Switch on a news channel when it is talking about the market and you are likely to hear a discussion about what the stock market trend was today and experts sharing their inputs on the Indian stock market trend analysis. But to make any sense of those discussions, it is important to know the trends in stock markets and their impact on our trading decisions.
What is a trend in stock market parlance?
Most investors look at the stock price chart and see those small lines going up and down. However, beneath all the daily fluctuations (or no movements sometimes) is a particular market trend.
A trend is nothing but the general direction of the movement of the stock market or an asset’s price. Timing your transactions plays a key role in making money in the stock market. Correct understanding of what is the current trend in the stock market enables the investors as well as traders to make their buy or sell decisions.
When the market is moving upwards (stock prices are on the rise) it is called a bullish trend. On the other hand, when the market moves down south and stock prices fall considerably, it is referred to as a bearish trend.
How to know the stock market trend today?
So, can you look at the stock price of a day and establish what is the stock market trend today? The answer is No. The Stock Market trend today is not decided basis only today’s stock price but rather its movement when compared to the earlier time points. Trends get established over a longer period. To know the stock market trend one needs to look at the movements for a certain period of time. There is no fixed guideline or specified duration for the movements to be considered as a trend. However, it is said that the longer the duration of the movement (irrespective of the direction – upward or downward), more noteworthy or reliable the trend is considered.
What is Trend Analysis
Trend Analysis is the process of making use of the current trends (or past data) to predict future movements. For instance, with the help of stock market trend analysis experts try to make a forecast if a specific market sector which is currently growing will continue to do so in the upcoming future.
How to identify trends in the stock market?
Before we let you know how to identify trends in the stock market, you need to understand some important terminologies and the types of market trends. When you want to interpret a stock chart, think of your last visit to the mountains. Like how you would have observed many hills or valleys there, you would see such points even on a stock market. These are the points we will be talking about.
- Peaks or Tops
This term is similar to the peaks of mountains. The highest or topmost price point that a stock touches is referred to as the “Peaks”.
- Troughs or Bottoms
The lowest or minimum price point that a stock falls to is called the "Trough".
Stock Market Trends
Market trends are divided into three categories:
An uptrend describes the price movement of a financial asset when the overall direction is upward. In the case of an uptrend, the stock chart creates new milestones. Both the ends – peaks as well as troughs keep going further successively. Hence, on a continuous and regular basis, the stock’s price would touch a new high or fall lower than what it did before. However, one important thing to understand is that it may not be the lifetime low or high. This is the movement or status in the last few days, weeks or maybe months (depending on the duration of the trend).
As long as the price keeps on making the higher swings, the uptrend remains intact. The steady rise in peaks and troughs indicates a positive sentiment in the market. The general expectation is that the stock would appreciate more rather than depreciate.
In the case of a downtrend, the stock price keeps on falling continuously. In addition to the successive tops getting lower, the successive bottoms are also lower. The general view in case of a downtrend is that the stock value will fall further.
Usually, no further buying transactions take place and investors use each peak (however little it may be) to sell off their current stock quota.
- Sideways Trend
A sideways trend is a phase of ambiguity. The stock prices do not move significantly in either direction over an extended time frame. Both tops and bottoms continue to be constant. There is no notable movement to enable the market participants to make a buying or selling decision.
Remember that old saying, “All good things must come to an end”. It applies to the stock market as well. Eventually, in all up-trending markets, there comes a time when the selling activities overtake the buying activities. The day when the index closes (from the earlier day) on a higher volume (more selling than buying), is referred to as a “Distribution Day”. Market analysts believe that about five such distribution days over five weeks can easily reverse a market trend from upward to downward. Hence, one may pay close attention to Distribution days as they indicate the end possibility for an uptrend.
Solid Market Rally
Every cloud has a silver lining. One must continue to monitor the market when it enters a downward trend. At some given point of time, it will rally and get better for a couple of days. However, many such rallies are fake outs. Before taking any market-related action one must confirm that there has been a trend change towards the upward direction. This usually comes as an explosive day and signals the market trend has reversed. This in market parlance is referred to as “follow-through day”. On this day, the market closes upwards by a substantial and decisive amount.
No new bullish phase has begun without this “follow-through” day. However, it is important to note that not every such day will lead to a new start (bull market). It just gives an indication and a timely heads-up to the investors (or traders) that they need to keep a constant look-out for their preferable stocks.
How to act on stock market trends?
There are many platforms (online or otherwise) that offer daily updates about the Indian stock market trend analysis. But before relying on any such analysis, it is important to establish the credibility of the source. IndiaNivesh is one trusted and well-renowned partner whom you can reach out to for stock market related expert opinion. Their team consists of experienced professionals with a deep understanding of the market who have helped investors create wealth for the last eleven years. The IndiaNivesh website has live updates and expert insights that help you make informed decisions.
Now that you know what are the possible trends in the stock market and also know a reliable expert who can help you realize your financial goals, what are you waiting for? Remember, time is money!
Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
Market volatility is quite like Voldemort. No one wants to talk about it though it is inevitable. It will creep into your equity trading life at some point or another. So, what should you do? Leave everything to fate or prepare for the fight like Harry Potter. If the answer is latter, continue reading. You will get to know some great equity trading tips that will ensure that you weather the volatility without a crease on your brow.What causes volatility in the markets?Volatility refers to big swings or fluctuations in the price of stocks in the market. The movement can be in either direction – up or down. When the stock prices come down significantly, it is referred to as a bear market. On the other hand, if the prices keep on rising, it is called a bull market. Some factors which result in market volatility Global and national political scenario (including election results) Fluctuations in crude oil prices Economic or policy reforms Unexpected developments (positive or negative) in the market, earnings or news about a reputed company Equity Trading Tips for Volatile MarketsEquity trading in India has been on a rise in the last couple of years. But so has been market volatility. Hence, it is important to understand factors that can make trading in equity a fruitful exercise.These equity trading tips will come handy while chalking out an investment strategy for effectively handling the volatility in the markets: Stick around for the long-term Sometimes, not taking action is the best action. Investors who take up trading in equity with a long-term view (at least a five-year time frame), do not keep on tracking the markets daily. Hence, they do not panic or get worried in the face of market fluctuations. It is best to review one’s investments on a bi-annual or annual basis. Step into the market A bearish or volatile market presents good opportunities for investors who have been waiting along with sidelines to make their entry. One can get stocks of good companies that have fallen just because of the market conditions. Not only would you be able to get more units (because of the low price) but also the net yield in the long term would be higher when compared with the cost of investment. Average out the cost of purchase As mentioned in the earlier point, the per-unit cost of stocks can come down in a bearish phase. The rupee cost averaging philosophy can help in reducing the average purchase cost of trading in equity over a period of time. For instance, let us assume that the average cost of one stock was Rs. 250 before the slump. If the market continues to fall (Rs. 200, Rs. 175 and Rs. 150) and the investor buys the same quantity as earlier, then the average cost of purchase comes down to Rs. 193. Book profits It is a wise choice to take out profits at regular intervals, especially when the market is going through turbulent times. In such scenarios, there is a high degree of overnight risk. So, all your profits can be wiped out at the blink of an eye. The FIFO approach works best. One should track their earlier investments and if they have generated sufficient profits, one can opt to sell them. The proceeds generated can fund a financial goal or can be used to invest elsewhere. Gracefully exit from non-performers In spite of the best equity trading tips, one is bound to make mistakes. That is, in fact, the name of the game. One should periodically review the stocks and identify the non-performing ones. If they have run their course, one should consider exiting from them during volatile times. The funds generated can be used to invest in other stocks with better prospects. Go Long and Short In times of volatility when one is unsure about the market performance, it is a wise decision to have a portion of the capital invested in short trades. One should not have a complete long-only portfolio. For example, in the case of moderately bullish investors, the ratio of long to short is recommended at 65:35. Covered Call Covered Call is one of the most highly recommended options strategies. It is effective in optimizing returns in a moderately volatile scenario wherein the price of the underlying asset lies within a small/tight range and the premiums are high. Other widely used options equity trading strategies that can be used to make money during market volatility include short straddles, iron condor, etc. But it is best to seek help from experts to effectively execute these strategies.Things to avoid when the markets become volatileThe list for equity trading tips will not be complete with only the DOs. One also needs to be aware of the DONTs or the mistakes to avoid in equity share trading. Panic or contingency sell Knee-jerk reactions and decisions based on speculation are the death of a smart equity trading strategy. Whenever the market is volatile, a sense of fear grips most investors. However, the important thing is to not act on that feeling without any research. Before taking any decision, one should carefully evaluate the reasons for the stock value going down. Go for the cheapest option Trading in equity is not only about the numbers. One should not just pick up stocks merely because they are available at really low price levels. Rather than making money for you, it could end up being a value trap. One should carefully analyze factors such as the stock’s track record, revenues, stability, PE Ratios, debt and equity ratios, etc. before taking a call. Leveraged bets Borrowed capital (or leverage) to fund equity trading may not be a good idea when the markets are volatile. Practices such as leverage and margin investing work both ways. When the times are good, they can generate high returns, but in case of a slump, the losses are also magnified. Hence, it is better to avoid in times of instability.Final Words Volatility in the market is not always an adversary. It also provides opportunities to invest at better (read more cost-effective) valuations and leads to market corrections. The idea is to remain cautious and alert and not fall prey to grapevine rumors or take knee-jerk reactions. And now that you know the DOs and DON’Ts, you can safely do equity trading in India (and also anywhere else in the world). One can also take the services of professional experts for equity trading in India who can help you navigate market volatility with ease. IndiaNivesh is one such partner who offers a wide range of financial services (equities, derivatives, commodities, mutual funds, insurance, IPO and online trading). Their “client-first approach” ensures that each customer gets customized inputs based on their financial goals, risk appetite, and investment horizon. So, whether you are new to trading in equity or just looking for some expert advice, IndiaNivesh can help you out. So, make sure you take help from the best and then even the worst of the market fluctuations will not trouble your trading aspirations.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
The ultimate goal for all investments is the same – Wealth Creation. But the routes can be different. In this article, we will talk about two popular investment avenues – Portfolio Management Services and Mutual Funds, both of which have the potential to fulfill your financial goals.Mutual FundsMutual Funds pool in money from a group of people and then invest the corpus in various asset categories as per the scheme’s objective. This investment avenue is professionally managed by a team of experts known as “Fund Managers” from Asset Management Companies.How to Invest in Mutual FundsThere are numerous ways to invest in Mutual Funds. Directly through the company’s website Through intermediaries such as brokers or R&T Agents Through online platforms that work as aggregators Portfolio Management ServicePortfolio Management Services (PMS) is a kind of wealth management service. Like mutual funds, they are managed by professionals known as portfolio managers. These experts offer a wide range of curated investment strategies to benefit from the available opportunities in the market. They can be bifurcated into two categories of services: Discretionary Non- Discretionary If the portfolio manager has complete control over the portfolio and can independently take trade decisions for the customer, it is referred to as Discretionary PMS. In the case of non-discretionary PMS, the portfolio manager does not have the authority to take any portfolio related decisions independently. He/she needs to manage the funds as per the client’s directions. Without the client’s approval, no buy or sell decisions can be taken by the portfolio manager. Portfolio Management Services in IndiaAs per SEBI regulations, only entities who are registered with SEBI for offering Portfolio Management Services in India can provide PMS to customers. Non-Resident Indians can also invest in these products. However, the documentation process is different (and slightly more exhaustive) than resident Indians. They need to open a PIS (Portfolio Investment Scheme) Account for the same.What makes these two investment avenues different?• Regulatory perspectiveMutual Funds are, comparatively, more strictly regulated in comparison to PMS. SEBI closely monitors their activities and investment decisions.• TransparencyBoth Mutual Funds and PMS offer timely disclosures to the clients. In the case of Mutual Funds, clients can get all relevant information such as portfolio disclosures, the commission given to distributors, daily performance data, etc. There are numerous websites through which the performance of each scheme can be tracked. Even in the case of Portfolio Management Services in India, the service provider is required to make periodic disclosures to the clients. The only difference is that it is not available to the general public. This might make it difficult for newbie investors to make an informed decision or identify the best portfolio management services. However, if one reaches out to reputable providers, the credibility of information or quality of services is assured.• FlexibilityIn the case of Mutual Funds, the pooled-in corpus can only be invested in asset categories as per the scheme’s objective. However, in the case of PMS generally there is no such restriction. They need not need to confine their investments to a stated objective or any such stringent terms, unless the theme of the investments is restricted to certain sectors or market cap. This provides flexibility to the portfolio manager to take aggressive calls whenever required. For instance, if they sense risk or volatility and the situation demands, they can decide to maintain a 100% cash position and sell off all the equity holdings.• OwnershipIn PMS, the stocks are held directly by the investor. However, in Mutual Funds, they are held by the AMC or Fund House and the investors receive units of the scheme.• RiskMutual Funds cater to all types of investors. An investor with a high-risk appetite can go for an aggressive equity scheme. Someone who is risk-averse or lower on the spectrum can go for a hybrid or balanced fund. The risk quotient in Mutual Funds is reduced to a certain extent as the risk gets spread across a wide range of stocks.Relatively, investments through PMS are riskier. They are usually a highly concentrated portfolio (consisting of about only 20-30 stocks). However, with higher risk comes the possibility of higher returns with PMS.• Entry BarrierPortfolio Management Services may not be accessible for all retail investors. It is primarily targeted towards HNIs (High net-worth individuals). One can start mutual fund investments with only Rs. 500. However, in the case of Portfolio Management Services, the least investment required is Rs. 50 Lakhs*.• Ease of InvestingInvestments in Mutual Funds can be made easily through multiple channels such as the company's website, through R&T Agents or distributors or with the help of online platforms. However, the process for investment in the case of PMS is lengthier considering the high value of funds that are transacted through these accounts.• Cost StructurePortfolio Management Services are way more customized than Mutual Funds. Mutual Fund charges fees daily as a percentage of AUM and is capped for all schemes. Whereas, the costs involved in PMS is relatively more such as Entry Load, Fund Management expenses, Profit Sharing or Fixed Fee, custodian fees, audit-related fees, brokerage, etc. All these vary according to the provider. However, relatively high returns generated by PMS more than compensate for the costs involved.• TaxationIn the case of Mutual Funds, the investors have taxed basis the type of scheme and the duration for which he/she had remained invested. For instance, in case of equity mutual funds, if one exits from the scheme within the lock-in period (usually 12 months), then 15% tax is applied. However, after that period the proceeds are taxed at 10% if gains exceed Rs. 1 Lakh. (Till the limit of Rs. 1 Lakh it is tax-free)However, the taxation methodology is quite different in the case of PMS. Gains are calculated on every underlying transaction (and not just redemption) done by the portfolio manager. So, each time the portfolio manager sells a share, capital gain (or loss) is calculated for the investor and then taxed accordingly.Which one should you go for?So, is one of these a better option? No. Both Mutual Funds and Portfolio Management Services are managed funds. They have their own set of benefits and targeted towards a different set of investors. The choice between these two should be made after considering factors such as risk profile, investment objective, market understanding, etc. For instance, if you are looking for higher flexibility and customization, PMS may be a better option. On the other hand, if you do not have too many funds at hand but still want to enter into the equity market, Mutual Funds are your best bet.Whatever be your choice, you can seek the help of experts from IndiaNivesh. They are adept at crafting portfolios customized as per the client’s needs and long-term goals.Why should you trust IndiaNivesh with your hard-earned money? Outstanding research experience of more than 11 years State-of-the-art technological tools to keep abreast with the market knowledge Highly skilled experts with the cumulative market experience of 300 years Wide range of financial solutions – broking and distribution, institutional equities, PMS and strategies, corporate advisory, investment banking, and wealth management So, are you looking for the best portfolio management services? Or wondering which is the best mutual funds to invest today? Or still struggling with how to invest in Mutual Funds? Then worry not and just reach out to the team at IndiaNivesh. They will ensure that you realize your financial goals irrespective of the route (PMS vs Mutual Funds) you take. Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing. *Effective from 1st Jan 2020.
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