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BSE Sensex – Meaning and Constituents

Meaning of BSE Sensex:

Introduced in 1986, BSE Sensex is one of the prominent stock market indexes in India. Sensex is the sensitivity index of Bombay stock exchange. It composed of 30 companies that belong to 11 various industries. These are the well established, reputed and highly traded companies in India.

Constituents of BSE Sensex:

The below table lists all the companies which constitute Sensex:

BSE Sensex constituents

 

BSE Sensex’s Constituents 

AXIS BANK LTD. HINDALCO INDUSTRIES LTD. NTPC LTD.
BAJAJ AUTO LTD. HINDUSTAN UNILEVER LTD. OIL AND NATURAL GAS CORPORATION LTD.
BHARAT HEAVY ELECTRICALS LTD. HOUSING DEVELOPMENT FINANCE CORP.LTD. RELIANCE INDUSTRIES LTD.
BHARTI AIRTEL LTD. ICICI BANK LTD. STATE BANK OF INDIA
CIPLA LTD. INFOSYS LTD. SUN PHARMACEUTICAL INDUSTRIES LTD.
COAL INDIA LTD. ITC LTD. TATA CONSULTANCY SERVICES LTD.
DR.REDDY’S LABORATORIES LTD. LARSEN & TOUBRO LTD. TATA MOTORS LTD.
GAIL (INDIA) LTD. LUPIN LTD. TATA STEEL LTD.
HDFC BANK LTD. MAHINDRA & MAHINDRA LTD. Vedanta LTD.
HERO MOTOCORP LTD. MARUTI SUZUKI INDIA LTD. WIPRO LTD.

Note: Companies are listed in alphabetical order and not on the basis of their market capitalization.

Recurring deposit – Meaning and features

Meaning of Recurring deposit:

Recurring deposit is a type of term deposit made for saving purpose. It provides an investor the flexibility to save a specific amount of money every month in RD account. The amount may vary from a thousand to lakh per month. This amount has to be deposited with a financial institution for a predetermined time period (Usually called Tenure). In India most of the banks provide such kind of deposit schemes to retain their customer’s money with them.

Fixed rate of interest is paid on recurring deposits. A longer tenure fetches higher interest rate than the shorter one.

Features of Recurring deposit:

1) RD can be opened with small amount of money. This way it does not hurt the pocket of an investor.

2) RD schemes provide a stable investment option irrespective of market fluctuations.

3) It provides the flexibility to direct debit the amount from investor’s account. So investors do no have to visit their bank every month for payment.

4) An investor can break RD at any point of time.

5) At maturity, it provides the facility of direct credit the amount of principal as well as interest in customer’s account.

Where do we find stocks to invest in?

I have been asked by a lot of new investors that how to find companies in which they should invest. The same question was in mind when I first started to invest in share market. But, as I spent some time investing in this market, I come to know a lot of sources which are useful to choose a company in which investment can be made.

So, in this article I am gonna deal with the question:

Where do we find stocks to invest in?

Below is the list of sources which are useful for finding a new company of investor’s interest.

BSE’s (Bombay stock exchange) website:

I started finding a new company from the database of BSE’s website.

But there are a lot of companies added in this list so which company should one choose?

BSE lists both loser as well as the gainer for the day. The best answer to our question can be found here.

I frequently check the list of loser companies (companies whose stock prices are decreasing).

It gives me a hint for choosing and analysing a company which might be worth investing in.

Often I also check for companies which are top gainer for the day.

Then I thoroughly analyse same company to find out the reason. Here you must aware that based only on increasing price for the day, you cannot select a company.

Market news:

Market news is the second source which I trust on. I frequently check for such a company which is in news for some reason. The reason might be unfavourable condition (prevent me to invest in such a company) or good news for the company (may be considered for investing).

At the time of writing this article I found ITC stock price plunged 8.27% in a single day. It was because of some announcement in budget. So, it gave me a clear reason not to invest in ITC stock for some coming days.

Find stocks to invest

Expert views:

Expert of share market also spread their thoughts time to time. All you need to do is to find out such views. These views are useful as they are based on some logical calculations.

Broker’s advice:

You may consider the advice of your broker as you are paying him for the same. But you should not trust these brokers every time and should make an analysis by yourself about the company they are telling you to invest in.

Consultant:

Now a day many consulting firms are also engaged in doing the same job for you for a fee. These consulting firms update you time to time and suggest you the list of companies which they think are going to increase in their values.

Final words:

All these sources are just a way to find out a company which you may consider for investing. But it won’t be wise for you to invest in these companies without doing a thorough analysis based on some basic criteria.

If you want to start investing in share market then you must be aware of analysing a company based on some basic techniques. It’s your money which is going to be invest so be careful and confident before investing it in a company.

Term deposit – Meaning & features

Term deposit is type of investment option in which an investor deposits a fixed amount for a predefined period. In India these types of deposit are offered mainly by banks to their existing customers. In a term deposit an investor has the flexibility to choose a time period (maturity period).

Term deposit

These deposits attract a fixed rate of interest on it. That’s why many investors prefer these deposits rather than investing in fluctuating markets like share market. It also provides the flexibility to withdraw the money before its maturity, subject to penalties over it.

Term deposit is also known as time deposit.

Why term deposit?

These are the traditional way of investment, which is cosidered less risky as compared to other investment options. This option is mainly prefered by people above the age of 40.

Main feautres of term deposits are:

Term deposits are subject to higher interest rate as compared to demand deposits. Demand deposits include saving account, current account etc.

Term deposits are subject to a fixed interest rate.

They provide an edge against market fluctuations.

They also provide the flxibility to choose a time for investment.

Capital gearing ratio – Meaning & Example

Capital gearing ratio represents the relationship between equity share capital of a firm and its fixed interest bearing funds. Fixed interest bearing funds include preference share capital, debentures, bonds and other type of loans which bear a fixed rate of interest on it.

This ratio is used to measure the ‘degree of leverage’ of a firm. A firm having low capital gearing ratio will be called as highly leveraged and vice versa.

Formula for computing capital gearing ratio:

Capital gearing ratio can be calculated by using below given formula:

Equity share capital / fixed interest bearing funds

Where:

Equity share capital refers to total share capital minus preference share capital.

Example:

Let’s assume that ABC Ltd Company has following figures on its balance sheet:

2012 2013
Equity share capital 1,00,00,000 90,00,000
Preference share capital 28,00,000 45,00,000
Debentures 25,00,000 30,00,000
Bonds 27,00,000 37,50,000

Using the above given figures, we are able to calculate capital gearing ratio for year 2012 and 2013 separately.

For the year 2012:

1,00,00,000 / 80,00,000 = 1.25 : 1

For the year 2013:

90,00,000/ 1,12,50,000 = 0.8 : 1

The above results show that the company was low geared (leveraged) in 2012 whereas it was highly geared (leveraged) in the year 2013.