Sunday, 5 March 2017

What is this "sensex" and how it is calculated ?

Every day when we pick up a newspaper the first page shows some figures like Sensex 28832 and then next day it is shows something totally different it either goes up or down what is this number, how it is calculated and what it says?

What is Sensex?

The SENSEX-(or Sensitive index) was introduced by the Bombay stock exchange(BSE) on 01/01/1986.The Sensex is designed to reflect the overall market sentiments. It comprises of 30 stocks. These companies are pretty well-established and financially sound companies from main sectors with excellent market capitalization.or we can say these companies represent the Sensex.

How it is calculated?

The method for calculating Sensex is the market capitalization weighted method in which weights are assigned according to the size of the company. Larger the size, higher the weight age.
Like if we see now weight in the index in terms of percentage ITC has 10.75 then we have Infosys 9.16 , Reliance industries 9.13 and so on these weight age are assigned according to their size of the company in terms of 
free float market capitalization. which means total number of shares available for the public to trade in the stock market. It excludes shares held by promoters, trusts or governments, Foreign direct investment etc.

Market capitalizationtotal number of shares outstanding*market price

Then if we multiply this by free float market value factor which is a percentage of free float shares of a particular company with the public we call it free float market capitalization. So we see more public holding company will have the high free float market capitalization and weight age also.Let's assume that the free-float market capitalization of Sensex (All 30 companies who represeSensex ) is Rs 1,00,00,000. and SENSEX is 25000 on Monday morning, after trading gets over at 3:30 PM prices of stocks have gone up and therefore free float market capitalization would also go up (because we know the formula which says market capitalization is equal to share price*no of shares) , What would be the value of Sensex on Tuesday morning if the new free-float market capitalization is Rs 1,15,00,000?

Free float market capitalization                                                 Sensex value
10000000                                                                                        250000
11500000                                                                                             ??


Index divisor =25000/10000000
So, Index divisor =.0025
Then we can find out new index =.0025*11500000=28750. so the value of Sensex on Tuesday morning (in every newspaper ) would be 28750. It is nothing but just a number which says the market has gone up by 15% (28750-25000/25000). 

It is an indicator of the general economic scenario of a country. If the stock market indices are growing, it signals that the overall economy of the country is stable and that the investors have faith in the growth of the economy and then they would keep on pouring money into stock market, however, if the economy of the country is in trouble then there would be a plunge in the stock market for sure and people would start selling their stock and the stock market would fall.
A stock index is created by selecting a group of high performing stocks. For example – The SENSEX ( the stock index of Bombay stock exchange) is constructed from the top companies trading in the Bombay stock exchange. If the Sensex records a jump over a period of time, it indicates that most of the top 30 companies in India are doing well at that point of time and that the investors are positive about putting their money in India.

If we dig more into this then we would see so many indices like Sensex, Nifty, Bankex, FMCG, IT, power etc. If we want to see the performance of all FMCG companies we can simply see the FMCG indices and figure things out.
For more details on indices like small cap mid cap etc email me. I would surely revert back.

Thanks & Regards

Jitender Kumar


Thursday, 2 March 2017

Where to invest our hard earned money to get the maximum return ?

All of us work really hard to earn money but inflation erodes all the saving that we do, so how to invest our money in the best possible manner wherein we get the higher return.
a lot of people go for Fixed deposits and buying houses or putting money into real estate which I personally feel is not a good investment now.Especially after Demonetization. those
days are gone now in which you buy a land and sell it in a massive return.

Seeing Indian equity market(Bombay stock Exchange and National stock Exchange ) in their best phase. I wonder why don't people put their money into stock market?? and one who does invest gets duped by folks who don't  have any idea about the stock market.
I mean how can you trust such a person who is just over phone and tells you the whole story about indices you do not  even get to see the person you are talking to and get cheated easily  , then what happens your belief in the stock market gets totally banished but it's not the market who gave you the negative return but the person who you believed in.

I have seen people loosing out their money because of wrong investment they just receive the call and put their money in which their broker wishes them to do. you don't even get to see your portfolio
I mean it's so simple all you need to do is get your Demat account open and do the trading yourself
its very easy it is not something which is next to impossible you just gotta give a shot.

why does anyone have to bring broker in between all they do is ruin your investment and make an incentive for themselves and move on. trust you me I  am not kidding on this. Watch boiler room a movie to learn from.

there is real-time instance I want to share with you all, I went to a wedding last night and I heard some doctors talking about shares, commodities, forex at the wedding. I was really taken aback I mean how can a doctor be knowing this much about finance.I found them extremely savvy they talked economics they understand the business facets and very importantly they knew the reasons for the prices of stock climbed.
they also talked about the technical, fundamental and economic reason of rising stock price.
I joined the conversation, later on,  we had some really nice discussion over the anual report of tata motors and how their share price jumped from Rs.340 to Rs.440 we also talked about Ashok Leyland balance sheet and their share price not being risen in fact it went down actually as compare to last the last year.
I was really enjoying the conversation but my main concern was how do they know so much .since they never studied all of that in their grad or post grad for that matter.
I finally went on asking the same and the replied made me respect them even more.
it is nothing but just one magazine who taught them this much
A magazine which transformed me as well that very famous magazine is DSIJ Dalal street investment journal  India's no.1 investment magazine since 1986.

What I really feel being a part of a business school students that colleges teach you all the ratio analysis, it gets you go through the annual report of the company.however, it doesn't give you the exposure in equity and commodity market.
So I endorse this particular magazine which will help you understand the nitty-gritty of financial market.

Features: It comprises the annual report of all the company in a nutshell who is listed on national stock exchange and Bombay stock exchange.
It gives you the brief idea about how an event like demonetization will affect you're earning in the financial sector.
It has a tax column which expedites your learning in taxes
You can get advice from the experts like warren buffet.
Apart from this, we carry special editions, special reports and interview from prominent personalities to provide unbiased research ideas to our investor.
It helps you built your portfolio and answers your question with facts and figures.
Advantage If you see other magazines most of them put false and fabricated data to get the attention or boom the price of that particular company by which a lot of investors lose hard earned money. We tell you to rely on our editors because all of them are well-known economists, analysts and that is the advantages we have over other magazines like India business journal, business today, money today, outlook money etc.

Since it gets issued every fortnight you will find all the big news from the business in this magazine in last 14 days. so you also have an advantage over newspaper because it gets monotonous to read the whole business newspaper every day.
once you start reading this magazine it really gives you an immense amount of knowledge in the financial sector.
Benefits to the customer, Easy language to understand (this is the biggest reason why I am recommending you all) it has helped me learn a lot about the stock market.
Subscription benefits-
A] Magazine availability: you don’t need to spend time in buying the magazine every time, Dalal street investment journal is available in digital and print version, you can choose your preferable mode of delivery (post/courier) and get your copy delivered at your place.
b] Early access to digital version: you can read this magazine in iPhone, kindle, or any mobile device and it will be less costly also as compare to print version.
c] Recommendation through SMS: Get messages via SMS to formulate the strategies for your investment in advance before it gets printed or come in the digital version.
d] Book profit in time: we not only recommend you but also track your investment and help you to book your profit on time.
We get your account opened with Dalal street wherein you can invest and do trading with virtual money and mind you other website do not provide the tutorial service.

For the ones who is really into the stock market, I believe you should go ahead and put your money into these blue chip companies stocks like   ITC and HDFC they do have a high target price.
I can email the details to the interested one about these companies without even charging anything you can also do your own analysis after that if you wish to.

Thanks & Regards
Jitender Kumar