of its parent company, Tata Sons.

— Infosys

Infosys Limited is an Indian multinational corporation that provides business consulting, information technology and outsourcing services. It has its headquarters in Bengaluru, Karnataka, India. Infosys is the second-largest Indian IT company by 2017 and 596th largest public company in the world in terms of revenue. On April 19, 2018, its market capitalization was $37.32 billion.

Infosys main business includes software development, maintenance, and independent validation services to companies in finance, insurance, manufacturing and other domains. It had a total of 200,364 employees at the end of March 2017.

— HUL

HUL is one of the largest Fast Moving Consumer Goods (FMCG) Company in India with a heritage of over 80 years. It is a subsidiary of Unilever, a British Dutch Company. HUL’s products include foods, beverages, cleaning agents, personal care products, and water purifiers.

Few famous products of HUL are Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair & Lovely, Pond’s, Vaseline, Lakmé, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Walls and Pureit.

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— Eicher Motors

Eicher Motors is an automobile manufacturer and parent company of Royal Enfield, a manufacturer of luxury motorcycles. Royal Enfield has made its distinctive motorcycles since 1901 which makes it the world’s oldest motorcycle brand in continuous production. Royal Enfield operates in over 40 countries around the world.

The Eicher Group has diversified business interests in design and development, manufacturing, and local and international marketing of trucks, buses, motorcycles, automotive gears, and components.

— Bajaj Auto

Bajaj Auto is a global two-wheeler and three-wheeler Indian manufacturing company. It manufactures and sells motorcycles, scooters and auto rickshaws. Bajaj Auto was founded by Jamnalal Bajaj in Rajasthan in the 1940s. It is the world’s sixth-largest manufacturer of motorcycles and the second-largest in India. 

Few of the popular motorcycle products of Bajaj Auto are PlatinaDiscoverPulsar and Avenger and CT 100. In the three-wheeler segment, it is the world’s largest manufacturer and accounts for almost 84% of India’s three-wheeler exports.

— Nestle India

Nestle India is a subsidiary of Nestle SA of Switzerland- which is the world’s largest food and beverages company. It was incorporated in the year 1956. Nestle India Ltd has 8 manufacturing facilities and 4 branch offices in India.  The Company has continuously focused its efforts to better understand the changing lifestyles of India and anticipate consumer needs in order to provide Taste, Nutrition, Health and Wellness through its product offerings.

Few famous products of Nestle India are Maggi, Nescafe, KitKat, MUNCH, MILKY BAR, BARONE, NESTLE CLASSIC, ALPINO etc. (On 8 March 2018, Nestle Indias food brand MAGGI completed 35 years of existence in India.)

Best Dividend Stocks in India That Will Make Your Portfolio

Whenever a regular retail investor, like you and me, buys a stocks, then their main aim is to make money through their investment. There are basically two ways by which anyone can earn money by investing in stocksThey are 1) Capital Appreciation & 2) Dividends.

The first one, capital appreciation, is quite simple and hugely famous among investors. Everyone knows this secret to earn in the stock market. Buy low and sell high. The difference is your buying and selling price is capital appreciation or profit.

Stocks

For example, suppose you bought 200 stocks of a company at Rs 100 and two years hence, the price of the stock has increased to Rs 240. Here, capital appreciation is Rs 240- Rs 100 = Rs 140 per share or 140%. The overall profit that you made on your investments will be Rs 140*200 i.e. or Rs 28,000.

Almost everyone who enters the market knows this method of earning by stocks. It can also be concluded that most people enter the market hoping that their investment will be doubled or quadrupled and will make them a millionaire one day through capital appreciation.

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What are Dividends?

Whenever a company is for profit, it can use this profit amount in different ways. First, it can use the profit amount in its expansion like acquiring a new property, starting a new venture/project, etc. This strategy is generally used by fast-growing companies. Second, it can distribute the majority of the profit among its owners and shareholders. Third and final, it can distribute some portion of the profit to the shareholders and use the remaining in carrying out its expansion work.

Basically, this amount distributed by the company (from its profit) among the shareholders is called DIVIDEND.

What is a dividend? “A dividend is a distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders. Dividends can be issued as cash payments, as shares of stock, or other property.”

Typically, most big and well-established companies give decent dividends to their shareholders. They may offer dividends two times a year, namely– Interim dividend and final dividend. However, this is not a hard and fast rule. A few companies, like MRF, give dividends three times a year. If you’re holding a stock of these companies and the company announces a dividend, then you’re eligible to receive the dividends as you’re a legal shareholder.

Why are dividends good?

Suppose you are a long-term investor. You have invested in the stocks of a company for the next 15-20 years. Now, if the company does not give any dividends, there is no way for you to make money until you sell the stocks. On the other hand, even though your investments might be growing, however, you won’t receive any cash in the hand unless you sell.

Nonetheless, if the company gives a regular dividend, say 3-4% a year, then you can are receiving some returns from your investments. Here, your capital is growing as you’ve not sold your stocks. Along with it, you’re also receiving some dividends being a loyal shareholder of the company.

In addition, a regular dividend is also a sign of a healthy company. An entity that has given a consistent (moreover growing) dividend to its shareholders for the last 5-10 consecutive years, can be considered a financially strong company. On the contrary, the companies that give irregular dividends (or skips dividends in a bad economy or market crashes) can not be considered as a financially sound company. Therefore, big dividend yields can be an incredibly attractive feature of stock for the long term value investors.

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Must know financial terms regarding Dividends

Here are a few terms that every dividend investor should know. These key terms are frequently used while discussing dividend stocks.

1. Dividend yield: A stock’s dividend yield is calculated as the company’s annual cash dividend per share divided by the current share price. It is expressed in annual percentage.

Dividend Yield = (Dividend per Share) / (Price per Share)*100

2. Dividend %: This is the ratio of the dividend given by the company to the face value of the share.

3. Payout ratio: It is the ratio of earnings paid out as dividends to shareholders divided by the total earnings by the company in that year. Dividend payout ratio typically expressed as a percentage and is calculated as follows:

Payout Ratio = Dividends per Share (DPS) / Earnings per Share (EPS)

As a thumb rule, avoid investing in companies with a very high dividend payout ratio. This is because a high payout ratio means the company is not retaining enough money for its expansion or growth. In other words, be cautionary if the payout ratio is greater than 70%.

Closing Thoughts

An intelligent dividend investor looks for a company that can provide consistent dividends for many long years without any dividend cuts. He/She is not interested in those companies giving high dividends just for one year and not able to sustain giving similar dividends in the future. That’s why it is really important that the fundamentals of the company should be strong, along with the dividend history. A bad market, slowdown, or recession should not stop good dividend companies from giving dividends to their shareholders.

That’s all for this article. I hope this post on ‘Ten Best Dividend Stocks in India’ is useful to the readers. Further, I will highly recommend not investing in stocks based on the list mentioned above. Do your independent research and invest only when you’ve studied the company enough and confident about its fundamentals.

Corporate Actions– Mandatory vs Voluntary Actions!

The announcement of a Corporate Actions attracts significant attention in the markets and also creates an exciting atmosphere. It may be Christmas early in the cases of dividends or at times a shock in some unfortunate cases of delisting.

Actions

Today, we try to further understand the world of corporate action through the means of an important distinction i.e. on the basis of choice available to shareholders. Here, we are going to discuss what are Corporate Actions, types of Corporate Actions and difference between Mandatory vs Voluntary corporate actions.

What is a Corporate Action?

A corporate action is a process initiated by a company after the approval of the company’s Board of Directors and brings material change to the organization and its stakeholders. Corporate Actions include dividends, mergers, and acquisitions, rights issues, name change, change of the security identification numbers like CUSIP, SEDOL, and ISIN, etc.

A Corporate Action at times may also impact the securities (both equity and bond securities) by affecting the price. Because of this, it is mandatory for a corporate action to be announced in order to keep the shareholder informed. This is done both by the company and also the exchange the security is listed on.

But did you know in certain cases shareholders too are given the option to vote over the processing of corporate action? Here we try to understand the basis on which corporate actions are differentiated as mandatory and voluntary.

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Mandatory vs. Voluntary Corporate Actions?

Some corporate actions when announced are generally automatically applied to the investments of the shareholders. These are known as Mandatory corporate actions.

In some cases, the shareholders are given the option to participate in the respective corporate action. Here the shareholder decides if he will be a part of the corporate action or not. These Corporate Actions are classified as voluntary.

Mandatory Corporate Actions

A mandatory corporate action is decided on by the board of directors and affects all shareholders once it is bought into effect. There is nothing much a shareholder can do in this case.

If the shareholder does not want to be affected by a mandatory corporate action he has to relinquish his ownership by selling off his holdings in the stock market.

Examples of Mandatory Corporate Action

Dividends: Here the shareholder is not required to do anything in order to receive the dividend. The only function the shareholder is limited to collecting the dividend and observing the effects on his shares.

Stock Splits: In this corporate action the shares of a company are divided based on the ratio provided. Say a company announces a 2 for 1 stock split. Here for every share held by the investor, he will receive an additional share. Or in other words, the number of shares held will be doubled. The value of the shares, however, will remain the same i.e. a share that was worth at Rs.10 will be 2 shares at Rs. 5 each.

The investor may be in favor of this decision as the shares which were earlier at a higher price may now be easily sold in the market. Or he may be disappointed as his investment may trade at a reduced market price due to its increased availability. But regardless of the scenario, he will only have to accede to the decision taken by the organization and not have any say.

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Voluntary Corporate Actions

A voluntary corporate action is like an offer made by the board of directors of the company that only comes into effect if the shareholder elects to participate in the corporate action. Unlike a mandatory corporate action, a voluntary corporate action does not impact all the shareholders after it is announced. It only affects those in favour of it.

In the case of Voluntary CA, the shareholder is required to respond to the company. Only then will the company go ahead and process the corporate action. The shareholders not in favour are not impacted and their investments are left untouched.

Examples of Voluntary Corporate Action

Tender Offer: Although a tender offer may possess various forms. They however generally outline a company offering the shareholders to purchase the shares from them at a predetermined price. This price is generally slightly higher than the price the security is currently being traded at in the market. Here the investors have the option to either tender their shares to the company or simply not participate and continue to hold their shares.

10 Largest Stock Exchanges in the World

People who invest in stock must be familiar with the New York Stock Exchange (NYSE), NASDAQ, Tokyo stock exchange as a few biggest exchanges in the list of Largest Stock Exchanges in the world. But there are a few large stock exchanges with which they might not be familiar with. In this post, we are going to discuss the biggest and largest stock exchanges in the world.

exchanges

Before we start this post, let us brief a bit about what the stock exchange is. A Stock Exchange is an organization that anchor formulated market for dealing in securities, derivatives, commodities, and other financial equipment. It is one of the powerful ingredients of the financial market. Here, buyers and sellers club together to carry out transactions. And, securities are bought and sold out according to clear-cut rules and regulations.

Stock exchange furnishes the required edifice and framework to the brokers and members who deal with asset classes. It also governs the transaction activities to certify free and fair trade. The most engaging aspect is that the Stock exchanges are also deemed as the financial measures of an economy where the industrial development and firmness is mirrored in the index. Here is the list of the ten largest Stock Exchange in the world.

10 Largest Stock Exchanges in the World

1) New York Stock Exchange

The New York Stock Exchange (NYSE) is first on the list of the largest stock exchange in the world and is a highly esteemed stock exchange in the USA which is situated at 11, Wall Street, New York City. It was established on May 17, 1792, and consists of 2,400 listed companies. It is the world’s largest stock exchange and has a market capitalization of US$ 30.1 trillion.

Back to the back of mergers has aided the New York Stock Exchange to gain its colossal size and global footprint. The blue-chip companies which are listed under NYSE are Berkshire Hathaway Inc, Coca-Cola, Walt Disney Company, Mc Donald’s Corporation, etc.

 2) NASDAQ

Second on the list of the largest stock exchange in the world is NASDAQ which was primarily an abbreviation and stage for the National Association of Securities Dealers Automated Quotations. It is an American stock exchange and is headquartered at 151 W, 42nd Street, New York City.

The NASDAQ commenced its business on February 8, 1971, and is sighted as the world’s first electronically traded stock market. NASDAQ has a combined market capitalization of $10.8 trillion and is ranked second in the list of largest stock exchanges.  It consists of more than 3,000 stocks listed under it and comprises of the world’s humongous tech giants such as Apple, Microsoft, Google, Facebook, Amazon, Tesla, and Intel.

3) Tokyo Stock Exchange

The Tokyo Stock Exchange (TSE) which is also known as Tōshō is located in Tokyo, Japan. It was validated on May 15, 1878, and is also the third-largest stock exchange in the world.

TSE  has close to 3,500 listed companies with a syndicated market capitalization surpassing the US$ 5.67 trillion. The TSE’s metric indicator is Nikkei 225 and it is home to some of the voluminous  Japanese giants with international exposure, including Toyota, Suzuki, Honda, and Mitsubishi and Sony.

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4) Shanghai Stock Exchange

The Shanghai Stock Exchange (SSE) is located in the city of Shanghai, China and is one of the two stock exchanges plying autonomously in the People’s Republic of China. Although its foundation traces back to 1866, it was adjourned after the Chinese Revolution in 1949. However, The Shanghai Exchange in its contemporary outlook was laid down in 1990.

Currently, Shanghai SSE is the world’s fourth-largest stock exchange with a combined market capitalization f  US$ 5.01 trillion. The most interesting fact is that the absolute market cap of the SSE is constructed out of formerly state-run insurance companies  & commercial banks.

5) Honk Kong Stock Exchange

The  Hong Kong Stock Exchange (SEHK)  is located in Hong Kong and is the world’s fifth-largest stock exchange on the basis of market capitalization.  It consists of 2,315 listed companies with a wholesome market capitalization of HK$29.9 trillion.

6) London Stock Exchange

The London Stock Exchange (LSE) is based in London and is the sixth-largest stock exchange in the world. It was established in 1571 and is the oldest stock exchange in the world.  It has more than 3,000 listed companies with a combined market capitalization of $4.59 trillion.

LSE is also the maiden source of benchmark prices, equity-market liquidity and market data in Europe. Some of the massive companies listed under the LSE are Barclays, British Petroleum and GlaxoSmithKline.

7) EURONEXT

The Word EURONEXT is an acronym for European New Exchange Technology and has its corporate address at La Défense in Greater Paris. EURONEXT was established in 2000 by the consolidation of the exchanges in Amsterdam, Paris, and Brussels.

Over the years, it amalgamated with multiple exchanges, most particularly the New York Stock Exchange. It steers financial markets in Amsterdam, London, Brussels, Lisbon, Oslo, Dublin,  and Paris. It has around 1,500 listed companies leading to a market capitalization worth €4.1 trillion. EURONEXT provided the segments which are equities, warrants, exchange-traded, bonds, commodities, funds and certificates, derivatives, indices, and foreign exchange trading platforms.

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8) Shenzen Stock Exchange

The Shenzhen Stock Exchange (SZSE) is oriented in the city of Shenzhen, China and was founded on  December 1, 1990. It is the 8th largest stock exchange in the world and has approximately 1,300 listed companies with a combined market capitalization of $3.92 trillion.

Most of the companies under this SZSE are corporate firms of companies in which the Government Of China has a controlling interest. The Shenzhen Stock Exchange had introduced the “ChiNext Board” in 2009 comprising of high-tech & high-growth startups, quite similar to NASDAQ.

9) Toronto Stock Exchange

The Toronto Stock Exchange (TSX) is situated in Toronto, Canada. It was introduced in 1852 and is held and wielded as a subsidiary of the TMX Group. It is the ninth-largest exchange in the world and has 2,207 listed companies with a combined market capitalization of $2.3 trillion.

The financial instruments include equities, investment trusts, exchange-traded funds, bonds, commodities, futures, options, and other products. It is also to be noted that mining and oil and gas companies are listed in more numbers under the Toronto Stock Exchange compared to other stock exchanges around the world.

10) Bombay Stock Exchange

The Bombay Stock Exchange  (BSE) is an Indian stock exchange located at the high-wheeled Dalal Street in  Mumbai. It was established in 1875 and is Asia’s first-ever stock exchange. It is also the world’s 10th largest stock exchange with a total market capitalization of more than $2.2 trillion.

The BSE has approximately 5,000 listed companies and has assisted in the growth of the country’s corporate sector and financial markets. Securities listed under BSE comprises of stocks,  futures, options, index futures, index options, and weekly options. However, the BSE’s benchmark is measured by the Sensex which nearly covers all the sectors of the Indian economy.

What are Supports and Resistances? And How ?

One of the most elementary concepts while trading in stocks that every trader should know is, “Supports and Resistances”. If you’re already involved in the market, you might have heard or read terms like “Nifty50 has got a big resistance at 10,800 points” or “Stock XYZ has a support line at Rs 105”. So, what exactly do the traders mean by these terms in their analysis? We are going to discuss that through this article.

Resistances

In this article, we are going to discuss what are supports and resistance, their characteristics, and how exactly to use them. By the end of this article, you will have a good idea about these concepts and use them in your trading.

What are Supports and Resistances?

The Synonym for the word support is “Reinforce”.  Basically, support can be said to be a point of reinforcement. In other words, supports are those points which acts as a barrier for the prices, when they start to some down. They can also be said as points, where the downtrend is expected to be paused. And we should see a new surge in buying and demand. In short, supports are those points, where buyers are more forceful than sellers.

On the other hand, Resistances are said to be the point where the supply increases or the longs start getting out of their positions from the market. Therefore, if we were to carefully analyze, supports and resistances can be said as the point of friction or tussle between buyers and sellers. And Resistances, are those points where sellers have higher say than buyers.

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Characteristics of Supports

Here are the key characteristics of Supports while looking into the charts:

  • Supports are those points or levels, below which the market finds difficult to fall. They can also be said as point of infliction between buyers and sellers.
  • Supports are also the point of Maximum demand from buyers, and even the sellers exit their selling positions from the market.
  • The buyers have a higher say in deciding the levels of support in the market. These levels can also be said to be mainstay for buyers.
  • Supports, if breached sees a quick sell off in the market, and then the next level of support becomes a point of contention.
  • If the levels of supports holds in the market, then fresh longs can be initiated and generally these trades have good risk to reward ratios.

— Understanding Supports with an Example

The figure below shows the daily chart of HDFC Bank. Through this chart, we get a clear illustration on the concept of supports and the impact on the market, if the supports are respected or breached

Now, if we carefully look, the market finds a very strong support in the range between Rs. 1030 and 1075. The sellers continuously try to breach this levels, but to no avail. And after forming a base at these levels, the market starts going up.

And, we see continuous buying momentum in the share price of HDFC Bank. A Trend line support is formed in the market by joining three points from where the market is bouncing. In this rally, the share price of HDFC bank moved up from 1030 levels to almost 1250 levels (a near 20 % gain).

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Characteristics of Resistances

Here are the key characteristics of Resistances while looking into the charts:

  • Resistances are the levels which are defended by sellers. And the market finds it difficult to go beyond that level. It is a tussle point between buyers and sellers.
  • Maximum selling pressure comes from sellers at this point and even the buyers start to exit their long positions at these levels
  • If the levels of Resistances are breached in the market, we could see a massive short covering in the market, up to next resistance levels.
  • Resistances can also be called as points where fresh short positions can be initiated in the market, with good risk to reward ratio.

— Understanding Resistances with an Example

The figure above is a weekly chart of Airtel Limited. Through this chart, we get a clear illustration on the concept of Resistances, and the impact on the market if the resistances are breached.

The Share price of Airtel Limited had made a new high in the year 2007 and after that, the market had corrected nearly 50% from its highs. And then again, the market made a move up and went up till near 500 levels and started correcting again. And by joining these two points, of the initial high and the recent high, we could form a trend line.

Closing Thoughts

In this article, we tried to simplify the concept of Supports and Resistances while looking into the charts. Let’s quickly conclude what we discussed today.

Supports and Resistances are important points of significance on charts as we get good entry or exit points for our trades. On one hand, Supports are defended by bulls/buyers and on other hand, Resistances are defended by bears/sellers. These levels of Supports and Resistances can be used to identify targets for the trade and also for keeping Stop losses for existing trades. As a thumb rule, for a longer trade, look for the immediate resistance level as target. On contrary, for a short trade, look for the immediate support level as target.

3 Easy Ways to Invest in Foreign Stocks From India

Apple, Google, Facebook, Amazon, Microsoft, Samsung, Twitter… foreign These are some well-known companies in the world. We all have grown up using the products/services offered by these companies. But along with using their products, can we also own a part of these companies?

foreign

Wait, these are not Indian companies, right? Therefore, they won’t be listed on the Indian stock exchanges. These companies will be listed in their respective country’s stock exchanges. So, how to buy shares of a company that are registered in the foreign stock exchanges?

Don’t worry, if you really want to buy these stocks- you’ll get it. Always remember the famous movie dialogue by King Khan- “Kehte hain agar kisi cheez ko dil se chaho … to poori kainath use tumse milane ki koshish mein lag jaati hai

Why should you invest in foreign stocks?

Before we start this post, let us first discuss why should you invest in foreign stocks? Are they better than Indian companies? Here, you need to make up your mind why you want to invest in foreign companies. There are over 5,500 listed companies in the Indian stock market. Aren’t they enough? Why do you need to invest alternative stocks?

Well, I’m really not in a position to answer the second question. These are giant multi-billionaire companies that we are talking about here. Google, Apple, Facebook, Amazon, Samsung, Cisco, Tesla, etc are too big companies to comment upon. These companies have lots of highly qualified professionals, employees in their management team. It won’t do justice if a boy in his 20s sitting on the comfort of his couch judges these companies. Nevertheless, I can share a few of my personal opinions regarding why to invest in foreign stocks.

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Top reasons why many Indian invests in the US

Here are my top reasons why many Indian invests in the US or other foreign stock exchanges:

1. People want to invest in their favorite companies

Apple, Google, Twitter, Facebook, Amazon, etc. are the darlings of this generation. And of course, many people want to invest in these companies

2. Diversification with Global Investments

Investing in foreign stocks helps in diversification. Let’s assume that the Indian equity market starts falling due to some local region. However, investing in foreign stocks can mitigate the risk in your portfolio as the local reason may not have a significant effect on the international markets.

3. To seize bigger opportunities

Once you start to invest in foreign stocks, there are no boundaries anymore. You can hunt for better (profitable) opportunities in the international markets.

Besides the above-mentioned points, few investors believe that foreign companies have better resources, facilities, government cooperation, and standards. That’s why they invest in these foreign companies, compared to Indian companies.

Cons of Investing in Foreign Stocks

There are two sides to every coin. Here are a few critical points to know before you invest in foreign stocks:

1. Be ready for the high charges

While investing in international stocks, you’ll be transacting in foreign currencies. For example, if you are trading in the US stock market, you have to pay the brokerages in the US dollar. And hence, the stock brokerages may be a little higher compared to the charges in the Indian stock market. Similarly, the annual/monthly maintenance charges may also be higher compared to domestic accounts.

2. Profits are subjected to the currency exchange rate

Let’s assume that you are investing in the US stock market. When you bought the US stock, the currency exchange rate was $1= Rs 68. However, next year- when you sold the US stock, let say the Indian currency got stronger, and the currency exchange rate becomes $1 = Rs 62. In such a case, you have already lost 8.8% due to the change in exchange rate. That’s why when you invest in foreign stocks, profits are always subjected to the currency exchange rate.

3. Up to $250,000 can be invested overseas by the Indian residents

As per the RBI notification in the Liberalised Remittance Scheme (LRS), an Indian resident individual can only invest up to $250,000 overseas per year. With the current exchange rate of ($1= Rs 68), this amount turns out to be over 1.7 Crores. Anyways, if you have a family of four, you can invest 4 x $250,000 = $ 1 Million. That’s enough money to invest, right?

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How to invest in foreign stocks?

Now that you have learned the basic concept of investing in the international stock exchanges, here are three simple ways to invest in foreign stocks—

1. An account with Indian Brokers having a tie-up with a foreign broker

Many full-service Indian brokers like ICICI Direct, HDFC Securities, Kotak Sec, Axis Securities, Reliance money, etc has a tie-up with the foreign brokers. They have made it very simple to open your overseas trading account with their partner (foreign) brokers. You can invest in foreign stocks using these full-service brokers. 

2. Open an account with the foreign brokers

A few international brokerage firms like Interactive BrokersTD AmeritradeCharles Schwab International Account etc permits Indian citizens to set up an account and trade in US stocks, mutual funds, etc. In fact, US-based brokerage like ‘Interactive brokers’ also has an office in India where you can visit, get your queries answered, and open your overseas trading account.

3. Investing in Foreign stocks through new startups Apps

In the past few years, many new starts have been launched in India and abroad than helps Indians to invest in foreign stocks. For example, recently launched startup Vested Finance, helps Indians to invest in US stocks. They are a US Securities and Exchange Commission (SEC) registered investment advisor. Similarly, you can also invest in foreign stocks using the Webull app, another popular startup company that is also committed to building the best investing and trading experience for India and Global stock markets.

Extra: Buying Indian MF/ETFs with global equities

There are a number of mutual funds/ETFs who invest in international markets (global market, emerging market, etc). You can invest in those mutual funds/ETFs to indirectly invest in foreign equities. 

This is the easiest approach to invest in foreign stocks. An advantage of investing through mutual funds is that you won’t need to open any overseas trading account. Further, you won’t also require to invest a hefty amount. Compared to direct investing in foreign stocks (where you might be asked to maintain a minimum of $10,000 deposit), investing in mutual funds/ETFs are cheap.

Closing Thoughts

Investing in the foreign market will help you widen your investment horizon. Here, you can invest without boundaries in your favorite companies. Moreover, in the era of the internet- it’s not much difficult to invest in the international market.

Nevertheless, investing in the international stock market has both advantages and disadvantages. The most significant advantage is that it helps in diversifying your portfolio. However, the obstacles are higher expense charges and currency exchange rates.