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Cost to Income Ratio in finance

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  Well I hope most of us are well aware of how a company calculates it's profit after all the investments and it's return. But we all often only look into the direct returns only. But it does that be sufficient enough to just judge how good profit the company is earning. Of course not and especially in case of banks and NBFCs the way the profit and analysis takes place is completely different. Well today we are going to discuss one such ratio which can help us understand the performance of a bank. It is the cost to income ratio. The cost to income ratio shows the relation between the income and the cost involved in acquiring that income. It is an important financial ratio, particularly in analyzing banking stocks. There is an inverse relationship between the cost income ratio and the bank profitability.  The lower a bank's cost to income ratio, the more efficiently a bank operates which results in increased profitability.  Even the rise in ratio on every yearly basis clearl

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NPS(National Pension Scheme)

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 How many are aware of the scheme by the government known as  National Pension Scheme(NPS)? Well I am pretty sure many might be. But, what is it and how does it work? Do you know? Well here I will be explaining you about it. National Pension Scheme:- National Pension Scheme (NPS) India is a voluntary and long-term investment plan for retirement, where your investment is diversified automatically to gain good returns into places like the equity, corporate bonds, government securities and other alternatives that could balance your returns with minimized risk. It is regulated by the Pension Fund Regulatory and Development authority(PFRDA).  This scheme  is a social security initiative by the Central Government. This pension program is open to employees from the public, private and even the unorganized sectors. These investments can be taken out after retirement (age 60). After retirement, the subscribers can take out a certain percentage of the corpus. As an NPS account holder, you will r

Cost Inflation Index(CII)

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  A  Cost Inflation Index(CII) or  consumer price index(CPI)   measures changes in the price level of a weighted average   market basket   of   consumer goods   and   services   purchased by households. A CII is a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically. Sub-indices and sub-sub-indices can be computed for different categories and sub-categories of goods and services, being combined to produce the overall index with weights reflecting their shares in the total of the consumer expenditures covered by the index. It is one of several  price indices  calculated by most national statistical agencies. The annual percentage change is measure of  inflation  in simple terms . A CII can be used to index the real value of increase in  wages ,  salaries , and  pensions   given by companies or government over years, to regulate prices; and to deflate monetary magnitudes to show changes in real values. In most coun

Transformation in Business

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 In stock market we often prefer investing in companies with stable growth and significant high profit yielding companies. People seem to trust these companies on along term basis and trust the capabilities of the company to improve. But, in today's fast moving world what really makes these companies long lasting and trustable. It is their capability to adapt with the fast moving technology and changing demand of the people. Life or business, change is the rule of the world and in this world only the fittest survives, even in business. Hence transformation in companies is a very important criteria for choosing any company for any kind off investment on a long term prospect.  Business transformation is a change in management strategy which can be defined as any shift, realignment or fundamental change in business operations.The vision is to cop with the requirement of the demands of the business. This transformation could be at many levels(especially in a large cap company), such as

Rising crude oil and its hurdle to Indian economy

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Petrol and Diesel prices both have breached the Rs. 100 mark and crude oils continue to rise with the opening of the economy, geopolitical fears, overpotential demand supply disruption or any policy stands taken by OPEC countries( Organization of the Petroleum Exporting Countries) , all around the world. Officials at oil marketing companies have however noted that even current record-high prices are lower than what refiners should be charging in line with international prices and that prices are set to rise further unless there is a cut on levies on autofuels or a fall in crude oil prices.   But, How could this effect the Indian economy indirectly or directly? Well let's discuss. India being the third largest importer of crude oil spends a huge amount on crude oils buying almost 1.5 billion barrels of crude oil every year at approx which accounts to almost 85% or more of its total crude oil requirements.  Well I hope you might be aware that the exchange currency for buying the crud

Devaluation and depreciation of currency. Are they same???

When the value of currency decreases, people often get confused between devaluation and depreciation. But what is the difference? Is the value of currency really important to be a developed nation? Devaluation:-   Devaluation is the deliberate downward adjustment of the value of a country's money relative to another currency or currency standard. It is done deliberately to reduce the export costs and shrink trade. It also helps in paying debts by printing of more notes which also decreases the value of money. Unlike depreciation, it is not the result of nongovernmental activities. This is often done to render themselves more efficient in the global market and gain better foreign investments by offering a low labour cost to the foreign companies. A export oriented country would always prefer to stay more committed towards a lower currency value as cheaper costs would attract more investors. Depreciation:-  Currency depreciation is a fall in the value of a currency in a floating exch

Why are crypto markets down?

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From last one year one market that has been in the news for its very large bull rally is the cryptocurrency. Especially in the last few months the bull rally has been out of expectation. But recently the market saw almost a loss of 60% last week. While a correction in any market could be common after such a large bull run in any market let us have a look at the main reason behind the fall. The digital currency market has plummeted from $2.2 trillion to just $1 trillion in the past few days. Well while social influence could be one of the factors the main reason behind the vast fall are as follows:- The strengthening crypto regulation in China leading to it's ban in the country has been one of the major factors in consideration to this crash. In response to the recent warnings from Chinese regulators, cryptocurrency exchange Huboi told  CoinDesk Sunday that it has halted its miner-hosting services in mainland  China. It’s unclear how much that could impact mining, but crypto-markets

Financial literacy in India

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"If you buy things you do not need, soon you will have to sell things you need." Hey guys. I hope you all must have heard this well known quote by Warren Buffet.  College graduates often spend 16 years gaining skills that help them command higher salary; yet little or no time is spent helping them save invest and grow their money. In a growing and developing nation like India where economy always remains the cause of concern, Do you all know that the financial literacy in India is just 24%, which is the least among it's well competing peers. You don't believe me! Well let me take you through a complete detailed study of the financial literacy in India. What financial literacy means? Financial Literacy is the ability to understand basic financial concepts and the possession of knowledge and skills required to make informed and effective financial planning, decisions using the available financial resources. It is about knowing how to generate, spend, invest and save mon

How is the Sensex and Nifty going to perform this year?

 From the time the second wave of covid has come in India it has created a unstability in the market and the sensex is continuously having a resistance at the level of 49,700 approx. While the covid cases continue to grow and touching the 4 lakh mark recently how are things in stock market going to change after the spike reduces a bit. Well I don't like making much predictions on the open platform but if I talk about my gut feeling this time I once again see a huge bull run in the market just like the one last year after the lockdown curbs reduced. The cases are predicted to touch the peak at mid may and after that when the cases begin to reduce it could see a change in the market sentiment since India is always a growing economy and hence there is nothing that prevent the long term bull run of the market inspite of certain pressures in the market at certain times. Hence this slow down in the market is giving repeated opportunities to the investors to buy at the dip. I predict that

P/E Ratio in stock analysis

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 P/E ratio or the Price to earnings ratio is the criteria which is used to compare with various other factors or is itself observed to understand weather a stock is undervalued or overvalued based on its share price. It can be calculated by simply dividing the price of the stock by the earnings per share of a stock.                                 P/E=  Share price / Earnings per share  The P/E ratio  helps investors determine the market value of a stock as compared to the company's earnings. In short, the P/E shows what the market is willing to pay today for a stock based on its past or future earnings. A high P/E could mean that a stock's price is high relative to earnings and possibly overvalued. Conversely, a low P/E might indicate that the current stock price is low relative to earnings or undervalued. However P/E ratio always individually can't be used to determine the value of a stock since sometimes a high P/E ratio could also show the sentiment and expectations of

What are ETFs? How is it different from mutual funds?

 What are ETFs:- An exchange traded fund (ETF) is a type of security that tracks an index , sector, commodity, or other asset, but which can be purchased or sold on a stock exchange the same as a regular stock. An ETF can be structured to track anything from the price of an individual commodity to a large and diverse collection of securities. ETFs can even be structured to track specific investment strategies.  ETFs generally offer low expense ratios and fewer broker commissions than buying the stocks individually.  An ETF is called an  exchange traded  fund since it's listed and traded on an exchange just like stocks. The price of an ETF’s shares will change throughout the trading day as the shares are bought and sold on the market. There could be various types of ETFs such as Bond ETFs, Industry ETFs, Commodity ETFs, Currency ETFs, Inverse ETFs.  How is it different from a mutual fund or index funds:- ETF prices keep fluctuating throughout the trading hours just like any other st

SPAC and equity based crowd funding

 SPAC( Special purpose acquisition companies) and equity based crowd funding are generally two concepts of the U.S stocks which haven't really been ruled out in India but are being analysed by SEBI if they are vulnerable for the Indian markets too. But the question in what are they? SPAC (Special purpose acquisition companies):-  These are companies  with no commercial operations that is formed strictly to raise capital through an initial public offering  (IPO ) for the purpose of acquiring an existing company. Also known as "blank check companies. " These companies are strictly asked to asked to complete their acquisition within a time frame of just 2 years or else written all the collected funds back to the public.  In 2020, as of the beginning of August, more than 50 SPACs have been formed in the U.S. which have raised some $21.5 billion. The  Investors in these SPACs can range from well-known private equity funds to the general public. Usually when these companies bri

Replacement cost theory

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  Yes, he is none other than Harshad Mehta the well known market manipulator. You all must have seen the series scam 1992, the series which has blown everyone's mind in the last one year. If not no problem. But, what is this replacement cost theory that was propogated by him. Harshad Mehtha proclaimed that the rise of ACC stock was just due to the philosophy of  'Replacement Cost Theory'.  Replacement cost is a cost   that is required to replace any existing asset having similar characteristics or the cash outlay  that firm has to pay in order to replace  an old asset at the current market price . An organization often chooses to replace its assets when the repair and maintenance costs increase beyond an acceptable level over a period of time. It is found out by calculating the present value  of the asset, followed by its useful life. The insurance company’s primary function is to evaluate whether the decision of replacement is better than repair and maintenance or not. It

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