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Author: pettyfrank | Total views: 2 Comments: 0
Word Count: 991 Date: Tue, 13 Nov 2007 6:19 PM

Stock market in India

The bull-run in the Indian stock market came to a halt on May 18, as the Bombay Stock Exchange recorded its worst fall.

The benchmark index of the Bombay Stock Exchange closed at 11,391 down 826 points, which is the highest ever fall for the Mumbai Stock Exchange. The NSE Nifty closed with a loss of 246 points at 3388. Taking cues from both global and domestic developments, the markets entered their first correction mode in two years.

These were the figures on May the 18th when the stock market came down crashing. This was one of the biggest crashes that Stock Market had suffered over a long period of time. But this was speculated by most of the stock experts and largely by the investors at large. Foreign funds have invested huge amount in India 's stock market and are currently driving the stock market rally. Fears of further rises in US interest rates, increasing inflation and growing risk aversion among international investors are driving the Asian markets down and the Indian market has followed the trend. But currently the stock markets are running on a rampage bull kissing the magical figure of 20K a dream come true for most share traders

It serves as the best investment option for the following reasons:

* Possibility of high returns
* Easy liquidity
* Unbeatable tax benefits
* Income from dividends

Bombay Stock Exchange is the largest, with over 6,000 stocks listed. The BSE accounts for over two thirds of the total trading volume in the country. Established in 1875, the exchange is also the oldest in Asia. Among the twenty-two Stock Exchanges recognised by the Government of India under the Securities Contracts (Regulation) Act, 1956, it was the first one to be recognised and it is the only one that had the privilege of getting permanent recognition ab-initio.Apart from the BSE, which is the most accepted stock index in India, BSE uses other stock indicators as well. These are BSE 500, BSE 100, BSE 200, BSE PSU, BSE MIDCAP, BSE SMLCAP, BSE BANKEX, BSE Teck, BSE Auto, BSE Pharma, BSE Fast Moving Consumer Goods, BSE Metal, BSE Metal and BSE Broadcast. The BSE Broadcast is a large timepiece on the wall of the BSE, which constantly exhibits the most recent stock quotes from the market. It is also displayed on one of the foremost business-news channels in India -- NDTV Profit. The Singapore Exchange (SGX) has already made a strategic investment in Bombay Stock Exchange (5%) for US$42.7m.

You must have read this statement many a times in the TV commercials and also on the form that you must have filled and wondered what does this line mean. Let me tell you this line means. I do agree that the mutual funds are subject to market risk but that market risk if you go to consider is very minimal. Thanks to the stringent regulations employed by SEBI (Stock Exchange Board of India)..
Please note that mutual funds do not provide any guarantee of returns or capital (initial amount you invested).
Mutual funds are a good place to start because they offer you the opportunity to diversify quickly into a range of investments
Hence, nobody can assure you of returns, or even not suffering losses. Going strictly by the book, the possibility of a fund performing exceptionally poorly and all your savings dwindling to nothing is quite real.
Having said that, please remember that over the long term, the possibility of such an extreme event is quite negligible. If the historical performance is to go by, then there are hardly any diversified equity funds which have delivered negative returns over the last 10 years, if one would have invested through the SIP.
Therefore, there is no need to be overly concerned. Mutual funds are a very convenient vehicle for individual investors.
Moreover, returns tend to be commensurate with the kind of risk you take. Mutual fund schemes are riskier than the assured return schemes like fixed deposits and bonds. But, they also have the potential to generate far superior returns.
It is upon the investor to strike a balance between the return he wants to earn and the risk he wants to take. Having done that, he can invest in an appropriate combination of assured return schemes (National Savings Certificate, Public Provident Fund, post office schemes, bonds from institutions) and mutual funds.
Mutual Funds come under the regulation of the Securities and Exchange Board of India and have to meet stringent regulations. Therefore, they cannot just close shop and run away with investors' money.
Mutual Funds comes under SEBI scanner and so does all the other public offering and there is a security deposit that they have to pay for getting listed. The chance of being fraudulent is negligible. With the growing number of people investing in mutual funds they are making it more reliable.
In fact, India happens to have quite stringent rules and norms regarding the setting up of an AMC and making periodic portfolio disclosures (stating where their have invested their money).
Moreover, in the set-up of a mutual fund, there is a body of trustees who are supposed to look after the interest of investors whose money is being managed under different schemes.
The mutual fund itself is a trust registered under the Indian Trust Act, and is initiated by a sponsor. The sponsor is the person who acts alone or with another corporate to establish a mutual fund. The sponsor then appoints an AMC to manage the investment, marketing, accounting and other functions pertaining to the fund.
Therefore, while it may be possible for a mutual fund to inflict losses to the investors as a result of poor fund management, they just can't wind up their operations and run away with your money.

For more information please contact Kotak Securities