How do you measure inflation?
What are P-Notea?
What are SWFa?
What in short aelling?
What in credit limit?
How in the Sensex calculated?
What are P-Notea?
What are SWFa?
What in short aelling?
What in credit limit?
How in the Sensex calculated?
How do you measure
inflation?
Inflation is one of the biggest stories of recent weeks, and has received a great deal of affention from the media and politicians. At the same time, inflation is an economic problem that the average person meets on a daily basis in terms of higher prices, particularly of food products
How is inflation measured?
In India, there are two broad measures of inflation - based on the consumer pnce index (OPI) and based on the wholesale price index (WPI). Of the two, the latter has a higher profile because it is measured every week. When you read about inflation rising to 7%, it is probably referring to inflation based on WPI.
WPI is based on the wholesale prices of 435 items ranging from agricultural commodities like wheat, rice, groundnuts etc to manufactured products like steel, cement etc. A single index number is calculated based on those prices, and the inflation rate is calculated by comparing the most recent index number with that of a year ago.
Inflation is one of the biggest stories of recent weeks, and has received a great deal of affention from the media and politicians. At the same time, inflation is an economic problem that the average person meets on a daily basis in terms of higher prices, particularly of food products
How is inflation measured?
In India, there are two broad measures of inflation - based on the consumer pnce index (OPI) and based on the wholesale price index (WPI). Of the two, the latter has a higher profile because it is measured every week. When you read about inflation rising to 7%, it is probably referring to inflation based on WPI.
WPI is based on the wholesale prices of 435 items ranging from agricultural commodities like wheat, rice, groundnuts etc to manufactured products like steel, cement etc. A single index number is calculated based on those prices, and the inflation rate is calculated by comparing the most recent index number with that of a year ago.
What is the government going
to do about inflation?
The government has taken some quick steps like trying to curb exports in sensifive commodities and reduce the cost of imports. The is done because exports reduce domestic supply adding to the pressure on prices . Therefore, the government has already banned the export of cement and non-basmati rice and may ban other commodity exports later.
RBI has also taken action by raising rates, which will reduce liquidity and the total demand in the economy that will reduce the pressure on prices.
What are P-Notes?
The government has taken some quick steps like trying to curb exports in sensifive commodities and reduce the cost of imports. The is done because exports reduce domestic supply adding to the pressure on prices . Therefore, the government has already banned the export of cement and non-basmati rice and may ban other commodity exports later.
RBI has also taken action by raising rates, which will reduce liquidity and the total demand in the economy that will reduce the pressure on prices.
What are P-Notes?
Participatory notes
(P-Notes) are financial instruments used by hedge funds not registered with
Sebi.
* Hedge funds invest in Indian stocks through custodians in India
* P-Notes are issued by registered FIls to overseas investors who want to invest in India without registering
How do P-Notes work?
* India-based brokerages buy India-based secunties and then issue P-Notes to foreign investors
* Any dividends or capital gains collected from the underlying securities go back to the investors
Why do FlIs use the Mauritius route?
* India has a double taxation avoidance agreement (DTAA) with Mauritius
* As per law, entities registered in Mauritius need not to be taxed in India
* Oapitsl gains from the sale of shares is taxable in the country of residence of the shareholder
* Hedge funds invest in Indian stocks through custodians in India
* P-Notes are issued by registered FIls to overseas investors who want to invest in India without registering
How do P-Notes work?
* India-based brokerages buy India-based secunties and then issue P-Notes to foreign investors
* Any dividends or capital gains collected from the underlying securities go back to the investors
Why do FlIs use the Mauritius route?
* India has a double taxation avoidance agreement (DTAA) with Mauritius
* As per law, entities registered in Mauritius need not to be taxed in India
* Oapitsl gains from the sale of shares is taxable in the country of residence of the shareholder
What are SWFs?
A sovereign wealth fund (SWF) is a state-owned fund composed of financial assets such as stocks, bonds, property or other financial instruments. These are state savings which are invested for the purpose of investment returns.
Some wealth funds are solely owned by Oentral banks Most SWFs originate in foreign currency reserves. Traditional investment vehicles for SWFs have been debt instruments. There are 40 SWFs worldwide managing $ 3 trillion.
A sovereign wealth fund (SWF) is a state-owned fund composed of financial assets such as stocks, bonds, property or other financial instruments. These are state savings which are invested for the purpose of investment returns.
Some wealth funds are solely owned by Oentral banks Most SWFs originate in foreign currency reserves. Traditional investment vehicles for SWFs have been debt instruments. There are 40 SWFs worldwide managing $ 3 trillion.
NATURE AND PURPOSE
> SWFs are typically crested when govts have budgetary surpluses
> SWFs are also created for economical or strategic reasons
> SWFs are typically crested when govts have budgetary surpluses
> SWFs are also created for economical or strategic reasons
CONCERNS ON SWFs
> Foreign investment by SWFs may create national security issues
> Foreign investment by SWFs may create national security issues
> Motives of SWFs could be to stifle
competition
> SWFs hold 2% of total assets traded worldwide
SWFs MOVES
> Govts of Singapore, Kuwait and Korea have provided $15 billion to Merril Lynch and Citigroup
> China’s SWF has invested $3 bn in Blackstone IPO
WORLDS LARGEST SOVEREIGN FUNDS
Abu Dhabi Investment Authority - $875 bn
Govt Pension Fund of Norway - $350 bn
Govt of Singapore Investment - $330 bn
Kuwait Investment Authority - $250 bn
China Investment Corp - $200 bn
Temasek Holdings - $lsgbn
Australian Govt Future Fund - $61 .3bn
Qatar Investment Authority - $50 bn
DOES INDIA NEED AN SWF?
> The country’s forex reserves are at $315 billion along with a fiscal deficit
> RBI governor say there is case for SWF in India
> FM says no proposal for Sovereign Fund for India
Top
> SWFs hold 2% of total assets traded worldwide
SWFs MOVES
> Govts of Singapore, Kuwait and Korea have provided $15 billion to Merril Lynch and Citigroup
> China’s SWF has invested $3 bn in Blackstone IPO
WORLDS LARGEST SOVEREIGN FUNDS
Abu Dhabi Investment Authority - $875 bn
Govt Pension Fund of Norway - $350 bn
Govt of Singapore Investment - $330 bn
Kuwait Investment Authority - $250 bn
China Investment Corp - $200 bn
Temasek Holdings - $lsgbn
Australian Govt Future Fund - $61 .3bn
Qatar Investment Authority - $50 bn
DOES INDIA NEED AN SWF?
> The country’s forex reserves are at $315 billion along with a fiscal deficit
> RBI governor say there is case for SWF in India
> FM says no proposal for Sovereign Fund for India
Top
What is short selling?
When an investor goes long on an investment, it means the stock has been bought believing its price will rise in the future. Conversely, when an investor goes short, he is anticipating a decline in share price.
When an investor goes long on an investment, it means the stock has been bought believing its price will rise in the future. Conversely, when an investor goes short, he is anticipating a decline in share price.
Short selling is the selling of a stock
that the seller doesn’t own. More specifically, short sale is the sale of a
security that isn’t owned by the seller, but that is promised to be delivered.
When you short sell a stock, your
broker will lend it to you. The stock will come from the brokerage’s own
inventory, from another one of the firm’s customers, or from another brokerage
firm.
The shares are sold and the proceeds
are credited to your account. Sooner or later, you must ‘close’ the short by
buying back the same number of shares and returning them to your broker. If the
price drops, you can buy back the stock at the lower price and make a profit on
the difference. If the price of the stock rises, you have to buy it back at the
higher price, and you lose money.
Since you don’t own the stock, you must
pay the lender of the stock any dividends or rights declared during the course
of the loan. If the stock splits during the course of your short, you’ll owe
twice the number of shares at half the price.
Also, because you are being loaned the
stock, you are buying on margin. In fact, you have to open a margin account to
short stocks.
There are two main motivations to short
a stock The most obvious reason to short is to profit from an overpriced stock
or market.
Sophisticated money managers short as an active investing strategy to hedge positions This means they are protecting other long positions with offsetting short positions.
Top
Sophisticated money managers short as an active investing strategy to hedge positions This means they are protecting other long positions with offsetting short positions.
Top
What is credit limit?
The ‘Credit limit’ is the maximum amount you can spend or borrow using your Credit Card in one billing cycle. This limit is based on various factors relating to your income. The credit limit can be changed on the basis of your payment and transaction history
The ‘Credit limit’ is the maximum amount you can spend or borrow using your Credit Card in one billing cycle. This limit is based on various factors relating to your income. The credit limit can be changed on the basis of your payment and transaction history
How is the Sensex
calculated?
The Sensex , an abbreviation of the BSE sensitive index, is a market capitalisation-weighted index of 30 stocks representing a sample of large, well-established and financially sound companies. It is the oldest index in India and has acquired a unique place in the collective consciousness of investors.
The Sensex , an abbreviation of the BSE sensitive index, is a market capitalisation-weighted index of 30 stocks representing a sample of large, well-established and financially sound companies. It is the oldest index in India and has acquired a unique place in the collective consciousness of investors.
The index is widely used to measure the
performance of the Indian stock markets. Sensex is considered to be the pulse
of the Indian stock markets as it represents the underlying universe of listed
stocks on The Stock Exchange, Mumbai. Further, as the oldest index of the
Indian stock market, it provides time series data over a fairly long period of
time (since
1978-79).
1978-79).
Sensex is not only scientifically
designed but also based on globally accepted construction and review
methodology
Sensex Calculation
Methodology
As per the methodology, the level of index at any point of time reflects the free-float market value of 30 component stocks relative to a base period. The market capitalisation of a company is determined by multiplying the price of its stock by the number of shares issued by the company. This market capitalisation is further multiplied by the free-float factor to determine the free-float market capitalisation.
The base period of Sensex is 1978-79, and the base value is 100 points. This is often indicated by the notation 1978-79=100. The calculation of Sensex involves dividing the free-float market capitalisation of 30 companies in the index by a number called the Index Divisor
As per the methodology, the level of index at any point of time reflects the free-float market value of 30 component stocks relative to a base period. The market capitalisation of a company is determined by multiplying the price of its stock by the number of shares issued by the company. This market capitalisation is further multiplied by the free-float factor to determine the free-float market capitalisation.
The base period of Sensex is 1978-79, and the base value is 100 points. This is often indicated by the notation 1978-79=100. The calculation of Sensex involves dividing the free-float market capitalisation of 30 companies in the index by a number called the Index Divisor
The Divisor is the only link to the
original base period value of the Sensex. It keeps the index comparable over
time and is the adjustment point for all index adjustments arising out of
corporate actions, replacement of scrips etc.
During market hours, prices of the index scrips, at which latest trades are executed, are used by the trading system to calculate the Sensex every 15 seconds and disseminated in real time.
During market hours, prices of the index scrips, at which latest trades are executed, are used by the trading system to calculate the Sensex every 15 seconds and disseminated in real time.
Understanding Free-float
Methodology
Concept: Free-float Methodology refers to an index construction methodology that takes into consideration only the free-float market capitalisation of a company for the purpose of index calculation and assigning weight to stocks in the index.
Concept: Free-float Methodology refers to an index construction methodology that takes into consideration only the free-float market capitalisation of a company for the purpose of index calculation and assigning weight to stocks in the index.
Free-float market capitalisation ia
defined aa that proportion of total aharea iaaued by the company that are readily
available for trading in the market
It generally excludea promotera
holding, government holding, atrategic holding and other locked-in aharea that
will not come to the market for trading in the normal courae. In other worda,
the market capitalisation of each company in a free-float index ia reduced to
the extent of ita readily available aharea in the market.
In India, BSE pioneered the concept of
free-float by launching BSE TECk in July 2001 and BANKEX in Jane 2003. While
BSE TECk Index ia a TMT benchmark, BANKEX ia poaitioned aa a benchmark for the
banking aector atocka.
Definition of Free-float:
Sharea held by inveatora that would not, in the normal courae, come into the
open market for trading are treated aa ‘Controlling! Strategic Holdinga’, and
hence not included in free-float. In specific. the following categoriea of
holding are generally excluded from the definition of free-float:
• Holdings by foundera/directora/ acquirera which baa control element
• Holdings by persons! bodies with ‘Controlling Interest
• Government holding as promoter!acquirer
• Holdings through the FDI Route
• Strategic stakes by private corporate bodies! individuals
• Equity held by associate!group companies (cross-holdings)
• Equity held by Employee Welfare Trusts
Locked-in shares and shares which would not be sold in the open market in normal course. The remaining shareholders would fall under the free-float category.
• Holdings by foundera/directora/ acquirera which baa control element
• Holdings by persons! bodies with ‘Controlling Interest
• Government holding as promoter!acquirer
• Holdings through the FDI Route
• Strategic stakes by private corporate bodies! individuals
• Equity held by associate!group companies (cross-holdings)
• Equity held by Employee Welfare Trusts
Locked-in shares and shares which would not be sold in the open market in normal course. The remaining shareholders would fall under the free-float category.
No comments:
Post a Comment