Avenues for investing in Indian Securities Market: A guide for a retail Investor.

Retail Investors, the new aged investors who have multiplied in number over the past one or two years have an overwhelming effect on the Indian Stock Market. The advancements in the technology world have bought Investing and trading experience to everyone’s fingertips. Nowadays investing in financial markets are as simple as ordering something from Amazon. The way this process has streamlined allows everyone to dive in the world of financial markets. The way technology has made this process Over the Air is one more reason why people find Investing so easy. There was a time, to open a Demat Account one had to go through several hardships, the processes were slow and staggered. Digitalisation of the account opening process was a good sentimental boost compared to the trivial documentation mode. The rippling effect of that was – Massive Amount of Demat Accounts were Opened. A matter of fact that, the number of Trading Accounts have doubled from 3.6 Crore in March 2019 to a whopping 7.7 crore in January 2022. The drawback of this enormous jump of new age investors in the market was – They were never a part of the greater market cycle. Market Cycle refers to the bull market followed by an alarming correction with pessimism surrounding it. Experiencing a market cycle is extremely important for an Investor/trader. A market cycle may take a year or two to complete. As opposed to this new age of retail investors, they haven’t had the experience of a Market Cycle due to which they might have a setback and loss of capital for that matter. Hence, understanding how markets perform in the uptrend or the downtrend is of utmost importance. We would like to help out the retail about our experience. We have set of seven major points which we think might be some of the mistakes that the new-age investors will commit.

Point One - Don’t just rely on tips
TIPS. This word might be one of the most used term when there’s a group discussion going on about financial markets. Tips refer to a recommendation or an insider news given from an experienced and educated financial expert. Retail Investors often rely on tips from these people. It’s not wrong to hear what experts says or recommend but its fallacious to not do your research on where you are betting. There are multiple ways you can cross verify tips. Not every tip will be profitable. If looking for an investor’s point of view, look for profitable companies. A good company will have growing profits, good revenues, reducing debts and higher dividend yields. There are multiple factors but these might be the key factors and any of them in the opposite way might be a red flag. From a Traders point of view, when trading on tips always stick to an accurate risk management strategy. When you fetch a tip, do ask on what basis is the tip given and once you fetch the reason do cross verify it. Quantity and price management is a noticeable skill here. Avoid stocks which have very less volumes and stocks which have multiple series of circuit movements.

Point Two - Never try to catch the falling knife
There are a certain group of stocks which have been under scrutiny and certain forms of financial strains. These are stocks with very huge volumes and less prices. These are companies with huge prices which depreciated over the past years due some form of irregularities. Investors of new age think, if they buy them in good quantity they can catch hefty returns on them. The thing gets more intense because the financials of the company are just for namesake. Some of these companies often see huge movements on news breaks but the person buying should know that it’s not the value you putting in. Value Investing means good business available for lesser valuations. The retail group are often interested in such stocks whose values have depleted over the past some years, expecting them to turn multibagger. The sad thing here is that it doesn’t work that way.

Point Three – Always book your losses first
When investing/trading in markets it’s very common that someday you’ll incur some losses – That’s the way the cookie crumbles. Losses and profits are two sides of same coin. The first loss might be very harmful to the newbie but the passion to never stop keeps the investor going on. This gets us to a very important aspects of booking your losses. You have your levels of stop loss once they hit get out of that trade because once you start trailing the market will make you trail till the time the trade goes null, so always follow a strict policy of booking losses. Booking losses is as important as entry time in a trade. Once a stop loss hits, never try to manipulate with it because you’re breaking your set of instructions which you had developed after sheer hard work and knowledge. Once you alter a stop loss, you’ll have to alter it again and again. It’s a loop of red days but what if you booked all your losses on the first stop loss trigger. Once a trader/investor incurs a loss, his sudden emotional response will be of a revenge trade. Revenge Trading refers to revengeful impulse caused by a losing trade. Revenge Trade might be one of the most common mistakes a retail investor does. Avoiding and forgetting a loss making trade will be the ideal choice.

Point Four - Learn Diversification before Investing
Diversification refers to the process of mixing wide variety of investments instruments to manage risk effectively. Let’s understand this with a wide example - Let’s say that Investor A bought significant stock of a company and parks all of his capital in a tech based company it while investor B buys companies from different sectors like IT, Banking and Realty. Here we have an investor who has parked all his/her capital in one Tech Company while on the other side we have an investor who has aimed at different sectors and different companies. Let’s say that tech stocks are under pressure then investor A will lose significant percentage of his/her capital while Investor B will lose capital but not a whole ton of it because banking and Realty won’t be that hit by the tech fall. The process by which an investor reduces the risk by adding more companies to his/her portfolio is what diversification is all about. Investing has some major core concepts which includes mental stability (patience to see losses), Diversification etc. While diversifying a portfolio, an investor should be cautious about not over-diversifying the portfolio. Once you add more than a certain number of stocks, it becomes very difficult to breakeven on day-to-day basis. Holding multiple sectoral stocks can hamper your growth to your dream portfolio. Hence diversification is of utmost importance when investing a large chunk of money into equity markets. As an investor, you can use multiple investment instruments like Mutual Funds, Bonds, and Commodities etc.

Point Five - Stick to your roots
This might be one of the most important aspects of investing. Understanding markets might be tough but sticking to your rules and investing framework will be way more complex then understanding markets. The market overall in the past of couple of years have been very uncertain and this was time most of the retail investors have got in. The wave of pandemic and rising inflation have made the market tricky and uncertain. In such time of high volatility and quick changing sentiments sticking to your rules and Investment framework. Investment framework is a set of investor defined rules to invest in the markets and fetch hefty returns. Creating an Investment/trading framework differs from person to person based on their risk profile some can risk it all while some are afraid to even take a small bet. Another thing to take care of is Stick to your views. Remember that day on drinks you told your friend that I will never invest in penny stocks – Yes so just stick to that you’re doing the right thing. Sticking to your investment framework just won’t make you a profitable trader it will make and educated and disciplined trader.

Point Six - F&O is the only way you can be poorer || Hedging is the only way
you'll be wealthier Futures and Options is a different segment of market here traders hold the position from a few seconds to a few week. In this segment there is a minute or no resemblance of fundamentals, technical here are the main deciding factor here. Futures are considered quite stable as they are prices similarly as the stock. Options are the more lethal ones here. Options are highly unstable and exceedingly volatile. The price the trader pays for buying an option is called the premium. The premiums of options can shoot up 300%-500% or even deplete 90-95% on major gap-ups and gap-downs. Majority of the new age traders often take naked positions in them and often loose a huge ton of their capital. Hedging refers to have a long position (Bullish Position) in one segment and countered by a short position (Bearish Position) in another segment. Hedging is a risk management method used by options trader to hedge their risks against non-favouring position. Naked trading is often a retails go to spot to trade. Options are always called leveraged positions because a trader has to buy a certain quantity known as the lot size. Hence these high leveraged positions are often poisonous to your portfolio. Hedging might be the best way you can have a chance to make money in this sect of the market. Hedging doesn’t make you a good trader, it makes you an educated one.

Point Seven - Follow Strict Targets and Stop Losses!
A good Risk Management system is of utmost importance when trading. A good Risk Management System includes – Variable Stop Losses and Targets. Stop Loss is a form of trigger order which is triggered at a certain price point. For Example if you have placed a Stop Loss order of selling Reliance Industries to sell the script at 2500-levels then the software will sell your position once the price is triggered. A 10% Stop Loss on a position less than INR 50,000 is considered healthy. A trailing stop is a type of stop loss which changes with price action. Trailing stop losses are a part of a greater profit making strategy. As compared to stop loss, we also have something called as Targets. Targets are price where the investor/trader thinks that the scripts has been valued appropriately. While stop loss orders are price triggered orders, targets are sentimental levels. Targets are not set on a computer software but are studied and developed in an investor/traders mind. Following your set of targets and stop losses are beneficial to your finances. You can change your stop losses according to the price action but manipulating with stop losses on the pretext of greed would be felonious. In the words of great American Financier Bernard Baruch, “In investing/trading it’s not how much you make but rather how much you don’t lose.”

This brings us to the end of the common mistakes made by new age investors and their solutions. The exponential rise of investors is likely to continue for the next decade and it’s too likely that the retail will dominate it. In the United States of America, 50% of the Adult population invests in stock market because of minimal or null interest rates as compared to India it is just 3% of the Adult Population invests in. With the sudden development of streamline and easy to use B2C trading apps it has helped everyone to capture markets extremely easy. The next 7-10 year of the India Inc. will be the years of the retail investors hence making them caution about all the contingency risk was of utmost importance.

Thanking You!

(“I, Chintan Nirmal Ruparel, confirm that the essay with the title “Avenues for investing in Indian Securities Market: A guide for a retail Investor.” was solely written by myself and no other aid was used and not have been previously published or considered for publication)

Every year in the last week of January and First week of February the markets turn very volatile the reason being the Financial Budget. The financial budget session starts on February 1. Due to which markets can’t decide a designated way of moving.

In this situation Investors can take advantage of any fall as we saw today on 24th of January, 2022. As of today we expect the markets to dip further. Today rumour played a designated role, Acc to some sources the LTCG (Long Term Capital gain ) was likely to be increased from 10% to 15% which caused panic among the big sharks in the market. Global markets weaken on higher bond yields. Dow Jones on 24th January saw a wild swing with dropping more than 1100pts but it ended in green staging a upbeat recovery.

In our opinion, there’s quite an uncertainty in the markets. Traders are using various methods to avoid risks but the wild swings is making it very hard to catch a winning trade. Its time for investors to stay awake and find bottoms in good companies. Many good firms are available at great discounts. So Go thrift shopping!Do spot the bottom well. For all our fellow traders there are some key points you should focus on right now!

• Market Mood - The current Market mood is quite pessimistic but the main indices are in their comfortable demand zones. You traders should also focus on the budget. For Options traders, A straddle would work the best in their favour. Avoid naked trading because if the swing happens against your position, Then the swing will be huge. Use Adequate risk management and hedging mechanisms.
• Overtrading - Opening multiple new positions in this hour wont be the most idle choice. Even if your conviction is very strong then buy half of what your capital can afford so incase it goes in the opposite direction you can average it by adding more. So for newbie’s TWODS Capital would advice to not overtrade. For experienced traders we will like to advice you to hedge your risks from time to time and have a backtested Risk Management System.
• Never Hold Overnight Positions - The swings which we are seeing today is replicating the global sentiment. Heavy falls in the US Markets is triggering a bearish sentiment in the world Markets with the Fed decision due in a day. Indian markets close at 3:30 while the US Markets open at 8PM. Pertaining to past experiences in panic situations like this, It’s advisable to square off all positions in Intraday to avoid risks from highly volatile US Markets.
• Follow Your Roots - You have been an educated trader, Its advisable to follow your roots at this moment. By roots we mean, Always follow strict stop losses and targets. Having control on your Greed and Fear are two traits which make you a good trader and an educated trader. Another thing to think here is, Remember once you said that this company is overvalued and has no profits or the time you spoke “the company is overvalued.” It’s time to stick to your, Many new startup companies are available at discounts of upto 50% but stick to your word and invest in SWAT(Sleep well at Night) and Bluechip companies

Do check this blog-space back as we uncover Budget 2022. There are some of key points everyone should focus on. May the trading gods be in your favour.
Disclaimer - This blog is for educational purpose only. Please do your due diligence and risk management before entering into any trade.

Internet and it's working

There are two main concepts that are fundamental to the way the Internet functions: packets and protocols.

• The internet is a world wide computer network that transmits variety of data and media across all connected devices. It works by using a packet routing network that follows Internet Protocol(IP) and Transport Control Protocol (TCP).
• All data sent over the internet is called a message. Once the trigger to send a message is triggered, Messages are broken into tiny bits called packets.

What is A Packet?

In networking, a packet is a small segment of a larger message. Each packet contains both data and information about that data. The information about the packet's contents is known as the "header," and it goes at the front of the packet so that the receiving machine knows what to do with the packet.

What is protocol?

Connecting two computers, both of which may use different hardware and run different software, is one of the main challenges that the creators of the Internet had to solve. This problem is solved with standardize protocols. In networking, a protocol is a standardize way of doing certain actions and formatting data so that two or more devices are able to communicate with and understand each other.

There are protocols for sending packets between devices on the same network (Ethernet), for sending packets from network to network (IP), for ensuring those packets successfully arrive in order (TCP), and for formatting data for websites and applications (HTTP).

What is IP (Internet Protocol)?

Rules that Govern how information is sent from one computer to another computer over an internet connection. The mapping of sharing information from one computer to another is done via a numeric code known as the IP address
Types of IP Address

• Public IP address - Accessible to everyone over the net
• Private IP address - Assigned to devices over a private/closed network like a home or office. This is not accessible over the web.

What is Transport Control Protocol?

Transport Control Protocol works with IP to ensure transfer of data is dependable, reliable and lossless. Main Use of Transport Control Protocol :-

• No Packets loss
• No delay affecting data quality
• Packet organised in proper sequence

How does the browser work

A browser is a client which connects the user to the webpages present on the web server. Without the existence of web browser we wouldn’t have been able to access things like today. The way browser performs operation is worth studying. Here we will learn how step by step what happens when you type www.google.com in the search bar.

STEP-1

Your PC/device is connected to the internet via the router present at your place. Once connected it will help you surf the web using protocols. Your personal PC is called the Client. Using the Client you can access files present on the Web server.

STEP-2

The User types in the URL in the browser. URL is Uniform Resource Locator. After typing the URL when the users approves it then the real work of the browser starts.

STEP-3

The URL is pushed as query. Then the query is processed and pushed to your ISP. The ISP has multiple servers which saves and stores data like Network Access Protection Server (NAP Server) and Domain Name Server (DNS) The browser looks up the IP address for the domain name you typed in the browser using DNS. DNS - DNS helps translates text-based URL which user enter in the search bar into number based IP address For Example - www.google.com gets converted to - 142.251.40.164

STEP-4

The browser then send a HTTP request to the server. It then requests a copy of the webpage using TCP/IP

• HTTP - Language Used for Internet Communication
• HTTPS - Secured Version of HTTP, All conversation between the browser and the server are encrypted

Once the Server approves the request, It will send a 200OK message directly to the client computer. Then the server will send in the webpage in the form of packets.

STEP-5

Once all packets are received then the browser re-assembles them and displays the web page. Then the work of the browser to load that one webpage from the web server is over.

The process on paper seems a bit lengthy but in real it’s super quick. The whole process happens in milliseconds that’s how fast our algorithm and protocols have evolved.

Correction

/kəˈrɛkʃ(ə)n/
noun
1. the action or process of correcting something.

2. Used to introduce an amended version of something one has just said.

Here I’m referring to a stock market correction. After the enormous rally in almost all months of 2021. The party came to an end by a sudden fall in the markets. The born of a new variant in South Africa shocked the world and rattled the financial word with uncertainty and pessimism. United States inflation at a 39-year high. Major news which might led to uncertainty fled through news which created havoc among traders and investors.
The broader market index for India Nifty50 rallied from 15,000 to 18,600 with certain small pull backs. While it is always said that corrections are always steeper on graph and sudden in time. Everyone knew that a correction was inevitable, It was going to come and create panic but a very few were able to time the correction. Here’s a research by Goldman Sachs which show the corrections and the number of months it took to recover.

Foreign Institutional Investors (FII) were on a continuous selling spree. Domestic Institutional Investors were on a buying spree. There was one more set of participants in the market - The new lads (Retail Investors). For the FII’s and DII’s correction was a discount at the mall while the new age investors who had never seen such a steep correction were really stunned by the fall because of tender their experience was.

Corrections have a nature of creating panic which makes it looks like this is the end of the world but the steeper the corrections, faster will be the bounce back. Staying Invested is an art. Seeing such wild swings in the world of Finance and staying calm needs a nerve of steel. Great Wealth can be compounded by doing nothing. Stock Market is 10% Buying, 10% Selling and 80% doing nothing.

The whole point of publishing this article is to educate everyone that temporary pull backs and corrections are common in the Stock Market. Corrections and Consolidations are good from the long term perspective of the market. The bulls will come back and take charge but you (Yes you impatient) gotta keep your calm

Compounding Wealth is important then earning wealth. All pessimism is permanent. Stay Invested.

Sneaker Culture

Michael Jordan and Nike were the founding stone of the Sneaker Culture in the world. Back then in 1984, Nike signed a $500,000 contract with none other than Michael Jordan. At that time, Nike wasn’t a leader like it is today. Most of them preferred Adidas including MJ. NIKE so desperately wanted to make it to the headline with launching their first ever collaboration with Michael Jordan. Yes those were the Air Jordans. The first Air Jordan was produced for Michael Jordan during his time with the Chicago Bulls in 1984 and designed by Peter b. Moore.



The brand Nike’s Air Jordan 1 shoes were divided into 3 main variants - The Mids, The Lows and The Highs. All of these variants vary by the ankle length. From 1984 till date Air Jordans have come with a ton of shoes. The limited supply of these kicks are the reason there is a whole resale market for that. The Resale Market which makes the sneaker culture an interesting place. The quantity of hyped sneakers launched by any company are so less that a $150 shoes can be sold for more than $2000.

The Brands which lie side by side the Air Jordans are Yeezys. Yeezys developed by Kanye West in collaboration with Adidas have also a significant market share in the Sneaker world. With collaborations with certain Personalities, There are collaborations with Brands the most likely Example of it is Off-White x Air Jordan. The collaborations shoes have a very limited quantity and cause a fortune in the resale market.
There’s a hype market living aside the Sneaker Culture its the market of hype clothing. Artists like Travis Scott have launched their own merchandise which is quite impossible to get at launch. These companies often launch their products once every quarter with limited supplies. Companies like Fear of God, Anti Social Social Club etc come with drops 4-5 times a year which make them super difficult to cop.

Yes I’m totally motivated to see what the next decade will look like for the sneaker culture. The Sneaker Culture and the Hyped Wear culture is here to stay for long. We can expect limited edition drop from daily wear companies like Calvin Klein, Lacoste etc. Indians have gotten well with the burst of Sneakers. Major Influencers and Celebs have forgotten luxury and have gone all in on Hype.

Who Controls the stock Market?

During the working hours of the Stock Market that's from 9 to 3:30. There are basically two groups of people during this time. One are the Bulls, Other are the Bears. Bulls are that group of people that actually want the Stocks to advance, And Bears that group of people who bet on the fall of the Stocks. During the working hours of the Stock Market the bulls and bears fight continuously. And by the end of the day there will be either of these 2 results. When Bulls win, The market gains momentum and is rising. When Bears Win, The markets slides and it produces losses to stocks in terms of Market Cap. And when there's a tie like there are no winners then the market flat.

So Lets see how does movement of prices happen - Imagine a Stock of INR 100 and you have a news that this company is going to sign a deal with a foreign company. And according to you, the predicted target for your trade is INR 40. Which means that you will have a profit of INR 40 per share. So you might be ready to even give INR 105 for that share and the seller will sell his stock at INR 105. So that's what becomes the market price and that's how the prices of Stocks fall or rise.