Dear All,

Please find below a good article for your reading:

Life Lessons From Chinese Billionaire Jack Ma

Have you ever felt discouraged when you consider your professional progress or financial state? Chinese billionaire Jack Ma has a few tokens of advice for you.

Ma is a Chinese internet entrepreneur who launched his first big endeavor, and many since, in the face of adversity or criticism. He was named Financial Times’ “2013 Person of the Year,” and is widely held as a symbol of the Chinese entrepreneurial spirit. While some of his insight may constitute a new approach more focused on the bottom line than others, there is no denying that his perspective is one that has proven staggeringly successful.

Ready to incorporate Ma’s approach into your management of professional and financial life? Copy those that resonate most with you on a notecard and post them on your computer, in your wallet, or at another location where you will see them regularly. You’re about to go on a wildly successful ride with Jack Ma.

1. Look far and wide for opportunity.

Ma categorizes those who fail as often being myopic to opportunity. Look across the professional and financial landscape with a broad lens first, considering all possibilities. Then, bend down to dig under every rock and in every nook and cranny for potential opportunities.

2. Treat every opportunity as an open door.

No chance is too small, too menial, or beneath you. When something lies before you, seize it. Grasp it with all of your strength, work this opportunity with all of your heart. Bring everything that you are to bear on this task. Do not treat anything as small if you want large results.

3. Seek understanding.

Work to understand both your current position and the position to which you aspire. What, exactly, are you working for? Why? What will it take to get you to where you want to go?

4. Act quickly.

Sometimes, the race does go to the swift. What most folks miss, however, is that being “swift” means bouncing back from failure, not necessarily running most quickly at all times. Acting swiftly can also mean being the first one out of the blocks when the gun goes off. When an opportunity presents itself, act.

5. See beyond your circumstances.

No matter what your current condition, how or where you grew up, or what education or training you feel you lack, you can be successful in your chosen endeavor. It is spirit, fortitude, and hardiness that matter more than where you start.

6. Channel your ambition.

It is your job as a visionary to become single-minded in your ambition. Focus on your goal, work toward it, and never let it go.

7. Be courageous.

When Ma launched Alibaba Group, a highly successful group of internet businesses, he did so in the face of cautionary feedback from potential backers. There is a time for boldness, and in pursuit of your chosen ambition is that time.

8. Take chances in your youth.

If you are not rich by the time you are 35, says Ma, then you have wasted the opportunities of youth. Capitalize upon these young years, with their energy and imagination, by giving in to your ambition and the pursuit of it.

9. Unify your team toward a common goal.

You will never succeed in unifying every member of your team behind a single person. Ma estimates that 30% of people will always disagree with you.  Unite them behind an idea, cause, or mission, however, and you can harness the power of the team.

10. Make yourself replaceable.

Part of unifying behind an idea or mission is reducing dependency upon any particular individual, including the founder or lead boss. Cultivate the ideas, skills, and approach that you value in individuals you trust. When you move on, their leadership will ensure the continued success of that mission or idea.

11. Hire those with better technical skills than you possess.

If the boss has better technical skills than the employees, then they hired the wrong people. Workers should always be technical experts. Hire them, empower them, and let them do their jobs. They’re better at it than you are.

12. Lead with vision, tenacity, and grit.

There are skills that are vital to successful leadership of any company or endeavor — vision, tenacity, and grit. A leader must be a visionary, able to see opportunity where others do not and acknowledge challenges before they come. A leader must be tenacious, be able to “hang in there” when a less determined individual would have long since given up. A leader must have grit, that ability to buckle down and do what is required in order to get the job before them, done.

13. Persevere.

Hard times will come. Challenges may be everywhere even at launch. Keep that founding vision in mind, and cling to it in rough waters as a lighthouse and guide. Your actions will inspire others to do the same.

14. Attitude is more important than capability.

It is your attitude that determines your altitude. Whether in smooth times or rough, successful leaders remain calm, confident in their mission, and focused on their desired outcome.

15. Savvy decision-making is more important than capability.

The most successful leaders are not always the smartest or the most qualified on paper. They do, however, surround themselves with extremely capable experts, turn to them for input, and make clear decisions. It is the decisions you make that will advance you and your endeavor forward one step at a time, not how qualified you are to move from square to square.

16. Money and political power cannot exist together.

Money and political power are mutually exclusive. One is the powder keg, the other, the match. Where both exist, an explosion will occur. If you are interested in both, pursue them consecutively, not concurrently.

17. Resilience is only understood after you have gone through hardship.

An intellectual understanding of resilience means nothing.  The capacity to be resilient means nothing.  It is only after having gone through hardships and having been tested, that an individual can be deemed “resilient.”

18. Your job is to be more diligent, hardworking, and ambitious than others.

There is a simple formula for success, every time. Be diligent. Work hard. Never lose sight of your ambition. Whatever form your endeavor takes, these principles hold true.

19. Compete with grace.

If you treat your competitors as enemies, you will be seen as an enemy yourself. You will soon be surrounded. Instead, enter professional competition with grace, honoring your competitor and remembering that next time, the tide may turn another way.

20. Take all competitors seriously.

No competitor is a giant unless you make them one in your perspective. Treat all competitors with respect; treat your own business with respect. All have an equal chance of success when the competition begins. The one you overlook may be the one that beats you.

21. Behold yourself a giant.

Every large business started somewhere. Your business started somewhere. All deserve a seat at the table. Behold yourself equal to those you are competing with, and conduct yourself accordingly.

22. Winners do not whine.

While occasional poor spirits are to be expected, with the accompanying utterances of annoyance or dejection, regular whining is a sure sign of failure. All endeavors will bring hardships and challenges. How you deal with them will indicate the success of your business. Winners do not whine.

23. Customers are first; employees, second; shareholders, third.

As a leader, you only have a certain amount of time and energy. Give yours to those who enable your business, first — your customers. Those who make your business run come second — your employees. The shareholders are given attention and resources only after the first two have been satisfied. Many business owners spend all day, every day, catering to the shareholders. This resource allocation is not sustainable.

24. Forget about the money.

You did not launch your business or project solely for the money. You went down this path to build a particular lifestyle, or to meet a need of your soul and mind. If you focus on the money, you will make different decisions than if you focus on the journey. Walk the path you started down diligently, with ambition; the money will come.

25. Find the right people, not necessarily the best or most skilled people.

The most skilled people on paper are not necessarily the ones who fit best into your culture, or work best with you. The most efficient people on paper may not be those you trust most. Sparkling resumes do not mean that an individual can grow and evolve with your company. Find the right people, now. They are the best people. Their skills can be developed, as will yours.

26. “Free” is a very expensive word.

When you give something away for “free,” you give away profits, as well as resources of manpower spent during development, implementation, and follow-up, and possibly intellectual property in the form of a great idea. Think carefully before you run such a promotion. Nothing is truly free.

27. A smart man uses his brain to “speak”…

The words that come from another’s mouth are not meaningful. Engage your mind. Utilize your intellect. Make decisions from an informed, grounded perspective.

28. … a wise man uses his heart.

Likewise, trust your intuition and your knowing. Making decisions from a place of faith can serve you exceptionally well, particularly with regard to personnel and when identifying strategic objectives.

29. We are born to enjoy life, not to spend it working.

The point of life is not to simply work, work, work, grinding away our bodies and our minds until we die. The focus should be on enjoyment, not only of your work but by creating time to play, relax, and enjoy those around you. If you work your life away, you will regret it — this is guaranteed.

30. Giving up is the greatest failure.

You will never know what you can achieve and accomplish, unless you try it. You will never know if your idea will “work” or if the business will produce, unless you stick with it. Adapt your ideas, change your strategies if you must, but never give up.

regards

aknarayan

Why millions choose not to invest in MFs?

Dear All,

Please find below a good article as appeared in Times of India by Mrs. Uma Sashikanth for your reading:

Why millions choose not to invest in MFs?

Despite being cheap, diversified and professionally managed, mutual funds are not the product of choice 

It's a puzzle why a sensible and useful product, with a highly regulated and transparent structure, is not the number one choice of households. Investors do not usually speak with pride about how mutual funds have helped them build wealth. There is something that does not invoke the confidence in MFs to act decisively. 

First, investors are not used to open-ended investment products. When we tell them that they can begin with an investment of `5,000 in a fund, keep adding amounts as per their convenience, and draw as needed, they do not believe us. To many, an investment product has a defined start and end date, and offers a known return at the end of that period. That a mutual fund is actually an investment account, which can be operated with ease, is unknown. The operational ease of funds is completely clouded by notions of cumbersome paperwork. The widespread aversion to KYC (know your customer) formalities has not helped the cause.

Second, it is not that investors do not understand risk. Their problem with mutual funds is that there is an overload of negative information. When told that past performance is not an indicator of the future, and that MFs are subject to market risks, they worry about investing in a product that flashes negative warnings and is covered in fine print. To promote good investing habits, campaigns should be positive. Third, investors do not care much about unrealised return. We can go to town talking about how `10,000 invested over 20 years became Rs 15 lakh. The truth is that very few actually invested this much money so many years ago. So, the story is inspiring, but does not seem real. Investors understand cash flows very well. They do not understand the compound annual growth rate that mutual funds are required to publish. What they want to know is that if they invested today, what would they get? The answer to that question cannot be that it depends on the market conditions. Nor can it be a complex web of performance charts that provide the fund manager's history. In rupee terms, investors should know how a fund has performed, year after year. In trying to be sure that there is no misrepresentation or overstatement of return, we have ensured that the good return story has not been communicated at all. 

Fourth, many investors think that mutual funds invest in stock markets, and stock market means reckless speculation. They worry about the right timing and selection. Diversification is a theoretical idea to many who know profit booking, but cannot see that it is a colloquial term for asset allocation. Many think much about an investment process. Unless there is some participation in the thrill of game and joy of victory, it is tough to get crowds to see that a cricket team holds both bowlers and batsmen. A large number of people will buy into the idea of strategic team selection and tactics for playing a specific ball after they have known the rules of the game. When it comes to investing, very few know the rules. In a chaotic world, one that swings between avoiding equity completely or day trading with derivatives to make a windfall, mutual funds offer the hope of a process. However, this is neither communicated, nor appreciated. 

Fifth, those who warm up to the idea of investing in mutual funds don't know which product to choose. Behavioural economists have shown how investors don't make a decision if there are too many choices since they cannot deal with the regret of having made the wrong choice. The product proliferation in mutual funds has been harmful. We have met many one-time investors in mutual funds, who don't want to come back because they were sold a wrong product at the wrong time and lost money. Mutual funds cannot afford this widespread inertia, apathy and negative experience among its customers and prospects. It's time to fix the incentive problem in the industry, pronto. 

Sixth, investors do not know whom to turn to in order to get their queries solved. They do not know how to get paperwork done to invest or redeem, or to switch from one fund to another. They think the systematic investment plan, or SIP, is a product. Their distributors give them conflicting answers to simple questions. They want to know from an independent source, in simple terms, the journey of their money, its process and performance. The educational content on most mutual fund websites is patchy; awareness campaigns are produced like advertisements. Investors need an unbiased, central and reliable source to turn to. 

Fund houses are not great collaborators despite dealing with the same set of distributors and investors. They differentiate products that do pretty much the same. They like to think that each one is exclusive. They should look at investor awareness collaboratively and find out ways to reach out, speak to and listen to the millions who do not buy a sensible, cheap, diversified and professionally managed investment product.

REGARDS

AKNARAYAN

Dear All,

Please find below a good article as appeared in Advisorkhoj for your reading:

Things that finance people say which does not make a lot of sense

About one year back, I read a funny article in article written by Morgan Housel in the popular US investment journal The Motley Fool. It was about excessive use of certain jargons by investment experts and financial journalists, but if you think rationally these phrases do not make any sense. For example Mr. Housel talks about a very commonly used phrase in the stock market. "We are cautiously optimistic". He questions what does this statement really mean and suggests that the investor does not know either. While Mr Housel’s article has a funny bone, it really begs the question, "is finance speak really useful for investors". After I read the article, I made it a point to make a note if investment experts here in India, whether on TV or print media indulge in the same kind of finance speak, which is confusing and in most cases, do not make any sense to the investors. I was not surprised to observe that the experts here use the same kind of lingo that Mr Housel referred to in his article. Here are a few examples.

• A few months back, I read a report from a leading media house that said "TCS share price slumped after earnings missed analyst estimates". Did earnings miss estimates? Or did the analyst did not forecast accurately? EPS or earnings are reality and the analyst estimate is a forecast. The reality is not right or wrong. It is what it is. The forecast may be right or wrong.


• Another leading website reported that, "Sun Pharma profits were in line with expectations, despite hopes of a beat". If somebody was expecting Sun Pharma to beat expectations, then what is the meaning of the word expectations? It is like, despite expecting India to score less than 250 in a one day match you were expecting India to score more than 250. It does not make any sense.


• One phrase we commonly hear on business channels during market hours, "there are more sellers than buyers in the market". How can there be more sellers than buyers, or even the other way around. Every trade in the market has one buyer and one seller. The presenter may want to imply that there is selling pressure, but the phase "there are more sellers than buyers in the market" literally does not make any sense in the context of stock market.


• You would have often heard analysts saying, "We are neutral on this stock". A few days back some brokerage houses said "they were neutral on SBI". Now how is this useful for investors? Should investors buy SBI, sell SBI, hold SBI? It is not very clear. As an investor would you not want your broker to give you an unambiguous recommendation? Often we use the "neutral on this stock" recommendation, to ignore the stock. If the brokers indeed want their clients to ignore the stock, why give not give a clear recommendation like "avoid this stock" or not give any recommendation at all.


• Here is an example of a market news headline that is not at all useful for the average retail investor. OnNovember 18, I read a headline in a leading business journal that, "Sensex falls most since October, down 161 points". How is the first part of the sentence relevant for the retail investor? October was just 6 weeks back, when the headline was published. What message does the new headline seek to convey? Should investors be worried? Should investors not be concerned? This is an example of using an irrelevant data point, just to make up a headline.


• I am sure you would have heard that this "scrip is a strong buy". I read somewhere that "ICICI Bank buy is a strong buy". What is a strong buy? As Mr Housel would say, are you supposed to click your mouse harder when placing the buy order online? A buy is a buy. Strong buy is really aggressive selling by your broker.


• You would have heard this many times on TV from well known investment experts, especially in the last few months. "It is the time to buy stocks". Who is the advice for? For a 28 year old single IT professional or 70 year old retiree with no Mediclaim. Chances are that both are watching the TV channel at the same time. Should not a disclosure of some sorts with regard to the suitability of the advice be added?


• Finance experts are often seen quoting from Nassim Taleb’s popular book "The Black Swan". But referencing some scenarios as Black Swans is an over simplification. One expert predicated that oil will be at $60 a barrel in the not too distant future. He also said that would be a Black Swan event. Surely Nassim Taleb meant a Black Swan event to be something else. If a Black Swan event could be predicted, it would not really be a Black Swan event.

The Finance community should make an attempt to make things simple for investors. Use of such jargons is not at all helpful, because to the average investor it is either misleading or simply does not make any sense. If you have come across jargons and found it confusing, please share your thoughts with us by posting your comments below.

https://www.advisorkhoj.com/articles/Equity-Investing/Things-that-finance-people-say-which-does-not-make-a-lot-of-sense#.VK4CadKUez4

Skills that separate you as an investment manager: creativity - Jason Voss, CFA

Dear All,

Please find below a good article as appeared in Cafe mutual for your reading:

Skills that separate you as an investment manager: creativity - Jason Voss, CFA

Gaining creativity has two major accelerants. First, constantly be aware of your and your firm’s boundaries. Second, creativity is about awareness. So the remedy here is: you guessed it, meditation and to challenge orthodoxy by taking mental leaps of faith.

Having hired research analyst interns, research analysts, a portfolio manager, and even my own successor when I retired from investment management in 2005, I have gained a fair amount of knowledge about which skills separate you as an investment manager. As such I’ve been writing a series on the skills — aside from the obvious (e.g., a love of economics, drive, confidence, etc.) — that help you stand out from the pack. Last month I wrote about introspection. Now try adding this one to your arsenal: creativity.

Creativity

One of the questions I used to ask aspiring investor candidates was, “What do you do that is creative?” In all of my years of asking this question I only ever got two coherent answers. One was so superior that I insisted on hiring the candidate on the spot.

Why is the answer to this question so important? There are two reasons. First, it measures whether or not you know how your mind works, and two, it reveals whether or not you are conscious about using your entire mind to think, and consequently, solve problems.

In reality, every time we cross the street we are taking in lots of data about the situation and inventing an on-the-spot solution to the various factors at play: icy road, fast-moving traffic, number of lanes to cross, your health, and so forth. The solution is a creative solution. So in reality, people are using their creativity all the time to solve problems, but most have zero awareness of how they think.

Many people who are conscious of creativity as a part of their mental framework still blow it because they have made an archetype of creativity. What do I mean by that? Creative things are drawing, painting, sculpting, or playing music. But a true creative practice is just being aware that you are creative and doing things to cultivate that part of your mental apparatus.

Remedy

Gaining creativity has two major accelerants. First, constantly be aware of your and your firm’s boundaries. Creativity is about pushing past boundaries into new territory; doing what no one else is doing. If you do what you have always done then you will get what you have always gotten. Second, creativity is about awareness. So the remedy here is: you guessed it, meditation and to challenge orthodoxy by taking mental leaps of faith.

Application

Creativity is such a generalized skill that it can be deployed in almost any situation. However, the most obvious application is in generating new investment ideas. After all, by definition, to outperform your investment management competition you must be doing something that they are not doing. Again, by definition, creativity is the skill that helps you to identify what no one else is doing.

In my investment management career, I developed an important thesis early on: a sneaky way to inexpensively own the technology boom. Via my creativity practice, I recognized technology was both a breadth and depth story. That is, more and more people globally would be buying technological gadgets, and also that more and more gadgets were beneficiaries of new technology (think: refrigerators, toothbrushes, and so forth).

Unfortunately, it was almost impossible to buy the technology leaders at discounted prices. But what I recognized through my creativity was that all of these devices required electricity, and that electricity was also therefore a depth and breadth story. This led me to look for a global power company so I could capture the upside benefits of technological growth but experience the growth through a very stable, established business. My creativity led me to purchase shares in AES Corporation (AES) — a decision that was among the best I made as an investment manager.

http://www.cafemutual.com/News/Skills-that-separate-you-as-an-investment-manager-creativity-~105~Fut~guestcolumn~73

regards

Dear All,

Please find below a good article as appeared in Advisor Khoj for your reading:

Investing in surging bull market

In 2014 the Sensex surged by 30% giving handsome returns to equity investors. Mutual funds saw the highest inflows in over a decade. The start of the New Year has not been great for equity markets. In just about a week, the Sensex fell by nearly 1000 points. There are questions about the global economy especially the situation in Europe and crude. Some retail investors are waiting on the sidelines for a deeper correction to get into equities. The question for such investors is, "what is the right level to enter this market". As per some market pundits, we may see a further correction over the next few weeks which may take Nifty to 7,800 – 7,900 from the current levels of around 8,280 if the market gets negative global cues. There are others who are of the opinion that Nifty may test its historical highs before a significant correction. This scenario may pan out, if ECB steps in with quantitative easing, crude prices bottom out and if our corporate earnings are not disappointing. There are yet others, who believe that the Nifty will be range bound in the absence of any major event and mixed earnings. The point is that, equity markets are uncertain in the short term.

Timing the market is difficult

Large sections of the retail investor population missed out on the bull market from 2012 to 2014. While it is natural for retail investors to be wary about equities after a prolonged bear phase, a lot of investors simply kept waiting for correction once the market ran up significantly. It is not as if we did not have corrections in the last 2 years. We had a quite a few, but with every sharp correction these investors thought there would be more downside to the market. The important point to note about bull markets is that, after every sharp correction the pull back is very strong and the market goes back to pre-correction levels in no time (please see the chart below).

We can see in the chart above that, rallies after corrections have been quite sharp. Bull markets do not give enough time for investors to enter after corrections. In fact, investors waiting for corrections, often end up buying at much higher levels. Disciplined investing by averaging your purchase cost is a much more prudent approach for long term investors, than trying to time the markets.

Let us understand with the help of an example. Let us assume we are in 2013. You invested in a disciplined systematic way by investing in the Nifty on the first working day of every month throughout the year. The average value for your investment in Nifty would be 5,908. Your friend, on the other hand, wanted to time the market. While it is impossible to know if the market is at its lowest level, let us assume for the moment that your friend was very lucky. He got it spot on and invested in Nifty on August 28 at 5,285 which was the lowest level of Nifty on a closing basis in the last 2 years. Apparently compared to you, your friend got a great bargain. But let us now be realistic. It would have been practically impossible for your friend to know on August 28 that 5,285 would have the bottom of the correction. In fact since Nifty was on declining trend from June to August that year, he would have waited beyond August 28 to see if it corrected further. If he waited for 7 days, Nifty would have been at 5,680 which is just 4% below your average cost. If he waited for 15 days, he would have invested in Nifty at a higher cost than your average cost. Such is the nature of bull market. Buy on dips is the age old investment advice for bull markets. Disciplined investing, such as mutual fund systematic investment plans (SIPs) ensures that you can buy on dips rather than waiting forever for a deep enough correction.

Is volatility and risk one and the same thing

As per finance text book definitions, volatility is a measure of risk. By its very nature, equity as an asset class is volatile. While bear markets are usually characterized by higher volatility, even bull markets are volatile. But is volatility is the same as risk for long term investors? It is true that, we as investors get jittery with volatility. There are mutual fund investors who made 30% in the last one year, ready to jump out if the market fell by 5%. Good diversified equity funds gave compounded annual return of over 20% over the last 10 years, even including the prolonged bear market phase, when the market fell by more than 50%. Why should a 5% correction matter to the long term investor? Once the investor understands the nature of a multi-year secular bull market, the investor should be able to ride out the volatility and get good returns over a sufficiently long investment horizon.

Nature of a secular bull market

There are three phases of a multi-year secular bull market.

• Early Stage: Early stage of a long term secular bull markets is characterized by high expectations and generally low economic growth. Equity returns are high because stocks bounce off the bottom. Usually large cap stocks do well in this period relative to midcap stocks. As the market transitions from early stage to mid stage, the economic outlook gradually improves. As the bull market matures, midcap starts outperforming in terms of returns. The Indian equity market, experts argue is in the early stage of a multi-year secular bull market, since it is characterized by the attributes described for this stage.


• Mid stage: The economic outlook keeps improving through the mid stage of the secular bull market. Corporate earnings show higher growth during this stage. While most developed equity markets grow at the pace of earnings growth, in a market like ours the growth is even higher as positive sentiments pushes up valuations (P/E ratios). The mid stage of the bull market is the longest stage and can last for many years. For our market, this can be especially a high growth stage if the Government implements its agenda of structural reforms. It is important for investors to remain invested in equities, because during this stage they can benefit from the power of compounding of returns.


• Late stage: This stage is characterized by high corporate earnings and GDP growth. High levels of exuberance sets in the market. Stock prices rise the fastest during this phase. Investors will recall how the equity market was in 2007. Market pundits, all of them turn bulls in this stage, start talking about new paradigms. Remember, how they talked about Indian market being decoupled from global markets, when there were early warning signals of a global recession. Unfortunately many retail investors enter the market at that stage attracted by high equity returns. When the market cycle turns, as it inevitably does, the late entrants lose out the most. The smart investors exit the market towards the end of the late stage. However, just like timing your entry in the market is extremely difficult, as discussed earlier, timing your exit is equally difficult. Having said that, even if you are not able to time your exit, if you have long time horizon for your equity investment, you can still make very good returns. For example, if you invested in ICICI Prudential Top 100 fund in 2003 and exited at the bottom of the bear market in 2008 (when the market fell almost 50% on a year on year basis), you would still made a compounded annual return of nearly 24%.

Conclusion

In this article, we have discussed that timing a bull market is difficult. Investors should follow a disciplined approach by investing in mutual fund systematic investment plans to get good returns to take advantage of volatility and buy on dips. Investors should not be worried about volatility and have a sufficiently long time horizon to benefit from the power of compounding. Most importantly, investors should ensure that their asset allocation is aligned with their investment objectives.

https://www.advisorkhoj.com/company/ICICI-Prudential-Mutual-Fund/articles/Investing-in-surging-bull-market#.VLPUn9KUez4

Dear All,

Please find below a good article as appeared in Morning Star for your reading:

Oil's slide and investing conditions

The sharp decline in oil prices reinforces the importance of purchasing stocks at a reasonable margin of safety, says Morningstar's Matt Coffina.

On what has been the biggest driver in the slide in oil prices…..

It seems to be a combination of both supply and demand. So, certainly, the outlook for economic growth in much of the world has been weakening in recent months, particularly outside of the U.S. in Europe, China--and China really has some follow-on effects in other emerging markets. And then that has coincided with very robust supply, especially out of North America but also a return of production in Libya and surprisingly strong production in much of the Middle East.

So, the combination of strong supply and relatively weak demand has really hammered oil prices. As of right now, Brent crude oil is trading at about $67 a barrel, which is basically a 5-year low and down from $115 as recently as June of this year.

On whether this has caught him and the rest of the market off guard….

I think we were definitely taken by surprise in terms of the extent and the speed of the decline. I wouldn't say that this level of volatility is necessarily unusual or abnormal for commodity markets. In the last 5 years, the price of oil has ranged anywhere from $67 a barrel now to a high of about $128 a barrel. Over the past 10 years, the low was maybe $34 a barrel and the high was $144 a barrel. So, oil prices are very, very volatile and I think that's important for investors to keep in mind.

If you are going to be an investor in energy, you need to be willing and able to weather these kinds of disruptions that will happen from time to time.

The impact on companies…

It definitely has an impact on the intrinsic value of pretty much any energy company.

I think the most important thing that we've learned from this experience is that commodity prices are just very, very difficult to predict. Our analysts do their absolute best. It's necessary to come up with a long-run oil price forecast to be able to value energy companies. Right now, our long-run oil price forecast is still $100 a barrel, which is based on what we think is the marginal cost of production for the highest-cost resources--things like oil sands mining, ultra-deep water.

But that marginal cost is really a moving target. There is a very high degree of uncertainty, in my view, surrounding that $100 a barrel price forecast, and it could just as easily be $75 or $125. So, for example, if demand weakens, it could push some of these very high-cost sources of supply off of the supply curve altogether. Maybe you don't need oil sands mining or ultra-deep water to meet demand anymore, in which case they are no longer relevant to setting the price. Similarly, the price of oilfield services and equipment: As companies pull back on their capital expenditures, the price of equipment tends to go down, labour becomes more easily available, and all of that can weigh on marginal costs.

So, there's a very high degree of uncertainty surrounding future commodity prices.

In The impact of falling oil prices, Patricia Oey, Senior Manager Research Analyst, Morningstar, explained why she feels India is an unusual play on falling oil prices. 

India has been one of the best-performing markets in 2014 on both domestic and foreign investors' optimism that the new prime minister is going to foster more business-friendly reforms. The MSCI India Index is up about 25%. So, it may seem right now is not the best time to invest in India, but there is a catalyst that may help sustain the current rally--and that is falling oil prices.

Historically, India has had a hard time. They have a lot of fuel subsidies they pay out to their citizens, and they've had a hard time cutting these subsidies. And these subsidies have weighted on the fiscal deficit, they've hindered the country's ability to invest in infrastructure, and also impacted the country's credit ratings. But with falling oil prices, the prime minister saw an opportunity to cut the fuel subsidy at a time when it won't have such a large impact on the end consumer.

And falling oil prices also have a lot of positive knock-on effects on the Indian economy. India imports about 70% of its oil needs, so with falling oil prices we're seeing less pressure on the country's current account, we're seeing inflation fall, and this may prompt the Indian central bank to cut interest rates a little earlier than expected. So, we're seeing consumers more confident with more cash in their pockets. These improving macroeconomic trends combined with Modi's ambitious reform program might create a virtuous cycle and help set the stage for India's long-awaited next phase of growth.

Derivatives – Median Quarter-Sigma Order Size – Explained

Derivatives – Median Quarter-Sigma Order Size – Explained Posted: 03 Jan 2015 10:32 PM PST Median Quarter-Sigma Order Size is a derivative rule to include new Stocks in Futures and Option Market. Before getting detailed into the Median Quarter-Sigma Order Size let look into the criteria for Selecting FNO Stocks. Criteria for Selecting FNO Stocks. 1)Median Quarter-Sigma Order Size (MQSOS) for a stock to be eligible to enter into FNO list is Rs10 Lakh. And after entering into the derivative segment the stock has to maintain MQSOS of Rs5 lakh on average otherwise the stock will be removed from derivatives list. 2)Market Wide Position Limit (MWPL) in the stock should be greater than Rs300 Cr. And after entering into the derivative segment the stock has to maintain MWPL of Rs200 Cr. 3)The stock shall be chosen from amongst the top 500 stocks in terms of average daily market capitalisation and average daily traded value in the previous six months on a rolling basis 3)Minimum average monthly turnover for the last three months should be Rs100 Cr to retain in FNO Segment. Average Median Quarter Sigma Order Size and MWPL Value of securities for the period June 16, 2014 to December 15, 2014 S. No Symbol Average Median Quarter sigma Order Size (Rs.lakhs) MWPL Value (Rs. crs) 1 AARTIIND 2.88 202.24 2 ABAN 56.10 357.04 3 ABB 7.42 1156.28 4 ABGSHIP 3.33 78.79 5 ABIRLANUVO 26.15 1842.29 6 ACC 32.98 2682.94 7 ADANIENT 69.43 2512.24 8 ADANIPORTS 53.50 3005.20 9 ADANIPOWER 41.82 656.96 10 AEGISCHEM 2.30 114.69 11 AHMEDFORGE 13.28 106.40 12 AIAENG 6.97 857.95 13 AIL 3.09 244.26 14 AJANTPHARM 12.19 434.26 15 AKZOINDIA 3.50 320.24 16 ALBK 38.66 515.44 17 ALEMBICLTD 4.56 82.62 18 ALLCARGO 2.31 246.21 19 ALOKTEXT 38.53 175.45 20 ALSTOMT&D 3.02 594.80 21 AMARAJABAT 12.11 1262.83 22 AMBUJACEM 27.02 3325.21 23 AMTEKAUTO 26.32 468.51 24 ANANTRAJ 7.14 112.93 25 ANDHRABANK 38.18 387.05 26 APARINDS 4.80 121.39 27 APLLTD 8.90 407.73 28 APOLLOHOSP 12.81 2117.66 29 APOLLOTYRE 63.80 1267.21 30 ARVIND 65.95 810.71 31 ASHOKLEY 95.66 1436.21 32 ASIANPAINT 44.90 6391.08 33 ASTRAL 2.30 350.69 34 ATUL 7.04 370.62 35 AUROPHARMA 95.81 2892.40 36 AXISBANK 103.87 14933.90 37 BAJAJ-AUTO 40.11 7661.26 38 BAJAJCORP 2.60 232.17 39 BAJAJELEC 8.19 141.31 40 BAJAJFINSV 4.68 1490.81 41 BAJAJHIND 7.58 143.48 42 BAJAJHLDNG 3.56 1869.80 43 BAJFINANCE 8.69 1172.35 44 BALKRISIND 6.80 516.50 45 BALLARPUR 4.30 109.73 46 BALMLAWRIE 4.96 348.76 47 BALRAMCHIN 4.72 173.75 48 BANKBARODA 70.85 3814.17 49 BANKINDIA 69.78 1171.29 50 BASF 3.04 291.23 51 BATAINDIA 13.55 762.94 52 BBTC 5.58 206.27 53 BEL 28.36 921.09 54 BERGEPAINT 8.19 658.10 55 BFUTILITIE 10.32 157.79 56 BGRENERGY 6.28 52.30 57 BHARATFORG 43.49 2367.28 58 BHARTIARTL 71.20 10669.27 59 BHEL 100.51 5139.18 60 BHUSANSTL 2.82 163.52 61 BIOCON 26.53 714.09 62 BIRLACORPN 2.35 260.74 63 BLUEDART 3.87 692.21 64 BLUESTARCO 1.98 378.23 65 BOMDYEING 7.90 131.75 66 BOSCHLTD 13.06 3253.08 67 BPCL 71.93 4696.32 68 BRITANNIA 13.11 1986.16 69 CADILAHC 8.88 1598.27 70 CAIRN 43.90 4099.36 71 CANBK 76.44 1094.95 72 CAPF 8.15 138.62 73 CARBORUNIV 1.71 372.66 74 CARERATING 8.93 824.52 75 CASTROLIND 10.17 1384.27 76 CCL 7.19 218.46 77 CEATLTD 47.18 360.47 78 CENTRALBK 6.79 232.98 79 CENTURYPLY 5.92 188.43 80 CENTURYTEX 40.26 590.79 81 CERA 3.64 190.63 82 CESC 24.81 822.57 83 CHAMBLFERT 4.46 234.29 84 CHENNPETRO 6.37 87.05 85 CIPLA 54.53 6352.63 86 CMC 7.71 592.39 87 COALINDIA 68.47 4564.61 88 COLPAL 18.92 2500.13 89 CONCOR 7.29 2176.62 90 COROMANDEL 4.09 660.54 91 CORPBANK 3.70 393.26 92 COX&KINGS 14.85 321.60 93 CRISIL 5.96 875.87 94 CROMPGREAV 63.59 1373.02 95 CUB 7.05 1074.92 96 CUMMINSIND 9.46 2324.28 97 CYIENT 2.35 894.40 98 DABUR 20.53 2723.75 99 DCBBANK 8.56 481.53 100 DCMSHRIRAM 3.71 201.77 101 DEEPAKFERT 3.45 125.79 102 DELTACORP 18.45 252.45 103 DEN 3.62 318.17 104 DENABANK 9.14 183.15 105 DHANUKA 3.04 139.79 106 DHFL 15.16 624.52 107 DISHMAN 15.47 89.09 108 DISHTV 25.99 377.51 109 DIVISLAB 22.48 2209.08 110 DLF 156.67 1325.72 111 DREDGECORP 4.55 51.67 112 DRREDDY 57.72 7071.18 113 ECLERX 2.89 366.02 114 EICHERMOT 56.85 3498.56 115 EIDPARRY 2.75 419.28 116 EIHOTEL 3.50 805.79 117 EMAMILTD 6.45 959.62 118 ENGINERSIN 14.80 464.34 119 EROSMEDIA 6.94 162.24 120 ESCORTS 17.59 198.92 121 ESSDEE 4.55 95.77 122 ESSELPACK 2.77 159.22 123 EXIDEIND 28.85 1496.95 124 FCEL 2.05 203.64 125 FDC 2.31 161.72 126 FEDERALBNK 40.27 2479.84 127 FINANTECH 12.98 93.15 128 FINCABLES 8.34 484.07 129 FINPIPE 3.65 335.43 130 FORTIS 4.85 284.77 131 FRL 8.12 199.92 132 FSL 10.75 203.19 133 GAIL 38.63 5256.57 134 GDL 5.35 433.79 135 GESHIP 2.93 794.47 136 GILLETTE 2.40 521.50 137 GLAXO 2.49 1242.47 138 GLENMARK 29.54 2271.04 139 GLOBOFFS 2.83 205.22 140 GMDCLTD 2.67 224.23 141 GMRINFRA 98.08 621.39 142 GODREJCP 8.70 2430.22 143 GODREJIND 9.56 471.81 144 GODREJPROP 3.25 250.25 145 GOLDBEES 10.87 416.34 146 GPPL 9.54 910.65 147 GRANULES 14.81 164.31 148 GRASIM 27.52 3891.26 149 GREAVESCOT 3.33 331.51 150 GRUH 4.47 774.36 151 GSFC 7.23 518.14 152 GSPL 6.37 777.67 153 GUJFLUORO 4.28 493.01 154 GUJRATGAS 6.20 404.97 155 HATHWAY 2.03 535.84 156 HAVELLS 28.77 1482.23 157 HCL-INSYS 14.78 126.41 158 HCLTECH 72.72 8981.02 159 HDFC 86.51 36179.70 160 HDFCBANK 69.46 27763.75 161 HDIL 104.42 430.39 162 HEROMOTOCO 79.54 7448.41 163 HEXAWARE 26.27 372.93 164 HINDALCO 104.28 3932.53 165 HINDCOPPER 3.17 141.45 166 HINDPETRO 70.60 1812.94 167 HINDUNILVR 42.11 11194.15 168 HINDZINC 17.40 4840.75 169 HITACHIHOM 8.81 112.61 170 HMT 1.82 59.38 171 HTMEDIA 1.89 160.11 172 IBREALEST 54.99 390.85 173 IBULHSGFIN 16.37 2264.14 174 ICICIBANK 134.28 28277.95 175 IDBI 30.66 519.04 176 IDEA 53.54 6023.44 177 IDFC 90.00 4913.93 178 IFBIND 5.68 98.71 179 IFCI 57.31 587.53 180 IGL 10.82 688.69 181 IL&FSTRANS 5.41 261.33 182 INDHOTEL 6.70 1072.96 183 INDIACEM 30.55 407.79 184 INDIANB 5.21 314.06 185 INDOCO 4.47 222.01 186 INDUSINDBK 28.44 5527.17 187 INFRATEL 8.86 2849.32 188 INFY 233.99 34638.01 189 INGERRAND 4.03 148.11 190 INGVYSYABK 7.19 1719.96 191 INOXLEISUR 4.17 170.57 192 IOB 19.97 273.37 193 IOC 35.52 5326.41 194 IPAPPM 2.57 53.76 195 IPCALAB 17.11 926.71 196 IRB 73.84 691.98 197 ITC 130.95 57364.51 198 J&KBANK 13.18 584.14 199 JAGRAN 1.05 328.08 200 JAICORPLTD 9.23 81.72 201 JBCHEPHARM 5.12 162.19 202 JETAIRWAYS 18.32 152.73 203 JINDALPOLY 7.01 63.13 204 JINDALSAW 8.08 336.13 205 JINDALSTEL 74.55 1026.13 206 JISLJALEQS 33.79 525.79 207 JKCEMENT 6.03 281.99 208 JKLAKSHMI 12.83 491.37 209 JKTYRE 33.84 275.19 210 JMFINANCIL 5.78 247.60 211 JPASSOCIAT 171.74 857.09 212 JPINFRATEC 12.47 166.63 213 JPPOWER 51.05 283.38 214 JSWENERGY 16.89 763.45 215 JSWSTEEL 45.11 3506.69 216 JUBILANT 3.16 196.62 217 JUBLFOOD 21.26 955.99 218 JUSTDIAL 34.15 1474.12 219 JYOTHYLAB 4.38 277.98 220 KAJARIACER 5.05 405.68 221 KALPATPOWR 3.92 229.68 222 KANSAINER 1.25 656.96 223 KARURVYSYA 8.04 1236.43 224 KEC 3.78 259.22 225 KITEX 7.55 232.95 226 KOLTEPATIL 5.16 75.35 227 KOTAKBANK 39.37 10680.14 228 KPIT 9.54 523.05 229 KRBL 4.34 188.55 230 KSCL 11.97 506.78 231 KTKBANK 30.23 538.75 232 L&TFH 29.74 602.59 233 LAKSHVILAS 7.11 267.19 234 LAOPALA 2.46 151.92 235 LAXMIMACH 3.71 687.45 236 LICHSGFIN 60.75 2445.52 237 LT 173.11 25769.92 238 LUPIN 36.50 6935.13 239 M&M 58.26 11066.44 240 M&MFIN 21.76 1649.44 241 MAGMA 1.93 268.22 242 MAHINDCIE 4.02 90.01 243 MAHINDUGIN 3.90 166.45 244 MAHSEAMLES 5.00 167.84 245 MANAPPURAM 14.66 407.25 246 MARICO 5.42 1686.27 247 MARKSANS 20.12 221.43 248 MARUTI 70.93 8634.54 249 MAX 9.01 1207.05 250 MCLEODRUSS 9.04 294.32 251 MERCK 2.91 125.38 252 MHRIL 2.44 111.46 253 MINDTREE 13.41 1683.13 254 MMTC 8.28 122.89 255 MOIL 3.94 213.70 256 MONSANTO 14.58 275.35 257 MOTHERSUMI 32.27 2577.23 258 MPHASIS 4.31 672.49 259 MRF 43.99 2044.35 260 MRPL 4.29 206.69 261 MTNL 9.23 146.08 262 MUTHOOTFIN 3.30 374.03 263 NATIONALUM 13.61 595.64 264 NAUKRI 5.61 1273.55 265 NBCC 40.22 191.23 266 NCC 12.53 270.57 267 NFL 1.73 37.09 268 NHPC 51.39 621.78 269 NIITTECH 4.86 316.72 270 NITINFIRE 2.74 43.75 271 NMDC 36.82 2222.13 272 NRBBEARING 1.84 102.08 273 NTPC 51.27 5829.07 274 OBEROIRLTY 4.27 429.49 275 OFSS 11.87 1426.68 276 OIL 14.92 2367.89 277 OMAXE 0.66 116.35 278 ONGC 121.76 20321.00 279 ORIENTBANK 39.42 701.29 280 ORIENTCEM 2.23 372.08 281 PAGEIND 8.10 1015.10 282 PCJEWELLER 10.68 252.76 283 PEL 5.16 1315.72 284 PERSISTENT 5.81 696.07 285 PETRONET 14.75 1484.63 286 PFC 71.40 2143.74 287 PFIZER 3.37 314.85 288 PFS 22.66 248.44 289 PGHH 2.67 1076.02 290 PHOENIXLTD 1.27 373.52 291 PIDILITIND 7.12 1330.41 292 PIIND 4.65 502.49 293 PNB 74.15 2972.97 294 POWERGRID 30.15 6200.75 295 PRAJIND 5.85 161.39 296 PRAKASH 5.62 82.76 297 PRESTIGE 4.38 561.38 298 PSB 2.84 62.30 299 PTC 25.41 479.90 300 PURVA 2.23 107.78 301 PVR 6.68 409.83 302 RADICO 3.60 128.16 303 RAIN 2.58 193.51 304 RAJESHEXPO 5.31 442.00 305 RALLIS 6.56 418.97 306 RAMCOCEM 3.58 933.27 307 RANBAXY 42.94 1840.14 308 RASOYPR 1.13 38.16 309 RAYMOND 13.45 359.41 310 RCF 12.50 142.99 311 RCOM 45.60 2126.37 312 RECLTD 46.56 2241.02 313 REDINGTON 3.34 744.95 314 RELCAPITAL 107.95 1183.45 315 RELIANCE 131.29 32889.15 316 RELINFRA 86.00 1582.77 317 RENUKA 15.92 139.87 318 REPCOHOME 4.32 427.61 319 ROLTA 10.33 167.23 320 RPOWER 49.34 957.75 321 SADBHAV 3.79 392.72 322 SAIL 46.23 1480.62 323 SANOFI 2.24 671.97 324 SBBJ 3.88 207.22 325 SBIN 353.40 17936.86 326 SBT 3.42 119.79 327 SCI 6.28 204.15 328 SHASUNPHAR 8.82 149.51 329 SHOPERSTOP 1.77 265.76 330 SHREECEM 5.86 2183.05 331 SHRIRAMCIT 1.60 1251.23 332 SIEMENS 25.34 1607.35 333 SIMPLEXINF 2.36 145.45 334 SINTEX 37.41 408.38 335 SJVN 3.30 197.54 336 SKFINDIA 3.43 668.05 337 SKSMICRO 22.39 793.67 338 SOBHA 7.94 371.01 339 SOUTHBANK 14.60 733.49 340 SPARC 7.61 287.36 341 SREINFRA 6.73 236.29 342 SRF 13.72 491.75 343 SRTRANSFIN 25.03 3481.09 344 SSLT 74.90 4696.24 345 STAR 18.97 677.80 346 STCINDIA 2.69 23.25 347 SUNDARMFIN 3.51 1753.62 348 SUNDRMFAST 4.05 409.33 349 SUNPHARMA 73.55 12676.69 350 SUNTV 17.19 627.38 351 SUPREMEIND 2.98 785.67 352 SUVEN 17.36 167.16 353 SWANENERGY 0.37 69.14 354 SYMPHONY 3.15 328.68 355 SYNDIBANK 34.65 500.40 356 TATACHEM 19.96 1513.41 357 TATACOFFEE 7.57 160.35 358 TATACOMM 18.59 653.16 359 TATAELXSI 16.59 213.38 360 TATAGLOBAL 30.28 1258.11 361 TATAINVEST 2.69 171.88 362 TATAMOTORS 118.17 12639.80 363 TATAMTRDVR 39.23 3129.14 364 TATAPOWER 46.43 3340.37 365 TATASPONGE 38.91 94.13 366 TATASTEEL 169.40 5976.49 367 TBZ 3.02 52.52 368 TCI 4.34 128.73 369 TCS 144.78 27133.01 370 TECHM 62.42 7976.57 371 TECHNO 1.13 166.97 372 TEXRAIL 10.81 163.37 373 THERMAX 4.85 965.18 374 THOMASCOOK 5.26 233.60 375 TIDEWATER 3.55 225.17 376 TIMETECHNO 1.46 82.17 377 TIMKEN 7.55 162.28 378 TITAN 34.30 3036.65 379 TORNTPHARM 4.69 984.76 380 TORNTPOWER 9.72 698.46 381 TREEHOUSE 2.16 234.95 382 TRENT 2.08 645.22 383 TTKPRESTIG 8.00 254.12 384 TTML 7.44 85.87 385 TUBEINVEST 2.74 611.69 386 TVSMOTOR 46.34 937.54 387 TVTODAY 9.77 109.68 388 UBL 7.10 992.50 389 UCOBANK 35.44 384.08 390 UFLEX 5.52 114.70 391 ULTRACEMCO 43.15 4964.73 392 UNICHEMLAB 2.52 203.10 393 UNIONBANK 69.86 1028.21 394 UNITECH 223.40 530.37 395 UNITEDBNK 4.27 54.59 396 UPL 32.54 2034.85 397 USHAMART 2.66 72.10 398 VAIBHAVGBL 3.42 130.49 399 VAKRANGEE 5.32 825.33 400 VGUARD 5.68 226.18 401 VIDEOIND 2.87 238.40 402 VIJAYABANK 4.98 223.54 403 VIPIND 6.57 139.48 404 VOLTAS 51.49 1261.09 405 VSTIND 2.65 379.25 406 VTL 4.70 203.80 407 WABCOINDIA 2.88 411.29 408 WELCORP 2.31 209.55 409 WHEELS 3.09 58.00 410 WIPRO 52.23 7075.14 411 WOCKPHARMA 71.00 461.36 412 WONDERLA 8.72 86.57 413 YESBANK 104.95 4491.69 414 ZEEL 32.86 4070.22 415 ZENSARTECH 3.33 271.65 416 ZYDUSWELL 1.77 152.36 Quarter Sigma Order Size is the order size (price x Volume) required for the stock price movement of 1/4th of Standard deviation of the stock price and it should be greater than Rs10 lakh. Higher the Quarter Sigma order Size means higher the liquidity and tougher for stock operators to manipulate the stock price movements to some extent. For Example Aban has an Quarter Sigma Order Size of Rs56 lakhs. Anyone one want to move the stock price by 1/4th of standard deviation of stock price his order size should be around Rs56 lakh. SEBI longback had setup an Advisory Committee on Derivatives headed by Prof. J. R Varma to inter alia review the eligibility criteria of stocks on which stock options and single stock futures could be introduced. You can read the brief report on Development and Regulation of Derivative Markets in India. And time to time the eligibility criteria will be reviewed by the committee to maintain market integrity and to protect investors. ICICIDirect in its newsletter stated that “In the last two occasions, the NSE has announced the inclusion of new stocks in F&O on November 19 (six stocks) and September 8(five stocks). We expect a new list to come out in January, 2015 where stocks may be picked from the below given stocks”. Newsletter mentioned the list of stocks likely to be included in the F&O segment in the next round of review, which is expected in January 2015. The list follows. 1. Aban Offshore 2. Dewan Housing Finance 3. Jammu and Kashmir Bank 4. Oil India 5. Sintex Industries 6. South Indian Bank 7. Bharat Electronics 8. Ipca Labs 9. Kaveri Seeds 10. National Aluminium 11. JK Lakshmi Cement Read the Full Report here Related Readings and Observations Understanding Financial Regulatory Bodies in India In India, the financial system is regulated with the help of independent regulators, associated with the field of insurance, banking, commodity market, and capital market and also the […] The Latest Rules And Regulations Of SEBI Crowdfunding SEBI( Securities and Exchange Board of India) has very recently changed its rules and regulations of crowdfunding. If you do not have any idea on the term crowdfunding, it is worth to […] How to Become a Registered Investment Advisor in India The career of investment advisors comes with great demand. They are the professional that provides exclusive assistance to the clients when the main area of concern is related with the […] Understand The Way To Demat Certificates Of Your Physical Shares It is evident that holders of physical shares are mostly senior citizens that find it pretty impossible and difficult to convert the same in demat format. A recent study has brought into […] The post Derivatives – Median Quarter-Sigma Order Size – Explained appeared first on Marketcalls.