Curbing inflation will be the topmost priority in FY'12: Says the Indian President

President of the Indian Democratic Republic, Hon. Smt. Pratibha Patil on 21st Feb 2011, in her address to the joint session of the Parliament (Lok sabha and the Rajya sabha) raised concerns over the rising prices of the essential commodities and said inflation posed the biggest threat to the country's

growth momentum and combating inflation will be the topmost priority of her government in the next financial year 2011-12. 

Following are few extracts of President smt. Patil's speech:

INFLATION, GROWTH

* Foremost priority in FY12 is to combat inflation.

* Deeply concerned over inflation's threat to growth.

* Inflation has been a problem in the past year.

* Need to protect common man from rising food prices.

* Prices of cereals under control now.

* Vegetable price have eased with fresh crop arrivals.

* Unseasonal Nov rains pushed up food inflation.

* Aim to sustain current economic growth momentum.

* Indian econ on a high growth trajectory.

* Steps to tackle global financial meltdown successful.

* No room for complacency on economic growth.

* Deeply concerned over inflation's impact on aam aadmi.

* Proactive steps to fight inflation have shown results.

* Raising farm yield long-term solution to tame inflation.

* Committed to give remunerative prices to farmers.

* Global economic situation "complicated".

Concentration on developing the ECONOMY & INFRASTRUCTURE

* Need to maintain momentum for wider reforms.

* Need more conducive environment to attract FDI.

* Last year was a difficult one for our country.

* Some areas have seen unacceptably high violence.

* Need to address concern on lack of probity, integrity.

* Plan 40 trln rupee invest in core sector in 12th Plan.

* Pvt sector contributed 34% of infra invest 2010.

* To extend pvt FM radio to town with over 100,000 people.

* Taking steps for broadband, mobile svc to rural areas.

* Plan to set up 806 FM radio channels in 283 cities.

* Plan to give sops for FM radio svc in J&K, northeast.

* Taking steps to push up growth in coal output.

* Aim to make coal production more environment-friendly.

* To add 20,000 MW solar capacity by 2020.

* 16,000 km road construction under progress currently.

* Giving priority to shale gas exploitation.

* Asking cos to aggressively seek coal, gas blocks abroad.

* Likely to top 2014 aim of 40% rural tele-density.

* Aim to construct 7.5 mln houses by 2014.

CORRUPTION , POLITICS

* Ministers' panel looking at steps to tackle corruption.

* Internal security scenario largely under control.

* Welcome the dawn of democracy in Egypt.

* Need to strike balance between environment, development.

* Govt committed to tackle menace of black money.

* To take all steps to bring back black money from abroad.

What is a stock split?

A Stock split is a process where in the company decides to reduce the face value of the outstanding shares. This is usually done only when the stock is in a strong uptrend and the board of the company has a   comfortable anticipation that the stock will continue the same trend further. When a stock is quoting high in the market, there are worries that there will be fewer takers for the stock implying lower liquidity to the shares of the company. By this exercise, the company tries to provide more liquidity to the stock in the market. More often than not the when a company declares a stock split it means that particular firm is experiencing success.

Mechanics of stock split:

To do a stock split it is important to know the requirements before a stock split, as well as the general profile of the company which is announcing a split of their stock. Naturally the company must have enough unissued authorized shares to split the stock and then the board of directors must then meet and declare a stock split. If authorized shares need to be added, then the company must seek approval from shareholders, which requires a shareholder meeting for a vote to support additional shares being issued. At that point the company can announce the stock split and both the split and recording dates are set. When the split date does indeed arrive, additional shares are issued and the stock price per share is adjusted accordingly.

The average profile of a company that declares a stock split is one that is currently operating with increasing revenue and net earnings.  Typically the stock price is close to or higher than the price of the last split, is in a general uptrend and of course is expected to continue to move northwards.  In addition, business is forecasted to be very good going forward, shareholder confidence is high and basically no major legal issues are pending reconciliation. In addition, a stock split announcement is typically accompanied by other major events which could be anything such as a bonus, dividend being paid, a stock buyback program or even changes to management.

Stock splits usually attract the interest of the retail and institutional participants as they are certainly worth monitoring and when correctly identified, they provide low risk and high reward options strategies. In fact, if you can see a stock split coming when implied volatility is currently very low, then these particular situations have a tremendous chance of being highly profitable when coupled with the appropriate options strategy.

Investing in IPOa, The ASBA route...

Investment through the Initial Public offering (IPO) has been flair of the investors in India, for decades. This is also the primary step where in the investors learn investing in the stock market. Over the past decade it is observed that the participation of the retail investor for IPO has taken a large leap as they are proving to be an avenue to make quick money as the IPOs list at high premium to the issue price.
Retail investors are subscribing IPOs hand to hand and their increased participation is making the IPOs a success for the issuing company. Mostly the IPOs are oversubscribed i.e., more applications for the shares offered for sale by the company. It is almost certain that due to oversubscription, the investors will not get the number of shares they apply for in an IPO – most of the time two lots are alloted for four applied, one lot for five and sometimes nothing at all! Running in the race to apply for the shares in an IPO, investors run out of cheque leaves and also experience that the balance in the savings account has dip below the minimum balance required. Banks mostly charge penalties to the account holders who do not maintain a minimum balance. The securities market regulator and watch dog of the investor community in INDIA, the Securities and Exchange board of India (SEBI) has formulated a smarter way of investing in IPOs wherein you can make applications for IPOs with the amount residing in your account till the allotment is finalized. This way is called as “Application Supported by Blocked Amount” (ASBA). This facility can be an ‘Icing on the cake’ for the investors in the country.
ASBA- Application Supported by Blocked Amount is an application that authorizes the banker to block a specific sum of money in an individual's bank account for an IPO and debit the account only to the extent of the shares allotted to the individual. However, even as the blocked amount will not be available for use of the customer and he will continue to earn interest on it.
The benefits that an investor can derive from ASBA are
a) Cancelling and revising the bid is also possible.
b) The application amount is not debited from the savings account.
c) Keep earning interest on the amount parked in the Savings account.

Unlike the normal procedure where the debit happens immediately and the applicant needs to wait for refunds on a partial allotment, the ASBA route provides interest and saves time.
Now the question arises, how does one apply for ASBA?
Applying for ASBA
To bid in an IPO, the investor has to take either the e-route via on-line trading account or fill the physical form and submit it with his banker/broker. In the first scenario, taking an online investor into consideration, the process is very simple, he needs to just check the ASBA check-box in his screen (top brokerage houses provide ASBA facility for their online clients) and rest of the process is taken care of automatically. Whereas, if the investor takes the traditional way of applying to IPOs still, he needs to approach his banker (ASBA application forms can be downloaded from the NSE/BSE Web sites too) for an ‘ASBA Bid cum Application' form.
The applicant has to fill in basic details that include bank account number, PAN number, demat number, the bid quantity and bid price and submit the form with the banker (if the applicant is a Net banking client, he may be able to do this online itself). The banker then uploads details of the application in the bidding platform and simultaneously blocks the amount in the client's account. What is to be noted here is that not all banks have ASBA facility; only self certified syndicate banks (SCSBs) offer this.
List of SCSBs is given as a link below. To name a few, State Bank of India, HDFC Bank, AXIS Bank, ICICI Bank, Bank of India, Kotak Mahindra Bank, Standard Chartered Bank etc., are among those offering the facility. The best thing in this way of applying is that currently most brokers and bankers offer this service free of cost for their clients. They collect the selling commission or the processing fee from merchant bankers of the issue.

With ASBA applications just kicking off, there has been queries as to whether one can apply at the cut-off price and if the place bids can be revised. The answer is: Yes, one can do that. “The investor has the option of revising and even cancelling the bid till the cut-off time on the last day of the issue”. The process is simple and doesn't require much of a doing.
Process to be complied:
The investor need to have a current/savings account with one of the SCSBs to be able to apply via ASBA route in IPOs. While accessing this route the investor should ensure that he makes sufficient amount is available in his account while making the application. Once the process is complete, the banker sends in an acknowledgement which should be filed and kept for future reference.
Recently, brokerage houses have also been given the ‘green' signal by SEBI to distribute ASBA forms. So now you needn't even walk up to the bank for an ASBA application; you can send it through your broker (not all brokerages currently offer this service).

Important Links:

- List of SCSBs (including details Controlling Branch & Designated Branch)

- To register with the Exchange as Self certified syndicate banks, the bank has to submit an undertaking as per the prescribed format.

- Investors, wishing to apply the E-route or Online trading account click here

Why Most Futures Traders Lose Money..?

A review of 50 very basic, often violated rules for trading futures

It is often viewed that most of the traders have had a bitter experience of trading in the futures. It was during my academic internship I was assigned a task to find out the reasons of people incurring losses in futures trading. I would like to share the experience with you  and help you take an informed and wise investing/trading decision.

A survey of 50 brokers asked what, in their experience, caused most futures traders to lose money. The executives represent the trading experience of more than 10,000 futures traders. In addition, most of these Executives have also traded or are currently trading for themselves. Their answers are not summarized because different traders make (and lose) money for different reasons.

Perhaps you may recognize some of your strengths and weaknesses. Yet many of the reasons given are very similar from broker to broker. The repetitions stand to demonstrate that, many futures traders lose money for many of the same reasons.

Here is what they said:

1. Many futures traders trade without a plan. They do not define specific risk and profit objectives before trading. Even if they establish a plan, they “second guess” it and don’t stick to it, particularly if the trade is a loss. Usually, they liquidate the good trades and keep the bad ones.

2. They fail to pre-define risk, add to a losing position, and fail to use Stop Losses.

3. After several profitable trades, many speculators become wild and unconservative. They base their trades on hunches and long shots, rather than sound fundamental and technical reasoning, or put their money into one deal that “can’t fail.”

4. Many traders don’t realize the news they hear and read.

5.Traders often trade with less capital and try to carry too big a position with too little capital (margins). They trade too frequently for the size of the account.

6. Most of the traders try to “beat the market” by day trading, nervous scalping, and getting greedy.

7. They frequently have a directional bias; for example, always wanting to be long.

8. Lack of experience in the market causes many traders to become emotionally and/or financially committed to one trade, and unwilling or unable to take a loss. They may be unable to admit they have made a mistake, or they look at the market on too short a timeframe.

9. Most of the traders Overtrade. They are of the perception that more trades with less profit in a volatile market will increase their profitability. These traders often end up paying high on commissions then their gains.

10. Many traders can’t (or don’t) take the small losses. They often stick to a posotion until it really hurts, then take the loss. This is an undisciplined approach...a trader needs to develop and stick with a system.

11. Many traders get a fundamental case and hang onto it, even after the market technically turns. Only believe fundamentals as long as the technical signals follow. Both must agree.

12. Many traders break a cardinal rule: “Cut losses short. Let profits run.”

13. Many people trade with their hearts instead of their heads. For some traders, adversity (or success) distorts judgment. That’s why they should have a plan first, and stick to it.

14. Often traders have bad timing, and not enough capital to survive the shake out.

15. Too many traders perceive futures markets as an intuitive arena. The inability to distinguish between price fluctuations, which reflect a fundamental change, and those that represent an interim change often causes losses.

16. Not following a disciplined trading program leads to accepting large losses and small profits. Many traders do not define offensive and defensive plans when an initial position is taken.

17. Emotion makes many traders hold a loser too long. Many traders don’t discipline themselves to take small losses and big gains.

 18. Too many traders are under financed, and get washed out at the extremes.

19. Greed causes some traders to allow profits to dwindle into losses while hoping for larger profits. This is really a lack of discipline. Also, having too many trades on at one time and overtrading for the amount of capital involved can stem from greed.

20. Trying to trade inactive markets is dangerous.

21. Taking too big a risk with too little profit potential is a sure road to losses.

22. Many traders lose by not taking losses in proportion to the size of their accounts.

23. Often, traders do not recognize the difference between trading markets and trending markets. Lack of discipline is a major shortcoming.

24. Lack of discipline includes several lesser items; i.e., impatience, need for action, etc. Also, many traders are unable to take a loss and do it quickly.

25. Trading against the trend, especially without reasonable stops, and insufficient capital to trade with and/or improper money management are major causes of large tosses in the futures markets; however, a large capital base alone does not guarantee success.

26. Overtrading is dangerous, and often stems from lack of planning.

27. Trading very speculative commodities is a frequent mistake.

28. There is a striking inability to stay with winners. Most traders are too willing to take small profits and, therefore, miss out on big profits. Another problem is under capitalization; small accounts can’t diversify, and can’t use valid stops.

29. Some traders are on an ego trip and won’t take advice from another person; any trades must be their ideas.

30. Many traders have the habit of not cutting losses fast, and getting out of winners too soon. It sounds simple, but it takes discipline to trade correctly. This is hard whether you’re losing or winning. Many traders overtrade their accounts.

31. Futures traders tend to have no discipline, no plan, and no patience. They overtrade and can’t wait for the right opportunity. Instead, they seem compelled to trade every rumor.

32. Staying with a losing position because a trader’s information (or worse yet, intuition) indicates the deteriorating market is only a temporary situation can lead to large losses.

33. Lack of risk capital in the market means inadequate capital for diversification and staying power in the market.

34. Some speculators don’t have the temperament to accept small losses in a trade, or the patience to let winners ride.

35. Greed, as evidenced by trying to pick tops or bottoms, is a frequent error.

36. Not having a trading plan results in a lack of money management. Then, when too much ego gets involved, the result is emotional trading.

37. Frequently, traders judge markets on the local situation only, rather than taking the worldwide situation into account.

38. Speculators allow emotions to overcome intelligence when markets are going for them or against them. They do not have a plan and follow it. A good plan must include defense points (stops).

39. Some traders are not willing to believe price action, and thus trade contrary to the trend.

40. Many speculators trade only one commodity.

41. Getting out of a rallying commodity too quickly, or holding losers too long results in losses.

42. Trading against the trend is a common mistake. This may result from overtrading, too many day trades, and under capitalization, accentuated by failure to use a money management approach to trading futures.

43. Often, traders jump into a market based on a story in the morning paper; the market many times has already discounted the information.

44. Lack of self-discipline on the part of the trader and/ or broker creates losses.
Futures traders tend to do inadequate research.

45. Traders don’t clearly identify and then adhere to risk parameters; i.e., stops.

46. Most traders overtrade without doing enough research. They take too many positions with too little information. They do a lot of day trading for which they are under-margined; thus, they are unable to accept small losses.

47. Many speculators use “conventional wisdom” which is either local, or “old news” to the market. They take small profits, not riding gains as they should, and tend to stay with losing positions. Most traders do not spend enough time and effort analyzing the market, and/or analyzing their own emotional make-ups.

48. Too many traders do not apply money management techniques. They have no discipline, no plan. Many also overstay when the market goes against them, and won’t limit their losses.

49. Many traders are undercapitalized. They trade positions too large, relative to their available capital. They are not flexible enough to change their minds or opinions when the trend is clearly against their positions. They don’t have a good battle plan and the courage to stick to it.

50. Don’t make trading decisions based on inside information. It’s illegal for some markets, and besides, it’s usually wrong.