and whoever wants to be first must be slave of all. For even the Son of Man did not come to be served, but to serve, and to give his life as a ransom for many.”

17 Feb 2016


 Hi friends, Investor tips: Inflation:  A simple explanation of inflation is that it refers to a situation where too much money is chasing too few goods.  Inflation indicates  a rise in the price of goods and  services.  Along with the growth of GDP, if the inflation rate also increases, then the real rate of growth would be very low.  Inflation and stock markets have a very close relationship.  If there is inflation, the stock market is adversely affected.  The price of stock is directly related to the  performance of the company.  Inflation typically results in the following:  1.  High raw material cost.  2. Non-availability of cheap credit due to rise in interest rates.  3.  Low earnings. Infrastructure Facilities:  Good infrastructure facilities affect the stock market  favourably.  Infrastructure facilities are essential for the growth of the industrial and agricultural sectors..  A wide communications network is a must for the growth of the economy.  Regular supply of energy without any power cuts will enhance production.  The banking and financial sectors should also be strong enough to provide adequate support to industry and agriculture.  In India, even though infrastructure facilities have been developed, they are not enough.  The government has liberalized its polity for the communication, transport, and power sectors.  For example, the power sector has been opened up to foreign investors with assured rates of return. Monsoon and Agriculture:  In spite of technological advancements, Indian agriculture still depends heavily on the monsoons.  Good monsoons are a boon for agriculture.  Agriculture is directly and indirectly linked to many industries.  For example, the sugar, cotton, textile, and food processing industries depend upon agriculture for raw materials.  Farm equipment, fertilizer, and insecticide industries supply the inputs used in agriculture.  A favourable monsoon leads to higher demand for these inputs, a bumper crop , and more disposable income in rural areas.  This leads to  buoyancy in the stock  market.  When the monsoon fails, agricultural production and hydro power generation decline.  They cast a shadow on the share market. Buyers’ bargaining power:  Here, customers of the industry’s product are referred to as buyers.  A strong customer can demand a higher quality product or service for the same price.  If they cannot get that, they may move over to other similar products.  Usually, the more the number of customers for the industry’s product, the less their commercial power over it.  If the number of producers is high, they can switch from one to the other.  When the products are similar and standardized, the possibility of a switch is high. Earnings of the Company:  The earnings of a company decide its stock value in the market.  The company pays dividends from its earnings.  Growing earnings result in high valuation of the stock.  Sometimes, the prices of a stock may be high but not the earnings.  This is because the market anticipates a future rise in the earnings of the company.  In simple terms, earnings are the operating profit of the company. The income for a company is generated through operating sources and non operating sources. The source of operating income vary from industry to industry. For the service industry no tangible products is involved and income is generated through the sale of services. Take the case of commercial Banks, its income is the interest on loans and investments. Interest income is referred to as the operating income. But in the case of industries producing tangible goods, earning arise from the sale of goods. Good luck.                                                                       See you later.                             

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