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Editorial

Natural Gas Trading: A Beginner’s Guide

natural gas trading in India | marketfeed

Welcome, traders! Today, we dive into one of the most exciting and dynamic commodities in the market: natural gas. It’s one of the most popular commodities among traders due to its high liquidity and volatility. Whether you’re a seasoned trader or just starting out, this guide will walk you through everything you need to know about trading natural gas effectively.

Why Trade Natural Gas?

Natural gas is a preferred asset for traders because of two key reasons:

1. High Liquidity – Liquidity refers to how easily an asset can be bought or sold in the market without affecting its price. High liquidity in natural gas means that traders can enter and exit positions quickly, which is crucial for intraday trading strategies. Both its major and mini contracts attract a large number of traders, ensuring ease of entry and exit.

2. High Volatility – The price of natural gas fluctuates significantly, providing opportunities for profitable trades.

    Moreover, commodity trading allows flexibility as the market remains open from 5:00 PM to 11:30 PM, making it ideal for traders who have day jobs or other commitments. You could use this window to maximise your trading potential.

    How to Trade Natural Gas?

    Unlike gold or silver, natural gas trading is exclusively conducted through derivatives, specifically futures and options (F&O). It’s strictly limited to MCX derivative contracts. This means understanding the basics of these financial instruments is essential for anyone looking to trade natural gas.

    Types of Natural Gas Contracts

    • Natural Gas Major Contract – Designed for institutional traders with larger capital and high margin requirements.
    • Natural Gas Mini Contract – Suitable for retail traders who wish to take smaller positions with lower margin requirements.

    The major contract has a trading unit of 1,250 Metric Million British Thermal Units (mmBTU), while the mini contract has a trading unit of 1/5th the major contract size.

    Each contract has a specific expiry date that traders must be aware of to avoid delivery complexities. For instance, if the current contract expires in a few days, it’s advisable to trade the next month’s contract instead.

    Capital Requirements for Natural Gas Trading

    The margin required to trade one lot of natural gas major contract is approximately ₹1.65 lakh. It’s about ₹32,584 for the mini contract— making it appealing to retail traders.

    How to Do Natural Gas Trading on a Broker Terminal?

    1. Search for Natural Gas Futures: Type in “Natural Gas” in your broker’s search bar and select MCX contracts.

    2. Choose the Right Contract: Select the contract with an expiration date that provides enough time for smooth trading. As mentioned earlier, the mini contract is ideal for retail traders.

    3. Analyze Price Trends: Use technical analysis to inform your trading decisions. This includes analyzing price charts, identifying trends, and applying indicators to predict future price movements. Price action strategies work particularly well in the natural gas market due to its volatility. [You can use the MCX Energy Index to track natural gas price movements].

    4. Consider Capital Requirements: Ensure you have the necessary margin before placing trades.

    5. Use Limit Orders: Given the low liquidity in some natural gas options, it’s advisable to place limit orders rather than market orders. This approach helps avoid significant slippage and protects your capital.

    Important Pointers:

    For options trading in natural gas contracts:

    • At-the-money contracts are recommended due to better liquidity.
    • Out-of-the-money contracts often suffer from low liquidity and high slippage.
    • Option buyers need less capital (based on premium x lot size), but liquidity is a concern.

      Factors Affecting Natural Gas Prices

      1. Supply and Demand Dynamics: High inventory levels of natural gas can lead to lower prices, while increased demand (especially during cold winters) can drive prices up. Monitoring inventory reports and production data is crucial for anticipating price movements.

      2. Weather Conditions: In colder climates, natural gas is used for heating, leading to increased consumption during winter months. Keeping an eye on weather forecasts in major markets like the U.S. and Europe can provide insights into potential price fluctuations.

      3. The Crude Oil Connection: As an energy commodity, natural gas prices are also tied to crude oil prices. Movements in crude oil can directly impact natural gas, so it’s essential to track crude oil market trends (including OPEC decisions) as part of your trading strategy.

      4. Geopolitical Factors: Events such as conflicts or trade disputes can disrupt supply chains and affect prices. For instance, the Russia-Ukraine conflict has had significant implications for European natural gas supplies, leading to increased volatility in the market.

      Who Should Go For Natural Gas Trading?

      Natural gas trading is ideal for:

      • Traders comfortable with volatility – Price fluctuations can be both an opportunity and a risk.
      • Those with sufficient capital – It’s important to have a proper risk management strategy.
      • Experienced traders in derivatives – Beginners should first learn futures and options trading before venturing into commodities.

      Conclusion

      Natural gas trading offers excellent opportunities due to its volatility and liquidity, but it also requires sound market knowledge and strategy. Before you start, ensure you understand futures and options, choose the right contract, manage risks effectively, and stay updated with market trends.

      By understanding the fundamentals of trading contracts, monitoring market conditions, and employing effective strategies, you can position yourself for success in this market.

      Are you ready to trade natural gas? Start with thorough research and practice before deploying your hard-earned money!

      Watch: Intraday Favourite! Natural Gas Trading after 5 PM! | marketfeed

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      Editorial

      Union Budget 2025-26: Key Highlights and New Tax Slabs Explained

      union budget 2025-26 | marketfeed

      Finance Minister Smt. Nirmala Sitharaman presented the Union Budget for the financial year 2025-26 in Parliament on Feb 1, 2025. The budget recognises agriculture, Micro, Small and Medium Enterprises (MSMEs), investment, and exports as the primary drivers for economic growth! Let us take a look at some of the key highlights and themes from the Budget presentation:

      1. Agriculture & Rural Development: Boosting Productivity & Farmer Welfare

      The government has committed ₹1.52 lakh crore to modernising agriculture and improving rural development. Key initiatives include:

      • PM Dhan Dhanya Krishi Yojana: Aims to improve crop diversification, irrigation, and storage in 100 low-productivity districts, benefiting 1.7 crore farmers.
      • Kisan Credit Card Expansion: Loan limits have been increased to ₹5 lakh, providing better financial access to farmers.
      • Self-Sufficiency in Pulses: India plans to achieve self-reliance in pulses within six years.
      • Cotton Farmers’ Support: A dedicated cotton farming mission aims to improve yields and incomes.
      • Makhana Board for Bihar: A special board will promote Makhana production and marketing in Bihar.

      2. Healthcare: Strengthening Accessibility & Affordability

      The healthcare sector gets a ₹98,311 crore allocation, focusing on infrastructure and affordability. Key developments include:

      • Ayushman Bharat Expansion: ₹4,200 crore allocated to extend health insurance coverage for vulnerable populations.
      • Cancer Care Expansion: 200 new daycare cancer centers to be set up in district hospitals over the next three years.
      • Medical Education: 10,000 new medical seats next year, with a target of 75,000 seats over five years.
      • Gig Workers’ Healthcare: 1 crore gig workers to receive health insurance coverage.

      3. Defense: Modernisation & Indigenous Development

      The defense budget rises to ₹6.81 lakh crore, with a focus on self-reliance and modernisation. Key announcements:

      • 75% of capital procurement will be from domestic manufacturers, boosting the ‘Make in India’ initiative.
      • Advanced Combat Aircraft & Submarines: More funding for Project P75(I) submarines and Advanced Medium Combat Aircraft (AMCA) development.
      • Procurement Boost: Acquisition of six submarines to strengthen India’s naval capabilities.

      4. Infrastructure: Enhancing Connectivity & Sustainability

      The government has allocated ₹12 lakh crore for infrastructure development, with a focus on roads, highways, railways, and airports.

      • Maritime Sector Development: ₹25,000 crore allocated for shipbuilding and port infrastructure.
      • Greenfield Airports in Bihar: Improving regional connectivity.
      • UDAN Scheme Expansion: 120 new domestic destinations added to strengthen regional air travel.

      5. Education: Enhancing Access & Skill Development

      The education sector sees a strong push for AI, research, and skill development. Key highlights:

      • ₹500 crore for AI Research: Centres of Excellence to be established for AI-based learning.
      • Expansion of IITs & Medical Colleges: More seats at IITs and 75,000 medical seats over five years.
      • Atal Tinkering Labs: 50,000 new labs in government schools to encourage innovation.
      • Skill Development Initiatives: New courses will equip graduates with industry-relevant skills.

      6. Renewable Energy & Sustainability

      India continues its push for clean energy with a ₹3 lakh crore allocation:

      • Solar & Wind Energy: Increased funding for solar, wind, and green hydrogen projects.
      • Net-Zero by 2070: Sustainability measures align with India’s long-term climate commitments.
      • ₹1 lakh crore Urban Sustainability Fund: Supports green city planning and waste management.

      7. Major Direct Tax Reforms in Union Budget 2025-26!

      There’s a big relief: No tax on income up to ₹12 lakh in the new tax regime!

      📌 Here’s the Revised Tax Slabs (New Regime):

      Income RangeTax Rate
      Up to ₹4 lakhNil
      ₹4 lakh – ₹8 lakh5%
      ₹8 lakh – ₹12 lakh10%
      ₹12 lakh – ₹16 lakh15%
      ₹16 lakh – ₹20 lakh20%
      ₹20 lakh – ₹24 lakh25%
      Above ₹24 lakh30%
      (The Standard Deduction remains at ₹75,000)

      Now the tax slabs may show a 10% tax for incomes up to ₹12 lakh, but Section 87A of the Income Tax Act offers a rebate that can wipe out your tax liability—if your taxable income stays within the limit. [A tax rebate is like a discount on your taxes. If your total taxable income is within a certain limit, the government reduces or cancels your tax amount.]

      Let’s look at a simple example: If you’re a salaried employee earning ₹12.75 lakh, the ₹75,000 standard deduction brings your taxable income down to ₹12 lakh. That means zero tax (excluding cess), thanks to the rebate!

      But the moment your taxable income exceeds ₹12 lakh—say, by earning an extra ₹1 lakh—the rebate disappears, and you pay full taxes.

      Also, capital gains (from stocks or real estate) aren’t eligible for this rebate, even if your total income is below ₹12 lakh.

      So plan your income sources wisely to maximise tax savings!

      Other Updates:

      • The capital gains tax rates and holding periods remain unchanged for assets like stocks, bonds, debt mutual funds, unlisted shares, and real estate in Budget 2025. Currently, the Short-Term Capital Gains (STCG) tax stands at 20%, while the Long-Term Capital Gains (LTCG) tax is set at 12.5%.
      • There’s an increase in the Tax Deducted at Source (TDS) threshold on rent from ₹2.4 lakh to ₹6 lakh to ease compliance.
      • Senior citizens can now earn up to ₹1 lakh in interest income from bank deposits and other sources without facing TDS deductions. Previously, this limit was just ₹50,000.

      Also Read: Income Tax Structure for Stock Market Investors & Traders

      The Way Ahead

      The Union Budget 2025-26 lays a roadmap for inclusive growth, modernization, and economic resilience. From agriculture and healthcare to defense, education, and infrastructure, key sectors receive significant investments.

      This budget aims to drive economic expansion and long-term sustainability through strong tax incentives, employment initiatives, and renewable energy investments. People would have more money to spend and save due to lower direct taxes. Increased spending drives up Goods & Service Tax (GST) collections, thereby boosting government revenues.

      On the other hand, businesses haven’t received any tax cuts. But with higher demand and sales, their profits could grow, leading to higher corporate tax payments. The government expects to collect ₹10.8 lakh crore in corporate taxes—10% more than its FY25 estimate.

      Now, let’s look forward to how these plans take shape in the coming months! 🚀

      Categories
      Editorial

      A Simple Guide to Trading Gold and Silver on MCX

      gold and silver on MCX | marketfeed

      Ever wondered why so many traders are drawn to gold and silver trading? Well, it’s not just about the shine! These precious metals are incredibly popular in the commodity market, thanks to their high liquidity and the big players (like jewellers and institutions) who actively trade them. In this article, we dive into everything you need to know about trading gold, silver, and bullion in the Multi Commodity Exchange of India (MCX).

      How to Start Trading Gold and Silver?

      One of the advantages of commodity trading is the ability to trade after regular market hours, from 5 PM to 11:30 PM in the Indian market. You can start trading through regulated brokers such as:

      • Zerodha
      • Upstox
      • Fyers
      • IIFL Securities

      These established brokers provide reliable platforms for MCX trading and ensure proper regulatory compliance. When selecting contracts through your broker’s terminal, always choose MCX contracts over NSE ones due to higher liquidity in the MCX segment.

      Understanding Gold Trading in MCX

      Gold trading in MCX is exclusively done through derivatives contracts – either futures or options. There are four different categories of gold contracts available:

      1. Gold (Main Contract): Trading unit of 1 kg
      2. Gold Mini: Trading unit of 100 grams
      3. Gold Guinea: Trading unit of 8 grams
      4. Gold Petal: Trading unit of 1 gram

        Each of these categories is tailored for different types of traders based on the trading unit, margin requirements, and liquidity. Let’s explore them in detail.

        Capital Requirements for Gold Trading

        Each category requires different margin amounts:

        • Gold (Main): Approximately ₹8 lakhs per lot
        • Gold Mini: Around ₹79,000 per lot
        • Gold Guinea: About ₹6,436 per lot
        • Gold Petal: Less than ₹800 per lot

        While gold mini and gold futures dominate in terms of liquidity, gold guinea and gold petal contracts often experience low participation. If you’re a beginner, you could focus on gold mini contracts for better price action and stability.

        Understanding Silver Trading in MCX

        Similar to gold, silver trading in MCX is available through derivatives contracts with three categories:

        1. Silver (Main): Trading unit of 30 kg
        2. Silver Mini: Trading unit of 5 kg
        3. Silver Micro: Trading unit of 1 kg

          Capital Requirements for Silver Trading

          The margin requirements vary significantly across categories:

          • Silver Main: Approximately ₹5.27 lakhs
          • Silver Mini: Around ₹87,000
          • Silver Micro: About ₹17,000

          Unlike gold’s smaller contracts, Silver Micro maintains decent liquidity, making it a viable option for traders with smaller capital.

          Understanding Bullion Index

          The MCX Bullion Index (BULLDEX) combines gold and silver futures contracts in a ratio of 63.7% gold to 36.3% silver. While this might seem like an interesting trading instrument, it’s important to note that BULLDEX suffers from extremely low liquidity and is not recommended for active trading.

          Price Impact and PnL Calculations

          Understanding price impact on profit and loss (PnL) is crucial:

          For Gold:

          • Main Contract: ₹100 PnL per ₹1 price movement
          • Gold Mini: ₹10 PnL per ₹1 price movement

          For Silver:

          • Main Contract: ₹30 PnL per ₹1 price movement
          • Silver Mini: ₹5 PnL per ₹1 price movement
          • Silver Micro: ₹1 PnL per ₹1 price movement

          Key Factors Affecting Gold and Silver Prices

          Several factors influence precious metal prices:

          1. Global Economic Conditions: Gold typically performs well during economic uncertainty as a safe-haven asset

          2. Interest Rates and Inflation: Higher inflation often drives increased demand for gold

          3. Currency Fluctuations: USD-INR exchange rates directly impact Indian market prices

          4. Geopolitical Events: Global uncertainty tends to boost gold prices

          5. Supply and Demand Dynamics: Particularly important for silver, given its industrial applications

            The Gold-to-Silver Ratio Trading Strategy

            The gold-to-silver ratio is a valuable tool for positional trading. When the ratio exceeds 80, it suggests gold is overvalued relative to silver, indicating potential outperformance by silver in bullish markets. Conversely, a ratio below 60 suggests silver is overvalued, pointing to potential outperformance by gold.

            Important Trading Considerations

            1. Contract Expiry:

            • Gold and Silver main contracts expire on the 5th of every alternate month
            • Mini and micro contracts typically expire on the last trading day of the month

            2. Risk Management:

            • Always use proper capital allocation
            • Never trade with 100% of available capital
            • Maintain reserves for potential drawdowns

            3. Technical Analysis:

            • Price action and technical analysis work well in precious metals
            • Support and resistance levels are generally well-respected
            • Monitor global gold and silver ETF flows for additional insights

              Trading precious metals can be profitable with proper understanding and risk management. Start with more liquid contracts like Gold Mini or Silver Mini, and always stay informed about global economic conditions affecting these markets.

              Watch: Gold & Silver Trading after 5 PM! | Commodity Series #3 | marketfeed

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              Editorial

              A Simple Guide to Crude Oil Trading in India

              trading crude oil | marketfeed

              Crude oil, often referred to as the “mother of all commodities,” plays a significant role in global trade. From powering vehicles to forming the raw material for plastics and pharmaceuticals, crude oil impacts nearly every aspect of our lives. In this article, we explore the fundamentals of crude oil trading in India! We dive into why it’s a compelling market, the capital required, and the critical data points that impact the pricing of crude oil.

              Why Trade Crude Oil?

              One of the most attractive features of crude oil trading is the extended trading hours, making it ideal for individuals who work during regular market hours (9:15 AM to 3:30 PM). With trading sessions running from 5:00 PM to 11:30 PM in India, crude oil offers flexibility for traders constrained by daytime work commitments.

              Crude oil also exhibits high volatility, creating opportunities for directional trades. Its global significance ensures consistent demand and its pricing can act as an indicator for other commodities and even stocks.

              Crude Oil Benchmarks

              Crude oil prices are determined by various benchmarks based on origin and quality. The three major benchmarks are:

              1. West Texas Intermediate (WTI): Sourced primarily from the United States, this is the most widely traded crude oil benchmark.

              2. Brent Crude: Extracted from the North Sea region, this benchmark serves as a reference for European and global markets.

              3. Dubai Crude: Predominantly produced in the GCC (Gulf Cooperation Council) countries, it represents the Middle Eastern oil market.

              The primary difference between these benchmarks lies in their geographical origins and levels of impurities.

              Tracking WTI Crude Oil

              For traders, WTI crude oil’s price movement is a key indicator. On platforms like TradingView, WTI is labelled as “US Oil” and provides valuable insights for market analysis. Observing technical patterns on WTI charts can help traders forecast movements in domestic crude oil contracts listed on the Multi Commodity Exchange (MCX).

              Understanding Crude Oil Trading on MCX

              Indian traders primarily access crude oil through MCX, which offers two types of contracts:

              1. Crude Oil (Standard): Contract size of 100 barrels.

              2. Crude Oil Mini: Contract size of 10 barrels.

              You can trade crude oil in India using any broker that offers access to MCX trading – Zerodha, Angel One, Upstox, etc.

              The crude oil market on MCX is highly active, with daily trading volumes exceeding ₹3,000 crores, equivalent to approximately 8,500 barrels. Both institutional and retail traders participate, with institutions often hedging their exposure in the physical market.

              How Prices Are Determined

              The price of crude oil on MCX is influenced by:

              • WTI Crude Oil Price: The global benchmark.
              • USD to INR Exchange Rate: Currency fluctuations directly impact domestic crude oil pricing.
              • WTI Price: $78.2 per barrel
              • USD/INR Exchange Rate: 86.62
                MCX Crude Oil Price: $78.2 × 86.62 ≈ ₹6,777

              Trading Hours

              WTI crude oil trades globally until 2:00 AM IST, while MCX closes at 11:30 PM (or 11:55 PM during daylight savings). This discrepancy can lead to price gaps and requires traders to account for after-market developments in global markets.

              Capital Requirements for Trading Crude Oil

              • Crude Oil (Standard): Requires a margin of approximately ₹3.32 lakhs for one lot.
              • Crude Oil Mini: Requires a margin of around ₹33,340 for one lot.

              For options traders, the required margin depends on the premium and lot size. Be cautious with options, as lower liquidity in the Indian market can lead to challenges in exiting trades, particularly if contracts are deep in-the-money.

              Key Data Points to Monitor

              Before diving into crude oil trading, closely monitor these factors:

              1. Geopolitical News: Global events like conflicts or OPEC meetings can significantly impact oil prices.

              2. Supply and Demand Data: Regular reports, such as the U.S. Energy Information Administration (EIA) inventories, influence short-term price movements.

              3. Technical Indicators: Utilise tools like moving averages, trendlines, and support/resistance levels to forecast price patterns.

              4. Currency Fluctuations: USD/INR movements can amplify or dampen the effects of international crude oil price changes.

              Trading Strategies for Crude Oil

              1. Futures Trading: Ideal for capturing directional moves in the market. However, ensure you understand margin requirements and risk management.

              2. Options Trading: Provides flexibility but requires caution due to liquidity constraints in the Indian market.

              3. Correlation Trades: Use crude oil trends to influence trades in related stocks or sectors, such as energy or logistics.

              4. Hedging: For advanced traders, crude oil can serve as a hedging instrument against exposure to other assets.

              Practical Tips for Beginners

              • Start Small: Begin with Crude Oil Mini contracts to limit risk.
              • Paper Trade: Use demo accounts to familiarise yourself with the market.
              • Stay Updated: Regularly monitor news and technical analysis platforms like TradingView.
              • Avoid Holding Positions Overnight: Gaps between global and domestic market hours can lead to unexpected losses.
              • Hedge Your Bets: Always consider strategies to minimise risk, especially in volatile markets.

              Conclusion

              Trading crude oil could be rewarding for disciplined and informed traders. Its global significance, high volatility, and accessibility on platforms like MCX make it a preferred choice for many. By understanding benchmarks, monitoring essential data points, and employing sound strategies, you can navigate the complexities of crude oil trading with confidence.

              Embark on your journey into crude oil trading today and harness its potential for growth. Remember, informed decisions and consistent learning are key to success in this dynamic market.

              Also Read: A Beginner’s Guide to Commodity Trading in India

              Disclaimer: Trading in commodities, including crude oil, involves risk and may not be suitable for all investors/traders. The information provided in this guide is for educational purposes only and should not be considered as financial, investment, or trading advice.

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              Editorial

              Understanding Volume Profile: A Powerful Tool for Traders

              what is volume profile? | marketfeed

              Volume is one of the most critical elements when analysing a stock’s price chart. Traditionally, traders analyse volume with respect to time. However, what if you could analyse volume with respect to price instead? This perspective unlocks a new layer of understanding in trading. Enter the Volume Profile—a versatile tool that gives traders insights into price levels with significant trading activity. In this article, we dive deep into understanding, using, and applying volume profile in trading.

              What Is Volume Profile?

              Volume Profile is a charting tool that plots trading volume against price rather than time. By doing so, traders can identify crucial price levels where significant activity has occurred. These levels often serve as strong support and resistance zones. Unlike traditional volume indicators, Volume Profile highlights areas of high liquidity where the price tends to gravitate and zones of low liquidity where the price can move rapidly.

              Let’s Look at an Example:

              Consider Raju, an onion wholesaler. Raju deals with highly volatile onion prices daily. He wants to know at what prices he sells the maximum and minimum quantities. By visualising onion prices and quantities sold on a chart, he discovers the most significant price levels. Similarly, traders can use Volume Profile to identify the most traded price levels for a stock, helping them understand key support and resistance zones.

              Key Components of Volume Profile

              1. Point of Control (POC): The price level where the highest volume of trades occurred. This level often acts as a pivot point for price action.

              point of control - volume profile | marketfeed

              2. High-Volume Zones: Zones with significant trading activity. These areas create a “gravitational pull,” slowing down price movement.

              3. Low-Volume Zones: Zones with minimal trading activity. Prices can move quickly through these areas due to low liquidity.

              volume zone - volume profile | marketfeed

              4. Fair Value: The range where 70% of all trades occur. Prices often oscillate within this range, creating a balance zone.

              fair value - volume profile | marketfeed

              Volume Profile provides actionable insights by uncovering patterns hidden within price and volume data. Next, let’s discuss how traders can interpret various scenarios.

              Candlestick Analysis with Volume Profile

              1. Bullish Candle: If the price closes above the fair value zone, the candle is bullish. Buyers demonstrate strength by breaking out of high-liquidity areas, suggesting upward momentum. For example, if a green candle closes above its POC, the POC may act as a strong support level in subsequent sessions.

              2. Bearish Candle: A red candle closing below the fair value zone indicates bearish sentiment. Sellers overpower buyers, pulling the price down. In this case, the fair value acts as a resistance zone.

              3. Neutral Candle: When the price closes near the fair value, the candlestick is neutral, signalling indecision. Analysing multiple candles in such cases is essential to identify the prevailing trend.

              4. Trend Reversal Candles: In some cases, the price moves strongly during the day but gets trapped in the fair value zone by the close. For instance:

              (i) Bullish to Neutral Reversal: Price rises quickly in a low-liquidity zone but closes in the fair value range.
              (ii) Bearish to Neutral Reversal: Price falls rapidly through low liquidity but closes in the fair value range.

              These scenarios indicate potential reversals for the next trading session.

              Intraday and Swing Trading with Volume Profile

              • Intraday Traders: Analysing the previous day’s Volume Profile helps anticipate trends for the next session. Key levels like POC and high-volume nodes provide critical zones for support and resistance.
              • Swing Traders: Longer-term trends can be identified by studying the Volume Profile over a week or month. Consolidation patterns and high-volume zones help traders understand upcoming support and resistance levels.

              Step-by-Step Guide to Using Volume Profile

              1. Open Your Charting Platform: On platforms like TradingView, navigate to the “Forecasting and Measurement Tools” section.

              2. Select Fixed Range Volume Profile: This tool is ideal for analysing volume over two fixed price ranges.

              3. Plot the Volume Profile: For instance, when analysing Cochin Shipyard stock, you can plot the day’s Volume Profile to identify key levels.

              4. Adjust the Fair Value Range: By default, 70% of trades are highlighted. Reducing this to 35% narrows the focus, enabling better insights into key zones.

              5. Analyse the Data: Use the plotted profile to identify the day’s fair value, POC, and high/low-volume zones.

                Example: Suppose Cochin Shipyard’s stock forms a red daily candle and closes inside its fair value zone. This indicates a potential reversal, as sellers couldn’t sustain their momentum. The next day’s trend might see the price bounce upward from this fair value zone.

                (Volume Profile in action in TradingView)

                Why Volume Profile is Essential

                1. Enhanced Market Understanding: By analysing volume at price levels, traders gain a clearer picture of market dynamics.

                2. Improved Accuracy: The tool helps pinpoint high-probability support and resistance zones.

                3. Combination with Other Tools: Volume Profile complements other technical analysis techniques, enhancing their effectiveness.

                  Conclusion

                  Mastering the Volume Profile can significantly improve your trading strategy. By understanding volume in relation to price rather than time, you unlock new dimensions of analysis. Whether you are an intraday trader or a swing trader, incorporating this tool into your arsenal will increase your trading success rate. So why wait? Start exploring Volume Profile today and take your trading skills to the next level!

                  Categories
                  Editorial

                  Here’s Why You NEED a Trading Plan in 2025

                  trading plan in 2025 | marketfeed

                  Trading in financial markets can be thrilling and profitable, but for many, it leads to consistent losses. A key reason for this is the absence of a well-structured trading plan. If you’re serious about making profits and avoiding emotional pitfalls, understanding and implementing a trading plan in 2025 is non-negotiable. In this article, we dive into the step-by-step process of building a robust trading plan.

                  Why Traders Lose Money Without a Plan

                  Statistics reveal that a staggering 90% of Indian traders experience losses. Out of this, 70% of traders who lose money don’t have a plan. This highlights the critical role a trading plan plays. While having a plan doesn’t guarantee immunity from losses, it significantly improves the odds of profitability by:

                  1. Avoiding emotional trading caused by impulsive decisions.
                  2. Promoting discipline and consistency, key traits for success.

                    Key Components of a Trading Plan

                    To craft a robust plan, focus on these components:

                    1. Set Clear Goals

                    Your trading goals should be:

                    • Specific: What do you aim to achieve?
                    • Measurable: How will you track your progress?
                    • Realistic: Are your targets aligned with your trading style?

                    Define attainable benchmarks based on your trading approach.

                    2. Risk Management

                    Here’s how you can protect your trading capital:

                    • Follow the 2% rule: Risk only 2% of your capital per trade.
                    • Diversify across strategies, sectors, and assets.
                    • Use stop-loss and position sizing to control losses.

                    Explore our Position Sizing Calculator!

                    3. Develop a Strategy

                    Your strategy should include:

                    • Indicators suited to your trading style: Examples include Relative Strength Index (RSI), Moving Average Convergence/Divergence (MACD), or multi-Exponential Moving Average (EMA) setups. [Read: What are Technical Indicators?]
                    • Rigorous backtesting: For systematic traders, test your strategy on historical data. For discretionary traders, forward test with small capital.
                    • Clear entry and exit rules: Define triggers for profitable and loss-making scenarios.

                    4. Review and Adapt

                    No plan is perfect from the start. Regularly assess and refine your approach by:

                    • Maintaining a trading journal to document strategies, trades, and emotional states.
                    • Tracking key metrics like win rates, risk-reward ratios, and drawdowns.
                    • Adapting to market conditions and learning from both successes and failures.

                    A trading plan is only effective if followed with discipline. Without consistency, even the most sophisticated plan will fail. Train your mind to stick to your rules and avoid impulsive deviations.

                    Automated Solutions for Modern Traders

                    If tracking multiple strategies feels overwhelming, consider algo trading services like those offered by marketfeed. Our automated systems execute pre-defined strategies, eliminating emotional biases and ensuring consistency!

                    Conclusion

                    Creating and following a trading plan is the cornerstone of successful trading. By setting realistic goals, managing risks, developing effective strategies, and continuously reviewing your performance, you can pave the way for consistent profits. Whether you’re an option buyer, swing trader, or algo trader, the principles of a trading plan apply universally.

                    Ready to take your trading to the next level? Start crafting your trading plan today—and watch your performance improve exponentially.

                    Watch: Why You Need a Trading Plan in 2025!

                    Categories
                    Editorial

                    A Guide to Commodity Trading in India

                    commodity trading in India | marketfeed

                    Commodity trading is an exciting segment of financial markets that many traders in India are unaware of. While Indian equity markets operate from 9:15 a.m. to 3:30 p.m., the commodity market offers extended trading hours from 9:00 a.m. to 11:30 p.m., divided into two sessions. This is especially beneficial for working professionals who can trade after office hours. However, entering this market requires a clear understanding of its dynamics, benefits, and risks. In this article, we dive into everything you need to know about commodity trading in India.

                    What is Commodity Trading?

                    Commodity trading involves buying and selling commodities, such as natural resources or agricultural products, on exchanges. This can include energy sources like crude oil and natural gas, metals such as gold and silver, and agricultural products like wheat and cotton. The primary goal in commodity trading is to profit from fluctuations in the price of these commodities.

                    Why Does Commodity Trading Exist?

                    Unlike equity markets that exist for companies to raise funds, the commodity market primarily serves to allow businesses to hedge against price fluctuations. For example, consider a gold shop owner named Charlie. He holds 10 kg of gold, hoping to profit from making jewellery. If the price of gold falls significantly from ₹80,000 per 10g to ₹60,000, Charlie may incur losses that outweigh his profits from jewellery sales. But if the price of gold goes way up (say ₹1 lakh per 10g), he might earn more, but it will also cost him more to restock. Thus, commodity trading allows Charlie to hedge his risk by using futures contracts to balance potential losses or gains.

                    [A futures contract is an agreement to buy or sell something (like gold, oil, or stocks) at a fixed price on a future date. It helps buyers and sellers protect themselves from price changes—buyers lock in lower prices if they expect a rise, while sellers secure higher prices if they expect a drop.]

                    How to Get Started in Commodity Trading in India?

                    To begin trading commodities, you need to understand the basics, including the types of commodities available, how trading works, and the exchanges involved.

                    In India, there are two primary exchanges for commodity trading:

                    • National Commodity & Derivatives Exchange Ltd (NCDEX): This platform primarily deals with agro-based commodities like wheat, spices, and cotton.
                    • Multi Commodity Exchange (MCX): This is where non-agro commodities like gold, silver, zinc, and crude oil are traded.

                    Both exchanges are regulated and provide a safe environment for trading. It is crucial to avoid unregulated platforms or apps that do not adhere to SEBI guidelines!

                    All major brokers in India like Zerodha, Upstox, Fyers, etc. support commodities trading. You should activate the commodities segment separately in your broker/trading account.

                    Types of Contracts

                    Commodity trading mainly involves derivatives, specifically futures and options:

                    • Futures Contracts: Agreements to buy or sell a commodity at a future date at a predetermined price.
                    • Options Contracts: Rights to buy or sell a commodity at a specific price before a set date.

                    Unlike stocks, commodities can’t be held forever. Every futures or options contract has an expiry (settlement) date. As a thumb rule, never let your commodity trades enter into a settlement phase. It’s better to square off your positions at least 2-3 days before the settlement date.

                    Some of the most actively traded commodities include:

                    • Gold: Available in various contract sizes, including 1 kg, 100 g, and 8 g.
                    • Silver: Typically traded in contracts of 30 kg or smaller sizes.
                    • Crude Oil: A significant commodity often influenced by global market conditions.
                    • Natural Gas: Another volatile commodity that attracts traders.

                    The capital needed to trade commodities depends on the type of commodity and the broker’s policies. Brokers often have specific margin requirements for commodities.

                    Commodity trading offers high leverage. For example, a gold mini contract worth ₹7.2 lakh may only require ₹72,000 as margin. Leverage amplifies both profits and losses, so it’s essential to have proper risk management strategies in place!

                    Commodity Indices in India

                    Similar to equity indices like Nifty50, commodity markets also offer indices for trading:

                    1. Bullion Index: Tracks gold and silver prices.
                    2. Metal Index: Tracks aluminium, copper, lead, zinc, and nickel prices.
                    3. Energy Index: Tracks crude oil and natural gas prices.

                    These indices allow traders to speculate on overall market movements rather than individual commodities.

                    Advantages of Commodity Trading

                    Commodity trading offers several benefits that can attract both individual and institutional traders:

                    • High Liquidity: Many commodities, especially gold and crude oil, have high trading volumes. These markets tend to follow price action well.
                    • People who are unable to trade during the daytime (office-goers) can use the opportunity to make potential extra income!
                    • Less Price Manipulation: Commodities are traded globally, reducing the chances of price manipulation compared to more localised markets.
                    • Hedging Opportunities: Businesses can hedge against price fluctuations to stabilise costs and revenues.

                    Disadvantages of Commodity Trading

                    While there are many advantages, there are also significant risks and drawbacks to consider:

                    • High Price Volatility: Commodity prices can change rapidly due to geopolitical factors or supply and demand shifts, which may result in substantial losses for unprepared traders.
                    • Leverage Risks: Trading with leverage can amplify losses. Commodity traders must understand how to manage leverage effectively.
                    • Liquidity Issues: Not all contracts have the same level of liquidity, which can complicate trades and lead to slippage.
                    • Geopolitical Sensitivity: Commodity markets are often the first to react to global events, requiring traders to stay informed about international affairs.

                    Conclusion

                    Commodity trading presents a unique opportunity for investors looking to diversify their portfolios and take advantage of market fluctuations. Also, profits from commodity trading are treated as business income (same as F&O). You’ll have to pay tax based on your tax slab.

                    Approach the commodities market only after a thorough understanding of the risks involved, the mechanics of trading, and the specific commodities you wish to trade. Always start small, educate yourself continuously, and consider consulting with financial advisors to navigate the commodities market effectively.

                    As you venture into commodity trading, remember to keep your capital allocation conservative, especially if you’re new to the field. With the right strategies and knowledge, you can successfully navigate the volatile waters of commodity trading and potentially achieve significant returns. Happy trading!

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                    Editorial

                    A Beginner’s Guide to Mutual Fund Investments

                    mutual fund invesmtents india | marketfeed

                    Legendary investor Warren Buffett’s famous quote, “Be fearful when others are greedy and be greedy when others are fearful,” often resonates in investing. This philosophy highlights the importance of investing wisely, especially when others are uncertain or scared. The Indian mutual fund market has seen an impressive surge in retail investments, with a net inflow of ₹41,877 crores in October alone (up 22% month-on-month), despite the stock market witnessing a significant drop of over 6%. This spike in mutual fund investments shows growing confidence among Indian retail investors, who are taking advantage of market volatility.

                    In this article, we will explore mutual funds, the different types of mutual funds, and key metrics you should consider before investing in them. By the end of this guide, you will have a better understanding of how to approach mutual fund investments and make informed decisions.

                    What are Mutual Funds?

                    A mutual fund is a pool of money collected from various investors to invest in a diversified portfolio of securities like stocks, bonds, and other financial instruments. Instead of investing directly in individual stocks, investors contribute money to a mutual fund, which is then managed by professionals. The aim is to generate returns for the investors, who receive profits based on the performance of the fund. In India, mutual funds are run by reputed financial players like SBI, HDFC, UTI AMC, etc.

                    The Securities and Exchange Board of India (SEBI) tightly regulates mutual funds to protect investors, making them a trustworthy option despite inherent market risks.

                    Understanding Mutual Fund Categories

                    1. Equity Mutual Funds:

                    These funds invest primarily in stocks/equities (like Reliance, HDFC Bank, etc). This category is popular among retail investors who seek higher returns over the long term. The returns can be substantial when the market performs well. However, they come with higher risk, as the stock market can be volatile.

                    2. Debt or Liquid Mutual Funds:

                    These funds invest in fixed-income securities such as corporate bonds, government bonds, and money market instruments. Debt mutual funds are typically safer than equity funds and are a popular choice among investors who want to park their surplus cash. These funds generally provide stable but lower returns compared to equity funds, making them suitable for conservative investors.

                    3. Balanced or Hybrid Funds:

                    Balanced funds invest in a combination of equities, bonds, and sometimes commodities like gold. These funds aim to provide the best of both worlds: growth potential from equities and stability from debt instruments.

                    While balanced funds can be a good option for beginners, investors looking for higher returns may prefer to focus more on equity funds once they understand the basics of investing.

                    How to Invest in Different Mutual Funds?

                    • Long-term goals (e.g., buying a house): High equity allocation for better returns over decades.
                    • Short-term goals (e.g., a foreign trip): Focus on debt funds for stability.
                    • Balanced Funds: For beginners with no specific goals, offering simplicity and diversity.

                    Thumb Rule:

                    • Long-term = higher equity allocation.
                    • Short-term/emergency = higher debt allocation.

                    Active vs Passive Mutual Funds

                    Mutual funds can be broadly categorized into two types based on their investment approach: active mutual funds and passive mutual funds. Here’s a breakdown:

                    1. Active Mutual Funds

                    Active mutual funds are managed by professional fund managers who actively make decisions about which stocks or securities to buy, hold, or sell. Their goal is to outperform a specific benchmark or index by leveraging market insights, research, and expertise.

                    Example: A large-cap equity fund aiming to outperform the Nifty50 Index.

                    2. Passive Mutual Funds

                    Passive mutual funds, often called index funds or exchange-traded funds (ETFs), aim to replicate the performance of a specific market index rather than beat it. They invest in the same securities in the same proportions as the underlying index.

                    Example: An index fund that tracks the Nifty50 or Sensex.

                    How to Choose an Active Mutual Fund?

                    When investing in mutual funds, it’s crucial to assess key factors that determine the fund’s performance. Here are five key ratios and metrics that will help you choose the best mutual fund:

                    1. Rolling Returns: This metric measures the fund’s performance over different periods, helping you understand its consistency. Look for funds with strong rolling returns over 3 years, ideally 30% or more.

                    2. Alpha: Alpha represents the percentage by which the fund outperforms its benchmark index. A positive alpha indicates that the fund manager is adding value by selecting the right stocks. Look for funds with an alpha of at least 2%, meaning the fund is outperforming its benchmark by this margin.

                    3. Sharpe Ratio: This ratio measures the risk-adjusted returns of a fund. It compares the return of the fund with the risk-free return (such as government bonds). A Sharpe ratio of more than 1 is considered good because it means the fund is delivering decent returns for the level of risk taken.

                    4. Assets Under Management (AUM): AUM refers to the total market value of the assets managed by the fund. A higher AUM can indicate a stable, trusted fund with significant investor interest. However, a very high AUM may affect the fund’s ability to generate returns, especially in smaller-cap stocks.

                    5. Percentage Away from All-Time High: This metric indicates how much the fund has fallen from its peak. While investing in a fund that has recently dipped might seem like a good deal, it’s essential to evaluate the reasons behind the drop. Look for funds that have a reasonable distance from their all-time high and aren’t in a downtrend due to poor management or strategy.

                      Practical Application: Using Screening Tools

                      To simplify the process of selecting mutual funds, investors can use online tools like TickerTape. TickerTape allows you to filter mutual funds based on the above metrics, helping you narrow down your choices. You can analyze funds in different categories (like small-cap, mid-cap, or large-cap) and make informed decisions based on their performance metrics.

                      For example, if you’re looking for a small-cap mutual fund, you can apply the following filters:

                      • Rolling returns of at least 30% over 3 years
                      • Alpha greater than 2%
                      • Sharpe ratio of more than 1
                      • AUM above 5,000 crores

                      By using these parameters, you can shortlist funds that meet your investment objectives and risk profile.

                      Check out the filtered Google Sheet of mutual funds derived from the formula given above: https://marketfeed.me/mutualfundlist

                      Conclusion

                      Mutual fund investing can be a smart way to build wealth over time, especially for those who are new to the stock market. By understanding the different types of mutual funds and applying key metrics like rolling returns, alpha, and Sharpe ratio, you can make informed decisions and build a diversified portfolio. Remember to tailor your investments to your financial goals—whether it’s a long-term objective like retirement or a short-term goal like funding a vacation.

                      The Indian mutual fund market is growing rapidly, and by making the right choices, you can benefit from the wealth of opportunities available. Always do thorough research and, if necessary, consult a financial advisor to ensure your investments align with your goals and risk tolerance.

                      Disclaimer: Mutual fund investments are subject to market risks. Please do your own research or talk to a registered investment advisor/profession before investing in mutual funds.

                      Categories
                      Editorial

                      Understanding the Magic Formula: A Value Investing Strategy

                      magic formula strategy in India | marketfeed

                      Imagine a value investing strategy that claims to have returned investors a 30% Compound Annual Growth Rate (CAGR) over 26 years. If you had invested ₹1 lakh into this strategy, it says you would have turned into over ₹9 crore! Sounds incredible, right? That’s the Magic Formula investment technique. In this article, we will dive deep into this investment strategy, exploring its origin, the nine key rules it follows, backtesting data, and its relevance in both the U.S. and Indian markets.

                      The Origins of the Magic Formula

                      Joel Greenblatt, a renowned asset manager since the 1980s, wrote a book titled The Little Book That Beats the Market, where he presented the magic formula for value investing. Greenblatt is a professional investment manager with an impressive $6.3 billion in Assets Under Management (AUM). His magic formula is said to be a simplified version of the value investing strategies used by legends like Warren Buffett and Charlie Munger.

                      In his book, Greenblatt outlines how investors can generate market-beating returns by following a set of simple rules. His confidence in the strategy led to a follow-up book, The Little Book That Still Beats the Market, further emphasising its relevance. The formula has been consistently applied for over two decades and claims to outperform traditional market benchmarks.

                      What is the Magic Formula?

                      The magic formula is a stock-picking strategy based on two financial metrics: earnings yield and return on capital (ROC). The strategy focuses on buying good companies at bargain prices, similar to Warren Buffett’s approach, but Greenblatt simplifies the process into an easy-to-follow method.

                      The key idea behind the formula is to select companies with a high earnings yield (indicating that the company is undervalued) and a high return on capital (showing that the company is efficiently using its capital to generate profits). These two metrics help identify companies that have strong earning potential and are available at a relatively cheap price.

                      Why Use the Magic Formula?

                      Greenblatt wanted to simplify stock picking to make it understandable even to a teenager. The book is written in simple language and provides a clear framework to follow, making value investing more accessible to beginners. As Greenblatt famously said, “Choosing individual stocks without any idea of what you’re looking for is like running through a dynamite factory with a burning match. You may live, but you’re still an idiot.”

                      In short, the magic formula provides a structured way to invest in the stock market, ensuring that investors are not making random picks but are following a tested and data-driven strategy.

                      The Nine Rules of the Magic Formula

                      Now that we have a basic understanding of the magic formula, let’s break down the nine rules that form the foundation of this strategy:

                      1. Market Cap Greater Than $50 Million

                      The formula requires that you only assess companies with a market cap greater than $50 million. In the Indian context, this translates to about ₹400 crore. However, we’ll focus on companies with a market cap of over ₹1,000 crore to account for inflation and currency depreciation.

                      2. Exclude Utility and Financial Stocks

                      Greenblatt’s strategy excludes utility and financial companies. Although he doesn’t provide a specific reason, it is likely because these industries tend to carry high debt levels, which may misrepresent/skew the financial metrics the formula relies on.

                      3. Avoid International Companies

                      The formula excludes international companies. Since there are very few foreign companies listed in our country, this rule is easily applicable in the Indian market.

                      4. Calculate Earnings Yield

                      Earnings yield can be calculated as earnings per share divided by the current share price, or using the formula EBITDA divided by enterprise value. The goal is to understand the company’s earnings capacity, essentially evaluating how well it is managing its profits relative to its price.

                      5. Calculate Return on Capital (ROC)

                      Return on capital measures the company’s profitability relative to the capital invested in the business. This metric reveals how efficiently the company is using its resources. Think of Coca-Cola, which can generate high profits with relatively low capital due to the brand’s long-standing moat. This rule is designed to simplify Buffett’s approach to analysing a company’s earnings potential.

                      6. Rank Companies Based on Earnings Yield and ROC

                      Once you’ve calculated the earnings yield and return on capital for each company, rank them accordingly. Companies with the highest combined earnings yield and ROC should be prioritised.

                      7. Invest in Top 20-30 Companies

                      After ranking the companies, invest in the top 20-30 based on their earnings yield and ROC. In the second edition of the book, Greenblatt introduced a small tweak: invest only in companies with a price-to-earnings (P/E) ratio greater than five. This helps to avoid low-quality or overly volatile stocks.

                      8. Rebalance Your Portfolio Annually

                      Greenblatt suggests rebalancing your portfolio once a year. He also introduces a useful tax-saving tip: sell loss-making stocks in the 51st week to account for short-term capital losses, which can be offset against other gains. Hold profitable investments for over 52 weeks to benefit from lower long-term capital gains taxes.

                      9. Stick to the Strategy for 5-10 Years

                      Finally, the magic formula requires patience. You need to stick to this strategy for at least five to ten years to see the compounding effect and generate significant returns. Short-term fluctuations in the market can cause temporary losses, but the long-term benefits are where the real value lies.

                      Backtesting the Magic Formula

                      Backtesting of the magic formula has shown positive results in different markets. Studies have consistently proven that the strategy outperforms the market over time, especially in non-bearish market conditions. Greenblatt’s own backtest of the U.S. market suggests that the formula has outperformed benchmarks like the S&P500 by a significant margin.

                      A study conducted in India in 2022 by professors from the University of Delhi revealed that the magic formula worked well in the Indian market. Over a period from July 2012 to 2020, the BSE Sensex gave returns of around 99.8%, while Greenblatt’s magic formula returned more than 1% CAGR during the same period.

                      This shows that the magic formula is not only relevant in the U.S. market but can also be applied successfully in India. With backtested data supporting its credibility, the magic formula stands as a proven, easy-to-implement value investing strategy.

                      How to Use the Magic Formula Screener in India?

                      To implement magic formula investing effectively, you can use online tools such as screener.in. This stock screener platform allows you to filter companies based on specific criteria aligned with the Magic Formula’s rules. Here’s how you can set up the screener:

                      1. Set a market capitalisation filter of greater than ₹1,000 crore.
                      2. Set a return on invested capital (ROIC) filter of greater than 25%.

                      After applying these filters, you’ll generate a list of potential quality companies to evaluate. The next step involves exporting this data into an Excel sheet for further analysis.

                      Once you have your list of companies, the next step is ranking them based on their ROIC and earnings yield. Use Excel’s rank function to assign ranks to each metric. After ranking, add up the ranks to derive a combined score that reflects both the earnings yield and ROIC. The companies with the lowest total rank are your best candidates for investment.

                      With your ranked list in hand, it’s essential to conduct a thorough analysis of each company. Look for any “shady” companies that might not align with the quality standards outlined in the Magic Formula. For instance, while a company may appear at the top of the list, further investigation might reveal potential red flags.

                      As emphasised in the rules, it’s crucial to rebalance your portfolio annually. This involves selling off underperforming stocks and maintaining a long-term investing outlook. Adhering to magic formula investing over a 5 to 10-year horizon can help mitigate short-term volatility and potentially yield higher risk-adjusted returns.

                      Disadvantages of the Magic Formula

                      While the Magic Formula presents a structured approach to systematic value investing, it’s not without its drawbacks:

                      • Return Expectations: The promised 30% CAGR may not be replicable in the current market environment, particularly in India.
                      • Complexity of Smaller Companies: Some smaller market cap companies may have less transparent financials, making them harder to analyse.
                      • Market Conditions: The formula tends to outperform during bullish markets but may lag in bearish conditions.

                      Conclusion

                      Joel Greenblatt’s magic formula is a time-tested value investing strategy that simplifies stock picking for long-term investors. By focusing on high earnings yield and return on capital, the formula helps investors find good companies at reasonable prices. The nine rules of the formula make it easy to implement, even for beginners, and the strategy has been backtested successfully in both the U.S. and Indian markets.

                      If you’re looking for a simple yet effective stock-picking method, the magic formula could be a great starting point for your investment journey!

                      Watch: How To Spot Hidden Stock Gems: Easy Value Investing Screener

                      Disclaimer: We are not SEBI-Registered Investment Advisors. The investment strategy mentioned in this article is purely for educational purposes. Please do your own research before investing!

                      Categories
                      Editorial

                      Top 5 Bluechip Stocks to Watch During a Market Fall

                      bluechip stocks to watch | marketfeed

                      As the festive season of Diwali approaches, it’s not just the festive deals in traditional or e-commerce stores turning heads—investors are spotting opportunities in the stock market, too. The Nifty 50 index has dropped by over 5% in the past month, with many stocks facing even sharper declines. This dip offers Indian investors a chance to buy low and potentially benefit from future gains. In this article, we’ll break down the market’s recent correction and unveil five bluechip stocks to watch out for.

                      Why Has the Nifty 50 Fallen Recently?

                      1. Heavy Selling by Foreign Institutional Investors (FIIs)

                      One of the primary reasons for the recent downturn in the Nifty 50 is the significant selling activity by Foreign Institutional Investors (FIIs). Following a recent SEBI circular that impacted futures and options (F&O) trading, FIIs have been pulling substantial amounts of money out of Indian markets. [FIIs buy assets, pledge them as collateral, and then use the funds for F&0 trading]. From October 1-21, 2024, FIIs have sold more than ₹80,000 crores worth of stocks in the cash market, marking a notable shift from their earlier buying trend.

                      2. Corporate Earnings Disappointments

                      Another contributing factor to the market’s decline is the flat earnings reports from major companies. For instance, the earnings for giants like Reliance Industries failed to meet market expectations, leading to a sell-off. Combined with FII selling, these earnings reports have contributed to a bearish sentiment in the market.

                      Why a Rebound is Likely to Occur

                      Despite these challenges, several indicators suggest that the market could rebound from its current levels:

                      1. Resilience of Midcap and Smallcap Stocks

                      Interestingly, while the Nifty 50 has fallen over 5%, midcap and smallcap stocks have not experienced a similar downturn. Historically, large-cap stocks tend to fall more sharply during market corrections. However, the relative strength of midcap and smallcap stocks this time indicates that the overall market sentiment may not be as bearish as it appears.

                      NIFTY50 bluechip stocks to watch | marketfeed
                      1-month data

                      2. International Market Correlation

                      The Indian stock market has shown a strong correlation with international markets. Currently, U.S. and European markets are trading near their all-time highs. If these markets continue their upward trajectory, it is likely that Indian markets will follow suit, leading to potential gains for investors who enter the market now.

                      Top 5 Bluechip Stocks to Watch

                      With the festive season upon us, here are five Nifty 50 stocks that present compelling investment opportunities:

                      1. Reliance Industries (RIL)

                      Reliance Industries has seen a decline of over 15% since July 2024. Currently trading below its 200-day exponential moving average, the stock has been under pressure due to FII selling and disappointing earnings, particularly in its oil-to-chemicals business. However, with an upcoming bonus issue on October 28, investor interest could rebound. Watch for resistance around ₹2,765, as a break above this level could indicate strength.

                      2. Tata Consultancy Services (TCS)

                      TCS has fallen by over 11% from its 52-week high and is currently near its 200-day exponential moving average (EMA). The stock has a strong support zone between ₹3,973 and ₹4,055, making it a solid pick for those looking to invest in a blue-chip technology company. As digital transformation continues to be a priority for businesses, TCS stands to benefit in the long run.

                      3. Kotak Mahindra Bank

                      Despite a recent earnings report that sent the stock down over 7%, Kotak Mahindra Bank has shown resilience, falling less than other banking stocks. Currently near its 200-day EMA with a support level around ₹1,730, this stock may provide a favourable risk-reward scenario for investors looking to enter the banking sector.

                      4. Tata Motors

                      Tata Motors has experienced a significant decline of more than 24% recently from its all-time high. Currently trading below its 200-day EMA, the stock’s support level at ₹888—previously an all-time high—offers an attractive entry point. With the Diwali season promising increased automobile sales, Tata Motors, with its low PE ratio, presents a compelling investment opportunity.

                      5. Titan Company

                      Titan has fallen approximately 13% recently from ₹3,866 levels, making it another attractive option. Historically, jewellery companies like Titan perform well during the festive season. The stock is nearing a critical support level around ₹3,200, and if it holds, it could be a solid investment, especially with the festive buying likely to boost sales.

                      Conclusion

                      The current market conditions present a unique opportunity for investors willing to do their homework. While the recent declines in the Nifty 50 and its constituent stocks may seem alarming, there are underlying reasons to believe a rebound is on the horizon. The stocks highlighted in this article offer a combination of strong fundamentals and favourable technical setups.

                      As always, it’s essential to conduct your research and consider your risk tolerance before making any investment decisions. The Diwali stock market sale could be your chance to invest in fundamentally strong companies at discounted prices. Happy investing, and may this festive season bring you financial prosperity!

                      Disclaimer: We are not SEBI-Registered Investment Advisors. The stocks and analysis mentioned in the article are purely for educational purposes. Kindly do your own research before investing!

                      Categories
                      Editorial

                      What are Robo Advisors? Do Robo Advisors Exist in India?

                      robo advisors in India | marketfeed

                      Automation is rapidly changing how we handle money and business today. Nowadays, computer programs or “algorithms” seamlessly execute multiple jobs that people used to do, making financial tasks faster and easier for everyone. Robo advisors are a prominent, new-age solution that can help you grow your wealth effortlessly. In this article, we discuss the world of robo advisors and their benefits (especially in the Indian context)!

                      What is a Robo Advisor? 

                      A robo-advisor is a digital platform that offers automated, algorithm-driven financial planning and investing services without human supervision. A typical robo-advisor will conduct an online survey to inquire about your financial condition and future objectives. It uses this data to offer personalised investment plans based on risk tolerance, time horizon & financial goals and executes them automatically in your own account.

                      How Does a Robo-Advisor Work?

                      • If you want to avail the services of a robo-advisor, you’ll need to complete a quick questionnaire. Usual questions include the client’s age, gender, income, investing goals, liabilities, current assets, and degree of risk tolerance.  These data points are utilised to allocate assets in a portfolio.
                      • Robo-advisors analyse these replies using an algorithm and complex software to build a diversified portfolio of exchange-traded funds, index funds, direct equity, and other assets.
                      • The algorithm automatically rebalances the portfolio once the money is invested, to ensure it remains close to the target allocation.
                      • Some robo-advisors include live consultations or access to a licensed human financial planner who can help you prioritise your goals and give strategies for reaching them. Users can log in to their investing accounts to track progress.

                      What are the Benefits of Robo Advisors?

                      There are various benefits that Robo Advisors offers:

                      1. Accessibility: Robo-advisors make investing easier for everyone, even those who might not have a lot of money or experience. Their sign-up and investment processes are much easier than the heavy paperwork involved with human advisors. You can start investing with a small amount and manage your portfolio from your phone or computer. 

                      2. Low Cost: Robo-advisors often charge lower fees than traditional financial advisors. A majority of robo-advisors in the US charge between 0.25-0.5% of the specified investment amount as annual fees. (Robo-advisory platforms in India usually charge a flat monthly, quarterly or annual fee). In contrast, the usual fee charged by a human financial advisor ranges from 1-2% or even more for commission-based accounts.

                      3. Personalised Advice: Robo-advisors use algorithms to understand your financial goals and risk tolerance. They then create a personalised and diversified investment portfolio just for you.

                      4. Automated Portfolio Management: The automated algorithms used by robo-advisors continuously monitor the market and rebalance portfolios based on predetermined strategies, eliminating the need for constant manual adjustments.

                      What are the Disadvantages of Robo Advisors?

                      1. Lack of Human Touch: Robo-advisors lack the personal touch that human financial advisors can provide. This can be particularly important for investors who prefer face-to-face interactions or require complex financial planning advice.

                      2. Risk of Technical Issues: Like any tech-driven service, robo-advisors are not immune to problems. These may range from platform outages and data breaches to errors in their underlying algorithms.

                      3. Challenges with Complex Financial Needs: Robo-advisors excel in simple investment scenarios but may struggle with more intricate financial tasks like tax planning, estate management, or specialised investment strategies. In these situations, human expertise is often essential.

                      Do Robo Advisors Exist in India?

                      Yes, robo-advisors do exist in India. However, they operate differently compared to the ones in the US:

                      • Robo-advisor services in the US are typically fully automated, with capital being allocated and invested without the need for user involvement. However, Indian regulations allow automation only for the initial investing process. For any changes to a user’s portfolio beyond the initial investment (like re-balancing or tax loss harvesting), the platform must obtain explicit consent from the customer/user for each transaction.
                      • US-based robo-advisors typically focus on passive investment strategies using ETFs. In contrast, Indian robo-advisors (like Scripbox and FundsIndia) often prioritise actively managed mutual funds.
                      • Robo-advisors in the US usually charge a transparent annual fee based on assets under management (AUM), typically between 0.25-0.50%, aligning with the performance of the investments. In India, fee structures vary, often involving flat quarterly/annual fees or commissions per transaction.

                      As India’s financial markets continue to evolve, investors are seeking ways to make informed investment decisions with minimal effort. Robo-advisors, with their automated investment strategies, offer a promising solution to meet this growing demand. 

                      However, do keep in mind that robo-advisory platforms you come across in India are technically “semi-robo advisors” — they do not offer complete automation of your investments. While the Securities and Exchange Board of India (SEBI) has established regulations for traditional investment advisors, it hasn’t yet implemented a comprehensive framework specifically addressing automated financial advice platforms. Looking ahead, the evolution of India’s regulatory landscape will likely play a crucial role in shaping the future of robo-advisors!

                      Categories
                      Editorial

                      How to Build a Profitable Investment Portfolio?

                      how to build an investment portfolio | marketfeed

                      In the world of investing, understanding how to build a profitable investment portfolio is key to achieving long-term financial success. Especially during market cycles like bull runs, investors often get caught up in a state of excitement, only to suffer losses when the market inevitably crashes. In this article, we’ll explore key strategies like diversification, risk management, and portfolio rebalancing to help you protect your investments, ensure steady growth, and reduce volatility.

                      The Bull Run Trap: How Investors Get Caught

                      During a bull run, two main things happen:

                      1. Existing investors pour more money into the market, pushing prices higher.
                      2. New investors jump into the market at high prices, hoping to ride the wave of profits.

                        The result is widespread market euphoria. But this is also the point where market crashes often occur, leaving both seasoned and new investors trapped. Those who bought at higher prices or averaged up their investments during the bull run suffer the most when the market reverses/falls.

                        This is why building a well-diversified and balanced portfolio is essential for safeguarding your investments during both bullish and bearish markets.

                        Why Diversification Matters?

                        Diversification is a term you’ve likely encountered in various financial discussions. But what does it truly mean? In essence, diversification involves spreading your investments across different asset classes to create a balanced portfolio. This strategy aims to shield your investments from the inevitable ups and downs of the market. Let’s break down the concept of diversification with an example:

                        If you’re heavily invested in the Nifty50 index and also have investments in small-cap and mid-cap stocks, you may think your portfolio is diversified. However, when the Nifty50 falls, small-cap and mid-cap stocks tend to fall as well. In this case, you’re exposed to a similar risk across different segments of the market, which doesn’t truly represent a diversified portfolio.

                        Non-Correlating Assets: The Key to True Diversification

                        True diversification means investing in non-correlating assets—assets that don’t move in the same direction as the rest of your portfolio. For instance, pairing Nifty50 stocks with government securities like Gilt funds can create a balanced portfolio.

                        When the stock market falls, government bonds, particularly top government security bonds (G-Secs), tend to rise. This inverse relationship between equities and bonds means that even if your equity investments take a hit during a market downturn, the bond portion of your portfolio may provide stability and potentially offset the losses.

                        How Much Should You Diversify?

                        When considering diversification, a common rule of thumb is to allocate your investments using the 100 minus your age formula. This means if you’re 30 years old, you should invest 70% in equities and the remaining 30% in bonds or other debt instruments.

                        While this is a basic approach, there are additional factors to consider when building your portfolio. These include:

                        • Your age and life stage
                        • Investment goals and time horizon
                        • Risk tolerance
                        • Number of dependents and financial responsibilities

                        The combination of these factors will help you assess how much to allocate to equities, bonds, and other asset classes. Your investment strategy should evolve based on where you are in life. For example, when you’re younger and earning less, you may be willing to take more risks and invest heavily in equities. As you grow older and your income and responsibilities increase, it might make sense to allocate more towards debt and gold to ensure stability in your portfolio.

                        One key takeaway here is that investment strategies are not set in stone. They should evolve as your financial situation, goals, and risk tolerance change.

                        The 80-20 Portfolio Rule

                        An advanced version of the traditional “100 minus your age” formula is the 80-20 rule, which has gained popularity among investors looking for both growth and stability. This rule suggests that you allocate 80% of your investments to equities and 20% to safer assets like government securities and gold.

                        This 80-20 allocation allows you to take advantage of the growth potential in equities while keeping a portion of your portfolio in safer assets. In times of market corrections, you can tap into your bond and gold investments and reallocate them into equities when prices are lower.

                        Portfolio Rebalancing: Maintaining Stability Over Time

                        Over time, your portfolio will shift due to market movements. For instance, during a stock market rally, the equity portion of your portfolio may grow from 80% to 90%, increasing the overall risk. In such cases, rebalancing your portfolio becomes necessary.

                        Rebalancing involves selling a portion of your over-performing assets (maybe equities) and reinvesting the proceeds into underperforming assets (bonds or gold) to restore your original allocation. This process helps reduce risk and ensures that your portfolio remains aligned with your investment strategy.

                        However, constantly buying and selling assets can trigger tax liabilities and transaction fees. To avoid this, consider increasing your allocation to safer assets (like bonds) during market rallies rather than selling your equities outright. This keeps your portfolio balanced without incurring unnecessary costs.

                        The Role of Risk Management in Investing

                        Risk management is an essential part of investing. Never invest 100% of your funds in equities, even if your goal is long-term growth. By having a diversified investment portfolio, you’re better prepared for any market condition.

                        For example, if you’re saving for retirement and have invested everything in equities, a market crash just before retirement could severely impact your savings. A diversified approach ensures that you have a mix of assets that can withstand market volatility and provide liquidity when needed.

                        Final Thoughts

                        Building a profitable portfolio requires careful consideration of your investment strategy, risk tolerance, and market conditions. By diversifying across various asset classes and regularly rebalancing your portfolio, you can create a resilient investment strategy that withstands market fluctuations.

                        As you embark on your investment journey, remember to adapt your strategy based on your evolving circumstances and financial goals. Whether you’re a seasoned investor or just starting, maintaining a balanced and diversified portfolio is key to long-term financial success.

                        Happy investing! 🚀

                        Watch the full video on this topic on marketfeed’s YouTube channel: Building a Profitable Portfolio: Tips and Tricks