Zebu blog

Tag: investment strategies

  • How can investing in mutual funds help in retirement planning?

    Financial planning must include retirement planning in order to guarantee a pleasant and long-lasting lifestyle when one’s working years are done. It is essential to have a strategy in place to maintain financial stability and self-sufficiency because of the increase in life expectancies and rising medical expenditures.

    Investing in mutual funds is one of the best methods to accomplish this. A form of investment instrument known as a mutual fund pools the funds of several participants to buy a diverse portfolio of stocks, bonds, and other assets.

    Investing in mutual funds can help with retirement planning for the following reasons:

    Potential for long-term growth: Investors may see long-term growth with mutual funds. This is due to the fact that mutual funds invest in a diverse portfolio of stocks, bonds, and other securities, which over time may generate a consistent flow of income.

    Asset diversification: Mutual funds offer a diverse portfolio of assets, which reduces risk. Mutual funds can lessen the effect of any one investment on the whole portfolio by investing in a number of other securities.

    Professional management: Professional fund managers who have the knowledge and skills to make investment choices on behalf of the fund’s investors oversee the management of mutual funds. This might make sure that the portfolio is well-diversified and managed in a way that is consistent with the investment goals of the fund.

    Automatic contributions are available with many mutual funds, which can make it simple to consistently save for retirement. This may be a practical approach to accumulate savings over time without having to give it much thought.

    Tax benefits: Some mutual funds offer tax benefits that may aid investors with their tax obligations. For instance, some mutual fund categories, such those that invest in municipal bonds, can be qualified for tax-free dividends.

    It’s crucial to keep in mind that there is some risk associated with investing in mutual funds, so do your homework and fully comprehend the fund before you do. When selecting a mutual fund, it’s also crucial to take into account your individual risk tolerance and investing objectives.

    When preparing for retirement, it’s crucial to invest for the long term and concentrate on asset diversification to lower risk. A well-diversified mutual fund portfolio can help assure a comfortable living in retirement by generating a consistent stream of income over time.

    As a result of its potential for asset development and diversification, expert management, automated contributions, and tax benefits, investing in mutual funds can be a useful tool for retirement planning. When selecting mutual funds, it’s crucial to conduct your homework, take into account your personal risk tolerance, and have financial goals in mind so that you can make an informed choice that works with your retirement plan.

  • The Future Of Algo Trading In India

    There are many opportunities on the stock market. Yes, there is nothing better than believing in a stock and seeing it go up in value by a lot. But since the stock market has grown into a big, complicated beast, there are other ways to make money consistently, like catching a short-term trend or reversal pattern or using options structures to profit from short-term moves.

    Are you in the search best stock trading platform? Then, your search ends here. We make online stock trading easy with our best trading platform.

    If you tried to use these strategies manually in a market that keeps getting bigger and bigger, you probably gave up because it was too hard. But if you use technology and automation to help you trade, you’ll see that you can make trading less stressful and easy. In a nutshell, that’s what Algorithmic Trading has to offer. As Indian markets become more developed, it will change the stock market in a big way.

    Even though Algorithmic Trading has been around for a while in India, it is still in its early stages. Algos make up 70–80% of the global market volume and have many different structures, rules, and participants. In India, however, algos only make up 50–60% of the market volume and are simpler and less understood.

    Around 2010, algorithmic trading began in India, but at first, only Institutions and brokers used it. But now, thanks to the growth of digital discount brokers and API solutions, anyone in the retail market can make algorithms, and the possibilities are endless!

    Algorithmic trading is becoming more popular, and people are learning more about it and getting better at it. But even so, there is a lot of room for growth for Algos in India if you look at how they are used in other markets. Algorithmic trading is different in many ways. Not only does it give the trader the chance to make money, but it also makes trading more systematic by removing the effects of human emotions and mistakes. It also makes the market run better and have more money in it.

    The main reasons why algorithmic trading is better than manual trading are that it is faster, more accurate, and saves money. Algorithms can find patterns and trades in a fraction of a second, which is faster than humans can see. When a machine follows instructions that have already been set, accuracy and precision are good. Also, the algo keeps an eye on your orders all the time without you having to do anything, which cuts down on trading time and costs and saves you a lot of time.

    Most people are interested in algorithms that are used for systematic trading. Trend watchers, hedge funds, and pair traders find that it is much more efficient to programme their trading rules into software and then let the software trade on its own.

    But apart from that, Execution and Arbitrage are two large areas of trading where algorithms are used. Mutual funds, pension funds, and insurance companies use algorithms to split up their orders when they don’t want their single, large-volume trades to affect stock prices.

    And there is arbitrage, which is buying and selling instruments that are highly related to each other to make consistent small profits from the spread and make the market work better.

    Then comes high-frequency trading, which means they trade every millisecond, or medium frequency, which means they trade every few minutes or even days.

    Trend following, also called momentum trading, and mean reversion, also called range-bound trading, are two other important types of algos.

    Smart Beta is a way to invest in market inefficiencies based on rules. It is becoming more popular in India. High-frequency traders use arbitrage and market-making, which is a way to trade on both sides of the range.

    Rules and the Way Forward:
    Along with the growth of markets, India is also changing its rules for Algorithmic Trading. SEBI has recently put out a consultation paper to make automated trading rules stronger and better for the end customer.

    Algos have had their fair share of problems, like the Colocation scam or the way some algo traders take advantage of people.

    But as the industry becomes more well-known, the inefficiencies would be fixed, and algorithms would change the markets by making them more efficient, fair, and data-driven.


    If you are looking for the best stock trading platforms? Then, we are here to help you. We make online stock trading easy with our best trading platform.

  • The Ideal Asset Allocation Formula For Your Capital

    For the same amount of capital, different investors will divide it and invest in different asset classes like mutual funds, real estate, bonds, FDs and so on.

    But how can we decide which portfolio is the best? Well, that depends on the investor’s age and what they want to do with their money. The right asset allocation for each investor is based on these things. But what does it mean to divide up assets? Let’s find out.

    As an online share broker company, we understand the importance of efficient digital technology and offer a seamless online trading platform for our users and an added advantage of the lowest brokerage options.

    How do you divide up your assets?

    Asset allocation is the process of putting your money into different kinds of investments, such as stocks, bonds, gold, real estate, cash, and so on. It is the process of choosing what assets to buy with the money you have to invest.

    Asset allocation is important because it makes sure that your portfolio is in line with your financial goals. It also makes sure that you don’t buy assets whose level of risk doesn’t match your risk tolerance.

    So, what’s the best way to divide your wealth among different assets?

    There is no one best way for investors, in general, to divide up their assets in their portfolios. Even for the same investor, the best way to invest their money will change as they get older. So, if you are just starting out with investing, here is how you can figure out the best way to divide up your assets.

    When you’re in your 20s, you’re still young and many years away from retirement. This means that you can take more risks with your money and invest in the stock market today. So, you may put more of your money into stocks and mutual funds that invest in stocks.

    This is fine as long as you don’t have too many debts in your name. Also, you should balance your equity investments with a few safe investments to make your portfolio more diverse and reduce the overall risk.

    When you’re in your 30s, you may be able to earn a lot more than when you were younger. But you may also have other debts under your name, such as a mortgage or car loan. Still, you can still take some risks at this age because retirement is still a long way off.

    So, your portfolio could have a lot of stocks and a few fixed-income investments to balance out the risk. You could buy shares in mutual funds, or you could put together your own portfolio of stocks and bonds.

    When you are in your 40s, you are getting closer to retirement age. You need to make sure that you pay off your high-interest debts. As for how you divide up your assets, it may be time to gradually put less money into high-risk investments and more into stable ones.

    You could keep investing in mutual funds on the stock market as long as you choose “blue chip” stocks from strong companies or stocks that pay regular dividends. Aside from that, it might be a good time to put more of your money into debt instruments and deposits.

    Asset allocation in your 50s: When you’re in your 50s, you should put more emphasis on keeping your money than on making it grow. With retirement coming up in just a few years, you need to make sure you have enough money to take care of your life goals after retirement. Since you won’t be working after you retire, it’s also important to set up another way to make money.

    At this point, you can almost completely get out of the stock market and change your portfolio so that it has more debt and fixed-income investments. Also, try to choose investments that can give you a steady stream of income.

    When you are in your 60s, it is likely that you have already retired. You should have been able to pay off all your debts if you had planned your money better. Your asset allocation should be made up of only safe, risk-free, or low-risk investments like gold, real estate, deposits, and debt instruments. This way, you can make sure that the money you’ve saved up over the years is safe and not affected by changes in the market.

    How to make sure the best use of assets?

    In addition to the above rules of thumb, you can also make sure your asset allocation is good by making sure your portfolio is in line with your financial goals.

    Know where your money is going:
    Your goals must match up with how you divide up your assets. You need to know why you’re investing, whether it’s to buy a new house, pay for your kids’ college, or save for your retirement.

    Think about the time frame of the investment. You should choose investments with a time frame that matches the time frame of your goals. In other words, choose long-term investments for long-term goals and short-term assets for short-term goals.

    Think about the money you’ll make from your investments. Find out how much money you’ll need to reach a certain financial goal, and invest in something whose returns will help you build up the money you’ll need. For instance, you can’t use an FD to get the money you need to build your house. Instead, if you want to make a lot of money, you should invest in the stock market or stock funds.

    Conclusion
    If investing in the stock market is part of your ideal mix of assets, you need to open a demat account before you can start. Zebu has an online platform that makes it easy to do this. Make sure you look at your portfolio every six months or once a year to make sure it fits your age and goals.

    As an online share broker company, we understand the importance of efficient digital technology and offer a seamless online trading platform for our users and the lowest brokerage options. Visit us to know more.

  • Rules Investing Rules That Every New Investor Should Know

    If you are a new investor, you can give yourself a pat on the back for getting started. Rest assured that if you invest wisely, you can provide your family with the ideal lifestyle. At first, getting started on this path might seem hard, but millions of people have made money from the markets by following a few simple but important tips.

    Along with the 5 golden rules of investing, another important aspect of investing is the technology we use. Hence, Zebu, one of the biggest share broker company offer the lowest brokerage for intraday trading and the best trading accounts for our customer.


    These five golden rules will be your guide when it comes to investing:

    Compound your returns

    Learn about the power of compounding. The key to your future wealth lies in the power that you haven’t used yet: the power of your investment growing over time. The earlier you start investing, the longer your money will make money for you. At the end of the day, it can be better to invest a small amount regularly over a long period of time than to invest a large amount for a short time. To get the most out of your equity investment, you need to stay invested through the market’s boom and bust cycles.

    Financial goals

    Know what you want to achieve with your investments. Always keep in mind that your portfolio must help you reach your life goals. If you make a plan with your financial advisor, your investments can help you reach your life goals, like saving for your kids’ college, buying a house or car, or saving for retirement. Many people make the mistake of investing on their own, which they later regret when their investments don’t meet their goals.

    Know your risk limits

    Accept the risk you’re willing to take. The risk of investing in the markets varies from one instrument to the next. For example, investing in fixed deposits is less risky than investing in mutual funds. Over time, though, many mutual funds do give better returns than fixed deposits.
    Before you buy a market instrument, you should think about what you want, what you need, and how much risk you can handle. Consider investing in a mutual fund or the shares of a company only if a trustworthy stock market expert tells you to do so.

    Keep your emotions in check

    Learn not to let your emotions get in the way. People often get too emotionally attached to their portfolios and give up on good sense and objectivity. Most likely, your portfolio will go up and down in the short term. During a bull market, it will make you happy when the price goes up, but it shouldn’t make you lose your nerve when the price goes down. As an investor, you need to develop the discipline to stick with your investments over the long term and not sell them off when things get hard. When investing in the markets, it’s always a good idea to be smart about your investments and listen to stock market experts you can trust.

    Appoint a Financial Advisor

    In the last few decades, the study of behavioural economics has shown that people often invest in a sloppy way. People they know often have an effect on what they decide to invest in. On the other hand, people fall for irrational cognitive biases. When it comes to the stock market, good advice from a reputable stock market advisor can be your best guide. You won’t sell your investments out of fear if you have well-researched market reports and good investment advice.

    Conclusion

    Overall, a disciplined approach to investing and a calm, patient attitude during market lows can help you not only survive the worst of the market lows but also profit from them. In the same way that you take your car to a mechanic to get it fixed, you can go to a financial advisor to help you get your portfolio in order. Getting help from a good financial advisor can make a big difference in how much money you and your family have.

    Zebu, one of the biggest share broker company offer the lowest brokerage for intraday trading and the best trading accounts for our customer. Get in touch with us to know more.

  • How To Make Sense Of A Company’s Earnings Report

    When you look at a company’s financial report, the words “earnings” and “profit” jump out at you. Which profit should you look at when judging a business? Why do we need so many ways to measure profit? How do analysts figure out the ratios they keep talking about?

    Here is a quick breakdown of the important terms of an earnings report.

    Before getting to understand a company’s earnings report, we would like to inform you that at Zebu, an online stock broker company we offer lowest brokerage for intraday trading and the best online trading platforms.

    1. Gross profit

    What it is: Sales minus the cost of making those sales. To figure out the cost of goods sold, you add the purchases made during the period to the net stock.
    The meaning: Not the company’s total income because it doesn’t count “other income” like rent.

    2. EBITDA

    What it is: Earnings before interest, taxes, depreciation, and amortisation. To figure out net profit, take gross profit and subtract operating, general, administrative, and selling costs.
    The meaning: Not a true picture of how profitable a company is because it includes taxes and interest payments, which can be very high for some companies.

    3. EBIT

    What it is: Income before interest and taxes are taken out. Operating profit is another name for it. Depreciation and amortisation costs are subtracted from EBITDA to get this number.
    The meaning: This shows how much money the company makes from its main business.

    4. EBT

    What it means: Income before taxes. Interest costs are subtracted from EBIT to get this number.
    What it means is that tax deductions are different for each company. EBT makes it easy to compare how companies use loans to increase their return per share because it includes taxes but not interest.

    5. NET PROFIT

    How it works: Calculated by taking the tax out of the EBT. Also called net profit (PAT).
    The meaning: Since all payments have been made, it shows how much the company made in the end. PAT is used to figure out the dividends.

    6. EPS

    This is the earnings per share. This number is found by dividing PAT by the number of shares in circulation.
    The meaning: It shows how much each share of a company is making. When calculating EPS, dividends on preference shares are not taken into account.

    7. P/E

    How it works: Divide the current share price on the market by the earnings per share to get this number.
    The meaning: This shows how much an investor is willing to pay for one rupee of a company’s earnings. Analysts use it to figure out if a company is undervalued or overvalued.

    8. Operating ratio

    It is figured out by dividing operating costs by net sales (revenue). It shows how much of the income goes toward operating costs. The lower the ratio is, the better the company is. This shows that the company has enough cash on hand to grow and pay interest.

    9. Net profit ratio

    It’s PAT divided by net sales. This shows how much money a company makes on every Rs 100 sale. If the ratio is high, it means that the company is making a lot of money.

    10. Debt-equity ratio

    It shows how financially stable a company is and is found by dividing debt by equity. If the ratio is less than one, the company is using more of its own money and less debt. If the ratio is more than one, the company is using more debt than its own money. Since interest costs are fixed, a company with earnings that change a lot can take a risk by having a lot of debt. Companies that make a lot of money can increase the returns for equity shareholders by taking on a lot of debt.

    These are the key terms that you should keep in mind while analysing a company’s performance.

    At Zebu, an online stock broker company we offer lowest brokerage for intraday trading and the best online trading platforms.

  • What Is A Stock Buyback And How Does It Affect A Stock’s Price

    Over the last few years, a number of companies have said they will buy back their own shares. Before we get into the details of buybacks in India, let’s look at how they work around the world. There are two ways for a company to buy back its own shares around the world. First, you can buy back the shares and keep them as “treasury stock” on the company’s balance sheet. The company uses this for treasury operations. Second, you can buy back the shares and get rid of them, which will reduce the number of shares that are still outstanding by that amount. In India, the first way isn’t allowed. Instead, shares can only be brought back to get rid of them.

    So, why do companies buy back their own shares? Why does a company buy back its own shares? One needs to know what the benefits are for the company and the shareholders. The most important question is what shareholders can get out of buying back their own shares.

    As a stock trading company we are inclined to recommend you the best tools for you to trade seamlessly. Our online trading platform is best for both first-time and regular traders and to top it off we also give the lowest brokerage for intraday trading.


    1. Have a lot of money but not many projects to invest in

    This is one of the main reasons why companies want to buy back their own shares. Indian IT companies like Infosys, TCS, Wipro, and HCL Tech had billions of dollars in cash on hand most of the time. Now, keeping money in the bank costs money, so it’s better to give it back to shareholders. A company like Reliance Industries may have billions of dollars in cash, but it also has huge investments in the telecom industry. Most IT companies use business models that have been around for a while, and there aren’t a lot of new projects to work on. One of the main reasons for buying back shares is that there is too much cash on the books and not enough investment opportunities.

    2. Buybacks are a better way to reward shareholders because they save on taxes

    This advantage became clearer in India after the 2016 Union Budget, when the government said that shareholders would have to pay a 10% tax if their annual dividends were more than Rs. 10 lakhs. Now, companies are taxed almost three times on the dividends they pay out. First, dividends are paid out after taxes have been taken out. Second, there is a dividend distribution tax (DDT) of 15% when the company pays out the dividend. Third, shareholders pay a 10% tax. Most of the 10 percent tax went to promoters and big shareholders. Even with the 10% tax on long-term capital gains that was added in the 2018 budget, buybacks are still a good tax deal.

    3. In theory, buybacks tend to raise the value of a company

    When a company buys back its own shares, the number of shares out in the market and the capital base go down. In this way, it makes the company’s EPS and ROE better. If the P/E stays the same, when the EPS goes up, the stock price should also go up. But in real life, it doesn’t happen very often. When a company buys back its own shares, it is seen as a business with few chances to grow and invest in the future. Since P/E ratios are usually based on growth, these companies tend to have lower P/E ratios. So, even though EPS goes up, the effect on valuation is usually about the same because P/E goes down.

    4. The company can send a message that the stock price is too low

    This may be the most important message that companies want to send when they buy back their own shares. The fact that the company is sure enough of itself to use its reserves to buy back its own shares suggests that the company’s leaders think it is undervalued. This is more important for stocks that have dropped sharply but don’t seem to have any major problems. In this situation, it might be a good idea for the company to buy back the shares to show that prices have hit rock bottom. Even though the stock may not rise sharply, it usually helps the stock find a bottom.

    6. It can help the company’s founders get a bigger share of the business

    There are times when the people who started a business may worry that their stake in it will fall below a certain level. A buyback is an offer, and it’s up to the shareholders to decide if they want to take it. If the promoters agree to the buyback, it keeps their stake in the business and gives them cash. On the other hand, if they don’t take the buyback, they can increase their stake in the company. This is very important if the company is afraid that another company will try to take it over.

    In India, the only way to buy back shares is to get rid of them. Even though the effect on stock prices is still up for debate, there is no doubt that buybacks are a tax-efficient way to give cash back to shareholders.

    As previously informed as a stock trading company we have the best tools for you to trade seamlessly. Our online trading platform is best for both first-time and regular traders and to top it off we also give the lowest brokerage for intraday trading.

  • The What And Why Of Rights Entitlement

    If a shareholder wants to take advantage of a rights offer, they will have to pay the rights price for the number of eligible shares. If a shareholder doesn’t want to buy more shares of the same company, they can either give up their rights or transfer them to someone else.

    It’s easy: I have the right to buy more shares, but I give up that right in your name. This means that you, who may not even be a shareholder, can buy the shares at the rights issue price. I might charge you a fee for this “renunciation.” If the rights issue price is 500 and the company is trading at 700, I will charge 200 per right entitlement to give it to someone else.

    What does “Rights Entitlement” mean?

    This is a fairly new thing on the Indian stock market, where the rights themselves are traded.

    When a company does a rights issue, it gives its shareholders Rights Entitlement (RE). As part of the rights issue, the same number of REs are given to each shareholder as of the record date. Using the same example as before, a person who owns 14 shares of Bharti Airtel will get RE for every 1 share they own.

    Reliance Industries was the first company to give its shareholders their rights directly to their Demat accounts so they could trade them on the exchange platform.

    When you sell a RE, you give up your rights and give them to someone else. The person who buys the RE is given the option to buy the shares.

    If you have RE shares, that doesn’t mean you also have the rights shares. An investor needs to fill out an application for rights shares based on separate entitlements. RE lets rights holders who don’t want to buy more shares of the same company sell their RE shares on a trading window on exchanges to other willing investors for a price.

    Shareholders who didn’t want to apply in the past had to let their RE expire. The renunciation process was complicated, and both the buyer and seller had to sign paper forms. But when the process is handled by the exchange, it’s much easier. All you have to do is click on your broker’s platform, and it’s sold. By giving out RE shares, investors can get some value from their RE shares.

    Setting the price of RE

    The difference between the stock’s market price at the time and the price at which the rights issue is being sold is used to figure out the price of the rights entitlements. Once the base price is set, price changes depend on how the market feels and how much demand and supply there is for the RE. For example, Airtel’s rights shares were being sold for 535, but at the time, each share of Airtel was worth about 681 on the market. So, RE’s base price, or what it was really worth, was 146. But on the first day, it went up by 40 percent and closed at around 205.

    Why would someone pay more than 146 for an Airtel share? The answer is in the actual issue, which is not for regular shares but for partially paid shares. The money for these shares doesn’t have to be paid all at once. Instead, it will be paid in parts over time. This adds a layer of “optionality,” which is why the RE is worth more ( 205) than the “intrinsic” difference of 146.

    Paid in part

    When a company gets money from shareholders, it gives them shares that show how much of the company they own. You can pay for these shares in full or in part. When a share is fully paid, the company gets the whole amount at once. When a share is only partially paid, the company gets the money over time. If a business goes the second route, it doesn’t have to raise all of the money at once. Also, it gives shareholders more time to pay for their shares.

    Investors can buy a company’s stock at a lower price if some of the shares have already been paid for. But they have to pay the rest of the payments when they are due. Once all the payments are made on these shares, they are turned into fully paid shares and traded at the same price. (These shares don’t come with as many voting rights or dividends.)

    For example, each share of RIL’s rights issue costed Rs 1257. But the company was supposed to get the money in three parts from the shareholders –

    314.25 at the time of allotment, 314.25 by May 31, 2021, and 628.5 in November 2021 for the last payment.
    Tata Steel was the first company to list its partially paid shares on the bourses.

    Price of shares that are “partially paid”

    Like fully paid shares, these partly paid shares can be bought and sold on stock exchanges. Their price depends on how much the company’s fully paid-up stock is worth, how much of the instalment has been paid, how much time is left to pay the rest, how volatile the stock is, and, of course, how much people want to buy them. The issuance price or base price is the part of the amount paid for a partially paid share.

    For example, on June 15, 2020, RIL partially paid shares were listed. On the day the shares were put on the market, they were listed at Rs. 698, which was more than double the base price of 314.25. The difference comes from the fact that:

    There was still about Rs 943 to be paid.
    The price of a fully paid share of Reliance was Rs. 1615.
    The price of the PP (partially paid) share should have been 672, which is the difference between Rs. 1,615 and Rs. 943.
    But it was sold for Rs 698. The slightly higher price takes into account how volatile the money is and how much it will be worth in about 1.5 years when Reliance was expected to get the remaining money.
    Since then, Reliance has paid 314.25 for the second call, bringing the total amount paid to 628.5. The PP trades at 1,944 in October 2021, which looks like a return of more than 200 percent. However, this is mostly because the partly paid share has built-in leverage that makes it act like an option contract.

  • What Is A Rights Issue? Everything You Need To Know

    In a rights issue, a company gets more money by giving more shares to people who already own shares.

    That is, if you own a share, you have the “right” to buy more shares at a certain ratio and price. For example, a 10:1 issue means that for every TEN shares you own, you can buy ONE more. Rights are only given to shareholders whose names are on the company’s register of shareholders on a “record date.” This date is usually a few days after shareholders approve the plan to sell rights to raise money.

    Why Does It Matter?

    If a company wants to raise money through a Follow-on public offer, it has to go through a long process that includes getting merchant bankers to price the issue, SEBI approving the offer document, etc. There are also a lot of fees that have to be paid.

    The rights issue is the fastest and least expensive way for the company to get money. The company saves a lot of money on costs like underwriting fees, advertising costs, and so on that it would have had to pay for if it had used another way to raise money.

    Why is the rights regulator not as strict? The reason for this is that an existing shareholder already knows a fair amount about the company, so she doesn’t need as much scrutiny and information as when selling shares to new shareholders.

    Also, in a rights issue, the promoter’s share of the company doesn’t go down, which doesn’t happen in any other way of raising money through equity. Most of the time, promoters agree to buy all of their rights and the rights that were not bought.

    Pricing and ratio of rights

    Most of the time, the price of a rights offer is lower than the market price, and allotment is guaranteed. If the rights are sold for about what they are worth on the market, existing shareholders may not be too interested.

    A company decides how many rights shares to offer based on how much money it wants to raise and at what price. For example, Bharti Airtel decided to raise 21,000 crore at 535 by giving its current shareholders one more share for every 14 they already owned on the record date. This means that a shareholder with 14 shares will be able to buy another 1 share for Rs. 535. At the time, the market price was much higher, around 680 per share.

    The ratio says for sure how many shares each person will get. But one can also try to get more shares.

    Also, these Rights can be traded on their own for a limited time, so shareholders can sell them to other investors on the stock exchange. For example, the recent Bharti Airtel Rights were traded on the exchanges under the name “AIRTEL-RE-BE” for a short time. The price of this script was 203. This means that a person with Airtel Rights could buy an Airtel share for 203 + 535, which is 738. At that time, one share of Airtel costed 687.

    Factor of Shareholding

    When a company issues more shares, its Return on Equity and EPS (Earnings per Share) will go down. But if the rights offer is fully taken advantage of, an investor’s share of the company doesn’t change. For example, if a shareholder-owned 5% of a company before rights, he would still own 5% of the company after rights if he bought his rights shares. If the shareholder doesn’t take advantage of the rights offer, his share of the company would go down (since others will buy and their shareholding goes up).

    If you apply for more shares than your rights allow, you can buy more if a few investors don’t subscribe.

  • Understanding Stock Splits And Its Impact On The Share Price


    Title Page Separator Site title

    Every investor looks to the stock market for shares that will make him money. But sometimes investors can’t buy shares of a popular company. The reason is that the share price is so high. Companies decide to split their shares when this happens.

    Stock split, as the name suggests, is when the face value of a stock goes down and the number of outstanding shares goes up at the same time. The main goal of a stock split is to make the stock easier to buy and sell, so that investors can buy more of it. Companies do stock splits when they realise that the price of their shares is too high or is higher than the prices of their peers.

    For example, if a company does a 1:10 stock split, a stock with a face value of INR 1000 is split into 10 shares with a face value of INR 100. But keep in mind that the company’s share capital doesn’t change. This means that a stock split is nothing more than a cosmetic change, and that the news of a stock split won’t affect the price of the stock in a way that will lead to unusually high returns. Even if there is information in the announcement, it is most likely to show up as unusual returns on the day of the announcement, which is called the record date.

    There are some ideas about why companies split their stocks:
    Signaling: a stock split is a sign that the company will grow in the future. This is because real-world studies of stock splits in developed economies have shown that the day after the announcement of a stock split, returns are often unusual.

    Optimal trading range:

    On every stock market, stocks tend to trade in a certain range. As we’ve already said, stock splits are done to get the price of the stock back into the normal trading range. This lets more investors buy shares.

    According to this theory, the goal of bringing the stock price back to the usual trading range is to improve liquidity, which will lead to investors making more money.

    This is a way for small or ignored firms to get the attention of the market. This is done by a company that feels it has been undervalued in the market because market participants haven’t shown much interest. So, companies use stock splits to get more attention and make sure that more investors can get information about the company. This is more important for small businesses than for big businesses.

    What do investors get out of a stock split?

    In a stock split, the number of shares goes up, but the value of each share goes down. This makes it easier for new investors to get interested in the company’s stock and buy some. In other words, the number of shareholders could grow if more investors bought at lower prices.

    It looks like investors who bought the split share at a lower price may not benefit from the stock split. But if the share price goes up, it could be because of a stock split. This tells the market that the share price of the company has been going up before the split, so investors think that the growth will continue in the future.

    So, after a stock split, should you buy a share?
    Before 1999, SEBI only let INR 10 and INR 100 be used as face values. Today, the split ratio can be 2:1, 10:1, 5:1, or any other number.

    A few reports suggest that the trading range theory is wrong because most stock splits are announced for stocks that were already trading at low prices.

    So, market experts have seen that the price of a share after a stock split depends on how the market is doing and how well the company is doing. Before investing in a share after a stock split, make sure you keep the above two points in mind. There’s no need to say that the market will always have mixed feelings about stock splits. Also, one last thing: don’t confuse a bonus with a stock split. Bonus shares only change the company’s issued share capital. A stock split, on the other hand, changes the company’s authorised share capital.

  • Four Things To Consider Before Investing

    Starting your investment journey can be intimidating but is a necessity considering inflation and economic uncertainty. That is why you need a sound investment strategy to help you meet your financial objectives. At Zebu, it is our mission to help every Indian become financially independent and that is why we have platforms that will help you invest wisely. Please get in touch with us to know more.

    At Zebu, an online share broker company it is our mission to help everyone in India become financially independent, we offer the best online stock market trading platform with the best trading accounts.

    Here are four things to think about before choosing an investment strategy.

    Financial Objectives

    Your long-term and short-term financial goals should be the main thing you think about before you choose an investing strategy. Keeping track of such financial goals will help you make smart choices. Some examples of such goals are getting married, going back to school, travelling abroad, and buying a new smartphone.

    For instance, if you want to save up for a trip to your favourite foreign country, a post office deposit or a recurring deposit could be some of the best ways for you to invest. You can put money in either of these accounts at a post office near you.

    Budgeted, near-term cost

    When looking for a way to invest in India, one of the most important things to do first is to figure out how much you expect to spend in the future. These can be things like your child’s wedding, college, or buying a home.

    If you do this, you’ll have a better idea of how much money you need to invest now in order to get enough money back in the future to pay for any upcoming bills.

    Present Expenses

    When looking for the best way to invest, it’s important to start by looking at what you’re already spending. For example, if you don’t have any big expenses like rent, you will have more money to save or invest for the long term.

    But if you have financial obligations that make it hard for you to save much money, it would be better for you to invest in a financial plan that gives you a good return on your money.

    Financial Dependents

    Most people in India don’t think about how their dependents’ finances affect them when they buy an investment plan. Still, you have to do this because you need to have enough investments or savings to meet the financial needs of your dependents as well as your own.

    For example, if you only have two children who depend on you, you probably won’t need to invest as much as someone who also has to take care of their parents, siblings, and children.

    Investment options for short-term goals

    Plan for investment for one year

    If you like to invest for the short term, even three years can seem like a long time. But there are many 12-month investment plans that can also help you avoid market risks. Here are some good short-term investments you might want to think about:

    • Recurring Deposits
    • Fixed Maturity Plan
    • Post Office Deposits
    • Arbitrage Funds
    • Debt Fund
    • Fixed Deposits

    Plan for an Investment for 3 Years

    3-year investment plans are a common type of short-term investment plan. These plans are best for people who want to make a lot of money in a short amount of time. Here are some choices you might want to think about:

    • Liquid Funds
    • Fixed Maturity Plan
    • Recurring Deposits
    • Savings Account
    • Arbitrage Funds

    Plan for 5 Years of Investing

    Even though five years is a long time, in India a five-year investment plan is usually seen as a short-term investment with low market risk. But compared to other short-term investments, the returns on a 5-year investment plan are much higher. So, here are some choices for you to think about:

    • Savings Account
    • Liquid Funds
    • Post Office Time Deposit
    • Large Cap Mutual Fund

    As an online share broker company, it is our mission to help everyone in India become financially independent, we offer the best online stock market trading platform with the best trading accounts.