Beta- Analyzing mutual funds

Guru Prasad -
 The risk of any investment made always depends on the volatility in the following investment. If we can have a factor that could tell us about the volatility of a investment and help us judge our risk and corelate it with our capability to take risk, how would that be? Well Beta factor is one such factor that could help us know the sensitivity of our stock or portfolio fund that we have chosen to invest. Beta ratio:- Understanding Beta:-  Beta is a metric used in fundamental analysis to determine the volatility of a stock with comparison to the overall market that has a fixed beta ratio of 1 always. Stocks or funds that are ranked with a beta ratio above 1 generally tend to fluctuate more and hence give access to more risk but yielding higher returns too at the same time if gone in favour. While the risk is slightly less in the funds with beta ratio below 1 they give less but yet stable return on investments generally. Hence, the beta factor can be said as a risk- reward factor, helpi
Post a Comment

Cost Inflation Index(CII)

Guru Prasad -

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 countries, the CII, along with the population census, is one of the most closely watched national economic statistics.


Let us have a look at how it has had a change over the year in India:-


It is given by the Income tax department every year and is a measure of inflation that finds application in tax law, when computing long-term capital gains on sale of assets. The most important factor to be actually looked at here is the rate at which it increases as this actually helps us identify the inflation of the country at a broader aspect every year.

How does Cost Inflation Index (CII) help in capital gains computation? Capital gain, as you know, arises when the net sale consideration of a capital asset is more than the cost. Since “cost of acquisition” is historical, the concept of indexed cost allows the taxpayer to factor in the impact of inflation on cost. Consequently, a lower amount of capital gains gets to be taxed than if historical cost had been considered in the computations.

The CII always helps us choose our right investment and could be a fundamental criteria for considering our actual growth in profit in consideration to the inflation of the country. We can see that the index has always had a significant growth over more than the last 20 years. Our country has been always a growing country and in such a country the CII could be a great criteria for understanding and choosing our investment.

 



Comments

Post a Comment

If you have any doubts, different opinions or any suggestions on how to improve the quality of my blogs please feel free to share.

Best Blogs

Financial literacy in India

Guru Prasad -
Image
"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
Read more

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

Guru Prasad -
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
Read more

SPAC and equity based crowd funding

Guru Prasad -
 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
Read more

Are markets over rallying?

Guru Prasad -
 The sensex has touched 59k and nifty has had a strong rally giving a touch to the 17,700 mark. While the nation is leading towards a fast economic recovery there are also certain concerns over a third wave of covid that lies, but yet the bull run has seemed to have no impact. While the reformations in the telcom sector to help revive vodafone idea has been a positive news for the telcom sector there are also reformary steps being taken by the government along side. The GST collections are touching new highs being a good symbol for an economy recovery. Hence, the foreign portfolio investments also seem to be flowing well into the country. While running corrections could take place in market now there does not seem any reason for a drastic fall in the market until effected by another wave of covid. But, yes the markets are growing at a pace more than expected and hence it could be the right time for partial profit bookings in some stocks. While the market still trades at a pe ratio whic
Read more

Contact Form

Name

Email *

Message *

Popular posts from this blog

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

Guru Prasad -
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
Read more

Are markets over rallying?

Guru Prasad -
 The sensex has touched 59k and nifty has had a strong rally giving a touch to the 17,700 mark. While the nation is leading towards a fast economic recovery there are also certain concerns over a third wave of covid that lies, but yet the bull run has seemed to have no impact. While the reformations in the telcom sector to help revive vodafone idea has been a positive news for the telcom sector there are also reformary steps being taken by the government along side. The GST collections are touching new highs being a good symbol for an economy recovery. Hence, the foreign portfolio investments also seem to be flowing well into the country. While running corrections could take place in market now there does not seem any reason for a drastic fall in the market until effected by another wave of covid. But, yes the markets are growing at a pace more than expected and hence it could be the right time for partial profit bookings in some stocks. While the market still trades at a pe ratio whic
Read more

Rising crude oil and its hurdle to Indian economy

Guru Prasad -
Image
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
Read more