WHAT PRECAUTIONS TO ADOPT WHEN TRADING ON THE INTERNET

Internet trading has rapidly become the default trading platform for most Indian investors. With the spread of smart phones, internet-enabled bank accounts and more robust online trading systems, we expect the trend towards internet trading to become more pronounced in the months and years to come. Internet trading offers you simplicity, convenience and transparency. You can execute transactions at the click of a button; you can operate your trading account, bank account and demat account from the comfort of your home or office and you can have full control and knowledge of the transaction being executed. Having said that, internet trading happens on the internet and hence there are some key precautionary measures you need to take. Here are a few such measures…

Password is your key to unlock your financial profile…

As a trader on the internet, the importance of a password cannot be overestimated. It forms the basis for you to operate your trading account, your bank account and your demat account. You can increase security by making your password as complex and as dynamic as possible. Here is how! Using your name, date of birth or marriage anniversary as your password are simple giveaways. Avoid that. Never write down a password on a piece of paper or in a text file on your PC. It should strictly exist only in your memory. Most trading sites will require you to change your password at frequent intervals. Even if your trading site does not insist on that, it is always advisable to keep changing your password at least once a month. More importantly, never share your password with your friends or even your relatives and never respond to phone calls asking for your password.

Be cautious of where you are accessing your trading account from…

The basic rule is that you must never access your trading account from computers that you are unfamiliar with. That includes computers belonging to your friends and relatives. Ensure that the PC or laptop that you are using has an anti-virus and anti-spyware program installed and the program is up to date. If you find the system slowing or multiple windows opening when you try to access your trading account then immediately shut down the computer as its security could have been compromised. In case your browser (Chrome or Explorer) offers to store your password, just say no. But most important, be careful of the connection you are using. Always use a dial-up connection or a secured wi-fi connection to access your trading account. Avoid trading in public places using public wi-fi systems at airports, railway stations and malls. Never, ever access your trading account from cyber cafes as that is an invitation for hackers to hack into your trading account.

Never forget to close your trading session when you are off the desk…

When you are trading on your PC or laptop, it is quite common to keep the session open when you go to grab a sandwich or to attend nature’s call. That is again a strict no! The moment you are not on your desk, you must be logged out of your trading account. Most trading accounts will automatically log you out if the system is idle for some time but you need not even take that much risk. Apart from logging out when leaving the seat, ensure that your cache is cleared at the end of each day. It will mean that you have to enter your user name and password each time, but it is worth the trouble.

Insist on a 2-factor authentication for your trading account…

Purely accessing your trading account using your user name and password is good but then it still exposes you to unwarranted attacks. A better way to protect yourself is to use a two-factor authentication for your trading account. A 2-factor authentication is an additional level of security that is imputed into your trading account to make it safer. For example, your first level can be your password and the second level can be your date of birth or some other secret code. Alternatively, your password can be authenticated each time you access the trading account through an OTP (One-Time Password) sent to your registered mobile. This 2 factor authentication further complicates your log-in process and makes it more difficult for hackers to chip into your account.

Eternal vigilance pays off when you are trading on the net…

One of the best ways to be very secure when using your internet trading account is to maintain high standards of vigilance both in terms of hardware, software and in terms of reporting. Avoid downloading any unknown software or programs from CNET or FILEHIPPO just because it is a freeware. Secondly, ensure that you are trading behind a firewall as that will successfully repel most of the attacks. Thirdly, always type your internet trading address directly in the address bar. Avoid using shortcuts and hyperlinks as these can be vulnerable to attacks. When your trading account opens first ensure that the web address is prefixed by https:// and not http://. This indicates that you have entered a secure area. Above all, you need to constantly cross check with trail reports. Check your order book and trade book each day and cross check with the e-contract notes that you receive. Ensure that shares come into your demat account on T+2 and money comes into your bank on T+2. A basic audit trail will protect you from a variety of operational hitches.

There is no rocket science about your internet trading account. In this world, there is nothing like fool-proof security. It is all about making it very difficult to break into your trading account. Such vigilance will go a long way in keeping your trading account safe and secure!

Source By Angel Broking

It is natural to look at the Union Budget each year from the point of view of the equity markets. The Sensex and the Nifty have been the barometers of market value and market sentiments and their gyrations best reflect the market interpretation of the Union Budget. If you look back at the last 2 years, the Union Budgets of 2016 and 2017 had been instrumental in giving a big boost to the equity markets. In fact, if you look at the Nifty and Sensex from the Budget day on 2016, then the indices are up by over 50% in less than 2 years. That is surely an emphatic thumbs-up for the last 2 Union Budgets. So, what exactly are capital market expecting from the Union Budget 2018-19?

Don’t let the fiscal deficit spill out of control

The last 2 years the government has managed to keep the fiscal deficit in check despite higher outlay commitments. This was well received by the markets and also eventually led to the sovereign rating upgrade by Moody’s. In the current fiscal year, the government has already touched 112% of its fiscal deficit targets in the first 8 months itself. While the fiscal deficit target for the year is 3.2%, it has kept a leeway of 50 basis points. As long the level of 3.7% is not breached, there should not be a problem. For the next year, the government should not exceed the target of 3% by more than 30 bps. Markets understand the need to pump prime the economy. As long as the fiscal deficit remains in the range, markets should be satisfied.

Rationalize DDT and tax on dividends

The markets are expecting the government to do a rethink on the 10% tax on dividends above Rs. 1 million that was recently introduced. This is leading to triple taxation of dividends. Firstly, dividends are a post-tax appropriation. Secondly, dividends are already subject to DDT. Now the 10% tax on dividends in the hands of the shareholders is leading to triple taxation. Markets are hoping that this will be rationalized through one of the methods. Either the limits of the taxable dividend can be enhanced from Rs.1 million or DDT can be scrapped. However, considering the government’s commitment to progressive taxation, this may not happen in this budget.

Give a big boost to infrastructure and rural spending

That has always been the booster dose for the economy and the markets. Infrastructure has strong externalities and hence has a multiplier effect on growth. The government spending on roads and highways has been a big boost to growth and that is expected to continue. The big stress on GDP growth came from agriculture. With the government committed to doubling farm incomes by 2022, the expectation is of a big push to infrastructure and rural spending in this budget.

A corporate tax cut; but, no LTCG please!

The government had promised a progressive cut in tax rates from 30% to 25% but also a simultaneous removal of exemptions. That will make the announcement neutral. The expectation is a cut in corporate tax rates and phasing out exemptions in a time-bound manner. After all, even the US is aggressively pursuing corporate tax cuts. Indian corporate tax rates are already among the highest in the world. The market also hopes that the LTCG on equities is not re-introduced. Tax free LTCG has been a key driver for investments in equities. However, an increase in the time limit for LTCG from 1 year to 3 years looks possible to foster a longer term approach to equities.

Including equity under ELSS definition

There are two aspects to this point. Firstly, the ELSS includes only equity mutual funds and that is narrowing the definition of eligible investments under Section 80C. In the past equity investments in infrastructure were also eligible under Section 80C subject to 3 year lock in. It is time to reintroduce that section. Also the benefit under ELSS is too small. In fact, a separate sub-section under Section 80C can be introduced for ELSS and Infrastructure equities with a separate sub-limit. That will give a big boost to long term investments in equities.

Including mutual funds for Section 54EC benefits

Section 54EC benefits are available when long term capital gains are reinvested in specific infrastructure bonds with a lock-in period. In the past, mutual funds and infrastructure equities were also included under the definition of eligible investments under Section 54EC of the Income Tax Act. In fact, if the government goes ahead and enhances the cut-off for LTCG on equities to 3 years, then extension of Section 54EC to equities will be a good measure to neutralize the effect. Again this will be a big boost for investors to look at equities for the long term.

A boost for purchasing power of investors

Lastly, the one thing that markets always expect is a boost for purchasing power of small investors. In the last few years domestic mutual funds have emerged as much bigger players than FPIs in terms of flows into Indian markets. That has been largely driven by retail savings surpluses. The budget is expected to give a big boost to retail surpluses in the form of lower tax rates, higher tax exemptions etc.

At a procedural level, it is also expected that the process for on-boarding of FPIs will be made simpler and also that the pending tax issues pertaining to large companies like Vodafone, Cairn and Nokia are amicably resolved. That will be a big boost for market sentiments. After all, markets are substantially about investor sentiments!

 Sourc By Angel Broking. 

 The Process of Trading

When you buy a share using your trading account, money is transferred out of your bank account and the share is transferred into your demat account

When you sell a share, it is transferred out of your demat account into the share market. The money resulting from the transaction will be madeavailable in your bank account.

Share Market Basics

As an Indian investor, the two share markets that you can trade in are:

 National Stock Exchange (NSE)

 Bombay Stock Exchange (BSE)

The two depositories with which all depository participants are registered are:

National Securities Depository Ltd (NSDL)

Central Depository Service Ltd (CDSL).

Two methods of trading

Trading is one of the methods of how to invest money in the share market. It can be defined as active form of buying and selling of securities with an intention to make profit.

There are two types of trading:

In intraday trading or day trading, you must square off all positions before the market closes. For the purpose of intraday trading, you may avail of margins, which is defined as the funding provided by the broker to increase your exposure in the stock market. It allows you to purchase/sell additional number of stocks, which would otherwise require you to invest greater amount of funds.

Delivery trading involves buying the stocks and holding them for more than one day, thus taking their delivery. It does not involve the use of margins, and hence you must possess the funds for your share market investments. It is a more secure method of investing in the Indian share market.

How Much You Should Invest

How much financial risk you can tolerate should determine how much you should invest. Your investments should not endanger your savings. It is also important to diversify your portfolio and utilize features such as stop loss to minimize losses.

What Should You Base Your Decisions on?

Financial analysis: Financial analysis is used to make inferences about future share prices and overallhealth of acompany using company reports and non-financial information such as industry comparisons and estimates of demand for growth of the company’s products. It is important to ask questions such as “What advantage does this firm have over other firms?” or “Does it have a sizeable market share?”

Technical analysis: Technical analysis involves the use of a two-dimensional chart to map the historical movement of prices. It uses historical values of share prices and volume charts to make predictions about future prices.

Using both types of analysis will allow you to make sound decisions.

Know Your Rights

Before entering into a contract with a broker, ensure that it is registered with SEBI and that its credentials support its claims. Ensure that you receive a ‘Statement of Accounts’ for funds and securities settled every quarter, and documented proofs of all deposits that you make.

Imports continue to see pressure from gold and oil…

   Imports for the month of August stayed elevated at the level of $35.46 billion. For the month of August, the imports of crude were up by 14.22%, which is understandable considering the stronger crude prices globally. Electrical goods imports were up by 27% and machinery imports were also up by around 19%. But the big worry is that gold imports for the month of August were up by 69%. Part of this can be attributed to the fact that last year was a weak year for gold imports due to tepid demand and a jeweller’s strike. All the same, the Indian economy can ill-afford such a massive growth in gold imports. Remember, that gold imports are an unproductive import and, unlike machinery or electrical goods, they do not add to domestic productivity. That is why a rise in gold imports is worrisome. The RBI and the government may have to seriously look at either reducing the level of gold imports, attaching export obligations or give special incentives for soaking up domestic gold supply.

                                 

                                                                                                                Source:-Angel Broking blog.

In the equity markets the only thing that matters is returns.

   More people have made money in the equity markets by focusing on risk than by focusing on returns. Once you learn to control and measure your risks your returns in the markets will automatically follow. It does not matter whether you are a small trader or a billionaire trader; you will effectively have to trade with finite capital. As long as capital is finite, the core challenge is to manage your risk.

There is another perspective to the superiority of risk over return. Let us say you took a wrong decision and lost 50% of your capital. Now on this smaller base you need to earn a 100% return to come back to parity. Which is why risk becomes so important? Risk management is not just about putting stop losses but it is also about when you should hedge your equity holdings and when you should stay out of the market altogether. The biggest challenge for any trader or investor is to ensure that the capital does not get depleted beyond a point. The bottom-line is that you must put more focus on managing risk. The returns will follow logically.