Foreign Direct Investment (FDI)

Foreign direct investment (FDI) plays an extraordinary and growing role in global business. It can provide a firm with new markets and marketing channels, cheaper production facilities, access to new technology, products, skills and financing. For a host country or the foreign firm which receives the investment, it can provide a source of new technologies, capital, processes, products, organizational technologies and management skills, and as such can provide a strong impetus to economic development. Foreign direct investment, in its classic definition,  is defined as a company from one country making a physical investment into building a factory in another country.  The direct investment in buildings, machinery and equipment is in contrast with making a portfolio investment, which is considered an indirect investment. In recent years, given rapid growth and change in global investment patterns, the definition has been broadened to include the acquisition of a lasting management interest  in a company or enterprise outside the investing firm’s home country. As such, it may take many forms, such as a direct acquisition of a foreign firm, construction of a  facility, or investment in a joint venture or strategic alliance with a local firm with attendant input of technology, licensing of intellectual property,   In the past decade, FDI has come to play a major role in the internationalization of business. Reacting to changes in technology, growing liberalization of the national regulatory framework governing investment in enterprises, and changes in capital markets profound changes have occurred in the size, scope and methods of FDI. New information technology systems, decline in global communication costs have made management of foreign investments far easier than in the past. The sea change in trade and investment policies and the regulatory environment globally in the past decade, including trade policy and tariff liberalization, easing of restrictions on foreign investment and acquisition in many nations, and the deregulation and privitazation of many industries, has probably been been the most significant catalyst for FDI’s expanded role.

Do's & Dont's of INTRADAY TRADING

It seemingly looks to be the simplest and the most rewarding. But in intraday trading one has to be very fast and quick and have to be on your toes always, so there are certain rules which one has to keep in mind.

• If index is in positive from yesterday and the share you are holding is in minus then it should be cut and if intraday trend of index is in buy then one should buy a stock in which is in plus.
• If index is in minus then one should look to short stocks which are minus and not stocks which are in plus.
• It is not necessary that a stock which is weak today during intraday trading might be weak tomorrow also, simultaneously if a stock is strong today might not be strong tomorrow
• If US Markets have gone up overnight, the markets here in all probability will open strong, so one should be quite careful when buying stocks as the general psychology of public is to buy when good news is there.
• Being a contrarians is very important while trading intraday.
• Stop loss is a must while trading intraday.
• Always trade in very liquid stocks i.e. which have very high volume because as entry and exit can be very fast in such stocks.
• Do paper trading before you actually start trading so that when you start making paper profits, then shift to actual trading.
• Keep your volume constant e.g.: if you trade in five lots of nifty future then trade in five lots only. This position can be increased only when you are satisfied with your trading for a month. It should not be that one day you buy five lots and next day you trade in ten lots and third day you get a loss and stop trading for two days.
• Fear and Greed are at maximum levels while trading intraday so always have less position when you are new to intraday trading as otherwise you will be mostly under tension.

How to Become a Good Investor

1. First of all, determine whether you should be investing at all. If you have any debt other than a home mortgage your first priority should be paying off that debt. It doesn't make sense to pay more in interest than you earn on your investments. The only exception to this is investing for retirement or education in a tax sheltered account like an IRA, 401K or 529 plan. Since you are getting a tax benefit it always makes sense to invest in them if you can spare the money.

2. A good investor always pays himself or herself first. Examine your monthly budget. After you take out what you need for essentials like food, shelter and utilities how much is left? Decide what you can afford and invest that much every month just like it is another bill. If you get a raise or a bonus invest it as if you never laid your hands on it. Also, avoid debt at all cost. Don't buy things you can't pay for immediately. Debt is the opposite of investing.

3. Now that you have gathered some money to invest, it's time to decide what to do with it. It all depends on what you will eventually need that money for. If you are saving to buy something big in a year or two then your investment should be conservative. If you wont need your money for at least five years you can take more risks. If you are saving for a child's education or retirement that wont happen for more than a decade then you can afford to be aggressive. The more aggressive an investment is the more likely it will grow in the long run. It is also more subject to wild swings up and down. If you can ride these out over time you should be fine. If you suddenly need money from an aggressive investment it may be worth much less than you initially put in. Knowing your time horizon will help you avoid such mishaps.

4. Most investors save money for several different reasons. They put away a little for retirement, a little for house down payment, a little for a big vacation next year. This is a sensible approach. Divide your investment dollars into three piles. One for short, one for medium and one for long term investments. How big each pile is depends on your priorities. The medium pile doubles as an emergency fund in case you lose your job or have a big unexpected bill.

5. Long term investments should take advantage of tax benefits. If your employer offers a 401K plan invest all you can afford in it. Your money is not taxed which makes it worth more than if you got it in your paycheck. Some employers also match some of your contribution. That's free money! An IRA is another good option if you don't have access to a 401K plan. They also offer tax benefits. 401K's and IRA's are long term investments so should be in aggressive funds like growth stocks. Put away a little money every month and you will live comfortably in retirement.

6. Most medium and short term investments will involve accounts that require you to pay taxes on your gains. Your goal should always be to pay as little tax a possible. If you buy stocks try to hold on to them at least a year. You pay less tax on gains that way. If you lost money you can deduct some of the losses from your taxes. Stocks are more risky than bonds which are more risky than cash investments. In general stocks change in value but you don't actually get a gain or loss until you sell them. In general bonds pay a dividend periodically which acts like income and their value fluctuates less. Cash investments include money market accounts and certificates of deposit you get at the bank. They wont fall in value but pay less in interest. They are the most conservative investment.

7. Your portfolio is the culmination of all your investments. A well balanced portfolio should be a mixture of stocks, bonds and cash. If you are young and wont need the bulk of your money for a long time, your portfolio should be heavy in stocks. If you are approaching retirement or will need a lot of your money within a few years, you should be heavier in bonds and cash. A portfolio grows unevenly so periodically examine it and adjust the proportions to suit your investment plan. As you grow older, your plan will change. There are mutual funds that will do all this for you. All you do is tell them when you plan to retire. The key is to make a plan and stick to it. Investing isn't hard but it does require discipline and commitment.

Rupee gained strength today!!!

The Indian rupee strengthened by 15 paise to Rs 52.10 per US dollar in early trade on the Interbank Foreign Exchange on Monday, tracking gains registered by the euro and other currencies against the American dollar. Forex dealers said a higher opening in the domestic stock market and dollar losses against the euro and other currencies overseas on hopes that European leaders will cobble together a rescue fund to ease the region's debt problems supported the rupee sentiment. However, month-end dollar demand from importers restricted the gains, they said. The rupee had weakened by 19 paise to close at Rs 52.25/26 against the US dollar on Friday amid fresh demand for the American currency from importers and weak equity markets. Meanwhile, the 30-share BSE benchmark Sensex index rose by 231.71 points, or 1.48 per cent, to 15,927.14 in opening trade on Monday.

Bearing downside risk !!!

Downside risk is the risk your investments will lose money due to a depreciation in value. In bear markets, investing in equities will have downside risk. The risk differs depending on the security involved. The index (Nifty or Sensex) will have the least risk followed by large cap stocks, mid-cap stocks and small-cap stocks. Certain levels in equity bear markets may look good in terms of many factors, including valuations. However, every level will be tested by the markets. For example, the Nifty may have looked good at 5,500, 5,300, 5,000 and 4,700. Investors buying into the Nifty at 5,500 with a long-term point of view will hesitate to buy the Nifty at 4,700, as they have already seen a 15 percent depreciation on their investments. The 15 percent depreciation is the downside risk the investor is taking when investing in the Nifty at 5,500. Investors, unfortunately, do not see it that way. They think that instead of making money, they lost money and that prevents them from staying invested or investing further sums of money at lower levels. It is a common investor trait and has no rationale attached to it. The truth is, no investment will make money from day one. Markets, by nature, are volatile and there will be upsides and downsides. In bear markets, investors will have to suffer downside risk when they buy, and in bull markets, investors have to suffer upside risk when they sell. Hence investing in today’s markets, with the Nifty at 4,800 levels and the Sensex at 16,000 levels, with return expectations of over 25 percent will come with downside risk that the Nifty and Sensex could slide further by 10 percent. Investors have to judge the downside risk they can bear. If they can tolerate higher downside risk, they should look at individual stocks, but if they are capable of only tolerating limited downside risk, they should stick to the index. Bear market investments will always lose money first before giving higher-than-average returns.

3 M's for Investing & Trading

MIND
METHOD
MONEY

Mind: The key to winning is inside the Mind. As master of your mind, you have to manage and understand your emotions very well. It is extremely important to understand not just the individual’s psychology, but also the crowd psychology of the markets. To become a good investor or trader, you must have perseverance and discipline.

Method: Plan your Trade and Trade your Plan. A good trading plan should cover your entry, exit and position sizing requirements. Use different methods for different market conditions.

Money: Overall profit/loss depends on money management. The first goal of money management is capital preservation. If you lose 10% of your capital, you have to make 11% just to break even. If you lose 40%, you need to make 67%, and if you lose 50%, guess what? You have to make 100% just to recover. So before you think about making big money, first you got to think about not risking your capital unnecessarily.

Enjoy..........:)

Why Indian Stock market is Crashing ?

Many factors. One, there is a change in the global investment climate. One of the primary triggers is the huge fear of the United States' economy going into a recession with foreign institutional investors trying to reallocate their funds from risky emerging markets to stable developed markets. Analysts are now expecting a cut in US interest rates. Hedge funds and FIIs could have been the biggest sellers in the Indian markets, booking profits and making the most of the unprecedented bull run that has dominated the Indian stock market for a long time now.

The current volatility is also linked to global bourses. There is a big correlation among global markets. The presence of hedge funds across asset classes, along with increased global movement of capital, has increased event-related volatility. Volatility in commodities markets has also significantly affected equity markets. A combination of global and local factors is affecting this market, said Mihir Vora of HSBC Mutual Fund, on NDTV Profit. On the global front, other emerging markets were down nearly 20% so India is playing catch-up, he said.

On the local front there has been a huge build-up in derivatives positions and volatility led to margin calls. Also many IPOs have sucked out liquidity from the primary market into the secondary market, said Vora. At current levels it would be a buy call and we would not advise investors to wait to catch the bottom, he added.

Rupee@52

A sharp plunge in rupee value to below Rs 52 per US dollar level may be a bad news for the stock markets and the overall economy, but has also brough cheers to certain segments, experts believe. 

Stock markets have fallen sharply and concerns are being raised about a slowdown in economic growth momentum in the backdrop of a sharp rupee depreciation, while worries are also mounting about further surge in inflation. 

However, a weaker rupee could mean good news for the NRIs and others remitting money from abroad to their families back in India, as also for those having invested in overseas mutual funds and the expatsworking in India with income in foreign currencies like the US dollar and expenses in rupee. 

The rupee on Tuesday hit a record low of Rs 52.73 against the US dollar, as investors exited from riskier emerging markets as well as eurozone assets, and made their bet on dollar - which is seen as a "safe heaven" at times of crisis. 

Some recovery was seen in the rupee this morning, but it remained above the 52-level and the analysts believe a further drop was still a possibility. The experts say that there are chances of a fall to as low as 55-level, as emerging market currencies are quite vulnerable to the eurozone debt crisis. 

Amid a plunge in rupee value, the stock market tanked today with a fall of over 500 points in the benchmark Sensex during the intra-day trade. 

But weaker rupee turns out to be good for those who depend on remittances from abroad, as the Indian currency has not only slipped against the dollar, but also against most other major currencies like the euro, British pound, Australian dollar and Kuwati dinar. 

One US dollar gets a little over Rs 52 now, which is nearly 17 per cent more than what it did at the beginning of the year, similarly the British pound brings Rs 81, (up 16 per cent), euro brings Rs 70.19 (up 17.27 per cent) and Australian dollar Rs 50.90 (up 11.30 per cent). 

Besides, for those people who are planning a visit to India now, are cheering as they will get good bargain for their home country currencies here. That gives them more spending power in this country than other favorite destinations like Singapore and Thailand. 

Indian Rupee All time low !!!!

India's rupee has hit an all-time low against the US dollar, with companies buying the greenback amid continuing fear about the global financial crisis.

The rupee plunged to 52.50 to the dollar on Tuesday, sparking new inflation concerns. The rupee has now fallen 14% since the start of 2011.

Delhi said the fall reflected market uncertainty and urged against an "overreaction".

The fall is also due to some investors leaving emerging markets, analysts say.

"At this moment, the dynamics seem to be pretty much against all emerging market currencies and that's not really helping the rupee," economist Siddartha Sanyal told AFP news agency.

The previous rupee low was in March 2009.

Shares rise

India's finance ministry has said that the central bank - the Reserve Bank of India - had only a "limited" ability to curb the fall of the rupee.

Trade secretary Rahul Khullar urged investors not to "overreact" to the weakening rupee.

Foreign investment in Indian equities has slumped this year, with India's market regulator putting the figure for 2011 so far at a net $530m, compared with $28.9bn during the same period last year.

Interest rates have been increased regularly over the past 18 months to try to curb overheating, but price rises remain a concern.

A weaker rupee makes imports more expensive and India is a massive oil importer.

On Tuesday, the Sensex index of leading shares was up slightly, after falling 2.6% on Monday. There had been eight straight sessions of decline.

Kishor Ostwal, chairman at CNI Research, told Reuters: "So long as the rupee is falling, I don't think anything can change fundamentally. What we are seeing today is purely because of short covering."

The rupee remains the worst performing of Asia's 10 most-traded currencies.

Markets still uncertain........

There is no downtrend without a pullback and that's what happened today. The market recovered some ground after seven days of despair. The pullback rally lost some steam mid-session, but frontline indices managed to close with handy gains. The Nifty gained just over 30 points to close just above the 4,800 mark, while the Sensex ended the session at 16,065, up 120 points.
Truth be told, the market had gotten very oversold — both equities and the foreign exchange. Therefore, a pullback was always going to be very technical in nature. Also, the market is very close to expiry, so maybe some of the shorts might have closed out as well and booked profits.
The same set of stocks, which were beaten down most, gained today. Therefore, there was no great leadership in this “upmove” at all. So, everything that the screen is showing is suggestive of a technical respite to the one-way fall. Well, it might become more if global markets generate some positive newsflow.
Unless there is some massive global event, can’t see how markets can turn the corner quite so easily.

Welcome to My Blog :)

Stock market is always changing, competitive and unpredictable. Stock market is driven by supply and demand rule. There are continuous fluctuations in the stock market, where the stocks within it rise and fall regularly. Many people mistakenly believe that when a specific stock is rising, then it will continue rising in the proceeding period and vice versa, and they make decisions based on this belief. But beliefs can be nightmare until you have studied market thoroughly and you know better technical aspects of the stock market. Its always necessary to invest in market with experts advice so that you can get good returns from your hard earned money. My blog is initiative for traders who are trading in Stock market & Commodity market so that they can get best of market updates.