News Bulletin & Market Update: 12/10/2021

News Bulletin

▫️ Govt. hopeful to complete LIC IPO by March’22.

▫️ India’s unemployment rate unexpectedly surged to 8.86% for the week ended October 10, compared to 7.56% a week earlier.

▫️ Bharti backed One Web, partners with ISRO for launch of satellite.

▫️ Coal India scales up the coal supply to 1.5 million tonnes during last 4 days to power companies.

▫️ India’s business activity picked up pace during the week ended October 10.

▫️Invesco alleged that Sony Zee deal, unfairly favours Zee founders.

▫️ Finance minister to travel US to attend annual meet of World Bank, IMF, G20 finance ministers and central bank governors.

▫️ Govt. will transfer ₹16,000 crores of unpaid fuel bills and other dues of Air India to SPV, before handing the airline to TATA.

▫️Govt. mandated power distribution companies to reduce electricity losses.

▫️Due to chip shortage Maruti, produced only 81,278 units in Sep’21 against 1,66,086 units in Sep’20.

▫️Tata Motors reported 24% rise in group global sales.

▫️ Prestige estates reported 88% rise in sales in July-Sep quarter.

▫️Internal restructuring of TVS Group gets CCI approval.

▫️ Bitcoin price zoomed past $57,000 mark on Monday.

▫️ Non Food credit grew 6.75 % in fortnight ended on ended on September 24 (highest in 18 months).

▫️ Indian companies to raise $10 billion in IPOs in the next 6 months.

▫️ China proposed ban on private capital in media.

▫️ SEBI to revoke license of credit ratings agency Brickwork Ratings, on failure to apply independent judgement for the IL&FS ratings (a very big and bold action by the government). SEBI to also bar 2 former senior officials of CARE ratings for the same incident.

▫️ Aluminum prices jumped to highest level since 2008 due to global energy crisis.

Market Update

▫️Indian markets reached new heights yesterday, as traders took support from healthy export data and fresh investments from FPIs. However, during the session market lost nearly all of its gain and managed to end slightly positive.

▫️ Sensex closed up by 0.13% at 60,135, while Nifty ended higher by 0.28% at 17,945, yesterday.

▫️ Market Breadth was in favour of bulls with advance decline ratio of 991:850.

▫️ Auto, power, metal, realty and banking shares help the index to climb, while IT was the only sector to end in red, due to disappointing result and commentary of TCS.

▫️Indian markets in near term can be negatively affected by rising crude oil prices, increasing bond yields, global energy crisis, soaring commodity prices and falling ruppee.

▫️Ruppee fell by 37 paise against dollar to end at 15 month low of 75.36, as crude oil jumped towards 7 year high.

▫️Gold prices remained above ₹47,000 mark, backed by weak ruppee and surging yields.

▫️Oil prices continue to hold up $80 mark (WTI Crude), as power crunch worries from Asia to Europe will further propel demand of oil.

▫️US markets closed down by 250 points (Dow Jones), due to increasing concerns of inflation as a result of higher oil prices, which may further trigger tighter monetary policy.

▫️Today morning, US futures is trading flat, whereas Asia is in sea of red. SGX Nifty is suggesting slightly gap down opening for Indian markets.

▫️F&O Ban List: BANKBARODA, BHEL, SUNTV, IBULHSGFIN, NATIONALUM, SAIL, PNB, IRCTC and CANBK.

This is for educational purposes only.

Market Update & News Bulletin: 04/10/2021

Market Update

▫️Markets slipped on Friday, following inflation concerns, rising petrol and diesel prices and weak global sentiments.

▫️Sensex and Nifty closed at 58,766 (-0.61%) and 17,532 (-0.49%).

▫️Market Breadth was marginally positive with advance decline ratio of 946:854. Midcap and Smallcap indices continued to outperform the benchmark and ended the day in green.

▫️ Volatility eased down on Friday, as VIX fell by 6.5%.

▫️ Sectorwise, pharma, energy, psu banks and media supported the market, while financial services, IT and real estate dragged down the indices.

▫️Ruppee finally ended its losing streak and gained 11 paise against dollar to close at 74.12, due to overall strength in major currencies against dollar.

▫️ Gold prices grew slightly over inflation concerns, and closed at ₹46,434 (Spot).

▫️Oil prices ended the day in positive as, the market is not expecting a big rise in oil production from OPEC+ countries. Further, higher natural gas prices is forcing energy power producers to move away from gas towards crude.

▫️The postive outcome from Merck’s covid antiviral pill introduced a fresh ray of hope against the end to pandemic, on Friday.

▫️Hence, US markets ended the day in positive territory with Dow Jones closing the day with a gain of 1.4%.

▫️Today morning US futures are trading at slightly lower, and Asia has opened mix. Negative SGX Nifty is reflecting muted start for the India markets.

News Update

▫️ Petrol and Diesel prices soared to life time highs, after latest round of hikes on Sunday.

▫️FPIs were net buyers in September, with net investment of ₹26,517 crores .

▫️NTPC to list 3 of its subsidiaries and exit a Joint Venture with SAIL, by FY24. This will fetch ₹15,000 crore to the Company.

▫️OPEC+ will meet today, to decide the quantum of increase in oil production, to ease the prices.

▫️ India’s major ports saw volume growth of 5% in August.

▫️ Hospitality sector is experiencing robust demand and there has been 20-30% rise in occupancy levels, compared to last year.

▫️Concur cuts rates for Nepal bound import boxes by 30% (it can impact the company’s net profit by ₹120 crores a year).

▫️ Tata Sons acquisition of Air India, will give serious competition to IndiGo’s domination in the country.

▫️Jet Fuel price was raised by 9% in September.

Weekend News Bulletin 03/10/2021

▫️Wholesale dispatches of passenger vehicles slowed down due to chip shortage.

▫️Tata sons is set to take over Air India, more than 50 years after it was taken by govt.

▫️Zee Board Of Directors refuse to conduct EGM and moved to court against Invesco (top shareholder).

▫️RBI ordered Dhanlaxmi Bank to speed up appointment of Board of Directors.

▫️ Manufacturing activities rose at faster rate in September than August.

▫️GST collection rose by 23% in September.

▫️Oyo has filed papers for ₹8,340 crores IPO.

▫️IT Dept. imposed ₹8,334 crores capital gains tax demand on Grasim.

▫️West Bengal and Tamil Nadu reported positive growth in per capita income in FY21, against nationwide fall.

▫️Due to rise in crude oil prices, trade deficit spikes by more than 50% in September.

▫️Jet fuel price increased by 5.8%.

▫️There has been surge i power demand of India, resulting in surged demand of coal. Further, over half of India’s coal based power plants have less than 3 days of inventory left.

▫️RIL extends deadline for Future Deal.

▫️ CEAT raised its stake in online tyre purchase and selling company – Tyresnmore.

▫️ Tech Mahindra to acquire IT Consultancy company – Beris Consulting for ₹60 crores.

▫️TATA Group makes open offer to acquire 26% stake in Tejas Networks for ₹1,038 crores.

▫️ Mahindra Lifespace leased about 15 acres of land to Ashiana Housing.

▫️Indian Bank signed pact with Indiabulls Housing for lending to priority sector.

▫️Merck made Covid antiviral pill has shown high efficacy in trial.

▫️US factory growth highest in 4 months in September.

▫️Euro Zone inflation jumps to 13 year high.

▫️Aditya Birla AMC IPO subscribed by 5.25 times.

▫️ India’s forex reserve down by $997 million to $639 billion.

▫️OPEC+ to release more oil to tackle rising crude oil prices.

▫️ India’s export jumped over 21% to $33.44 billion in September.

▫️Telecom Department has imposed fine of ₹2,000 crores on Voda Idea and ₹1,050 crores on Bharti Airtel.

▫️Truck rentals grew 3-6% in September, due to rising demand.

▫️There has been record number of credit ratings upgrade of Indian companies between Apr-Sep.

▫️ Employment rises by 8.5 million in September, highest in 20 months.

▫️Term insurance prices to rise by 40% as reinsurers have increased their rates.

▫️Kerala to reopen cinemas from October 25th.

Market Update and News Bulletin: 30/09/2021

Market Update

▫️Indian markets continues their sell off on Wednesday, amid weak global markets, rising treasury yields and rising inflation concerns.

▫️Indian bond market is also seeing wide selling as there has been 5-15 bps increase in the bond yields.

▫️At the end of the day, Sensex and Nifty closed at 59,413 (-0.43%) and 17,711 (-0.21%).

▫️ Private Banks, Financial Services and Auto dragged down the market. Whereas, IT, Pharma, PSU Bank, Metal, Energy and Realty restricted the fall.

▫️Market breadth turned positive with advance decline ratio of 1019:766. Further midcap and smallcap indices also ended positive.

▫️Ruppee fell 8 paise to 74.14 against dollar (1 month low), due to month end dollar demand, rising treasury yields and stronger dollar overseas.

▫️ Oil prices fell marginally on Wednesday, after US oil inventories rose more than expected.

▫️ Gold prices continue to fall and reached 45,500 mark on Wednesday, as dollar is now trading at 1 year high.

▫️US market ended higher on Wednesday after the govt’s decision to lift the partial ban on debt limit.

▫️US futures are trading in green territory this morning, while Asia has opened mix. SGX Nifty is flat reflecting silent start for the Indian markets.

▫️Stocks in F&O ban: SUNTV.

News Roundup

▫️State telecom operator BSNL has asked govt. ₹37,000 crores to stay afloat.

▫️Piramal Enterprises has completed the insolvent DHFL takeover by paying its creditors ₹34,250 crores.

▫️ Govt. loan scheme of ₹4.5 lakh crore has been extended by 6 months to March’22.

▫️Indian Overseas Bank has been removed from RBI’s Prompt Corrective Action watchlist.

▫️Invesco moved to NCLT against Zee, for removal of CEO Punit Goenka.

▫️L&T is in discussion to merge its thermal power business with the Indian unit of Singapore-based Sembcorp Industries.

▫️ Govt. is considering to come up with PLI scheme for power equipment manufacturing.

▫️China is facing severe power crunch due to coal shortage and strict emission norms. Chinese govt. has asked railway firms and local coal bodies to smoothen coal supply.

▫️ Govt. to launch IPO of ECGC in FY23, and infuse ₹4,400 crore of capital support in the company. ECGC is the largest export credit insurance company of India.

▫️OPEC expects India’s oil demand to reach pre pandemic level in 2021.

▫️RIL backed appointment of Saudi Aramco’s non-executive chairman, as the Company’s independent director, while two institutional investors voted against it.

▫️ Persistent Systems to acquire US based Software Corporation International, Shree Partners and India based Shree Infosoft for a total of $60 million.

▫️ Spicejet has collaborated with Ease My Trip for holiday bookings.

▫️ Britannia joined hands with Accenture to boost its digital transformation.

▫️ Housing sales have more than doubled in 7 cities of India in the July-Sep quarter.

▫️NTPC (India’s largest power producer) to raise ₹18,000 crores via bonds.

▫️ Flipkart to deploy 2,000 EVs (2 and 3 wheelers) in its delivery fleet, ahead of festive season sale.

▫️HDFC Bank issued 4 lakh credit cards since August, after RBI lifted the ban.

▫️ Standard Life sold 5% stake in HDFC AMC for ₹3,060 crores.

▫️A whistle blower alleged that HDFC bank asked for fee from customers if they submit forged documents, instead of reporting it to authorities.

▫️Aditya Birla AMC IPO was subscribed 56% on Day 1.

▫️Induslnd Bank invoked pledged shares of McLeod Russell and acquired 4.79% stake in the company.

▫️US govt. to lift debt limit on govt funding to avoid the near term crisis.

▫️ Govt. may raise GST on garments and footwear from 5% to 12%.

▫️Coal India to increase coal supplies to the power sector.

▫️ Alstom India to bid for India’s 7 infra projects worth €1Billion.

▫️ Chinese troubled real estate company Evergrande to raise $1.5 bn by selling its stake in banking company.

▫️Vedanta may be in race to acquire Shipping Corporation of India from the government.

This post is for educational purposes only.

An easy way to select stocks for Investment: F-Score

We are often told to analyse financial statements/fundamentals before investing in a stock. But hardly anyone tells, how to analyse and what to analyse. In this blog we will explain a simple and well proven method to analyse a company’s financials, thanks to Professor Joseph Piotroski, for his Piotroski’s F score.

The F score segregates companies in 3 categories: Weak stocks (score b/w range of (0-2), Grey stocks (3-7) and Strong stocks (8 or 9). The score is based on the outcome of 3 parameters: a) profitability b) leverage, liquidity and source of funds and c) operating efficiency. The F-score is widely used as a screener by fund managers who invest in value stocks.

Profitability is measured via 4 sub parameters:

  1. Return on asset (ROA): If positive, score of 1 else 0
  2. Cash from operations (CFO): If positive, score of 1 else 0
  3. CFO/Net Profit: If >= 1, score of 1 else 0
  4. Current year ROA – Previous year ROA: If > 0, score of 1 else 0

Leverage, liquidity and source of funds is assed using 3 sub parameters:

  1. Present year current ratio/last year current ratio: If > 1, score of 1 else 0
  2. Present year long term debt/last year long term debt: If < 1, score of 1 else 0
  3. Equity issuance: If null in current year, score of 1, else 0

Operating efficiency is tested with the help of 2 sub parameters:

  1. Present year gross profit margin – last year gross profit margin: If > 0, score of 1 else 0
  2. Present year asset turnover – last year asset turnover: If > 0, score of 1 else 0

Overall F-score is the sum of 9 sub-parameters, with 9 being strongest and 0 being weakest. Historically, the companies screened via this method have given high returns to the shareholders’ in the long term.

If you look at latest earnings report of companies in the BSE500 then you may identify many companies with a score of 9. Some of them are: Aurobindo Pharma, Colgate, Emami, UPL, CESC, etc. A score of 9 solely doesn’t assure high investment return, as returns also depend on several other factors. But, you can certainly use the F-score as a guide for equity investment, wherein you should clearly avoid companies with a score of less than 2.

Hence, before buying any scrip, run the F-score to get an idea about its fundamentals. Further to ease your worries, we have developed an interactive excel sheet to calculate the F-score. Reply/Comment with your mail id, to have a copy of the same.

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Outlook 2021…

If 2020 was a year to preserve your finance, 2021 will be a year to multiply your wealth. The global economy has restarted with a bang and emerging economies are eyeing for a double digit GDP growth, along with high single digit growth in developed nations, thanks to low base, rock bottom interest rates, rapid technological adoption, ocean of liquidity and responsible US President elect. Let’s look at how some of the investment avenues will perform in 2021:

Gold: Gold glittered all its way in 2020, and reached all-time high of ₹56,191, after 2020-low of ₹38,400. Safe heaven nature of gold made it popular amongst the investors in 2020. However, in 2021 and the years to come gold may lose its shine. After the Global Financial Crisis, Gold reached an all-time high in mid-2011 and then delivered a negative return c.17% as on 2019 end. Vaccination drive has already put pressure on the yellow metal’s price and we expect it to remain stagnant or fall in 2021 and onwards.

Crude Oil: 2020 proved out to be a nightmare for crude, but it may not be the same in 2021. With Democrats taking control over the US Parliament, we may see a downturn in US oil production. Further, Saudi Arabia and OPEC’s recent announcement of production cut to revive oil prices will support the fossil fuel’s price. On the flip side, waiver of sanction against Iran may increase the global supply. Consequently, oil may hover between $50-$55/barrel throughout 2021.

Silver: Silver was the best performing precious metal in 2020, up over 49%. After such a grandeur year, if you believe silver may take a breathing in 2021, then you may be wrong. However, forecasting silver prices is relatively a difficult task due to its volatility, Silver is seen both as a safe investment asset class, as well as an industrial metal, due to its wide scale use. Overall, silver can be a very good investment for years to come, as the metal is highly utilised in green technologies. We expect silver to give double digit return in 2021.

Indian Stock Market: The bourses discounted almost all of the economic recovery in second half of 2020, and benchmark indices delivered almost c.15% return during the pandemic year. The Nifty50 is presently trading at forward 12 month PE of 22, compared to historic PE of 17.5. Rock bottom interest rates and sharper than expected economic recovery supports the stretched valuation. However, we see very limited upside potential left for the markets in 2021. YTD Return (29Jan21) of Nifty50 stands at –2.5%, setting the stage for low market returns in 2021. Overall, markets are expected to deliver single digit return in 2021, as it will try to align with the real economy during the year.

All the best for your investment journey in 2021!
Save more, invest wisely.

Indian Stock Markets in 2020!

2020 was a Roller Coaster Year for the Global as well Indian Capital Markets. The roller coaster ensured that no one is missed during the year, which rewarded patient investors and punished fragile market participants. First half of the year witnessed tragic onset of the “Coronavirus Pandemic”, followed by worldwide Lockdowns, which rock bottomed all the global indices. Nonetheless, the roller coaster turned its course in the second half of the year, to touch the sky. World markets soared on the back of trillions of liquidity being pushed into the financial systems along with historic fiscal stimulus packages to resurrect the falling economy.

The Indian benchmark Indices (Nifty50 and BSE Sensex) delivered a return of +15% during 2020, reiterating the attractiveness of equity as an investment vehicle. The markets bounced back almost 80% from their March lows (Nifty-7511.1, Sensex- 25,638.9), and Nifty finally kissing the magical 14,000 mark on 31st December, 2020. The “hero” behind such a robust bounce back were “FIIs”, pumping in record USD22.0bn in Indian financial markets in 2020, highest in comparison to all other emerging economies. This is in sharp contrast to all other emerging economies, where FIIs were net sellers during the year.

Primary markets had steal the show in 2H’2020, with record INR1.77 lakh crore being raised in 2020 (highest ever in an year), which is 116% increase over 2019’s INR82, 241 crore. The average listing gains from the top 15 IPOs of 2020 was massive 35.5%, way above the previous high of 22.3% in 2017. Although Mrs. Bectors Food Specialities Limited IPO was the last IPO of 2020, it became the most subscribed IPO of the year, at 198.02 times.

There was no sales for almost 2 months in 2020, yet there was no respite in fixed costs. Hence, India Inc. looked for external financing to fund their operations, and there kicked in Rights Issue and QIPs which saved the day for them. Reliance Industries was one of the biggest beneficiary of external financing and it alone raised INR53, 125 crore in right issue in 1H20. Whereas, Banking and Financial Services Sector were the most sought after in the QIP segment.

The love for Indian equities was driven by several themes: corporate tax reforms, much awaited interest rate cuts, India’s growth story, abundance of global liquidity and quick economic revival on the hopes of vaccine. But markets once again proved in 2020 some of its age old theories, which never goes obsolete:

“Markets are forward looking”
“No one can predict the bottom”
“Prices are Supreme”

While you ponder upon the market performance of 2020, and if you think that you have missed the bus, don’t worry. We will soon come up with the 2021 expectations for various asset classes, including equity.

Till Then Sayonara, Take Care, Continue Your SIPs!

Which is best for you, Index Fund or ETF?

You might have heard of the two terms Index Fund and ETF before, but you may not be aware of their obscure features. Your investment portfolio is incomplete without them. Inclusion of Index Fund or/and ETF in the investment portfolio provides the required diversification and helps in long term wealth creation . Hence, they form an essential part of every good investment portfolio.

We often get queries from our readers, which one to choose between the two. On the face, Index Funds and ETF may look like twins, but in reality they are different and have different finger prints. Here we will try to explain both the financial products, and will help you to decide, which one to choose for yourself.

What is an Index Fund?
In simple terms, Index Fund is a category of Mutual Funds, whose portfolio is similar to that of a stock market index. The stock market index can be any; Nifty50, BSE Sensex, Nifty 100, etc. For example, HDFC Index Fund- Sensex, consists of all the 30 stocks which are part of the BSE Sensex, and in the same proportion. For instance, if Reliance Industries has 18.5% weight-age in Sensex, then the HDFC Index Fund-Sensex, will also try to invest 18.5% of their total Asset Under Management in Reliance Industries. Hence, one can infer that the return generated by HDFC Index Fund-Sensex will be very similar to that of the BSE Sensex.

Index fund is a passive investment fund, i.e. its target is to achieve same return of that of the benchmark. The fund manager doesn’t have to scratch his head over investment strategies and stock picking, all he has to do is replicate the portfolio of the fund with that of the chosen Index. Hence, expense ratio (fund management charges) for these type of funds is very low.

What is an ETF?
ETF or Exchange Traded Funds, as the name suggests are funds that are traded on exchange, (i.e. listed on a stock exchange) and comprises of equity, bonds, or metals or a combination thereof. Generally, Equity ETFs are passive funds and mimic a stock market index, similar to that of an Index Fund. However, unlike Index Funds, ETFs are listed on exchange. The price of an ETF on the exchange is almost similar to its net asset value (NAV). For example: SBI ETF – Nifty 50, tracks the Nifty50 in a homogeneous manner. Return on SBI ETF -NIfty 50, is almost similar to the performance of Nifty 50.

One can buy ETF on the stock exchange just like any other stock. Hence, by buying just one unit of SBI ETF – NIfty50, one can get exposure to the entire 50 stocks of Nifty 50. It is as simple as it looks.

Now, after reading about both, you might be confused, which one is better. Don’t worry, we have juts the correct solution for your confusion. Which is better Index Fund or ETF?

Systematic Investment Plan (SIP): If you are a SIP lover and need a reminder every month to invest or save, you should go with Index Fund. An Index Fund gives you the SIP option. However, the same option is not available in ETF, as ETF is not a mutual fund scheme and trades on the exchange like any other stock.

Expense Ratio: Expense ratio is the annual cost paid to fund manager by investors for management of the fund. Although expense ratio of Index Fund is low, but in comparison to ETF, it is higher. For instance, expense ratio of Index Funds typically range between 0.15% to 0.50%, whereas for ETFs, it is usually between 0.05% to 0.20%. So, why would you give the Index Fund manager higher fees for just replicating the Nifty50. It is because of the convenience offered by Index Fund.

Convenience: Once you start a SIP in Index Fund, the entire headache is now with the fund manager. Your money will be automatically invested in the Fund, every month. You don’t have to do any transaction by yourself. However, in ETF, you have to place order for the ETF through your DEMAT/Trading account, which may be little difficult for a newbie. When to place the order, how to place, at what price to place the bid, etc. So, if you are a complete newbie and want the convenience of the Index Fund, you can incur higher expense ratio and invest in Index Fund, to get a peaceful sleep.

Expenses: While investing in ETF, you will have to incur brokerages and demat account charges, which is not there in case of Index Fund. All in all, if the amount being invested in ETF is large and you invest lump sum in ETF once in a while, then brokerage charges will be lower compared to the expense ratio incurred in Index Funds.

Control: ETF offers you complete flexibility and control over your investment. You can invest in ETF on any trading day at any trading time, which is not feasible in Index Fund. Net Asset Value of an Index Fund is only available at the end of the day, while for ETF it is available throughout the day. If you have fair market knowledge and you are sure of your timings, you can go for ETF, as that will allow you to invest your money, when the markets are down and sell your investment when markets are high.

Dividends: In case of Index Funds you have an option to choose, that whether you want the dividends from portfolio stocks to get reinvested or receive the same in cash in your bank account. As a long term investor it is always advisable to go for reinvestment option. There is no reinvestment option in case of ETF, you are forced to receive dividends in your bank account. If you want to reinvest dividends in ETF, then you will have to manually investment the dividend money in ETF by yourself.

Tracking Error: Tracking error measures the deviation of the fund from its benchmark. Since both Index Funds and ETFs replicate their respective benchmarks, tracking error in case of both is low. Nevertheless, tracking error is little higher in Index Funds compared to ETF, as the index fund manager has to keep some amount in liquid funds for unit redemption, which is not the case with ETF. If you want exact return like the benchmark, then ETF is more suitable financial product for you.

Tax Implication: Tax on Index Fund is charged at the time of redemption of units. You will incur Capital Gains tax for your Index Fund. If Index Fund units are sold before 12 months, the Short Term Capital Gains Tax of 15% will be applicable. While, if they are sold after 12 months, the Long Term Capital Gains Tax of 10% will be charged, over ₹1 lakh of capital gains. Equity ETFs are taxable in the same manner as the Index Fund. You may also be taxed on the dividends received from ETF.

Final Verdict:
Overall, merits and demerits of Index Funds and ETFs are quite balanced. Nonetheless, Index Fund is suitable for new investors who are not active in markets, lack investment discipline and desire convenient investing experience. On the contrary, knowledgeable folks, with fair bit of stock market experience and having the desire for control and flexibility over their investments should go for ETFs.

Thanks for reading! Hope this will help you in your investment journey!
#rare4share, Keep sharing the rare!

How to invest in international stocks?

Recently, Apple Inc. was in the news for reaching market capitalisation of $2.0 trillion, which is more than 50% of India’s GDP. Bewildered by the hefty returns of Apple Inc., many Indian investors expressed their willingness to invest in the Company. However, shares of Apple Inc. are not listed on Indian bourses.

Before we move ahead with the ways to invest in international stocks, let us learn about the merits and demerits of investing in international stocks. If you look around yourself, you are surrounded with products of international companies. When you binge watch your favourite show on Netflix/Amazon Prime, on your Apple/Samsung smartphone, while sipping Coca Cola/Pepsi and having your Lays potato chips, you are unknowingly boosting the share prices of these companies. Have you ever considered that you could invest in these companies too, and earn handsome returns? If not, consider it now!

Portfolio diversification is one of the important feature of successful investing. In the Asian Financial Crisis of 1997, markets all across Asia suffered, in contrast to western markets. Hence, by investing in international stocks one can gain geographic diversification of the portfolio. However, sky is not always blue, i.e. there are some inherent risks while investing in international equities. The biggest amongst them is: currency risk. Apple Inc. is listed in the US stock market. So, to invest in Apple Inc. you need to first buy US Dollar and then use your US Dollar to buy shares of Apple Inc. You may incur significant loss, in case of exchange rate volatility and it may turn out to be a nightmare. However, since you are reading this post, you are willing to take that extra currency risk.

There are various ways by which you can invest in international stocks, and it doesn’t require a minimum ticket size; you can invest in international equity with $1 also!!! Nevertheless, there is a maximum limit of $250,000 (₹1.8 crores) as stated by RBI under Liberalised Remittance Scheme (LRS). Coming to the most important question now, HOW?

  • Indian Brokers: Popular Indian Brokers like HDFC Securities, Axis Securities, ICICI Direct, Kotak Securities, etc. have tie up with foreign brokers and offer Indian clients access to international stock markets. They may charge some extra fees or premium or brokerage for international equities, and hence one must go through the terms and conditions very carefully before proceeding. We don’t advise retail investors to use this method, as the costs involved under it may outnumber the returns. It is suitable for people who want to invest large corpus in international equity and have the requisite expertise.
  • Foreign Brokers: There are few international brokers, which have branches in India and give their client an option to invest in foreign market. Some of them are Interactive Brokers, TD Ameritrade, Charles Schwab, etc. These brokers are generally expensive and require a minimum amount in the investment account of the client. This option is suitable for fund managers and full time active traders.
  • Startup Apps: Exploiting the opportunity and interest of Indian investors, many new age startups have come with apps to provide access to international stock markets. Vested Finance and Webull App provides easy access to foreign equities. Although they are regulated and registered, their recency creates a risk factor. Hence, it is advisable to not put a large sum of money through these apps. They can be used for small investments, to just get a taste of international markets.
  • Mutual Funds: There are many Indian Mutual Fund Houses that offer dedicated mutual funds for international stocks. You can easily invest in them and get exposure to international equity. Some of these funds are: Aditya Birla Sun Life International Equity, DSP Global Allocation Fund, ICICI Pru Global Stable Equity Fund, etc. This is the best option for retail investors to get international exposure. Low cost of investing (no currency conversion and transfer charges) along with minimum risk (presence of a dedicated fund manager), makes this a popular option amongst retail investors.

So, next time when you tune into your Apple Smartphone with Coca Cola Can in your other hand, you are actually creating money for yourself.

Do share with your friend who wanted to invest in Google! #rare4share

Safe Harbour: This post is for education and awareness purpose only!

Is Gold rally likely to fizzle out soon?

2020 has been a painful year for all of us till now (no need to mention the reason). However, amidst all the difficulties there has been a ray of sunshine especially for the stock markets enthusiasts, be it, investors or fund managers (of course those who could catch up to the opportunity). i.e. the prolific rally in two asset classes: Equities & Gold. Both these asset classes have delivered handsome returns to investors in a timeframe of fewer than 4 months; ~20 per cent for GOLD and ~30 per cent for EQUITY (Nifty50).

In this article, we will focus on the current and future prospects of GOLD as an investment avenue.
Firstly, let us understand why GOLD has had a dream run because many of us might be wondering that there has been a massive demand destruction on the discretionary side owing to the COVID pandemic, and as such who on earth is going to buy jewellery or any other gold item. Keeping this in mind, prices of GOLD should have been on a southward journey? Right?
NO. To your surprise, three days back GOLD touched an all-time high of ₹51,500/10gm in the spot market and is in close proximity to reach all-time high levels internationally.

The following factors were behind the GOLD’s stellar rally:
Linkage to International Prices – Internationally, gold prices are on the rise because of its tag of “safe haven” in difficult times. And since domestic prices have a linkage with international prices, they have risen too
Accumulation by fund houses across countries – At a time when interest rates across countries are abysmally low or negative in some case coupled with a bleak economic outlook that has cast a dark shadow on companies’ prospects, it makes sense for fund houses to park their money elsewhere for generating returns. Fund houses across the US and Europe have followed suit by piling up gold during these tough times resulting in 18% surge in demand for the precious metal. The behaviour has almost been an encore of what they did in 2009 after the global financial crisis.

Now the moot question – How long will the gold rally last?
In the short term, there are a host of events which can keep the prices of gold buoyant and might even take it to a fresh all-time high; rising Coronavirus infections with a possibility of a second wave, geopolitical tensions between US-China, China-India and US Presidential elections in November to name a few.

But does this mean we should stock up the yellow metal for a holding period ranging from 3-5 years?
Let’s take the example of the year 2011 – The year in which gold reached an all-time high of $1920/oz and ₹26,400/10gm, both internationally and domestically, owing to economic issues around the world.
But what happened after that? India’s GDP growth recovered from 5.24 per cent in 2011 to 8.17 per cent in 2016, while gold prices remained almost flat during the period (₹28,623.50/10gm in 2016).

We all are familiar with this quote: “This too shall pass”. So, the COVID-2019 pandemic will pass too. It can’t stay here for years or else we will have to live with it.
Recently, there has been a stupendous advancement in R&D particularly for the development of a vaccine. What if the vaccine comes way before than projected? Will gold still shine?
Secondly, the geopolitical tensions and US presidential elections, can’t keep gold afloat at all-time high levels for too long.
All of us are praying for a quick arrival of vaccine and COVID-2019 to go. If things materialize, then the so-called “safe haven” might lose its sheen similarly like it did after 2011. We believe that although there are enough triggers for some more upside in GOLD in the short term, for the long term it would be prudent for investors to wait for a correction and then ride on the GOLD-RUN. Till then enjoy any short term investment opportunity as far as gold is concerned.

Keep sharing the rare #rare4share, See you next time soon. Till then take care and stay safe!