May 2010 was a bad month for Indian stock market. Selling pressure continued almost all the trading days. But towards the end of the month some recovery also seen. Global uncertainties were the major reason behind this bear run! Doubts about the long term prospects of Euro zone countries are worrying the investors across the globe. As a result of this Indian investors also lost confidence and they engaged in bulk selling. After the global financial crisis  Euro zone crisis is the worst one and now also it is sustaining. FII sell off made a bad impact on Indian indices during May. They sold Indian equities worth Rs.9436.70 Cr. When the residues of the crisis settle down it is expected that they will come back to Indian market. However India’s growth story is still promising, Indian corporates are performing well.
Sensex closed at 16945 in May. It recorded a decrease of 3.5 percent against it’s April closing figure of 17559. Sensex traded in the range 15960-17537 during May. Nifty recorded a fall of 3.64 percent to close at 5086. Smallcap stocks can’t survive the selling pressure and they were down by 7.17 percent- the worst performance by this sector in 2010. Midcap stocks were down by 4.87 percent. All sectors except Health Care and Oil and gas were under selling pressure in May. Metal stocks plunged 14.25 percent. Whereas Reality stocks fell 11.3 percent against last month closing figure. Both banking and power sector stocks were down by 4.4 percent. Health care sector was up by 2.71 percent. Oil and gas sector recorded a growth of 2.6 percent during May.
Domestic mutual fund companies were net buyers. They bought equities worth Rs. 98.60 Cr. Indian market opened weak in June also. But traders are of the view that once the issues settle down there will be renewed buying interest. FIIs withdrew their money only to protect their capital. In the long term view, when Indian market is concerned, we have the growth potential.
Indian economy grew  8.6 per cent during the last quarter of 2009-10, mainly powered by Industry and service sectors. Now the country has an overall GDP growth of 7.4 per cent in 2009-10. Which is more than expected. Inflation eased to 9.59 percent in April. This is the second continuous month the inflation figures show a downward trend. According to reports monsoon will be on track. If this happens in line with expectation food inflation would also become lower. Which is a prime concern for Indian economy.
Indian Finance Minister Mr Pranab Mukherjee expects 8.5 percent GDP growth in 2010-11, which seems to be attainable according to present estimate. From the global financial meltdown we have learned that Indian market is capable of bounce back from any lows. Every crisis is an opportunity. Now is the time to buy good picks at moderate rate. Opportunity never knocks twice!

High rate of volatility seen in Indian indices during April. Market witnessed an upward trend during the first half of the month, whereas in the second half there was continuous selling pressure. Sensex touched a height of 18047 and a low of 17277 in April. Both sensex and nifty closed just a few points above last month’s closing figure.
Considering the global scenario, Greek crisis and Goldman Sachs issue were the major ones. U.S. Securities and Exchange Commission sued Goldman Sachs Inc. for fraud tied to collateralized debt obligations. The firm is facing inquiries in UK and Germany. A 110 billion euro ($147 billion) plan to bail out Greece reduces the risk of a debt default of that country. But according to experts it will not be a complete solution for the problem. The residue of these crisis remains now and investors across the globe are more cautious.
Considering Indian market, RBI credit policy announcement was the major event. The central bank hiked the key rates by 25 basis points. The rates which are now effective are Repo-5.25%, Reverse Repo-3.75% and CRR-6%. RBI is optimistic about bringing down inflation figures which is at 9.9 percent in March. The food inflation figure is even more dangerous which is at 17.65 percent according to the latest data.
The closing figure of sensex for April is at 17559. It gained 31 points (0.18%) against it’s March closing rate. Nifty recorded a gain of 0.55 percent to close at 5278. It touched a height of 5399.65 during April. Buying interest scaled down to Smallcap and Midcap stocks. Both were up by 8.4% and 5.6% respectively. Consumer durable stocks were the major gainers, the sector was up by above 10 percent. Reality (6.6%) and Banking stocks (4.7%) were also hot favorites among investors. Oil and gas stocks were under severe selling pressure. The sector was down by 2.3 percent. Metal and Engineering stocks were also in the negative terrain. FIIs continued their buying activity in stocks, in April they bought equities worth Rs. 9361 crore. Whereas domestic institutions sold Indian equities worth Rs.1715 crore. During the last week ahead of F&O expiry the turn over in Indian market was much higher.
According to RBI estimate the final real GDP growth for 2009-10 may settle between 7.2 and 7.5 per cent. Which itself is a decent one. The Euro zone crisis is not over yet. There are reports that apart from Greece, countries like Portugal, Spain and Ireland may face difficulties in the near future. Concern about these crisis is clouding above Indian market also. Recently China hiked it’s CRR rate also. These developments may prove bad for Indian equities as well. There will be range bound movement in Indian market in the near term. Little caution is the need of the hour. At the same time an eye for opportunity is not a bad idea.

Budget concerns prevailed in Indian stock market during February. Market was more or less volatile. During second half of February market showed a little bit of consolidation. Rail Budget was non- event in Indian Market but Union budget was not. On the budget day sensex gained 175 points, the highest single day gain in February. Except the fuel price hike proposal budget was pretty decent according to first reviews. Finance Minister later stated that the inflationary impact of budget would be 0.41 percent. The wholesale price index in India rose 8.56% in January, mainly because of higher food prices. Estimates show that the figure will go up in the coming months also. Finance Ministers’s announcement regarding disinvestment and foreign investment were the major factors influenced Indian market on Budget day.

The February closing of sensex was at 16430, up by 0.44 percent against last month closing rate of 16358. Comparing to January, February was a good month for Indian equities. Market expectations regarding the union budget was less but Finance Minister surprised the street. His announcements regarding fiscal consolidation and fiscal deficit made everyone happy. Particularily when he stated that double digit growth rate is achieveable. Positive impact of Budget continues in Indian stock market during the opening days of March also. Nifty was up by 40 points in February against it’s January closing. Midcap and Smallcap indices underperformed sensex and Nifty. Smallcap stocks were down by 2 percent whereas Midcap stocks recorded 1.72 percent decrease in February. Selling pressure in these stocks continued in the whole month.

FIIs were in favour of Indian equities, altogether they bought equities worth Rs. 1216.90 Cr. But indian Insurance and Mutual Fund companies continued selling for the second consecutive month. DIIs sold Rs.309.80 Cr worth equities during February. Mixed response seen in different sectors. Reality was the most beaten down sector, recorded a decrease of 7.51 percent. Oil companies and power sector companies were not in the radar of buyers. Both down by 3.54 percent and 3.27 percent respectively. Public sector companies, also felt the heat of selling pressure,were down by 2.74 percent. All other sectors barring these four were in the green territory. Consumer durable stocks were hot favourite among traders in February. BSE CD index was up by 5.34 percent. Buying interest also seen in IT, Health Care and Auto stocks. All these sectors were up by above 3 percent.

Debt worries in Eurozone countries were another major event during this period. But it failed to make a strong impact in Indian stocks. Positive trend in Asian Indices influenced Indian stocks too. Government set it’s disinvestment target at Rs.40,000 Cr in FY2011 and has plans to redraw the foreign investment structure. There are Budget proposals to give banking licence to more public players and NBFCs. All these developments served as positive inputs to Indian stock market. Going ahead economic consolidation would lead to sustainable growth which will be beneficial for India Inc. Selective investment will be an intelligent decision now.

The most awaited union budget has come. In a line Budget targets more growth without much risk. In order to sustain the momentum of growth finance minister took the way of income increase. There are positives as well as negatives in the budget. The remarkable negative point is that fuel price is going to increase. Which will increase inflation. Although minister said that steps will be taken to contain inflation this proposal is against his statement. Government primarily going to collect money from disinvestment and 3G auction. Tax rate becomes lower. MAT increase by 3% negative for the business. Indian market reacted well to the budget. Nifty up by 100 points and sensex by above 300 points post budget.
Inflation will go up further. Cost for household articles going to increase extra burden for aam admi. Government partially withdraw stimulus package. And set up a bright fiscal deficit target for FY13. These are positives. Apart from that there are proposals to increase the foreign investment inflow to indian market which will be beneficial for India Incorporated. RBI mulling to give banking licence for private players and NBFCs. Details of this proposals are not available. This is a move which will evoke long term consequences (even bad ones-if not implemented properly).

Government wants to decrease fiscal deficit in the coming financial years. FY10 fiscal deficit revised to 6.9 percent of GDP. According to the finance minister FY11 fiscal deficit target pegged at 5.5 percent of GDP. It will further come down in FY12 to 4.8 percent of GDP and will reach 4.1 percent by FY13. He intends to decrease the fiscal deficit to 4.1 percent of GDP with in 3 years. Finance minister also said 10 percent growth rate is attainable.

In a way budget is investor friendly. It intends to increase capital inflow to the economy. Rs. 15,000 Cr. more money will be collected through disinvestment in FY11. Service charge remains the same which is also a good move. Finance minister eased the tax burden so more money will flow into the economy.

Union Finance minister  praised UPA government. He termed Indian economy is now at a “better situation”. He was in favor of PSU disinvestment and disclosed that the target of Rs.25,ooo Cr from disinvestment. Double digit inflation is a major concern and will take steps to reduce it in 2 months. Manufacturing sector led the recovery, termed Finance Minister.

Tax proposals

Nil tax for income upto 1.6lakh
10 percent tax for income between 1.6-5lak
20 percent tax for income between 5-8lakh
30 percent tax for income above 8 lakh

Key Points

Rs. 50 per tonne cess on Indian coal

LED and CFL lights to cost less

More sops for tourism sector

Business with 60 lakh turnover have to audit A/cs

Partially withdraws stimulus package

Agriculture seeds exempt from service tax

Service tax retained at 10 percent

Tax for construction materials increased, red signal for construction industry

Refrigerator, Television,Mobile phones to cost more

3G auction to fetch Rs.36,000 Cr

Propose to extent interest subvention for export by one year

2 percent loan subsidy for farmers

Smart card alloted to NREGA

Defence allocation 1.47 lakh Cr

extended subsidy subvention for affordable housing

Surcharge for companies cut from 10 percent to 7.5 percent

Excise duty hiked from 8 percent to 10 percent
Central Excise Duty on petroleum products increased by Re 1 per litre
cigeratte to cost more
Partial rollback of excise duty on large cars

Foreign investment increased to a great extent. This was because of the loose FDI policy. More steps will be taken to increase foreign inflow

Challenges outlined during the last budget still remains

Food security and Health care system will be given more preference

10 percent growth rate is attainable

Will discuss kirit parikh report in due course (will lead to free pricing of Petroleum products)

GST and DTC (direct tax code) will implement in April 1, 2011

Will reduce fertilizer subsidy (red signal for agriculture, which is already recording a even more negative growth rate)

Banking licence for private banks and NBFCs

India market up following these announcements.

13 percent higher road allocation. Asked to fund infrastructure development more.Rs 1.73 lakh Cr. For infrastructure development.

Government to setup coal regulatory authority

Doubles allocation for power sector. Hiked fund allocation for renewable energy by 61 percent

Will extent farm loan payment by 6 months

Fund allocation for increased for school education to Rs.31036, and more grant for states.

Draft food security bill in public domain soon

More allotment for rural development, Bharat Nirman gets more money

Q. What is an Equity Share?
A. An equity share represents ownership in a company. The holder of such a share is a member of the company eligible to share many benefits from the company.

Q. What Returns can I expect from my investments in equity shares?
A. Investment in good equity shares brings different types of returns such as capital appreciation, dividend, bonus and right shares etc.

Q What is Capital Appreciation (capital gain)?
A. It is the difference between buying price and selling price of a share. People buy shares with the view of selling at a better price and this difference is one of the most important gains from equity investment.

Q. What is Dividend?
A. Dividend is the part of profit distributed by the company among its investors. It is declared as a percentage of the paid-up value or face value of the share.
E.g. 20% dividend on a Rs.10 face value share is Rs.2 whereas it is 20 Ps. on a Re.1 share.

Q. What is a Bonus Share?
A. A share issued by companies to their shareholders free of cost by capitalization of accumulated reserves from the profits earned in the earlier years.

Q. What is a Rights Issue?
A. In a rights issue, a company issues new shares by giving existing shareholders the right to purchase new shares in proportion to their existing holding. E.g. one right share for each existing share (1:1), one right share each for two existing shares (1:2) etc. Right Shares are usually offered at a discount, and most investors take up the offer of a rights issue.

Q. What are the risks?
A. Equity shares are “High-Risk High-Return Investments”. The major distinction of Equity investment from all other investments is that while the return from many avenues such as Bank Deposits, Small Saving Schemes, Debentures, Bonds etc are fixed and certain, the earnings from equity investments are highly uncertain and varied. A good scrip picked up at the right time could fetch fairly good returns else the return may be meagre or it may even turn negative, i.e. the invested fund itself may be eroded. In short, if the investment in fixed income category instruments is secured and risk-free to a large extent, investment in equities and related fields could be termed as risky. E.g. Rs.9500 invested in Infosys Technologies in 1993 has grown to Rs.2.50 crore plus at current valuations* – a case of high returns. If HFCL was bought in 2000 at Rs.1800, your investment would have come down to Rs.12 at current valuations* – a case of high risk.
*July 2009

Q. What is Preferential Allotment of shares?
A. A fresh allotment of shares to promoters, their friends and relatives on a preferential basis is called preferential allotment.

Q. What is the Face Value of a share?
A. Face Value, also called Par Value, is the nominal value of the share. The company arrives at this figure on the basis of the total capital issued by it and the number of shares issued in order to raise that capital. While earlier, companies were required to fix the face value of their shares at Rs.10 or multiples of Rs.10 as per the prevailing regulations of the time, now they are free to fix the face value at any amount they desire.

Q. What is Issue at Par?
A. It is when a share is issued at the same price as the face value of the share.

Q. What is Issue at Premium?
A. It is when a share is issued at a price above the face value of the share. Face value of Sobha Developers equity is Rs.10 but the share was issued at a price of Rs.640, i.e., at a premium of Rs.630.

Q. What is a Bond?
A. A Bond is a promissory note issued by a company or government to its lenders. A bond is evidence of debt on which the issuing company usually promises to pay the bond holder a specified amount of interest at intervals over a specified length of time, and to repay the original loan on the expiration date. A bond investor lends money to the issuer and in exchange, the issuer promises to repay the loan amount on a specified maturity date.

Q. Where can I buy shares from?
A. You can buy shares from the IPO market or from stock exchanges.

Q. What is an IPO?
A. When a company offers its shares to the general public for the first time ever, it is known as an Initial Public Offer or IPO. After the IPO, shares are listed in stock exchanges for trading.

Q. What is a Stock Exchange ?
A. A Stock Exchange is a place where the buyer and seller meet to trade in shares in an organized manner. There are at present 23 recognized stock exchanges in the country that are governed by the Securities Contract (Regulation) Act, 1956.

Q. What is the function of the Stock Market?
A. Stock market enhances capital formation in the economy and
comprises of
a) Primary Market is a place where new offerings by companies are made either as an Initial Public Offering (IPO) or Rights Issue.
b) Secondary Market is a market where securities are traded after being initially offered to the public in the Primary Market and/or listed on the Stock Exchange. Majority of trading is done in this market.

Q. Whom should I contact for my Stock Market related transactions?
A. To be able to buy or sell shares in the stock markets a client would need to be registered with a stock broker like who holds membership in stock exchanges and is registered with SEBI.

Q. What Accounts have I to open?
A To start trading in shares, you have to open a trading account with a stock broker and a DP account with a Depository Participant.

Q. Am I required to sign any Agreement with the broker or sub- broker?
A. Yes, you have to sign the “Member-Client agreement” for the purpose of engaging a broker to execute trades on your behalf from time to time, and furnish details relating to yourself(KYC-Know Your Client), to enable the member to maintain the Client Registration Form.

Q. What is a Member-Client Agreement form?
A. This form is an agreement entered into between client and broker in the presence of witnesses wherein the client agrees (is desirous) to trade/invest in the securities listed on the concerned Exchange through the broker, after being satisfied of broker’s capabilities to deal in the same.

Q. How do I place my Orders?
A. Trading (buying or selling of shares) can be done via the phone or by coming in person to the office of broker or through any other facility provided the broker like Internet trading. The dealer (employee of the broker who is supposed to input the investor’s order into the stock exchange order system) after checking the authenticity of the person calling and after checking the margin available in the account would put/enter the order into the stock exchange system

Q. What are the different types of orders?
A. There are several types of orders that you can place through a broker. The most common type, which is a regular buy or sell order, is called a market order. Another type of order is a limit order wherein you ask the broker to trade only if the price reaches a specific level. In a stop order, you tell the broker to sell your shares if the price drops to a certain level. This helps you to check your losses if the price of that share drops further.

Q. What is the Methodology of trades?
A. The market watch, i.e. the screen kept open normally on the trade screen would show the following as columns -
1. Best bid price or best buy price
2. Best bid quantity or quantity of stocks in demand at the best bid price
3. Best offer price or best sell price
4. Best offer quantity or quantity of stocks available at the best offer price
5. Last traded price

Q.  How does the transaction take place?
A. Orders put into the trading system are executed automatically when the price for a buy order on a security is matched with a sell price.

Q. What is taking a position?
A. When you act upon a stock and buy or sell into it, you are taking a position. A position is an amount of money committed to an investment in anticipation of favorable price movements.
There are two kinds of positions: -
a) Long positions or going long is nothing but buying a share. When you buy, that means you are anticipating an upward movement in the price, and that is how you profit. People usually buy stocks at prices expecting to sell them later at higher prices, and hence make profits.
b) Short positions or going short represent sell positions. When you sell, you are anticipating a fall in the price and the fall is the source of your profits. The shares will be sold and when the price falls they will be repurchased and given back, and the
price difference is the investor’s profits. Of course, the investor who borrowed the shares carries the risk of not having the price move as anticipated, in which case he may lose money in repurchasing the stocks.

Q. What is a Rolling Settlement?
A. Rolling Settlement is one in which there is no fixed settlement period. Each trading day will be a settlement day under this system. Trades executed on a particular day are settled based on the net obligations for the day. In NSE and BSE, the trades pertaining to the rolling settlement are settled on a T+2 day basis where T stands for the trade day. Hence, trades executed on a Monday are typically settled on the following Wednesday (considering 2 working days from the trade day). The funds and securities pay-in and pay-out are carried out on T+2 day.

Q. What is a Clearing House?
A. It’s an agency of the Stock Exchange that is responsible for the effective delivery and settlement of contracts between the members (brokers) of that exchange.

Q. What is Pay-in day and Pay-out day?
Pay-in day is the day when the broker shall make payment or delivery of securities to the exchange. Pay-out day is the day when the exchange makes payment or delivery of securities to the broker.

Q. What is a Contract Note?
Contract Note is a confirmation of trades done on a particular day on behalf of the client. It establishes a legally enforceable relationship between the client and Broker with respect to the settlement of the trades. The Contract Note would show settlement number, order number, trade number, time of trade, quantity and price of the trades, brokerage charged etc and it would be signed by an authorized person from the Broker.

Q. What are the additional charges other than brokerage that can be levied on the investor?
A. The trading member can charge:
1. Securities Transaction Tax.
2. Service tax as applicable.
3. Transaction charges levied by NSE, stamp duty and other charges directly attributable to the transaction.
Note: The brokerage and service tax is indicated separately in the contract note.

Q. How do I make or receive payments to or from the broker?
A. Payments to the broker have to be made via an Account Payee cheque/Demand Draft in favor of the broker. The payment should necessarily come from the bank account of the investor and not from any other person. Similarly broker would pay an Account Payee cheque in the name of the investor, which will also contain the bank name and account number of the client.

Q. How long does it take to receive my money for a sale transaction and my shares for a buy transaction?
A. The pay-out of funds and securities to the clients by broker will be within 24 hours of the pay-out.

Q. What is a depository?
A. A depository can be compared to a bank. A depository holds securities (like shares, debentures, bonds, Government Securities, units etc.) of investors in electronic form. Besides holding securities, a depository also provides services related to transactions in securities.
There are two main depositories in India, namely,
a) National Securities Depository Ltd. (NSDL) and
b) Central Depository Services Ltd.
(CDSL), both of which are regulated by SEBI.

Q. What should I do when I want to open an account with a DP?
A. You can approach any share broker. or any DP of your choice and fill up an account opening form. At the time of opening an account, you have to sign an agreement with the DP in a NSDL prescribed standard agreement, which details your and your DP’s rights and duties. You will need to furnish photocopies of an address-proof (this could be a ration card or a voter ID card),
a passport-size photograph and PAN card for verification.

Q. Do I need to possess shares or other securities to open a DP account?
A. No.  You are not required to possess shares or other securities while opening a DP account.

Q. Should the client keep a minimum balance of securities in his account?
A. No. NSDL has not prescribed any minimum balance of securities. The client can have a zero balance in his account.  However, the DP may fix some minimum limit.

Q. Is there any restriction on the number of DP accounts an individual can open?
A. No.  There is no such restriction.

Q. How do I deliver or receive shares to or from the broker ?
A. In case of sales, the investor would need to transfer the shares to the pool account of the broker for the specified settlement number. The delivery should necessarily come from the demat account of the investor and not from any other person. Similarly, broker would directly transfer shares bought to the account of the investor.

Q. What do you mean by ‘Market Trades’ and ‘Off Market Trades’?
A. Any trade settled through a clearing corporation is termed as a ‘Market Trade’. These trades are done through stock brokers on a stock exchange. ‘Off Market Trade’ is one which is settled directly between two parties without the involvement of a clearing corporation. The same delivery instruction slip can be used either for market trade or off-market trade by ticking one of the two options.

Q. How are Margins paid?
A. To buy or sell shares, the client has to maintain a minimum amount in his trading account as prescribed by the Stock Exchange margin rules from time to time. Currently, the margins are calculated on the Value at Risk model. Margins are to be paid by the investor before placing the order.

Q. What happens if I could not make the payment of money or deliver shares on the pay-in day?
A. In case of purchase on your behalf, the member broker has the liberty to close out transactions by selling securities in case you fail to make full payment to the broker for the execution of contract before pay-in day as fixed by Stock Exchange for the concerned settlement period, unless you already have an equivalent credit with the broker. The shortages in case of sales are met through auction process and the difference in price indicated in Contract Note and price received through auction is paid by member to the Exchange which is then liable to be recovered from the client. In both the cases any loss in
transactions will be deductible from the margin money paid by you.

Q. What is an Auction?
A. The securities are put up for auction by the Exchange on account of non-delivery of securities by the selling trading member to ensure that the buying trading member receives the securities due to him. The non-delivery by the trading member could arise on account of short delivery. The Exchange purchases the requisite quantity in the Auction Market and gives them to the buying trading member.

Q. What happens if the shares are not bought in the auction?
A. If the shares could not be bought in the auction i.e. if shares are not offered for sale in the auction, the transactions are closed out as per SEBI guidelines. The guidelines stipulate that “the close out price will be the highest price recorded in that scrip on the exchange in the settlement in which the concerned contract was entered into and up to the date of auction/close out OR 20% above the official closing price on the exchange on the day on which auction offers are called for, whichever is higher.” Since in the rolling settlement the auction and the close out takes place during trading hours, the reference price in the rolling settlement for close out procedures would be taken as the previous day’s closing price.

Q. What happens if I do not get my money or share on the due date?
A. In case a broker fails to deliver to you in time and make the proper payment of money/shares or you have a complaint against the conduct of the broker, you can file a complaint with the respective stock exchange. The Exchange is required to resolve all complaints. To resolve the dispute the complainant can also resort to arbitration as provided on the reverse of Contract Note /Purchase or Sale Note. However, if the complaint is not addressed by the Stock Exchanges or is unduly delayed then the complaints along with supporting documents may be forwarded to Secondary Market Department of SEBI. Your complaint would be followed up with the exchanges for expeditious redressal. In case of a complaint against a sub-broker, for redressal the complaint may be forwarded to the concerned broker with whom the sub-broker is affiliated.

Q. What are the rights of the investor?
A. The right to get – Proof of price/brokerage charged, Money/shares on time, Statement of Accounts and Contract Note from trading member.

Q. What are the obligations of the investor?
A. The obligation to -
•  Sign a proper Member-Constituent Agreement
•  Possess a valid contract or purchase/sale note
•  Deliver securities and make payment on time
•  Provide Margin before trade

Q. What is internet trading?
A. Instead of visiting/calling your stock broker’s office you can trade from your home or office. This is called internet trading. For this, you require a computer with an internet connection. The advantage is that you can place your own orders.

Q. What are the various kinds of accounts that I need to trade via Internet with a broker?
A. Three kinds of accounts are required to be able to trade online.
They are:
a) E-Broking account with the broker
b) Depository Participant (DP) account with the broker
c) Bank account, which has developed an interface with the broker

Q. What are the tax implications of investing in Indian equities?
A. Tax rates on investment gains are categorized as long term and short term capital gains.
(a) Long term capital gains
Long Term investments that are held for more than 12 months are termed as long term capital assets. Profit on sale of such
assets is termed as long term capital gain (LTCG) which as per the latest Budget notification will attract nil tax. Dividend is also tax free in the hands of investors.

(b) Short term capital gains
Shares that are held for less than 12 months are classified as short term capital assets which as per the latest Budget notification will attract 15% tax.

Q. Who is a Portfolio Manager?
A. Any person who pursuant to a contract or arrangement with a client, advises or directs or undertakes on behalf of the client (whether as a discretionary portfolio manager or otherwise) the management or administration of a portfolio of securities or the funds of the client, as the case maybe, is a Portfolio Manager.

Q. What is meant by bullish and bearish trends in the market?
A. When the market goes up it is called a bullish trend and when the market goes down it is called a bearish trend.

Q. Why are some shares called Blue Chips?
A. The term ‘Blue Chips’ refers to the stock of renowned companies with established and stable businesses. Such companies offer a steady stream of earnings and are preferred by investors because of the stability of their earnings. People desiring solid investments with minimal risks should invest in shares of ‘Blue Chip’ companies.

Q. What is an index?
A. An index is a stock-market indicator created as a statistical measure of the performance of an entire market or segment of a market based on a sample of securities from the market. An index is thus a means to evaluate the overall performance of a market or of a segment of the market at any point of time. As a measure of the performance of the market at a particular time, the index at that point of time is compared to the index number at another point of time in the past and the strength or weakness of the market is measured on the basis of the difference in the index figures.
For example, one Monday’s market could be termed as strong if the index value on that day is better than last Friday’s index figures. Similar comparisons are possible intra day, daily, weekly, monthly or annual basis to measure the market performance. Apart from being a general market indicator, indices are used as a benchmark to evaluate individual portfolio performance. Professional money managers will always try to outperform the market, i.e. they will always try to do better than the indices. For example, if the value of a portfolio moves up by 10% while the index moved up by only 5% then the portfolio is doing better than the market.
We have 2 renowned indices viz. (a) BSE Sensitive (BSE Sensex) and (b) S&P Nifty 50 (Nifty).  BSE Sensex comprises of 30 large-cap companies. As the name suggests, it is the premier index of the Bombay Stock Exchange (BSE).  Nifty is the prominent index of the National Stock Exchange (NSE) and it comprises 50 large-cap stocks traded in the National Stock Exchange.

Stock market indices not only in India but across the globe also witnessed an upward trend during calender year 2009. Stock markets and commodity markets rallied during the period. Calender year 2008 witnessed the worst financial crisis in modern times. Beginning of the year 2009 was the passing phase of the recession. Within no time indices all around the world staged a comeback and during the second half of year 2009 they all remained in the bullish phase.

Bombay sensitive index recorded a growth rate of 80 percent during 2009. Sensex started the year at 9721 as a result of global financial meltdown but it closed at 17465. During 2009 sensex was in the range 8047-17531. 2009 started with the Satyam scam. Which was a shock in Indian stock market. Another negative factor during the period was the raising commodity prices. But Indian investors were optimistic. FIIs also chose Indian market as favourite destination, in 2009 they bought equities worth 83424 crore. Which played a crucial role in the recovery of Indian indices. There are expectations that Indian bourses would break their past records during 2010.

So many policy changes including time change happened in Indian market. From 4^th January onwards the new time schedule came into effect. The bourses will open at 9.00AM and will close at 3.30PM. In the days to come there would be more policy changes. Leaving all odds behind one can surely says that Indian market is growing faster than any other market in the world. Equities were the worst performing asset during 2008 but it bounced back in style in 2009 and became the best performing asset.

Last week of December witnessed bullish rally in Indian stock market. In December Indian market was slightly volatile. Less than expected IIP figures were one negative factor behind the volatility soaring food and commodity prices added fuel. But when reached towards the end of 2009 investors started buying Indian stocks. Apart from stock market Mutual Fund and Insurance sector also witnessed drastic changes. SEBI abolished entry load in Mutual Funds which attracted severe protest from fund houses. SEBI also allowed exchanges to trade in Mutual Fund units. These were the major reforms in the Mutual Fund industry during 2009. In December Mutual Funds sold Indian equities woth 1515.60 crore.

IRDA also made some changes in Insurance sector. The major one is the implementation of a cap on the expenses of the ULIP plan. Another one is allowing life insurers to sell policies online. It is believed that these moves will protect policyholder’s interest.

Sensex closed the year at 17465.It’s November closing was 16926-an increase of above 3 percent. FII inflow continued in December also. They bought equities worth 10233.10 crore. Nifty also recorded a growth rate of 3.3 percent against it’s November closing to close at 5201. From index stocks now the buying interest came down to midcap and smallcap stocks. This is a good sign for Indian market. Smallcap stocks recorded a growth rate of 11 percent during December whereas midcap stock’s growth rate is at 4.7 percent against November 2009. Recovery in global markets also influenced Indian traders. US markets recorded biggest annual gain since 2003 in 2009. IT and Consumer Durables witnessed major buying interest during December. They recorded 9 percent and 8 percent growth respectively. Power, metal, auto and engineering stocks also witnessed renewed buying interest. Oil and gas sector was the least performing one during December.

2009 proved the strength of equities. It is believed that increased trading time would attract more participants to Indian market. Market volume would increase. Inflationary pressure is the major concern now. There are rumors that there will be some changes in key rates in order to tackle inflation. More and more traders will be attracted towards midcap and smallcap stocks. Invest in stock markets with long term plans is the need of the hour.