INTELLECTUAL TRADING

How Does Inflation affect Interest Rates? Central Banks across the world use interest rate as a primary instrument to control inflation.Simply put:Inflation can be defined as the sustained increase in the general price levels of an economy.On the other hand;interest can be defined as the cost of borrowing funds.This blog discusses how interest rate is used as an inflation control method. The use of interest rate to control inflation is different in different situations.Let us discuss two main situations: High Inflation: To control high inflation :interest rate is increased .A rise in interest rate will make borrowing funds expensive.As a result; borrowing will decline:which in turn will lead to a fall in the money supply (i.e the amount of money in circulation in the economy). As the amount of money in circulation declines;people will have lesser amount of money in hand to spend and hence they will buy less amount of goods and services.This,in turn, will lead to a fall in the

We all had felt the pinch of that abrupt effect in our expenditure against our planned budget. It makes our plans haywire and leaves us in dismay. So did Mr. Khanna. Mrs. Khanna planned her yearly budget and accordingly estimated expenditure of Rs. 5, 00,000/- for the entire upcoming year. At the end of the year when he reviews the budget based on his estimations, he finds that his expenses has soared high up to Rs. 7,00,000/- This means that there was an unexpected upward shift in expenditure of Rs. 2,00,000/- Let me tell you that one of the reasons for this gap of Rs. 2,00,000/- was inflation. Now, the question arises, what is inflation and how is this related to Mr. Khanna’s budget. In this article, we will understand as to how, inflation was one of the factors to the increased monthly expenditure of Mr. Khanna by Rs Rs2, 00,000/- What is inflation? In simple terms, inflation is the effect that reduces the worth of money. For example: Inflation = 3%. Let us take a

People may have huge resources at their disposal deployed in a particular asset class. For Example: Mr Alex had huge amount of funds which he decided to invests only in real estate. Accordingly, he pooled large amount of funds in the real estate market. In a couple of years,  he gained multiple amounts of returns from the investment made and therefore continued to invest in that particular asset class. He was contended without diversifying his portfolio. What if that particular asset class suddenly starts showing bad result? What if the market does not respond well to that asset class? What if Mr. Alex had a cash crunch and liquidity becomes an issue? Like Mr. Alex there are several investors who are unwilling or are not aware about the benefits of portfolio diversification. To resolve all the above mentioned queries and to make the investors understand the concept of  portfolio diversification, we bring you this blog. It will help you to understand the ways to invests in a divers

  In stock market everyone wants to buy low and sell high, but there is always a confusion as to what is low and high. This is how the stock market works as there has to be a buyer for every seller and vice versa. Basically there are two types of investors based on their stock picking namely growth stocks and value stocks. Similarly in mutual funds, you will come across this two labels- Value funds and Growth funds. The difference however lies in their method of stock picking and the approach they employ for the same. Growth investing Growth stocks are linked with high quality, good companies where you expect the earnings to grow at a higher pace vis-a-vis  general market. These stocks often tend to have higher P/E ratio and higher P/B ratio. For instance, the current price is trading at Rs 100 and the EPS over the last 12 months is Rs 2.5, so the PE ratio stands at 40. Generally, the market places a high value on growth stocks as they believe these stocks have great potential

You must have heard or read about “blue chip stocks” in business news channel or newspaper. These stocks are often considered safe bets which can provide you with much better return in future. The domain of equity trading, bonds and mutual funds have opted for blue colour since traditionally it has been used to denote wagering chip that has the highest intrinsic value, while other coloured chips like red or white represents lesser value. In this article, we will learn that why blue chip stocks are worth more than others and the benefits associated with holding blue chip stocks in the portfolio. What are blue chip stocks? A blue chip stock is a stock of financially sound and well established company, which have a large market capitalization and are leaders in their respective sector or industry. They deliver strong financial results and rewards shareholders with regular dividends. Though dividend payment is not the main characteristics of these companies, rather they have a lon

Share buybacks are once again in a spotlight after a host of announcements made by IT companies including software behemoth TCS. IT companies with their asset-light models and profitable operations are big cash generators. 'Cash is King' goes a famous proverb. This is because companies that have substantial cash flows on their books have greater flexibility of taking timely business decisions. These decisions can range from acquiring a new business or expanding the current business. Basically cash offers companies a powerful option to make growth investments at the most opportune time and price. World renowned value investor, Warren Buffett, is a strong proponent of this philosophy. While conserving cash for a rainy day is a good measure and imparts companies with a powerful moat, this practice should not become the norm. Cash being hoarded over long periods of time, instead of being deployed profitably in business, is a poor reflection on the financial foresight and capital