The value of the rupee goes down every day. This year was the first time it went up to 80 against the dollar. Due to several global economic factors, the Rupee has been fluctuating and eventually, it hit a new record low and went past the psychological 80-per-dollar mark. What does it mean for a "rupee" to "drop"? When the Indian rupee loses value against the dollar on the foreign market, what does it mean for the economy? This means that when India imports from the U.S. or any other country, it will have to pay more because the payment is made in dollars. In other words, less import will cost more. India imports a huge amount of things: 20.96% of its GDP. Mineral fuels, oils, electrical equipment, nuclear reactors, mechanical appliances, jewellery, and many other things are among them. Since all of these imports are paid for in dollars, the fall in the value of the Indian rupee against the dollar is having an effect on these industries. 1. Energy Over 85% of India's oil and 50% of its gas come from outside the country. As the value of the currency goes up, this industry is losing money. The prices of crude (Indian Oil, BPCL, HPCL, RIL, and Nayara) and gas (GAIL and GSPC) may go up for companies that buy them. 2. FMCG About half of the costs come from importing raw materials like crude oil and palm oil derivatives. Businesses are now raising their prices to make up for the higher costs of the things they use. 3. Technology India will buy an average of $56.73 billion worth of electrical and electronic goods from other countries. A huge 40–60% of all input costs, including component costs, come from outside the country. This number goes up to 70–80% for cellphones. Since the value of the dollar has gone up, they may cost more. 4. Telecom services Importing network equipment costs the telecom industry about $6 billion per year. When the rupee falls in value, the cost of imported goods goes up. 5. Alternative Energy Most of India's solar power projects use imported solar cells and modules. Because of this, the cost of the project will go up. For example, the next bids will have higher tariffs. Why is the rupee going down? The main reasons for this rupee depreciation are the rise in crude oil prices, the withdrawal of foreign capital from the Indian market, and the regularity of business in India. Early stock market statistics show that foreign institutional investors sold more than they bought on the capital market. What difference will it make to you? The price of imports will go up because the rupee is losing value. Since the rupee has gone down against the dollar, importers will now have to pay more for the same thing at the same price and amount. Those who wanted to study abroad during this time would have to pay more for tuition. People who live abroad but have family in India will pay more to send money to them because they send more rupees overall. But when the rupee falls, the cost of exports goes down.
Aug 11, 2022
If you're looking for assets that can lower your tax bill, the National Pension Scheme (NPS) should be at the top of your list. In addition to the tax benefit, NPS is a great way to invest if you want to increase your wealth and build up a strong retirement fund. This article will talk about the tax benefits of the National Pension Scheme and why it should be on your list of investments that save you money on taxes. The main goal of the NPS is to make sure that account holders continue to get a steady income after they retire, even if their investments have made a lot of money. What is the NPS program and how does it work? Before we look at the tax benefits of the NPS scheme, let's take a closer look at how it works. People who have an NPS account can make regular payments to their account while they are working. If you are a Tier I subscriber, you must give at least Rs. 6,000 per year. If you are a Tier II customer, there is no minimum amount you must give. If you do decide to give, you may contribute Rs 250. A person with an NPS account can take out about 60% of the money in their account after they retire. With the remaining 40% of the total amount invested, an annuity should be bought so that there is a steady source of income after retirement. What are the basic parts of NPS tax savings? Not sure if investing in the NPS plan will be worth it? NPS has many benefits, such as being a cheap way to save for retirement and invest. It is important and helps you plan for retirement, and it also gives you stable long-term returns and a good income after you retire. Here are some more reasons why NPS is good: It's up to the investor to decide where to put their money. Investments in the NPS are handled by people who are qualified to do so. The person who uses the account can decide how much to give each month. Accounts in the NPS can be managed from anywhere in India. NPS gives you a tax break. Let's look at the NPS Income Tax Benefit in more depth. Under Section 80CCD, NPS gives tax breaks of up to Rs. 1.5 lakhs (1). Also, Section 80CCD(2) of the Income-Tax Act says that the employer's contribution to the NPS can only be deducted from taxes up to 10% of the employee's salary (base plus DA). Salary people who have already claimed the tax exemption of Rs. 1.5 lakh under Section 80C can save more money on taxes through NPS. Section 80CCD lets people who have NPS accounts and invest up to Rs 50,000 get a tax break. This is true for both salaried and self-employed people (1B). Section 80CCD allows this extra deduction, but only for owners of Tier I NPS accounts (1B). Unlike Tier I NPS accounts, Tier II NPS accounts are not affected by Section 80C of the Income Tax Act. Another thing to remember about the NPS tax benefit is that the deduction under Section 80CCD is available to both salaried and non-salaried people (1). But under Section 80CCD (1), the most a paid professional can deduct is 10% of their income for the year. Those who don't get a salary, on the other hand, pay 20% of their gross annual income. An important point The government has also agreed to raise the costs of the NPS fund manager from 0.01% to 0.09%. This is a small raise to make sure that the pension fund's management can pay for it. IPOs and more than 200 stocks are now available to NPS fund managers.
Aug 10, 2022
We've all wished that we could choose a stock and get a return of 50%, 100%, or even 1,000% on the day we bought it. This may not be possible, though, because there may be limits to how far the price of a stock can go. In India, the Securities and Exchanges Board of India (SEBI) decides what the upper and lower circuits are. Here, we explain what upper and lower circuits are, how stocks can reach them, and what happens when they do. What is the upper circuit? The upper circuit is the highest point where the price of a stock above which it can't go up in one day. Stocks that are in the upper circuit have a lot of buyers but zero sellers. The closing price from the day before is used to figure out upper circuits. Some stocks may have upper circuits that are 2% above the price at which they closed the day before. Other stocks can have upper circuits that are 5%, 10%, or 20% above where they closed the previous day. The price of a stock can't rise more than its upper circuit in a single trading session. But if some people start to sell, the prices can go down. What is the lower circuit? The lower circuit is the point where the price of a stock or the value of an index could drop the most. Stocks that a lot of people want to sell but not many people want to buy may drop in price. Lower circuits are also calculated using the stock's closing price from the day before, though they may be different for each stock. For some stocks, the lower circuit could be 2% lower than the last closing price. For other companies, it could be 5%, 10%, 15%, or 20% lower. A company's price may not fall below its lower circuit in a single trading session, but if investors start buying the stock, the price may go up. What makes stocks trade in higher or lower circuits? Let's look at some examples of stocks that have touched the upper or lower circuit to learn more about why this might happen. When a stock hits its upper circuit, it has: Imagine that a new pharma company unexpectedly beats the market leader in terms of market share. This would cause a lot of people to want to buy this stock at once. The people who own shares in such a company are not likely to sell them. But people who want to buy these stocks may offer more money for them. Upper circuits can protect investors from volatility and unwarranted speculation, like the pump-and-dump operation. When a stock is in the lower circuit Let's say you heard that a certain business was doing business in a way that wasn't right. The government is likely to take harsh action against this company. The shares of this company are no longer worth much. Since no one would want to buy, the people who already own shares won't be able to sell them. If no one buys a stock, its price might go down. The stock price might keep going down because investors don't want to buy stocks that are already going down. So that this doesn't happen, lower circuits are set up. So, in theory, a stock could reach its circuit limits if something happened that changed how desirable the stock was. For a stock to move to the upper or lower circuit, there must be a big change in how people feel about it. Sometimes, when the market is manipulated, stocks hit their upper or lower circuits.
Aug 09, 2022
How can we avoid false outbreaks? Since this is a problem that many traders face, it was also the reason we wrote this post. At first, trading breakouts may seem easy, but they quickly become hard to do in real time. This article gives you five important tips for trading breakout setups with more success and confidence. Let's begin. Rule 1: Change the map and look for patterns. No trader knows for sure if a breakout will work or turn out to be a false break. As usual, the market decides what to do and what to say. We traders must listen and follow, NOT the other way around. Many traders make the mistake of studying and making predictions about the markets, only to blame the market when their predictions don't come true. Trading doesn't operate like this. The most likely path of least resistance, which acts as a road map for pricing, needs to be found over and over again. This is not a set path, and you have to keep improving it. Also, keep in mind that chart patterns come first, and breakout trade ideas come after that. Learn and recognise all chart patterns, or at least the most common ones. For example, if you know what a contracting triangle is and how it is expected to form five waves (ABCDE), you can figure out when to expect a real breakout. Rule 2: Wait for breakouts with strong candlesticks We can tell if a breakout is successful by looking at how strong the candle closes. When the candlestick closes close to the high or low, this is called a powerful candle closure. How a breakout setup and a candlestick closure work together is as follows: A strong bullish breakthrough is shown by a candle that closes close to the high. When a candle closes close to the bottom, this is a strong sign that the price is going down. The power can also be seen in the size of the candle. Compared to the other candles in that time frame, a big breakout candle is shown by a big candle, not a small one. Even though candle size is important, how close the candles are to each other is more important. Rule 3: The break of the break Traders love trading breakouts by focusing on a single time frame, watching for a drop, and then letting the trade develop. If you could see a pattern on a 4-hour chart, for instance, you would zoom in on a 1-hour chart and look for a smaller pattern to show up over that time. Why? Because when price makes a pattern after a big breakout, it shows that the breakout is real. It shows that the price is in fact making a new correction after gaining momentum. Price psychology in the market suggests that this is a sign of more of the same. If prices don't form a pattern after the breakout, it's likely that they will turn around and move quickly in the opposite direction. If that's the case, the price is either making a false breakout or has hit a major support or resistance level and is now strongly going back up. In any case, it's smart to stay outside. Rule 4: Candle Close and Body Above the Support and resistance Reviewing how market activity relates to the support or resistance (S&R) level is a good approach when employing moving averages and trend lines. When the candle body is above the MA or trend line (50% is respectable), the breakout is at its finest. By following these tips, you can avoid a significant amount of false breakouts. To open a demat account with Zebu and start trading breakouts today, please get in touch with us.
Aug 08, 2022
Technical analysts use a number of rules to predict how much stocks will go up or down in the future. Once you know what a trend is, the next important idea in technical analysis is support and resistance. The theory of support and resistance According to technical analysis, when the price of a stock reaches certain predetermined price points, it tends to stop and move in the opposite direction. Support level: This is the point where the price of a stock stops going down. It's possible that the price will go up instead of down. At this point, it is likely that the demand from buyers will be much higher than the demand from sellers. Resistance level: The opposite of a level of support is a level of resistance. It is a price level (ceiling) above which the stock price is not expected to rise. At this price, the market for this stock is better for sellers than it is for buyers. What does support mean? The support and resistance levels on a candlestick chart might help you figure out the target price at which to buy or sell. The support level is where the market expects more buyers than sellers. The price at which traders can expect to see the most buying interest in a stock is called the support level on the chart. In a falling market, the support-resistance indicator, which is an important level market player to watch for, is often a sign to buy. The support line is formed when the price of a security goes down and the demand for shares goes up. What is resistance? On a candlestick chart, a price has reached the resistance level when there are more sellers than buyers. Resistance level is a price point on the chart where traders expect to sell as much of a certain stock as they can. It keeps the price from going up even more. Since resistance is always higher than the current market price, it is often a sign to sell. In a bullish market, the resistance level is one of the most important things that traders pay close attention to. Support and resistance are, in a nutshell, the exact opposites of each other. By looking at the support and resistance levels, the trader can get an idea of how the price of a stock will move. But there is always a chance that the stock price will go above these levels. When this happens, which happens often, a new level of support and resistance is set up. If the support level is broken, the stock price will keep falling until it finds a new level to support it. Also, if the stock price breaks through the resistance level, it keeps going up until it hits a new resistance level. Resistance and Support: How Reliable Are They? Even though support and resistance can tell you when to buy or sell, you shouldn't rely on them alone. Or, to put it another way, before deciding whether or not to buy or sell a certain stock, you should think about a number of other things. When it comes to technical analysis, Predicting the future price of a stock is the most important (and hard) part of analysis for a trader in the stock market. The next high (or low) price cannot be predicted with any level of reliability. So, the idea of support and resistance is a good way to understand how prices change. Support and resistance levels help traders make decisions because they let them see patterns. For example, if a trader sees that a stock has reached a support level, he could buy more shares. This is done so that the stock has a better chance of coming back. In a similar way, the trader may sell his shares and make money when the stock reaches a level of resistance. When a stock's price reaches these levels, you should always be careful because the area between the support and resistance levels is known to be very volatile. Conclusion Traders can use the idea of support and resistance to spot trends in the stock market and take advantage of them. This doesn't mean, though, that the stock will never go above a support or resistance level. The price of a stock can always go up or down. Also, as a trader, you shouldn't make trades based only on these levels.
Aug 06, 2022
Individual traders tend to utilise technical analysis more frequently than fundamental analysis, so trendlines are particularly popular in both forex and cryptocurrency trading. Interest rate movements affect forex markets, yet central banks' established interest rates seldom fluctuate. This implies that prices fluctuate in line with traders' predictions of interest rates, which are far more difficult to interpret. Price action and analytical tools like trendlines, according to technical experts, are the most reliable ways to gauge the sentiment of traders. Trading strategies using trendlines There are other methods to employ trendlines, but in this article, we'll go through the two most popular trendline trading techniques as well as a third, less well-known but extremely viable, strategy. 1) Trendline reversal Trading in accordance with the trendline-supported trend is the aim of this technique. Either purchasing or selling near to an uptrend or downtrend line. Steps in the plan: Decide if the price is moving up, down, or sideways. Create a trendline that connects at least three swing points. the trendline be extended into the future A) Watch for a subsequent price contact of the trendline B) Place a limit order at the trendline (adjust as price moves) When the price has reached the trendline, place a trade in the trend's direction. In an upswing, place a stop-loss order under the prior swing low (above the previous swing high in a downtrend) Place a take profit order with a minimum ratio of 2:1 to the stop loss size. Example of a chart: trendline bounce 2) Trendline break-through Although the trendline breakout may be utilised to trade against the trend, that is not what we are promoting here. How is breaking a trendline a trend-following tactic? Trading the breakout of short-term trendlines in the direction of the main trend is how it's done! Steps in the strategy: identify a long-term trend Wait for a price "correction" or buck the general trend. Create a trendline to represent this recent correction. Keep an eye out for the price to go over this trendline. A) Place a stop order past the trendline to enter on the breakout B) Buy at the break of a downtrend line or sell at the break of an uptrend line On the other side of the trendline, place your stop loss order. Place a take profit order with a minimum ratio of 2:1 to the stop loss size. Examples of charts: inner trendline breakout 3) Confluence between trendlines The use of trendlines is effective, however no technical indicator or price action trading strategy is faultless. Using many analysis techniques and watching for possibilities when they all come to the same conclusion will always boost your chances of success on a transaction. For instance: Using Fibonacci retracements, draw trendlines In this illustration, a buying opportunity at a rising trendline is supported by one at the 61.8% Fibonacci retracement level. Moving averages and trendlines In this instance, a rising trendline coincides with the prominent 200-day moving average. Japanese candlestick designs with trendlines In this case, bullish engulfing candle patterns help trendline bounces.
Aug 05, 2022
Trendlines are one of the most simple and useful tools that traders use. Read on to find out what they are, how to draw them, and the best ways to trade based on trendlines. What is a trendline? A trendline is a line that is drawn through a chart to show the trend. On price charts, trendlines are drawn to show the general direction of prices in the trading environment. Traders use this information to decide whether to buy or sell in the direction of the trend. Trendlines can be used to track the price of a stock, a currency pair, or a cryptocurrency. In technical analysis, trend lines are one of the most common ways to show how prices are moving. A good example of how a trendline works Usually, a trendline is made by drawing a straight line between a number of swing highs or swing lows. For an up-trend line and a down-trend line, the swing lows and swing highs are used. In this method, the trendline helps traders understand till when a trend can continue. These can also be thought of as dynamic support and resistance points. Starting on the left side of the chart and moving the line to the right is how you draw a trendline. As a general rule, a trend line must go through at least three price "swings" before it can be taken seriously. How to use trend lines in trading Use a trend line to figure out the direction of the price trend. Traders can then choose to go with the trend if they think it will keep going or against the trend if they think it will change. Both strategies use the same way to read the trendline. Bullish because the price is above the uptrend line, which means the trend is going up. Bearish because the price is below a line that shows the price is going down. Trend following Trend following is a way to trade where you buy when the price is going up and sell short when the price is going down. A common trading strategy is to use an uptrend line to figure out if the general price trend is going up. A decline can also be shown by a line going down. Trading against trend Countertrend trading is a way to trade where you sell when the price goes up and buy when the price goes down. This is more like the basic rule of investing, "Buy low and sell high." Reversion to the mean says that after a price trend goes in one direction, it will eventually go back to its average price. This is why short-term traders trade against the trend. The following point is one of the most important pointers to remember while using a trendline. Using a trendline when there is no trend is the worst mistake you can make as a beginner with trendlines. The clue is in the name! The best angle for a trend line is 45 degrees. Even if the trend keeps going in the same direction, a slope of more than 45 degrees means that the price is going up too quickly and could easily break the trendline. Less than 45 degrees means that the trend is weaker and is almost trading sideways. Three times in total As a trendline goes through more swing points, more traders can see it. This makes the trendline stronger. But after five touches, the chances of the trendline "breaking" are much higher. Zoom out To see where the trend you're trying to show with the trendline started, make sure to zoom out on your trading platform's chart. For example, if you want to draw an uptrend, try to start your trendline at the bottom of the previous downtrend or at the swing low. Five trendlines zones Trendlines are not based on good science. Price doesn't often hit a trendline right before it turns around. The trendlines shouldn't be taken as a specific price but as an "area" of prices. Having this information makes it easier to choose an entry price and a stop loss.
Aug 04, 2022
Did you know that sometimes on the stock market, fake breakouts can happen? But what are breakouts? How can you tell if a breakout is real or not? Assume that there is a resistance for the market at 18,000. When the price reaches there, sellers might come in and try to push the price down. However, if the price manages to move above 18,000, then it is called a breakout. Similarly, you could say that there is some support. When the price gets to the support level, everyone buys. When the price hits this level twice in a row, it means something. When there is a third strike and the price goes through the support level line, this is called a breakdown. Simply put, breakouts and breakdowns are a rise and a fall. First, let's talk about what "breakout" means. What price action will help you the most if there is a breakout? For our breakout to happen, a bullish engulfing pattern must form. Now, the price breakout should be supported by the volume breakout, which means that when the price breakout happens, there should be a lot of volume. This can be seen when the volume bars at the bottom of the chart break over the black line that shows the volume line. The first thing is that a bullish engulfing candle pattern forms, and this is the second thing. The third and most subtle trait is called consolidation. Think about how the market always forms bullish candlestick patterns right before a breakout during intraday trading on a 15-minute time frame. Many people think the upward trend is reliable, but they will learn over time that after the candle breaks out, smaller green candles, a doge, and finally a huge giant red candle are seen, and smaller red candles start moving sideways. As a result, a lot of people lose. Then, how can we stop this? Consolidation. When a breakout happens, it should follow a significant pattern, like three or four contact points. This tells us that the breakout is real, and the breakout of the candle and the volume should back this up. If there has been no consolidation and there is a straight breakout, there is a higher chance that the trade will fail. We should enter those breakout trades when there is a strong consolidation. The fourth quality is that it's been tested more than once. It's important to test the level of resistance more than once. Let's say that over the course of 15 minutes, you can see a lot of consolidations against the resistance level, that the resistance line has been reached before and really broken through the day before. It will be less likely that the stock will break through resistance. When we talk about breakdown, it's for the same reason that bearish engulfing candle patterns, the volume breakout, consolidation, and several tests all work. Once all of these checklists are met, then you can go ahead and take your trade. As always, follow a strict stoploss. Breakout trading is a simple price action strategy that can work wonders if you know how to prevent false breakouts. To open a trading account with Zebu and start trading breakout strategies today, please get in touch with us.
Aug 03, 2022
Investors in the stock market can choose to keep their stocks for only one trading day. Stocks, on the other hand, are great investments for the long term because they can be kept for many years or even decades. For commodities trade, on the other hand, the time frame is very different. On the commodities market, contracts that are usually short-term are bought and sold. Also, unlike stocks, they have an end date, which means you have to trade them before the deadline. So, the commodities market is a great place to invest for short-term goals. Compared to trading stocks, trading commodities often goes on for longer hours. Stocks can be bought and sold from morning to afternoon. However, commodities can almost always be bought and sold. Here are a few more differences between the stock market and the commodity market. Bid-Ask spread: The bid-ask spread, which is a measure of liquidity, is lower for stocks. In the stock market, the bid-ask spread is the difference between the highest price a buyer is willing to pay and the lowest price a buyer is willing to accept. Margin: The margin requirement for trading commodities is lower than for trading stocks. So, it lets traders take bigger risks, which can be very dangerous when the market moves quickly and in large moves. Key indicators: For equity traders and analysts, the most important things are the quarterly results, the company's dividend payments, and the state of the economy as a whole in the country. When trying to understand the market, traders in the commodity market put more weight on the demand and supply situation than on other factors. Also, traders in commodities have to pay more attention to macroeconomic factors than traders in stocks, who focus on the fundamentals of the companies and their markets. Traders and market analysts thought that investing in commodities was a bit easier because it was mostly based on supply and demand. Before deciding how to invest in the stock market, you need to do more research. When you buy a security, for example, you need to look at the company's earnings and how it has behaved in the past. To understand the copper market, on the other hand, you mostly need to keep an eye on the outlook for industrial growth. So, there are less things to keep an eye on in the commodities market than in the stock market, which may be good for a new trader. Stocks can be traded directly in the cash part of an exchange, but commodities must be traded using derivatives. Similarities between the stock market and the commodity market Both the stock market and the commodity market are affected by many different factors. Take the case of interest rates. Changes in interest rates affect both the market as a whole and the companies that depend on those rates. The interest rate affects how much it costs to keep inventory on hand, which in turn affects the price of goods. Pick either stocks or commodities Investors can choose to trade on the stock market or the commodities market, depending on how much risk they are willing to take. On the stock market, a common strategy is to buy an investment and hold on to it for a long time. This is not possible when trading commodities. Whether you trade stocks or commodities will depend on how willing you are to take risks. If you're looking for short-term returns, the commodities market might be a better choice. However, investing in stocks is more likely to help you reach your long-term goals. So, investors should keep in mind that stocks and commodities are different in how they are owned and how long they are held. Open an account with Zebu to trade and invest in both stocks as well as commodities. Get in touch with us to get started today.
Aug 02, 2022
If a smart investor makes the right investment in the right financial market, they could make a lot of money, especially now, when the internet makes trading in almost every market easier and more accessible than ever. So, we'll compare the stock market and the commodities market, two very popular markets, to see if it makes a difference. What is a stock market, anyway? A stock is a type of security that shows that someone owns part of a company that is traded on the stock market. The amount of company shares a person owns, which he or she can then sell or buy from other stockholders, shows how much of the company that person owns. The group of markets where this buying and selling of stocks takes place is called the "stock market." A person can invest in the stock market by opening a trading and demat account with a brokerage firm. The brokerage firm could then set up accounts for you at the right stock exchanges and make trades for you. What is the commodity market? A commodity is a useful resource or item that can be traded for another of the same kind. There are two types of commodities: soft commodities, like food and livestock, and hard commodities, like gold or oil. A commodity market is a place where traders can buy and sell different goods, either in person or online. There are many ways to trade and invest in commodities. These include both direct investments in commodities and investments in futures contracts on commodities. Differences between the stock market and commodity market After we've talked about the difference between stocks and commodities, let's look at how each market is different. Here are the most important things that set the stock market apart from the commodities market: Effects of inflation: Inflation often means that expected costs go up, which could mean that businesses lose money and the value of their shares goes down. This is bad news for the stock market. But inflation is sometimes good for the commodities market because it lets people who own the items sell them for more than they thought they would. But both situations give experienced players chances to make money. In the same way, a drop in the price of oil or other commodities could help stock market indexes. Ownership: When an investor buys stocks on the stock market, they get a piece of a company. Most people trade on the stock market by holding on to a stock they already own until the market turns in their favour. But futures contracts are the most common way to trade on the commodity markets. When you use futures contracts, there is no change of ownership. Instead, these agreements cover upcoming supplies of goods that are often traded but rarely owned. Volatility: Compared to other asset classes and financial markets, the commodity and commodity markets tend to have the most volatility. The patterns in the commodity market will be much more unpredictable than those on the stock market. This is because the commodities market has a reputation for having less liquidity and is affected by factors like supply and demand and geopolitics that change all the time. We’ll discuss more about the differences between the commodity and equity market in the follow up article as well.
Aug 01, 2022
Even though the stock market has had a rough few months, gold is still highly valued, especially in India. India is one of the two biggest consumers of gold in the world, along with China. Each year, India uses more than 25% of the world's gold. Demand for jewellery in the country goes up a lot during the wedding and holiday seasons, which often drives up the price of the item. Even if this rise in demand and price for gold is due to this, there are other factors that affect gold prices across the country. In one of its reports, the World Gold Council (WGC) said that income and the price of gold are two important factors that have a long-term, large effect on consumer demand. Some other things that can affect the price of gold are: Inflation Inflation, which is when the prices of goods and services go up, could have a big effect on the price of gold. Most of the time, inflation has a direct effect on the price of gold. Since inflation makes money worth less, the price of gold usually goes up when inflation goes up. This is because when inflation is high, people tend to store their money in gold because they think its value will stay the same over time. This makes the demand for gold go up. So, gold can also be used to protect against inflation. Interest rates Historically, interest rates and gold prices have had the opposite relationship. When interest rates go up, people often prefer to sell gold to make more money. But when interest rates go down, more people decide to buy gold, which drives up both its demand and price. Festive seasons Gold has always been seen as a strategic asset in Indian homes, and it has also become a part of Indian culture. Gold has a special place in the lives of Indian families, from being used in wedding ceremonies to being worn as jewellery on important holidays like Diwali. Gold prices go up during wedding and festival seasons because people want to buy more of it. In 2019, the World Gold Council (WGC) did a study that found that Indian families may have as much as 25,000 tonnes of gold. This makes India the country with the most gold in the world. Pleasant Monsoon Rains Studies show that rural India uses up to 60% of India's total annual gold use, which is thought to be between 800 and 850 tonnes. So, the agricultural market has a lot to do with the demand for gold in the country, and the farmers' incomes depend a lot on how well their crops do. When the monsoon rains are good, there is more demand for gold in the country. This makes farmers, who use about a third of the country's gold, buy gold to build their wealth. Reserves on Treasury Like the central banks of most other countries, the Reserve Bank of India keeps gold reserves along with their money. The price of gold goes up when the RBI starts to buy more gold than it sells. This is because there isn't enough gold and there is more cash coming into the market. A Way to Deal with Uncertainty People often choose to invest in or buy gold as a commodity when the market is volatile. This could be because of a slowing economy or trouble in the government. Gold is seen as a good alternative when other assets lose value because its value stays the same over time. Also, because uncertainty isn't a number, it has more of a psychological effect on gold prices than other factors. Politics and geography India is one of the countries that uses gold the most, so any change in the price of gold on the international market would affect how much it costs there. Investors also see gold as a safe place to put their money during times of political uncertainty or geopolitical unrest. This increases the demand for gold, which drives up its price. During times of crisis, people tend to buy more gold, which makes it a good way to store money. Other types of assets, on the other hand, would often lose value during these times. What the Rupee Does to Gold It is important to understand how the relationship between the rupee and the dollar affects the price of gold in India. Since most physical gold is brought in from other countries, the price of gold in rupees will go up when the rupee falls against the dollar. So, a falling rupee could make India less interested in buying gold. Conclusion: Gold, which is seen as a valuable financial asset, is one of the most popular ways to invest in India. Investors often turn to gold as a safe place to put their money during uncertain times like geopolitical turmoil or trade disputes between countries. But gold prices in the country are also affected by things like inflation, interest rates, and the rupee-dollar exchange rate.
Jul 30, 2022
In continuation with the previous article, we discuss more about the opportunities available in trading crude oil in the commodities market. Demand for crude oil is lower for immediate delivery than for delivery in the future. Investors don't want fast delivery because it's hard to get oil to where it needs to go. Because of this, end users and investors often choose futures contracts. By entering a commodities futures contract, a trader promises to buy or sell a certain amount of crude oil at a certain price on a certain date. An example is the best way to understand the idea of trading in commodities. Example 1: Buying and selling goods to protect against risk Let's say you're a farmer who grows wheat and sells it for 500 rupees per quintal on the market. You make a good profit. Since you have a lot of rice to sell, you need to make sure you won't lose money if the price of wheat drops quickly. To protect yourself from losing money, you can buy a futures contract to sell the wheat at Rs. 500 per quintal at a later date. This is known as "hedging." Example 2: Trading goods for the sake of speculation Let's say, for now, that you are a trader who wants to trade crude oil futures. You are optimistic about crude oil (meaning you think that crude oil prices will increase in the future). A futures contract for crude oil has 100 barrels and costs Rs. 3,00,000 (Rs. 3,000 per barrel), but you don't have to pay the full amount to buy it. There must be a 5% margin, which costs Rs. 15,000. Think about a rise in the price of crude oil to Rs. 3,500 per barrel. In this case, if you spend Rs. 3,000, you might make Rs. 500 per barrel and Rs. 50000 in total. As a result, trading commodities gives traders a lot of power. The commodities market is another place where it might be profitable for crude oil prices to go down around the world. For example, if you bought an oil futures contract on December 1 with a strike price of Rs. 4520, the price of a barrel of oil dropped to Rs. 4500 But if the sale was for 10,000 barrels, you could still sell the futures for Rs. 4520 and make a profit of Rs. 100 per barrel, or a net profit of Rs. 10 lakh (10,000 barrels x 100). In order to trade oil futures, a trader must find the right exchange for the oil benchmark he or she wants to use. Oil benchmarks:The benchmark price for crude oil is used by both buyers and sellers as a standard. The three most important oil benchmarks around the world are the West Texas Intermediate (WTI), the Brent Blend, and the Dubai Crude. Exchanges: In India, oil futures are traded at the Multi Commodity Exchange, which is also known as MCX. On the MCX, crude oil is one of the commodities that is traded the most. 8500 barrels of oil, worth Rs 3000 crores, are often traded on the exchange every day. In FY19, close to 32% of the MCX's over Rs. 66 lakh crores in income came from crude oil. Every day, crude oil futures worth more than Rs. 3,000 crore are traded on the MCX. On the MCX, there are two kinds of crude oil futures: Brent crude (Main) - 100 barrels Brent crude (Mini) - 10 barrels Crude oil micro is more popular among dealers because the lot sizes are smaller and the required margin is lower. Can an individual investor buy and sell oil futures? There's no question that you only need a small amount of money to start, and the higher leverage gives you the best chance of making more money. But oil futures are not only easy to buy and sell, but they are also very volatile, which makes it hard to guess how prices will change. If your broker works with commodities and is connected to the MCX or NCDEX, you can talk to them about trading crude oil futures. It's better to start out trading with professionals and then gradually go it alone. To get started with trading with crude, open your demat account with Zebu today.
Jul 29, 2022