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Top Reasons to Choose a Mutual Fund App

Investing in mutual funds can be a rewarding financial strategy, but managing your investments effectively can often be complex and time-consuming. Fortunately, the emergence of a mutual fund app has simplified the process, offering a convenient solution at your fingertips.

In this blog, we will delve into the compelling reasons why opting for a mutual fund app is a smart choice.

What is a mutual fund app?

A mutual fund app is a software platform that streamlines mutual fund research, tracking, and investing. It provides a convenient alternative to visiting websites or contacting customer service. Moreover, the app's mobile accessibility enhances the ability to stay updated on-the-go, ensuring investors stay well-informed and effectively manage their long-term investment portfolios.

Why choose a mutual fund app?

Here are some key reasons why you should consider using a mutual fund app for your investment needs:

All-in-One Convenience

Mutual fund app provides a comprehensive platform where you can monitor the market, explore a wide range of investment options, and make investments, all in one place. Additionally, you can link your bank account for seamless and immediate transactions.

User-Friendly Interface

Mutual fund apps are designed to simplify the investment process, offering a user-friendly interface. You can easily browse through various investment plans, evaluate their performance, and choose the ones that align with your investment goals.

Anywhere, Anytime Access

A mutual fund app enables you to invest anytime and from anywhere. With mobile accessibility, you have the freedom and flexibility to manage your investments on the go.

Paperless Experience

Most mutual fund apps allow you to complete the Know Your Customer (KYC) process and other verifications by uploading scanned documents. This ensures a hassle-free and entirely paperless investment experience.

Research Capabilities

Stay updated with the latest financial news and insights by receiving daily news alerts and analysis through top mutual fund apps. Access scheme-related data to make informed investment decisions.

Market and Portfolio Updates

With the help of a mutual fund application, you have constant access to market information such as shares, commodities, stock indexes, and more. It allows for real-time portfolio reviews and updates on market conditions.

Notification Feature

The notification functionality stands out as a notable feature of a mutual fund app. The app will send you alerts no matter where you are to let you know about the most recent happenings in your portfolio and broker suggestions.

News Updates

Users of mutual fund apps can follow real-time updates on events pertaining to a specific stock or market segment.

Is investing using mutual fund apps safe?

Investing through mutual fund apps is considered safe as they implement robust security measures and adhere to SEBI regulations. Transactions are designed to minimize the time funds spend with intermediaries, ensuring quick and secure processing. If a transaction doesn't occur on a specific day, the money is promptly refunded.

How to withdraw funds from a mutual fund app?

The procedure for withdrawing funds from a mutual fund app differs depending on the particular app in use. Typically, it involves selling or redeeming a portion of your mutual fund units at the net asset value for that day, based on the desired amount. After a successful redemption, you can initiate the withdrawal. Certain apps offer the alternative of investing in liquid funds for immediate cash, enabling withdrawal within 30 minutes, subject to the submission of a power of attorney for your account.

Conclusion 

Choosing a mutual fund app offers a multitude of advantages for investors seeking convenience, efficiency, and better control over their portfolios. Whether it's monitoring portfolio performance, making informed investment decisions, or staying updated on market trends, a mutual fund app empowers investors to navigate the complexities of the financial world with ease.

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Strategies for Identifying and Investing in Top Gainer Stocks at Their 52 Week Highs

Stock investing can be a lucrative endeavour, especially if you can identify top gainer stocks at their 52 week highs. These stocks have shown consistent growth and upward momentum, making them appealing to investors. Identifying and investing in such stocks, on the other hand, necessitates a strategic approach. We will discuss some effective strategies for identifying and investing in top gainer stocks at their 52 week highs in this article.

Research and Analysis: Thorough research and analysis are essential before investing in any stock. Begin by identifying sectors or industries that have demonstrated strong performance and potential for growth. Look for companies that have consistently delivered positive financial results in these industries. Examine their financial statements, earnings reports, and prospects for the future. This research will assist you in identifying stocks with the potential to be top gainers stock.

Fundamental Analysis: Fundamental analysis is the process of assessing a company's financial health, management team, competitive advantages, and growth prospects. Key financial ratios to consider include earnings per share (EPS), price-to-earnings ratio (P/E), return on equity (ROE), and debt-to-equity ratio. A company with solid fundamentals is more likely to maintain its growth and perform well over time.

Technical Analysis: Technical analysis is the study of stock price charts and patterns in order to identify trends and potential entry points. Look for stocks that have recently hit 52 week highs and show signs of continued growth. To confirm the stock's strength and potential for further gains, use technical indicators such as moving averages, the relative strength index (RSI), and volume trends.

Monitor Market Sentiment: Market sentiment has a significant impact on stock price movements. Keep up to date on market news and trends that may have an impact on the performance of specific industries or companies. Positive market sentiment can propel stocks to new highs, making them attractive investment candidates. However, excessive market optimism should be avoided because it can lead to overpriced stocks.

Diversify Your Portfolio: Risk management relies heavily on diversification. Rather than putting all of your money into a single stock, diversify your investments across sectors and industries. This reduces the impact of a single stock's poor performance on your overall portfolio. Diversification increases your chances of profiting from multiple top gainer stocks.

Set realistic expectations: Investing in top gainer stocks does not guarantee immediate or ongoing profits. While these stocks have performed well, it is critical to maintain realistic expectations. Stocks at 52 week highs may experience short-term price corrections or consolidation periods. Prepare for market volatility and invest with a long-term outlook.

Consider the following growth drivers: Determine the growth drivers that contribute to a company's success. Look for companies with a competitive advantage, innovative products or services, growing market share, or a strong presence in emerging markets. Companies with long-term growth drivers are more likely to perform well in the future.

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The Essentials of Option Trading You Need to Know

When it comes to building an investment portfolio, it's common to include a mix of stocks, mutual funds, ETFs, and bonds. However, there's another asset class that can offer unique advantages called options trading. While stocks and bonds have their merits, options present opportunities that go beyond traditional investing.

In this blog, we will explore the fundamentals of options trading, how it works, and key advantages and disadvantages  to help you navigate this dynamic and rewarding financial landscape.

What is Options Trading? 

Options trading involves participating in the buying or selling of options contracts. These contracts provide the holder with the ability to buy or sell a predetermined set of underlying securities at a specified price during a specific period. The buyer (holder) pays a premium to the seller (writer) for this right. This approach enables investors to speculate on stock performance without risking more than their initial investment. However, options trading entails intricate strategies, associated risks, and additional regulations to consider.

How does Options Trading work?

Options trading involves speculating on the direction, magnitude, and timing of stock price changes. You can enter into a contract to buy or sell a company's stock based on these predictions. The basic types of contracts are calls and puts. 

As a holder, you can exercise your right to buy or sell, sell your contract to someone else, or let it expire. Holders can potentially make unlimited gains if they predict correctly or lose their initial investment if the contract expires worthless. Sellers profit from the premiums charged but face potential losses if the market moves against them.

Why trade Options?

There are three main reasons why people trade options.

Hedging

Hedging is like having insurance for your investments. Options can help minimize the risk of sudden market changes. For example, if you own a stock and worry it might drop, you can buy a protective put option to offset potential losses.

Speculation

Speculation is when you make predictions about how a stock will perform. With options, you can place bets on stock movements without actually owning the stock. If your prediction doesn't come true, the most you can lose is the money you initially invested.

Profit

Options can also be used to make profits. Writers of options contracts earn premiums from buyers. However, they also have an obligation to fulfill the contract at a specific price, which can result in losses if the stock moves unfavorably.

Advantages of Options Trading

Advantages of options trading include affordability compared to stocks, as options require less initial capital. While there is potential for high rewards, the risk of contracts expiring worthless remains. Options can serve as an insurance policy, enabling holders to hedge against losses by purchasing contracts inversely related to their owned stocks. Additionally, options provide the benefit of locking in a fixed price, offering a sense of security in uncertain market conditions.

Disadvantages of Options Trading 

Disadvantages of options trading include the need for educational investment. Mastering the vocabulary, jargon, and strategies associated with options can be overwhelming, especially for new investors or those seeking a hands-off approach. Sellers of contracts face high risks, including potentially unlimited losses. Holders may incur additional costs such as setting up margin accounts with fees and interest rates. Careful planning and tax strategies can help mitigate these liabilities.

Conclusion 

Understanding the essentials of option trading can greatly enhance your investment portfolio. With its unique advantages and opportunities, options trading offers a valuable asset class to consider. To make the most of your options trading journey, leverage the convenience and accessibility of a reliable trading app. Start exploring the world of options and elevate your investment strategy today.

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canara bank, BOB and SBI share price

Canara Bank is one of India's largest public sector banks and has been around since 1906. As of now, the stock was trading at INR 275.55 per share. The bank has been focusing on improving asset quality and reducing non-performing assets (NPAs), which is a positive sign for investors. Additionally, Canara Bank's merger with Syndicate Bank has created a larger entity with improved access to resources, which will ultimately benefit shareholders. Overall, expert opinions suggest that Canara Bank is still a solid bet for investors who are looking for steady returns over time rather than short-term gains. But as with any investment decision, it's always good to do your research and make informed choices based on your own financial goals and risk profile. 

Read more about Canara Bank Share Price

BOB Share price

BOB is a publicly traded company and is listed on the New York Stock Exchange. The company operates in the banking industry and provides a range of financial services to its customers. Baroda is one of India's largest banks and its stock has been performing well in recent months. Several factors have contributed to this impressive performance, including increased lending activity in the wake of government stimulus measures and improved asset quality. Additionally, BOB announced a successful merger with another Indian bank Corporation Bank last year, which has boosted investor confidence. While the current market conditions are unpredictable, many analysts remain optimistic about BOB's future growth potential as it continues to solidify its position as a leading bank in India. Today the BOB share price stands at INR 160.05 per share. 

SBI share price

State Bank of India's (SBI) share price has been quite interesting recently. State Bank of India (SBI) is one of the largest banks in India and has a huge impact on the Indian economy. In the past year, SBI's share price has seen some ups and downs due to various factors such as changes in government policies, economic trends, and global events. However, overall, it has remained stable with occasional fluctuations.  Additionally, their recent move to merge with several other banks is expected to bring significant cost savings and operational efficiencies, potentially leading to better returns for investors in the long run. 

As of now, its share price is INR 508.55 and at a healthy level with decent growth potential. With increasing consumer confidence in the banking sector and positive growth prospects for the Indian economy, SBI's stock is expected to perform well in the coming years. So keep an eye out!

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10 tips for navigating the share market

Everyone is aware that the stock market may be a profitable venture if you know what you're doing, but novice investors frequently lack a thorough understanding of how the market operates and the precise reasons why equities rise and fall. Before you begin investing, here are some tips for navigating the share market.

Knowing how to invest well over the long run

Peter Lynch frequently discussed "ten baggers"—investments that saw a tenfold increase in value. He said that a select few of these stocks in the share market in his portfolio were the reason for his success. Yet if he believed there was still tremendous upside potential, he would need to have the self-control to hold onto equities even after they had appreciated by a significant amount. The lesson is to not hold to arbitrary standards and to evaluate a stock according to its own merits.

Build a diversified investment portfolio

Diversification in the share market is crucial because it lowers the likelihood that any single stock in the portfolio will significantly detract from overall performance, which actually increases overall returns. In contrast, if you only purchase one stock, you are effectively putting all of your eggs in that one basket.

Taxes should be a concern but don't worry

Investors who prioritize taxes may end up making poor choices. Tax ramifications are significant, no doubt, but investing and safely growing your money comes first. While you should work to reduce your tax obligations, getting large returns should be your top priority.

Never follow a hot tip

Never take a stock suggestion at face value, regardless of the source. Before you invest your hard-earned money, always conduct your own research on a company. Certain tips can be profitable depending on the source's credibility, but a thorough investigation is necessary for long-term success.

Choose a course of action and follow it

There are numerous approaches to stock selection, so it's crucial to adhere to just one style of thinking. Vacillating between different tactics essentially makes you a market timer, which is risky ground. Consider how renowned investor Warren Buffett avoided the dotcom boom of the late '90s by adhering to his value-oriented strategy, avoiding significant losses when tech businesses failed.

Selling off investments

Being realistic about the possibility of underperforming investments is vital because there is no assurance that a stock will recover after a protracted slump. Also, while admitting to losing stocks may psychologically signify failure, there is no shame in making corrections and selling off holdings to prevent additional loss.

Don't worry about minor specifics

It's better to follow an investment's long-term trend than to freak out over its short-term fluctuations. Have faith in an investment's bigger picture and resist the urge to be influenced by volatility in the short term.

Don't overstate the few pennies you might save by using a limit order as opposed to a market order. Yes, savvy traders employ minute-to-minute variations to secure profits. But, long-term investors are successful over spans of years or more.

Maintain a long-term vision and concentrate on the future

Making educated judgments about future events is a requirement of investing. Although historical data can predict future events, this is never a guarantee. Significant short-term gains can frequently lure market novices, but one needs to remember that long-term investing is crucial for higher success. Also, while short-term active trading can generate profits, there is a higher risk involved than with buy-and-hold tactics.

Don't emphasize the P/E ratio too much.

Price-earnings ratios are frequently given significant weight by investors, but focusing too heavily on one statistic is unwise. The ideal way to use P/E ratios is in conjunction with other analytical techniques. As a result, neither a low P/E ratio nor a high P/E ratio implies that a security or firm is inherently cheap or overvalued.

Begin right away

It usually doesn't work well to wait for the ideal moment to invest in the stock market. Nobody can say with absolute confidence when it is best to enter. Also, investment is a long-term endeavor. There is no ideal moment to begin.

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Should You be Averaging Out Your Investments in Adani Stocks?

Post-COVID-19 pandemic, the Indian securities markets have witnessed a massive surge in the participation of retail investors, supported by an influx of trading apps. This increased participation kept the markets upbeat throughout 2021, even when the global markets weren’t faring well.

Retail investors showed high interest in the IPO offerings of new-age startups, which eventually waned due to a lack of profitability. In contrast, Adani Wilmar's IPO received a muted response at first but quickly turned into a multibagger over the course of the year. Other Adani stocks followed suit, gaining significantly on the back of investor interest, with valuations soon turning frothy.

The Hindenburg Shock

The euphoria was short-lived, as Hindenburg published its research report, alleging several discrepancies in Adani's financials. As a result, the flagship Adani Enterprises stock slid to a low of Rs. 1,017 on January 24, a colossal fall from its highs of Rs. 3,400 in the past year. The total market capitalisation of the Adani Group is down over 50%, amounting to Rs. 8.5 lakh crores.

In fact, retail investors' total stake in the Adani Group's nine stocks has fallen to Rs. 30,100 crores from Rs. 56,435 crores as of December 30, 2022. This is despite their holding under a 3% stake in the majority of Adani stocks, with Adani Wilmar, ACC, Ambuja Cements, and Adani Power, being the exceptions.

The Law of Averaging Out

So the Adani stocks are down, which means so are your portfolio valuations? Does it signal it’s time to open your trading app, constantly monitor for further lows, and indulge in averaging? Probably not.

For the uninitiated, averaging is the practice of lowering or improving the share prices of your stocks. Buying on dips is the poster child of averaging. So, if an Adani stock is going down and you decide to buy even more of it at lower prices to raise your total investment stake, you are averaging out your stock investments.

But the question is, why would you? Because of the sunken cost fallacy. Once investors see a huge market correction in stock, they believe it is a good buy and expect it to rise again. But most of the time, it only results in value erosion. 

Historical Trends of Stock Corrections

As the data shows, stocks with steep corrections mostly do not recover. This is particularly the case for the shares that fall over corporate governance issues or high debt levels. In fact, approximately 82% of companies that were removed from the NIFTY index between 2007 and 2021 never ever broached their all-time highs.

Thus, stocks that correct over 50% due to poor financial performance or management have a hard time recovering their fortunes. But does this scenario apply to Adani stocks?

Adani Stock Valuations

While there are no major concerns over the group’s fundamentals, the stocks continue to be overvalued, even after the Hindenburg correction. Adani Enterprises and Adani Total Gas continue to trade at 139x and 213x PE, respectively.

However, debt levels may cause concern, with over $2 billion in bonds due for repayment next year. Additionally, with Adani not going forward with its FPO, the cash flow situation could be murky.

And yet, the group continues to attract interest from HNI clients. While it is still unclear how this scenario will eventually pan out, retail investors would do well to err on the safe side.

Are you looking for an easy way to execute your trades while easily keeping up with market trends? Check out Angel One’s trading app now!

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Are IPOs Set to Rule 2023?

It’s halfway through January, and we have already seen two companies listed on the bourses with more in the pipeline. 

Sah Polymers debuted on the stock exchange at a premium price of Rs. 85, and surged further to Rs. 89.25 intraday, thus, resulting in a 5% upside, and hitting the upper circuit (as it is a small-sized IPO listed in the trade-for-trade segment). Indeed, Sah Polymers’ IPO gained over 37% on the listing day itself, against its issue price of Rs. 65, making it one of the best-performing IPOs in the last two months.

Similarly, despite low analysts’ expectations, Radian Cash Management Services listed on January 4 at Rs. 103, a premium to its issue price of Rs. 94 and outperformed the bearish equity markets.

Furthermore, Cyient DLM, an electronic manufacturing services provider, has filed its draft prospectus with SEBI to raise Rs. 740 crores through an IPO. Some of its peers, including Kaynes Technology India, Rivals Syrma SGS Technology, and DCX Systems, have already listed last year and are trending upwards.

IPOs Trends in 2022

Unlike the blockbuster year of 2021, which saw various new-age startups, such as Zomato, Nykaa, and PayTM, launch their IPOs to a lot of fanfare, 2022 foresaw a tepid response to new listings. This is, despite India experiencing its biggest IPO to date of LIC with an issue size of over Rs. 21,000 crores.

However, not all was gloomy, with companies like Adani Wilmar and Venus Pipes & Tubes generating multibagger returns for their investors to the tune of over 100%. Stocks like DCX Systems and Harsha Engineers even managed to zoom over 45% on their listing date.

All in all, IPOs in 2022 managed to raise approximately Rs. 57,000 crores, a 43% decline from Rs. 1.2 lakh crores raised in 2021. And yet, India ranked amongst the top 5 securities markets in terms of equity capital market (ECM) fundraising—when it usually fails to rank even in the top 10!

India’s outperformance can partly be attributed to the overall decline in global markets, particularly in the UK, Japan, and Australia. 2022 has definitely experienced high volatility levels on the back of the Russia-Ukraine war and monetary tightening.

Another factor that buoyed Indian securities markets in 2022 is the increased participation from domestic investors—a fact heavily supported by the 145% rise in Demat account openings from its pre-pandemic years.

2023’s IPO Outlook 

Due to retail investors’ continued interest and a pivot by startups towards profitability, 2023 is set to experience a revival in equity fundraising. In fact, SEBI has already approved listing plans worth $ 9 billion, which have a high chance of fructifying in 2023.

Per some analysts, the IPO markets can see an uptick of 30% in 2023, mostly led by niche and high-growth companies from the defence, healthcare, consumer, and pharmaceutical sectors. But the issue sizes are likely to remain restricted to the range of up to Rs. 2,000 crores with a few exceptions.

It is expected that the IPO market can reach Rs. 25 billion in 2023, with over 100 companies taking to the stock exchanges, with offers for sale (OFS) dominating new equity issues. 

Are you looking to invest in upcoming IPOs? Download Angel One’s smart app for an easy investing experience while keeping up with IPO trends.

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An Introduction to the Derivatives Market for Beginners 

Investors have multiple options when it comes to investing, like derivatives. Like stocks and bonds, derivatives are a separate asset class that provide exciting investment opportunities. 

In investing perlance, derivatives are financial contracts struck between two parties to transact an underlying asset on a future date at a predetermined price. The underlying asset of a derivative can be stocks, bonds, commodities, currencies, or ETFs. These contracts are traded both over the counter and on the stock exchanges. 

Derivatives are used for hedging, but derivative trading carries its own risks as they derive their value from the price fluctuation of the underlying asset. 

Derivatives recapitulations 

Derivatives are financial contracts drawn on underlying assets - groups of assets or benchmarks.

These are tools commonly used to access specific markets or to hedge against rising risks.

Traders use derivatives to mitigate risk or to assume risks with the expectation of profit (speculations).

This helps to shift the risk from a risk-averse individual to a risk seeker. 

Types of derivatives 

There are two primary classes of derivatives - lock and options. Lock contracts bind the participating parties to the terms and conditions of the contract for the duration of the contract - futures, forwards, and Swaps. Options give holders rights without an obligation to buy or sell securities on or before contract expiration. 

Futures 

Futures are standardised contracts bought and sold on the stock exchanges. Traders use future contracts to hedge and speculate against future price movements of the underlying asset. Cash-settled futures don’t involve physical delivery of the underlier.

Traders can use an open interest chart to trade in futures. Open interest futures show the number of available future contracts (that haven’t expired or exercised) on a day. Open interest determines the inflow and outflow of money in the future market. An increase in open interest means more money is coming to the market ,and the current trend will continue. Declining open interests indicates a possible trend reversal.

Forwards 

Forwards are non-standardised contracts that allow the parties involved to customise the terms when they draw the contract. 

Forward contracts are not traded on the exchanges like futures and involve counterparty risks.  

Counterparty risks are types of credit risk which mean the other party may not be able to meet the obligations of the contract. So, the other party may end up losing the value of its position if one party becomes insolvent 

Swaps 

Swaps allow parties to exchange one type of cash flow with another. For example, one can use an interest rate Swap to switch a variable interest into fixed interest. 

Besides interest rate Swaps, currency, commodities, credit default, and total return swaps are other common types of Swaps. Like forwards, Swaps are also traded over the counter. 

Options 

Options contracts allow the participants to buy or sell an asset on or before a future date at a predetermined price. Like futures, options are traded on the stock exchange, but these are non-obligatory contracts, meaning the options holder exercise or let the contract expire if the market changes against their anticipation. 

Options are two types - call and put. Call options allow the contract holder the right to buy an underlying asset on a future date at a set price. Similarly, a put option is a contract to sell. Traders can employ various trading strategies to optimise their gains and minimise losses from options trading.

Final Words

The derivatives market in India is well-developed and presents excellent trading opportunities. Open a trading account with a broker who offers futures and options trading services. 

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What Is the Strike Price For Options

Derivatives in share market are tools used by traders to safeguard their interests against price volatility. The strike price is a critical concept associated with derivatives like futures and options.

The strike price is the future set price of the contract at the expiration date. It is important for traders to understand the concept and importance of strike prices to be able to select the best deals from the market. 

An introduction to derivatives

In the world of finance, derivatives are exercisable financial contracts that allow the derivative holders' rights to buy and sell securities at a future date at a predetermined price. The most common types of derivatives are - futures and options. Futures are fungible contracts, which are legally binding. Options are contracts that give option holders rights (non-compulsory) to buy or sell an underlying security at a specific price on or before a future date. 

Options are two types - call and put. A call option allows the contract holders rights to buy underlying securities at a predetermined price at a future date. Put options give the owner the right without any obligations to sell the securities at a fixed price on or before a future date.

What’s the strike price in F&O?

An option will have a strike price, which is the specific price quoted for the underlying security. Selecting the strike price is one of the critical decision making involved in options trading. The result of your trade will depend on your selection of strike price.    

For call options, the strike price refers to the price at which the underlying security can be bought on or before the expiration of the contract.

Similarly, the put options strike price gives rights to the options holders to sell the underlier security on or before the expiration date. 

Spot price vs strike price vs market price

Traders can confuse spot price and strike price. The spot price is the current market price of the security. The spot price is used as a reference price for deciding the strike price for the option. 

A strike price is a price at which the contract is drawn. The options writer or seller is responsible for buying/selling securities at the strike price if option holders decide to exercise their rights.

The market price (or spot price) refers to the price at which the contract is bought/sold in the spot market. Unlike the strike price, which is fixed, the market can go up or down. As the market price fluctuates with time, it varies from the strike price. 

How to analyze strike price

The NSE ‘Option Chain’ table quotes options’ open interests, strike prices, and premiums. Different strike prices of the security are listed in the Options Chain for available open interests. Traders can enter into a trade for a strike price for the underlier by paying the quoted premium. The strike price entitles the trader to buy the stocks at the end of the expiration date on the selected strike price.   

Traders should do their homework to select the best strike price for the deal. It is a necessary step to improve your chances of success from options trading. Selecting the optimal strike price is the most important for options traders as that impacts the profitability of their options trade. 

Final words 

Having learned strike price and how to analyze strike price options, it is time to explore the derivatives in share market and diversify your portfolio. To start options trading, you should open an options trading account.

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Are the Stock Markets and Economy Correlated?

 

 

It isn’t unusual for investors to parse through reams of economic data, such as GDP, inflation rate, IIP, etc., to get an inkling about future market direction. Similarly, numerous investors keep abreast of benchmark indices to base their opinion about a country’s economy. But do economic cycles and trade cycles always move in tandem?

 

Stock Markets: Not A True Reflection of Economy

  

Although, in the long term, stock markets may align with the state of the economy, it is generally not the case, particularly during the short term. There are several reasons for this.

  

Price Direction

Unlike economic data, which is backwards-looking, stock markets reflect the future outlook. Economic data gives a snapshot of what has already transpired and generally gets collated with a lag. On the other hand, stock prices are based on investors’ expectations about the company and the industry it belongs to. Hence, even if an economy is undergoing a recession, it wouldn’t necessarily dim a corporation’s long-term prospects.

 

In a similar vein, just because an economy is experiencing a downturn doesn’t mean that investors should stop investing. This is because chances are the recessionary impact has already been priced in a stock’s price, and it is more likely than not to soar on the back of positive news, especially for well-established companies with strong moats.

 

To illustrate, back in 2020, almost all countries imposed a lockdown, thus adversely impacting sectors like aviation, consumer discretionary, hospitality, etc. And yet, the stock market zoomed almost 30% from the March 2020 lows within 5 weeks.

 

Volatility

 

Discrepancies may also arise when markets are experiencing acute volatility levels despite the economy being upbeat and vice versa. This usually happens when investors perceive a specific piece of information as abysmal but which has no implications in the long term.

 

Another scenario would be when an economy continues to show growth but fails to beat industry expectations. Then, the stock markets may go down as they already priced in a higher growth rate, but it in no way is a reflection of a poor economic state.

Sector Makeup

It’s a fact that not all sectors are equally represented in the stock market. Thus, stock markets, in a way, reveal the performance of listed companies with a survival bias. Further, if more cyclical sector-based companies are listed on the exchange, then stock markets will be more volatile. So, stock markets do not always echo the fundamentals of an economy.

Miscellaneous Factors

Stock markets are not impacted solely by economic factors. Indeed, reasons like geopolitical situations, tax rates, and government policies can spook the markets suddenly without unduly disadvantageous to the economy. For instance, a change in dividend distribution tax (DDT) or capital gains tax will factor into the share prices but will not impact the country’s GDP data.

Bottom Line

A country’s economy and the stock market do not always move together. Hence, a better way to mitigate investment risk is to create a diversified portfolio with allocations made across numerous asset classes.

 

Download Angel One’s trading app today to create your own diversified, comprehensive portfolio.

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Should You Become a Full-Time Stock Trader?

With the Indian markets holding their own despite global recessionary fears, retail participation has been picking up meaningfully, particularly since the pandemic. This can be seen with retail participants turning net buyers of Indian equities since 2020, after a hiatus of 11 years. With the IPO market back in an uproar, and news of multiple stocks, such as Adani Wilmar, generating multi-bagger returns, one wonders if they should take the plunge and get into stock market trading full-time. 

Things to Consider Before Shifting to Stock Market Trading

Below, we elaborate on a few factors you should consider while deciding on quitting your 9-5 job to move to stock market trading.

Current Financial Position

If you quit your regular job to become a full-time trader, you are basically leaving behind the safety and dependability of a regular income. While you might have been profiting off your last few trades (why else would you be quitting, right?), it may not be enough to sustain your lifestyle right away. 

Hence, before switching to stock trading as a profession, you must ensure that you have enough funds to meet your expenses for the next 5-6 months. This will take off any undue pressure on you to make a profit from every single trade for paying your bills.

Amount of Investment

To be a full-time stock trader, you need a copious sum of money, especially for day trading. So, you will need to decide on the investment corpus allocated to regular trading and long-term investment. This can be based on the minimum amount of return you need to support your current lifestyle.

To illustrate, if you have saved up about Rs. 30 lakhs, ensure that around 60% of it is invested in safe and secure assets, while you can use the rest for trading purposes. The profits earned can then be reinvested as you are already secure on your expenses front. In case you don’t have a considerable amount of money to invest but are sure about your trading skills, then you can opt for markets that require less capital, such as currency markets.

Time Bounds

Let’s face it. Nobody becomes rich overnight, particularly with trading. It is a hard grind; some might even take up to 2 years to fully secure their finances. While stock trading affords you more flexibility than a regular job, since your hours are restricted to the stock market timings, you will still need to put in hours for research. 

Keeping up with market news, trends, and sentiments is no longer a hobby but an essential trait to becoming a successful stock trader. If you really wish to pursue stock trading full-time, maybe start off by first working part-time. This way, you will be better suited to decide whether you are really cut out for this.

Conclusion

Switching over to stock market trading as a full-time profession is a huge deal. Be mentally ready to put in the time and energy needed to become successful and realise that there will be days when you incur losses, but you will sail through eventually.

Start your stock trading journey today by opening a free Demat account with Angel One and easily track your investments on Angel One’s smart app.

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The ultimate guide to choosing a stockbroker for beginners

Stock market investment is excellent for short-term and long-term investment. But to invest as a regular investor, you must open an account with a stockbroker. Choosing a stockbroker is the first important step toward your investor's journey. 

Here are the steps to choosing a stockbroker

When you open a Demat account for the first time, you need some guidance to select a suitable broker. Although your first broker doesn't have to be your broker for life, it can certainly be an excellent lesson for your future.

 Selecting a stockbroker in India requires some research. There are discount brokers and full-service brokers in the market. 

A full-time broker offers financial advisory, investor education, and stock analysis reports. If you are a first-time investor, these services can be helpful. A discount broker doesn't offer all these services. They only facilitate buying and selling of stocks on their share market app.    

Background and reputation: The stockbroking domain is competitive, and a stockbroker with years of experience in the market enjoys an edge over others. It evokes trust among investors. When selecting a broker, you must research the broker's background, reputation, and track record.

Brokerage and other key fees: The brokers charge a commission for facilitating buying and selling stocks in the market. The brokerage fees vary among the brokers. A full-service broker offers advisory services, other premium facilities, and trading services. Hence, a full-service broker will charge higher fees than a discount broker.

On the other hand, a discount broker only provides trading facilities on their share market app, meaning they would charge lower fees.    

Besides brokerage, other charges will impact your investment cost in the long run. 

Customer service: If you are a new investor, you would need some customer service. Customer service is a critical differentiating factor that can separate a good broker from another. Do not ignore customer service while selecting a broker. You can check online for reviews before opting for a broker to evaluate the quality of the broker's customer service.

Trading platform: Since traders will spend the most time on the trading app, the broker's trading platform is a critical differentiator. You must evaluate the trading platform on parameters like user interface, latency, speed, and simplicity of use.

Checking the broker's share market app is critical, and all the other factors are secondary since you will spend most time on the app.

Range of facilities: If you are looking for a broking service that provides multiple investment options, select a broker who offers investment services on a wide range of investment products. These days most leading brokers offer multiple investment facilities and trading services. 

Tools and education material: Many brokers offer education material to investors, helping them become confident with their decisions. For example, Angel One offers investor education on its website. If you are a budding investor, these services are helpful. Select a broker who offers educational tools and materials.

Conclusion 

Investing can be stressful if you select the wrong broker. Invest your time in doing homework while you choose your first stockbroker. Open a Demat account online with Angel One to invest in various investment products like stocks, ETFs, international stocks, and mutual funds.