Muhurat Trading - History

Muhurat Trading is an exceptional trading day - when the time and day is flexed to suit the sentiments of Indian Culture. No other festival - across the globe has got this special treatment. 

Vikram Samvat is a calendar system followed by Hindus and Sikhs in the Indian subcontinent. In fact, it is the official calendar of Nepal. This calendar is used as a regional one in many states, mainly in the central, west and north India.

An inscription dating back to the year 971 CE indicates the beginning of Samvat in 842 CE and is associated with King Vikramaditya. As per several historians, King Chandragupta II conferred upon himself the title of Vikramaditya, also changing the name of that era to 'Vikram Samvat'. And Diwali marks the beginning of new year (Samvat). 

Every year, on Diwali Day, the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) come alive with a unique and age-old tradition known as 'muhurat trading'. This annual ritual, performed during the auspicious Laxmi Puja ceremony on Diwali, has deep-rooted significance in Indian culture and the world of finance.

The tradition of muhurat trading has its origins in the BSE in 1957 and was later adopted by the NSE in 1992. Within the Indian trading community, muhurat trading on Diwali is considered highly auspicious, and it is believed that participating in this special trading session can bring wealth and good luck throughout the year.

The celebration of Diwali, with the worship of the goddess Laxmi, the deity of wealth and prosperity, holds great importance. According to Hindu tradition, the planets align in favourable positions during this time, making it especially auspicious for financial endeavours.

Does that mean that investments made on Muhurat trading give you good profits? Not really. It just means new year and you start new book of accounts. And an invest made on the auspicious day marks a new beginning. 

Investing is a continuous process. There is no end to it. Same holds true with investing on Muhurat day also.

Converting Mutual Funds to Demat Mode and Viceversa

Mutual Funds which were held traditionally in physical mode can now be held in demat account also. While this has been in existence for quiet long, many investors might not be aware of it. And sometimes - after converting to Demat mode - some investors may wish to convert it back to physical mode. While the conversion to demat mode is quiet prevalent and familiar among investors, the reverse is not so. 

An article has been published THE MINT newspaper on 22nd Aug 2024, which deals on this subject. Hope it is useful to those who seek clarity on this topic.

Changes in capital gain tax - July 2024

At the outset it looked like there has been too many changes in capital gains tax. But if you take a closer look, you would appreciate there has been a sincere effort to simplify taxation. 

Here is our article on recent changes here. Except for real estate capital gains tax calculation, where investor has option to go with old or new taxation on properties bought till June 2023, all others remain the same.

Hope you find it simpler to understand.

True Diversification:

 "Don't put all eggs in one basket" is an age old adage emphasising diversification." Usually risk reduces when you diversify. Instead of investing in one stock - spread it across many and instead of investing in one asset invest across many. And instead of investing in one country it  becomes truly diversified if you invest across many countries.

Indian mutual funds have been adding value to investors for investing international markets. While this has been around for long, the taxation became favourable in current years budget. If you hold on to your international investments for more than 2 years, they qualify to be long term investments and the capital gains is taxed at 12.50% - the same as indian equities lint term capital gains.

From now on indian investors can explore international waters at their convenience.

The only limitation is - sometimes RBI limits international investing to manage its forex reserves. But that is ok. Whenever they allow, we can invest.

Here is an article on this topic published in our recent newsletter.

Olympics of Investing

We can learn from everything around us. There seems to be a common thread that results in better results. Here is a beautiful article on the essence and relevance of Olympics (rather any game) with investing. Hope you get the message.

 

All about REITs (Real Estate Investment Trust)

With growing popularity, many investors may be wondering what REITs is all about. 

 We published an article in our monthly newsletter on REITs. Reproducing the same here for be benefit of investors. Also publishing a news article in The Business Line dated 20th May 2024. Hope these articles are helpful in undestanding REITs.

Gold & Silver Funds

Gold is the first choice for Indians. It is invariably part of everyone’s investment portfolio. Many are happy to wearing them as jewellery. In recent times, many have been buying Gold as coins and Bars – just for investment purpose. But the real challenge is:

• Safety: You need to keep them in SAFE lockers for obvious reasons.
• The Purity of the gold you buy is a big question.
• The bazaar rate of Gold and Silver is different from its international price – due to jewellers margins, taxes etc.
• When you buy gold, the rate is usually higher when compared to the rate at which you tend to sell.
• And when you buy in tranches, you keep adding multiple jewellery / coins / bars – making it difficult to keep track.

Now you can Buy Gold and Silver in electronic (demat) form - as Exchange Traded Funds. All the above challenges have been addressed here:

• Since you buy in demat form – there is no need to keep in locker
• The purity of gold you buy in electronic form is 24 Carat.
• The price at which you buy / sell is at transparent, international rates.
• While you may buy in tranches – like 5 grams, 10 grams etc – all of them get pooled under single entry in your demat statement. Hence there is no bits and pieces of gold here.
• Gold is traded as 1/100th of a Gram. Hence if you wish you buy 1 gram – you need to buy 100 shares of Gold ETF. And Silver is traded in grams.

Action... Reaction

 In stock market, the price movement is influenced by variety of factors like:

• company specific news
• sector specific news
• Macro news on overall economy
• Global factors like Geopolitical tensions

While all these factors are the tradional reasons for moving a share price, sometimes simple shift in buyer - seller demand can move the needle.

But whatever said and done, it is ultimately the fundamentals that dictate the stock price. 

If a stock price is running up but the fundamentals are not supportive, when the results are declared and is subdued - then the price crashes. Below mentioned screen shot is an evidence of the same. 

Having invested your hard earned money, you need to be mindful of the fact that - THE MOST IMPORTANT THING while investing is to keep an eye on the results of the companies in which you invested in. 

What goes... Comes back... The Jet Airways Way

What you do to others WILL come back to you. It is a sort of cause and effect. And when we see LIVE EXAMPLES of such cases, we refrain from inflicting pain on others for selfish gains. At the end - Wise people learn from others mistakes. JET AIRWAYS could be one such example.

Teary-eyed and dejected, aviation veteran Naresh Goyal felt so hopeless about the system that he told a special court last week that he would prefer to die in prison. For a man who ruled Indian skies, that's quite a fall. 

While one may pitty the fate of a person who once ruled Indian skies, the reasons that lead to his fall his unethical business tactice can give us a different opinion.

To read the full article, kindly visit: https://www.ndtvprofit.com/bq-blue-exclusive/naresh-goyals-turbulent-ride-from-ruling-indian-skies-to-hopeless-imprisonment

• Hailing from Punjab, Goyal started his career in the late 1960s in a relative's travel agency. 
• He quickly learned the ropes and set up Jetair Pvt. in 1974 to provide sales and marketing services to foreign airlines. 
• After representing global giants such as Cathay Pacific and Air France for years, he established Jet Airways soon after the Indian economy was liberalised. 
• When Jet Airways launched commercial operations in 1993, its competitors were Damania Airways, Sahara India or Air Sahara, ModiLuft and East-West Airlines, along with government-owned Indian Airlines and Air India. 
• There was a time when any major aviation policy by the government was speculated to have the prints of  Mr.Naresh Goyal's.
• "He knowingly or unknowingly caused more harm to Indian aviation than good through his ways of functioning," Jitender Bhargava, former executive director of Air India, told NDTV Profit. "Goyal prevented airlines from starting operations and later growing by creating stumbling blocks through political clout and influence in the policymaking—only to thwart competition."  The 5/20 policy formulated by the government can be cited as one major example of that, according to Bhargava. The policy required carriers to complete five years of commercial operations and own 20-aircraft fleet to begin international operations. No other country had such a rule. Goyal, according to sector watchers, was even said to be behind derailing Air India's divestment in early 2000s.
• Goyal, according to sector watchers, was even said to be behind derailing Air India's divestment in early 2000s.
• The Tata Group, along with Singapore Airlines, had withdrawn the proposal after criticism from trade unions and political backlash. 
• As a result, Jet Airways climbed higher and gained domestic market share, backed by its world-class service with no other airline to match it. 
• The next step was going public, which it executed successfully. Its initial public offer was subscribed 4.25 times on the first day.

Emerging Threats 

• Indian market changed with the launch of new carriers such as InterGlobe Aviation Ltd.'s IndiGo, Air Deccan, SpiceJet and Go Air (now Go First). As the number of flyers increased, low-cost became the name of the game and the quality of services took a back seat. 
• Feeling the threat from budget airlines, Goyal overplayed his hand by acquiring Air Sahara for Rs 2,200 crore. After the expensive acquisition, Jet Airways' costs began to balloon on international routes. Rapid network expansion, not enough in-house talent and price war among low-cost carriers created the perfect storm that rocked Jet Airways. The 2008 financial crisis hit demand and oil prices soared. Jet Airways, already burdened with rising costs, resorted to heavy borrowing.

Unending Turbulence  

• When Kingfisher Airlines was in dire need of funds and Vijay Mallya was pleading the government to allow foreign airlines to buy stake in domestic carriers, Goyal was reported to be against such a policy and denied the need to tie-up with a foreign carrier. When Mallya's Kingfisher stopped commercial operations in 2012, Jet Airways' efforts for survival came under the spotlight.
• Conveniently, Goyal changed his view: "Today, I may not need FDI, but tomorrow I may need," he was quoted as saying. In another "twist of fate" that year, Jet Airways got a booster as the government changed its foreign direct investment policy. It allowed foreign airlines to own up to 49% stake in Indian carriers, just when Goyal was hunting for more funds to keep Jet Airways going. 
• Etihad Airways acquired 24% stake in Jet Airways for Rs 2,000 crore when India and Abu Dhabi agreed to increase flights under the bilateral agreement. But that respite didn't last. Over the next few years, IndiGo's business model, led by single aircraft and frugal operations, became something to imbibe to run a sustainable and profitable airline. Jet Airways again needed funds. 
• In April 2019, a consortium led by State Bank of India refused to inject more funds in Jet Airways as it crumbled under huge debt and years of loss. Etihad didn't come to rescue either this time. At the time, Jet Airways operated over 120 aircraft and flew on hundreds of routes. And the airline was grounded and ceased operations. Soon after, the lenders initiated bankruptcy proceedings against the airline and the National Company Law Tribunal admitted the case in June 2019. Allegations came to the fore that Goyal was siphoning funds from the airline. Jet Airways' board, which included Goyal and his wife, had to step down. The Enforcement Directorate began examining Etihad Airways' investment in Jet Airways, reportedly on claims of violation in foreign direct investment rules. Goyal was barred from leaving India.

Losing Hope 

• In May 2023, Canara Bank filed a complaint with the Central Bureau of Investigation, accusing Goyal of cheating, criminal conspiracy, criminal breach of trust, and criminal misconduct. Based on the CBI's FIR, he was arrested in September by the Enforcement Directorate for alleged fraud of Rs 538 crore. The case has since been heard in a special court.
• When Goyal first emerged in the aviation scene, many pointed to his charming ways and how he had the potential to become Indian aviation's face after JRD Tata. Years later, during the hearing last week, he stood with folded hands and bowing before the court to express how he's missing his bedridden wife in the jail. "He came before the court with continuous tremors in his whole body and hands," the judge said. The 74-year-old said his wife is bedridden and their only daughter is unwell, too. Referring him to JJ Hospital would be useless and he conveyed reluctance to travel to hospital from the Arthur Road jail.

While the Airlines may Survive - Naresh Goyal may not. That is true for any one who does unethical business.

WHAT GOES... COMES BACK... THE JET AIRWAYS WAY

Should you Shun Mid and Small Cap's? - Taher Badshah of Invesco MF