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Gold is considered a very precious commodity and that’s why investors always prefer Gold as a commodity trading instrument because it acts as a safe investment.
In India, gold holds a strong place in people’s hearts as Indian citizens believe it's an auspicious metal that is being worn on every occasion. Also, Indian citizens feel gold is a symbol of richness and power.
It has been seen that the importance of gold has significantly increased over the years as investors keep this metal as a hedging tool during market volatility and inflation.
The price of gold keeps on fluctuating due to several factors. It is interesting to know that the US dollar affects the gold price to a greater extent.
Gold puts strong value not only on a state's strong economy, but even on personal investments.
1) Demand and Supply
Gold prices heavily depend on demand and supply. When there is a huge demand, the price of gold rises or vice versa.
Since Gold is a commodity that is continuously in demand; factors such as demand and supply play an important role in the gold price.
2) Inflation
Whenever inflation is on the rise, the value of currency starts to decrease. As most financial instruments fail to generate better commodity trading returns, gold acts as a strong hedging tool.
3) Government Reserves
The Government of India holds reserves of gold. Here, the price of gold gets affected when RBI purchases more or sells more gold. If you wonder about the gold prices, government reserves could be one of the reasons.
4) Import Duty
Few of us know that India produces less than 1 per cent of global gold production. However, due to the high demand for gold in the country, the government imports a lot of gold from overseas to meet the demand. Hence, import duty plays an important role in increasing gold prices.
In 1944, 44 countries signed the significant Bretton Woods Agreement. The agreement is about international trading, import and export via the US dollar.
A country will sum up its total US dollar reserve at the end of a year. Then, the country goes to the International Monetary Fund (IMF) with that amount of US dollars.
That means the currencies are convertible to gold. Because of this agreement, the USA eventually took profit from all other countries obliged to trade against the US dollar.
During the pandemic time, Gold prices were increased. Why does this happen?
Because gold is a safe investment, people started investing in gold during the times of COVID to use it as a currency if they were in financial trouble.
Investors hold the gold as compared to currency. As a result, when Inflation in India is high, the gold price also increases and vice versa.
Due to high demand and less supply, gold prices get high, and the people who hold gold during inflation make a lot of profit.
If an RBI imports gold, it does affect the demand and supply of the currency in the country.
To import gold from another country, the RBI needs to print a larger number of notes to pay for it, and due to an excessive amount of currency notes, inflation is caused in the country, and hence the gold price will also be increased.
In India, many people buy gold in the form of jewellery, and they give gold as a valuable gift to their loved ones.
India depends on the import of gold as our production of gold is less than 1 per cent of the total world production. Because of the high demand in the festival season, we need to import gold from foreign countries.
During festivals like Diwali and Dhanteras, gold prices increase because of high demand and less supply.
India is increasing the production of gold mines to control the gold imports and fulfill our gold requirements.
The rupee-dollar equation plays a role in Indian gold rates, although it does not impact global gold prices.
India imports gold, and hence if the rupee is getting weaker against the dollar, it directly affects the gold prices.
So, a depreciating rupee may affect the demand for gold in the country. However, the change in rupee-dollar rates has no impact on gold rates denominated in dollars.
As we discussed factors that affect the gold price in India, Gold prices are volatile and considered a safe investment.
Gold is also a portfolio diversifier for stock market trading investors.
When the market falls, people start investing in gold to diversify their portfolios.
Commodity Trading is considered "sensitive" because stock market experts have seen frequent instances of price manipulation in the past 5 years.
Therefore it is suggested to take advice before starting trading in any commodity. Taking help from a reliable stock broking firm will always be helpful as they have strong stock market research reports and an experienced analyst team.
अमेरिका से जारी होने वाले आर्थिक आकड़ो से पिछले सप्ताह बाज़ारो में मिले जुले संकेत रहे, जिससे सोने और चांदी में साप्ताहिक गिरावट दर्ज की गई है। नॉन फॉर्म एम्प्लॉयमेंट चेंज के आंकड़े अप्रैल माह में घट कर 431 हजार रह गए जिससे सोने और चांदी के भाव को सपोर्ट मिला।
जबकि बेरोज़गारी दर में मजबूती देखि गई है। रूस और यूक्रेन के बीच शांति वार्ता में हुई थोड़ी प्रगति से अमेरिकी डॉलर इंडेक्स और बांड यील्ड में निचले स्तरों से सुधार दर्ज किया गया जिसके सोने और चांदी के भाव में दबाव दिखाई दिया।
हालांकि, कीमती धातुओं में कीमते अभी गिरावट के साथ एक सीमित दायरे में चल रही जिससे आगे इनमे उछाल भी देखने को मिल सकता है। जून वायदा सोने के भाव पिछले सप्ताह में 1500 रुपये प्रति दस ग्राम और मई वायदा चांदी के भाव 3200 रुपये प्रति किलो तक टूटने के बाद हिन्दू नव वर्ष की शुरुवात के पहले ही निचले स्तरों से सुधार रहा और सोना पिछले सप्ताह में 1 प्रतिशत और चांदी 2.5 प्रतिशत टूट कर क्रमश 51900 और 67000 के स्तरों पर रहे।
भारतीय सराफा बाज़ारो में शादियों का सीजन शुरू होने के पहले ज्वेलर की मांग बढ़ने की सम्भावना है। निचले स्तरों पर सोने और चांदी की हाजिर मांग आने की सम्भावना से कीमती धातुओं के भाव में उछाल देखने को मिल सकता है।
उधर, ऊर्जा की कीमतों में मजबूती भी सोने और चांदी के भाव को सपोर्ट करती दिख रही है क्योकि पिछले सप्ताह में ओपेक और नॉन ओपेक देशो के समूह की बैठक में पूर्व आधारित योजना के अनुसार ही कच्चे तेल का उत्पादन बढ़ाया जायेगा जबकि बढ़ी हुई तेल की मांग और रूस पर प्रतिबंध के कारण, तेल और गैस के भाव मजबूत है जिसके कारण मुद्रास्फीति के नियंत्रण में ज्यादा वक्त लगेगा।
इस सप्ताह सोने और चांदी के भाव सीमित दायरे में रह सकते है। जून वायदा सोने में 51200 रुपये पर सपोर्ट और 52500 रुपये पर प्रतिरोध है। मई वायदा चांदी में 65000 रुपये पर सपोर्ट और 69000 रुपये पर प्रतिरोध है।
When Indian companies generate profits, they face the decision of how to share that success with their shareholders. Two popular methods are share buybacks and dividends. Let’s explore these concepts and see how they play out with examples from Indian stocks.
Share buybacks occur when a company repurchases its own shares from the market. This reduces the number of shares available, which can lead to an increase in the stock’s price. Buybacks offer flexibility and can signal confidence in a company's future. However, they can also be controversial, as critics argue they might be used to artificially boost share prices.
In 2023, TCS announced a buyback program worth ₹18,000 crore. This move aimed to return excess cash to shareholders while demonstrating the company’s confidence in its future growth. By reducing the total number of shares, TCS increased its earnings per share (EPS), which positively impacted its stock price.
Dividends are regular cash payments made to shareholders from a company's profits. They provide a steady income stream, which is particularly attractive to long-term investors seeking consistent returns. Regular dividends often reflect a company’s financial health and stability.
Infosys has a strong history of paying regular dividends. In 2023, the company declared a dividend of ₹17.50 per share, continuing its tradition of rewarding shareholders with reliable payouts. For many investors, Infosys' consistent dividend payments are a key reason for holding onto the stock, as they offer dependable income over time.
The choice between buybacks and dividends depends on individual investor goals. Buybacks might be more appealing if you’re looking for capital gains, as they can drive up share prices. On the other hand, dividends are favored by those seeking a steady income, such as retirees or conservative investors.
Reliance Industries employs both strategies. The company has conducted share buybacks to signal confidence in its stock value while also maintaining a robust dividend policy to reward its shareholders. This balanced approach allows Reliance to cater to a wide range of investor preferences.
Market reactions can vary depending on the economic environment. For example, in a low-interest-rate environment, buybacks might be more favored due to their tax advantages, whereas in a more stable economic climate, dividends might be preferred for their reliability.
Both buybacks and dividends have their advantages and can play an important role in a company’s strategy to return value to shareholders. In India, companies like TCS, Infosys, and Reliance Industries illustrate how these methods can benefit investors. Whether you prefer the potential for capital appreciation through buybacks or the steady income from dividends, understanding these strategies can help you make more informed investment decisions.
Ultimately, the best approach depends on the specific circumstances of the company and its shareholder base. Many companies use a combination of both strategies to balance short-term returns with long-term growth.
We can see that price-to-sales is the most popular valuation ratio used on YCharts.
That is because the P/S ratio is easy to calculate by a stock trading and can be used for companies with a wide range of earnings and cash flow profiles.
P/S is also a very useful valuation ratio for high growth companies. Many high growth companies do not have positive earnings or cash flow in their early years.
P/S does not require earnings, so it can be applied to young companies as well as more established businesses.
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Price-to-sales ratio (P/S) is the ratio of a company's stock price to its sales per share. It is calculated as market capitalization divided by the revenue per share.
The price-sales ratio is similar to the price-earnings ratio in that it helps investors determine whether a stock is undervalued or overvalued.
The P/S ratio can be used with any type of company, but it is most commonly applied to those companies that are not profitable or whose profits are not consistent.
The P/S metric does not consider whether a company is earning a profit, only how much revenue it generates for each share outstanding.
Because profit margins vary widely across industries, the price-sales ratio does not always provide a meaningful comparison between companies in different sectors.
Also Read - Is It Good To Buy Low P/E Ratio Stocks?
There are Several Determinants of the P/S Ratio and they are:
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Price-Sales Ratio is a ratio of Price per share / Sales per share. For ex: Price per share = ₹100, Sales per share = ₹200 then the price-sales ratio = 100/200 = ₹0.5 which means that for every rupee in sales, the company's market value is 50 Paisa.
This ratio gives us the value of a company per share in terms of sales.
When comparing companies from different industries, it is important to compare their price sales ratios within their respective industry group.
Because different industries have different profitability and capital structures.
P/S ratio for typical technology companies tends to be higher than for other types of companies because investors are willing to pay more for growth.
The P/S ratio is also useful in comparing two companies that are growing at different rates because the P/S ratio will adjust accordingly and make them easy to compare.
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The PSR Ratio has Some Drawbacks:
A price-to-sales ratio is a company’s share price divided by the company’s revenue per share. It compares a company’s stock price to the total revenue of the business.
If a company's P/S ratio is between 1 and 2, it is considered to be a good investment. However, a P/S ratio of less than 1 is considered excellent.
For example, imagine that Company A has a P/S ratio of five, while Company B has a P/S ratio of 10.
You can conclude that investors expect Company B to grow faster than Company A. This makes sense, because investors expect to pay more for future earnings growth.
Also Read about intraday trading
The P/S ratio is the Price to Sales Ratio. The price/Sales ratio (PS ratio) for a sector is calculated by taking the sum of the market capitalization of all the stocks in the sector and then dividing it by their aggregate sales.
Higher the ratio, the more expensive the sector. Lower the ratio, the cheaper the sector.
The Price/Earnings (PE) Ratio for a sector is calculated by dividing the total market capitalization of all the stocks in that sector by its total earnings.
If a company has a PE ratio of 25, it means investors are willing to pay ₹25 for every rupee of its earnings.
The higher the ratio, the higher is the risk associated with that company’s stock. The lower the PE ratio, the lower is the risk associated with that stock.
It can be concluded that there are many advantages and disadvantages to valuing companies, it depends on the companies.
In stock market trading, if the stock pays regular dividends with a record of steady dividend growth is called an income stock.
Companies usually issue income stocks with stable cash flows and well-established financial infrastructure.
It's also quite common for companies that issue income stocks to have long histories of success, a large market capitalization, and to operate at a mature stage in their growth curve.
Income stocks are often compared with value stocks. While income stocks pay out dividends at a high rate, value stocks are often trading at a price lower than the company's fundamental value or the stock's book value.
Investors generally invest in income stocks to get a stable cash flow from their investment without putting too much risk on their money.
Income stocks are generally considered less risky than other types of investments.
If you face any difficulty in understanding income stocks then feel free to mail us and talk to our experts.
Income stocks are considered to be less risky as compared to growth stocks.
Suppose a company is well established and has a consistent track record of paying dividends. In that case, it can be considered an income stock.
Income stocks are considered good for investors who want stability and regular stock trading returns in dividends.
High yielding dividend stocks refer to companies with a long history of paying high dividend yields.
These companies have a steady cash flow stream and can afford to pay higher dividend yields.
Low yielding dividend stocks refer to those companies that payout low or moderate dividend yields.
Such companies generally have a stable financial position. They reinvest their cash flows into their business to expand and grow.
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Dividend-paying stocks are those whose payments are made by a company to its stockholders. Most income stocks pay dividends regularly, whether monthly, quarterly or annually.
The amount of each dividend payment can vary depending on the company's profitability.
The total amount of dividends paid by a company over a given period is its dividend yield or dividend payout ratio.
Also, Read - 5 Smart Rules to Follow While Investing in Dividend Paying Stock
Income stocks offer lower risk than many other investments - they are usually large, well-established companies with long track records of paying stable or rising dividends.
Income stocks have the potential for steady growth through reinvesting their dividends into the business or using them for acquisitions.
The price of income stocks tends to be less volatile than those of speculative growth stocks but more volatile than defensive shares (which pay lower yields and have less scope for capital gains).
It has been found that income stocks are highly defensive in nature. They don't fluctuate with the frequent changes in the market.
Income stocks don't reinvest their profits. Instead, they distribute most of their profits to the shareholders in the form of dividends. As a result, they lack a surplus fund for further investments.
These stocks provide stable dividends to shareholders as compared to other stocks.
Income stocks are less risky as they are less volatile than other stocks.
These are apt for those who have a low-risk appetite investment mindset viz students, non-income people, older people and more.
Companies that issue income stocks have a strong financial background and hence they provide stable dividends to their shareholders.
Companies that issue income stocks mostly come under the large-cap market.
Yes, it is good to invest in income stocks.
We would say that you should make sure you do not put all your eggs in one basket.
If you are investing for the long term, it makes sense to have a lot of different investments.
Income stocks are a great place to start when you begin investing as they are not too risky but offer a decent amount of risk.
One of the main reasons for stock traders to invest in defensive stocks is as a defensive measure against economic uncertainty.
These companies are so-called because they tend to be less volatile and more stable than the wider market, even in times of economic turmoil.
In this blog, we'll outline what makes a stock defensive, how to recognize which shares are defensive, and why you might want to include them in your portfolio.
To get more information about defensive stocks in detail, feel free to write to us at - hello@swastika.co.in
A defensive stock is expected to maintain a stable share price during an economic downturn or when the broader market falls.
Typically these are companies with products or services that people will continue to buy regardless of how much they spend.
Typically, defensive stocks have the following characteristics:
As a result, investors typically turn to defensive stocks to reduce risk in their portfolios, especially during uncertain times in the market cycle.
Also Read - Everything about Stock Market Trading
Stable Revenue and Earnings Growth: Defensive stocks have steady revenue and earnings growth which means they don't make large profits or losses in any particular year.
Low Debt: Most defensive stocks have very little debt. Debt is not something these companies would want to carry on their books as it affects their valuation.
High-Profit Margin: Defensive Stocks also tend to have high-profit margins, compared to other sectors, because of the stability in their businesses. This high-profit margin keeps them profitable during economic downturns.
Stable Dividends: The dividend payment for most defensive stocks is stable and growing steadily over some time.
These dividend payments are also less volatile than consumer discretionary or technology stocks.
Defensive stocks are companies that sell products and services that are considered essential and non-cyclical.
These products are not affected by economic downturns and always remain in demand.
For example, a company that sells FMCG products like soap, toothpaste, shampoo etc., or a pharmaceutical company can be considered as a defensive stock.
The recession affects the demand for these products because people still need to buy food, medicines, and other items for daily use.
Defensive stocks generally have competitive advantages like low-interest rate loans, government contracts etc.
These stocks tend to be less volatile than cyclical stocks and provide a greater level of security to investors. Defensive stocks also offer higher dividend yields.
Defensive stocks are those which can weather economic downturns and market volatility.
These stocks can provide stability to your portfolio, and hence they are known as defensive stocks.
The characteristics of defensive stocks include stable or consistent earnings, regular dividend payouts, low beta, lower risk profile and low volatility.
Defensive stocks belong to sectors with essential products or services and are used in all phases of the economic cycle.
So, when the economy is weak or during periods of uncertainty, these stocks perform relatively well compared to the overall market.
Open Demat account to invest in defensive stocks.
Utilities
Electric utilities, water, and gas are examples of defensive stocks. Similarly, communications service companies such as telephone and cable television companies are also defensive.
Since utility companies primarily deal in essential services and communication, these businesses remain fairly stable during recessions.
Pharmaceuticals
Pharmaceutical companies are another example of defensive stocks. These companies generate revenue by selling drugs that treat chronic conditions like high blood pressure, diabetes, and arthritis.
Although some prescription drug sales may decrease during a downturn due to patients' inability to afford them, new customers will enter the market.
Also Read - Everything about Intraday trading.
Consumer Staples
Consumer staples are non-discretionary products that people buy regardless of income levels or economic cycles.
For example, consumers still need food and personal care items even during economic downturns.
Consumer staple stocks are also considered defensive because they offer stable earnings with modest growth prospects;
These qualities make them appealing to conservative investors seeking low-risk equities.
Food Stocks
Food stocks are a great example of defensive stocks. Food items like rice and wheat are in high demand regardless of the economic conditions.
When the economy is booming, people buy more food products, but even when the economy is struggling, they still buy basic food items like wheat and rice.
Defensive stocks are a must-have in every investor's Portfolio. They help to create a balanced portfolio and reduce overall risk.
Defensive stocks are not affected by economic downturns and hence, their value does not decrease much in bearish market conditions. These stocks are ideal for investors who want to create a diversified portfolio.
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