Zebu blog

Tag: Supply and Demand

  • How The Price Structure Of The Share Market Works

    Stock prices on the market are affected by how much demand there is and how much supply there is. The market capitalization of a company affects part of its share price. This is the sum of the stock price times the number of outstanding shares. The most recent sale price is used to set the current asking price on the market. Let’s say that the last closing price of 100 shares of company XYZ was Rs 50, and you want to buy them. The fair market value of the share is (50 x 100), or Rs. 5,000.

    The discounted cash flow method is another way to figure out what the fair price is. The fair price, according to the hypothesis, is equal to the sum of all future dividend payments discounted to the present value.

    The stock market is a network of exchanges, brokerage firms, and brokers that connects businesses and investors. IPOs, which stand for “Initial Public Offerings,” is how companies get listed on the market before investors can buy their shares. An initial public offering (IPO) can tell what a company’s market capitalization is, and investors can choose shares from separate lists of large-cap, middle-cap, and small-cap companies on the stock markets.

    Indexes are also used by stock exchanges. The Indian exchanges NSE and BSE use two different indices: Nifty and Sensex. These indices are made up of the best large-cap firms based on their market size and how popular their shares are. Most investors use these indicators to figure out where the market is going.

    The bid-ask spread is another important term to know when you want to talk about how the stock market works. “Bid” is the amount that buyers are willing to pay for an underlying, which is often less than the “ask” price set by the seller. This difference in prices is called the bid-ask spread. For a deal to happen, the seller must lower the price they want and the buyer must raise the price they are willing to pay.

    How to invest on the Indian Stock Exchange

    Companies send SEBI a draught offer document that has information about the company. After getting approval, the company does an initial public offering (IPO) on the primary market to sell investors’ shares. The Company offers and gives shares to some or all of the investors who bid during the IPO. The shares are then listed on the secondary market, or the stock market, so that they can be bought and sold. After getting orders from their clients, brokers put those orders on the market. When a buyer and a seller are found, the trade goes well.

  • What Factors Affect Gold Prices?

    Even though the stock market has had a rough few months, gold is still highly valued, especially in India. India is one of the two biggest consumers of gold in the world, along with China. Each year, India uses more than 25% of the world’s gold.

    Demand for jewellery in the country goes up a lot during the wedding and holiday seasons, which often drives up the price of the item. Even if this rise in demand and price for gold is due to this, there are other factors that affect gold prices across the country. In one of its reports, the World Gold Council (WGC) said that income and the price of gold are two important factors that have a long-term, large effect on consumer demand.

    Some other things that can affect the price of gold are:

    Inflation

    Inflation, which is when the prices of goods and services go up, could have a big effect on the price of gold. Most of the time, inflation has a direct effect on the price of gold. Since inflation makes money worth less, the price of gold usually goes up when inflation goes up. This is because when inflation is high, people tend to store their money in gold because they think its value will stay the same over time. This makes the demand for gold go up. So, gold can also be used to protect against inflation.

    Interest rates

    Historically, interest rates and gold prices have had the opposite relationship. When interest rates go up, people often prefer to sell gold to make more money. But when interest rates go down, more people decide to buy gold, which drives up both its demand and price.

    Festive seasons

    Gold has always been seen as a strategic asset in Indian homes, and it has also become a part of Indian culture. Gold has a special place in the lives of Indian families, from being used in wedding ceremonies to being worn as jewellery on important holidays like Diwali. Gold prices go up during wedding and festival seasons because people want to buy more of it.

    In 2019, the World Gold Council (WGC) did a study that found that Indian families may have as much as 25,000 tonnes of gold. This makes India the country with the most gold in the world.

    Pleasant Monsoon Rains

    Studies show that rural India uses up to 60% of India’s total annual gold use, which is thought to be between 800 and 850 tonnes. So, the agricultural market has a lot to do with the demand for gold in the country, and the farmers’ incomes depend a lot on how well their crops do. When the monsoon rains are good, there is more demand for gold in the country. This makes farmers, who use about a third of the country’s gold, buy gold to build their wealth.

    Reserves on Treasury

    Like the central banks of most other countries, the Reserve Bank of India keeps gold reserves along with their money. The price of gold goes up when the RBI starts to buy more gold than it sells. This is because there isn’t enough gold and there is more cash coming into the market.

    A Way to Deal with Uncertainty

    People often choose to invest in or buy gold as a commodity when the market is volatile. This could be because of a slowing economy or trouble in the government. Gold is seen as a good alternative when other assets lose value because its value stays the same over time. Also, because uncertainty isn’t a number, it has more of a psychological effect on gold prices than other factors.

    Politics and geography

    India is one of the countries that uses gold the most, so any change in the price of gold on the international market would affect how much it costs there. Investors also see gold as a safe place to put their money during times of political uncertainty or geopolitical unrest. This increases the demand for gold, which drives up its price. During times of crisis, people tend to buy more gold, which makes it a good way to store money. Other types of assets, on the other hand, would often lose value during these times.

    What the Rupee Does to Gold

    It is important to understand how the relationship between the rupee and the dollar affects the price of gold in India. Since most physical gold is brought in from other countries, the price of gold in rupees will go up when the rupee falls against the dollar. So, a falling rupee could make India less interested in buying gold.

    Conclusion:

    Gold, which is seen as a valuable financial asset, is one of the most popular ways to invest in India. Investors often turn to gold as a safe place to put their money during uncertain times like geopolitical turmoil or trade disputes between countries. But gold prices in the country are also affected by things like inflation, interest rates, and the rupee-dollar exchange rate.

  • How Are Commodities Priced On The Share Market?

    On the financial market, commodities are treated as a separate type of asset. The commodities market is a place where people buy and sell basic goods. On commodity exchanges in India and other countries, people buy and sell things like natural gas, corn, soybeans, gold, silver, and copper.

    If you want to trade on the stock market, you need an online trading stock broker who will help you make the best trades. Contact us to learn more about Zebu and the services it offers.

    India has six commodity exchanges, but the Multi Commodity Exchange is the best-known one.

    On the Indian commodity market, traders can buy and sell complex financial products such as derivatives, swaps, futures, and options. So, no one institution is in charge of setting the prices of the goods that are traded on the markets. Several economic factors affect the price of a product.

    In finance terms, commodities are basic goods that can be bought and sold in large quantities on the open market. When commodities are traded, they may be an important asset class for traders. Hard commodities and soft commodities are the two main types of commodities. These goods are traded for business reasons on the global commodity market.

    Types of Commodities
    There are three types of commodities that are traded on the Indian markets.

    Metals: This group includes both precious metals and metals used for other things, like nickel, copper, zinc, and gold.
    Energy – Natural gas and crude oil are energy sources traded on the market
    Agriculture – Rubber, black pepper, cardamom, castor seeds, cotton, and crude palm oil are all products of agriculture and livestock

    Factors that affect how much commodities cost
    Just like stock prices, commodity prices change all the time because of internal and external market factors. Let’s look at the factors that affect the price of commodities on the market.

    Global politics and macroeconomics
    Changes in global politics often have an effect on the prices of goods. For example, the price of crude oil on the global market is affected by changes in the political and economic situations of OPEC members.

    Supply and demand
    Demand and supply have a direct effect on the prices of commodities. When demand is higher than supply, prices go up in the market. On the other hand, prices go down when the economy has less supply than it needs.

    Speculators
    These are traders who buy and sell commodities with the goal of making money from price changes. The prices of goods on the market are affected by what they do.

    What do the prices of goods in the share market look like?
    The price of a good is set by what buyers and sellers do on the market. Prices for goods can be given in two different ways. The first way is to use the market futures price, which is the price that is reported in market news. The second is the “spot price,” which is the cash price of the item. If you want to buy the item today, you will have to pay the price listed.

    Trading commodities is a great way to add another asset class to your portfolio of investments. You can invest in commodities as an asset class if you understand the basics and know how much risk you can handle. Trading in commodities is risky, but it can also bring in a lot of money. Before putting a lot of your hard-earned money into something, you should do a lot of research and learn about every part of the goods market. Open a demat account with Zebu to start trading commodities.

    If you are looking to trade in the stock market, you need an online trading stock broker who will help you make the best trades. Get in touch with us to know more about Zebu and its services.

  • Factors That Decide An Option’s Premium

    Factors That Decide An Option’s Premium
    Any trader will tell you that in order to be successful, you have to understand and, more importantly, master the concept of option pricing and how to figure out its correct value.

    When you look at all the things that affect an option’s price, you can figure out what its real price is. Let’s look at oil as an example. The final prices of petroleum depend on consumer demand, the price of crude oil, the time of year, local and state taxes, refinery output, etc. If you want to know or figure out the price of an option before you buy or sell it, you can use a mathematical model like the Black Scholes model. You only need to think about the different parts of the model to figure out the right price.

    Being a successful trader depends on several things, but most importantly it depends on the kind of platform you use to trade. As a stock broker, we understand this and offer the best trading platform to our users that provides them with the best trading accounts.

    Putting a price on an option depends on a number of things.

    The stock’s current price: If you’re interested in a call option that lets you buy shares of X company for, say, Rs 350 each, you’d probably be willing to pay more for that call when the stock is trading at Rs 320 instead of Rs 350. This is because the call option gets much closer to being ITM at Rs 49 than it would have been if it traded at Rs 40. Put options, on the other hand, do the opposite.

    The Strike Price: This is the price that a call owner has to pay to buy stock, while a put owner has to pay if he wants to sell his stock. This is like the example that was given above. Most of the time, it costs more to get the right to buy stock at Rs 350 than at Rs 380. The average investor would, of course, like to have the right to buy stocks at lower prices at any time of day. With the strike price going down, this makes calls cost more. In the same way, the value of puts goes up when the strike price goes up.

    Time before expiration: It’s important to remember that all options have a set amount of time they can be used and usually end on or after a certain date. Because of this, the value of an option goes down as time goes on. The more time there is until expiration, the more likely it is that you can make moves that will make you money.

    Interest rates: This is not a very important factor when figuring out the price of an option. When interest rates go up, so do the prices of call options. When the trader chooses the call option instead of the stock, any extra cash in his account should, at least in theory, earn him interest. This doesn’t really happen in the real world, but the basic idea makes sense.

    Dividends: When a stock trades but the owner doesn’t get any dividends, this is called “ex-dividend,” and the price of the stock goes down by the amount of the dividend that was due. When dividends go up, put values go up and call values go down.

    Volatility is thought to be the most important variable. In simple terms, volatility is the difference between the prices of stocks from one day to the next. It can also be called swings in the price of a stock. When compared to stocks that are less likely to change, volatile stocks are more likely to have a different strike price level. When investors make big moves, their chances of making money go up. So, options on stocks that change a lot are definitely more expensive than options on stocks that change less or not at all. So, it’s important to remember that even small changes in estimates of volatility have a big effect on the prices of options. Volatility is usually thought of as an estimate, and if you only have an estimate, especially of future volatility, it’s almost impossible to figure out the right option value.

    As we mentioned earlier being successful as a trader depends on several things, but most importantly it depends on the kind of platform you use to trade. As a stock broker, we understand this and offer the best trading platform to our users that provides them with the best trading accounts.