~~~Market Updates~~~

ABC of investing in Fixed Income

The income fund I invested in returned only 5% last year. I would be better off investing in the fixed deposit of my neighborhood bank. I can get 9.5% for a one-year deposit. This used to be a familiar argument till some time back. Then came the FMPs – or the fixed maturity plans from mutual funds. These FMPs looked like Godsend for the mutual fund sellers. Why? Based on the interest rate scenario at the time of launch, the returns to the investor can be easily predicted. That gives a lot of comfort to the conservative predictability-loving fixed income investor. Let us explain this and that should start with an understanding of how fixed income instruments (and the fixed income funds) work.

http://www.moneycontrol.com/india/ne...e/10/12/315391

Mkt trades with moderate losses: IT, bank stks down
2007-12-12 09:35:04 Source : moneycontrol
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The markets are trading with moderate losses on selling pressure seen in IT and banking stocks. But we have still outperformed most of the Asia, which closed in red. The Fed cut rates by 25 bps disappointing analyst who were expecting a 50 bps cut leading to a fall. Action can be clearly seen in the broader market. The breadth is in favour of the advances. Both the BSE midcap index and smallcap index are up nearly 1% and 1.5% each respectively.

On the macroeconomic front, industrial growth growth came in at 11.8% versus 4.5%, YoY, slightly ahead of expectation of 11%.

At 1.18 hrs IST, the Sensex is down 83.43 points or 0.41% at 20207.46, and the Nifty down 21.15 points or 0.35% at 6076.10.

About 2188 shares have advanced, 851 shares declined, and 50 shares are unchanged.

Pharma, oil & gas, metal and realty stocks are trading higher. However, select bank, IT and capital goods were under pressure. Metal index is up 1.6% and realty index is up 1.7%. Tata Steel, HIndalco, Nalco are some of the top gainers.

IT index is down over 2%, Infosys is down 4%, Satyam and Wipro are down over 2.5%.

Glenmark Pharma up 8.4%, Nicholas Piramal up 5.4% and United Phosphorus are among some of the midcap gainers.

Colgate, Panit and Bank of Maharahtra are among the midcap losers.

On the Nifty among the top gainers were Idea, HDFC up 4%, Zee Ent up 3%, Tata Steel up 2.8%, followed by GSK, Sterlite Ind and Cairn India.

Top gainers on the Sensex are HDFC up 2.75%, Tata Steel up 2.2%, Hindalco up 1.8% and Maruti Suzuki up 1.6%.

On the primary market front, Edelweiss made a stellar debut and Renaissance listed inline with street expectations.

Most active shares on the exchanges were Edelweiss Capital, IFCI, Reliance Petroleum, Reliancce and Lanco Infratech.

HDIL, Ansal Properties, Omaxe and Puravankara Pro in the realty pack were buzzing. In the metal space, Shree Precoated, Nalco, Tata Steel and Hindalco were in focus.

Fed meet fails to deter mkt: Midcaps, smallcaps up

The markets are trading flat outperforming Asian peers. Markets were undetered by the fall in Asia post the Fed meet where it cut rates by a quarter point. Action can be clearly seen in the broader market. Both the BSE midcap index and smallcap index are up nearly 1.5%. Pharma, oil & gas, metal and realty stocks are trading higher. However, select bank, IT and capital goods were under pressure. The breadth is in fvaour of the advances.

At 12.07 hrs IST, the Sensex is up 5.17 points or 0.03% at 20296.06, and the Nifty down 4.15 points or 0.07% at 6093.10.

About 2268 shares have advanced, 773 shares declined, and 48 shares are unchanged.

On the macroeconomic front, industrial growth growth came in at 11.8% versus 4.5%, YoY, slightly ahead of expectation of 11%.

On the Nifty Nalco and the new addition Idea Cellular were both up over 3% followed by GSK, Sterlite Ind and Cairn India.

Top gainers on the Sensex are HDFC up 2.75%, Tata Steel up 2.2%, Hindalco up 1.8% and Maruti Suzuki up 1.6%.

On the primary market front, Edelweiss made a stellar debut and Renaissance listed inline with street expectations.

In the real estate sector Omaxe, HDIL are up 10% each

Top losers on the Sensex are Infosys at Rs 1,700.05 down 2.47%, Wipro at Rs 495.50 down 1.91% and Satyam at Rs 434.50 down 1.63%. HDFC Bank, ICICI Bank, Suzlon and Bharti were the other losers.

Most active shares on the exchanges were Edelweiss Capital, IFCI, Reliance Petroleum, Reliancce and Lanco Infratech.

HDIL, Ansal Properties, Omaxe and Puravankara Pro in the realty pack were buzzing. In the metal space, Shree Precoated, Nalco, Tata Steel and Hindalco were in focus.

Mkts bounce back from days low; metal, realty stks firm

The markets have bounced back from the early lows and were trading in modest green on the back of heavy buying witnessed in the realty, metal and pharma stocks. However, IT and capital good pack was still under pressure.

At 11 am, the Sensex is up 15.03 points or 0.07% at 20305.92, and the Nifty down 6.90 points or 0.11% at 6090.35. About 2214 shares have advanced, 820 shares declined, and 55 shares are unchanged.

Top gainers on the Sensex are Tata Steel at Rs 856 up 2.41%, Hindalco at Rs 204.20 up 2.33% and Maruti Suzuki at Rs 1,096 up 1.62%.

Top losers on the Sensex are Infosys at Rs 1,700.05 down 2.47%, Wipro at Rs 495.50 down 1.91% and Satyam at Rs 434.50 down 1.63%.

Most active shares on the exchanges were Edelweiss Capital, IFCI, Reliance Petroleum, Reliancce and Lanco Infratech.

HDIL, Ansal Properties, Omaxe and Puravankara Pro in the realty pack were buzzing. In the metal space, Shree Precoated, Nalco, Tata Steel and Hindalco were in focus.

Mkts still under pressure; IT, banks worst hit

The markets continue to trade in red with significant cuts on the back of selling witnessed in the IT, power, FMCG and banking space.Realty and auto stocks were also under deep pressure.

At 10.20 am, the Sensex is down 105.89 points or 0.52% at 20185.00, and the Nifty down 25.45 points or 0.42% at 6071.80. About 2009 shares have advanced, 1018 shares declined, and 62 shares are unchanged.

Top gainers on the Nifty are BPCL at Rs 449.10 up 2.23%,NALCO at Rs 414.05 up 2.22% and GAIL at Rs 527 up 1.45%.

Top losers on the Nifty are Infosys at Rs 1,697 down 2.71%, HDFC Bank at Rs 1,737.05 down 2.44% and Bharti Airtel at Rs 1,012 down 2.33%.

Most active shares on the exchanges were Edelweiss Capital, IFCI, Reliance Petroleum, Reliancce and Lanco Infratech.

Markets open with gap down on weak cues

The markets opened on weak note today taking cues from the global markets. Heavy selling was witnessed in the early trade led by the power, realty, telecom and metals stocks. Asia was trading with deep cut following US mkts which plunged yesterday after the Fed cut rates by a quarter point disappointing traders looking for twice that amount.

At 9:56 am, Sensex was down 217 points at 20073 and Nifty was down 80 points at 6016. Major losers in the early trade were Bharti Airtel, Rel Comm, Rel Energy, MTNL, ICICI bank, Cipla, HDFC bank, Sterlite Inds, Infosys, Unitech, Satyam, SAIL and VSNL.

Edelweiss Securities got listed on the bourses today at Rs 1443 versus its issue price of Rs 825.

Asian markets were trading weak. Hong Kong's Hang Seng tumbled 2.64% or 772.56 points at 28,454.28, Japan's Nikkei plunged 1.84% or 294.85 points at 15,749.87, Taiwan's Taiwan Weighted was down 2.09% or 180.78 points at 8,457.55, Singapore's Straits Times declined 1.77% or 63.61 points at 3,525.42 and South Korea's Seoul Composite slipped 1.46% or 28.01 points at 1,897.06.

US markets: US stocks closed with huge losses after the Fed cut rates by a quarter point disappointing traders looking for twice that amount. The Dow tumbled 294.26 points, or 2.14%, to 13,432.77 after dropping as much as 313.29. The Standard & Poor's 500 index plunged 38.31 points, or 2.53%, to 1,477.65, and the Nasdaq composite index declined 66.60 points, or 2.45%, to 2,652.35

Market cues:

* Global markets weak after Fed decision of 25 bps rate cut
* FIIs net buy USD 74.5 million in equity on Dec 10
* NSE F&O Open Interest up by Rs 1,932 crore at Rs 1,04,622 crore

Many people think trading is the simplest way of making money in the stock market. Far from it; I believe it is the easiest way of losing money. There is an old Wall Street adage, that "the easiest way of making a small fortune in the markets is having a large fortune."

I discuss below eight ways of undisciplined trading which lead to losses. Guard against them, or the market will wipe you out. I am qualified to speak on this subject because I was myself an undisciplined trader for a long time and the market hammered me into line and forced me to change my approach.

1. Trading during the first half-hour of the session

The first half-hour of the trading day is driven by emotion, affected by overnight movements in the global markets, and hangover of the previous day's trading. Also, this is the period used by the market to entice novice traders into taking a position which might be contrary to the real trend which emerges only later in the day.

Most experienced traders simply watch the markets for the first half of the day for intraday patterns and any subsequent trading breakouts.

2. Failing to hear the market's message

Personally, I try to hear the message of the markets and then try to confirm it with the charts. During the trading day, I like to watch if the market is able to hold certain levels or not.

I like to go long around the end of the day if supported by patterns, and if the prices are consistently holding on to higher levels. I like to go short if the market is giving up higher levels, unable to sustain them and the patterns support a down move of the market.

This technique is called tape watching and all full-time traders practice it in some shape or form. If the markets are choppy and oscillate within a small range, then the market's message is to keep out.

Hearing the message of the market can be particularly important in times of significant news. The market generally reacts in a fashion contrary to most peoples' expectation. Let us consider two recent Indian events of significance.

One was the Gujarat earthquake that took place on 26 January 2001 and the other the 13 December 2001 terrorist attack on the Indian parliament. Both these events appeared catastrophic at first glance. TV channels suggested that the earthquake would devastate the country's economy because Gujarat has the largest number of investors and their confidence would be shattered, making the stock market plunge.

Tragic as both the events were, the market reacted in a different way to each by the end of the day. In both cases the markets plunged around 170 points when it opened, in both cases it tried to recover and while it managed a full recovery in the case of the Gujarat earthquake, it could not do so in the Parliament attack case.

The market was proven correct on both counts. The Gujarat earthquake actually held the possibility of boosting the economy as reconstruction had to be taken up, and also because most of the big installations, including the Jamnagar Refinery, escaped damage. In the case of the attack on parliament, although traders assessed that terrorist attacks were nothing new in the country but the market did not recover because it could see some kind of military build-up ahead from both India and Pakistan. And markets hate war and uncertainty.

In both these cases what helped the cause of the traders were the charts. If the charts say that the market is acting in a certain way, go ahead and accept it. The market is right all the time. This is probably even truer than the more common wisdom about the customer being the king. If you can accept the market as king, you will end up as a very rich trader, indeed.

Herein lies one reason why people who think they are very educated and smart often get trashed by the market because this market doesn't care who you are and it's certainly not there to help you. So expect no mercy from it; in fact, think of it as something that is there to take away your money, unless you take steps to protect yourself.

3. Ignoring which phase the market is in

It is important to know what phase the market is in -- whether it's in a trending or a trading phase. In a trending phase, you go and buy/sell breakouts, but in a trading phase you buy weakness and sell strength.

Traders who do not understand the mood of the market often end up using the wrong indicators in the wrong market conditions. This is an area where humility comes in. Trading in the market is like blind man walking with the help of a stick.

You need to be extremely flexible in changing positions and in trying to develop a feel for the market. This feel is then backed by the various technical indicators in confirming the phase of the market. Undisciplined traders, driven by their ego, often ignore the phase the market is in.

4. Failing to reduce position size when warranted

Traders should be flexible in reducing their position size whenever the market is not giving clear signals. For example, if you take an average position of 3,000 shares in Nifty futures, you should be ready to reduce it to 1,000 shares.

This can happen either when trading counter trend or when the market is not displaying a strong trend. Your exposure to the market should depend on the market's mood at any given point in the market. You should book partial profits as soon as the trade starts earning two to three times the average risk taken.

5. Failing to treat every trade as just another trade

Undisciplined traders often think that a particular situation is sure to give profits and sometimes take risk several times their normal level. This can lead to a heavy drawdown as such situations often do not work out.

Every trade is just another trade and only normal profits should be expected every time. Supernormal profits are a bonus when they -- rarely! -- occur but should not be expected. The risk should not be increased unless your account equity grows enough to service that risk.

6. Over-eagerness in booking profits

Profits in any trading account are often skewed to only a few trades. Traders should not be over-eager to book profits so long the market is acting right. Most traders tend to book profits too early in order to enjoy the winning feeling, thereby letting go substantial trends even when they have got a good entry into the market.

If at all, profit booking should be done in stages, always keeping some position open to take advantage of the rest of the move. Remember trading should consist of small profits, small losses, and big profits. Big losses are what must be avoided. The purpose of trading should be to get a position substantially into money, and then maintain trailing stop losses to protect profits.

Most trading is breakeven trading. Accounts sizes and income from trading are enhanced only when you make eight to ten times your risk. If you can make this happens once a month or even once in two months, you would be fine. The important point here is to not get shaken by the daily noise of the market and to see the market through to its logical target.

Remember, most money is made not by brilliant entries but by sitting on profitable positions long enough. It's boring to do nothing once a position is taken but the maturity of a trader is known not by the number of trades he makes but the amount of time he sits on profitable trades and hence the quantum of profits that he generates.

7. Trading for emotional highs

Trading is an expensive place to get emotional excitement or to be treated as an adventure sport. Traders need to keep a high degree of emotional balance to trade successfully. If you are stressed because of some unrelated events, there is no need to add trading stress to it. Trading should be avoided in periods of high emotional stress.

8. Failing to realise that trading decisions are not about consensus building

Our training since childhood often hampers the behaviour necessary for successful trading. We are always taught that whenever we take a decision, we should consult a number of people, and then do what the majority thinks is right. The truth of this market is that it never does what the majority thinks it will do.

Trading is a loner's job. Traders should not talk to a lot of people during trading hours. They can talk to experienced traders after market hours but more on methodology than on what the other trader thinks about the market.

If a trader has to ask someone else about his trade then he should not be in it. Traders should constantly try to improve their trading skills and by trading skills I mean not only charting skills but also position sizing and money management skills. Successful traders recognise that money cannot be made equally easily all the time in the market. They back off for a while if the market is too volatile or choppy.

Excerpt from: How to Make Money Trading Derivatives by Ashwani Gujral.

Price: Rs 395

Ashwani Gujral trades derivatives for a living and is a featured expert on several business channels. He writes regularly for some leading US specialist magazines and journals on trading and technical analysis.

Quote:

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Originally Posted by dev

ABC of investing in Fixed Income

The income fund I invested in returned only 5% last year. I would be better off investing in the fixed deposit of my neighborhood bank. I can get 9.5% for a one-year deposit. This used to be a familiar argument till some time back. Then came the FMPs – or the fixed maturity plans from mutual funds. These FMPs looked like Godsend for the mutual fund sellers. Why? Based on the interest rate scenario at the time of launch, the returns to the investor can be easily predicted. That gives a lot of comfort to the conservative predictability-loving fixed income investor. Let us explain this and that should start with an understanding of how fixed income instruments (and the fixed income funds) work.

http://www.moneycontrol.com/india/ne...e/10/12/315391

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what do u mean by an income fund ... and also .. wats an index fund ..

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Originally Posted by chevy

what do u mean by an income fund ... and also .. wats an index fund ..

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Income fund is one which emphasizes on regular income ratehr than growth... they pay out in the form of dividends, returns from bonds,preference shares etc on a regular basis... these r mainly attractive for those who need steady cashflow at lower risk....ex:retirees

Index fund is one that tries to make a copy of the index(like nifty, S&P 500 or whatever)... they form a portfolio by purchasing all the stock in tht particular index in the same ratio/percentage as that of the index...these funds are generally know as passive funds or passively managed funds as the portfolio doesn't change freq... the portfolio changes only when the index composition changes & tht too changes r made in the exact same way as the index... no great decision making required... just keep copying the index...:)

Quote:

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Originally Posted by dev

Quote:

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Originally Posted by chevy

what do u mean by an income fund ... and also .. wats an index fund ..

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Income fund is one which emphasizes on regular income ratehr than growth... they pay out in the form of dividends, returns from bonds,preference shares etc on a regular basis... these r mainly attractive for those who need steady cashflow at lower risk....ex:retirees

Index fund is one that tries to make a copy of the index(like nifty, S&P 500 or whatever)... they form a portfolio by purchasing all the stock in tht particular index in the same ratio/percentage as that of the index...these funds are generally know as passive funds or passively managed funds as the portfolio doesn't change freq... the portfolio changes only when the index composition changes & tht too changes r made in the exact same way as the index... no great decision making required... just keep copying the index...:)

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oh ok... so beginners without much knowledge of the markets and trading usually get into this right?

I am not sure if i understood u correctly. Could you direct me to some link that tells more about this . Are index funds popular in india?

Does a falling U.S. dollar or rising euro interest you? Do you want to protect your dollar-denominated assets or profit from a rise in European currency? If so, traditionally you would have to trade currency futures, open up a forex account, or purchase the currency itself to profit from changes in currencies.

However, with the advent of currency exchange-traded funds (ETFs) you can now benefit from changes in currencies without all the fuss of futures or forex by simply purchasing ETFs in your brokerage account (IRA and 401(k) accounts included).

In this article, we will look at why currencies rise and fall and check out the different types of currency ETFs. (To go more in depth into currency ETF trading, check out Currency ETFs Simplify Forex Trades.)

Why Currencies Move
Foreign exchange rates refer to the price at which one currency can be exchanged for another. The exchange rate will rise or fall as the value of each currency fluctuates against another.

Factors that can affect the value a currency include economic growth, government debt levels, trade levels, and oil and gold prices among other factors. For example, slowing gross domestic product (GDP), rising government debt and a whopping trade deficit can cause a country's currency to drop against other currencies. Rising oil prices could lead to higher currency levels for countries that are net exporters of oil or have significant reserves, such as Canada.

A more detailed example of a trade deficit would be if a country imports much more than it exports. You end up with too many importers dumping their countries' currencies to buy other countries' currencies to pay for all the goods they want to bring in. Then the value of the importers' country currencies drops because the supply exceeds demand. (To learn more basics for currency pricing, check out Wading Into The Currency Market and our The Forex Market tutorial.)

How ETFs Work
For years, many investors have used ETFs instead of mutual funds to track major equity indexes , such as the S&P 500 and the Lehman Brothers three- to seven-year U.S. Treasury Index .

ETFs have a few advantages over mutual funds, including:

* Easy to trade: They can be bought and sold anytime through any broker, just like a stock.
* Tax efficiency: ETFs typically have lower portfolio turnover and strive to minimize capital gains distributions so that investors are only taxed when they initiate a trade.
* Transparency: ETFs disclose on a daily basis the exact holdings of the funds so you always understand precisely what you own and what you are paying for.
* Flexibility: Anything that you can do with a stock, you can do with an ETF. This includes shorting, holding in margin accounts and placing limit orders.

With currency ETFs, you can invest in foreign currencies just like you do in stocks or any other ETF. You can even buy ETFs with your IRA money.

Currency ETFs
Currency ETFs replicate the movements of the currency in the exchange market by either holding currency cash deposits in the currency being tracked or using futures contracts on the underlying currency.

Either way, these methods should give a highly correlated return to the actual movements of the currency over time. These funds typically have low management fees as there is little management involved in the funds but it is always good to keep an eye on the fees before purchasing.

There are several choices of currency ETFs in the marketplace. You can purchase ETFs that track individual currencies such as the Swiss franc, which is tracked by the CurrencyShares Swiss Franc Trust (PSE:FXF). If you think that the Swiss franc is set to rise against the U.S. dollar, you may want to purchase this ETF, while a short sell on the ETF can be placed if you think it is set to fall.

You can also purchase ETFs that track a basket of different currencies. For example, the PowerShares DB U.S. Dollar Bullish (AMEX:UUP) and Bearish (AMEX:UDN) funds track the U.S. dollar up or down respectively, against the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. If you think the U.S. dollar is going to fall broadly, you can buy the Powershares DB U.S. Dollar Bearish ETF.

There are even more active currency strategies used in currency ETFs, specifically the DB G10 Currency Harvest Fund (AMEX: DBV), which tracks the Deutsche Bank G10 Currency Future Harvest Index. This index takes advantage of yield spreads by purchasing futures contracts in the highest yielding currencies in the G10 and selling futures in the three G10 currencies with the lowest yields.

In general, much like other ETFs, when you sell an ETF, if the foreign currency has appreciated against the dollar, you will earn a profit. On the other hand, if the ETF's currency or underlying index has gone down relative to the dollar, you'll end up with a loss.

Follows Most Major Currencies
Currency ETFs can be an efficient tool that allow you to diversify away from the U.S. dollar and track the price movements for most major markets, including the:

* Australian dollar (or Aussie)
* British pound
* Canadian dollar (or Loonie)
* Euro
* Japanese yen
* Mexican peso
* Swedish krona
* Swiss franc (or Swissie)

So if, for instance, you think the U.S. dollar is weakening against the Japanese yen, you can capitalize on that movement. And if you think the opposite is true, you can sell the ETF short. As currency ETFs grow in popularity you will see more and more different currencies being tracked as well as more exotic strategies being used.

The Risks
Some of the specific currency risks that come with currency ETFs include:

* Political problems
* National debt
* Trade deficits
* Interest rate changes
* Government defaults
* Changing domestic and foreign interest rates
* Central banks or other government agencies selling the currency in large quantities
* Commodity price changes

It is important to recognize these risks and the effect they could have on the price of your currency ETF. If you fail to recognize a new political leader as a threat to your rising currency, you could be out a lot of money in a few short days.

Conclusion
As ETFs have grown in popularity, there has been an equal growth in the variety of options opening up for investors. These investment vehicles allow us to both hedge and speculate against changes in currency prices. However, like all investment there are risks and it is imperative to understand them before jumping in.

by George D. Lambert ( Email | Biography)

George D. Lambert is a freelance financial writer with more than 20 years of experience in the financial services industry. He has worked as a Certified Financial Planner, a Certified Divorce Financial Analyst and an arbitrator for the NASD, NYSE and AAA. George is approved by the Florida Licensing Education Section to instruct life, health and variable annuity courses. To read more about George and his services, visit www.e-financialWriter.com. Also be sure to check out his latest book, "A Boomer's Guide To Long-Term Care".

Quote:

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Originally Posted by chevy

oh ok... so beginners without much knowledge of the markets and trading usually get into this right?

I am not sure if i understood u correctly. Could you direct me to some link that tells more about this . Are index funds popular in india?

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yeah MF is good for beginners or people who doesnt have time to track the market properly.

check out moneycontrol.com or valueresearchonline.com

:shock: Within 1 hour Relaince IPO has been over subscribed by 4 time . Eventhough they dont have any substantial project in near future :D

Future Capital Holdings Ltd :roll: The price band is pretty high around 765.

Anybody planning to invest in any of these IPO :?

these 2 days are the best days in my stock mkt career.... :lol: It's testing me to the core... :P lost almost all the unbooked profits I made last yr... will have to wait & see how I behave if the fall continues & it starts eating up the capital aswell..:)