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{"title": "4. The USD INR Pair (Part 1)", "text": ["We make an extremely critical assumption at this stage \u2013 we will assume you are familiar with how Future\u00a0and Options contracts work.", "Technical Analysis plays an important role in setting up short term currency trades, so we\u2019ll assume you know Technical Analysis as well.", "If you are not familiar with these topics, then I\u2019d strongly suggest you read through these modules before proceeding further. The currency and commodities market is largely a Futures market; hence a working knowledge of these derivative instruments is the key.", "Now, assuming you understand these concepts fairly well, let us begin by slicing and dicing the USD INR futures contract. The contract specification of the USD INR futures gives us insights on trade logistics.", "Here are the salient features of the USD INR pair \u2013", "All weekly expiry contracts will expire on the Friday of the expiring week", "To give you a sense of how this works, let\u2019s take an example \u2013", "", "This is the 15-minute chart of the USD INR pair, as you can see the encircled candle has formed a bearish Marubuzo. One can initiate a short trade based on this, keeping the high of the Marubuzo as the stoploss.", "Note that I\u2019m not trying to justify a trade here, my objective is to showcase how the USD INR contract works.", "The trade details are as below \u2013", "Date: 1st July 2016", "Position \u2013 Short", "Entry \u2013 67.6900", "SL \u2013 67.7500", "Number of lots to short \u2013 10", "1 lot of USD INR = $ 1000", "The contract value of 1 lot of USD INR = Lot size * price", "=1000 * 67.7000", "=67,700", "The margin required for this can be fetched from Zerodha\u2019s margin calculator; here is the snapshot of the same.", "", "As you can see, the margin required to initiate a fresh position in USD INR is about Rs.1,524/-. Therefore on a contract size of 67700, this works out to \u2013", "1525/67700", "= 2.251%", "Out of this, I\u2019m guessing about 1.5% would be SAPN margin requirement (read as the minimum margin required as per exchange) and the rest as exposure margin.", "Further, the idea is to short 10 lots, hence total margin required is \u2013", "10 * 1525", "= 15,250/-", "A point to note here \u2013 when trading equity futures, one has to earmark anywhere between 15% and 65% of the contract value as margins, this obviously varies from stock to stock. In contrast to equities, the margin charged in currencies is way lower. This should give you a sense of how leveraged currency trading really is.", "On the other hand, currency sticks to a tight trading range compared to equities\u2014hence higher leverage.", "Notice how the currency futures are quoted \u2013 they go upto the 4th decimal digit. There is a reason for this \u2013 when it comes to currency futures, a number as small as this \u2013 0.0025 is considered big.", "When RBI states the reference rate, they quote upto the 4th decimal. Even a minor difference at the 4th decimal can alter the foreign reserves by a large degree. In fact, it is a norm world over to quote the currency to 4th decimal \u2013 in case of USD INR, this is 0.0025. This is called the tick size or in currency parlance, a \u2018pip\u2019. A pip/tick is the minimum number of points by which a currency can move.", "So when the USD INR moved from 67.9000 to 67.9025, it is said that the currency has moved up by a pip.", "How much money would you make per pip in the USD INR pair? Well, this should be easy to figure out \u2013", "Lot Size * pip (tick size)", "= 1000 * 0.0025", "= 2.5", "This means to say, for every pip or every tick movement you make Rs.2.5/-.", "Going back to the short trade, here is how the Marubuzo panned out \u2013", "", "After initiating the short, the currency pair declined 67.6000. If I choose to close this position, he is how much I would make \u2013", "Entry = 67.6900", "CMP = 67.6000", "Total number of points = 67.6900 \u2013 67.6000 = 0.0900", "Position \u2013 Short", "This could be a bit tricky, do pay attention. A pip as you know is the minimum number of points the currency can move. To know how many pips a currency had moved when it moved by 0.09 paise, we divide the total number of points moved by the pip size.", "Number of pips = 0.0900/0.0025", "= 36", "As you can see the trade managed to capture 36 pips, let us now calculate how much money one would make \u2013", "Lot size * number of lots * number of pips * tick size", "We know, Number of pips * tick size is as good as the total number of points caught with this trade. Therefore we can restate the above formula \u2013", "Lot Size * Number of lots * total number of points", "= 1000 * 10 * 0.0900", "= 900", "Remember this is an intraday trade. What if you were to carry this forward to expiry? Well, we can carry this forward as long as we maintain the adequate margin requirements. The July contract will stay in series 2 days before the last working day of the month.", "Here is the calendar \u2013", "", "So 29th July happens to be the last working day of the month. Hence 27th July will be the expiry of this series. In fact, you can hold the contract only till 12:30 PM on 27th July.", "Of course, you can always look at the contract to see the exact date of the expiry.", "Another question at this stage \u2013 at what price will the settlement happen?", "The settlement will happen at the RBI reference rate set for 27th July, and it is important to note that the P&L will be settled in INR.", "So for example, if I hold this position till 12:30 PM on 27th July and let it expiry, assume the price is 67.4000, then I\u2019d stand to make \u2013", "= 1000 * 0.29 * 10", "=2900/-", "And this money will be credited to my trading account on 28th July 2016. Needless to say, as long as you hold the contract, your position will be marked to market (M2M). This is similar to the way it works for equity futures.", "Hopefully, this example should give you a sense of how the logistics for the currency futures work.", "Let us quickly run through the USDINR options contract.", "", "Let us have a look at how the USDINR option contract is structured. You may be interested to know that the option contract is made available only for the USD INR pair. Hopefully, in the future, we could see option contracts on other currency pairs as well. While most of the parameters are similar to the futures contract, there are few features specific to option contracts.", "Option expiry style \u2013 European", "Premium \u2013 Quoted in INR", "Contract cycle \u2013 While the future contracts are available for 12 months forward, the options contracts are available just 3 months forward. This is similar to equity derivatives. So, since we are in July, contracts are available for July, August, and September.", "Strikes available \u2013 12 In the Money, 12 Out of the Money, and 1 Near the money option. So this is roughly 25 strikes available for you to pick and choose from. Of course, more options are added based on how the market behaves. Strikes are available at every 0.25 paisa intervals.", "Settlement \u2013 Settled in INR based on the settlement price (RBI reference rate on expiry date).", "Let\u2019s have a look at the USD INR option contract and figure out the logistics. Have a look at the following image \u2013", "", "From the option quote, we know the following \u2013", "Option type \u2013 Call option", "Strike \u2013 67.0000", "Spot price (see RBI reference rate) \u2013 67.1848", "Expiry Date \u2013 27th July 2016", "Position \u2013 Long", "Premium \u2013 0.7400 (quoted in INR)", "We know the lot size is $1000, although the lot size has not been mentioned in the quote above. \u00a0Usually, this information is made available in the quote for equity derivatives. So if you are seeing this for the first time, be aware that the lot size is $1000.", "Now, if you were to buy this option, what would be the premium outlay? Well, this is fairly easy to calculate \u2013", "Premium to be paid = lot size * premium", "= 1000 * 0.7400", "= 740", "The option contract works similar to the equity derivative contracts. Here is another snapshot I captured \u2013", "", "As you can see, the premium has shot up, and I can choose to close my trade right away. If I did, here is how much I would make \u2013", "= 1000 * 0.7750", "=775", "This translated to a profit of 775 \u2013 740 = 35 per lot.", "What if you were to sell/write this option instead? Well, you know that option selling requires you to deposit margins. You can use Zerodha\u2019s F&O Margin calculator to get an estimate on the margin required.", "Have a look at the snapshot below; I\u2019ve used the calculator to identify the margin required to write (short) this option \u2013", "", "As you can see, the margin required is Rs.2,390/-.", "I hope this chapter has given you a basic sense of how the USD INR contracts are designed. In the next chapter, we will try and discuss some quantitative aspects of the USD INR pair and perhaps look at the contract specification of other currency pairs.", "Option writing in currency is similar to option writing in Equity?", "If only 2390/- rupees are required to sell one lot n keeping short position till expiry , isn\u2019t it cheaper instrument that index / stock options?", "Yes, this is similar to equities, and way too cheaper to enter a transaction!", "Sir how long time will it take to complete module 9&10 i am eagarly waiting for them. Can you please update it with in 2 months?", "Shreyadr \u2013 I completely agree with you. Infact I try the margin with 10 lots and it comes to Rs. 25,433 only. Premium that will be earned is Rs. 7,800. If this trade moves in our favour than there is return on investment of 30.67%. Is there a catch that we have not discussed in this chapter ?", "can you explain which strike price u traded? what was the futures price then? and when u had taken the position, i mean at start of the month or middle or last week of the month or whatever?", "There is no catch \ud83d\ude42", "Margin requirements for trading currency is lesser, simply because of the restricted movements in currency. A diligent trader can explore great trading opportunities here!", "e.g. say i am bearish on USDINR (futures 67.6250 at present) and wanted to short 4 lots of 69CE\u2026 trading at 0.04, i requires Initial margin Rs: 1,530 + Exposure margin Rs: 4,047 = Total margin ?Rs: 5,577\nbut Premium receivable ? is only Rs: 240.\nso is it worth to take this trade? now on 7th July and waiting till expiry by blocking 6k for 4 lots and more if wanted more lots?", "I cant really comment on the trade \ud83d\ude42", "You would receive 240 for a deposit of 5577, which if works in your favor turns out to be around 4.3% over next 15 days. Not bad I\u2019d say from a return perspective !", "F EURUSD: 1.0925 / 1.0950; USDINR: 68.02 / 68.03 how to calculate EURINR (I MEAN BOTH BID AND ASK)? Please help, I am preparing for Nism Currency Exam\u2026 i am confused with these calculations on work book,", "Check this chapter \u2013 http://zerodha.com/varsity/chapter/reference-rates-impact-of-events/ section 2.2.", "Name (required)", "Mail (will not be published) (required)", "", "Post comment", "", "\u0394", "Varsity by Zerodha \u00a9 2015 \u2013 2024.\r\n\t\t\t\t\tAll rights reserved.\r\n\t\t\t\t\tReproduction of the Varsity materials, text and images,\r\n\t\t\t\t\tis not permitted. For media queries, contact [email\u00a0protected]"], "images": ["https://zerodha.com/varsity/wp-content/themes/varsity2/images/logo.png", "https://zerodha.com/varsity/wp-content/themes/varsity2/images/logo-small.png", "http://zerodha.com/varsity/wp-content/uploads/2016/07/Image-1_USDINR.png", "http://zerodha.com/varsity/wp-content/uploads/2016/07/Image-2_margins.png", "http://zerodha.com/varsity/wp-content/uploads/2016/07/Image-3_Short-exit.png", "http://zerodha.com/varsity/wp-content/uploads/2016/07/Image-4_expiry.png", "http://zerodha.com/varsity/wp-content/uploads/2016/07/M8-C4-cartoon-1.png", "http://zerodha.com/varsity/wp-content/uploads/2016/07/Image-5_options.png", "http://zerodha.com/varsity/wp-content/uploads/2016/07/Image-6_option-exit.png", "http://zerodha.com/varsity/wp-content/uploads/2016/07/Image-7_option-margins.png", "https://secure.gravatar.com/avatar/c99cb5f426c5d265e34f3f4dbe574865?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/9d4d13ddb241e13aa706d9f06e8bb951?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/e94b28d73023b7ecf1215e88775f00da?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/c99cb5f426c5d265e34f3f4dbe574865?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/c99cb5f426c5d265e34f3f4dbe574865?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/76a5028cc22e10a1bd11fcad2bbe3479?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/playstore.png", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/appstore.png"], "tables": ["<table border=\"1\" cellpadding=\"0\" cellspacing=\"0\" style=\"height: 769px;\" width=\"501\">\n<tbody>\n<tr>\n<th valign=\"top\" width=\"82\"><strong>Particular</strong></th>\n<th valign=\"top\" width=\"234\"><strong>Details</strong></th>\n<th valign=\"top\" width=\"163\"><strong>Remark</strong></th>\n</tr>\n<tr>\n<td valign=\"top\" width=\"82\">Lot Size</td>\n<td valign=\"top\" width=\"234\">$1,000</td>\n<td valign=\"top\" width=\"163\">Inequity derivatives, the lot is number of shares, but here it\u2019s a dollar amount</td>\n</tr>\n<tr>\n<td valign=\"top\" width=\"82\">Underlying</td>\n<td valign=\"top\" width=\"234\">The rate of Indian Rupee against 1 USD</td>\n<td valign=\"top\" width=\"163\"></td>\n</tr>\n<tr>\n<td valign=\"top\" width=\"82\">Tick Size</td>\n<td valign=\"top\" width=\"234\">0.25 Paise or in Rupee terms INR 0.0025</td>\n<td valign=\"top\" width=\"163\"></td>\n</tr>\n<tr>\n<td valign=\"top\" width=\"82\">Trading Hours</td>\n<td valign=\"top\" width=\"234\">Monday to Friday between 9:00 AM to 5:00 PM</td>\n<td valign=\"top\" width=\"163\"></td>\n</tr>\n<tr>\n<td valign=\"top\" width=\"82\">Expiry Cycle</td>\n<td valign=\"top\" width=\"234\">Upto 11 weekly expires and 12 monthly expiries</td>\n<td valign=\"top\" width=\"163\">Note, equity derivatives have an expiry upto 3 months.</td>\n</tr>\n<tr>\n<td valign=\"top\" width=\"82\">Last trading day</td>\n<td valign=\"top\" width=\"234\">\n<p style=\"text-align: left;\"><span lang=\"EN-US\">All weekly expiry contracts will expire on the Friday of the expiring week</span></p>\n</td>\n<td valign=\"top\" width=\"163\">All contracts other than weekly, will expire Two working days prior to the last business day of the expiry month at 12:30 pm</td>\n</tr>\n<tr>\n<td valign=\"top\" width=\"82\">Final Settlement day</td>\n<td valign=\"top\" width=\"234\">Last working day of the month</td>\n<td valign=\"top\" width=\"163\"></td>\n</tr>\n<tr>\n<td valign=\"top\" width=\"82\">Quantity Freeze Limit</td>\n<td valign=\"top\" width=\"234\">10,001 or greater</td>\n<td valign=\"top\" width=\"163\"></td>\n</tr>\n<tr>\n<td valign=\"top\" width=\"82\">Margin</td>\n<td valign=\"top\" width=\"234\">SPAN + Exposure</td>\n<td valign=\"top\" width=\"163\">Usually, SPAN is about 2%, and exposure is around 0.5%. Hence roughly about 2.5% is the overall margin requirement.</td>\n</tr>\n<tr>\n<td valign=\"top\" width=\"82\">Settlement Price</td>\n<td valign=\"top\" width=\"234\">RBI Reference rate on the day of Final settlement</td>\n<td valign=\"top\" width=\"163\">The closing price of spot</td>\n</tr>\n</tbody>\n</table>"], "videos": []}
{"title": "14. Supplementary note \u2013 Rights, OFS, FPO", "text": ["Initial Public Offering is when a company is introduced into the publicly traded stock markets for the first time. In the IPO, the company\u2019s promoters choose to offer a certain percentage of shares to the public. The reason for going public and the process of an IPO is explained in detail in Chapters 4 and 5.", "The primary reason for going public is to raise capital to fund expansion projects or cash out early investors. After the IPO is listed on the exchange and is traded in the secondary market, promoters of the company might still want additional capital. There are three options available: Rights Issue, Offer for Sale and Follow-on Public Offer.", "The promoters can choose to raise additional capital from its existing shareholders by offering them new shares at a discounted price (generally lower than Market Price). The company offers new shares in the proportion of shares already held by the shareholders. For example, a 1:4 Rights Issue would mean that every 4 shares held 1 additional share is offered. Although this option looks good, it limits the company to raise the capital from a small number of investors who are already holding shares of the company and might not want to invest more. A rights issue leads to the creation of new shares that are offered to the shareholders, which dilutes the value of the previously held shares.", "An example of a Rights issue is South Indian Bank which announced a 1:3(One share for every 3 held) issue for Rs 14 which is 30% lower than the Market Price the stock was trading (Rs 20 as on Record date 17 Feb 2017). The bank offered 45.07 lakh shares to the existing shareholders.", "The rights issue is covered in detail in Chapter 11, covering key Corporate Actions.", "The promoters can choose to offer the secondary issue of shares to the whole market, unlike a rights issue restricted to existing shareholders. The Exchange provides a separate window through the stockbrokers for the Offer for Sale. The exchange allows a company to route funds through OFS only if the Promoters want to sell out their holdings and/or maintain minimum public shareholding requirements (Govt. PSU have a public shareholding requirement of 25%).", "There is a floor price set by the company, at or above which both Retail and Non-Retail investors can make bids. The shares are allotted, if bids are at a cut-off price or above will be settled by the exchange into the investor Demat account in T+1 days.", "An example of an Offer for Sale is NTPC limited, which offered a maximum of 46.35 million shares at a floor price of Rs 168 and was fully subscribed in the 2 day period. The OFS was held on 29th August 2017 for Non-Retail Investors and 30th August 2017.", "An FPO also has the same intent of raising additional capital after it has been listed but follows a different mechanism for applying and allotting shares. Shares can be diluted, and fresh shares can be created and offered in an FPO. Just like an IPO, an FPO requires that Merchant Bankers be appointed to create a Draft Red Herring Prospectus which has to be approved by SEBI after which bidding is allowed in a 3-5 day period. Investors can place their bids through ASBA and shares are allotted based on the Cut-off Price decided after the book-building process. Since the introduction of OFS in 2012, FPOs are seldom used due to the lengthy approval process.", "The company decides on a Price Band, and the FPO is publicly advertised. Prospective investors can bid for the issue using the ASBA portal through Internet Banking or apply offline through a Bank Branch. After the bidding process is complete, the cut-off price is declared based on the demand and the additional shares allotted are listed on the exchange for trading in the secondary markets.", "An example of an FPO is of Engineers India Ltd which underwent an issue in February 2014 with Rs 145-Rs 150. The issue was oversubscribed by 3 times. The shares on the day of the starting date of the issue were trading at Rs 151.1. The lower price band was at a 4.2% discount from the market price.", "Excellent Efforts on clearing the contents\u2026 Thank You So Much\u2026.", "\ud83d\ude42", "Happy learning!", "Thanks. I have started now.", "Cheers!", "This is great,I appreciate alot for this but if it\u2019s in a video form then that will be better", "Sure, thanks Ahmed. We will try and do a webinar on this.", "Is there a feature in Kite to see the price action of an underlying for a particular day in the past by choosing a date? It is very tedious to scroll all the way back by pulling the cursor.", "Ah, not really.", "Would you great, if you could forward this feedback to have this feature, to your software development team. \ud83d\ude42", "I\u2019ve done that already, they will review it and implement if feasible.", "Poor Service account opening\u2026.. No help\u2026 No support at all\u2026. I don\u2019t know how you guys are working\u2026", "Can you please share your experience on [email\u00a0protected]?", "really very much insighting and value educating for beginners\u2026.thanks sir", "Happy learning, Raju!", "Hi Karthik,\nThe modules are informative and useful for someone like me who is new to the share market. I am holding 1890 shares of Rana sugars and bought it for 10.20 per share and did not put a stoploss( I was not aware about it). Now the share price is 7.70 Rs as of today. Please let me know the future of the shares", "Happy learning, Sabarivasan \ud83d\ude42", "As a business, we do not advise clients on individual shares. So I\u2019m afraid I cannot help you with this.", "The content was excellent..but i have one confusion..if compnay has done IPO so it will again go for OFS\u2026it can issue additional shares as a bonus also..", "Once the company is listed on the exchange by means of an IPO, it can choose to raise additional capital through OFS(or FPO or Rights Issue)- Cash inflow\nBonus issue is different where the company chooses to reward the shareholders by giving additional shares using its reserves- Cash outflow", "Hi karthik,\nI need a small clarification on how the stock price is fixed .. I have given few examples as per my understanding\u2026please clarify me on this:", "Example:", "A company ABC is trading at Rs.325 at a particular time\n1)Two persons have placed an order: one for a buy with bid 324 and another for a sell with ask 326.\n Assuming these are the only two persons trading for that company at that time.\nWhat happens in this situation. (I think the trading value will remain same!)", "A company ABC is trading at Rs.325 at a particular time\n2)Now there are three bids and four asks\nBid: 325; quantity -2\nBid: 324; quantity -10\nBid: 323; quantity -6", "Ask: CMP(325); quantity -2\nAsk: 326; quantity -8\nAsk: 327; quantity -4\nAsk: 328; quantity -2\nIn this case, after the shares are traded at 325, the trading price will still remain same at 325\u2026Am i right?", "3) How is the open price of a day decided?\n4)How is the listing price of an IPO decided?", "1) Since the bid-ask does not match, no trade happens. One of them will have to change the price to match the counterparty.\n2) Yes, because the top bid-ask does not match. However, if a new guy comes and places a market order, the transaction will go through (for either buying or selling)\n3) Based on the bid-ask order book build during the pre-open\n4) Book building process", "Regarding 3, I would like to quote another example\u2026 please do tell me if I am right\nDay 1: closing price of a stock ABC is Rs200\nDay 2:\nAs soon as the trading starts company hits UC(240)\nMY query is stock price keeps increasing only when there is a buy at any price\u2026 But before the market opened no one would have placed a bid for 240 or 230( i think so because no one exactly knows that it will exactly increase by that much percentage) then how will it reach that price as soon as the market opens.\nAnd regarding 4 I was asking how the listing price of an IPO sometimes opens at a higher price\u2026how is this decided.\nExample: DMART\nI think if i get an answer for 3, probably 4 will also be answered", "Stock ABC will only hit upper circuit if a trade occurs at Rs 240(A buyer willing to buy at 240 and a matching seller). At Pre-market between 9:00 and 9:15AM there is buying interest for this to occur. Once a non-F&O stock hits 20% limit, buying is not allowed anymore.\nFor IPO, Pre-open session runs between 9.00 AM and 9.45 AM where orders are accepted. Between 9.45 AM and 10.00 AM, the orders are matched and the listing price is decided at 10.00 AM when it commences for normal trading", "Hi faisal,\nI still lack some clarity.\nday 0 : closing price of abc is 200\nday1 : open is 240(UC)", "So between 9 and 9:15 am of day1, there should be a bid placed at 240 with an ask at the same price..\nBut during that pre open session, no one knows how many bids are placed, right?\nWhy would someone want to place an order at such a price\u2026 ( This point is where I am not getting)", "Although you are not able to see the bid and ask during pre-open, the exchange does order matching and that\u2019s how the open price is determined. In your hypothetical case, I\u2019m assuming there\u2019s a lot of demand for the script, and there are buyers willing to pay \u20b9240. You can read more here.", "Thanks faisal", "Regarding 3 \u2013 this really depends on the kind of buying or selling pressure in the market. The best way to think about this is by thinking about it as a pressure cooker \ud83d\ude42\nWhen there is excessive bullishness, price tends to gap up. Likewise with gap downs.", "Thanks karthik\u2026 Btw the documentation is too good", "Cheers!", "Hi Karthik,", "1 query. If the closing price of stock was 200. And suppose in the pre open session there\u2019s a single bid of 250 and a single ask of 250 and it has matched. So does this mean the stock will open at 250..?", "Maybe, if its an F&O stock. F&O stocks do not have upper lower circuits. For everything else, there are circuit restrictions.", "Name (required)", "Mail (will not be published) (required)", "", "Post comment", "", "\u0394", "Varsity by Zerodha \u00a9 2015 \u2013 2024.\r\n\t\t\t\t\tAll rights reserved.\r\n\t\t\t\t\tReproduction of the Varsity materials, text and images,\r\n\t\t\t\t\tis not permitted. For media queries, contact [email\u00a0protected]"], "images": ["https://zerodha.com/varsity/wp-content/themes/varsity2/images/logo.png", "https://zerodha.com/varsity/wp-content/themes/varsity2/images/logo-small.png", "https://zerodha.com/varsity/wp-content/uploads/2017/09/Ch5-title.jpg", "https://secure.gravatar.com/avatar/233ff6b528cb1016425a3d7523d1551f?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/6418ff04c282468ef6c3aae8a183f4d0?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/399be78c5b63ad993ef504528092f528?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/912b983b37f3176f1a59b45c3199cbf8?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/0bd244c210ba8dd6ab23655ba00a7583?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/0bd244c210ba8dd6ab23655ba00a7583?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3d89ef69acbedfd36593cd06ed9c054f?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/7ec7dfe325a50494a93b80a8d2b0cdb9?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/c1db5763818b1db5c0fef925308b2392?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/b16c4ca51048657604739b06ffcf1142?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/6418ff04c282468ef6c3aae8a183f4d0?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/343aa4f3cd7a4ce24e48512dccf7632e?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/343aa4f3cd7a4ce24e48512dccf7632e?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/6418ff04c282468ef6c3aae8a183f4d0?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/343aa4f3cd7a4ce24e48512dccf7632e?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/6418ff04c282468ef6c3aae8a183f4d0?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/343aa4f3cd7a4ce24e48512dccf7632e?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/343aa4f3cd7a4ce24e48512dccf7632e?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/296b2d0c0eb9c7fea6359368e0699a5e?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/playstore.png", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/appstore.png"], "tables": [], "videos": []}
{"title": "1. \u0926\u093f\u0936\u093e \u0928\u093f\u0930\u094d\u0927\u093e\u0930\u0923", "text": ["\u0939\u092e \u0911\u092a\u094d\u0936\u0928 \u0938\u094d\u091f\u094d\u0930\u0948\u091f\u091c\u0940 \u092a\u0930 \u0907\u0938 \u092e\u0949\u0921\u094d\u092f\u0942\u0932 \u0915\u094b \u0936\u0941\u0930\u0942 \u0915\u0930\u0947\u0902, \u0907\u0938\u0915\u0947 \u092a\u0939\u0932\u0947 \u092e\u0948\u0902 \u0906\u092a\u0915\u094b \u090f\u0915 \u0932\u0947\u0916 \u0926\u093f\u0916\u093e\u0928\u093e \u091a\u093e\u0939\u0924\u093e \u0939\u0942\u0902 \u091c\u093f\u0938\u0947 \u092e\u0948\u0902\u0928\u0947 2 \u0938\u093e\u0932 \u092a\u0939\u0932\u0947 \u092a\u0922\u093c\u093e \u0925\u093e\u0964 \u0907\u0938 \u0932\u0947\u0916 \u0915\u093e \u0936\u0940\u0930\u094d\u0937\u0915 \u0939\u0948 \u201c\u0935\u093e\u092f \u0935\u093f\u0928\u093f\u0902\u0917 \u0907\u091c \u090f\u0921\u0940\u0915\u094d\u091f\u093f\u0935\u201d (Why winning is addictive) \u0964 \u0907\u0938\u0947 \u092c\u0940 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\u0928\u093f\u0936\u094d\u091a\u093f\u0924 \u0914\u0930 \u0938\u0939\u0940 \u092b\u093e\u0930\u094d\u092e\u0942\u0932\u093e \u0928\u0939\u0940\u0902 \u0939\u0948\u0964 \u0906\u092a \u091c\u093e\u0928\u0924\u0947 \u0939\u0940 \u0939\u0948\u0902 \u0915\u093f \u092c\u093e\u091c\u093e\u0930 \u092e\u0947\u0902 \u0915\u0941\u091b \u092d\u0940 100% \u0928\u093f\u0936\u094d\u091a\u093f\u0924 \u0928\u0939\u0940\u0902 \u0939\u094b\u0924\u093e\u0964 \u0939\u092e\u093e\u0930\u093e \u092e\u0915\u0938\u0926 \u092f\u0947 \u0939\u0948 \u0915\u093f \u0939\u092e \u092f\u0939\u093e\u0902 \u092a\u0930 \u0915\u0941\u091b \u092e\u0939\u0924\u094d\u0935\u092a\u0942\u0930\u094d\u0923 \u0914\u0930 \u0938\u0940\u0927\u0940 \u0938\u094d\u091f\u094d\u0930\u0947\u091f\u091c\u0940 \u092a\u0930 \u091a\u0930\u094d\u091a\u093e \u0915\u0930\u0947\u0902 \u0914\u0930 \u0905\u0917\u0930 \u0906\u092a \u0907\u0928\u0915\u093e \u0938\u0939\u0940 \u0907\u0938\u094d\u0924\u0947\u092e\u093e\u0932 \u0915\u0930\u0947\u0902 \u0924\u094b \u0906\u092a \u092a\u0948\u0938\u0947 \u092c\u0928\u093e \u0938\u0915\u0947\u0902\u0964", "\u091c\u0948\u0938\u0947 \u0915\u093f \u092e\u093e\u0928 \u0932\u0940\u091c\u093f\u090f \u0915\u093f \u0906\u092a\u0915\u0947 \u092a\u093e\u0938 \u090f\u0915 \u0905\u091a\u094d\u091b\u0940 \u0915\u093e\u0930 \u0939\u0948, \u0906\u092a \u0905\u0917\u0930 \u0909\u0938\u0915\u094b \u0905\u091a\u094d\u091b\u0947 \u0938\u0947 \u091a\u0932\u093e\u090f\u0902\u0917\u0947 \u0924\u094b \u0906\u092a \u0907\u0938\u0915\u093e \u0907\u0938\u094d\u0924\u0947\u092e\u093e\u0932 \u0905\u092a\u0928\u0947 \u0914\u0930 \u0905\u092a\u0928\u0947 \u092a\u0930\u093f\u0935\u093e\u0930 \u0915\u0947 \u0906\u0930\u093e\u092e\u0926\u093e\u092f\u0915 \u0938\u092b\u0930 \u0915\u0947 \u0932\u093f\u090f \u0915\u0930 \u0938\u0915\u0924\u0947 \u0939\u0948\u0902\u0964 \u0932\u0947\u0915\u093f\u0928 \u0905\u0917\u0930 \u0906\u092a \u0907\u0938\u0915\u094b \u0920\u0940\u0915 \u0938\u0947 \u0928\u093e \u091a\u0932\u093e\u090f\u0902 \u0924\u094b \u092f\u0939 \u0915\u093e\u0930 \u0906\u092a\u0915\u0947 \u0932\u093f\u090f \u0916\u0924\u0930\u0928\u093e\u0915 \u0939\u094b \u0938\u0915\u0924\u0940 \u0939\u0948 \u0914\u0930 \u0906\u092a\u0915\u0947 \u0906\u0938\u092a\u093e\u0938 \u0932\u094b\u0917\u094b\u0902 \u0915\u094b \u092d\u0940 \u0928\u0941\u0915\u0938\u093e\u0928 \u092a\u0939\u0941\u0902\u091a\u093e \u0938\u0915\u0924\u0940 \u0939\u0948\u0964", "\u0920\u0940\u0915 \u0907\u0938\u0940 \u0924\u0930\u0940\u0915\u0947 \u0938\u0947 \u0905\u0917\u0930 \u0906\u092a \u0907\u0938\u0915\u093e \u0938\u0939\u0940 \u0907\u0938\u094d\u0924\u0947\u092e\u093e\u0932 \u0915\u0930\u0947\u0902 \u0924\u094b \u092f\u0947 \u0938\u094d\u091f\u094d\u0930\u0948\u091f\u091c\u0940 \u0906\u092a\u0915\u094b \u092a\u0948\u0938\u0947 \u0915\u092e\u093e \u0915\u0930 \u0926\u0947 \u0938\u0915\u0924\u0940 \u0939\u0948 \u0928\u0939\u0940\u0902 \u0924\u094b \u092f\u0939 \u0906\u092a\u0915\u0947 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\u0939\u0948\u0964 \u0932\u0947\u0915\u093f\u0928 \u0907\u0938 \u0938\u094d\u091f\u094d\u0930\u0948\u091f\u091c\u0940 \u0915\u093e \u0906\u092a\u0915\u0947 \u0932\u093f\u090f \u0915\u093e\u092e \u0915\u0930\u0928\u093e \u0906\u092a\u0915\u0947 \u0939\u093e\u0925 \u092e\u0947\u0902 \u0939\u0948\u0964 \u092f\u0939 \u0907\u0938 \u092a\u0930 \u0928\u093f\u0930\u094d\u092d\u0930 \u0915\u0930\u0947\u0917\u093e \u0915\u093f \u0906\u092a \u0915\u093f\u0924\u0928\u0947 \u0905\u0928\u0941\u0936\u093e\u0938\u093f\u0924 \u0924\u0930\u0940\u0915\u0947 \u0938\u0947 \u0915\u093e\u092e \u0915\u0930\u0924\u0947 \u0939\u0948\u0902 \u0914\u0930 \u092c\u093e\u091c\u093e\u0930 \u0915\u0940 \u0906\u092a\u0915\u094b \u0915\u093f\u0924\u0928\u0940 \u0905\u091a\u094d\u091b\u0940 \u0938\u092e\u091d \u0939\u0948\u0964 \u0932\u0947\u0915\u093f\u0928 \u092e\u0947\u0930\u093e \u092e\u093e\u0928\u0928\u093e \u0939\u0948 \u0915\u093f \u0938\u092e\u092f \u0915\u0947 \u0938\u093e\u0925 \u0914\u0930 \u091c\u0948\u0938\u0947-\u091c\u0948\u0938\u0947 \u0906\u092a \u0938\u094d\u091f\u094d\u0930\u0948\u091f\u091c\u0940 \u0915\u093e \u0907\u0938\u094d\u0924\u0947\u092e\u093e\u0932 \u091c\u094d\u092f\u093e\u0926\u093e \u0915\u0930\u0947\u0902\u0917\u0947 \u0914\u0930 \u092c\u093e\u091c\u093e\u0930 \u0915\u094b \u0905\u091a\u094d\u091b\u0947 \u0938\u0947 \u0938\u092e\u091d\u0947\u0902\u0917\u0947, \u0906\u092a \u0907\u0928\u0915\u0947 \u0907\u0938\u094d\u0924\u0947\u092e\u093e\u0932 \u092e\u0947\u0902 \u092c\u0947\u0939\u0924\u0930 \u0939\u094b\u0924\u0947 \u091c\u093e\u090f\u0902\u0917\u0947\u0964", "\u0924\u094b \u0905\u0917\u0932\u0947 \u0905\u0927\u094d\u092f\u093e\u092f \u0938\u0947 \u0939\u092e \u092c\u0941\u0932\u093f\u0936 \u0938\u094d\u091f\u094d\u0930\u0948\u091f\u091c\u0940 \u092a\u0930 \u0915\u093e\u092e \u0936\u0941\u0930\u0942 \u0915\u0930\u0947\u0902\u0917\u0947 \u0914\u0930 \u0938\u092c\u0938\u0947 \u092a\u0939\u0932\u0947 \u092c\u0941\u0932 \u0915\u0949\u0932 \u0938\u094d\u092a\u094d\u0930\u0947\u0921 \u092a\u0930\u0964", "Plz. Provide all modules in hindi . As yet only 6 modules are in hindi.", "\u0939\u092e \u0909\u0928 \u092a\u0930 \u0915\u093e\u092e \u0915\u0930 \u0930\u0939\u0947 \u0939\u0948\u0902, \u092c\u093e\u0915\u093f \u0915\u0947 \u092e\u0949\u0921\u0932\u094d\u0938 \u092d\u0940 \u091c\u0932\u094d\u0926 \u0939\u0940 \u0909\u092a\u0932\u092c\u094d\u0927 \u0939\u094b\u0902\u0917\u0947\u0964", "Sirr hindi modules ki pdf file kaise download hoggi??", "\u0939\u093f\u0902\u0926\u0940 \u092e\u0949\u0921\u0932\u094d\u0938 \u092b\u093f\u0932\u0939\u093e\u0932 PDF \u092e\u0947\u0902 \u0909\u092a\u0932\u092c\u094d\u0927 \u0928\u0939\u0940\u0902 \u0939\u0948\u0902, \u0939\u092e \u0906\u092a\u0915\u0947 \u0938\u0941\u091d\u093e\u0935 \u092a\u0930 \u0917\u094c\u0930 \u0915\u0930\u0947\u0902\u0917\u0947, \u0927\u0928\u094d\u092f\u0935\u093e\u0926\u0964", "\u0907\u0938\u0915\u0947 \u0905\u0932\u093e\u0935\u093e \u092e\u0948\u0902 \u090f\u0915 \u0910\u0938\u093e \u090f\u0915\u094d\u0938\u0947\u0932 \u0921\u0949\u0915\u094d\u092f\u0942\u092e\u0947\u0902\u091f \u092d\u0940 \u0906\u092a\u0938\u0947 \u0938\u093e\u0925 \u0906\u092a\u0915\u0947 \u0938\u093e\u0925 \u0936\u0947\u092f\u0930 \u0915\u0930\u0942\u0902\u0917\u093e \u091c\u094b \u0924\u092c \u0906\u092a\u0915\u0947 \u0915\u093e\u092e \u0906\u090f\u0917\u093e \u091c\u092c \u0906\u092a \u0907\u0938 \u0938\u094d\u091f\u094d\u0930\u0948\u091f\u091c\u0940 \u0915\u093e \u0907\u0938\u094d\u0924\u0947\u092e\u093e\u0932 \u0915\u0930\u0928\u093e \u091a\u093e\u0939\u0947\u0902\u0917\u0947\u0964\n \u0906\u092a\u0915\u0940 \u0926\u093f\u092e\u093e\u0917 \u0915\u093e \u0930\u093f\u092b\u094d\u0932\u0947\u0915\u094d\u0938\u093f\u0935 \u0939\u093f\u0938\u094d\u0938\u093e \u0906\u092a\u0915\u094b \u0910\u0938\u093e \u0915\u0930\u0928\u0947 \u0915\u094b \u0915\u0939 \u0930\u0939\u093e \u0939\u094b\u0924\u093e \u0939\u0948\u0964\n \u0938\u0930 \u090a\u092a\u0930 \u0935\u093e\u0932\u0947 \u0926\u094b\u0928\u094b\u0902 \u0935\u093e\u0915\u094d\u092f\u094b\u0902 \u092a\u0930 \u0928\u095b\u0930 \u0921\u093e\u0932\u0947\u0902 \u0914\u0930 \u0924\u094d\u0930\u0941\u091f\u093f \u0938\u0941\u0927\u093e\u0930 \u0928\u0947 \u0915\u0940 \u0915\u0943\u092a\u093e \u0915\u0930\u0947\u0902\u0964", "\u0938\u0942\u091a\u093f\u0924 \u0915\u0930\u0928\u0947 \u0915\u0947 \u0932\u093f\u090f \u0927\u0928\u094d\u092f\u0935\u093e\u0926\u0964 \u0939\u092e\u0928\u0947 \u0907\u0938\u0915\u094b \u0938\u0939\u0940 \u0915\u0930\u0926\u093f\u092f\u093e \u0939\u0948\u0964", "Sir,\n ismeto kewal 13 module hi hai,\nAap to kahe the ki \u092e\u0949\u0921\u094d\u092f\u0942\u0932 \u092e\u0947\u0902 \u0915\u0930\u0940\u092c 16-20 \u0905\u0927\u094d\u092f\u093e\u092f \u092c\u0928\u0947\u0902\u0917\u0947. Or sare module kab uplode hoga.\nPlease uploade All module", "\u0939\u092e \u092c\u093e\u0915\u093f \u0905\u0927\u092f\u093e\u092f\u094b\u0902 \u092a\u0930 \u0915\u093e\u092e \u0915\u0930 \u0930\u0939\u0947, \u0935\u0947 \u091c\u0932\u094d\u0926 \u0939\u0940 \u0909\u092a\u0932\u092c\u094d\u0927 \u0915\u0930\u093e\u092f\u0947 \u091c\u093e\u090f\u0902\u0917\u0947\u0964", "sir apka ye jo samjhane ka tarika hai wah kash bahut pahle mil gaya hota to jyada behatar hota ,but koi bat nahi abb samjh aa raha hai ki kya hai share market thank sir . bas ek bat yah puchna hai ki option selling /writing me stoploss kaise aur iske liye primium jo milta hai kya uske liye expiry date par hi milegi ya jab possition se exit huye ussi din ? ho sake to eply jarur kare sir kyonki ye bat mai zerodha wale se hi puch sakta hu ,", "\u091c\u092c \u0906\u092a \u092a\u094b\u091c\u0940\u0936\u0928 \u090f\u0917\u094d\u091c\u093f\u091f \u0915\u0930\u0947\u0902\u0917\u0947 \u0924\u092c \u0939\u0947 \u092e\u093f\u0932\u091c\u093e\u090f\u0917\u0940 \u0964", "Name (required)", "Mail (will not be published) (required)", "", "Post comment", "", "\u0394", "Varsity by Zerodha \u00a9 2015 \u2013 2024.\r\n\t\t\t\t\tAll rights reserved.\r\n\t\t\t\t\tReproduction of the Varsity materials, text and images,\r\n\t\t\t\t\tis not permitted. For media queries, contact [email\u00a0protected]"], "images": ["https://zerodha.com/varsity/wp-content/themes/varsity2/images/logo.png", "https://zerodha.com/varsity/wp-content/themes/varsity2/images/logo-small.png", "https://zerodha.com/varsity/wp-content/uploads/2015/11/M6-C1-cartoon.png", "http://zerodha.com/varsity/wp-content/uploads/2015/11/bullish-strategies.png", "http://zerodha.com/varsity/wp-content/uploads/2015/11/bearish-strategies.png", "http://zerodha.com/varsity/wp-content/uploads/2015/11/neutral-strategies.png", "https://secure.gravatar.com/avatar/454b7b976b598023b79e74980b3d04dc?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/be5de1b57c0a4cfdd8c128e3b984d149?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/e46579c72b36e24c254a0f1ee302fa69?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/be5de1b57c0a4cfdd8c128e3b984d149?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/652a8bff5fdd4e21638d9fd1570a19c5?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/be5de1b57c0a4cfdd8c128e3b984d149?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/0086133e0061318f243da9a8d20dcd51?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/be5de1b57c0a4cfdd8c128e3b984d149?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/74ccb26c5a1f1ec6b6654bc69625a00e?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/be5de1b57c0a4cfdd8c128e3b984d149?s=32&d=identicon&r=g", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/playstore.png", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/appstore.png"], "tables": ["<table>\n<tbody>\n<tr>\n<td valign=\"top\"><img alt=\"bullish-strategies\" class=\"aligncenter wp-image-2805 size-full\" decoding=\"async\" height=\"140\" src=\"http://zerodha.com/varsity/wp-content/uploads/2015/11/bullish-strategies.png\" width=\"140\"/><br/>\n<strong>\u092c\u0941\u0932\u093f\u0936 \u0938\u094d\u091f\u094d\u0930\u0947\u091f\u0947\u091c\u0940\u091c</strong>\n<ol style=\"text-align: left;\">\n<li>\u092c\u0941\u0932\u094d\u0932 \u0915\u0949\u0932 \u0938\u094d\u092a\u094d\u0930\u0947\u0921</li>\n<li>\u092c\u0941\u0932\u094d\u0932 \u092a\u0941\u091f \u0938\u094d\u092a\u094d\u0930\u0947\u0921</li>\n<li>\u0915\u0949\u0932 \u0930\u0947\u0936\u094d\u092f\u094b \u092c\u0948\u0915 \u0938\u094d\u092a\u094d\u0930\u0947\u0921</li>\n<li>\u092c\u0947\u092f\u0930 \u0915\u0949\u0932 \u0932\u0948\u0921\u0930</li>\n<li>\u0915\u0949\u0932 \u092c\u091f\u0930\u092b\u094d\u0932\u093e\u0908</li>\n<li>\u0938\u093f\u0902\u0925\u0947\u091f\u093f\u0915 \u0915\u0949\u0932</li>\n<li>\u0938\u094d\u091f\u094d\u0930\u0948\u092a\u094d\u0938</li>\n</ol>\n</td>\n<td valign=\"top\"><img alt=\"bearish-strategies\" class=\"aligncenter size-full wp-image-2806\" decoding=\"async\" height=\"140\" src=\"http://zerodha.com/varsity/wp-content/uploads/2015/11/bearish-strategies.png\" width=\"140\"/><br/>\n<strong>\u092c\u0947\u092f\u0930\u093f\u0936 \u0938\u094d\u092a\u094d\u0930\u0947\u0921\u094d\u0938</strong>\n<ol style=\"text-align: left;\">\n<li>\u092c\u0947\u092f\u0930 \u0915\u0949\u0932 \u0938\u094d\u092a\u094d\u0930\u0947\u0921</li>\n<li>\u092c\u0947\u092f\u0930 \u092a\u0941\u091f \u0938\u094d\u092a\u094d\u0930\u0947\u0921</li>\n<li>\u092c\u0941\u0932\u094d\u0932 \u092a\u0941\u091f \u0932\u0948\u0921\u0930</li>\n<li>\u092a\u0941\u091f \u0930\u0947\u0936\u094d\u092f\u094b \u092c\u0948\u0915 \u0938\u094d\u092a\u094d\u0930\u0947\u0921</li>\n<li>\u0938\u094d\u091f\u094d\u0930\u093f\u092a</li>\n<li>\u0938\u093f\u0902\u0925\u0947\u091f\u093f\u0915 \u092a\u0941\u091f</li>\n</ol>\n</td>\n<td valign=\"top\"><img alt=\"neutral-strategies\" class=\"aligncenter size-full wp-image-2807\" decoding=\"async\" height=\"140\" src=\"http://zerodha.com/varsity/wp-content/uploads/2015/11/neutral-strategies.png\" width=\"140\"/><br/>\n<strong>\u0928\u094d\u092f\u0942\u091f\u094d\u0930\u0932 \u0938\u094d\u091f\u094d\u0930\u0947\u091f\u0947\u091c\u0940\u091c</strong>\n<ol style=\"text-align: left;\">\n<li>\u0932\u0949\u0928\u094d\u0917 & \u0936\u093e\u0930\u094d\u091f \u0938\u094d\u091f\u094d\u0930\u0921\u0932\u094d\u0938</li>\n<li>\u0932\u0949\u0928\u094d\u0917 & \u0936\u093e\u0930\u094d\u091f \u0938\u094d\u091f\u094d\u0930\u093e\u0902\u0917\u0932\u0947\u0938</li>\n<li>\u0932\u0949\u0928\u094d\u0917 & \u0936\u093e\u0930\u094d\u091f \u0906\u092f\u0930\u0928 \u0915\u0902\u0921\u0930</li>\n<li>\u0932\u0949\u0928\u094d\u0917 & \u0936\u093e\u0930\u094d\u091f \u092c\u091f\u0930\u092b\u094d\u0932\u093e\u0908</li>\n<li>\u092c\u0949\u0915\u094d\u0938</li>\n</ol>\n</td>\n</tr>\n</tbody>\n</table>"], "videos": []}
{"title": "32. Personal finance review (Part 2)", "text": ["This is the sexiest part of the personal finance journey and one that most people focus on. The amount of time people waste fussing over XYZ stock or mutual fund always surprises me. In the grand scheme of things, as long as you get a few basics right, investing doesn\u2019t matter.", "Before you review your investments, it\u2019s important to keep a few things in mind:", "", "One of the oldest clich\u00e9s in the markets is that diversification is the only free lunch. But just because it\u2019s a clich\u00e9 doesn\u2019t mean it\u2019s not true. Diversification is the process of investing in and within different asset classes. A good portfolio will always be diversified across asset classes.", "Why?", "As a reminder, humans haven\u2019t yet figured out a way to predict which asset will do well. Until we do, the best way to build wealth slowly is to allocate between different asset classes.", "", "Make sure your portfolio is diversified across the following asset classes.", "Equity: Domestic equities, and international equities.", "Debt: Between various durations and risk levels.", "Precious metals: Gold can act as a diversifier if you understand the risks. Gold can go a long time not doing anything, it can fall as much as equity, and doesn\u2019t always have a negative correlation with equities.", "Off late, a lot of silver ETFs and funds have been launched, but it makes no sense to me. Silver is all risk and no returns.", "I remember reading somewhere that the average retail investor holds between 20-30 mutual funds in a portfolio. In case you\u2019re wondering, that\u2019s not diversification; that\u2019s diworsification.", "Let me explain.", "According to SEBI guidelines, large-cap mutual funds can invest in the 100 largest companies by market cap. If you were to hold 3 large-cap funds, you would not just be holding similar funds with similar portfolio exposure, but you would also be replicating an index fund by paying more. The average expense ratio of a direct plan of an index fund is about 0.25%, but the average expense ratio of direct large-cap funds is about ~1.3%.", "If you have multiple funds in the same categories, that\u2019s a red flag. You need to review and trim your portfolio.", "Are you well diversified? As I explained above, make sure you are well diversified across various asset classes and sub-asset classes.", "Asset allocation is how you divide your portfolio between various asset classes. The younger you are, the more risk you can take by having a higher equity allocation. As you get closer to retirement, it\u2019s better to reduce your equity allocation and increase your debt allocation.", "", "Check the performance of your active funds against their chosen benchmarks and not against category averages. Don\u2019t judge their performance just based on 1-2 year performance, no fund can outperform all the time.", "How?", "That\u2019s the million-dollar question. When you pick an active fund, you\u2019re betting on the fund manager. Some prefer to pick funds and managers only based on quantitative measures like;", "Some use qualitative measures with quantitative measures like the personality and temperament of the manager, processes, risk management, alignment of interests, reputation, and track record of the AMC. There\u2019s an entire CFA book on the topic if you\u2019re interested.", "You can use all fancy tools, techniques, artificial intelligence, and machine learning, but most active fund managers fail to beat their benchmarks. The underperformance of active funds is quite sharp in the large-cap category, with 70-80% of all funds underperforming S&P BSE 100.", "In mid-caps and small-caps, the argument you\u2019ll hear is that they are \u201cinefficient\u201d and that active fund managers can \u201cadd value,\u201d but the evidence says otherwise. The number of underperforming active mid-cap funds is increasing when compared against the S&P BSE Midcap 150 or the Nifty Midcap 150 indices. At best, picking a good active fund is a coin toss.", "(Source: S&P Global)", "Based on the evidence, these are the building blocks of your core portfolio:", "This index consists of the 50 biggest companies in India, and it\u2019s 62% of the free float market capitalization. Buying a Nifty 50 index fund is as good as owning 62% of all listed companies.", "NSE categorizes this index as a large-cap, but it behaves like a mid-cap index. The index consists of the 50 biggest companies after Nifty 50 companies. It accounts for 10% of the free float market capitalization of the stocks listed on the NSE.", "This index consists of the 150 biggest companies after Nifty 100 and accounts for 12.9% of the free float market capitalization of the stocks listed on NSE.", "Small-cap funds are risky, and they are not for most investors.", "Though Nifty Next 50 is categorized as a large-cap index, it behaves more like a mid-cap index. For most of its history, the performance of the Nifty Next 50 and Nifty Midcap 150 look similar, barring the last 5 years. So, it\u2019s unclear whether adding a mid-cap 150 fund to a portfolio offers additional diversification.", "But if you still believe in your active fund manager:", "You should review your portfolio if you are investing in direct equities.", "", "Check out these chapters to dive into more detail:", "The Investment Due Diligence", "Portfolio Optimization", "Asset allocation is the process of allocating a percentage of your portfolio to an asset class. Let\u2019s say you decide that 60% equity, 30% debt, and 10% gold is the right asset allocation for you. After a year, if equities go up, the equity allocation in your portfolio would\u2019ve gone to 70%, and debt and gold would\u2019ve become 25% and 5%. If you let the portfolio, be as is and don\u2019t readjust them, the risk in your portfolio increases and so does the volatility.", "The higher your portfolio volatility, the more variation in the odds of reaching your goals, especially if you are closer to your goals. To reduce the volatility of your portfolio, you need to rebalance your portfolio periodically to reduce the risk.", "", "You sell the assets that have gone above your desired allocation and buy those that have fallen below. In the above example, you would sell 10% of your equity allocation and 5% of your debt allocation to bring it back to 70% and increase your gold allocation to 10%. This is called rebalancing.", "I know what you\u2019re thinking\u2014the dreaded T word. Yes, by rebalancing, you will incur taxes, but saving taxes is not the objective of investing, reaching your goals is.", "A few things to remember:", "Here\u2019s a handy guide to the taxation on equities and debt.", "Remember that old Maruti Suzuki advertisement about Kitna Deti Hai? That sums up most investors. They waste a lot of time worrying about the returns on their investments without realizing that the savings rate matters more than the return on their investment. What\u2019s more, you can control your savings rate, but not the return on your investment. The market will give what it wants to give.", "A simple example.", "In the long run, your rate of savings will matter more than the rate of return on your investments.", "The simple answer is whatever you can save without being miserable in life and foregoing coffee, soap, and toothpaste. But if you are starting your personal finance journey, aim to save 15-20% and increase your savings every year. The \u201cincrease every year\u201d part is the most important aspect.", "This is where the next point comes into the picture.", "If you were to build your personal balance sheet, it would look like this.", "But let me ask you this, what\u2019s your biggest asset?", "It\u2019s not your house, land, or your investment portfolio, it\u2019s your human capital. In other words, human capital is the present value of your future earnings potential. We think that we are working to build financial assets to retire comfortably. But we\u2019re converting our human capital into financial capital.", "(Source: CFA Institute)", "People don\u2019t understand this concept well, and most financial planners don\u2019t even include this as part of the financial planning process. All the conversations revolve around stocks, mutual funds, and asset allocation. They don\u2019t understand that the source of financial wealth is human capital, not the other way around.", "In summary, the most valuable asset that requires the utmost amount of care and consideration is not your investment portfolio, but your human capital.", "The younger you are, the higher your human capital. If you\u2019re reading this, you\u2019d be well aware of the magic of compounding on your investments. But imagine the power of compounding your skills. The rate of return from improving your skills and knowledge will be far greater than the rate of return on your investments.", "The rate of return on your human capital determines your savings rate. It is far more important than the rate of return on your investments.", "So, what does that mean?", "Human capital should be a consideration in your asset allocation. The nature of your job and your skills can influence your risk preferences.", "One of the best things to have happened in finance in the last 40-odd years is the rise of behavioral finance. This is one of my favorite images ever, not because I\u2019ve memorized all the biases and live a perfect life but I like it because it shows humans aren\u2019t the cold, calculating, and rational beings that they are made out to be. We\u2019re capable of some dumb things too.", "", "But somewhere along the way, behavioral science lost its way. The focus shifted from finding solutions to help people to creating a laundry list of biases, labels, and cute experiments. The term \u201cbias\u201d also became a dirty word. People started throwing them around to paint people as dumb and stupid. But that\u2019s the mainstream, nonsensical interpretation of behavioral science.", "Our biases are not a bug, they\u2019re a feature. Research has shown that these biases have an evolutionary explanation\u2014they helped our ancestors survive. While these \u201cquirks\u201d helped us survive, they are unsuited for the task of investing. Our ancestors lived in a harsh world where there was no guarantee of tomorrow, so saving for tomorrow made no sense. But the world is a different place today.", "Coming back to the point, the core idea of behavioral science remains true\u2014that we don\u2019t always act in our best interests and make \u201cutility-maximizing decisions.\u201d", "We make mistakes like:", "By now, it must be obvious that investing is a giant distraction once you have taken care of key basics. Once you have covered the key bases, the success or failure of your portfolio doesn\u2019t depend on stock or fund selection but rather on your behavior. You can build the perfect portfolio, but it\u2019s pointless if you can\u2019t hold it through the good times and bad times. Being disciplined with your investment is one thing, but behavior matters more.", "The best way to behave is to get out of your way, so automate your finances.", "The other aspect is to minimize the odds of you doing silly things.", "In this section, I want to talk about something that is near and dear to my heart, and I had written about it earlier as well. If there\u2019s just one thing I want you to take away from this post, it\u2019s this.", "For better or worse, money looms large in our lives. It\u2019s easy to say \u201cmoney doesn\u2019t matter\u201d or \u201cmoney isn\u2019t everything in life\u201d when you have a lot of money. But you don\u2019t have that luxury when you are living paycheck to paycheck and have bills to pay. But given how central money is in day-to-day decisions, it can be a source of significant stress and anxiety.", "The American Psychological Association conducts a\u00a0survey to gauge the perceptions of people toward stress and also identify the sources of stress. Since the survey started, money has consistently ranked as one of the top sources of stress. We don\u2019t have robust data about financial anxiety in India, but I have no doubt it\u2019ll be the same.", "Financial stress and anxiety can occur due to a host of reasons, both external and internal. In the last three years, we\u2019ve had a pandemic, a war, and tremendous economic uncertainty. These events have led to financial shocks of a lifetime and have caused immense stress and anxiety, but they are not in our control.", "But financial stress can also be caused by having a bad relationship with money. We don\u2019t realize it, but there are a lot of overt and covert influences on how you think about money. Your earliest experiences with money and the money beliefs of your parents have a large impact on your own money beliefs. These beliefs manifest in a\u00a0multitude of ways. For example, people who face hardships early in life or grow up during economic downturns tend to become more conservative. These beliefs impact everything from how they eat, save, and spend to their chosen jobs.", "I cannot overstate the importance of understanding how money affects the rest of your life. Money is a source of significant financial stress and anxiety. Financial stress and anxiety can impact your mental health, which affects your physical health. Knowing this relationship is important if you want to learn how to deal with financial stress and anxiety.", "(Source: Money and Mental Health)", "Financial stress and anxiety are complex issues, and there\u2019s no one-size-fits-all solution. For example, in an uncertain economic environment like 2020-2023, when there had been a recession, recovery, and another economic downturn coupled with job losses and business closures, there\u2019s very little in our hands. The only choice is to adapt to the environment.", "But there are things in your control that can cause significant financial stress:", "These are things you can control and change. All you can do in life is control what you can and make peace with the things you cannot. Have you heard of the serenity prayer?", "God, grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.", "Did you know that according to an Economic Times estimate, there\u2019s over Rs 80,000 crores of unclaimed money in investments, banks, and insurance policies?", "This is because of two reasons:", "Someone who works in financial services told me one such story recently. His friend had passed away due to COVID-19, and he had over a crore in investments, which his parents didn\u2019t know. But since he knew, he helped them claim. Otherwise, his parents wouldn\u2019t have known about it.", "When we work hard to ensure our loved ones have a comfortable life, not ensuring that they are taken care of in the event of our passing is stupid.", "Things to keep in mind:", "Now, this is the most important thing, create a physical or digital folder with the following details:", "Create a folder on a platform like Google and share it with your nominees. But before you share, make sure your nominees have a strong password on their emails, and two-factor authentication enabled.", "From hacking to identity theft, financial fraud is rampant everywhere.", "Be mindful of the financial information you consume. We live in an age of excess, where there\u2019s more garbage than sensible content. Then there\u2019s the issue of social media influencers who are not just saying ridiculous things, but dangerous things. We saw a demonstration of how things can go badly when a crypto platform promoted by these influencers went bankrupt. Those people making funny faces and teaching you how to invest in a 60-second Instagram reel\u2014the odds are they don\u2019t know what they are talking about.", "Thank you for providing the comprehensive information. I seek advice regarding a decision I\u2019m struggling to make. At present, my NPS (National Pension System) account holds a sum of slightly over 10 lakhs, with 75% invested in HDFC Pension Scheme E and the remaining 25% in Scheme G. I have a term insurance policy worth Rs. 1.5 crores. Now, I intend to initiate a SIP of Rs. 10,000 per month. Considering I am 36 years old, what would be the most suitable option for me? Thank you in advance.", "Sampath, I\u2019d suggest you speak to a financial advisor on this. But if I were you, I\u2019d consider starting a SIP in Nifty Next 50, considering you have age by your side and also you\u2019ve taken care of basics.", "I express my gratitude for your valuable suggestion, which has provided me with a thoughtful direction to explore. Your guidance is much appreciated, and I am thankful for it.", "Thanks, Sampath. Happy learning \ud83d\ude42", "Nice one and keep \u2019em coming!\nI\u2019m 35 & have a portfolio of ~1 cr with below high-level breakdown\n\u2013 70L fixed-income (13 in liquid fund, 6 in tbills/gsec, 6 in FD\u2026rest is all illiquid in PF,PPF etc.)\n\u2013 30L equity (11 in nifty50 index, 7.5 in large cap, 2.5 in S&P500 index, 4 in NPS, 2.5 in ESOP, some midcap & stocks)\n\u2013 1L in SGB\n\u2013 Some emergency cash in bank\nPlease suggest how I can make it better, especially the rebalancing. The market always seems high after Covid & in current market conditions to put into equity, so even the new monthly savings end up in fixed income which makes it worse.", "Congrats on accumulating a good corpus at a young age. I hope this compounds better for you in the years to come.", "Regarding the composition, I suggest you consider increasing your equity component to at least 50 or 60%. Age is by your side, you can afford to take more risks. Also, Nifty 50 and large-cap is essentially the same, so maybe you can relook at that.", "Do talk to a professional financial advisor for this to help you restructure the portfolio a bit.", "Sir, I am a regular reader of varsity and a Zerodha user. I really want to thank you for giving this immense knowledge. It has helped me a lot. I have a request. Can you please upload PDF files of module 12, 13, 14 and 15. It becomes very easy to read from a PDF file. Thank you.", "Module 12, no PDF. For the rest, we will put up shortly.", "\u201cRemember, LTCG in equity only applies after Rs 1 lakh of gains, and indexation is available for debt funds.\u201d\nPlease correct this like, indexation benefit is no longer available for debt funds.", "Yes, will do that.", "Name (required)", "Mail (will not be published) (required)", "", "Post comment", "", "\u0394", "Varsity by Zerodha \u00a9 2015 \u2013 2024.\r\n\t\t\t\t\tAll rights reserved.\r\n\t\t\t\t\tReproduction of the Varsity materials, text and images,\r\n\t\t\t\t\tis not permitted. For media queries, contact [email\u00a0protected]"], "images": ["https://zerodha.com/varsity/wp-content/themes/varsity2/images/logo.png", "https://zerodha.com/varsity/wp-content/themes/varsity2/images/logo-small.png", "https://zerodha.com/varsity/wp-content/uploads/2023/01/Personal-finance-review-4-1024x580.png", "https://zerodha.com/varsity/wp-content/uploads/2023/01/p3kmc-asset-drawdowns-3-1024x663.png", "https://zerodha.com/varsity/wp-content/uploads/2023/01/Personal-finance-review-5-1024x475.png", "https://zerodha.com/varsity/wp-content/uploads/2023/01/p3kmc-asset-drawdowns-5.png", "https://zerodha.com/varsity/wp-content/uploads/2023/01/Personal-finance-review-6-1024x638.png", "https://zerodha.com/varsity/wp-content/uploads/2023/01/Cognitive_bias_codex_en.svg_.png", "https://zerodha.com/varsity/wp-content/uploads/2023/01/Personal-finance-review-7-1024x599.png", "https://secure.gravatar.com/avatar/be64759edcf8c5e3d60c30192a9ed580?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/be64759edcf8c5e3d60c30192a9ed580?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/2cb47519f373cb7b1930ff3e5290e259?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3763af7b563f2e3a3845b7825d5f8773?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3d534585cff753ed55de3906bd9e2a19?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/playstore.png", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/appstore.png"], "tables": ["<table style=\"height: 422px;\" width=\"715\">\n<tbody>\n<tr>\n<td></td>\n<td><strong>A</strong></td>\n<td><strong>B\u00a0</strong></td>\n</tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Monthly SIP\u00a0</span></td>\n<td><span style=\"font-weight: 400;\">10,000\u00a0</span></td>\n<td><span style=\"font-weight: 400;\">10,000\u00a0\u00a0</span></td>\n</tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Rate of return\u00a0</span></td>\n<td><span style=\"font-weight: 400;\">9%\u00a0</span></td>\n<td><span style=\"font-weight: 400;\">13%\u00a0</span></td>\n</tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Annual SIP increase\u00a0</span></td>\n<td><span style=\"font-weight: 400;\">10%\u00a0</span></td>\n<td><span style=\"font-weight: 400;\">0%\u00a0</span></td>\n</tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Duration\u00a0</span></td>\n<td><span style=\"font-weight: 400;\">30 years\u00a0</span></td>\n<td><span style=\"font-weight: 400;\">30 years\u00a0</span></td>\n</tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Final investment value\u00a0</span></td>\n<td><span style=\"font-weight: 400;\">\u20b9\u20095,53,21,220\u00a0</span></td>\n<td><span style=\"font-weight: 400;\">\u20b9\u20094,42,06,469\u00a0</span></td>\n</tr>\n</tbody>\n</table>", "<table style=\"height: 348px;\" width=\"710\">\n<tbody>\n<tr>\n<td><strong>Asset\u00a0</strong></td>\n<td><strong>Amount\u00a0</strong></td>\n<td><strong>Liabilities\u00a0</strong></td>\n<td><strong>Amount\u00a0</strong></td>\n</tr>\n<tr>\n<td><span style=\"font-weight: 400;\">House\u00a0</span></td>\n<td><span style=\"font-weight: 400;\">3,000,000\u00a0</span></td>\n<td><span style=\"font-weight: 400;\">Home Loan\u00a0</span></td>\n<td><span style=\"font-weight: 400;\">180,000\u00a0</span></td>\n</tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Car\u00a0</span></td>\n<td><span style=\"font-weight: 400;\">1,200,000\u00a0</span></td>\n<td><span style=\"font-weight: 400;\">Car loan\u00a0</span></td>\n<td><span style=\"font-weight: 400;\">100,000\u00a0</span></td>\n</tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Cash\u00a0</span></td>\n<td><span style=\"font-weight: 400;\">200,000\u00a0</span></td>\n<td><span style=\"font-weight: 400;\">Credit card\u00a0</span></td>\n<td><span style=\"font-weight: 400;\">30,000\u00a0</span></td>\n</tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Investments</span></td>\n<td><span style=\"font-weight: 400;\">500,000</span></td>\n<td></td>\n<td><span style=\"font-weight: 400;\">\u00a0</span></td>\n</tr>\n</tbody>\n</table>"], "videos": []}
{"title": "4. Taxation for Investors", "text": ["In continuation of the previous chapter: Classifying your market activity", "You can consider yourself an investor when \u2013", "If the frequency of transactions (buy/sells) is high, it is best to consider them as trades and not investments. If considered as trades, any income is non-speculative business income, whereas if these are investments, then it falls under capital gains.", "Keeping this in perspective, you may have few questions \u2013", "We discussed this in the previous chapter, but just to refresh your memory \u2013 there is no set rule from the IT department to quantify \u2018frequency\u2019 or determine \u2018long term\u2019.", "As long as your intent is right, and you are consistent across financial years in the way you identify long term or high frequency, there is nothing to worry about.", "Do note, if you are indulging in equity delivery based trades as frequently as a few times every week, it would be best to consider all of them as \u2018trades\u2019 and classifying income from them as business income instead of capital gains.", "Reiterating again that if investing/trading on the markets is the only source of income, and even if you are trading with moderate frequency, it is best to classify income from all your equity trades as a business income instead of capital gains.", "On the other hand, if you are salaried or have some other business as your primary source of business, it becomes easier to show your equity trades as capital gains even if the frequency of trades is slightly higher.", "Updated 2nd March 2016", "Finally, the income tax department has brought in clarity by allowing an individual to decide on his own to either show his stock investments as capital gains or as a business income (trading) irrespective of the period of holding the listed shares and securities. Whatever is the stance once taken, the taxpayer will have to continue with the same in the subsequent years. Check this circular.", "So essentially,", "The focus of this chapter is on investing; hence we will keep the discussion limited to just points 1 and 2. We will talk about taxation when trading/business income in the next chapter.", "Firstly you need to know that, when you buy & sell (long trades) or sell & buy (short trades) stocks within a single trading day then such transactions are called intraday equity/stock trades. Alternatively, if you are buying stocks/equity and wait till it gets delivered to your DEMAT account before selling it, then it is called \u2018equity delivery based\u2019 transactions.", "Any gain or profit earned through equity delivery based trades or mutual funds can be categorized under capital gains, which can be subdivided into:", "Taxes on long term capital gains for equity and mutual funds are discussed below \u2013", "For stocks/equity \u2013 0% for first Rs 1lk and @10% exceeding Rs 1lk", "The above taxation rate is only if the transactions (buy/sells) are executed on recognized stock exchanges where STT (Security transaction tax) is paid. As discussed above, LTCG is a holding period of more than 1 year.", "If the transactions (buy/sells) are executed through off-market transfer where shares are transferred from one person to another via delivery instruction booklet and not via a recognized exchange by paying STT, then LTCG is 20% in case of both listed and non-listed stocks (Listed are those which trade on recognized exchanges). Do note that when you carry an off-market transaction Security Transaction Tax (STT) is not paid, but you end up paying higher capital gains tax.", "Note that a gift from a relative through DIS slip is not considered as a transaction and hence not capital gain. It is important that gift not be treated as transfer, and relative could be\u00a0(i) spouse of the individual\u00a0(ii) brother or sister of the individual\u00a0(iii) brother or sister of the spouse of the individual(iv) brother or sister of either of the parents of the individual\u00a0(v) any lineal ascendant or descendant of the individual(vi) any lineal ascendant or descendant of the spouse of the individual\u00a0(vii) spouse of the person referred to in clauses (ii) to (vi)", "For equity mutual funds (MF) \u2013\u00a00% for first Rs 1lk and @10% exceeding Rs 1lk", "Similar to equity delivery based trades, any gain in investment in equity-oriented mutual funds for more than 1 year is considered as LTCG and exempt from taxes up to Rs 1lk per year. A mutual fund is considered as equity-oriented if at least 65% of the investible funds are deployed into equity or shares of domestic companies.", "For non-equity oriented/Debt MF \u2013 flat 20% on the gain with indexation benefit", "Union budget 2014 brought in a major change to non-equity mutual funds. As opposed to 1 year in equity-based funds, you have to stay invested for 3 years in non-equity/debt funds for the investment to be considered as long term capital gain. If you sell the funds within 3 years to realize profits, then that gain is considered as STCG.", "Note: The government in the Finance Bill 2023 made certain amendments that apply to debt funds that invest not more than 35% in equity shares in Indian companies. As per the new rules, these mutual funds and ETFs will not be eligible for indexation benefits and will be taxed at applicable slab rates, for investments made on or after April 1, 2023.", "When calculating capital gains in case of non-equity oriented mutual funds, property, gold, and others where you are taxed on LTCG, you get the indexation benefit to determine your net capital gain.", "I guess we would all agree that inflation eats into most of what is earned as profits by investing in capital assets such as the ones mentioned above.", "For someone wondering what that inflation is, here is a simple example to help you understand the same \u2013", "All else equal, if a box of sweets priced at Rs.100 last year, chances are the same could cost Rs.110 this year. The price differential is attributable to Inflation, which in this example is 10%. Inflation is the % by which the purchasing value of your money diminishes.", "Assuming the average inflation rate in India of around 6.5%, if you had invested into a debt fund, wouldn\u2019t a big portion of your long term capital gain at the end of 3 years get eaten away by inflation?", "For example assume you had invested Rs.100, 000/- into a debt fund, and you got back Rs 130,000/- at the end of 3 years. You have a long term capital gain of Rs.30,000/-. But in the same period assume the purchasing value of money is dropped by 18k because of inflation. Should you still pay long term capital gain on the entire 30k? Clearly this does not make sense right?", "", "Indexation is a simple method to determine the true value of the sale of an asset after considering the effect of inflation. This can be done with the help of the Cost inflation index (CII) which can be found on the income tax website.", "Let me explain this with an example of a purchase/sale of a debt mutual fund.", "Purchase value:\u00a0 Rs.100,000/-", "Year of purchase: 2005", "Sale value: Rs 300,000", "Year of sale: 2015", "Long term capital gain: Rs 200,000/-", "Without indexation, I would have to pay tax of 20% on the capital gains of Rs 200,000/-, which works out to Rs 40,000/-.", "But we can reduce the LTCG by considering indexation.", "To calculate indexed purchase value, we need to use the cost inflation index (CII). Find below the cost inflation index from the income tax website until 2019/20. Refer to this for CII data before 2001/02.", "Going back to the above example,", "CII in the year of purchase (2005): 117", "CII in the year of sale (2015): 240", "Indexed purchase value = Purchase value * (CII for the year of sale/ CII for the year of purchase)", "So \u2013", "Indexed purchase value = Rs 100000 * (240/117)", "= Rs 205128.21", "Long term capital gain = Sale value \u2013 Indexed purchase value", "Therefore, in our example", "LTCG = Rs 300,000 \u2013 Rs 205128.21", "= Rs 94871.79/-", "So the tax now would be 20% of Rs 94,871.79 = Rs 18,974.36, much lesser than Rs 40,000/- you would have had to pay without the indexation benefit.", "Like I had said earlier, the indexed purchase value can be calculated using the above method for all long term capital gains which are taxable like debt funds, real estate, gold, among others. You could use the IT department\u2019s Cost inflation index utility to check on the indexed purchase value of your capital assets instead of having to calculate manually.", "The interesting thing to note in regards to 20% after indexation for non-equity oriented or debt funds: Most of these funds return between 8 to 10% and typically inflation in India has been around that for the last many years. So with the indexation benefit, you typically won\u2019t have to pay any tax on LTCG of non-equity oriented funds.", "Tax on short term capital gains for equity and mutual funds are discussed below \u2013", "For stocks/equity: 15% of the gain", "It is 15% of the gain if the transactions (buy/sells) are executed on recognized stock exchanges where STT (Security transaction tax) is paid. STCG is applicable for holding period over 1 day and not more than 12 months.", "If the transactions (buy/sells) are executed via off-market transfer (where shares are transferred from one person to another via delivery instruction booklet and not on the exchange) where STT is not paid, STCG will be taxable as per your applicable tax slab rate. For example, if you are earning over Rs.10,00,000/- per year in salary, you will fall in the 30% slab, and hence STCG will also be taxed at 30%. Also, STCG is applicable only when the income exceeds the minimum tax slab of Rs 2.5lks/year. So if there is no other income for the year and assuming there was Rs 1lk STCG, it would not entail the flat 15% tax.", "For equity mutual funds (MF): 15% of the gain", "Similar to STCG for equity delivery based trades, any gain in investment in equity-oriented mutual funds held for lesser than 1 year is considered as STCG and taxed at 15% of the gain. Do note a fund is considered Equity based if 65% of the funds are invested in domestic companies.", "For non-equity oriented/Debt MF: As per your individual tax slab", "Union budget 2014 brought in a major change to non-equity mutual funds. You have to now stay invested for 3 years for the investment to be considered as long term capital gain. All gains made on investments in such funds held for less than 3 years are now considered as STCG. STCG, in this case, has to be added to your other business income and tax paid according to your income tax slab.", "For example, if you are earning around Rs 800,000/- per year in your normal business/salary and you had STCG of Rs 100,000/- from debt funds, you will fall in the 20% slab as your total income is Rs 9,00,000/-. So effectively in this example, you will pay 20% of STCG as taxes.", "For an investor, the taxation difference between LTCG and STCG is quite huge. If you sold stocks 360 days from when you had bought, you would have to pay 15% of all gains as taxes on STCG. The same stock if held for 5 days more (1 year or 365 days), the entire gain would be exempt from taxation as it would be LTCG now.", "It becomes imperative that you as an investor keep a tab on the number of days since you purchased your stock holdings. If you have purchased the same stock multiple times during the holding period, then the period will be determined using FIFO (First in First out) method.", "Let me explain \u2013", "Assume on 10th April 2014, you bought 100 shares of Reliance at Rs.800 per share, and on June 1st, 2014 another 100 shares were bought at Rs.820 per share.", "A year later, on May 1st, 2015, you sold 150 shares at 920.", "Following FIFO guidelines, 100 shares bought on 10th April 2014 and 50 shares from the 100 bought on June 1st, 2014 should be considered as being sold.", "Hence, for shares bought on 10th April 2014 gains = Rs 120 (920-800) x 100 = Rs 12,000/- (LTCG and hence 0 tax).", "For shares bought on June 1st, Gain = Rs 100 (920-820) x 50 = Rs 5,000/- (STCG and hence 15% tax).", "Small little sales pitch here \ud83d\ude42 \u2013 if you are trading at Zerodha the holdings page in our back office platform called Console will keep a tab for you on a number of days since your holdings were purchased, and even a breakdown if bought in multiple trades.", "Here is a snapshot of the same \u2013", "", "The highlights show \u2013", "Besides Zerodha Q, equity tax P&L is probably the only report offered by an Indian brokerage which gives you a complete breakdown of speculative income, STCG, and LTCG.", "STT (Securities Transaction Tax) is a tax payable to the government of India on trades executed on recognized stock exchanges. The tax is not applicable to off-market transactions which are when shares are transferred from one DEMAT to another through delivery instruction slips instead of routing the trades via exchange. But off-market transactions attract higher capital gains tax as explained previously. The current rate of STT for equity delivery based trades is 0.1% of the trade value.", "When calculating taxes on capital gains, STT can\u2019t be added to the cost of acquisition or sale of shares/stocks/equity. Whereas brokerage and all other charges (which include exchange charges, SEBI charges, stamp duty, service tax) that you pay when buying/selling shares on the exchange can be added to the cost of share, hence indirectly taking benefit of these expenses that you incur.", "Advance tax when you have realized capital gains (STCG)", "Every taxpayer with business income or with realized (profit booked) short term capital gains is required to pay advance tax on 15th\u00a0June, 15th Sept, 15th December, and 15th March. Advance tax is paid keeping in mind an approximate income and taxes that you would have to pay on your business and capital gain income by the end of the year. You as an individual are required to pay 15% of the expected annual tax that you are likely to pay for that financial year by 15th\u00a0June, 45% by 15th Sept, 75% by 15th Dec, and 100% by 15th March. Not paying would entail a penalty of annualized interest of around 12% for the period by which it was delayed.", "When you are investing in the stock markets, it is very tough to extrapolate the capital gain (STCG) or profit that will be earned by selling shares for an entire year just based on STCG earned for a small period of time. So if you have sold shares and are sitting on profits (STCG), it is best to pay advance tax only on that profit which is booked until now. Even if you eventually end up making a profit for the entire year which is lesser than for what you had paid advance tax, you can claim for a tax refund. Tax refunds are processed in quick time by the IT department now.", "You can make your advance tax payments online by clicking on Challan No./ITNS 280 on https://incometaxindiaefiling.gov.in/.", "Which ITR form to use", "You can declare capital gains either on ITR 2 or ITR3", "ITR3 (ITR 4 until 2017): When you have business income and capital gains", "ITR 2: When you have a salary and capital gains or just capital gains", "We pay 15% tax on short term capital gains and 0% on long term capital gains, what if these were not gains but net losses for the year.", "Short term capital losses if filed within time can be carried forward for 8 consecutive years and set off against any gains made in those years. For example, if the net short term capital loss for this year is Rs.100,000/-, this can be carried forward to next year, and if net short term capital gain next year is Rs.50,000/- then 15% of this gain need not be paid as taxes because this gain can be set off against the loss which was carried forward. We will still be left with Rs Rs.50,000 (Rs.100,000 \u2013 Rs.50,000) loss which is carried forward for another 7 years.", "Long term capital losses can now (post introduction of LTCG tax@10%) also be set off against long term gains.", "Long term capital loss can be setoff only against long term capital gain. Short term capital loss can be setoff against both long term gains and short term gains.", "Interesting reads:", "Livemint: If you pay STT STCG is 15% otherwise as per tax slab", "Income tax India website \u2013 Cost inflation index utility", "Taxguru \u2013 Taxation of income & capital gains for mutual funds", "HDFC- Debt mutual funds scenario post finance bill (no2), 2014", "", "Disclaimer \u2013 Do consult a chartered accountant (CA) before filing your returns. The content above is in the context of taxation for retail individual investors/traders only.", "In the previous chapter you mentioned that Speculative loss can be carried forward only for 4 year whereas in the section 4.7 it is mentioned that, the period is 8 years. Please clarify which is correct.", "Praveen, speculative or intraday equity trading losses can be carried forward to 8 years. What we are talking about in Section 4.7 is not intraday equity losses but short term equity losses (short term delivery based trades).", "Hello Mr.Nithin,\nSuppose i earn a short term capital gain of 60000 (stocks selling in less than 1 year) and a loss of 50000 in FNO in same year , how the taxation is calculated?", "You have to pay 15% on short term gain (if your total income doesn\u2019t add upto 2.5lks, no need to pay), declare the loss and carry forward.", "Dear Nithin Ji,", "If i made a short term capital gain of 15 lakhs and f&o loss of 20 lakh in the same financial year. Now i wanted to ask if F&O loss can be settoff against the short term capital gain.", "Regards\nPrateek Bansal", "No we can\u2019t Prateek. If you show your short term capital gain as business income, you can. But if you show as business income this year, you need to plan to show it the same in future.", "Hi,", "I have a Trading and Demat account with Zerodha. I want to clear my doubt regarding Transfer of shares to own demat account.\nScenario:\nI bought shares 200 shares of Infosys through Zerodha and transferred it to HDFC demat for pledging purpose(LAS).After paying back loan and unpledging shares, I re- transferred it to Zerodha demat. I holded 200 Infosys shares for over 1 a year (3 months in zerodha demat and 10 months in HDFC demat. Will my holding period of more than 1 year continue(eligible under LTCG) after transferring it firstly to HDFC demat and than again to Zerodha demat?\nCATEGORY IS\u201dtransfer to own account\u201d.", "Yes, you are moving between your own accounts. Your holding period wont\u2019 get affected because of that.", "Is there a write up on the grand fathering clause for LTCG on sale of equities that might be useful for 31.3.2019 calculations. How does this will get authenticated by the tax officials, our declaration/returns?", "Thank you so much Zerodha. I have one question please. If STCG is Rs25000/- so I pay 15% on that..right which gives me profit Rs21250/-.\nNow if I have other income from rentals /FDs totalling to Rs300,000/- . Now do I have to add the Rs21,250/- to the Rs300,000/- and then find out my total tax liability or the STCG doesnt hv to be taken in this calculation as it has already bben taxed. Please advise.", "Rajeev, if you are using ITR forms. You can show the entire STCG of Rs 25000 under that head. Rental and FD\u2019s etc is shown under a separate head. So STCG shouldn\u2019t be taken in this case.", "Hi Nithin,", "I think you wanted to mention that \u201cSpeculative losses i.e. Intraday equity losses\u201d can be carried over for a period of 4 years only\u2026 whereas the \u201cShort term equity losses\u201d can be carried over for a period of 8 years. Please correct if my understanding is wrong.", "Yes, thanks for correcting.", "I think for \u201c4.7 \u2013 Short and long term capital losses\u201d you need to update below para as now LTCGs are taxed.", "\u201cLong term capital losses can\u2019t be used to set off against long term gains as in the first place long term capital gains is exempt from any tax. So long term capital loss is a dead loss, and can\u2019t be set off or carried forward.\u201d", "Yep, thanks.", "Suppose i bought 100 shares @ 10 and sold 50 shares @ 20 to recover my investment within 1 year. And sold another 50 shares after 1 year holding. I am in 10% tax bracket. So what will be tax implications in this situation.", "On the first 50, you have STCG of Rs 500. If you are in 10% bracket, you pay 10% of this as tax. Next 50 no taxes.", "Tax on STCG is irrespective of tax slab. So flat 15% tax on the gain i.e Rs 75.", "No, you get the benefit of lower slab if you are in that. So if your total income is less than 2.5lks, no STCG, between 2.5 to 5 at 10% and after that 15% flat.", "If i have shares held jointly in demat account of Person A and Person B. When i sell them on stock exchange \u2013 who will be taxed :", "1) Person A 100 %\n or\n2) Person A \u2013 50 % and Person B 50 %", "2.", "Hello Nitin", "Are you sure on this?\nI think all profits accrue to the name of the first holder in the demat account and not equally among them.", "Hmm.. Yeah, this is an accounting method. But best to follow what your CA suggests. Nothing wrong in either of the ways.", "Can loss incurred in intra day equity market be carried over to next year? Can it be adjusted towards STCG incurred in the same year and net STCG/STCL be shown in tax return?", "Intraday equity trading losses are speculative, so they can be carried forward for 4 years. It cannot be offset with STCG, it can be offset with only any other speculative gains.", "So What tax is applicable on intraday trades (speculative income) ?", "\u2013 What type of gain is STBT or BTST trades in futures or options ( STCG or speculative)\n\u2013 If someone is earning 50lacs/yr will it still pay only 15% on STCG or by the tax slab.", "Intraday is business income. So you need to add it to your rest of income, and pay as per the tax slabs.", "STBT/BTST, is tricky. Can be shown as STCG or speculative. Upto you.", "Yes on STCG fixed 15%.", "Hi Nithin,", "I have to show the loss made under STCG in ITR 4. But in Schedule CG tab , its not accepting -ve numbers. Is it done somewhere else??", "Schedule CG, look at point 3. Full value of consideration is the price at which you sell, cost of acquisition without indexation is your buying value. Balance will automatically become negative.", "If i purchase stocks on delivery options but sell them on the same day, would it be considered Intra-day or delivery based transaction.", "Trading options is considered as a non-speculative business income irrespective of if it is intraday or delivery.", "Name (required)", "Mail (will not be published) (required)", "", "Post comment", "", "\u0394", "Varsity by Zerodha \u00a9 2015 \u2013 2024.\r\n\t\t\t\t\tAll rights reserved.\r\n\t\t\t\t\tReproduction of the Varsity materials, text and images,\r\n\t\t\t\t\tis not permitted. For media queries, contact [email\u00a0protected]"], "images": ["https://zerodha.com/varsity/wp-content/themes/varsity2/images/logo.png", "https://zerodha.com/varsity/wp-content/themes/varsity2/images/logo-small.png", "http://zerodha.com/varsity/wp-content/uploads/2015/07/M7-Ch3-cartoon.png", "http://zerodha.com/varsity/wp-content/uploads/2015/06/M7Ch3-image.png", "https://secure.gravatar.com/avatar/70b7290c9e7de95b7fb6c4bd3dd59972?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/6681229bfdc45f5c67ba43f912b95ad3?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/7c73ad57709cabb2bb717592ff78269b?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/6681229bfdc45f5c67ba43f912b95ad3?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/e07f37ea5f6a7cf02a7348181881c200?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/6681229bfdc45f5c67ba43f912b95ad3?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/0a1261ba6172302bcb29af0858b608dd?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/6681229bfdc45f5c67ba43f912b95ad3?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/613a2ce2f585d7ba40b8bb8947bb1162?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/58a30b3f2b5de830922187a790506e75?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/6681229bfdc45f5c67ba43f912b95ad3?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/27b254abf774810399740699b8de0b36?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/6681229bfdc45f5c67ba43f912b95ad3?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/d6e27e3ce1c9499cf5e84b3100d02d2d?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/6681229bfdc45f5c67ba43f912b95ad3?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f1ceb69026956b06cf10e77203d0dd43?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/6681229bfdc45f5c67ba43f912b95ad3?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/c209838fba0a033d10d1debd9ed1a0d9?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/6681229bfdc45f5c67ba43f912b95ad3?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/c94f19da02de5a32e9e56eabaa8c445b?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/6681229bfdc45f5c67ba43f912b95ad3?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/09ac7997e7745b26c4757880284c6c51?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/6681229bfdc45f5c67ba43f912b95ad3?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/040cecad07ec4d7dbc7514943503dd6b?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/6681229bfdc45f5c67ba43f912b95ad3?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/0033d48899fc37d386b63bc67bf4e555?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/6681229bfdc45f5c67ba43f912b95ad3?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/51da18bd6f58d201ad40ff7c5f10adcd?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/6681229bfdc45f5c67ba43f912b95ad3?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/861467fd523091714a7431ebba4771f9?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/6681229bfdc45f5c67ba43f912b95ad3?s=32&d=identicon&r=g", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/playstore.png", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/appstore.png"], "tables": ["<table class=\"tableizer-table\">\n<tbody>\n<tr class=\"tableizer-firstrow\">\n<th>Financial Year</th>\n<th>CII</th>\n</tr>\n<tr>\n<td>2001-02</td>\n<td>100</td>\n</tr>\n<tr>\n<td>2002-03</td>\n<td>105</td>\n</tr>\n<tr>\n<td>2003-04</td>\n<td>109</td>\n</tr>\n<tr>\n<td>2004-05</td>\n<td>113</td>\n</tr>\n<tr>\n<td><span style=\"background-color: #78ddb9;\">2005-06</span></td>\n<td><span style=\"background-color: #78ddb9;\">117</span></td>\n</tr>\n<tr>\n<td>2006-07</td>\n<td>122</td>\n</tr>\n<tr>\n<td>2007-08</td>\n<td>129</td>\n</tr>\n<tr>\n<td>2008-09</td>\n<td>137</td>\n</tr>\n<tr>\n<td>2009-10</td>\n<td>148</td>\n</tr>\n<tr>\n<td>2010-11</td>\n<td>167</td>\n</tr>\n<tr>\n<td>2011-12</td>\n<td>184</td>\n</tr>\n<tr>\n<td>2012-13</td>\n<td>200</td>\n</tr>\n<tr>\n<td>2013-14</td>\n<td>220</td>\n</tr>\n<tr>\n<td><span style=\"background-color: #78ddb9;\">2014-15</span></td>\n<td><span style=\"background-color: #78ddb9;\">240</span></td>\n</tr>\n<tr>\n<td>2015-16</td>\n<td>254</td>\n</tr>\n<tr>\n<td>2016-17</td>\n<td>264</td>\n</tr>\n<tr>\n<td>2017-18</td>\n<td>272</td>\n</tr>\n<tr>\n<td>2018-19</td>\n<td>280</td>\n</tr>\n<tr>\n<td>2019-20</td>\n<td>289</td>\n</tr>\n</tbody>\n</table>"], "videos": []}
{"title": "15. Supplementary note \u2013 The 20 market depth or level 3 data", "text": ["I\u2019ve driven a car for many years and I\u2019ve even changed my car a few times now. Each time I changed my car, the engine remained more or less the same, but the features within the vehicle and its aesthetics continuously changed. Air conditioner, power steering, and power windows were all luxury features in the car at one point, but today, I guess no one buys a car without these essential features. The game-changer for me though was parking assist. The little camera at the back of the car gave me complete visibility of the parking space available. I was no longer required to pop and twist my head out and struggle to park the car, nor did I have to bug my co-passenger to get down and help me navigate my way into a parking spot. The parking assist feature did everything and helped me execute a perfect parallel park. The parking assist feature was my edge for hassle-free car parking.", "I feel the same edge while trading the markets with the level 3 data \ud83d\ude42", "", "Level 3 or the 20 market depth feature is unique and has multiple uses. You\u2019ll probably appreciate the level 3 market window if you have traded at an institutional desk. A regular retail trader would not understand this feature anytime soon, simply because this feature was unavailable all these years until we introduced it for the very first time to the Indian retail traders.", "The purpose of this chapter is to help you understand how useful this feature is and get you started on building trading strategies around this feature.", "If you are entirely new to this, I\u2019d suggest you read this blog to understand what the level 3 data is all about.", "Assuming you know what it is, this chapter will help you understand the multiple uses of this feature.", "For the option traders, the 20-depth order book gives great visibility into the availability of contracts to trade and help identify better price points to execute these trade. Without this visibility, it becomes really hard to trade illiquid contracts. While I\u2019m specifically talking about options here, you can extend this to Futures contracts as well, especially the illiquid ones.", "Let us put this in context, have a look at the regular market depth (i.e. the top 5 bid-ask) of the 13000 CE expiring in Jan 2020.", "", "We can see narrow bids on the left and a notch better offer on the right. You\u2019d probably hesitate to trade this contract if you are someone looking at trading a few lots of Nifty.", "But check what\u2019s hiding under the hood here by opening the level 3 data \u2013", "", "", "As you can see, there are many contracts available, but they are not visible in the regular market depth. In fact, the bid and offer quantities are heavily concentrated below the 8th row respectively.", "Given the availability of the contracts in this strike, the perspective to trade or not completely changes and will now depend upon your trading strategy.", "Level 3 data gives you full visibility of the approximate execution price for your trade. This is particularly useful when you decide to scalp the market. When you scalp the market \u2014", "Let us say you want to buy and sell 5000 shares of Hindustan Zinc; the regular market depth window gives you the following information \u2014", "", "", "As you can see, there is no visibility on how these 5000 shares will get filled. Now, take a look at the 20 depth window \u2014", "", "", "The 20 depth window paints an entirely different picture. It not only tells me that I\u2019ll get the 5000 shares, but it also gives me information about the approximate buy price. If I were to place a market order for 5000 shares, I\u2019d be buying this order book from 210.5 to 211.25. I also see at 211; there are 2425 shares available, so I can expect the average price is at or around 211.", "Now, my decision to scalp the stock should depend on the pop I\u2019d expect over and above 211. Maybe 211.5 or so. Of course, you\u2019ll get the exact breakeven (post charges) if you were to use a brokerage calculator.", "Level 3 market window plays a critical role in \u2018guesstimating\u2019 the number of shares to trade, given the liquidity of the stock. For the sake of this discussion, we will assume that the availability of capital is not an issue.", "Now, have a look at the regular market depth \u2014", "", "You expect Siemens to move from 1675 to about 1690 over the next hour. So, given the fact that you are not constrained by capital, how many shares will you buy for this intraday trade?", "The regular market depth window suggests that you can buy close to 175 shares. However, the 20 depth opens up a different perspective altogether \u2014", "", "In fact, the liquidity in this stock lies below the best five bid and ask, and the impact cost is reasonable. The regular market depth window fails to capture this information. Assuming you intend to buy about 1500 shares, the buy price will lie somewhere within 1675.5 to 1678, which is spread of 0.149%.", "In this case, assuming you are sure about the target price (1690), you can go all in and buy through whatever is available at that moment.", "You can extend the position sizing concept and use the 20 depth market watch to place a stop loss or a limit order. Assume you have an intraday buy position in VST Tillers at 1313.8.", "", "The question is, where you would place the stop loss for this trade? Can the 20 market depth help us with this?", "Of course. Have a look at the 20 depth window for VST Tillers. As you can see, there is a concentration of bids in 1290. The good part is that the number of order count is also the highest (35) in 1290.", "This implies that several traders have placed an order at 1290, indicating some sort of price action at that level. This perhaps builds a case for placing the stop-loss.", "A prudent trader would probably place a stoploss not at 1290, but maybe at a price just below it.", "", "So I was a buyer in this stock, then purely based on 20 depth I\u2019d probably place my SL at 1290 or below, maybe at 1287 and by the same logic, set my target at 1340 or at 1338.8.", "I find this extremely interesting. In the example above, we identified 1290 as the stoploss price, simply because there was a concentration of bids. In other words, we expect 1290 as a support price.", "If this is indeed true, then it should show up on the charts as well, right? Have a look at the chart below \u2013", "", "Clearly, there is some price action around 1296. Remember, support and resistance is not one price point, but rather a range. Therefore 1290 \u2013 1300 marks as an intraday support for this stock.", "This is a perfect example of seeing the price action concept play out in the market.", "Another way to look at this is first to identify the S&R level and then check the 20 depth to figure if there is a concentration of bids/offers in that zone.", "", "Hopefully, by now you\u2019ve started to appreciate the immeasurable value 20 depth order book brings to you while trading.", "Remember, irrespective of which technique you use to develop a point of view (technical or quantitative analysis), things boil down to price, and the action trades take at that price.", "The 20 depth market window is essentially your ticket to validate the truth of this price action. Make sure you use your card wisely!", "Do post your comments and tell us how differently you will use the 20 depth window for identifying trading opportunities.", "Good luck!", "", "", "cannot see market depth", "You need to have generated at least 100 Rupees in brokerage to see the 20 depth. Please check this \u2013 https://zerodha.com/z-connect/featured/introducing-20-depth-or-level-3-data-beta-on-kite", "Very nicely written, thank you for your incredible insight.", "Salman, thank you \ud83d\ude42", "Sir, how will the market depth data be relied upon? When clients or trading systems use the disclosed quantity feature, not the entire quantity is shown. In such a case, isn\u2019t there a chance that the wrong assumptions are made looking at just the market depth?", "Valid point, but there is no way one can identify disclosed quantity. By the way, level 3 helps you identify contract availability. Given this, the disclosed quantity, if any, will only make the liquidity situation better.", "Hi Karthik! Newbie here, under the \u2018The 20 Market Depth (level 3 data) Window\u2019 section, you\u2019ve said \u2013 If you are entirely new to this, I\u2019d suggest you read this blog to understand what the level 3 data is all about.\nAre you referring to this chapter as the blog or have a separate blog elsewhere, in which case I do not see a link to it. Can you help?", "\u2018Read this blog\u2019 is hyperlinked \ud83d\ude42", "Amazing featute for the reatil traders. Way to go team for bringing such innovative and pro Tools to the world at such decent costs.", "Happy learning and trading \ud83d\ude42", "Name (required)", "Mail (will not be published) (required)", "", "Post comment", "", "\u0394", "Varsity by Zerodha \u00a9 2015 \u2013 2024.\r\n\t\t\t\t\tAll rights reserved.\r\n\t\t\t\t\tReproduction of the Varsity materials, text and images,\r\n\t\t\t\t\tis not permitted. For media queries, contact [email\u00a0protected]"], "images": ["https://zerodha.com/varsity/wp-content/themes/varsity2/images/logo.png", "https://zerodha.com/varsity/wp-content/themes/varsity2/images/logo-small.png", "https://zerodha.com/varsity/wp-content/uploads/2019/11/M1-C14-illustration.jpg", "https://zerodha.com/varsity/wp-content/uploads/2019/11/Image-11_opt-300x217.png", "https://zerodha.com/varsity/wp-content/uploads/2019/11/image-12_opt.png", "https://zerodha.com/varsity/wp-content/uploads/2019/11/Image-1_-reg.png", "https://zerodha.com/varsity/wp-content/uploads/2019/11/Image-2_20.png", "https://zerodha.com/varsity/wp-content/uploads/2019/11/Image-3_sie.png", "https://zerodha.com/varsity/wp-content/uploads/2019/11/Image-4_sie20.png", "https://zerodha.com/varsity/wp-content/uploads/2019/11/Image-5_buy.png", "https://zerodha.com/varsity/wp-content/uploads/2019/11/Image-6_vst.png", "https://zerodha.com/varsity/wp-content/uploads/2019/11/Image-7_vst-chart-1024x668.png", "https://secure.gravatar.com/avatar/8ae49f259b17e76c97817ef1957c034e?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/18482bfabb59ae631437a294a8fe8c32?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/be359703db43c0d46f9f305847bf829e?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/2a5b3ed3fc30901a754014d297f1a3b2?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/ea09dbfb81940c38a28ee1214b8e85cc?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/playstore.png", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/appstore.png"], "tables": [], "videos": []}
{"title": "12. Key Events and Their Impact on Markets", "text": ["Trading or investing based on just company-specific information may not be sufficient. Outside events, both economic and/or non-economic, impact stocks and the market\u2019s performance in general. It is also important to understand the events that influence the markets.", "In this chapter, we will try to understand some common events and how the stock market reacts to these events.", "The monetary policy is a tool through which the Reserve Bank of India (RBI) controls the money supply by controlling the interest rates. RBI is India\u2019s central bank. Likewise, every country\u2019s central bank is responsible for setting interest rates. For example, the European Central Bank in Europe and Federal Reserves in the US. Central Banks tweak the interest rates to control the money supply in the mainstream economy.", "While setting the interest rates, the RBI has to strike a balance between growth and inflation. In a nutshell \u2013 if the interest rates are high, the borrowing rates are high (particularly for corporations). If corporate can\u2019t borrow easily, they cannot grow. If corporations don\u2019t grow, the economy slows down.", "On the other hand, borrowing becomes easier when the interest rates are low. This translates to more money in the hands of corporations and consumers. With more money, there is increased spending which means the sellers tend to increase the prices of goods and services, leading to inflation.", "I\u2019d encourage you to watch this YouTube video where I\u2019ve tried to explain what causes inflation and the means through which RBI controls inflation.", "", "To strike a balance, the RBI has to consider all economic factors and carefully set the key rates. Any imbalance in these rates can lead to economic chaos. The key RBI rates that you need to track are as follows:", "Repo Rate \u2013 Banks can borrow from the RBI. The rate at which RBI lends money to other banks is called the Repo Rate. If the repo rate is high, the cost of borrowing is high, leading to slow economic growth. You can check the latest repo rate (And other rates, too) on RBI\u2019s website. Markets don\u2019t like the RBI increasing the repo rates because it slows down economic growth.", "Reverse repo rate \u2013 Reverse Repo rate is the rate at which RBI borrows money from banks. Or in other words, Reverse Repo is the deposit rate RBI offers to other banks when the banks park funds with RBI. When banks deposit money to RBI, they are certain that RBI will not default, so the rate RBI offers is relatively low. However, the banking system\u2019s money supply reduces when banks deposit money with RBI (at a lower rate) instead of the corporate entity. An increase in the reverse repo rate is not great for the economy as it tightens the money supply. Sometimes via the central bank\u2019s policy, the central bank mandates higher deposits by banks; again, this is a way to curtail excess money supply in the mainstream economy.", "Cash reserve ratio (CRR) \u2013 Every bank must maintain funds with RBI. The amount that they maintain is dependent on the CRR. If CRR increases, more money is sucked out of the mainstream economy, which is not good for the economy.", "The monetary policy committee members meet regularly to review the economic situation and decide upon these key rates; hence keeping track of the monetary policy event is a must for any active trader. The first to react to rate decisions would be interest-rate sensitive stocks across various sectors such as \u2013 banks, automobiles, housing finance, real estate, metals, etc.", "Inflation is a sustained increase in the general prices of goods and services. Increasing inflation erodes the purchasing power of money. All things being equal, if the cost of 1 KG of onion has increased from Rs.15 to Rs.20, this price increase is attributed to inflation. Inflation is inevitable, but a high inflation rate is not desirable as it could lead to economic uneasiness. A high level of inflation tends to send a bad signal to markets. Both the Government and RBI work towards reducing inflation to a manageable level. Inflation is generally measured using an index. If the inflation index increases by certain percentage points, it indicates rising inflation. Likewise, an index falling indicates inflation cooling off.", "There are two inflation indices \u2013 The Wholesale Price Index (WPI) and Consumer Price Index (CPI).", "Wholesale Price Index (WPI) \u2013 The WPI indicates the movement in prices at the wholesale level. It captures the price change when goods are bought and sold wholesale. WPI is an easy and convenient method to calculate inflation. The inflation measured here is at an institutional level and does not necessarily capture the consumer\u2019s inflation.", "Consumer Price Index (CPI)\u2013 The CPI, on the other hand, captures the effect of the change in prices at a retail level. As a consumer, CPI inflation is what matters. The calculation of CPI is quite detailed as it involves classifying consumption into various categories and subcategories across urban and rural regions. Each of these categories is made into an index, the final CPI index is a composition of several internal indices. The CPI captures the effect of inflation on daily household consumables like fruits, vegetables, cereals, and even fuels like petrol and diesel.", "The computation of CPI is quite rigorous and detailed. It is one of the most critical metrics for studying the economy. \u00a0A national statistical agency, the Ministry of Statistics and Programme Implementation (MOSPI), publishes the CPI numbers around the 2nd week of every month. The RBI\u2019s challenge is to strike a balance between inflation and interest rates. Usually, a low-interest rate tends to increase inflation, and a high-interest rate tends to arrest inflation.", "The Index of Industrial Production (IIP) \u00a0is a short-term indicator of the country\u2019s industrial sector\u2019s progress. The data is released every month (along with inflation data) by the Ministry of Statistics and Programme Implementation (MOSPI). As the name suggests, the IIP measures the Indian industrial sectors\u2019 production, keeping a fixed reference point. As of today, India uses the reference point of 2004-05. The reference point is also called the base year.", "Roughly about 15 different industries submit their production data to the ministry, which collates the data and releases it as an index number. If the IIP increases, it indicates a vibrant industrial environment (as the production is going up) and hence a positive sign for the economy and markets. A decreasing IIP indicates a sluggish production environment, hence a negative sign for the economy and markets.", "To sum up, an upswing in industrial production is good for the economy, and a downswing rings an alarm. As India is getting more industrialized, the relative importance of the Index of Industrial Production is increasing.", "A lower IIP number puts pressure on the RBI to lower the interest rates and aid industrial credit with cheaper credit.", "The Purchasing managers\u2019 index (PMI) is an economic indicator that tries to capture business activity across the country\u2019s manufacturing and service sectors. This is a survey-based indicator where the respondents \u2013 usually the purchasing managers- indicate their business perception change concerning the previous month. A separate survey is conducted for the service and manufacturing sectors. The data from the survey are consolidated on a single index. Typical areas covered in the survey include new orders, output, business expectations, and employment.", "The PMI number usually oscillates around 50. A reading above 50 indicates expansion, and below 50 indicates a contraction in the economy. And reading at 50 indicates no change in the economy.", "A Budget is an event during which the Ministry of Finance discusses the country\u2019s finance in detail. The Finance Minister, on behalf of the ministry, makes a budget presentation to the entire country. During the budget, major policy announcements and economic reforms are announced, which impacts various industries across the markets. Therefore the budget plays a vital role in the economy.", "To illustrate this further, in one of the recent budgets, the expectation was to increase the duties on a cigarette. As expected, during the budget, the Finance Minister raised the duties on a cigarette, so the prices increased. An increased cigarette price has a few implications:", "In reaction to the budget announcement, ITC traded 3.5% lower for this precise reason.", "A budget is an annual event, and it is announced during the last week of February. However, the budget announcement could be delayed under certain special circumstances, such as a new government formation.", "Corporate earning season is perhaps one of the important events to which the stocks react. The listed companies (trading on the stock exchange) must declare their earnings once every quarter, also called the quarterly earnings numbers. During an earnings announcement, the corporate gives out details on various operational activities, including:", "Besides, some companies give an overview of what to expect from the upcoming quarters. This forecast is called \u2018corporate guidance.\u2019", "Invariably every quarter, the first blue-chip company to make the quarterly announcement is Infosys Limited. They also give out guidance regularly. Market participants follow what Infosys has to say regarding guidance as it impacts the markets.", "The table below gives you an overview of the earning season in India:", "Do note that the 1st of April in India marks the beginning of the financial year. In the US, the financial year starts on 1st Jan, so the first quarter starts from January through March, and so forth.", "Every quarter when the company declares its earnings, the market participants match the earnings with their expectations of how much the company should have earned. The market participant\u2019s expectation is called the \u2018street expectation.\u2019", "The stock price will react positively if the company\u2019s earnings are better than the street expectations. The stock price will react negatively if the actual numbers are lower than the street expectation.", "If the street expectation and actual numbers match, the stock price tends to trade flat with a negative bias more often than not. This is mainly because the company could not give any positive surprises.", "Apart from the events we discussed above, it would be best to watch out for other non-financial events to understand their impact on markets. For example, the Covid crisis of 2020 had a significant effect on economies around the world, disrupting the world economic order. The supply chain took a hit across the globe leading to an inflation spike. That said, there were select pockets of the economy that did very well, mainly the online services industry.", "Events like the Russia \u2013 Ukraine war or the tension between China and Taiwan have impacted world markets. Geo-political affairs such as these impact various connected economies. For instance, the war between Russia and Ukraine affects the supply of natural gas and crude oil, which significantly impacts the energy costs in Europe.", "As an active trader or a market participant, you need to watch out for these events and understand how these events can impact the markets.", "While the world economies are interconnected, isolated events (Country specific) impact the local economy. For example, the elections in India impact only the Indian economy.", "So, keep an eye on these non-financial events and how they can impact the stock markets or sometimes specific industries.", "Key takeaways from this chapter", "1. From the close of a quarter/financial year, what are the time limits within which companies must declare the results?\n2. In case of insider trading (SAST), what is the time limit to inform the exchanges about it ?\n3. Is there any rule/law making it mandatory for companies to report events with financial significance?", "Answers in the same order \u2013", "1) If I\u2019m not wrong companies must declare results within 30 days\n2) In order to make it a level playing field SEBI mandates the companies to disclose insider trading \u2018at the earliest\u2019, which pretty much means the company has to declare this information within the same trading day\n3) Yes companies have to declare this information.", "Hi,\n What is insider trading and SAST ? How it works?\n Is their any facility into Versity to get notification once get solution of query?", "You should get an email notification when this gets answered. Anyway, insider trading is basically trading on information not known to the public. For example, an employee of TCS can buy the shares of TCS based on his knowledge of the quarterly results yet to be announced.", "Thanks Karthik \ud83d\ude42", "Cheers!", "By 8% & 7% in Repo and Reverse repo rate, do you mean it is same as we borrow from banks at 11 % ?", "No, repo & reverse repo rate are rate at which banks transact with RBI. The lending rates to us are different.", "Sir, i am not able to understand \u201cPurchasing managers index(PMI)\u201d", "PMI or the Purchasing Manager\u2019s Index is an index which measures the activity of a purchasing manager (PM) of a company. This is measured by running a survey across many PM\u2019s across sectors and industries. If the PM is sheen to be purchasing things for the company then the perception of growth and industrial activity is created, which is good for the markets. Else its considered not so good.", "Thank you sir", "Welcome \ud83d\ude42", "Important & better for new trader", "You bet, it is.", "Name (required)", "Mail (will not be published) (required)", "", "Post comment", "", "\u0394", "Varsity by Zerodha \u00a9 2015 \u2013 2024.\r\n\t\t\t\t\tAll rights reserved.\r\n\t\t\t\t\tReproduction of the Varsity materials, text and images,\r\n\t\t\t\t\tis not permitted. For media queries, contact [email\u00a0protected]"], "images": ["https://zerodha.com/varsity/wp-content/themes/varsity2/images/logo.png", "https://zerodha.com/varsity/wp-content/themes/varsity2/images/logo-small.png", "https://zerodha.com/varsity/wp-content/uploads/2021/08/Ch12title1.jpg", "https://secure.gravatar.com/avatar/7b8af71faf621d7ca41321e30f4c64b4?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/ad7d75c3ddae092d7305e3a171400ead?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/ad7d75c3ddae092d7305e3a171400ead?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/ae03cd0ed3f24290912bdba952d9b722?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/5c9e2399cd3c52595f68f8bb970faa7f?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/5c9e2399cd3c52595f68f8bb970faa7f?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/c865f37da3a64aac54b3f773f1df9218?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/playstore.png", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/appstore.png"], "tables": ["<table>\n<tbody>\n<tr>\n<th>Sl No</th>\n<th>Months</th>\n<th>Quarter</th>\n<th>Result Announcement</th>\n</tr>\n<tr>\n<td>01</td>\n<td>April to June</td>\n<td>Quarter 1 (Q1)</td>\n<td>1st week of July</td>\n</tr>\n<tr>\n<td>02</td>\n<td>July to September</td>\n<td>Quarter 2 (Q2)</td>\n<td>1st week of Oct</td>\n</tr>\n<tr>\n<td>03</td>\n<td>October to December</td>\n<td>Quarter 3 (Q3)</td>\n<td>1st Week of Jan</td>\n</tr>\n<tr>\n<td>04</td>\n<td>January to March</td>\n<td>Quarter 4 (Q4)</td>\n<td>1st Week of April</td>\n</tr>\n</tbody>\n</table>"], "videos": []}
{"title": "16. Momentum Portfolios", "text": ["If you have spent some time in the market, then I\u2019m certain you\u2019ve been bombarded with market jargon of all sorts. Most of us get used to these jargon and start using them without actually understanding what they mean. I\u2019m guilty of using a few jargon without understanding the true meaning of it, and I get a feeling that some of you reading this may have experienced the same.", "One such jargon is \u2013 momentum. I\u2019m sure we have used momentum in our daily conversations related to the markets, but what exactly is momentum, and how is it measured?", "When asked, traders loosely define momentum as the speed at which the markets move. This is correct to some extent, but that\u2019s not all, and we should certainly not limit our understanding to just that.", "\u2018Momentum\u2019 is a physics term. It refers to the quantity of motion an object has. If you look at this definition in the context of stock markets, everything remains the same, except that you will have to replace \u2018object\u2019 with stocks or the index.", "Momentum is the rate of change of stock returns or the index. If the rate of change of returns is high, then the momentum is considered high; if the rate of change of returns is low, the momentum is considered low.", "This leads us to the next obvious question i.e. what is the rate of change of returns?", "The rate of change of return, as it states the return generated\u00a0 (or eroded) between two reference periods. For the sake of this discussion, let\u2019s stick to the rate of change of return on an end-of-day basis. So in this context, the rate of change of returns means the speed at which the daily return of the stock varies.", "To understand this better, consider this example \u2013", "", "The table above shows an arbitrary stock\u2019s daily closing price for six days. Two things to note here \u2013", "Consider another example \u2013", "", "Two things need to note \u2013", "Given the behavior of these two stocks, I have two questions for you \u2013", "To answer these questions, you can look at either the absolute change in the Rupee value or the percentage change from a close-to-close perspective.", "If you look at the absolute Rupee change, the change in Stock A is higher than in Stock B. However, this is not the right way to look at the change in daily return. For instance, in absolute Rupee terms, stocks in the range of, say, 2000 or 3000 will always have a higher change compared to stocks in the range of 1000 or lower.", "Hence, evaluating absolute Rupee change will not suffice, and therefore we need to look at the percentage change. In terms of percentage change, Stock B\u2019s daily change is higher, and therefore we can conclude that Stock B has a higher momentum.", "Here is another situation, consider this \u2013", "", "Stock A has trended up consistently daily, while stock B has been quite a dud all along except for the last two days. On an overall basis, if you check the percentage change over the 7 days, then both have delivered similar results. Given this, which of these two stocks is considered to have good momentum?", "Well, Stock A is consistent in terms of daily returns, exhibits a good uptrend, and, therefore, can be considered to have continuity in showcasing momentum.", "Now, what if I decide to measure momentum slightly differently? Instead of daily returns, what if we were to look at the return on a 7 days basis? If we do that, stocks A and B qualify as momentum stocks.", "The point I\u2019m trying to make here is that traders generally look at momentum in terms of daily returns, which is perfectly valid, but this is not necessarily the only way to look at momentum. The momentum strategy we will discuss later in this chapter looks at momentum on a larger time frame, not daily. More on this later.", "I hope by now; you do have a sense of what momentum means and understand that momentum can be measured not just in terms of daily returns but also in terms of larger time frames. High-frequency traders measure momentum on a minute-to-minute or hourly basis.", "Among the many trading strategies traders use, momentum is one of the most popular strategies. Traders measure momentum in many different ways to identify opportunity pockets. The core idea across all these strategies remains the same, i.e., to identify momentum and ride the wave.", "Momentum strategies can be developed on a single-stock basis. The idea is to measure momentum across all the stocks in the tracking universe and trade the ones that showcase the highest momentum. Remember, momentum can be either long or short, so a trader following a single stock momentum strategy will get both long and short trading opportunities.", "Traders also develop momentum strategies on a sector-specific basis and set up sector-specific trades. The idea here is to identify a sector that exhibits strong momentum; this can be done by checking momentum in sector-specific indices. Once the sector is identified, look for the stocks that display maximum strength in terms of momentum.", "Momentum can also be applied on a portfolio basis. This involves portfolio creation with, say \u2018n\u2019 number of stocks, with each stock showcasing momentum. In my opinion, this is an excellent strategy as it is not just a plain vanilla momentum strategy but also offers safety in diversification.", "We will discuss one such strategy wherein the idea is to create a stock basket, aka a portfolio of 10 momentum stocks. Once created, the portfolio is held until the momentum lasts and then re-balanced.", "Before we discuss this strategy, I want you to note a few things \u2013", "Given the above, here is a systematic guide to building a \u2018Momentum Portfolio\u2019.", "As you may know, there are close to 4000 stocks on BSE and about 1800 on NSE. This includes highly valuable companies like TCS and absolute thuds such as almost all the Z category stocks on BSE. Companies such as these form the two extreme ends of the spectrum.\u00a0 Do you have to track all these stocks to build a momentum portfolio?", "Not really. Doing so would be a waste of time.", "One has to filter out the stocks and create the \u2018tracking universe.\u2019 The tracking universe will consist of a large basket of stocks within which we will pick stocks to constitute the momentum portfolio. The momentum portfolio will always be a subset of the tracking universe.", "Think of the tracking universe as a collection of your favorite shopping malls. Maybe out of the 100s of malls in your city, you may go to 2-3 shopping malls repeatedly. Clothes bought from these 2-3 malls comprise your entire wardrobe (read portfolio). Hence, these 2-3 malls form your tracking universe out of the 100s available in your city.", "The tracking universe can be pretty straightforward \u2013 the Nifty 50 or BSE 500 stocks. Therefore, the momentum portfolio will always be a subset of the Nifty 50 or BSE 500 stocks. Keeping the BSE 500 stocks as your tracking universe is an excellent way to start. However, if you feel adventurous, you can custom-create your tracking universe.", "Custom creation can be on any parameter \u2013 for example, out of the entire 1800 stocks on NSE, I could use a filter to weed out stocks that have a market cap of at least 1000 Crs. This filter alone will shrink the list to a much smaller, manageable set. Further, I may add other criteria, such as the stock price should be less than 2000. So on and so forth.", "I have randomly shared a few filter ideas, but you get the point. Using custom creation techniques helps you filter out and build a tracking universe that matches your requirement.", "Lastly, from my personal experience, I would suggest you have at least 150-200 stocks in your tracking universe if you wish to build a momentum portfolio of 12-15 stocks.", "Assuming your tracking universe is set up, you can proceed to the 2nd step. In this step, you must ensure you get the closing prices of all the stocks in your tracking universe. Ensure your data set is clean and adjusted for corporate actions like the bonus issue, splits, special dividends, and other corporate actions. Clean data is the crucial building block to any trading strategy. There are plenty of data sources from where you can download the data for free, including the NSE/BSE websites.", "The question is \u2013 what is the lookback period? How many historical data points are required? To run this strategy, you only need 1-year data point. For example, today is 2nd March 2019; then I\u2019d need data points from 1st March 2018 to 2nd March 2019.", "Please note once you have the data points for the last one-year set, you can update this daily, which means the daily closing prices are recorded.", "This is a crucial part of the strategy; in this step, we calculate the returns of all the stocks in the tracking universe. As you may have already guessed, we calculate the return to get a sense of the momentum in each stock.", "As discussed earlier in this chapter, one can calculate the returns on any frequency, be it daily/weekly/monthly, or even yearly returns. We will stick to yearly returns for the sake of this discussion; however, please note; you can add your own twist to the entire strategy and calculate the returns for any time frame you wish. Instead of yearly, you could calculate the half-yearly, monthly, or even fortnightly returns.", "So, you should have a tracking universe of about 150-200 stocks at this stage. All these stocks should have historical data for at least 1 year. Further, you need to calculate the yearly return for each stock in your tracking universe.", "To help you understand this better, I\u2019ve created a sample tracking universe with just about ten stocks in it.", "", "The tracking universe contains the data for the last 365 days. The 1-year returns are calculated as well \u2013", "", "If you are wondering how the returns are calculated, then this is quite straightforward, let us take the example of ABB \u2013", "Return = [ending value/starting value]-1", "= [1244.55/1435.55]-1", "= -13.31%", "Relatively straightforward, I guess.", "Once the returns are calculated, you need to rank the returns from the highest to the lowest returns. For example, Asian paints has generated a return of 25.87%, the highest in the list. Hence, the rank of Asian paints is 1. The second highest is HDFC Bank, which will get the 2nd rank.\u00a0 Infosys\u2019s return, on the other hand, is -35.98%, the lowest in the list; hence the rank is 10. So on and so forth.", "Here is the \u2018return ranking\u2019 for this portfolio \u2013", "", "If you are wondering why the returns are negative for most of the stocks, that\u2019s how stocks behave when deep corrections hit the market. I wish I had opted to discuss this strategy at a better point.", "So what does this ranking tell us?", "If you think about it, the ranking reorders our tracking universe to give us a list of stocks from the highest return stock to the lowest. For example, from this list, I know that Asian Paints has been the best performer (in terms of returns) over the last 12 months. Likewise, Infy has been the worst.", "A typical tracking universe will have about 150-200 stocks, and with the help of the previous step, we would have reordered the tracking universe. Now, we can create a momentum portfolio with the reordered tracking universe.", "Remember, momentum is the rate of change of return, and the return itself is measured yearly.", "A good momentum portfolio contains about 10-12 stocks. I\u2019m comfortable with up to 15 stocks in the portfolio, not more than that. For the sake of this discussion, let us assume that we are building a 12 stocks momentum portfolio.", "The momentum portfolio is now the top 12 stocks in the reordered tracking universe. In other words, we buy all the stocks starting from rank 1 to rank 12. In the example we were dealing with, if I were to build a 5-stock momentum portfolio, then it would contain \u2013", "The rest of the stocks would not constitute the portfolio but will remain in the tracking universe.", "You may ask what is the logic of selecting this subset of stocks within the tracking universe?", "Well, read this carefully \u2013 if the stock has done well (in terms of returns generated) for the last 12 months, it implies that it has good momentum for the defined time frame. The expectation is that this momentum will continue onto the 13th month, and therefore the stock will continue to generate higher returns. \u00a0So if you were to buy such stocks, you are to benefit from the expected momentum in the stock.", "This is a claim. I do not have data to back this up, but I have successfully used this technique for several years. It is easy to back-test this strategy, and I encourage you to do so.", "Back in the day, my trading partner and I were encouraged to build this momentum portfolio after reading this \u2018Economist\u2019 article. You need to read this article before implementing this strategy.", "Once the momentum portfolio stocks are identified, the idea is to buy all the momentum stocks in equal proportion. So if the capital available is Rs.200,000/- and there are 12 stocks, the idea is to buy Rs.16,666/- worth of each stock (200,000/12).", "By doing so, you create an equally weighted momentum portfolio. Of course, you can tweak the weights to create a skewed portfolio, there is no problem with it, but then you need a solid reason for doing so. \u00a0This reason should come from backtested results.", "If you like to experiment with skewed portfolios, here are few ideas \u2013", "So on and so forth. Ideally, the approach to capital allocation should come from your backtesting process, this also means you will have to backtest various capital allocation techniques to figure out which works well for you.", "So far, we have created a tracking universe, calculated the 12-month returns, ranked the stocks in terms of the 12-month returns, and created a momentum portfolio by buying the top 12 stocks. The momentum portfolio was built based on the 12-month performance, hoping to continue to showcase the same performance for the 13th month.", "There are a few assumptions here \u2013", "Now the question is, what happens at the end of the month?", "At the end of the month, you re-run the ranking engine and figure out the top 10 or 12 stocks which have performed well over the last 12 months. Do note at any point, we consider the latest 12 months of data.", "So, we now buy the stocks from rank 1 to 12, just like we did in the previous month. From my experience, chances are that out of the initial portfolio, only a hand full of stocks would have changed positions. So based on the list, you sell the stocks that no longer belong in the portfolio and buy the new stocks featured in the latest momentum portfolio. In essence, you rebalance the portfolio and you do this at the end of every month.", "So on and so forth.", "Before we close this chapter (and this module), I\u2019d like to touch upon a few variations to this strategy.", "The returns have been calculated on a 12-month portfolio and the stocks are held for a month. However, you don\u2019t have to stick to this. You can try out various options, like \u2013", "As you can see, the options are plenty, and your imagination only restricts it. If you think about what we have discussed so far, the momentum portfolio is price based. However, you can build a fundamental-based momentum strategy as well. Here are a few ideas \u2013", "You can do this on any fundamental parameter \u2013 EPS growth, profit margin, EBITDA margin etc. The beauty of these strategies is that the data is available, hence backtesting gets a lot easier.", "As good as it may seem, the price-based momentum strategy works well only when the market is trending up. When the markets turn choppy, the momentum strategy performs poorly, and when the markets go down, the momentum portfolio bleeds heavier than the markets itself.", "Understanding the strategy\u2019s behavior with respect to the market cycle is crucial to this portfolio\u2019s eventual success. I learned it the hard way. I had a great run with this strategy in 2009 and \u201910 but took a bad hit in 2011. So before you execute this strategy, do your homework (backtesting) right.", "Having said all of that, let me reassure you \u2013 a price-based momentum strategy, if implemented in the proper market cycle can give you great returns, in fact, better more often than not, better than the market returns.", "Good luck and happy trading.", "Dear sir,What about volatility based delta hedging strategy?", "Kehav, perhaps I\u2019ll add that sometime as an addendum. Moving forward onto the next module.", "When will Varsity Android app launch.. waiting for it..", "Here you go, Ankit \u2013 https://play.google.com/store/apps/details?id=com.zerodha.varsity&showAllReviews=true, please don\u2019t forget to rate us on play store \ud83d\ude42", "Hey thanks sir.. app is awsum.. hopeing for all the modules to be added soon.. and even the new app of kite 3 is awsum.. thanks alot\u2026", "I\u2019m happy to note that, Ankit! Lots of efforts towards building these apps \ud83d\ude42\nYes, eventually all the modules will be added to the app. Did you check out the wall feature?", "h1", "Sir,\nThanks for an this topic was waiting for it to be covered..\nAccording to you which is the best source to get eod data which is adjusted of splits and bonus for bse 500 stocks apart from nse/bse websites.", "And secondly you said u need a coder to get a this strategy working can u share excel sheets to calculate momentum score as you did for pair trading chapter", "Thanks", "Nick, there are plenty of data vendors who provide you clean data. I\u2019d suggest you subscribe to any of them. Unfortunately, I was unable to produce the excel, hence I took up the example of 10 stocks.", "At present I am investing on long-term basis and good results and very much Happy with the returns. I want to start trading shortly and watching articles related\u2026 thanks\u2026 waiting further.", "Good luck, Shakeel!", "Sir correct me if I\u2019m wrong but this is one of the longest chapters in varsity and I enjoyed reading it in one sitting. I\u2019m currently in the process of back testing the portfolio based on momentum. What would the next chapter be about sir?", "I\u2019m glad you could read through it in one sitting, do share the backtested results if you are comfortable with it \ud83d\ude42", "This module ends with this chapter. We are moving ahead with the next one.", "Name (required)", "Mail (will not be published) (required)", "", "Post comment", "", "\u0394", "Varsity by Zerodha \u00a9 2015 \u2013 2024.\r\n\t\t\t\t\tAll rights reserved.\r\n\t\t\t\t\tReproduction of the Varsity materials, text and images,\r\n\t\t\t\t\tis not permitted. For media queries, contact [email\u00a0protected]"], "images": ["https://zerodha.com/varsity/wp-content/themes/varsity2/images/logo.png", "https://zerodha.com/varsity/wp-content/themes/varsity2/images/logo-small.png", "https://zerodha.com/varsity/wp-content/uploads/2019/03/M10-C16-Cartoon.png", "https://zerodha.com/varsity/wp-content/uploads/2019/03/Image-1_stock-a.png", "https://zerodha.com/varsity/wp-content/uploads/2019/03/Image-2_stock-b.png", "https://zerodha.com/varsity/wp-content/uploads/2019/03/Image-3_total-change.png", "https://zerodha.com/varsity/wp-content/uploads/2019/03/image-4_tu.png", "https://zerodha.com/varsity/wp-content/uploads/2019/03/image-5_rets.png", "https://zerodha.com/varsity/wp-content/uploads/2019/03/Image-6_rank.png", "https://secure.gravatar.com/avatar/bed2d68e83bc599a6007214e7c261052?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/dff6c1f76841d29542a82a20652b01d5?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/dff6c1f76841d29542a82a20652b01d5?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/af621df63131d4b85e510fbecd77796b?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/aaf5f150f9435777c2d3f97df2a70eb1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/9298fc1b0653eb89cf0db7f72afec67a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/7681b3c76c2fa0783227b027f5c4d0d0?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/playstore.png", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/appstore.png"], "tables": [], "videos": []}
"{\"title\": \"1. Sector analysis overview\", \"text\": [\"Welcome to another Varsity Module!\", \"T(...TRUNCATED)
"{\"title\": \"2. Cement\", \"text\": [\"We laid down a basic foundation for sector analysis in the (...TRUNCATED)

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