Impact of RBI in Sharemarket

RBI is the Reserve Bank of India or you can say mother of all Indian banks. RBI has a Hugh impact not just only on sharemarket but also on Indian economy. RBI is the strength of Indian economy since Indian freedom. India is the most safe place to invest, Hugh role belongs to RBI.

Why RBI has a great impact? reasons are the policies, Monetary policy and Fiscal policy. RBI's monetary policy is the world's one of the greatest policy, they have a fine hold on supply of money. Monetary policy which decide the interest rate and borrow rate.

2008 global crisis, it was the most disappointment of the world economy, The famous bank Lehman brothers was collapsed due to their Monetary policy and it affected the American economy including the federal reserve bank (FED) of US. US is the most demanded country and they had started to get their money back from all other markets like European Markets, Asian Markets, etc,. Result is the global crisis but that time due to RBI policy Indian economy was recovered in next six months.

In European Union, the Monetary policy is the same for 27 countries but they have a different fiscal policies, Germany's impact is high in European market and thus the other countries got the borrowing money on very low interest rates on German credit card, and thus Greece was almost default. European central bank has suffered a lot.

I am not going in much depth on world crisis or Greece crisis, they itself are the potential topics. Just mentioned them to explain you the impact of central bank's role in any country's economy. another things are Repo rate and Cash reserve ration (CRR). Repo rate is the rate at which central bank of a country grants money to other Indian banks while CRR is the cash reserve ratio is a minimum fraction of the total deposits of customers, which other Indian banks have to hold in cash or as a deposits in central bank.

Now how to earn money from impact of RBI, first you need to read the country's economy, how the things are going on in India. every three months RBI governor decide or give statement on weather changes the Monetary policy or not. it always depending on quarter result and overall impact of global as well as domestics. We have to judge that rate cut is possible or not, if rate cut happens then it always useful for the country's economy. The moment you read Indian economy and you are more then 90% sure that money is going to invest in India you can enter as a Trader or Investor.

If the rate cut is useful then why RBI couldn't decrease every three months? Big reason is that RBI have some limitations in rate cut because India is highly inflated market, RBI's first role is to settle the inflation first and then they can think about money flow. India is a highly populated nation and there are very poor people too, thus they can not change or decrease rate cut so easily. Also they have to manage CAD (Current account deficit) and fiscal deficit, Fiscal deficit is belongs to gov. who collect money by tax and spend money by using money from Tax. Mostly Indian people are not paying their Tax regularly and thus country has to suffer with fiscal deficit and it creates the overall impact on nation, including politicians' or industrialists' scam . India's current account deficit is always high because India's exports are very low as compare to imports. So these are such reasons why RBI can not easily change their policies.

Tips of how to earn money by Investment in Sharemarket

1)      Investment is all about collection of knowledge of certain enterprise (company), including their long term plans. Read many things about the company you can.

2)      Don’t invest without reading the balance sheet.

3)      In balance sheet read about all assets and liability including long terms and short terms.

4)      If you can see website (moneycontrol.com) then go to mutual fund section and see the top mutual funds’ portfolio and pick your stocks from there, list them, check which sector is most favorite for top 5 all time mutual fund companies.

5)      If you see the top companies don’t straight away buy them, because when to enter and exit, it's a major factor.

6)      Decide what time period you want to invest, weather a month, 3 months, 6 months or 1 year.

7)      I personally always prefer to enter when stocks are cheaper, example, at the moment china’s slow down so metal shares are much cheaper, so I choose those companies and invest for long term because China is the second largest economy in the world and they will try their level best to grow.

8)      3 terms are very important, 1) fundamental (read balance sheet) 2) analysis (graph reading) 3) sentimental (which is least affected for long term)

9)      Watch latest events (triggers) like election, PM’s visit, RBI governor’s statement, Global markets, etc,. 

Tips of how to earn money by Trading in sharemarket

1)      Avoid the calls from local intraday or option service people who gives you their analysis, remember it’s a smart people’s field where you are the one who decide by your own analysis of the company.

Example: HDFC bank, check daily changes, or check graph, of daily up-down.

2)      You have to give your full time from by the time market open 9:15 AM to market close 3:30, if you want to become a successful trader.

3)      Remember there is always chance to earn money or lose money, when you lose don’t take it negative way because it’s a time to learn from mistake.

4)      Always make your own strategy rather then other people’s advice. However, you can discuss your strategy with others but always make your own decision.

5)      Read about not just only Indian market but also global market, especially US market because US market brings maximum FIIs to India and moreover US is the most demanded country in the world.

Example : 2008 world crisis.

6)      Sharemarket is not a magic to make people millionaire, you are earning money of your knowledge or attention and analysis. This is hugh market, with so many sectors included, so don’t copy to anyone that he is doing trading in Gold so I also looking to trade in gold. It’s a logic of demand.

7)      Currently Modi and Raghuram Rajan two both important factors in Indian economy because their decisions bring investment in India, but this is my personal view.

8)      Start your first trade after 3 months practice.  

Categories of people in Stock Market.

In Sharemarket or stockmarket or sharebazar there are people of two types of category.

• Investors
•  Traders

“Who are investors”?

Investors are doing investment in the market, even most of the people even know how they earn money!!

* Example, you buy one share of infosys in 1000 INR and when it is nearly 1200 INR you'r going to sell, you made the profit of 200 INR including brokerage and tax. Mostly people aware about investment fundamentals.

Now we are going on a topic of “who are traders then” but before that I would like to tell you about supply, demand and market price. Market price is belongs to supply and demand.

*Example, crude oil, now what is supply here? There is a two types of crude oil in world.

•  Brent crude oil
•  WTI crude oil

Brent crude oil is produced in US by petroleum industries while WTI crude oil is produced in Arab. So these are supply where other countries like India, china, japan, etc., who are the buyers, mostly they deal with Saudi because it is nearer to Asian countries which I mention. So WTI crude oil is supply and from crude oil we have most necessary things like petrol, diesel, etc,.

Suppose I take an example of 10 people and they use 30 litre of petrol each in a single month so eventually they use 300 litre every month. Now supply is only available of 200 litres then? Each person can only use 20 litre each or it increases the demand for 200 litres and eventually crude oil’s market price is going up. Now in same example if supply is nearly 400 litres available so now each person can use 40 litre each and it makes demand is decreased and so crude oil’s market price.

The same way share price in share market is depending on supply and demand. To earn in sharemarket you must have a knowledge because this is not the magic, you are earning of your knowledge just like in job. You are paid for your effort and work same way you are an investor and you are paid for your analysis and risk.

Now we are coming on trader, Traders are buying quantities in lot.

Example, monsoon is going on and you know that demand of pharmacy companies are increased so you have two options either investment or trading. In trading you can earn more money in a short span of time as compare to investment because you buy things in a lot. I know in this month demand of medicines are increased or so buy things in a lot and sell in same month or same day. So how you can earn more money in short span of time but again it’s a knowledge not magic so do only trading when you are more than 90% sure or you have grip on Indian market because you can earn good money in short span of time or you can lose money in same short span of time. Don’t start straight away with trading, take one year to understand what is going in Indian market and the reasons of Indian markets up and down.

There are three strategies of sharemarket.

• Intrday: buy today and sell today or sell today and buy today (Trading), validity 1 day
• Delivery: buy shares and sell when you want to sell (Investment), validity life time
•  F&O: buy a lot and sell a lot or sell a lot and buy a lot (trading), validity 1-3 months

Fundamentals of Stock Market & why you invest in it.

Mostly people new in the sharemarket are confused about sharemarket, they don't understand few basic terms so this blog hopefully help these confused people better understand about sharemarket and will be easier for the new comers in sharemarket.

Why you invest in sharemarket because it can give you better returns. Today you have 1 lakh INR in your account and what you do with this? Suppose you are not doing anything with 1 lakh, bank will use for their personal investments and give you 4%-5% interest of that amount. In the other hand you are going to make FD for this 1 lakh in bank it gives you 7%-9% returns, but in sharemarket you can earn more than that with right investment and so people prefer to invest money in sharemarket or I can say that Indian market is one of the emerging market in the world and third largest economy in the world so personally I prefer to invest in sharemarket and so others that I strongly believe.

I will add new posts soon about difference between traders and investors, tips for how to earn money by trading, tips for how to earn money by investment, how to earn money from volatile market, how RBI policies affected, impact of media like CNBC awaz, impact of politics, Large cap, Mid cap, small cap, Production manufacturing index (PMI), infaltions like CPI and WPI, quarter results of companies, GDP growth, dividend, cash flow, assets, liability, brokerage, tax, DP charge, strategies of intraday, different sectors, commodities, sentiments, fundamental, analysis, mutual funds, IPO, balance sheet, graphs, economy, currency market, forex.