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  • KYC Regulations Update: Comprehensive Guide

    KYC Regulations Update: Comprehensive Guide

    1.3 crore mutual fund accounts are on hold in India due to incomplete KYC, which means they cannot currently be used to buy or sell mutual funds. But why did this happen? This blog will answer all your questions regarding KYC and its issues.

    KYC Regulations Overview

    KYC stands for Know Your Customer. It is a set of regulations and procedures financial institutions, including mutual funds, use to verify customers’ identities and assess their risks. Verifying customers’ identities is a crucial measure to prevent fraudulent activities, money laundering, and the financing of terrorist activities. Financial institutions ensure that their customers are not engaging in business activities with criminals or suspicious individuals by verifying their identities.

    It protects institutions from legal and financial risks linked with illegal activities, and KYC safeguards retail investments and reduces the chance of someone else accessing the investor’s account.

    Changes in KYC Regulations by SEBI

    Documents

    The following documents are required when doing a KYC.

    Proof of Identity (POI) – this could be your PAN card, Adhar card, Voter ID, or passport.

    Proof of Address (POA) – this could be your Adhar card, utility bills, bank statements, etc.

    Overview of Updated Regulations

    The capital markets regulator, the Securities and Exchange Board of India (SEBI), has modified the roster of documents permissible for KYC compliance. These updated KYC regulations have been enforced since April 1, 2024. In its master circular, SEBI provided a list of valid documents for the POI and POA. 

    According to the circular, investors with outdated and inaccurate details will keep their mutual fund accounts on hold. These outdated documents mainly consist of older bank statements and utility bills. 

    However, SEBI has clarified that bank statements and utility bills issued within two months are still accepted as proof of address if other documents don’t contain an updated address.

    Change in KYC Regulation by SEBI

    Updated List of Permissible Documents

    Here’s the list of documents that are now accepted as POI and POA,

    • The passport
    • The driving licences
    • Proof of possession of Aadhaar number
    • The Voter’s Identity Card issued by Election Commission of India
    • Job card issued by NREGA duly signed by an officer of the State Government
    • The letter issued by the National Population Register containing details of name and address
    • Any other document as notified by the Central Government in consultation with the Regulator

    Furthermore, suppose the OVD (Official Valid Document) provided by the client does not contain an updated address. In that case, they must submit officially updated valid documents or e-documents within three months. The following documents are allowed to be submitted.   

    • Utility bills (electricity, telephone, post-paid mobile phone, piped gas, water bill) that are not more than two months old.
    • Pension or family pension payment orders (PPOs) issued to retired employees by Government Departments or Public Sector Undertakings, if they contain the address.
    • Letter of allotment of accommodation from employer issued by state or central government departments, statutory or regulatory bodies, public sector undertakings, scheduled commercial banks, financial institutions, and listed companies

    Additionally, SEBI has mandated registered intermediaries to regularly and systematically update all the documents and information about every client collected as part of the Customer Due Diligence (CDD) process.

    List of updated documents of KYC Regulation change

    How to Check KYC Status Online?

    To check your KYC Status online, follow these steps

    1. Visit any KYC Registration Agency (KRA), such as CDSL KRA, CAMS CRA, or CVL KRA.
    2. Suppose you have selected CAMS KRA, click on transactions, and then choose KYC. A new web page will pop up.
    3. Enter your PAN details, and the status will be displayed on the screen.

    One of the 3 statuses will be displayed on the screen. The status decides your restrictions, if any. Here is a list of the KYC statuses and their implications. 

    Read Also: What is Securities Transaction Tax (STT)?

    Explanation of Various KYC Status

    Validated KYC Status

    This means that the issuing source has validated the investor-provided documents, and if the information is not modified, a mutual fund investor is allowed to invest readily in any scheme.

    Registered/Verified KYC Status

    This means that the documents provided by the person cannot be verified or confirmed by the issuing authority. This applies to investors who have provided other officially valid documents (OVDs) besides PAN or Adhaar, such as passports, voter ID cards, etc., to validate address and identity during the KYC.

    If the KYC status is either ‘KYC registered’ or ‘KYC verified,’ it will not affect their current investments. However, if they wish to invest in a new mutual fund scheme, they are required to submit the KYC-related documents again. They can undergo a re-KYC process to transition to Validated KYC status.

    KYC on Hold Status

    The KYC status will be put on hold if the documents submitted at the time of the initial KYC are not official valid documents, such as voter ID cards, passports etc., but rather unofficial documents like bank statements, electricity bills, and utility bills. The issue may also arise if the investor’s mobile number and email ID still need to be validated. 

    All financial and non-financial transactions will be restricted until the required documents are submitted. This would impact the existing SIP transactions, redemption, etc.

    KYC Statuses

    Read Also: RBI Action On Kotak Mahindra Bank: Should You Invest?

    Conclusion

    A complete and up-to-date KYC is necessary for seamless access to your mutual fund account in India, as it protects the financial system from fraudulent activities. If your KYC needs to be completed, gather the essential documents to resolve the issue. A valid KYC status can help you avoid restrictions and participate actively in the Indian mutual fund market to achieve your financial goals.

    Frequently Asked Questions (FAQs)

    1. Is KYC mandatory for investing in mutual funds?

      Yes, KYC is mandatory for all mutual fund investments in India.

    2. What documents are needed for KYC?

      Proof of Identity and Proof of Address are required to complete your KYC.

    3. What will happen if my KYC status is on hold?

      If your KYC status is on hold, your transactions will be restricted. However, all the restrictions will be lifted once you provide all the updated documents.

    4. How can I complete my KYC?

      You can do it online (eKYC) or offline by submitting documents at a KYC Registration Agency (KRA).

    5. Can I still use my bank statement or utility bills for KYC?

      Yes, SEBI has clarified that bank statements and utility bills issued within two months are still accepted as proof of address if other documents don’t contain an updated address.

  • What Is an Option Contract?

    What Is an Option Contract?

    If you are familiar with the idea of stock trading and have been involved in it for some time, you have probably heard of options trading, which is a type of derivative trading. Options are available for various assets and offer a wide array of features.

    In this blog, we’ll discuss everything you need to know about different types of option contracts, their features and the associated risks. 

    What is an Option Contract?

    An option contract is a type of derivative instrument that gets its value from an underlying asset such as stocks, currencies, indexes, commodities, etc. The buyer of the option contract is granted a right, but not an obligation, to purchase or sell the underlying asset by a certain date at a certain price. Options trading can be profitable, but only if you strictly enforce a stop-loss to safeguard your investment from losses. 

    Types of Option Contracts

    Types of Option Contracts

    There are several types of option contracts:

    1. Based on the Right to Buy or Sell

    There are two types of option contracts based on the right they provide to the buyer:

    • Call Option: The buyer of the call option will have the right, but not the obligation, to purchase the underlying asset at a specified price within a specific period. Suppose the buyer believes that the underlying asset’s value will increase. In that case, they will purchase these contracts and pay the call option seller a premium that varies according to the underlying asset’s value. These contracts have an expiration date. A long-call strategy is to purchase a call option; a short-call strategy is to sell a call option. 
    • Put Option: The buyer of the put option will have the right, but not an obligation, to sell the underlying asset at a specified price within a specific timeframe. Consequently, purchasing a put option entails creating a short position in the underlying asset and anticipating a price decline. Similar to call options, these contracts contain expiration dates as well. Purchasing a put is also known as a long put strategy, whilst selling an option is known as a short put strategy.

    2. Based on Their Rules of Exercise

    There are three types of option contracts based on the different exercise options they offer:  

    • American Option: An American option contract is one in which the contract owner may exercise their right to purchase an asset, in the case of a call option, or sell it, in the case of a put option, at any time before or on the contract’s expiration date. The name does not imply that these contracts are exclusively available in the United States. It makes it possible for investors to profit quickly from market movement. An American call option is also denoted as CA, and an American put option is denoted using PA. 
    • European Option: Unlike American options, this type of option permits an investor to exercise their right to purchase, in the case of a call option, or sell, in the case of a put option, an underlying asset at a certain strike price only on the expiration day. Options available in Indian financial markets are European and referred to as CE for call and PE for put.
    • Bermudan Option: These are a special type of American option as they also allow for early contract exercise, but only on specific dates. These dates are mentioned in the option contract.

    3. Based on the Underlying Asset

    • Index Option: An index, as opposed to a single stock, serves as the underlying asset for an index option contract. An investor can profit from market index movement when they trade in index options, and because an index contains a variety of individual stocks, diversification helps to reduce risk. These kinds of contracts are usually settled in cash. 
    • Stock Option: A stock option enables an investor to purchase or sell a particular stock at a predetermined price, known as the strike price, within a specific timeframe. One can insure their portfolio against market volatility by using stock options. With call and put options, you can use your assumptions to go long or short on the stock. 
    • Commodity Option: The underlying asset in this option contract is a commodity like gold, silver, etc. The value of these option contracts changes in line with changes in the commodity’s underlying price.  

    Features of an Option Contract

    Features of an option contract are listed below:

    1. The option contract differs from buying any asset, as it derives its value from an underlying asset.
    2. Option contracts give the buyer a right but not the obligation to exercise a contract.
    3. There is a predetermined price, also known as the strike price, at which you can exercise the option contract.
    4. There are fixed dates on which one can exercise a contract.
    5. The option contract comes with a fixed contract size, known as lot size. You can buy or sell the contract in multiples of the market lot.

    Read Also: Option Chain Analysis: A Detail Guide for Beginners

    Uses of Option Contracts

    Uses of Option Contracts

    Option contracts can be used for the following purposes:

    1. Hedging: It is a risk management technique that allows one to protect their portfolio from losses. 
    2. Income Generation: An investor can receive the premium and make a consistent income by selling option contracts on their equities. 
    3. Speculation: Traders use option contracts to generate profit from their view of the market movements. They buy calls or sell puts if they expect the underlying asset’s price to increase and buy puts and sell calls if they expect the underlying asset’s price to decrease.

    Advantages of Option Contracts

    The advantages of an option contract are:

    1. Because you can obtain the underlying asset for a small portion of its total value, the option provides leverage, which can magnify investor’s returns. 
    2. Options can be used as hedging instruments in your portfolio to safeguard it from market downturns. 
    3. Selling options can help generate a regular income by receiving the premiums.

    Disadvantages of Option Contracts

    The disadvantages of an option contract are:

    1. The option market is considered risky due to various factors affecting its value simultaneously, such as the time value of money, volatility, etc., making it extremely complex to understand. 
    2. Option contracts provide leverage, which magnifies losses and can result in a complete loss of capital.
    3. Option contracts for some assets may have lower liquidity due to the non-availability of buyers and sellers, as most people do not trade in options.
    4. Trading in an option contract requires margin as you are required to pay a certain sum of money to your broker to cover the potential losses, and selling an option contract requires even higher margins than buying an option contract.

    Read Also: What is Options Trading?

    Conclusion

    Only those who thoroughly understand market dynamics and techniques and are well-versed in option trading concepts can consider it a good investment alternative. Trading in options can offer you the chance to make larger profits with fewer initial investments. Traders must always be careful as these instruments are extremely risky and can result in huge losses. Therefore, you must speak with your investment advisor before making trading decisions. 

    Frequently Asked Questions (FAQs)

    1. Can a beginner trade-in option contract?

      Yes, even a novice trader can profit from an options contract, but one must understand the concept and their types before investing.

    2. Can I earn a high profit with minimum investment while trading in options?

      Yes, the option gives you the chance to make a large profit with a small initial investment, but doing so requires a solid understanding of options, such as the time value of money, volatility, etc.

    3. What is the duration of the expiration of the option contract in India?

      While index option contracts expire every week, stock option contracts expire every month.

    4. What is the meaning of options premium?

      The option premium refers to the price paid by the buyer of the option to the seller for the rights offered in the option contract.

    5. Can I trade in the index through options?

      Yes, you can trade in index through options.

  • What is Hammer Candlestick Pattern? 

    What is Hammer Candlestick Pattern? 

    Several chart patterns available to traders can be used to determine a stock’s trend. Let’s take an example where you are searching for a trading opportunity, and you come across a stock that is consistently declining. You then notice a pattern that suggests the stock’s price may be about to reverse. One such pattern is the Hammer Candlestick pattern.

    In today’s blog post, we’ll explore more about the Hammer Candlestick pattern, how to use it, and its limitations. 

    What is a Hammer Candlestick Pattern? 

    This candlestick pattern is a bullish reversal single candle pattern, which indicates a downtrend reversal in a stock price. Candlestick generally forms at the bottom of a downtrend, suggesting that sellers are losing control and buyers are about to push prices upwards. This pattern is a powerful technical tool and is used by traders frequently.

    Read Also: Introduction to Bearish Candlesticks Patterns: Implications and Price Movement Prediction

    Types of Hammer Candlestick Patterns

    There are generally two types of candlestick patterns-

    1. Classic Hammer: This is the standard form of hammer pattern and generally appears at the bottom of a downtrend. After this, a potential uptrend in the stock price can be seen. This pattern has a small body and a long lower shadow, which is generally twice the size of the body. It suggests a strong rejection of lower prices and allows buyers to enter the rally.
    Classic Hammer
    1. Inverted Hammer: This candlestick pattern is almost similar to the regular hammer and is flipped upside down. It also appears at the end of a downtrend and has a long upper shadow instead of a lower shadow. It also suggests a potential reversal, although considered less reliable than the classic hammer. It indicates that buyers attempted to take the price high during the session but failed because of resistance.
    Inverted Hammer

    Features of Hammer Candlestick Pattern

    Hammer candlestick pattern has the following features:

    1. 3The candle can be either bullish or bearish.
    2. The lower shadow of the candle should be at least twice the length of the body.
    3. There should be no or little upper shadow, which indicates that the closing price is near the highest price of the session.

    Interpretation of Hammer Candlestick Pattern

    Interpretation of Hammer Candlestick Pattern

    This reversal pattern generally forms at the bottom of a downtrend and indicates a reversal. The lower shadow suggests that the seller has taken the prices down during the trading session, but due to strong buying pressure, the prices are pushed upwards near the end of the session. The sentiment is turning bullish, indicating that there might be a reversal in price after a downtrend. The importance of a hammer candlestick can be seen in the length of the shadow; the longer the shadow, the higher the chances of reversal. 

    Advantages of Hammer Candlestick Pattern

    Hammer candlestick pattern has the following advantages:

    1. It acts as a leading indicator, suggesting a shift in momentum.
    2. A trader can use the shadow’s low for setting a stop-loss, which helps them minimize losses.

    Limitations of Hammer Candlestick Pattern

    Hammer candlestick pattern has the following limitations:

    1. Traders consider a hammer candlestick as a potential reversal signal without waiting for proper confirmation.
    2. These patterns are less effective in volatile market conditions.
    3. The hammer candlestick pattern does not provide any upside target. Therefore, a trader is required to use other tools to determine potential entry and exit points.
    4. For a trader, it is sometimes difficult to identify the exact hammer candlestick, as the length of shadow varies, or the candle’s body does not resemble the exact hammer pattern.

    Strategy Based on Hammer Candlestick Pattern

    Strategy based on Hammer Candlestick Pattern

    Entry Point: A trade can take a long position in stock upon confirming the hammer pattern. But one should take entry once the next candle after the hammer closes above the hammer’s high.

    Stop Loss: Typically, a stop-loss should be placed below the low of the hammer candlestick to minimize the risk.

    Target: The target is generally set near the next resistance point or as per the trader’s risk-taking capacity.

    Difference Between Doji and Hammer Candlestick Pattern

    Generally, the Doji and hammer candlestick patterns are considered similar. Still, these two have a few basic differences, as the Doji appears as a small body with long lower and upper shadows. In contrast, the hammer has only a long lower shadow and a long upper shadow in the case of an inverted hammer. While the hammer indicates a bullish reversal pattern, the Doji indicates price reversal or trend continuation.

    Read Also: Introduction to Bullish Candlestick Patterns: Implications and Price Movement Prediction

    Conclusion

    The hammer candlestick pattern is very popular among traders, as it helps them identify the reversal point in a downtrend. However, a trader should wait for a confirmation of the bullish candle following the hammer pattern. It is suggested that a stop loss be placed below the low of the hammer candlestick as it helps them minimize their losses in case of market volatility.

    Frequently Asked Questions (FAQs)

    1. Is the hammer candlestick a bullish or bearish pattern?

      The hammer is a bullish reversal candlestick pattern.

    2. How do you identify a hammer candlestick pattern on a chart?

      To identify this pattern, a trader must look for a candlestick with a small body at the upper range of the trading session. It should also have a long lower shadow at least twice the length of the body, with little or no upper shadow.

    3. Is it possible that the hammer pattern provides a false signal?

      Yes, there is a possibility that hammer patterns can produce false signals. Therefore, a trader should use stop loss while executing a trade.

    4. Where can you put stop loss while trading a Hammer Candlestick pattern?

      Generally, a stop loss should be placed below the low of the Hammer Candlestick.

  • Mutual Fund Fees & Charges in India 2024

    Mutual Fund Fees & Charges in India 2024

    Mutual funds have become increasingly popular over the last few years as a solution to earn significant investment returns. But, one must also pay attention to the fees a mutual fund charges as they reduce investment returns. In today’s blog, we will discuss the various fees a mutual fund charges and their meaning.

    Depending on the goal of the investment scheme, fund managers chosen by mutual fund firms, sometimes referred to as asset management companies (AMCs), allocate their money across different asset classes. These firms charge their investors a nominal fee for the entire process to cover their ongoing costs, also known as the expense ratio. These asset management companies get their revenue from the fees that they charge. 

    Types of Fees Charged by Mutual Fund

    There are several kinds of fees charged by the AMC, a few of which are mentioned below-

    1. Entry Load: Asset management firms impose a fee on investors when they invest for the first time in the scheme. In the early stages of the mutual fund industry, this was imposed to cover the distribution expenses related to the mutual fund industry’s marketing and sales. The Securities Exchange Board of India eliminated this charge later in 2009 (SEBI). 
    2. Exit Load: This is a fee that investors must pay if they withdraw their money before a certain time. The time frame is known as the lock-in period, and it varies from plan to plan. The exit load typically ranges from 0.25% to 4% of the redemption value. There is no exit load if you redeem your money after the lock-in period. The AMC imposes this fee to deter investors from withdrawing early. 
    3. Transaction Charges: Mutual funds impose these fees on you upon buying and selling mutual fund units when the transaction amount goes above a certain threshold. In India, this threshold is INR 10,000. If you buy units worth more than INR 10,000 as a new investor, you will be charged a maximum of INR 150 as transaction costs, and if you are an existing investor, the maximum amount that can be charged is INR100. 
    4. Expense Ratio: The mutual fund companies also impose other fees, which typically include fund management fees, audit fees, marketing and sales costs, and administration and distribution costs. This charge is computed by dividing the total expenses of the scheme by the total assets managed by AMC. This fee is typically charged on an annual basis.

    Calculation of Total Expense Ratio

    Calculation of Total Expense Ratio

    The total expenses charged by the mutual fund can be calculated by using the below-mentioned formula:

    Total Expense Ratio(TER) = [(Total Costs of the Fund during the period) / (Total Fund Assets)]*100

    Let us understand this with an example.

    Assume that an AMC pays 10 crores in total expenses, which includes fund manager fees, marketing and distribution costs, etc., for a fund with a total asset value of 1000 crores. Next, the ratio of expenses will be computed as 

    (10 Crores/1000 Crores)*100 = 1%.

    Suppose an investor has invested INR 5,00,000 in the scheme, and then the total expense ratio of the scheme is 1% of 5,00,000 = INR 5,000. Investors get charged this amount annually.

    Read Also: Types of Mutual Funds in India

    SEBI Guidelines on Mutual Fund Charges

    The maximum TER (Total Expense Ratio) limit for mutual funds is determined by the Securities and Exchange Board of India (SEBI). It depends on the amount of assets the company manages. Guidelines on charges are as follows:  

    Asset Under Management (Crores)Equity-oriented mutual funds (Max. TER)Other mutual funds (Excluding FoFs, ETFs and index funds) (Max. TER)
    Up to 5002.25%2.00%
    500- 7502.00%1.75%
    750- 20001.75%1.50%
    2000- 50001.60%1.35%
    5000- 10,0001.50%1.25%
    10,000- 50,000TER decreases by 0.05% for every increase of 5000 crore in AUMTER decreases by 0.05% for every increase of 5000 crore in AUM
    > 50,0001.05%0.80%

    To boost the penetration of mutual funds in Tier 2 and Tier 3 cities in India, SEBI has further permitted the AMCs to charge an extra 0.30% on top of the previously indicated restrictions for selling their products in cities outside of the top 30 cities in the country. 

    Impact of Expense Ratio

    Impact of expense ratio

    The expense ratio directly impacts your mutual fund investment’s returns. However, these costs represent a minor amount of your investment; over time, they may consume a greater share of your return. Generally speaking, investors believe that a fund with a larger expense ratio will yield higher returns. However, this is not a suitable strategy for selecting a mutual fund because skilled fund managers can manage funds with a lower expense ratio. Therefore, it is important to review the fund’s expense ratio if you are currently investing or plan to do so. 

    Read Also: History of Mutual Funds in India

    Conclusion 

    Mutual funds are becoming increasingly popular as they provide investors access to professional market expertise to earn substantial returns. However, investors must be careful of the fees they charge and have a good understanding of them to minimize the impact of mutual fund fees on investment returns and select the best mutual fund.  

    S.NO.Check Out These Interesting Posts You Might Enjoy!
    1Shariah-Compliant Mutual Funds: Should You Invest?
    2Regular vs Direct Mutual Funds: Make The Right Investment Decision
    3A Comprehensive Guide on Mutual Fund Analysis
    4What are Small Cap Mutual Funds?
    5Who Regulates Mutual Funds in India?

    Frequently Asked Questions (FAQs)

    1. What are the charges associated with the mutual fund investments?

      Exit load, transaction charges, and expense ratio are the costs related to mutual funds.

    2. What is the exit load?

      Mutual fund firms impose this fee to prevent investors from making early withdrawals. It is based on the investor’s holding term; for instance, 1% is charged as an exit load if the withdrawal is made within a year after the investment.

    3. Is there any restriction on fees charged by mutual fund companies?

      Yes, official norms specify a threshold that no asset management business may charge fees above, as provided by the mutual fund regulatory body SEBI.

    4. Do investors pay fees to start investing in a mutual fund?

      No, there aren’t any costs to start investing in mutual funds. In the past, AMCs levied a fee known as an entry load, but SEBI eliminated that fee in 2009.

    5. Do I need to pay transaction charges every time I invest in a mutual fund?

      If you are investing or withdrawing more than INR 10,000, the regulation allows mutual funds to charge INR 100 for existing investors and INR 150 for new investors as transaction charges.

  • Top Tyre Stocks in India

    Top Tyre Stocks in India

    The Indian auto industry is a powerhouse, driven by a thriving tyre sector that keeps its wheels turning. For investors seeking to get in on the action, tyre stocks can provide a stable journey with solid growth opportunities. But with several major players, where do you begin?

    No worries, in today’s blog we will deeply do a comparative analysis of the top 5 tyre stocks in India.

    By including the focus on best tyre stocks in India, you’ll have a clearer understanding of which companies stand out in terms of market performance, innovation, and investment potential.

    MRF

    MRF is an Indian multinational tyre manufacturing company with its headquarters in Chennai, Tamil Nadu. Founded in 1946 by K.M Mammen Mappillai, it started as a toy balloon manufacturing unit and has grown into a tyre giant. The company manufactures a wide range of products including tyres for two-wheelers, cars, trucks, and even aeroplanes. They are also into the manufacturing of tyres, treads, tubes, conveyor belts, paints and toys.

    MRF is the largest tyre manufacturer in India and ranks among the top 20 globally. They are well-recognised for their high-quality tyres and extensive reach across the country.

    It was incorporated as a private company, Madras Rubber Factory Limited, and began tyre production in partnership with an American company, Mansfield Tire & Rubber Factory.

    MRF has a wide distribution network in India, serving retail stores, dealerships, and car manufacturers. The company sells tyres directly to manufacturers (B2B) for factory use and also has a strong presence in the replacement tyre market for individual consumers (B2C).

    They achieve this reach through an extensive network of franchised stores and dealers. The company focuses on offering excellent customer service through initiatives like roadside assistance programs and informative resources on its website.

    MRF Consolidated Financial Statements

    MRF Balance Sheet

    Key MetricsFY 2024FY 2023
    Total Assets26,84924,369
    Total Liabilities10,1469,662
    Total Equity16,70314,708
    (Note : All values are in INR Crore)
    MRF Balance Sheet

    MRF Income Statement

    Key MetricsFY 2024FY 2023
    Total Revenues25,48623,261
    Total Expenses22,69922,191
    Net Profit2,081769
    (Note : All values are in INR Crore)
    MRF Income Statement

    MRF Cash Flow Statement

    Key MetricsFY 2024FY 2023
    CFO3,3012,755
    CFI-2,379-1,923
    CFF-868-840
    (Note : All values are in INR Crore)
    MRF Cash Flow Statement

    Balkrishna Industries

    Balkrishna Industries Limited (BKT) is an Indian company that makes tyres for different types of vehicles and industries. They focus on off-highway tyres. The company was founded in the year 1987 and is headquartered in Mumbai. The company products include agriculture, industrial, and OTR tyres, as well as tubes and carbon black.

    The company’s expertise lies in manufacturing Off-Highway Tyres (OHT) for agricultural, industrial & construction, earthmovers & port, mining, forestry, and All-Terrain Vehicles (ATV). They have five modern production facilities in India located in Aurangabad, Bhiwadi, Chopanki, Dombivali, and Bhuj.

    Balkrishna Industries Consolidated Financial Statements

    Balkrishna Industries Balance Sheet

    Key MetricsFY 2024FY 2023
    Total Assets13,68412347
    Total Liabilities4,8304,790
    Total Equity8,8537,556
    (Note : All values are in INR Crore)
    Balkrishna Industries Balance Sheet

    Balkrishna Income Statement

    Key MetricsFY 2024FY 2023
    Total Sales9,3689,759
    Total Expenses7,7648,623
    Net Profit1,4711,057
    (Note : All values are in INR Crore)
    Balkrishna Income Statement

    Balkrishna Cash Flow Statement

    Key MetricsFY 2024FY 2023
    CFO2,0821,447
    CFI-1,475-1,783
    CFF-601358
    (Note : All values are in INR Crore)
    Balkrishna Cash Flow Statement

    Read Also: MRF vs Apollo Tyres: Which is Better?

    Apollo Tyres

    Apollo Tyres Limited is an Indian multinational tyre manufacturing company headquartered in Gurgaon, Haryana. The company was established in the year 1972 by Onkar Kanwar, and since then it has grown from a domestic Indian company to a global tyre manufacturer with a presence in over 100 countries. Apollo caters to a wide range of segments, including passenger vehicles, two-wheelers, trucks, buses, and light trucks.

    In the 1990s, Apollo Tyres expanded globally with an ambitious strategy. The company acquired manufacturing facilities in the Netherlands in 2009 to better serve the European market.

    The company employs a multifaceted business model, wherein it successfully integrates manufacturing, branding and a customer-centric approach. This strategic blend enables the company to effectively compete in the highly competitive global tyre market.

    Apollo Tyres Financial Statements

    Apollo Consolidated Balance Sheet

    Key MetricsFY 2024FY 2023
    Key MetricsFY 2024FY 2023
    Total Assets26,95727,359
    Total Liabilities13,05414,481
    Total Equity13,90112,877
    (Note : All values are in INR Crore)
    Apollo Consolidated Balance Sheet

    Apollo Tyres Income Statement

    Key MetricsFY 2024FY 2023
    Total Sales25,37724,568
    Total Expenses22,48522,651
    Net Profit1,7211,104
    (Note : All values are in INR Crore)
    Apollo Tyres Income Statement

    Apollo Tyres Cash Flow Statement

    Key MetricsFY 2024FY 2023
    CFO3,4392,134
    CFI-710-476
    CFF-2,659-1,691
    (Note : All values are in INR Crore)
    Apollo Tyres Cash Flow Statement

    JK Tyres

    JK Tyre is another leading Indian tyre manufacturer. The company was not always a separate entity. It began as part of the J.K. Organisation, a diversified Indian conglomerate founded in 1918 by Lala Kamlapat Singhania. It became the first company to manufacture radial tyres in India.

    J.K. Industries Limited, the parent company of JK Tyres, was restructured and in 2007, JK Tyres & Industries were created to concentrate more on the tyre business. They cater to a wide range of vehicles, including cars, motorcycles and off-road vehicles.

    Additionally, with operations in key regions such as ASEAN, the Middle East and Africa as part of the APMEA region, the Company continued to invest in brand building, working on the requirements of each region to bring country-specific products.  

    JK Tyre has a strong distribution network in India that serves retail outlets, dealerships, and original equipment manufacturers (OEMs) of automobiles. This helps them keep a strong position in the local market.

    The company’s manufacturing facility in Mexico serves the North American market and exports to over 100 countries worldwide. The global reach of the company enables them to access and explore untapped markets and exciting opportunities.

    JK Tyre Consolidated Financial Statements

    JK Tyre Balance Sheet

    Key MetricsFY 2024FY 2023
    Total Assets14,09412,448
    Total Liabilities9,6069,051
    Total Equity4,4883,395
    (Note : All values are in INR Crore)
    JK Tyre Balance Sheet

    JK Tyre Income Statement

    Key MetricsFY 2023FY 2022
    Total Income15,00114,644
    Total Expenses13,38813,815
    Net Profit811264
    (Note: All values are in INR Crore)
    JK Tyre Income Statement

    JK Tyre Cash Flow Statement

    Key MetricsFY 2024FY 2023
    CFO1,6141,224
    CFI-1,208-400
    CFF-413-747
    (Note : All values are in INR Crore)
    JK Tyre Cash Flow Statement

    CEAT

    CEAT Limited, previously known as Cavi Electtrici e Affini Torino (Electrical Cables and Allied Products of Turin), is a leading and recognised multinational tyre manufacturing company headquartered in Mumbai, India. It was founded in 1924 in Turin, Italy, and then moved to India in 1958. The company is a flagship entity of the RPG Group, a prominent Indian conglomerate.

    CEAT is more than just car tyres. They manufacture tyres for motorcycles, cars, trucks, buses, and other vehicles. The company has a global footprint spanning over 120 countries. Their tyres are trusted across various regions. It focuses on producing top-notch products and embracing innovation to meet the varied requirements of customers in different terrains and locations.

    The company caters to a wider range of vehicles. They make tyres for a wide variety of vehicles, including motorcycles, cars, trucks, buses and other types of vehicles.

    The company has a strong distribution network in India and abroad. It divided India into regions, and each Regional Distribution Centre (RDG) supplies tyres to Carrying Forward Agents or directly to dealers based on demand.

    Carrying Forwarding Agents (CFA) act as intermediaries between RDCs and dealers ensuring efficient delivery of tyres to local retailers.

    CEAT has over 4500 dealers and 51,000 sub-dealers in India, which makes their tyres widely available to consumers.

    CEAT Consolidated Financial Statements

    CEAT Balance Sheet

    Key MetricsFY 2024FY 2023
    Total Assets9,9949,627
    Total Liabilities5,9516,187
    Total Equity4,0423,439
    (Note : All values are in INR Crore)
    CEAT Balance Sheet

    CEAT Income Statement

    Key MetricsFY 2024FY 2023
    Total Sales11,94311,314
    Total Expenses10,85810,843
    Net Profit614174
    (Note : All values are in INR Crore)
    CEAT Income Statement

    CEAT Cash Flow Statement

    Key MetricsFY 2024FY 2023
    CFO1,7191,205
    CFI-853-849
    CFF-871-319
    (Note : All values are in INR Crore)
    CEAT Cash Flow Statement

    Read Also: Top 10 Most Expensive Stocks in India

    Tyre Stocks Comparative Analysis

    Tyre Stocks Market Capitalisation (in INR crore)

    Company NameMarket Cap (in INR crore)
    MRF55,561
    Balkrishna Industries62,060
    Apollo Tyre31,450
    JK Tyre10,263
    CEAT10,058

    Tyre Stocks Current Market Price

    Company NameCMP (in INR)
    MRF1,26,145
    Balkrishna Industries3,210
    Apollo Tyre495
    JK Tyre394
    CEAT2,486

    Tyre Stocks Price-to-Earnings Ratio

    Company NamePE Ratio
    MRF26.70
    Balkrishna Industries39.99
    Apollo Tyre17.24
    JK Tyre13.49
    CEAT15.65

    Read Also: List of Best Chemical Stocks in India

    Conclusion

    The Indian tyre industry showcases a diverse range of companies, each with its unique strengths and specialities. MRF’s legacy and brand recognition, BKT’s focus on Off-Highway Tyres, and Apollo Tyre’s global presence constitute compelling options that cater to the diverse needs of the investors. JK Tyres dominates the trucks/bus Radial segment, while CEAT offers a comprehensive portfolio across various vehicle types. So which tyre stock suits you best? Consider your investment goals, risk tolerance and the specific market segment. The Indian Tyre industry is poised for growth due to rising vehicle production, incomes and infrastructure development. As these trends continue to unfold, the top tyre companies will probably take the lead by pioneering constant innovation and adapting to the ever-evolving needs of the market.

    Frequently Asked Questions (FAQs)

    1. What factors should I consider before choosing a tyre stock?

      Legacy, product range, market presence, brand recognition and commitment to innovation should be considered before selecting a stock.

    2. How are these tyre companies adapting for the future?

      These companies are likely to continuously innovate and develop new technologies to fulfil the needs of the customers.

    3. Should I invest in the above-discussed stocks?

      Conduct your own research and due diligence before making any investment decisions.

    4. Where can I find more information about these companies?

      You can visit the company websites or search for industry reports and news articles.

  • Guide to Behavioral Finance: Definition, Biases, and Impact

    Guide to Behavioral Finance: Definition, Biases, and Impact

    Ever wondered why you tend to spend more freely with a credit card than with cash? Or why do you hesitate to sell a losing stock but quickly sell your winning holdings at a small profit?

    Behavioral finance provides interesting insights into various financial puzzles. Unlike traditional finance, which assumes that investors are rational, behavioral finance recognizes the influential role that psychology plays in our financial decision-making. 

    What is Behavioral Finance?

    Behavioral finance is a field of study that examines how psychology influences the financial decisions of investors and financial markets as a whole. In contrast, to traditional finance, which assumes investors act rationally depending on the available information, behavioral finance recognizes that emotions and biases can cloud judgment and lead to suboptimal choices.  

    It shows how psychological factors like overconfidence, herd mentality, loss aversion, etc. can affect an individual’s financial decisions. It challenges the efficient market hypothesis, which holds that markets are totally efficient and reflect all available information. 

    Evolution of Behavioral Finance

    Evolution of Behavioral Finance

    In 1912, George Selden’s groundbreaking book “Psychology of the Stock Market” laid the foundation for understanding the profound psychological elements present in the financial markets. 

    In 1979, the psychologists Amos Tversky and Daniel Kahneman presented their Prospect Theory, which effectively challenged the long-standing belief in rational decision-making. This theory sheds light on the interesting ways in which individuals perceive and prioritize gains and losses. This set the stage for behavioral finance.

    In the 1980s, Richard Thaler, a well-known economist, teamed up with Tversky and Kahneman to implement ideas for the financial markets. During this period, important ideas like mental accounting and framing effects were developed. 

    Since the 2000s, behavioral finance has emerged as a well-established field, witnessing a surge in academic research, industry adoption, etc. 

    Read Also: Top 10 personal finance lessons for self-learning

    Role of Psychology in Behavioral Finance 

    Role of Psychology in Behavioral Finance 

    Behavioral finance is all about the psychology of money. It is the core principle behind the field. Let’s see how psychology plays a major role in understanding financial decisions. 

    • Mental Shortcuts: Our brain depends on mental shortcuts to efficiently process information. Biases stem from these shortcuts. For example, the availability bias leads us to assess the likelihood of events based on how easily we can recall them. This could lead to overreacting to news and neglecting historical trends. 
    • Cognitive Bias: These are thinking patterns that can cause errors in judgement. Behavioral finance identifies and explains how biases such as overconfidence or anchoring bias can distort financial decisions. 
    • Individual Differences: People have different personalities, risk tolerance, and financial goals. Understanding your own psychology is important for making sound financial decisions. Psychology helps us in a comprehensive understanding of these aspects and their impact on financial behavior. 

    Biases in Behavioral Finance

    Biases play a central role in behavioral finance, greatly influencing the way investors make decisions. These biases are mental shortcuts that can lead to judgment errors in financial situations.

    Let’s have a look at some of the common biases: 

    • Loss Aversion: Loss aversion is when people feel the pain of losses more than the pleasure of gains. This can cause investors to keep holding losing stocks and sell winning stocks too early. 
    • Overconfidence: Overconfidence is a common pitfall for investors, who tend to overestimate their knowledge and abilities, resulting in risky decision-making and an underestimation of potential losses or black swan events. 
    • Anchoring Bias: Individuals have a tendency to rely excessively on the initial information they come across when making decisions. This could pose a problem in investing. For instance, an investor is fixated on a stock’s initial price and fails to consider evolving market conditions. 
    • Herd Mentality: Herd mentality refers to the natural inclination to follow the crowd. Investors often make decisions based on the actions of others, rather than their own analysis. This can lead to bubbles and crashes. 
    • Confirmation Bias: Confirmation bias is the tendency to search for information that supports our preconceived notions while disregarding conflicting information. This can cause investors to ignore potential risks or miss out on great opportunities. 
    • Disposition Effect: People tend to sell investments that have made money quickly and keep those that have lost money for a long time. This can hinder returns because winning stocks often have more potential for growth. 
    • Framing Bias: The presentation of information has a profound impact on our perception. For instance, an investment presented with a “90% chance of success” may appear more appealing than one described as having a “10% chance of failure.” 
    • Status Quo Bias: Most individuals generally tend to cling to the status quo and shy away from making any alterations. This can result in a lack of momentum in investment decisions, even when a change could yield better decisions. 
    • Mental Accounting: People often separate their money into different categories and treat them in different ways. For instance, you are more likely to spend your bonus amount than money you have been saving for years. This can result in unplanned expenses. 

    Impact of Behavioral Finance 

    Impact of Behavioral Finance 

    On Individuals

    • Improved Decision-Making: Identifying biases allows investors to make better decisions and avoid expensive errors. Creating a strategy that takes into account risk tolerance and objectives can help minimize the impact of emotions such as fear and greed. 
    • Reduced Risk: Behavioral finance helps recognize biases that lead to risky behavior, like overconfidence leading to excessive investment in volatile assets. Investors can use diversification and disciplined investing strategies to lessen risk.  
    • Awareness: Understanding behavioral biases empowers individuals to take control of their financial decisions. They can become more critical of financial information and avoid falling prey to biases that exploit emotional triggers. 

    On Market

    • Market Volatility: Behavioral tendencies can indeed contribute to market fluctuations. Herding and panic selling make crashes worse, while overconfidence creates bubbles. 
    • Market Anomalies: Behavioral finance helps explain market anomalies, such as calendar effects or seasonal trends, that cannot be fully explained by traditional finance. 
    • Investors protection: Regulators can use behavioral finance insights to create policies that protect investors from making emotional or biased decisions. 

    Read Also: How to achieve financial freedom before retirement

    Conclusion 

    In summation, behavioral finance focuses on the role of human behaviour in making financial decisions. It challenges the idea of rational investors and recognizes how psychology affects our financial choices. 

    Behavioral finance is not a miracle solution that guarantees financial success. However, incorporating these principles into your investment strategy can help you become an informed and mindful investor. Remember that the goal is not to get rid of emotions, but to be aware of how they can affect our financial decisions and to make choices that support long-term goals. 

    Frequently Asked Questions (FAQs)

    1. What is Behavioral Finance?

      It studies how psychology influences financial decisions, acknowledging we are not always rational.

    2. How do emotions affect investing?

      Emotions play a significant role in investing; for example, fear can lead to panic selling, while greed can make you chase risky investments.

    3. How can I be a more mindful investor?

      You can educate yourself on biases and how they might influence you. Consider your emotions and goals before making decisions.

    4. Is there a way to overcome biases?

      Not entirely, but by being aware of the biases, you can take steps to mitigate their influence.

    5. Does behavioral finance replace traditional finance?

      No, it contemplates it. Traditional finance focuses on market data, while behavioral finance considers the human element.

  • What is NFO? Features, Types, & How to Invest in It

    What is NFO? Features, Types, & How to Invest in It

    In the stock market, there are lots of investing opportunities for different participants, whether traders or investors. Investment options such as stocks, ETFs, mutual funds, etc. However, what would happen if a brand-new fund enters the market with no prior performance history? It is known as the “New Fund Offer,” or NFO.

    In this blog, we will deep dive into the NFO, along with the benefits and risks of investing in it.

    What is NFO (New Fund Offer)?

    Asset Management Companies (AMCs) come up with NFOs, or new fund offerings, as an investment product. The process by which AMCs offer a new mutual fund for subscription to the general public is called an NFO. The NFOs offer investors a chance to invest in emerging trends or themes such as Green Energy, AI, Electric Vehicles, etc.

    Further, when new indices are launched by exchanges like NSE and BSE in India, and there is significant demand for them by investors, AMCs often introduce NFOs for such indices as a passive investment option.

    The aim of the AMCs in initiating the NFO is to procure funds and allocate them to buy the securities of the underlying fund. Investors may subscribe to it during the NFO period, or in the case of open-ended schemes, they can invest in the fund later as well once the allotment is done.

    Features of NFO

    1. The NFO is opened for a specific period in which investors can subscribe.
    2. Most of the NFOs are initially offered for INR 10.
    3. An offer document that contains information on the fund manager’s strategy, investment goal, risk, and other details is attached to NFOs.
    4. NFOs offer you an opportunity to invest in a new theme or indices, which might not be available in the market.

    Read Also: NFO Alert: PGIM India Large & Mid Cap Fund

    Types of NFOs

    Types of NFOs

    There are various types of NFOs-

    1. Based on Structure

    Generally, there are 3 types of NFO based on the structure:

    • Open-Ended Fund: These funds allow you the flexibility to invest and withdraw from the fund at any point in time.
    • Close-Ended Fund: An investor can invest during the NFO period, but cannot exit until the lock-in period is over, but they have the option to exit from the fund by selling it in a secondary market.
    • Interval Funds: These funds have all the features of a close-ended fund, but an investor can exit from this fund during the exit interval provided by the scheme.

    2. Based on Asset Classes

    There are 3 different types of NFO based on asset class-

    • Equity Fund: In an equity-oriented mutual fund, a predominant part of your capital is invested into equity and equity-related instruments.
    • Debt Fund: The NFOs of debt funds invest in fixed-income securities, which include bonds, government securities, debentures, etc.
    • Hybrid Fund: These NFOs invest in a combination of both equity and debt asset classes, providing you with a combination of both stability and growth in your portfolio.

    Did you know?

    As per SEBI, for open-ended schemes (except ELSS), the NFO should be open for 15 days.

    Advantages of Investing in NFO

    1. NFOs allow you to invest in emerging sectors or new themes of the economy such as green energy, AI, ESG, etc.
    2. Certain NFOs provide an excellent opportunity for diversification in the investment portfolio.
    3. Generally, units of NFOs are offered at a fixed price of INR 10 per unit, which makes them accessible to a diverse set of investors.
    4. NFOs are managed by an experienced fund manager who invests the proceeds of the fund as per the investment objective defined by the scheme.

    Disadvantages of Investing in NFO

    1. Since NFOs lack a track record, it can be challenging for investors to compare the performance of the schemes.
    2. In NFOs, there is no assurance that the fund manager will perform well.
    3. Most of the thematic NFOs generally have a higher expense ratio as compared to existing funds.
    4. As per the trend, AMCs often launch NFOs during a bull market phase. However, if the market is at its peak during the NFO launch, these unfavorable conditions can negatively impact future returns of the fund.

    Key points before investing in NFOs

    Key points before investing in NFOs
    1. AMC Reputation: It’s crucial to consider the reputation of the Asset Management Company; an established fund house typically offers greater security and stability.
    2. Cost: Always check the total expense ratio (TER) of the NFOs before investment. The TER of the NFO should not be very high, as this may erode your returns over time.
    3. Sectoral NFO: If the NFO is investing in a particular sector or theme, one must analyze the growth prospects of that particular sector before making any investment.
    4. Flexibility: One must check if the fund is open-ended or close-ended, as close-ended funds do not provide liquidity.
    5. Investment Goal: As a prudent investor, one should invest in NFOs only if the investment objective and risk profile are aligned with the NFO.

    How to invest in NFO

    There are multiple ways to participate in the NFOs, whether online or offline. There is a direct way to invest by visiting the office or website of the AMC offering NFOs. Further, various investment platforms and stock brokers in India provide the facility of participating in the NFOs.

    What happens after the NFO period

    What happens after the NFO period

    Within five working days of the NFO period, the units are allocated to the investors by the Asset Management Company (AMC).

    If the fund is open-ended, the AMC will permit investors to make regular contributions and withdrawals from the fund once the allotment of NFO is done. However, if the fund is close-ended, investors cannot sell the units before the lock-in period. However, they have an option to sell the units of fund in the secondary market if there is enough liquidity.

    Read Also: Bandhan Long Duration Fund NFO: Objective, Benefits, Risks, and Suitability Explained

    Conclusion

    In conclusion, NFOs present new investment opportunities offered by asset management companies, allowing investors to invest in indices or themes not currently provided by the existing mutual funds.

    However, the lack of a historical track record makes it challenging for investors to compare the performance. Additionally, AMCs often launch NFOs in a bull market with investment objectives similar to existing options in the market. Therefore, it is crucial to consult with your financial advisor and consider all the associated risks before investing in an NFO.

    S.NO.Check Out These Interesting Posts You Might Enjoy!
    1What Is An IPO Mutual Fund? Should You Invest?
    2Mutual Fund Taxation – How Mutual Funds Are Taxed?
    3What is Solution Oriented Mutual Funds?
    4What is TREPS & Why Mutual Funds Invest in it?
    5Debt Mutual Funds: Meaning, Types and Features

    Frequently Asked Questions (FAQs)

    1. Is NFO good for investment?

      Investors with a high tolerance for risk can invest in NFOs; or investors can wait for a while to assess the fund’s performance, compare it to other funds in the same category, and then decide whether to invest.

    2. Can I withdraw my money during the NFO period?

      No, withdrawals are not permitted during the NFO open period. However, investors can sell their investment once allotment is done.

    3. What are the risks involved while investing in NFO?

      Investing in New Fund Offerings (NFOs) entails various risks due to their lack of performance history.

    4. How can I invest in NFOs?

      There are multiple options to invest in NFOs. One can visit the AMC website and use their online platform or can apply via stock brokers as well.

    5. Is NFO better than existing mutual funds?

      Since NFOs do not have an established track record of performance, it is challenging to compare them to existing mutual funds.

  • What is a Covered Put Strategy?

    What is a Covered Put Strategy?

    Covered Put strategy could help you earn some extra income in a range-bound market with a slightly bearish outlook; let’s find out how.

    As an investor, you use this technique when you think the price of a stock or index will stay in a narrow range, fall slightly, or volatility will fall. The Covered Put approach is used to benefit from a neutral to bearish outlook of the markets. In the Covered Put writing strategy, investors sell a stock or short the index and also sell a put on the stock or index. In today’s blog, we will further explore its payoff scenarios with an example and its advantages and disadvantages.

    What is the Covered Put Strategy?

    The Covered Put is a neutral to bearish market view and expects the price of the underlying to remain in a range or go down slightly. The investor simultaneously sells a put and the stock. When the option is out-the-money, the investor keeps the premium. As the investor shorted the stock in the first place, the investor is protected from downside movements. The investor keeps the premium if the stock price does not change. In a neutral market, he can use this method to generate income. The risk is unlimited (if the security’s price increases significantly), while the reward is limited in this strategy.

    The Put that is sold is usually an out-of-the-money put. Shorting a stock indicates that the investor is bearish on it, but is willing to purchase it back once the price reaches a target price. This is the price at which the investor sells the Put  (Put strike price). If a put is sold, it means that if it is exercised, the stock will be purchased at the strike price. 

    When to use Covered Put?

    The Covered Put works well when the market is moderately Bearish. Employ this strategy when you are expecting a moderate drop in the price and volatility of the underlying.

    Covered Put Strategy Payoff Scenarios

    Covered Put Strategy Payoff Scenarios

    Covered Put strategy has the following payoff scenarios:

    Break Even Point = Sale Price of stock + Premium Received 

    Maximum Profit = Sale Price of stock – Strike Price + Premium Received 

    (The maximum profit is limited to the premiums received and downward movement until the strike price of the put. The position remains profitable unless the short position in security doesn’t exceed the premium received.)

    Maximum Loss = Unlimited

    (The maximum loss is Unlimited as the price of the underlying can theoretically go up to any extent.)

    Example

    Example of Covered Put Strategy

    Let’s take a simple example of a stock called Coal India trading at Rs 460 (spot price) in June. The option contracts for this stock are available at the premium of:

    July 450 Put : Rs 20        

    Lot size : 100 shares in 1 lot    

    Sell 100 Shares : 100*460 = Rs 46000 Received

    Sell July 450 Put : 100*20 = Rs 2000 Received

    Now, let’s discuss the possible scenarios:

    Scenario 1: Stock price remains unchanged at Rs 460

    Buy 100 Shares : 100*460 = Rs 46000 (no profit or loss)

    Short July 450 Put : Expires worthless

    Net Credit was Rs 48000 initially received to take the position.

    Total Profit : 48000 – 46000 = Rs 2000.

    The total profit of Rs 2000 is also the maximum profit in this strategy. This is the amount you received as a premium at the time you entered the trade.

    Scenario 2: Stock price goes to Rs 550

    Buy 100 Shares at Rs 550, sold initially at 460 : (460*100) – (550*100) = –  Rs 9000

    Short July 450 Put : Expires worthless

    Total Loss = – 9000 + 2000 (Premium Received) = – Rs 7000

    In this scenario, Rs 9000 is the loss made from shares shorted. The net loss made in this transaction is Rs 7000.

    Scenario 3: Stock price goes down to Rs 400

    Buy 100 Shares at Rs 400, sold initially at Rs 460: (460*100) – (400*100) = Rs 6000

    Short July 450 Put : Expires in-the-money (400-450)*100= – Rs 5000

    Total Profit = 6000 – 5000 + 2000 (Premium Received) = Rs 3000

    In this scenario, Rs 6000 is the profit earned from shares shorted. At the same time, we lost Rs 5000 in July 450 Put. The net profit earned is a Rs 2000 premium received at the beginning and Rs 1000 from the short position.

    Read Also: What is Covered Call?

    Advantages of Covered Put

    • Benefits from decreasing volatility : Covered Put works best when volatility decreases.
    • Time decay benefits in Covered Put : Covered Put benefits from the passage of time.
    • Income-generating strategy in a sideways market : A covered put strategy is used if an investor is moderately bearish and plans to hold a short position for an extended length of time. The covered put will help generate income during the holding period. 
    • Use it as a hedge : It is used to hedge a short position. If an investor holds a short position, they can use a covered put strategy to limit their downside risk. By selling a put option, they can offset some of the potential losses from their short position in the security.

    Disadvantages of Covered Put

    • Limited Profit Potential : Covered Puts have defined maximum profits.
    • Undefined Risk Strategy : In this strategy, maximum loss is unlimited.  
    • Require a higher margin : To short an option higher margin is required.
    • Assignment risk : It exists when an investor writes an option. An early assignment occurs when a trader is forced to buy or sell stock when the short option is exercised by the long option holder. In Short put assignment the option seller must buy shares of the underlying stock at the strike price much before the time period strategy requires to become profitable.
    • Expiration risk exists in a covered put strategy : A big rise in the stock price, not only near expiration, is always a threat to this strategy.
    • Futures should be used for shorting as there are limitations on shorting stocks.

    Conclusion

    Covered Put is used when you are mildly bearish on the market. This strategy involves selling an OTM Put Option along with selling the underlying. Ideally, this strategy is well executed using stock futures due to limitation of shorting stocks by exchanges. Only intraday shorting of shares is allowed. As you are moderately bearish, you won’t mind buying back the underlying (obligation to buy under Put Option) if the price goes down to the strike price. At the same time, you will make gains on your short position on the underlying as the price goes down and also on the amount of premium received on a Put Option. When using a covered put strategy, maximum loss is unlimited as stock prices can rise significantly and maximum gains are limited. Covered Puts have pros and cons, an investor should understand every aspect of it before deciding to take a position.

    Frequently Asked Questions (FAQs)

    1.  What is a Covered Put trading strategy?

      Short stock + Sell OTM stock Put Options

    2. Is Covered Put Safe?

      Though it is a basic option strategy, the maximum loss is unlimited in it, so it’s not for beginners as some knowledge and experience are required in it.

    3. Is Risk involved in this strategy?

      Yes, unlimited risk is involved in this derivative strategy.

    4. Is the Covered Put different from the Protective Put?

      Yes, the Protective put strategy has a long position in stock and a long position in put to protect from any downside. An investor buys puts, so the loss is limited to just the premium, while profit is unlimited on the bullish side due to a long position in the stock.

    5. When to write a Covered Put?

      When the trader is neutral or slightly bearish in the market.

  • Listed AC Manufacturing Companies in India

    Listed AC Manufacturing Companies in India

    Summers are around the corner, hotter than ever, and nowadays you cannot sit without an air conditioner, but have you ever thought of making profits in this summer season while enjoying your soft drinks? Yes, you can achieve this by investing in a listed AC manufacturing company in India with a strong market presence.

    In this blog post, we’ll provide you with all the information you need about India’s top five air conditioner manufacturers.

    What are Air Conditioner Stocks?

    AC manufacturing firms are those that design, develop, and manufacture commercial air conditioners, room air conditioners, and other cooling equipment. Suppliers of AC unit parts, such as compressors and condensers, are also included in this industry. Additionally, some businesses distribute air conditioners and sell the units to merchants. 

    List of Best AC Stocks in India

    1. Voltas Ltd.
    2. Blue Star Ltd.
    3. Amber Enterprises India Ltd.
    4. Johnson Controls
    5. EPACK Durable Ltd.

    Explore the top air conditioner stocks in India with this comprehensive list of the best-performing AC companies to invest in for steady growth.

    Overview of Best AC Stocks in India

    1. Voltas Limited 

    In 1954, the company was established in partnership with Volkart Brothers and became a member of the Tata Group. The company’s name comes from the union of its two original names, Volkart’s “Vol” and Tata Sons’ “Tas.” The company started off selling air conditioners, but later on, they added air coolers, water dispensers, and commercial refrigeration to their line of products. To manufacture household appliances, the company recently partnered with the Ardutch, which is controlled by the Koc Group which makes the Beko brand of appliances, and started manufacturing appliances under the name of “Voltas Beko”. The Ministry of Finance awarded the company “The Most Energy Efficient Appliance of the Year in Air Conditioners” in 2021. The company’s headquarters are located in Mumbai.

    Know the Returns:

    1Y Return (%)3Y Return (%)5Y Return (%)
    -1.43%0.34%152.17%
    (As of 15 April 2025)

    2. Blue Star Limited

    In 1943, Blue Star Limited was established by Mohan T. Advani. The company’s first concentration is on air conditioner and refrigerator repair and reconditioning. The company worked along with a US-based company to manufacture air conditioners. The company employs 765 service associates and has 5000 stores and has presence in 18 countries. The company owns and operates manufacturing plants in Dadra, Kala Amb,Wada and Ahmedabad. The company’s headquarters are located in Mumbai. 

    Know the Returns:

    1Y Return (%)3Y Return (%)5Y Return (%)
    46.31%250.22%721.12%
    (As of 15 April 2025)

    3. Amber Enterprises India Ltd. 

    The company was founded in 1990, and its main office was located in Gurugram, Haryana. In 2004, they also began producing room air conditioners and sheet metal components. The business was listed on a stock exchange in 2018. They employ more than five thousand people. To support the strategic expansion of their business, they have completed several well-considered acquisitions, including those of PICL India Pvt. Ltd. and IL JIN Electronics India Pvt. Ltd. 

    Know the Returns:

    1Y Return (%)3Y Return (%)5Y Return (%)
    90.04%93.54%582.77%
    (As of 15 April 2025)

    4. Johnsons Control India

    The company is a part of Johnson Controls International PLC. The company offers a range of products, including heating, ventilation, and air conditioning systems. The business set up a shop in India in 1995 and bought HVAC automation equipment for the populace there. In an attempt to broaden its product line in India, the business merged with Tyco International, a firm that offers fire safety and security solutions. 

    Know the Returns:

    1Y Return (%)3Y Return (%)5Y Return (%)
    55.00%-16.15%-19.02%
    (As of 15 April 2025)

    5. EPACK Durable Limited

    This Indian business produces a broad variety of long-lasting consumer goods. It was established as “EPACK Durable Solutions Private Limited” as a private company. The company started to expand its line of products to include consumer durables like refrigerators, air conditioners, and other household appliances. The business changed its name to “EPACK Durable Limited”, a public limited company in June 2023. The company is acknowledged as India’s second-largest manufacturer of original room air conditioner designs.

    Know the Returns:

    1Y Return (%)3Y Return (%)5Y Return (%)
    117.69%77.90%77.90%
    (As of 15 April 2025)

    Read Also: List of Best Tobacco Stocks in India 

    Comparative Study of AC Companies Stocks

    Market Capitalization

    CompanyShare Prices (In INR)Market Capitalization (In crores)52 Week High Price(In INR52-Week Low Price(In INR
    Voltas Ltd.1,28242,4231,9461,135
    Blue Star Ltd.2,02441,6162,4201,350
    Amber Enterprises India Ltd.6,89623,3258,1773,310
    Johnson Controls1,7624,7922,6211,109
    EPACK Durable Ltd.3933,771674158
    (As of 15 April 2025)

    Income Statement Comparison (FY 2024)

    CompanyTotal SalesTotal ExpensesNet Profit
    Voltas Ltd.12,48112,054386
    Blue Star Ltd.9,6859,118413
    Amber Enterprises India Ltd.6,7296,423141
    Johnson Controls1,9182,011-75
    EPACK Durable Ltd.1,4191,33836
    (The above-mentioned figures are in crores unless stated otherwise)
    Income Statement of Top AC Stocks in India

    According to the above statistics, Voltas Ltd.. reported the greatest profit of INR 414.31 crores and had the highest sales of INR 12734 crores.

    Balance Sheet Comparison (FY 2024)

    CompanyTotal AssetInventoryTotal Shareholder FundsCurrent Liabilities
    Voltas Ltd.12,0352,1355,8205,756
    Blue Star Ltd.6,6181,4072,6093,879
    Amber Enterprises India Ltd.6,5938402,0633,285
    Johnson Controls1,657656582968
    EPACK Durable Ltd.1,767378891752
    (The above-mentioned figures are in crores unless stated otherwise)
    Financial Statement Analysis of Top AC Stocks in India

    According to the above table, EPACK Durable has the least amount of assets, while Voltas has the most. 

    Cash Flow Statement Comparison (FY 2024)

    MetricVoltas Ltd.Blue Star Ltd.Amber Enterprises India Ltd.Johnson ControlsEPACK Durable Ltd.
    Cash Flow from Operating Activities761289964254256
    Cash flow from Investing Activities(522)(524)(1034)(32)(376)
    Cash flow from Financing Activities(116)364(121)(172)166
    (The above-mentioned figures are in crores unless stated otherwise)

    Among the above-mentioned companies, all companies have negative cash flows from investing activities, whereas only Blue Star and EPACK durables have positive cash flows from financing activities.

    Key Performance Indicators

    ParticularVoltas Ltd.Blue Star Ltd.Amber Enterprises India Ltd.Johnson ControlsEPACK Durable Ltd.
    Net Profit Margin (%)  3.09  4.272.10    -3.942.56
    ROCE (%)10.8322.4410.90    -8.058.8
    Current Ratio (x)  1.341.301.02    1.201.33
    P/E (x)194.7677.692.81  -34.3233.78
    P/B (x)  8.4410.015.97    4.441.62
    (Source – Company Financial Reports)

    Of the companies listed above, Blue Star has the highest ROCE while Johnson Controls has a negative ROCE.

    Read Also: Top 10 Most Expensive Stocks in India

    Reasons to Invest in Air Conditioning Stocks

    1. Due to hot climatic conditions, the demand for air conditioners will be on the higher side, resulting in higher revenues and profits. AC stocks can be considered as a good investment opportunity.
    2. The introduction of innovative technologies such as inverter ACs or energy-efficient ACs creates an opportunity for companies to introduce new products to the market and increase their revenue.

    The Risk Associated with AC Stocks

    The risks associated with investing in AC company stocks are as follows- 

    1. Due to intense competition between various players in the industry can lead to price competition and lower profit margins.
    2. If the disposable income of the people decreases due to economic conditions, the demand for such products will be affected negatively.
    3. The sales of AC are seasonal, which will lead to fluctuation in the stock prices, hence not suitable for investors who are looking for long-term gains.

    Future of AC Stocks in India

    India’s need for air conditioners is predicted to rise as a result of rising disposable income and urbanization. Additionally, as a result of the rising temperatures, more people are eager to get air conditioners, which will boost business revenue. Numerous other variables, including government programs and energy efficiency legislation, also have an impact on this sector’s growth. As a result of the increasing popularity of energy-efficient and creative technologies like inverter air conditioners, companies can increase the manufacturing of these kinds of products. 

    Read Also: List of Best Chemical Stocks in India

    Conclusion

    In conclusion, urbanization, temperature rise, and rise in disposable income present growth opportunities for investing in AC stocks. However, there are several other elements you should take into account before investing, including the company’s finances, product innovation, general economic conditions, etc., all of which could have an impact on the performance of the firm. Therefore, before making any investing decisions, it is advisable to take all of these issues into account and consult with your financial advisor.

    Frequently Asked Questions (FAQs)

    1. Which is the largest AC company in India?

      Based on market capitalization and market share, Voltas is the biggest AC company. Its market capitalization is about 49133 crores, and its market share is approximately 35%.

    2. What are some of the biggest air conditioner stocks in India?

      Some of the leading air conditioner stocks include Voltas Ltd., Blue Star Ltd., Amber Enterprises India Ltd, and Johnson Controls Ltd.

    3. How can I invest in air conditioner stocks?

      You can invest in air conditioner stocks by choosing a brokerage firm and opening a demat account with them.

    4. What factors should I consider before investing in air conditioner stock?

      There are various factors, such as economic conditions, seasonal demand, financials of the company, its market share etc.

    5. Should I invest in air conditioner stocks?

      The growth of air conditioner companies depends on the climatic conditions in a region or country; as in India, the temperature is rising continuously, and along with this, disposable income is also increasing. One can consider investing in these stocks after consulting their investment advisor.

  • ICICI Vs HDFC Bank: Which Has Larger Market Capitalization?

    ICICI Vs HDFC Bank: Which Has Larger Market Capitalization?

    You save a lot of money and put in a lot of work, but you need help determining where to keep it. It is only possible to retain some of your hard-earned savings at home; opening a bank account is your only option. You might be surprised to hear that banks where you have accounts allow you to invest in their business.

    If you’re wondering “ICICI or HDFC, which is better” for your investment and banking needs. This blog post will compare ICICI Bank and HDFC Bank. 

    ICICI Bank Overview

    ICICI Bank is among the biggest banks in India’s private sector. The government of India established the Industrial Credit and Investment Corporation of India (ICICI) on 5 January 1955. As a division of ICICI Limited, ICICI Bank was founded in 1994. It made history by being the first Indian bank and firm to list on the New York Stock Exchange. ICICI and ICICI Bank combined to form a new financial organization to increase business efficiency. Following accusations against Chanda Kochhar, the managing director of ICICI Bank, in 2018 about inappropriate lending practices, Sandeep Bakhshi assumed the role of managing director. It was the first bank to provide contactless credit and debit cards. 

    HDFC Bank Overview

    With its headquarters in Mumbai, HDFC Bank was established in 1994 as a subsidiary of HDFC Ltd. The Reserve Bank of India granted it a banking license in January 1995. In November 1995, the bank launched its Initial Public Offering (IPO) and became a listed company on the Bombay Stock Exchange and the National Stock Exchange. In 2000, the Times Bank merged with HDFC Bank. HDFC Bank acquired Centurion Bank of Punjab to increase its branch network and clientele. Aditya Puri was replaced as the bank’s CEO by Sashidhar Jagdishan.

    Read Also: Axis Bank vs ICICI Bank

    HDFC and ICICI Bank Comparative Study

    ParticularICICI BankHDFC Bank
    Current Share Price1,199.61,683.8
    Market Capitalization (Crores)8,44,06112,81,055
    52 Week High Price1,2351,757.5
    52-Week Low Price8991,363.55
    FIIs Holdings (%)44.7747.83
    DIIs Holdings (%)45.6233.59
    Book Value per Share383.78596.39
    PE Ratio (x)18.6320

    The table above indicates that HDFC Bank has a higher market capitalization than ICICI Bank and that FIIs own a larger interest in it. In contrast, DIIs own just 33.59% of HDFC Bank and 45.62% of ICICI Bank. 

    Read Also: HDFC Bank vs Axis Bank

    HDFC and ICICI Bank Financial Statements Comparison

    Income Statement Comparison (FY 2024)

    ParticularICICI BankHDFC Bank
    ParticularICICI BankHDFC Bank
    Interest Income1,59,515.922,83,649.02
    Total Income2,36,037.724,07,994.77
    Total Expenditure1,71,890.953,06,407.89
    Net Profit44,256.3764,062.04
    (The figures mentioned above are in INR crores unless stated otherwise)
    Income Statment comparision of ICICI Bank and HDFC Bank

    According to the above income statement, HDFC Bank has a larger interest income than ICICI Bank. It also reported a profit in the most recent fiscal year (2024) of 64062.04 crores, 44% more than ICICI Bank. 

    Balance Sheet Comparison

    ParticularICICI BankHDFC Bank
    ParticularICICI BankHDFC Bank
    Deposits14,43,579.9523,76,887.28
    Total Capital & Liabilities23,64,063.0340,30,194.26
    Advances12,60,776.2025,65,891.41
    (The figures mentioned above are in INR crores unless stated otherwise)
    Balance Sheet comparision of ICICI Bank and HDFC Bank

    The statistics above indicate that HDFC Bank outperforms ICICI Bank regarding deposits and advances. 

    Cash Flow Statement Comparison

    ParticularICICI BankHDFC Bank
    Cash Flow from Operating Activities1,57,284.4819,069.34
    Cash Flow from Investing Activities(1,45,931.09)5,313.77
    Cash Flow from Financing Activities13,764.51(3,983.06)
    (The figures mentioned above are in INR crores unless stated otherwise)
    Cash Flow Statement comparision of ICICI Bank and HDFC Bank

    HDFC and ICICI Bank Key Performance Indicators

    ParticularICICI BankHDFC Bank
    Net Interest Margin (%)3.613.21
    Net Profit Margin (%)28.2123.07
    ROCE (%)3.332.85
    Capital Adequacy Ratios (%)16.3318.80

    From the preceding table, we may infer that ICICI Bank has a bigger net profit margin than HDFC Bank and a higher net interest margin.  

    Read Also: HDFC vs SBI

    Conclusion

    The comparison of India’s biggest private sector banks presented above leads us to conclude that while HDFC Bank has more revenue and profits overall, ICICI Bank posts higher profit margins even with less revenue. Although every bank has something special to offer, we always advise speaking with an investment expert before making investment decisions. 

    S.NO.Check Out These Interesting Posts You Might Enjoy!
    1SBI vs ICICI Bank
    2PNB vs Bank of Baroda
    3Bank of Baroda vs SBI
    4Bank of Baroda vs Canara Bank
    5PNB vs SBI

     Frequently Asked Questions (FAQs)

    1. ICICI Bank and HDFC Bank, which has the larger market capitalization?

      Compared to ICICI Bank, HDFC Bank has a larger market capitalization.

    2. After Chanda Kochhar, who becomes the MD of ICICI Bank?

      After Chanda Kochhar left ICICI Bank, Sandeep Bakshi became the MD.

    3. Which bank is more profitable than HDFC Bank or ICICI Bank?

      ICICI Bank’s net profit margin is higher than that of HDFC Bank, even though HDFC Bank reported a profit of 64,062 crores, 19,806 crores more than that of ICICI Bank.

    4. Which person oversees HDFC Bank as managing director?

      The managing director of HDFC Bank at the moment is Mr Sashidhar Jagdishan.

    5. In India, which private bank has the largest market capitalization?

      HDFC Bank has the largest market capitalization of all the private banks in India.

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