Personal Finance

A stock exchange is a focal place for investors and traders to buy and sell different financial securities such as stocks, Exchange-traded Funds (ETFs), and derivatives like options and futures. It brings buyers and sellers together under one roof to trade and profit from market inefficiencies (different between buying and selling prices). With advancements in this space, investors can trade across the country as well as globally with ease. In this article, we will talk about Indian stock exchanges, their history, different stock exchanges in India and more.  Open a Free Demat Account What is a stock exchange and how did it begin in India? In technical terms, a stock exchange is a platform permitted and authorized by the government that lets a company list itself and provides a marketplace for investors/traders to transact a company’s shares. In India, the Securities and Exchange Board of India (SEBI) regulates this space. In terms of market maturity, India is considered an emerging market because.  Established on August 31, 1957, the Bombay Stock Exchange (BSE) is India’s first official stock exchange. However, the history of the stock market in India is more vivid than this and dates back to the 19th century. The Native Share and Stock Broker’s Association was a known institution around 1875 for trading. It later became known as the predecessor of the Bombay Stock Exchange.  The Ahmedabad Stock Exchange began in 1894. However, it had the purpose to trade shares of textile mills; Ahmedabad was quite popular back then for its textile business. Followed by that, in different parts of the nation, new stock exchanges started to form, leading to where we are at present.  The stock market in India has its fair share of ups and downs, and as a result, in 1992, the regulatory body SEBI was established to ensure fair conduct and protect investors. SEBI was set up after the Harshad Mehta scam of 1992 shook investor confidence in the market. Its job is to make sure companies disclose their financials honestly, brokers handle your money properly, and no one manipulates prices. For investors, this means the numbers a company publishes — revenue, profit, debt — are regulated and auditable. Learning to read those numbers is one of the most useful skills you can build as an investor. Ratio Analysis: The Right Way to Evaluate Business Financials Learn Finance the Right Way How many stock exchanges are there in India at present? 1. BSE (Bombay Stock Exchange Limited)  Established in the year 1875, BSE is India’s first official stock exchange platform. It is situated on the famous Dalal Street in Mumbai. 5500+ companies are listed on BSE, making it the 10th largest stock exchange globally. 2. NSE (National Stock Exchange of India) Inaugurated in 1992 and started functioning in 1994, NSE is a competitor of BSE. NSE is also India’s first electronic exchange. Because of that, investors across the country could buy and sell shares with more accessibility to the stock market. Since its inception, NSE has improved a lot on its tech part and innovations to provide better services to investors.   BSE vs NSE: Which Exchange Should You Trade On? For most retail investors, both BSE and NSE are accessible through the same broker app — you won’t log into them separately. The real question is which broker platform you choose. Upstox, for example, gives you access to both NSE and BSE from a single demat account, with trades starting at just ₹20 per order. If you haven’t opened one yet, this is a good time to do it — Open a Free Upstox Demat Account   3. CSE (Calcutta Stock Exchange Limited)  CSE began in 1830 when a bunch of brokers gathered under a neem tree to seal their deals. This practice continued and in 1908, it officially became Calcutta Stock Exchange. Electronic trading was introduced at CSE in 1997; it is the second oldest stock exchange in the South Asia region. CSE is no longer in use, but the case against terminating is still pending in court which makes it an active exchange in India. 4. INDIA INX (India International Exchange) For international trading, INDIA INX leads the pack. Established on January 9, 2017, It is based in GIFT City, Gujarat at the International Financial Services Centre (IFSC). Investors can directly purchase and sell individual stocks on this exchange of nations such as the US, Canada, Australia, and Japan. INDIA INX has the Eurex T7 platform which is considered the most advanced tech in the world. 5. National Stock Exchange IFSC Limited Quite similar to INDIA INX in location and functioning, this exchange is a subsidiary of NSE. It was launched to help the nation attract better investment opportunities and expand its market size. 6. MCX (Multi Commodity Exchange of India) MCX, established in 2003, was initially formed under the Forward Market Commission and later merged with the SEBI. It is India’s first commodity exchange and is situated in Mumbai. It has also been ranked 7th in the largest commodity exchanges in the world. From gold to crude oil to wheat, a majority of commodities can be traded in MCX. 7. NCDEX (National Commodity and Derivatives Exchange) Established on April 23, 2003, NCDEX is an online commodity exchange having headquarters in Mumbai. NCDEX’s ownership is majorly divided between institutions, companies and large public banks. It is open 5 days a week between 10 am to 11:30 pm. 8. MSE (Metropolitan Stock Exchange of India Limited) MSE began its operations in 2009. Currently, there are 1500+ companies listed on this exchange. Just like BSE and NSE, investors can buy or sell individual stocks on MSE. It offers trading in various segments including debt, equity, derivatives, and more. 9. ICEX (Indian Commodity Exchange Limited) ICEX is a commodity derivative exchange which is regulated by SEBI. It was established in August 2017 and is located in Mumbai. It allows trading to registered brokers for trading contracts across the nations. It is a permanently recognized

There can be two ways of evaluating a company’s stock while investing: technical analysis and fundamental analysis.  When discussing technical analysis, there are various methods to decide whether it is an excellent time to sell or buy a stock, especially in the case of intraday trading.  Today, we will talk about one of the most popular methods of technical analysis, Ichimoku Cloud. In this article, we will understand Ichimoku cloud, Ichimoku indicator, Ichimoku cloud indicator, Ichimoku trading strategies, Ichimoku trading, and Ichimoku cloud trading strategy.  Open your Free Demat Account What Is the Ichimoku Cloud? The Ichimoku Cloud is also known as Ichimoku Kinko Hyo. It is an adaptable indicator that defines support and resistance, identifies trend direction, gauges momentum and provides trading signals while conducting technical stock analysis.  Ichimoku Kinko Hyo, which means “one look equilibrium chart,” is a Japanese term. Journalist Goichi Hosoda created the indication, which was then made available in his book in 1969. Chartists can see the trend at a glance and search inside it for potential signs. The Ichimoku Cloud is a relatively simple indicator; the concepts are clear, and the signals are well-defined, even though it may appear complicated when examined on the price chart. In comparison to the traditional candlestick chart, it offers more data points. While it may appear complicated at first, individuals who know how to interpret charts frequently find it simple to comprehend with clear trading signals. A crucial component of the indication is the cloud. The trend is downward when the price is below the cloud. The trend is upward when the price is higher than the cloud. If the cloud moves in the same direction as the price, the aforementioned trend signals are strengthened. For instance, the cloud’s top moves upward during an uptrend and its bottom move downward during a decline. The Ichimoku Cloud gives you a full-picture view of trend direction — but it doesn’t measure momentum speed on its own. MACD adds that dimension: while Ichimoku tells you which direction the trend is going, MACD signals how strongly it’s moving and when momentum is shifting. The Formulas for the Ichimoku Cloud There are five plots that make up the Ichimoku Cloud indicator. Their names and calculations are: TenkanSen (Conversion Line): (High + Low) / 2 default period = 9 KijunSen (Base Line): (High + Low) / 2 default period = 26  Chiku Span (Lagging Span): Price Close shifted back 26 bars  Senkou A (Leading Span A): (TenkanSen + KijunSen) / 2 (Senkou A is shifted forward 26 bars)  Senkou B (Leading Span B):  (High + Low) / 2 using period = 52 (Senkou B is shifted forward 26 bars) How to calculate? The highest and lowest prices recorded throughout the period—in the case of the conversion line, the highest and lowest prices recorded over the previous nine days—are the highs and lows. If you wish to compute it manually, you can add the Ichimoku Cloud indication to your chart. Here are the following steps that you need to follow: Calculate the Conversion Line and the Base Line A positive signal is generated during an uptrend when the Conversion Line crosses above the Base Line. Similarly, a negative signal is given when the Conversion Line crosses below the Base Line during a downturn. Calculate Leading Span A based on the prior calculations Span A is a 26-period ahead-plotted leading indicator. It is determined by taking the average of the tenken and kijun values over the previous 26 periods. Since it takes a short time to calculate, this indicator mainly slants with the prices rather than remaining flat. Calculate Leading Span B This indicator is calculated by averaging together the last 26 periods. Since it takes a while to calculate, it is usually flat; therefore, it can be used as a line of support when prices are above it and a line of resistance when prices are below it. Plot the closing price 26 periods in the past on the chart to get the lagging span. The cloud is drawn by colouring in the difference between Leading Spans A and B. Color the cloud green if Leading Span A is higher than Leading Span B. Color the cloud red if Leading Span A is lower than Leading Span B. This is how you can calculate Ichimoku Cloud to make a technical analysis of a stock. For trend strength confirmation on your Ichimoku signals, ADX (Average Directional Index) is the cleanest filter. If ADX is below 20 when price exits the cloud, the breakout is much less reliable — ADX above 25 with an Ichimoku signal is the combination experienced traders look for. Learn Finance the Right Way What does it indicate? Now that we know everything about Ichimoku cloud trading strategies, let’s understand what Ichimoku cloud indicates.  How should you assess the trend’s persistence and corrective actions? Price crossing the cloud signifies an upward trend. A downtrend is indicated when the price drops below the cloud. A sideways trend is indicated by price moving within the cloud. A cloud shifting from green to red indicates a correction during an uptrend. A cloud turning from red to green indicates a correction during a downtrend. How to assess support and resistance levels through Ichimoku trading? The first support line for an uptrend is provided by Leading span A. A second support line for an uptrend is provided by leading span B. A downtrend’s first resistance line is provided by Leading span A. For a downtrend, Leading span B acts as a second resistance line. How to recognize buy/sell signals  When the conversion line crosses Base line up from below, it is a signal to buy When the conversion line crosses Base line down from above, it is a signal to sell Limitations  There are always two faces of one coin, advantages and disadvantages. While pursuing Ichimoku Cloud trading strategies, you need to remember a few limitations it has while trading.  There are three main limitations that you

The core goal of investing money is to generate value, whether in stocks or other financial assets such as bonds. In investing, two things are imperative: i) return on investment and ii) risk involved. One can not exist without the other; if you invest in the equity market, you are prone to market fluctuations daily, which creates a question on how much return you should get on the risk undertaken? You can find this answer using the Capital Asset Pricing Model or CAPM.  Open Your Free Demat Account What is CAPM? Capital Asset Pricing Model is the calculation to determine how much return can be expected given a certain percentage of risk. In corporate finance, the CAPM formula holds significance as it helps find the cost of equity investment which is necessary for calculating the Weighted Average Cost of Capital (WACC). WACC helps in finding the real risk-return trade-off for a diversified portfolio.  The model was invented by the prominent economist and Nobel laureate William Sharpe in the early 1960s, which he later published in his book named Portfolio Theory and Capital Markets in 1970. He is also the inventor of the famous ‘Sharpe Ratio’. Each portfolio has a different cost of capital and degree of risk. As a result, one size doesn’t fit all and demands an efficient pricing model to gauge how much risk should be taken to gain a certain return and if it’s even worth it at all! CAPM model is the solution here.  The CAPM model considers the systematic risk of investment. If you wonder what systematic risk is, recall the market volatility when interest rate changes occur? In simple words, anything that affects the stock market becomes a systematic risk. With the inclusion of this market risk, the cost of equity returns becomes much more realistic.  These terms may sound complicated, but with some basic understanding, you can ace the calculation of the CAPM model. How to calculate CAPM? The CAPM formula is essential to ensure that the return on equity is at least equal to the cost involved. If it is less, the investment is a red flag and vice versa.  CAPM formula: Ra = (Rrf) + [βa * (Rm- Rrf) ] Whereas,  Ra = Expected return on equity asset Rrf = Risk-free rate of investment. Typically, the risk-free rate is equal to the 10-year US government bond. Though, the appropriate way is to consider country-specific bond rates. Ba = Beta (volatility) of the equity investment or stock. It shows the correlation of investment with the market fluctuations. For example, if a stock increases by 10% in reaction to market volatility, the Beta is said to be 1.1. The higher the Beta, the more the sensitivity to the market. If the Beta equals 1, the stock will behave the same as the market volatility; 1% move for 1% volatility. Beta can also be negative, which means that the stock value would reduce with regard to the market.  Rm – Rrf = Expected return of the market – Risk-free rate (Known as Risk Premium) The risk-free rate in the CAPM formula is typically based on government bond returns — in India, the 10-year G-Sec yield. This rate is directly influenced by RBI monetary policy decisions. When the RBI raises rates, the risk-free rate goes up, which raises the required return for every stock in the CAPM model — effectively making equities less attractive. RBI Monetary Policy — Objectives, Tools and Types explains how these decisions work and why they matter for investors. Deduction of the risk-free rate of investment from the expected market return is also known as the market premium. The conscience here is that investors always prefer higher returns than the risk taken; they want a premium beyond the risk-free rate. The risk premium, in simple words, is investors’ compensation for undertaking the risk. We can also write the CAPM formula as: Expected return on equity = Risk-free rate (Beta of investment – Market premium)  Let’s understand the CAPM model better with the example.  Learn Finance the Right Way CAPM example: The XYZ stock trades around Rs. 500 per share, and you expect to get a 5% return on this stock. It has a beta of 1.3, the market is likely to increase at the rate of 8%, and the risk-free rate is 3.5%. What is the cost of equity in this case or the return that can compensate you for the risk taken? Ra = (Rrf) + [ βa * (Rm- Rrf) ] Ra = 5 + [1.3 * (8 – 3.5)]  The return on your equity investment will be 10.85%.  Advantages of using CAPM  Below are the advantages of using CAPM.  The CAPM model considers the market risk, the systematic risk for investment, making the calculation realistic.  It helps calculate the cost of equity and, in turn, find the total cost of capital, aka WACC.  Compared to other models for calculating equity cost, such as the Dividend Growth Model (DGM), the application of CAPM is easier and has greater scalability.  Shortfalls of CAPM model Below are the disadvantages of using CAPM. CAPM is based on assumptions that there is perfect competition in the market and the market is highly efficient, which is not the case typically. There is always an opportunity to benefit from arbitrage trades.  Another assumption on which CAPM is based suggests that the investors are rational and averse to the risk. That is also a highly unrealistic expectation since investors often trade with emotions and are not rational.  The CAPM model doesn’t account for taxes an investor has to pay, which can sometimes reduce their returns. For example, In India, an investor has to pay a 10% long term capital gains tax on long term investment gains. This is not a part of calculating the cost of equity.  Apart from this, the other drawbacks include challenges to calculate Beta and potential frequent changes in the risk-free rate.  Because of these limitations, researchers developed more refined models. The most widely used successor

Introduction Business assets usually cost a fortune and have a limited lifespan. Hence, it is necessary that this cost be expensed proportionately across their functional life. Depreciation and amortization are two such accounting processes that involve spreading out the cost of these assets throughout their useful life.  Before understanding how these two methods work, let us understand what business assets are.  Open your FRee Demat Account What are Business Assets? Business assets refer to items of value owned by firms/companies, etc. Assets play a vital role in increasing productivity, revenue and efficiency.  Based on physical characteristics, the assets of a business are of two types:  Tangible Assets: Tangible assets refer to those resources that have a physical form. Examples of tangible assets include plant, building, machinery, etc.   Intangible Assets: Intangible assets are resources without any physical form. Trademarks, patents, goodwill are examples of intangible assets.   Now let’s find out how depreciation and amortization works. Understanding the Meaning of Depreciation and Amortization In simple terms, depreciation refers to the reduction in a tangible asset’s monetary value due to prolonged usage. This accounting technique enables businesses to spread the cost of their fixed assets over the span of their useful life. This allocation is reflected in the business’s profit and loss account for the particular financial year. On the flip side, amortization refers to the reduction in the monetary value of intangible assets over time. It involves prorating the cost of intangible assets over the course of their useful life. Similar to depreciation, amortization appears as an expense in the income statement or profit and loss account of a business. Why are depreciation and amortization shown in the income statement? As per Indian Accounting Standard 6, “The depreciable amount of a depreciable asset should be allocated on a systematic basis to each accounting period during the useful life of the asset.” This is because the annual depreciation of an asset is an expense, and hence, is a charge on profits. Similar rules are applicable on amortization as well, as mentioned in Indian Accounting Standard 38.  Common Methods of Computing Depreciation and Amortization Here are some popular methods that businesses use to calculate depreciation and amortization: Straight Line Method When a business opts for the straight-line method, the depreciation is spread out evenly over a period until the salvage value is reached. In other words, if a company computes depreciation using this process, the depreciation expense will be the same in each year over an asset’s lifespan. Note that salvage value refers to the estimated book value of tangible long-term assets at the end of their useful life. The straight-line method is the most straightforward process of distributing the cost of business assets over their useful life. Example 1: Amortization Using Straight Line Method Suppose Company XYZ has a patent worth ₹15,00,000 expiring in 30 years. But since the patent’s estimated useful life is 15 years, note that the amortization interval must be 15 years.  To compute the amortization of the patent, the company has to divide the patent’s cost price by its estimated useful life.  Therefore, the amortization of XYZ Company’s Patent will be ₹15,00,000/ 15 = Rs. 1,00,000  Example 2: Depreciation Using Straight Line Method Let’s say ABC Company purchased a machine worth ₹50,00,000 to manufacture garments. The estimated lifespan of this machine is 10 years, and its salvage value is 10% of the cost price.  ABC can compute the value of depreciation using this formula:  Depreciated Value = Machine’s Purchase Price – Salvage Value                                    = ₹(50,00,000 – 5,00,000)                                    = ₹45,00,000 Now, considering that the useful life of the machine is 10 years, the calculation of depreciation per year will be as follows: Annual Depreciation = ₹45,00,000/10                                        = ₹4,50,000 Reducing Balance Method The reducing balance (or written down value) method involves charging depreciation based on the previous year’s closing balance of an asset. Closing balance refers to the credit/debit balance of an account at the end of an accounting period. To calculate closing balance, businesses have to deduct the previous year’s depreciation from the asset value. Under this method, the profit for a financial year will be lower in the first few years. But in the later years, it will be higher. Generally, a company uses the same method for computing amortization as well as depreciation. That said, note that amortization schedule is used in the case of loans. Example 3: Depreciation Using Reducing Balance Method Some companies use the reducing balance method to compute depreciation instead of the straight-line method. Here’s an example to explain this method: Let’s say ABC purchased new machinery worth ₹5,00,000 to increase production and strengthen its top line. As per the manager, this machine’s estimated useful life is 10 years, and salvage value is ₹10,000. The depreciation rate is 20%  ABC can use the following calculation to ascertain the amount of depreciation resulting from regular usage:  Depreciation Percentage x Annual Depreciation Amount  Year Depreciation Calculation Amount of Depreciation (₹) Value at the End of the Year (₹) 1 20% of ₹(5,00,000 – 10,000) 98,000 4,02,000 2 20% of 4,02,000 80,400 3,21,600 3 20% of ₹3,21,600 64,320 2,57,280 4 20% of ₹2,57,280 51,456 2,05,824 5 20% of ₹2,05,824 41,164.8 1,64,659.2 6 20% of ₹1,64,659.2 32,931.84 1,31,727.36 7 20% of ₹1,31,727.36 26,345.47 1,05,381.89 8 20% of ₹1,05,381.888 21,076.38 84,305.51 9 20% of ₹84,305.5104 16,861.10 67,444.41 10 20% of ₹67,444.40832 13,488.88 53,955.53 Both the straight-line and written-down value methods follow the same underlying logic — matching the cost of an asset to the period in which it generates revenue. This is the Matching Principle of Accounting → and once you understand it, depreciation stops feeling like an arbitrary accounting entry and starts making intuitive sense. Learn Finance the Right Way Key Differences between Depreciation and Amortization This table represents a head-to-head comparison of depreciation and amortization:  Basis of Comparison Depreciation Amortization Definition Depreciation is an accounting technique for computing the reduced net worth of tangible fixed assets. The reduction in cost price over an asset’s life is

Introduction ‘Cash is king’ is a popular saying that you might’ve heard. This is particularly true for all types of businesses, as cash is a measure of their financial standing in the long run. Hence, cash management is an essential skill to sustain the ongoing activities of a business, mobilize funds where needed and optimize its liquidity. A company’s liquidity can accordingly be measured adequately via its financial statements – income statement, balance sheet and cash flow statement. Statement of Profit & Loss or Income Statement: An account of all the revenues and expenses of a firm during an accounting period, which then ascertains the net profit (or loss). Balance Sheet: A summary of a firm’s total assets, liabilities, and capital. As a result, it evaluates the firm’s financial standing at the end of an accounting period. Cash Flow Statement: A report of all cash inflows and cash outflows incurred by a firm in an accounting year. That is, it determines the net cash utilized/generated by the business.  The cash flow statement doesn’t stand alone — it’s one of three interconnected financial statements. Changes in the cash flow statement feed directly into the balance sheet’s cash position, while the operating section reconciles back to net income from the income statement. Balance Sheet — A Complete Guide shows how these three statements connect and why analysts read all three together. Let us take a closer look at what is cash flow statement, its examples, and the cash flow statement format. Learn Finance the Right Way Cash Flow Statement Meaning In general, a cash flow statement is a financial statement that details a company’s inflows and outflows of its cash and cash equivalents. Cash equivalents simply refer to those assets that can be converted into cash immediately, like bank accounts and marketable securities. A key objective of the cash flow statement is to lay out how much cash is moving and in which direction. Furthermore, it helps a business understand how much net cash they are generating from their operating, financing, and investing activities. Thus, the cash flow statement acts as a bridge between the income statement and the balance sheet. For instance, we can infer from the balance sheet a change in the cash position of a company from Rs 1,00,000 to Rs 2,00,000 in a particular year. On the other hand, the cash flow statement highlights the activities which have resulted in this net cash inflow of Rs 1,00,000. It also evaluates the financial performance of a company, just like the income statement. However, CFS gives an entirely different result, as it is not affected by non-cash transactions. Basically, the income statement reflects a company’s performance via its revenues, expenses by determining its net profit/loss for a given period; whereas, a cash flow statement shows how that profit or loss moves across the company. Cash vs Non-Cash Transactions Cash transactions are those transactions directly involving the inflow and outflow of cash and cash equivalents. For example, cash sales, interest paid or received, cash purchases, sale/purchase of fixed assets using cash or bank balance. Non-cash transactions are those transactions that do not have an actual cash flow associated with them. One major example of such a transaction is depreciation. Depreciation is the distribution of the cost of an asset over its useful life. For example, a company buys a machine for Rs, 10,00,000 and estimates its useful life to be 5 years. So, the company decides to spread this expense equally over the years, instead of writing it down as a single, big expense. Dividing Rs 10,00,000 by 5, gives us depreciation of Rs 2,00,000 every year for the next 5 years. However, no cash was actually paid out when these expenses were recorded, so they appear on the income statement as a non-cash expense. Depreciation is added back because it’s a non-cash charge — it reduces profit on paper but doesn’t actually drain the bank account. If you want to understand exactly how depreciation is calculated and why it exists, Depreciation vs Amortization  covers both the mechanics and the accounting logic behind it. Now that we have some idea as to what is cash flow statement, let us dive deeper into its intricacies and understand what constitutes a cash flow statement. Components of Cash Flow Statement Cash flow from Operating Activities Operating activities are the day-to-day business activities of a company. For example, a grocery shop’s business activities could be buying and selling groceries. Therefore, the cash spent or earned from operating activities is the cash flow from these operating activities. Examples of operating activities include income tax payments, payments made to suppliers, salary and wages to employees, rent payments, etc. Cash flow from Investing Activities The next component is cash flow from investing activities. Investing activities are integral to a business as, without these activities, the business cannot conduct its day-to-day operations.  As a result, the business would be unable to determine its cash flow from operating activities. For example, a manufacturing firm has to acquire relevant plant and machinery in order to produce finished goods. The cash spent or earned from buying or selling fixed assets refers to cash from investing activities. Put simply, any payment regarding a company’s changes in equipment, plant, long-term investments, etc., are included in this section. Some common investing activities include purchasing fixed assets, stocks, bonds, securities, selling off securities, etc. Cash flow from Financing Activities Lastly, to invest in assets, so that a firm can run its operations and generate profits, it needs funds – which can be raised via financing activities. Financing activities are those transactions that affect the capital or long-term borrowings of a company. These can be – positive cash flows, like capital raised from investors, issuing shares, debentures, etc. or negative cash flows, like repurchasing stock, paying dividends to shareholders, repayment of loans, etc. So, net cash generated or utilized in these activities is the cash flow from financing activities. How to prepare the Cash Flow Statement

Book building can also be called the process of price discovery. Under this, the company collects bids at various prices from the investors at the time when the IPO is open. The prices may be above or equal to the floor price. Once the bidding is closed, the price of the shares is determined. The book-building method was introduced by SEBI (Security And Exchange Board of India) in October 1995. It helps in the preparation and implementation of the IPO filing by providing detailed information about the company’s financial status, business strategies, and future plans. This blog explains the exact meaning of book-building and discusses the steps in the book-building process. Open your Free Demat Account What Do You Mean by Book Building? In most layman’s terms, we can define book building as the collection of information regarding how much the investors want and what they are willing to pay. And by using that information, a demand curve is built by the investment bankers or the underwriter. Based on this information alone, they are able to look at the X amount of shares that the company is going to offer, and, based on the amount of interest in this issue, they can price it at X rupees. So, by using this information available, they can accurately project what is a good price and what will be met in the market with strong demand. Book building is a part of a three-step process that is required to complete an Initial Public Offering. The other two processes are the auction and fixed price offering. An auction is a process in which the company sells its shares to the highest bidder. The company will not sell all of its shares at one time, but it can sell as many or as few shares as it wants. In order for an IPO to be successful, investors must bid on and purchase enough stock that would make them eligible for future dividends. Fixed price offerings: Fixed price offerings are a type of offering that is almost always used in the initial public offering (IPO) process. The fixed price offer is an option for companies to sell shares at a set price, which is usually higher than the current market value of the company. In this way, investors can buy shares at a lower cost and still make money on their investment as long as they hold onto them until after the IPO date. The book-building process includes all the steps that will help the company to build its book. They can also use some other strategies like selling shares, options, and other things that may help them to get listed on the stock exchange. The book-building process is a very important part of the IPO. If they are not able to build their book in the best possible way, then it will be difficult for them to get listed on the stock exchange. When a company goes public, it’s making a fundamental shift in how it funds itself — moving from private capital to public equity. This changes its entire capital structure. Capital Structure: Meaning, Types and Importance explains this shift clearly, and why it matters to you as the investor on the other side of the bid. What Are Fixed Price Issues And Book Building Issues? Once the valuation is done by the investment bank, the next step that comes is to decide what type of issue is to be brought. So there are two types of issues. One is the Fixed Price Issue, and another is the Book Building Issue.  Fixed Price Issue: Fixed price issues are those in which the share price of a company is fixed for a period of time. In a fixed price issue, the price is fixed and no bidding is done. There is a situation of taking it or leaving it. That is, the offer price is given, and people who want to invest can, and whoever doesn’t want to can leave it. So the demand is not properly assessed, which is why the book-building issue is highly recommended. The issue will be listed on the stock exchange and traded as per the terms and conditions laid out by SEBI. This means that there will be no change in the share price during this period, unlike other issues where it is possible to see changes in its value depending on market forces. Book Building Issue: Under the Book Building Issue, the price is not fixed, rather the price band is kept. The maximum amount is known as the “cap price,” and the minimum amount is known as the “floor price.” And people who are willing to invest and want to subscribe to that issue can place their bids. The maximum difference between the floor price and the cap price can only be 20%. Under this method, the risk of the issuer or underwriter is reduced because he is assessing the demand for how much investment will be kept at what price. The most crucial reason why the book-building issue is recommended is that while making the decisions, the qualitative factors are also assessed. When a huge number of people bid on it, they will also analyze the qualitative factors, and collectively, market forces will also be an important factor in the pricing. What are the Major Steps in Book Building? In order to have a deeper understanding of Book Keeping, you need to learn about the steps involved in it. Appointment of Investment Banker: An investment banker is appointed by the company for the purpose of selling its shares in the public market. The appointment of an investment banker is a legal requirement under the Securities and Exchange Board of India (SEBI) rules. According to SEBI, it will be mandatory for all companies to appoint an independent investment banker before they can sell their shares in public markets. This means that when you are buying or selling your stock, there should be a third party involved

There are multiple forms in which a business can be incorporated like proprietorship, partnership or joint stock company. A joint stock company, as the name suggests, is jointly owned by a large number of owners in the proportion of their contribution towards the total capital of the company. The total capital of the company is divided into smaller units called shares. This form of business is favourable  when huge amounts of funds are required as a single owner or a group of people can raise limited funds only as is the case of proprietorship and partnership. In words of Prof. L.H. Haney, “A Joint Stock Company is a voluntary association of individuals for profit, having a capital divided into transferable shares, the ownership of which is the condition of membership.”  Elaborating the definition above, a joint stock company is an association of members who are willing to share profits and losses and cohesively invest their funds in the company. The shares of a joint stock company are transferable, i.e., these shares can be bought and sold in the secondary market. In the case of a private company, there are certain restrictions but there are clauses for transfer of shares. The way a joint stock company raises and manages its funds — through equity shares, debentures, retained earnings — is what determines its capital structure. Capital Structure: Meaning, Types and Importance explains exactly how companies balance debt and equity, and why this ratio matters to investors evaluating a JSC. Open your Free Demat Account Features Joint Stock Company is one of the most popular and desired forms of business and following characteristics of company differentiate it from other traditional forms: Incorporation: A company gets incorporated after it is registered under the Companies Act, 2013. According to this act, it is mandatory for all the joint stock companies to get themselves registered with the Registrar of Companies to legally commence business. Separate Legal Entity: In the eyes of the law, a joint stock company is a separate unit than its shareholders and management. It has a separate existence in the eyes of law Artificial Person: Created under the provisions of Companies Law, a joint stock company has a special identity as an artificial person. It has gained the title of an artificial person since it can’t perform the basic human functions like eating, sleeping, breathing, etc but it has the authority to sign and get into contracts with third parties in its own name.  Perpetual Existence: Unlike partnership or proprietorship, the life of a joint stock company is not affected by the admission or withdrawal of its members. Since it is created by law, it can only be dissolved by law. Death, insolvency or quitting of any member will not result in the dissolution of the joint stock company. Limited liability of shareholders: The most attractive feature of this form of business is the limited liability of its shareholders. The personal assets of the owners cannot be claimed in case the company fails to repay its debt as there is in the case of other two most common business forms. The flip side of limited liability for shareholders is that someone else carries the remaining risk — creditors. When a joint stock company is wound up, creditors get paid before shareholders see anything. What are Creditors breaks down this relationship and the priority hierarchy that determines who gets paid first. Common Seal: After incorporation, every company has a common seal (a stamp) which can be used to enter into contracts by a company. A company is only bound to the contracts that carry its seal along with the signatures of its directors.  Transferability of shares: the shares of a joint stock company can be transferred easily from one shareholder to another. There are some conditions in case of a private company applied to transfer of shares whereas the shares of a public company are easily transferable from one person to another. The market where these shares are sold and purchased is called Stock Exchange. Merits The popularity of joint stock companies has increased since they offer the advantage of raising more capital and a clear distinction between the firm, its management and its owners. To understand this in depth, let’s look at the various advantages/ merits of a joint stock company. Limited liability: In a joint stock company, the liability of its shareholders is limited to the unpaid amount of the shares allotted to them which means that their personal assets are not under the risk of being claimed in case of the insolvency of the company. This is one of the major advantages of incorporating a company. This benefit is not enjoyed by sole proprietorship or partnership form of business.  Large amount of funds: one of the major drawbacks of other forms of business is limited funds.There is a limit as to how much money a single owner or a group of partners can raise. This problem is solved by a joint stock company. The capital that can be raised in a company is more than any other form as many people pool in their funds. Although there is a limit of 200 members in a private company, the number of shareholders in a public company can be unlimited, therefore, large funds are available.   Perpetual Succession: The life of a joint stock company is never ending. Members may come, members may go, but the company will go on forever. In other forms, the business life is intact with the life and will of its owners and that is a major drawback that restricts their growth. Transferability of Shares: People are hesitant when it comes to blocking their money in long term funds as huge risk is involved. However, the shares of a joint stock company are easily transferable. This allows people to invest in the shares of a company and then sell off their shares when it is profitable. Efficient Management: In a joint stock company, owners are separate from the

Japan is known to be the origin of candlestick patterns, and as a result, candlestick patterns are also called Japanese candlestick patterns. They have been implemented in Japan since the 18th century, and now it has become a popular practice in the investment and trending space to predict the trend of the market, stocks, or other financial assets.  There are thousands of candlestick patterns available, and it can be hard to identify them. A bullish engulfing pattern is one of those candlestick patterns used in technical analysis. This article is your guide to know everything you need to know about this candlestick pattern. We will cover what a bullish engulfing pattern is, what it indicates with an example, its limitations, and how it is different from a bearish engulfing pattern in this article.  Open your Free Demat Account What is the bullish engulfing pattern? A bullish engulfing pattern is a part of the candlestick-based technical analysis performed to know the trend reversal possibility and the best time to invest in equity stock. It helps technical analysts know that a trend reversal is in store, and it’s time to take advantage of that.  As its name suggests, a bullish engulfing pattern shows a positive change in the trend, and it completely covers (engulfs) the red/bearish candle. It typically appears when the market or a stock is in a red and downward trend. The appearance of a bullish engulfing candle means that the trend will reverse, and the market or the stock will go upwards. The pattern alone isn’t enough — you need to know whether the trend is actually strong enough to reverse. Average Directional Index (ADX) is the cleanest filter for this: a bullish engulfing pattern in a strong downtrend (ADX above 25) carries far more weight than the same pattern in a directionless, low-ADX market. How to identify a bullish engulfing pattern? These are the main traits of a bullish engulfing pattern that helps you identify it.  It appears during a downward trend. A big and strongly positive (green) candle engulfs the previous red candle. It is a strong indication if a Doji candle appears before the bullish candle. (A Doji candle forms when the opening and closing price are almost similar with no major changes during the day.) The next candle following the bullish engulfing candle closes above its high (this is not mandatory, though). The bullish engulfing pattern shows a reversal and indicates that the selling pressure is reducing with investors and traders focusing on buying momentum.  What are the trading implications of this pattern? Now that the base is clear, let’s understand the implications this pattern has on investors and their decisions As the image shows, a bullish engulfing pattern comes after a downward trend when the selling pressure is already high. When a giant green candle overshadows the red bearish candle, it is the start of a bullish trend. This is day one for investors.  On the second day, bears again try to take the market down, and that reflects in the red candle as shown in the picture. However, the closing is still higher than the previous day’s candle as the bulls try to take charge. That is day two. We can also call this candle a gap up after a gap down in the morning session.  A risk-taking investor may enter the trade on the first or second day, while a risk-averse investor would wait for two to three days for the reversal trend to confirm and continue.  The reversal of the trend occurs as the investor sentiments change from bearish to bullish, and that reflects in the candles. Eventually, it is a win for bulls over bears. For momentum confirmation after the pattern fires, MACD is one of the most widely paired indicators. If the MACD line is crossing above the signal line at the same time a bullish engulfing forms, that double confirmation significantly increases the reliability of the trade. Learn Finance the Right Way What is the key difference between bullish and bearish engulfing patterns? A bearish engulfing pattern is the counterpart of a bullish engulfing pattern. It appears when the market is in an upward trend. Opposite of the bullish engulfing, a big red candle covers a bullish candle and engulfs it completely in the bearish engulfing pattern.  It sets a new course of trend as the market sentiments change to bearish, and investors put pressure on selling. You can see how the candlestick pattern looks in the image below.    Bullish and bearish, both the engulfing patterns work similarly for different market scenarios. The only difference is that the first one leads to an upward market trend, while the latter is a reversal pattern that invites a market downturn.  When doesn’t the bullish engulfing pattern work? No candlestick pattern ensures a sure shot result, and a bullish engulfing pattern is no different. If the candles following the bullish candle are Doji, or let’s say the market is going sideways, then even if the market is rising eventually, it doesn’t confirm a trend reversal. This can reduce the effect of the bullish engulfing pattern.  While a bullish engulfing pattern confirms a trend reversal, it does not necessarily help investors determine the range for the coming trend with a price target. Thus, the pattern alone is not enough for investors. They need to combine it with other candlestick patterns or other technical analysis techniques to secure a profitable trade.  Conclusion Bullish engulfing patterns help investors find a reversal in trend and take advantage of the upcoming market bullishness. It appears when the market is already in the downward trend and covers the bearish candle. It is suggested for investors to wait for two to three days to make sure that the trend reversal alarm is not false. Investors should also use other candlestick patterns or tools to analyze the perfect price target and know when to exit the market.  The bullish engulfing pattern works best when it forms at a

Introduction Trend chasing is an important trait for trading in the stock market. It helps one better analyze the market movements and devise a trading strategy to capitalize on gains. Knowledge of trend-chasing strategies can reduce the risk of the trader and increase their potential profits. Several different trading indicators are used by traders to access the market momentum. One such indicator is the average directional index.  In this blog, we will study the ADX indicator and understand how to use the ADX indicator to measure a trend strength. Let us first understand what the average directional index is. Oprn your Free Demat Account What is the ADX indicator? ADX indicator was first developed by an American engineer Welles Wilder to determine the price movements in the commodity industry, but due to its high relevancy, today this is an important indicator for technical trading of stocks and for analyzing stock trends. ADX is primarily used to study the strength of the trend. Let us now understand how ADX works. How average directional index works: ADX is an important trend indicator that is used to assess the strength of a stock market trend. ADX is derived from two indicators, the positive directional index (DI+) and the negative directional index (DI-). Therefore an ADX indicator will always have 3 lines:  The positive directional indicator (DI+) line The negative directional indicator (DI-) line The ADX line. The value of ADX lies in a range of 0-100 and is used to signify the strength of a trend irrespective of its direction. The strength of the trend generally refers to the level of influence that the buyers and sellers have over the market over a specific period of time. The readings that are closer to zero or greater than 60 are generally a rare occurrence.  Another important aspect of the ADX indicator is the DM which stands for Directional Movement. Let us now understand what these lines tell us What do ADX lines tell you? Let us now learn about some ADX indicator strategies that help the analysts study the ADX charts.  If the DI+ line is above the DI- line, it indicated the upward price trend with the ADX line measuring the strength of the uptrend. Similarly, if the DI+ line is below the DI- line it shows a downtrend in the prices. Here the ADX line is used to measure the strength of the downtrend. A strong trend is reflected, if the ADX line is above 25. However, if the ADX line is above 40, it shows a very strong trend. Similarly, if the ADX line is below 20, it means that no trend can be shown.  If the ADX line drops after reaching a high value, it indicated the end of a trend. If the ADX line starts going up it shows a strengthening trend. How to Calculate ADX To calculate ADX, you first need to find +DM, -DM, and the true range (TR). Typically TR is calculated for fourteen periods. +DM is calculated by reducing the value of the previous high from the current high. -DM  is calculated by reducing the value of the current low from the previous low. Then the True range(TR) is calculated by reducing the low price (of the day) from the High price. For example, Assume that for the stock of XYZ, there were the following figures on 1 March Day low = Rs. 160Day high = Rs. 200 Previous low = Rs. 166Previous high = Rs. 180 Day high – previous high = Rs. 200 – Rs. 180 = Rs. 20 Previous low – current low = Rs. 166 – Rs. 160 = Rs. 6  Since Rs. 20 > Rs. 6, DM is positive in the above case and vice versa. Now, to calculate the ADX, continue to calculate DX values for at least 14 periods.  After calculating DM, one can derive the value of DI Then the DX is calculated as = DI 14 difference/ DI 14 sum x 100  ADX = Simple average of DX (taken for 14 periods) ADX is undoubtedly an important tool to study stock trends but it comes with its own set of limitations. Let us now discuss some of the limitations of ADX: Learn Finance the Right Way Limitations of ADX ADX is not always considered a good indicator for the less volatile stocks, and for the more volatile stocks, it may generate some false signals. Since ADX is based on moving averages, it reacts slowly to any changes in the price. Hence, It is a laid-back indicator. ADX is not a wholesome tool for analyzing stock trends and it must be used in conjunction with other indicators when trading. Two indicators that pair particularly well with ADX are MACD — which confirms trend direction — and the Ichimoku Cloud, which adds support/resistance context to the strength ADX measures. MACD and Ichimoku Cloud are worth reading alongside this one. Conclusion: When investing in the market, the trend is your only friend. It is extremely important to analyze the trend and devise a suitable strategy. ADX is one of the most used technical indicators because it is simple to use and when combined with other indicators it can help one analyze the market trends with accuracy. ADX indicator can help one identify the strength of trends and make profits out of them. It allows one to detect favourable trading conditions and invest in profitable trends. ADX also helps one find the changes in trend momentum and allows them to manage their risks. One can get the highest returns by trading in the strongest trends. It also helps one identify the exit points from the markets and provides them with analytical insights. Once you’ve built your technical toolkit, you need a platform to actually trade. Upstox gives you live charts, real-time data, and flat ₹20 per trade — everything you need to put ADX into practice. Open a Free Upstox Demat Account.

Established in 2000, CIBIL is an entity liable for maintaining credit information. The full form of CIBIL is the Credit Information Bureau (India) Limited.   Generally, such Credit Information Companies (CICs) are third-party, independent organizations that accumulate credit card and loan data.  And then, they share this data with associated financial institutions and banks. Individuals can obtain their CIBIL report with credit score, history, and more information.  However, for a layperson, decoding this report can become quite taxing. If you are also feeling the heat, find the easy way to read a CIBIL score report and familiarize yourself with your credit situation in this post.Your CIBIL report and your CIBIL score are related but different things — the score is the three-digit number, while the report is the full document that explains how that score was arrived at. If you haven’t already read about how the score itself works and what ranges are considered good or poor, What is CIBIL Score and How to Improve It is the right starting point before diving into the report sections. Learn Finance the Right Way What is a CIBIL report? Once CIBIL has accumulated the financial data of individuals and companies, it creates a Credit Information Report (CIR), also known as a CIBIL report. This report comprises vital information that financial institutions can view if that concerned individual has applied for a credit card or a loan. This information discusses previous loans, such as home, car and personal loans. Along with that, it also has information regarding your overdraft facilities and credit cards.  One detailed section is dedicated to your repayment history and how quick you have been with your EMIs. Ultimately, this report helps the lender comprehend whether you can return the loan or repay the bills on your credit cards.  But how to get CIBIL report? You can go to the CIBIL website and click on the ‘know your score’ option. Fill out an online form with information like your name, date of birth, income, identity verification, address, phone number, and the loans you have taken out.  In addition to individual CIBIL reports, financial institutions also get CIBIL Commercial Report to make better lending decisions when they get loan requests from public limited corporations, private limited companies, partnership firms, and sole proprietorships.   What is the CIBIL score? Your CIBIL score is a three-digit numeric summary of your credit history calculated using information from your CIBIL report’s ‘Accounts’ and ‘Enquiries’ sections, which includes your loan accounts or credit cards, payment status, and outstanding amounts’ that are past the due date. The score indicates your credit worthiness, as determined by lenders, based on your borrowing and payback history. The CIBIL score ranges from 300 to 900, and the higher your score, the more likely you will be approved for a loan.  How is the CIBIL report calculated? Four significant factors influence your CIBIL score: Payment history: Your CIBIL score depends on your payment history of loan EMIs and credit card dues. If you pay your payments on time without missing a payment, it will positively impact your score.One of the simplest habits that prevents negative entries on your CIBIL report is maintaining a healthy, active savings account — it signals consistent banking behavior and keeps you from accidentally missing EMI payments linked to that account. Savings Account: Advantages and Disadvantages covers what to look for in a savings account and common pitfalls that affect your financial track record. Credit mix: A well-balanced mix of secured and unsecured loans is likely beneficial.  Multiple loan queries: Having too many loan inquiries will lower your score because it shows that you might depend more on credit.  Credit utilization ratio: The credit utilization ratio is the proportion of the credit amount you have used out of the total available credit. A low credit utilization ratio has a positive impact on your credit score.  How to read a CIBIL report? In a CIBIL report, you will find 7 primary sections. While they have varying roles, each of these sections is equally vital. The objective of these sections is to offer genuine and complete information. Find out more about these sections in the following points:  CIBIL Score Your CIBIL score, based on ‘Accounts’ and ‘Enquiries’ in your CIR, ranges from 300 to 900.  Personal Information CIBIL collects personal information to help NBFCs and banks in verifying your data. This section contains: PAN card details Name Date of birth Voter’s ID Other identification proofs It collects this information through a variety of methods. If there is any data that has been collected from previous lenders, it will be marked with an ‘e’ to ensure accuracy.  Contact Information As the name suggests, this column contains all of your contact information. This is additional proof of genuineness. This section offers a variety of contact information and addresses, such as: Addresses (permanent, temporary, work, and home) Email IDs Contact numbers (home and mobile) This information is taken from previous and current lenders to ensure accuracy.   Employment Information In this section, you will find data related to the companies and your jobs. They check your records at the companies and how frequently you switched from one organization to the other.  This way, the lender gets to comprehend your income patterns. Anybody who frequently switches jobs has fewer chances of getting a loan disbursed because of consistent income changes and unstable earnings.  Account Information This is the most vital section of a credit report. Account Information connects the financial institutes and banks to your financial status. You will find records of your ongoing and previous credit card statements and loans here.  It also contains information regarding how frequently you make your repayments or if you have missed any payments. The account information also has your bank account details.  It also mentions your account type, be it savings or current, single or joint. With this data, they can comprehend your behavior and determine your creditworthiness.  Red Box Sometimes, you can see a red box above the