Fall in Indian Currency.

Indian currency, rupee is falling down day by day. It is expected that it may also fall in near future. The main reason behind this fall is the increasing Current Account Deficit or Trade Deficit. Current Account Deficit or Trade Deficit means the excess of import over the export.Current Account Deficit increases problems for the economy when it becomes more than 2.5% of the GDP.It becomes the main reason for the devaluation of the money.It becomes good for the export but bad for the import.

The import limit of India is increased because of the day by day increase in the import of crude oil and Gold.Government has increased the tax on Gold to reduce the consumption.But Government can't do any thing to reduce the consumption and demand of crude oil.If government will increase the price of diesel then it may become one of the solution to reduce its demand.

The policies which government has announced on 25th June to stop the devaluation of money such as increase in the limit of different types of bond purchased by foreign investors, reduce the lock in period

for the foreign investor which invest in bonds ,increase in the limit of debt which Indian companies  take from foreign etc.I think that these steps are not the permanent solution because all the steps are much more related to increase the dollar reserve means to increase the FIIs. To bring the stability in the economy ,Government has to make good policies to increase the FDI investment.

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Importance of financial planning

Financial planning is very required for all people, what so ever his/her income is. A habit of saving must be necessary for all people because no one in this world know about his/her future. As we all know that future of a person is very uncertain. So, take the right step at the right time.

 If you do not know about the plans and policies of different companies, their interest rates and feel difficulties to decide about your investment then you can take the help of a financial planner. We can define financial planner as the professional who will help you to put your money in the safest place and earn a good return from your investment.

 You can easily understand the requirement of saving and financial planning with the help of following figure.

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Advantage and disadvantage of service based economy

I want to discuss some of the advantage and disadvantage of service based economy and whether it is good for an economy to be fully based on service sector?

Later I shall introduce the service based economy USA and at last, like to conclude this discussion.

  

ADVANTAGE OF SERVICE BASED ECONOMY

•      It can give faster and more flexible adjustment in times of economic crisis or downturns.
•       It minimizes environmental degradation from heavy industry
•        It allows for faster economic development than that which follows the traditional pattern
•       Reduce the material & energy consumption.
•       Enhancement of Knowledge.
•      More customer oriented product for their satisfaction.

DISADVANTAGE OF SERVICE BASED ECONOMY

•     More dependability on other country for goods.
•     Trade deficit is increased because of more import and less export of goods.
•     manufacturing jobs  have been lost to outsourcing of products
•      More skilled employees & workers are required.

USA Economy is an example of service based economy because nearly 80-90 % of the GDP comes from the service sector.

The US is the largest and most technologically powerful economy in the world. Most of the US population is well educated and their spending power is better than other parts of the world. But, increasing trade deficit is slowing down the growth of U.S. economy as hundreds of billions of dollars are going to the rest of the world. Imported oil accounts for about 60% of US consumption. Long-term problems include inadequate investment in deteriorating infrastructure, rapidly rising medical and pension costs of an aging population, sizable trade and budget deficits.

Conclusion

• An economy cannot be totally reliant on services alone. However a service-economy is a sign of economic growth and development of the country and it shows the strength of the economy.

•  US is service-based economy. It means that they have highly skilled and competent workforces who work in the tertiary sector.  US also has primary and secondary sectors- but they're not that dominant as compared to tertiary sector

•  A service-based economy will be reliant on other countries for manufacturing products and import goods to fulfill the demand of primary and secondary sectors.

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Effect of Eurozone Crisis on China

As we all know that Euro zone crisis has affected the whole world..No economy is untouched with this crisis. When we talk about the china, which is the world's second largest economy after USA and it's GDP growth was highest, also suffered from it. As China's manufacturing sector shrank for eight straight month. It's export is also goes down. Many of the banks and companies are planning for the job cut. It is expected that if the economy's GDP will dips down below 7% then a huge job cut will be seen.As the Investment banks and brokerages across Asia  have launched a sweeping round of job cuts as Europe's debt crisis and China's economic slowdown bite into the region's financial activity. CLSA , Deutsche Bank, Goldman Sachs, and UBS were among the banks and brokerages that cut jobs

We know China for it's manufacturing industries through which it gives jobs to both educated and uneducated people.But as the manufacturing goes down so the job cut is usual.Demand for long term loan is also shrinking. However analysts say the central bank may have to ease policy further by cutting Reserve Requirement Ratios(RRR) or interest rates again to stabilize the economy.

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Market & rating agencies

Rating agencies plays a very important role in stock market & the decision making of the investors.The role of rating agencies is to rate the countries, organization & Banks according to  the financial & debt position.

The investors sentiment is very much related to these ratings agencies if they downgrade their rating for these economy & organization then investors want to take out their money from the market and if they keep the rating unchanged or upgrade the rating then at that time  Investors becomes ready to invest.AS some days before different credit rating agencies downgrade different banks and countries of the world for the investment purpose then most of the indices go in the downward direction.

According to me these rating are not always very perfect because rating given by these companies depends 

on many aspects & parameters.  So, if one aspect of the country or organization is not good then it may happens other aspect is very good.

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Addiction of Intraday Trading

In Intraday trading I think that the person who do this trading becomes addicted  to do that , whether you are in profit or loss. I think a profit gives more energy to sustain the loss & we always think that in next day we can take a higher profit which will fulfill all our losses.
 Intraday trading become a game of loss when we will trade in multiples of own money to gain more profit. It means that If you have INR 10,000 in your account then you can trade in 10 times of your money. It means you can buy shares of INR 1,00,000 but, we have to sell share of INR 90,000 in that particular day because this extra money is provided for that day only.

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Intraday Trading

According to my experience,  Intraday trading can  give us more benefit if we will take care of the following things.

• It becomes beneficial when  market starts in negative and it goes to positive after 2-3 hours.
• Intraday is good when we trade in the share whose price is more than INR 90.
• We must have to review the ups and down of the share from historical data available on the site of different stock exchange.

• We must have to updated with the public news available in the market.
• Most of the ups and downs come in the market before 1P.M. and after that we can  buy  the shares at its lowest price and can sell it after taking a good benefit. 

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India is an emerging market.

India is an emerging market with young population.World's market leaders want to open their offices here.Many foreign motor car companies such as Nissan, Ford have made India their export hub. But in last 9 months this economy goes down very poorly because Rupee has losses its value continually and the government has no attractive policy to attract the foreign investment.
But  a ray of hope is seen when on Saturday, government said that It will announce new policies on Monday.
So,It is expected that Indian market may take a hike and rupees position will be improved.

As Fitch downgraded India from Investment point of view, then many foreign investors take out their money from the market.This market is also take a negative effect when Moody, a  rating agency had downgraded  top 15  banks of the world.We all know that euro zone  crisis is already effected the whole world.

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Risk Taking Ability

How much risk a person can take in his life?
It depends on the risk taking ability of the person .According to me the risk taking ability of a person depends on many things such as age,family situation , economical & political environment etc.
I listen  from many people that when anyone has to invest in equity ( which is most risky) then he has to take care of the following formula
                       Percentage investment in equity = ( 100 - age of the person ) %

Remaining investment he can do in Unique Investment Insurance Plan,Mutual Fund ,Governments Bonds & debentures.
Family situation also plays an important role during the decision of investment & saving because if your family situation is good then you can save a bigger part of your income and can invest more money in equity.

Economic & Political environment : If the economical & political environment of the country is good then investment in equity  becomes better and then investment in equity is not very risky . We can say it is good and It can give a higher return.

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Future of Insurance sector in India

According to my point of view the future of insurance sector is very good in India. As the current market share of new companies is not  attractive but the potential market is very attractive and lucrative in India.Insurance has get popularity in cities as most of the members in every family is insured where as only head of the family is insured in towns.The position of insurance sector is worse in the villages .People living in  villages  do not know the importance of insurance and no family member is insured in many of the families.

New companies which entered into the India is not because of the current market but because of the potential market as the population of India is also increasing continually .They believe that if they will educate people about the importance of insurance then a good response may come.

To get success in India  companies also have to change the mindset of people because the Indian people believe more on public sector companies.So, The companies belong to private sector must have to provide the lucrative product with user friendly facilities.
                                                                         

 

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Current State of Indian Economy

Indian currency touches its record low and reason behind this fall is ,both the global and Indian issues.When we talk about the Global issues then the euro zone crisis is the most important and when we talk about the Indian issue , the increasing Current Account Deficit of the country  is  important.

Now the Reserve Bank of India and the Government of India are taking steps to control the fall.Both RBI and GoI want to attract the investment from foreign countries so that their dollar reserve can increase.As the demand of dollar is very high by the importers.

From these steps ,a hope is seen to control the fall.

On other hand the rate cut from the Reserve Bank of India was expected from the investors,but it didn't happened and this news hits the sentiment of investors. Its direct effect was seen on the same day on stock exchange when indices goes down very quickly.This step of RBI create hurdles for the banks because now they will face difficulty in the rate cut in different types of  loans.

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Eurozone Crisis & its Effect

Eurozone crisis was started from the Greece & now, Spain is also in Trouble.This two and a-half-year old crisis put in trouble the whole worlds economy.June was the fifth consecutive month that activity across the eurozone has declined, dragging down Germany and France and putting pressure on the European Central Bank to take further action to support the economy.

Eurozone stocks traded lower.

Germany has posted it's lowest reading in the manufacturing and the service sector in 7 months.France activity declined in both sectors with moderate pace than last month.

Its effect on US   : Europe is a trading partner with US and about 2 percent of the US GDP  is  effected by it. But the perception that is created for US investors is that the eurozone has a significant impact on the company's prospects.So, US market is over reacted.

Its effect on emerging market  : The linkage of eurozone with emerging market is very less and these market is not much more effected by it. There is general malaise, which is keeping investors on the sidelines.

Now, The new government is formed in Greece & it  looks for two years more from lenders to meet targets.The delay of the bailout deadline and on extension of the unemployment benefits are key elements of 

the new government policy document. 

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Overview of the Stocks

World stock markets mostly slid on Friday , bank share goes down  after Moody's downgraded some of the biggest banks including HSBC.The health of 15 of the world's biggest financial institutions has been called into serious question after Moody's downgraded their credit ratings, citing risk exposure and the euro zone crisis.

 Some of the biggest names in banking -- including Goldman Sachs, Bar clays, Citigroup and Deutscheb Bank saw their ratings slashed on Thursday after the close of US markets, spelling increased investor scrutiny and potentially higher borrowing costs for lenders.

 Europe's main stock markets were lower approaching the half-way point after losses for equity indices in Asia and on Wall Street overnight in the wake of weak manufacturing data from China and Europe.

The US Federal Reserve's light-touch stimulus on Wednesday also weighed on share prices with concerns it would not be enough to boost the economy.

Spanish and Italian bonds came under renewed pressure. Debt crisis had pushed business confidence in Germany, Europe's biggest economy.

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Government Budget & Its Importance

Budget is a statement of estimated receipts and expenditure of the government in respect of every financial year.we can also understand the budget in a very simple way because it is prepared in every house in the beginning of every  month.
As the government budget is a very broad concept.This comprise of
    (1) Revenue budget
    (2)Capital budget
Revenue Budget : The revenue budget shows the current receipts of the government and the expenditure that can be met from these receipts.
Capital Budget : Capital budget shows the requirement of the government and the pattern of their financing.
It consist of capital receipts and capital expenditure of the government.
 When a government spends more than its collects by the way of revenue , it incurs the budget deficit.

Revenue deficit :  The revenue deficit refers to the excess of the governments revenue expenditure over revenue receipts.
Fiscal deficit :  Fiscal deficit is the difference between the government's total expenditure and its total receipts excluding borrowing. These deficit is financed by the government by increasing the tax burden on the public and the organizations or by disinvestment in PSUs.

Budget plays a very important role because it is a framework on which government applies the policies related to revenue and expenditure.It helps the economy  to work in a efficient way and to identifies the weakness.
                                 

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Insider Trading

Insider trading is not legal .The trader who do the insider trading use some private information of the company and buy or sell the stocks before this information becomes public.Insider trading can be done by the promoter,director ,broker or any family member or friend of these people.

                               Insider trading is a crime because they take a huge benefit from the company's inside's

private information.If these people have some information which may proven bad for the company in the future and  they know if,this information will become public ,share price will go down then they sell their share at higher price before the information becomes public.

                                And if they know some information is very good for the company and share price may take a higher pick from this then they buy a huge amount of share before this information becomes public.

     

Insider trading is a big offense and some countries has made very hard and fast rules for it.

A jury found Rajat K. Gupta guilty of leaking Goldman's private board room discussion to former hedge fund titan Raj Rajaratnam.He was acquitted on account to divulging secret about P&G. Now they are in a big problem.
                                

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Central Bank's policy and its effect

Evey free economy's  monetary & bank's policy is regulated by the central bank of that economy.Central bank controls the demand and supply of the money in the market through the increase or decrease in the various policy instruments such as CRR ,SLR, Bank rates etc.Central Bank uses various policy instrument to bring forth a healthy reserve deposit ratio  in commercial banks.

Cash Reserve Ratio which specifies the fraction of deposits that banks must keep with the central bank.

Statuary Liquidity ratio which require the bank to maintain a give fraction of their total demand and time deposit in the form of specified liquid assets with the central bank.

Bank Rate is the rate at which commercial banks can borrow money from central bank of the country when they run short of reserves.A high bank rate makes such borrowing costly and in effect,encourages the commercial banks to maintain a healthy Reserve Deposit Ratio.

If the central bank wants to control the supply of money in the market then it increases the rates.It also increases the rates when the inflation of the country increases.The increased money supply may not altogether be good for the economy's health. If the volume of goods and services produced in the economy remains unchanged,then the extra money will lead to increase in prices of all commodities.And at that time when people have more money with them then they will compete with each other in the commodities market for buying the same old stock of goods.

So, the central bank plays a very important role to maintain the equality in the economy.
                                            

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Investment in Undervalued Shares

Are you a trader ?Are you interested in long term trading?If yes, then pick up undervalued shares and book profit in future.

 Undervalued Share - When the price of the share is less than it's intrinsic value then it is said to be undervalued.We can determine the undervalued share from the following things

• The company's PE ratio is good
• The company's earning history is stable.
• The company is not in the middle of some financial scandal.
• The company's low PE ratio is not due to profits from capital gain or due to major decline in profitability etc.

If we think in a very simple way then the share of a good company is said to be under valued when it is at a price which is lower  than the face value of the share because the price of a good company's share always increases where as the share of a financially weak company is  said to be over valued even when  it's share price is lower than the face value because this company can become insolvent at any time in the future.

We can earn a good return from the undervalued share if we shall become able to identify an under valued share very smartly.

                             

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Types of Trading

As a trader when we enter into the stock market we are very confused about the  type of investment ,means whether we want to invest in long term or want to do the intraday trading. And at  that time we are also think about the choice of the stock.
         If want to invest our money to buy the stock at lower price and sell it at higher price in future then it is called the long term investment and for this  we have to analyse the past one year performance of that stock.We can get the past data from the NSE Site.It means we  have to see the highest and the lowest price of the past one year . From this we can predict our stock's future performance.
      When  we think about the intraday trading then we have to analyse the intraday fluctuation of that paticular stock. As we know intraday trading is very risky but it can give you the higher return, if we shall take care of the stock's past 10-15 days intraday performance.You can get the past performance from NSE Site. Intraday trading is affected by the news of that particular day also.

We can take the example of 18 Th June when the Indian stock market goes down on the response of the two news
1. Fitch lowered the India's credit rating outlook to negative.
2. RBI keeps key rates unchanged.
So, If you want to inter into the stock market then don't enter as a naive or stranger.

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Share market a place of uncertainty

Share market is a place full of risk and joy .When we invest in the share market we do not know about the future so it is an uncertain market and a single wrong decision can give us a huge loss. So, we must have to analyse the information which is present in the market from various sources such as newspaper ,internet ,magazines ,television  etc.

Before investing in the share market we should analyse some of the shares according to the economical ,political , industrial and through the company’s information.

In the economical analyse we take the view on the following things such as

·         Foreign exchange rate

·         Central bank’s policy

·         Rating give by various recognised credit rating agencies

·         Taxation structure of the government  for the particular industry in which we want to invest our money

·         Debts position of the country

·         Foreign investment policies of the government and so on.

When we go for the industrial analysis . First of all we have to classify the industry such as mining ,services ,retail ,manufacturing industry etc. We should also analyse the industry life cycle because the risk varies according to the stages.whether it is in pioneering stage ,expansion stage ,stabilisation stage or in  decay stage. As  the risk is high in the pioneering and decay stage because at that time the growth of industry is uncertain whereas the risk is comparatively low in the expansion and stabilisation stage.

Some important qualitative factors that define an industry are

·         Performance

·         Labour  condition

·         Competitiveness

·         Industrial policy of the government

At last we will do the company analysis and we should analyse the following variables

·         Sales position

·         Competitive position

·         Dividend policy of the company

·         Profitability

·         Management

·         Capital structure etc.

After analysing the above factors we can invest our money very smartly.


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