How to Calculate Nifty??

Stock market is a growing trading platform where most of the investors are interested to trade. Nifty is used as an index in National Stock exchange of India, now the query arises how to calculate nifty?? Let us have a look how it is calculated. Nifty index is introduced by National Stock Exchange. Nifty is composed of two words “National” & “Fifty” fifty defines 50 national stocks include from various sectors. India is considered to be largest single financial products comprising of offshore & onshore exchange traded funds.

CNX nifty which is used as an index was founded in 1995, owned & managed by Indian index Services & Products (ISL). The CNX nifty also called nifty 50. CNX nifty is a large type cap.

Nifty is calculated as 

1) Base year is 1995 & 1000 as its base value
2) Traded in 50 stocks included from various 24 sectors

Formula of Nifty 

Nifty = (Sum of free flow market cap of 50 stocks)*index value in 1995/Market cap. Value in 1995

Nifty index is an indicator to calculate the value of measuring the existence of company stock price. While trading it can be heard that sensex has increase by 100 points or Nifty has gone up by 50 points what does it mean?? it describes that an average of 30 shares in BSE & 50 shares in NSE have performed well.
As Sensex & nifty both use as an index to measure the strength of stock market exchanges but with quite differences:

1) Nifty is the index of National Stock exchange whereas Sensex is the index of Bombay stock exchange.
2) NSE uses the base of 50 major shares which represent 24 different shares on the other side BSE      represents 330 major shares of different sectors.
3) Nifty is the indicator of major share in NSE & sensex is the indicator of shares in BSE
4) NSE is located in New Delhi whereas BSE is located in Mumbai.

There are many other indexes are used to gauge the performance of various stocks such as BSE IT & BSE Bankex.

So in this way nifty is calculated to measure the stock price. You can contact us to get more detail or visit us on: http://www.capitalstroke.com/bullion-tips.php Contact here: 9770670009, 0731-3299704

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Risks Involved in the Commodity market

Commodity market is the fastest growing market over the worldwide. Lot of option & opportunities are there to invest in agricultural products, minerals and metals As commodity market leads to huge profit return but it involves a lot of risk, so certain strategy has to be adopted to minimize the risk in order to maintain your profit return. Uncertainties in future market may also led to commodity risk. So lets us have looked over some common type of risk involved in commodity market.

1. Price Risk - Price risk occur due to the adverse movement in world prices and exchange rates.

2. Cost Risk - Input price risk

3. Political Risk

Participants that affected by the risk

1.Producers – Farmers, plantation companies & mining companies face price & cost risk based on the input produced.

2. Buyers – Commercial traders and cooperatives face price risk between the times up to which the country is buying or selling.

3. Exporter – Exporters also face the price risk between the purchasing & selling at the port to the destination market.

4. Government – Government face both price and quantity risk with the regard of tax revenue generally this occur due to the rise of commodity prices.

Apart from these risks there are certain more factors which affect the commodity market. The uneven weather changes may affect the productivity which in turn affects the rise in price. Political instability is another factor of rising of commodity price, fluctatution in exchange rate may also leads to huge loss for investors.

So to minimize such type of risk various options are there to minimize such risk among them stop loss and stop-limit order is most popular.

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Nifty Future Trading Strategy

Nifty a great platform for traders in Indian stock market. Nifty is basically a collection of 50 stocks that make up an index value which is termed as S&P CNX nifty. Nifty index may reflect 23 sectors of the economy.

As nifty cover 60% of the total market capitalization and the no of 50 companies which is listed in National Stock Exchange (NSE) who uses nifty as an index to measure the performance of a company. Investors who trade in future basis speculate stock indices, interest rate & other financial instruments.

In nifty future, a future contract is established on the basis of benchmark of NSE. The period time of Nifty future is considered to be 3 months. Now lets us have a look on few steps while trading in nifty future.

Nifty Future Trading Steps

• While trading in nifty future one should have to open a nifty future trading accounts. 
• Liquid contract month is the best way to trade. For example November month is considered to be a    liquid month because it is an expiry month.
• Lastly if a trader wants to close a future contract then he should have to sell its present month contract as well.

Intraday Nifty Future Trading

In Intraday trading traders make huge profit on single day price fluctuation basis in stock & index. Now here are the few steps while making huge profit in intraday calls.

•  Before trading in nifty future, one should check whether the total selling & buying quantity increases    buying which implies rising of stock or vice versa.
•  Go for the right price fluctuation in market.
•  Nifty future is considered to be unpredictable risky market where a investor suffer from a huge loss so it would be better to trade with a stop loss.
•  You should have patience while trading, need to watch the right time to put your capital in to the market.

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Equity v/s Future Contracts In Indian Trading Market

Investment in stock market assures maximum profit return for an investor. While investing mostly people do the same mistake while assuming stocks & future are same. Here we are going to differentiate stock and future contracts.

a)  Own a Stock  and You Contract The Future

Traders first buy a stock and enter into future contracts. Whenever an investor buys a stock he is supposed to be buying a part of the company in which he is going to trade this is why stocks are also referred as “shares”.On the other hand in future contract in spite of buying any commodity like cotton, wheat or corn , you just settled a contract in which an investors may be a buyer or seller based on the future price of commodity. For example if you found that the price of silver is moving higher then you contract as a buyer of silver with the hope of raising the price and vice versa.

b) Future Contracts Involve Buyer & Seller 

Future contracts held between buyer & seller so if one is assuming that the price of commodity is moving high than the other one assumes that the price is moving down. This means the future contracts are usually zero sum trade.As in the commodity market liquidity is maintained, no such exception occur like someone holding the opposite position.

c) Valuable Profit Return

When an investor buying a stock from a company he is supposed to be investing his money into that company hoping of gaining the maximum profit return. However the profit gaining is depend upon the value of the stock as well as company itself. Well in future a contract is agreed between a buyer & seller there is no Enron type of experience. Someone is there to handle the other side of contract.

d) Time Limit of Future contract 

 As it name suggest that future contract are mainly delivery of a commodity in future which have a fixed time delivery month. Such as if the corn has a November month of delivery the it will only deliver in November month.

So by considering all these points now we are cleared how to deal with stock as well as future contracts.

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Future contracts Basics

Future Contracts
A standardized agreement between buyer & seller in which seller have to deliver a specific assest for a fixed price to buyer on specific date & time on future basis or  in other words it is an zero –sum game between buyers & sellers. Future contract was established in 1848 the Chicago Board of trade (CBOT) one of the oldest future exchange in united states. Future contracts include few aspects such as the identity of an underlying commodity, size of the future contract, its expiration date, procedure to follow and the future price.

Assets involved in Future Trading 

Agriculture Goods (wheat, maize) etc
Natural Goods (oil, natural gas) etc
Fixed Income Securities (T-Bonds)
Foreign Currencies (pounds, marks) etc
Market Indices (S+P 500, value line) etc

Clearing House Functions
-A orderly and stable meeting place for buyers & sellers
-Safe the parties for huge losses
 For a future contract to go an initial and maintenance margin set up

Future trading accounts
A future exchange allow exchange members to trade, exchange trader may be a individual firm or a brokerage firm.

Market Participants

1. Hedgers- Hedgers are those traders who transfer price risk from an existing position. Hedgers are those traders who buy & sell in spot market in order to reduce the risk associated.
2. Speculators - These types of traders buy & sell on future contracts basis with the aim of hoping maximum profit return.

Marking Market - The process of maintaining an investor’s account in equity in order to settle the price for future contract, each day a new contract is set up while replacing the old ones. The settled price is assumed to be the purchase price of that day. On the basis of that fixed price a contract is set up. Now to these whole process price limits are set up.

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How Stock Future works??

The future market trade for the delivery of commodities in future time. One such class of future contract is Equity future which have value based contract on selected stock. Now how the stock market works lets us have looked over it. It can be found that in the past couple of time US market is volatile so stock future is one of the way to hedge your investment.

Let us take an example suppose you want to purchase Popcorn Company and for making that product you need to purchase the corn. Each day the price of the corn goes up and down. But you want to purchase that corn at low price so that you will get maximum profit while selling that product. But it is found that the price may vary on each day due to which traders enter in to future contracts with a farmer to purchase his corn at a particular price with specified date in future. But on the other side the farmer is also making money he is not agreeing with the selling price. So after a fair price mentioned both of they agreed with the contract.

In the same way stock future works two parties agreed future contract of particular stock at a specified date. As future trading involves lots of risk but with an appropriate way one can gain more profit.

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Basic Terms of Equity Derivative

Equity derivative is a financial class of derivatives whose value can be derived from one or more equity securities. Option and future are one of the most commonly used equity derivative. There are many types of derivative found over the worldwide. Here we are going to discuss a few of them.

1. Stock Option - It is one of the commonly used derivatives by the investor in order to hedge the risk, if a investor is holding a stock option position then he have the right over the stock but not the obligation to sell & buy the assets stock option have liquidity and transparency to work with them. Much care should be taken while trading in option market.
2. Single Stock future (SSF)- It is a contract to deliver a particular stock  during its designated time. The price of SSF is basically depending on price of an underlying stock plus the cost of interest minus its dividend. Trading in SSF require very low margin.
3. Warrants- Warrants are right to purchase a stock over its predetermined date. The price of the stocks here are higher as compared to underlying asset. Unlike stock option warrant price also include time premium.
4. Contract for Difference - An agreement where the seller pay the net amount of current value of the stock & its value. CFDS are available to certain countries such as Germany, Japan, Singapore, Africa, France Canada and United Kingdom. The main advantage CFD is its pricing simplicity 

Trading involve lots of risk so to on safe side while joining our services. For more details log on to: http://capitalstroke.com/stock-futures-tips.php or Contact us: 9770670009, 0731-3299704

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Is It Safe to trade With Loan Money??

Indian stock market is one of the grooming trading platforms for worldwide investors .Investing in Indian stock market is a big chance for traders to earn money. But due to lack of knowledge many of them go for wrong strategy due to which many traders trying to invest the loan money in the market then they should think over twice. Many investors started trading with loan money, Is it safe?? The answer is NO. So be careful don’t let your money waste. Now we will go to discuss some points why not to trade with loan money.

First let us have look what is loan money?? People usually take loan from bank when they have urgent requirement of money with the deal of being repay the amount within in certain period of time and also pay the interest of the loan they have taken. There is also various types of loans available such as home loan, personnel loan, education loan. Rate of interest may vary depend on the loan taken.

What happens if you trade with loan money??

As it is unpredictable to examine the stock market as it moves up and down, we are not sure about the scenario what will happen to next day. There are many investors who do day trading suppose you invest loan money in day trading and get a profit return and on next day if market clashes then think over your loan money?? You will loose everything so how will you repay your loan money.

Lastly it can be said that be careful while investing, consult with an research analyst in spite of bearing any loss.

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Stock Buying Tips

Stock market a big platform for investors in terms of profit return. But it should be very necessary to have right knowledge about which shares one should buy or sell while trading. Although there are certain   strategies to follow which guide regarding the proper choice of stocks which have the potential to return you big profit. We are going to describe those factors are as follow.

1.Sales Revenue - It is the amount of money that a company earns during a financial year Revenue can be calculated by multiplying price of goods and services at which it is sold to the number of units or amount of unit sold.

2.Earnings - Net income of a company that shows the figure of a company whether it is losing money or gaining. It is one of the factors which show company potential and financial strength in the market. So it is clear that an investor likes to invest in a company which has strong financial earning.

3.Debt - The amount of money that a company owns in different ways. So it should be better to invest in a company which has relatively low or no debt level.

4.Liquidity - Liquidity shows the cash holding position of a company. Company which expands its area and volume of business and assures high profit gain for investors is considering being a good investing stock.

5.Valuation - It’s the worth of a company which can be determined by the P/E ratio

Last but not least while investing one should have to do research about a company profile with the  annually report publish time to time.

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A Mapping of India’s Trade

India’s economy is growing day by day as compared to GDP over the past few years. Since 1991, the International trade strengthens the country’s economy due to the liberalization. Due to which the ratio of international trade to GDP has rises continuously with certain factors.

We are going to classify these factors into three categories

1.The Demand of India’s Export of Goods and Services

2.The Supply of India’s Export of Goods and Services

3.The Demands for India’s Imports

1.Factors that affect Demands for Export- India’s trading factor depend upon the intensities of India trade relation with other countries such as North America, the Middle union, Middle East, Asia and south Asia. Although US market adversely affect the demands for products.

2.Factor Affecting the Supply of Exports- It has been observed that India’s is unable to fulfill the supply scheduled due to following reasons are as follow.

a.Infrastructure Bottleneck - This is one of the critical factors in fulfilling the supply order. Due to power shortage, delay in transportation and less efficient techniques proves to be failure in demand supply.

b.Domestic Demand Growth - The huge growth of domestic demands lessen the exporting products.

c.Inflow of Export-Orientated Foreign Direct Investment -  MNE’S play a great role in the manufacturing of exports from East and South –East Asian countries as they provide  good investment platform from US and Japanese MNE’S.

3.Factor Affecting the Demand for Imports- Due to the overall growth of the economy, trade liberalization and growth changing factors, increases the surplus demand for import. The performances of Indian industry generated a tremendous optimism and sustain an existing competitive platform for future time.

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Derivative Market

A derivative market are based upon another underlying market which includes stock market, stock indices and currency market .A financial market which is a derivative market or financial instrument just like future contracts or option that can be derived from other forms of assets.

Underlying assets in derivatives

a. Precious metals like gold and silver
b. Foreign exchange rate of currency
c. Bonds of various types including long and short term negotiable debt
d. Over the counter(OTC) money market products such as loan or deposits

 Classification of derivatives

a. Forward Contract - A forward contract or “specific delivery contract” occurs between buyer and seller where long position holder (buyer) agrees to buy an underlying asset in future with a certain price. Forward contracts are traded over-the-counter and are not allowed to deal with exchange. As this contracts are bilateral contract. Forward contracts are very popular in foreign exchange market.

b. Future Contracts - An agreement between two parties of buying and selling of an asset with a specific quantity, time and place. These contracts allow trading in exchanges which defines certain standardized norms for future contracts.

c. Option Contracts - Option contracts are those contracts which give the right but not the authority to buy and sell the asset before its specified time or date. Option can be traded in various instruments commodities, financial asset, stock index petroleum products, metals etc

d. Swap Contracts - An agreement over a predefined interval of time between two parties to exchange assets. These are generally customized transactions and are helpful in problem of price fluctuation forex market.

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Stock Market Index

 A stock market index is the measurement of value of a section or it’s a tool used by investors to keep track of changes in market value. It is one of the best means to check economic situation. It is mainly used in analysis and investment decision making.

                                             

Stock index can be classified as

1. Value Weighted Index - In this type of index each stock affects the index value as compared to market value.

2. Price Weighted index - A price weighted stock is the average of prices all the stock included in the index. Consider an example a price weighted index containing 3 stocks - Stock A priced 10 dollar, Stock B priced 40 dollar, Stock C priced 100 dollar. The average of this stock price is 10+40+100 can be divided by no of stocks in the index which is 50.         

Popular stock market indexes in India

Index	Sample size	Base year	Base value	Weighting Typs
BSE Sensex	30	1978-79	100	Value Weighted
CNX Nifty	50	1995	100	Do
RBI Index	338	1981-82	100	Un-Weighted
BSE National	100	1983-84	100	Value
Economic Times	72	1984-85	100	Equal Weighted
Financial Exp	100	1979-80	100	Value

Factor affecting in construction of Stock market Index

1.Sample Size

  -Statistically significant large enough sample should be taken

2. Representativeness

  -It represents total no of population and its essential characteristics of interest

3. Base year

  -It should be a normal year

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Basics of Option Trading

An option is a contract that gives the owners the right, but not the compulsion to buy or sell a particular asset before its specific date. An option is just an security aspect which includes stock and bonds. Its an agreed contract with certain terms and condition mentioned in it.

Still Not clear?? Just look at these example, You want to purchase a expensive new house but you don’t have sufficient money to purchase it for another two months, now you contact the dealer to provide an option to buy that house in two months for a price of $200,000, the dealer will agree and now for this option you have to pay $3000.People who purchase an option are called holders and those who sold option are called writers.

Now option trading can be done in two ways

1 Call Option - A call gives an authority to holder to buy assets with certain price during a particular period of time with the hope of increase in price of the stock before option expires. Trading in Calls has long term position.

2 Put Option - Put gives the right to sell an asset with certain price during a fixed period of time, puts can hold the stock position for short position

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FACTORS AFFECTING STOCK PRICE

Stock market the best place for investors. Before investing in market a keenly survey of the whole market should be taken. As no one predict the market correctly, so we need to know the functioning of stock market. So let’s discuss some major factors that affect stock price in the market.

1. The Stock’s Demand and Supply -  If you are using an online trading account, then you should know about the volumes of shares bought and sold during a trading session. If there are more buyers of a particular commodity, then it results scarcity which affects the price of commodity
2. Market Capitalization of a Company - To understand the company capitalization, the right way is to find the company worth. The capitalization of a company is the main indicator in finding the stock price.
3. The Earning of Stock Per Share - The profit of a company can be detected by the earning made per share. The EPS is one of the good indicator to measure company’s performance as wells as its financial status.
4. Market/Company News - It is advisable to stay clear of speculative news which aims either to break the price or inflate it.

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INTRADAY TRADING TIPS IN STOCK MARKET

Intraday trading is generally a short term trading which involve price movements for single trading session. It generally shows the fluctuation in high or low price of a stock or option during a particular trading session. Intraday trading involves high risks with buying and selling of shares. The main reason to do intraday trading is to gain momentum which affect the present economic stability.

                                                                 

                                        

This instability in market is due to hyper trading in shares which made many investors and traders gain big return in the market. In Indian market intraday trading involves buying and selling of NSE & BSE shares. Scalping is the common strategy which intraday trading follows which involve buying of share at fixed price and immediately selling it at price of quick profit.

Intraday trading is of two types

1. Scalp trading - These types of trading involve buying and selling of shares with very    small profits and here less risk is found.

2. Momentum trading – In this type of trading traders buy the stock and wait for the target    profit. These involve high risk as the market varies time to time.

Intraday trading tips

1.      The strategy you follow in market must be dynamic and adoptable with the market condition.                         The strategy should be clear and tested.
2.       Prompt decision should be made in intraday trading
3.       First one should know all types of stocks included in major companies.
4.       One should fix a fixed amount you deposit in Investment Company.
5.       Initially you should start with low investment in the market.
6.       Be updated with financial news and stock market movements.
7.       Always keep option for stop less as it saves you in getting heavy loss.

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Risks Involved In Stock Market

Investment in the stock market involves risks. The possibility of facing a loss for an investor affects the financial market performance. Market risk also called “Systematic risk “.The risk which declines the market profitable situation in to a disaster one. Market risk occurs due to recessions, political turmoil, changes in interest rates and terrorist attacks.

                           

                                               
Risk may be of two types 

1. Systematic Risk - Systematic risk occur due to external factors of an organization. This risk is uncontrollable.

2. Unsystematic Risk - Unsystematic risk occur due to internal factors of an organization. This risk is micro in nature.

Top risks involved in stock market

1. Economic Risk - These are also know as external risk .This may occur due to fluctuation in market such as changes in demand for the product, price fluctuation, changes in income.

2. Market Risk - Market risk also be called as un-diversifying risk. This risk occurs when there is fluctuations occur in trading price of any particular shares & securities.

3. Liquidity Risk - Liquidity risk is a type of risk where investment is quickly converted in to cash without bearing any loss. These risks occur when the sales and purchase of securities get affected by business cycles.

4. Financial or credit Risk - This risk occur due to change in changes in the capital structure of an organization. There are various types of financial risk such as exchange rate risk, credit event risk, sovereign risk and settlement risk.

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10 terms related to stock market

       

       Important terms used in trading:

1.       Index - Index is most commonly used benchmark for traders.

2.       Initial public offering (IPO) - The first offering of a stock by a company to the traders.IPO is used in order to make more profit.

3.       Dividend - It’s a portion of company earning which is distributed to a class of its shareholder, decided by board of directories.

4.       Hedge - To reduce the risk in price movements for an asset hedge is used. It hold an position for an stock and sold it for future contracts.

5.       Yield - Yield is the measure of return on an investment this is calculated by  annual dividend amount to the price paid for the stock

6.       Margin - To purchase an investment in share market, a person borrow money from brokers. The difference between the loan amount and securities price is termed as margin.

7.       Day trading  - In general terms  day trading is the purchasing and selling of different financial things like future, option, stocks and currencies with the aim of gaining a profit.

8.       Bear market - A long term decline market, the country’s economy recession time is termed as bear market.

9.       Bull market - A financial market where the price rising is expected to rise. This word is often term as bull market.

10.   Over the counter market (OTC) – A decentralized market where there is no geographical limitation, trading is done through computers and telephone.

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Brief detail on Indian stock market

 Indian share market is one of the oldest and finest markets in Asia

Trading in Indian stock market is basically done in two exchanges Bombay stock exchange (BSE) and National stock exchange (NSE)

1. Bombay stock exchange – BSE is one of the oldest stock exchanges in Asian region. It was established on 1875 with the old name as “The Native Share and Stock brokers” under the regulation act of 1965.The index calculation is based on “Free Float market capitalization”.

2. National stock exchange – NSE was established in 1990 as a demutualised electronic      exchange. This exchange uses National Securities Trading system (NSTS) which perform all auction market tasks.

Stock market Index – BSE represents collection of 30 stock samples including representative company. The base year of sensex used is 1978-79 and the base value is 100.On the other hand Nse include 50 stock indexes accounting for 24 sectors of economy.

Trading Mechanism

Trading at both exchanges is carried out through an open electronic limit order book, where order matching is done with the help of trading computer, no market makers and specialist included and the entire process is carried out automatically as order-driven which state that order placed by an investor will automatically matched with  best limit order.

Market Regulation

The regulation of stock market is done by the Securities and Exchange Board of India (SEBI) which was found in 1992 as an independent authority.

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3 Major Types of Trading For High Profit Gain

Most of us are well understood by the term “Trading” But do not have much knowledge about trading and its types. Trading indicates buying and selling of financial assets /securities in order to make profit over a certain period of time. During financial transaction various types of trading practices that investor follows. Trading can be done for short, mid and long term.

Three major types of trading are:

1. Day Trading

2 .Swing trading

3 .Positional trading

11. Day Trading  - Day trading is the buying and selling of financial assets for a single day such as currencies, stock,  future, and  option  in order to make a desired profit. Day trading are short term trading where traders close their trading within the same day thus minimizes the risk. The main objective is to earn quick profit.

12.  Swing trading - Swing trading is also known as momentum trading and is one of the kinds of fundamental trading where position are held for longer time than a single day. The main motive is to identify market trends and capture profit.

13.  Positional trading - Positional trading is long term trading where traders  look for benefit  over a price movements for long period of time .Traders generally hold their position from days to weeks and month as well as. As this type of trading make huge profit by holding position but different risks are involved in it. A team of fundamental and technical analyst is required to carry out right trading strategy.

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