The New York Stock Exchange
The most prestigious exchange in the world is the New York Stock Exchange (NYSE). The "Big Board" was founded over 200 years ago in 1792 with the signing of the Buttonwood Agreement by 24 New York City stockbrokers and merchants. Currently the NYSE, with stocks like General Electric, McDonald's, Citigroup, Coca-Cola, Gillette and Wal-mart, is the market of choice for the largest companies in America.
The trading floor of the NYSE
The NYSE is the first type of exchange (as we referred to above), where much of the trading is done face-to-face on a trading floor. This is also referred to as a listed exchange. Orders come in through brokerage firms that are members of the exchange and flow down to floor brokers who go to a specific spot on the floor where the stock trades. At this location, known as the trading post, there is a specific person known as the specialist whose job is to match buyers and sellers. Prices are determined using an auction method: the current price is the highest amount any buyer is willing to pay and the lowest price at which someone is willing to sell. Once a trade has been made, the details are sent back to the brokerage firm, who then notifies the investor who placed the order. Although there is human contact in this process, don't think that the NYSE is still in the stone age: computers play a huge role in the process.
The Nasdaq
The second type of exchange is the virtual sort called an over-the-counter (OTC) market, of which the Nasdaq is the most popular. These markets have no central location or floor brokers whatsoever. Trading is done through a computer and telecommunications network of dealers. It used to be that the largest companies were listed only on the NYSE while all other second tier stocks traded on the other exchanges. The tech boom of the late '90s changed all this; now the Nasdaq is home to several big technology companies such as Microsoft, Cisco, Intel, Dell and Oracle. This has resulted in the Nasdaq becoming a serious competitor to the NYSE.
The Nasdaq market site in Times Square
On the Nasdaq brokerages act as market makers for various stocks. A market maker provides continuous bid and ask prices within a prescribed percentage spread for shares for which they are designated to make a market. They may match up buyers and sellers directly but usually they will maintain an inventory of shares to meet demands of investors.
Wednesday, August 4, 2010
Saturday, July 24, 2010
GST – INDIA’S MOST AMBITIOUS INDIRECT TAX REFORM
The big bone of contention in implementation of GST has been – how will the state and the Centre levy one flat rate of tax? Right since the time GST was proposed, the challenges had seemed so overwhelming that many felt, GST would either remain only on paper or would see a very watered down version getting implemented.
And the proposal put out by the FM is a relief – relief because GST will indeed the light of the day but would be a watered down version. To get the states to agree to meet the 1st April 2011 deadline, the FM has diluted the biggest plus point of GST – to have one tax slab for the state as well as the Centre. What is proposed now is multiple tax slab, and it will not include actual money earners like alcohol, petroleum products, electricity and real estate.
So what we could now have is Central GST (CGST) rate pegged at standard rate of 10%, 6% concessional for goods and 8% for services. The proposed timeline is three years, starting next fiscal, 2011-12 where there will be dual GST rate – CGST at 6% for essential commodities and 10% standard rate on other goods. This means, combined GST will be between 12 to 20%. In 2012-13, only standard rate will be reduced to 9%, with CGST remaining constant at 6%. In 2013-14, all rates will be brought down to 16%, both CGST and State GST (SGST) put together (8% each on CGST and SGST). The FM expects peak rates to be 15% in first year, coming down to 12% by end of third year.
This is probably the best formula which the FM could come up with, more importantly, he stuck to the deadline of 1st April 2011 and got the states to agree. The indirect tax stands simplified - goods at 20%, services at 16% and essential items at a concessional 12%. But this has come at a cost. This dual GST is expected to increase costs. Undoubtedly, 20% is high but it could be slightly lower than the current rate, which is around 22.5-23%, excise plus VAT. Only if the manufacturers pass on their benefits to consumers, will the tax burden come down for the common man. A list of 99 essential items exempt under the value-added tax regime will not be taxed under the GST as well. But many have voiced concern that many essential items which get charged just a 4% VAT, will now come under the 12% bracket. And that could be the main cause for concern.
What is GST?
Known as Goods and Service Tax (GST), it is a reform in the entire indirect taxation process of India. This Finance Minister has set the deadline of 1st April 2010 for implementation of GST. The basic idea of GST is to simplify the indirect taxation process and earn more revenue. Its aim is to re-distribute the burden of taxation equitably between manufacturing and services.
What will GST include?
It will include central excise, service tax and state VATs. It will also include entertainment tax, luxury tax and entry tax. GST would be on all products except petroleum, electricity, real estate and liquor. It is a consumption based tax. Currently, the despatching state pays the tax but under GST, it is the receiving state which will pay the tax. There would be a lower rate for necessary items and goods of basic importance and a standard rate for goods in general. Exports would be zero-rated but imports would attract GST, both from the state as well from the Centre. Inter-state transactions would attract an integrated GST of state and centre. Tobacco products, like cigarettes and gutka would face the double wrath and will attract both GST as well as excise duty.
What is input tax credit?
Input tax credit will allow a manufacture to deduct the tax he has already paid on an input from the tax on final product. Credit would then be available on the calculation of GST.
How to calculate GST?
Suppose a manufacturer buys his inputs for production at Rs.10 and then he makes the product with value add which costs Rs.30. The his total cost on goods would be Rs.30, so assuming GST is 10%, GST on output would be Rs.3 and input tax credit would be 10% of cost of input, which would be Re1. So net GST to be paid would be GST on output minus the input tax credit, ie; Rs.3 – Re1 = Rs.2. This is how net GST would percolate down the value chain – from the manufacturer to the wholesaler and then to the retailer and as it goes down the chain, as the purchase price goes on at each level, the net GST would come down.
Does this mean higher prices for common man?
The introduction of GST would remove all the current effects on pricing due to levy of CENVAT and service tax and its cascading effect. Currently, both the Centre as well as states, levy tax on production, manufacture and many more, which add on to the cost of the goods and is passed on to the consumer. Under GST, the central taxes – service, excise, additional excise and customs duties, countervailing duty, surcharges and cesses, all will be subsumed under GST. On the state level - VAT, entertainment tax, luxury tax, taxes on lottery, betting and gambling, state cesses and surcharges, will all come under GST. Hence the idea of GST is that the taxation burden would reduce as it goes down the value chain and by the time it gets to the consumer, rates would be lowest.
And the proposal put out by the FM is a relief – relief because GST will indeed the light of the day but would be a watered down version. To get the states to agree to meet the 1st April 2011 deadline, the FM has diluted the biggest plus point of GST – to have one tax slab for the state as well as the Centre. What is proposed now is multiple tax slab, and it will not include actual money earners like alcohol, petroleum products, electricity and real estate.
So what we could now have is Central GST (CGST) rate pegged at standard rate of 10%, 6% concessional for goods and 8% for services. The proposed timeline is three years, starting next fiscal, 2011-12 where there will be dual GST rate – CGST at 6% for essential commodities and 10% standard rate on other goods. This means, combined GST will be between 12 to 20%. In 2012-13, only standard rate will be reduced to 9%, with CGST remaining constant at 6%. In 2013-14, all rates will be brought down to 16%, both CGST and State GST (SGST) put together (8% each on CGST and SGST). The FM expects peak rates to be 15% in first year, coming down to 12% by end of third year.
This is probably the best formula which the FM could come up with, more importantly, he stuck to the deadline of 1st April 2011 and got the states to agree. The indirect tax stands simplified - goods at 20%, services at 16% and essential items at a concessional 12%. But this has come at a cost. This dual GST is expected to increase costs. Undoubtedly, 20% is high but it could be slightly lower than the current rate, which is around 22.5-23%, excise plus VAT. Only if the manufacturers pass on their benefits to consumers, will the tax burden come down for the common man. A list of 99 essential items exempt under the value-added tax regime will not be taxed under the GST as well. But many have voiced concern that many essential items which get charged just a 4% VAT, will now come under the 12% bracket. And that could be the main cause for concern.
What is GST?
Known as Goods and Service Tax (GST), it is a reform in the entire indirect taxation process of India. This Finance Minister has set the deadline of 1st April 2010 for implementation of GST. The basic idea of GST is to simplify the indirect taxation process and earn more revenue. Its aim is to re-distribute the burden of taxation equitably between manufacturing and services.
What will GST include?
It will include central excise, service tax and state VATs. It will also include entertainment tax, luxury tax and entry tax. GST would be on all products except petroleum, electricity, real estate and liquor. It is a consumption based tax. Currently, the despatching state pays the tax but under GST, it is the receiving state which will pay the tax. There would be a lower rate for necessary items and goods of basic importance and a standard rate for goods in general. Exports would be zero-rated but imports would attract GST, both from the state as well from the Centre. Inter-state transactions would attract an integrated GST of state and centre. Tobacco products, like cigarettes and gutka would face the double wrath and will attract both GST as well as excise duty.
What is input tax credit?
Input tax credit will allow a manufacture to deduct the tax he has already paid on an input from the tax on final product. Credit would then be available on the calculation of GST.
How to calculate GST?
Suppose a manufacturer buys his inputs for production at Rs.10 and then he makes the product with value add which costs Rs.30. The his total cost on goods would be Rs.30, so assuming GST is 10%, GST on output would be Rs.3 and input tax credit would be 10% of cost of input, which would be Re1. So net GST to be paid would be GST on output minus the input tax credit, ie; Rs.3 – Re1 = Rs.2. This is how net GST would percolate down the value chain – from the manufacturer to the wholesaler and then to the retailer and as it goes down the chain, as the purchase price goes on at each level, the net GST would come down.
Does this mean higher prices for common man?
The introduction of GST would remove all the current effects on pricing due to levy of CENVAT and service tax and its cascading effect. Currently, both the Centre as well as states, levy tax on production, manufacture and many more, which add on to the cost of the goods and is passed on to the consumer. Under GST, the central taxes – service, excise, additional excise and customs duties, countervailing duty, surcharges and cesses, all will be subsumed under GST. On the state level - VAT, entertainment tax, luxury tax, taxes on lottery, betting and gambling, state cesses and surcharges, will all come under GST. Hence the idea of GST is that the taxation burden would reduce as it goes down the value chain and by the time it gets to the consumer, rates would be lowest.
Sunday, July 4, 2010
Stock Suggestions
Stock Suggestions
* Do not overtrade.
* Do not trade on rumors.
* Do not trade in all stocks of one sector.
* It's better to buy the wrong stocks at the right time than to buy the right stocks at the wrong time.
* Trade with the trends rather than trying to pick tops and bottoms.
* As long as a market is acting right, don't rush to take profits.
* Don't buy something because it is low priced.
* Money cannot be made everyday from the markets.
* Avoid making average, when stock is coming down.
* Don't watch or trade too many stocks at once.
Wednesday, June 30, 2010
Trading Trick (General Market Advice)
Trading Trick (General Market Advice)
1. Never chase a stock.
2. Buy when markets are in the grip of panic.
3. Only buy fundamentally strong stocks, which are undervalued.
4. Buy stocks grown in top line and bottom line over the past years.
5. Invest in companies with proven management.
6. Avoid loss-making companies.
7. PE Ratio and Growth in earnings per share are the key.
8. Look for the dividend paying record.
9. Invest in stocks for sure returns.
10. Stocks have been the high yielding asset class over the past.
11. Stocks are an asset class.
12. The basic property of any asset class is to grow.
13. Buy when everyone is selling and sell when everyone buys.
14. Invest a fixed amount each month.
1. Never chase a stock.
2. Buy when markets are in the grip of panic.
3. Only buy fundamentally strong stocks, which are undervalued.
4. Buy stocks grown in top line and bottom line over the past years.
5. Invest in companies with proven management.
6. Avoid loss-making companies.
7. PE Ratio and Growth in earnings per share are the key.
8. Look for the dividend paying record.
9. Invest in stocks for sure returns.
10. Stocks have been the high yielding asset class over the past.
11. Stocks are an asset class.
12. The basic property of any asset class is to grow.
13. Buy when everyone is selling and sell when everyone buys.
14. Invest a fixed amount each month.
Thursday, March 4, 2010
Govt plans to export wheat
Govt plans to export wheat and rice even if the food inflation soars to 17.9%.
For the first time in six years govt is planning to export wheat and rice which is about to touch 81 million tonne in 2009-10. India is second largest wheat producing country in the world. Major wheat players and expected to benefit from this move, players like Adani. AWB, Glencore.
Sugar production has also gone up this year.
Food Inflation hovering at around 17%.
Food Inflation hovering at around 17%. Todays biggest concern is the raising food inflation with the food pricing index going higher and higher with an annual rise of 17.87% this week.
Truckers have also decided to raise the price which would also impact inflation and make it a major concern. High food prices coupled with a pick in manufacturing and fuel prices are expected to push the headline inflation to double digits by end March from 8.56% in January.
Wednesday, March 3, 2010
Suzuki has bought an addition 5% stake in Maruti.
Suzuki has bought an addition 5% stake in Maruti. This makes Suzuki to have 55% stake in Maruti. Suzuki requires enough of approvals in this acquisition. This acquisition has also made Maruti to increase its unit capacity from 1 million units to 1.8 million unit. Maruthi comprised 80% of Suzuki’s stake in it and is the largest overseas acquisition to Suzuki and over to that Suzuki gets most of its profit from Maruti .In fact it is Maruti sells more units than Suzuki.
Since Government also has stake in Maruti and Suzuki is an foreign entity it requires fair bit of approvals from RBI and even SEBI’s .
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