Tuesday, October 26, 2010

Share market in Indian Languages

Share market in Official Indian Languages

The share market boom has attracted thousands of people towards investments in shares and mutual funds. Still there are thousands of potential investors without knowledge of English, the only official language in which Share market details are available.

An official from companies affairs yesterday announced that the Government of India is planning to offer share market details in 16 official Indian languages including Tamil, Telugu, Kannada, Malayalam and Hindi. This will be useful to People without English knowledge. It is expected that this facility will be implemented around April, 2011.

Small investors can invest upto 2 Lac in IPOs

SEBI increased ceiling for investment in IPOs

Intial Public Offer, popularly called IPO is the offer of company shares to general public. Companies offer IPOs to raise money to their business. Till date retail / individual investors can not buy shares for more than 1 lac in IPOs. In the year 2005 this ceiling was lifted from Rs. 50000 to Rs. 100000.

Due to increased awareness of Stock market in the recent years the investments by retail investors have increased. Securities Exchange Board of India (SEBI) is the legal body governing the activities of Stock Exchanges. SEBI released the Draft Report for the increase of Maximum ceiling from 1 lac to 2 lac rupees. So those interested in Public Issues can utilize this. SEBI will finalize this during November, 2010.

Indian Overseas Bank

IOB Introduces 2 New Deposit schemes

Indian Overseas Bank is the leading nationalized bank in India. IOB has recently introduced two new deposit schemes. The first scheme is for 333 days and the rate of interest in 7.75 % per annum. Another deposit scheme is for 555 days and this scheme offers 8% interest per year.

This scheme is effective from today. If you are a senior citizen you will get 0.75% more interest for investment upto Rs. 25 lac.

Traditionally bank investment (Fixed Deposits) have been safe and reliable. Especially aged people prefer Bank deposits to shares and stock market. Because it is their lifetime savings and they depend on that money. If you belong to this category go and deposit your money with banks without hesitation.

Sunday, October 24, 2010

Difference between Shares and debuntures

Difference between Shares and debuntures

The most common form of Shares in stock market are Equity shares. There are some less common shares like preference shares and rights share. Whenever a company wants more capital for expansion or new projects they will accumulate the money by selling shares to the public. Otherwise they can sell debuntures.

The important difference between shares and debuntures.

1. For debuntures the company should pay the interest. Interest is mandatory for debuntures. For shares dividend is decided by the company depending on the profit that makes. If there is no or less profit the company may not give dividend for that year.

2. For debuntures the interest rate is fixed and will not increase or decrease. Dividend for Equity shares will vary depending on the performance of the company.

3. The amount invested in the debuntures should be returned within specified number of years. The company has no obiligation to return the money invested in shares. You have to sell your shares in the secondary market only.

4. Debentures are more secure than share investment.

What is the difference between debuntures and Fixed Deposits.

You can invest in fixed deposits any time you want. You can buy debuntures only when it is offered by the company. Then if it is listed in stock market you can buy it in prevailing market rate. You can sell debuntures at any time in the secondary market. This facility is not available in Fixed Deposits.

Public Provident Fund

Public Provident Fund (PPF)

Public Provident Fund is handled by Government of India. You have to contribute a minimum of Rs. 500 each year. The current interest rate is 8% per annum. PPF investments are eligible for Tax exemption under section 88. The maximum amount for Tax exemption is Rs. 100000. You can draw part of the amount after 7 years from Provident Fund. You can also avail loan on PPF after 3 years. This 15 years scheme can be extended in multiples of 5 years optionally.

Some companies have made PF compulsory to their employees. 12% of amount from the salary (Basic+DA) is deducted towards PF contribution. Company will also contribute the same 12%. So total of 24% of the salary goes to savings.

NSC - National Savings Certificate

The duration of NSC deposit if for 6 years. Minimum deposit is Rs. 1000 and maximum is Rs. 100000. This amount is eligible for Tax deduction under section 88. Interest income from NSC is also exempted from Tax.

Post Office Monthly Income Schemes

This scheme is for 6 years. Interest rate is 8%. At the end of the 6 year term a 10% bonus is given. For example if you invest Rs. 1 lac in this scheme you will get Rs. 666 each month for 72 months and at the end of the 72 months you will get the investment back with Rs. 10000 bonus.

Kisan Vikas Patra - KVP

Deposits in KVP will double in 8.5 years. There is no Tax benefits for investments in KVP. The deposit can be withdrawn after 2.5 years if you wish to do so.

Fixed Deposits in Companies: Interest rates will vary often. It depends on the term of deposit. There is no Tax benefit for the Interst income. If you get more than Rs. 5000 interest in a year TDS (Tax Deducted at source) will be deducted for that income.

Investment options available in India

Various investment options available in India

1. Deposits

  • Post office Recurring deposit
  • Fixed deposits in banks
  • Fixed deposits in companies

2. Government offers

  • National Savings Certificate - NSC
  • Public Provident Fund - PPF
  • Kisan Vikas Patra - KVP

3. Debt Instruments

  • Public Sector Bonds
  • Government Securities
  • Treasury Bills
  • State Government Bonds
  • Debuntures from companies
  • Bonds from Financial Institutes
  • Commercial papers

4. Mutual Funds

  • Growth Oriented Funds
  • Returns at fixed interval
  • Balanced Funds

5. Derivative Products
  • Futures
  • Options
  • Forwards
  • Warrants
  • Swaps

  • Equity Shares
  • Preference Shares

Which one to select to make an investment? It depends on your needs whether you want your money to be safe and risk free, want higher returns, liquidity i.e able to encash your investment in short time.

Fixed Returns

These schemes fixes a certain percentage of yearly return on your investment. You will get that amount for sure. You will not get extra. Fixed Deposits in Banks, Post Office, Debuntures and Bonds give fixed returns and your investment is also safe.

Variable Returns

Mutual Funds and Shares comes under this category. You can not be absolutely sure about the returns. You may or may not get good dividend. You may or may not get bonus shares. The returns depends on the companies performance and market conditions.

Tax Exemptions

Income from Government Post office deposits, NSC, KVP will get Tax benefits. Some mutual Fund Incomes are also exempted from Tax. Dividends from shares are also exempted from Tax!

Time Limited

Fixed Deposits in KVP, NSC is are Time limited. After the fixed Time period the deposit will mature and you will claim your money. Except KVP and NSC you can buy other schemes in the market at the prevailing rate.

You can get loan against NSC and KVP bonds.

Mutual Funds, Shares and Derivatives have no time limit. You can buy them any time and sell any time.

Keep an eye

Fixed deposits in Banks and POST office does not require your attention. The returns will be the same whether you watch it or not. But you have to be careful about investment in Mutual Funds and share. You have to buy them at right time and sell at right time. Profit or Loss depends on the timing of purchase and sales.

Friday, October 22, 2010

An Introduction

Introduction to Shares & Stocks

What is share / stock market? What is BSE / NSE Index? How it is calculated? How to buy a share? What is Initial Public Offer (IPO)? What is primary market? What is secondary market? Who is trading member? What is inside trading? The questions are endless. You will learn everything about shares and stock market in this website. Many people are afraid about share trading because they don't know these technicalities. These jargons are really scary to them.

Basically a share is a ownership in a public limited company. A private limited company's shares are owned by its proprietors and partners. In India a company should be registered with registrar of Companies in order to be called a company and get the benefits of a company. In the long run a company may need funds for expansion and new projects. So a company may want to collect the fund from the public or people willing to invest. So a company may go public. The company will become public limited as it is owned by public. An Initial Public Offer or IPO is the first issue of shares to public. A company must be listed on Stock Exchange in-order to trade its shares. BSE (Bombay Stock Exchange) is India's popular stock exchange. NSE is other popular Stock Exchange.

Once the shares are listed they are traded in secondary market. A company will sell shares at a face value (Normally Rs.10). A popular and big company may sell it share with a premium i.e Face value + extra premium. People will still want to buy its shares because it a valuable company.

When you buy a company's share you buy part of the ownership of the company. Why should you buy a share? You want to make an investment and you want returns from your investment. By investing in Shares you will get yearly dividend and also your share value may increase. It may also decrease and you will lose your money.

How to avoid losses in share market? How to become a successful trader? Please read on.