Trendlines: The ultimate way to analyze stocks

Posted on December 24, 2018Categories Short term programmes   Leave a comment on Trendlines: The ultimate way to analyze stocks

Data analysis forms the bed rock of a majority of decisions that are taken. Right from politics, to business, data is the foundation that everything depends on. This is more visible in the world of Finance, where data is the reason for Billion Dollar trades on a daily basis. For example: How are the rates of petrol/ diesel determined? How do some investors always make money by just following the price of stocks on their laptops/ PCs. By identifying a certain trend investors will be able to indicate the speed and direction of price, and also understand patterns during the period of price fluctuation .  This blog tells you in detail about trendlines and how it is used.

What are Trendlines?

A trendline is a type of line which over the axis highs or under axis lows to determine the prevailing direction of price. A trendline can also be called as a visual representation of support and resistance in any time frame. They indicate the speed and direction of price, and also explains patterns during the period of price fluctuation.

Why are Trendlines used?

Technical analysts consider Trendlines as an  important tool for stock analysis. They are basically used in 2 branches of stock research: Fundamental Analysis and Technical Analysis. Fundamental analysis is used to show what to buy in the market, and on the other hand, technical analysis is used to determine  the exact time to buy it.

Big companies are driven by profit. A company which has a growth in its earnings and revenues is also inclined  to have an increase in its stock price, which is what fundamental analysts depend on for analysis. This is because the markets try to match and assign a value to the earnings. This value is shown by the market price, which is what the major technical analysts and stock charters use it to analyze it in the market.

These analysts, instead of looking at the past performance, look for trends in the prices. To identify trends there is a tool which we talk about “Trendline”. Trendlines help technical analysts determine the current performance of prices in the markets. Technicals analysts say that identifying the correct trend is the first step of making a good trade.

How to create a trendline?

The most important part in creating a trendline is that you should at least have 2 points on a price chart. Every analyst has a different way of showing his trends. Some analysts use minute frames such as one minute or five minutes. Others determine by using daily or weekly charts. Some analysts doesn’t use time but view trends based on tick intervals rather than time intervals.  The main reason why Trendlines are globally popular is that they can be used to identify trends regardless of the time period, time frame or interval used.

For Example: If company X is trading at Rs.35 and it moves to Rs.40 in a span of two days and Rs.5 in three days, so the analyst has to plot three points on the chart, which will start at Rs.35, then move to Rs.40, and then at last at Rs.45. If an analyst draws a line between all the three price points, they are said to have an upward trend. Thus, the trendline drawn has a positive slope and is indicating the analyst to buy in the direction of the trend. And on the other hand, if company X’s price falls from Rs.35 to Rs.25, then the trendline indicates a negative slope and the analyst should not sell in the direction of the trend.

Trendlines may help analysts identify and determine the value of stock, but it is still a skill that takes many years to learn. Trendlines have been an important part of any trader/ investor’s skill set and they will continue to be important in the future. BSE Institute Limited, a 100% subsidiary of the World’s largest stock exchange BSE India, helps you learn all about Trendlines on its online learning portal bsevarsity.com. A short-term course on Trading with Trend Lines can help one learn and identify patterns in stocks and thus be better investors and money managers. As they say – well begun is half done!

 

NAVs – The building blocks of Mutual Funds

Posted on December 19, 2018Categories Short term programmes   Leave a comment on NAVs – The building blocks of Mutual Funds

We all have heard of NAVs (Net Asset Value). The units of Mutual Funds which we invest in and the value of which determines the amount we receive when we exit the fund. It plays an important role in determining the value of a Mutual Fund, but have you ever wondered how? This blog explains the fundamentals of  an NAV and the way to calculate the value.

What is the Net Asset Value (NAV)?

The NAV determines the current value of a mutual fund. It represents the fund’s market value. Basically, it is the price calculated after dividing the total value of assets per portfolio, subtracted by all the liabilities. The NAV of a fund is calculated by the mutual fund house or the accounting firm hired by the mutual fund. All the transactions carried out by investors are conducted at prices linked to the NAV of the particular scheme.

How is the NAV Calculated

NAV of a fund changes daily. It fluctuates depending on the changes in the value of the securities held. It includes the total assets of each mutual fund which is the sum of the current market value of all the securities held in the particular portfolio, cash and accumulated income. The current liabilities and expenses that are spent in building and management of the particular portfolio and servicing the investors, up to the limits permitted by SEBI, are deducted to arrive at the net assets of the particular fund.

The NAV can’t be calculated during the market hours as the prices of the holdings change every minute. NAV of a particular fund is calculated after taking into account of closing market prices of securities that the fund holds.

What does high and low NAV indicate?

The NAV whether high or low doesn’t affect the rate of returns. To understand let us look at this example, Here are 2 schemes X and Y where we invest a sum of money. Scheme X has a NAV of Rs. 50 and Y has a NAV of Rs. 10. We have made an equal amount of investment in both the schemes of Rs. 1,00,000. Scheme Y would now come as a cheaper buy because we here, got 10,000 units as against 2,000 units in Scheme X.

Now, let us imagine that both the scheme’s returns are 10 percent per month. The NAV for scheme Y now will be Rs. 11 and Scheme X will have a NAV of Rs. 55. The value of your investment in both the cases was Rs. 1,10,000. Therefore, we saw that the NAV of a particular scheme is inappropriate, as far as generating the returns are concerned. The only difference, in this case, is that in Scheme Y, the investor gets more number of units than in Scheme X where he gets a lesser number of units. For both this schemes with identical portfolio and other things remaining constant, the difference in NAV does hardly matter as long as the schemes keep deliver the same returns.

The amount of investment in different schemes is the same, but only the NAVs are irrelevant. An investor only needs to look closely at the returns given by the particular scheme.

Further, daily change in the NAV of a mutual fund indicates the rise or fall in the assets of the particular scheme. Financial planners advise investors, that when they select a particular mutual fund scheme for managing their investments, daily changes in the NAV do not matter. Investors should only focus on the annual return of the fund over different time frames to judge its performance in the market.

With the rapid growth in the funds invested in Mutual Funds, understanding the fundamentals of Mutual Funds has become very important. BSE Institute (bsevarsity.com)has successfully transformed the lives of many students and working professionals by helping them learn about various financial concepts. A short-term course on Mutual Funds from this institute can help one understand all about mutual funds in 4 days!!

 

The name’s Bond, investment Bond!

Posted on December 19, 2018Categories Short term programmes   Leave a comment on The name’s Bond, investment Bond!

Not heard about bonds? It’s only the most reliable and one of the oldest form of investments! Bonds have been a form of investment that have been around for many millenniums! Bond investing has been known to exist since as early as 2400 B.C. Bonds are believed to be the most simple form of investment. They are the most widely used form of investment, with each and every country of the World having a thriving bond market.

What are Bonds?

In financial terms, a bond is considered as a fixed income instrument which represents a loan made by an investor to a borrower (typically government or corporate). A bond can also be considered as an IOU between the lender and borrower which includes all the details of the loan and payments. A Bond has an end date and the desired principal of loan due has to be paid to the bond owner, which usually includes terms for variable or fixed deposit interest which has to be made by the borrower.  

Bonds are also referred to as fixed income securities and are one of three asset classes individual investors are familiar with, along with stocks (equities) and cash equivalents. Many government and corporate bonds are publicly traded; whereas the others are traded only over-the-counter (OTC) or privately between a borrower and a lender.

Bonds are used in all sectors of industries whether it is by companies, municipalities, states, and sovereign governments to finance projects and operations. Owners of bonds are the debt holders/ creditors of the issuer.

Functioning of a Bond :

When companies or entities need funds for financing new projects or to maintain ongoing operations, or clear existing debts, they issue bonds directly to investors. The borrower issues a bond which includes the terms of the loan, interest that will be made and the time at which the loaned should be paid back (maturity date). The interest payment is the part of the return that bondholders get for loaning their funds to the issuer. The interest rate determines the payment which is called the coupon rate.

Example :

Imagine a bond which is being issued with a coupon rate of 5% and a Rs.1000 par value. The bondholder will be paid Rs.50 in interest income annually. As long as there is no change in the rate of interest environment the price of the bond remains at its par value, but as the interest rates start to fall and same bonds are now issued at 4% coupon, the value of your bond increases.

Investors who now wish to get a higher coupon rate will have to pay extra for the same bond in order to entice the original owner to sell. The total increased price will thus bring the bond’s total yield down to 4% for new investors because of which they will have to pay an amount above the par value to purchase that bond.

On the other hand, if interest rates rise and the coupon rate for bonds increases up to 6%, the 5% coupon is no longer popular. The price of the bond will gradually decrease and begin selling at a discount compared to par value until its return is 6%.

The interest rates are usually determined by the ability of the issuer to repay the bond amount. If the markets believe that the issuer can repay the bond easily, the bond is a safe investment and hence will attract a low rate of interest. Conversely, the bond will attract a higher rate if interest if the issuer is not considered to be in a financially sound position.

India’s biggest lender State bank of India(SBI) is planning to raise up to USD 1.25 Billion by issuing bonds through various modes. The public sector bank has said that they will raise this fund between January and March the next year. It is believed that the bank is raising funds for some unseen contingencies, which could be a provision for NPAs.

Investing in bonds is sometimes the most lucrative form of investing for some investment banks as it ensures a steady stream of income year after year. This is why investing in bonds is considered to be one of the most important activity for investors and financial houses.

BSE Institute offers a wide range of short-term online courses for all students and professionals on topics ranging from Algo trading, Machine Learning, Risk Management, etc. It’s online platform bsevarsity.com has over 50 courses on offer for finance enthusiasts. BSE Institute offers a basic course on Bonds and Valuation, which can help students and investors learn and gain deep insights about Bonds as an investment vehicle.

 

Why do some risk managers report directly to the CEO?

Posted on December 11, 2018Categories Executive Courses   Leave a comment on Why do some risk managers report directly to the CEO?

What is Risk Management?

Risk Management is defined as a process of identification, analysis and acceptance  of unreliability in investment decisions. The need of risk management generally occurs when when an investor or fund manager analyzes to quantify the potential for losses in an investment and then takes appropriate action to save his investment objectives and risk tolerance.

Risk management is necessary in the financial world. It generally occurs when investors tend to buy low-risk government bonds over riskier corporate bonds. Every official in the finance world uses different ways to reduce risk management. For ex: Stockbrokers generally use financial instruments like options and futures. Money managers on other hand use strategies like portfolio and investment diversification to mitigate or effectively manage risk.

Risk Management faced by India Corporates :

Large scale cyber attacks, massive incidents of data theft and extreme weather conditions are the top three risks faced by India.

A report titled ‘Marsh RIMS – State of Risk Management in India’ addresses the major risks faced by Indian corporates and explains the key factors of risk management the risks of adopting emerging technologies, and key recommendations for risk management executives.

The biggest risk faced by Indian corporates is that of cyber-attacks. 88% of the representatives across 19 industries have faced this problem. This is followed by data fraud, volatile weather, severe energy price shock and major financial failures  among the other top risks faced by Indian corporates.

The other risks which are identified among the top risks include financial crises in major economies, water problems, a shortfall of critical infrastructure, failure of urban planning and failure of national governance.

The inter-dependant nature of global politics, technology and the global economy means that one risk is likely to influence another one. The high degree of inter connectivity between new and current risks creates bigger challenges which makes it difficult for organizations to predict risks of the future. Hence, upgrading risk assessment methods is a priority for businesses in India given the rapidly changing business landscape.

Camera manufacturer Kodak is a great example of this environment. People have been buying cameras and rolls for many many decades. With the introduction of camera phones, people started using their phones to click pictures. People stopped buying cameras specifically for capturing moments.

This led to a massive drop in sales and resulted in the company filing for bankruptcy. Who could have imagined that mobile phones would be responsible for the demise of an iconic brand founded in 1888? Technology took Kodak completely by surprise.

Who could have imagined that a brand which was so strong, could lose its footing in a few short years! This is why risk identification is a necessity.

Risk management practices among Indian companies have evolved over a period of time and today they are much better prepared to handle newer risks. Having said that, there is definitely room for improvement particularly when it comes to quantifying the risks.

BSE Institute (bsevarsity.com) provides short term/ executive courses for students and senior officials who wish to learn about Risk Management. An Executive course on Risk Management is a great way to keep yourself abreast with all the changes happening in your industry and beyond.

 

The Robots are Taking over!!

Posted on December 7, 2018Categories General   Leave a comment on The Robots are Taking over!!

In the world of digital reformation, Artificial Intelligence (AI) is emerging as a core component for companies in every sector. Big MNC’s like Google, Amazon, Microsoft use a wide range of products enabled by artificial intelligence such as virtual customer assistants, smart vision systems and smart personal agents to not only support their staff in decision making but also to obtain great business insights and to generate high profits in a cost-effective manner.

Gartner, a global research and advisory firm says, “This is the beginning of AI and till 2020, organizations using AI will achieve long-term success and business stability”.

Working upon a systematic analysis of a company looking to the future and changing its entrepreneurial developments based on more than it’s historical data is called Business Intelligence (BI).

Artificial Intelligence, when applied with BI, becomes ‘Deep Learning’ which is a part of machine learning that deals with an algorithm of “artificial neural network” that can learn, adapt and make decisions on its own.

For AI to be helpful in the world of Finance, a large amount of data analysis will always be required and linked to other information to learn about new customer behaviour patterns and for management to make important decisions.

How does artificial intelligence help in transforming organizations :

With the help of machine learning and AI, basic behavior patterns can be assessed. Using automated data analysis, automatic data entry checking, automatic forecasting and other similar applications – voice-controlled bots can help support the finance department, by offering seamless customer support .

This is how AI helps in managing the finance department of every sector :

  1. Automated Data Analysis :

Most NGOs rely on donations to carry out their activities. Automated data analysis here can be very useful for the finance team. Such data analysis systems allow the relevant teams to target areas which are not contributing significantly to their budget. By targeting their marketing activities in a certain area, it’s possible to get great results even on a smaller budget.

With AI, it’s simpler for people to solve specific problems and it helps people save time as one can get to the root cause of all their problems. The most important thing about automated data analysis is it can analyze data in a detailed manner, much faster than a normal human.

  1. Automated Data Verification :

This is highly useful for sales managers who use databases for business development and sales forecasting. The use of AI in data verification helps in ensuring higher accuracy and less mistakes in data entry. Therefore, the quality of data can be very good, thus improving the number of leads, conversions and sales.

  1. Automated Forecasts:

AI-based automation allows finance teams to get high-level system generated sales forecasts and other MIS reports. This will be possible without any human involvement. As most customer interactions, sales and after sales services can be executed by bots, all reports can also be tabulated by bots. This in contrast to the highly statistical procedures which require a large amount of human brain storming and expertise.

  1. Automated Voice Controlled Bots :

We are not far from the day when automated voice bots execute all the customer interaction tasks. In fact, it is predicted that by 2019, chat-bots will execute most of the financial tasks all over the world. This is because humans today communicate more with bots rather than with other humans. chat-bots like Siri, Alexa help you get all the information you need.

Moreover, the use of bots is predicted to increase in the next few years. Major tech companies and industry followers predict that 40 percent of large MNCs will adopt some form of chat-bots by the end of 2019.

There are many countries which are pioneers in the development of AI, Machine Learning and other technologies. However, the important thing is to implement these technologies in their day to day operations and lives. New Zealand is one nation, which has embraced new technology and solutions extremely fast.

It is believed that New Zealand will soon be a cashless country. This will be happening as early as the net 2 years.

Major Kiwi companies focus on AI and other innovations to grow. It is a well understood fact that the country with the best technology is the one in a position to attract more capital. New Zealand is a superb destination for any individual who hopes to work in the field of Finance. As a nation that is promoting innovative technology, New Zealand is on its way to be the Silicon Valley of the East.

One can learn at the best Universities of New Zealand, the University of Otago, with BSE Institute’s Masters of Finance and have a chance to work after their MBA. It is one of the best learning experiences which students can get abroad.

There are only a very few developed countries in the World, which support innovation in the field of finance like New Zealand does. It is surely the best place for students with creative ideas. It is only with innovation, creativity and technology, that the human race can progress to lead a better life.

 

Crude Economic Gains?

Posted on December 7, 2018Categories Short term programmes   Leave a comment on Crude Economic Gains?

In our daily life, crude oil is very essential. Gasoline, jet fuel, diesel, and heating oils are made with the help of crude oil. It is also useful in making tar, asphalt, paraffin wax, and lubricating oils. As this commodity is an integral part of our lives, it’s value is extremely high. A sudden change in the cost can save thousands of crores of rupees/ Oil Dollars for the nation. Any speculative news about it can result in a sharp rise or fall of the price.

Prices of crude oil have fluctuated primarily because of an inconsistency in the supply of crude oil. This is primarily because of global politics.

  

Currently, it is happening due to the sanctions imposed on Iran, one of the largest exporter of crude oil.

“Crude is not just a commodity it is also considered a financial product with billions of dollars traded on it. So people with future predictions have expected a reduction in supply of oil from Iran may have to square off a lot of their predictions as this crunch didn’t happen and this is one of the main reasons for the fall of the crude oil prices” says, V.K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, while explaining the drastic fall in the prices of crude oil.

How it has affected the Indian economy :

The prices of a financial commodity heavily affect the economy of any nation. The sudden fall in the prices of  crude oil has benefited the economy by Rs 2 lakh crore.

Yes, you have heard that right. We saving approximately $ 30 billion on our imports. Our nation faces a lot of stress due to the regular fluctuation in the prices of crude oil, but this change has highly benefited the economy of the nation.

“This fall is good for the financial stability of the nation”, says Sankaran Naren, ED, and CIO, ICICI Pru Mutual Fund.

Rupee exchange rate is another factor that is affected by the fall in crude oil prices.

The value of a free currency like Rupee depends on its demand in the currency market. This is why it depends to a great extent on the current account deficit of the country. A high deficit means the country has to sell rupees and buy dollars to pay its bills. This reduces the value of the rupee. A fall in oil prices is, thus, good for the rupee. However, the downside is that the dollar strengthens every time the value of oil falls. This negates any benefits from a fall in current account deficit.

Gainers and losers :

This sudden fall in prices has brought a tremendous change in the commodity markets. The oil marketing companies and importers have greatly benefited due to the sudden fall of prices. Consumer sectors such as daily transport vehicles also get the benefits due to the fall in the prices of petrol and diesel.

Due to this fall, the Indian oil marketing companies will be able to gain high in their balance sheet. There will be also a rise in the automobile industry, as the prices of petrol and diesel have fallen resulting in demand and gain in the industry. And as the demand increases the value of the stock also increases resulting in the benefit of the economy.

But with gainers there are also losers, the Indian oil exporters will face a severe impact on the fall of crude oil prices, because as the demand from the oil importing countries also reduces.

An example of a consequence of this fluctuation in prices of crude oil is the acquisition of Inter Globe Technologies a leading IT & back office arm of travel major Inter Globe Enterprises, for $230 million Rs 1,600 crore by AION Capital. IGT is the parent company owned by billionaire Rahul Bhatia who is the CEO of domestic airlines Indigo and it is rumored that the constant fluctuation in oil prices has led to the sale of their IT arm.

Airlines depend heavily on jet fuel. Any increase in the cost of oil or any weakening of the rupee hurts their balance sheets heavily and it can push them into bankruptcy very soon. Due to high oil prices, many airlines were bleeding money and losing market share. This had an adverse impact on all airlines, including Indigo – an airline with almost 42% of the market share.

Indigo is one of the rare examples of an airline being profitable for years together. Imagine this – an airline that has been profitable for years together has been forced to raise capital to stay afloat! This is the impact commodity prices have on a company.

Understanding the fundamentals of a commodity is a must before you opt for investing in the futures or for managing a business. So to make this easier, BSE Institute (bsevarsity.com) offers you a wide range of short-term online courses for people of all age groups. A short course on Fundamentals of Commodity Trading can help you understand and gain knowledge about the various commodities we deal with in the markets.