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New Banking and Insurance Rules applicable from 2021

Personal Finance

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December 21, 2020

New Banking and Insurance Rules applicable from 2021

New Banking and Insurance rules will be introduced from the new year 2021. Apart from banking and insurance, there are many other rules which are getting applicable from 2021. As all these rules are linked to your pocket you should know all these new rules.

In this post, I will share information about new rules related to banking and insurance applicable from 2021.

New Banking Insurance Rules

New Banking and Insurance Rules applicable from 2021

#1 Positive Pay – Cheque Payments

The concept of positive pay will be introduced from January 2021. Positive pay means confirming detail about large value transactions. This rule is introduced to reduce frauds taking place via cheque payment. This facility will be applicable for the payment above Rs.50000. The account holder will be given choice to avail this facility. This means this facility will be by choice. The bank may think of introducing this facility for cheques with an amount above 5 Lakh.

In this process issuer of the cheque need to submit certain minimum details via electronic channels such as SMS, mobile app, internet banking, and ATM. The details would be the name of the beneficiary or payee and amount to the drawee bank. In case of any discrepancy is encountered cheuqe can be stopped for payment.

The facility of positive pay will be developed and given to participant banks by the National Payment Corporation of India (NPCI).

#2 Contactless Card Transaction Limit

As of now the limit of the Contactless card is Rs.2000. This means you can use the contactless credit card for making a payment Rs.2000 by just placing the card nearby the point of sale. From 1st January 2021, the limit of contactless card transactions is enhanced. The new limit is Rs.5000. This means up to Rs.5000 you will be able to make payment via contactless card. This step is taken by the government to enhance digital payment especially at the time of COVID-19 pandemic. The facility to enhance the limit will be at customer discretion.

#3 30% Cap for UPI Transactions on Google Pay, PayTm, PhonePe

From 1st January, 2021, new rule of UPI transaction is applicable. NPCI has placed 30% cap for UPI transactions on every app. This means no single app can do more than 30% of the transaction via UPI. The maximum transaction limit for every application would be 30%. NPCI will monitor transactions taking place via every application once the transaction is crossing 30% limit app will not able to process additional transactions.

You will not able to do payment transactions on your favorite app such as Google Pay, PayTm, PhonePe or other UPI app once these apps have crossed 30% share in a specific month. This step is taken to remove the monopoly of the specific application from the UPI market.

#4 Standard Term Insurance Policy

The IRDAI has mandated all life insurance companies to provide standard term life insurance policy from 1st January 2021. It will be called as Saral Jeevan Bima. The maximum sum assured of term insurance policy would be 25 Lakh. The policy term would be 40 years. The terms and conditions of this policy would be the same across insurance companies.

The standard term insurance policy would be offered to individuals without restrictions on gender, place of residence, travel, occupation or educational background. The purpose of launching a standard term insurance policy is to standardize the term insurance policy for the customers.

#5 Mutual Funds Rules

New Multicap mutual fund is applicable from Jan,2021. SEBI has announced portfolio allocation rules for mutlicap equity mutual funds. As per new rule it is mandatory for these funds to have 75% asset allocation in equity compared to current 65%. The fund will invest 25% of their portfolio each in large-cap, mid-cap and small cap companies.

#6 Mutual Fund Risk-o-Meter tool

SEBI has improved on Risk-o-Meter tool and introduced new category of “very high” risk. This means now Risk-o-Meter contains six different categories (1) Low Risk (2) Low to Moderate Risk (3) Moderate Risk (4) Moderately High Risk (5) High Risk (6) Very High Risk. AMC are required to publish a history of risk-o-meter changes at the end of every year.

Fundamental Analysis of the Stock – Important Factors to check

Stock Market

Shitanshu Kapadia

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December 16, 2020

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What is Fundamental Analysis? How to do Fundamental Analysis of the Stock? These questions were asked to me by many blog readers.

Well, before getting the answers to your query. Let me ask you one simple question – How you select stock for investment? Your answer could be –

I make investments based on the advice of friends and relatives
I follow Stock Broker Tips for investing in the stock market
I invest in a stock based on news associated with stock
I do proper research and study about a stock before making an investment

I am 100% sure most of you would select option 1 to 3. Only few will select option 4. If you have selected option 4 you are in the right direction. Whatever you are doing in terms of research and study is known as fundamental analysis of the stock.

The synonym of fundamental is basic or essential. Whenever we purchase any product including food and vegetable we check the basic or essential elements of the product. We also check the price of the product before buying. It is nothing but fundamental analysis.

I hope you have got the answer to the question what is fundamental analysis? Now, let’s take a look at the second question.

fundamental analysis of stocks

How to do Fundamental Analysis of the Stock?

Fundamental analysis means checking the basic and essential elements of the company. In other words, you need to check the financial condition, the health of the business and analyze various other critical parameters before investing your money. I usually check the following factors as a part of fundamental analysis.

#1 Net Profit

The first thing you need to check is the net profit margin of the company. Net profit margin means profit that is generated after all types of deductions. It is profit after tax and after deduction of operating cost and overhead. Please note that Net Profit is not gross profit. A Gross profit is a difference between sales and the direct cost of goods sold before making any deduction. The net profit margin of the company should be consistent. In case the net profit margin is low or not growing it is not advisable to invest in such companies.

#2 Profit Margin

Checking the net profit of the company is not enough. You also need to check the profit margin. Profit margin is calculated on net income and revenue. The logic here is the increase in earnings of the company is good but it should not increase revenue cost. The profit margin shows how much money the company earns on its revenues. This analysis is more useful in comparing the similar type of companies.

The formula of Profit Margin is given below.

Profit margin= Net income/Revenue

The company should show a higher profit margin. A higher margin indicates the company is controlling costs incurred against competitors. This is usually calculated in percentages.

#3 Return on Equity Ratio

The return on Equity ratio is one of the critical factors to consider while doing a fundamental analysis of the company. ROE is the ratio of revenue and profit to the shareholders. To be more specific it shows how much profit a company can earn with the money invested by its shareholder.

The formula for calculating Return on Equity Ratio is given below.

Return on equity = Net Income / Shareholder’s Equity

The outcome of this ratio is in the form of rupees. This ratio contains important information about leverage, revenue, profits, margins, and returns to the shareholders. The ROE value should be higher.

#4 PE Ratio

PE ratio is also known as the price to earning ratio. It is commonly used to know the valuation of share.

The formula for calculating PE ratio is given below.

PE = Price per Share / Earnings per Share

The PE ratio is always calculated on the current price of the share. The PE ratio helps in understanding the valuation of the stock. Higher the PE ratio that means the share price is high compared to its earning. This ratio is used in comparing with other companies in the same sector or to its own historical PE.

#5 Price-to-Book (P/B) Ratio

The price to book value is another important ratio to consider while doing a fundamental analysis of the stock. This ratio is used to compare the stock market value with its book value.

The formula of calculating price to book value is given below.

P/BV Ratio = Current Market Price per Share / Book Value per Share

Book Value per Share = Book Value / Total number of shares

If the price to book value ratio is higher than 1 it denotes that the share price is higher compared to its book value. This ratio is generally seen to know the future prospects of the company.

#6 EPS

Earnings per share is one of the important parameters to check. The EPS shows the amount of money earned by the company per share. Higher the EPS better is the company. The EPS of the company should be increasing in a consistent manner.

The formula of EPS is given below.

Earning Per Share = (Net Income – Preference Dividend)/Weighted Average Number of Shares Outstanding

You should also compare the EPS of one company with another company in the same industry. The EPS of the company should increase steadily.

How to get data for doing fundamental analysis?

The data/information for doing fundamental analysis of the stock can be easily obtained from the financial statement of the company.

I generally make use of screener.in to get the stock-specific information.

You just need to visit the screener.in site and enter stock name. You will be able to see all financial information including balance sheet, P&L, financial ratios, peer comparison etc.

You can also export this stock information in excel for doing further analysis.

How you do financial analysis of the stock? Share your views and experience in the comment section given below.

5 Different Stock Market Career Options

Career

Shitanshu Kapadia

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December 14, 2020

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Stock Market Career – Can I start my career in stock market? Yes! You can.

Once upon a time stock market was considered as most complex thing. There were very few options to learn stock market. However, time is changed. Now, there are multiple online courses available to learn stock market.

You can learn and start your own career in stock market.

There are multiple employment opportunities in the stock market. You can become equity advisor, broker, sub broker, trader, financial consultant, relationship manager, fundamental analyst in the stock market.

Graduate in any field with knowledge of stock market can start career in the stock market. There are multiple benefits of choosing stock market trading as career option.

You can get lot of flexibility compared to traditional job.
You can be your own boss and work as per your terms.
You can invest and earn lot of money from the stock market.
You can learn new skill and strategy while dealing with market every day.
This career offers you good work-life balance.
Once you become expert you can become researcher, trainer or SEBI registered advisor.

Stock Market Career

5 Different Stock Market Career Options

#1 Relationship Manager

Relationship Manager is entry level job in the stock market. A relationship manager is bridge between client and broker. The primary task of relationship manager is to draw customer attention on buying opportunity of stock and mutual fund. Additionally, they are also responsible for solving technical or stock related queries of customers.

You need a bachelor’s degree in business, marketing, finance or management to become relationship manager. You are likely to get salary of Rs.20000 to Rs.30000 per month as a relationship manager.

#2 Stock Broker

Stock Broker means professional trader who buys and sell stock on the behalf of customer. The stock broker is registered representative or an investment advisor. Stocks are traded on exchange. However, investor can not directly trade in stock market. They will need demat or trading account and platform for buying and selling stocks.

Stock broker offers services to customer for stock trading and investments. There are two types of stock brokers. (1) Full service stock broker (2) Discount stock broker. Full service stock broker provides full stack of services including stock advisory. Discount stock broker only provide online trading platform. They do not provide any advisory or research facility.

#3 Financial or Investment Advisor

You can start your own financial or investment advisor consultancy services. You have to register at SEBI in order to become register financial advisor. Once you become registered financial advisor you can offer investment advice and charge money.

You need to have post graduate in finance in order to apply for license at SEBI. SEBI follow the strict education guideline in order to issue license. You can also apply for license if you are CA, CFA or CFP. You can earn lot of money as Financial or Investment Advisor.

#4 Research Analyst

Research Analyst is lucrative career option in the stock market. Research analyst is responsible for researching, analyzing, interpreting and presenting stock market and finance data in the meaningful format as require by the customer.

You can get very good job as research analyst in the investment firm. You can start your own business as independent research analyst. The eligibility criteria are similar to investment advisor. You can also become research analyst if you are MBA, CFA or CA.

#5 Portfolio Management Services

Portfolio management services or wealth management firm is one of the most promising stock market career. If you are good at managing money and having strong understanding of stock market and its operation you can start PMS services.

It is extremely hard to start PMS services for the fresher. You have to be experience stock market investor with professional qualification such as CA, MBA (Finance) or CFA and vast experience to become PMS.

In addition to above stock market career option you can also become equity analyst, market researcher, hedge fund manager, mutual fund manager, risk analyst, trainer or MF Distributor.

Over to You

I would recommend before starting your career in the stock market, you should get in-depth knowledge of stock market and finance world. You should also complete financial course and gain experience in the stock market.

Which stock market career option you will select and why?

Do share your views in the comment section given below.

7 Learnings from Scam 1992 web series – The Harshad Mehta Story

Stock Market

Shitanshu Kapadia

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December 6, 2020

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7 Learnings from Scam 1992 web series – The Harshad Mehta Story

Scam 1992 Web Series – The Harshad Mehta Story is grabbing attention of everyone. Best dialog delivery, acting, story and learning of stock market. This web series has everything. In short time this web series has become top web series.

I watched the trailer of this web series on YouTube. The trailer was exciting and being a finance guy I could not resist myself from watching this series. I watched entire web series on SonyLIV. The web series is 10 hours long. It was great experience to watch the story of BSE’s Bachchan Big Bull Harshad Mehta. Entire 15 years’ stock market journey of Harshad Mehta is shown in this web series. How Harshad Mehta entered in the stock market? How he has grown so big? How he fought with his competitors Manu Manek, Radha kishan Damani and Rakesh Jhunjhunwala? What was 1992 stock market scam?

scam 1992

In short from Zero to Hero to Criminal the life story of Harshad Mehta is included in this web series.

After watching web series, I can say, this web series is simply superb!

I could learn lot of things from this web series and though to share with all of you. So, here is 7 Learning from Scam 1992 web series – The Harshad Mehta Story.

Also Read – Rakesh Jhunjhunwala Portfolio Holdings – December 2020

7 Learnings from Scam 1992 web series – The Harshad Mehta Story

#1 Leaning is Life – सीखना बंध तो जितना बंध

Learning is everything. You can learn and earn. Harshad Mehta has zero knowledge about stock market when he started his journey. In order to learn stock market, he took job as jobber (dealer) at the initial stage. He was fast learner and he could learn stock market very soon. He soon opened his trading account and started making money. He had learning attitude and he applied his learning and intelligence in the stock market for making money.

The lesson learned here is one should never stop learning in the life. If you don’t have knowledge of specific field you can first do job in that field and once you learn you can start your own business.

#2 The biggest risk is not taking any risk – रिस्क है तो इशक है

The famous saying of Mark Zukerberg – “The biggest risk is not taking any risk” is shown very practically in this web series. Risk hai to Ishq hai is famous dialog of this web series. Harshad Mehta has taken risk in his life to enter in the stock market for making money. His decision of starting own in the stock market and money market was bold decision. The entire success of BSE’s Bachchan Harshad Mehta was on this decision.

The lesson learned here is one should take calculated risk in the life. Play it safe in life does not work if you want to have big success.

#3 Money attracts money – पैसा ही पैसे को खींचता है

Harshad Mehta has proved that money attracts money. You can make money from money in the stock market. You need to select right stock for investment at right time. Harshad Metha made a big money from the stock market. He used funds obtained from various sources to create bull run in the stock market.

The lesson learned here is if you have small money you can grow it to big money by doing business or by stock market investment.

#4 Team is Important – टीम से सफलता की सम्भावना बढ़ जाती है

Team is utmost important in business and even in the stock market. Manu Manek the Black Cobra shown in the series has made bear cartel (team of people) to control the stock market. The bear cartel was against Harshad. Even Harshad Mehta said he want to build team of 100 people to create history.

The learning here is to build a Fortune, First Build Great Team. High performance team is important to get success in the business.

#5 Become Expert in the Subject – ज्ञान ही शक्ति है

You should become expert in the subject which you are dealing with. The ability to understand stock market at the fullest was strength of Harshad Mehta. He could see hidden part of stock market as well as loopholes in the system. He could build investment strategies based on various indications. He could able to outsmart the bear operators and create bull run as he was aware of all happening of the stock market.

The learning here is you should have knowledge of subject in which you are dealing. You can make use of your expertise in order to get succeeded in life.

#6 Trust is Everything – विश्वास बनाये रखना बड़ी बात है

Trust is everything. Harshad Mehta has grown big and gained lot of fame. Many people were considering him as hero. He has gained unimaginable success. However, he became victim of own greed. He crossed the limit and entered in to illegal practice called as scam. Once scam details were out he lost all that he had including trust. The entire Indian stock market and banking system got affected by the scam and he was sent into jail.

The learning here is one should maintain trust of the people. Trust is utmost important for business and in every works of life. Second learning is you should never enter into illegal practices which are against law.

#7 Never make investment by taking loan – ऋण लेकर निवेश से बचे

You should never make any investment by taking loan. In order to make big money from stock market, Harshad Mehta has taken big loan. He has used unethical ways to take loan which he could not return. Stock market is sensitive and one cannot predict stock market moves. Better to take risk that can be calculated not like taking a blind risk like Harshad Mehta.

Learning here is never use illegal practice to take loan and second is never make stock market investment by taking a loan.

I hope above lessons would help you while dealing in business and in stock market.

If you have learned any other lessons from Scam 1992 web series and the life of the real Harshad Mehta, feel free to share your thoughts in the comment section given below.