Commodity Correction Buying Opportunity in Indian Markets: Defence & Banking as Long-Term Bets

Equity investment is one of the most important investment avenues for investors as it always gives multiple returns in a long duration. But yes the major question is how can we select that stock, just by hearing the name only, Is that enough? Probably not, but you try to understand the basic structure of the company can surely benefit.

Every investor tries to invest in those companies which are having a long record of performance along with high trust value. Because it's business it may run long or can collapse soon. So while investing in equities there lies a risk of investment also, which actually makes Indian investors stay away from the equity asset class. And Investors shift themself towards other instruments like FD, Bonds Gold, etc which are having criteria of fixed return which many investors enjoy.

How to Identify Good Stock for Investments:-

It's been always a big question to identify a good stock as there are more than 6000+ companies listed on the exchange and it's not easy to track each company from an investment perspective. As all it takes a long time just to understand about the company better one should the basic approach to understand it.

Identification of Sector:

Before proceeding towards investment in any stock we should first select the sector in which we want to invest, Selection of the sector actually depends upon the understanding of the business model of the company so that investor should relate it with the current market condition. In the stock market, it's better to go with the flow instead of going against the flow.

Understand the Business Model of the Stock:

Once the sector selection process is done. We must look into the business of a selected company, what kind of business the company is doing will it be suitable for the long-term, how its revenue generated, the impact of government policy etc, these all things actually play a vital role while selecting any stock.

Company Management:

Warren Buffett Quoted once – "I look for integrity, energy, and intelligence in management."

Management is considered as the backbone of the company, A fair management always gives a clear outlook of the business as well as present a fair image of the company. One should look at what kind of management is in the company is it Professional management or Family management. Professional management is more favorable while selecting any stock.

Past track record of the company:

Investment is actually a game of numbers along with facts & figures, Companies showing consistent growth with positive returns are always considered more favorable, Though the business is not the same all-time some times its profit some times its loss, So investors actually show faith in those companies who are consistent in the market from a long run.

With the help of certain financial statements like P&L, Balance Sheet one can actually look into the company performance, though it's not easy for everyone to read the financial statements one can take the help of certain financial websites available for it.

We all know that trading in the stock market is not so easy as it considered orally, for daily trading in you need to track the market on all basis especially those are indulge in Day Trading / Intraday Trading, Before we proceed lets clear the concept of Intraday Trading:-

“A person or individual who is engaged in purchasing or selling of stocks within the same day is Intraday Trading “

But how can we do it? Is still a question mark for many. For this just follow a very simple top-down approach to understand how the market can behave for the very next day.

For a trader, it is very important to know the next day market for which need to look not only the domestic ques but the global outlook is also very important as the Indian market is on its developing stages.

Tracking of Market:-

For an everyday trader, it is essential to know about the global ques along with domestic market So a trader first need to check out the Closing of  “US & Europe Market”.

After this, we should check the Opening of Asian Market, whatever happened overnight in US & Europe market will make an impact on the opening of the Asian market.

Once Asian market opened its important for Indian traders to check the opening of SGX NIFTY, it acts as an opening indicator for the Indian market, it also takes the cues from another market ( US & Europe Impact on Asian Market) which leads to indicate the opening of the Indian market.

At last, a trader should check the impact of any News or Data which can create an impact on market should be tracked prior, Impact of any Micro or Macroeconomic news should be considered while one is tracking the market because it may give impact on the same day or can affect later on.

Once a trader is clear about the opening of market the second most important work is to track the stock for trading, No one can directly jump and purchase any stock after just hearing the name though many newcomers do that only as they are not aware of the process.

Points to Remember while Day Trading:-

Trade-in Liquid Stocks:

Volume plays a vital role while you trade in the market so a beginner its better to trade only in liquid stocks or in blue chips & always follow proper research and self-study before taking any trade. The market is inherently volatile in nature you cannot blame anyone for your loss.

Follow Market News & Views:

One should always be aware of market updates as it actually impacts on the performance of that particular sector/stock.

Avoid Unplanned Trades:

Many often if you are not clear about the market condition, avoid taking any trades into the market because it's better to sit without trade rather then booking an unnecessary loss.

Google, Facebook, Amazon, Apple Netflix, etc have been household names in our homes and our lives, and it goes without saying that these will continue to become more prevalent and relevant in the years to come. But…why haven’t we been able to be a part of this bull ride? Just because these are international stock?

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On our online trading platform, you can invest in either full or fractional shares. If the investment is in full shares, then our broker partner, Drivewealth, will route the orders to market centres on an agency basis. If the investment is in fractional shares, our broker partner, Drivewealth, will satisfy the order form on its own account on a principal basis, at the National Best Bid or Offer. NBBO means that the broker partner cannot add a margin to the price. Therefore, any order for both full or fractional shares will be executed via both methods, part as an agent and part as a principle. Under the RBI’s Liberalised Remittance Scheme guidelines (LRS). Reserve Bank of India (RBI) has laid out a set of policies that governs the maximum amount and purposes of remittance. Under LRS, an Indian Resident can annually send or invest up to USD 250000 abroad without seeking approval from RBI. This scheme has simplified it for Indian residents to study abroad, travel and make investments in other countries. For latest up to date information, refer RBI’s website and also see article 6(iii) for specific LRS regulations regarding investment in equity. If you want to buy $50 dollar worth of a share of Apple or Microsoft, you can! WE have democratized access to international investing with fractional investments.

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What are Farm Bills?

On September 27, India's President gave consent to three farm bills herein listed below:

Farmer's Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020

As per this bill, farmers can enter into a written agreement for a specified period of time with companies and companies can customize the price, standard, and quality for the produce and other legalities in advance.

Farmer's (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020

The new Marketplace law says that farmers can sell their produce anywhere – and not just in the APMC approved marketplace or mandis, they can sell it into not only their state but outside their state even online. Whereas state governments are prohibited from levying any market fee, cess, or levy outside APMC or Mandi areas.

The Essential Commodities (Amendment) Bill, 2020

This Act mainly controls and deals with the production, supply, and distribution of certain essential commodities. Companies and Supermarkets etc cannot accumulate the items listed in this act when there is a shortage and they can’t artificially increase the price.

Why Are Farmers Protesting?

The Farmers of UP, Haryana, and Punjab are upset with these bills and fear that this may be an excuse to pull off the MSP safety net from under their feet.

What is MSP?

MSP stands for Minimum Support Price, It is the price lay down by the government to purchase crops from the farmers, whatever may be the market price for the crops. It is a significant part of India's agricultural price policy that assures the farmers about agricultural income before the sowing. MSP protects the farmers against excessive fall in price during bumper production years

Further State like Haryana & Punjab has vested interest of reduction in their state earnings as state governments are prohibited from levying any market fee, cess, or levy outside APMC or Mandi areas.

Haryana levies 2% Mandi Tax that goes to Mandi Board & 2% Rural Development cess that goes to state govt. whereas in Punjab it is 3% Mandi Tax and 3% rural development cess. Punjab is a smaller state and that earns Rs. 1700 crore in a year through rural development cess & Mandi tax. Besides this 2.5% commission agent also take home 2.% of the sale price.

So. these are some controversies on Farm Bills, Now let's see what comes out on round table conference between Farmer Unions and Centre.

Source:

https://www.indianeconomy.net/splclassroom/what-is-minimum-support-price/

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The Bitter Truth of the Indian education system is that it has completely side-lined capital markets as a subject altogether. The knowledge is not integrated, it is not taught as a life-skill and furthermore, the educational institutions lack the much-needed regulations. This one of the reasons why most of the students are not conscious of the prominent and elite career opportunities present in the scope of the stock markets.

In the recent decade, a shortage of trained professionals in the financial market has prompted the need for specialized professionals in various verticals ranging from stock traders to venture capital analysts.

It is good to see many enthusiastic and young people from other professions are interested in checking their luck in the Stock Market. However, specific precautionary steps are necessary before considering Trading as a full-time profession even if you have decent success as a Trader as the Market situations always change. Besides, I have noticed people attracted to the luxuries available in Trading, and sometimes they plan to jump to Full-time trading to avoid the problems in their current profession.

In India, many young adults refrain themselves from any investing decisions until their financial situation becomes, at least theoretically, more stable and therefore, a small chunk of the population is exposed to the equity investment compared to other developing countries, and we see immense opportunities lying out there in the stock market considering the phenomenal growth in the last decade or so.

Stock Market Represents Health of Any Economy

As the stock market is one of the key barometers that represent the health of any economy, the growth story of India coupled with the current low rate of penetration in the stock market suggests that there will be increased demand for professionals in this sector.

For people who are interested in making a career in the stock markets, the opportunities are plentiful. For instance, one could work with a buy-side firm such as a mutual fund, hedge fund, pension fund etc., or with a sell-side firm such as a broker, an advisory firm, an investment bank etc.

Apart from the diversity of companies that employ people willing to work in the stock market, the positions for which these companies hire is also just as diverse. For instance, companies hire for the position of a Fundamental Analyst, Technical Analyst, Risk Analyst, Derivatives Analyst, Investment Banker, Mutual Fund Manager, Hedge Fund Manager, Wealth Manager, Economist, Financial Planner, Trader, Dealer, Systems Developer etc. The list simply goes on such as the diversity of working in the stock market.

On the education front, there are a lot of finance-related courses that one could pursue to make a career in the stock market. The internationally recognized ones the Chartered Financial Analyst (CFA) program, the Financial Risk Manager (FRM) program, the Chartered Market Technician (CMT) program, the Chartered Alternative Investment Analyst (CAIA) program, the Certified Financial Planner (CFP) program, Master of Finance, Master of Business Administration with specialization in Finance, etc. Pursuing one or more of these courses opens the door for entering the highly competitive world of stock markets.

Besides these courses, there are a lot of short-term courses that are available in India, such as the ones conducted by the NSE and the BSE. NISM certifications are considered to be the standard in the field of trading and investments. They are recognized by the exchange and many of them are mandatory for market participants.

Commerce degrees such as B.COM, BBA/BBM, MBA, PGDF, PGDM etc. have little to no emphasis on stock markets, trading or investing as a subject. These courses are considered to be a standard, and many undergraduates go on to pursue an MBA hoping for a value-add in terms of their employability, but in real terms, it adds little to no value in terms of the knowledge offered. However, there are a handful of institutes that are good.

However, there is a tendency among most aspirants to complete as many degrees as possible to become more employable. Beyond a point, degrees and certificates don’t matter. Hence, it’s best not to focus too much on the theoretical aspect of finance but rather on the practicality which can only be earned with years of experience.

Financial Markets have grown tremendously in the past decade in terms of participants and volumes but a proper education and training system in this industry is still missing.