Money will come and go; after all, you just have a life to live –why not live it to the fullest? Sounds perfect and positive, isn’t it? Unfortunately, if you are living your life like that, not everything is positive and perfect. You will realize the perils of reckless spending when you face a financial emergency. I have done it in my initial investing life– reckless spending – but soon realized that you cannot discount uncertainties in life. A sudden drop in my monthly cash flows turned my life into a nightmare. So, when i write my sixth principle, I have my own experiences to back it up!
The principle is not very hard to follow – never take money from your savings or borrow temporarily from your friend’s pocket to buy a little more luxury. Be it a slightly bigger house that caught your wife’s imagination or the latest electronic gadgets.
WHERE IS THE PROBLEM?
The lifestyle you want to maintain depends on three factors:

• The circumstances in which you were born and bought up
• The kind of friends you have
• The place or community where you live.

Have you asked your parents about how they started their life? They din’t have a big car or latest electronic gadgets. They probably didn’t live in the big apartment or villa they’re living right now. They built everything brick by brick. It would have taken a lot of time, effort and disciplined life to get to where they are now. That’s exactly the way you should also start off. If you try to achieve all the life’s goodies in very short time, there’s every possibility that you’ll borrow a lot of money assuming that you’ve the ability to re-pay everything in 5 or 10 years and chances are that you’ll get into debt trap should there be an unexpected fall in your monthly income.
Another problem amoung youngsters is that spending habits are greatly influenced by their friends and colleagues. Bank balance doesn’t matter, the car or home doesn’t matter – what matters is the answer ‘yes’ to this question- Are you better off than your neighbor , friend , relative or colleague? If the answer is yes, you are confident, you feel happy. Or else – you stretch beyond your limits to maintain yourself the standard of living that your friend has! You will over borrow, over spend or do something to satisfy your ego. This category of people falls into the trap of personal loan providers. Personal loans are easy to get. There is less documentation and there are no restrictions on how you use the money. Since money comes in quickly with minimum documentation, you won’t mind the higher rate of interest.
Another reason for reckless spending is that these days, a lot of technologically advanced gadgets and appliances are introduced into the market that drives everyone crazy. Financial schemes are introduced by institutions which would seem like a very simple deal. These schemes are advertised in such a way as to lure customers. Such facilities tempt us to spend more. When you buy into such schemes, what you are actually doing is getting into the finance trap. I am sure 99% of people reading this would have done this in some form or other.

That’s principle 6 for you. It’s always wise to stay within your limits.
You may like these posts:

INTEREST
Interest, usually expressed in terms of a percentage, is the additional amount you pay for using borrowed money or the return you get when you invest it with an institution like a bank.Its also the compensation you can demand if someone delays a payment that’s due to you. If you think clearly, the two concepts we discussed earlier viz, time value of money and compounding were based on the concept of interest rates.In this post we are discussing certain practical scenarios where interest rates can baffle you. It’s discussed under two heads
1. Interest payments
2. Interest incomes.
INTEREST ON LOANS
Interest rates are always tricky.  In most of the cases, interest rates advertised by the banks are not the actual rate of interest you pay. It’s something more than that.
Trap 1.
When you apply for a loan, there are a lot of financial charges you need to consider before deciding whether to avail it or not. For example – you are offered a loan for Rs.2 lakhs and your EMI works out to say, Rs. 18000 with 2 EMI’s payable in advance. Effectively, you are getting only Rs 164,000 in hand. But since the interest rate is calculated as if the entire 2 lakhs is given to you, the rate of interest you pay is actually very high.
Is that all? No. The bank will also deduct a processing fee of 1 % of the ‘total amount’ ie. Rs 2000 for a 2 lakhs loan. So on net, you get Rs 162,000.
Trap 2.
You are offered the same loan for reducing balance interest. You feel light thinking of the fact that interest is charged only on the balance outstanding. But look closer – reducing balance can be on monthly basis, half yearly basis or on Annual basis. If it’s on annual basis – your interest is calculated on the amount outstanding at the ‘beginning’ of the year. So, you keep paying interest on a higher amount even though your loan is decreasing every month. This pushes up the effective rate of interest you pay.So always confirm whether the reducing balance is on annual basis or half yearly basis.
Trap3.
Higher loan pre-closure charges. The bank would like you to pay your EMI’s regularly. If you do that, the bank likes you so much that on the basis of that regular loan track, they will sanction a second loan if you want. But – if you try to close off your loan liability before the stipulated loan period – the bank will charge an additional amount of 3% to 4% on the outstanding principal. They don’t want their customers to be ‘Too regular’. strange isn’t it?. That’s the way bank deals with it’s customers. If you try to be too good , you’ll be fined This preclosure charge you pay effectively raises the cost of your loan.
The solution-
The best way to deal with these traps is to stop comparing the interest rates and instead, compare the EMI’s and compute the total amount going out of your pocket including processing fee and pre-closure charges. This will give you the right picture of which loan is actually right for you.
INTEREST INCOME
The principle to be applied is quite simple – The earlier you get it, the better it is.
This principle will help you to compare different offers. For example – A bank offers 8% P.a  interest on FD , payable annually. NSC also offers 8% P.a but, payable half yearly. You get another offer on FD which pays interest at 8% p.a – payable monthly. Which is better? The one you get on monthly basis, of course!. Why? Because, the bank’s effective rate is 8% , the NSC’s effective rate is 8.16% and the third option of FD gives you an effective annual interest rate of 8.30% !
How? Let’s calculate with an example –

• Let’s assume that you have 2 lakhs with you.
• The first bank would give you 8% – annually so, you receive an interest income of Rs.16,000 at the end of one year.
• Suppose you depoited the same with NSCThey would give you  8% -half yearly. So, at the end of 6 months you get Rs 8,000 which can be again invested for 8% interest for 6 months whch gives you an additional interest of Rs. 340. So, the total interest you receive is now Rs 16,340. effective rate – 8.16%
• Similarly , when you work out 8% interest received on a monthly basis the effective interest rate would workout to 8.30%
• You may like these posts:
  
  Financial Discipline for all:: Principle 1.Finding money
  Financial Discipline for all :: Principle 2.Time value of money
  Financial Discipline for all : Principle 3. Compounding

   
   
   

When asked to name the greatest mathematical discovery, Albert Einstein, one of the most influential and best known scientist and intellectual of all time replied – “compound interest”.

Let’s try to understand why he said so with a very simple example:

• Jerry starts saving when he turned 25 and invests Rs 50,000 every year. He earns a return of 10% every year.At the end of ten years; he has been able to accumulate Rs 8.77 lakh. After that, he dosen’t invest Rs 50,000 anymore. He leaves that investment there until he’s retires at 60. At that time,  he would have accumulated around Rs 95 lakhs .
• Tom, had fun and lived his first few years spending on all kinds of things and did not think of investing regularly. At 35, he starts to invest Rs 50,000 regularly every year until he retires at 60. I.e. for 25 years. But, he would have managed to accumulate only Rs 54.1 lakhs which is around Rs 41 lakhs less in comparison to Jerry.

5 simple points spell out from this story:

• Even by investing two-and-a-half times more than Jerry,Tom has managed to build a corpus which is 43% less!
• Why? Because,Jerry’s Rs 5 lakhs was allowed to compound for a longer period of time than Tom’s.
• As the fund grows, the impact of compounding is greater.Jerry starts at 25, accumulates 50,000 for ten years, stops at 35 and then, his 8.77 lakhs (5 lakhs + Interest) is allowed to compound for 25 years till he’s 60. Whereas Tom starts at 35 and invests Rs 50,000 for the next 25 years, accumulates 12.5 lakhs (50,000 x 25) only to get 54.1 lakhs at 60.
• Now let’s assume that Jerry had allowed the fund to compound for only 20 years i.e.  Till he turned 55. At 10% return every year, he would have accumulated an amount of around Rs 59 lakhs. By choosing to let his investment run for 5 more years, he accumulates Rs 45 lakh more.
• Essentially, compounding is the idea that you can make money on the money you’ve already earned.

Compounding is very powerful.As Napoleon hill has said- “make your money work hard for you, and you will not have to work so hard for it” To take advantage of it, you have to start investing as early as possible.The earlier you start, the better it gets.
Easily said ! isn’t it?
I know it generally doesn’t work as i said. Because at 25, most of you haven’t drawn a plan to invest 50,000 a year. Even if you’ve done it , somewhere down the way , you’ve missed to add to your corpus regularly year after year. And , due to some emergency that crept in, you took back some amount from the corpus and din’t let your money grow !
So , how can a regular person use it to his/her advantage? Always remember to reinvest interest or dividends received on your investments. Over a period of time, such small amounts will add up to a tidy sum.
FREQUENCY FACTOR IN COMPOUNDING
The frequency of compounding is a major factor that that influences the compounding effect. The shorter the compounding frequency, the earlier your interest is re-invested and thus you earn more interest and your money grows faster.
Here’s more examples:

• Savings of Rs 2500/- per month (Rs.30000 Per year) with 15% return will be worth Rs. 15028707/- (1.5 Crores) after 30 years. Yes, this is not typing error. It will be worth Really 1.5 Crores.
• Savings of Rs 2500/- per month (Rs.30000 per Year) with 15% return will be worth Rs. 30400370/- (3.04 Crore) after 35 years.

COMPARATIVE CHART.
Here is a comparative chart for you to understand.
Let’s assume that you invest Rs 10,000 annually. Your retirement age is 60. Let’s also assume that the interest rate you get is 10%.
At the age of 60 you will have -

• 49 lakhs -if you had started investing from age 20.
• 30 lakhs -if you had started investing from age 25.
• 18 lakhs – if you had started investing from age 30.
• 11 lakhs – if you had started investing from age 35.
• Just 6 lakhs – If you start at 40!! Take note of the impact.

Oh! That’s a huge difference! Now that you realized it late, what can you do? You can start now, invest more and reach the target of 49 lakh at age 60. This would mean more hard work and budgeting for you.   Let us see how much more you would need.
To get 49 lakhs at age 60 –

• Invest 10,000 annually – at age 20
• Invest 16,500 annually – at age 25
• Invest 27000 annually – at age 30
• Invest 45,000 annually- at age 35
• Invest 78,000 annually – at age 40!!

Generally what I find is that most of the Indians start thinking of saving and investing at the age of 30-35. The above calculation is made assuming that the interest rate you get is 10 percent. But the average interest rate of banks is less than that. I hope the picture is now clear for you. The more you delay, the more you need to invest.

Hope you have understood the concept of compounding and how it impacts your savings. That’s principle 3 for you.
You may like these posts:

The best money advice anyone can ever give you is the “time value of money” concept . It is a vital concept in finance. Every financial decision involves the application of this concept directly or indirectly.The calculation of time value involves simple mathematics and it’s easy to calculate. Since this topic is a very important to everyone, we put it down as principle number two.

ENTER-TIME VALUE OF MONEY

The principle is – Rs 100 today is more valuable than Rs 100 a year from now. The reasons for this is quite simple to understand -

• First, since the cost of living goes up , your money will  buy less goods and services in the future .So, today, money has more value or the purchasing power of your money is more
• Second, if you have that money today, you can invest and earn returns.When you receive the money at a future date instead of receiving it today, you lose the interest or profit you would have made, had this money been with you now
• Third, you prefer to have money today since the future is uncertain.

EXAMPLE :

Lets’s assume that you are  25 years old. You have Rs.2500 with you now. You  can either put it in bank FD or buy yourself a new dress. Now, let me further assume that you opt for buying new dress.The reality is that you are spending far more than that Rs 2500. How? Let’s try to calculate the real cost of not investing that money.
FV = pmt (1+i)n
FV = Future Value
Pmt = Payment
I = Rate of return you expect to earn
N = Number of years

HOW TO SOLVE THE EQUATION?

N = Number of years invested - The money you’ve spend on a dress is lost forever. That means,  that  Rs 2500 could have compounded in the bank for atleast 35 years.  How did i get that ’35′ figure? I assumed that you’ll retire at 60 and since you are 25 now, there’s 35  years left. let’s substitute 35 for “n” in the equation.
I= Rate of return expected – The ‘I’ in the formula stands for the expected rate of return. Since  bank fixed deposits would pay around 8% and   stock markets have returned an average of 15 %- 17% ,  Let’s assume you would earn some where in between – an average of 10% rate of return. So, we’ll assume  ’I’ as 10% .

PMT –  is the value of the single amount you want to invest (in this case Rs 2500).
Now substituting the figures, our   formula would be –  FV = 2500 (1+.10)35.
Enter 1.10 into your calculator (this is the sum of 1+.10). Raise this to the 35th power. The result is 28.1024. Multiply the 28.1024 by the pmt of Rs 2500. The result (Rs 70,256 ) is the true cost of spending the Rs 2500 today (if you adjusted the Rs 70256  for inflation of 6 % , it would probably work out to about Rs 9150  That means your real purchasing power would increase approximately 4 fold).
Now,  after realizing the actual cost of spending Rs 2500,   would you prefer to buy a dress for Rs 2500 today or Rs 9150 in the future. The answer is entirely personal.
Once you understand this vital concept,  you would realize that all those bits and pieces of money you spend unnecessarily are costing you thousands in future wealth. This is why time value of money is considered as the central concept in finance.

MORE EXAMPLES..

Future value of money –compounded annually.
You deposit Rs 50,000 for 5 years at 5% interest rate compounded annually. What is the future vale?

• FV= PV ( 1 + i ) ^N
• FV= Rs. 50,000  ( 1+ .05 ) ⁵
• FV= Rs. 50,000  (1.2762815)
• FV= Rs. 63,815.

Future Value of money – Compounded Monthly
You deposit Rs 50,000 for 5 years at 5% interest rate compounded monthly. What is the future value?
(i equals .05 divided by 12, because there are 12 months per year. So 0.05/12=.004166, so i=.004166)

• FV= PV ( 1 + i ) ^N
• FV= Rs. 50,000 ( 1+ .004166 ) ⁶⁰
• FV= Rs. 50,000 (1.283307)
• FV= Rs. 64,165.

GOING BACKWARDS.

Present Value of money – Compounded Annually
You will receive Rs 50,000 5 years from now.  How much money should you get now instead of Rs 50,000 5 years later if the interest rate is 6%?

• (i=.06)
• Rs.50,000 = PV ( 1 + .06) ⁵
• Rs.50,000 = PV (1.338)
• Rs.50,000 / 1.338 = PV
• Rs. 37,370.

Present Value of money – Compounded Monthly

You will receive Rs 50,000 5 years from now.  How much money should you get now instead of Rs 50,000 5 years later if the interest rate is 6% calculated on monthly compounding basis?

• Here , (i equals .06 divided by 12, because there are 12 months per year so 0.06/12=.005 so i=.005)
• FV= PV ( 1 + i ) ^N
• Rs.50,000 = PV ( 1 + .005) ⁶⁰
• Rs.50,000 = PV (1.348)
• Rs.50,000 / 1.348= PV
• Rs. 37,091.

KNOW IT

• A rupee received today is greater than a rupee received tomorrow because money has ‘time value’
• The time value of money is the compensation for postponement of consumption of money. It is the aggregate of inflation rate, the real rate of return on risk free investment and the risk premium.
• ‘Time value of money’ can be different for different people because each has a different desired compensation for postponing the consumption of money.

That’s interesting! This is one topic everyone will read very carefully because it all about finding money! Imagine that you found Rs 1000 between the pages of an old book on the shelf. You kept it some months back and forgot about it. How does it feel? Even if that money was never found, you would have still lived with what’s left in your wallet without even bothering where it disappeared. isn’t it?
This is the principle behind accumulating savings from your income. Set aside your target savings and forget about it as if it were not there and live with the rest. It’s not easy as you think,but definitely not impossible. And , it’s never too late to apply this principle !

To most of us Savings = Income (or salary)- Expenses . However, this formula doesn’t work ( as you would have already experienced ) since when money is in your pocket, you get trapped by advertising tricks like discount offers on Clothes or new gadgets which tempts you to spend more. It’s difficult to control expenses. As a result, your savings never hits the target. If what we said holds true for you and you seriously want to save a fixed 10% or 20% of your take home salary each month, you need a different approach to savings. We suggest Robert Kiyosaki’s method from his famous book ‘Rich Dad Poor Dad’.
What kiyosaki said is very simple. Instead of trying to limit your expenses every month, first deduct an amount which you intend to save and keep it in a separate account so that you live with only what’s left. So our formula has to be modified like this :

INCOME – SAVINGS(INVESTING FUND) = EXPENSES

Smart ! isnt’ it ? This formula forces you to “pay yourself first,” before the other expenses. That way you know your savings will not get lost in the daily grind of living expenses.
The other side of this formula is a forced discipline. You hold your expenses to no more than 90% of your take home pay.
You can even automate the process by having 10% (or any amount you want) deducted from your Salary account and transfer it into a separate account or fixed deposit, recurring deposit or other savings instrument .
So that’s the basic trick to find money!
But, that’s not all. You can also find money from many other sources. For example, Instead of going for parties and shopping, you can set aside extra payments like bonuses, commissions and so forth into your savings Fund.
So try to make it a habit to set aside 10% ( or what ever percentage you would like to set aside) and live with rest. If you do that, you have a great chance to succeed.

MORE TIPS TO CONTROL YOUR EXPENSES:

SPEND LESS

This is one simple method to save more. Sit back and analyse your spending habits and look where you spend more unnecessarily. Once you have identified certain areas of high spending, try to find ways to cut back. Take a decision that you’ll not spend more than a fixed budget.

MAKE A BUDGET

A budget is a very important tool to control expenses. Be it individuals or corporates. A budget is nothing but a chart or a statement that shows how much you earn and hence, how much you can spend.

PAY OFF YOUR LOANS

Loans carry high rates of interest. If you have a lot of EMI’s to pay, it naturally reduces your capacity to save more. It also shows that you’re living on high levels of debt which is not a right thing to do. If you have loans, first look for ways to pre-pay it as soon as possible. Another common area where you could lose a lot of money is credit cards. Credit cards companies slap huge interest for delayed payments.

TRY TO AVOID LATE PAYMENTS

Any bills – like electricity or telephone or internet or credit card has a deadline within which you are supposed to pay the dues. Unnecessarily delaying such payments results in payment of fines. Such expenditures can be avoided if you can get organized on your bill payments. Make a list of monthly payments and the deadline within which you are supposed to pay. These days banks also allow their customers to automate or link their periodic bills to their savings account or credit card.
Credit cards over dues need particular mention here. Credit card companies slap huge interest and fines for delayed payments.

THINK BEFORE YOU BUY

Do not buy anything on impulse. Before laying your hands on any fancy thing which is up for sale, think if it’s really needed.

SHOP SMART

Most of the big brands will be available at throw away prices once there’s an off season sale or sales promotion drive. For example if you want to buy an expensive watch, wait for the company to announce some discount offers. All the big brands announce discount offers at least twice a year.

KEEP DISTANCE FROM LAVISH FRIENDS

High spending lavish friends are may hinder your route to save money. It’s natural for you to get tempted by such friends to buy new gadgets every year. They may be nice guys and may not harm you in anyway, but to keep up with them , it may become necessary for you to spend high ( for example latest electronic items or cars , parties, expensive dresss etc ) which other wise ay not be required !

SAVING ENOUGH IS HALF THE JOB DONE

If you have saved enough,good. but saving is only half the job done.You have to give your savings the right opportunity to grow. Putting all your funds in fixed deposits or fixed income bonds is not a good idea. Your investments should have the right mix of equities, bonds, gold and fixed deposits.Deciding the ‘right mix’ of investments is something an investment expert can do. It depends on an individual’s age and risk profile.

KNOW IT

• Finding money is a matter of making it a priority.
• Pay yourself first and learn to live off with what is left. You will always have money with you. It may be difficult at first. But gradually, you will see your fund growing and that would encourage you to stick to it until you reach your goal of finding enough money.
• Bonuses and extra pays you get are opportunities to buy the latest iphone or Blackberry but a prudent option would be to create a savings out of it
• You can save a lot of money if you control your expenses.
• As time goes by, your small saving will also give you additional money in the form of interest. Finally, you’ll find that you’ve done a great job,creating more money than expected.

Take our word. It’s fool proof !!

Millions of people fall prey to financial frauds;millions suffer from financial imbalance despite earning good money;even billioners have committed suicide due to financial problems- The root cause of all this is failure in handling their money in an informed manner. People from all walks of life face this problem of financial indiscipline.In the following articles,we detail the basics one must follow while handling their money in order to stay safe and have peace of mind. Some are concepts, while others are practical tips.

• The story of Adolf Merckle

• Principle 1.Finding money !

• Principle 2.Time value of money

• Principle 3. Compounding

• Principle 4. Interest rates.

• Principle 5: Cash reserves and idle cash.

• Principle 6: Never stretch beyond your limits.

• Principle 7. Don’t try ‘Get rich quick’ schemes.

• Principle 8. Inflation

• Principle 9. You are not safe with fixed deposits alone.

• Principle 10. Have a Monthly budget

• Principle 11. Utilize credit cards wisely.

• Principle 12. Lending money to friends and relatives.

• Principle 13. Signing surety for friends.

• Principle 14: Multiple streams of income.

• Principle 15. Do not spend recklessly

• Principle 16. Avoid financial litigations

• Principle 17. Pay your taxes.

• Principle 18. Safeguard your documents.

• Principle 19. Insurance is a must.

• Principle 20. Know your net worth

• Principle 21. Think of retirement when you’re young!

• Principle 22. Diversify your investments.

• Principle 23. Valuation is the key to right investments.

• Principle 24. Gold – A must in your portfolio

Indian indices:

Welcome to the ‘Weekly Market Wrap’ for July 11, 2014 where key benchmark indices slumped last week as investors booked profit after a strong rally in the past few months. An upward momentum in Indian shares kicked off after BJP led NDA government won a thumping victory in general election in May this year. Investors build up position in the equity market ahead of the Union Budget 2014-15 on expectations of far-reaching reforms.
Modi government's maiden Budget on Thursday, 10 July 2014, fell short of the hype. It lacked any major policy reforms and roadmap for reduction of subsidies. But Narendra Modi's administration earmarked substantial sums for new infrastructure, which should revitalise growth. Finance Minster Arun Jaitley made a number of announcements in Budget such as a proposal to increase in foreign direct investment in insurance and defence manufacturing, a sharp increase in plan expenditure, measures to boost long-term financing for infrastructure by banks and provided clarity on taxation with respect to foreign portfolio investors. But, market expectations that the Finance Minster would scrap the law on retrospective taxation were not met. Government spending on plan expenditure was substantially increased to support growth.
The S&P BSE Mid-Cap index fell 670.51 points or 7.02% to 8,875.24 and the S&P BSE Small-Cap index fell 819.92 points or 7.80% to 9,688.11. Both these indices underperformed the Sensex.
The S&P BSE Sensex fell 937.71 points or 3.61% to 25,024.35. The 50-unit CNX Nifty fell 292 points or 3.77% to 7,459.60.

Weekly market trend from July 07 – July 11:

July 07- India's NSE index rose on Monday to a third consecutive record high, while the benchmark BSE index surpassed 26,000 points, riding on gains in technology stocks ahead of Infosys Ltd's results and hopes of a fiscally prudent budget. The BSE Sensex rose 0.53% and NSE Nifty gained 0.46% for the day. The Sensex closed at 26100.08, up by 138.02 points, while the Nifty rose 35.55 points to close at 7787.15
July 08- Indian shares fell more than 2 percent on Tuesday, marking their biggest single-day fall in over 10 months as a lower-than-expected railway budget outlay sparked worries about subdued government expenditure in the federal budget due on Thursday. The BSE Sensex fell 1.98% and NSE Nifty slipped 2.11% for the day. The Sensex closed at 25582.11, down by 517.97 points, while the Nifty fell 163.95 points to close at 7623.20
July 09- India's NSE index marked a 1-1/2 week closing low on Wednesday, continuing to retreat from the record high hit in the previous session, as investors pared positions in blue-chips such as Tata Motors ahead of the federal budget. The BSE Sensex fell 0.54% and NSE Nifty slipped 0.50% for the day. The Sensex closed at 25444.81, down by 137.30 points, while the Nifty fell 38.20 points to close at 7585.00
July 10- Indian shares edged lower in a volatile session on Thursday as Finance Minister Arun Jaitley's pledge to narrow the fiscal deficit and open up sectors such as insurance and defence were offset by disappointment over the lack of major reforms. The BSE Sensex fell 0.28% and NSE Nifty slipped 0.23% for the day. The Sensex closed at 25372.75, down by 72.06 points, while the Nifty fell 17.25 points to close at 7567.75
July 11- India's NSE index fell 1.4% on Friday to post its biggest weekly loss since March 2013 as blue chips were hit by a range of factors including profit-taking and disappointment over the budget's lack of specifics. The Sensex closed at 25024.35, down by 348.40 points, while the Nifty fell 108.15 points to close at 7459.60

Global indices:

Top Losers: CAC40 down 3.75%, DAX100 fell 3.50% and FTSE100 slipped 2.82%.

Sectoral and stock screening:

Top Gainers: S&P BSE FMCG up 1.47% and S&P BSE IT up 0.73%
Top Losers: S&P BSE Power down 10.16%, S&P BSE CG slipped 9.98% and S&P BSE Realty fell 9.18%
Looking at the 'A' group stocks, the top three gainers of the week were – Crisil up 11.28%, IDFC up 9.52%, Sun Pharma up 6.84%
Top three losers of the week were - Unitech fell by 26.93%, GMR Infra fell by 22.75% and JP Power down 21.40%.

FII/MF activity

The foreign institutional investors (FIIs) have been the net buyers of the Indian stocks to the tune of Rs2091.93 crore and the domestic investors bought Indian shares worth a net of Rs131.60 crore as on July 09, 2014.

Market outlook for the coming week!

In the coming week, selling may continue amid lack of any major event. There could be some stock-specific action based on April-June 2014 corporate earnings announcements.
Macroeconomic data, trend in investment by foreign portfolio investors (FPIs), trend in global markets, trend in other global emerging markets, the movement of rupee against the dollar and crude oil price movement hold key.
On the macro front, the government is scheduled to announce the rate of inflation based on the wholesale price index (WPI) for the month of June 2014 on 14 July 2014.

If you wish to have securities in demat mode, you need to indicate the name of the depository and also of the depository participant with whom you have depository account in your application.
It is, however desirable that you hold securities in demat form as physical securities carry the risk of being fake, forged or stolen.
Just as you have to open an account with a bank if you want to save your money, make cheque payments etc, Nowadays, you need to open a demat account if you want to buy or sell stocks.

HOW TO OPEN A DEMAT ACCOUNT ?

Opening an individual Demat account is a two-step process: You approach a DP and fill up the Demat account-opening booklet. The Web sites of the NSDL and the CDSL list the approved DPs. You will then receive an account number and a DP ID number for the account. Quote both the numbers in all future correspondence with your DPs.
So it is just like a bank account where actual money is replaced by shares. You have to approach the DPs (remember, they are like bank branches), to open your demat account. Let’s say your portfolio of shares looks like this: 150 of Infosys, 50 of Wipro, 200 of HLL and 100 of ACC. All these will show in your demat account. So you don’t have to possess any physical certificates showing that you own these shares. They are all held electronically in your account. As you buy and sell the shares, they are adjusted in your account. Just like a bank passbook or statement, the DP will provide you with periodic statements of holdings and transactions.
Is a demat account a must? Nowadays, practically all trades have to be settled in dematerialised form. Although the market regulator, the Securities and Exchange Board of India (SEBI), has allowed trades of upto 500 shares to be settled in physical form, nobody wants physical shares any more.
So a demat account is a must for trading and investing.
Most banks are also DP participants, as are many brokers.
You can choose your very own DP.
To get a list, visit the NSDL and CDSL websites and see who the registered DPs are.
A broker is separate from a DP. A broker is a member of the stock exchange, who buys and sells shares on his behalf and on behalf of his clients.
A DP will just give you an account to hold those shares.
You do not have to take the same DP that your broker takes. You can choose your own.
Banks are also advantageous because of the number of branches they have. Some banks give the option of opening a Demat account in any branch, while others restrict themselves to a selected set of branches.
Some private banks also provide online access to the Demat account. So, you can check on your holdings, transactions and status of requests through the net banking facility. A broker who acts as a DP may not be able to provide these services.

DEMAT ACCOUNT OPENING COST AND OTHER CHARGES

The cost of opening and holding a Demat account. There are four major charges usually levied on a Demat account: Account opening fee, annual maintenance fee, custodian fee and transaction fee. All the charges vary from DP to DP.
Depending on the DP, there may or may not be an opening account fee. Private banks, such as ICICI Bank, HDFC bank and UTI bank, do not have it. However, players such as Karvy Consultants and the State Bank of India charge it. But most players levy this when you re-open a Demat account, though the Stock Holding Corporation offers a lifetime account opening fee, which allows you to hold on to your Demat account over a long period. This fee is refundable.
Annual maintenance fee: This is also known as folio maintenance charges, and is generally levied in advance.
Custodian fee: This fee is charged monthly and depends on the number of securities (international securities identification numbers – ISIN) held in the account. It generally ranges between Rs. 0.5 to Rs. 1 per ISIN per month.
DPs will not charge custody fee for ISIN on which the companies have paid one-time custody charges to the depository.
Transaction fee: The transaction fee is charged for crediting/debiting securities to and from the account on a monthly basis. While some DPs, such as SBI, charge a flat fee per transaction, HDFC Bank and ICICI Bank peg the fee to he transaction value, subject to a minimum amount.
The fee also differs based on the kind of transaction (buying or selling). Some DPs charge only for debiting the securities while others charge for both. The DPs also charge if your instruction to buy/sell fails or is rejected.
In addition, service tax is also charged by the DPs.

INVESTING

Investing is not just about depositing your savings in the bank every few months. It’s about growing your money. It’s about making your money work for you.

INVESTING IS A LONG TERM ACTIVITY

When you invest, you  buy an asset like shares, mutual funds, gold or real estate when it’s available at a bargain and wait till its price go up. You may have to wait for a long time, say 5 or 10 years to get a real appreciation for your invested funds. So,  investing is a long term activity, you have to wait for your rewards.

IT’S ALSO ABOUT GROWING YOUR MONEY PRUDENTLY.

Money is a weapon that’s to be used very very carefully or else, it can backfire within no time resulting in a total ruin of your life. By being ‘prudent’ we  mean, determining an action or a line of investing that’s practically wise, judicious and careful.
When you look around for opportunities to invest, it’s natural to stumble upon ideas like multi level marketing of certain financial schemes or money chains etc that may seem to be too good an opportunity to make a quick buck. It’s important not get tempted by such investment offers. Any investing decision you take must be practical, legal, safe and capable of creating wealth for you in the long run.

REWARD FROM INVESTMENTS

Investments range from risky types like stocks  to very safe ones like fixed deposits. Depending on the type of investment you’ve made you get return in the form of rent, interest, dividends, premiums, pension benefits or appreciation in value. The more risk you take, the more you earn as rewards.

OBJECTIVES OF INVESTING

Objectives or purpose of investing would be different for different people.  By choosing to budget your expenses, accumulate money, invest that accumulated fund and limiting the amount of debt – you can achieve most of your life’s goals. Normally, a person would invest with one or many of the following objectives in mind:

• A Regular Income
• Creation of wealth
• Preserving his capital
• Planning for retirement life
• Education /marriage of his children.
• To start a business

THE PROCESS OF INVESTING

The process of investing is quite simple-
Depending upon the money you got, you will have to short list the type of asset suitable for investment.
Next, you’ll have to assess yourself and find out how much knowledge you have in that particular asset category. This assessment will tell you where you stand right now, and the amount of preparatory work you need to do before investing you money in it.
Once you gain enough knowledge, try to draw a plan to invest systematically – get access to the right information, plan properly and make the right choice.

REASONS TO INVEST

Why does investing acquire so much of importance? That’s because of three core benefits of investing-
First, the probability that you’ll beat inflation.
Second, the probability of achieving your financial goals quickly.
Third, the probability of building something for your next generation.
An investor’s  main focus should be to beat inflation.  Inflation and it’s after effects were discussed in our previous articles.  You’ve to invest in such a way that the rate of return beats the inflation rate. If you don’t do that, it eats away your returns. Unless your rate of return beats the inflation rate, you’re not growing your investments.We said ‘probability’ because, investments carry the risk of not hitting the desired targets. When you set higher targets ( higher returns) the risk of not achieving it is also high.
Apart from achieving financial goals and securing your children’s future, another important reason would be to plan for your retirement. When do you plan to retire? At 60 or at 50? You can opt to retire when you have a sufficient amount of wealth so that, you can maintain the standard of living that you are maintaining today. The earlier, the better!
In the coming lessons, we take to you through different aspects of investing. Each lesson has a concept to share. At the end, you’ll know what investing is all about, why it’s essential to invest early, different avenues to invest etc..In our next article , let’s see why investing is the most important activity one should have.

The markets ended on a high note last week after three weeks of sideways movement. It was the hopes built around the first budget of Modi government that made the sensex and the nifty rally 862 and 242 points respectively.
Going ahead, the Big day is here. Millions of people, corporates and businessmen are waiting to hear what the finance minister has worked out for each one of them so that they may retain the hope of good days ahead. A friendly budget which will not impact the living standards of the people negatively and which will kick off the growth process will immediately spur an upward movement that may crack the 27,000 level (sensex) and 8,000 levels (nifty) for the first time. But on the other had if the budget turns out to be a disappointing one (especially for the FD investors) we’re going to witness a plunge that may dip below 23,500 (sensex) and 6,500 (Nifty). Finally, if the budget happens to be an ordinary one which leaves some happy n some sad, it’s going to have a mixed reaction with a short rally on the budget day and then a retreat back to where we’re standing now.

Now, we can’t really say what exactly is going to come out of Mr. Arun Jaitley’s box on July 10^th. So we suggest investors to watch the game from the sidelines. It will be prudent for those who have profitable positions in cash market to liquidate a portion and take some profits home. Investors having loss positions may hold on to their investments for a gamble – should the budget spark a rally, they might get an opportunity to off load their investments at a profit or at least at par. Remember that not all is well with the fundamentals and Mr. Modi had earlier hinted about taking tough steps that may not impress the common man. Apart from the budget, the first quarter earnings results will also kick off this week with Infosys results on July 11th. For investors looking for opportunities in banking sector , Indian overseas bank looks fairly valued at the present market rate of Rs 84.
Expect a volatile week ahead. We expect the sensex and the nifty to trade in a range of 25,000-26,500 and 7,550-7,890 for the nifty assuming that the budget is going to be a reasonably good one.

Hi there,
After interacting with some beginners, I found 3 very silly mistakes that’s so common. So, i thought i should write about that in this article, with the help of an example.
– You buy shares in company ‘x’ of IT sector. The shares move up and you get a decent profit. From that moment, you are tempted to look more deals like that., preferably from the IT sector- since you get a feeling the IT sector is a sure bet !
Not only that, in the process of trying to find such deals, you tend to overlook other investment opportunities that come your way – a new mutual fund offer or a low  rate in gold ETF or an opportunity to lock in a  debt fund that’s available at a higher rate of interest.

• This is the first point – as long as your investment remains in a few stocks or markets, you may be missing on other opportunities. It’s important to have an overall view of the economy and financial markets regularly- and not just stock market alone.Beginners tend to concentrate on stocks alone and in the process, they forget to take note of what’s going around in the financial world. For example – in 2010-11, it was gold that out performed all other asset classes. Those who had an overall knowledge about financial markets would have invested a part of their funds in gold.

Continuing the above example – let us assume that the buy price of that IT stock was Rs 150 and you sold it for Rs 225 in one month, thereby making a gross profit of Rs 75 per share. You made a killing on that stock. Every time that stock drops to Rs 150, even if it’s a year or two later, you’ll be tempted to buy that stock based on the previous experience. That ‘Rs 150’ remains in your memory as a sweet spot to buy. You tend to forget the fact that financial fundamentals of the company might have changed by then.

• So, that’s my second point – financial fundamentals of a company keep changing. That’s the reason why result announcements create such hype in the stock markets. It’s important to keep track of the fundamentals of the company every quarter. Do not buy a share just because it came back to the previous levels. This time, may be, there’s some problem with the fundamentals.

Let’s continue our story – after valuating some IT companies including the stock you previously owned, you have now short listed 2 companies – one trades at Rs 200 and the other trades at Rs 600. A common belief of beginners is that Rs 200 stock is 3 times cheaper than a Rs 600 stock. That’s wrong. For example, the company that trades at Rs 200 may have 6 million shares while the other one that trades at Rs 600 may have only 2 million shares. So the market capitalization of the two companies is the same. So the solution to this is in finding out the P/E of the stocks. The price of the stock is divided by the earnings per share and that tells you which company is more expensive. A stock that has a P/E of 20 is definitely priced lower than a stock that has a P/E of say, 65.

• That brings us to our 3^rd point – price per share is not the criteria to decide whether a stock is cheap or expensive. You need the P/E of the stocks.

From my interaction with freshers, these are 3 of the most common mistakes that they commit.
Bye for now!!

Commandment 1: Don't attempt to time the market

Timing the market is no guessing matter. To the little investor, timing the market is like taking a random walk. Most people only recognise the correct path after already having set foot on the wrong one. One exception to this is “bottom-fishing”, an approach to buy stocks that you want in your portfolio at prices below the prevailing levels. This entails biding your time and buying into a market downturn before the others do (the age-old philosophy of buying low, selling high). The downside of this approach being that the stock you want may never see the downside you expect.

Commandment 2: Don't try to outguess the market

Market psychology is for shrinks, not for couch potatoes like we humans. What captures the imagination of the market is transient. This means that what is “in” today is “out” tomorrow. Most people only recognise the pattern after it has become apparent to almost everyone else and is too late to act upon. For example, if investment in technology appears to be the current flavour, you are probably already too late to cash in on the trend. In this instance, you should only invest in technology as part of a long-term balanced approach.

Commandment 3: Treat investing like marriage--go for the long haul

Short-term investing could go either way. Invest for the long term. Almost all market pundits and investment studies show that stock investing should be part of a long-term strategy, lasting for five to ten, or even 20, years or longer. Beware that not every year will result in a positive return on your investment. However, over time the plus will likely overwhelm the minus by a substantial margin.

Commandment 4: Stay clear of broker's advice, hot tips and "multibaggers"

Every portfolio advisor is not Sharekhan (J) who swears by sound investment principles. Think. Wouldn't most brokers be tempted to make their living by goading their clients to constantly move in and out of positions, thus garnering commissions? This is diametrically opposite to Commandments 1, 2 and 3. For most people, stock advice is like a game--of darts! Only accept advice if the person has your financial interest in mind and is not making a living by selling your stock. Of course never buy from someone who calls on you and gives you advice. J

Commandment 5: Almost always invest in blue chips and blue chips-to-be

Do invest in companies that are considered blue chips. These include not only the BSE 100, but also the others that are slowly stepping into the big league. Invest only in established companies with a good track record. Beware that not every blue chip will rise after you buy it, and that even these otherwise stellar performers will have their good months/years and bad months/years. But over time, the fluctuations will even out and you would be left with a considerable net plus. Also invest in companies that have a good record of declaring dividends (and if you find the solitary one that increases its dividend pay-out each year...you know what to do).

Commandment 6: Prefer steady installment-like buying of stock to buying at one go

Investing should never be done in panic or be treated as an emergency. Purchasing your favourite few is best accomplished at a steady rate over time, so as to avoid the ups and downs of the market. This is called rupee cost averaging and is one of the safest approaches to investing. It works just like any other habit: you buy, regardless whether the price is up or down, until you reach the desired number of shares of that stock.

Commandment 7: Diversify, diversify and diversify

Do diversify your portfolio, both within your selected sectors and within the overall industry. For example, don't invest in only technology because it happens to be in vogue but consider the other industries as well.

Commandment 8: No shopping with borrowed money and maintain a core reserve

Never use margin money to buy stocks. You should not invest money you don't have. A simple and basic rule is to not leverage yourself to an extent that when the tide turns against you, all you are left with is nothing.

You never know when a financial emergency might arise. That's why you must keep a comfortable cash reserve in your savings account, so you do not have to tap into your long-term investments. A reserve equal to six months of salary should be just about ideal.

Commandment 9: Set realistic financial goals

Treat a 500% return with as much derision as you would a 5% return. Decide what you need the money for: To retire early, to finance your kid's college education or to fund your daughter's marriage or just to preserve and build wealth? Whatever the goal you set, make sure it is reasonable and attainable. Expecting too much will only lead to disappointment down the road. Aim for an expected return level that is realistic--not mediocre or overambitious.

Commandment 10: There are 10 more commandments

For those who thought that was the last of the ten commandments I have good news. There's more. Ensure that your portfolio size is controllable (15 stocks is about ideal) and your stocks are well researched. Checkpoints: Is the management quality above board? Does the company have a positive cash flow? Does it have the capability to compete on a global scale? Most importantly, is it shareholder friendly?

Finally, leave your emotions behind when you enter the world of investing. Follow the ten commandments. Time is on your side. Investment success won't happen overnight, so stay focused on long-term returns and avoid overreacting to short-term market swings. Remember, investment success depends on time, not timing.
Sharekhan has the best stocks under its coverage. Invest in them for the long term for healthy returns.

In line with the key identified investment themes (policy push-driven re-rating of construction, power and public sector undertakings, and early beneficiaries of an economic revival, like auto and financial services), we are adding
LIC Housing Finance, 
TVS Motor Company, 
Gabriel India and  
Gateway Distriparks
to the Top Picks basket. We believe that a possible pull-back or correction in these stocks after the recent upsurge would offer an attractive opportunity for investors to accumulate these stocks with a little longer time horizon.

Country's largest carmaker Maruti Suzuki India (MSI) reported a 5.5 percent decline in total sales in March at 1,13,350 units as against 1,19,937 units in the same month last year. The company said its domestic sales declined  by 5.2 percent during the month to 1,02,269 units as against 1,07,890 units in March 2013. Sales of mini segment cars, including M800, Alto, A-Star and WagonR, declined by 11 percent to 40,085 units as compared to 45,047 units in the year-ago month, MSI said in a statement.
The company said sales of the compact segment comprising Swift, Estilo, Ritz rose by 9.3 percent to 28,285 units in March this year as against 25,868 units last year, reports PTI. 12:50pm HSBC's India manufacturing PMI down in March HSBC's India manufacturing PMI declined in March at 51.3 versus 52.5 in February, but remained above the waterline, indicating positive growth. "Growth in the manufacturing sector eased on the back of weaker growth in output and a slowdown in order flows from domestic clients.
By goods, consumer goods firmed, but the production of investment goods remains subdued according to panellists. Looking ahead, the recovery is likely to prove protracted. Meanwhile, inflation eased in March, with the PMI index for input and output prices falling," the HSBC report said.
12:45pm Expert on RBI policy Kunal Shah, fund manager-debt, Kotak Mahindra Old Mutual Life Insurance said, "RBI has maintained status quo as per our and consensus expectations, though not clearly spelled out in policy but RBI is incrementally concerned about sticky growth underperformance." According to him, RBI has hinted that lead indicators do not point to any sustained revival in industry or services & hence believes that slower activity will help disinflate the economy which will support the fight against inflation. "Till these processes evolve RBI feels current policy rates are appropriate and may not require further tightening," he added. "We expect current disinflation process to continue and core inflation to moderate further however sharp fall is unlikely in short-term. Monsoon will be key to watch as it can create short-term volatility in inflation path," Shah said.
12:40pm Rate hike unlikely if inflation does not rise further The Reserve Bank’s policy stance will be firmly focussed on keeping the economy on a disinflationary glide path that is intended to hit 8 per cent CPI inflation by January 2015 and 6 per cent by January 2016, the central bank said. It further said that at the current juncture, it is appropriate to hold the policy rate, while allowing the rate increases undertaken during September 2013-January 2014 to work their way through the economy. Furthermore, if inflation continues along the intended glide path, further policy tightening in the near term is not anticipated at this juncture, the RBI said.
12:35pm RBI says Since December 2013, the sharper than expected disinflation in vegetable prices has enabled a sizable fall in headline inflation. Looking ahead, vegetable prices have entered their seasonal trough and further softening is unlikely. Meanwhile, CPI inflation excluding food and fuel has remained flat. There are risks to the central forecast of 8 percent CPI inflation by January 2015 stemming from a less-than-normal monsoon due to possible el nino effects; uncertainty on the setting of minimum support prices for agricultural commodities and the setting of other administered prices, especially of fuel, fertiliser and electricity; the outlook for fiscal policy; geo-political developments and their impact on international commodity prices. 12:30pm Market falls further, banks extend losses Equity benchmarks extended losses in afternoon trade weighed down by banking and financial stocks.
The Sensex is down 81.76 points to 22304.51 and the Nifty down 20.25 points to 6683.95. India's biggest lender State Bank of India plunged 2 percent while rival HDFC Bank slipped 1.9 percent. Top private sector lender ICICI Bank and housing finance company HDFC dropped over a percent. Shares of L&T, ITC, HUL, Bharti Airtel, Maruti Suzuki, Bajaj Auto, BHEL and Coal India declined over 1 percent.

However, TCS held its early gains, up 2 percent followed by Wipro and ONGC with more than 1.5 percent. Infosys and Tata Motors climbed over 0.5 percent. 12:25pm RBI says Retail inflation measured by the consumer price index (CPI) moderated for the third month in succession in February 2014, driven lower by the sharp disinflation in food prices, although prices of fruits, milk and products have started to firm up. Excluding food and fuel, however, retail inflation remained sticky at around 8 percent. This suggests that some demand pressures are still at play.
12:20pm RBI increases the liquidity provided under 7-day and 14-day term repos from 0.5 percent of net demand and time liability (NDTL) of the banking system to 0.75 percent. It decreases the liquidity provided under overnight repos under the liquidity adjustment facility (LAF) from 0.5 percent of bank-wise NDTL to 0.25 percent with immediate effect.
12:15pm Rajan says the bank may need to push foreign banks to follow subsidiary model. Foreign banks avoid subsidiary route on priority sector norm, he adds.
12:10pm While addressing press conference after an announcement of bi-monthly review, RBI governor Raghuram Rajan said the bank had responded to Election Commission queries on banking licences. "We took Election Commission (EC) opinion on banking licences to stay away from controversy. Bimal Jalan had also suggested getting EC nod for banking licences," Rajan said. He further said the window for differentiated banking licences would be opened soon. 12:05pm Reserve Bank of India kept repo rate, at which banks borrow money from RBI, unchanged at 8 percent and cash reserve ratio at 4 percent. The central bank also left marginal standing facility rate and bank rate unchanged at 9 percent.
12:00pm The market remains volatile after the Reserve Bank of India kept policy rates unchanged that is in-line with expectations. The Sensex slips 15.12 points to 22371.15 and the Nifty declines 4.75 points to 6699.45. About 1174 shares have advanced, 1042 shares declined, and 131 shares are unchanged.   Top lenders State Bank of India, ICICI Bank and HDFC Bank decline 0.5-0.8 percent. Housing finance company HDFC slips 0.66 percent. State-run power equipment maker BHEL drops 1.7 percent, and engineering and construction major L&T is down 1.3 percent.

Media plays an important role in helping political parties interact with voters and most of the parties are now using the print media, television, radio and other social networks like Facebook, Twitter and WhatsApp to convey their messages to their prospective voters.
It is true that this would translate into huge revenue growth for the media industry at large. Also, it is expected that the formation of a stable government at the Centre post-election would result in a series of reforms to boost the economy and this would further enhance the revenue growth prospects of the industry. 
However, the sluggish economic growth and a decrease in consumer spending have strained advertisers, leading them to cut promotional budgets. This has adversely affected the media industry. 
As the election is around the corner, media stocks have become attractive to investors and some of the media stocks have witnessed smart gains since the Election Commission (EC) announced the schedule for the general election on March 5, 2014.
Also, the fast moving consumer goods (FMCG) companies are raising their advertising expenditure, which is expected to further boost the performance of the media companies.
Almost 75 per cent of television advertising is concentrated over just three categories -- FMCG, telecom and auto -- while FMCG continues to dominate television advertising. 

Nandan Chakraborty, MD, Institutional Equity Research, Axis Capital recommends investors to have a judicious mix of defensives and cyclicals in their portfolios now.
Sharing views on the current market rally, Chakraborty told CNBC-TV18 that in upmoves, consumer discretionary and BFSI stocks rise first. He expects 15 percent growth in Sensex levels by year-end. He sees big upside in select engineering and infrastructure  stocks.
Also, certain pockets of banking stocks may see large upmove going ahead. From the PSU banking pack, he is positive on  SBI  and PNB  . One can bet on auto ancillary stocks like  Motherson Sumi  in the midcap auto space, he added.
 Further, he added that earnings upgrade is seen only for companies with improvement in balance sheet, he said. Meanwhile, he expects further appreciation in the Indian currency.