After the web series Scam 1992 was released, the one name trending in India is Harshad Mehta. Now, Who Harshad Mehta is? What did he do exactly? In this article, we will explain about him in brief.
One of the biggest scams that struck India hard in 1992 by Harshad Mehta, AKA Big Bull&rdquo of India. Harshad Mehta was born in a middle-class Jain family of Gujrat in 1954 and spent his childhood in Mumbai. He completed his bachelor's in commerce from Lajpatrai College in Mumbai. Harshad tried his luck in many jobs like a diamond, accountant, etc. he found his major fortune in the Indian stock market only. After graduation, Mr. Mehta started his career as a salesman at the New India Assurance Company (NIACL). After a few years of hustle and not getting the geek, he showed his interest in the share market and joined a brokerage firm, B.Ambalal & Sons, where he worked as a jobber for the broker, P. D. Shukla. People start recognizing him as Amitabh Bachan of the Stock market as time passes. In 1984, Harshad Mehta started his brokerage firm and named it Growmore Research and Asset Management.
He actively started trading in the market in 1986, and by the year 1990, people had started joining him, and they were investing with his firm. In the mean years, he got some big shot clients like then minister Mr. P. Chidambaram. After getting a veteran in the market he started to manipulate the market, he manipulated the share price of Associated Cement Company (ACC) from Rs.200 to Rs.9000 in nearly just 3 months.
Now the question is where the scam started?
Until 1990, banks were prohibited from investing in the equity markets. They were expected to post profits and retain a certain ratio (threshold) of their assets in the government's fixed-interest Bonds. Mr. Mehta smartly brought the capital out of the banking window and pumped this money into the share market. He promised the banks a higher rate of interest than the normal ongoing. He asked them to transfer the amount into his account, under the belief of buying securities for them from other banks. At that time, a bank had to go through a broker to buy securities and forward bonds from other banks. Mehta got the idea from there only to use this money temporarily in his account to buy shares. Now, he started to boost the price of certain shares of already established companies like (ACC, Sterlite Industries, and Videocon ) when the market cruised at its best; he Eventually sold the shares and passed on a part of the proceeds to the bank and kept the rest into his pocket.
To carry out the scam, the deliveries of security and payment were made through the help of the broker only; for example, one seller handed over the security to the broker, and now the broker passes them to the buyer, and the buyer gave the cheque to the broker, now the broker made the payment to the seller. The buyer and the seller would not even know who they had traded with; the broker is going to be the only mediator between these two
Another instrument used in a big way was the Bank Receipt (BR). The confirmation of security sale is the BR; it 's like a receipt received by the selling bank. i.e. the seller of securities gave the buyer of the securities a BR. A BR promises to deliver the securities to the buyer and also states that, in the meantime, the seller holds the securities in the buyer's trust. Mehta cleverly found a bank providing him with fake BRs or BRs not backed by government securities. Too small and not very well known banks – the Bank of Karad (BOK) and the Metropolitan Co-operative Bank (MCB) – came in handy for this purpose. Once these fake BRs were issued, once the money was invested in the share market and was sold in profits, he returned the money to the banks.
This was all the tricks MR. Mehta was using it to boost the market, and people started calling him the Big Bull of Dalal Street; this all continued until Sucheta Dalal showed her interest in it.
Sucheta Dallas was a Young enthusiastic financial journalist, she got the tip about the SBI BR frauds. Sachet kept digging into this and found all the scams of Harshad Mehta.
On 23rd April 1992, journalist Sucheta Dalal exposed the illegal ways of Harshad Mehta in the Times of India about how Mr Mehta was using bank money in the share market.
Just after the article, Banks realizes they were holding the BRs of no value. The chairman of Vijaya Bank committed suicide after the scam exposure came out; he was found guilty of having issued checks to Mehta and knew that he would lose all the reputation he had earned in the market.
One late night under custody in Thane prison, MR. Harshad Mehta. He complained of chest pain and was admitted to the Thane Civil Hospital. He died with the following pain, at the age of 47, on 31st December 2001, he left behind the biggest scam of the Indian finance history.
To keep yourself away from these scams, you need to upgrade yourself so that you can be safe in the Stock Market, and for that, you need to join share trading course in Delhi to learn about the Stock Market
This man was Harshad Mehta from a basic middle-class family who dreamed of a big house and dived into the ocean of the finance market and brought the tornado into that ocean. People built their fortune with Mr Mehta, but in the end, he was the culprit and journalist Sucheta Dalal brought to light his scams of more than Rs 4000 crore.
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Industry Analysis in Stock market
Michael Porter’s Five Force Model for Industry Analysis
Horizontal Forces
Threat of Substitutes
The threat of New Entrants
The threat of Established Rivals
Vertical Forces:
Bargaining Power of Suppliers
Bargaining Power of Customers
Barriers to entry (threat of new entrants):
Entry barriers in an industry can be understood by following simple industry characteristics.
They would be high if:
There are lots of licensing required in the business
Patents and copyrights prevent new entrants
Huge investments in specialized assets pose a challenge
Strong Brands, strong distribution network, specialized execution capabilities, customer loyalty with existing products/services exist in the business.
Attractive Industry from the Equity shareholders’ perspective:
Low competition
High barriers to entry
Weak suppliers’ bargaining power
Weak buyers’ bargaining power
Few substitutes
Pestle Analysis
Pestle Analysis stands for Political, Economic, Socio-cultural, Technological, Legal, and Environmental Analysis for investment in the Stock Market. Some models also extend this to include Ethics and Demographics, thus modifying the acronym to STEEPLED. This analysis is done more from the perspective of a business looking to set up a unit offshore and analyzing several countries to choose from in the share market. This model primarily analyses the external environmental factors that will act as influencers for a business.
Boston Consulting Group (BCG) Analysis
Stars: These are segments in a business where the market is growing rapidly and the company has a large market share. This segment generates increasing cash for the business with time. Cera Sanitary Ware could be a good example of a “star&rdquo with a large market share, continuous growth, and significant cash generation.
Cash Cows: These are segments that require low cash infusion for investment to maintain market shares because of low growth prospects but, at the same time, steadily generate cash for the company from the established market share. Navneet Publications could be a good example of a “ cash cow in the business of books and notebooks business. The industry grows at a predictable and steady rate each year.
Question Marks Business segments in a fast-growing market with a low market share. The right strategies and investments can help the business's market share grow, but they also run the risk of consuming cash in the process of increasing market share and, in the end, not generating enough cash. Tata Nano can be considered as an example of a question mark which did not succeed, whereas Bajaj Pulsar may be considered an example of a question mark product that succeeded.
Dogs: Business segments which have slow growth rates and intensive competitive dynamics that lead to the low generation of cash are categorized as Dogs.
Key Industry Drivers for Various Sectors in share Market:
Telecom: A key parameter used to analyze this sector is the Average Revenue Per Unit (ARPU). It is calculated by total revenue divided by the number of subscribers and the higher it is, the better for the company. It must be noted that India has amongst the lowest ARPUs in the world. Other parameters like mobile penetration and spectrum costs are also important for the Telecom industry.
IT/ BPO/ KPO: The IT sector in India grew primarily due to a large, available pool of English-speaking young talent at a low cost. IT companies earned in Dollars and spent in Rupees and made huge profits. Even today, the USDINR rate, the attrition rate among employees, the concentration of revenues with selected clients, the concentration of geographies, etc. are important parameters to watch out for in IT and related sectors.
Retail: The retail sector saw a huge jump in the new millennium's first decade. Retail store formats rely on low-cost procurement of goods from manufacturers and selling it on wafer-thin margins to many people.
Banking/ NBFC/ Housing: Monetary Policy by the RBI is this sector's most significant impacting factor. NPA levels, provisioning norms, tight/loose regulatory reserve requirements all impact banks and NBFCs.
Media: Any media company depends upon content; hence, a company generating its own content will have an advantage over others. Distribution companies are almost always under pressure as there is intense competition in the sector, and content providers to media companies charge a premium. Television Rating Points (TRPs) are the most widely tracked indicator in electronic media.
COMPANY ANALYSIS
Qualitative Dimensions for Investments
What does the company do and how does it do?
Who are the customers, and why do customers buy those products and services?
How does the company serve these customers?
There are over 6000 companies listed on Indian exchanges. It is not possible to track and understand all of them. Investors should consider buying shares of a few companies they understand rather than invest in several companies they don't understand. Quoting Warren Buffet: Wide diversification is only required when investors do not understand what they are doing.
Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis
Every business has its own strengths and weaknesses. It is good for the analysts to clearly understand and document both to have a clear picture of the situation. Similarly, the analysts can document opportunities for the business and potential risks in the form of opportunities and threats. In a way, SWOT analysis is nothing but a way of concisely documenting strengths, weaknesses, opportunities, and threats in one place. Hence, without an analysis of the company, investing can be riskier, and for better research, one needs better knowledge of the stock market. It is recommended to join stock market classes in delhi and study the different modules of the stock market, then take the step forward of investing.
Sources of Information for Analysis
Annual/Quarterly reports - Most easily available, reliable and consistent source of information
Conference Call transcripts
Investor Relation (or Company) Presentations
Management interviews on the internet
Company website
Ministry of Corporate Affairs website
Research Report from Credit Rating Companies
Research Report from various other sources – media reports
Parent Company’s annual report and website
Competitors’ website including international competitors
Print media reports on companies
Discussion with suppliers, vendors, consumers, and competitors
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Liquidity - Secondary markets provide liquidity and marketability to existing securities. Investors can transact in the secondary markets to exit or enter any listed security.
Price Discovery - Secondary markets enable price discovery of traded securities. The price at which investors undertake to buy or sell transactions reflects their individual assessment of the security's fundamental worth. The continuous flow of price data allows investors to identify the market price of equity shares.
Information Signaling - This information-signaling function of prices works like a continuous monitor of issuing companies and, in turn, forces issuers to improve profitability and performance. Efficient markets are those in which market prices of securities reflect all available information about the security.
Indicating Economic Activity - Secondary market trading data generates benchmark indices that are widely tracked in the country. Movements in the index represent the overall market direction.
The market for Corporate Control - Stock markets function as markets for efficient governance by facilitating changes in corporate control. Potential acquirers could acquire a significant portion of the target firm’s shares in the market, take over its board of directors, and improve its market value by providing better governance.
Moreover, you can join share market classes in Jaipur if you need to upgrade your trading skills.
The secondary market consists of the following participants:
Stock Exchange:
The core component of any secondary market is the stock exchange. The stock exchange provides a platform for investors to buy and sell securities from each other in an organized and regulated manner. The two leading stock exchanges in India are the BSE and the NSE.
Investors
If investors buy and sell shares among themselves, such trades are called “off-market” and do not enjoy the benefits of regulatory and redressal provisions of the law. Investors come to the stock exchange through their brokers to get a competitive price and liquid markets where transactions can be completed efficiently.
Issuers
Issuers are companies and other entities that seek admission to list their securities on the stock exchange. Equity shares, corporate bonds, debentures, and securities issued by the government are admitted to trading on stock exchanges.
Custodians
Custodians are institutional intermediaries authorized to hold funds and securities on behalf of large institutional investors such as banks, insurance companies, mutual funds, and foreign institutional investors (FIIs).
Regulation
Secondary markets are regulated under the Securities Contract Regulations Act, 1956, and SCR (Rules), 1957. SEBI is authorized by law to implement these provisions and its rules. It has empowered stock exchanges to administer portions of trading, membership, and listing regulation.
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Elliott Wave Theory is one of the most renowned theories in technical analysis. Ralph Nelson Elliot developed this. This theory speaks about Waves (patterns). Elliot believed that mass psychology depicts the same recurring patterns in the financial markets. He discovered the underlying social principles and developed the analytical tools in the 1930s. Elliott stated that "because man is subject to rhythmical procedure, calculations having to do with his activities can be projected far into the future with a justification and certainty"
Elliott developed his market model theory before he realized that it also reflects the Fibonacci sequence. The Fibonacci sequence is also closely connected to the golden ratio of retracement and extension (1.618). Intraday and Swing Traders commonly use this ratio and related ratios in sequence as to establish support and resistance levels for market waves, ideally, it signals the price points which help define the parameters of an uptrend or downtrend.
The Elliott Wave theory infers that layman trader’s psychology, or herd psychology moves between optimism and pessimism which occurs in natural sequences. These mood swings or behavior can be created in the form of patterns which show as an evidence in the price movements of markets at every degree of the trend either uptrend or downtrend or multiple time scale. This theory helps a swing trader to identify longer duration trade setup with signals of resumption, termination of an uptrend, downtrend, correction and extension of the trend.
Elliott's final major work isNature's Law --The Secret of the Universe, which was published in June 1946, two years before his death.
Elliott Wave Theory was popularized in the seventies by Robert Prechter and A.J.Frost with their book " Elliott Wave Principle"
He speaks about waves in 5-3 moves, wherein five waves move in an upward direction of the main trend, known as impulse and three waves move in the corrective phase. These 3 moves are also referred to as ABC. The completed motive patterns include 89 waves, followed by a completed corrective pattern of 55 waves. This theory helps in gauging the upward trend and the corrections that are likely to happen in the future with very high probability.
The classification of the wave at any degree can vary slightly however standard order of degree or duration would be approximately:
Grand Super cycle: It can be of multi century (which historically not yet tested in swing trading as no data sets available in financial markets before 19th Century)
Super cycle: It can be of Multi Decade (again reliability cannot be justified with datasets available given the fact that for any strategy to be tested in trading we need to have backtesting datasets of at least 4 to 5 times)
Intermediate Cycle: The duration can range from a few weeks to a month which is majorly used or can be deployed by swing traders practically as the other cycles discussed before need extreme discipline and a very high degree of patience. Excuse Me!!! Markets test your patience and to work on Cycle or Super Cycle a trader himself knows how much discipline one needs to have to work on extremely long duration timeframes. Sometimes we need to be practical and realistic in approach.
Minor Cycle: The duration cycle can be of a week
Minute Cycle: The duration will be of days and can be used by traders and can be deployed for a day or two
Minuette Cycle: The duration will be of an hour and can be used by an intraday trader
Subminuette: The duration will be of an hour and can be used by a scalper who wants to take trade setup for a few minutes of shorter durations.
Every wave serves one of two functions: action or reaction. Specifically, a wave may either advance the cause of the wave of one larger degree or interrupt it. The function of a wave is determined by its relative direction. An actionary or trend wave is any wave that trends in the same direction as the wave of one larger degree of which it is a part. A reactionary or countertrend wave is any wave that trends in the direction opposite to that of the wave of one larger degree of which it is part. Actionary waves are labeled with odd numbers and letters. Reactionary waves are labeled with even numbers and letters.
All reactionary waves develop in corrective mode. If all actionary waves developed in motive mode, then different terms would not be needed. Indeed, most actionary waves do subdivide into five waves. However, as the following sections reveal, a few actionary waves develop in corrective mode, i.e., they subdivide into three waves or a variation thereof. Detailed knowledge of pattern construction is required before one can draw the distinction between actionary function and motive mode, which in the underlying model introduced so far are indistinct.
The following are the advantages of trading with Elliott wave theory in swing trading:
1. Wave analysis identifies the trend
2. It signal resumption of the trend
3. It identifies the termination of the trend
4. It provides a High probability risk reward ratio trade setup in swing trading
5. It provides specific exit points when the trade setup fails.
6. It identifies countertrend move within the trend
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Stock Market is Fire, Rules, Tools, and Strategy are Gasoline to win the game.
Technical analysis is a method used to predict future prices based on historical cost, volume, and open interest. Technical analysis can help investors anticipate what is "likely" to happen in the coming days, weeks, or months. Technical analysis is the study of past data to predict the future. The past data we studied will be related to price and volume to analyze future price action.
For example:
When someone visits a Palmist, he studies the lines in his hand and, based on the analysis which he has learned by analyzing the lines in the past, will help him to predict the future, which means history tends to repeat itself, which means that to predict the future one needs to have the past data which is called analysis.
Technical analysis applies to stocks, commodities, futures, indices, or any tradable instrument where the price is influenced by supply and demand, i.e., volumes. To analyze a stock or commodity, we need information like prices, volumes, and open interest on a chart, as well as applying various patterns and indicators to assess future price movements. Price refers to any combination of the open, high, low, or close for a given security over a specific time frame. The time frame can be based on intraday (1-minute, 5-minute, 10-minute, 15-minute, 30-minute, or hourly), daily, weekly, or monthly price data, and last a few hours or many years. In addition, some technical analysts include volume or open interest figures in their study of price action. The study is done with the help of candlestick charts and patterns. So you are willing to become a stock market expert by learning the different aspects of technical analysis, then join a technical analysis course at share market course in Delhi.
What is Layman Trader Phycology?
In stock market trading, the fact is that 98% of traders lose money, and 2% of traders make money. Trading is a zero-sum game, which means 2% of the traders take away 98% of traders&rsquo money. This 2% of traders have huge money flow and news flow; in technical terms, they are called market operators. In the short term, demand and supply plays an important role compared to fundamental aspects, which is the basic essence of trading. When layman traders (98% of them) enter the trade on the buy-side or sell-side based on the news flow created by the market for short-term trading, the demand/supply they create is fulfilled by the 2% operator. The real Game Begins Now! The price will now move against the 98% layman traders and continuously move opposite until the entire 98% trader's capital is wiped out.
“ Market always move anticlockwise of layman traders.
One should never forget to fly the kite toward the wing. The trend is the best friend of the trader. Change in the market trend needs a change in the behavior of a trader because you need to flow with the market and cannot win no matter what when you try to go against the market.
A layman trader does not always sit in the wrong trade. Still, he is not able to reap the entire profits when he is in the profitable trade and wipes out his entire capital when he is in the wrong trade because he does not have a proper entry, exit plan, and stop-loss when the trade or the price action is against him. Further, the market tries to manipulate you by its actions and forces a trader's psychology to enter into a wrong trade and play with emotions and human psychology.
For example:
In the game of Cricket, when a batsman hits the first two balls of a bowler out of the court &lsquo SIX! SIX!, the bowler's psychology changes, and instead of trying to bowl him out, he tries to finish the next four balls as a DOT. The batsman takes advantage of this emotional change and scores more in the same over. Similarly, a trader enters the trade when the market opens to make a profit, but his psychology changes when he loses money in the first trade due to the wrong trade setup. Instead of entering a proper trade setup to make a profit, he tries to recover his loss, which is the change in psychology and behavior called emotions.
“There should not be any emotions when you are trading.”
How does technical analysis help you in trading?
Technical analysis helps a stock market trader enter into a trade with a proper entry plan for selecting a stock. It helps a trader have a proper exit plan for profitable trades and a wrong trade setup. Further, it indicates when a trader should try to maximize his profits with the help of tools and indicators when the volumes support the price. Practice and Patience are the keys to success in trading.
“ Tools, Rules, and Strategy is the key to success in Trading in Stock Market” Stock Market is like a game of Chess” A trader needs to have a proper strategy for his intraday/swing trading with money management, and he needs to have the data of price and volume for the study and analysis to win big in stock market trading.
Trading is not a team game. It's a one-man show! A perfect Trader is one who has the proper strategy to take
What is the basic Assumption of Technical Analysis?
Price Discounts Everything:
Technical analysts believe that the current price fully reflects all information. Because all information is already reflected in the price, it represents the fair value and should form the basis for analysis.
After all, the market price reflects the sum of knowledge of all participants, including traders, investors, portfolio managers, buy-side analysts, sell-side analysts, market strategists, technical analysts, fundamental analysts, and many others.
Technical analysis assumes that, at any given time, a stock's price reflects everything that has or could affect the company - including fundamental factors. Technical analysts believe that the company's fundamentals, along with broader economic factors and market psychology, are all priced into the stock, removing the need to actually consider these factors separately. This only leaves the price movement analysis, which technical theory views as a product of the supply and demand for a particular stock in the market.
The market price reflects the sum of knowledge of all participants, including traders, investors, portfolio managers, buy-side analysts, sell-side analysts, market strategists, technical analysts, fundamental analysts, and many others.
Price Movements Are Not Totally Random:
Most technicians agree that prices trend. However, most technicians also acknowledge that there are periods when prices do not trend. If prices were always random, it would be extremely difficult to make money using technical analysis.
A technician believes that it is possible to identify a trend, invest, or trade based on the trend and make money as the trend unfolds. Because technical analysis can be applied to many different time frames, it is possible to spot both short-term and long-term trends. Most technical trading strategies are based on this assumption. “Trade with the trend” is the basic logic behind the technical analysis.
What Is More Important than Why :
A technical analyst knows the price of everything, but the value of nothing.
Technicians, as technical analysts are called, are only concerned with two things:
1: What is the current price?
2: What is the history of the price movement?
All of you will agree that the value of any asset is only what someone is willing to pay for it. Who needs to know why? By focusing just on price and nothing else, the technical analysis represents a direct approach. The price is the final result of the fight between the forces of supply and demand for any tradable instrument.
The principles of technical analysis are universally applicable. The principles of support, resistance, trend, trading range, and other aspects can be applied to any chart. Technical analysis can be used for any time horizon, for any marketable instrument like stocks, futures, commodities, fixed-income securities, forex, etc.
Although generating calls using principle rules may sound easy, technical analysis is not easy. Success requires serious study, dedication, and an open mind.
Step-by-step analysis of any stock or commodity:
1: Overall Trend
2: Support and Resistance
3: Buying and Selling Pressure
4: Relative Strength
Technical analysis uses a top-down approach to investing.
An investor would analyze long-term and short-term charts for each stock.
Consider the overall market, probably the market behaviour index.
If the market is in bullish mode, then select the particular sector and then choose the stocks.
Supply, Demand, and Price Action:
Many technicians use the open, high, low, and close when analyzing a security's price action. Each bit of information provides information.
These will not be able to tell much separately. However, taken together, the open, high, low, and close reflect forces of supply and demand.
“ The effort and toil given in your practice and training will help a soldier save his blood in war!”
1-Mutual funds are full of risk.
In the long run, we have learned from our friends, family, and relatives that investing in mutual funds is very risky. Yes, it is risky but if we have the best knowledge of investing then we won't feel any collapse, the same applies in the mutual funds the moment we invest in it we get the financial managers who handle our investment wisely.
The mutual fund gives us a safe opportunity to invest in the market we get to see the brighter side of the market through this. A mutual fund is a subject to risk, but they invest the money in parts to the best companies of the market through this. So it is not that full of risk how people think about it.
2-You need lots of money to start.
Earlier, we saw that people are making the wrong perception that mutual funds are full of risk, however, they also make erroneous thinking that you need a lot of money to start investing in mutual funds.
You can start an investment in mutual funds as low as Rs 500 in an equity-linked saving scheme (ELSS) or Rs 1000 every month in systematic investment plans (SIPs).
These are the lowest price you can start investing within mutual funds, a middle-class family man can also invest in the mutual funds without troubling their financial chart, with this they can invest to grow into the market and this again breaks this myth that you need a big amount to start investing into the market.
3- You need a master's knowledge of the market to invest.
It's again a misconception, people tend to have this in their mind that they need a master's knowledge to start investing in mutual funds before you invest. You get the full guidance of the company's experts to pick up the best of the market. They explain to you everything about the share.
The finance expert always provides you with the best knowledge of the market with their experience, with the help of them you can invest wisely and grow your fortune with it. With the guidance of the expert, you can learn from them and grab the knowledge.
4-You need the Demat account to invest in Mutual funds.
Although It is beneficial for you to have a Demat account, that doesn't mean that you need a Demat account to start investing in mutual funds.there are so many online distributors who provide you the funds with the best knowledge of investment, you will get all the guidelines from them about the mutual funds.
apart from that, you can get it directly from the fund house. From there you can buy it directly along the side they will provide you the mutual fund from their parameters.
5-You can not invest in the international market & it's hard to exit from the mutual funds.
Due to COVID-19, the Indian market has seen some disaster numbers in the economy but, with this, we ponder to invest in the international market. But, we tend to get this that we can not invest in the international market. This is not true. We can invest in international mutual funds.
Despite this, people also believe that it's hard to exit from the funds. They think if you sign for X years then you have to stick with it or the company will charge you with the penalty. It is not true you can sign freely for 5,10,20 or whatever time you want to invest. You can easily sign off with a single notification.
So, after all the points we hope that we have provided you with the best knowledge about the myth of Mutual funds that people are creating around the market with no credibility in it. We are not telling you, people, that it is full of risk-free but yes for sure it is not full of risk too.
Keep coming to our website or join the share trading course in Delhi to learn more about investment plans, we hope that we will always help you to guide you the best.
Start with a demonstration class.
