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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. 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{"title": "1. Sector analysis overview", "text": ["Welcome to another Varsity Module!", "This module on Varsity explores sectors as an investment avenue. We all know that a well-diversified portfolio is the key to building a successful stock portfolio. The diversification should be across sectors and market capitalizations.", "If we are looking at picking stocks from different sectors, we need to understand sectors from a stock-picking perspective. The objective of this module is just that, i.e., to help you understand what to look for in each sector as a stock picker or an equity investor.", "Each chapter will focus on one sector. So after reading this chapter, you can jump across to any sector you are curious to learn about without worrying about losing the chain of thought.", "", "By the way, my name is Vineet Rajani; I hold a CFA charter and have four years of experience in researching equities. I recently joined the Zerodha Varsity team to help Karthik develop content, and the sector analysis module is the first module I\u2019ll be working on. I hope you all will like this module as much as you\u2019ve liked all the previous modules \ud83d\ude42", "A sector is a set of companies engaged in similar business activities. For example, Infosys, TCS, and HCL are similar businesses, forming the Information Technology sector. HDFC Bank, ICIC Bank, and SBI are banks, and these companies belong to the banking sector. Sun Pharmaceuticals, Apollo Hospitals, and Dr. Lal Path Labs are all companies belonging to the healthcare sector.", "Sectors can have sub-sectors or industries. Sectors and industries are often used interchangeably. Each industry has a distinct business at a granular level, but at a broader level, many industries can make one sector. While banking, insurance, and mutual funds are all distinct industries, collectively, they are financial services and make up the financial services sector. Similarly, the healthcare sector comprises sub-sectors such as hospitals, diagnostics, pharmaceuticals, pharmacies, preventive healthcare, and wellness.", "The following table classifies various industries in a limited set of sectors. There are about 3-4 globally accepted standards for industry classification. This table shows how Refinitiv classifies the sectors and industries.", "", "An investor would want to analyze a particular sector when they see a factor or phenomenon influencing it. For instance, an investor investing in the fertilizer or packaged foods sector would want to take note of the monsoon season\u2019s data as it tends to impact those sectors as a whole. Or an investor in the IT sector may want to keep an eye on the USD-INR exchange rate as the sector makes a significant part of revenues in USD.", "Investors also take an interest in the sector of their occupation \u2013 a doctor might want to invest in healthcare stocks, or a software engineer might be confident about their understanding of the technology sector. Investor frenzy in a particular sector also stimulates the interest of other investors in that sector.", "Sector analysis involves looking for factors, features, events, and metrics that impact the businesses in a given sector. A factor might positively impact one sector while a negative impact on another. The idea of sector analysis hinges on the fact that certain aspects or events are specific to sectors and do not impact the overall market.", "Sector analysis is a part of fundamental analysis. While our module on fundamental analysis explains the approach to researching a particular company, sector analysis focuses on the features and operational or performance metrics unique to a sector. The exercise becomes meaningful when several companies within a sector are compared based on these metrics.", "No two sectors are the same; therefore, no two sectors can be analyzed the same way. Banks, for instance, are analyzed using key performance indicators such as NPAs, capital adequacy ratios, and interest margins. Insurance companies are analyzed for solvency ratio, claims settlement ratio, expense ratio, persistence ratio, etc. Airlines look at revenue per seat kilometer, cost per seat kilometer, fuel costs, and occupancy rates to understand performance. These metrics depict the operational efficiency of the players in an industry and how those players stack against each other.", "For industries in the heavy manufacturing space \u2013 cement, steel, aluminum, and the like \u2013 production capacity, production volume, and sales volume are important comparables. Volume metrics are significant for automobiles and electronics too. Companies in FMCG, or Fast Moving Consumer Goods, focus significantly on distribution, brand awareness, packaging, etc.", "When an investor begins studying a sector, understanding the value chain could be a good starting point (I will explain the concept of \u201cvalue chain\u201d soon). A study of the value chain provides more insights into a particular sector\u2019s unique dynamics. The exercise could also unearth certain industry players\u2019 competitive advantages or disadvantages.", "Simply put, a value chain begins with the sourcing of raw materials and goes up to the point of end consumption. For example, the textile industry\u2019s value chain would include fiber production, spinning yarn, fabric production, dying and printing, garment manufacturing, packaging, distribution, and retail. Cement\u2019s value chain starts with limestone mining, followed by clinkerization, blending, grinding, packaging, and distribution. This value chain might be extended if the cement manufacturer processes it further into ready-mix concrete (RMC) before selling it in the market.", "Dissecting the value chain in this manner enables an investor to identify which steps drive costs or improve or hamper productivity. A value chain typically has many steps. Here, the investor must put on a business owner\u2019s hat to understand what steps along the value chain add value to the business and what do not. Cement companies generally own the limestone mines and all the processes up to distribution. The cement industry is predominantly vertically integrated. Let me introduce three new concepts: Vertical Integration, Backward Integration, and Forward Integration.", "Although a rare phenomenon, a fully vertically integrated company owns all the processes from raw material production to end consumer retail sales. Samsung, a global leader in consumer electronics, is essentially a vertically integrated business. It produces semiconductors, memory chips, and screens that go into making mobile phones, then assembles mobile phones at its plants and even sells them through its own retail stores. While Samsung also sells through other retailers and e-commerce channels, its retail stores symbolize some level of vertical integration.", "Most companies within an industry exhibit similar business structures across the value chain. FMCG companies in India can hardly be backward integrated. Palm oil, a key ingredient in many food products, personal care, and cosmetic goods, is primarily sourced from Malaysia and Indonesia. Packaging for these products uses petroleum derivatives which have their source in oil-producing countries. It does not make business sense for an FMCG company to own supply-side processes.", "The case of the FMCG sector suggests that the geography of the value chain also influences a business\u2019 vertical integration, costs, and material availability. Automobile companies are mostly assembly companies. The thousands of parts that go into making a car are all sourced from vendors that may be geographically located far apart.", "The significance of packaging in a value chain depends on the nature of a product, its application, size, shape, and perishability. It also depends on where the end consumer is located and what modes of transport will be used to deliver the product. Regulatory requirements must also be met concerning packaging material, dimensions, eco-friendliness, etc.", "These concepts above can be put into a framework for an investor researching a particular sector. This framework can act as a checklist for the investor to ensure that adequate efforts have been dedicated to comprehensively understanding a sector.", "Political Factors: The political will of the ruling government can influence the overall business sentiment in an economy as a whole. Businesses engaged in sin goods such as liquor and tobacco and necessities such as grains and oil often carry large political overhangs.", "Economic Factors: The strength of an economy and the stage of economic development can present different opportunities for different sectors. High-interest rates could limit corporate growth, while low-interest rates could enable easy borrowing and faster growth. However, low-interest rates could encourage excessive retail borrowing and spur inflation. The ability of the economic authorities to balance growth and control inflation is of the essence here. Economic factors such as inflation, exchange rates, FDI, and money supply play along with interest rates to influence the business environment.", "Socio-cultural Factors: Festivals can stimulate seasonal buying for specific sectors. Socio-cultural shifts can create long-term trend growth for certain products while a decline in others. The gradual move from coal-fired stoves to gas stoves results from economic development and social acceptance of a new cooking method.", "Demographic features and changes are a major influence on demand creation. The vast size of India\u2019s youth population, in both absolute and percentage terms, has led to the creation of various products and brands meant to attract the young crowd. A decline in the average fertility rate suggests a decline in population growth. The aging of today\u2019s young population could boost the demand for old-age products after three-four decades.", "Technological Factors: The stories of Nokia and Blackberry losing market share to Apple and Samsung have been discussed every time the impact of technological change has to be depicted. Innovations in technology can create new sectors and even wipe out some. All industries related to e-commerce were built upon the Internet. The Internet was a technological breakthrough. On the other hand, typewriters and Telegram are technologies that died as better ones replaced them.", "Legal Factors: The duties, tariffs, quotas, and other restrictions have an impact on the import-export trade of a country. Legal factors often create entry barriers for new players to enter a particular industry. For example, the heavy licensing requirements and different state-wise laws make liquor manufacturing a capital-intensive and difficult industry to get into. Pollution control, labor laws, and regulators like SEBI, RBI, and IRDAI constitute an economy\u2019s legal machinery.", "Environmental Factors: The natural environment of a country can present opportunities for some sectors while discouraging others. Mining businesses are possible only if a country has minerals under its earth.", "", "Pollution and environmental deterioration result in imposing restrictions and requirements on industries. Water and effluent treatment plants have become a regulatory mandate for various chemical and industrial goods companies. Natural calamities could purge industries while displacing civilizations. Insurance companies carry a huge risk on account of natural disasters.", "These factors also influence each other. Economic development could lead to social development and shifts in culture. Issues related to society and the environment could be behind the development of certain legal barriers. Some legal factors can also be politically influenced.", "These factors make the PESTLE Analysis (Political-Economic-Social-Technological- Legal-Environmental), a framework commonly taught in colleges and business schools.", "Beyond the PESTLE framework, as an investor, you must also study how a particular company competes with its peers. By the way, competition is much more than just outselling each other. A company also competes during the sourcing of raw materials. Two dairy companies, for example, will compete with each other to source milk from farmers.", "Companies also compete with new players in the industry. New players can disrupt the industry. A large influx of new players can change the industry\u2019s competitive landscape. Industries also have to worry about being replaced by substitutes.", "A company\u2019s ability to outrun its competition and negotiate with external factors depends on what differentiates it from its peers. Let us look at a few differentiating factors.", "Size: Size is essentially about the capital of the company. Being big or small comes with its advantages and disadvantages.", "Larger companies managed to stay afloat through the Covid-related lockdowns while many smaller companies shut down. Why did this happen? Business activity was mostly dull through the lockdowns. So regular operations were not yielding profit. Larger companies survived by using capital reserves. Remember how large retailers survived while many smaller retailers closed shops?", "Huge capital reserves also open opportunities that are otherwise out of reach. For example, the huge capital and licensing requirements to set up a telecom business are a barrier. Smaller businesses or individuals with small capital do not even consider starting a telecom business. But the deep pockets of Reliance Industries enabled it to pump in loads of capital to set up Jio. Its war chest was huge enough to wipe out some existing players (remember Aircel, Uninor) while others were forced to merge (Vodafone and Idea).", "Larger companies also enjoy economies of scale. Ever wonder why a readymade shirt generally costs lower than a tailor-made one? Makers of readymade shirts source everything in bulk to get deep discounts. These discounts can be passed down to customers in the form of lower prices. Conversely, a tailor cannot compete with the quick turnaround of automated sewing machines. A tailor charges a higher price to make up for the hours dedicated to a single shirt.", "Being small also has its advantages and disadvantages. A newly set-up business generally has limited funds, workers, and resources. But the ability to disrupt is high mostly because larger companies do not consider smaller companies a threat, and smaller companies do not have legacy issues.", "Let me break this down. For example, the Brushless DC (BLDC) technology has been used for 50 years in electricals to save electricity. However, it was first used in ceiling fans in the US only in 2009. And a few years later, smaller players like Versa Drives and Atomberg adopted the technology and made it big. The incumbent players had been improving upon the existing technology but did not consider an alternative technology as an energy-saving solution. Once the smaller players disrupted the space, all larger players introduced the BLDC range of fans under their brand names.", "Why didn\u2019t the larger players act first? Introducing a new technology could mean re-training the production staff and introducing new machinery. Existing skills and systems make the management averse to changes. These are known as legacy issues. Decision-making often slows down in larger organizations. So even if they were aware of better technology, its adoption took time. Small companies are not considered a threat because even if they have a superior product, their ability to sell it and scale it up is limited. A few that do manage to scale up become the disruptors.", "Age: With age comes experience. It is a commonly known concept. It is applicable to businesses too. Sometimes experience helps businesses avoid the same mistakes. Sometimes, experience makes them averse to trying new methods, techniques and technologies.", "Just by the virtue of being around for years, businesses have a network of suppliers, distributors, and allies that a new business will take some time to build. However, new businesses with huge capital can overcome this obstacle. Ola and Uber disrupted other cab services mainly due to the large venture capital that they spent on technology, networking, and marketing.", "Long-standing relationships with vendors are useful when the supply of inputs is limited. They could also allow easier payment terms. A long-standing distribution network can be used to launch new products. For example, Polycab used its wide network of wire distributors and retailers to launch its electrical goods. Tata Consumer Products has been launching several new products that it can distribute using the existing Tata Tea and Tata Salt network.", "These long-standing relationships can also become a hurdle in making objective business decisions. For example, HUL and Colgate-Palmolive had to face disputes with their long term distributors for offering differential pricing to B2B e-commerce platforms. HUL also faced boycott threats in Madhya Pradesh when it was looking for distributors in addition to the existing ones.", "Newer consumer brands established their online channels before exploring physical retailing. They do not have long-standing relationships with any distributor. Therefore, they are unlikely to face protests like HUL and Colgate-Palmolive did.", "Focus: Focus can be related to products, target market, costs, or pricing.", "The product focus sounds very basic. Every business is focused on its product. However, some businesses have multiple products. Some organizations have multiple businesses. Reliance Industries has three large businesses \u2013 oil, retail, and telecom. Its next bet is going to be on financial services. Similarly, ITC is a large FMCG company with a presence in hospitality, technology, packaging, and agri-exports.", "So when you study conglomerates like these as part of a sector, you must consider what drives the business and profitability. You might even want to consider each business as a separate organization to draw proper comparisons with relevant peers.", "A company operating in a single sector might be better equipped to innovate and scale up than a peer conglomerate with other business interests. The difference is mainly about focus. A conglomerate has diluted focus across divisions. This is also why some analysts assign a conglomerate discount when valuing a conglomerate business.", "The target market is the target customers. Both Maruti Suzuki and Mercedes are automobile companies but are incomparable because they focus on different markets. Maruti will not be able to charge as high for its cars as Mercedes does. Similarly, Mercedes will not be able to sell as many cars as Maruti does. Their different market focus is also visible in their marketing tools. Maruti uses TV commercials to spread the word about its car. It wants the maximum population to buy its cars. Mercedes understands that millions may watch TV commercials, but only some can afford their cars. Therefore, it does not spend on TV commercials.", "Some businesses focus on attaining cost leadership. Indigo Airlines has managed to stay afloat while so many airlines are struggling or have perished. Indigo\u2019s flight tickets may be priced similarly to its competitors, but its focus on cost controls has led to profitability.", "Other businesses focus on pricing. FMCG companies often price their products competitively, meaning they keep the prices low to maintain and increase the customer base. Ever wondered why many biscuits and chocolates still sell in \u20b95-packs despite all the inflation after so many decades? It is because a consumer with limited means finds the \u20b95 price point psychologically comforting. Round figures such as \u20b95 or \u20b910 sell more than odd figures such \u20b96 or \u20b97. Also, they might not be willing to spend \u20b910 or higher when their budget is \u20b95.", "Price leadership is not always about the lowest prices. Apple has become the world\u2019s most valuable smartphone brand by always pricing its phones at a premium. Such pricing power is achieved with a heavy focus on the product and branding.", "Regulations also impact a company or sector\u2019s pricing power. One can argue that the healthcare sector has strong pricing power. But because of its essential nature, the government regulates medicine prices.", "Substitutes: Substitutes come in various forms. Tea and coffee are each other\u2019s substitutes. Mobile phones have substituted personal cameras, computers, diaries, and watches. In the case of luxury goods, a vacation, watch, car, handbag, and chandelier are all substitutes for each other. So when I pointed out earlier that Mercedes and Maruti may not be comparable, Mercedes could compare with other luxury goods.", "Substitutes are a challenge because they can come from a different sector or even create a new one altogether. There can also be regulatory support for substitutes in certain industries \u2013 solar and wind energy getting favorable policies over coal. Electric vehicles are also getting incentives over combustion engine (conventional) vehicles.", "Certain businesses, mostly large ones, can identify substitutes and even own them. For example, petrol and diesel pumps are now setting up EV charging and gas stations. Since substitutes can render an industry obsolete, an analyst must try to ascertain the magnitude of the threat from substitutes.", "Competition from substitutes pushes businesses to expand into the substitute business as well. New entrants in a sector often increase the competitive intensity in the market. This causes businesses to sell at lower prices. The advent of e-commerce has forced physical stores to give comparable discounts. Competition from Jio forced telecom operators to offer 1 GB of data per day for a price point they would otherwise charge for a monthly limit of 1 GB.", "Sector analysis could help you as an investor understand whether a sector appears attractive or not. Accordingly, you may bet on the whole sector or a few selected stocks. Either way, valuations must be justified. A good business at a high price is likely a bad investment. Therefore, you must combine sector analysis with a proper valuation analysis to improve the likelihood of investment returns. A comprehensive study would also include fundamental analysis.", "I shall delve into understanding each sector in depth in the subsequent chapters of this module.", "The first sector I will cover is Cement. Stay tuned!", "Hello VIneet,", "Welcome to varsity. I have been a long-time reader of Varsity and I think Karthik would remember me. I was disheartened when there were no new write-ups in varsity for a long time. All that is over now and thank you for that.", "My question is, you have written about valuations, and I am searching for a good book on the topic. Could you suggest some apart from Damodaran?", "Thank you,", "Hi Sundeep,", "Thanks for the warm welcome!", "About your question on Valuations, I have learned only from Damodaran\u2019s books. Wouldn\u2019t be too sure of others.", "Regards,", "sectoral analysis of steel & metal are highly solicited.also explain the forthcoming changes in relation to C emmission we may seee in next decade.\nregards.", "Great read. Especially the value chain part is extremely important for an investor to understand.\nThanks team.\nAkshat.", "Thank you \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. 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{"title": "2. Cement", "text": ["We laid down a basic foundation for sector analysis in the previous chapter. In this chapter, we will discuss the Cement industry. I have picked cement as the first sector because cement is an inherent part of modern civilization. The concrete jungle, as we call our cities, is made of cement.", "India is the world\u2019s second-largest cement producer, with a 7% global market share. Surprisingly, the largest producer, China, accounts for over half of the total global cement production. China produced 2.1 billion tonnes in 2022, while India produced ~370 million tonnes.", "The vast difference between China\u2019s and India\u2019s share in cement production perhaps shows the long runway ahead that India\u2019s infrastructure has to cover and the opportunity for the cement sector. India has an installed capacity of over 570 million tonnes per annum (mtpa). Another ~150 mtpa in capacity is expected to be added by 2027.", "", "Owing to the housing and infrastructure boom in Eastern India, the region is expected to get a third of the total capacity additions. It also accounts for 80% of houses constructed under the PMAY-G scheme. Pradhan Mantri Awas Yojana (Gramin), or PMAY-G, is the central government\u2019s scheme to subsidize the construction of pucca houses with basic amenities in villages.", "Generally speaking, there are two types of cement \u2013 Portland Cement and Non-Portland Cement. All cement we generally see being used around is Portland Cement and its various blended forms. Non-Portland cement is not commonly used due to its corrosive nature. Although a value-added product in itself, cement is essentially a commodity. Its all-pervasive use has made the cement an industry of its own, and its peculiarities warrant an analysis unique to the sector.", "Let us have a glimpse of the Portland cement manufacturing process to identify the various sources or steps that could impact the cost of production, its selling price, and profitability.", "", "You can also understand cement production in this video by Vox. It is interesting for two reasons: One, it graphically explains the cement manufacturing process, and two, it discusses the possible solutions to the environmental concerns around cement manufacturing. But more on the environmental concerns later.", "As you can see, the process of manufacturing cement remains the same across companies. As an investor in the sector, you should analyze which steps in the manufacturing process consume more cash and where a company can save costs. Also, remember, although belonging to the same sector, no two companies are the same. You need to analyze if a factor impacts the whole sector or is specific to a company. In fact, this is the end objective of a typical sector analysis, i.e. to understand a sector and its nuances and eventually zero in on companies that thrive within the sector so that you can make wise investment decisions. It may sound complex at this stage, but eventually, you will realize this is a common sense approach without rocket science.", "This is basically the Cost of Goods Sold, a concept we learned in the Fundamental Analysis module.", "Limestone is the most important ingredient in cement. Cement companies own limestone quarries to control costs. They mine limestone from their quarries and process it to make clinker at plants that are generally set up close to the quarries.", "Water is another major input in the process. Consistent water supply is also a major challenge in many parts of our country. Therefore, many cement companies have water recycling, rainwater harvesting, and groundwater recharging systems in place. This ensures regular water availability and better visibility of costs.", "Most cement manufacturers maintain captive power plants to bring down fuel costs. Let me introduce the concept of captive plants or units. If a manufacturing company can produce power for its own use, it is said to have a captive power plant.", "Another example would be a pizza chain owning a small tomato farm to produce fresh organic tomatoes for its pizzas. In this case, the tomato farm is called a captive farm. A captive unit\u2019s product is not sold but used in-house for producing another product.", "Larger players like Ultratech Cement, Ambuja Cement, and ACC have captive thermal, wind, and solar power plants. Despite captive power plants, fuel costs for these major players can be as high as 25% of the revenues. Some cement makers even own coal mines to insulate from the impact of coal price fluctuations. Ultratech and Ambuja both have captive coal mines to support their requirements partially.", "Sourcing coal can often be a challenge. For instance, whenever there is a coal shortage, the government could ask domestic coal producers to sell coal only to power generation companies. Cement producers that own coal mines or other forms of captive power plants are at an advantage here. Others will have to import coal from international markets. Steel and aluminium industries are also heavy coal users and compete with cement in the international market to import coal, pushing prices up.", "", "This is not to say that coal mine owners are always better off. During a down cycle when the demand for cement is low, owned coal mines are a fixed cost that the manufacturer must bear amid slow production and sales. Or if there came a time when coal prices were abysmally low, buying coal from the market would become cheaper than mining at owned quarries.", "Given that coal is a dirty fuel, the possibility of a regulatory ban on its industrial use will only increase. Owned mines would become a dead cost if that were to happen.", "\u201cControlling wastage and climate change", "All cement producers have waste heat recovery system (WHRS) plants in place. WHRS is good for two reasons \u2013 fuel cost savings and reducing carbon footprint. The tremendous heat generated in clinker production is channelled to generate steam. This steam is passed through turbines to generate electricity. This electricity can cater to 25-30% of the cement plant\u2019s power requirements.", "The increasing focus on reducing fuel costs and carbon footprint has given rise to an interesting metric known as the Clinker factor. It represents the proportion of clinker in a cement recipe. The lower the clinker factor, the better. This may seem paradoxical \u2013 how can having less of the primary component be better? It is because clinker is also the most fuel-consuming step in the process of cement production.", "But wouldn\u2019t that hurt the quality of cement? Manufacturers have been innovating recipes that augment the features of cement while retaining its strength. Fly ash, gypsum, silica fume, volcano ash, and other industrial by-products are common ingredients of blended cement. The Vox video after the manufacturing process above explains this well.", "Cement is a perishable product. It typically has a shelf-life of just 90 days. Therefore, the distribution of cement has to be fast and efficient. It is also perhaps why cement producers own the entire value chain beginning with limestone quarries. It enables them to be in control of the inventory and costs.", "Since perishability is a concern, cement companies might also own warehouses and trucks to monitor costs, time, and wastage.", "Another industry hack is to have grinding facilities closer to the market. According to Ultratech Cement\u2019s Annual Report for 2021-22, it has 23 integrated plants, 27 grinding plants, and over 175 Ready-mix Concrete Plants.", "Let me break this down. An integrated plant crushes limestone, makes clinker, and grinds it into cement. Such plants are mostly close to the raw material source \u2013 the limestone quarries, in cement\u2019s case.", "To solve the perishability problem, grinding units are set up closer to the market. The grinding unit will cater to a market which is more likely a state or comparable region. These facilities receive clinkers from the clinker plants that are set up near the quarries. Other components to be blended into the cement are procured directly at this grinding facility. The clinker with other components is ground to make the final cement. The grinding unit\u2019s proximity to the market means a shorter time spent transporting the cement to the market.", "Further closer to the market are RMC plants. RMC, or ready-mix concrete, is a mixture of cement, sand, gravel, water, and other ingredients that make a paste used to bond the bricks in a wall. RMC has a very short shelf-life of a few hours. Therefore, RMC plants are smaller than grinding units and cater to small clusters of markets or just cities.", "Not all cement is sold in the form of RMC, but it is growing in popularity. As a business, cement companies would love to sell RMC; it is a value-added product and hence can improve margins. But it also adds capital expenditure. For construction companies, RMC is convenient because of the limited spaces available in cities and because it is one less job to do.", "Distribution of cement, or bringing it to the market, requires its own study. Cement is a \u201clow value, high volume\u201d product. As of this writing in May 2023, a 50 kg bag of cement costs roughly \u20b9400. Compare that with a bag of grains or cloth or cosmetics or gold. Transporting a unit of any of these items from one point to another will surely bring higher revenues than transporting the same unit of cement. Perishability, as discussed earlier, is a challenge too. An efficient distribution system is key to maintaining profitability in the cement business.", "At a time when urbanization has picked up pace, cement has become a necessity. If the market had only a small number of manufacturers, they could dictate prices, effectively impacting infrastructure growth and real estate prices. But the industry has several large players; over 25 are listed. However, the top five players account for almost half the national capacity. Huge capacity additions have been driving competition. Competition is also pushing the players to innovate and develop more ways of cutting costs and improving margins. Some are spending on branding and marketing to boost sales.", "The next step is to understand the uses or users of cement. In other words, let us understand what drives the demand for cement.", "Cement is used in building houses, roads, dams, and other infrastructure. The cement users could be classified into three broad categories \u2013 housing, infrastructure, and industrial.", "Seasonality also impacts the demand for cement. All forms of construction activities usually slow down during the monsoon season, thereby impacting the demand for cement.", "Studying manufactured bulk commodities like cement requires a deeper focus on the entire value chain, from production to distribution and sales. The asset-heavy nature of the value chain also makes cement manufacturers prone to take on more debt. An investor studying the sector must also look at the debt levels of the companies and the sector at large. A structure to the above discussions to simplify studying the sector could be very useful. Let me suggest a checklist that you could use when studying the cement industry.", "You can find these metrics in cement companies\u2019 quarterly presentations and annual reports.", "", "Now why do metrics matter? These metrics are specific to the cement sector. If you are interested in investing in cement, combining these metrics with the regular company-based fundamental analysis can ensure complete sector research. Let us have a look at each metric one by one.", "Regional Presence: Diversification helps reduce risk. A company with its operations and market spread out across the country is more likely to continue operating despite any challenges. If one plant cannot operate for any reason, the others can fill in.", "Market Share: A larger market share usually results from a strong distribution network. Customers might want to buy a specific cement brand but will usually buy one easily available near their location.", "Production Capacity: The larger the production capacity, the larger orders the cement maker can serve. Cement makers want to add capacity if the economy is seeing a boom in infrastructure and real estate sectors. However, the cost of adding capacity must also be justified with the expected projected income from that capacity.", "Capacity Utilization: Let\u2019s say a cement maker has an annual capacity of producing 100 mtpa worth of cement, but they produce only 70 mtpa. Effectively, they operate at a 70% capacity, or capacity utilization was 70%.", "As an investor, you must determine why the full capacity was not utilized. External factors such as natural calamities, pollution controls, and regulations could limit full utilization. For example, if heavy rains were to shut down production for three months, operating at 100% capacity for the remaining nine months would also mean only 75% utilization. Internal factors such as the unavailability of raw materials or labour could also hamper production.", "Sales Volume: Not all that is produced is sold. In fact, some cement makers sell more than what they produce. They may buy volumes from other cement makers to fulfil their commitments to customers.", "Realization \u20b9/MT: Realization is the average selling price per unit. Higher prices lead to higher revenues. Comparison of the realization numbers of cement players can lead to various insights. The one with the highest number could be commanding a solid premium in the market or must be servicing locations others have not been able to service. The highest number could also suggest a larger share of value-added products in the total sales volume.\nThis snapshot from Ultratech Cement\u2019s Q4 presentation for FY23 shows that grey cement realizations have slightly moderated compared to the previous quarter.", "", "Input / Power and Fuel / Freight Cost Ratios: You can compute these ratios by dividing the cost item by revenues.", "", "The smaller these ratios, the better. Looking for each of these ratios separately can help identify what part of the business is driving costs and which one is improving margins. Cement companies typically try to control all these costs by having these activities in-house \u2013 captive quarries, power plants, and fleets.", "That is about it. This checklist should equip you well to comprehensively understand the cement industry and the companies operating in it.", "In the next chapter, we will discuss the highly regulated and frequently disrupted insurance industry.", "Very usefull information", "It\u2019s very interesting and informative", "Thank you:)", "Thank you!", "Sir this kind of content is very unique and i have not seen it anywhere else.", "Could you please give me some pointers as to how to do my own sector analysis? What resources, books and websites do you use?", "Thanks again for the superb content.", "Thank you, Karthik!", "I mostly read the annual reports of a few players in any sector. Their \u201cManagement Discussion & Analysis\u201d section gives a good perspective. If it is a highly regulated sector like banking or insurance, you can get a lot of information on the respective regulator\u2019s website too.", "Good content, Excellent explanation, a non-finance/management persons can understand with this simpler explanation.", "Thank you so much:)", "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/2023/06/M15-image-1-1024x640.png", "https://zerodha.com/varsity/wp-content/uploads/2023/06/M15-image-2-1024x359.png", "https://zerodha.com/varsity/wp-content/uploads/2023/06/M15_image-3-1024x491.png", "https://zerodha.com/varsity/wp-content/uploads/2023/06/M15_image-4-1024x314.png", "https://zerodha.com/varsity/wp-content/uploads/2023/06/M15_Image-5-1024x573.png", "https://zerodha.com/varsity/wp-content/uploads/2023/06/M15_image-6-1024x247.png", "https://secure.gravatar.com/avatar/cf18edb44de205b92a23279b482786a7?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f0c58f7534270a4ad62fe1a72b1b5826?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/4f3652c161db4245513ee7c8a2f080c7?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/d62708a97c9281d33c56f7cc42408310?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?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": "47 comments", "text": ["", "VIDEO WAS QUITE FASCINATING MATCHING WITH MY CURRENT VILLAGE SITUATION. SAME BLACK AND WHITE 70\u2019S VILLAGE AND COREOGRAPY WAS ALSO FASCINATING .", "Thanks! Glad you liked it \ud83d\ude42", "My son enjoyed this, when are the next episodes getting published, it adds a lot of value to childrens learning", "Glad your son liked it, we just published the 2nd episode, hope he likes it too \ud83d\ude42", "The content is amazing. You are making Finance concepts so much easy to understand by this interesting way.\nThank you Karthik Sir and Team.", "Thanks for letting me know, Yatesh. Hope you continue to like all the videos \ud83d\ude42", "Hi Karthik", "You have highlighted the importance of compounding in education and finance.\nThe characters are relatable, and the sprinkle of humor was well enjoyed by my child.\nThank you for introducing Finance concepts for kids.\nI appreciate what you and your team at Zerodha are doing for the future generation.", "Best wishes,\nBee.", "Thanks so much for letting me know, so happy that your kid enjoyed watching these vidoes \ud83d\ude42", "This is a beautiful piece of content for kids and grownups as well. Thank you, Varsity team, for making time and resources to simplify financial knowledge\ud83d\ude4c\ud83d\ude4cOne small recommendation. It would be more engaging if the cartoon is in the color format.", "The next episode is in color \u2013 https://www.youtube.com/watch?v=D916Xq4Fbxg this 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://secure.gravatar.com/avatar/2e698b172395a851b66e7c0e3682a7c8?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/26d898245a18d5a8ee5ec86af5296367?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/843ae4fd5a791a7715a8a3794bf7c232?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/8945fd7c153d172247e91c1e7c134204?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/5bb4a0f97e782f0ce68cdc3ca10e3c1f?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": "No Title", "text": ["", "", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "", "Comments are closed.", "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/themes/varsity2//images/playstore.png", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/appstore.png"], "tables": [], "videos": []}
{"title": "211 comments", "text": ["", "", "Download the excel here.", "We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.", "Love the way they care for their customers\u2026 And upgrading knowledge of customers is one of the best way .. proud member\u2764\ufe0f", "And we are equally happy to have you as a part of our family!", "Very excited to see zerodha versity in video series excellent effort from zerodha\nI am starting to see it from today I am in market from last 8 months.. and I have no doubt that it will add some more knowlege in my market experiance", "We hope so too Anurag! Happy learning \ud83d\ude42", "Very well explained and useful", "Happy learning, Manjunath!", "MAKE ALL THE VIDEOS IN HINDI ALSO", "Such a excellent work knowledge sharing is the best for those who are new in share market.", "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://secure.gravatar.com/avatar/3124abe50c675a5a90a01f3959bc4460?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/e13b2f47e676b90936ac6a4658e90d31?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/2d91666caa9776d55b4a4b73be494ea5?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/549c860cac913a0ef3299ac3917c2d99?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/698efb60835b7ced3c81810d3a71e7c8?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": "60 comments", "text": ["", "", "We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.", "", "nice", "Very nicely explained. Just one suggestion, in the key takeaway slide (last 15 sec of the video), varsity logo (for subscribe button) in the middle and next video thumbnail in the Right hand corner is hindering some text. Can you please fix these? Or add extra 15 seconds blank space at the last so these thumbnails icons cover that blank space and key takeaway slides will cleared from any hinderance.", "Noted, will try and rectify this.", "Logo and Next Video disrupts the Key Takeaways thumbnail. Also Next video skips one video (eg. after watching Video 2 the next video they shows is Video 4 instead of Video 3).", "+1.\nLogo and next videos disrupt the takeaway slides in all the videos. please fix this.", "Working on it, Dhaval.", "Thank you so much sir for these wonderful lessons!! \ud83d\ude42", "Happy learning, Brianna!", "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://secure.gravatar.com/avatar/1fad5165687116f85d0b3b08313e27a3?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/d1fe32989eaa9645f0aafb16f36ca7a7?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/8523dbcce93f90a1ecd7b1de211c74b2?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/74e95e50c2a1f34b48dda2b00ac05a1d?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/90c3ea66e25ca31b7d9769fb915525a3?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": "48 comments", "text": ["", "", "We recommend reading these Part 1 and Part 2 chapters of IPO Markets on Varsity to learn and understand the concepts in-depth.", "", "Hi Team Zerodha, Great work. Good Initiative. I like to personally congratulate Mr.Karthik and Mr.Prateek. I thought of sharing some content which I had prepared some 8 years back. If possible please share your contact email so that I can forward the same.", "Thank you, Dinakar. Please do share on Google dive with a link here itself.", "Brilliant explanation. Eagerly waiting for the day I might also join the Zerodha team as a Content Contributor. Coins tossed and fingers crossed.", "Glad you liked the content \ud83d\ude42", "Hi Team, Great learning. the way Mr Prateek is teaching is awesome, loved it .", "Happy learing!", "thank you so much for such great explanation of all the topics !!", "Happy learning!", "Brilliant content and presentation by Prateek. Precise and compact 8n a small capsule\u2026 Love this innovation at Varsity.", "Happy learning \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://secure.gravatar.com/avatar/e97da18e82bfbea18031ebc493f7815c?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/bbc32dd6928ffd913a06fbad24ba20ec?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/138b148343c31565804e3d1c9b3fa827?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/dbf892c6538f90409f9e81eb8249a9fc?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/a23c7f357f35ae07d3290f6aa7a2594f?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": "No Title", "text": ["", "", "", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "Comments are closed.", "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/themes/varsity2//images/playstore.png", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/appstore.png"], "tables": [], "videos": []}
{"title": "No Title", "text": ["", "", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "Comments are closed.", "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/themes/varsity2//images/playstore.png", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/appstore.png"], "tables": [], "videos": []}
{"title": "No Title", "text": ["", "", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "Comments are closed.", "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/themes/varsity2//images/playstore.png", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/appstore.png"], "tables": [], "videos": []}
{"title": "No Title", "text": ["", "", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "", "Comments are closed.", "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/themes/varsity2//images/playstore.png", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/appstore.png"], "tables": [], "videos": []}
{"title": "No Title", "text": ["", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "Comments are closed.", "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/themes/varsity2//images/playstore.png", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/appstore.png"], "tables": [], "videos": []}
{"title": "84 comments", "text": ["", "", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "Good to learn from tech & fundamental analysis of stocks", "Happy learning \ud83d\ude42", "Quite good learning", "Happy learning!", "Many thanks sir for making this video for us", "Hope you like it \ud83d\ude42", "Good going Varsity team!\nGreat to see TA in video series with collaboration with LA.\nKarthik Rangappa content with Pratik presentation through video is just perfect combo!", "You both knowledge Gurus are changing Indian stock market education!\nAppreciate your efforts:)", "PS: I just came to see if option theory and Strategy videos are uploaded but guess we need to wait for some more time.\nHoping to see it soon:)", "Thanks for the kind words, Gururaj. Yes, Prateek and his team is awesome! We are doing videos only for the first 5 modules for now \ud83d\ude42", "Oh great! Thank you for video also\u2026 Free", "Hope you like it!", "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://secure.gravatar.com/avatar/68189bb2c3c92f914d0713fb8dc85ac8?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/bea8c45ab775de716e7127cbd92efc36?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/ceb9b2074ed243bac73528a11f26fd92?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/8306b089d28aeec6a06b5ac1984d12ad?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/662b5efc907be4d5a4674c44eee27913?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": "33 comments", "text": ["", "", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "", "this is one of the sexiest video I have ever watched", "Glad you liked it \ud83d\ude42", "Zerodha will eliminate all the fake market gurus from YT.", "Not sure about that, but we do hope to educate many people.", "Dear team,\nI really appreciate your commendable effort for coming with this video series for which I was looking for. As I was studying the varsity but due to time factor was unable to complete as per the target.\nAlso, many of the fake YT with simply making people bluff with the name of free webinar and earning lots of bugs will be eliminate", "Great salute to Kartik sir and zerodha team along with Prateek sir", "Thanks for the kind words, Diwakar!", "First up all thanks to zerodha for such vdo arrangements. The vdo are very easy to understand to a newer trader. I like it very much . The style of Pratik sir to teach is very informative, creative examples are very good easily understood. The short short vdos are easy to play ( no issue of net or range) . Not boring as if it is in one slot", "Thanks for the kind words, glad you liked the content happy learning!", "I know candle sticks , but how do i become expert in these", "By learning and implementing what you\u2019ve learned in the market.", "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://secure.gravatar.com/avatar/f8f5c2fd01148529ffddee8ed5a2c376?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/800014556195f27ce124f2b0a5ad9a2f?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/a8e50c97cf5454f17fbe8db16cacb9fe?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/8d1cab3fb0e3b70a6638beb318b1b0c5?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/7bc0b84f2d7c9fb402df52db4967912b?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": "31 comments", "text": ["", "", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "Very good video and explained well", "This is what I was looking for. Thanks Zerodha", "Happy learning!", "Really helpful and wonderful job.", "Brilliant place to develop your beginn er knowledge. Highly recommend for #BEGINNERS.", "Happy learning!", "Hindi me video post karo sir please.", "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://secure.gravatar.com/avatar/2d91666caa9776d55b4a4b73be494ea5?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/9d891f4b1a28e55152600552bab1944a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f0432e947335c586e2ebe50340fe9759?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/87ceca2819832a451968633bd4aca0cb?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/acc4de58a36f9e6414853f0520922a8b?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": "21 comments", "text": ["", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "Like", "it was really awesome thank you soo much zerodha and @Karthik Rangappa sir @prathik sigh", "Happy learning, Sai!", "Thanks Zerodha for starting the video series. It is very very helpful to understand better than reading just theorotical.", "Happy learning!", "Hello sir, I am little confused about monthly timeframe and weekly timeframe. In both this frame, sir mentioned both of this is used by long term investors and he also explicitly told about second one that long term means 3 to 4 months or up to 6 months. so my question here is what about the first one? how long it would be?.", "Monthly you can use to get a sense of a really long-term view on the trend, maybe like last 5 years.", "Thanks a lot, sir. I am enjoying, learning, and exploring new things through these top-notch video series and also the articles and I like the support you give by answering questions in the comment section. It matters a lot to me.", "Happy learning Priyanshu. Glad you liked the content \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://secure.gravatar.com/avatar/b29d40414598d2a5469fbe8bd9dbe79a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/a9c4cd83a354ad81cb91c582399aebdf?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/66d2b741d012916735732c2f5154b92a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/c6788db36f0116b3635799836e99e58a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/c6788db36f0116b3635799836e99e58a?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 comments", "text": ["", "", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "TA is based on a few core assumptions.", "Well presented video.", "Happy learning!", "Just now I paid through net banking Rs.200/- for account opening and the payment\nId is\u2013 pay_KCkCGfD7pOApjf\nMethod netbanking.\nBut you say the transaction failed.\nExplain.", "Please create a ticket for this \u2013 https://support.zerodha.com/", "Can anyone give me a brief note on assumption", "What sort of note, Sivakumar?", "The videos are well made. Easy to understand and giving a clear idea. I have one request. Towards the end when you give takeaway points, they are covered by smaller windows showing the next video and the zerodha monogram. could you please do something about it", "Thanks Raju. The issue has been fixed in subsequent videos, and we have anyway put up the key takeaways here in the post as well.", "Thanks for all these great video sir,its well understandable and clear.", "Happy learning \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://secure.gravatar.com/avatar/91114f659a50d633440cffa59a50cda6?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/c5961a8c27016ff788e099721785eb86?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/0c17d08fbd672204b355d543c0b91e28?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/4993860277ca3c5f3645afdb85a00bf4?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/a45aac0c1dd16933176305388df28f4a?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": "16 comments", "text": ["", "", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "Can you remove the end cards and logo from the videos, it entirely covers the slide, which has the most important takeaways from the video", "The key takeaways are mentioned in the post itself (see just below the video embed).", "Buy strength and sell weakness.\nBe flexible \u2013 quantify and verify.", "what does it mean?", "Akshay, please check the comments here \u2013 https://zerodha.com/varsity/chapter/introducing-technical-analysis/ have explained this in detail.", "Pardon my ignorance, but do the videos and the text series contain the same information? Or do the text series contain some extra information?", "The text contains some extra information. But wherever there is extra info to be covered, we have mentioned in the vidoe.", "Got it, thanks! So basically if I only watch the videos, I won\u2019t miss anything?", "Hopefully, but do check the contents on both platforms.", "Will do, thanks a lot!", "Happy learning!", "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://secure.gravatar.com/avatar/9b6f604dcc8e3ec464e06acb6a510db5?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/2d7f229f4c4162f85765a8e3652f860b?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/1c3450bdd670fa524e906dd1ba7e9b41?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/1c3450bdd670fa524e906dd1ba7e9b41?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/1c3450bdd670fa524e906dd1ba7e9b41?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": "121 comments", "text": ["", "", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "Great Lectures!!!!", "A heartfelt appreciation for this much required initiative, Thank you.", "Hope you continue to like the content on Varsity!", "One feedback \u2013 Towards the end of these videos where the key takeaway section appears, the suggested video thumbnails cover the content making it difficult to read the key takeaways. Would it be possible to resize the suggestions videos in a way that it does not cover the video content?", "We are working on this Pradeep.", "Hi, loving the video lectures.", "Just a comment- The spinning tops and dojis are missing from the video content.\nWould appreciate if these were covered as well.", "Aditi, thanks for the kind words. Let me check on this.", "What should be the timeframe for the analysis?", "Depends on your trading style.", "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://secure.gravatar.com/avatar/320aee00cbdf8bff43104257b36424d3?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/2e2c75b1bc57ea559c663a1949d53897?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/e17ac1e8f54133dcb30e972c2b684c34?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/0d49f8c8bf4dcfae4174aa83e4d60ade?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/584709442cd4504faa4125fcab585331?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": "46 comments", "text": ["", "<", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "Sir,\nIf we have downtrend move and the last candle of that down move\nIs red and next candle is green in which it\u2019s open is higher than privious day red candle close and the close of green candle is higher than open of red candle .\nNow what will happen", "That seems like a variation of a bullish engulfing pattern. You can go long provided you are satisfied with all other things in the checklist.", "As the Green Candle open is higher than the previous Red candle close it doesn\u2019t satisfy the BULLISH ENGULFING PATTERN condition the trend will not change and will continue the down", "Yes, Suresh. It is ok if there is a small gap up compared to P1.", "Wont this be a sign of a reversal..?!", "Almost all candlestick patterns indicate reversals \ud83d\ude42", "Hi Karthik, seems to be erroneous statement at interval 15:50 \u2013 16:11. It should be \u2018bears are in full control\u2019 and not \u2018bulls are in full control\u2019, since it\u2019s a downtrend. Please review once.", "Let me check this, Satyakam.", "At 3:14 of the video, notice that you said the CLOSE of D2 is greater than the OPEN of D1. That is absolutely false according to me. Do check and do the necessary corrections in the video ASAP as it may be misleading for new investors/traders like me. BTW, love your explanations and continue doing the good work\ud83d\ude0a\ud83d\udc4d!", "Navya, let me check that. Thanks for pointing it out \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://secure.gravatar.com/avatar/882db82db4732be603f48eb730152b08?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/c1d3ae3013686cddcceff51856f0dce7?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/33d5974856e8f8a10999c8df4b3c7d6b?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/9ebe8a833332d95cf0e5f4cae6bb58a4?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/bb7ac454d5abd92d04b315cb247343ea?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": "55 comments", "text": ["", "", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "Want varsity in marathi language.also want best stock market books for indian investors which are beginners in marathi.plz reply", "Not sure about Marathi, Dr.Pradeep, will be very tough to get his translated. But will keep this in mind.", "Nifty and bank nifty option", "I am using Zerodha to trade stocks. I am unable to find support & resistance levels in the charts. How to ensure that i can see them. Please advice.", "Narendra, you will have to plot the S&R manually.", "THE VIDEOS ARE NOT IN A FRIENDLY LANGUAGE WHERE A BEGINNER CAN LEARN SOMETHING TOO MUCH OF TECHNICAL LANGUAGE WHICH IS DIFFICULT FOR A BEGINNER TO COPE WITH UP", "thanks. its really useful", "Happy learning!", "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://secure.gravatar.com/avatar/6a3bbd3ad9a8c06b656aee13ac578ef6?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/360982070b6814da1ac491a5733527f9?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/947ec914c641ba34a76c2780b3833cb2?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/2d533d725c80a87c27452ba2dab4c2f8?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/8e9941a5e6cd9c2f3e66d94e2ee2bb81?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": "79 comments", "text": ["", "", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "Good job guys \u2026.but the key takeaways could be longer \u2026.now it\u2019s masked by the next video thumbnail.", "Working on it, Sony.", "I would really appreciate your great work with quality content.", "Glad to know you liked the content. Happy learning \ud83d\ude42", "This is awesome! The video quality, interactive video edits, camera angles, and ofcourse the content quality is just too good!", "How a broker turns into a value generation machine can be absolutely learned from Zerodha. Other brokers need some marketing lessons from you all!", "Thanks for the kind words, Ninad. Glad you liked the content on Varsity \ud83d\ude42", "It would be better if certification exams can be given on web also. As of not only mobile app supports that.", "Noted \ud83d\ude42", "On which platform he is teaching these charts? Kindly tell the name of the website", "All teaching is on the Varsity platform itself.", "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://secure.gravatar.com/avatar/b99627b324a71cffcd3c49055824b132?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/0e7f49912e19116c56e7e6ed3e408f88?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/d1d232b5c799bd20c1efb87bcf4a4711?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/8000be06716930e9530d7bc0af849091?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/e60ebb67dac191396dbfa1ad5db609f9?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": "80 comments", "text": ["", "", "We recommend reading\u00a0this chapter on Varsity to learn more and understand the concepts in-depth. Also, visit the complete module here to know some more theories.", "Very useful for me and explained clearly", "Thanks and happy learning!", "Really simple and useful. Thanks", "Happy learning, Sundar!", "Simple and effective. To the point explanation. Watching videos and going through the theory module definitely teaches you a lot. Honestly, so much better than paying 25-40k to these youtube trainers out there. The stock market is the same around the world. There is nothing extra or new someone is gonna teach. Thank you Zerodha, Karthik, and Prathik for putting out efforts to spread the rightful knowledge without being selfish.", "Happy learning, Tauseef. I hope you find more value from Varsity \ud83d\ude42", "It was awesome, attended so many youtube classes, bought so many classes over Udemy but could get even a single thing there, you explained very clearly the things, it was so interesting classes with clear examples, that\u2019s why i finished it within single shot of sitting", "thank you so much for all thins", "Happy to note that, Harsh. Glad you liked the content \ud83d\ude42", "thank you sir very helpful", "Happy learning, Abhishek!", "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://secure.gravatar.com/avatar/2d91666caa9776d55b4a4b73be494ea5?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/e8cae5906ed5fbe22c26830c047c4524?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/441889116ab05a1c5ca2966813458a9a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/6ff2d81526fe9cd31e341052cd93b485?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/353f72f06549e863f04306fe37acb5c7?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": "43 comments", "text": ["", "", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "The voltas example also kind of failed. entry at 620 and exit at 590.", "Hello sir\nVery nice video .thank you for this video.", "Happy learning \ud83d\ude42", "Best ever videos sir!!!!!", "Happy learning, Harsh!", "In the Kite in the chart mode, how to add MA 50 and MA 100 Indicators in the chart. I did not find the option to add the indicators. Please advice.", "Sasikumar, I\u2019d suggest you reach out to the support desk for this, they will help you with it.", "How do we set ema in the graphic in kite", "Jim, sorry, dint get the query. Can you share more insights?", "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://secure.gravatar.com/avatar/1072737b427c0f1a8a398a127a49c6cb?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/45a12218cd1facb01aad6b40106b6a85?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/6ad462f77396095ccc1ea2688ccf0764?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/df5e1c1882238a28258b541b1d37c1cc?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/4176c0de0345a983d64eb420c3ab8916?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": "42 comments", "text": ["", "", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "Was checking the website to clarify a topic and saw these new amazing video based modules. Will help all those people who are lazy to read (Sometimes even me \ud83d\ude05\ud83d\ude48)\nSo happy and once again Zerodha and team taking the financial awareness to the next level in India.\nSo so happy to see you karthik sirji \ud83d\ude42 and Prateek.", "Thank you Zerodha", "Thanks, Laxman. I hope you like all the videos \ud83d\ude42", "I\u2019ve really loved this new way zerodha come up for teaching us! Thanks zerodha for adding one more thing in my everyday\u2019s to-do list.\nI\u2019ll refer this to some of my lazy friends who are damm lazy to even read a single card of the course.\nThank you Karthik sir and all other members of his team to make investing exciting as hell!", "Thanks, Udit! I hope both you and your friends like the content \ud83d\ude42", "Finally!!!", "i am a 17 year old kid ,read this fundamental analysis module its easy to understand and i am feeling exciting to watch this video [even sometimes i am lazy to read].THANK YOU KARTHIK SIR", "Haha, hope you enjoy reading and watching! Happy learning \ud83d\ude42", "We Indians need more and more knowledge about our stock market as our market is a gold mine with highest potential of the companies", "I agree! Happy learning!", "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://secure.gravatar.com/avatar/96eeaa1b040d85f1fad12159a90c7e64?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/7b25415fd7c36462538b2aa97ffce41b?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3b4e4950288769df9a129daaf3a21159?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f55dcf70540eed29079f46018dd2b744?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/d45dbe96ad8a1544e6dee7cbd9b4442f?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": "16 comments", "text": ["", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "short and sweet video series..", "Happy learning!", "Thanks for the video series. You made it pretty much interesting and handy.", "Glad you liked the content, Sagar. Happy learning!", "Thank you for giving us free financial education! Really appreciated", "Happy learning!", "Nice Videos, Karthick. New investor looking to learn the stock market and Zerodha\u2019s Varsity is one stop learning.\nI have learnt a lot under TA and looking forward for the same under FA as well.\nKeep it up!!!", "Thanks, Mohan, I\u2019m glad you liked the video series. We could not have had a better partner than Prateek and Learnapp to make these videos. Keep learning \ud83d\ude42", "sir can i be both trader and an inverster", "Certainly, why not \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://secure.gravatar.com/avatar/19661f1f98c1e1501bf90da6bf9df21d?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3dddc79ab8cfec322bf763cbc88306ef?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/35c1cdc105e31fbce8e5071d7ca20179?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/e6d34adda4b5cdd9f7a4efe25ad0ebd0?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f1b95257ee27fe93b6011b0cff8a743c?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": "19 comments", "text": ["", "", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "Thanks sir", "Good luck!", "Sir, I am starting to learn about stock market. Right now I want to restrict myself to investing only, that too on equities only. So, which modules should I read from the Varsity for this purpose??", "All you need is the fundamental analysis module along with the basics to get started.", "HELLO Karthik Sir, on the last of video KEYNOTES, KEY TAKEAWAYS GET HIDDEN FROM ICON OF ZERODHA VARSITY. KINDLY ADJUST THE ZERODHA VARSITY ICON IN ANY CORNER SO THAT KEY NOTES WILL BE VISIBLE. Thanks You for your informative video", "Noted, we are working on this Kundan.", "Thank you sir for such a short video with clear information.", "Happy learning, Varsha!", "Sir\nI am a new investor and opened zerodha account recently. How to invest in sbi small cap Or parag parik flexicap funds through coin app of zerodha. Pl mail me.\nThank you for video on balance sheet reading.", "Susheela, as far as I know, PPFF fund is closed for new investment. For the other funds, please search for it in coin app and click on buy. Maybe you can call the customer desk to help you with the exact steps.", "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://secure.gravatar.com/avatar/ab8051b7d788ec31d8484e42fd8b6eb7?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/9cfca4a0a3749d8937b97a6d053ab81e?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/748d5c38edaadfc0dbb2963cd9ca4976?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/bd5943bcd4e85850b830477dd083142e?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/2ad771586e88a00c95a66db4bfa3b0c7?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": "7 comments", "text": ["", "", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "thanks sir. you highlighted whats to be read.", "1. If the proceeds from PAT directly sits in reserve and surplus of the balance sheet. Then why same amount is not added up in cash and cash equivalents.\n2. Is cash and cash equivalents totally unrelated to reserve and surplus. Please explain\n3. How can we add all the profit to cash reserve, though the entire amount may not be received by the company. Shall be very grateful if u explain the queries pointwise\nThanks", "1) They are accounted differently under two different sides of the Balance sheet\n2) Cash is the amount of liquid cash at disposal parked in banks. Why cash can be a smaller amount, R&S represents the networth of the company\n3) Sorry, I don\u2019t understand this query", "I meant that how entire profit from P&L is added to reserve and surplus in BS. Though the entire depicted profits of P&L may not be received by the company.", "The PAT from P&L flows into Reserves & Surplus only.", "Further which part of proceeds is added in cash and cash equivalents. Please elaborate, i am totally confused between the two.", "I\u2019d suggest you check the associated schedule of cash, you\u2019ll get an idea of cash flow. Of course, looking at cash flow statements gives you the complete picture.", "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://secure.gravatar.com/avatar/8e9941a5e6cd9c2f3e66d94e2ee2bb81?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/5e7adb1e6ab4f153c57fbcc097023a9d?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/5e7adb1e6ab4f153c57fbcc097023a9d?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/5e7adb1e6ab4f153c57fbcc097023a9d?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": "22 comments", "text": ["", "", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "what is the interpretion of Decreasing Non Current asset and increase in current asset?", "A decrease in long-term assets means the company is selling off stuff. YOu need to figure why they are doing it. Maybe because debt is high? Increase in current assets means the company\u2019s working capital is improving.", "Sum of all assets is equal to sum of all liabilities ensures balance sheet is balanced. What is meant by this statement? As pe rmy understanding, if assets value more than liabilities then it represents good financial health.", "From a balance sheet perspective, if assets are more than a liability, then how is the company financing such assets?", "I did not understand the other equity part. how it is part of liability?", "You need to look at it from the company\u2019s point of view, Vimit. From the company\u2019s POV, networth is a liability to its shareholders.", "sir ,\nI have one doubt that where we can get these information about [document]", "Please check the annual report of the company you are interested in.", "Sir,", "Are the reserves and surpluses represents \u201cTreasury share\u201d?", "Not really.", "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://secure.gravatar.com/avatar/271ec98ef9398b7f531ddf4ffb74f4ef?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/89f0e2e57d2981dc740921634b71482b?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/2999a91e3556acf42f3c7ff239e278ba?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/2c09b8b092529ba76f46c50bd5b2fa49?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/e7d2b55061fddf6c58bd0162487e06e1?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": "44 comments", "text": ["", "", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "Thanks for posting this video. Can you pls. tell \u2013 where to find the cash flow statement for particular company like Bajaj-auto? I could not find the table mentioned in your video on their website. Pls. give more info on that. Moreover, apart from those 3 rows like operating, investing and financing, I am seeing many other data on any company cash flow statement on ET. So, pls. go through any in details.", "Ashish, you will have to download the annual report of the company and look for the cash flow statement.", "Can you please tell me how to calculate free cash flow?", "YOu can keep a track here \u2013 https://zerodha.com/varsity/chapter/fcff-fcfe/", "Hello Sir, I would like to know from where can i get cash flow statement for last ten years.", "Please do check the annual report of the company. Alternatively, you can 3rd party websites like Tijori or Screener.", "Historical annual report, Priya.", "Thanks for the response", "Sure, good luck and happy learning \ud83d\ude42", "1.Sir in operating cash flow it show total amount recive from operation .\nThese amount is with revnue or just profit of revenue.\n2. Where to see repaymet of repayment of a company.", "It is PAT and not revenue. Repayment details are in the finance activity.", "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://secure.gravatar.com/avatar/5e5fe5c9b9548b56b7f2208c1b315347?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/02e91891d04ea8b1e1c1ed290fdd944a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/853ffac6a7d067722c796b4d59e66fc4?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/853ffac6a7d067722c796b4d59e66fc4?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/66858c260fa530e5fb22a6be724252f1?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": "9 comments", "text": ["", "", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "This was so helpful. Thanks alot!", "In the summary of the video, under the Cashflow statement box (@4:12), the first line item should be \u201cOperating Activities\u201d instead of \u201cBalance Sheet\u201d, it must have been a typo. Thank you, Karthik and team Zerodha for all your efforts in making such content available.", "Ah, thanks of pointing that RObin. Not sure if we can edit that now. But I hope can figure its a typo \ud83d\ude42", "Sir could you please tell me how to calculate at what percentage the company has taken the loan?", "But as a percentage of what do you wish to calculate?", "Sir you have explained in the video the finance cost part, that\u2019s what I am not able to understand that how do I calculate at what percentage the company has taken its long term loans or borrowings? ( Like in balance sheet finance cost states that it is the interest amount paid by the company. So I want to know the figures or amount from which that finance cost has been calculated and written there.)", "For that, please check the notes or schedule associated with the liabilities. The notes will give you a detailed split.", "Very good teaching. Nice presentation with example.", "Happy learning!", "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://secure.gravatar.com/avatar/7bbfbd52a57643e0396dd62a09065f8f?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/2c27ad7a97bd3a09cdcbf111a655e74d?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/887a6abbc7163c732009e1a2790cca03?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/887a6abbc7163c732009e1a2790cca03?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/60b1ae63688d8a6b09e364fb502dea33?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": "47 comments", "text": ["", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "Great content keep it up !!! Was also reader of varsity, but videos are very insightful and easy to understand. Just one recommendation, please put varsity logo at end of video on left or right so viewer can read the \u201cKey takeaway\u201d section.", "Thanks, Mihir. Not sure if we can do the edits now, but will certainly try.", "Very helpful content. Thanks lot Karthik for making this available for free. It\u2019s truly valuable. I was reading the ROCE and I did not understand why\nROCE = [Profit before Interest & Taxes / Overall Capital Employed] and why not ROCE = [PAT / Overall Capital Employed].", "Thank you.", "The idea is to get a sense of return from both the assets and liabilities, without really considering the effect of financial charges and taxes.", "Please elaborate the subject", "while calculating EBITDA in video series you just substract total income from total expanse but the 2014 written module u first minus other income and minus finance cost and depreciation &amortization and than calculated EBITDA . why it is changed now ?", "It is not changed \ud83d\ude42", "These are two different methods. The one in the video series is generic and widely used.", "Should we use EBIT or EBITDA? Why are we not taking depreciation and amortization into account? As per Warren Buffett, ignoring the above doesn\u2019t provide the correct picture.", "It really depends on the individual analyst, Shweta. Some prefer EBIT as they consider D&A as just accounting entries, while others like to consider D&A. You need to find what works for you.", "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://secure.gravatar.com/avatar/5e2231f7212d333501eceaf06bae0ead?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/95ae79c13eef6e16505cc3d18cc1230b?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/df87e682b73ca610ed464153df3de60a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/d58a70474afe05ae92cb2c14c9541e6d?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/7b52623985dfab085f997682f4d6066b?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": "8 comments", "text": ["", "", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "All your content are very easy to read and understand.great going.\nwhere do I study more about option based valuation and when can we expect an upload for the same from your side.", "Thanks, Pravin. I dont know if there is enough content around option-based valuation. Let me dig around.", "In dcf valuation when there are high capital expenditures (due expansion),the valuation gets reduced .for ex: for acrysil dcf valuation comes to Rs188 but if i remove the capital expenditures the valuation goes up .is it correct that way (idea being the expansion is going to increase the income) or how do we go about it.Also when the cash flow is negative but we know in future the income is gonna increase ,how do we value those stocks.", "No, you will have to consider the CAPEX, otherwise your results will be skewed.", "Great explanation! Thanks a lot.", "Glad you liked it, happy learning.", "Hello I would like to asked for considereding the DCF model the Net debt should be considered of which fiannacial year to be calculated for ex. as you have take the Amara raja batteries example you have taken the debt and cash & cash balance of 2014 year why? please explain this in bit detail", "Yes, the immediate previous year is what you are supposed to consider Apurva as the numbers represent the latest financial position of the company.", "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://secure.gravatar.com/avatar/8227d06aca7faeec878e9e808fe35dc2?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/8227d06aca7faeec878e9e808fe35dc2?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/7bbfbd52a57643e0396dd62a09065f8f?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3e2f3eaf9d7c66b63f4022f5792e9efa?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": "45 comments", "text": ["", "", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "Congratulations, you can now be proud to understand various financial statements. Now that you understand the concepts and techniques, we hope you apply them to your trading strategies and take mindful trading decisions. But before you get started, read our Innerworth module to understand trading psychology and the impact of events on a trader\u2019s mind.", "Happy trading \ud83d\ude42", "Thank you for great work", "Happy learning, Sidhant.", "I\u2019m reading Varsity for almost 7 Months and this help me a lot better to understand step by step approach so so much thank you for financial modelling, I understand the company\u2019s growth a lot more before reading financial modelling", "I\u2019m glad to hear that, Sidhant. Hope you find other content also useful on Varsity. Happy learning.", "After*", "hey Karthik, fantastic again. great to see you in person. Had printed out the pdf file, sometime back. Great contribution to investing knowledge.", "A query \u2013 is there any case studies \u2013 books, that you could recommend \u2013 that deals with fradulent or inappropriate BS/CF. it could be either real life or imaginary (example satyam computer). That would help in consolidating the knowledge learnt, a sort of self assessment; and better prepare to search/analyse/weed out inconsistencies.", "many thanks. again, great work \u2013 your work is and should be the starting point to learn about markets.", "I don\u2019t have any content around that, but this is a nice idea, will try and do something around this.", "Thanks a lot, Sir. It\u2019s really nice effort you are showing. I really appreciate your conceptual teaching, which is everywhere in Varsity.", "Glad you liked the content, Muktesh! Happy learning \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://secure.gravatar.com/avatar/84ad2126c4f34f4d60be4adee43b45d8?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/84ad2126c4f34f4d60be4adee43b45d8?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/84ad2126c4f34f4d60be4adee43b45d8?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/4cde0b87d3f1d779f156cd6f9731508e?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/7b6b283514da61ef2f176cb9649ab806?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": "19 comments", "text": ["", "", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "Nice work! This has to be one of the most professional video that I\u2019ve ever seen. It had my attention from the start to the very end of the video. Thank you for this!\nMadhav", "Happy to note that, thanks \ud83d\ude42", "why is there the v sign and next vedio option in the end . cannot read the key points", "Please see the key takeaways right below the video, we have typed them out for your reference.", "Hi Prateek,", "I wanted to know whether the stock prices of Equity shares gets affected due to derivatives or not. If Yes, how does it actually affect.\nAlso, please explain how whole Nifty50 index can be an underlying asset if the initial moto of it is only speculation.", "Ur lectures are very nice.", "Thanks", "Ram, its the other way round. Prices influence the derivatives. Nifty 50 is not just for speculation, its also benchmarking, hedging, investment etc.", "If the price went up, the buyer would be happy, right? Because he is going to get the gold at the contracted price (which is lesser than the current market price of gold) from the seller. And the seller would be unhappy. But the video says the other way.\nOr am I missing something here?\nNice videos by the way!!!", "Need to check the video, could be a voice typo. But a buyer benefits when price increases and seller benefits if price decreases.", "I was having same confusion. Thanks for the explanation.", "Sure, happy learning \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://secure.gravatar.com/avatar/926b090f048f85f328556c276311e474?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/bb8345fbe50b634aa6e010c1b7cca891?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/30218337b10f0eeb8db3e9c084c75528?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/e6d34adda4b5cdd9f7a4efe25ad0ebd0?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/b4025dc93af3159b2de50a3d10db3625?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": "11 comments", "text": ["", "", "We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.", "Beautiful content and Awesome clarity with Confidence", "Happy learning!", "Prateek you teach very well", "He does \ud83d\ude42", "Waiting for options videos", "Hopefully in another 15-20 days.", "IG the contract value will be \u2013 Lot size x Future\u2019s Current price instead of \u201cLot size x underlying\u2019s current price\u201d As per the written content of this same topic.", "I am I right or is there some misunderstanding?", "Contract value = Lot size x Future\u2019s Current price", "Hindi videos", "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://secure.gravatar.com/avatar/70b03db954aa45fc2559e85f5d5bd13e?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/cdc2c03d146a05367ffec52bf806b398?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/883abae50e2f916e1e54acf8e008cca5?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/913e7bc5253fd608ff633615c7904c30?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/ee5a4eeb0b7512c5a20422fae623189d?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": "7 comments", "text": ["", "", "We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.", "Will this chapter need update post new margin rules implemented by SEBI? Any thing planned on peak margins?", "Yeah, needs an update. Will do that soon.", "What is margin required and margin collected in zerodha statement", "Is the training module updated?", "We are in the process of doing it.", "Hi,", "In margins, Sir mentioned that if I have one long and one short margin requirement becomes very less. So how can I leverage this to place trades so that my margin requirement is less, as I do not have so much capital.", "Kushal, with lesser capital, it is advisable not to trade leveraged trades in the first place. But anyway, the margins do shrink when you have hedged positions.", "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://secure.gravatar.com/avatar/98111e6fc90fd79862ca85bfb3a00b06?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/08762c9cfd89cbea1199bd36a5f6fe3c?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/65079f6f3166c7d27bab9276695f1811?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/ab4f2131796a86d97d8402c9e41f8579?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": "8 comments", "text": ["", "We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.", "", "Seems so simple.\nBut the risk is real and it is hidden under unseen.", "Yeah, in trading you need to decipher where the risk lies \ud83d\ude42", "How to read IPO\u2019s? How should one know whether you should invest in an IPO or not.", "For long term, you will have to do a full-fledged FA on the company before investing. If you are playing for listing gains, then keep an eye on the supply demand situation/hype for the IPO and decide.", "Should we wait till the expiry to exit the market? If I buy at 1710 and the price reaches 1720 one week before expiry, is that allowed? or there will be some loss?", "No, there is no need to wait till expiry. You can exit the position anytime you wish.", "Like if my risk per trade is 100 ruppes on trade if my stoploss hit will I lose only 100 ruppes or I lose 500 ruppes depending on how much leverage brokerage providing hope your getting my point and it same goes to wise versa", "If you\u2019ve placed a stoploss in such a way that you will lose Rs.100, then thats the max you will lose (provided the SL order gets executed). Not the leverage amount.", "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://secure.gravatar.com/avatar/711fc911b5a1ff32ce0f73865928bcf8?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/2bb85a267c197c84d07a91884b36f506?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/e5b192e67834b5eb7da487a543a25d1f?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/8124059e5e95697bc544023e3f063e36?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": "8 comments", "text": ["", "", "We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.", "But Karthik I\u2019ve read it somewhere that in \u201cFutures\u201d we are obliged to buy at the predetermind price. Whereas in \u201cOptions\u201d we have this choice whether to buy or not (only loose the premium paid).\nKindly explain.", "Thats the definition of forwards, the predecessor of Futures \ud83d\ude42", "Choosing Intraday or Overnight which is best while doing futures?", "Depends on your strategy as both come with its own set of advantages and disadvantages.", "Got to learn something new in the simplest manner. thank you very much.", "Glad you mentioned that, happy learning Divya.", "I have purchased futures 10qty @13 total 130 now market going down 9 rupee, loss 40 rupees, this loss amount also required to maintain in balance in my wallet/demat account, if not maintaining these loss what will impact to my purchased qty(not expiry)?", "This is the market to market process, Shaik. Your margins will take care of this.", "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://secure.gravatar.com/avatar/711fc911b5a1ff32ce0f73865928bcf8?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/e5b192e67834b5eb7da487a543a25d1f?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/8ebbbaa6aeb0f497da11879550d2c6f4?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/642a939d6bc1e95f37c446331c1e8aaa?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": "22 comments", "text": ["", "We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.", "No key takeaways from this video \ud83d\ude42", "What will happen to my balance/trade if I don\u2019t close by position during end of the expiry day", "Varun, based on the position, it will be settled accordingly by your broker.", "Hi Karthik,\nAs it is said in the video, that as we approach the expiry date of the futures contract, the margin required increases. Therefore, will the margin become equal to the total contract size of our position on the day of the expiry, since we have to ensure physical delivery on the expiry date?", "Yes, it goes up considerably, almost to the extent on contract value, depending on the contract under consideration.", "I sold IGL 400 PE @ 3 and currently somewhere at 9 due to sharp fall. Lets say if it goes further down to 380 and by the expiry how the settlement happens exactly. Will I get the stock price at 380 or 400 as I sold the 400 contract. Also how the losses will be adjusted. Please explain with some examples.", "Yes, since its an ITM option, short PUT will result in taking delivery of the stock. Hence you need to have the necessary margins in your account.", "Please explain me about currency option settlement. For example,", "USDINR CONTRACT EXPIREY DATE OCTOBER 30 , 2021\nSPOT PRICE ON EXPIRY 77\nI SOLD 78 Put , 1 lot\nMy question is that, how much I need to pay for settlement on expiry.", "It depends on the spot price on expiry right?", "Hi Karthik,\nCan you help to understand last sentence from video \u201cIf you are short seller you have to make sure you have those share in your DP account\u201d in futures perspective ?", "It means that upon settlement, you will have to deliver shares from your demat account, for which you need to have shares in your DP.", "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://secure.gravatar.com/avatar/27577eb1a2773288f43d8c69b98bea77?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/bb1cc0108df89f1c1dfb5802ae42718f?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/e1ea437186d62248e96d5bfc1397cd9a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/a0a6bf041c292b219b017e49054145bf?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/9f1469309218fe264970f04a1f4058dc?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": "18 comments", "text": ["", "", "We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.", "Great video Team Zerodha! I went through the entire video series on \u2018Futures\u2019 and I must say you guys have done a fantastic job of explaining Futures. I had read about these concepts in books, articles and even some videos. But what differentiates your videos is clear information, simply and confidently presented by Prateek with excellent graphics. Take a bow guys!", "Thanks, Namrata! Glad you liked the content \ud83d\ude42", "I\u2019m truly grateful to the content that your team is providing, great job!\nGod bless y\u2019all \ud83d\ude42", "Happy learning!", "Thanks for such a nice and simply explained video", "Glad you liked it, Pawez. Happy learning \ud83d\ude42", "Hi Karthik,", "Can we Sell Futures if we don\u2019t have the holdings, I mean short selling is allowed?", "Yes, you can sell/short futures.", "How long it takes to update OI?", "NSE does this real time I believe.", "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://secure.gravatar.com/avatar/1a8a0ecbe52d57646b992ce14fad7ffc?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/33c685ad3cf9020f1f111a87939e499f?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/0427b1fc8c5e86d543ab6bb1d18c23af?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/e086afdb85a89ac0f65de60abae7d5d8?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/37c928a70e6d75b3d2284af2be1a6c6f?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": "20 comments", "text": ["", "We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.", "", "This was so helpful. Thanks a lot", "Happy learning!", "Hi Karthik and Prateek.\nQuick Question \u2013 What if I short the futures of a company by using the overnight function because my initial intention was to hold my position for a few days; however, towards the end of the trading day (the same day I placed my short position) I decided to exit my position since I notice a significant profit/loss. Is there a way I would be able to exit my position on the same day even though I placed an overnight position and not intraday?", "Yes, of course. You can buy and sell futures at any frequency during the day.", "Hi Prakeek/Kartik,", "Why are futures some companies not available? Is there an option to short a stock that you know will fall in a few months time (for which the future contract is not available)?", "can i sell the future stock first and then buy the stock after one week", "Yeah, you can. No problem with that.", "Lets say I short a futures contract trading $120 (spot trading at $100) when the futures is in contango and I exit it on expiry when futures\u2019 price approaches spot and lets say at the time of expiry spot is still at $100.\n 1. Will I be at a profit of $20 now? because futures\u2019 price approaches spot on expiry be it in contango or backwardation\n 2. Does this mean futures\u2019 sellers have an edge over buyers when in contango? (which is usually the case)", "1) Yes, thats right.\n2) Hmm, not really. If the spot is not priced in correctly, then the spot can also catch up with the futures right?", "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://secure.gravatar.com/avatar/947f0ba5347f647318cf3a0c5749a3ae?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/bb1cc0108df89f1c1dfb5802ae42718f?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/6a16e4cde5de4e50eb96e0bba5ead993?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/c2f85f91187dd1ebff2d3d527457ce68?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/99ed42596abf156d99ee254f29429759?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": "38 comments", "text": ["", "", "And with this, we would like to conclude this video series on Futures Trading. We hope you enjoyed watching and learning from this module as much as we enjoyed curating it!", "In the next series, we will discuss options.", "Visit this link to learn more about currency and commodity futures.", "No key takeaways from this video. \ud83d\ude42", "Dear Karthik,\nI am unable to find Option Video Series.\nPlease help as the content is too good and learning has been awesome.", "We are yet to put up the option videos. Maybe another 15-20 days.", "Weekly and monthly can be the expiry of future contracts?", "Yes, thats right.", "Thanks sir\ud83d\ude00\nHave a nice day!!", "YOu too!", "Great video , now I am waiting for options videos", "Hope to put it up soon.", "Such a great series.\nCan you please confirm the option module date\ud83d\ude05?", "In 10 days is what the team said \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://secure.gravatar.com/avatar/ddaa41474f7af2e9a492234743b5665f?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/e7fc320b97bdb930bfe3988f38d56363?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/e7fc320b97bdb930bfe3988f38d56363?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/29594bd585dfbc7e60c65e3fd674b9e9?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/18d6c962f194af44cc54b8f560ec04f6?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": "99 comments", "text": ["", "", "We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.", "What a dreaded concept explained so lucidly .Only \u201cThe Zerodha\u201d team can make it happen .", "Happy learning Tarun!", "Hands down the best video I\u2019ve seen on Options. Looking forward to learning more from this series. Kudos to the Zerodha Team!!!", "Thanks! I hope you continue to like the other videos we will release shortly.", "Thank you Kathik sir\u2026\nFor the wonderful work\u2026\nU really are making a great work..", "Happy learning \ud83d\ude42", "Killing it as always \ud83d\ude42\nExcited for the next videos\u2026", "Glad you liked it, will release the video soon \ud83d\ude42", "Thank u very much Karthik sir for the video lectures.", "Happy learning!", "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://secure.gravatar.com/avatar/ecdc68126144c8a6d3fdc0ec0de07f5c?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/7d07820484ed2f227d0f9ee2d7fa4f11?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/5a4dc72b02084864bc6fc9fc6a91c1d7?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/8e9dedd313356e7627ffde5526e28f64?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/e7fc320b97bdb930bfe3988f38d56363?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": "22 comments", "text": ["", "", "We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.", "Amazing explanation ! The language is so simple, anyone can learn options trading. Thanks for enhancing learners confidence.", "Glad you liked it, Pankaj. Happy learning \ud83d\ude42", "easy to understand\u2026..", "Video is very good but the music is distracting from the content.", "Noted, will pass that as a feedback to editing team.", "How to trading data live zerodha?", "Every data point on Kite is live, Sanju.", "hey karthik why there are different options with different strike price when there is only one spot/underlying asset price\neg; infosys has infy dec 1020 CE,infy dec 1060 CE etcc? why is that", "The underlying is just one, but these are all bets that the underlying will or will not cross a price point. Hence different strikes.", "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://secure.gravatar.com/avatar/01e2b35a3df26223f673093520a95beb?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/29dccf31f197121ecb4ffeca45d9ed92?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/535bc109db89905bda4565d011ad7d7d?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/94a01d1a06b39f3add92f09ce4099245?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/df4b03ff70e560b6803ff4b791b4e935?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": "50 comments", "text": ["", "We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.", "From where we can find the next part of the videos in the modules", "It will be uploaded soon.", "This is the first series of videos I have watched, and they are invaluable to a brand new entrant to the market! Keep up the good work.", "The P&L chart in your example had a negative even beyond the 477.5 spot price for SBI. I assume that was a typo?", "Glad you liked it, Kaushik. Yes, that\u2019s a typo, we have put a pinned message on Youtube, will put the same here as well \ud83d\ude42", "What if I didn\u2019t square off my option call and it\u2019s in the money and facing loss at close of expiry , will i just have to pay premium and can get out of situation or I\u2019ll have to bear the loss", "Against possible expiry 495\u2026\u2026P&L\u2026.should be +17.5", "sir\n CAN YOU MAKE ONE MOULE FOR PRICE ACTION TRADING", "Check this \u2013 https://www.youtube.com/watch?v=z0Rwoz6PduM&list=PLX2SHiKfualEyD05J9JsklEq1JFGbG6qJ&index=3", "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://secure.gravatar.com/avatar/7e828814ef3f8434854f6211b8e780d8?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f61d7a5dc975c37b8e1c14c835bcc2cc?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/ef34b15a2cc20b2e7abc6cc939fe3365?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/1bb5b1ea9d184d30b156479deb5f87c8?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/5ec9ddffe6a008b740c47408d7dcdd69?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": "30 comments", "text": ["", "", "We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.", "Hi", "Is the breakeven for that PE option is 2632.5 is that right:-Premium Paid+Strick Price", "Yes, I guess ppl have commented on the videos as well.", "Break even is 2487.50 i.e strike price minus premium", "Yup, please do check the comments on youtube as well.", "put option buyer & seller-breah even point-2487.50", "Yeah.", "I have a question and an errand:", "Question: The premium is the only price that the buyer has to pay as in is that not any multiplication with lot size.? For more clarity based on reliance example taken:\nRealised Loss = Premium Paid = 72.50\nOR\nRealised Loss = Premium Paid * Lot Size = 18,125 (72.50 * 250)", "Errand: At 4 Mins when mentioning the Lot Size of trade we added the rupee symbol to it.", "I all and whole thank you so much for this series. This is super super content to start things up. \ud83d\ude42", "Its premium * lot size, Jitin. Lot size is a number, not in Rupees \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://secure.gravatar.com/avatar/86f49804d5b1f9079f3f5aa6c09834fe?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/bc4e7eedb9011cbd5eba137b0c1438c6?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/0be93f5cc59a423ce93e50ef5ad4297f?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/4bcbec865648e730b4388488e6af82eb?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/bdd5affe8943c973c2c1419a5294b981?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": "15 comments", "text": ["", "", "We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.", "", "next viedo kb aayegi option ki", "Waiting sir for another option video.. No total option series sir", "Next week \ud83d\ude42", "sir how can we minimize our risk in selling the option please provide a video on that topic", "Coming soon \ud83d\ude42", "Hello Karthik Sir, Its a great tutorial. Everything is very smooth and clear the way you taught. While watching this video I got a question.\nLet say a buyer and seller get into a contract, where buyer pays margin. I understood buyer can square off this deal anytime and leave position. If the seller of that particular contact square off before expiry, and Buyer holds the contract and wants settlement on expiry day. Who will settle money to buyer in this case?", "Thanks, Mrinal. The buyer pays a premium, not a margin \ud83d\ude42", "So for a contract, there will always be a buyer and seller. So assume the seller wants to square off, to square off the seller has to buy, and there will be someone else who will sell. So that keeps going till expiry.", "Hi Sir if the market keeps on going down, is it possible to exit while in the F & OP trading, if I will be going to exit what will happen?\nlast week i was did same as i mention above, now my doubt is there possible to loss my whole money or no.\nbecause i had invested 50000 and when i was exit my demand account credited nearly 48000 but I got a message like Margine shortfall happened so need to keep more than the premium which is i have paid. i just scared of my money..", "Ah, not sure what could have happened here. But you can exit the position whenever you want. I\u2019d suggest you speak to the support executive to figure what exactly has happened in your case.", "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://secure.gravatar.com/avatar/c3ee179f4831b280c93384ecd08d1b3d?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f3b41108277bb0c945c615c746eeaf3f?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/4cebe22bbd226c9f72b66051c824bc71?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/ba10081db227e8019b5f2db58782a5f4?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/fd9aebe936e36b93836bf68e1077059e?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": "27 comments", "text": ["", "", "We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.", "excellent presentation. how to go to the next module.", "Varghese, you can navigate from here \u2013 https://zerodha.com/varsity/", "Sir, can we expect some videos on Option Strategies as well in the upcoming sessions?", "Will try and include that as well.", "very informative videos, thank you versity. Requesting to share more video\u2019s on option trading (like practical execution\u2019s, how to select strike price, intraday trading in options)", "We will do that soon, Deepika.", "I was awaititng long to clear technical F&O concept.\nThank you Karthik and Zerodha.", "Happy learning, Prashant!", "Hello Karthik Ji,", "I have already posted my query on 14.07.22 but still I didn\u2019t get response from your end, so I am posting my query one more time", "Why does the Open Interest shown in NSE option chain is different from Open Interest shown in Sensibull option chain? In fact OI numbers from these two websites are nowhere to each other. Or am I missing something to read? E.g. On 14 July 2022 at 11:22 pm OI shown on NSE open chain for Nifty Index 16000CE & 16000 PE are 1,67,185 & 2,06,550 respectively where as on Sensibull website OI for the same 16000 CE & 16000 PE are 86.3 Lakhs and 103.3 lakhs respectively. Or am I missing something to read? Please Guide.", "Nagesh, I think you should check with Sensibull itself and may post your findings here to benefit others.", "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://secure.gravatar.com/avatar/85c426907599084d8ee535971dab32fe?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/5d293fd6ac97d95a9ac4cf358c23ec5a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3a692f4221285363ccb54abeb57153ed?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/711fc911b5a1ff32ce0f73865928bcf8?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/919dad153f6f54fba15d8d241c017e0c?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": "22 comments", "text": ["", "", "We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.", "", "is another video coming in this module? One with the factors that influence delta movement?", "Yeah, more coming out soon.", "Explained very nicely. Waiting for the next video.", "Will be up soon.", "hi, is there a calculator for computing delta value of an option? can you mention it, if there is?", "It\u2019s called the Black & Scholes calculator. Do check here \u2013 https://web.sensibull.com", "I don\u2019t come from Maths backgroung. seems \u2018Bahut dimag lagana padega ye seekhne ke liye\u2019.", "But we have tried to simplify it as much as possible \ud83d\ude42", "when this videos coming karthik eagerly waiting! I appreciate your hard work, may god doesn\u2019t give what you want! & gives you what you haven\u2019t dreamt off!!", "Mayank, the entire video series is out, check this \u2013 https://www.youtube.com/watch?v=-mO0YOTcCiQ&list=PLX2SHiKfualFiusiT9G5uE9jU3vetvW2x", "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://secure.gravatar.com/avatar/45e097aa9f06878a82e257489a31461f?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/b586d33ee665d849527251c2ee168eac?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/7864802bc0759a6c494e79242db66538?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/711fc911b5a1ff32ce0f73865928bcf8?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/ba73554bdf94132452a0db3d0d2dadf6?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": "13 comments", "text": ["", "", "We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.", "Hi Karthik,\nI can\u2019t see the theta module video after watching the gamma video.", "Coming up sir.", "Hi Karthik, These videos gave me confidence and clarity to start investing in the stock market. Thank you very much for sharing these; looking forward for all the other modules\u2026", "Any idea by when we will have the videos for all the other modules? Just to make sure I wait for them, if it is not taking long, rather than learning else where\u2026", "Once again, thanks \u2013 Kiran Kondaiah", "Hey Kiran, so we wont be making videos for other modules. Vidoes are only for the Basisc, TA, FA, Futures, and OPtions. However, we will start making videos on several market topics and post them on regular basis.", "Does we get the paid permium back in profit or in rise in permium?", "Sorry, can you elaborate this?", "Hi Sir\nWhy and how did you take 0.0006 as Gamma? Pls explain.", "That\u2019s the output from the B&S calculator.", "What is the Calculate of this value (0.0006)", "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://secure.gravatar.com/avatar/4173c30c5113ed16b25550f0ffe4e04c?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/b4b170cf0f847c7a32066a08fd197749?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/5f88c8bdb1dff50601dc0b218d886e06?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/798bdb0128ff033a477af5a5e5ff7959?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/2572b9a56784a3e26ed69f9bab847fbd?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": "11 comments", "text": ["", "", "We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.", "Sir, will there be a video series on options strategies?", "No plans for now, Poornesh.", "could u explain why theta is friendly to option seller", "With passage of time, theta increases and premium loses more value, which is good for sellers.", "Basic logic behind selling \u2014> Sell High Buy low", "As all options \u2013 both Calls and Puts lose value as the expiration approaches.", "Theta is friendly to option seller", "RIGHT", "Thank you Karthik Ji and team.", "I would like to call you \u2018PANDIT \u2019, coz person who is able to give us a deep insight into a subject is called Pandit", "I am new to stock market world, whatever I know about stock market world, it\u2019s because of you & Zerodha Varsity team. Thank you so much.", "I have been reading modules available on this platform. I have few doubts in Option Theory, instead of annoying you about repeated question, I spent almost 10-12 hours reading all the 1914 comments, I found only 3-4 traders raised doubt regarding my Query No.1 (as follows) and you responded that you will look into this and reply. But I think still this query is unanswered. So I decided to put into the comments. I know you might be busy, but I request you to please find some time and solve this query.\nQuery 1:\na)\tIn section 15.3 you have calculated Nifty & TCS lower range and upper range by directly subtracting and adding S.D. from their respective spot prices respectively (without adding/subtracting volatility to average value and doing rest of the calculations) {Eg. from section 15.3 is as: 8547-(16.5%8547)=7136 & 8547+(16.5%8547)=9957}", "b)\tIn section 17.4, you have calculated Nifty\u2019s range for next 1 year with 68% & 95% confidence. Here you have added and subtracted 1SD or 2SD to Nifty\u2019s average value and then you have taken exponential of these two (as we have calculated S.D. with Log to the base \u2018e\u2019) and multiplied to the spot price to get Nifty\u2019s range for next 1 year. {Eg. from section 17.4 is as: 8337exp (1.15%+5.73%)= 8930 & 8337exp(1.15%-5.73%)=7963}", "c)\tIn section 18.1, you have calculated Nifty\u2019s range till expiry (for 16 days) with 68% confidence. Here you have added and subtracted 1SD to Nifty\u2019s average value and then without taking exponential of these two %, you have directly added & subtracted these % to Nifty\u2019s spot price. {Eg. from section 18.1 is as: 8462 [1+(0.65%+3.567%)]=8818 & 8462 [1+(0.65%-3.567%)]= 8214}", "Here are some observations:\nPoint 1: In a) & b) you have directly added/subtracted % to spot price to get the range, but there is slight difference between these two. In a) you haven\u2019t added/subtracted S.D. to average value & calculated range and In b) you have added/subtracted S.D. to average value & calculated range. {e.g. from Section 17.4 : 1.15% +5.73%= 6.88% & 1.15%-5.73%=-4.58%}", "Point 2: In b) & c) you have added/subtracted S.D. to average to calculate range, but difference between these two is as: In b) you have taken exponential of % and calculated the range of Nifty {e.g. from Sect 17.4 : 8337exp (1.15%+5.73%)= 8930 } in c) you haven\u2019t taken exponential of % to calculate range of Nifty. (eg. from section 18.1 : 8462 [1+(0.65%+3.567%)]=8818}", "Point 3: average % is not taken with function of \u2018Log\u2019 to the base \u2018e\u2019, while calculating S.D. %, it is taken with function of \u2018Log\u2019 to the base \u2018e\u2019 (section 16.1). So how can we add these two % (average & S.D.) directly?", "So kindly clarify which method to use.\nWhether we should add/subtract S.D. to average OR not???? And accordingly which calculation method to use, with spot price multiplied by Exponential of % OR spot price should directly be multiplied by % to get range. (spot price shouldn\u2019t be multiplied by exponential of %)", "Query 2:\nIn section 18.2, you expect airtel trade to materialize over next 5 trading session. I have heard this from many persons that they expect particular stock XYZ to hit the target with certain \u2018T\u2019 (suppose) time period/trading sessions. So I want to know how one can predict or expect particular stock to materialize with certain trading sessions.??? Your guidance on this please.", "Please please please solve query no. 1 & your guidance on query no. 2 (as usual). Thank you in advance.", "Have replied to your query in \u2018Volatility Basics\u2019, chapter as well. I need sometime to respond to your query. I will get back.", "Here are the exact steps to calculate the price range \u2013", "1) Calculate the daily log returns\n2) Calculate the mean and SD\n3) 68% confidence interval is \u2013 Current Price Exp (meantime +/- SD Sqrt (time))\n4) 95% confidence interval is \u2013 Current Price * Exp (meantime +/- 2SD Sqrt (time))", "The process in computationally intensive as it involves the calculation of mean, log returns, exponential etc. You can approximate it with simpler calculations \u2013", "1) For short time period (say for 1 year data), the (Meantime) is so small that it hardly makes any difference to the final value i.e. Mean * time << SD * Sqrt (time)\n2) When daily % movements <10%, % returns and log returns are nearly same. So use % returns instead of logs \n\nFaster approximation : \n1) Calculate % return \n2) Calculate SD and Mean\n3) 68% confidence interval = Current price * (1 +/-SDSqrt(time))\n4) 95% confidence interval = Current price (1 +/-2SDSqrt(time))\n\nI may have switched techniques between accurate and faster methods between chapters, hence all the confusion. If you are developing a system, go for a simpler method. If the price range is >20%, then calculate using the accurate method.", "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://secure.gravatar.com/avatar/5d293fd6ac97d95a9ac4cf358c23ec5a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/c72963699f6eba555ad1ee6140843856?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/ccfaa21a19c1b135abbaef215dbb45e4?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/07ba9dd5447b455110e0b5239c316113?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/fa9cfc24bbbd56b01f451b8747bd9dbf?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?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": "20 comments", "text": ["", "<", "We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.", "Delta 0.5 Gamma -0.5 theta.0.0006 Vega 0.15 totally values consider after buying or selling", "You can look at it either when buying or selling, Ajeem.", "Is the premium for an option solely driven by option greeks? Does demand and supply also play a role in determining the premium? If so how do they exactly fit into the equation?", "Greeks + demand + supply. All these factors matter in pricing an option.", "Hi, considering the past years experience, what\u2019s the probability that near union budget IV (Implied Volatility) will shoot up??", "By the year, elections are becoming a non-event unless there is an absolute googly by the Fin Minister. That said, there will be some spike in volatility.", "Sir I am new to options trading, I didn\u2019t understood that whenever there is a change in premium either due to expiry or volatility change, how does it affects my profit or loss, for eg if I am an option buyer, and there is a change in premium amount after initiating the trade , how will it affect my profit /loss", "I\u2019d suggest you read the last chapter in this module, where I\u2019ve discussed this particular topic on P&L.", "Like option with stocks as underlying asset .stocks are given at expiry as per contract. Then what is underlying asset given to buyer at that price at expiry", "The stocks are debited from a call option seller and credited to the call option buyer. Likewise, stocks are debited from Put option buyer and credited to the put option buyer. Do check our chapter on physical settlement of options.", "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://secure.gravatar.com/avatar/cdd8604fee7dfab2e46ed96578fedd34?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/e7eec48b4cca9a55cab66dd830b32b4c?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/909780def6417162df47d733ffb0a44f?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/83fd57e78492eb98d3b5fde54119fb43?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/2687cfe1f61dab525acaf17d306671dc?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 comment", "text": ["", "", "We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.", "Whether option chain analysis is applicable for currency trading also? Kindly give your views.", "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://secure.gravatar.com/avatar/c294178e87b4e172d922f8faad895d6d?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": "28 comments", "text": ["", "", "We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.", "There are no key takeaways in this chapter \ud83d\ude42", "", "I purchased x shares 1000 nos.( equivalent of one lot ) for Rs.1000 per share in equity segment.\nI sell call option at strike price 1050 for premium of Rs.80.\nDuring contract expiry the underlying value becomes Rs.1200.", "Kindly clarify what will be my profit / loss.\nAlso clarify whether brokerage charges will be charged for selling as well as for equity delivery.\nAlso kindly clarify whether entire margin paid will be re-credited into my trading account or any part only.\nThanks.", "Check this chapter \u2013 https://zerodha.com/varsity/chapter/options-m2m-and-pl/", "Hello ,", "By mistake I sold CE (which is illiquid) instead of PE of stock but to hedge I bought future of stock same expiry .", "Real Life example \ud83d\ude42 :\nAarti Ind was at 750 at starting of month , I want to sell it\u2019s Aug PE but by mistake sold it\u2019s Aug CE at 50 [Contact is illiquid only single contact ]\nTo hedge I bought Aarti Aug Future at 749.50\nBut on the day of expiry Aarti trading at 799", "I do have enough margin available till end but just like to know is what will be extra charges after 0.1% of STT of net delivery values in my case it will be 799 X 850 + 700 * 800 \u2018s 0.1% if I am not wrong", "I had purchased 4 lot for futures for about 4 laks,but i didn\u2019t exist on the last day.what happens in this case.", "The futures contract will be settled physically if its a stock future, cash-settled if its index futures.", "Give your views about physical settlement of currency option trading on the expiry day. Is it same as that of index option trading i.e. cash settlement.", "What exactly is physical settlement?\nDo we need to do anything extra?\nUnable to understand this concept", "Sourav, I\u2019ve explained this in the chapter itself. I\u2019d suggest you start with understanding cash settlement and then move to physical settlement.", "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://secure.gravatar.com/avatar/e8e511f779ba022b82808f4130d4211d?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/09cce6aaea457f58e531b392c0c14cfc?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/c630ce8b1a7c72ff3801616b221059b3?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/c294178e87b4e172d922f8faad895d6d?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/41e08eaf5e43267d26e035e9e7c44136?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": "15 comments", "text": ["", "", "We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.", "Hello karthik Ji,", "I have already posted my query on 14.07.22 but still I didn\u2019t get response from your end, so I am posting my query one more time.", "First of all thank you for such a beautiful content.\nI have a query, it may not make any sense at this stage after reading all these wonderful modules by you & team, but I am really eager to know. Kindly provide your view on this. Query is as follows:\nHow can anyone know within how many days one\u2019s target will be achieved? I know from TA, using S&R levels or any other method one can expect what target can be expected in market. But it mentioned nowhere how to know time period within which one can expect these targets can be achieved. I think it is very much important to know this, because without knowing this time period one cannot choose correct strike option (whether Far OTM/ OTM/ ATM/ ITM to choose) either within 1st of of series or within 2nd half of series\nI know you have already mentioned in one of the comment that one will develop this time period view with time, but I am still not able to do so. Because of this reason I am posting this comment.\nYour guidance on this please.\nThank you in advance.", "Nagesh, you actually answered it yourself \ud83d\ude42", "There is no way to figure the time it will take for your strategy to hit your target. That said, sometimes you can guess that the trade you take will be a quick one. But there is no backing for such claims (for example a stock in a breakout, target will hit soon). However, if you feel you are stuck in a trade for long, then maybe its a good idea to have time based stoploss and move to other compelling opportunities.", "Aren\u2019t the articles on varsity too outdated to invest time and energy on?\nI guess most of the new age learners prefer visual learning rather than reading lengthy chapters.\nThere must be some reason behind YouTube influencers experiencing millions of views even though they are far from being any good.\nThink! and Think again \u2013 while I spread the words of how tactically you guys have skipped important topics and just made videos on basics so that amateurs are tricked into trading asap, enabling Zerodha to make money out of innocent people Loss.\nRemember \u2013 Half knowledge is Dangerous than no knowledge", "Mohit, when we announced the videos, we put this posy for public \u2013 https://zerodha.com/z-connect/varsity/introducing-varsity-video-series , here is an extract from that post \u2013", "So if you are watching these videos, use them as a quick start tool. Use it to quench your curiosity, but come back to the main website or the app to learn all the technicalities.", "It is best to supplement the video content with the web content and vice versa. Do not take the Varsity video series as your only source to learn the subject. I\u2019m pretty confident that you will extract maximum value from the video series with this approach in mind.", "After learning the intrigues of this hedging strategy, I\u2019m still grappling with the fact that how to place the bull spread trade in kite app???", "What part are you fining difficult Rajesh?", "Dear Karthik\nI am very new to this trading. Assuming bulish on Bandhan Bank 3 lots took long position for expiry 25 Jan CE@ 250 (ATM)on 11 Jan 2022. Now its huge loss. Can i adopt hedging now by selling in the same method of bull call spreading.\nKindly advise", "YOu can, but chances are that you\u2019ll lose more money. I\u2019d suggest you take the hit and wind up. But if you insist on adjusting, sell OTM Calls and hedge your position.", "Hi Karthick,", "I\u2019m finding difficult to understand the OPTION CALL SELL. How option sell can be done without doing a CALL BUY.\nPlease help me understand with an example.", "Do check the video series on Varsity youtube, Vignesh.", "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://secure.gravatar.com/avatar/919dad153f6f54fba15d8d241c017e0c?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/26b72dcf6d24bbcc2625ee236e74b283?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/5292aee6853eaaab3ea21745f4e2202e?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/9808ac21787ccac95b4b83cf0b7aca25?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f193665905d7f4b5227d7c41d6c38bc2?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": "20 comments", "text": ["", "", "We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.", "Please make videos on options strategies.. Eager to learn\u2026 and do share intraday strategies\u2026 for equity trading\u2026", "Noted.", "Hi Karthik,\nCan we please get Zerodha Varsity app for iPad also ? I think it is really really required.", "Let me check this, Malik.", "Congratulations, and many thanks for an excellent presentation. You addressed the subject with command, clarity and understanding. Many of us now understand the intricacies of options trading and how to deal with it much better. I especially appreciated your examples and the rule points you applied to each. I wish you success in your efforts to educate learners like me. Your slides and infographics made a convincing arrangement. Thank you for your careful preparation. Please let me know the names of the software packages that you have used for preparing this presentation.", "Thanks, Dr.Abhijit I\u2019m glad you liked the content. In most cases, its just MS Excel that I\u2019ve used.", "You should have mentioned high risk in hedging with sell options. Where your 1 premium of 100 can become 0 and another premium of 100 can become 2000 and you\u2019ll be eventually in loss of 1900 * 25 per lot. I wonder why didn\u2019t you mention", "Hmm, ok. But these are things you can control with SLs right?", "Thankyou Karthik and Prateek ji..\nAs a beginner i learnt a lot. . awaiting for your next video series.", "Happy learning, Priya!", "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://secure.gravatar.com/avatar/10602b11bc99ef511246e1ed2145f4eb?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/0b8b4cd201c9186f387c8be35840de6a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/01af2b87e5a0e4de8655acc1f332dea3?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/79e5f83323548e2f77e1b8ed41a12568?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/9da65db4eb5945635646d21c16c30e05?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": "4. The IPO Markets (Part 1)", "text": ["This chapter was updated on 15th November 2022. A few comments in the query section may seem out of place. Kindly ignore those comments. The essence of the chapter remains the same.", "The initial three chapters set the background on basic market concepts you need to know. It becomes necessary to address a fundamental question at this stage \u2013 Why do companies go public? A good understanding of this topic lays a sound foundation for all future topics.", "In this and the next chapter, we will learn about why companies go public and, in the process, also learn a few financial concepts.", "Before we seek an answer as to why companies go public, let us figure out a basic concept \u2013 the origins of a typical business. We will build a familiar story around this concept to understand IPOs better. Let us split this story into several scenes to understand how the business and the funding environment evolve and the circumstances that lead a company to list in the public market.", "", "", "Let us start our story. Imagine a passionate entrepreneur with a business idea \u2013 to manufacture highly fashionable, organic cotton t-shirts. The designs are unique, priced attractive, and the best quality cotton is used to manufacture these t-shirts. The entrepreneur is confident that the business will click and is enthusiastic about starting the business.", "As you\u2019d imagine, the entrepreneur will face a typical problem \u2013 how to fund the idea? Assuming the entrepreneur has no business background, he/she will not attract any serious investors initially. Chances are, the entrepreneur will approach the family and immediate friends to pitch the idea and raise some money.", "Let us assume that the entrepreneur pools some of his money and convinces two good friends to invest in his business. These two friends invest in the business based on their trust in their friends. The two friends in this context are referred to as the Angel investors. Please note that angel money is not a loan but an investment in the business.", "So let us imagine that the promoter (entrepreneur) and the angels raise INR 5 Crore in capital. This initial money the business gets to kick start operations is called \u2018The Seed Fund.\u2019 Sometimes, it is also called a \u2018Friend & Family round.\u2019 It is important to note that the seed fund will not sit in the entrepreneur\u2019s bank account but the company\u2019s bank account.", "Angel funding need not always come from friends; there are professional angel investors who invest money in companies that they think are good.", "In return for the initial seed investment, the original three (promoter plus two angels) will be issued share certificates of the company, which entitles them to certain ownership. The only asset that the company has at this stage is cash. Hence the value of the company is only to the extent of the cash they own. In this case, the valuation is 5Crs.\u00a0 Of course, one can argue that the company\u2019s value is cash plus the company\u2019s unique business idea, and therefore the valuation is beyond 5Crs, but we will not get into that.", "Issuing shares is quite simple; the company assumes that each share is worth Rs.10, and because there is Rs.5 crore as share capital, there have to be 50 lakh shares, with each share worth Rs.10. In this context, Rs.10 is called the \u2018Face value\u2019 (FV) of the share. The face value could be any number between Rs.1 to sometimes even above Rs.10 per share as restricted by SEBI DIB guidelines to protect investors. If the FV is Rs.5, the number of shares would be one crore, and so on.", "Backed by the seed fund, the promoter kick-starts business operations. The entrepreneur moves cautiously, hires the right people, establishes the right process, and starts manufacturing high-quality t-shirts. At this stage, the entrepreneur has one small manufacturing unit and one store to retail the product.", "", "", "The entrepreneur\u2019s hard work pays off, and the business generates a steady revenue stream. The company starts to break even at the end of the first two years of operations. The promoter is no longer a rookie business owner. Instead, he is more knowledgeable about the business and, of course, more confident. Backed by confidence, the promoter wants to expand the business by adding one more manufacturing unit and a few additional retail stores in the city. The entrepreneur chalks out the plan and figures out that the fresh investment needed for business expansion is INR 7 Crs.", "The entrepreneur is now in a better situation when compared to two years ago. The big difference is the fact that the business is generating revenues. The healthy inflow of revenue validates the business and its offerings. The entrepreneur can now access reasonably savvy investors for investing in the business. The investor who typically invests in such an early stage of business is called a Venture Capitalist (VC), and the money that the business gets at this stage is called Series A funding.", "Assume the entrepreneur raises the 7 Crs required to expand the business. Typically when new investment flows into the business, the following happens \u2013", "With the VC\u2019s money coming into the business, the notional value (valuation) increases, and therefore, notional wealth is created for early investors.", "As we advance with our story, the promoter now has the capital required for the business. As planned, the company gets an additional manufacturing unit and a few more retail outlets in the city. Things are going great; the product\u2019s popularity is growing, translating into higher revenues. The management team gets more professional, thereby increasing operational efficiency, which translates to better profits.", "", "", "Three more years pass by, and the company is phenomenally successful. The company decides to have a retail presence in at least three more cities. To back the retail presence across three cities, the company plans to increase its production capacity and hire more resources. Whenever a company plans such expenditure to improve the overall business, the expenditure is called \u2018Capital Expenditure\u2019 or simply \u2018CAPEX\u2019.", "The management estimates 40Crs towards their CAPEX requirements. How does the company get this money, or in other words, how can the company fund its CAPEX requirements?", "There are a few options for the company to raise the required funds for their CAPEX:", "Assume the company exercises all three options to raise funds for Capex. It plows back 15Crs from internal accruals, plans a series B \u2013 divests some equity for a consideration of 10Crs from another VC, and raises 15Crs debt from the bank.", "Note that the company\u2019s valuation again increases with 10Crs coming in from series B. With the increase in valuations, the previous investors tend to make bigger notional profits. \u00a0Also, I would encourage you to think about the wealth created over the years. This is exactly what happens to entrepreneurs with great business ideas and a highly competent management team.", "Real-world examples of such wealth creation stories are companies like Infosys, Page Industries, Eicher Motors, Titan Industries, Bajaj Finserve, HDFC Bank, and internationally, one could think of Google, Apple, Amazon, etc. The list is quite exhaustive.", "", "", "A few years pass by, and the company\u2019s success continues to grow, and with the growing success of this 8-year-old company, ambitions swell. The company decides to raise the bar and branch out across the country. They also diversify the company by manufacturing and retailing fashion accessories, designer cosmetics, and perfumes.", "The CAPEX requirement to fuel the new ambition is now pegged at 60 Crs. The company does not want to raise money through debt because of the interest rate burden, also called the finance charges, bites into the company\u2019s profits. For example, suppose the company generates Rs.100 as profit and pays Rs.20 towards finance charges; the profitability is reduced to Rs.80. We will discuss more on this in the Fundamental Analysis module.", "The company decides on Series C funding. They cannot approach a typical VC because VC funding is usually small and runs into a few crores. This is when a Private Equity (PE) investor comes into the picture. Think about the PE as a big brother of a VC. Here are a few differences between a PE and VC \u2013", "PE investors are quite savvy. They are highly qualified and have an excellent professional backgrounds. They invest large amounts of money to provide the capital for constructive use and place their people on the board of the investee company to ensure the company steers in the required direction.", "Usually, when a PE invests, they invest in funding large CAPEX requirements. Besides, they do not invest in the early stage of a business; instead, they prefer to invest in companies that already have a revenue stream and have been in operation for a few years. Deploying the PE capital and utilizing the capital for the CAPEX requirements takes a few years.", "Let us assume that the company raises funds via a Private Equity company and expands its business.", "", "", "Fast forward 5 years after the PE investment, the company has progressed well. They have successfully diversified their product portfolio and have a presence across all the country\u2019s major cities. Revenues are good, profitability is stable, and the investors are happy. The promoter, however, does not want to settle in for just this.", "The promoter now aspires to go international! The company now wants the brand available across all the major international cities, with at least two outlets in each major city worldwide.", "The company needs to invest in market research to understand the demographics of other countries, invest in people, and increase manufacturing capacities. Besides, they also need to invest in real estate space across the world. The CAPEX requirement is huge; the management estimates this at 200 Crs. The company has few options to fund the CAPEX requirement \u2013", "For convenience, let us assume the company decides to fund the CAPEX partly through internal accruals and the rest via an IPO. When a company files for an IPO, they have to offer its shares to the general public. The general public will subscribe to the shares (i.e., if they want to) by paying a certain price. Now, because the company offers the shares for the first time to the public, it is called the \u201cInitial Public Offer\u2019.", "We are now at a crucial juncture where a few questions need to be answered.", "In the following chapter, we will address each of the above questions plus more, and we will also give you more insights into the IPO Market. Hopefully, from this chapter, you should have developed a sense of the sequence of events that would typically drive a company to raise funds via an IPO.", "When you say the \u201ccompany is valued at\u201d, you refer to the company\u2019s balance sheet or the notional value based on its future returns?", "Because the company is not listed yet, the valuation is based on the transaction value of private investors (Angels, Ventures, PE etc).", "This is injustice man. Apple is the father of all these, just see the youtube video for Steve Jobs life. I\u2019d prefer if the example of Apple is entered into the examples of internationally successful companies. Nevertheless, it is the most powerful company on Earth.", "Sure Sir, I\u2019ll remember that \ud83d\ude42", "please i have a request to you that please mention share delusion or dilute shares or please inform where i can get these topic", "We will add a supplementary note on this in FA module soon.", "Hey,", "How can we know when you people added new content?", "I wanna learn a lot. Is there any mail we get whenever you add something?", "Can you please point to that?", "I dont wanna miss anything", "Follow us on twitter \u2013 every new chapter gets announced here \u2013 https://twitter.com/ZerodhaVarsity", "sir, can u check all the tables one more time. i am getting miscalculations", "Sure.", "In PE series C the number of shares must be 700,000.", "Let me recheck, but as I have mentioned in the chapter, don\u2019t read too much into the numbers. This is just to give you an idea about the flow of events.", "Hi kartihk kindly edit the line \u2026 \u201cNote, the company still has 31% of shares not allotted to shareholders which are now being valued at 62 Crs\u201d\nThe correct is : \u201cNote, the company still has 29% of shares not allotted to shareholders which are now being valued at 58 Crs \u201c", "Thanks so much for pointing this out, I have made the necessary edit.", "Hi, karthik, please edit this \u201d Assuming they pick up 15% stake for a consideration of 60Crs, they are now valuing the company at 400Crs, no. of shares should be 15% of 50lakh i.e. 750,000 not 1,000,000 as mentioned in the table after.", "Thanks Renu, let me check this.", "Yeah.. this is a miscalculation in the table. It actually got me confused too. This is should be 750,000 and not 1,000,000", "Lemme check, thanks.", "It is still appearing as 1000000 instead of 750000?", "Will look at this.", "I agree with your point", "Sir, the calculation given as 31% equivalent to 62 Cr. is correct, which mentioned in your article\u2026..\nThanks for providing such good articles which i never find anywherelse", "Cheers!", "Thanks", "Karthik, what is mean by floating the bonds? again is it like debt offering @ some % interest ?", "Yes, it is just that. \u2018Floating a bond\u2019 is just a jargon.", "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/2014/07/Ch4-title.jpg", "http://zerodha.com/varsity/wp-content/uploads/2014/07/A.png", "http://zerodha.com/varsity/wp-content/uploads/2014/07/V1.png", "http://zerodha.com/varsity/wp-content/uploads/2014/07/B.png", "http://zerodha.com/varsity/wp-content/uploads/2014/07/PE.png", "http://zerodha.com/varsity/wp-content/uploads/2014/07/IPO.png", "https://secure.gravatar.com/avatar/bf15c27a12691df5e5f36fa452990801?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/544ebc25cf54fbd425ac6d0a19f1c583?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/c2cdac8c957c87d47adb32fe730ab2ac?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/48ef6a440a92a789f86bcf0b4564e4ab?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/ae6912f9232957e6780bd546a3d8af63?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/401da63580e68727ae78322a41f87883?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/d45287ff575e8b323fb733c8eb42bd50?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/84ff9ea279dd443e144b682d169237c4?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/a62febb1d034e02e6e5123dbf467c9f8?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/5dd6b66cbef795003bb2eefff2774579?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/9e8e738ff2444002f24be6e690d09636?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/55be99ebe2a2d68e35c3c34b8b8a9ec3?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/7f2e6c52383e3638afa399c5c1aad27e?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/a7312014f5c7d38b2379de05a4dd0375?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": "13 comments", "text": ["", "", "Waw good. keep posting more..", "really very good and need some more effort because no school or college provide financial knowledge.", "Glad you liked it, happy learning Pramod.", "Its really very good and interesting..much more important for kids to learn and understand in this way..thank you\u2026.my 10 and 7 yearsold loved both the videos \u2026", "Go glad that they liked the story, Rohini. Happy learning to them \ud83d\ude42", "This is a great way to learn and understand about finance . Hoping that \ud83d\ude42 Zerodha bring more such video series on topics like taxes, inflation \ud83d\ude00 etc.", "I will make sure that whenever I have kid, they learn about this from here \ud83d\ude00", "\ud83d\ude41 I hoped that someone make it as simple as you did when I was a kid, but happy for the future generation \ud83d\ude00", "Thanks Madhav! I hope they do benefit from it \ud83d\ude42", "its so informative and i enjoyed it . I am eagerly waiting for the next episode", "Happy learning \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://secure.gravatar.com/avatar/63028cfe7822507ca3980b2d0a5536e4?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/27ce95f650be621101c5d7b4467936b5?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/5112d9ff9b10944f8b31a7505254abb3?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/1e1b9f1d60d4ff204f1a53249d61d6a7?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/8d7d6e4e70d3c8c066e17760f885b368?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": "29. Exchange-traded funds (ETF)", "text": ["Please note, this is a guest chapter, and I\u2019ve not authored this. This chapter on ETFs is authored by my colleague, Bhuvan. However, I\u2019ll try and answer all the follow on queries that you\u2019d post.", "Happy learning,", "-Karthik Rangappa.", "In chapter 7, we looked at what a mutual fund is and how it works. To recap, a mutual fund is a pooled investment vehicle that collects the money from various investors, invests and manages that money on their behalf. When you invest in a mutual fund before the order placement cut-off time, you will get the units as per the same day\u2019s NAV which is disclosed by midnight. If you invest after the order placement cut-off time, you\u2019ll get the allotment of units per the next day\u2019s NAV. Basically, everything happens at the end of the day.", "Now, what if those mutual funds units could be traded on the stock exchange just like stocks like Reliance or Infosys? Just like a mutual fund, an exchange-traded fund (ETF) is a pooled investment vehicle that holds a basket of securities like stocks, bonds, and commodities and trades on the stock exchanges. You can buy and sell an ETF anytime, just like a stock.", "There are a few more nuances to an ETF than a mutual fund, but before we dive in, I hope you have a working idea of what an ETF is.", "Mutual funds have been around in some form for well over 100-years. The first open-ended mutual fund in the US was launched in 1924 and is still in existence today. The first mutual fund in India was launched in 1964. Mutual funds have democratized access to stocks, bonds, real estate and commodities globally to common investors. Exchange-traded funds (ETF) were the next evolution of mutual funds.", "ETFs, on the other hand, are relatively new. The SPDR S&P 500 trust, arguably the first ETF, was launched in 1993 in the US. Coincidentally, it is today the largest traded security in the world. NiftyBeES an ETF tracking the Nifty 50 index was the first ETF in India and was launched in 2002. It was launched by Benchmark AMC, which Goldman Sachs later acquired, which Reliance later acquired, which Nippon India Mutual Fund later acquired \ud83d\ude42", "Though ETFs have been around for a while in India, they haven\u2019t really popular among retail investors. ETFs, have mostly been used by HNIs and institutions. For example, the SBI Nifty 50 ETF with Rs 89,441.55 cr is the largest mutual fund in India. This is almost entirely because this is one of the ETFs in which the Employees\u2019 Provident Fund Organisation (EPFO) invests.", "A large part of the ETF AUM growth is due to:", "Growth of ETF AUM in India", "Though still a small piece of the pie, the retail participation has been growing steadily over the years and so has the trading turnover on the exchanges.", "#ETFs\u00a0saw transactions by 32.2 lakh investors in CY20,\u00a0a jump of 200% over\u00a0CY19, maintaining the\u00a0growth\u00a0trend for the 5th\u00a0consecutive year, since 2016.\u00a0Average daily turnover at Rs 241 crores\u00a0also\u00a0increased by\u00a015% in CY20 over CY19.#NSE #Happy2021 #ETF #MutualFunds pic.twitter.com/6m02ehPsfr", "\u2014 NSE India (@NSEIndia) January 7, 2021", "", "NiftyBeES which is 20 years old, just has about Rs 2800 crores of AUM. There are a lot of reasons for the under penetration of ETFs:", "", "An exchange-traded fund (ETF), just like a mutual fund is a basket of securities, but this is where the similarity with a mutual fund ends. Unlike a mutual fund, an ETF trades throughout the day on the stock exchanges. You can buy and sell an ETF anytime you want just like a stock.", "For example, if you search for \u201cNifty ETF\u201d on Kite, you\u2019ll see a list of all ETFs that track the Nifty 50 index.", "Searching ETFs on Kite", "When you buy a mutual fund, the AMC takes money from you and buys the securities and discloses the NAV at the end of the day. Similarly, when you redeem your mutual funds, the AMC sells the securities and returns your money. This is quite straightforward. However, when you buy an ETF, you don\u2019t really interact with the AMC most of the times because most buying and selling happens on the stock exchanges. It\u2019s just an exchange of units between buyers and sellers.", "I said when you buy an ETF, you \u201cmostly\u201d don\u2019t interact with the AMC and I\u2019ll explain what that means.\u00a0If you remember chapter 6, we discussed all the entities involved in an MF transaction \u2014 the AMC, custodian and the RTA. But what makes an ETF unique is something called the creation and redemption mechanism. But before we talk about it, you need to know a couple of things.", "When you buy a mutual fund, you look at the NAV. Similarly, when you are buying an ETF, you look at the ETF market price on Kite.", "ETF prices", "These prices are determined by the demand, supply and the trading activity on the exchanges. But how do you know if the price you see on Kite is the fair price you are paying for an ETF? Here\u2019s where the Net Asset Value (NAV) comes in.", "Like a mutual fund, an ETF also has an end of the day Net Asset Value (NAV). Just to refresh your memory, NAV tells you the total value of all the fund\u2019s assets and yours. The formula for calculating NAV is NAV = (Value of all the assets \u2013 the expenses)/number of shares (units). But remember, an ETF trades real-time, whereas NAVs are only announced at the end of the day. So how do you figure out if the price you are paying for an ETF is fair in real-time? Enter iNAV", "Given that ETFs trade real-time, you need a reference point to see if the market price you see on your trading platform is a fair one and the indicative or intraday NAV (iNAV) serves as that reference. AMCs usually calculate this every 10-15 seconds and publish it on their websites. iNAV = last traded price of all the securities in the ETF basket X number of shares in the ETF creation basket + cash component (i.e. cash which is not deployed in the ETF) divided by total ETF shares in the creation basket. Put simply; this serves as a real-time NAV so that you can use this as a fair value reference to compare it with the current market price on the stock exchanges.", "Like buying ETF units on the stock exchange, you can also buy units directly from the AMC. I\u2019ll explain why you\u2019d want to do that later. But, unlike the exchanges, you cannot buy 1 or 2 units directly from the AMC. You can only create and redeem units in what\u2019s called the creation size that the AMC defines. A creation unit is nothing but a representative basket of all the securities in the same proportion as the underlying index. For example, the creation unit size of the ICICI Nifty 50 ETF is 50,000 units, and as of this writing, it\u2019s about Rs 80 lakhs. Meaning, you need 80 lakhs to buy all the stocks in Nifty 50 in the same weight.", "Unlike mutual funds, there\u2019s another entity called market markers or authorized participants in the ETF ecosystem. The role of these guys is to provide liquidity on the stock exchanges. You don\u2019t have to worry about liquidity in a mutual fund because there\u2019s no real-time trading. But since an ETF trades real-time on the exchange, market makers are appointed by the AMC to provide liquidity continuously. They do this by providing continuous two-way quotes on the exchange, meaning they buy at the bid and sell at the offer, and the difference is the profit they make. Even though these are small amounts, since they keep doing this, it tends to add up.", "Market makers typically tend to be large brokers in India.", "Since an ETF trades real-time on the exchanges, their price is influenced by demand and supply\u2014the prices of liquid ETFs trade in line with the NAV of the ETF most of the time. But sometimes, particularly during volatile market phases, the price of an ETF can trade away from the NAV of the ETF. If the price of an ETF is above its NAV, it\u2019s called a premium and if the price is below it\u2019s NAV, it\u2019s called a discount.", "Tracking error is the annualized standard deviation of the difference between the ETF NAV returns and the index that it tracks. In simple terms, it shows you how closely an ETF tracks its underlying benchmark. A simple example would be if Nifty 50 returned 10% and Nifty ETF gave 9.8%, the tracking error would be 0.2%. An ETF or an index fund will have lower returns than the index because they have an expense ratio and an index doesn\u2019t.", "A lower tracking error indicates that an ETF or an index fund is tracking the index better. But this is not really an intuitive measure to understand and we\u2019ll discuss that later.", "There are a few reasons why the creation and redemption mechanism is important. For one, you need not always buy an ETF on the stock exchange. If you are buying in multiples of the creation unit size, buying it directly from the AMC is way better because you might face liquidity issues and impact costs when you buy large quantities on the exchange.", "So, in the example I mentioned above, the ICICI Nifty 50 ETF\u2019s creation size is roughly 80 lakhs. If you are investing in multiples of 80 lakhs, you can directly contact ICICI, and they will create units, in this case, 50,000 units and credit them to your demat. The AMC will create units at the iNAV.\u00a0 Similarly, you can redeem them by transferring the ETF units to ICICI, and they will credit the cash to your bank account or you can also get the underlying shares instead of cash.", "The second reason why creation and redemption mechanism important is for ETF arbitrage. Like I mentioned earlier, ETFs can trade at premiums and discounts to the NAV. Market makers are essential in the ETF ecosystem because they are responsible for correcting these premiums and discounts. They do this through the creation and redemption mechanism.", "Typically ETFs trade close to their NAVs. Here\u2019s a comparison of Nifty BeEs, SBI Nifty ETF, ICICI ETF and Nifty 50.", "Nifty ETFs vs Nifty 50", "But during a volatile market phase, for example, like the COVID crash in 2020, there can be wide premiums and discounts. Here\u2019s how even a popular ETF like NiftyBeEs and SBI Nifty 50 ETF, India\u2019s largest mutual fund performed during the volatile market phase of March-April 2020.", "Nifybees vs Nifty 50", "Now, here\u2019s where the market makers come in. If there\u2019s a premium, the authorized participant (AP) will buy all the underlying securities that make up the ETF creation unit. In this case, the AP will buy all the 50 Nifty stocks of the same weight; this is also called the creation basket and give them to the AMC. In turn, the AMC will create ETF shares and give them to the AP, who will then sell them on the exchange.", "Similarly, if there\u2019s a discount, the AP will buy the ETF units on the exchange and give them to the AMC. In return, the AMC will give the underlying shares of the ETF to the AP, who will, in turn, sell them in the market. The difference between the premium, discount, and the NAV will be the AP/market maker\u2019s profit.", "Perhaps, the best example of this would be the Motilal Oswal NASDAQ 100 (N100). During 2017-2018, the ETF was trading at a huge premium to the NAV. The premiums were as high as 20%+. This was probably because the market makers weren\u2019t active in providing liquidity. Value Research allows you to compare the NAV and price, here\u2019s a chart, notice the huge difference between the NAV and the price.", "Someone could have taken advantage of this premium by going to Motilal AMC and asking them to create units, which happens at the NAV and sell them at the market price on the exchange. The difference would\u2019ve been the profit.", "N100 ETF price vs NAV", "This premium persisted for a long time. Then Motilal, If I\u2019m not wrong, appointed new market makers and launched a fund of fund (FOF) for the ETF, which corrected the premium. So the market maker around 2018 would have created Motilal units at the NAV and sold them on the exchange at the market price and corrected the premium.", "N100 ETF price vs NAV", "This is how creation and redemption mechanism in an ETF is used to ensure liquidity and arbitrage premiums and discounts.", "This is the most important thing when buying or selling an ETF because they trade real-time. When choosing an ETF, most people tend to look at the AUM of an ETF and the trading volumes to decide if an ETF is liquid. Although these 2 things should be considered, the size of an ETF or the daily trading volumes alone don\u2019t indicate liquidity.", "Let\u2019s unpack what ETF liquidity really means. It\u2019s essential to remember at this point that even though ETFs trade like stocks, they are not the same.", "Layers of ETF liquidity -American Century", "", "Secondary market liquidity:\u00a0This is what you see on your trading platform. The spread between the bids and offers give you an idea of the available liquidity, but that\u2019s not all. Take a look at this image, comparing Mirae Nifty 50 ETF and LIC Nifty 50 ETF. The LIC ETF has an AUM of Rs 618 crs, and the Mirae ETF has about 483 crs. As of writing this post, both the ETFs had just traded 500+ units.", "Spreads", "Typically, you\u2019d ignore both ETFs assuming that they are too small and don\u2019t trade much. But that would be an incorrect assumption because on-screen liquidity isn\u2019t everything.", "ETF market depth: If you look at the Mirae ETF, nearly 60,000 shares are available for purchase. That means, even if you place a market order, which is a really terrible mistake when buying an ETF, you will get a good fill at Rs 157.44. This is probably a market maker posting a bid and an offer. The LIC ETF, on the other hand, has no liquidity at all. If you\u2019d have placed a market order for 100 unit by chance, your average price would have been way higher than the last traded price, given that there are no volumes and your order would\u2019ve been continuously executed at higher and higher prices.", "So, AUM and trading volumes don\u2019t tell you everything. Market markers typically hold units that don\u2019t show up in the market depth. If you place a limit order to buy, your order will be executed as the market makers place an order to sell. But yeah, not all ETFs have active market makers, this has to be part of your ETF due diligence which we\u2019ll talk about in a bit.", "Here\u2019s how the Mirae ETF and LIC ETF have tracked Nifty 50. While Mirae has closely tracked Nifty 50, LIC has been all over the place trading at premiums and discounts.", "Mirae vs LIC Nifty 50 ETF", "Primary market:\u00a0The third layer of ETF liquidity is the primary liquidity. Remember, a stock has a fixed number of shares on offer, But even though an ETF trades like a stock, it\u2019s not a stock. Market makers and investors can create new ETF units. Large institutions, HNIs, typically don\u2019t buy ETFs on the exchange. They directly reach out to the AMC and create units that don\u2019t show up on your trading platforms\u2019 market depth.", "Liquidity of the underlying stocks: The last and the most important layer of ETF liquidity is how liquid the underlying stocks that make up an ETF are. Remember, an ETF is just a wrapper that holds all the stocks that make up the ETF or an index. So, an ETF can only be as liquid as the underlying stocks.", "This might be a little confusing, so let\u2019s take an example. Today, in India, we don\u2019t yet have a small-cap ETF, have you ever wondered why? In the Indian markets, the liquidity quickly starts disappearing after the 200 largest stocks. As we go down the market cap, the smaller stocks tend to have less outstanding shares, less trading volumes, and usually keep hitting upper and lower circuits.", "So, assuming there was a small-cap ETF and that there was a sudden spike in demand, the market maker would have had to create units to satisfy the demand. Now if some of the underlying stocks are not liquid or have hit circuits, which is quite common in small-caps, he wouldn\u2019t have been able to create units. In such a case, the ETF will probably trade at a premium to the NAV because there will be more demand for the existing units. Not just, small-caps, even mid-cap stocks in India have liquidity issues. So, an ETF can only be as liquid as it\u2019s underlying stocks. But this isn\u2019t a problem in a large-cap ETF like a Nifty 50 ETF because these are the biggest and the most liquid stocks.", "To summarize, trading volumes and AUM are factors, but they don\u2019t tell you everything about an ETF.", "Like I mentioned at the start of the chapter, ETFs are pretty new in India, we have about 88 ETFs today. A majority of them are equity ETFs. Here are your ETF choices:", "Here\u2019s a list of all Indian ETFs.", "This is a common question that keeps coming up. Today, the biggest ETFs we have are passive ETFs that track either the Nifty 50 or Sensex 30. But smart beta ETFs aren\u2019t passive, even though the ETFs track an index. They are more of a hybrid of active & passive like we discussed in the smart beta chapter. Globally, 80-90% of all ETFs are passive, but we see the first traditional active ETFs in the US. Maybe, we\u2019ll eventually see them in India as well. So ETFs need not be all passive, it\u2019s just that they are passive today.", "I know this has been a little long, but the idea was to give you the full context you need before investing in an ETF and help you avoid rude surprises. And I hope at this point; you have a clear understanding of how an ETF works and its mechanics. With that in mind, let\u2019s now look at some things you should consider before you buy an ETF.", "I cannot stress this enough but never use market orders when buying an ETF, always use limit orders. This is one mistake I see investors constantly make. We saw this earlier but let me reiterate this with an example. Take a look at the market depth of Aditya Birla Sun Life Nifty Next 50 ETF. If you placed a market order for 200 units, your order would be executed at prices starting from Rs 350, which is above the LTP, to begin with, and finally, at Rs 374, that\u2019s 8.7% higher than the LTP.\u00a0 So, always use limit orders.", "Market depth of Aditya Birla Nifty Next 50 ETF", "Always look at the iNAV on the AMC website and place a limit order at that level. Don\u2019t just place a limit order without looking at the iNAV. The other issue is that sometimes AMC websites don\u2019t update their iNAVs or their websites might be down. If there is a big difference between the last updated iNAV and the current market price, that\u2019s a sign that there is something wrong. So, make sure to compare the ETF with the intraday chart of the underlying index of the ETF on Kite, and that will give you an indication if the price is correct. Check with the AMC in such a case before placing an order.", "You should always buy an ETF that tracks the underlying index as closely as possible. Here\u2019s how Nippon NiftyBeEs ETF has tracked it\u2019s NAV, it\u2019s pretty close. You can compare the price and the NAV on Value Research; we\u2019ll\u00a0try having this feature on Coin.", "Niftybees NAV vs price", "Picking up on the earlier point about the tracking error, AMCs disclose the tracking error on their factsheets. But if you see a tracking error as 0.02%, it\u2019s hard to understand what it means. Moreover, AMCs calculate the tracking error on the NAV, but you buy and sell based on the price, which can be totally different. So the best way to analyse an ETF is to look at the difference between ETF prices and the underlying index. You want the price of ETF to track the index consistently without huge differences.", "Note: Always compare the ETF price with the total returns index (TRI) and not the price returns the index (PRI). The TRI includes dividends. All the index data you see on Kite is PRI. Since ETFs track TRI indices, they re-invest the dividends which reflects in the NAV of the ETF.", "Look at the average volumes over a period of time and see how an ETF has traded. You should invest in an ETF that trades regularly. You should avoid ETFs that just have a brief spike in volumes and then don\u2019t trade. The Edelweiss ETF \u2013 Nifty 100 Quality 30 is an example. The monthly average volumes are about 150 units. You can check the average volumes by applying a moving average on the volume chart on Kite. So assuming you had bought this ETF and had to exit, you most likely wouldn\u2019t have been able to.", "Edelweiss ETF \u2013 Nifty 100 Quality 30", "Most ETFs don\u2019t trade much for 30 mins to 1 hour of the market open. They also tend to trade at abnormal prices because of the low volumes, even orders for a few units can move prices. If you can, avoid trading in the open. And if you have to, check and verify the iNAV and use limit orders.", "Today, most of the AMCs offer ETFs but doesn\u2019t mean they are serious about them. Most of the ETF volumes are in ETFs offered by Nippon, ICICI, and SBI largely. Other AMCs like Mirae, Edelweiss with their debt ETFs do seem serious about building out their ETF offerings. So, along with the other things on the due diligence list, you\u2019ll also have to look at whether an AMC is serious about the ETFs it offers. For example, if you look at some of the ETFs by Aditya Birla Mutual Fund, IDBI, LIC, Indiabulls etc., they have horrible tracking errors and almost no volumes.", "If your investments in ETFs are equal to or more than the creation basket value, it\u2019s better if you approach the AMC to create units rather then buying on the stock exchange.", "This is another question that keeps coming up. Hopefully, this table should help answer these questions. In short, if you want to have active control or if you are actively using passive ETFs, then ETFs are a better choice. But if you are lazy like me and want to make as fewer choices as possible, then index funds are a better choice.", "With ETFs, you can express tactical strategies better than index funds because you can\u2019t buy and sell index funds immediately.", "We discussed this earlier in the index funds chapter as well. In the last decade or so, index funds and ETFs have become increasingly popular around the world. One reason is that investors have increasingly realized that a vast majority of actively managed mutual funds don\u2019t beat their benchmarks. In a developed market like the US,\u00a0 ~90% of active funds don\u2019t beat their benchmarks.", "The Indian markets have grown a fair bit and have become increasingly professionalized; institutional investors are a big part of today\u2019s market. This means that most of the informational edges and asymmetries have been arbitraged away. Today, pretty much everyone has access to the same information. The odds of someone finding some piece of information that can move a stock, at least in the large-cap space, for example, is pretty much zero. But perhaps the biggest reason why active funds underperform is that they charge too much.", "Actively managed large-cap funds on an average charge~1.5% whereas a Nifty 50 index fund is available for 0.10%. And we see this in the performance. S&P publishes a report called SPIVA, which measures the performance of active funds. For any period, over 70% of all large-cap funds fail to beat their benchmarks.", "SPIVA India", "Traditionally, the view was that the mid-cap and small-cap space was inefficient, and this was where stock pickers thrived. While this was true, it seems like this is increasingly becoming less so. In the last 5 years since the SEBI categorization exercise, active mid-cap funds have had a tough time keeping up with a broad mid-cap benchmark like the Nifty 50 or BSE/NSE Mid-cap 150 index and even Nifty Next 50 etc. Here\u2019s a quick look, this is just for illustration, and ideally, you should look at the rolling returns.", "Fund Name", "The bottom line is that most actively managed funds don\u2019t outperform a simple broad-market ETFs or index funds like Nifty 50, Nifty Next 50 and Nifty Midcap 150. This is due to a combination of high costs, increasing market efficiency, and internal fund mandates to not deviate too much from the indices. Moreover, it\u2019s tough to pick those funds & managers that beat their benchmarks. And even if you figure out how to pick a winning manager, there is very little persistence in performance. The best performing fund often ends up being the worst-performing fund over a period of time.", "Today, it\u2019s a no-brainer to look at index funds in the large-cap space. There\u2019s increasing evidence that it\u2019s the same in the mid-cap space as well. As for small-caps, these are severely risky and buy and hold may not be an optimal strategy, and active management both in a fund and in timing is needed.", "Is there any process to find good ETF & starting investment", "This module and this chapter, Harsh \ud83d\ude42", "While investing in ETF , How dividend is treated in Nifty 50 , whether dividend is distributed to retailers or AMC kept with them.", "Where can v track such things ?", "Thanks", "Ah, added a note Alpesh. Since all ETFs have to track the total returns indices, all dividends in an ETF are reinvested and this adds to the NAV of the ETF.", "Sir this chapter is easily the most comprehensive material on ETFs available in Indian context. It cleared up lots of doubts I had. Thanks a lot sir.\nWhat is the next chapter going to be on sir?", "Thanks, Sundeep. The next chapter is on Macro Economics (basics).", "What happens with the dividend and how to check the impact of dividend on pricing?? Any comments..", "Shubham, Since all ETFs have to track the total returns indices, all dividends in an ETF are reinvested and this adds to the NAV of the ETF.", "Which are the ETF I can pledge in zerodha? And what\u2019s the percentage of hair cut?", "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/2021/01/ETF-AUM.png", "https://zerodha.com/varsity/wp-content/uploads/2021/02/M11-C29-MF-ETF-WEB.jpg", "https://zerodha.com/varsity/wp-content/uploads/2021/02/ETF-search-Kite-300x262.png", "https://zerodha.com/varsity/wp-content/uploads/2021/02/Market-price-300x293.png", "https://zerodha.com/varsity/wp-content/uploads/2021/02/P-D-1-1-1024x491.png", "https://zerodha.com/varsity/wp-content/uploads/2021/02/Premiums-Nifty-1024x491.png", "https://zerodha.com/varsity/wp-content/uploads/2021/02/N100.png", "https://zerodha.com/varsity/wp-content/uploads/2021/02/N100-2.png", "https://zerodha.com/varsity/wp-content/uploads/2021/02/ETF-liquidity-1.jpg", "https://zerodha.com/varsity/wp-content/uploads/2021/02/Mirae-Nifty-50-ETF-vs-LIC-Nifty-50-ETF.png", "https://zerodha.com/varsity/wp-content/uploads/2021/02/Mirae-vs-LIC-Nifty-50-ETF-1024x486.png", "https://zerodha.com/varsity/wp-content/uploads/2021/02/Aditya-biral-Nifty-Next-50-ETF.png", "https://zerodha.com/varsity/wp-content/uploads/2021/02/Niftybees-NAV.png", "https://zerodha.com/varsity/wp-content/uploads/2021/02/Edelweiss-Nifty-100-Quality-30-ETF-1024x449.png", "https://zerodha.com/varsity/wp-content/uploads/2021/02/2023-08-10_16-19.png", "https://secure.gravatar.com/avatar/e6e919af12f9e69a6f9df98e3ee0d3d1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/be5de1b57c0a4cfdd8c128e3b984d149?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/0cfd0448ed725af0f3823a66be8c30e5?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/be5de1b57c0a4cfdd8c128e3b984d149?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/ff6a96262ebb959c90963aeeada2b009?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/efe02dc351dc9a190457b690db3ea307?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/be5de1b57c0a4cfdd8c128e3b984d149?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/bed2d68e83bc599a6007214e7c261052?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 style=\"border: 1px solid #222;\" width=\"312\">\n<h4>Index funds</h4>\n</td>\n<td style=\"border: 1px solid #222;\" width=\"312\">\n<h4><strong>Exchange-traded funds</strong></h4>\n</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\" width=\"312\">End of the day NAV</td>\n<td style=\"border: 1px solid #222;\" width=\"312\">Real-time pricing. Can be bought and sold anytime</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\" width=\"312\">No issue of spreads because execution happens at the end of the day</td>\n<td style=\"border: 1px solid #222;\" width=\"312\">You might see wide spreads in certain ETFs and during market volatility.</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\" width=\"312\">Liquidity isn\u2019t an issue and can be managed.</td>\n<td style=\"border: 1px solid #222;\" width=\"312\">Certain ETFs don\u2019t trade much, and underlying liquidity of stocks can impact APs and market-making</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\" width=\"312\">Can create SIPs</td>\n<td style=\"border: 1px solid #222;\" width=\"312\">Possible with Zerodha, may not be possible with other brokers</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\" width=\"312\">Expense ratio is all-inclusive\u2014no additional charges</td>\n<td style=\"border: 1px solid #222;\" width=\"312\">You have to pay a brokerage (free at Zerodha) & other charges & taxes separately</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\" width=\"312\">Not possible to have tactical strategies. Less flexible compared to ETFs</td>\n<td style=\"border: 1px solid #222;\" width=\"312\">With ETFs since you can buy & sell anytime, you can express tactical views. ETFs are much more flexible</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\" width=\"312\">Index funds tend to hold more cash and hence have a slightly higher tracking error</td>\n<td style=\"border: 1px solid #222;\" width=\"312\">ETFs don\u2019t hold much cash and hence have a lower tracking error</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\" width=\"312\">Lesser choice at-least as of now. But AMCs are launching a fund of funds for ETFs</td>\n<td style=\"border: 1px solid #222;\" width=\"312\">Pretty much all of the smart-beta products are ETFs. You have a wider choice</td>\n</tr>\n</tbody>\n</table>", "<table width=\"788\">\n<tbody>\n<tr>\n<td style=\"border: 1px solid #222;\" width=\"368\">\u00a0\n<p>Fund Name</p></td>\n<td style=\"border: 1px solid #222;\" width=\"140\">3 Yr Ret (%)</td>\n<td style=\"border: 1px solid #222;\" width=\"140\">5 Yr Ret (%)</td>\n<td style=\"border: 1px solid #222;\" width=\"140\">10 Yr Ret (%)</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\">Kotak Emerging Equity Fund Regular Plan</td>\n<td style=\"border: 1px solid #222;\">12.09</td>\n<td style=\"border: 1px solid #222;\">19.16</td>\n<td style=\"border: 1px solid #222;\">17.89</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\">DSP Midcap Fund \u2013 Regular Plan</td>\n<td style=\"border: 1px solid #222;\">10.97</td>\n<td style=\"border: 1px solid #222;\">18.49</td>\n<td style=\"border: 1px solid #222;\">16.63</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\">Invesco India Mid Cap Fund</td>\n<td style=\"border: 1px solid #222;\">13.24</td>\n<td style=\"border: 1px solid #222;\">18.07</td>\n<td style=\"border: 1px solid #222;\">17.95</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\">Edelweiss Mid Cap Fund \u2013 Regular Plan</td>\n<td style=\"border: 1px solid #222;\">9.85</td>\n<td style=\"border: 1px solid #222;\">17.92</td>\n<td style=\"border: 1px solid #222;\">18.28</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\">Nippon India Growth Fund</td>\n<td style=\"border: 1px solid #222;\">10.68</td>\n<td style=\"border: 1px solid #222;\">17.65</td>\n<td style=\"border: 1px solid #222;\">13.27</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\"><strong>BSE Midcap 150 Index</strong></td>\n<td style=\"border: 1px solid #222;\"><strong>9.07</strong></td>\n<td style=\"border: 1px solid #222;\"><strong>17.6</strong></td>\n<td style=\"border: 1px solid #222;\"><strong>12.94</strong></td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\">Taurus Discovery (Midcap) Fund \u2013 Regular Plan</td>\n<td style=\"border: 1px solid #222;\">9.44</td>\n<td style=\"border: 1px solid #222;\">17.59</td>\n<td style=\"border: 1px solid #222;\">15.3</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\">Tata Midcap Growth Fund \u2013 Regular Plan</td>\n<td style=\"border: 1px solid #222;\">11.2</td>\n<td style=\"border: 1px solid #222;\">16.91</td>\n<td style=\"border: 1px solid #222;\">16.93</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\">HDFC Mid-Cap Opportunities Fund</td>\n<td style=\"border: 1px solid #222;\">8.03</td>\n<td style=\"border: 1px solid #222;\">16.44</td>\n<td style=\"border: 1px solid #222;\">17.41</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\">L&T Midcap Fund</td>\n<td style=\"border: 1px solid #222;\">5.39</td>\n<td style=\"border: 1px solid #222;\">16.33</td>\n<td style=\"border: 1px solid #222;\">16.15</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\">Franklin India Prima Fund</td>\n<td style=\"border: 1px solid #222;\">8.86</td>\n<td style=\"border: 1px solid #222;\">15.79</td>\n<td style=\"border: 1px solid #222;\">17.27</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\">ICICI Prudential Midcap Fund</td>\n<td style=\"border: 1px solid #222;\">6.98</td>\n<td style=\"border: 1px solid #222;\">15.28</td>\n<td style=\"border: 1px solid #222;\">15.07</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\">UTI Mid Cap Fund \u2013 Regular Plan</td>\n<td style=\"border: 1px solid #222;\">8.68</td>\n<td style=\"border: 1px solid #222;\">15.27</td>\n<td style=\"border: 1px solid #222;\">17.2</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\">Baroda BNP Paribas Midcap Fund</td>\n<td style=\"border: 1px solid #222;\">8.44</td>\n<td style=\"border: 1px solid #222;\">14.94</td>\n<td style=\"border: 1px solid #222;\">17.59</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\">Baroda Midcap Fund</td>\n<td style=\"border: 1px solid #222;\">8.52</td>\n<td style=\"border: 1px solid #222;\">14.51</td>\n<td style=\"border: 1px solid #222;\">3.73</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\">Motilal Oswal Midcap 100 Exchange Traded Fund</td>\n<td style=\"border: 1px solid #222;\">5.8</td>\n<td style=\"border: 1px solid #222;\">14.36</td>\n<td style=\"border: 1px solid #222;\">12.11</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\">SBI Magnum Midcap Fund</td>\n<td style=\"border: 1px solid #222;\">9.36</td>\n<td style=\"border: 1px solid #222;\">13.97</td>\n<td style=\"border: 1px solid #222;\">17.37</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\">Sundaram Mid Cap Fund \u2013 Regular Plan</td>\n<td style=\"border: 1px solid #222;\">3.56</td>\n<td style=\"border: 1px solid #222;\">13.25</td>\n<td style=\"border: 1px solid #222;\">14.98</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\">Quant Mid Cap Fund</td>\n<td style=\"border: 1px solid #222;\">12.15</td>\n<td style=\"border: 1px solid #222;\">13.01</td>\n<td style=\"border: 1px solid #222;\">11.29</td>\n</tr>\n<tr>\n<td style=\"border: 1px solid #222;\">Aditya Birla Sun Life Mid Cap Fund</td>\n<td style=\"border: 1px solid #222;\">2.77</td>\n<td style=\"border: 1px solid #222;\">12.28</td>\n<td style=\"border: 1px solid #222;\">12.94</td>\n</tr>\n</tbody>\n</table>"], "videos": []}
{"title": "10. Clearing and Settlement Process", "text": ["The topic of clearing and settlement is super important to understand as it gives you a sense of the movement of money and funds between your account and, let\u2019s just say, the stock market. For instance, when you buy a stock, say 100 shares of Marico, you need to clearly understand how long it takes for the broker to remit these 100 Marico shares to your Demat account. We can extend this to stock selling as well.", "The lack of understanding of the clearing and settlement process could leave a void and leave you with many unanswered questions related to the market structure. Hence, for this reason, we will explore what happens behind the scenes from when you buy a stock to when it hits your DEMAT account.", "We will keep this discussion practical with a clear emphasis on what you need to know about clearing and settlement.", "Day 1 \u2013 The trade (T Day), Monday", "Assume on a Monday, you buy 100 shares of Reliance Industries at Rs.1,000/- per share. The total buy value is Rs.1,00,000/- (100 * 1000). The day you make the transaction is the trade date; brokers refer to this as the \u2018T Day.\u2019\u00a0 The assumption is that you intend to hold Reliance Industries in your Demat account for a few days or maybe years, and it is not an intraday trade.", "When you place an order to buy, the broker quickly validates if you have the necessary funds. In this example, the order will go through only if you have Rs.1,00,000/- in your trading account; it will be rejected otherwise. Assuming the trade is executed through Zerodha, the applicable charges are \u2013", "Additionally, Rs.15/- towards stamp duty is applicable. Stamp duty is charged at 0.015% on the buy side. Hence the total applicable charges are Rs.119.19. Note that these rates are subject to change; you can visit Zerodha\u2019s Brokerage calculator to figure out the exact applicable rate when you wish to carry out a transaction.", "So an amount of Rs.1,00,000 plus 119.19 totaling Rs.1,00,119.19/- is required to carry out this particular transaction. Remember, the money is blocked in your account when you place a trade, but the stock is yet to hit your DEMAT account.", "Also, on the T day, the broker generates a \u2018contract note\u2019 and emails you the copy to your registered email id.\u00a0 A contract note is like a bill detailing all your daily transactions. You can save the contract note for future reference. A contract note gives you a break up of all daily transactions and the trade reference number. It also shows the breakup of charges charged by the broker.", "Day 2 \u2013 Trade Day + 1 (T+1 day, Tuesday)", "Starting January 2023, India became the first country to implement a T+1 settlement for all the scrips listed on the stock exchanges. Earlier when you used to buy the shares, these would be delivered to your demat account on T+2 day. For example, if you bought shares on Monday, these will be credited to your demat account only on Wednesday. With T+1 settlement, if you buy shares on Monday, they will be credited to your demat account on Tuesday, the next day itself.", "So on Day 2, also called T+1, the settlement is due to the exchange. Assuming the purchaser and seller are trading via two different brokers, the funds are debited from the buyer\u2019s broker\u2019s pool account by the clearing corporation and credited to the selling broker\u2019s pool account. Also, on T+1 day, the shares will reflect in the purchaser\u2019s DEMAT account, indicating that you own 100 shares of Reliance.", "The day you sell the stocks is again referred to as the \u2018T Day\u2019. The stock gets blocked when you sell the stock from your DEMAT account, and by the end of the day, the stocks are \u2018earmarked\u2019 for settlement. Please refer to the next section to learn more about earmarking.", "Before the T+1 day, the earmarked shares are delivered to the depository. On settlement day, the blocked shares are debited from your demat account and moved to the clearing corporation for payin. Against the debit of such shares, you\u2019d have received a credit for the sale after deducting all charges. You may be interested to note that you will receive 80% of the funds on T-Day and the remaining 20% on T+1. In other words, the seller will be settled fully on a T+1 basis, just like how the buyer is settled.", "What transpires between T day and T+1 is a complex settlement process involving the stockbroker, clearing corporation, depository, and the stock exchange. Each entity uploads and receives multiple files to ensure the transaction goes smoothly. As far as you are concerned, you need to remember that equity transactions are settled on a T+1 basis, meaning, if you are a buyer, you will get the shares on T+1, and if you are a seller, the funds are credited on a T+1 basis.", "Earlier, for the settlement of a sell trade, the broker would be required to debit shares from a selling client, hold the securities in the broker\u2019s pool account, and transfer the securities to the clearing corporation (CC) on T+2. Upon transfer, the client would receive a credit of funds against the sale, and the transaction would have been said to be settled. It was usual practice for brokers to debit shares on T day or T+1 day and transfer it to CC on T+2 (since the settlement was on T+2).", "From the time the shares were debited until they were settled, the client shares lie in the broker\u2019s pool account, possibly allowing a broker to misuse these securities. SEBI identified this as a potential risk and introduced \u201cearmarking\u201d for settlement. In this new earmarking system, shares are no longer debited from the client\u2019s account; they are only earmarked for settlement. Think of earmarking as a temporary hold on the securities towards an upcoming settlement for the sale transaction initiated by the client.", "On settlement day, the shares are debited from the investor\u2019s account and credited to the clearing corporation. This new process eliminates the need for brokers to hold client shares in their pool account, thereby eliminating the risk that comes along. The new earmarking process has been made mandatory from November 2022.", "", "", "In case of there is a bank/DP holiday on T+2 day, will the shares still shown under T1 holdings?", "Yes. If there is a bank/DP holiday on T+2 day, the shares will still show up in the T1 holdings in day 1 and 2.\nFor example : If shares are bought on 8th November and 10th November is a settlement holiday, the shares will reflect in the T1 holdings on 9th and 10th November and the client can sell after the 13th November.", "I have question if I sell one share after it got credited in Demat account. What are the charges I need to pay for it. Thanks.", "Hi Vijay, there is no brokerage for the sell transaction. However you will have to have to pay DP charges of Rs.13.5/- irrespective of the quantity sold. I\u2019d suggest you take a look at this \u2013 https://zerodha.com/charges.", "When the DP charges are debited from the trading account?", "When you sell shares from DP.", "Hi Karthik,\nI am confused about selling an instrument and settlement. Following is my understanding:\n1. If we buy an equity today we can sell on the same day and it will be called intraday trade. In this trade the equity never actually hits the demat account but we only trade the price difference.\n2. If we sell an equity on T+1 day, since buy orders are already sent to the exchange on T day-end, it is out of broker\u2019s control and cannot be treated as intraday. Also, equities don\u2019t hit demat on T+1 day and we sell equity that we don\u2019t yet own resulting in shorting.\n3. This will lead to two different trades in portfolio viz., T day long trade and T+1 day short trade.\n4. If we sell equity on T+2 or beyond, we essentially sell the equity that we own in our demat.\n5. Regarding our profits, all profits are available only on the next day of settlement except for intraday which is made available on the same day end. And our T+1 trade was not a settlement at all.\nKindly correct if I am wrong in above understanding. Now following are my questions:\nA. Are these same rules applicable on futures/options also?\nB. Are futures/options being just contracts can be bought and sold anytime i.e., intraday, T+1 and T+2 and beyond?\nC. If they have different rules, please explain.\nThanks,\nSumit Kumar Pandit", "1) Yes, this is correct\n2) Yes, this is correct as well\n3) This will be a BTST trade, suggest you read this \u2013 https://zerodha.com/z-connect/queries/stock-and-fo-queries/btstatst-buyacquire-today-sell-tomorrow\n4) Yes, sell would be from DEMAT\n5) Yes", "A) The settlement is slightly different. I\u2019d suggest you read the Futures module \u2013 https://zerodha.com/varsity/module/futures-trading/\nB) Yes, these can be bought and sold anytime. Your holding period can be as small as 30 Seconds.\nC) Please go through the module on derivatives.", "Hi Karthik, thanks for curating such great and educative content @varsity. Could you please refer me to the Derivatives section where I could read all about CO and BO. I couldn\u2019t find the derivatives module.", "Glad you liked it, Prateek. We have divided the derivative across 3 modules \u2013", "1) Futures \u2013 https://zerodha.com/varsity/module/futures-trading/\n2) Options Theory \u2013 https://zerodha.com/varsity/module/option-theory/\n3) Option Stratergies \u2013 https://zerodha.com/varsity/module/option-strategies/", "BO/CO is a part of the Futures module.", "hello sir i am karan . i am not able to sell my stocks\u2026i am trying to sell my stocks from over 1month but some other user ADMINSQF1 is buying it \u2026whats that \u2026..what should i do????", "I\u2019m a little confused. Can you please call our support and speak to our executive once? Thanks.", "There is some problem with Zerodha.", "Some person is handling my portfolio.\nEven I faced similar problem ADMINSQF1 sold my shares.\nI have not authorized him to do so.", "Looks like you\u2019ve used our intraday product MIS to take the position. All MIS positions are squared off after 3.20 PM.\nRead more here", "If i sell my shares on Thursday when i will able to transfer money in my bank account from Trading account?", "Yes, you will be able to do that on Friday.", "Why am i being charge BSE Charges every day 500.99", "There is no such charge, Mohit. Which broker are you trading with? If its Zerodha, then all charges are mentioned here \u2013 https://zerodha.com/charges", "You mentioned:- When you sell shares, the shares are blocked immediately and the sale proceeds credited again on T +2 day.\nSo how will it be credited on thursday.", "Sorry, on friday.", "Monday you sell the shares, the funds against this sale will be credited by Wednesday evening, you can place the withdrawal on Thursday.", "The funds will be credited on T+2.", "I want to ask one question I am using Zerodha So what happen in the case where I sold X company shares and amount is reflected immediately as free cash with same figure as -minus in margins and if I used this same amount shown in -margins for purchasing Y company shares do it deduct some charges for it apart from normal brokerage charges\u2026???", "All applicable charges will be deducted, Avinash. You should buffer for this before buying Y to avoid any -ve balance in your trading account. Check this to know about all the charges \u2013 https://zerodha.com/charges", "I have the same question.\n1) If I sell \u201cStock/Bond/InvIT/FMP X\u201d for Rs 1000 today, and want to buy \u201cCompany Y\u201d shares the same day for Rs 950, is it possible, or do I have to wait for T+2 after the sale before I can buy with the Rs 1000?\n2) What if I have units worth Rs 1000 of Liquid Bees/ETF of Reliance/DSP? Do I have to sell the units before or after I buy \u201cCompany Y\u201d stock? (I assume at least in this case I don\u2019t need to wait for T+2 before buying)\nThanks in advance!", "1) We provide you credit to the extent of the shares sold on the same day. So you can buy Y shares the same day. But do account for the applicable charges\n2) Its the same, you get credit to the extent of sale. So you can buy shares of Y the same day.", "I sold shares at 5000/- profit still my free cash and margin used are same\nWhen will it get changed", "The settlement is on a T+2 basis, but you will have the margins available on your dashboard. I\u2019d suggest you call the support desk to check this once. Thanks.", "Sir main 20/12/2018(Thursday) ko intraday me 185/- profit earned kiya but abhi tk profit hmare Demat account me nhi credit kiya gya hai.", "Please check your ledger details on Console. Thanks.", "If i am buying one share on MIS option and after buying rate is going down and wish to take delivery then how to retain that share and stop selling on market rate at the end of the day?", "Ankit, you can do a simple position conversion here. Doing so the MIS position will be converted to a CNC buy and you can carry forward the position overnight.", "How does the intraday buy and sell work in this case? Does it mean in case of intraday trading we are essentially selling the shares that are not with us?", "Yes, that is the way it would work. But do remember intra day trades are squared off by 3:20PM.", "Thank you Karthik", "Still not getting the perfect answer.I have the same question in mind as asked.So, Can you please elaborate your answer?", "Intraday trades are settled on the same day Manash.", "if i buy share om friday ,what will be t+1 day and t+2 day??", "T+1 is Monday and T+2 would be Tuesday.", "On the same lines, I would like to know, what exactly is T1 and T2 in relation to any newly bought shares?", "The day you buy the shares, that day is referred to as \u2018T\u2019 day. Next day is T1, next to next is T2. So shares bought on T gets delivered to your DEMAT on T2.", "Okay, just to clear up. so the sign disappears from beside the scrip, when it actually sits in my DEMAT, right?\nThanks Karthik Sir.", "Yup, you will no longer see T1.", "\u092e\u0947\u0930\u093e \u0938\u0935\u093e\u0932 \u0939\u0948 \u0915\u0940\u2026..\u0915\u094d\u092f\u093e \u0938\u094b\u092e\u0935\u093e\u0930 \u0915\u094b share \u0916\u0930\u0940\u0926 \u0928\u0947 \u0915\u0947 \u092c\u093e\u0926 \u0924\u0941\u0930\u0902\u0924 \u0905\u0917\u0932\u0947 \u0926\u093f\u0928 \u0909\u0938\u0915\u094b sell \u0915\u0930 \u0938\u0915\u0924\u0947 \u0939\u0948 \u0915\u094d\u092f\u093e ? \u0915\u094d\u092f\u093e \u0939\u0930 share \u0915\u0947 \u092c\u093e\u0930\u0947 \u092e\u0947 \u0939\u092e \u0910\u0938\u093e \u0915\u0930 \u0938\u0915\u0924\u0947 \u0939\u0948 ?", "Amrut \u2013 my bad, I\u2019m not good at reading Hindi. Request you to kindly translate that to English.", "Can buy now and pay latter (t+2) ,if i have many stocks already in dmat ,available in zerodha or we have to transfer money first to account than buy .", "As of now, you will have to transfer money and buy only to the extent of what you have. Thanks.", "Kartik the english translation for the same is \u201ccan i buy the shares on monday and sell it on the next day and can I do this for all the shares\u201d", "Yes, you can. This is called Buy Today, Sell Tomorrow or BTST. More on this here \u2013 https://zerodha.com/z-connect/queries/stock-and-fo-queries/btstatst-buyacquire-today-sell-tomorrow", "if i by share in CNC and sell on same day ,which brokerage i have to pay intraday or delivery ?", "Intraday.", "Can I buy and sell stock on NSE and BSE respectively. Purchased under CNC and want to sell on the same day", "Yup, you can.", "Hello Sir,", "I do intraday and CNC same day trading for GMR, i see profit credited and shown only for intraday and not for CNC, how CAC settlement is done and duration required for the same?", "CNC is cash and carry, the profits that you see are paper profits, which is not realised. Hence there is no credit. However, the profits for intraday is realized hence credited at the end of day.", "Hi Karthik,", "I bought 80 SBI shares yesterday for 252 and sold all the 80 today for 254. Again I bought 80 shares for 252 today. But my open position is showing my Qty as 0 and in my holdings it is showing yesterday\u2019s price for all the 80 shares. Anything wrong ?", "Nothing really wrong. You sold 80 from yesterday which will say -80 and you bought 80 today which kind of offsets the position and therefore you see Qty as 0.", "You will get it the next day.", "If i buy cnc and sell the same day as cnc can i become a victim of short selling. Is there any risk in that", "No, this is a simple intraday trade. Nothing to worry about.", "Hi", "If i buy cnc today and sell next day. Is there any risk in that after sell still it\u2019s showing in holding\u2019s.", "Do check this, Chandan \u2013 https://zerodha.com/z-connect/queries/stock-and-fo-queries/btstatst-buyacquire-today-sell-tomorrow", "Are DP charges applicable to intraday", "No, its not.", "How to transfer money from bank to trading account and vice versa?", "You can do this by clicking on the \u2018Fund Transfer\u2019 option. Through this you can bring money into your trading account or take money out of your trading account (back to your bank account).", "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/2014/09/Ch10title.jpg", "https://secure.gravatar.com/avatar/11e459b6e12b93d656c86212b0db792b?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/1163e82fbf74fb4086f2410575c953c8?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/833d4c4fc2bd84929c3d9036cc2b00b3?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/035f745e0a5e399a384dc683f974b1ea?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/773cd5a64bd12a2a37f26f7b05e8c159?s=32&d=identicon&r=g", 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["<table>\n<tbody>\n<tr>\n<th>Sl No</th>\n<th>Chargeable Item</th>\n<th>Applicable Charges</th>\n<th>Amount</th>\n</tr>\n<tr>\n<td style=\"text-align: left;\">01</td>\n<td style=\"text-align: left;\">Brokerage</td>\n<td style=\"text-align: left;\">Zero for Equity Delivery. For intraday, charges are 0.03% or Rs.20/- whichever is lower, per executed order</td>\n<td style=\"text-align: left;\">Zero</td>\n</tr>\n<tr>\n<td style=\"text-align: left;\">02</td>\n<td style=\"text-align: left;\">Security Transaction Charges(STT)</td>\n<td style=\"text-align: left;\">0.1% of the turnover</td>\n<td style=\"text-align: left;\">100/-</td>\n</tr>\n<tr>\n<td>03</td>\n<td style=\"text-align: left;\">Exchange transaction Charges</td>\n<td style=\"text-align: left;\">0.00345% of the turnover</td>\n<td style=\"text-align: left;\">3.45/-</td>\n</tr>\n<tr>\n<td>04</td>\n<td style=\"text-align: left;\">GST</td>\n<td style=\"text-align: left;\">18% of Brokerage + Transaction charges + SEBI charges</td>\n<td style=\"text-align: left;\">0.62/-</td>\n</tr>\n<tr>\n<td>07</td>\n<td style=\"text-align: left;\">SEBI Charges</td>\n<td style=\"text-align: left;\">Rs.10 per crore of transaction</td>\n<td style=\"text-align: left;\">0.12/-</td>\n</tr>\n<tr>\n<td colspan=\"3\" style=\"text-align: center;\"><strong>Total</strong></td>\n<td style=\"text-align: left;\"><strong>104.19/-</strong></td>\n</tr>\n</tbody>\n</table>"], "videos": []}
{"title": "5 comments", "text": ["", "These is super aap", "Just what the doctor ordered\u2026As Ravi Shastri would say\u2026cyrstal clear like trace of bullet. Thanks a lot.", "We do have a many more videos here, do check them out \ud83d\ude42", "https://www.youtube.com/@varsitybyzerodha", "Please create English videos. In this module only the first video is English", "We do have many other videos in English \u2013 https://www.youtube.com/playlist?list=PLX2SHiKfualEyD05J9JsklEq1JFGbG6qJ", "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://secure.gravatar.com/avatar/197f1770ad5257b0b70ea86496ff9c12?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/433652ddcc73e9fb0069e0246c9a7d02?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/d04515e758746659e02525a27f9dde84?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": "8 comments", "text": ["", "No one ever told this kind of details\u2026.Gratitude and many thanks to whole team at Zerodha Varsity.", "Glad you liked the content. Happy learning \ud83d\ude42", "Is bid ask spread on the zerodha terminal is for the orders placed on the app or is it the real time data shared by sebi?", "Its real time, as it happens in the market.", "Nice\u201d Content <3", "Can I Get Rewards Of Watching Every Video on Zerodha Varsity", "Your rewards are in terms of improved knowledge \ud83d\ude42", "nice information. our knowledge gaining journey would have been so difficult without zerodha varsity. Thanks so much.", "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://secure.gravatar.com/avatar/433652ddcc73e9fb0069e0246c9a7d02?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/664fb695ff67aa55ac10546860ce0be7?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/655f187f4b6205723d517452b4405305?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/241c0e29759dbda2274ed337f9dd0e68?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/d8cad32a08c7bd3f482a69c8698c1fae?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": "5 comments", "text": ["", "Thik", "thanks for the very informative video\u2026Can you please clear couple of points. 1. Why do we have different prices for different set of investors (Floor and Cut off). 2. Doesn\u2019t retail are at disadvantage when they have to higher as compared to Non retail. 3 How does company decide on exact Floor and Cutoff price.?", "Many thanks.", "The HNIs & Institutions are the price discoverers in an OFS. The seller decides what is the minimum price they want to sell the shares at \u2013 floor. But the selling price finally depends on the demand from the large investors. Since a portion of the OFS is given to retail shareholders also, they simply become takers of the price realized by the large buyers demand.", "In a multiple price issue, retail shareholders may feel they are disadvantaged since the price increases for them. However, from the perspective of the seller, it seems fair to first sell the biggest part of the OFS, figure the price and then finally open it up to retail.", "How can I apply for OFS of IRCON through Zerodha?", "Here you go \u2013 https://support.zerodha.com/category/trading-and-markets/corporate-actions/articles/how-do-i-apply-for-ofs", "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://secure.gravatar.com/avatar/c9a9eaa5cb661f742d2f4dd6ebf0ce3c?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/433652ddcc73e9fb0069e0246c9a7d02?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/a749d7876deff3f646197f5039781bde?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": "5 comments", "text": ["", "You have explained it so nicely in detail. Thank you.", "The way you explain,without naunces,and point to point, invokes an urge to meet you and see your webinars/videos and all that is avilable here. THANQ RANGAPPA", "Thanks for the kind words, Chandra. Happy learning \ud83d\ude42", "Insightful and very deep understanding, Thank you.", "Happy learning!", "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://secure.gravatar.com/avatar/c1dafc9d0705a5047fac15e8626f56c6?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/d78613b904d859d0ff2db1a58ab77b8d?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/899914dc697507bd63ac7a16f9d76078?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": "No Title", "text": ["", "", "", "We recommend reading\u00a0this chapter\u00a0on Varsity to learn more and understand the concepts in-depth.", "Comments are closed.", "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/themes/varsity2//images/playstore.png", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/appstore.png"], "tables": [], "videos": []}
{"title": "11. Corporate actions and impact on stock prices", "text": ["Corporate actions are financial initiatives undertaken by a company that results in a change to its stock price. There are different corporate actions that an entity can choose to initiate. A good understanding of these corporate actions gives a clear picture of the company\u2019s financial health and determines whether to buy or sell a particular stock.", "This chapter will examine the five most important corporate actions and their impact on stock prices. A corporate action is initiated by the board of directors and approved by the company\u2019s shareholders.", "Dividends are portions of profits made by the company, which are distributed to the company\u2019s shareholders. Dividends are paid on a per-share basis. For example, Infosys recently declared a dividend of Rs.42/- per share, which means you get Rs.42/- as dividend income for every share you own. Suppose you own 100 Infosys shares; you can get 10042 = Rs.4,200/- as dividend income. The company directly remits the dividends to your bank account (linked to your Demat account). The dividend paid is also expressed as a percentage of the face value. In the above case, the face value of Infosys is Rs.5/-, and the dividend paid was Rs.42/- hence the dividend payout is said to be 840% (42/5).", "It is not mandatory to pay dividends every year. If the company feels that instead of paying dividends to shareholders, they are better off utilizing the same cash to fund a new project for a better future, they can do so. Typically, companies in the growth phase (young companies growing fast) choose not to pay dividends but rather to plow back the profits into the business for more growth. However, when the company\u2019s growth opportunities slow down and it holds excess cash, it would make sense to reward its shareholders via dividends. Cash with shareholders makes more sense than retaining the cash on the company\u2019s book, and distributing the dividends may be the best way forward for the company.", "The dividends need not be paid from the profits alone. If the company has made a loss during the year but it holds a healthy cash reserve, it can still pay dividends from its cash reserves.", "The company\u2019s board members at the Annual General Meeting (AGM) decide whether to pay a dividend. The dividends are not paid right after the announcement. This is because the shares are traded throughout the year, and it would be difficult to identify who is eligible to receive dividends and who isn\u2019t. The following timeline would help you understand the dividend cycle.", "", "Dividend Declaration Date: This is the date on which the AGM takes place, and the company\u2019s board approves the dividend issue", "Record Date: The date the company decides to review the shareholder\u2019s register to list all eligible shareholders for the dividend. Usually, the time difference between the dividend declaration date and the record date is 30 days.", "Ex-Date/Ex-Dividend date: With the T+1 settlement cycle, the ex-dividend date normally is on the same day as\u00a0the record date. Only shareholders who own the shares before the ex-dividend date are entitled to receive the dividend. This is because, in India, the equity settlement is on a T+1\u00a0basis. So for all practical purposes, if you want to be entitled to receive a dividend, you need to ensure you buy the shares before the ex-dividend date.", "Dividend Payout Date: The date on which the dividends are paid to shareholders listed in the company register.", "Cum Dividend: The shares are said to be cum dividends till the ex-dividend date.", "When the stock goes ex-dividend, usually, the stock drops to the extent of dividends paid. For example, if ITC (trading at Rs. 335) has declared a dividend of Rs.15. On ex-date, the stock price will drop to the extent of the dividend paid, and as in this case, the price of ITC will drop down to Rs.320. The reason for this price drop is that the dividend amount paid no longer sits on the company\u2019s balance sheet; hence the stock price is adjusted. From the balance sheet perspective, dividends paid are considered cash out. Hence the new stock price has to factor in the shrunk balance sheet. Hence the price drops. That said, you will not always notice a significant price drop in the share price.", "Sometimes, the company pays out a special dividend. A special dividend is non-recurring and happens on a \u2018one-time basis.\u2019 The special dividends are usually very large payments compared to a regular dividend, and that\u2019s when the stock price significantly drops. The drop in stock price should not be considered negative as you would receive a cash payment as a shareholder.", "Lastly, dividends can be paid anytime during the financial year. If it\u2019s paid during the financial year, it is called the interim dividend. If the dividend is paid at the end of the financial year, it is called the final dividend.", "A bonus issue is a stock dividend allotted by the company to reward the shareholders. In regular dividends, cash is paid out to shareholders, but in a bonus issue, stocks are paid out instead of cash. The bonus shares are issued out of the reserves of the company. The shareholders receive these free shares against shares they currently hold. These allotments typically come in a fixed ratio of 1:1, 2:1, 3:1, etc. In a bonus issue, the stock price declines to the extent of the bonus ratio, but this decline should not be mistaken for a correction in stock price or a fall.", "If the ratio is 2:1, the existing shareholders get two additional shares for every share they hold at no additional cost. So if a shareholder owns 100 shares, 200 additional shares will be rewarded. The total holding after the bonus issue will become 300 shares. When the bonus shares are issued, the number of shares the shareholder holds will increase, but an investment\u2019s overall value will remain the same.", "To illustrate this, let us assume a bonus issue on different ratios \u2013 1:1, 3:1 and 5:1", "So as you see, in a bonus issue, only the number of shares increases, and your investment value remains the same before and after the bonus issue.", "The bonus announcement date, ex-bonus date, and record date are similar to the dividend issue.", "Companies issue bonus shares to encourage retail participation, especially when the company\u2019s price per share is very high, and it becomes tough for new investors to buy shares. The number of outstanding shares increases by issuing bonus shares, but the share price is slashed, as shown in the example above.", "Think about this \u2013 fewer retail participants can buy or sell that share if the share price is bloated (I mean just the per-share price here, not the valuation). For example, the share price of MRF Limited is in the region of Rs.90,000 per share. A retail investor has to shell out 90K to buy and invest in 1 share, and this also means a small retail investor, with, say, Rs.25,000 to invest, can never buy MRF. Many retail investors spread the risk across 100s and 1000s of investors as opposed to a few investors. Hence, when the stock price bloats, companies issue a bonus share to slash the stock price without impacting any other financial metric, which is one reason to issue a bonus share.", "Why isn\u2019t MRF splitting the shares, then? Well, at the end of the day, the decision is solely dependent on the company and I guess MRF is yet to make up their mind or perhaps they just wont indulge in these corporate actions \ud83d\ude42", "The word stock split sounds weird, but this happens regularly in the markets. What this means is quite literally \u2013 the stocks that you hold are split!", "Similar to a bonus issue, when the company declares a stock split, the number of shares held increases, but the investment value remains the same. The big difference between a bonus and a split is that in the bonus issue, the face value of the company remains unchanged, but in a stock split, the face value changes. Suppose the stock\u2019s face value is Rs.10, and there is a 1:2 stock split, then the face value will change to Rs.5. If you owned one share before the split, you would now own two shares after the split.", "We will illustrate this with an example:", "Like a bonus issue, a stock split encourages more retail participation by reducing the value per share. The dates and timeline (announcement date, ex-date, record date, etc.) are similar to dividend and bonus issues.", "The idea behind a rights issue is to raise fresh capital. However, instead of going public, the company approaches its existing shareholders. Think about the rights issue as a second IPO and a select group of people (existing shareholders). The rights issue could indicate promising new development in the company, but this is not always true. As an investor, you need to evaluate the reasons for the right issue and determine if it makes sense. The shareholders can subscribe to the rights issue in the proportion of their shareholding. For example, 1:4 rights issue means for every four shares; the shareholder can subscribe to 1 additional share. The new shares under the rights issue will be issued at a lower price than what prevails in the markets. For example, if a stock is trading at Rs.500 per share, then the right issue could be at a 20% discount, at Rs.400 per share.", "However, a word of caution \u2013 The investor should not be swayed by the company\u2019s discount, but they should look beyond that. A rights issue is different from a bonus issue as one is paying money to acquire shares. Hence the shareholder should subscribe only if he or she is completely convinced about the company\u2019s future. It can so happen that after the company announces the right issue, the stock price can go below the right issue price. If the market price is below the subscription price/right issue price, it is cheaper to buy it from the open market.", "A buyback can be seen as a company\u2019s method to invest in itself by buying shares from other investors in the market. Buybacks reduce the number of shares outstanding in the market; however, the buyback of shares is an important corporate restructuring method. There could be many reasons why corporates choose to buy back shares\u2026", "When a company announces a buyback, it signals the company\u2019s confidence in itself. Hence this is usually positive for the share price, but like other things in the market, always evaluate the reasons for the corporate action.", "First of all many thanks for sharing knowledge in a format which everyone can understand.\nI have a doubt on your below impact on stock price due to dividend payment \u2013\n\u201cWhen the stock goes ex dividend, usually the stock drops to the extent of dividends paid. For example if ITC (trading at Rs. 335) has declared a dividend of Rs.5. On ex date the stock price will drop to the extent of dividend paid, and as in this case the price of ITC will drop down to Rs.330. The reason for this price drop is because the amount paid out no longer belongs to the company.\u201d\nIf this is so easy then will it not create a shorting opportunity just before the ex-dividend date if the dividend amount is significant?", "Thanks for your kind words.", "With respect to shorting just before ex-dividend..its not so easy. Think about it, everybody attempts to do the same \ud83d\ude42", "Not clear. Please elaborate.", "When dividends are expected, the stock tends to dip to the extent of the dividend paid. This is a known fact and there is no edge shorting based on this expectation.", "This is not the correct explanation Karthik. When you are shorting a cum-dividend stock and squaring off when the stock goes ex-dividend, you need to square off with the ex-dividend stock plus the dividend amount. Since you have to pay the dividend amount as well to square off, there is no gain.", "To sell short you first must set up a margin account with your broker. A margin account allows you borrow from your brokerage company using the value of your portfolio as collateral. The general rule is that the value of your portfolio must equal at least 50% of the size of the short sale transaction. In other words, If you have Rs. 100,000 worth of stock/cash in your margin account, you can borrow Rs. 200,000 of stock to sell short.", "Prateek \u2013 are you talking about shorting in the spot or Futures market?", "So what Prateek says, is it correct?", "How to keep a track or get to know about these dates in specific?", "You will have to follow the news, Rakesh.", "dear sir its my humble request to you plz provide ( I P O ) facility in zerodha its self only this what we are missing for example i cant apply ipo from zerodha every time i need to go netbanking ..etc\u2026", "Narendra, this is the only way for now \u2013 https://support.zerodha.com/category/trading-and-markets/corporate-actions/articles/how-to-apply-for-ipos-and-how-to-stay-informed-of-new-ones", "If someone bought shares of BEL yesterday (27th SEPT). will the shares be delivered with price adjusted for ex bonus. I mean deliveries for BEL yesterday were at 60% so all those who bought were already aware that tomorrow price will go down 10%.. so why they\u2019d take such a risk ?\nI\u2019m thinking that during delivery of these shares the price should be adjusted to ex bonus.. or is it not ?", "Thanks in advance for the info.\nCheers!", "Its not really a risk as the prices are adjusted to the extent of bonus. SO there is no risk.", "how much time required for bonus share credit in demat account. ?", "Pradip, it can take upto 15 days to get credited to your DEMAT Account (depends on the RTA handling the company\u2019s shares).\nCheck this article on the Support Portal for more", "I have a question wit regards to dividend\u2026I some where read on google DAT stock price will get reduced to the extent of percentage declared\u2026ex:if 300 price stock company declared 40% of face value 10\u2026den stock price will reduced to 40%..which is Rs.120 \u2026is it true\u2026plz provide some info\u2026thanks in advance", "No, 40% is calculated on the face value. So that would be 40%10 = 4. Hence, the stock price may reduce to 300-4 = 296. However, you may not experience this for small dividend payouts. Happens when large dividends (special dividends) are paid out.", "How can we call the Bonus Issue as a reward to shareholders when the value of investment is not increasing?", "Thanks", "With the Bonus issue the number of shares increases, this means when dividends are issued you earn more money \ud83d\ude42", "Does the Face Value remain the same on bonus issue?", "Yes, it does.", "Karthik. first of all thanks for the info sharing. Really fantastic initiative.\nMy question to your response for\nSo, what is the difference between Bonus issue and Stock Split? seems to be a very thin line.\n1) The value of investment is not increasing in both cases.\n2) The # of shares remains the same", "So the difference is the change value remains same in Bonus issue and reduces in Stock split?", "Bonus issue \u2013 you get additional shares against what you already hold. This is also considered as a dividend in the form of new shares issued. The split is dividing the shares. Both cases number of shares increases, value remains the same.", "Hi,\nThanks for the great initiative by zerodha.\nIts really helpful.\nI have a doubt on these topics- bonus issue and stock split.\nIn both the cases the number of shares we are holding increases but the value remains the same?\nExcept the face value decreases by stock splits.\nAre there any other differences between bonus issue and stock split.\nPlease explain.", "Thanks.", "Yes, the investment value remains the same. In stock split, the Face value reduces and in Bonus issue it does not. In both the cases. This helps in realizing a higher dividend value.", "How does Stock Split and Bonus shares help us realize more dividend value.\nAccording to my understanding,\nConsider before Stock Split FV of a XYZ share is 10. Dividend announced would be 1000% ie Rs 100 per share. After Stock Split FV would be 5 and 2X shares. Dividend announced would be 1000% ie 5210 = 100 for 2 shares. Dividend would not increase right.", "In case of Bonus since FV does not decrease the Dividend realization increases right?.", "That right. Maybe I need to rewrite this bit. But there is another angle here \u2013 capital appreciation, especially for companies with strong capital structure and business model. For example Relaxo Footware was trading around 800 in early 2014..the stock split and the value dropped to 175. The number of shares increased and the stock continued to rally\u2026its back to 800 now, so in the whole process massive wealth has been created. This is one of the advantages of stock split.", "Hi,\n Here I am not able to understand 5210. What is 10 in this case ?", "Face value?", "Hi Karthik,", "Please mention this is the module, in case of stock split the face value also splits, while in case of bonus shares the face value remains the same. Otherwise both look exactly the same just the name difference.", "And thanks I have been confused for a long time about these, only came to know from the comments.", "Is that not mentioned already? If not, I will plug that in. Thanks for pointing, Tanmay.", "\u201cOnly shareholders who own the shares before the ex dividend date are entitled to the dividend.\u201d\nIf I bought the shares 4 days before the AGM and sell on AGM day, still I am entitled to get the dividend?", "No Sir. In fact AGM is when the decision on any corporate actions (bonus, dividend, stock split etc) is taken. For you to enjoy the benefit, you need to be a shareholder by the record date.", "So if I buy it before AGM and sell it after record date, am I eligible for dividend?", "Yes Sir, you will be.", "if I buy shares of company 3 days before record date, am I eligible for bonus issue?", "Yes you will be eligible as long as you hold the company\u2019s shares before the record date.", "Sir, if I buy after AGM but before EX date , then will I get the benfit ?", "Yes, you will.", "How a 5:1 bonus will be issued, if a investor has 4 shares or 21 shares. Do the investor lose benefit for some shares in this case? If so, will that money be moved to share capital from surplus or not?.", "A 5:1 bonus indicates 5 additional shares are being issued for every 1 shares. If the investor has 4 shares (before issue), he would get 20 additional shares, likewise if you held 21 shares.", "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/2014/09/Ch11title.jpg", "https://zerodha.com/varsity/wp-content/uploads/2014/09/dividend1.png", "https://zerodha.com/varsity/wp-content/uploads/2014/09/ch11-diagram.png", "https://zerodha.com/varsity/wp-content/uploads/2014/09/bonus-issue.png", "https://zerodha.com/varsity/wp-content/uploads/2014/09/stocksplit.png", "https://zerodha.com/varsity/wp-content/uploads/2014/09/rightissue1.png", "https://zerodha.com/varsity/wp-content/uploads/2014/09/buyback.png", "https://secure.gravatar.com/avatar/c764e17953e3d52b23a2f64e909a2180?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", 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["<table>\n<tbody>\n<tr>\n<th>Bonus Issue</th>\n<th>No. of shares held before bonus.</th>\n<th>Share price before Bonus issue</th>\n<th>Value of Investment</th>\n<th>No. of shares post Bonus.</th>\n<th>Share price after Bonus issue</th>\n<th>Value of Investment</th>\n</tr>\n<tr>\n<td>1:1</td>\n<td>100</td>\n<td>75</td>\n<td>7,500</td>\n<td>200</td>\n<td>37.5</td>\n<td>7500</td>\n</tr>\n<tr>\n<td>3:1</td>\n<td>30</td>\n<td>550</td>\n<td>16,500</td>\n<td>120</td>\n<td>137.5</td>\n<td>16,500</td>\n</tr>\n<tr>\n<td>5:1</td>\n<td>2000</td>\n<td>15</td>\n<td>30,000</td>\n<td>12,000</td>\n<td>2.5</td>\n<td>30,000</td>\n</tr>\n</tbody>\n</table>", "<table>\n<tbody>\n<tr>\n<th>Split Ratio</th>\n<th>Old FV</th>\n<th>No. of shares you own before split</th>\n<th>Share Price before split</th>\n<th>Investment Value before split</th>\n<th>New FV</th>\n<th>No. of shares you own after the split</th>\n<th>Share Price after the split</th>\n<th>Investment value after the split</th>\n</tr>\n<tr>\n<td>1:2</td>\n<td>10</td>\n<td>100</td>\n<td>900</td>\n<td>90,000</td>\n<td>5</td>\n<td>200</td>\n<td>450</td>\n<td>90,000</td>\n</tr>\n<tr>\n<td>1:5</td>\n<td>10</td>\n<td>100</td>\n<td>900</td>\n<td>90,000</td>\n<td>2</td>\n<td>500</td>\n<td>180</td>\n<td>90,000</td>\n</tr>\n</tbody>\n</table>"], "videos": []}
{"title": "2. Basics", "text": ["India needs help from all of us countrymen in developing a tax culture. The fear of the income tax department can be removed only by gaining knowledge of all the basic rules and regulations. Income tax rates in India have drastically reduced from over 90% in the early seventies to now (2020) where no tax has to be paid on annual income up to Rs 2.5lks. But the apathy of taxpayers towards filing income tax returns and paying taxes continues till today.", "With the systems used by the IT department becoming sophisticated every year, the chances of repercussions in terms of notices and penalties due to non-filing, misfiling, and hiding information while filing your income tax returns (ITR) is going up significantly. Similar to how Income-tax (IT) department has access to all your bank account details, they can also check up on all your capital market activity easily through the exchanges as they are all mapped to your PAN (Permanent account number). With AADHAR slowly getting linked everywhere the day isn\u2019t far when the IT department will be able to send you a consolidated activity (income and expenses) statement, similar to how NSDL/CDSL sends for your holdings across all Demat accounts.", "Check this notice received by a client who hadn\u2019t declared his\u00a0trading activity on commodity exchanges in FY 2012/13. The notice was sent only in 2015 asking for an explanation. Check this link that has a list of various codes in which these notices are sent by the IT department.", "", "Even if the intent is there to be compliant, most people including many Chartered Accountants (CAs) don\u2019t understand the subject of taxation when investing & trading very well. We had put up a blog post, \u201cTaxation Simplified\u201d on Z-Connect many years back simplifying key aspects of taxation for market participants. We received a few thousand queries on that post. Answering all of them it was obvious that we had to do a lot more to simplify all aspects around taxation while trading or investing in the markets, hence this module.", "If you only invest in stocks or mutual funds filing returns is quite simple, but can get tricky if trading intraday stocks or financial derivatives (futures and options).", "We will in this module break all the concepts down into small easy to understand chapters without any of that jargon typically used by CA\u2019s or tax consultants. Here is a sneak peek into what you can expect going forward in this module \u2013", "", "It is a tax levied by the Government of India on the income of every person. The provisions governing the Income-tax Law are given in the Income-tax Act, 1961. In simpler words, Income Tax is a portion of the money that you earn paid to the government of India.", "Why should I pay tax?", "Yes, India does not offer social security and free medical facilities as being provided in some developed countries, but the government needs funds collected as taxes to discharge a number of responsibilities like Government hospitals, Education, National defense, Infrastructure development just to name a few.", "Who is supposed to pay income tax?", "Income-tax is to be paid by every person who earns more than the minimum income slab set by the government. The term \u2018person\u2019 as defined under the Income-tax Act covers in its ambit natural as well as artificial persons (including corporate).", "Only 5 percent of over 130 crore population file income tax returns and only 1.5 crore Indians (<1%) pay any income tax. If you had to compare, over 45% of the population in a developed economy like the U.S.A pay taxes. Part of the reason for such an abysmally low number is also because many Indians don\u2019t earn enough to qualify to pay income tax, but the larger factor has got to do with a lack of tax culture.", "Taxes have to be paid based on how much income you earn every financial year. The financial year in India starts from April 1st and ends on 31st March. Do note that year can be specified either as a financial year (FY) or assessment Year (AY).", "FY is used to denote the actual year the income was earned for which you are filing taxes. So FY 2019/20 is the financial year starting April 1st, 2019, and ending 31st March 2020.", "AY is used to denote the year in which you are supposed to file your taxes. So AY 2020/21 is the year when you file the returns for income earned in FY 2019/20. So AY 2020/21 and FY 2019/20 are one and the same. So you will use ITR with AY 2020/21 on it to file your taxes for the income earned in the financial year starting April 1st, 2019, and ending 31st March 2020.", "All Indians have to pay taxes on the total income earned every year as per the below tax slabs they belong to. If you are salaried, your employer would already be paying taxes on your behalf to the government and issuing you a \u2018Form 16\u2019 as an acknowledgment for having paid the taxes. Your employer will not have access to all your sources of income, like bank interest, capital gains, rental income, and others. You are supposed to use the form 16, add all your other income, calculate and pay any additional tax, and file your income tax returns before due date every year. The tax slab for individuals (FY 20/21) is as below \u2013", "Individual (age upto 60 years)", "Senior citizen (age 60 to 80 years)", "Super senior citizen (age 80 years and above)", "If total income between Rs 2.5 to Rs 5lks, you can claim for the 5% tax rebate and effectively paying zero tax.", "Surcharge for all the above age groups: \u00a010% of income tax if income between Rs 50lks to Rs 1 crore. 15% if income between Rs 1 Crore to Rs 2 crores. 25% if income between Rs 2 crores to Rs 5 crores. 37% if it exceeds Rs 5 crores.", "Budget 2020 has introduced a new tax regime where the taxpayer has an option to decide either to pay taxes as per the above slabs claiming the various deductions (eg. Investment in ELSS, House rent allowance, etc) or let go of all deductions and opt-in for the below tax slabs. The surcharge as applicable above.", "", "From the next chapter, we will start focusing in detail on all aspects of taxation when trading and investing in the markets.", "Disclaimer \u2013 Do consult a chartered accountant (CA) before filing your returns. The content above is for your general knowledge only. Content meant for Individual retail investors/traders in India.", "It\u2019s really a great topic and very helpful and need full for every traders n investors n all, Thnq \ud83d\ude42", "very thoughtful, well researched and informative acticle.\nkudos to you nithin!!!\nthanks a million", "Sir\nSimple to understand.thank u", "Whether the previous FY\u2019s unknowingly left out other ncome shall be taken for consideration in the present FY?", "Tax slabs are different for women, correct me if i am wrong.", "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/whytax1-911x1024.jpg", "http://zerodha.com/varsity/wp-content/uploads/2015/06/M7-C1-cartoon1.png", "https://secure.gravatar.com/avatar/060c131e968e679723599d57a2f15405?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/8e1eb226cada2a00086ea9532101f091?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/49b65a6ef1c77a484c5c5e6df0372b64?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/fe5cb93fda075eadebc0644dbe7508ed?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/d4c41b280b32548ee1b6dbe1c512c9c5?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>Income slabs</th>\n<th>Tax Rates</th>\n</tr>\n<tr>\n<td>0 \u2013 Rs 2.5lks</td>\n<td>NIL</td>\n</tr>\n<tr>\n<td>Rs 2.5lks \u2013 Rs 5lks</td>\n<td>5% of the amount by which income exceeds Rs 2.5lks.</td>\n</tr>\n<tr>\n<td>Rs 5lks \u2013 Rs 10lks</td>\n<td>Rs. 12,500 + 20% of the amount by which income exceeds Rs 5lks</td>\n</tr>\n<tr>\n<td>10lks and above</td>\n<td>Rs. 112,500 + 30% of the amount by which income exceeds Rs 10lks</td>\n</tr>\n</tbody>\n</table>", "<table class=\"tableizer-table\">\n<tbody>\n<tr class=\"tableizer-firstrow\">\n<th>Income slabs</th>\n<th>Tax Rates</th>\n</tr>\n<tr>\n<td>0 \u2013 Rs 3lks</td>\n<td>NIL</td>\n</tr>\n<tr>\n<td>Rs 3lks \u2013 Rs 5lks</td>\n<td>5% of amount by which income exceeds Rs 3lks.</td>\n</tr>\n<tr>\n<td>Rs 5lks \u2013 Rs 10lks</td>\n<td>Rs. 10,000 + 20% of the amount by which income exceeds Rs 5lks</td>\n</tr>\n<tr>\n<td>10lks and above</td>\n<td>Rs. 110,000 + 30% of the amount by which income exceeds Rs 10lks</td>\n</tr>\n</tbody>\n</table>", "<table class=\"tableizer-table\">\n<tbody>\n<tr class=\"tableizer-firstrow\">\n<th>Income slabs</th>\n<th>Tax Rates</th>\n</tr>\n<tr>\n<td>0 \u2013 Rs 5 lks</td>\n<td>NIL</td>\n</tr>\n<tr>\n<td>Rs 5lks \u2013 Rs 10lks</td>\n<td>20% of the amount by which income exceeds Rs 5lks</td>\n</tr>\n<tr>\n<td>10lks and above</td>\n<td>Rs. 100,000 + 30% of the amount by which income exceeds Rs 10lks</td>\n</tr>\n</tbody>\n</table>", "<table>\n<tbody>\n<tr>\n<td><span style=\"font-weight: 400;\">0 \u2013 Rs 2.5lks</span></td>\n<td><span style=\"font-weight: 400;\">NIL</span></td>\n</tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Rs 2.5lks \u2013 Rs 5lks</span></td>\n<td><span style=\"font-weight: 400;\">5% of the amount by which income exceeds Rs 2.5lks.</span></td>\n</tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Rs 5lks \u2013 Rs 7.5lks</span></td>\n<td><span style=\"font-weight: 400;\">Rs. 12,500 + 10% of the amount by which income exceeds Rs 5lks</span></td>\n</tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Rs 7.5lks \u2013 Rs 10lks</span></td>\n<td><span style=\"font-weight: 400;\">Rs. 37,500 + 15% of the amount by which income exceeds Rs 7.5lks</span></td>\n</tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Rs 10lks- Rs 12.5lks</span></td>\n<td><span style=\"font-weight: 400;\">Rs. 75,000 + 20% of the amount by which income exceeds Rs 10lks</span></td>\n</tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Rs 12.5lks- Rs 15lks</span></td>\n<td><span style=\"font-weight: 400;\">Rs. 1,25,000 + 25% of the amount by which income exceeds Rs 12.5lks</span></td>\n</tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Above 15lks</span></td>\n<td><span style=\"font-weight: 400;\">Rs. 187,500 + 30% of the amount by which income exceeds Rs 15lks</span></td>\n</tr>\n</tbody>\n</table>"], "videos": []}
{"title": "14. Iron Condor", "text": ["These are fascinating times we are living in, especially if you are an options trader in India \ud83d\ude42", "Starting 1st June 2020, NSE\u2019s new margin framework is live, which essentially brings down the margin requirement for the hedged position.", "What is a hedged position you may ask? Well, we have discussed this several times in this module, but for the sake of completeness of this chapter, we will quickly discuss this again.", "Assume you are riding a bike at 75Kms per hour, without wearing a helmet. Suddenly you come across a pothole, you slam the breaks to cut speed, but it\u2019s too late, you crash and fall.\u00a0 What is the probability of injuring your head? Quite high given the fact that you are not wearing a helmet.", "Now imagine the same situation, but instead of being carefree, you decide to wear a helmet. Given the crash, what is the probability of injuring your head? Low probability, right? Because the helmet protects you from an injury.", "", "The helmet acts as a hedge against a potential disaster.", "In the same way, a naked futures or options position in the market is like riding a bike without wearing a helmet. The risk of market-moving against your position, causing capital erosion is high.", "However, if you hedge your position, then the risk of losing capital reduces drastically.", "Now, think about this \u2013 if your capital loss is minimal, then it implies that the risk for your broker is also minimum right? Now, if the risk for the broker reduces, it also means the risk for the exchange reduces.", "So what does this mean to you as a trader?", "Remember, the critical margin dynamics \u2013 the lesser the risk you carry, the lower the margin requirement. Higher the risk, higher the margin requirement.", "Therefore, this means whenever you initiate a hedged strategy, the margins blocked by your broker is less compared to the margin required for a naked position.", "In essence, NSE has proposed the same in the new margin framework.", "You can check this presentation by NSE for more details.", "The presentation is quite technical; you do not have to crack your head to understand this unless you really want to.", "From a trader\u2019s point of view, there are three key takeaways from the new margin policy; all the three highlighted in 1 slide of this presentation, here is a snapshot \u2013", "", "Starting from the top \u2013", "What does this mean to you as an options trader?", "Well, some of the useful strategies, which looked great on paper but were prohibitive to implement due to excessive margin requirement, now look enticing.", "A trick question for you here \u2013 why do you think the margin reduction is higher for spread position compared to a neutral market position?.", "Do think about it and post your response in the comment section.", "So given this, I want to discuss one more options strategy in this module, I had not discussed it earlier since the margin requirement was very high, but now, it\u2019s no longer the case.", "The iron condor is a four-legged option setup. The iron condor is an improvisation over the short strangle.", "Have a look at this \u2013", "", "I\u2019ve taken this snapshot from Sensibull\u2019s Options Strategy Builder. As you can see, Nifty is at 9972.9, and I\u2019m trying to set up a short strangle by shorting OTM calls and puts \u2013", "Since both the options are written/sold, I get to collect a total premium of 164.25+145.25 = 309.5.", "For those of you not familiar with the strangles, I\u2019d suggest you read through this chapter.", "The pay off for this short strangle set up is as follows \u2013", "", "I love this strategy because it lets me retain the premium as long as Nifty stays within a range, which most often it does. Besides, this is also a great way to trade volatility. Whenever you think the volatility has shot up (usually it does around big market events) and therefore the option premiums, then you\u2019d want to be an options seller and pocket the high premiums. Short strangles is perfect for such trades.", "In a short strangle, since you sell/write options, it results in a net premium credit. In this case, you get a premium of Rs.23,288/-.", "", "The only issue with short strangles is the exposed ends. The strategy bleeds if the underlying asset moves in either direction.", "For example, this particular short strangle has a range of safety between 9490 and 10411.", "I agree this is a wide enough range, but markets have taught that it can make crazy moves within a short period. Most recent being the COVID-19 crash in early 2020 followed by quick recovery from the lows.", "If you are caught with such a rapid market move, the potential loss can be colossal and can wipe your account clean. Now, because the possible loss is unlimited, this means the risk to you and the broker is quite high. Eventually, this translates to higher margins as well \u2013", "", "The margin to set up a short strangle is nearly 1.45L, which is quite prohibitive for many traders.", "However, this does not mean that you have to say goodbye to a short strangle. You can improvise on the short strangle and set up an iron condor, which in my opinion is a far better strategy.", "An iron condor improvises a short strangle by plugging in the open ends. Think of an iron condor in 3 parts \u2013", "This makes an iron condor a four-leg option strategy. Let us see how this looks \u2013", "The trade setup looks like this \u2013", "", "If you think about this, the short option premium collected finances the long option positions.", "Since you buy two options to protect against two short options, the profit potential reduces to a certain extent \u2013", "", "As you can see, the max profit is now Rs.9,634/-, but the reduced profit comes with reduced stress \ud83d\ude42", "The max loss is no longer unlimited but restricted to Rs.5,366, which in my opinion is awesome because I now have visibility on risk and it is not open-ended.", "The profit is restricted, as long as Nifty stays within a range, in this case between 9672 and 10228. Notice, the range has shrunk compared to the short strangle.", "The payoff of an iron condor looks like this \u2013", "", "Now, what do you think about the risk? The risk here is completely defined. You have clear visibility on the worst-case scenario. So what does it mean to you as a trader, and what does it mean to the broker?", "You guessed it right since the risk is defined, the margins are lesser.", "", "This is where the new margin framework of NSE comes into play. An iron condor requires you to pay an upfront margin of only Rs.44,303/-, contrast this with the short strangle\u2019s margin requirement of Rs.1.45L.", "Besides, before the new margin framework, executing an iron condor was not very viable for a retail trader. For these strikes and premiums, the margin requirement for an Iron Condor was roughly in the range of 2 to 2.2L.", "There are a few important things you need to remember while executing an iron condor \u2013", "I\u2019d suggest you look at the excel sheet at the end of this chapter for detail working of this. Please note, I have updated the excel sheet 2 days after I wrote this chapter, hence the values are different.", "By setting up a short strangle, you receive a premium of Rs.23,288/- and for the iron condor, the premium receivable is Rs.9,643/-. Agreed, in terms of absolute Rupees, the iron condor offers a far lesser premium inflow. But when you measure this against the margin requirement, the ROI flips in favour of the Iron condor.", "Short strangle requires a margin of Rs.1,45,090/-. Therefore the ROI is \u2013", "23,288/1,45,090", "=16%.", "The margin requirement for iron condor is Rs.44,303/-. Therefore the ROI is \u2013", "9,643/44,303", "= 21%", "As a trader, you need to think in terms of ROI and not absolute numbers, and the margin benefit makes a significant difference here.", "The sequence of trade execution makes a big difference here. If you are considering an iron condor, then here is the trade sequence \u2013", "The point here is that you need to have a long position first before initiating the short position.", "Why? Because short option position is a margin guzzler, so when you have a long position, the system knows the risk is contained and hence will ask you for lesser margins for the short position.", "Please note, I\u2019ve only considered the margin blocked for the ROI calculation, I\u2019ve not considered the money paid to buy the options and the money received when you write an option.", "So traders, as a next step, I\u2019d urge you to select different strikes for the long positions and see what happens to the premium receivable, breakeven points, and the max loss.", "Do post your observation and queries below.", "Download Iron Condor Excel Sheet", "If the trade is going in the direction desired, should te the whole trade be just left to expire ..till June end , meaning just let them expire..all 4 legs ?? Kindly clarify", "Yes, that\u2019s when you\u2019ll get to squeeze out the entire premium. Btw, there is no desired direction here \ud83d\ude42", "hi karhik.iron condor is better over short strangle.would u plz highlight on iron butterfly.", "I\u2019ll try and do that sometime soon.", "Thank you for Iron Condors.. It was today only that I was looking forward to studying Iron Condors. What a coincidence \ud83d\ude00\nRegarding the trick question, the Put Call Parity Arbitrage, even though has a synthetic long and short futures position, there is still 1 short put and 1 futures short, both of which will require big margins when done naked. Due to the volatility in market and M2M everyday, higher margin is required for these 2 positions than just 1 short position on calls in the Bull Call Spread.\nAm I correct?", "That also. The main thing is that the delta-neutral strategy may not remain delta neutral if the market start to move in a particular direction. These positions need constant adjusting to make it remain delta-neutral. The example highlighted here may not be the best for what I just said, but something thing like a straddle and strangle is.", "And the payoff of market neutral is actually zero (not considering transaction costs) when held till expiry.. Also more scope to exit out of 1 leg of a trade. If getting out of the bought call prematurely, then short put and short futures both have risk to the downside and it won\u2019t be a hedged position anymore", "Pay off is not zero. I mean why would you want to initiate a strategy if the pay off is zero right? The pay off is the difference in spread. The risk of exiting one leg remains with other spread as well.", "Not sure why this did not come as a reply to previous comment", "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. 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{"title": "2. Who can raise funds on SSE?", "text": ["Now that you\u2019ve understood what a social stock exchange is from the first chapter let\u2019s dive into what kind of entities can get on the platform.", "The concept of allowing social entities to raise funds through a stock exchange is a game-changer. Not only does it offer entities access to a wider pool of potential donors, it also gives investors an assurance that their money is being put to good use.", "Getting access to public markets means taking up some grown-up responsibilities. With increased transparency and disclosure requirements, the entities will now be accountable to investors for the ultimate usage of funds.", "As per Sebi, two types of entities \u2013 non-profit organizations (NPOs) and for-profit social enterprises (FPEs) \u2013 can list on the social stock exchange. For your reference, you may check the NPOs listed on NSE here.", "Unlike some other countries, where they keep NPOs and FPEs separate, India offers both these entities a shared platform.", "", "Now, you might be thinking, \u201cHold up, why are we letting those profit-making entities (FPEs) join the social stock exchange?\u201d Well, that\u2019s the same question Nithin Kamath from Zerodha asked Hemant Gupta, head of BSE Social Stock Exchange.", "Gupta said that FPSEs are becoming an integral part of the social development in India and excluding them would make the social stock exchange incomplete. \u201cFurther, when non-profit and for-profit organizations come together, they can deliver far more impact than either one of them can do individually,\u201d he replied.", "Both NPOs and FPEs put together are called \u2018social enterprises (SEs).\u2019", "To get on to SSE, they have to show that social intent and impact are its primary goals. There is a checklist to prove that.", "Firstly, the entity has to engage in at least one of the 16 welfare activities that the regulator suggests. We are talking about things like eradicating hunger, promoting education, and promoting livelihoods for rural and urban poor. You can check the list of 16 themes here in the table.", "", "*As and when the list is updated, the eligible activities for social enterprises also changes", "Two, the entity must target an underserved or less privileged population. Or it could be regions that have recorded lower performance in the development priorities of the government.", "Now, the third one is the real test. The entity should prove that it has been earning its revenue from or spending money on those who really need it.", "How, you ask? There are again a few metrics to check-", "About two-thirds of the entity\u2019s average revenue in the preceding 3 years must come from providing welfare activities to the target population. The welfare activity must be part of one of the 16 themes mentioned above.", "Or, it has to show that two-thirds of their expenditure, as calculated above, was spent towards the welfare of the target population.", "Or, there\u2019s one more card in the deck. The entity can prove that the welfare activities were provided to a population that makes up about two-thirds of their targeted customer base/beneficiaries.", "Pretty long list, huh? There are other conditions as well for an NPO and FPE separately.", "NPO, for example, has to be in existence for three years. It should have been registered as a trust, society, or a Section 8 company under the Companies Act 2013 or as stated. It has some minimum fund-raising (\u20b950 lakh) and spending requirements as well.", "On the other hand, FPE has to meet all the eligibility criteria that any other commercial entity does. It can be listed either on the main board or SME platform (Small and Medium Enterprises) or Innovators Growth Platform for young fast-growing companies.", "Sebi wants to make sure there are enough safeguards and no illegal or bogus company raises funds from the social stock exchange. After all, investor protection is one of the principles on which the regulator functions.", "Back to eligibility criteria, a few entities, despite having a social intent, cannot become part of the SSE platform. Think political or religious organizations, professional or trade associations, and infrastructure and housing companies (except affordable housing). Even corporate groups that are mostly funded by their parent companies don\u2019t make the cut.", "Keep in mind that some of these conditions could be tweaked as the SSE keeps growing and shaping up.", "Investors will be able to differentiate between an NPO and an FPE entity on the social stock exchange, as they would be labeled differently.", "To step onto the Social Stock Exchange (SSE), NPOs need to go through a registration process, unlike FPEs, who can jump right in for listing.", "FPE has the flexibility to list its securities on the main board, SME platform, or startup platform and raise funds.", "On the other hand, once NPOs are registered on the SSE, they can choose whether or not to raise funds.", "Remember, for most NGOs, funding is required at a project level. Whenever they want to raise funds for specific projects, they can do so by filing paperwork each time.", "You might ask, \u201cWhy bother with registration for NPOs then?\u201d", "The reason for registering is because NPOs can be familiarized with the rules of public fundraising. By registering, NPOs all agree to follow the same legal rules and it pushes them to be more open about how they get their funds. For-profit organizations would already have some idea of what listening means and what it entails.", "Registering serves as a good transition for NPOs, especially the smaller ones. Even if they don\u2019t plan on listing anything right away, registering shows off their intent of social development to the public. Periodic disclosures and assessments also help improve governance in these organizations. Of course, this all comes with some extra compliance costs.", "The registration for an NPO is valid only for 12 months and can be renewed based on meeting the eligibility criteria each year.", "", "Once onboarded, NPOs and FPEs can raise funds using different instruments/modes such as \u2013 ZCZP bonds (Zero Coupon Zero Principal), donations through mutual funds, development impact bonds, and social impact funds \u2013 which we will discuss in the next chapter.", "Dear sir/ma\u2019am,", "The content is great as usual. To the point & crisp.", "But it\u2019s my earnest request to update the varsity app with the new modules present in website.", "Regards\nDipanjan Paul\n9123061717", "Thank you, Dipanjan. \ud83d\ude42 We shall upload the modules on the app once they are complete. Apologies for the inconvenience.", "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. 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{"title": "12. Hotels (Part 1)", "text": ["The past few chapters have been about heavy industries \u2013 cement and steel, banking and insurance. These are the building blocks of an economy. We will study more building blocks, but let\u2019s slow down a bit. Let\u2019s explore a few sectors that are indicators of an economy\u2019s growth and prosperity.", "We will explore the analysis of the hospitality sector, more specifically, the hotel industry. How can hotels indicate economic prosperity? Hotels are essentially a discretionary spend. People spend on hotel stays after they have fulfilled their necessities. When more and more consumers can spend on things other than necessities, the economy is said to be growing. Remember how consumers continued to spend on groceries but stopped traveling during the Covid lockdowns?", "As I write this chapter towards the end of 2023, hospitality is said to be the strongest employment generator, as other sectors are going through a slowdown. Post-Covid travel boom, destination weddings, business travel and events, and the opening up of new airports under the UDAN scheme are all said to be the demand drivers for hotels and hospitality at large.", "", "Hotels are a service industry. Unlike salons, movies, laundry, or plumbing, where a service could take only a few hours, hotels offer a longer form of service that could last a day, a few days, or even weeks. Therefore, the sector harbors some peculiar features.", "People-intensive \u2013 Hotels are people-intensive on both customer and employee fronts. How customers experience their stay can determine whether they would like to return in the future.", "Throughout their stay, a customer would interact with the valets, security guards, receptionists, concierge, bellhop, butlers, servers, and housekeepers, among others. Each of these professionals has different skills. Each one of them is expected to have great soft skills too.", "For that, employees have to be adequately trained in their respective responsibilities. Keeping employees motivated in the hotel industry is a challenge. Angry or demanding customers could hurt employee morale. Training them to handle such situations is imperative.", "You will notice that these aspects are qualitative. There are ways to measure customer satisfaction, but none is definite. Every hotel or organization will have its own way of measuring customer satisfaction. Two customers can rate the exact same experience differently.", "The involvement of so many people in delivering a service makes it an operational challenge. Margins are difficult to maintain. Large hotel chains become large by establishing standard operating procedures and controlling wastage and costs.", "Experience is the product \u2013 Like any service industry, a hotel stay is an experience. And experience is an outcome of several elements \u2013 decor, staff demeanor, staff\u2019s level of knowledge, quality of the bed, cleanliness of the room and common areas, goodies or freebies in the room, facilities on the property, etc.", "Again, the effectiveness of all these offerings may be difficult to measure but they do collectively build a customer\u2019s experience. Certain offerings may improve customer experience while others may not. The factors that do not improve experience are very important. They are the bare minimum factors. For example, having drinking water in the room does not improve your experience, but not having it could seriously annoy you.", "As the price point inches up, the level of the bare minimum also moves up. As more hotels start offering added services, very soon, those services will become the standard norm or bare minimum. Therefore, hotels charging a high price must keep innovating to augment and differentiate customer experience.", "Offering differentiated experiences comes at a cost. Employee training also has to be more frequent and regular. Experiences can drive revenues as well as costs. In doing so, an efficient business is one that can balance profits.", "New daily inventory \u2013 Suppose your local fruit vendor intends to sell 50 kilos of fruit every day. But today, he could sell only 40 kilos. He can try to sell the remaining 10 kilos the next day on top of the daily target of 50 kilos. He might even succeed. Can the same happen with a hotel? If a hotel with 50 rooms could sell only 40 rooms in a day, it cannot sell 60 rooms the next day. The next day\u2019s inventory will again be 50 rooms only. This is similar to airlines \u2013 unsold seats cannot be carried forward to the next flight.", "However, only room inventory gets reset every day. Most other things and services that a hotel sells are not limited by a daily inventory. Restaurants can sell more food than their tables can accommodate by offering deliveries and room service.", "Seasonal business \u2013 Children\u2019s vacations, wedding season, monsoons, festivals, etc., are major determinants of the level of business a hotel will get. Families often plan their holidays during their children\u2019s vacations. Hotel properties in tourist destinations often see a large influx of customers around vacations. Rooms rates also surge accordingly.", "Most weddings in India take place between November and April. Destination weddings have also become popular. Therefore apart from driving the demand and prices of banquet halls and party lawns, weddings also boost the demand for hotel stays. Increasingly, most large hotels now have wedding venues as part of their offerings.", "Many tourist destinations are open only for a few months during the year. Ladakh, Kedarnath, Badrinath, and Doodhsagar are some examples. Hotels in such places do not have business all year round.", "Seasonality may often be reflected in the quarterly revenues of the businesses most affected by it. To mitigate this, hotels offer special discounts on room stays. The idea is to offer cheaper rooms and get customers to spend on food and beverages. Price competition is usually high in a dull season.", "There are businesses that enlarge their target market by altering their offerings and marketing efforts. I am talking about Airbnb here. By popularizing homestays, Airbnb practically created this working class of people who call themselves \u201cdigital nomads\u201d. They travel places for weeks and months. They work out of Airbnb\u2019s homestays. Then the terms \u201cstaycation\u201d and \u201cworkcation\u201d came up.", "This new category of travellers inspired conventional hotels to offer similar arrangements. Boutique and business hotels started offering weekly and monthly plans. Lemon Tree is now offering \u201cday-cation\u201d or day rooms between 7.00 am and 5.00 pm.", "These innovations in room plans, price points, and overall offerings are meant to improve the return on asset ratio. The next point discusses this extensively.", "Capital-intensive \u2013 Picture this. There is a wedding in your family. You will probably be buying clothes, gifts, and jewellery worth lakhs. You and a few family members would spend a few hours at each store choosing and buying these things.", "It is going to be a destination wedding. The stay and wedding venue at a hotel will also cost lakhs. The hotel stay would be for a few days. You will need rooms for your guests and venues for all rituals and functions.", "The point I am trying to make here is that the hotel will need much more space to deliver its offerings. This space, or real estate, is often a fixed cost. Space requirements are relatively smaller for a store.", "Therefore, return on assets, or return on fixed assets, is an important metric for hotels. Hotels will always try to maximize their revenue per square foot to improve their return on asset ratio. They offer many add-on services to get their customers to spend more. Salons, spas, fitness classes, drawing classes for kids, bicycle rentals, gaming centers, etc., are a few such services I can think of. There can be many more.", "A fixed-cost business often has a long gestation period. This means that if you are looking to develop a new resort, it could take a few years between the time you buy a land parcel, begin construction, and start serving customers. The money you employ will yield no returns for these years. Ratios such as return on equity and assets are impacted.", "Many hotel chains run a mix of owned, managed, and franchised properties. There are various combinations. Let us see a few examples to understand these types of properties.", "Managed or franchised properties enable a hotel company to grow its capacity without investing much in fixed capital.", "If a large chunk of properties are owned, the chances of high debt on the balance sheet are also high.", "Large unorganized sector \u2013 According to an estimate from Nov-2022, about 1.5 lakh hotel rooms are in the branded category or organized sector. Compared to that, independent hotels in the unorganized sector collectively had 29 lakh rooms. The unorganized sector may have rooms ranging from economy to luxury. Therefore, the level of competition arising from the unorganized sector may be difficult to ascertain. Nevertheless, the organized sector can attract more customers by virtue of their brands.", "Having discussed these features, we are all set to dive into the key performance indicators of the hotel industry. But I will take it up in the next chapter for the sake of brevity.", "Few months ago i requested for this, thank you!", "Happy learning \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. 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{"title": "13. Hotels (Part 2)", "text": ["I was once talking to someone researching the brand position of five-star hotels in India. And it occurred to me that while people may not be able to use or afford to stay at luxury hotels, they are still aware of some names. These names carry aspirational value for them. They might want to visit such five-star hotels with their first salary, on a date, or for some special occasion.", "In the previous chapter, I spoke of hotels selling experiences and not just rooms or food. The price they charge is for the richness of experience they provide. To be able to afford that experience is a matter of pride for most. Hotels have to live up to the feeling of pride customers expect to have.", "You could form a judgement of how well a hotel company is delivering experiences by studying the key performance indicators of the industry.", "", "Considering the industry\u2019s peculiar features and the existing generally accepted standards, I have collated this checklist that one could use when analyzing the industry.", "You will see in the table below that I have collated these numbers for different segments of hotels \u2013 five-star hotels, operators of five-star hotels, business or boutique hotels, and even a vacation seller. In your analysis, try comparing companies within the same segment.", "Let me reiterate that this checklist must be used along with fundamental analysis and valuation models for holistic research of the hotel industry.", "", "Number of properties \u2013 This is a good proxy for understanding how geographically distributed a hotel company\u2019s operations are. A large number can help cushion the financial performance against seasonality. Seasonality bears on different regions at different times and in different ways. Impact on properties in one region can be compensated for by properties in other regions.", "If a hotel company offers hotels in various categories, you can try to break this number down to understand its composition. For example, IHCL offers Taj branded luxury hotels, Vivanta branded premium hotels, Ginger branded business hotels, and Seleqtions branded experiential hotels. Such a hotel portfolio enables IHCL to cater to luxury tourism, business travel, wedding tourism, etc.", "Number of keys \u2013 This is basically the number of rooms. So why not call it rooms? A suite or villa having multiple rooms for group travellers cannot be called a room. But such suites or villas are sold as a single unit. Hence, to avoid confusion, they are called keys.", "Hotel properties with a larger number of rooms (or keys) have certain advantages \u2013 they can host conferences or weddings having large numbers of guests. Too many rooms can also become a fixed cost burden if there is not enough demand.", "Having a large number of rooms also adds to the grandeur and aspirational value of a hotel.", "Occupancy rate \u2013 If a hotel with 200 available rooms has guests in 150 rooms today, it is said to have a 75% occupancy rate today. The occupancy rates that hotels report are aggregated for the whole year for all properties collectively. Let\u2019s go step-by-step.", "A higher occupancy rate is better. It might be practically impossible to have a 100% occupancy rate. A hotel with 30-40% occupancy can also be profitable if it can charge a high price and control costs. However, comparison of occupancy with peers gives a better perspective on how well a hotel company is doing to attract customers.", "Improving occupancy rates year after year could suggest improving brand strength. A declining occupancy rate could also result in deteriorating financial performance.", "Average Daily Rate (ADR) \u2013 It is the total room revenues divided by the total number of rooms sold.", "Let\u2019s carry forward with the example of the occupancy rate. The hotel company had sold 5,00,000 room nights during the year. Assume that it earned \u20b9315 Cr in room revenues. So, its ADR would be \u20b96,300 (\u20b9315 Cr / 5,00,000 room nights).", "Improving ADR year after year implies improving revenue per square foot. How is ADR growth better than revenue growth? Revenues could grow by adding more rooms. In fact, revenues could improve even when ADR is falling. It will be using more assets to generate the same level of revenue. This may not be an optimal situation for the hotel. Let us look at a few examples in this table.", "", "Example 1 is what I used to explain ADR. Let us take that as the base example, and we will build upon that.", "Comparing ADR with peers shows a hotel company\u2019s pricing power. Stronger pricing power is usually an outcome of a strong brand. However, ADR must be analyzed deeper. Lemon Tree offers mid-priced rooms. Its ADR will be lower than that of EIH, which operates in the luxury segment.", "For a hotel\u2019s management, ADR can help make business decisions. A study of ADR across quarters can help identify the impact of seasonality. Accordingly, the management can devise promotional or pricing strategies.", "Revenue Per Available Room (RevPAR) \u2013 It is the total room revenues divided by the total number of rooms available.", "Let\u2019s alter the previous example in the following table to understand RevPAR better.", "", "Here again, example 1 is the base, and we will build scenarios on top of it. I have added the occupancy rate in this table to give more context.", "In simple terms, ADR and occupancy rate positively impact RevPAR.", "Note that RevPar will usually be lower than ADR because the occupancy rate is generally less than 100%. The number of rooms available will be more than the number of rooms sold.", "The ratio of room revenue to other sources \u2013 Hotels charge their customers for the multiple services and experiences they offer. Restaurants, spas, salons, laundry, cabs, etc, are all sources of revenue on top of room revenues. A higher share of revenue from other sources indicates that customers like and are willing to spend on other services and experiences.", "In dull seasons, a hotel may offer big discounts to attract customers. The idea is to earn revenues by getting them to spend on other services and experiences.", "EBITDA \u2013 EBITDA is Earnings Before Interest, Tax, Depreciation, and Amortization. We have learned this is Fundamental Analysis. So why am I discussing this here?", "We know that hotel companies use various combinations of portfolio ownership. Some properties are owned, and some are leased, managed, or franchised. A company having mostly owned/leased properties will tend to have a higher asset base and, hence, a higher depreciation charge on the P&L. A company using borrowed funds to acquire or develop properties will tend to have a higher interest charge on the P&L.", "Let\u2019s look at these two hypothetical companies, A and B.", "", "While both A and B have the same level of revenues and expenses, B has higher profits because it does not own the properties. A\u2019s profits are lower because it has taken loans to own properties.", "This is a very simplistic example. B could have higher operating expenses due to the rent it would pay to acquire the property. It could also have a revenue-sharing arrangement with the property owner.", "The point here is to establish an apple-to-apple comparison between peers and not just to compare their reported profits.", "Many moving parts work in tandem to deliver service in the hotel industry. Experiences are crucial but difficult to quantify.", "Differentiated services improve brand strength. Brand strength improves KPIs. Strong KPIs should ideally lead to robust financial performance. This is where management acumen becomes important. As someone studying the industry, your ability to identify quality management will set your analysis apart.", "very insightful information. gald to be part of zerodha\nIts my sincere request that if you give Information about how to analyse Retail and Fashion industry in the upcoming chapters", "Thank you, Reethesh, for the suggestions. Will try to cover them soon. \ud83d\ude42", "This will be all our more sector will be coming up?", "Yes, we will add a few more sectors \ud83d\ude42", "When will we get pdf from trading module", "Hi, we will release the pdf version once the module is complete. We still have to add a few more sectors. \ud83d\ude42", "great initiative\u2026.", "Thank you:)", "Hello Vineet,\nJust wanted to know if you will cover the Infra Theme & if so tentatively when?\nAnd btw Thank You soo much for this beautiful module.", "Thank you, Omkar. \ud83d\ude42\nI will be covering FMCG, retail, and energy sectors next. Can cover infrastructure after that. It will take a few months as there other projects running simultaneously.", "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/2023/12/Group-744.png", "https://zerodha.com/varsity/wp-content/uploads/2023/12/The-hotel-checklist.png", "https://zerodha.com/varsity/wp-content/uploads/2023/12/ADR.png", "https://zerodha.com/varsity/wp-content/uploads/2023/12/RevPAR.png", "https://zerodha.com/varsity/wp-content/uploads/2023/12/Hotel-EBITDA.png", "https://secure.gravatar.com/avatar/155c33b6e82ce13e7c3d6a6a5b5cacf8?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/58e5d37c0f71f8d04342cc6714d49d60?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/eee276301d61876d533144e0aafe5721?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f59b09b05f1aa23a6f517fe5d37960ca?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/fd1964c23c6a7e632ae645bbdad82cc1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?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": "3. Modes of raising funds (Part 1) : ZCZP and other instruments", "text": ["In the previous chapter, we discussed who can raise funds on SSE. Here, we discuss the various modes of raising funds.", "What do companies do when they want to raise funds from the public? They may issue fresh equity shares, or they may also issue bonds/debentures in the form of a loan.", "The public subscribes to these offerings because they expect to receive investment returns.", "However, when we invest in companies listed on the social stock exchange, the returns may not be monetary; instead, they come as social impact returns. Your investment may also be considered a donation.", "", "", "So, the methods and means of raising funds for organizations on the social stock exchange vary.", "In this chapter, we will explore the various means of funding for NPOs (non-profit organizations) and FPEs (for-profit social enterprises) and the types of instruments they can issue.", "Retail investors will be allowed to invest in instruments issued by both FPEs and NPOs.", "In this chapter (part 1 & 2), we discuss all the key instruments and methods through which a company on SSE can raise funds. We want to reiterate again that the social stock exchange is a new structure in India, and the rules and regulations may change as it evolves.", "The graphs below give you an idea of the instruments/modes available for NPOs and FPEs to raise funds via the Social Stock Exchange.", "", "", "Equity and debt instruments are common across commercial and social entities. Here, we delve into other instruments/modes of fundraising and its functioning.", "Zero Coupon Zero Principal (ZCZP) bond is an instrument that a registered non-profit organization (not a for-profit organization) can issue to raise funds on the social stock exchange.", "ZCZP bonds differ from conventional bonds. Let me break it down. When any commercial company collects money by selling bonds, it promises to pay a set interest amount at regular intervals and return the principal at the end of the agreed-upon time period.", "On the other hand, ZCZPs, as the name suggests, have zero coupons (no interest) and no principal payment at maturity. An NPO can issue ZCZPs for specific social development projects/activities.", "The minimum application amount to invest in ZCZPs is kept at \u20b9 10,000 so retail investors can also participate. But note, as of now, that is January 12, 2023, the systems are not yet ready for a retail investor to invest.\u00a0The minimum issue size when an NPO comes with a ZCZP issue is set at Rs 50 lakh, while the minimum subscription required from investors for ZCZP issuance to float is 75%.", "Rules aside, ZCZP only promises a social return to the funder. The offer document for the issue will contain all the details about the issue, including tax benefits, risks, and other consequences of investing in their ZCZPs.", "What do you think is the risk of investing in ZCZP?\u00a0As there is no monetary return, the main risk with ZCZPs is that NPOs will not deliver the social impact that they promised to create.", "How will you know if the issuer delivers the social impact? It is through the disclosures that the NPO comes up with subsequently.\u00a0NPOs have an incentive not to default. Why? If the NPO loses the investor\u2019s trust, it will impact the donations in the future.", "NPOs generally raise funds at a project level. So, funding for future projects will dry up if the funds raised for past projects are not used efficiently.", "Before investing, you can also do your due diligence about the issuer. The NPO coming out with ZCZPs has to display the following on its website \u2013 vision, target segment, strategy on how they plan to achieve the vision, governance matters, details of key management people, operations, financial statements, compliance, registration documents, details of past social impact and the risks.", "Just as you analyze a company before investing, performing basic due diligence before donating through ZCZPs is essential. After the bond\u2019s tenure, the performance can be checked in its disclosures.", "When these bonds are issued, they will be listed on the stock exchange in demat form. These bonds will not be traded in the secondary market but can be transferred for other purposes, such as transfer to legal heirs.", "Once the tenure is over, the bonds will be terminated, equivalent to delisting.", "The bonds may also be terminated when the object for which the funds were raised has been achieved and when the NPO submits a certificate to the social stock exchange.", "If the NPO decides not to issue ZCZP to the public but only to limited donors, it can do so privately through social impact funds (discussed later) or other means.", "Have you heard of Alternative Investment Funds (AIFs)?", "They operate much like mutual funds, but the key difference is that AIFs can invest in unlisted equity or a variety of structured products and the minimum amount you need to invest is \u20b9 one crore.", "Why are we talking about it now?", "That is because the regulator categorizes Social Impact Funds as a Category I AIF, which can invest in social ventures or social enterprises, including those companies that are listed on the social stock exchange.", "These funds used to be called social venture funds in India, but now they are called Social Impact funds.", "The Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012, will regulate these social impact funds.", "The regulator has given some concessions to these funds \u2013", "Note that these minimum investment amounts will not apply to an accredited investor, who is considered a sophisticated investor with a special status under financial regulation laws.", "So, if you want to support businesses that positively impact society, you can consider these funds. The only return one can expect is a \u2018social impact\u2019 return.", "But why invest through a fund instead of directly picking businesses on the exchange? Well, it\u2019s a bit like the difference between buying individual stocks and investing in a mutual fund. When you invest through a fund, they do all the research to make sure your money is used in the best way to make a positive impact. They would also charge a small fee for that.", "Plus, each fund has specific rules about the kinds of businesses they can invest in. They must show that they make a difference by being accountable to investors through periodic disclosures.", "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/2024/01/Group-826.png", "https://zerodha.com/varsity/wp-content/uploads/2024/01/Group-825.png", "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": "4. Modes of raising funds (Part 2)", "text": ["We discussed ZCZP (zero coupon zero principal) bonds and social impact funds in the previous chapter. Now, we will delve into two other instruments/modes: development impact bonds and donations through mutual funds.", "", "Development Impact Bonds (DIBs) are a special financial arrangement used to fund social projects. How it works can be explained well by describing the role of each of the parties involved.", "The Technical Group on Social Stock Exchange presented an illustrative structure of a typical DIB as shown below \u2013", "", "Who can issue DIBs and whether a retail investor can act as a risk investor or as an outcomes funder is still not clear. We need to wait and see how this evolves moving forward.", "DIBs are a way to bring in new money from people who want to support these projects, but they have to follow certain rules and be transparent about what they\u2019re doing.", "DIBs work best for projects that have already been proven to work and have clear goals/outcomes that are easy to measure.", "Clearly, they may not work well for projects that require significant innovation to implement or where the outcomes cannot be linked to the inputs/interventions by the service provider.", "DIBs are not new in India. There are cases of \u2013 Educate Girls DIB and the Utkrisht DIB \u2013 that were discussed in the report of the SEBI Working Group on the social stock exchange. What\u2019s new is how entities on SSE can make use of it.", "In a few countries, such as the UK, these are also called Social Impact Bonds (SIB). In the USA, impact bonds are better known as Pay For Success (PFS) projects.", "You all know how mutual funds work. It pools funds from various investors and invests those funds in securities such as shares and debentures in accordance with the objectives of the scheme.", "Retail investors can donate to the entities on the social stock exchange through these mutual funds as well. Contributions are allowed only to organizations that have undergone certain scrutiny either 1) by the AMC or 2) by an intermediary.", "Let us see the two ways money is donated towards social causes through a mutual fund.", "", "Since such mutual funds mostly come in close-ended form(where your investment is locked for a specified period), their units will be listed on the stock exchange and available for trade.", "We have to wait and see how this route will be used to fund companies on the social stock exchange.", "", "Thank you for this valuable content.", "Happy reading, Zair! Thank you.", "Sir, Please make an economics related modules containing explanations regarding interest rates of India us and more things related to the same. would be really helpful", "Unrelated question, but can you please suggest some resources to learn financial statement analysis? I\u2019ve read all modules of Varsity and they\u2019re helpful. but if I wanted to learn it deeper what resources would you recommend? like blogs or youtube videos/channels,etc.", "Answering on behalf of Dinesh \u2013 if you are not from accounting backgroud, then any 1st year BA accounting book should help you get a better understanding of financial statements.", "I wanted to ask you that there is no option to download pdf of modules 12-16 . Can you please avail this option because I always print them and then read it", "Noted, waiting for the sector analysis module to wrap up \ud83d\ude42", "thank you so much . and i also wanted to ask you is it worth doing NSE courses like NCFM . just wanted a professional opinion .", "Not sure, I\u2019ve not really looked at the content to comment on that \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/2024/01/Group-827.png", "https://zerodha.com/varsity/wp-content/uploads/2024/01/DIB.png", "https://secure.gravatar.com/avatar/05490c7cfdf584a116ac9a355bbefd77?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f9dc25f9d6d13197893950aeff6cd4a5?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/70b03db954aa45fc2559e85f5d5bd13e?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/9796010b6c5f026a308676284d6e3b46?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/749d1bfaf92e0345a795166fcca7f999?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/749d1bfaf92e0345a795166fcca7f999?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": "5. Margin & M2M", "text": ["Margins clearly play a very crucial role in futures trading as it enables one to leverage. In fact, margins are the one that gives a \u2018Futures Agreement\u2019 the required financial twist (as compared to the spot market transaction). For this reason, understanding the margins and many facets of margins is extremely important.", "However, before we proceed any further, let us list down a list of things you should know by now. These are concepts we had learnt over the last 4 chapters; reiterating these crucial takeaways will help us consolidate all the learning. If you are not clear about any of the following points, you will need to revisit the previous chapters and refresh your understanding.", "If you can clearly understand the points mentioned above, then I\u2019d assume you are on the right track so far. If you have any questions on any of the above-mentioned points, you need to revisit the previous four chapters to get the concept right.", "Anyway, assuming you are clear so far, let us now focus more on the concept of margins and mark to market.", "Let us now rewind to the example we quoted in the forwards market (chapter 1). In the example quoted, 3 months from now, ABC Jewelers agrees to buy 15Kgs of Gold at Rs.2450/- per gram from XYZ Gold Dealers.", "We can now clearly appreciate that any gold price variation will either affect ABC or XYZ negatively. If the price of gold increases, then XYZ suffers a loss, and ABC makes a profit. Likewise, if the price of gold decreases, ABC suffers a loss, and XYZ makes a profit. Also, we know that a forwards agreement works on a gentleman\u2019s word. Consider a situation where gold price has drastically increased, placing XYZ Gold Dealers in a difficult spot. Clearly, XYZ can say they cannot make the necessary payment and thereby default on the deal. Obviously, what follows will be a long and gruelling legal chase, but outside our focus area. The point to be noted here is that in a forwards agreement, the scope and the incentive to default is very high.", "Since the futures market is an improvisation over the forwards market, the default angle is carefully and intelligently dealt with. This is where the margins play a role.", "In the forwards market, there is no regulator. The agreement takes place between two parties with literally no intermediary watching over their transaction. However, in the futures market, all trades are routed through an exchange. The exchange in return takes the onus of guaranteeing the settlement of all the trades. When I say \u2018onus of guaranteeing\u2019, it literally means the exchange makes sure you get your money if you are entitled. This also means they ensure they collect the money from the party who is supposed to pay up.", "So how does the exchange make sure this works seamlessly? Well, they make this happen using \u2013", "We briefly looked into the concept of Margin in the previous chapter. The concept of Margin and M2M is something that you need to know in parallel to appreciate futures trading dynamics fully. However, since it is difficult to explain both the concepts simultaneously, I would like to pause a bit on margins and proceed to M2M. We will understand M2M completely and come back again to margins. We will then relook at margins keeping M2M in perspective. But before we move to M2M, I would like you to keep the following points in the back of your mind \u2013", "So, for now, remember just these points. We will go ahead to understand M2M, and then we will come back to margins to complete this chapter.", "As we know, the futures price fluctuates daily, under which you either stand to make a profit or a loss. Marking to market or mark to market (M2M) is a simple accounting procedure which involves adjusting the profit or loss you have made for the day and entitling you the same. As long as you hold the futures contract, M2M is applicable. Let us take up a simple example to understand this.", "Assume on 1st Dec 2014 at around 11:30 AM; you decide to buy Hindalco Futures at Rs.165/-. The Lot size is 2000. 4 days later, on 4th Dec 2014, you decide to square off the position at 2:15 PM at Rs.170.10/-. Clearly, as the calculation below shows, this is a profitable trade \u2013", "Buy Price = Rs.165", "Sell Price = Rs.170.1", "Profit per share = (170.1 \u2013 165) = Rs.5.1/-", "Total Profit = 2000 * 5.1", "= Rs.10,200/-", "However, the trade was held for 4 working days. Each day the futures contract is held, the profits or loss is marked to market. While marking to market, the previous day closing price is taken as the reference rate to calculate the profit or losses.", "The table above shows the futures price movement over the 4 days the contract was held. Let us look at what happens on a day to day basis to understand how M2M works \u2013", "On Day 1 at 11:30 AM, the futures contract was purchased at Rs.165/-, clearly after the contract was purchased, the price has gone up further to close at Rs.168.3/-. Hence profit for the day is 168.3 minus 165 = Rs.3.3/- per share. Since the lot size is 2000, the net profit for the day is 3.32000 = Rs.6600/-.", "Hence the exchange ensures (via the broker) that Rs.6600/- is credited to your trading account at the end of the day.", "Now here is another important aspect you need to note \u2013 from an accounting perspective, the futures buy price is no longer treated as Rs.165 but instead, it will be considered as Rs.168.3/- (closing price of the day). Why is that so, you may ask? The profit earned for the day has been given to you already using crediting the trading account. So you are fair and square for the day, and the next day is considered a fresh start. Hence the buy price is now considered at Rs. 168.3, which is the closing price of the day.", "On day 2, the futures closed at Rs.172.4/-, clearly another day of profit. The day\u2019s profit would be Rs.172.4/ \u2013 minus Rs.168.3/- i.e. Rs.4.1/- per share or Rs.8,200/- net profit. The profits that you are entitled to receive is credited to your trading account, and the buy price is reset to the day\u2019s closing price, i.e. 172.4/-.", "On day 3, the futures closed at Rs.171.6/- which means concerning the previous day\u2019s close price, there is a loss to the extent of Rs.1600/- (172.4-171.6) 2000. The loss amount will be automatically debited from your trading account. Also, the buy price is now reset to Rs.171.6/-.", "On day 4, the trader did not continue to hold the position through the day but rather decided to square off the position mid-day 2:15 PM at Rs.170.10/-. Hence concerning the previous day\u2019s close, he again made a loss. That would be a loss of Rs.171.6/- minus Rs.170.1/- = Rs.1.5/- per share and Rs.3000/- (1.5 * 2000) net loss. Needless to say, after the square off, it does not matter where the futures price goes as the trader has squared off his position. Also, Rs.3000/- is debited from the trading account by the end of the day.", "Now, let us just tabulate the value of the daily mark to market and see how much money has come in and how much money has gone out \u2013", "Well, if you summed up all the M2M cash flow, you will end up the same amount that we originally calculated, which is \u2013", "Buy Price = Rs.165/-", "Sell Price = Rs.170.1/-", "Profit per share = (170.1 \u2013 165) = Rs.5.1/-", "Total Profit = 2000 * 5.1", "= Rs.10,200/-", "So, the mark to market is just a daily accounting adjustment where \u2013", "Why do you think M2M is required in the first place? Think about it \u2013 M2M is a daily cash adjustment by which the exchange drastically reduces the counterparty default risk. As long a trader holds the contract, the exchange by the M2M ensures both the parties are fair and square daily.", "Keeping this basic concept of M2M, let us now move back to relook at margins and see how the trade evolves during its life.", "Let us now relook at margins keeping M2M in perspective. As mentioned earlier, the margins required to initiate a futures trade are called \u201cInitial Margin (IM)\u201d. Initial margin is a certain % of the contract value. We also know \u2013", "Initial Margin (IM) = SPAN Margin + Exposure Margin", "Every time a trader initiates a futures trade (for that matter, any trade), few financial intermediaries work in the background, ensuring that the trade carries out smoothly. The two prominent financial intermediaries are the broker and the exchange.", "", "If the client defaults on an obligation, it obviously has a financial repercussion on both the broker and the exchange. Hence if both the financial intermediaries have to be insulated against a possible client default, they need to be covered adequately using a margin deposit.", "In fact, this is exactly how it works \u2013 \u2018SPAN Margin\u2019 is the minimum requisite margins blocked as per the exchange\u2019s mandate, and \u2018Exposure Margin\u2019 is the margin blocked over and above the SPAN to cushion for any MTM losses. Do note both SPAN and Exposure margin are specified by the exchange. So at the time of initiating a futures trade, the client has to adhere to the initial margin requirement. The exchange blocks the entire initial margin (SPAN + Exposure).", "SPAN Margin is more important between the two margins as not having this in your account means a penalty from the exchange. The SPAN margin requirement must be strictly maintained as long as the trader wishes to carry his position overnight/next day. For this reason, SPAN margin is also sometimes referred to as the \u201cMaintenance Margin\u201d.", "So how does the exchange decide what should be the SPAN margin requirement for a particular futures contract? Well, they use an advance algorithm to calculate the SPAN margins daily. One of the key inputs that go into this algorithm is the \u2018Volatility\u2019 of the stock. Volatility is a very crucial concept; we will discuss it at length in the next module. For now, just remember this \u2013 if volatility is expected to go up, the SPAN margin requirement also goes up.", "Exposure margin, which is an additional margin, varies between 4% -5% of the contract value.", "Now, let us look at a futures trade, keeping both the margin and the M2M perspective. The trade details are as shown below \u2013", "If you are trading with Zerodha, you may know that we provide a Margin calculator that explicitly states the SPAN and Exposure margin requirements. Of course, at a later stage, we will discuss the utility of this handy tool in detail. But for now, you could check out this margin calculator.", "Keeping the above trade details in perspective, let us look at how the margins and M2M plays a role simultaneously during the life of the trade. The table below shows how the dynamics change on a day to day basis \u2013", "", "I hope you don\u2019t get intimidated looking at the table above; in fact, it is quite easy to understand. Let us go through it sequentially, day by day.", "10th Dec 2014", "Sometime during the day, HDFC Bank futures contract was purchased at Rs.938.7/-. The lot size is 250. Hence the contract value is Rs.234,675/-. As we can see from the box on the right, SPAN is 7.5%, and Exposure is 5% of CV, respectively. Hence 12.5% of CV is blocked as margins (SPAN + Exposure); this works up to a total margin of Rs.29,334/-. The initial margin is also considered as the initial cash blocked by the broker.", "Going ahead, HDFC closes at 940 for the day. At 940, the CV is now Rs.235,000/- and therefore, the total margin requirement is Rs.29,375/- which is a marginal increase of Rs.41/- compared to the margin required at the time of the trade initiation. The client is not required to infuse this money into his account as he is sufficiently covered with an M2M profit of Rs.325/- which will be credited to his account.", "The total cash balance in the trading account = Cash Balance + M2M", "= Rs.29,334 + Rs.325", "= Rs.29,659/-", "Clearly, the cash balance is more than the total margin requirement of Rs.29,375/- hence there is no problem. Further, the reference rate for the next day\u2019s M2M is now set to Rs.940/-.", "11th Dec 2014", "The next day, HDFC Bank drop by Rs.1/- to Rs.939/- per share, impacting the M2M by negative Rs.250/-. This money is taken out from the cash balance (and will be credited to the person making this money). Hence the new cash balance will be \u2013", "= 29659 \u2013 250", "= Rs.29,409/-", "Also, the new margin requirement is calculated as Rs.29,344/-. Clearly, the cash balance is higher than the margin required; hence there is nothing to worry about. Also, the reference rate for the next day\u2019s M2M is reset at Rs.939/-", "12th Dec 2014", "This is an interesting day. The futures price fell by Rs.9/- taking the price to Rs.930/- per share. At Rs.930/- the margin requirement also falls to Rs.29,063/-. However, because of an M2M loss of Rs.2250/- the cash balance drops to Rs.27,159/- (29409 \u2013 2250), which is less than the total margin requirement. Since the cash balance is less than the total margin requirement, is the client required to pump in the additional money? Not really.", "Remember, between the SPAN and Exposure margin; the most sacred one is the SPAN margin. Most brokers allow you to continue to hold your positions as long as you have the SPAN Margin (or maintenance margin). The moment the cash balance falls below the maintenance margin, they will call you asking you to pump in more money. In the absence of which, they will force close the positions themselves. This call that the broker makes requesting you to pump in the required margin money is also popularly called the \u201cMargin Call\u201d. If you are getting a margin call from your broker, it means your cash balance is dangerously low to continue the position.", "Going back to the example, the cash balance of Rs.27,159/- is above the SPAN margin (Rs.17,438/-); hence there is no problem. The M2M loss is debited from the trading account, and the reference rate for the next day\u2019s M2M is reset to Rs.930/-.", "Well, I hope you have got a sense of how both margins and M2M come into play simultaneously.\u00a0 I also hope you can appreciate how under the margins and M2M, the exchange can efficiently tackle a possible default threat. The margin + M2M combination is virtually a foolproof method to ensure defaults don\u2019t occur.", "Assuming you are getting a sense of the dynamics of margins and M2M calculation, I will now take the liberty to cut through the remaining days and proceed directly to the last day of trade.", "19th Dec 2014", "At 955, the trader decides to cash out and square off the trade. The reference rate for M2M is the previous day\u2019s closing rate which is Rs.938. So the M2M profit would Rs.4250/- which gets added to the previous day cash balance of Rs.29,159/-. The final cash balance of Rs.33,409/- (Rs.29,159 + Rs.4250) will be released by the broker as soon as the trader squares off the trade.", "So what about the overall P&L of the trade? Well, there are many ways to calculate this \u2013", "Method 1) \u2013 Sum up all the M2M\u2019s", "P&L = Sum of all M2M\u2019s", "= 325 \u2013 250 \u2013 2250 + 4750 \u2013 4000 \u2013 2000 + 3250 + 4250", "= Rs.4,075/-", "Method 2) \u2013 Cash Release", "P&L = Final Cash balance (released by broker) \u2013 Cash Blocked Initially (initial margin)", "= 33409 \u2013 29334", "= Rs.4,075/-", "Method 3) \u2013 Contract Value", "P&L = Final Contract Value \u2013 Initial Contract Value", "= Rs.238,750 \u2013 Rs.234,675", "=Rs.4,075/-", "Method 4) \u2013 Futures Price", "P&L = (Difference b/w the futures buy & sell price ) * Lot Size", "Buy Price = 938.7, Sell Price = 955, Lot size = 250", "= 16.3 * 250", "= Rs. 4,075/-", "As you can notice, either of which ways you calculate, you arrive at the same P&L value.", "For a moment, let us assume the trade was not closed on 19th Dec, and in fact, carried forward to the next day, i.e. 20th Dec. Also, let us assume HDFC Bank drops heavily on 20th December \u2013 maybe an 8% drop, dragging the price to 880 all the way from 955. What do you think will happen? In fact, can you answer the following questions?", "I hope you can calculate and answer these questions yourself; if not, here are the answers for you \u2013", "Hi,", "Thanks for your outstanding work. The content and the presentation is really awesome and it is priceless.", "I am yet to start Futures trading and I am sure this material will help me a lot. I am afraid in Stock futures because, stocks at times if goes for a correction, they will in the correction mode even for months and if I am long without clue, I might take severe loss. So I thought Index futures is better because, even if it corrects for a week or 2 at least next month it may turn. ( exceptions will be there). For stocks you say the specific % as SPAN and Exposure, what about Nifty and Bank Nifty? what is the SPAN and Exposure percentage, do we have this in NSE website?", "I hope you will include, volatility and Open interest analysis in the upcoming chapters", "All the best", "Thanks, I hope you will get the required conviction to trade futures confidently with this module \ud83d\ude42", "The next chapter (Margins Calculator) will have these details. it will be updated sometime this week, so you could check that out. Yes, we will cover volatility, open interest, and many other things topics as well. Please stay tuned.", "If I have 0 balance in my account. Will the future share be square off?", "If the position makes a loss and M2M dips below the required SPAN, then yes it will be sq off.", "I admire the clarity and the precise quality, your teachings offer to learners as well as stalwarts! I have a doubt.Assume that there are 50,00,000 shares of a company getting traded in the market. ( market cap/no of shares in the market).\nNow,\nTotal no of shares traded in the market = No fo shares in equity + No fo shares in Futures + no of shares in options etc\nIs it the futures and option quantity of shares ( lot size x no fo lots ) is a just a notional no that has no boundaries. In other words, can I ask exchange to deliver my \u2018futures shares\u2019 on expiry ( in case of buy) instead of cash settlement.", "Thanks\nMuthu", "Total no of shares traded in the market = No fo shares in equity + No fo shares in Futures + no of shares in options \u2014-> this is not correct, because whatever gets traded in the F&O market is notional value.", "In the above example the span value too keeps on changing . So now even if the CV changes to 1.5 lacs wouldn\u2019t this mean that the span too changes and thus the requirement to pump in more money or there will be square off dosen\u2019t seem valid as stated above. As for any amount lower than this also would mean that the span margin required is also lower .", "True. In fact you maybe surprised to know exchange updates the margin requirements close to about 5 times a day! But from my experience this hardly has any impact on margin required, unless there is a drastic movement in the prices. Under such circumstances one would need to pump in more money towards margin requirements.", "Here is a situation \u2013 If i buy a future agreement and so do i have a counter party who is selling the same (shorting) . In case if the counter party square off his position and lets say that delay to find another counter party by exchange is 10 secs. During this 10 seconds if the price of the underlying changes drastically and before the the exchange finds another counterparty i decide to square off , then who is supposed to pay the profit earned over those 10 seconds. This situation is purely hypothetical but i guess it may be possible in the low liquidity futures .", "Thanks for answering my previous question kartik .", "When you buy obviously there is a person who is selling at the other end. It is impossible to identify if he is shorting or just squaring off an existing long position. Do note there is a difference between the two. Also, whenever you buy or sell the transaction is approved only if there is a counterparty. If there is no counter party your order will not go through. Hence as you have mentioned \u201cIn case if the counter party square off his position and lets say that delay to find another counter party by exchange is 10 secs. During this 10 seconds if the price of the underlying changes drastically and before the the exchange finds another counterparty i decide to square off , then who is supposed to pay the profit earned over those 10 seconds\u201d This can never happen.", "Also karthik does the margin required as quoted by the exchange imply anything ? like high margins than usually may be implying more probability of loss in the trade than chance of making profits . Also the link http://zerodha.com/open-account is not working . Not able to download application form .", "Sorry for typo in my my previous comment Karthik", "Monil, the Open account link is working. If you want someone to contact you from sales, do let me know and I can put you through.", "The exchange stipulated margin is the SPAN part. Also higher margin requirement means the stock\u2019s volatility is high hence the probability to lose money is high. It could also be due to low liquidity.", "Hi Karthik, To make sure I have understood it right, I have the following questions-\n1) As long as the Span margin is intact, no money from my account would be debited?\n2) All M2M losses would be debited from the cash balance. That is if I make a loss one the day I bought the futures and further make losses for 3 continuous days, these M2M losses( of 4 days) would be debited from the Initial Margin and as long as the balance is above the Span Margin I can still trade without any infusion of funds. Am I right in understanding this?\n3) With reference to your example on the 20th of December suppose instead of a fall of 8%, there is a rise of 8% and I gain the profit of 18750. Now this gets added to the cash balance. My question is can I use this a part of this profit (of 18500), say 15000 to buy a option or something else or would the trading terminal/exchange not allow me to use these profits as long as I am trading this contract?", "You are right on all the counts here. Cash balance + Initial Margin should take care of your M2M obligations. For this reasons it is always advisable to have some money to cushion (cash balance) your trade. Also, the profits are released when you terminate the trade completely (at least in Zerodha) and not while you are in the trade.", "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/2015/01/M4-Ch5-title1.jpg", "http://zerodha.com/varsity/wp-content/uploads/2015/01/M4-Ch5-chart1.jpg", "http://zerodha.com/varsity/wp-content/uploads/2015/01/M4-Ch5_table.jpg", "https://secure.gravatar.com/avatar/7df2387ea80b1065c333834de1024b5c?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/91ba38d2932f2959e827ea00ba5a2afe?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/613a2ce2f585d7ba40b8bb8947bb1162?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/7f61bab0456021ed428c8cfd8de0140d?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/7f61bab0456021ed428c8cfd8de0140d?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/7f61bab0456021ed428c8cfd8de0140d?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/0115063874a1b1ead33bd2d4376240d7?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>Day</th>\n<th>Closing Price</th>\n</tr>\n<tr>\n<td>1st Dec 2014</td>\n<td>168.3</td>\n</tr>\n<tr>\n<td>2nd Dec 2014</td>\n<td>172.4</td>\n</tr>\n<tr>\n<td>3rd Dec 2014</td>\n<td>171.6</td>\n</tr>\n<tr>\n<td>4th Dec 2014</td>\n<td>169.9</td>\n</tr>\n</tbody>\n</table>", "<table>\n<tbody>\n<tr>\n<th>Day</th>\n<th>Ref Price for M2M</th>\n<th>Closing Price</th>\n<th>Daily M2M</th>\n</tr>\n<tr>\n<td>1st Dec 2014</td>\n<td>165</td>\n<td>168.3</td>\n<td>+ Rs.6,600/-</td>\n</tr>\n<tr>\n<td>2nd Dec 2014</td>\n<td>168.3</td>\n<td>172.4</td>\n<td>+Rs.8,200/-</td>\n</tr>\n<tr>\n<td>3rd Dec 2014</td>\n<td>172.4</td>\n<td>171.6</td>\n<td><span style=\"color: red;\">-Rs.1,600/-</span></td>\n</tr>\n<tr>\n<td>4th Dec 2014</td>\n<td>171.6 & 170.1</td>\n<td>169.9</td>\n<td><span style=\"color: red;\">\u2013 Rs.3,000/-</span></td>\n</tr>\n<tr>\n<td colspan=\"3\"><strong>Total</strong></td>\n<td><strong>+Rs.10,200/-</strong></td>\n</tr>\n</tbody>\n</table>", "<table>\n<tbody>\n<tr>\n<th>Particular</th>\n<th>Details</th>\n</tr>\n<tr>\n<td>Symbol</td>\n<td>HDFC Bank Limited</td>\n</tr>\n<tr>\n<td>Trade Type</td>\n<td>Long</td>\n</tr>\n<tr>\n<td>By Date</td>\n<td>10th Dec 2014</td>\n</tr>\n<tr>\n<td>Buy Price</td>\n<td>Rs.938.7/- per share</td>\n</tr>\n<tr>\n<td>Sell Date</td>\n<td>19th Dec</td>\n</tr>\n<tr>\n<td>Sell Price</td>\n<td>Rs.955/- per share</td>\n</tr>\n<tr>\n<td>Lot Size</td>\n<td>250</td>\n</tr>\n<tr>\n<td>Contract Value</td>\n<td>250938.7 = Rs.234,675/-</td>\n</tr>\n<tr>\n<td>SPAN Margin</td>\n<td>7.5% of CV = Rs.17,600/-</td>\n</tr>\n<tr>\n<td>Exp Margin</td>\n<td>5.0% of CV = Rs.11,733/-</td>\n</tr>\n<tr>\n<td>IM (SPAN + Exposure)</td>\n<td>17600 + 11733 = Rs.29,334/-</td>\n</tr>\n<tr>\n<td>P&L per share</td>\n<td>Profit of Rs.16.3/- per share (955 \u2013 938.7)</td>\n</tr>\n<tr>\n<td>Net Profit</td>\n<td>250 * 16.3 = Rs.4,075/-</td>\n</tr>\n</tbody>\n</table>"], "videos": []}
{"title": "1. Social Stock Exchanges \u2013 An Introduction", "text": ["We often feel like helping the poor, the underprivileged, or the oppressed with whatever little we can afford. A common question we face is who to donate to. We mostly doubt the legitimacy of the NGOs (non-governmental organizations) around us. This is where a Social Stock Exchange (SSE) steps in. An SSE will act as a bridge between the less-informed but willing donors and legitimate organizations doing real social work.", "Hold on. Why are we discussing social organizations on Varsity? Because it will exist in the capital market, seek contributions from the participants in the capital market, and draw several parallels from the capital market. As market participants, we must know what SSEs are, what entities you can invest in, and what kind of returns you can expect. Therefore, we, Satya Sontanam and Vineet Rajani, are writing this module to introduce Social Stock Exchanges to the investment community.", "", "Starting with Brazil in 2003, at least seven countries established a social stock exchange (SSE). Not all have survived. The Indian SSE structure will draw some of their features, learn from their experiences, and improve upon their construct.", "A social stock exchange is a platform where social enterprises/organizations can raise funds from the public. Just like equity, commodities, derivatives, and small and medium-sized enterprises (SMEs), the social stock exchange will be a segment on the stock exchange. Both BSE and NSE have received approvals to run an SSE. Organizations listed on the SSE can be For-profit Social Enterprises (FPEs) and Not-for-profit Organizations (NPOs).", "Organizations looking to register on the SSE must prove \u2018social intent\u2019. There is no legal definition of a social organization in India. SEBI has outlined 16 broad areas that represent social activity or intent. We will elaborate on the eligibility criteria of social enterprises in greater detail in the next chapter.", "The two types of social enterprises, NPOs and FPEs, draw some similarities with commercial entities. The table below compares the three types of entities.", "", "ZCZP, or Zero Coupon Zero Principal, is a new innovative security.\u00a0 When you buy a ZCZP, you essentially donate your money to the issuing social enterprise. The ZCZP security in your demat account is symbolic and cannot yield monetary returns. As an investor, you can participate whenever there is a new issue from a social enterprise.", "In the third chapter of this module, we will elaborate on other fund-raising instruments that could be issued on the SSE in greater detail. Do note that the tax benefits will likely be available for investments in entities raising funds via SSE. However, these rules are not yet defined and the tax benefits under section 80G or 80GGA are currently unavailable.", "Very few social enterprises in India function in a corporate structure. Their intent to list on the SSE will likely bring more structure to their functioning and reporting. However, their resources may be limited in understanding and carrying out the complete listing process and compliance obligations. Listing, in itself, could be an additional compliance burden on them.", "A capacity-building fund is being set up under NABARD to educate social enterprises on how to use the SSE and create awareness among the donors / general public. Four organizations, NSE, BSE, NABARD, and SIDBI, have collectively contributed INR 10 Cr as initial capital for the fund.", "Just like you use a broker to trade in securities, you can use the same broker to buy instruments on SSEs. Because SSEs in India are a segment on commercial stock exchanges, they can use the readily available infrastructure of these exchanges. Therefore, it also becomes easier for the brokers to offer SSE instruments to their clients.", "How is being a segment of NSE or BSE better than being a standalone exchange? A standalone exchange will have to enroll brokers. Only a few brokers might be willing to do this, as it will require additional compliance, deposits, and management focus. Separate marketing efforts must also be employed to raise awareness about SSE. Further, it will be one more account for investors/donors to create and maintain.", "Being a segment on an existing commercial exchange means all existing brokers can, by default, offer SSE instruments. They won\u2019t have to do any separate registration and compliance tasks. The broker can start offering these instruments on its website and app. So, they may not need to put too much effort into making investors/donors aware of the SSEs. Investors will discover SSEs as a segment more easily. They will be more accepting of the product as it will not require opening and maintaining a new account.", "Other functionalities, such as how the SSE instruments will be displayed on exchange, the frequency of market trading hours, bid-ask spread, market depth, etc., are not known yet. Issues related to brokerage, stamp duty, and transaction charges are being ironed out. There might be many more once the exchanges begin offering the various SSE instruments.", "The securities you buy on an SSE will be stored in your demat account. ZCZP will be a peculiarity as it will have no returns or principal repayment. You are basically promised social returns on ZCZP, which may be difficult to quantify and standardize. The depositories are expected to carry ZCZPs at zero value as soon as they are credited to your demat account.", "Return reporting aside, the not-for-profit social enterprises are not expected to deliver monetary returns. The for-profit organizations will also have to prioritize social impact. The challenge here is measuring the social returns or impact of the work these organizations would do.", "The social enterprises listed on the SSEs in foreign countries have reported output measures like the number of people reached or the extent of geography covered. However, they have struggled to quantify the impact of their work. For example, when the goal is to educate marginalized communities about personal finance, you can tell how many people attended your workshops. What you cannot tell is how many of these people started managing their personal finances better after your workshops.", "Having this challenge is understandable because every social enterprise is looking at solving different social, climatic, or economic problems. Even in our example of personal finance education, it is difficult to follow up with the audience. Also, what are the exact metrics that you want to follow up on? These metrics will vary in every organization. The scale of operations and the level of impact each social enterprise intends to achieve will also vary.", "SEBI has taken a step in this direction by requiring social enterprises to publish their Impact Score Card annually. The Impact Score Card must include details on the extent of the target social segment served, the intensity of impact on the median individual, and dimensions of income, social equity, and diversity.", "The Securities & Exchange Board of India (SEBI) will regulate the social stock exchanges in India. It has also established disclosure requirements for the social enterprises listed on SSEs.", "SEBI requires NPOs on social stock exchanges to publish an Annual Impact Report (AIR) every year, detailing the impact of their work. They will also have to publish a statement of utilization of funds periodically. The AIR will have to be audited by a Social Impact Assessor. Chartered Accountants, Company Secretaries, and Cost Accountants could act as Social Impact Assessors upon attaining certain certifications and meeting the eligibility requirements.", "SSEs will be required to constitute an SSE Governing Council (SGC) to oversee its functioning. SGCs will have at least seven members, with at least one from each of the following categories.", "The SSE is a new set-up. The challenges and collateral benefits or pitfalls may only be known as more social enterprises get listed and use the variety of fund-raising avenues available to them. The regulator and the exchanges will keep monitoring and adjusting their policies to streamline the processes. Therefore, our knowledge about SSEs will also evolve and refine over time.", "In the next chapter, we will discuss what kind of social organizations can list on SSEs and what are the eligibility requirements.", "Dear sir/mam , are retail investors allowed to invest in NPO category, as in the above given table it is not mentioned clearly.", "Hi Khaiyam. Yes, retail investors can invest. \ud83d\ude42 Anyone having at least Rs. 10,000 can invest in an NPO by buying their ZCZP bonds at the time of its issue\nHowever, the platform for retail investors is under development.", "Gifts dowry family events are form of social exchanges how this is registered on exchanges?", "Hi Anupama, these chapters are about organizations engaging in social work, and not about gifts or family events. \ud83d\ude42", "Can we get link for this Social Stock Exchange to see", "What the benefit the donor will get if invested in ZCZP? Why will he take these bonds if they don\u2019t have any benefits? There are various ways for CSR, so why they would not this only?", "Hi Rajesh,", "Tax benefits are likely to be available, but they are not currently defined. Additionally, a social stock exchange (SSE) acts as a bridge between donors and legitimate organizations engaged in genuine social work, as there are checks and assessments in place. Therefore, apart from tax benefits, individuals investing via SSE platform can select from a wide array of options to which they want to contribute.", "Can we see demo video about how to search and how to invest in it. Step by step as beginner.", "I\u2019m suggest you take this up \u2013 https://varsitylive.zerodha.com/home", "Hi Ranjeet,", "As mentioned in the chapter, as of now there is no facility for retail investors to invest in it.", "Check out this tweet \u2013 https://x.com/Nithin0dha/status/1777260391543787765", "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/2023/12/SSE-1.png", "https://zerodha.com/varsity/wp-content/uploads/2023/12/SSE.png", "https://secure.gravatar.com/avatar/f0352d723990861cc962084329c2b2fb?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/69eefcebf0f563af996d32e2346435c1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/7051fd2bfd4008ac1e2abd658944fecf?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/6a7d13b592ec0bba51de1cb331ed0b92?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f9dc25f9d6d13197893950aeff6cd4a5?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/c9a33613a39d48cee98e4b7fca99885c?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f9dc25f9d6d13197893950aeff6cd4a5?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": "8. Foreign Stocks and Taxation", "text": ["In the previous chapters, you learned how investing and trading in the Indian stock market are taxed as per the Income Tax Act. We also touched upon maintaining books of accounts and rules of the tax audit.", "Those chapters were written by @Nithin Kamath himself, that too, from an investor/trader\u2019s perspective, giving you a clear picture of Indian markets and taxation.", "In this chapter, I, @Satya Sontanam, look at how investments in foreign stocks are taxed in India.", "", "If you think the tax rules of Indian investments are overwhelming, tax laws for foreign investments can get tricky and complicated.", "The main challenge comes when the investments are taxed in a foreign country as well. On top of it, the tax laws of all countries differ from one another.", "Here, we tried to simplify as much as we could to give you a brief understanding of what to consider when it comes to taxing income from foreign assets. We focus on investments in the stock market abroad and not on other forms of assets, including real estate.", "", "When we hear about a few international stocks like Meta, Microsoft, Tesla, and Alphabet, it is totally natural to want to own a piece of these companies, isn\u2019t it?", "Lately, Indian investors have caught on to buying international stocks and diversifying their portfolios.", "But how to invest in these stocks?", "Many fintech platforms in India made investing in some of the foreign country\u2019s stocks and ETFs (exchange-traded funds) simpler for retail investors compared to a few years ago.", "But here\u2019s the thing, investing in international stocks isn\u2019t as straightforward as dealing with the Indian stock market. There are a few rules we have to keep in mind before taking the leap.", "First, your overseas investments fall under the Liberalised Remittance Scheme (LRS). This is a scheme by the Indian government that lets you send up to 2.5 lakh dollars annually abroad. That\u2019s about Rs 2 crore in Indian currency at the current exchange rate of Rs 82. So, you must keep your investments, along with other foreign trip expenses, abroad education costs, etc.. within that limit.", "Next comes the tax collection at source (TCS) at 20% (5% before October 2023) if your foreign spending or investments exceed Rs 7 lakh per year. That is, even before you invest Rs 100, a tax of Rs 20 is deducted, and the balance is invested. Of course, you can use that Rs 20 to set off with your other tax liability later that year or claim a refund. But the point is, your money is stuck until then.", "Here\u2019s another \u2013 when you sell your investments, any money you get from the sale must be brought back to India within 180 days unless invested back. Funds can\u2019t lie idle in foreign bank accounts.", "Oh, and one more thing: when you file your income tax return in India, do not forget to disclose your foreign assets separately. The income tax department wants to know about all your global assets.", "Remember that these restrictions apply when buying foreign stocks or ETFs directly. If you do not want to deal with LRS, TCS, tax disclosure and remittance rules, you can also invest through Indian mutual funds investing in select international stocks and ETFs.", "In this chapter, the focus is on direct investments.", "An Indian resident must pay taxes on his/her global income, the taxman says.", "What does it mean? If you are an Indian resident, you have to pay taxes on any income you earn, whether from India or abroad \u2013 be it in the US, UK, Australia, Singapore, or any other country.", "But if you are a non-resident, the Indian government does not care about your foreign income. Our friends and family residing abroad investing there would not pay any taxes in India, right?", "The taxman has specific rules to decide who is a resident and who is not. Basically, it depends on the period of stay in India. The definition of \u2018resident\u2019 is a bit technical. You can refer to the definition in the annexure to this chapter at the end to understand who qualifies as a resident.", "The simplistic explanation is that if you are like many \u2013\u00a0 live and work in India \u2013 and take occasional trips abroad \u2013 you are a resident.", "When it comes to investments in stocks, there are two types of income to consider: capital gains and dividends.", "Let\u2019s talk about capital gains first. The taxability of capital gains depends on the holding period of the stocks. If you hold foreign company shares for more than 24 months, the gains are considered long-term capital gains and are taxed at 20% (plus applicable surcharge and cess). Moreover, you may also get the benefit of cost indexation that adjusts the purchase cost for inflation (more about this later).", "On the other hand, if you hold the shares for up to 24 months, any resulting gains are considered short-term capital gains. These are added to your total income and taxed according to the applicable slab rates.", "Now, let\u2019s consider an example to understand how this works. Suppose you invested Rs. 1,00,000 in foreign stocks on April 1, 2018, which was equivalent to, say, $1,500.", "When you sold your investment on April 31, 2023, say, you received $2,500.", "As the stocks are held for more than 24 months, it qualifies for a long-term capital gains tax rate of 20%.", "For tax purposes in India, you need to convert the sale amount into Indian rupees. You must use the exchange rate (telegraphic transfer buying rate provided by the State Bank of India) on the last day of the month prior to the month in which the sale happened.", "In our example, since the sale happened in April, take the exchange rate at the end of March 2023. It was around Rs. 82.", "So, your sale value, as per Indian tax rules, would be about Rs. 2 lakh (Rs. 82 * $2,500).", "Now, to calculate the indexed cost of acquisition, you need to use the Cost Inflation Index (CII) published by the Indian government. Say, the CII for the financial year 2018-2019 (when you bought the stocks) was 280, and for the financial year 2023-2024 (when you sold), it was 400.", "The formula for indexed cost of acquisition is \u2013", "Cost of Acquisition * (CII of the year of sale / CII of the year of purchase).", "In our example, the adjusted cost would be Rs. 1,42,857 (Rs. 1,00,000 * (400 / 280)).", "Next, let\u2019s calculate the taxable capital gains: Capital gains = Rs. 57,143 (Rs. 2,00,000 \u2013 Rs. 1,42,857).", "Therefore, tax to be paid = Rs 57,14320%, about Rs 11,430.", "If not for indexation, your profit would have been Rs 1,00,000 (Rs 2,00,000 sale value \u2013 Rs 1,00,000 cost) and the tax liability would be Rs 20,000 (Rs 1 lakh20%)", "Basically, indexation escalates your cost to the tune of inflation in the economy and lowers your profit.", "Moving on to dividend income, it is treated as \u2018income from other sources\u2019 that has to be added to the taxpayer\u2019s total income.", "Just like with capital gains, you need to convert dividend income into Indian rupees using the exchange rate on the last day of the month prior to the month you received the dividend.", "This will be added to your total income and taxed at your slab rate.", "So far, we have discussed tax on investing in foreign stocks.", "If you invest in foreign ETFs directly or Indian mutual funds that are investing primarily in foreign stocks/ETFs, for investments to be qualified as long-term capital gains, the period of holding will be increased to 36 months (from 24 months).", "For investments in foreign ETFs made on or after April 1, 2023, the gains are taxed at your slab rate, irrespective of the holding period.", "Thus, if you are in a higher tax bracket, investing via mutual funds/foreign ETFs attracts higher tax liability, at 30% (excluding cess and surcharge).", "If you\u2019ve noticed, investing through mutual funds comes with a higher tax rate but minimal operational requirements, while it\u2019s the opposite when investing in foreign stocks directly.", "Both paths have their pros and cons. You have to choose wisely based on what fits your investing style.", "Don\u2019t breathe easy just yet. The toughest nut to crack is up next.", "Just like non-residents investing in India are taxed in India, Indians investing abroad might face taxation in the foreign country too. You might wonder why you have to pay taxes twice, right?", "Well, most governments, too, agree that taxing income twice isn\u2019t fair.", "The Indian government offers relief if you are taxed abroad. You might either be exempted from tax in India or receive a tax credit that you can use to pay your taxes here. To figure out which one applies, we have to dig into the Double Taxation Avoidance Agreements (DTAA) that India has with other countries.", "Now, if finance stuff is not your cup of tea, these agreements can be pretty overwhelming, especially on the first read. You will need the expertise of a tax consultant to decipher it all.", "Your broker or fintech platform might provide tax details on your investments, but you would be better off understanding how it works.", "In many DTAA treaties, India follows the credit method to avoid double taxation. This means they give credit for taxes paid in the foreign country. This can set off tax liability on the same income in India. You can claim this credit by submitting Form 67 when filing the income tax return.", "Let\u2019s take the example of DTAA with the US-", "For capital gains, the DTAA between the US and India states that each country may tax as per the provisions of its domestic law. This implies that both countries can charge tax.", "But the US income tax laws do not charge capital gains tax on non-residents. So, the gains of Indians on US stocks are taxed only in India; hence, no double taxation.", "Now, dividends. As per the DTAA between the US and India, dividends received from a US company are taxed only in India.", "But here comes the catch \u2013 there\u2019s a 25% withholding tax on gross dividends in the US. That means 25% is deducted at the source by the US, and you get the rest in your account.", "No matter how much you receive, the entire gross dividend (converted into Indian rupees) will be taxed in India. In such cases, you need to submit Form 67 to claim credit for the withholding tax paid in the US.", "Remember, these DTAA provisions and available tax credits can vary from country to country. If you are investing in countries other than the US and your broker isn\u2019t helping with precise information, consider consulting your tax advisor. They will guide you through this tax maze!", "If you hate paperwork and endless documentation, reporting foreign assets and income in your tax return won\u2019t be a walk in the park.", "As a resident, you must disclose all foreign assets, like bank and depository accounts, stocks etc., held outside India while filing your income tax return. But if you fail to disclose them, you\u2019ll face penalties and possibly even imprisonment under the provisions of Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.", "The income tax returns have dedicated schedules to fill in the detail of foreign assets, including foreign stocks.", "As of now, there are three schedules (FSI, FA and TR) and one form (Form 67 discussed above to claim credit for tax paid abroad). Select the correct ITR form to fill in these details.", "While we cannot discuss every aspect of these schedules, here are a few key points to keep in mind before reporting foreign assets and income. Note that these details are as per the rules as of FY23.", "Here\u2019s an example \u2013", "Say, you bought a stock of Microsoft in September 2022, which issued a dividend in November 2022. Take a share of another company \u2013 Alphabet \u2013 which was bought in January 2023 that gave dividends in March 2023.", "For reporting assets and income for FY23, calendar Year 2022 would be applicable.", "Microsoft stock: You bought the stock in September 2022. Since the purchase was made in the calendar year 2022, you would need to disclose this investment in your income tax return for the financial year 2022-2023. Even if you sell the company as of the date of filing the return, you still must report it as you held the company at least for a day in the year 2022. If the stock was bought in 2021 or before, and you own it at least for a day in 2022, you still have to report it in the ITR.", "The dividend from the stock, which was received in November 2022, has to be reported in schedules as it was received in calendar year 2022. The dividend amount has to be considered for taxability in FY23 since it falls within the financial year period from April 2022 to March 2023.", "Alphabet stock: You bought the stock in January 2023. As you do not hold the stock in the calendar year 2022, you do not need to disclose this investment in the schedules.", "The dividend from Alphabet stock received in March 2023 would be considered for taxability in 2022-2023 (FY23). But it need not be disclosed in schedules as it was not received in the calendar year 2022.", "Income earned from assets held outside India will be taxable as per the provisions of the Income Tax Act, even if it is not required to be disclosed in schedules.", "Annexure", "Definition of \u2018Resident\u2019 as per the Income Tax Act", "A taxpayer will qualify as a resident of India if he/she satisfies one of the following two conditions:", "If you are a citizen of India or a person of Indian origin who leaves India for employment or visits India during a financial year, the conditions are a bit different and also depend if your total income from India is more or less than Rs 15 lakh in that year.", "Further, if an Indian citizen is considered \u2018stateless\u2019 and earns a total income in India exceeding Rs 15 lakh during a financial year, he/she will be treated as a resident in India for that year.", "For example, say you are an Indian citizen who works in a country where people are not subjected to income tax as per local tax laws (For example, UAE). If your income from India during the financial year exceeds Rs 15 lakh, you will be considered a deemed resident in India, even if you haven\u2019t set foot in India throughout the year.", "Disclaimer \u2013 Consult a chartered accountant (CA) before filing your returns. The content above is in the context of taxation for retail individual investors/traders only.", "Thank you for the valuable information Satya Sontanam, also please elaborate", "1. How does trading FnO and intraday in US markets are taxed?\n2.How forex are taxed we know its illegal but we can trade openly and regulators are not taking any actions and also when will cross currency trade will start?", "Hello Ashay,", "Answering your first question- I cannot comment on how the US taxes the F&O income.\nIndian residents cannot trade in the US F&O markets. If you want to know about trading in a few US stocks in Gift City, derivative profits from those securities in foreign currency are exempt from tax.", "Thanks for the details. Can you please confirm if section 54F will be applicable on this long term capital gain earned by indian resident from sale of US listed shares.", "Hello Manmohan,\nSection 54F of the Income Tax Act allows you to claim tax benefits if long-term capital gains from \u2018any\u2019 long-term capital asset (not being a residential house) are reinvested in a residential property in India. It did not specifically exclude foreign stocks. Hence, I believe that section 54F benefit will be available on LTCG from the US listed shares as well. You can check with tax experts to confirm the same.", "Can anyone confirm if I can save LTCG (from sale of foreign shares) tax using 54F?", "Hello Manish,", "I answered the same query in the above comment.", "Happy reading!", "I am a resident in India as per Income Tax Act, 1961. In case I incur short term capital loss by trading in US listed stocks, can I set it off against short term capital gain earned in trading Indian listed shares while filing my ITR.", "Hi Rahul,", "There is no restriction on setting off short-term capital loss from investing in US shares against profit from investing in Indian shares. STCL can be set off\nagainst long-term or short-term capital gain.", "But you mentioned \u2018trading\u2019 in Indian stocks. In that case, your gains would be either speculative business income or non-speculative business income.", "As per tax rules, loss under head \u2018Capital gains\u2019 cannot be set off against income under other heads of income.", "Hence, I am afraid you cannot set-off loss from US shares against gain from trading in Indian shares.", "Hi Team,", "Can I avail section 54F For foreign shares to save capital gain tax.\nhttps://www.zeebiz.com/personal-finance/income-tax/news-capital-gains-tax-exemption-under-section-54-and-section-54f-income-tax-act-capital-gains-residential-property-eligibility-stst-240147#:~:text=Section%2054%20focuses%20on%20long,tax%20benefits%20can%20be%20claimed.", "Hi Utkarsh,", "Section 54F of the Income Tax Act allows you to claim tax benefits if long-term capital gains from \u2018any\u2019 long-term capital asset (not being a residential house) are reinvested in a residential property in India. It did not specifically exclude foreign stocks.", "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. 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{"title": "No Title", "text": ["", "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/themes/varsity2//images/playstore.png", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/appstore.png"], "tables": [], "videos": []}
{"title": "11. Steel (Part 2)", "text": ["In the previous chapter, Steel (Part 1), we established that steel comes in various grades and forms and has a wide range of applications. We also saw how steel is produced and why value addition is necessary to improve profitability.", "In this chapter, we delve deeper into value addition with respect to its importance in the distribution of steel. I have also created a checklist of parameters you could use to compare steelmakers. The features and the future of the industry will conclude the chapter.", "Who buys steel?", "Steel is not a retail product. But steel products may be retail products. Let me elaborate. We do not buy a steel rod or slab, but we buy furniture, appliances, utensils, cars, and other products made of steel. So, the manufacturers of these products are buyers of steel. Steel is a raw material for them.", "", "Let\u2019s say a car manufacturer wants steel for its cars. It can buy steel sheets from a steel manufacturer. It will cut and mold the sheets in the required shapes and sizes. Some carmakers might get a third party to do the cutting and molding. Old and established carmakers might do this function in-house, but newer manufacturers could use a third-party service. Even the newer plants set up by established carmakers might want this service.", "Some steel makers might offer to do the cutting and molding jobs also. They do so by setting up \u201cservice centers\u201d closer to their client locations. These service centers are generally set up as independent subsidiaries. They may be free to buy steel sheets from the parent company or any other steelmaker.", "JSW Steel has several such downstream JVs and subsidiaries. Some of its subsidiaries are Anjar Works (steel plates and coils), Kalmeshwar Works (color-coated products), and JSW Vallabh Tinplate Pvt. Ltd. (tinplate), among many others. Tata Steel was awarded an order for a complete seating system for 22 rakes of Vande Bharat Express, which will be delivered from its Khopoli facility in Maharashtra.", "Remember how steel manufacturers are always looking to sell value-added products to increase their margins? This is probably the farthest they can go to offer value-added products. Involvement beyond this in the value chain might make them a car or appliance manufacturer.", "Reiterating here that since steel is a commodity, pricing power is low. Value-added products are an easy target to achieve differentiation and pricing power, which leads to better profitability. However, going far down the value chain can be risky. They may not have the know-how to add value. Figuring out could require massive investments and dilute management focus. Creating subsidiaries is a good way out, as the subsidiary\u2019s management will have the sole focus on adding value.", "Whether value-addition is adding to a steel company\u2019s competitive advantage and profitability is for you to figure out through your analysis. A simple way would be to look at how the steelmaker\u2019s product mix has evolved over the years. Have the sales of value-added products grown? Has the profitability from those products improved? Has the overall profitability improved?", "If the answer to these questions is yes, perhaps value addition is improving the company\u2019s performance. If the answer is no, there could be two possibilities \u2013 the company is still figuring out its value-addition endeavors or has failed at them.", "Transportation of steel", "Large steelmakers maintain a fleet of containers, trucks, and rail wagons. This fleet is used for both bringing in scrap and raw materials and sending out finished goods. The decision to own logistics is again driven by the possible cost savings it could deliver.", "", "", "Depending on the type of steel product and the quantity of purchase, the channel of distribution and mode of transfer will differ. The ownership of the distribution channel further depends on the scale of operations and the demand for value-added products.", "The advent of Electric Arc Furnace (EAF) technology in steelmaking has led to several mini-mills cropping up across the country. These mini-mills depend on scrap steel as their primary source of raw material.", "They are called mini-mills for two reasons. First, they operate at a really small scale to cater to the needs of local businesses. Second, scrap availability is limited. When the primary raw material is limited in supply, the operating scale also will be limited.", "Why is scrap supply limited? Scrap is not produced; it is generated.", "", "", "", "Scrap economics is strange. The more you buy, the higher the prices go. This is unlike other products or materials where bulk buying is generally associated with cost savings.", "Why am I discussing scrap so much in detail? Because the larger steel players have also been investing in EAFs. It may not be big today, but it will likely become a primary steel production method in the decades to come. Recycling is imperative in a carbon-neutral world that we are trying to achieve.", "Several features can be observed while trying to understand the production and application of steel. These features also throw light on the parameters you could look at when studying a steelmaker. Here is a list of features that I observed.", "", "", "", "", "", "", "Now that we have discussed the process of steelmaking and the features of the steel industry, let us consolidate all of it into a checklist of factors that could be used as a reference for studying the steel industry.", "", "The first few ratios are about capacity, production, and sales. You must find out how much a steelmaker can produce, how much it produced, and how much it sold. If a steelmaker sold more than it produced, it could be due to two likely scenarios \u2013 one, it had excess stock from the previous year or it also or two, it bought from other steelmakers to meet customer demand.", "Having captive coal and iron mines is to understand the level of backward integration and, thus, the scope of cost control.", "You will notice that input cost ratio, power and fuel cost ratio, and freight cost ratio are the same parameters we studied in the Cement chapter of this module.", "While you have studied the debt-equity ratio in the Fundamental Analysis module, I have added it to this checklist because asset-heavy businesses like steel tend to carry large debts. You might want to study other leverage ratios, too.", "Upon completing 50 years in 2017, World Steel Association laid down three major challenges for the steel industry for the next 50 years.", "As I write this chapter in 2023, these challenges still remain relevant.", "Efficiency in steel could be because of", "Currently, about 30% of the world\u2019s steel is produced using the Electric Arc Furnace (EAF) method, the one used in producing steel from scrap steel. Rapid industrialization at the global level in recent decades has increased steel usage considerably. In the decades to come, more steel will be available for recycling. The share of recycling will most likely only go up. Existing companies will have to be ready with the technology and capacity to produce recycled steel.", "Happy learning. \ud83d\ude42", "Kind request to cover Retail sector along with FMCG at the earliest", "Yes Pradhum, we are on it. Thank you \ud83d\ude42", "APL APPOLLO is not an integrated steel plant (as mentioned).Therefore their business can not be compared with TATA,JINDAL or SAIL.The inclusion of RINL or Essar/Arsenal Mittal would have been more appropriate.Special steel definitely constitute a considerable chunk of steel industry & some similar companies comparison could have taken.\nTata steel fig.are only in Indian business or including its overseas plants together?Freight cost is a major chunk of steel cost.Developoment of N-E states may create a better opportunity of steel demand.Not to forget the demand of Nepal,Bangladesh (& Afganistan).Water transport may in future play big roles provided planned correctly (effective use of Ganga-Brahamaputra-Bay of bengal).", "You are right. Ideally APL Apollo should not be compared with the integrated players. But this list is representative, not meant to cover all integrated or specialty steel players.", "All figures are consolidated, meaning they include all operations, Indian and foreign. You should, however, rely on the financial statements released by the company itself for your analysis.", "Yes freight cost is a major cost. Therefore, it is also part of the comparison checklist. You are correct to point out the potential role of North-eastern states. Also, water transport domestically will gain significance. These are dynamic features, they keep changing. Five years later, perhaps, a different set of factors could impact the distribution of steel. The idea of the chapter is to point out all the factors you should be analyzing in the industry. \ud83d\ude42", "Happy learning!", "Hello , sir\nIt was a great reading and it seems we have much more to learn from you.\nKeep enlightening the people.\nA big Thanks for your Guidance.\ud83d\udc90", "Thank you for the kind words, Parveen! Happy learning! \ud83d\ude42", "Thank you so much sir for all your efforts .\nRequesting you to please cover renewable energy sector as it has higher expected growth in near future.", "Thank you, Abhishek! Adding that to the list. \ud83d\ude42", "Previous UI was better, We don\u2019t have to go back to change chapters and also add Updates/renewed chapter section, So that if you guys update any older chapters or add in previous sections, we\u2019ll know", "Noted, Srajan. Will update soon.", "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/2023/10/Utensils.png", "https://zerodha.com/varsity/wp-content/uploads/2023/10/Steel-Checklist-300x82.png", "https://secure.gravatar.com/avatar/3d662449c54d040312d39fe3cad82740?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/0f39fc64ecfdd77de62f3a9e39b2b88d?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/958da8c55f6a6bfc2861858cce1c92e8?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/46092095d8dba97adec34dbaaf331ab3?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/e23921a9b65279d1fb58b0eb3c99c66d?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": "10. Steel (Part 1)", "text": ["As I want to start writing this chapter on steel, I am thinking of a good way to start. I look out the window; the balcony railing is made of steel. The chair I am sitting on has steel rods. Cars, utensils, boats, hairpins, space crafts, screws, buildings, toys, and guns are made of steel. It has applications at home, on the streets, in defense, in space exploration, and whatnot. Steel is perhaps the most commonly used material in the modern world.", "It is a massive industry and a major employment generator. In 2022, China was the world\u2019s largest steel producer at 54% global share. India stood a distant second at 6.6% of the world\u2019s production. Due to China\u2019s global steel dominance, steel players in all other countries have become price takers.", "", "A price-taker business or sector has little control over its pricing. External factors heavily influence the product prices of such businesses. Most commodity businesses are price-takers.", "A price-maker business can independently decide its product prices and even influence its competitors\u2019 prices. Externalities have little influence. Apple and Nike are price-makers in their respective industries.", "Remember, in late 2021, China had ordered a temporary shutdown of some steel manufacturers due to energy shortages and emission concerns? This caused global steel prices to rally. Also, the scaled-down domestic steel production caused China\u2019s iron ore producers to export more iron ore, thereby depressing global iron ore prices. Cheaper iron ore and expensive steel produced solid profits for Indian steelmakers that year.", "The world\u2019s per capita steel consumption is about 233 kg, while India\u2019s per capita steel consumption is roughly 77 kg. India\u2019s current steel production capacity is 125 mtpa. The plan is to take the capacity up to 300 mtpa by 2030. While growing exports is always good, I believe most of this steel will be for domestic consumption.", "Note that China produces over 1000 mtpa but exports only 70-80 mtpa. It uses over 90% of its steel domestically. Sure, a lot of domestic usage must be for manufacturing goods that will be exported. But the crux of the matter is that steel production and consumption seem inherent to India\u2019s growth plans.", "Steel is commoditized globally. Commoditization happens when companies offering the same product cannot differentiate in quality and features. Metals like steel, aluminium, gold, and silver are commodities. Crude oil is also a commodity. In such cases, companies compete based on sourcing, distribution, marketing, and financial muscle.", "I like reiterating that a manufacturing sector is best analyzed by understanding its value chain. I introduced the concept of value chain in Sector Analysis, the first chapter of this module. I will break down the steel value chain into three sections \u2013 sourcing, production, and distribution.", "Iron ore and coking coal are the primary inputs for making steel. About 1.7 tonne of iron ore and 0.8 tonne coal go into making one tonne of steel. However, coking coal is a larger cost center. Iron ore would cost around $100/tonne. Coking coal comes for about $250-300 per tonne. Therefore, coal prices have a larger impact than iron ore prices on steel prices.", "Sourcing coking coal: While steelmaking requires coking coal, India specializes in thermal coal. India does not have adequate reserves of coking coal. Indian steelmakers rely on imports for 90% of their coking coal requirements. Captive coal mines of Indian steelmakers help control only some costs. They have to buy the rest from Australia and a bit from Russia and Indonesia. Importing coking coal makes the process expensive.", "Steelmakers use Pulverized Coal Injection to control coal costs. PCI is a process of injecting large volumes of fine coal as a partial replacement for coking coal.", "Further, to help decrease reliance on imported coal, the Indian government, in June 2023, decided to reserve some coal mines with attached washery operations exclusively for steel companies. The coking coal mined in India needs to be cleansed of impurities to make it more combustible. Coal washery uses water and industrial separators to filter shale, sand, and stones out of the raw coking coal to make it usable for steelmaking. Non-coking coals may also be washed for applications in other industries.", "Sourcing iron ore: India is abundant in iron ore. Iron ore can be of two types \u2013 hematite and magnetite. India primarily uses Hematite. Hematite iron reserves are mainly found in the eastern states of Odisha, Jharkhand, Chhattisgarh, Assam, and Bihar. Magnetite is a richer source of iron ore but is mostly found in the ecologically sensitive areas of the Western Ghats. Therefore, recoverable reserves of Magnetite are roughly a third of recoverable Hematite reserves. The southern states of Goa, Karnataka, Andhra Pradesh, Kerala, and Tamil Nadu have the most Magnetite reserves in India.", "Like I said earlier, cost control is critical for commodity companies. Larger steel companies have integrated backwards to control costs. Tata Steel meets 100% of its iron requirements and about 20% of its coal requirements in India from its captive mines. JSW meets ~40% of iron requirements from captive mines.", "Did you know that JSW Steel has a ~24 km conveyor belt between its captive mines and the Vijayanagar plant? It is a great cost-cutting measure, but the length of the belt is astonishing.", "Setting up the raw materials", "Iron ore can be in the form of sinter, pellets, and lumps \u2013 depending on the iron ore grade. A high-grade ore can be used as lumps; lower grades might go as pellets or sinter. Pellets are small oval-shaped lumps that are hardened using fuel. Sinter iron is grainy. If the extracted iron ore has high impurities, it is ground into gravel, cleansed using magnets, and processed into sinter.", "Parallely, coking coal is heated in an oven to produce coke and clean it of impurities. Coke is the source of carbon required in the steel alloy. Coke comes in the form of briquettes. Gas produced in this heating process is used as fuel. The by-products, tar, and sulfur, are extracted and refined.", "Making iron", "The iron ore and coking coal are now fed into a blast furnace from the top. Limestone and some other additives are also added.", "The mixture is heated inside the furnace at temperatures as high as 2200 degrees Celsius.", "This process creates pig iron or molten iron in the bottom half of the furnace. The limestone combines with other impurities to form slag. The slag is used as an input in road construction and cement making. We have seen in the cement chapter of this module how slag is blended with cement.", "The molten iron is released from below the furnace, and the slag is skimmed off the top.", "This molten iron is not pure. It is treated again to stabilize its iron content. At this stage, carbon, sulfur, phosphorus, manganese, and silicon content must be managed, and other elements must be added depending on the type of steel required. While the molten iron here can be used for casting iron goods, most of it goes into making steel.", "", "Making steel", "So far, we have just made iron out of iron ore. This is where the actual steelmaking begins. There are two common ways of making steel.", "Steel Casting", "Through either of the two methods, molten steel is now ready. It is sampled and analyzed. Other alloys may be added to ensure the desired composition. Once it reaches the correct temperature and composition, it is extracted from the bottom of the furnace.", "From there, the molten steel is channeled into a caster. It comes out in the form of a slab, bloom, or billet. The steel is now ready. This steel is still not in the shape or size we can use. Therefore, these products are called semis. Semis have to be molded into the final product.", "Vertically integrated steelmakers like Tata Steel and JSW Steel might carry out molding in-house. Specialist steelmakers such as APL Apollo Steel Pipes buy semis and are engaged only in value addition.", "Value addition may be done using hot rolling or cold rolling of steel, depending on the type and grade of steel required. Making steel tubes will undergo different processes.", "Hot rolling happens when the molten metal is molded into required shapes at high temperatures, around 900-1000 degrees Celsius. Hot rolled steel is cooled at room temperature. It is used in applications where the exact shapes and appearances may not be necessary, such as construction, automotive frames, and agricultural equipment, among other applications.", "Cold rolling happens when the molten metal is molded below recrystallization temperatures, around 500-700 degrees Celsius, depending on the properties of the steel. It is used in applications where precision, smoothness, and appearance are important, such as home appliances and automotive parts. It can also be coated with zinc to protect from corrosion, with tin for cans, and with plastic/paint coating for protection and decorative purposes.", "Cold-rolled steel is more expensive than hot-rolled steel as it takes longer to make and is used for more specific purposes.", "Steel tubes may be welded or seamless. Welded tubes are made by rolling a flat sheet of steel and welding together its edges. Seamless tubes are made by piercing a hole through a hot billet.", "I extensively referred to this video to properly understand steelmaking. Take a look if you like.", "So far, we have seen how the raw material for steel is sourced and how steel is produced. In the next chapter, we will see how steel is distributed, the role of scrap steel, and the impact of external factors on the steel industry. We will also see a checklist of the parameters to compare various steel makers.", "See you in the next chapter.", "Can you explain types of integration?\nI get confused often between vertical integration, horizontal integration, backward integration and forward integration.", "Hi Manish, I have explained these concepts in the first chapter. Let me try with an example here.", "Let\u2019s say there is an AC manufacturer.\nBackward integration is when it also starts manufacturing the wires and spares that go into an AC. Manufacturing the raw materials and inputs that you would generally source from outside is backward integration.\nIf this AC manufacturer, sells its ACs from own retail outlets, or through own distribution network, it is forward integration.\nBackward and forward integrations make a company vertically integrated.\nIf this AC manufacturer also starts manufacturing refrigerators, it is horizontal integration. It is getting into a business that is similar to the existing one.", "The steel manufacturing value chain is roughly like this. Mining iron ore and coal \u2013 making iron and steel \u2013 making value added steel products \u2013 distribution to the customers. \u201cMaking iron and steel\u201d is the primary function. Engaging in all other functions is vertical integration.", "Hi Vineet,", "Thanks for detailed explanation on Steel. Can you please provide me details on how the manufacturing process of Green Steel? As the EU imposes CBAM on steel which uses Coal as major ingredient and is restricting the import of steel which uses coal fired blast furnace.", "Regards", "Hi Rakesh, any steel produced without the use of fossil fuels is green steel.", "Let\u2019s say there are two manufacturers, A and B, producing steel using EAF method. Basically, both are recycling steel. If A is using only renewable energy to run the EAF and B is using thermal power to run it, A is producing green steel and B is not.", "Manufacturers around the world are exploring other greener options, too. Each of them could have a unique but green manufacturing process.", "Hi Vineet,", "Thanks for the reply. By the way, what does EAF method means?", "Electric Arc Furnace. I have explained it in detail in the chapter. \ud83d\ude42", "Hi Vineet, Amazing explanation. Can you share your framework for analyzing a sector? I mean the real stuff like where to start (Research Reports/ Annual Reports, etc.), where to get the data, and summarizing the whole value chain, etc.", "Thanks and regards", "Hi Sumantha, thank you. \ud83d\ude42", "I usually start by looking at the \u201cManagement Discussion & Analysis\u201d, business-overview, and performance highlights sections of a few companies in a given sector. This gives a fairly good picture of the key parameters to look at. As for understanding the supply chain, while you can get a lot of content on Google, it is better to talk to someone from the industry to cross-check your understanding.", "Besides, I get economy-level data from https://cimsdbie.rbi.org.in/DBIE/#/dbie/home.", "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/2023/10/Sea-Link.png", "https://zerodha.com/varsity/wp-content/uploads/2023/10/Steel_making2-300x267.png", "https://secure.gravatar.com/avatar/dda1af199e32f02fa01b81b4e4cf72f6?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/5deb4d438195f1f8d5cd421db1942095?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/5deb4d438195f1f8d5cd421db1942095?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/a6895d429e27db511b707ec89d67f69b?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?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": "9. Banking (Part 2)", "text": ["The banking sector can be analyzed by studying its sources of revenues, capital adequacy, and asset quality, among other parameters. The previous chapter, Banking \u2013 Part 1, covered sources of revenues and capital adequacy. This chapter will cover asset quality, liquidity, and others.", "Asset quality: Let\u2019s compare two banks. Both have given loans totaling \u20b91 Cr. This table shows a breakdown of their loan portfolio. Which bank has a better asset quality?", "", "We know how risk can be mitigated through diversification. Therefore, with its loan book diversified across various categories, Bank 1 seems to have a better asset quality.", "Diversified or not, every loan book will have some defaults. Meaning some borrowers may not repay part or all of their dues. These are bad loans or non-performing assets.", "Why are bad loans called non-performing assets? Loans are a liability. Why are they called assets? If you are a borrower, a loan is your liability to the bank. It also means that your loan is the bank\u2019s asset. So, when people do not repay their loans on time, their loans are called non-performing assets. For simplicity, some banks call them non-performing loans (NPLs) too. Don\u2019t be confused; both are the same.", "The asset quality of a bank can be quantified with the help of three ratios \u2013 GNPA, NNPA, and PCR. Again, you do not have to calculate these, as the banks have to report them every quarter.", "This snapshot from ICICI Bank\u2019s investor presentation shows these three ratios. The figures highlighted in blue in this image are of the most recent period, i.e., March 2023.", "", "Lower NPAs are preferred. Comparing the NPAs of a bank with peers helps understand their relative performance. A bank with 1% GNPA is doing better than a bank with 2% GNPA. Comparing NPAs with the previous quarters can suggest if the bank\u2019s asset quality is improving or deteriorating.", "Higher PCR eats into profits. Therefore, a PCR suggests that a bank is prudent and conservative. If a bank can consistently grow profits while maintaining a high PCR, it is said to have a high quality of performance and reporting.", "Deposits: The following snapshot shows that ICICI bank has given \u20b910839 bn worth of loans. However, its own net worth is \u20b92145 bn, and it has borrowings of \u20b91891 bn. Where did the bank get the rest of the money to lend? Deposits. ICICI Bank had deposits with \u20b912108 Cr. It used these deposits from customers to give loans to customers.", "", "Deposits can be further categorized into CASA and Term deposits. CASA is an acronym for Current Account-Savings Account. Banks are always looking to increase their CASA ratio. Why?", "Because CASA is the cheapest source of funds for the banks. They usually pay 3-4% interest on savings accounts and nearly nothing on current accounts. Banks borrow from the RBI at the repo rate, which is at 6.5% currently. Borrowings in the form of debentures and bonds are even more expensive. Therefore, banks keep chasing CASA deposits. A higher CASA ratio is preferred.", "An issue with CASA deposits is that they are demand-based. Customers can place and withdraw deposits as and when they want. Therefore, term deposits or fixed deposits are also chased. Banks have to pay slightly higher interest on fixed deposits but have more certainty about the availability of funds.", "", "Advances (Loans): Core banking is about taking deposits and giving loans. If deposits are the first leg, advances are the second leg.", "As an investor studying a bank, check out what its loan book is made up of. More than half of ICICI Bank\u2019s loan book is retail. Having a large, diversified retail loan book is good. Each loan amount is small, and a default by one or a few borrowers will have a negligible impact on the bank\u2019s balance sheet. Retail loans can be further de-risked by giving loans for housing, auto, credit cards, personal loans, consumer durable goods, etc.", "", "Corporate loan amounts are large, and loan book is built up fast. However, a single corporate loan default can hurt the balance sheet significantly. Basically, risks are concentrated in the case of corporate loans. A healthy mix between corporate and retail loans is preferred.", "", "Banks also report a credit rating-wise break-up of the overall health of their corporate loan book. Credit ratings of A or above are safer. Some banks might also show the NPAs in each loan category. This metric can give insights into the tension or potential in any particular sector.", "Liquidity: Banks must maintain a certain minimum level of liquidity to ensure that the depositors have access to their funds when required. The RBI mandates the banks to maintain two ratios.", "Digitalization: This aspect does not include any ratio. It is more qualitative in nature. The number and growth of accounts opened, FDs booked, loans approved, and credit cards issued through digital channels are important indicators of a bank\u2019s progress in digitalization. Digitalization has become more of a hygiene factor for banks. Digitalization may not make a bank unique, but not having a digital presence is a sure deterrent to its growth. In their annual reports and quarterly investor presentations, banks often give an update on the progress of their digital initiatives.", "", "Branches and other infrastructure: The number of branches, ATMs, employees, credit cards, and customer base are some infrastructural parameters that you could look at. However, more or less of these parameters may not necessarily mean good or bad for a bank. For example, a bank might have issued a large number of credit cards, but spending per credit card could be low. Similarly, a bank focusing on corporate banking might have a few high-value customers, while a bank focusing on retail banking might have many low-value customers.", "The idea is to look at external trends and see which banks stand to benefit from those trends. For instance, if there is stress in the balance sheets of businesses, perhaps the bank focusing on corporate banking might underperform. The approach here is nuanced and subjective to your interpretation of economic trends. If you believe the whole banking industry will do well, you could even buy into a banking ETF or index fund.", "This table contains all the parameters covered above and the previous chapter on banking, with FY23 numbers for the five largest Indian banks by market capitalization. You may use this as a ready checklist to ensure you have covered all the parameters in your banking sector analysis.", "", "The RBI publishes views on the banking sector and the economy in various annual and semi-annual reports. A few examples are listed below.", "Apart from these reports, the banking industry\u2019s trends, health, and potential can be studied from the RBI\u2019s annual report and the regular bulletins on its website.", "While the financial statements of banks are often considered difficult to understand, I believe the easy availability of complex ratios and loads of data from the RBI make banking a relatively comfortable sector to analyze. \ud83d\ude42", "The next chapter is going to be a little challenging, I think. Stay tuned.", "Whats the next topic??? When will it be Released\u2026", "Hi Siva, we are planning to do Steel and Hotel sectors next. But it might take a little while.", "dear sir\ni had registared for varsity certifide and my exam was scheduled on 16 sep 2023 from 4 pm to 6 pm.but i have not got any link or communiction from varsity regarding exam.hence i mailed but got no response.therefore i am writing here as i dont know where to raise this issue.", "Suresh, I\u2019d suggest you speak to a support desk of create a ticket for this. I\u2019m not sure why you\u2019ve not received the link.", "Very insightful!\nCould you tell me from where you get the information?\nIf I want to analyze a sector from where I can get the information?\nThank You\ud83d\ude0a", "Hi Himanshu, annual reports are the richest source of information. If it is a regulated sector, you can get information from the regulator\u2019s website too. For example, RBI for banking and IRDAI for insurance.", "Will the energy sector be covered in the future?", "Sure Manob. But energy is a vast sector \u2013 petroleum & gas exploration, transmission, and marketing; power generation, transmission, and distribution. Each might need a separate chapter. So it will take a little while.", "Dear Vineet,\nI cannot express my appreciation in writing for the efforts you have put into writing this module.", "After Technical Analysis, Fundamental Analysis, and Personal Finance modules by Karthkik sir, I find this module super simple to understand. Being an engineer without any knowledge of business, it was vital for me to understand a business in the simplest form, like a teacher is teaching me and I\u2019m clearing my doubts just by asking him. You did it through writing. Hats off. God bless you.", "\u2014\nThanks & Regards,\nSanjay Kumar Jena", "Dear Sanjay,\nYour message has made me swell with pride. Thank you for the kindest words. Happy learning. \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/2023/09/Banking-2-1-300x73.png", "https://zerodha.com/varsity/wp-content/uploads/2023/09/Banking-2-2-300x36.png", "https://zerodha.com/varsity/wp-content/uploads/2023/09/Banking-2-3-300x157.png", "https://zerodha.com/varsity/wp-content/uploads/2023/09/Banking-2-4-300x145.png", "https://zerodha.com/varsity/wp-content/uploads/2023/09/Banking-2-5-300x134.png", "https://zerodha.com/varsity/wp-content/uploads/2023/09/Banking-2-6-300x147.png", "https://zerodha.com/varsity/wp-content/uploads/2023/09/Group-547-300x188.png", "https://zerodha.com/varsity/wp-content/uploads/2023/09/Banking-2-8-300x163.png", "https://secure.gravatar.com/avatar/d90945907f0f257150966dab62b85d3f?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3a564e031a5b0a045d80d1df6152a0b9?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/1a0c5002965e53a0585c859cfa9d847d?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/7cfe55033e05d672020f69e515169aea?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/05faa55ee3adfbe98efd5389bb8fb492?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?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": "8. Banking (Part 1)", "text": ["I opened my first bank account at the age of 13 or 14, I think. I had to fill out and sign an account opening form. My friends and I would love to go to the bank and have the passbook printed. We would deposit and withdraw \u20b920-30 all the time just to increase the passbook entries. If you are a Gen-Z reader, this experience might be alien to you. You could still do all this at your bank, but why would you?", "You can now open bank accounts digitally from your home. Sending money was already easy through banking apps, but now we have the comfort of UPI apps. You can even have loans approved on apps.", "This evolution is no wonder. I would like to take the liberty to call banking the first and most digitized industry.", "", "Banks are often called the lifeline of an economy. We hold our money in the banks. We make fixed deposits. We take loans from banks. Some of us also buy insurance and investments through banks. Banks facilitate foreign trade. Every business maintains a bank account, and many businesses also take loans.", "When there is optimism in the economy, enterprises are willing to take risks. They borrow funds and expand their businesses. Their vendors and buyers also see renewed demand. Money starts rolling in the ecosystem, and banking activity picks up. The inverse is true when there is pessimism in the economy.", "Basically, economic health has a direct impact on the banking sector. However, the relationship is a bit layered. We will see that later in this reading.", "India\u2019s banking system has a tiered structure. The Reserve Bank of India (RBI) regulates all banking activities in the country. The three broad types of banks are scheduled commercial banks, specialized banks, and cooperative banks.", "", "As of this writing in July 2023,", "As I mentioned above, the focus of this reading will be listed commercial banks, most of which will fall under private, public, or small finance banks\u2019 categories.", "Banks differ from regular businesses. They pay their customers for maintaining deposits. They earn interest for giving loans. They make fees and commissions from other financial products. All these services deal in money for money. There is also no manufacturing or warehousing of products. Therefore, banks do not have inventory or cost of goods sold in their financial statements.", "Their peculiar nature is perhaps why banks have a separate regulator, the RBI. It is also considered one of the most important institutions in the country. Its policies and actions have a direct bearing on many industries and an indirect bearing on all. The RBI is expected to stimulate economic growth when there is a slowdown and tame it when there is inflation.", "The RBI sets regulations for banks with respect to customer account opening and maintenance, permissible business activities, scale of operations, liquidity requirements, capital adequacy, and non-performing assets, among others.", "The global financial crisis of 2008 showed how a crisis in the banking sector could ripple across sectors and countries and severely dent their economies. As a result, central banks across the world agreed on a set of strict principles to regulate banks. These principles are called the Basel-III norms. The idea was to monitor and control the risks that banks took.", "The RBI adopted Basel-III norms but took a step further. It mandated stricter requirements for the Indian banking system. Since we are a developing economy, stricter risk parameters seem prudent. \ud83d\ude42", "Just like insurance, the heavy regulations in the banking sector are an advantage for an analyst. Banks are mandated to report a number of ratios every quarter. The formula for calculating these ratios is stipulated by the regulator. You will get most ratios directly in the banks\u2019 financial reports and investor presentations. Therefore, a comparison of ratios across banks is easier.", "Sources of revenues: A bank\u2019s revenues are split based on the type of customers.", "Growth in corporate and retail loans is essential for the growth of core banking operations.", "Revenues can also be split into interest income and non-interest income. The next section on net interest income discusses this elaborately.", "Net Interest Income and Net Interest Margin: Net Interest Income is the difference between interest earned and interest paid. A bank earns interest on loans, credit lines, and credit cards. It pays interest on savings accounts and fixed deposits. It makes business sense when interest earnings are more than interest payments.", "Interest earnings \u2013 Interest payments = Net Interest Income (NII).", "If you are reading a bank\u2019s investor presentation, the net interest income figure will be given. You can see it in this snapshot from ICICI Bank\u2019s presentation.", "", "If you are reading the bank\u2019s financial statements, you can compute it using the NII formula. Interest earned = (34438.91)", "Interest expended = (14479.47)", "NII = Interest earned \u2013 Interest expended", "= (34438.91-14479.47)", "= 199.59 Billion or about Rs.19,959.49Crs.", "= 19959.49 Cr. This is the same as 199.59 billion, as shown in the presentation.", "", "It is essential that a bank\u2019s NII is positive. Negative NII means interest expenses are more than interest earnings. That means losses from the main banking operations.", "Net Interest Margin (NIM) gives perspective to NII. Dividing NII by the average interest-earning assets gives NIM. The issue here is that the figure of \u201caverage interest-earning assets\u201d is available only in the annual reports. But we don\u2019t have to worry \u2013 the banks are mandated to declare NIMs every quarter.", "A wider or growing NIM is a positive sign for the bank. It means the bank is either borrowing at lower interest rates or lending at higher interest rates. It could even be a combination of the two.", "In fact, in FY22, ICICI Bank\u2019s NIM grew compared to FY21 even when its interest earnings fell. This is because interest earnings declined by 28 bps while interest payments declined by 54 bps.", "", "If the NIM is narrowing consistently over a few quarters, it could be a warning sign of the bank\u2019s probably declining fundamentals and creditworthiness. Even when a bank is steadily improving its fundamentals, it is considered stable only when it has significantly improved and stabilized its NIM.", "There is no ideal NIM figure. Perhaps you could use the industry average to judge a bank. Or you could even compare a bank\u2019s NIM with an independent forecast. For example, Fitch Ratings expects the average NIM for FY24 to be 3.45%. So, any bank\u2019s NIM higher than 3.45% is a good number.", "Capital Adequacy Ratio (CAR):", "A measure of a bank\u2019s ability to lend, CAR is also known as Capital to Risk-Weighted Assets Ratio (CRAR).", "Here, assets are basically loan assets. The loans given are a bank\u2019s assets. Based on the nature of the borrowers and the types of loans given, each loan asset is assigned weights according to the level of risk it carries. Accordingly, the total risk-weighted value of all loan assets is determined. The ratio calculates capital as a percentage of total risk-weighted assets.", "CAR = (Tier 1 Capital + Tier 2 Capital)/Risk Weighted assets", "Again, you do not have to compute CAR, as the banks are required to report the ratio every quarter. Understanding the concept is important.", "A bank is in the business of lending loans. It can lend roughly 4-5 times its equity capital. One of the biggest risks is the loans not being repaid. Loan losses directly hit the equity capital. If equity capital reduces, the bank\u2019s ability to lend also reduces.", "Suppose a bank has a capital of \u20b92 Cr; it can lend roughly \u20b910 Cr. What if loans worth \u20b950 lakhs went bad? That amount of \u20b950 lakhs is a loss that directly hits the equity. So, the remaining capital is \u20b91.5 Cr. At roughly five times, the bank can lend \u20b97.5 Cr. But it has already lent \u20b99.5 Cr (after allowing for bad loans). In this case, it will have to either sell the loans or raise new capital. Both options can trigger events for the overall banking system. Therefore, the RBI mandates banks to have a minimum capital adequacy ratio of 9%. Basel-III norms have guided for an 8% CAR, but the RBI is stricter.", "AT1 and Tier 2 instruments can be similar, but AT1s are subordinate to Tier 2 instruments. If a bank were to suffer losses, AT1s would be written down or written off before Tier 2 instruments.", "This snapshot shows that ICICI Bank has a CAR of 18.09%. This is well above the required 9%. We can say that this bank is well-capitalized. It has enough space to accommodate bad loans.", "", "Banks are also required to maintain a buffer of 2.5%. It is called the capital conservation buffer. They are expected to build this buffer in times of good business. When there is stress, they can use this buffer. When the stress fades away, they can refill this buffer by reducing dividend payouts.", "This snapshot from RBI\u2019s Master Circular on Basel-III Capital Regulations shows the types of capital requirements for banks.", "", "When a bank becomes excessively large, it becomes a systemically important bank. Any stress in such banks can have adverse ripple effects on the economy. Therefore, such banks have additional capital requirements. Only three banks fall into this category. SBI has to maintain additional common equity tier-1 capital of 0.60%. HDFC Bank and ICICI Bank have to maintain 0.20% additional common equity tier-1 capital.", "A Note on risk-weighting of assets \u2013 Investments classified as Held for Trading (HFT) or Available for Sale (AFS) are given risk weighting mainly for market risk and not credit risk. This could understate the risk associated with such assets. A lower risk-weighted asset value would require lower amounts to maintain capital adequacy. A bank could buy non-convertible debentures of a risky company, classify it as Held for Trading, and under-report its risk. This could overstate the bank\u2019s capital adequacy.", "When studying the banking sector, you do not have to generally worry about large banks or banks with comfortable capital adequacy. But you must be careful when studying banks with only borderline capital adequacy.", "In order to not stuff too much information in one chapter, I will take up asset quality, liquidity, and other parameters critical to analyzing banks in the next chapter, Banking \u2013 Part 2. It will also contain a checklist of all the parameters covered in both chapters that you can use as a reference while analyzing banks on your own.", "", "", "Thanks a lot for choosing this sector. Was waiting for it. Kudos !", "Happy learning. \ud83d\ude42", "Thanks a lot for this, I am waiting for aviation sector", "Alright Himanshu, adding it to the list. \ud83d\ude42", "Some headings like Capital Adequacy Ratio are not fully explained in detail. A lot is left to guesswork.", "Hi Dipan, could you please elaborate on what is missing? Or help me with the questions that came to your mind when reading this chapter? I will try to address the questions or edit the chapter accordingly.", "Can you give a few examples of weighted assets? Also Additional Tier 2 capital and Tier 2 have the same parameters like preference shares,debentures etc. Kindly elaborate. Thanks", "Hi Dipan,\nAll loans that a bank gives are risk-weighted assets. Depending on the type of borrowers and terms of loans, each loan asset will be assigned a different weight.\nTier 2 and AT1 instruments are similar, but AT1s are subordinate to Tier 2.", "Have updated a few lines in the chapter, too, to clarify these things.", "Eagerly waiting for the Retail sector which is changing like never before. A article over it will be very useful", "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/2023/09/Group-546-1024x640.png", "https://zerodha.com/varsity/wp-content/uploads/2023/09/Flowchart_bold-300x118.png", "https://zerodha.com/varsity/wp-content/uploads/2023/09/Banking-1-3-1024x621.png", "https://zerodha.com/varsity/wp-content/uploads/2023/09/BAnking-1-4-1024x451.png", "https://zerodha.com/varsity/wp-content/uploads/2023/09/Banking-1-5-1024x614.png", "https://zerodha.com/varsity/wp-content/uploads/2023/09/Banking-1-6-1024x581.png", "https://zerodha.com/varsity/wp-content/uploads/2023/09/Banking-1-7.png", "https://secure.gravatar.com/avatar/47937adcaa19612a9695000466944c86?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/b566833dce6e55365b47b24ef54cdfad?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/81c8edbd5fdaea0b228810b1d8510281?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/81c8edbd5fdaea0b228810b1d8510281?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3d662449c54d040312d39fe3cad82740?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": "6. Automobiles (Part 1)", "text": ["The previous chapter was about the IT sector, a primarily B2B service business. This chapter will look at the automotive sector, mainly a manufacturing business. Sure, servicing is a huge part of the automotive sector, but it comes after the goods are produced and sold.", "The automotive sector is an ecosystem. It comprises several moving parts. It has many sub-segments depending on the type of vehicles or customers. The vendors or suppliers to the automotive sector are also an industry of their own.", "For example, a standard car is built of roughly 30,000 parts, including nuts and bolts. Engine, gearbox, chassis, axle, fuel tank, tires, batteries, airbags, glass, mirrors, handles, lights, and seats are just a few parts of a car that an amateur like me can think of. Today\u2019s smart cars also have Bluetooth, wifi, digital screens, parking sensors, safety sensors, and GPS, among other features. Each of these parts is further made of several components.", "Automobile manufacturers do not make these inputs themselves. Instead, they are mostly assembly lines. For example, Maruti Suzuki\u2019s production plant in Manesar and Tata Motors\u2019 plant in Pune are both assembly plants. They buy most parts and components from outside vendors. These vendors are called Original Equipment Manufacturers (OEMs). Each automobile company maintains multiple vendors for each component, making their vendor list run into thousands of names.", "", "In this chapter, I endeavor to address all segments and ancillary sectors of the automobile industry. I will also dedicate separate chapters to some ancillary sectors. Let us first have a look at the landscape of the Indian automotive industry.", "", "By the way, ICE vehicles are regular engine vehicles powered by petrol, diesel, or gas. ICE vehicles run the combustion of fossil fuels. Electric vehicles do not run on combustion.", "We will focus on volumes and product mix to understand the business performance. Let\u2019s enlist the parameters.", "", "While all automobile companies report volume sales, very few report production volumes in a comprehensive manner.", "This is a snapshot from SIAM\u2019s website. It shows production volumes across vehicle types.", "", "", "An automaker might sell more or fewer units than the number produced. Continuously lower sales volume than production could indicate inventory build-up. Continuously higher sales than production cannot last for long. You cannot sell what you have not produced. But higher sales numbers suggest increasing demand.", "Higher demand has to be met with higher production. This may not be possible if the production capacity is already fully used. If the automaker is convinced that the demand will continue, it can add capacity. Capacity addition comes with significant capital expenditure. Debt levels could also rise to fund capital expenditure. All automobile manufacturers report sales volume every month.", "Either way, the average realization is growing. \u201cRealization\u201d is the money Maruti Suzuki is making per car.", "", "If realizations were falling, revenue growth would be slower than volume growth. This is a more problematic feature. The carmaker may be losing brand value and is forced to sell at lower prices.", "As shown in the previous point, if Maruti Suzuki sells more higher-priced cars than lower-priced ones, it reaps the benefits of a good product mix. Profit margins on higher-priced products tend to be higher.", "This applies to all industries. If you buy Lifebuoy Soap, HUL wants you to buy Dove. If you have a Super subscription, Hotstar wants you to buy a Premium subscription. If you have a Swift, Maruti wants you to upgrade to Swift Dzire.", "Let\u2019s compare these metrics for some automobile companies.", "", "These metrics are all about revenues. A business needs to keep its costs in check to be profitable. Cost, efficiency, and profitability ratios for automotive companies are the same as what we have covered in the Fundamental Analysis module on Varsity.", "The automobile business is asset-heavy. The chance of high debt on the balance sheet is also high. Therefore, when studying the automobile sector, I would also study the debt-equity and other leverage ratios from the fundamental analysis module.", "That said, we must also study what and how external elements influence the sector. For the sake of not making this chapter too heavy, we will discuss the rest in the next chapter. It will primarily focus on what factors drive costs and impact the efficiency of automakers.", "Happy reading! \ud83d\ude42", "", "Great content Vineet,Keep Going:)", "Thank you, Raghu Ram!!", "Hi, In the revenue \u2013 sales table of different companies, the sales of M&M was high but revenue was low\u2026in products segment i can see that Mahindra produces passenger,commercial,farm vehicles which may cost high\u2026does it means that segment took a hit?? is this how we have to analyse??", "Yes Siva, it is possible that the segment took a hit. But you have to verify that. It is also possible that their two- and three-wheelers did exceptionally well which would mean higher volumes but lower revenues. So when you think a segment took a hit or did exceptionally well, you must dig deeper into finding out what really happened? Check their segment revenues and results in the notes section. That could shed some light. \ud83d\ude42", "What will be the Key performance Indicators (KPIs)of the Automobile Sector?", "For an investor analyzing the automobile sector using publicly available data, factors mentioned in section 6.3 of this chapter are the most easily accessible KPIs.", "Lead time, utilization rate, supplier network and score, error rate, etc. are also KPIs but might be difficult to get for all the players in the sector.", "Therefore, other external factors that may impact the operations and performance of automobile companies and may give some idea about their business are elaborated in Automobiles (Part 2), the next chapter.", "how can we analyze growing industries and sectors which could give us realistic returns in near future for ex. green energy ,electric vehicles,alternative fuels etc.", "Hi Karnakya,\nMost new industries have unproven revenue or business models. Adoption of their technologies or products is also uncertain. Therefore, instead of a structured analysis, you will have to look at pseudo-indicators such as number of users, number of outlets, etc. There is no sure shot answer to this. When Zomato and Paytm IPOs came, they did not have a listed peer for analysts to use as a reference. Each applied their own independent approach.", "Also, Warren Buffett would say that he always knew technology was going to greatly benefit humans, he just was not sure which companies would actually deliver or fail. That is why he stayed away from tech stocks for the longest time. Similarly, these new industries will do well, but it might be difficult for now to identify which companies in these industries would do well. \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. 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{"title": "7. Automobiles (Part 2)", "text": ["This chapter is in continuation with the previous chapter, Automobiles \u2013 Part 1, which sets the context for the automobile industry. So, I suggest you read that before venturing into this one. \ud83d\ude42", "While we have discussed performance parameters for automobile companies, here we will discuss the externalities driving or impacting their performance.", "For the sake of simplicity, I have split the external factors into supply-side and demand-side. Supply-side factors impact the availability of inputs, raw materials, and labor. Demand-side factors create, drive, or hurt the demand for automobiles. Let us first look at the supply-side factors.", "Commodity prices \u2013 Steel, iron, aluminium, and magnesium are the most commonly used metals in automobile manufacturing. These metals are commodities. Their prices fluctuate a lot. Excessive upward fluctuations in commodity prices can hurt the gross margin of automakers. This chart of only two base metals, iron ore, and aluminium, shows how their prices have fluctuated over a 10-year period between Jul-13 and Jul-23.", "", "Rubber prices \u2013 Rubber is used in several components of a car. Most importantly, it is used in tires. Automakers do not make tires. They buy tires from tiremakers. When rubber prices shoot up, tires can become expensive. This adds to the cost of production.", "Batteries \u2013 Batteries are primarily made of either lithium or lead. Both are commodities. Lead-acid batteries have long been used for auto-start, headlights, horns, and other support functions. This is mostly applicable to ICE vehicles. Electric vehicles are mainly powered by lithium batteries. The growing adoption of electric vehicles has given a boost to the demand for lithium batteries.", "Components \u2013 The availability of components is critical for timely production. Quality also must be ensured. Certain components are mission-critical for automobiles. Carmakers maintain teams specifically meant to certify the quality of components that suppliers are delivering.", "Suppliers of many components are small enterprises. Their limited capital and resources make them vulnerable to shocks and failures. Remember how Covid hurt small businesses? Shutdowns, production delays, labor shortages, and stuck payments were a few of the many issues that small manufacturers dealt with. Many had to close down their businesses. This contributed to slower production of vehicles in the months when operations resumed post-Covid.", "The increasing use of smart devices has digitized several functions of automobiles. The audio systems, parking sensors, dashboard screens, and remote locks are smart functions that run on semiconductors. Post-covid shortage of semiconductors had caused nearly all automakers across the world to suspend or cut production for months.", "Labor \u2013\u00a0The automotive industry is one of the largest users of robotics in the production process. Still, the industry is labor-intensive. Every automaker employs thousands of employees on its shop floor. So the availability of employees is critical to ensuring uninterrupted production. Worker strikes, natural disasters, and pandemics can often hinder worker availability. Maintaining good worker relations, therefore, becomes essential.", "The sector is often touted as the indicator of economic development. Being a high-value consumer product in India, automobile purchase is a big financial and emotional decision for most families. In fact, when a farmer purchases a tractor, it could become a village-level event in some parts of India. So, what drives this demand?", "Disposable income \u2013 Many industries are hopeful of the rising disposable income of the Indian middle class. Economic growth can improve employment levels and grow household incomes. This, in turn, can create demand for aspirational products. Cars are still an aspirational product \u2013 on average, only 1 in 12 Indian households own a car. In contrast, at least half of all Indian households own a two-wheeler.", "", "Cost of running the vehicle \u2013\u00a0Purchasing an automobile is an expensive affair. But the costs of maintaining a vehicle can be high, too. Fuel, maintenance, servicing, repairs, and insurance are regular costs. Consumers account for these in their purchase decision. Therefore, to influence customer decisions, free services, warranties, and mileage are the most commonly offered features with most vehicles.", "After-sales service \u2013 This point draws from the previous one. The quality and affordability of after-sales services is a major factor driving vehicle purchase decisions. Carmakers often market the quality of their after-sales services to drive sales.Those living in tier-3 or tier-4 towns often buy cars from brands that have service centers in their towns. They may reject cars with better features just because there are no authorized service centers near them.", "Availability of financing \u2013\u00a0Nowadays, people do not save up for years to buy a car. They can simply take a loan.", "Last year, I decided to buy a car, the first in my middle-class household. If I had to save up, I would have taken maybe two or three years to buy the car of my choice. Thanks to easy loans, I could afford a car two or three years earlier. \ud83d\ude00 There are many others like me. The easy availability of loans has made it possible for us to buy a car at an early age.", "In fact, the salesperson wanted me to buy a more expensive car because I was eligible for a higher loan. Easy financing often drives a customer to buy a more expensive car.", "Financing is a major driver for tractor sales, too. Most farmers buy tractors on loan. Affordability among farmers is anyway a challenge. Therefore, loans are a significant enabler.", "Two-wheeler financing is a huge market. India had active two-wheeler loans worth over \u20b986,000 crore at the end of FY22. Clearly, people are dependent on financing for all vehicle purchases.", "Buses, trucks, and other commercial vehicles are mostly bought by business firms. Businesses are always looking to manage cash flows. A lump sum payment can dent the cash reserves. So, firms also prefer to buy vehicles on loan and pay monthly installments.", "Simply put, any vehicle purchase that could be done three years later is done today, thanks to easy loans. Therefore, the availability of financing is seen as a demand driver for automobiles.", "Seasons: The focus here is on monsoons. A good monsoon season results in good agricultural produce. This improves farmers\u2019 income, thereby creating demand for tractors and two-wheelers. Since rural income levels are low, two-wheelers are preferred and easy to afford. Two-wheeler makers often comment on the impact of monsoons on rural sales.", "This snapshot from a news report by Financial Express attributes erratic monsoon and inflation to lower rural demand for two-wheelers.", "", "And this snapshot argues why tractors and two-wheelers are performing differently in the rural markets. Tractors and two-wheelers are generally expected to perform similarly in rural markets.", "", "Charging infrastructure: This is applicable only to electric vehicles. A wider availability of charging infrastructure can motivate consumers to buy more electric vehicles. The target of achieving 30% EV car adoption by 2030 can be realized only if charging stations could come up faster. After so many years since they were introduced, CNG vehicles have struggled to achieve wider acceptability because of the limited number of gas stations.", "The speed of charging is an issue, too. Charging an electric vehicle can run into a few hours. If you forgot to refill the petrol in your car, you could always stop by at the next fuel station. But if you forgot to recharge your EV last night, your journey will be delayed by a few hours. Therefore, fast charging infrastructure is critical to encourage more adoption of EVs.", "Battery swapping has often been discussed as an alternative to charging. It involves replacing exhausted batteries with charged ones at swapping stations. This can happen in a few minutes instead of a few hours taken by charging. But it has its own challenges.", "We would need a full-fledged battery-swapping infrastructure. For example, battery swapping would be more effective if the battery size and shape were standardized across carmakers. Getting all industry players to agree on one standard can be a tall task. There also are other logistical issues with battery swapping.", "Regulations: Regulations can spur or hurt demand for vehicles. Often, safety-related regulations come with an additional cost to the consumer. While safety is preferred, higher prices are a deterrent to demand. I have enlisted a few examples of regulations below.", "My effort here was to explain how to interpret externalities rather than give a fixed checklist of externalities. I hope you found it useful. \ud83d\ude42", "Can we expect part 3\u2026", "We do not plan on it but what would you like to see in Part 3, if we develop it?", "Sir,", "Can we expect material for some more traditional industries like FMCG/Banking?", "Hi, Banking should be released next week. FMCG might happen a little after that. \ud83d\ude42", "Hello Vinnet Sir It Was A Well Written Module On Automobile Sector As Always By Varisty, My Question May Be Slightly Off Track As I Want To Do An Intern In Content Writing in Varisty As After Reading Every Module Of Varsity I Am Well Equipped With Finance And Now Looking For Industry Expereince,Most Happy If You Can Guide Me \ud83d\ude42", "Thank you for reaching out, Vamsi. We will let you know when we plan on offering internships.", "HEY TANISH HERE, AMAZING INSIGHTS I WOULD SAY.\nIF YOU UPLOAD SOLAR INDUSTRY ANALYSIS THAT WOULD BE VERY HELPFULL.\ud83d\ude0a", "Thank you, Tanish.\nAdding that to the list.", "As part 3, It would be really helpful if you can present it as a case study what led to the fall in the auto sector in the calendar years 2018 and 2019 and which factors effected the auto sector negatively in those two years.", "Thanks for the idea, Akhil. \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/2023/08/1-4-1024x633.png", "https://zerodha.com/varsity/wp-content/uploads/2023/08/2-4-1024x640.png", "https://zerodha.com/varsity/wp-content/uploads/2023/08/3-7.png", "https://zerodha.com/varsity/wp-content/uploads/2023/08/4-4-1024x320.png", "https://secure.gravatar.com/avatar/d90945907f0f257150966dab62b85d3f?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/e7d2b55061fddf6c58bd0162487e06e1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f7da5590dc8fe75c8c9f128864210788?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/0df2cdd6cc9ca554c752f27cbeea3f47?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3763f77bfb6a291bf1af294c3825ac10?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?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": "5. Information Technology", "text": ["In the previous chapter, we studied the parameters unique to the insurance industry. Here, we will explore the performance metrics specific to the Information Technology (IT) industry. While insurance was tricky due to the regulations in the sector, IT is tricky because of its global nature.", "Among all sectors, Indian IT was perhaps the first to achieve global prominence. From exporting IT services worth a little over $6 billion in 2000-01 to about $245 billion in 2022-23, Indian IT has come a long way. Interestingly, while the sector has grown 40x in USD terms, it has grown ~80x in INR terms. This is because the INR has depreciated against the USD over these decades. For a business engaged in exports, a depreciating currency is like a cherry on the cake \u2013 earn foreign exchange and then convert it to extract even more value in INR.", "", "The IT sector had its humble beginnings in the 1990s when it mainly exported services such as insurance claim processing, payroll and HR maintenance, and call centers. Fast forward two decades to 2023, and the sector has become a behemoth. Digitalization, cloud computing, AI-driven insights, consulting, and cybersecurity are some of the many sophisticated services the IT sector provides. From less than 2% about two decades ago, India\u2019s share in global IT revenues has soared to about ~35%.", "The IT sector is also a major employment generator. Indian IT employed over 51 lakh employees in 2021-22. This figure does not include the lakhs of employees working at the foreign offices of prominent players like Tata Consultancy Services and Infosys. Remuneration is, in fact, the biggest cost for IT companies.", "Over the years, automation and AI have largely replaced repetitive services like call centers and payroll maintenance. A key driver for the success of Indian IT firms in the face of automation is their ability to stay relevant. They have constantly spent on new technologies, upskilled their workforce, and focused on innovation.", "Service business: Indian IT is almost entirely service oriented. They hardly sell any hardware. Software used to be a product, but the cloud transition has made it a service. Remember SaaS or Software as a Service? Previously businesses would buy software packages from IT companies to digitalize their processes. Now they buy subscriptions for regular payments so that the IT company can continuously improve and update the product. IT companies also prefer this arrangement as it is not just a one-time software sale but a subscription service that brings regular revenues.", "Tethered to global events: About three-fourths or 75% of the total revenues of Indian IT come from outside India, with the US alone commanding ~60% share. An economic boom in these countries triggers IT spending, and Indian IT gets a boost in revenues. An economic downturn, on the other hand, hits revenues. A large part of IT has become essential to the operations of many businesses. During a downturn, the demand for augmented or experimental services mainly declines while that for essential services remains stable. Therefore, a significant revenue decline due to a recession may be rare.", "Exposure to foreign exchange: You may call this feature a derivative of the previous one, as both are mostly related. Forex exposure is mostly seen as a good feature for an Indian exporter. India is a developing country witnessing a steady depreciation in INR.", "How does an exporter benefit from a depreciating currency? Let\u2019s say Infosys sold a service for US$ 1,000 in 2013 when the USD/INR exchange rate was ~\u20b950. When converted into INR, Infosys made \u20b950,000 in 2013. If the same service were sold for US$ 1,000 today when the exchange rate is ~82, Infosys would make \u20b982,000. Effectively, Infosys made more money simply on account of INR depreciation.", "", "The INR could depreciate for reasons internal or external to India. If high inflation has caused INR depreciation, it is mainly an internal issue. But when the Russia-Ukraine war pushed up the demand for USD, the INR depreciated due to external factors.", "Please also be mindful of any INR appreciation, which could show muted growth. The point to take home is that the slow growth could be due to currency fluctuations rather than a slow business.", "Regulations: Every country or region is developing its version of laws around cyber security, data management and ownership, and digital privacy. Since IT companies cater to customers in tens or even hundreds of countries, they must navigate each of these laws. The cost of compliance can be high. Monitoring an IT company\u2019s litigations in foreign countries might be prudent.", "As a sector, IT is mostly organized, formalized, and structured. The value chain is also not too big \u2013 the company hires talent to develop products that business clients consume. Therefore, a basic fundamental analysis should ideally be adequate for studying the IT sector or its companies. However, I also seek the following information to gain deeper insights.", "", "When employees leave, expenses that the organization must have incurred on training and upskilling them become a sunk cost. The management has to find their replacement. Finding, training, and inducting replacements costs time and money. A high attrition rate could make IT companies desperate to fill positions by offering higher salaries, thereby increasing costs.", "A high attrition rate across the industry, as was seen in 2022, suggests high demand for talent. Increased digitalization after Covid-19 led to higher demand for IT services. IT companies, in turn, hired more employees. Higher demand led to employees switching jobs for higher salaries. Organizations started poaching each other\u2019s employees, thereby pushing up the overall industry attrition rate.", "Attrition rates might differ across sectors or industries. A 10% attrition rate might be too high for one sector but acceptable for another. Therefore, studying the attrition rate is more meaningful when compared with other IT companies.", "You could use the following table as a guide for the Key Performance Metrics for IT companies.", "", "Apart from the KPIs mentioned above, some IT companies might also mention net recurring revenues (NRR), which measures how much the repeat customers of last year spent this year. An NRR of more than 100% suggests that repeat customers have spent more on the company\u2019s services this year than they did last year. It basically shows customer loyalty. It is a good measure to highlight revenue growth when decent and consistent profitability may not have been achieved.", "In the previous chapters on cement or insurance, studying the value chain and ratios helped identify risks. Certain risks, which are qualitative, have a higher probability of occurrence in the IT sector. This is perhaps because of the B2B nature of the business. Insurance, cement, or toothpaste can be sold to millions and millions of consumers. However, IT services are generally sold to organizations. The global nature of the sector also adds to the complexity. Let us explore the risks thus associated.", "", "IT companies might create redundancies to protect themselves, their data, and their clients. For example, they could maintain a data warehouse that exactly copies every data and action of the main business operations. So if the primary operations are under attack, the backup at the data warehouse could be used to revive operations.", "Backups are called redundancies because extra resources are employed just to copy and store the data. But redundancies are important in the face of extreme events. Some organizations also maintain redundancies of redundancies.", "Indian IT is largely an organized sector. It draws a significant part of its business from foreign clients. Therefore, whether good or bad, the impact of geopolitics, regulations, and foreign exchange fluctuations is more pronounced. Being a service business, it is heavily dependent on its human resources. Due to its B2B nature, client addition is a critical factor.", "In this chapter, we studied the IT sector, which is service oriented and where new clients are an important indicator of business performance. In the next chapter, we will examine the automotive sector, which is mainly product-oriented and where volume sales are an important performance indicator.", "Incredibly useful module as always. My query might be a bit digressive, but I\u2019ve wanted to ask when will the previous module (Integrated Financial Modelling) go live on the Varsity app and will it have certification quizzes if it does? Thank you for the amazing modules and making them available for free:)", "Hi Harshwardhan, the app is undergoing a revamp, post which all modules will be available on the app. Yes, we will eventually add quizzes too.", "Thanks for this much anticipated chapter on the IT sector. Hard to believe that such quality material is available for free. Varsity is essentially like a free business school.", "Thank you, Saumya, for the validation. Messages like these keep us going. \ud83d\ude42", "Hello, Vineet Rajani. When we can expect sector analysis on AUTOMOBILE, my desire is that video series, in addition to varsity, be used to acquaint knowledge further.", "Hi Raghu Ram, Automobile sector is under works. Should be released in a few days.", "Highly insightful and useful. Would suggest to add sector specific valuation metrics and benchmarks.", "Hi Anup, thank you.\nFirstly, valuation approaches are subjective. you might want to do DCF, I might want to do relative valuation. Even when we agree on a model, our assumptions could vary. Also, sector averages keep changing over time. \ud83d\ude42", "Such complex sector explained with such simplicity. Thanks much. Some more light on how hedging is done practically to overcome currency fluctuations will be helpful. Thanks \ud83d\ude4f", "Hi Nikkhil, thank you.\nYou could check out the Currency, Commodity, and Government Securities module on Varsity to understand currency trading and hedging.", "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/2023/07/1-2-1024x640.png", "https://zerodha.com/varsity/wp-content/uploads/2023/07/2-2-1024x640.jpg", "https://zerodha.com/varsity/wp-content/uploads/2023/07/3-2-1024x290.png", "https://zerodha.com/varsity/wp-content/uploads/2023/07/4-2-1024x561.png", "https://zerodha.com/varsity/wp-content/uploads/2023/07/Screenshot-from-2023-07-29-10-17-53-3-1024x378.png", "https://zerodha.com/varsity/wp-content/uploads/2023/07/6-1-1024x456.png", "https://secure.gravatar.com/avatar/1410452bb76845e8f9dc757f8207141f?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/18d45e8c1e8f3762d81c0c6febcdd251?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/10192cc75693799453de8bd874acf57b?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/b5f6e69f512ca41c9b62608c4d4776fc?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/2f6f56d1f06ad515a4a6f41186155442?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/3274f561155ec035becbfce0731bf96a?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": "3. Insurance (Part 1)", "text": ["In a broad sense, businesses can be into either manufacturing or services. The previous chapter was about cement, a manufacturing business. In this chapter, we will study how to analyze the insurance sector, a service business.", "This chapter will mainly cover the following:", "Insurance, in the simplest terms, is protection against risk. If your family depends on your regular income, you would prefer to insure your life. Vehicle insurance could pay for damages in case of an accident. Health insurance could cover your medical expenses if you have a health-related issue. Any unforeseen event that could cost you dearly becomes easier to deal with if you had insured it.", "", "If insurance can make life so easy, why don\u2019t all of us have insurance? Lack of awareness and inability to afford premium payments are common reasons. Those who can afford to pay premiums mostly use insurance only to save taxes. Even those who understand that insurance is essential may not see it as an urgent need. So they keep delaying the purchase of insurance. For many people, it is a psychological barrier \u2013 how can I put value into my life? Why should I think about what will happen if I meet with an accident or die? And how to discuss my death with my family? An easy way out is not having any insurance at all.", "To think that psychological barriers might be more visible among the older, conservative Indians may be a fallacy. About 83% of millennials do not have life insurance. Millennials are now of working age and likely have dependents. If education and awareness, or any other solutions, do manage to bring about wider acceptance of insurance, there is tremendous potential for insurance companies to grow their business. If 83% of millennials do not have life insurance, only 17% do. It also means there is a five-fold market waiting to be tapped.", "If you are an investor, the insurance sector indeed seems a hot and ripe investible opportunity. However, insurance is a tricky business. And it is regulated by IRDAI or the Insurance Regulatory and Development Authority of India. IRDAI attempts to safeguard customer interests, along with regulating selling practices, risks, and financial strength of insurance companies.", "As an investor in the insurance sector, you must realize that insurance companies are in the business of acquiring risks. The risk that a policyholder is insuring is the risk that an insurance company is acquiring. So the question is, how does an insurance company make money from these risks?", "The answer is twofold. Insurance companies make money from underwriting profits and investment gains. Underwriting profits occur when the premiums earned by the insurer exceed the total amount paid out in claims. The insurance company may not immediately need the funds from premiums to service claims. Until then, it can invest these funds to make investment gains, the second money-making stream for insurers.", "While money-making happens primarily from just two sources, insurance companies differ in the type of insurance they offer. This also impacts the insurer\u2019s approach to managing risks. Let us delve deeper.", "At the top, insurance companies are classified into two categories: life and general insurance.", "The industry comprises both private and public players. LIC alone commands two-thirds of the life insurance market in India. It is also the only government-owned life insurer. The general insurance segment is crowded with private players. The government also promotes six general insurance companies. These are the General Insurance Corporation of India, The New India Assurance Company, the United India Insurance Company, The Oriental Insurance Company, the National Insurance Company, and Agriculture Insurance Company of India.", "", "When studying the insurance sector, it is essential to understand why and how the two types of insurance companies (life and general) are different.", "Life insurers typically have obligations that are long-term in nature. Let me break this down. Life insurance policies span years or even decades. People keep paying premiums for several years. So there is a considerable gap between the time an average policy is bought and when its claim is settled. Hence, the long-term nature of obligations.", "During this gap, the collected premiums are lying idle. These idle funds are called \u201cfloat\u201d. The life insurance company can invest the float to make investment gains. It can also take on additional investment risk because the time horizon is long. Higher risk, as you know, is taken in search of higher returns.", "General insurers mostly have short-term obligations. Whether medical, vehicle, or property insurance, most general insurance policies have a maximum duration of one year. For example, you paid a medical insurance premium today. This policy will be in force until one year from today. Let\u2019s say you did file a claim after six months. The insurer will have to pay you. For general insurance companies, any liability will arise in less than one year. Therefore, investments are also for a short duration and must carry minimal risk. Of course, if the insurance was not claimed, it is a gain for the insurer.", "By the way, if you have read about Warren Buffett\u2019s success, you have likely heard of the advantage his investments get from float money. Buffett\u2019s holding company, Berkshire Hathaway (BH), is a large multinational corporation. Its main business is insurance. Insurance gives BH a large pool of float money. Float is free money \u2013 no borrowing cost or obligation to share investment gains with premium payers. A larger float gives more room to take investment risks. However, if there are losses on the Float, the insurer will have to pay for it out of its own capital.", "", "Now let\u2019s stop and ponder a bit. The ability to invest comes only if the premiums earned are more than the payments made toward claims. As an investor trying to understand the insurance sector, you must analyze where the premiums are coming from, if they are growing, whether there is any surplus after settling claims, whether all investments yield positive returns, and how the balance sheet is holding up to sustain long-term growth.", "Let us first see where the premiums can come from or what are the sales channels.", "Insurance is heavily reliant on selling efforts. When there is a lack of awareness around a product, marketing and selling become a significant force for increasing awareness and adoption. And those who do not look at insurance as an urgent need may require a little bit of nudge from insurance sellers. Insurance companies use multiple channels to sell their policies.", "The snapshot from HDFC Life\u2019s fourth-quarter investor presentation for FY23 shows the various channels HDFC Life uses to sell its life insurance products.", "", "In fact, insurance companies that are part of banking groups rely the most on bancassurance and have an advantage over other standalone insurers. HDFC Bank, SBI, ICICI Bank, and Kotak Mahindra Bank have affiliated life and general insurance companies. These banks are also the largest bancassurance partners for these affiliates.", "The concept is similar to chocolates placed next to the cashier\u2019s counter at a retail store. While billing, you impulsively pick a few chocolates while not worrying about the small expense.", "Tax saving is a powerful motivation for people to buy insurance. Premiums up to \u20b91.5 lakh paid towards life insurance are tax-exempt under Section 80(C). Endowment plans, which come with some level of savings along with providing insurance, have been trendy. Taxpayers choosing the old tax regime are using these exemptions. However, taxpayers do not need these exemptions if they choose the new tax regime. A more significant number of people choosing the new regime could hurt the demand for insurance.", "Similarly, exemptions under Section 10(10D) have been scrapped for annual premium payments of over \u20b95 lakhs. Section 10(10D) makes maturity benefits tax-free if they are at least ten times the annual premium payment. Budget 2023 amended this provision. If annual premium payments are over \u20b95 lakhs, the benefits become void. Essentially, the amendment took away tax benefits from insurance that the wealthy could enjoy.", "When you are an investor in the insurance sector, you want to know how a tax policy is impacting the insurance business. The scenario can change every year with the annual budget.", "As I mentioned earlier, the business of insurance is about taking on risks. So it makes business sense to diversify these risks. Diversification has to be across geographies, age groups, customer profiles, investment assets, and the timeline of committed payouts. Let us discuss why each of these is important.", "Geographies: High mortality rate in one region could be compensated for by the low mortality rates in other areas. Violence or natural calamities tend to increase the number of claims being filed; if policyholders are situated far apart, not all will have suffered the calamity of filing claims.", "Age groups: Certain age groups may be more vulnerable to diseases or pandemics. For example, most cases of swine flu were in children, while the coronavirus mainly affected adults. Insuring across age groups would help life and health insurers to earn premiums from the unaffected group while settling claims from the affected groups.", "Investment assets: This point is about asset allocation. Given the nature of the business risk that an insurer carries, it must carefully allocate investment assets to make optimum returns. This point is similar to the asset allocation chapter we discussed in the Personal Finance module of Varsity. The insurer must spread investments across asset classes and issuers to minimize risk and maximize returns.", "Liability schedule (or timeline of committed payouts): The annuities are a fixed cost for insurers. There may also be annuities or pensions that the insurer must start paying out on pre-set future dates. The investment decisions have to account for these future cash outflows. Insurers also borrow funds to run their business. Repayment of this also needs to be taken care of. Spreading these obligations over multiple years could make it easier to honour them.", "This is not an exhaustive list. Your analysis could show more ways of diversifying premium inflows.", "Apart from diversification, insurance companies also cover their risks by reinsuring the policies they have sold. They might reinsure all or part of their obligations. It is a great tool to protect against unusually high-payout events. For example, if there were a major earthquake in a region, homeowners\u2019 claims could go up significantly. If the insurer had reinsured part of their obligations, the hit from the payout could have been mitigated.", "Reinsurance is also used to comply with the regulator\u2019s capital requirements. Insurers are required to maintain a minimum solvency ratio of 150%. What if an insurer\u2019s liabilities are too high? Its solvency ratio could fall below the minimum limit. Here, reinsurance is of great use. The insurer could transfer part of its claim-related liabilities by reinsuring some policies.", "General Insurance Corporation of India, promoted by the Government of India, is the largest reinsurer in the country.", "In this chapter, we covered the business of insurance and its industry landscape. The next chapter is Part-2 of this one. We will use real examples to look at how to study a life insurance company and a non-life insurance company. We will look at metrics that show the effectiveness of selling efforts, cost management, and capital maintenance.", "", "Very well introduced and detailed insight about Insurance sector. Thank you for making such effort towards preparing and explaining these sectors in detail.\nFor the first time such a detailed sector analysis is provided.", "Thank You", "Thanks for the validation, Gaurav..", "Its great to see this content. I am a firm believer this industry will grow like telecom did. Thanks and keep up the good work.", "Thank you, Diya.", "Can you please define solvency Ratio in simple terms?", "Suppose you have a liability of 100 and you have 150 in your pocket, your solvency is 150%. This is the basic concept behind solvency ratio.", "In case of insurance, not every customer is going to file a claim. But the insurance company has to predict how many customers will file a claim, and what would be the payable amount. This estimated payable amount + all other debt = total liabilities. Insurance companies must have financial assets that are at least 1.5X or 150% of the total liabilities. This 150% is the minimum solvency ratio that insurance companies have to maintain.", "Hope that helps. \ud83d\ude42", "Learnt something new today", "It is 10(10D) not 10(10)D. Please correct this.", "Thank you for pointing it out, Sir. It is now corrected. \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. 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{"title": "4. Insurance (Part 2)", "text": ["The previous chapter set the tone for the overall insurance industry. It spoke of the market structure, sales channels, and the risks involved. In this chapter, we will understand the industry with the help of two insurers \u2013 HDFC Life and ICICI Lombard.", "Just like stock broking or banking, insurance is a highly regulated sector; insurance companies have to disclose many data points and financial ratios on a regular basis. These data points and ratios are calculated using IRDAI-prescribed formulas. There are two advantages here \u2013", "You only have to know how to interpret these numbers and ratios mean and figure out if they are good or bad. And that\u2019s exactly what we will discuss in this chapter!", "", "To help you understand the insurance sector better, I\u2019ll work with the numbers of HDFC Life and explain the same. Note I\u2019ve got the fourth quarter (FY 2023) numbers here. You can download the entire presentation from HDFC Life\u2019s website; look for it in the investor relation section.", "", "The executive summary gives a glimpse of the most critical parameters to be reviewed. The subsequent pages will show insights into some of these metrics. Let us dig.", "Premium income: This one is straightforward. If you\u2019ve ever bought insurance in your life, then you\u2019d have paid a premium. The premium you pay becomes the \u2018Premium Income\u2019 for the insurance company. One might wonder if the premium income is the same as revenues because an insurance company\u2019s business is primarily collecting premiums. The answer is no because the insurance company also earns other income which comes from investments.", "Do note that total premium income is of two types: gross premium and net premium. Gross premium is the premiums that policyholders pay. Net premium is the premium an insurance company is left with after reinsuring part of its issued policies. Further, premium income is of two types: New business premiums and Renewal Premiums.", "", "I\u2019ve taken this snapshot from HDFC Life\u2019s presentation. It shows the trend in new business premiums and renewal premiums.", "Annualized Premium Equivalent (APE): When you buy an insurance policy, you can pay premiums every month, quarter, or year. There is another option \u2013 you pay one lumpsum premium to get coverage on a multi-decade basis. For example, check the insurance plan by HDFC Life in this snapshot \u2013 here, I will have to pay \u20b92.4 lakhs for \u20b91 crore insurance for 40 years.", "", "The lumpsum premium has to be annualized in order to make it comparable with the regular premium receipts, and also give a perspective on premium collection. Conventionally, APE is calculated by summing all the annualized first-year premiums with 10% of all single-premium policies.", "In this snapshot, you can see how different the total premium and APE figures are.", "", "Value of New Business (VNB): VNB measures the profitability from the new policies sold during the year. It is the present value of expected future profits from new policies issued during the year. You can learn how to calculate PV. But for studying insurance companies, you do not have to compute VNB, as they declare it with their quarterly results. Each insurer will have its own actuarial assumptions around expected policy life, future profits, and the discount rate applied to arrive at the present value. More conservative assumptions could lead to understatement of VNB, while loose assumptions could overstate the VNB. Therefore, comparing the VNB of two life insurers might not be helpful. \n\nHowever, comparing with the previous year\u2019s performance could show how an insurer has been able to grow profitability. This snapshot from HDFC Life\u2019s presentation shows VNB has nearly doubled between FY20 and FY23.", "", "I used the term \u201cactuarial\u201d in the previous paragraph. Insurers hire \u201cActuaries\u201d who employ statistical techniques to measure and manage risks. Accordingly, they decide on the right premium price for all policies. The techniques and assumptions used to measure risks and premiums differ across insurers.", "New Business Margin / VNB Margin: VNB is divided by APE for a given year to arrive at the VNB margin. It is similar to the profit margins of any business. Again, since this is based on each insurer\u2019s subjective management assumptions, comparing with peers may not help, but comparing with past performance could be useful.", "An insight to draw from these metrics would be to check the growth of APE and VNB. For example, an increasing APE with a declining VNB suggests that new business is coming at lower margins. You could further dig to find out if the lower margins are due to higher selling expenses or due to selling low-margin policies.", "The expense of management ratio / Operating Expense Ratio: It is the ratio of operating expenses to gross premiums received. Operating expenses include all expenses incurred as part of normal business operations \u2013 selling and distribution, administrative, servicing claims, bad debts, depreciation, etc. Interest expense is excluded.", "Since this is an expense ratio, the smallest possible ratio is more desirable. And when I said earlier that the regulations are tricky, I was referring to how regulations can alter a formula. For example, IRDAI has stipulated limits on the expenses made toward selling policies. Expenses in excess of that limit have to be borne by the shareholders/owners of the business.", "Underwriting profit: It is the profit generated from the core insurance operations. Out of the premium collected, the insurer has to pay commissions, brokerage, other selling expenses, and claims. What remains after paying all that is underwriting profit. The underwriting profit ratio is calculated by dividing the underwriting profits by gross premiums.", "", "For an insurer to make underwriting profits, it must have strong underwriting practices. In simple words, the insurance seller must sell policies where the chances of claims are minimal. They cannot just reject high-risk customers, but they can charge higher premiums to accept high risks. Insurance companies also have to avoid getting defrauded.", "Shareholder surplus: It is the part of profits that can be assigned to shareholders / added to equity after paying all the benefits to policyholders and setting aside a provision for future appropriations. Appropriation is used to allocate profits to specific purposes. For example, splitting profits to share with policyholders and shareholders is an act of appropriation of profits.", "I got this snapshot from the FY2022 annual report of HDFC Life to show the appropriation of shareholder surplus.", "", "Assets under management (AUM): It is the current market value of all investments made by the insurer. Remember, this is not just the surplus from the most recent P&L, it is the accumulation and growth of all investments made so far in all previous years. AUM is made up of both shareholders\u2019 and policyholders\u2019 funds.", "This slide from HDFC Life\u2019s presentation shows a break-up of the AUM on two parameters:", "", "Growth in AUM could be because of large surpluses during the year or a growth in the market value of the investments. Similarly, a decline in AUM could mean a loss in the market value or redemption of investments to service claims. If the premiums earned in a period were inadequate to service the claims, funds from investments could be used. A larger reservoir of AUM can help the insurer stomach losses for several quarters or years. Therefore, the larger the AUM, the better.", "Claims settlement ratio: Claims settlement ratio speaks of the credibility of the insurer. The approach to understanding the claims settlement ratio is a bit nuanced. A high ratio could mean either poor underwriting or strong business practice. Insurers always market their claims settlement ratio. A high claims settlement ratio instils a sense of trust among the customers \u2013 they believe when the time comes, their claims will be honoured. As an investor, you need to dig deeper, though. \n\nLet\u2019s say there are two insurers: A and B. A has a 97% claims settlement ratio, while B has 95%. Is A the better insurer? Not necessarily. If A is a small insurer and has settled 97000 claims out of 100,000 claims received while B has settled 95 lakh claims out of a crore received, perhaps B is a better insurer because of its size and experience.", "This snapshot is from IRDAI\u2019s annual report for FY22. You can find the annual reports on IRDAI\u2019s website. You can see how Pramerica has received ~1000 claims while SBI Life has received over 50000 claims. The larger size of business operations comes with a greater number of claims. What matters is the organization\u2019s ability to honour claims.", "", "Solvency ratio: The solvency ratio checks the ability of the insurer to be able to pay all its liabilities. It is calculated as the ratio of the Available Solvency Margin to the Required Solvency Margin.", "You do not have to compute this as it is part of every insurer\u2019s quarterly financial results. IRDAI mandates all insurers to have a minimum solvency ratio of 150%. The following snapshot from IRDAI\u2019s FY22 annual report shows the solvency ratios of life insurers.", "", "Let me elaborate on the concept of solvency ratio using this snapshot from HDFC Life\u2019s presentation. The \u201cMar 31, 2023\u201d column shows the Required Solvency Margin (RSM) worth \u20b972.1 billion. This is also the size of liabilities. The regulatory requirement of a 150% solvency ratio means its needs a cover of \u20b9108.2 billion (\u20b972.1 billion * 150%). The red-colored part of the column is this additional mandatory cover.", "Further, the grey-colored part of \u20b938.4 billion is extra cover HDFC Life has over the regulatory requirement. The total of the three portions is the available solvency margin of \u20b9146.6 billion against the required solvency margin of \u20b972.1 billion. The ratio of ASM to RSM is the solvency ratio of 203%.", "", "Persistency Ratio: Persistency depicts the percentage of policies that continue to be active after a certain period of time. Persistency is generally checked for the 13th month or the 61st month. Let me simplify this with an example.", "Suppose an insurer sold 1000 policies in one year. If only 800 of those policies were renewed or held on after one year, i.e., 12 months, the persistency ratio for the 13th month would be 80%. If 550 policies were renewed for the sixth year, the 61st-month persistency ratio would be 55%. If you noticed, the 13th month is the beginning of the second year, 61st month is the beginning of the 6th year. Insurance companies disclose persistence for several periods. Make sure you compare them with peers for the correct period.", "In this snapshot from HDFC Life\u2019s presentation, it is evident that about half of the total policies are abandoned by customers by the 61st month or after five years.", "", "The persistency ratio might also be calculated for the total premium earnings and not just the number of policies. A higher premium-based persistency ratio than that based on the number of policies suggests that higher premium-paying customers are being able to hold on to their policies. Or that low-income customers are falling back on their premium payments.", "This table is a summary of the metrics one must look at when analyzing companies in the life insurance sector.", "", "We have so far looked at a life insurance company. Let\u2019s move our attention to general insurance companies. General insurance companies include \u2013 health, auto etc.", "The concepts of solvency ratio and claims settlement ratio are applicable to general insurers too.", "I will use snapshots from ICICI Lombard\u2019s fourth-quarter investor presentation for FY23 to discuss other key concepts of general insurance companies.", "", "Premium Income", "", "Underwriting expense ratio: Underwriting expenses are incurred while selling or renewing policies. Commissions, brokerage, incentives, processing, verification, etc are all part of underwriting expenses incidental to selling or renewing policies. The ratio is calculated by dividing underwriting expenses by gross premium collections. A lower underwriting expense ratio is important to achieve better profitability.", "Loss Ratio: The ratio of total claims payout to gross premium. A smaller Loss Ratio is desirable. A high loss ratio suggests that maybe the premiums are priced too low or the basket of policyholders is not adequately diversified.", "Combined Ratio: Combined ratio is the sum of Underwriting expense and Loss ratios. A combined ratio of less than 100% suggests that claim payouts are less than the premiums received. Therefore, a smaller combined ratio is preferable. A combined ratio of more than 100% suggests underwriting losses \u2013 claim payouts are higher than the premiums received. This is the case for ICICI Lombard too.", "", "However, this does not necessarily mean net losses for the insurance company. The company could be making gains on investments, thereby having a positive bottom line. A combined ratio of more than 100% for several quarters, however, could be a red flag. You could also compare the combined ratio of a company with the industry average to understand its position with respect to peers.", "This table summarizes the metrics one could look at while studying non-life insurers.", "", "", "Hi Team,", "Thanks for putting extensive efforts to write the content.\nFew pointers from a reader perspective.\n1. We are not using PESTLE framework mentioned in the 1st chapter to analyze each industry. Reader will be confused on why a frame work is introduced with out further use. I understand the PESTEL factors change over time but at least at the time of writing your article you can explain the impact of PESTLE on each industry.\n2. Please post the source of your information, specially the ratios of ICCI and HDFC presentations. Are they available to common audience?\n3. I liked the cement chapter, easy to understand and few metrics to assess but taking insurance as a next topic kind of became information overload for reader. Too many metrics to comprehend for a beginner learner. We should have started with lean metrics industries to stir interest.\n4. Its good to understand these metrics but are there any screeners available either in Zerodha or in other tools to compare a sector companies with these metrics.\n5. We should also add some case studies or point of view at the end to give a over view of the sector analysis. For e.g. While we write this article we can perform analysis of sector using both fundamentals and sector metrics to give a bird view about how companies are faring in the sector. Learners can use this as a frame work for future use.", "Thank you, Shiva, for your elaborate feedback.", "1. You will see I have mentioned PESTLE only after discussing all the factors and not before. I did not want the chapter to appear like an MBA curriculum.\n2. This chapter mentions that you can download the entire presentation from HDFC Life\u2019s website. \ud83d\ude42\n3. Point taken.\n4. Most screeners will have financial figures and ratios as filters. Sector-specific screeners are unlikely to be found as sector analysis is largely qualitative. You may want to use more or fewer parameters in studying the sector.\n5. The aim is to enable the readers to have their own view and not anchor it to our view. Also, the first chapter mentions that sector analysis must be combined with fundamental analysis.", "Hi, looking forward for the BFSI. thank you", "Thank you, Paul. The chapter on banking will be out in a few weeks. \ud83d\ude42", "Sir, any guidelines do to sector analysis for very niche segments like the wedding industry or like the shrimp industry?", "Hi, the effort here is to enable investors to understand sectors of listed companies. If there are enough listed companies in any sector, I will try and cover that sector.", "Dear zerodha varsity team we are waiting your next module. I like your teaching behaviour so please share your valuable time .", "Dear Kishan Singh, the next chapter will be released in a few days. \ud83d\ude42", "Hello varsity team,\nThanks for these valuable info your team is doing fabulous job to aware investors to make informed decision before buying and selling. Please cover manufacturing sectors and realted industry groups so can make out of recent capex cycle of this and upcoming bull run", "Thank you, Mayank. Auto and steel sectors are in the pipeline. We shall cover some more manufacturing industries after 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. 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{"title": "19. Government Securities", "text": ["In a fascinating new development, NSE in collaboration with RBI has recently made it possible for retail investors to start investing in Government Securities, mainly the long-dated bonds and the treasury bills (T-bills).", "These were products which were available only to banks and the large financial institution, but now we can invest in them and take advantage of attractive and guaranteed returns. However, since these are new financial instruments (at least to the retail participants), understanding the nuances before investing is important. For this reason, we have put the following conversational FAQs with a hope that you will be able to figure out the basics.", "Do read on and post your comments below.", "", "What am I investing in?", "You are investing in Bonds/T-bills issued by the Government of India. Since the Government of India backs these, these are virtually risk-free investments. The guarantee from the Government is also called \u2018Sovereign Guarantee\u2019.", "What are bonds/T-bills?? Tell me more.", "Whenever you and I need money, we go to the bank to avail a loan. Against this loan, we promise to pay the bank periodic interest and also return the money after a certain amount of time. This is common practice, where the interest and principal are repaid to the bank.", "Likewise, the Government of India also needs money to build roads, bridges, dams, hospitals, etc. When they run short of money, they approach their bank for a loan, which is the RBI. The RBI, in turn, auctions the loan in the form of bonds/T-bills that you can purchase. Essentially, you are lending a part of the overall loan the government is seeking.\u00a0 Against this loan, the Government of India, promises to pay periodic interest and also repay the principal at the end of the tenure.", "The loan which the government intends to repay within a year is called the Treasury Bills or T-bills. Loans which the Government intends to repay over many years are called the Bonds.", "What should I choose? T-Bills or Bonds?", "Both are great investments if you seek the safety of your capital. There are a few easy to understand variables that you need to look at before deciding on an investment in these two G-Sec instruments.", "Variables like what? Start with T-bills, please.", "There are three T-bills variants, and they vary based on the maturity period. They are 91 days, 182 days, and 364 days. T-bills do not carry an interest component; in fact, this is one of the biggest difference between T-bills and Bonds. T-bills are issued at a discount to their true (PAR) value, and upon expiry, it\u2019s redeemed at its true value.", "Woah! That sounds complex. Give me an example, please!", "Ok, consider a 91-day T-bill. Assume the true value (also called the Par value), is Rs.100. This T-bill is issued to you at a discount to its par value, Say Rs.97. After 91 days, you will get back Rs.100, and therefore you make a return of Rs.3. Think of it; this is as good as buying a stock at Rs.97 and selling it after 91 days at Rs.100.\u00a0 The only difference is that this is a guaranteed transaction, meaning, there is no risk of you selling below 100 (or above 100).", "This sounds quite straightforward, is there anything else I need to know about T-bills?", "That\u2019s it pretty much. You need to remember that t-bills are issued at a discount to par, and upon maturity, you get the Par value. Of course, you can get a little technical and measure the yield of this investment if you want.", "I\u2019m all ears, let\u2019s get technical!", "Yield essentially measures the return on your investment on an annualized basis. After all, all investments should be measured by its returns on an annualized basis. So if you have made 3 bucks over 91 days on investment of Rs.97, then at this rate, how much would you have made every year?", "The formula is \u2013", "Yield = [Discount Value]/[Bond Price] * [365/number of days to maturity]", "= [3/97][365/91]", "= 0.03094.010989", "=12.4052%", "So in other words, the T-bill offers a return on investment of 12.4052%, but since you held it for 91 days, you will enjoy this return on a pro-rata basis.", "Typical 91-day yields are around 6-7.5%. Needless to say, the higher the yield, the better it is.", "What happens upon maturity of a T-bill?", "Upon the maturity, the Government debits the T-bill from your DEMAT automatically, this is called \u2018Extinguishment of Securities\u2019 and the par value gets paid to the bank account linked to your DEMAT account.", "Is that all about T-bills? Is there anything else that I need to know?", "Nope, that\u2019s it. You are all good to start \ud83d\ude42", "Alright, tell me how the bonds work.", "Bonds differ from T-bills on 2 counts. Bonds have long-dated maturities, and they pay interest twice a year.", "Sounds, interesting. Can you give me an example?", "Every bond issued will have a unique name or symbol. The symbol contains all the information you\u2019d need. For example here is a symbol \u2013 740GS2035A, and here is what this really means \u2013", "Annualized interest \u2013 7.40%", "Type \u2013 Government Securities (GS)", "Maturity \u2013 2035", "Issue \u2013 \u2018A\u2019\u00a0 means it\u2019s a fresh issue (don\u2019t worry much about this, be aware that this is NSE\u2019s internal nomenclature for their own book-keeping )", "This issue is expiring in 2035 or 17 years from now (we were in 2018). If you were to invest in this bond, you would receive a 7.4% interest every year until its maturity in 2035. Please note, the interest will be paid semi-annually so that you will get 3.7% interest twice a year. Finally, upon maturity, you will also get back your principal amount.", "Here are few more government security (GS) symbols \u2013", "Can you give me an illustration to help me understand how much I earn if I were to invest in a bond?", "Fair enough, but before we get into the details, you need to know one more thing.", "Every bond has a Par value, of say Rs.100. When you invest in a bond, you usually invest either at a discount (ex: 98, 97 etc.) or par (100), or a premium to par (101,102 etc.). The price at which you invest in a bond depends on something called an \u2018auction process\u2019. More on that later, but for now, you need to be aware that you can invest in a bond at par, at a discount, or a premium.", "Now, consider you invest in 700GS2020 (7% with a maturity of 2020 or 2 years from now) at a discount price of 98.4. Assume, you invested in 150 of these bonds, so you\u2019d pay \u2013", "15098.4", "= Rs. 14,760/-", "From the time you invest, the interest cycle starts. The interest is paid on the face value of the bond. The total amount you earn is as follows \u2013", "So on an investment of Rs.14,760/- you will earn \u2013", "525 + 525 + 525 + 525 + 15,000", "= 2100 + 15,000", "= Rs.17,100/-", "If you do the math, the yield on this works out to approximately 7.88%. RBI has beautifully explained the calculation of yield here, do check this if you are keen to know more.", "I\u2019ve heard the term \u2018 Yield to Maturity\u2019, is this the same?", "Hmm, not really. The concept of \u2018Yield to Maturity\u2019 or YTM is a little tricky. The YTM calculation assumes that you reinvest the interest payment back into a similar bond, which further generates interest on interest. Bond traders and institutional investors only look at YTM because this is the true comparable value between two different bonds.", "This is similar to reinvesting the dividends from a stock back into the stock.", "Alright, tell me about the interest payment? How does it get paid?", "The interest payment gets credited directly to your bank account linked to your DEMAT account, just like the way you receive the dividends from a company.", "Can you give me some insights into the auction process?", "Till recently, investment in G-Sec bonds/T-bills was restricted to banks and large financial institutions with a minimum ticket size of 5 Cr. However, recently NSE and RBI have opened it up to retail investors with a minimum of Rs.10,000/- investment.", "However, the price you pay for the bonds is still decided by the banks and other major financial institutions. They place bids on RBI\u2019s auction platform, and RBI decides the price of the bonds based on these bids placed on their platform. So the auction process is basically a process to discover the price you\u2019d pay for the bond, also called the weighted average price of the bond.", "So it is the weighted average price of the bond, the price I need to pay to purchase the bonds?", "Yes and no.", "At the time of placing your order, you pay a slightly higher amount. This amount is called the \u2018amount payable\u2019. Once all the orders are placed, the auction process starts and RBI evaluates the weighted average price. Any difference between the \u2018amount payable\u2019 and \u2018weighted average price\u2019,\u00a0 is credited back to your account the very next day.", "Wait for a second, what do you mean by \u2018option to sell in secondary market\u2019?", "This works exactly like how you buy and sell stocks.", "Let\u2019s say you decide to invest in 740GS2035A. This means you will continue to enjoy a semi-annual interest payment of 3.7% every 6 months for the next 17 years, till 2035.", "Now, after a few years, you no longer wish to hold this bond. In such an event, you can decide to sell this bond in the secondary market, pretty much like how you buy and sell stocks on NSE.", "Check this post on TradingQ&A to know more about selling G-Sec in the secondary market.", "Great! It looks like I\u2019ve got my basics right. Is there anything else that I need to know?", "Think of the whole thing as applying for an IPO followed by the stock getting listed on the exchanges. It\u2019s pretty much the same. The auction process is like the IPO, and once the bidding is done, the Bond (or T-bill) will get listed on the exchange. You can sell the bond whenever you want, or you can even trade the bond once it gets listed!", "The minimum ticket size is Rs.10,000/- and its multiples and a maximum of Rs. 2 Cr. You can place the orders when there are new auctions (just like an IPO). However, the good part is that RBI notifies the auction dates and schedule well in advance.", "Here is the calendar for the upcoming t-bills auctions.", "Here is the calendar for the upcoming bond auctions.", "Here is the link of all the bonds that have been issued by RBI. Do pay particular attention to the nomenclature, coupon rate, and year of maturity.", "", "What are SDLs?", "To meet the budgetary requirements, State Governments also raise loans from the market, and these loans are called State Development Loans (SDLs). These loans are similar to the dated securities issued by the Central Government, the interest is credited half-yearly, and the principal amount is repaid at the time of maturity. SDLs also qualify for Statutory Liquidity Ratio (SLR), and they are also eligible as collaterals for borrowing through market repo as well as borrowing by eligible entities from the RBI under the Liquidity Adjustment Facility (LAF) and special repo conducted under market repo by CCIL. You may read this FAQ from RBI for more information.", "Here is the calendar for the upcoming SDLs auctions.", "How does the Floatation and Yield of SDLs work?", "RBI facilitates the issue of SDL securities in the Market, and the auctions are generally held every fort-night. These are traded electronically on the RBI managed NDS-OM (Negotiated Dealing System-Order Matching). Below is the snapshot of some securities floating for auction as on October 12th, 2020 on the NDS-OM managed by RBI.", "", "Like every other Government Security SDLs also have a unique name or symbol. For example, let\u2019s take 05.75APSDL2024 Security from the above snapshot. And, here is what it really means:", "Annualized Interest \u2013 05.75", "State Code \u2013 AP (Andhra Pradesh in this case)", "Type \u2013 SDL", "Maturity \u2013 2024", "This issue is expiring in 2024, i.e. 4 years from now (we are in 2020). If you were to invest in this bond, you would receive 5.7% interest semi-annually until maturity, which is 2024. Please note, similar to other G-Secs the interest for SDLs will also be paid semi-annually so that you will receive 2.8% interest twice a year. Finally, upon maturity, you will also get back your principal amount.", "What about the Risk Assessment?", "Unlike most G-Secs that have Implicit Sovereign Guarantee ( High Risk or significant funding cost advantages for the institutions that benefit from them), SDLs are associated under Explicit Sovereign Guarantee, which basically means, according to CRAR prudential norm released by RBI the risk accompanied with SDLs is weighted as zero. Banks are not required to keep any capital for investing in SDLs. Hence, making it the risk-free instrument to invest in than most of the other Central Government Securities.", "What about taxes?", "Bonds \u2013 Interest income is credited to your bank account. It is considered as income from other sources and taxes have to be paid as per the income tax slab. If there is any appreciation in the bond price, it is considered capital gains. Long-term (LTCG) is 10% flat or 20% with indexation. STCG is as per the applicable slab rate.", "T-bills \u2013 You buy at a discount and sell it at par. This appreciation is considered as short-term capital gain, and taxes as is per the applicable slab rate.", "In the case of G-Secs, the gain is considered long-term (LTCG) if held for more than 3 years. Otherwise, it is short term capital gain (STCG).", "Will I get assured allotment if I place my order?", "These securities are issued for limited amounts, and there is no guarantee of allotment if the number of bids received is higher than the issue size. However, if you fail to get an allotment, you can try again next week. RBI carries out multiple issues a month.", "This sounds good. How do I start?", "Start Investing Now!", "Happy investing!", "Post your comments below.", "I did bit of research about 700GS2020 and similar names on NSE . I can only found bond futures trading on NSE that too with very low volumes. Also can you tell me ticker for T-bills or they will be available post 2018 Aug? Am I missing something?\nAlso I have read in books that people invested in bonds during 2008 crash and still made money. Which script do they went for in Indian markets?", "Nikunj, yes at present only the bonds are listed. The actual bonds are yet to be listed, and NSE says they will be listed by August this year and I guess the trading symbol will be known around the same time.", "I have no idea about the 2008 bonds, Nikunj. But I\u2019m not surprised at all. When there is fear in EQ markets, the bond markets tend to perform quite well.", "I want to buy old Gsecs (meaning Gsecs which were auctioned long back and have high interest rate) i don\u2019t see any sellers ..how do i know the Gsecs traded in the secondary market ? Maybe i can buy from those ?", "Milind, you can try placing an order in the market. These are now tradable anyway.", "How to Actually invest in these securities ? Can we do this from our Dmat Account or there is any other way ?", "We will be setting up an order collection form where you can place your orders to buy these securities. Should happen this very shortly I guess.", "Is this now available for investment?", "Next week onwards, hopefully \ud83d\ude42", "Why next week? NSE already advertise buying the government bonds via mail. So, it means Zerodha should have the facility by now.", "The broker needs to build a system to accept and process the order, Hiren.", "Hi Karthik,", "Will Zerodha notify its registered users (via email) when the system is ready? Or do we have to keep checking this space?", "Thanks", "Please do follow us on Social media, thats the easiest and fastest way to keep track of developments at our end. Of course, we will also email all clients. Btw, I think we are almost ready, a matter of a day or at the most two \ud83d\ude42", "Thanks for the update, Karthik.", "Good luck!", "Here you go \u2013 https://coin.zerodha.com/gsec", "Hi Sir, If i place order for T-Bill through Zerodha, by when can i see the securities in my demat if i get allocated?", "By T+5 days at the most.", "Hi sir,\nIf i place an order for T-bills through zerodha and its get allocated on my demat account and later if i want to sell that T Bill, Is it possible through zerodha?", "Yes, for this you will have to write to us.", "Hi,", "https://coin.zerodha.com/gsec", "This link doesn\u2019t work. I am retail investors. Please tell How can I invest in government securities?", "The link works fine Mayur. What is the issue that you are facing?", "Is interest earned on this bills and bonds are taxable ?", "Yes, they are taxable.", "The article says that indexation benefit is available. How is that possible if we are getting paid interest semi annually?", "Indexation is on the capital appreciation i.e the difference between the price at which you buy the bond and the price at which you sell the bond. The interest income gets clubbed to your other income and you are taxed accordingly.", "Hi Karthik, the price of the bond gets pulled to the par as time passes (if nothing else changes aka credit rating of the govt), hence shouldn\u2019t we price the bonds (buy price) at it\u2019s constant yield-price trajectory while selling and calculate our capital gains against this price so that it is amortized over it\u2019s time period.", "Example for discount bond: We buy bonds @ Rs 95. After 2 years we sell @ Rs 98. But as per the constant yield trajectory, the price of the bond should be Rs 97. That means we have made capital gain of 98-97 = Re 1.", "This is what I studied for CFA. Not sure how Indian Tax laws interpret it.", "Sujeet, this is interesting, but I don\u2019t think the taxation works on constant yield-price trajectory. I will verify and get back. However, when you hold the bond for more than 3 years, you can take the benefit of indexation (for capital gains), which works pretty much like the way you explained in the example.", "hmm.\nAlso, If we invest (from initial bidding)/buy at Rs 95 and hold till maturity, we will get Rs 100. Then this is the maturity amount which we are guaranteed to get. I don\u2019t think this should be considered as Rs 5 capital gains. The constant yield-price trajectory supports this idea.\nSimilarly, if it is a premium bond that we buy (say @Rs 105), we will still get Rs 100 at maturity. We shouldn\u2019t be able to show this as capital loss.\nPlease do verify and update us. Thanks a lot \ud83d\ude42", "Sujeet, this is interesting, we will take the opinion from a tax consultant for this. Meanwhile, this is like the indexation way of treating capital gains. Maybe you should check this.", "I guess India follows indexation rules then. Same as in debt MFs. Bit different. Sad that it will be considered STCG for T-Bills and bonds below 3 years and taxed. But it does make the calculations much easier.", "How is the 10% flat or 20% with indexation chosen for LTCG?", "This is like the debt mutual funds, Sujeet.", "Hey Kartik!\nI wanted to know whether there are any free paper trading platforms available online. Could you please help me out here.\nThanks.", "I\u2019ve not really explored paper trading platform, Rohan\u2026so cant really help you with this.", "Hi Karthik Rangappa", "if we calculate the ytm for 91 days T bill ( at indicative yield of 6.93 % as shown on coin page ) ,\nthen the result is around 29 % . Is this so good to be true ?\nIt means that we can have almost 30 % return via investment in bonds alone (of course repeatedly investing upon maturity till 1 year ) ?", "YTM is on an annualized basis, Raghu. So 6.93% is for the entire year.", "If annualized percentage is 6.93% for 91 days as given on coin website.\nSuppose i invested 10,000 then how it is calculated for 91 days and how much money will get into my trading account after 91 days.", "You will get 100 minus the allotment price after 91 days.", "Hi Karthik,", "I did not understand the comment you made \u201cYou will get 100 minus the allotment price after 91 days.\u201d Can you please explain a little more?", "This line actually refers to the P&L, let us say the allotment price is 98, then the profit that you make will be 100-98 = 2. You will get this amount after 91 days.", "How can we invest in government bonds and securities on Zerodha ?", "We will soon open an order collection window for this.", "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/2018/05/M8-C19-cartoon.png", "https://zerodha.com/varsity/wp-content/uploads/2018/05/SDLs-1024x441.png", "https://secure.gravatar.com/avatar/80c20d7cf6ba46d542fd829a96ee2445?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/fa3350cf0bf1fe02dd00a668ad160330?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/1ebe3e2064a9168a2b3e79200bc5430a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", 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"https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/a65d3dadff7e8c8f74fe1571ce8f7c27?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/5d6488b05602930959c688b2e32c573f?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 class=\"aligncenter\" width=\"623\">\n<tbody>\n<tr>\n<th style=\"text-align: center;\" width=\"90\"><strong>Symbol</strong></th>\n<th style=\"text-align: center;\" width=\"125\"><strong>Annualized Interest</strong></th>\n<th style=\"text-align: center;\" width=\"143\"><strong>Semi-annual interest</strong></th>\n<th style=\"text-align: center;\" width=\"112\"><strong>Maturity Year</strong></th>\n<th style=\"text-align: center;\" width=\"153\"><strong># years to Mature</strong></th>\n</tr>\n<tr>\n<td width=\"90\">662GS2051</td>\n<td width=\"125\">6.62%</td>\n<td width=\"143\">3.31%</td>\n<td width=\"112\">2051</td>\n<td width=\"153\">33</td>\n</tr>\n<tr>\n<td width=\"90\">668GS2031</td>\n<td width=\"125\">6.68%</td>\n<td width=\"143\">3.34%</td>\n<td width=\"112\">2031</td>\n<td width=\"153\">13</td>\n</tr>\n<tr>\n<td width=\"90\">737GS2023</td>\n<td width=\"125\">7.37%</td>\n<td width=\"143\">3.68%</td>\n<td width=\"112\">2023</td>\n<td width=\"153\">5</td>\n</tr>\n</tbody>\n</table>", "<table class=\"aligncenter\" width=\"624\">\n<tbody>\n<tr>\n<th style=\"text-align: center;\" width=\"145\"><strong>Time Period</strong></th>\n<th style=\"text-align: center;\" width=\"173\"><strong>Interest</strong></th>\n<th style=\"text-align: center;\" width=\"159\"><strong>Cash flow</strong></th>\n<th style=\"text-align: center;\" width=\"147\"><strong>Remarks</strong></th>\n</tr>\n<tr>\n<td width=\"145\">0 \u2013 6 Months</td>\n<td width=\"173\">3.5%</td>\n<td width=\"159\">3.5% 100 * 150 = Rs.525</td>\n<td width=\"147\">Half year interest</td>\n</tr>\n<tr>\n<td width=\"145\">6 months\u00a0 \u2013 1 year</td>\n<td width=\"173\">3.5%</td>\n<td width=\"159\">3.5% * 100 * 150 = Rs.525</td>\n<td width=\"147\">Half year interest</td>\n</tr>\n<tr>\n<td width=\"145\">1 \u2013 1.5 years</td>\n<td width=\"173\">3.5%</td>\n<td width=\"159\">3.5% * 100 * 150 = Rs.525</td>\n<td width=\"147\">Half year interest</td>\n</tr>\n<tr>\n<td width=\"145\">1.5 \u2013 2 years</td>\n<td width=\"173\">3.5%</td>\n<td width=\"159\">3.5% * 100 * 150 = Rs.525</td>\n<td width=\"147\">Half-year interest</td>\n</tr>\n<tr>\n<td width=\"145\">At Maturity (2 years)</td>\n<td width=\"173\">Principal repayment at Par</td>\n<td width=\"159\">150 * 100 = 15,000</td>\n<td width=\"147\">Additional Rs.240</td>\n</tr>\n</tbody>\n</table>"], "videos": []}
{"title": "Blog", "text": ["Nikhil.A on March 14, 2024", "..", "Satya Sontanam on January 12, 2024", "We discussed ZCZP (zero coupon zero principal) bonds and social impact funds in the previous chapter. Now, we will delve into two other instruments/modes: development impact bonds and donations throug ..", "Satya Sontanam on January 12, 2024", "3.1 \u2013 The Background In the previous chapter, we discussed who can raise funds on SSE. Here, we discuss the various modes of raising funds. What do companies do when they want to raise funds fro ..", "Vineet Rajani on December 22, 2023", "13.1 The aspirational value of hotels I was once talking to someone researching the brand position of five-star hotels in India. And it occurred to me that while people may not be able to use or affor ..", "Vineet Rajani on December 22, 2023", "12.1 Why the Hotels sector? The past few chapters have been about heavy industries \u2013 cement and steel, banking and insurance. These are the building blocks of an economy. We will study more buil ..", "Vineet Rajani on December 14, 2023", "2.1 \u2013 Introduction Now that you\u2019ve understood what a social stock exchange is from the first chapter let\u2019s dive into what kind of entities can get on the platform. The concept of all ..", "Vineet Rajani on December 14, 2023", "1.1 \u2013 Background We often feel like helping the poor, the underprivileged, or the oppressed with whatever little we can afford. A common question we face is who to donate to. We mostly doubt the ..", "Vineet Rajani on October 13, 2023", "11.1 \u2013 The context In the previous chapter, Steel (Part 1), we established that steel comes in various grades and forms and has a wide range of applications. We also saw how steel is produced an ..", "Vineet Rajani on October 13, 2023", "10.1 \u2013 Overview As I want to start writing this chapter on steel, I am thinking of a good way to start. I look out the window; the balcony railing is made of steel. The chair I am sitting on has ..", "Nikhil.A on October 3, 2023", "..", "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/themes/varsity2//images/playstore.png", "https://zerodha.com/varsity/wp-content/themes/varsity2//images/appstore.png"], "tables": [], "videos": []}
{"title": "1. Orientation", "text": ["Before we start this module on Option Strategy, I would like to share with you a Behavioral Finance article I read couple of years ago. The article was titled \u201cWhy winning is addictive\u201d.", "Here is the article, authored by B.Venkatesh (a regular columnist for HBL) \u2013", "\u201cTo buy and bet on a lottery ticket \u2013 a game that you typically avoid because you understand the odds of winning the jackpot is really low. However, if you do win the ticket, you will be most likely tempted to buy a lottery ticket regularly thereafter!", "We exhibit similar behavior when it comes to our investments as well. What drives such behavior? As humans, our life is governed by anticipation. So, looking forward to winning a lottery is exciting and so is realizing that expectation.", "Research in neuroscience has however shown that anticipating a win is more exciting than actual winning! Nevertheless, once you experience the excitement of winning a lottery you feel the need to indulge. That is, your brain compels you to buy a lottery ticket, even though you are aware of the odds of winning the second one.", "This happens because we tend to use more of reflexive brain than reflective brain. The reflective brain performs calculation that helps you analyze and think. The reflexive brain helps you feel and is more intuitive. When you feel an urge to buy a lottery ticket, it is your reflexive brain that is pushing you to do so. Your reflective brain is likely to tell you that the odds of winning the jackpot for the second time are low!", "Now consider trading in equity options. You know that buying calls and puts has its risk, as options often expire worthless. Yet we may choose to buy them regularly, especially if we have already experienced large gains from such investments, for it is the reflexive brain in action. With trading options there is another factor at play. We know that options carry the risk of losing capital when our view on the underlying stock or the index turns wrong.", "The fact that we can lose money makes our experience of winning against such odds even more exciting! This is not so much true of lottery because a lottery is a game of chance while investments, we believe, require some degree of skill\u201d", "\u2013End of article\u2013", "You maybe be wondering, why I chose to post the above article right at the beginning of this module. Well, this article echoes some of my own thoughts; in fact it goes a step further to put things in the behavioral finance context. From the many interactions that I\u2019ve have had with both experienced and aspiring options traders, one point is quite common \u2013 most options traders\u00a0 treat options trading as a \u2018hit or miss\u201d kind of a trade. There is always a sense of amusement when one initiates an option trade, many don\u2019t realize how fatal this na\u00efve amusement can be.", "Traders buy options (month after month) with a hope they would double their investment. Trading options with such a mindset is a perfect recipe for a P&L disaster. The bottom line is this \u2013 if you aspire to trade options, you need to do it the right way and follow the right approach. Else you can be rest assured the gambling attitude will eventually consume your entire trading capital and you will end up having a short, self destructive option trading career.", "", "I do have to mention this now \u2013 the common phrase that goes like this (w.r.t options) \u201climited risk, unlimited profit potential\u201d is a silent P&L killer. Newbie traders are disillusioned by this \u2018theoretically correct\u2019 but practically disastrous fact and thereby end up blowing up their books, slowly and steadily. Hence I do believe that trading options blindly without a strategy is a \u201cdangerous but irresistible pass time\u201d \u00a0\u263a (courtesy \u2013 Pink Floyd).", "I don\u2019t intend to scare you with this note; I\u2019m only trying to set the context here. With the previous module on Options Theory, I\u2019m sure you would have realized that unlike other topics in the markets, the science involved in Options is heavy duty. It can be quite overwhelming, but you will have to trust me here \u2013 the only way to understand and master options trading is by structuring your learning path with a good judicious mix of theory and practice.", "In this module, I will attempt to give you a good overview of what you really need to know about some of the popular options strategies. Like always, I will try and stick to the practical aspect and ignore the unwanted (and confusing) theory part.", "As far as I\u2019m aware, there are close to 475 options strategies out there in the public domain and I\u2019m sure at least another 100 odd strategies are hidden in the proprietary books of brokers, bankers, and traders. Given this should you know all these strategies put up in the public domain?", "Answer is a simple no.", "You only need to know a handful of strategies but you need to know them really well. Once you know these strategies all you need to do is analyze the current state of markets (or the stock) and map it with the right option strategy from your strategy quiver.", "Keeping this in perspective we will discuss certain strategies.", "Besides discussing the above strategies I also intend to discuss \u2013", "The plan is to discuss one option strategy per chapter so that there is ample clarity about the strategy, without any mix up or confusion. This means to say we will have roughly about 20 chapters in this module, although I suppose each chapter would not be too lengthy. For each of the strategy I will discuss the background, implementation, payoff, breakeven, and perhaps the right strikes to use considering the time to expiry. I also intend to share a working excel model which would come handy if you intent to employ the strategy.", "Do note, while I will discuss all these strategies keeping the Nifty Index as reference, you can use the same for any stock options.", "Now here is the most important thing I want you to be aware of \u2013 do not expect a holy grail in this module. None of the strategies that we discuss here in the module is sure shot money making machine; in fact nothing is in the markets. The objective here in this module is to ensure that we discuss few basic but important strategies, if you deploy them right you can make money.", "Think about this way \u2013 if you have a nice car and drive it properly, you can use it to commute and ensure comfort of yourself and your family. However if you are rash with the car, then it can be dangerous to you and everyone else around you.", "Likewise these strategies make money if you use it right; if you don\u2019t then they can create a hole in your P&L. My job here is to help you understand these strategies (help you learn how to drive the car) and I will also attempt to explain the best condition under which you can use these strategies. But making sure it works for you is in your control, this really depends on your discipline and reading of markets. Having said this, I\u2019m reasonably certain your application of strategies will improve as and when you spend more \u2018quality\u2019 time in the markets.", "So starting from the next chapter we focus on the Bullish strategies with the \u2018Bull Call Spread\u2019 making its debut.", "Stay tuned.", "Dear Karthik,\nLooking forward to only two strategies: a) Trend reversal, buy call with credit put spread and b) trend reversal, buy put with credit call spread.\nThese are the only strategies i want to specialize on index, please help me.\nThank you,\nD.Rajendran.", "Sure, meanwhile do have an open mind for other strategies as well:)", "Sorry, I mean pdf file of Module 6.", "We are working on it, will be putting it up shortly.", "Sir,\nI really like the way you explain.\nI request you to explain nifty and banknifty options trading with some examples.\nI would be very happy to attend a workshop on options trading.", "Thanking you,\nYours sincerely,\nMridula Somashekar", "Option theory is the same for all assets, be it Nifty, Bank Nifty, Infy options or SBIN.", "How can I download the whole module in a pdf format. The other modules have a direct download link to download the whole module at the end of the list of chapters.", "We are working on it!", "Hello sir gud evng \u2026.sir i have one doubt in options\u2026.sir yesterday evening i bought bank nifty 19800 ce @104 \u2026160 shares\u2026n bought 18700 pe @ 37 rs\u2026160 shares\u2026on the view of us elections\u2026later ban of 500 1000 rs news added\u2026but today when market opened bank nifty did 18185 low\u2026sir sir sir\u2026.my ce value opened by 4 rs\u2026but 18700 pe not opened for 30 mins\u2026later it was showing that premium was 41.80 rs\u2026but 30 mins later market rebounded to 18800 \u2026so according to options law the PE value should open around 300-400 but it was not happend\u2026.so finally i knew that market is gambling\u2026it will operate by some rich people\u2026.what do u say sir\u2026not only in zerodha pi software \u2026the 18700 pe value not traded in brokers software like sharekhan ventura\u2026etc\u2026finally i booked loss \u2026.so finally my query is if 19800 ce value trading perfectly @ 4 rs \u2026then why 18700 pe was not opened for 30 mins \u2026and later showing bank nifty @18800 \u2026\u2026if people those r trading in stock market\u2026pls dnt enter into this gambling game\u2026it is only for ratan tata birla\u2026fills and diis\u2026not for small investors\u2026", "Samanth \u2013 this is quite unfortunate. Ideally, you should have had been in a position to square the positions and take the profits. But in this case it is purely because of the lack of liquidity which dint allow you to do so.", "but18700 PE option value should have increased? why premium amount does not increased even though market fall?", "The premium is not affected just by the delta. The volatility too influences the premium. As the volatility cools off, so does the premium. I guess this is what has happened in this case.", "When can I expect the next chapter sir..?", "Very soon Sir.", "Thanks Karthik.Eagerly waiting for this. Pls give some idea about how to pick particular Bullish/bearish strategy from 10 to 15 strategy. From my 6 months option trading experience , I made profit when at least one call/put sell is part of my strategy. But as Zerodha span calculator always show high margin for sell option, it is difficult for me to implement some strategy.", "Yes. Even i m also facing the same difficulty.. I m making profits consistently on selling rather than buying call/put options. But reward is less due to high margins.", "But the probability of booking profit also high \ud83d\ude42", "which selling strategy you are using", "Picking the right strategy for the given market condition depends upon your reading of the market. This will improve as and when you gain more experience in the market.", "Also, selling options requires a margin amount.", "Super say bhi Upaar .Picture abhi baaki hai as always Starring Karthik ji .", "lol \ud83d\ude42", "Hi Karthik,\nThe market turns bullish and bearish overnight. Hence learning bullish strategy and bearish strategy simultaneously will help us to apply the strategy in the market. Hence please explore possibility to publish one chapter for one bullish strategy the next for one bearish strategy ; one bullish strategy; one bearish strategy and so on. Is it possible?.", "I understand Ravi \u2013 but I also have to keep the flow of the module in perspective.", "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/2015/11/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/d5c62ab5d7cef3fddf9d4bbef8ef0876?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/33365d52aa1774f75ec054c509d1cd18?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/e844cee33d0ee31eda8a870427593760?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/8c5ae8a4f7c148f06fc6627150df0988?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/414eeca9af5d3680fd6167ee957a6ccc?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/58b8b8489e021b2c3fa32fa174706d97?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "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/59a8749ec78f6bbe48807c6640ce216e?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/b099616939ce6a37e32793fa45f29ce4?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/39a609c2afa3b32bf24e1424c3daba3a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/4a4e780d84573c5e24db4d0ca95256c7?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/e7b6f4b22ca34be7cceec350fc320f34?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<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>Bullish Strategies</strong>\n<ol style=\"text-align: left;\">\n<li>Bull Call Spread</li>\n<li>Bull Put Spread</li>\n<li>Call Ratio Back Spread</li>\n<li>Bear Call Ladder</li>\n<li>Call Butterfly</li>\n<li>Synthetic Call</li>\n<li>Straps</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>Bearish Spreads</strong>\n<ol style=\"text-align: left;\">\n<li>Bear Call Spread</li>\n<li>Bear Put Spread</li>\n<li>Bull Put Ladder</li>\n<li>Put Ratio Back spread</li>\n<li>Strip</li>\n<li>Synthetic Put</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>Neutral Strategies</strong>\n<ol style=\"text-align: left;\">\n<li>Long & Short Straddles</li>\n<li>Long & Short Strangles</li>\n<li>Long & Short Iron Condor</li>\n<li>Long & Short Butterfly</li>\n<li>Box</li>\n</ol>\n</td>\n</tr>\n</tbody>\n</table>"], "videos": []}
{"title": "1. Orientation note", "text": ["I\u2019m excited about this brand new module on Varsity, wherein we will be discussing two important and closely related market topics \u2013 \u2018Risk Management and Trading Psychology\u2019. While risk management may seem straightforward, \u2018psychology\u2019 may sound boring. Trust me; both these topics can potentially open up new realms of trading. Risk management, for instance, is not what you are thinking \u2013 it goes beyond the usual topics of position sizing, stop loss and leverage. While trading psychology is a reflection of your actions in the markets \u2013 helps you introspect and find answers to why and how you made a profit or a loss in a particular trade or investment.", "Given the exhaustive nature of these topics, I tried looking for ideas on how best I can structure this module, and what chapters to include, and to my surprise, there are no contents related to these topics. Of course, you can find tonnes of content online, but they are all fragmented and lack continuity. This gives us both the opportunity and the responsibility to develop some dependable content around these topics, centered on the Indian context. We will have to work as a team here \u2013 we will take up the responsibility to post the content and you will have to take up the responsibility to enrich it by posting queries and comments.", "At this stage, I can give you a brief orientation on what to expect, however as we proceed, if necessary I\u2019ll take the liberty to alter the learning methodology, although not too drastically.", "So there are 2 main topics we are dealing with here \u2013", "Risk management techniques vary based on how you are positioned in the market. For example, if you have a single position in the market, then your approach to risk management is very different compared to the risk management techniques of multiple positions, which is again completely different compared to the risk management techniques of a portfolio.", "Given this, we will look at risk management from multiple angles \u2013", "In my attempt to explain the above, I will cover the following topics \u2013", "I\u2019m guessing these topics will give you a completely different perspective on risk and how one can manage risk.", "Further, we would be discussing trading psychology both from a trader and an investor\u2019s perspective. The discussion would largely involve cognitive biases, mental models, common pitfalls, and the thought process which leads you these pitfalls. Here are some of the topics we would be discussing in this section \u2013", "Of course, we will build upon this as we proceed. This is going to be an exciting discussing these topics.", "Stay tuned.", "", "Looking forward to get experience trading psychology in Indian Share Market Context. Read many books on the subject like Mark Douglas \u2013 The Disciplined Trader, Trading in the Zone etc. Very excited to get it.", "Will put in all efforts to do a good job \ud83d\ude42", "Dear one", "I am unable to download module 9 pdf suggest me to how to download it.", "Its not really available yet. Will put this up in a month\u2019s time.", "No pdf yet of previous module!", "Will put it up soon. Thanks.", "Kartik, i desperately want those pdf files,please put it up asap! Thanks", "YOu can download it, its on the module home page \u2013 https://zerodha.com/varsity/module/markets-and-taxation/", "I eagerly waiting for risk management management in f & o , especially in options trading\u2026 which may include in above list!?!!", "Yes, will be covering all that and more!", "Hi Karthik, can you suggest good books for risk and trading psychology apart from Marcus Douglas books which I have read already", "I will let you know shortly.", "Eagerly waiting for all the upcoming stuff from you guys!", "Cheers!", "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/2017/02/M9C1-cartoon.png", "https://secure.gravatar.com/avatar/9158591ad089f5a6316786664b08a8bd?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/bbca2af1f3de1d5ad481d40229ed83e0?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/6aeef0599da541b3e20a92f4b6f63f6a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/a1fd4e9e77bec5612f48a733d5d778a3?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/c07235742670242a2261babd1eacad70?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/af459c250fcdc273aaf85cfcdcfe6aec?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/19b87a77fbfadde793ffb896f040b234?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": "3. Risk (Part 2) \u2013 Variance & Covariance", "text": ["", "In the previous chapter, we touched upon the topic of expected return, continuing on it, we will understand the concept of \u2018Portfolio variance\u2019. Portfolio Variance helps us understand the risk at a portfolio level. I\u2019m hoping you are familiar with \u2018Standard Deviation\u2019 as a measure of risk. We have discussed standard deviation multiple times in the previous modules (refer to Module 5, chapter 15 onwards). I\u2019d suggest you get familiar with it if you are not already. While we can easily measure the risk of a single stock by calculating its standard deviation, calculating the risk of a portfolio is a whole different ball game. When you put a few individual stocks together and create a portfolio, it becomes a different animal altogether. The agenda for this chapter is to help you understand how to estimate risk at a portfolio level.", "However, before we proceed, we need to understand the concept of Variance and Covariance. Both Variance and Covariance are statistical measures. Let\u2019s deal with the Variance first.", "The variance of stock returns is a measure of how much a stock\u2019s return varies with respect to its average daily returns. The formula to calculate variance is quite straight forward \u2013", "", "Where,", "\u03c32 = Variance", "X = Daily return", "\u00b5 = Average of daily return", "N = Total number of observation", "Note, the variance is measured as sigma squared; I will not get into the reasons for this as the explanation is quite complex and we could digress. For now, I\u2019d request you to be aware of the fact that variance is sigma squared. Anyway, calculating variance is quite simple, I\u2019ll take a simple example to help us understand this better.", "Assume the daily return for a stock for 5 consecutive days is as below \u2013", "Day 1 \u2013 + 0.75%", "Day 2 \u2013 + 1.25%", "Day 3 \u2013 -0.55%", "Day 4 \u2013 -0.75%", "Day 5 \u2013 +0.8%.", "In this case, the average return is +0.3%. We now need to calculate the dispersion of daily return over its average return, and also square the dispersion.", "We now sum up the dispersion squared to get 0.0318000%. We divide this over 5 (N) to get the variance i.e", "0.0318000% / 5", "\u03c32\u00a0= 0.0063600%.", "So what does this number tell us? It gives us a sense of how the daily returns are spread out from the average expected returns. So you as an investor should look into the variance to determine the riskiness of the investment. A large variance indicates that the stock could be quite risky while a small variance can indicate lesser risk. In the above example, I would consider the variance high, since we are looking at just 5 days worth of data.", "Now, here is something you may be interested in knowing. Variance and standard deviation are related to each other by the following simple mathematical relationship \u2013", "Square Root of Variance = Standard Deviation", "We can apply this to the example above and calculate the 5-day standard deviation of the stock,", "%", "~ 0.8%", "which is the standard deviation a.k.a. the volatility of the stock (over the last 5 days). Anyway, at this point, I want you to be aware of Variance and what it really means. We will eventually plug variance along with covariance into the portfolio variance equation.", "Covariance indicates how two (or more) variables move together. It tells us whether the two variables move together (in which case they share a positive covariance) or they move in the opposite direction (negatively covariance). \u00a0Covariance in the context of stock market measures how the stock prices of two stocks (or more) move together. \u00a0The two stocks prices are likely to move in the same direction if they have a positive covariance; likewise, a negative covariance indicates that they two stocks move in opposite direction.", "I understand covariance may sound similar to \u2018correlation\u2019, however, the two are different. We will discuss more on this further in the chapter.", "I guess calculating the covariance for two stocks will help us get a grip on understanding covariance better. The formula to calculate covariance of two stocks is as follows \u2013", "", "Where,", "Rt S1 = Daily stock return of stock 1", "Avg Rt S1 = Average return of stock 1 over n period", "Rt S2 = Daily stock return of stock 2", "Avg Rt S2 = Average return of stock 2 over n period", "n \u2013 The total number of days", "In other words, you can calculate the covariance between two stocks by taking the sum product of the difference between the daily returns of the stock and its average return across both the stocks.", "Sounds confusing? I guess so. \u263a", "Let us take up an example and see how we can calculate the covariance between two stocks.", "For the sake of this illustration, I\u2019ve selected two stocks \u2013 Cipla Limited and Idea Cellular Limited. To calculate the covariance between these two stocks, we need to work around with the above formula. We will resort to good old excel to help us implement the formula.", "Before we proceed, if you were to guess the covariance between Cipla and Idea, what do you think it would be? Think about it \u2013 two large corporate, similar size, but in two completely unrelated sectors. What do you think would be the covariance? Give it a thought.", "Anyway, here are the steps involved in calculating covariance in excel (note, although there is a direct function in excel to calculate covariance, I\u2019ll take the slightly longer approach, just to ensure clarity) \u2013", "Step 1 \u2013 Download the daily stock prices. For the purpose of this illustration, I\u2019ve downloaded 6 months data for both the stocks.", "", "Step 2 \u2013 Calculate the daily returns for both the stocks. Daily returns can be calculated by dividing today\u2019s stock price over yesterday\u2019s stock price and subtracting 1 from the result of this division", "", "Step 3 \u2013 Calculate the average of the daily returns", "", "Step 4 \u2013 Once the average is calculated, subtract the daily return by its average", "", "Step 5 \u2013 Multiply the two series calculated in the previous step", "", "Step 6 \u2013 Sum up the calculation made in the previous step. Take a count of the number of data points. You can do this by using the count function in excel and giving any of the fields as the input array. I\u2019ve used the count on the dates here.", "", "Step 7 \u2013 This is the final step in calculating the covariance. To do so, one needs to divide the sum by count minus 1 i.e (n-1). The count, in this case, is 127, so count-1 would be 126. Sum calculated in the previous step was 0.006642. Hence, covariance would be", "= 0.006642/126", "= 0.00005230", "", "You can download the excel sheet.", "As you can see, the covariance number is quite small. However, that\u2019s not the point here. We only look at whether the two stocks share a positive or negative covariance. Clearly, since the two stocks share a positive covariance, it means that the returns of the two stocks move in similar directions. It means that for a given situation in the market, both the stocks are likely to move in the same direction. Note \u2013 covariance does not tell us the degree to which the two stocks move. The degree or magnitude is captured by correlation. The correlation between Idea and Cipla is 0.106, which indicates that the two stocks are not tightly correlated.", "By the way, here is something very interesting fact. The mathematical equation for correlation between two stocks is as follows \u2013", "", "Where,", "Cov (x,y) is the covariance between the two stocks", "\u03c3x = Standard deviation of stock x", "\u03c3y = Standard deviation of stock y", "Note, the standard deviation of a stock is simply the square root of the variance of the stock. Here is a task for you \u2013 we have calculated the correlation between Idea and Cipla using the direct excel function. Can you confirm the accuracy by implementing the formula?", "Anyway, in the case of building a stock portfolio, do you think a positive covariance is good or bad? Or rather do portfolio managers desire stocks (in their portfolio) which share a positive covariance or they don\u2019t? Well, portfolio managers strive to select stocks which share a negative covariance. The reason is quite simple \u2013 they want stocks in the portfolio which can hold up. Meaning if one stock goes down, they want, at least the other to hold up. This kind of counter balances the portfolio and reduces the overall risk.", "Now, think about a regular portfolio \u2013 it will certainly contain more than 2 stocks. In fact, a good portfolio will contain at least 12-15 stocks. How would one measure covariance in this case? This is where things start getting complicated. One will have to measure covariance of each stock with all the other stocks in the portfolio. Let me illustrate this with a 4 stocks portfolio. Assume the portfolio is like this \u2013", "In this case, we need to calculate the covariance across \u2013", "Note, the covariance between stock 1 and stock 2 is the same as the covariance between stock 2 and stock 1. So as you can see, 4 stocks require us to compute 6 covariances. You can imagine the complexity when we have 15 or 20 stocks. In fact, when we have more than 2 stocks in the portfolio, the covariance between them is calculated and tabulated using a \u2018Variance \u2013 Covariance Matrix\u2019. I would love to talk about this now, but I guess, I\u2019ll will keep it for the next chapter.", "Stay tuned for more!", "I have calculated variance of stock using daily return of last 1000 days. Then I calculated Standard Deviation using square root of variance.Then I calculated Standard Deviation using standard deviation method. But values are not matching. Do you know why? e.g I took \u201cNSE:ITC\u201d everyday close value of past 1000 days. So from variance calculations I am getting \u201c0.000487\u201d and from Standard Deviation method I am getting \u201c0.1788465\u201d. Am I doing anything wrong calculations?", "Need to check the excel for this, ideally they should match.", "https://docs.google.com/spreadsheets/d/1g8yrl3dj0vn-FLgBYSNkbveWZ6SeVfx9WAGLLC7DjNY/edit?usp=sharing Can you please check above sheet", "Will look into this shortly.", "Thanks! Did you get a chance to look into this one? Thanks in advance.", "Not yet, Susim. I\u2019ve been really tied up with few things.", "no problem thanks!", "Bravo!\nIs it possible that covariance could change over a long period for any 2 (or more) stocks? Supposing it was positive when we buy them and it might becomes negative at some point of the holding period (or vice versa)", "Over a long time, yes, there is a chance for covariance to change.", "Shouldn\u2019t we consider the trading holidays for such calculations. Since stocks only moves on live trading session. So average daily returns will not be whole 365 days but actual trading days. Just a smart doubt.", "Yes, on trading holidays we wont have any data points anyway.", "Hi karthik, Is there anyway to download last 10 year data of Nifty in a single excel file from NSE website. Right now I can able to download only one year data at a time.", "No, NSE used to allow that few years ago but have stopped doing so.", "By the way thanks for this great initiative(varsity) by your team. Looking forward for Trading strategies and system", "Hello Varsity team, I have made complete Varsity documents as audio book ( Uploaded in You tube channel). Where i need your confirmation/approval to publish as education content.", "Sure Ramaraj, please do share the link with us. Also, I\u2019d request you to please give Zerodha the required credit for this on your youtube channel.", "Thanks Karthik , I do share the link once all videos uploaded.", "Sure, thank you so much.", "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/2017/03/M9-C3-cartoon.png", "http://zerodha.com/varsity/wp-content/uploads/2017/03/Formula-variance.png", "http://zerodha.com/varsity/wp-content/uploads/2017/03/Formula-covariance.png", "http://zerodha.com/varsity/wp-content/uploads/2017/03/Image-1_daily-data.png", "http://zerodha.com/varsity/wp-content/uploads/2017/03/Image-2_daily-rt.png", "http://zerodha.com/varsity/wp-content/uploads/2017/03/Image-3_avg-rt.png", "http://zerodha.com/varsity/wp-content/uploads/2017/03/Image-4_rt-minus-avg.png", "http://zerodha.com/varsity/wp-content/uploads/2017/03/Image-5_rt12.png", "http://zerodha.com/varsity/wp-content/uploads/2017/03/Image-6_sum.png", "http://zerodha.com/varsity/wp-content/uploads/2017/03/Image-7_cov.png", "http://zerodha.com/varsity/wp-content/uploads/2017/03/Formula-correlation.png", "https://secure.gravatar.com/avatar/c25d0b227a4e2e000edf0d53d6884cfa?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/b788fcc1f0a2b52fa52472e568688c0c?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/b788fcc1f0a2b52fa52472e568688c0c?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/b788fcc1f0a2b52fa52472e568688c0c?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/c6a36f08f1e70b17caf12b7f6695d156?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/e8f41a3044fd77ee14e90d6e50c3367d?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/23f393e7c9382f8a9d17294e0fc06f5a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/23f393e7c9382f8a9d17294e0fc06f5a?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/57d0b91ae866d005451f3d0c5cc77a9d?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/f77c3f8361982099ed9ac6d852b2e2b1?s=32&d=identicon&r=g", "https://secure.gravatar.com/avatar/57d0b91ae866d005451f3d0c5cc77a9d?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<thead>\n<tr>\n<th width=\"160\"><strong>Daily Return</strong></th>\n<th width=\"160\"><strong>Dispersion from average</strong></th>\n<th width=\"160\"><strong>Dispersion squared</strong></th>\n</tr>\n</thead>\n<tbody>\n<tr>\n<td width=\"160\">+ 0.75%</td>\n<td width=\"160\">0.75% \u2013 0.3% = + 0.45%</td>\n<td width=\"160\">0.45%^2 = 0.002025%</td>\n</tr>\n<tr>\n<td width=\"160\">+ 1.25%</td>\n<td width=\"160\">+1.25% \u2013 0.3% = + 0.95%</td>\n<td width=\"160\">0.95%^2 = 0.009025%</td>\n</tr>\n<tr>\n<td width=\"160\">-0.55%</td>\n<td width=\"160\">-0.55% \u2013 0.3% = -0.85%</td>\n<td width=\"160\">-0.85%^2 = 0.007225%</td>\n</tr>\n<tr>\n<td width=\"160\">-0.75%</td>\n<td width=\"160\">-0.75% \u2013 0.3% = -1.05%</td>\n<td width=\"160\">-1.05%^2 = 0.011025%</td>\n</tr>\n<tr>\n<td width=\"160\">+0.80%</td>\n<td width=\"160\">+0.8% \u2013 0.3% = +0.5%</td>\n<td width=\"160\">0.50%^2 = 0.002500%</td>\n</tr>\n</tbody>\n</table>"], "videos": []}