What is Forex? – Forex Trading in India

What is Forex? – Forex Trading in India

What is Forex?

In simple terms, Forex is foreign exchange i.e. it is the conversion of the currency of one country into the currency of another. It can also be referred to as FX or currency trading and is a decentralized international market where currency trading of the whole world happens.

The Currency of a country is valued as per the principles of supply and demand. There are some factors like tourism, trade, investment, etc. on which the value of a particular currency depends. For instance, when tourists visit our country they will need to pay for the goods. For this, they will exchange their currency for Indian rupees. This refers to the demand factor of our Indian currency. Similarly, there are trade requirements due to which one country will exchange and obtain the currency of another country. These factors pave a platform for foreign exchange and are major contributors to the foreign exchange market.

Forex Trading

What is forex trading? Forex trading is defined as an activity of buying and selling currencies. Forex trading occurs through an online channel where currencies are traded 24X7 for 5 days a week. The global turnover of the forex market is approximated to be more than US$5 trillion and it is one of the world’s largest financial markets. It is the highest traded market in the world as people from all geographies participate in it.

Now, let us have a look at the forex trading basics. Since in forex trading, all transactions always involve the simultaneous buying and selling of currencies; they are known as currency pairs. In the currency pair, one is known as the base currency and the other one is called the quote currency. One of the famous global currency pairs is EUR/USD. In this currency pair, the base currency is EUR and it is either bought or sold in exchange for the quote currency i.e. USD in the given pair (In any currency pair first currency will be base currency and second will be quoting currency). The difference in the price between the currencies determines your profit or loss. It shows how much USD needs to be paid to buy 1 EUR.

There are some other famous currency pairs as well like the GBP/USD, USD/CHF, and AUD/USD, etc. These popularly used currency pairs of the world's currencies trade comprise a major percentage of the Forex market. So, these currency pairs are known as Majors. Some currency pairs do not include USD and are known as cross currency pairs like the GBP/JPY and JPY/CAD pairs. Furthermore, there is an exotic currency pair which is a combination of one major currency and the currency of an emerging economy like the USD/ZAR.

Since USD is the world’s most traded currency, most forex rates are mentioned against USD. Then comes EUR, Japanese Yen, GBP, CAD, etc. The Indian currency, INR is not yet fully convertible. It means, even though Indians can invest in forex and participate in other currency‘s trading and investment, there are a few restrictions when the amount is high and certain regulatory approvals need to be obtained. This is a regulatory requirement of the Government.

Once the Indian market matures further and proceeds towards a global economy, INR becoming a fully convertible currency is the only way ahead. However, the pace depends on India’s performance in terms of fiscal consolidation, reducing NPA, inflation control and robust financial infrastructure and increased efficiency in monitoring financial institutions and businesses.

To understand Forex Trading, certain terminologies are inevitable. They are:

Spread, Pips and Forex chart define the opportunities in forex

A spread is defined as the difference between the asking price and the bid price. In simple terms, a spread is the cost of trading.

Pip stands for a point-in-price and is defined as the measure of the changes occurring in the currency pair. It is used to measure the movements in prices and currency pair changes. We can also refer to Pip as a percentage in point or price interest point.

In a forex transaction, there are mainly 3 types of charts i.e. Candlestick Chart, Bar Chart, and Line Chart. A candlestick chart is most popular among traders because of the wide range of information displayed on it. The high, low, opening and closing prices of the currencies are all well portrayed by a candlestick chart. It has 3 major points i.e. open, close and the wicks. The wicks will depict the high to low region of currency prices.

A bar chart represents the opening, closing, high and low points of the currency prices. A bar chart is mostly used by forex traders to find out about the contraction and expansion of the price ranges. Furthermore, a line chart is usually depicted from one closing price to the next closing price and is quite helpful for beginners in forex trading.

Two more important terms related to forex trading basics are Long position and Short position. When a trader purchases a currency with an expectation of the value to increase, it is said as a long position and when a trader sells a currency by expecting its value to decrease in the future, it is known as a short position.

Exchange rate and its changes

The major concept while making a trade in foreign currencies is the exchange rates. The exchange rates for currencies keep on changing continuously and a forex trader will attempt to earn profit from these changes.

With precise knowledge of what is forex trading and forex trading basics, we can now learn about how it works? Suppose, you have been on a trip to Europe in July 2019 and you buy EUR 5000. To do so, if you had bought EUR in May, you would have got better exchange rate than in June, since the EUR/INR rate has gone up from 77.70 to 78.6 in the last 1 month or so. So, the cost of buying 5000 EUR would have risen by a few thousand INR.

For example, the EUR/INR rate before the trip was 78.2. So, to buy 5000 EUR, you would have had to spend INR 3,91,000 and for 1000 EUR, your amount spent was INR 78,200.

Now, say after the trip, you wish to change the remaining amount of 1000 EUR back to INR and the rate has gone up from 78.2 to 78.7, then the amount you would receive is INR 78,700.

Thus, this profit of INR 500 (78,700-78,200) is the profit from forex.

With the onset of modern technology in all fields, you can easily practice currency trading by online forex trading. Due to online forex trading, you do not have to commute or leave your place to get involved in forex trading. You can sit at your home, invest in the prices of different currencies and earn profits. Online forex trading has made this forex trading process even more simple and convenient.

How to start a Forex transaction?

Let us have a look at the process to start Forex trading.

o Selection of currency pair
In the first step, you need to select the currency pair which you want to trade and the initial amount which you are interested to invest.

o Select your deal size
The size of your deal can be expanded up to 400 times by using leverage.

o Selection of direction
Suppose, you are planning to make trading of foreign currencies, then you will be able to make a profit even when the prices of currencies go down. So, it is important that you select your direction wisely.

o Close your deal and profit collection
Suppose the price of the currency pair EUR/USD rose up. Then at that point, you can decide to close your deal and get the profit.

Forex Trading in India

It is legal to carry out Forex trading in India, but it should be practiced strictly through the forex trading platform. In simple terms, you can only carry out a forex transaction through registered forex brokers in India. There is a prohibition on the forex trade between any two foreign currencies in India. Citizens of India cannot send funds overseas to forex brokers by any direct or indirect means. All this is because of the regulatory norms of India, as already stated before.

To carry out forex trading in India, you should know that the regulatory bodies for forex trading in India are the Reserve Bank of India (RBI) and the Securities Exchange Board of India (SEBI). As a first step, you need to open an FX or currency trading account with a forex broker who is registered with SEBI. There can be two types of accounts viz. The Personal Account and The Business or Corporate Account. After the creation of the account, the trader can trade on different currency derivatives.
Backed by research, experts from IndiaNivesh are well versed with foreign laws, procedural know how of forex trading in India & key currency movements. Our team can help you to make the right investment decisions for a profitable and legal forex trading in India.


Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.


How to Buy Shares – Steps to Buy Shares Online in India

How to Buy Shares?If you are worried about share trading or investing in the share market, let us tell you that you are not the only one. New investors with limited knowledge are scared of losing their entire or part of their portfolio. However, with knowledge and disciplined investment, the risk can be mitigated and share trading can prove to be one of the most profitable investments to build one’s investment portfolio in a healthy manner. What are stocks then?Before moving on to answering how to buy shares, it might pay off to understand what are shares and why to buy them. It is one of the ways to invest and grow your capital. If done well, stocks can beat many other investible instruments in returns.There are quite a few other perks of buying shares apart from attractive returns. For starters, you become a fractional owner of the company, if the company does well, you can receive bonuses in the form of additional shares or dividends and so on. Stocks or shares of a company are a part of their ownership, which gives the shareholders a right to partake in the profit (and loss) of the company and a right to vote in the shareholder meetings.Before you can buy shares online, a company must be listed on the stock exchanges. Companies first must declare IPO or Initial Public Offering and get listed on the stock exchanges. Then you can buy shares online from either the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE). You can then place an order via your broker to buy or sell the shares. The below steps will answer how to buy shares online and at the same time, how to buy shares for beginners. How to buy and sell shares for beginners?If you are pondering over how to buy shares, there are two primary ways of doing so. • You can buy and sell your shares with the help of a broker.• You can buy and sell your shares with the help of a financial institution, that offers seamless integration with a Demat account. In this case, the bank or the NBFC acts as your broker.Buy shares in India for beginnersFor your question on how to buy shares, here are all the steps involved.1. Find a brokerNumerous firms are offering you services when it comes to buying and selling of stocks or shares. It is worth spending some time on zeroing down a broker before you start buying or selling stocks. You can consider factors such as SEBI registration (securities and exchange board of India), membership of stock exchanges, brokerage costs, etc. before deciding. 2. PAN CardThe next step in how to buy shares online in India involves your PAN card. You are obliged to provide your PAN card number for all financial transactions. If you do not have a PAN card, it is time that you get one at the earliest. Without a PAN card, you will not be able to invest in the stock market. 3. Open demat and trading accountAs long as we are answering how to buy and sell shares, the first and foremost requirement is a demat and a trading account. The demat account is a placeholder where all your stocks and shares will be held electronically. You can think of it as a bank for your shares. Where you can deposit (buy) new shares or withdraw (sell) existing shares. The two major depositories in the country are NSDL and CSDL. You can open demat and trading accounts with a broker like IndiaNivesh Securities Ltd. 4. Knowing your depositoryThere are two primary depositories in the country. They act as a bridge between you, the company whose shares you want to buy and other shareholders. The depositories ensure that you have access to seamless paper-less transactions. These depositories transact the shares via agents known as depository participants (DP). And a DP can either be a bank, a broker or a financial institution. 5. Buy or Sell SharesYour broker acts as the connection between you and the buying or selling of shares. How to buy shares? You let your broker know the number of shares that you want to buy, the price at which you wish to buy them and the number of shares also. They will then purchase the shares on your behalf. Of course, there is a time limit until which the orders are valid. Post which, the orders are canceled, and you will have to place fresh orders. The same process applies to the selling of shares also. If you are wondering how to buy shares of a company that you always wanted to, here are some easy steps to do so after the steps mentioned above are fulfilled. • Keep the money in your savings account that is linked to your demat and trading account.• Finalize which shares you want to buy, either using an analysis method or recommendation.• Place an order for buying shares at a specific price point.• Keep reviewing your positions regularly.The steps to buy shares in India for beginners remain the same. During the initial days, you can take the recommendations provided by the research team of brokers, before you come up with your method of buying or selling. If you are wondering how to buy shares online, there are several brokers or banks with whom you can register and create a demat account. And then you can follow the above steps. There are two major ways in which you can earn money in the stock market. Firstly, buy a stock at a lower price and sell the same at a higher price. Easier said than done, as you would never know when the price is low or high even with the price-earning ratio calculated. The easier option is to invest in good-quality stocks of healthy companies and hold it for a longer tenure.Alternatively, if you hold on to shares, companies might pay you dividends. They will first trace who are the shareholders either through NDSL or CSDL and deposit the dividend amount directly to your account. Consider this example, you buy 100 shares of a company AS Technologies at INR 250 each. If the price of the shares were to reach INR 350, you would make a profit of INR 100 per share i.e. INR 10,000. If the company is doing well and they declare dividends at INR 10 per share, the company will deposit INR 1,000 for the shares that you hold. The stock market is vastly operated electronically, thus ensuring that you do not have to worry about how to buy and sell shares or how the share market works. You can simply follow the steps mentioned above and your ‘how to buy shares online’ question will be answered.Though buying or selling of shares or even the stock market comes with inherent risks, the results in the form of potential returns are quite rewarding. Experts from IndiaNivesh will be able to guide you to understand the best way to invest in the share market systematically while ensuring operational ease. Depending on your risk appetite and financial goal, our experts will aid your share market investments for a healthy portfolio in the long run.   Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

read more


ऑनलाइन ट्रेडिंग क्या है - मतलब, सुझाव और लाभ | इंडियानिवेश

पिछले 30 वर्षों में शेयर बाजार में व्यापार तेजी से विकसित हुआ है। फोन के माध्यम से पहले किए गए ऑफ़लाइन ट्रेडों से, हम एक ट्रेडिंग के ऐसे युग में चले गए हैं जो पूरी तरह से ऑनलाइन है। ऑफ़लाइन ट्रेडों में पहले एक आदेश को रिले करने के लिए अपने ब्रोकर को कॉल करने वाले निवेशकों को शामिल करना पडता था। आदेश की पुष्टि होने के बाद, दलाल ऑर्डर को एक्जिक्यूट करने के लिए स्टॉक मार्केट फ्लोर पर जाता है। स्टॉक मार्केट एक ओपन फ्लोर ट्रेडिंग सिस्टम पर संचालित होते हैं, जहां ब्रोकर अपने ऑर्डर को कॉल करते हैं और कीमतों और लेनदेन को अंतिम रूप दिया जाता है। इसे ओपन आउट क्राई भी कहा जाता है। जहां दलाल एक दूसरे के साथ संवाद करने के लिए हाथ के संकेतों और इशारों का उपयोग करते है। एक बार जब निष्चित कीमत के साथ आदेश को अंतिम रूप दिया जाता है, तो शेयर के प्रमाणपत्र का आदान प्रदान किया जाता है। शेयर प्रमाणपत्र के इस हस्तांतरण को स्वामित्व में परिवर्तन बताते हुए शेयर प्रमाणपत्र के पीछे स्याही में चिह्नित किया जाता है। एक बार जब यह हस्तांतरण हो जाता है, तो फंड यह दर्शाता है कि लेनदेन पूरा हो गया है। जैसा कि इस प्रक्रिया में बोझिल लगता है, 1980 के दशक तक दुनिया के सभी स्टॉक लेनदेन ने इस प्रणाली का पालन किया जिसके बाद स्टॉक एक्सचेंजों ने धीरे-धीरे डीमैटरियलाइज्ड शेयरों और ऑनलाइन ट्रेडिंग के लिए परिवर्तन शुरू कर दिया। ऑनलाइन ट्रेडिंग क्या है? ऑनलाइन शेयर ट्रेडिंग, लेन-देन के अलावा और कुछ नहीं है, यानी ऑनलाइन शेयरों की खरीदी और बिक्री। यह ब्रोकर के ऑनलाइन ट्रेडिंग सिस्टम के माध्यम से किया जाता है। ब्रोकर की ऑनलाइन ट्रेडिंग प्रणाली स्टॉक एक्सचेंज के ऑनलाइन शेयर ट्रेडिंग सिस्टम के साथ रजिस्टर है और इस प्रकार इसका उपयोग ट्रेडों के संचालन के लिए किया जा सकता है। ऑनलाइन ट्रेडिंग खाते का उपयोग करके ट्रेड किए जाने वाले कुछ उपकरण निम्नलिखित हैं: • जनरल शेयर• म्यूचुअल फंड्स• बांड• डेरिवेटिव• कमोडिटी• करेंसी• कोई अन्य लिस्टेड फंड ऑनलाइन ट्रेडिंग स्टॉक मार्केट में निवेश शुरू करने के लिए एक सुविधाजनक तरीका है। अब आपके ब्रोकर को आपके आदेशों के आधार पर सही कीमत का पता लगाना आवश्यक नहीं है। यह प्रक्रिया पूरी तरह से एक्सचेंज के प्राइस मैचिंग मैकेनिज्म के माध्यम से ऑनलाइन की जा सकती है। खरीदारों को खोजने के लिए प्रतिस्पर्धा करने वाले ब्रोकेरो के बजाय, सिस्टम एक मैचिंग सिस्टम के माध्यम से संचालित होता है जहां ऑर्डर खरीदने और बेचने के आदेश कीमत के आधार पर मेल खाते हैं। साधन की कीमत विनिमय पर लिस्टेड मूल्य से प्राप्त की जा सकती है। ऑनलाइन ट्रेडिंग एक निवेशक को उस कीमत को चुनने की सुविधा देता है, जिस पर वह उपकरण बेचना चाहता है और ऑर्डर मैचिंग सिस्टम के आधार पर, यह मिलान होने पर ऑर्डर पूरा हो जाता है। फंड ट्रांसफर और सिक्योरिटी ट्रांसफर, लेन-देन की तारीख के अगले दो दिनों के भीतर होता है, जिससे पूरी प्रक्रिया सहज हो जाती है। ऑनलाइन ट्रेडिंग की शुरुआत के साथ, भारत पहली बार वित्तीय बाजारों में निवेशकों से बढ़ी हुई भागीदारी को देख रहा है। भारत में ऑनलाइन ट्रेडिंग बेहद आसान है और प्रत्येक ब्रोकर यह सुनिश्चित करने के लिए वीडियो, ब्लॉग और ग्राहक सहायता प्रदान करता है कि उनके ग्राहक अपने प्लेटफॉर्म पर आसानी से व्यापार कर सकें। ऑनलाइन ट्रेडिंग निवेशक को विभिन्न प्रकार के ऑर्डर सेट करने की अनुमति देता है जैसे: • मार्केट और्डर• स्टॉप लोस्स आर्डर• लिमिट ऑर्डर्स ये खाते निवेशक को अपनी होल्डिंग्स का उपयोग करने की अनुमति देते हैं और इंस्ट्रूमेंट दर्ज करने या उससे बाहर निकलने के लिए तत्काल निर्णय लेते हैं। ऑनलाइन ट्रेडिंग के लाभ: 1. कॉस्ट:ऑनलाइन ट्रेडिंग का सबसे बड़ा फायदा ब्रोकरेज लागत है। एक ऑनलाइन प्रणाली का उपयोग करके ट्रेडिंग न केवल ब्रोकर के लिए बल्कि निवेशक के लिए भी प्रभावी है। एक मानवीय तत्व की अनुपस्थिति ब्रोकरो को उनकी दलाली की लागत को कम करने की अनुमति देती है, जिससे यह बहुत प्रभावी हो जाता है। 2.एफिशिएंसी:ऑनलाइन ट्रेडिंग बहुत कुशल है। मानवीय गलती के लिए बहुत कम जगह है। एक बार रखा गया आदेश लगभग हमेशा निष्पादित होता है। साथ ही, आपका ऑनलाइन ट्रेडिंग खाता आदेशों की पुष्टि और एग्जेक्युशन पर ईमेल और संदेश भेजता है। 3. रिसर्च रिपोर्ट:अधिकांश ब्रोकर विभिन्न बाजार साधनों के बारे में बाजार अनुसंधान रिपोर्ट और विश्लेषण की एक विस्तृत श्रृंखला पेश करते हैं। ये रिसर्च रिपोर्ट आपको शेयर बाजार की जानकारी देती हैं। आप इन रिपोर्टों पर भरोसा कर सकते हैं क्योंकि आप जानते हैं कि ये उद्योग के विशेषज्ञों द्वारा बनाए गए हैं। इस प्रकार, एक अच्छे ब्रोकर की एक शोध रिपोर्ट आपको समय बचाने में मदद करती है जो आप अन्यथा शोध करने में खर्च करेंगे। 4. स्क्रिप ट्रैकिंग:निवेशकों के लिए अलग-अलग शेयरों को ट्रैक करना संभव है, जिनमें उन्होंने निवेश किया है। ऑनलाइन ट्रेडिंग निवेशक को शेयरों में मूवमेंट को ट्रैक करने का मौका प्रदान करता है। यह समय-समय पर मूल्य मूवमेंट जैसी रिपोर्ट प्रदान करता है, बाजार में वर्तमान में रखे गए विभिन्न खरीद और बिक्री के आदेश आदि। 5. वॉच लिस्ट:ट्रेडर्स अपनी वॉच लिस्ट में कुछ शेयर डाल सकते हैं जो उन शेयरों की कीमतों को ट्रैक करने का एक आसान तरीका प्रदान करता है जिन्हें वे खरीदने का इरादा रखते हैं .. 6. स्पीड:एक ऑनलाइन ट्रेडिंग खाते का उपयोग करना बेहद सरल है। यह कुछ सेकंड में एक व्यक्ति को एक व्यापार पूरा करना करने की अनुमति देता है। ऑनलाइन व्यापार कैसे करें? 1. एक डीमैट और ट्रेडिंग खाता खोलें:ऑनलाइन ट्रेडिंग करने के लिए पहला कदम डीमैट और ट्रेडिंग खाता खोलना है। एक डीमैट खाता आपके सभी निवेशों के लिए एक ऑनलाइन भंडार या रिकॉर्ड है। जब भी आप कोई व्यापार करते हैं, तो शेयर जैसे इंस्ट्रूमेंट्स आपके डीमैट खाते से डेबिट या क्रेडिट होते हैं। ट्रेडिंग खाता ऐसा खाता है जो आपको शेयर बाजार में खरीदने और बेचने में सक्षम बनाता है। 2. सभी विभिन्न इंस्ट्रूमेंट्स के बारे में जानें:नए निवेशकों या व्यापारियों के लिए, विभिन्न इंस्ट्रूमेंट्स को समझना और बाजारों के काम करने के तरीके के बारे में जानना बहुत महत्वपूर्ण है। यह सही ट्रेडों को रखने में मदद कर सकता है और रिटर्न कमाने के लिए शेयर बाजारों का उपयोग कर सकता है। ऑनलाइन उपलब्ध कई रिसोर्सेज के साथ, बाजार के बारे में सभी सीखना आसान है। निवेश या व्यापार करने से पहले, सुनिश्चित करें कि आप जानते हैं कि आप कहाँ निवेश कर रहे हैं। 3. अपनी इंवेस्टिंग स्ट्रेटेजी चुनें:इस कदम का अर्थ है यह तय करना कि आप निवेशक हैं या व्यापारी। यदि आप एक निवेशक हैं, तो आप मध्यम से लंबी अवधि के लिए निवेश कर रहे हैं। व्यापारी आमतौर पर शॉर्ट टाइम ट्रेडों पर ध्यान केंद्रित करते हैं जो या तो कुछ महीनों में ट्रेडों या ट्रेडों को इंट्राडे कर सकते हैं। ये दोनों स्ट्रेटेजी काफी हद तक अलग हैं, इसलिए यह जानना महत्वपूर्ण है कि जब आप निवेश करते हैं तो प्रत्येक शेयर या म्यूचुअल फंड के लिए आपकी स्ट्रेटेजी क्या है। 4. मेक योर ट्रेड:ऑनलाइन शेयर ट्रेडिंग का अंतिम चरण ऑर्डर प्लेस करना और ट्रेड करना है। आपकी निवेश स्ट्रेटेजी के आधार पर, आप शेयरों को खरीद या बेच सकते हैं। अपने शेयरों को ट्रैक करने और सही समय पर बाहर निकलने के लिए याद रखें ताकि आप अपने कमाई के लक्ष्यों को प्राप्त कर सकें। ऑनलाइन ट्रेडिंग अर्थ पिछले कुछ वर्षों में विकसित हुआ है और इसने निवेश और इंट्राडे ट्रेडिंग को बड़ी संख्या में लोगों के लिए सस्ती और सुलभ बना दिया है। ऑनलाइन निवेश को ध्यान में रखते हुए? खैर, इंतजार क्यों? इंडिया निवेश सिक्योरिटीज लिमिटिड. जैसे अग्रणी ब्रोकर के साथ डीमैट और ट्रेडिंग खाता खोलें।   अस्वीकरण: प्रतिभूतियों के बाजार में निवेश / म्यूचुअल फंड बाजार के जोखिमों के अधीन हैं, निवेश से पहले सभी संबंधित दस्तावेजों को ध्यान से पढ़ें।

अधिक पढ़ें

Are you Investment ready?

*All fields are mandatory

related stories view all

  • IPO Process - 5 Steps for Successful Listing in India

    The last two years have proven to be very fruitful for the IPO (Initial Public Offer) market. Investors have cashed in the opportunity and made huge returns in the IPO. The journey of the company to offer its shares to the public is exciting and at the same time, it also offers an opportunity to the investors to reap the benefits of IPO. Seeing the performance of recent IPOs, the attention of investors towards it is at an all-time high and they are always on a lookout for the new opportunities to arrive. When a private company decides to go public, the initial public offering process starts. The companies go public to raise a huge amount of capital in the exchange of securities. An IPO is an important stage for the growth of any company because they have access to public capital which enhances their credibility and exposure. The initial public offering process in India is regulated by the ‘Securities and Exchange Board of India (SEBI). In this article, you will learn about 5 steps of the IPO process for a successful listing on the Indian stock exchange. IPO Process in India Step 1: Selection of an Investment Banker for Underwriting Process Before understanding the IPO process, let us understand what underwriting is. Underwriting is a process in which the shares of the companies are issued and sold during the initial public offering. During this process investment bank advices and gives suggestions to the company against a fee. The investment banker understands the financial situation of the company and accordingly suggests them plans to meet their financial needs. They sign an underwriting agreement with the company. The agreement has all the details about the deal and the amount that will be raised by issuing securities. The companies may select an investment bank after determining various factors such as the reputation of the bank, expertise in the process, quality of their equity research and experience in the sector they deal. All these factors help in selling the IPO to the investors, traders and retailers. Step 2: Due Diligence and Regulation Process After the selection of the investment banker, the company is required to make an initial registration statement as per the regulations of the SEBI. In this process, the company and the underwriters submit the SEBI its fiscal data and the future plans of the company. The company is also required to give the declaration about the usage of funds that will be raised from IPO procedure. This declaration ensures that the company has given each and every disclosure that an investor must know. The company must file various versions of the prospectus from the initial stage to the final stage with the investors. The prospectus consists of the company’s details like valuation of the company, risk and rewards of the investment along with other details. This IPO process ends with the filing of the above-mentioned documents. Step 3: Pricing The final price of the Initial Public Offering is determined by the investors. The investment bank markets the IPO. To attract the public to the IPO application process, they are priced at a discount. By issuing shares at discount, the share performs well when they are listed on the stock exchanges. The price of the stock during IPO procedure can be a fixed price with the price mentioned in the order document. On the other hand, a book building issue will have a price band within the bids that can be made by the investor. Step 4: Stock Listing and Price Stabilization When the shares of the company are listed on the stock exchange and trading begins, the investment bank takes measures to establish the price of the securities. When there are not enough buyers, the bank will purchase the shares. The role of the investment bank in stabilizing the share price is essential. However, one must remember that such buying would last only for a short period of time because the IPO process already consumes a huge amount of capital investment. Step 5: Transition to Market Competition When the company's transition period to the normal competitive environment is over, the company is required to make disclosures like its financial results, significant news, etc. that is material in nature and can affect the price of the shares. The role of the investment bank is still significant. It can continue as an advisor to the company and assist in increasing the price of the shares over a period of time.   Conclusion The above mentioned are the IPO process steps for a successful listing. An IPO can change the fortunes of the company and it can grow at a rapid pace. Apart from the company, investors can also reap the benefits of an IPO by investing in them. Since there are many risks and uncertainties associated with a company going public, good research before investment can be fruitful. The investors can compare the company with its peers and check its fundamentals before investing. An investor must also consider his risk appetite and availability of funds before investing money in the IPOs. If you are an investor and need any assistance regarding investing in the stock market, you can contact IndiaNivesh.Disclaimer: "Investment in securities market and Mutual Funds are subject to market risks, read all the related documents carefully before investing."

    read more
  • IPO Allotment Status – All you need to know about IPO Allotment Process

    Initial Public Offerings have been in existence for a long time. But recently they have come under a lot of limelight. In the July-September period of last year, funds to the tune of USD 0.86 billion were raised from just 10 IPOs. And as per an EY report, IPOs are expected to gain more momentum in 2020. IPOs or Initial Public Offer are the buzzwords these days. Especially after the successful ones like IRCTC and Ujjivan Bank. Indian stock exchanges (BSE & NSE) ranked 6th worldwide in the highest number of IPOs in Quarter 3 of 2019. Read on to understand the IPO Allotment process in detail. Important aspects of bidding in an IPO Before we move to the allotment, we should know some important basics about IPO bidding. These days, most IPOs take the book building route. Some important terms to be aware of: Price Band Each IPO involves a price band. It is a price range within which applicants can make their IPO bids. The upper limit (or maximum price) is s the cap price. The lower limit of the price band is the floor price. The final issues price (known as the cut-off price) is decided based on the bids received.   Lots The total shares (on offer in the IPO) are divided into small lots. Each applicant needs to bid in these lots and not for individual shares. For instance, if a company intends to issue 1 lakh shares and the lot size is 20 shares per lot. Hence, the total number of lots on offer is 5,000. As per the SEBI guidelines, applicants cannot bid for shares quantity which is lower than the lot size. Also, bidding for lots in decimals (such as 1.5 lots) is not permitted. It is important to note that the lot size is applicable only at the stage of IPO allotment. Post listing, investors can trade their shares in the market in whatever quantity they want. ASBA ASBA stands for Application Supported by Blocked Amount. This facility lets you bid in IPOs without paying any money upfront. The amount remains blocked in the bank account and is deducted only after the allotment. IPO Allotment process Share allotment in an IPO needs to be done as per the SEBI guidelines. With the changes introduced by the regulator in 2012, all RII (Retail Institutional Investors) applications need to be treated equally. Some important points about IPO Allotment process: Only bids which are equal to or higher than the issue price qualify for allotment. Retail applicants (with qualified bids) need to be allotted the minimum application size, subject to stock availability in the aggregate. Apart from retail investors, there are two other types of investors in an IPO – QIB (Qualified Institutional Buyers) and NII (Non-Institutional Investors). Allotment to them is done on a proportionate basis. Post submission of all the bids, a computerised application is used to eliminate all invalid bids. This helps to identify the number of successful bids. There can be two situations –Under subscription (number of applications received is lesser than the total lot of shares offered) and Oversubscription (number of applications received is higher than the total lot of shares on offer). Allotment Rules for over and under subscription In case of an under subscription, every investor gets full allotment, regardless of the application size. For retail investors, in case of an IPO oversubscription, the max number of retail applicants eligible for allotment of the minimum bid lot is determined by using this formula – Total no. of shares available for RII (Retail Individual Investors) divided by Minimum Bid Lot. If the IPO is oversubscribed by a huge margin, the final allotment is done through a computerised lottery method. This would mean that some applicants will not get any allotment. If the oversubscription is not by a huge margin, then all applicants will get the minimum bid lot and the balance is proportionality allotted to applicants who had bid for multiple lots.   IPO Allotment Status IPO Allotment Status of each applicant gives the details regarding the number of shares applied for and final allocation in the IPO. The IPO status details are available online on the website of the registrar. Each IPO has a specific registrar such as Karvy, Linkintime, etc. Applicants can check their IPO allotment status by providing details such as PAN, IPO application number, etc. IPO Allotment Status Online is available within one week of the IPO closing date. The entire allocation process takes almost 10 business days. In the case of non-allotment within that period, the amount paid by the applicant is refunded back. The registrar also publishes an allotment document which has all the details regarding the IPO allotment such as the total number of applications received, IPO allotment calculations, etc.   Why were shares not allotted to you in the IPO? There can be three reasons for this. Invalid Bid Bids in an IPO can be rejected or considered invalid for numerous reasons. Some of these are invalid Demat or PAN details, incomplete information, multiple applications by the same person, etc.   Over Subscription Oversubscription means that the demand for the company’s shares exceeds the number of shares issued. In case of a hugely oversubscribed IPO, the shares are allotted based on a lottery. The rationale being that every applicant has an equal chance. If your name does not come up in the lucky draw, you will not be allotted the shares.   Bid Price is below the issue price IPOs following the book building route requires applicants to bid for lots as well as the price they are willing to pay. If the bid price you have submitted is less than the final issue price, you will not get any IPO allotments.   If you want to stay on top of the IPO game, a financial expert can be of great help. A partner like IndiaNivesh, who has more than 11 years of experience in the Indian markets, can keep you informed about all the upcoming IPOs and help you make the most of it.  Disclaimer: "Investment in securities market and Mutual Funds are subject to market risks, read all the related documents carefully before investing."

    read more
  • Tax Saving FD – Know About Tax Saving Fixed Deposit

    Every salaried individual as well as a business person is required to pay taxes as per the income tax laws. While paying taxes, we all aim to legally save it in some way or the other. But how do we do that? It is the most confusing question for most of the taxpayers. One of the excellent ways of saving taxes is by investing in tax-saving investment schemes. They not only help you save taxes but are also instrumental in effectively achieving your financial goals. There are many investment avenues available in the market that either offer tax exemption or tax deduction. Having said that, selecting the most suitable and right tax-saving investments may not come easy for everyone. While choosing the right scheme, one needs to access several factors such as safety, returns and liquidity, among other things. A very popular tax-saving investment option among taxpayers is investments under section 80C. As per section 80C of the Income Tax Act, 1961, investments of up to Rs. 1.5 lakhs can be claimed as a deduction. Tax saving fixed deposit is a type of fixed deposit where you can get a deduction of maximum Rs. 1.5 lakhs under section 80C. To arrive at the net taxable income, the amount invested in tax saving FD is to be deducted from gross total income. Let us learn about some of the important points that you must consider before investing in tax saving FD. Things to Know About Tax Saving Fixed Deposit Investment in tax saving FD can be done by individuals and Hindu Undivided Family (HUF) only. The minimum amount for fixed deposits varies from bank to bank. Income tax saving FD has a lock-in period of 5 years. You cannot make premature withdrawals and loans against these FDs. Investment in these FDs can be made only through private or public sector banks. Rural and co-operative banks are not eligible for these FDs. Tax-saving fixed deposits can be held in ‘singly' or 'jointly'. When the holding is in joint mode, the tax benefit is available to the first holder. Tax saving FD interest rates vary from bank to bank. The interest rate ranges from 5.5% – 7.75%. However, note that some banks offer higher rates on FDs to the senior citizens. These fixed deposits have nomination facilities. The interest earned on the income tax saving FD is taxable according to the investor’s tax bracket. The interest on tax saving FD is payable on a monthly or quarterly basis. The main advantage of investing in tax saving fixed deposits is that they are less risky in comparison to equities. Since many banks offer this type of FD, let us learn about its details. Banks and Income Tax Saving FDs SBI Tax Saving FD Tax saving FD interest rates of SBI is 6.25% for general customers and 6.75% for senior citizens. The maximum deposit in a year is Rs. 1 lakh and the minimum deposit is Rs. 1,000. By using a tax saving FD calculator you can know the amount receivable after the lock-in period of 5 years depending on the maturity period of your FD.   HDFC Bank Tax Saving FD Tax saving FD in the HDFC Bank can be opened with a minimum amount of Rs. 100. The maturity period of this FD is 10 years. Tax saving FD interest rates is 6.30%. Senior citizens get an added benefit of 50 basis points over general customers.   ICICI Bank Tax Saving FD The interest rate on tax saving fixed deposits at the ICICI Bank to the general customers is 6.6% and for senior citizens, the interest rate is 7.10%. These rates are applicable to FDs having a maturity period of 5 to 10 years. The maximum amount that can be deposited is Rs. 1.5 lakhs and the minimum amount for opening tax saving FD at the ICICI Bank is Rs. 10,000.   PNB Tax Saving FD Punjab National Bank offers an interest rate of 6.30% on a five-year tax saving FD. The minimum amount for opening tax saving FD at the PNB Bank is Rs. 5,000.   Bank of Baroda Tax Saving FD Bank of Baroda offers an interest rate of 6.30% on a five-year tax saving FD.   The Bottom Line The above mentioned are the basic details about the major banks that offer income tax saving FDs. You may access each individual option carefully and select the suitable one after doing good research. You can find all the basic information on the bank’s website. If you want to find out the returns that you will be earning from the fixed deposit, you can access the tax saving FD calculator and find out the returns by entering your fixed deposit details. If you want to learn more about income tax saving FD or want to learn about other investment options, you can contact IndiaNivesh. We are among one of the most trusted and value-enhancing financial groups in India.Disclaimer: "Investment in securities market and Mutual Funds are subject to market risks, read all the related documents carefully before investing."

    read more