The Sensex & The Nifty

What are the Sensex & the Nifty?

• The Sensex is an "index". It gives you a general idea about whether most of the stocks have gone up or most of the stocks have gone down.
• The Sensex is an indicator of all the major companies of the BSE. The Nifty is an indicator of all the major companies of the NSE.
• If the Sensex goes up, it means that the prices of the stocks of most of the major companies on the BSE have gone up. If the Sensex goes down, this tells you that the stock price of most of the major stocks on the BSE have gone down.
• Just like the Sensex represents the top stocks of the BSE, the Nifty represents the top stocks of the NSE. Just in case you are confused, the BSE is the Bombay Stock Exchange and the NSE is the National Stock Exchange. 
  
• The BSE is situated at Bombay and the NSE is situated at Delhi. These are the major stock exchanges in the country. There are other stock exchanges like the Calcutta Stock Exchange etc. but they are not as popular as the BSE and the NSE. Most of the stock trading in the country is done though the BSE & the NSE. Besides Sensex and the Nifty there are many other indexes. 
• There is an index that gives you an idea about whether the mid-cap stocks go up and down. This is called the “BSE Mid-cap Index”. There are many other types of indexes. There is an index for the metal stocks. There is an index for the automobile stocks etc.

NOTE:-

• The stocks selected are based upon a number of parameters that the creators of the index decide. Equally, the valuation is also done using complex mathematical principles.
• Periodically, the list of shares used for computing the index also undergoes a change. 
• These changes are decided by the index creators based on the parameters they have set for the stocks for inclusion.
• An index shows whether the stock market, on the whole, is appreciating in value or declining in value.
• The movement of the index itself is no indicator for individual shares. 
• You may find that a particular share may be increasing in its price even when the index is down and vice versa. 
• The index is only an indicator of the general trend. 
• The common indexes in Indian stock markets are the SENSEX, the index for stocks listed on the Bombay Stock Exchange and Nifty, the index for stocks listed on the National Stock Exchange.

Reserve Capacity of MONEY!!!

HOW MUCH RESERVE?

That depends from person to person.

There are a number of factors that influences your decision on the quantum of emergency fund that needs to be created. Factors such as age, occupation, health condition, monthly EMIs, number of members in the family, other sources of income needs to be considered on a one to one basis. 

1. AGE: 

Depending upon how old you are, the emergency fund required keeps changing. As you grow older, the possibility of medical emergencies is also high. Hence, if your age is on the higher side (let’s say you’re 45 years old) you also need an emergency fund that’s higher than some one who is just turning 30. 

2. OCCUPATION:

The style of occupation/business you do is another factor that influences emergency fund decisions. If you are doing a seasonal business or if your job has an uncertain future, you need a higher emergency fund. People living on commission based income would also require a high emergency fund. 

3. HEALTH CONDITION: 

More reserve funds may be required for a person whose health condition is questionable. The amount of insurance cover he has should also be considered while assessing his future requirement. Higher the insurance, lesser the need for reserve funds on these grounds. Again, if you have your parents or grand parents living with you, you might need to plan accordingly. 

4. MONTHLY EMIs. 

The volume of debt you have needs to be analysed to get an idea about how much EMIs you’ll have to pay a month. Typically, while creating reserve funds, an amount equal to 6 months EMIs should be kept aside so that in case of emergency, you don’t default in your loan payments. A clear track record of loan re-payments is absolutely necessary for your future financial needs. 

5. NUMBER OF MEMBERS IN FAMILY. 

If the numbers of members you need to support are more (say 7 members) naturally you need a higher reserve than what would be required if you have only say, 3 members in your family. 

6. OTHER SOURCES OF INCOME

You can count on your other sources of income, if any, while creating a reserve fund. One time or casual income or credit card limits should not be considered in this group. However, you can count on the income of your spouse or other family members staying with you in case of emergency. 

7. OTHER POSSIBLE EXPENSES. 

You may also want to consider other expenses like possible higher education fees for your child who is about to enter college or a possible repair for your house. It all depends from person to person. 

HOW TO KEEP RESERVE FUNDS? 

Hundred percent of your reserve funds need not be kept in liquid cash. A portion of it can be kept in short term fixed deposits or debt funds and a certain portion in gold or easily marketable securities.

Any cash lying idle over and above your emergency fund results in a lost investment opportunity. You are not making your money work efficiently for you.

THUMB RULE

The thumb rule is – You should have enough reserves to meet all the expenses for 4 or 5 months plus some extra to meet unforeseen expenditure like medical expenses. 

Find Out Where The Money!!!!! Is

 

Where the MONEY!!! is?

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That’s interesting! This is one topic everyone will read very carefully because it all about finding money! Imagine that you found Rs 1000 between the pages of an old book on the shelf. You kept it some months back and forgot about it. How does it feel? Even if that money was never found, you would have still lived with what’s left in your wallet without even bothering where it disappeared. isn’t it? This is the principle behind accumulating savings from your income. Set aside your target savings and forget about it as if it were not there and live with the rest. It’s not easy as you think,but definitely not impossible. And , it’s never too late to apply this principle !

 
To most of us Savings = Income (or salary)- Expenses . However, this formula doesn’t work since when money is in your pocket, you get trapped by advertising tricks like discount offers on Clothes or new gadgets which tempts you to spend more. It’s difficult to control expenses. As a result, your savings never hits the target. If what we said holds true for you and you seriously want to save a fixed 10% or 20% of your take home salary each month, you need a different approach to savings.\

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INCOME – SAVINGS(INVESTING FUND) = EXPENSES

Smart ! isnt’ it ? This formula forces you to “pay yourself first,” before the other expenses. That way you know your savings will not get lost in the daily grind of living expenses. The other side of this formula is a forced discipline. You hold your expenses to no more than 90% of your take home pay. You can even automate the process by having 10% (or any amount you want) deducted from your Salary account and transfer it into a separate account or fixed deposit, recurring deposit or other savings instrument .

But, that’s not all. You can also find money from many other sources. For example, Instead of going for parties and shopping, you can set aside extra payments like bonuses, commissions and so forth into your savings Fund. So try to make it a habit to set aside 10% ( or what ever percentage you would like to set aside) and live with rest. If you do that, you have a great chance to succeed.

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MORE TIPS TO CONTROL YOUR EXPENSES: 

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SPEND LESS

This is one simple method to save more. Sit back and analyse your spending habits and look where you spend more unnecessarily. Once you have identified certain areas of high spending, try to find ways to cut back. Take a decision that you’ll not spend more than a fixed budget. 

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MAKE A BUDGET

A budget is a very important tool to control expenses. Be it individuals or corporates. A budget is nothing but a chart or a statement that shows how much you earn and hence, how much you can spend.

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PAY OFF YOUR LOANS

Loans carry high rates of interest. If you have a lot of EMI’s to pay, it naturally reduces your capacity to save more. It also shows that you’re living on high levels of debt which is not a right thing to do. If you have loans, first look for ways to pre-pay it as soon as possible. Another common area where you could lose a lot of money is credit cards. Credit cards companies slap huge interest for delayed payments. 

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SHOP SMART

Most of the big brands will be available at throw away prices once there’s an off season sale or sales promotion drive. For example if you want to buy an expensive watch, wait for the company to announce some discount offers. All the big brands announce discount offers at least twice a year. 

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SAVING ENOUGH IS HALF THE JOB DONE

If you have saved enough,good. but saving is only half the job done.You have to give your savings the right opportunity to grow. Putting all your funds in fixed deposits or fixed income bonds is not a good idea. Your investments should have the right mix of equities, bonds, gold and fixed deposits.Deciding the ‘right mix’ of investments is something an investment expert can do. It depends on an individual’s age and risk profile. 

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KNOW IT

• Finding money is a matter of making it a priority.
• Pay yourself first and learn to live off with what is left. You will always have money with you. It may be difficult at first. But gradually, you will see your fund growing and that would encourage you to stick to it until you reach your goal of finding enough money.
• Bonuses and extra pays you get are opportunities to buy the latest iphone or Blackberry but a prudent option would be to create a savings out of it
• You can save a lot of money if you control your expenses.
• As time goes by, your small saving will also give you additional money in the form of interest. Finally, you’ll find that you’ve done a great job,creating more money than expected.

Who Can Invest In India?

  

India started permitting outside investments only in the 1990s. Foreign investments are classified into two categories: foreign direct investment (FDI) and foreign portfolio investment (FPI). All investments in which an investor takes part in the day-to-day management and operations of the company, are treated as FDI, whereas investments in shares without any control over management and operations, are treated as FPI.

For making portfolio investment in India, one should be registered either as a foreign institutional investor (FII) or as one of the sub-accounts of one of the registered FIIs. Both registrations are granted by the market regulator, SEBI. Foreign institutional investors mainly consist of mutual funds, pension funds, endowments, sovereign wealth funds, insurance companies, banks, asset management companies etc. At present, India does not allow foreign individuals to invest directly into its stock market. However, high-net-worth individuals (those with a net worth of at least $US50 million) can be registered as sub-accounts of an FII. 

 
Foreign institutional investors and their sub accounts can invest directly into any of the stocks listed on any of the stock exchanges. Most portfolio investments consist of investment in securities in the primary and secondary markets, including shares, debentures and warrants of companies listed or to be listed on a recognized stock exchange in India. FIIs can also invest in unlisted securities outside stock exchanges, subject to approval of the price by the Reserve Bank of India. Finally, they can invest in units of mutual funds and derivatives traded on any stock exchange. 



An FII registered as a debt-only FII can invest 100% of its investment into debt instruments. Other FIIs must invest a minimum of 70% of their investments in equity. The balance of 30% can be invested in debt. FIIs must use special non-resident rupee bank accounts, in order to move money in and out of India. The balances held in such an account can be fully repatriated. (For related reading, see Re-evaluating Emerging Markets. )

Restrictions/Investment Ceilings

The government of India prescribes the FDI limit and different ceilings have been prescribed for different sectors. Over a period of time, the government has been progressively increasing the ceilings. FDI ceilings mostly fall in the range of 26-100%. By default, the maximum limit for portfolio investment in a particular listed firm, is decided by the FDI limit prescribed for the sector to which the firm belongs. However, there are two additional restrictions on portfolio investment. First, the aggregate limit of investment by all FIIs, inclusive of their sub-accounts in any particular firm, has been fixed at 24% of the paid-up capital.


However, the same can be raised up to the sector cap, with the approval of the company's boards and shareholders. Secondly, investment by any single FII in any particular firm should not exceed 10% of the paid-up capital of the company. Regulations permit a separate 10% ceiling on investment for each of the sub-accounts of an FII, in any particular firm. However, in case of foreign corporations or individuals investing as a sub-account, the same ceiling is only 5%. Regulations also impose limits for investment in equity-based derivatives trading on stock exchanges. (For restrictions and investment ceilings go to http://www.fiilist.rbi.org.in/) 

Investment Opportunities for Retail Foreign Investors

Foreign entities and individuals can gain exposure to Indian stocks through institutional investors. Many India-focused mutual funds are becoming popular among retail investors. Investments could also be made through some of the offshore instruments, like participatory notes (PNs) and depositary receipts, such as American depositary receipts (ADRs), global depositary receipts (GDRs), and exchange traded funds (ETFs) and exchange-traded notes (ETNs). (To learn about these investments, see 20 Investments You Should Know.)

As per Indian regulations, participatory notes representing underlying Indian stocks can be issued offshore by FIIs, only to regulated entities. However, even small investors can invest in American depositary receipts representing the underlying stocks of some of the well-known Indian firms, listed on the New York Stock Exchange and Nasdaq. ADRs are denominated in dollars and subject to the regulations of the U.S. Securities and Exchange Commission (SEC). Likewise, global depositary receipts are listed on European stock exchanges. However, many promising Indian firms are not yet using ADRs or GDRs to access offshore investors

Retail investors also have the option of investing in ETFs and ETNs, based on Indian stocks. India ETFs mostly make investments in indexes made up of Indian stocks. Most of the stocks included in the index are the ones already listed on NYSE and Nasdaq. As of 2009, the two most prominent ETFs based on Indian stocks are the Wisdom-Tree India Earnings Fund (NYSE: EPI) and the PowerShares India Portfolio Fund (NYSE:PIN). The most prominent ETN is the MSCI India Index Exchange Traded Note (NYSE:INP). Both ETFs and ETNs provide good investment opportunity for outside investors.

 

 

Indian Economy!!!

 

Studies/Surveys/Reports

In India, various agencies and organisations conduct studies and surveys as well as publish reports on a regular basis covering diverse aspects of the economy. Each research and publication focuses on a particular section of the country and analyses its performance and happenings. 

Reserve Bank of India (RBI) is the most important organisation which publishes information and data on all sectors of the economy in its annual, quarterly, monthly, weekly and occasional publications. They include:- 

• Annual report is a statutory document relating to the financial year of the Reserve Bank (July to June), released every year in late August. It is the statement of the Board of Directors on the state of the economy and on the balance sheet of the Reserve Bank. It also presents an assessment and prospects of the Indian economy.
• Report on Trend and Progress of Banking in India is also a statutory publication produced annually to review the policies and performance of the financial sector for the preceding year. The publication, covering period from April to March, is generally released around November/December.
• Report on Currency and Finance is an annual document which dwells around a particular theme and presents a detailed economic analysis of the issues related to the theme. Since the publication is released around December, it also serves the purpose of presenting a mid-year review of the economy.
• Handbook of Statistics on Indian Economy is a major initiative by the Reserve Bank aimed at improving data dissemination by providing a useful storehouse of statistical information at one place. The publication provides time-series data (annual/quarterly/monthly/fortnightly/daily) pertaining to a broad spectrum of economic variables, including data on national income, output, prices, money, banking, financial markets, public finance, trade and balance of payments.
• State Finances : A Study of Budgets is a publication which provides a comprehensive analytical assessment of the finances of the State Governments.
  
• Macroeconomic and Monetary Developments provides an analytical overview of macroeconomic and monetary developments during the year under review. The publication serves as a backdrop and rationale of the monetary policy for the year.
• Statistical Tables relating to Banks in India is an annual publication containing comprehensive data relating to the commercial banking sector. It covers balance sheet information as well as performance indicators of each commercial bank in India including those registered abroad.
• Basic Statistical Returns is another data-oriented publication which presents comprehensive data on number of offices, employees, deposits and credit as per occupation of scheduled commercial banks.
• RBI Bulletin is a monthly publication released in the first week of every month. It publishes analytical articles based on data collected by the Reserve Bank and carries speeches of the Governor, Deputy Governors and Executive Directors. Other useful inclusions in the Bulletin are important press releases and circulars issued by different departments of the Reserve Bank and data relating to economy, finance and banking.
• Weekly Statistical Supplement to the RBI Bulletin presents the weekly balance sheet of the Reserve Bank and other developments relating to financial, commodity and bullion markets. This is published on every Friday. 

'Economic Division' of the Ministry of Finance examines trends in the economy and undertakes techno-economic studies all of which helps to keep a close watch on economic developments, both internally and externally. It also issues selected economic indicators on monthly basis and prepares Economic Survey on an annual basis. The economic survey reviews the major developments and trends in the economy for a given year and brings out the guidelines and considerations relevant for formulation of budgetary and economic policies for the coming year.