What Is Intraday Trading?

Right Entitlements of shares a term that recently made the headlines these days when India’s famous brokerage firm reported that it lost a huge amount of Rs 10 Crore in expired Rights Entitlements.

Rights Entitlements is a fresh concept that was introduced in India’s share markets only in 2020 with RILs Rs 53,125 crore rights issue.

Rights Entitlement is issued by a company launching its share to its shareholders, which ultimately give them the right to subscribe to the issue or sell it to the other investors. Rights entitlement are issued similar to the rights issue in the same ratio to the shareholders as on the record date.

As per the capital market regulators SEBI, a shareholder may trade the entitlement in favor of another person for a price.

Before getting a deep down into this, let’s have a quick understanding of what Rights Issue is:

In a Rights Issue, a company gives its shareholders the right to buy more shares at a discounted price.

Here, the Rights shares issued by a company are of two types: Fully paid-up shares or partly paid shares. In fully paid-up shares, you don't have any obligation to the company which means you don’t have to pay any additional amount to the company as you are a shareholder with limited liability.

If your company has partly paid rights share to you, then in this case you need to pay installments over a given period. In case, if you failed to pay the fixed amount decided by the company, you need to pay interest on the called amount.

The rights entitlement has a specific time frame within which one has to apply for rights share or sell it before they stop trading. These instruments cannot be traded on an intraday basis. Hence, one has to take delivery of these instruments before applying for the rights issue within the issue period or selling them again in the stock market.

Several investors have zero clues on what it is and have just bought them from the market thinking it will be like regular shares in the market. Some of them have not applied for the rights share within the issue period and saw them disappear from their Demat account.

Rights Entitlement - A New Instrument

In January 2020, SEBI did an announcement regarding the launch of rights entitlements tradable in the Demat form. The Right Entitlement instrument was first made available to the shareholders of Reliance Industries when its rights issue launched in May 2020.

All the shareholders will get Rights Entitlement credited to their Demat account after a few days from the record date. Rights Entitlement usually traded in the secondary market for a definite period of time.

For instance, if you had 15 shares of Reliance Industries and the companies announced that they are raising more funds through the Rights issue at a ratio of 1:5 at a price of Rs 1200. You will get 3 quantities of Rights Entitlement that you can choose to apply for the rights issue or sell in the secondary market.

What Happens If You Don't Apply for the Rights Issue through Rights Entitlement

The Rights Entitlement will lapse at the rate of 0 and the RTA (Registrar and Share Transfer Agent) will debit the REs from your Demat Account. To make use of REs that were credited to the DEMAT account, you can either sell it in the secondary market or apply for the Rights Issue shares.

Difference Between Fully Paid Up Shares and Partly Paid Up Shares

Fully Paid Up Shares

When a company is raising funds in a shot and issues the actual shares if the client is applying for the rights issue, it is said to be a fully paid up issue. The company will announce the price at which an eligible shareholder can apply for the Fully paid Rights Issue a few days before crediting the Rights Entitlement to the Demat account.

M & M financial services announced a fully paid up rights issue in the month of January 2021, where the shareholders 1 Rights Entitlement (RE), against 1 share of M&M financial services and the RE holders had the rights to apply up for the fully paid up shares at the rate of Rs 50 (including a premium of Rs 48 per fully paid-up equity share).

Partly Paid Up Shares

Here, a company is said to raise funds partially with a formal notice to the shareholder on every call. Irrespective of one applying for the next partly paid up shares will get extinguished with zero value, so it's better to apply for the next call or to sell it in the secondary market as it will trade for a temporary period of time in the secondary market.

Example:

Reliance Industries announced a partly paid up rights issue in May 2020 where the RE holders had the right to apply for the partly up shares of Reliance Industries and the company is set to raise funds in the first call (From May 17, 2021, to May 31, 2021) at the rate of Rs 314.25 per partly paid-up equity share.

And the second call will be in the month of November. We recommend you either pay the first call in order to carry forward to get the next partly paid-up shares or sell them within the last trending day which is on 10 May 2021. Contact us to learn more.

Any investment portfolio whether it is of the stock market or other, is often associated with different types of risks.

No one knows when there may be a stock market crash but to cope with it, we can take certain measures to minimize the stock market risks by using tested and certified tactics.

The most appropriate way to save your portfolio from the stock market crash is hedging and diversification.

Whether you are planning to pick an individual stock or ETF investing, a lot of hedging strategies can be used to minimize the downside risks and other risks as well.

Hedging in finance refers to a list of strategies that help us to reduce the risk of uncertainties while monitoring our current finances.

Hedging tactics help investors to limit their strategies arising because of ups and downs in the price of the investment.

In short, hedging in the stock market acts as a safeguard against the losses occurring from the investment strategies.

Understanding Hedging with an Example

Portfolio hedging is a list of strategies used by investment managers that mitigate the risks of adverse price movements in an asset.

For example: if we have an open position in the stock that is trading at Rs. 200, but due to some negative news circulating in the market regarding the stock, the price of the stocks has fallen.

Now, to mitigate the losses, we can choose an alternative path by taking a short position in the same stock in the derivative market.

You can implement a hedging process by buying another asset that has the ability to give you high returns with less time or by short selling an asset. Many investors use short selling during the stock market crash as they find the best way to overcome the potential losses.

It may be noted that hedging is used to reduce or minimize the losses but it cannot eliminate the complete risks associated with the stocks. Hence many investors only hedge a part of their portfolio so as they can save themselves from a complete loss.

Tools for Hedging

Derivatives

Derivatives are the most effective hedging tool that is used against their underlying assets. Traders mostly use derivatives as a strategy where the loss for one investment is compensated by the gain of incomparable derivatives.

Derivatives are the financial contracts that derive their value from an underlying asset such as stock, commodity, currency or more. An option is a type of derivative that gives you the right but not an obligation to buy or sell a specific stock within a particular time.

Using Derivative as a Hedging Tool

Let’s consider a hypothetical situation, where you bought a stock with a belief that the price would go up. At the same time protect your stocks against the losses if the prices move down.

Here, we can hedge several risks associated with a stock with a put option. In a put option, we can have the right to sell the stock at the same price. For that, you have to buy a premium.

If the price of the stock falls, then we can exercise the put option and bring back the amount we invested minus the premium amount that we paid for the put option.

What if we have not used the premium option?

If we couldn't use the premium option as a hedging tool here, we would have lost the full investment amount.

Using diversification as a hedging tool

Another hedging tool we can use is “Diversification”. In this strategy, we add multiple stocks to our portfolio that doesn’t rise or fall simultaneously. If the price of one asset collapses, the others remain safe. For instance, to minimize risks, many investors own bonds to compensate for the losses occurring from the stocks.

Thus when the stock price falls, the bond prices rise or vice versa.

Below are the 5 hedging strategies commonly used by investment managers to minimize the risks:

1. Forward

The forward contract refers to the agreement in which traders can buy or sell underlying assets at a fixed price on a date that is pre-defined by the two parties. Forward contracts include many contracts such as forward exchange contracts for currencies, commodities and more.

2. Futures

A futures contract refers to a contract where two parties agree to buy and sell a particular asset at a predetermined price at a specified date in the future.

3. Money Market

A money market is a type of financial market where short term buying and selling can be made with financial assets that are having a maturity of one year or less such as selling, borrowing, lending with a maturity of one year or less.

Strategies of Hedging

1. Asset Allocation

Traders use asset allocation to diversify their portfolio with more than one asset class used. For instance, traders can invest 60% in equity and the rest 40% in other asset classes such as bonds, derivatives in order to have a balanced portfolio.

2. Structure

Traders can invest a part of the portfolio in debt and others in derivatives. As the debt portion maintains the stability of the portfolio, derivatives on the other hand protect the portfolio from the downside risk.

3. Options

The option is a good strategy that helps traders to buy a put option to reduce the losses from the equity market.

Takeaway

Hedging is used to overcome potential losses in the stock market. A hedge is an investment that protects our finances from a risky situation. It is done for minimizing the chance that your asset will lose its value and also limits our losses to a known amount if the asset does lose value.

Harsh Goenka is the Mumbai head-quartered RPG Group leader (RAMA PRASAD GOENKA ENTERPRISES), which comprises more than fifteen organizations across central areas of the economy with a turnover of US ~$4 Billion.

The Group's Vision is to Unleash Talent, Touch Lives, Outperform and Be Happy. The following are the subsidiaries of the RPG group.

CEAT SPECIALTY was founded in 1989. Its headquarters is in Mumbai. CEAT SPECIALTY Tyres Ltd. is CEAT's particular auxiliary for off-highway (OTR and Agri) tyres in homegrown and global business sectors, with a product portfolio across band spiral tyres.

CEAT, the Mumbai head-quartered CEAT established in 1981, is one of India's leading tyre producers and has a solid presence in worldwide business sectors.

HARRISONS was established in 1988. Its headquarters is in Kochi. Harrisons Malayalam is the biggest producer of pineapples in India and of tea in South India. Not only banana, cardamom, cocoa, espresso, coconut, pepper, and vanilla, its essential items also include elastic, tea, and pineapple.

KEC INTERNATIONAL was established in 1982. Its headquarters is in Mumbai. It is one of the biggest engineering procurement and construction companies in the world.

RAYCHEM RPG LIMITED. Headquartered in Mumbai. A pioneer in Heat-Shrink technology and established in 1989 it is a 50:50 joint endeavour among RPG and US group TE Connectivity and is engaged with designing items and administrations taking into account the infrastructure sections of the economy.

RPG CABLE is a division of KEC International. It is headquartered in Mumbai. It is a Top tier plant and machinery and consists of a World Class Quality and IT frameworks.

RPG LIFE SCIENCE  establishment dates back to 1983. It is a speciality developer of pharmaceutical products with the new approaches to work with admittance towards the manufacturing and marketing of fermentation and biotechnology, active pharmaceutical ingredients, and its formulation.

RPG VENTURE is the funding arm of the RPG group, which makes interests in creating new businesses in various areas like health and wellness, technology, automotive, infrastructure, and project management. Its headquarter is situated in Mumbai.

SAE TOWER is headquartered in Mumbai. SAE Towers is one of the largest operating capacities globally. It is also the largest steel lattice tower manufacturers in Latin America

ZENSAR was established in 1989 and headquartered in Mumbai. Zensar is a leading digital solutions and technology services company in alliance with global organizations on their digital transformation journey.

Interested to know about the companies stocks and their fundamental and technical reports. Open a demat account and get expert recommendations before investing.

If you are a salaried person whose income is between 5 lakh to 15 lakh annually, you must be aware of the term tax liability. As the famous saying goes “ A penny saved is a penny earned”. Tax planning is the best way through which you can not only save tax but also increase your salaried income in an effective way.

Once you ascertain the amount of tax you have to pay, you must plan to save tax by availing of tax deduction under the provision act of Income Tax Act.

To achieve maximum tax benefits, you can choose to invest in tax saving options under several provisions of the Income Tax Act.

It could be anything from making voluntary donations, taking a home loan or asking your employer to restructure your salary.

The perfect time to plan for tax saving is earlier as much as you can, mainly at the beginning of the FY to prevent any stress or hassle while filing your INR.

Saving Tax Under Section 80C, 80D and 80E

Making an investment of Rs 1.5 lakh under section 80C helps you to minimize your taxable income in the best possible way. Additional deduction of Rs 50,000 can be claimed by investing in NPS under 80CCD.

On buying Medical Insurance, the maximum deduction allowed is Rs 100000 out of which Rs 50000 is for self and family and Rs 50000 for parents if they come under the senior citizen category under Section 80C.

Claim deduction up to Rs 50,000 on Home Loan Interest under section 80EE.

Understanding Income Tax Slab Rates

The income tax department deduces your tax liability based on your annual income. As per the IT act, individuals who have an income between 2.5 Lakh and 5 Lakh comes under the tax slab of 5% for an annual income. The age limit is 60 years.

Similarly, there are different income tax slabs for individuals having different incomes. For instance, a tax slab of 20% is applicable for an annual income that comes between Rs 5 Lakh and Rs 10 Lakh.

While the tax slab of 30% is applicable for the individuals whose annual earnings come above 10 Lakh. It may be noted that an additional amount is also payable for health (4%) and education (4%).

However, the government provides a full tax rebate for individuals who have an income below 5 Lakh.

Investment Options Under Section 80 C

The foremost way to save tax is only through investing your money into several tax saving instruments. Here, you can avail of tax up to 1.5 lakh under section 80C of the Income Tax Act.

1. Public Provident Fund (PPF)

These are government-backed savings schemes that come with a lock-in period of 15 years. The interest rate of PPC changes every quarter. However, the current interest rate of PPF is 8%.

2. Employee Provident Fund

Employee provident fund is the perfect scheme for salaried employees. Here, 12% of the basic salary and dearness allowance can be deducted by the government. This fund is then invested in numerous government-backed securities.

3. National Savings Certificate (NSC)

NSC has a minimum lock-in period of 5 years with a fixed return of 8%. The interest on NSC is often counted as Rs.1.5 lakh under 80C and is tax-deductible if no investment options are using up the limit.

4. National Pension Scheme (NPS)

A national pension scheme is backed by the government, providing retirement benefits to employees. It provides for two accounts: Tier 1 and Tier 2.

5. Equity Linked Saving Scheme

These are tax saving mutual fund schemes giving the dual benefits of tax saving along with high market-linked returns. The minimum lock-in period of the equity-linked saving scheme is 3 years.

6. Tax Saving Fixed Deposit

These schemes are similar to fixed deposits but have a minimum lock-in period of 5 years. The interest earned on Tax saving fixed deposits from 7% to 9%.

7. Sukanya Samriddhi Yojna

This is a government-backed scheme where you can invest a maximum of Rs 1.5 lakh annually. If you are blessed with a baby girl, you can easily open an account in the name of a baby girl and earn an interest of up to 8.5%.

8. Senior Citizen Saving Schemes

Senior Citizen Saving Schemes have a minimum lock-in period of 5 years and are available to those whose ages cross above 60 years. The interest rate of SCSS is higher than prevailing FD rates and is currently 8.7%.

Other Tax Saving Options Beyond Section 80C

Take a Home Loan

Did you know that taking a home loan could also provide you with tax saving? As per section 80C under the Income Tax Act, paying the amount for both the principal and interest rate of your home loan will be exempt from taxation.

Make Voluntary Donations

You can also save tax by making voluntary donations in numerous relief funds such as the PM relief fund, funds for control of drug abuse and other similar funds. All these donations are completely exempt from taxation under section 80G of the Income Tax Act.

Restructuring of Salary

Restructuring of salary allows employees to restructure their salary in such a way that they are eligible for tax saving allowances.

These allowances include conveyance, House Rent Allowance (HRA), medical treatment etc. You can also claim tax exemptions on Leave Travel Allowance twice in four years.

Tax Saving on Education Loan

Interest paid on education loan is allowed as deduction under section 80E.

How to Plan Your Tax Saving Investments for the Year

The best time to start your tax planning investment is at the beginning of the financial year. Many taxpayers deliberately delay their tax planning which results in hurried decisions. Instead, if you plan tax saving at the beginning of the year, your investment can compound and achieve long term goals.

Conclusion

The above methods explained are various tax-saving methods that allow people to save taxes under different sections of the IT Act.

However, it is important to note that not all tax savers are the same, hence one should select the investments that best suit their individual needs.

The liquidity, safety and returns of the tax investment should be taken into consideration. Make sure that your financial decision is not only based on the returns to be gained from the products but also depends on the different goals that you have set for yourself.

Therefore, it is important to have a clear cut objective about investments and the tax-saving scheme should be linked to the desired objectives.

Many people are aware of the stock market and its functioning. The people who seek stocks as an investment material always prefer to do a bit of stock market research and homework before investing their money in any trade.

When you see any business channel, a single word you often come across is Stock rating. People have many questions regarding the term stock trading such as when to buy, sell or hold a stock.

In this blog, we will highlight the fundamental yet important term share market trading and how the right knowledge of stock rating helps investors and traders to achieve their best trading decisions.

Introduction of Stock Ratings

Stock ratings are used to measure the performance of a stock in a given specific time period. Analysts and numerous brokerage firms keep you aware of many stocks when they issue stock recommendations to investors and traders.

In order to provide effective stock ratings, analysts and brokerage firms go through the financial statements of various companies, talk to the management, and attend conference calls.

The stock ratings are issued once three months or quarterly.

By reading stock ratings, you may notice that the ratings include a target price that helps traders to reach its intrinsic value which in turn gives people an idea about the potentiality of a stock.

Hence by evaluating a stock’s rating, one can get a clear idea of whether you buy, sell or hold a stock.

What Does a Stock Rating Mean?

Research Analysts give recommendations regarding stocks by evaluating their financial performance, reviewing the company’s management, and listening to the company's financial calls on their future prospects.

Sometimes, these analysts have direct access to contact the management team and the customers to get an idea about how the company is performing compared to its past performance.

To get a deep insight into a stock, research analysts also conduct surveys that help them decide which stock deserves the best rating and which does not?

Types of Stock Ratings

Above we discussed stock ratings and how to use them for investment decisions. Here, we will discuss the five types of stock ratings:

1. Buy Ratings

Buy ratings gives recommendations to traders and investors to buy a specific stock which analysts expect that the price of a stock will increase in the short to mid-term.

2. Sell Rating

A sell rating recommends selling a particular stock which means that the analysts expect that the price of a stock will subsequently fall from its current price.

3. Hold Ratings

This rating suggests that the particular stock will stick to the same price for the near term.

The hold ratings tell the traders to not buy or sell the stock but to hold it for a short term.

Hold rating is assigned to a stock where there are some uncertainties or some company’s prediction. For example company’s new service or product launch.

4. Underperform Stock Rating

An underperform rating indicates that the stocks are going to perform down as compared to the market performance or set benchmark.

In such a situation, the analysts suggest you stay away from such stocks or avoid investing in stocks.

For instance, if a stock’s total return is 3% and Nifty’s return is 6%, then it underperformed the index by 3%.

5. Outperform Stock Rating

An outperform stock rating tells you that the particular stock is going to perform well in the stock market and will give outstanding stock market trading returns in the future.

For example, if a stock’s total return is 12% and Dow Jones Industrial Total average return is 6%, then the stock has outperformed the index by 6%.

Analyze Stock Rating For Investment in the Stock Market

Stock ratings provide a lot of impact on the individual stock as it helps traders and investors to get the intrinsic value of a stock that will tell its past and future performance. Also, it gives investors an idea of whether to buy, sell or hold a particular stock.

Although stock ratings tell many things about a stock, investors can also use their own experience to predict the potential value of a stock.

Overall, stock ratings help you to make an appropriate equity trading plan to earn maximum profit.

Hence, if you strategize your move regarding a stock, you may not neglect the stock rating and stay updated with every stock rating.

Key Takeaways

A stock rating is a measure of a stock's performance in a specific period.

Stock’s rating can be categorized into five types: buy, sell, hold, underperform and outperform.

Analysts define the stock rating by researching various companies, talking to management, listening to customer’s reviews, and attending conference calls.

The current ruling political party in India has done a fantabulous come back with a majority of seats in 2019. However, the party took certain decisions which might have hampered its political presence in the rural areas.

The decisions taken by the prevailing party such as GST bills caused a major disruption among the poor people and as a result, the party’s dominance has only stuck to the middle class and HNI sectors.

In the recent election held in 2019, the BJP tally has come down to 99 seats as compared to 119 in 2019. It was due to the negligence towards the rural sector where the party performed poorly.

The party’s stronghold place called Saurashtra having 56 assembly seats, the ruling party could manage to win only 23 seats in 2019, which is far less than 36, in 2012.

The continuous negligence of rural areas has affected the party’s political presence to a much greater extent.

To cope with the situation, the Modi government has decided to invest more in the rural economy to shed its image as pro-industrialist and anti-poor.

Keeping this in mind, numerous programs have been designed to accomplish rural requirements.

In an initiative taken by the government towards rural people, the Modi government has decided to double the farm income by 2022. The government is all set to allocate Rs 1.07 Lakh Crore for the expenditure on rural development.

Of the total amount Rs 1.07 Lakh Crore, the government has already allocated Rs 48000 Crore to MNREGA for FY 2017-18.

According to the media sources, India has nearly 4 Crore households that are unelectrified and the government took a decision to provide electricity to every single village under the Deendayal Gram Jyoti Yojana.

Also, the Pradhan Mantri Awas Yojana plans to provide shelter for the rural people of India.

If things are getting done at this pace, analysts believe that the rural income will increase in the coming years, the rural consumption of resources will get a boom which in turn would prosper the rural society.

As a result, the whole Indian business scenario will completely change. This will also impact the stock market and the trading scenario. Hence trading in such stocks provides you with outstanding stock market trading returns.

Here, we have selected some of the stocks that are likely to benefit from Modi's rural push. These stocks can act as a long term bet for investment purposes. Below are the top 5 stocks which may get benefit from the rural policies:

Mahindra and Mahindra Financial Services (MAMFS)

Mahindra and Mahindra Financial Services are India’s leading non-banking finance companies in India. The company aims at focussing on the rural and semi-urban sectors. In addition to this, the company is the largest tractor financier.

As of September 2017, the company’s AUM consisted of auto/UV (28%), tractors (17%), cars (22%), CV (12%), pre-owned cars (9% and SME (12%).

Its AUM is expected to grow at almost 17% CAGR over FY-17 to 19E to pick up the rural economy that is supported by the average monsoon from the last two years.

NCDs are forecasted to be approximately 60% of the funding mix in FY19E which will reduce the cost of funding and margin expansion by nearly 130bps.

Investing in MAMFS stocks offers you great stock trading returns.

Hero Motocorp

Hero Motocorp Limited is the largest manufacturer of motorcycles in India having a market share of 53% as per the Q2FY18 domestic sales data. The company recovers half of the revenue from rural India.

In FY18, the total volume growth experienced by Hero motorcycle was 13% and two-wheeler was 11%. Moreover, the company is planning to launch its new brand new scooter to increase the market share in a particular sector.

With this aim (launching of the scooter), Hero seeks a 25bn Capex plan for over 2 years.

The government’s push to double the farm income, adolescent monsoon and the increment of urban income is the strongest points that will contribute towards the growth of the company.

Despite the company has made a late entry into the export market, it plans to do the exports in a double way in the upcoming years. Hero Corp seeks huge growth in the coming years and the stocks of the company will generate better share market trading returns.

Dabur India

Every citizen of India heard the name Dabur. Dabur India is one of the fast-growing FMCG companies in India that diversified its business majorly into the 4 segments: consumer care, retail, food and international business.

The company behaves like a beneficiary of rural expansion and development of existing as well as new products.

The company’s main products Dabur toothpaste and juices are the products that drive the company’s major revenues as the toothpaste are already reaching the rural areas.

To revive its rural consumption, Dabur India plans to penetrate nearly 60,000 villages.

The additional products launched by the company such as hair care, fruit drink and other ayurvedic products help Dabur to increase its volume growth.

Also, the company’s recent acquisitions in the African market in the hair care and personal segment strengthens its online presence with e-retailers which in turn will generate high profits.

Rallis India

Rallis India is a vast manufacturer of fertilizers, pesticides and fine chemicals. The company is an active member of the Tata Group, which aims to improve the quality and yield of the crops through the Rallis Samridh Krishi.

This is a digital initiative taken by a Tata Group that helps Indian farmers end to end Agriculture solutions.

Apart from launching the Rallis Samridh Krishi Yojana, the company is planning to launch its new products in wheat, rice, cotton and hybrid cotton segments.

By doing this, the company’s objective is to increase the market share of the Non-Pesticides Portfolio.

Rallis India also plans to increase its focus on plant growth to support the sustainability of crop yields.

The company is targeting a 20% sale’s increase from its subsidiary Metahelix.

Jyothi Laboratories Ltd

Jyothi Laboratories Ltd is a renowned name in the homecare sector. The company is known for producing soaps and detergents for home care.

Although Jyothi laboratories is a south India based company, it has spread business in multiple sectors that would help it grow its market share in the respective categories.

The six powerful brands of Jyothi Laboratories are - Ujala (fabric whitener), Henko (fabric detergent), Exo (Dish Bar), Margo (Bath Soap), Prill (Dish wash) and Exo (Dish Bar).

These products contributed nearly 87% of revenue in FY17. Keeping this in mind, analysts have predicted that by investing in Jyothi’s laboratories, investors would generate better returns than other mid-cap stocks.

Takeaway

With the government’s initiative to strengthen the rural sectors, the companies stated above are doing their best towards rural growth. As a result, the stocks of these companies are likely to increase in the upcoming months.

Therefore, many analysts recommended these stocks by giving them a positive sign.

Stock’s performance has always remained uncertain. That’s the reason, analysts have to keep an eye on stock price movement. They use different tools and charts to analyze the stock’s performance in order to predict its future potential value.