Zebu blog

Tag: Regulatory Environment

  • The Role of Economic and Political Factors in the Indian Stock Market: Insights for Investors

    As an investor in the Indian stock market, it is important to understand the various factors that can impact the performance of your investments. Economic and political factors can have a significant impact on the stock market and it is essential to be aware of these influences in order to make informed investment decisions.

    One of the most significant economic factors that can affect the Indian stock market is the state of the country’s economy. The stock market is closely tied to the overall health of the economy, as companies’ profits and stock prices are largely dependent on economic conditions. Factors such as GDP growth, unemployment rates, and inflation can all impact the stock market. For example, a strong economy with low unemployment and steady GDP growth may lead to an increase in stock prices, while a struggling economy may lead to a decline in stock prices.

    Political factors can also have a significant impact on the Indian stock market. Changes in government policies and regulations can affect the performance of specific industries and individual companies, which in turn can impact the overall market. For example, if the government enacts policies that are favorable to a particular industry, it may lead to an increase in stock prices for companies in that industry. On the other hand, if the government enacts policies that are unfavorable to a particular industry, it may lead to a decline in stock prices for companies in that industry.

    In addition to economic and political factors, other external influences such as global market trends and geopolitical events can also impact the Indian stock market. It is important for investors to be aware of these factors and to stay up-to-date on current events in order to make informed investment decisions.

    So, what can investors do to navigate these complex and constantly changing economic and political factors in the Indian stock market? Here are a few tips:

    Stay informed: As an investor, it is important to stay informed about current economic and political developments in India and their potential impact on the stock market. This can involve reading financial news, following economic indicators, and keeping track of government policies and regulations.

    Diversify your portfolio: By investing in a diverse range of assets, you can help mitigate the impact of economic and political events on your portfolio. This can include investing in different industries and sectors, as well as investing in both domestic and international markets.

    Have a long-term perspective: While it can be tempting to make impulsive investment decisions based on short-term market movements, it is important to maintain a long-term perspective. This can involve setting clear investment goals and sticking to a long-term investment plan, rather than reacting to every market fluctuation.

    Seek professional advice: If you are new to investing or unsure about how to navigate the Indian stock market, seeking the advice of a financial professional can be helpful. A financial advisor or investment professional can provide guidance on how to build a diversified portfolio that is aligned with your investment goals and risk tolerance.

    In conclusion, economic and political factors play a significant role in the performance of the Indian stock market. By staying informed, diversifying your portfolio, maintaining a long-term perspective, and seeking professional advice, you can make informed investment decisions and navigate these complex and constantly changing factors with confidence.

  • Equity Market vs Commodity Market – Part 2

    Investors in the stock market can choose to keep their stocks for only one trading day. Stocks, on the other hand, are great investments for the long term because they can be kept for many years or even decades. For commodities trade, on the other hand, the time frame is very different. On the commodities market, contracts that are usually short-term are bought and sold. Also, unlike stocks, they have an end date, which means you have to trade them before the deadline. So, the commodities market is a great place to invest for short-term goals.

    Compared to trading stocks, trading commodities often goes on for longer hours. Stocks can be bought and sold from morning to afternoon. However, commodities can almost always be bought and sold.

    Here are a few more differences between the stock market and the commodity market.

    Bid-Ask spread: The bid-ask spread, which is a measure of liquidity, is lower for stocks. In the stock market, the bid-ask spread is the difference between the highest price a buyer is willing to pay and the lowest price a buyer is willing to accept.

    Margin: The margin requirement for trading commodities is lower than for trading stocks. So, it lets traders take bigger risks, which can be very dangerous when the market moves quickly and in large moves.

    Key indicators: For equity traders and analysts, the most important things are the quarterly results, the company’s dividend payments, and the state of the economy as a whole in the country. When trying to understand the market, traders in the commodity market put more weight on the demand and supply situation than on other factors. Also, traders in commodities have to pay more attention to macroeconomic factors than traders in stocks, who focus on the fundamentals of the companies and their markets.

    Traders and market analysts thought that investing in commodities was a bit easier because it was mostly based on supply and demand. Before deciding how to invest in the stock market, you need to do more research. When you buy a security, for example, you need to look at the company’s earnings and how it has behaved in the past. To understand the copper market, on the other hand, you mostly need to keep an eye on the outlook for industrial growth. So, there are less things to keep an eye on in the commodities market than in the stock market, which may be good for a new trader.

    Stocks can be traded directly in the cash part of an exchange, but commodities must be traded using derivatives.

    Similarities between the stock market and the commodity market

    Both the stock market and the commodity market are affected by many different factors. Take the case of interest rates. Changes in interest rates affect both the market as a whole and the companies that depend on those rates. The interest rate affects how much it costs to keep inventory on hand, which in turn affects the price of goods.

    Pick either stocks or commodities

    Investors can choose to trade on the stock market or the commodities market, depending on how much risk they are willing to take. On the stock market, a common strategy is to buy an investment and hold on to it for a long time. This is not possible when trading commodities. Whether you trade stocks or commodities will depend on how willing you are to take risks.

    If you’re looking for short-term returns, the commodities market might be a better choice. However, investing in stocks is more likely to help you reach your long-term goals. So, investors should keep in mind that stocks and commodities are different in how they are owned and how long they are held.

    Open an account with Zebu to trade and invest in both stocks as well as commodities. Get in touch with us to get started today.

  • Equity Market vs Commodity Market – Part 1

    If a smart investor makes the right investment in the right financial market, they could make a lot of money, especially now, when the internet makes trading in almost every market easier and more accessible than ever. So, we’ll compare the stock market and the commodities market, two very popular markets, to see if it makes a difference.


    What is a stock market, anyway?

    A stock is a type of security that shows that someone owns part of a company that is traded on the stock market. The amount of company shares a person owns, which he or she can then sell or buy from other stockholders, shows how much of the company that person owns. The group of markets where this buying and selling of stocks takes place is called the “stock market.”

    A person can invest in the stock market by opening a trading and demat account with a brokerage firm. The brokerage firm could then set up accounts for you at the right stock exchanges and make trades for you.

    What is the commodity market?

    A commodity is a useful resource or item that can be traded for another of the same kind. There are two types of commodities: soft commodities, like food and livestock, and hard commodities, like gold or oil.

    A commodity market is a place where traders can buy and sell different goods, either in person or online. There are many ways to trade and invest in commodities. These include both direct investments in commodities and investments in futures contracts on commodities.

    Differences between the stock market and commodity market

    After we’ve talked about the difference between stocks and commodities, let’s look at how each market is different. Here are the most important things that set the stock market apart from the commodities market:

    Effects of inflation: Inflation often means that expected costs go up, which could mean that businesses lose money and the value of their shares goes down. This is bad news for the stock market. But inflation is sometimes good for the commodities market because it lets people who own the items sell them for more than they thought they would. But both situations give experienced players chances to make money. In the same way, a drop in the price of oil or other commodities could help stock market indexes.

    Ownership: When an investor buys stocks on the stock market, they get a piece of a company. Most people trade on the stock market by holding on to a stock they already own until the market turns in their favour. But futures contracts are the most common way to trade on the commodity markets. When you use futures contracts, there is no change of ownership. Instead, these agreements cover upcoming supplies of goods that are often traded but rarely owned.

    Volatility: Compared to other asset classes and financial markets, the commodity and commodity markets tend to have the most volatility. The patterns in the commodity market will be much more unpredictable than those on the stock market. This is because the commodities market has a reputation for having less liquidity and is affected by factors like supply and demand and geopolitics that change all the time.

    We’ll discuss more about the differences between the commodity and equity market in the follow up article as well.

  • Everything You Need To Know About Crude Oil Trading In India – Part 2

    In continuation with the previous article, we discuss more about the opportunities available in trading crude oil in the commodities market.

    Demand for crude oil is lower for immediate delivery than for delivery in the future. Investors don’t want fast delivery because it’s hard to get oil to where it needs to go. Because of this, end users and investors often choose futures contracts.

    By entering a commodities futures contract, a trader promises to buy or sell a certain amount of crude oil at a certain price on a certain date. An example is the best way to understand the idea of trading in commodities.

    Example 1: Buying and selling goods to protect against risk
    Let’s say you’re a farmer who grows wheat and sells it for 500 rupees per quintal on the market. You make a good profit. Since you have a lot of rice to sell, you need to make sure you won’t lose money if the price of wheat drops quickly. To protect yourself from losing money, you can buy a futures contract to sell the wheat at Rs. 500 per quintal at a later date. This is known as “hedging.”

    Example 2: Trading goods for the sake of speculation
    Let’s say, for now, that you are a trader who wants to trade crude oil futures. You are optimistic about crude oil (meaning you think that crude oil prices will increase in the future). A futures contract for crude oil has 100 barrels and costs Rs. 3,00,000 (Rs. 3,000 per barrel), but you don’t have to pay the full amount to buy it. There must be a 5% margin, which costs Rs. 15,000.

    Think about a rise in the price of crude oil to Rs. 3,500 per barrel. In this case, if you spend Rs. 3,000, you might make Rs. 500 per barrel and Rs. 50000 in total. As a result, trading commodities gives traders a lot of power.

    The commodities market is another place where it might be profitable for crude oil prices to go down around the world. For example, if you bought an oil futures contract on December 1 with a strike price of Rs. 4520, the price of a barrel of oil dropped to Rs. 4500 But if the sale was for 10,000 barrels, you could still sell the futures for Rs. 4520 and make a profit of Rs. 100 per barrel, or a net profit of Rs. 10 lakh (10,000 barrels x 100).

    In order to trade oil futures, a trader must find the right exchange for the oil benchmark he or she wants to use.

    Oil benchmarks:The benchmark price for crude oil is used by both buyers and sellers as a standard. The three most important oil benchmarks around the world are the West Texas Intermediate (WTI), the Brent Blend, and the Dubai Crude.

    Exchanges: In India, oil futures are traded at the Multi Commodity Exchange, which is also known as MCX. On the MCX, crude oil is one of the commodities that is traded the most. 8500 barrels of oil, worth Rs 3000 crores, are often traded on the exchange every day. In FY19, close to 32% of the MCX’s over Rs. 66 lakh crores in income came from crude oil.

    Every day, crude oil futures worth more than Rs. 3,000 crore are traded on the MCX.

    On the MCX, there are two kinds of crude oil futures:

    Brent crude (Main) – 100 barrels
    Brent crude (Mini) – 10 barrels

    Crude oil micro is more popular among dealers because the lot sizes are smaller and the required margin is lower.

    Can an individual investor buy and sell oil futures?

    There’s no question that you only need a small amount of money to start, and the higher leverage gives you the best chance of making more money. But oil futures are not only easy to buy and sell, but they are also very volatile, which makes it hard to guess how prices will change.

    If your broker works with commodities and is connected to the MCX or NCDEX, you can talk to them about trading crude oil futures. It’s better to start out trading with professionals and then gradually go it alone. To get started with trading with crude, open your demat account with Zebu today.