A Day in the Life of the Momentum Trader

A good way to illustrate momentum trading is to look at a typical day of a momentum trader:

He gets up an hour before the market opens, switches on his computer, goes online and immediately logs into one of the popular trading chat rooms or message boards.

When looking at these boards, our hero focuses on stocks that are generating a significant amount of buzz. He looks at stocks that are the focus of trading alerts based on earnings or analyst recommendations. These are stocks rumored to be in play, and they are anticipated to provide the most significant price movements on high volume for that trading day.

While surfing the web, he will also turn on CNBC and listen for mentions of companies releasing news or positioned to undergo significant movement.

He eyes the morning equity options pages to find stocks with significant volume increases in calls. Any increase in calls written indicates that a price increase or decrease above or below the option premium is expected.

Once the market opens, he watches his initial list of stocks in relation to the rest of the market: Are his stocks going up when the market goes down? Are they significantly increasing in price in relation to the rest of the market? Are they behaving consistently with his expectations based on his pre-market assessment?

He will then narrow his watch list to include only the strongest stocks: those increasing more rapidly on higher volume than the rest of the market, stocks trading contrary to the market and stocks with movements clearly propelled by external factors.

Analyzing the Charts
Next, a momentum trader will analyze the list of stocks he has chosen to focus on by examining their charts. The primary technical indicator of interest is the momentum indicator - the accumulated net change of a stock's closing/ending price over a series of defined time periods. The momentum line is plotted as a tandem line to the price chart, and it displays a zero axis, with positive values indicating a sustained upward movement and negative values indicating a potentially sustained downward movement.

That upward or downward momentum indicator often immediately portrays a breakout for the stock, which means that even a period or two of sustained momentum will propel that stock in the direction of the breakout. While watching the momentum chart, he has his Level 2 screen up, looking for evidence of a push, where bids start to line up (indicated by the presence of market-maker limit orders) and offers start to disappear.

When the trader believes he has identified a breakout, he does not necessarily need to jump immediately into the stock. He is not generally worried about missing the first one or two breakout ticks, but he has his hand on the buy trigger (or sell trigger in the case of a short sale, but a short sale must be done on an uptick) for one of the next momentum periods. And he is generally not too concerned about hitting the bid either, as he will have an easier time getting in at the market price. Then he places a market order.

Momentum Trader: In Position
Once he has entered into his position, the white-knuckle ride and nail-biting begins. Will the stock continue to move strongly in the direction of his momentum line? Or will it immediately change course, proving the momentum chart wrong and perhaps pointing to a trap set by the market maker? Or will the breakout fizzle quickly, providing some limited upside but not enough profit to make the trade worthwhile?

Whether the momentum fizzles almost immediately or continues to build, the trader remains glued to his screen. He is looking for a saturation point, where orders start piling up on the offer and bidding slows or thins at the market price a few levels back on the Level 2 screen. The saturation point does not mean an immediate end to the momentum, but it may signal that the top is near. So the trader sells his position (or covers his position in the case of a short sale) and takes his profits to pack it in for the day or to move on to the next stock on his list.

Note that in the event of a breakout gone wrong, where a stock immediately turns direction and moves against the trader's wishes, a special strategy applies. Far from hoping for yet another reversal to make the stock go his way, this astute trader immediately cuts his losses and sells (or covers) his position. It is often a far better strategy to take a small loss early after a bad trade than to hope for a reversal later in the day. The odds generally ensure that a small loss will turn much larger the longer the trader waits with crossed fingers.

And here's where psychology rules the roost: The astute trader realizes that there will be bad trades that result in losses. Accepting that fundamental fact of trading life helps us manage our money so that trades that go swimmingly will outweigh these losses.

Pitfalls of Momentum Trading
Like all investing - and particularly active trading - momentum trading is not without risk. The pitfalls of momentum trading include:

• Jumping into a position too soon, before a momentum move is confirmed.
• Closing the position too late, after saturation has been reached.
• Failing to keep eyes on the screen, missing changing trends, reversals or signs of news that take the market by surprise.
• Keeping a position open overnight. Stocks are particularly susceptible to external factors occurring after the close of that day's trading - these factors could cause radically different prices and patterns the next day.
• Failing to act quickly to close a bad position, thereby riding the momentum train the wrong way down the tracks.

The Bottom Line
Because of these pitfalls, momentum trading is fraught with peril that can easily destroy even the most disciplined and knowledgeable trader. However, this style also offers the most potential for significant profit, since rarely any factor inside or outside the market drives a stock as powerfully as momentum. With a proper understanding of the technique, sufficient knowledge of the risks and a willingness to take an occasional loss, momentum trading offers an appealing choice for the aspiring trader who enjoys living on the edge.

Major styles of equity trading

Lets review all the major styles of equity trading:

• Scalping
  The scalper is an individual who makes dozens or hundreds of trades per day, trying to "scalp" a small profit from each trade by exploiting the bid-ask spread.
• Momentum Trading
  Momentum traders look for stocks moving significantly in one direction on high volume and try to jump on board to ride the momentum train to a desired profit. For example, Netflix (Nasdaq:NFLX) surged over 260% to $330 from January to October in 2013, which was way above its valuation. Its P/E ratio was above 400, while its competitors' were below 20. The price went up so high primarily because many momentum traders were trying to profit from the uptrend, which drove the price even higher. Even Reed Hasting, CEO of Netflix, admitted that Netflix is a momentum stock during a conference call in October 2013.
• Technical Trading - Technical traders are obsessed with charts and graphs, watching lines on stock or index graphs for signs of convergence or divergence that might indicate buy or sell signals.
• Fundamental Trading
  Fundamentalists trade companies based on fundamental analysis, which examines corporate events such as actual or anticipated earnings reports, stock splits, reorganizations or acquisitions.
• Swing Trading
  Swing traders are really fundamental traders who hold their positions longer than a single day. Most fundamentalists are actually swing traders, since changes in corporate fundamentals generally require several days or even weeks to produce a price movement sufficient enough for the trader to claim a reasonable profit.

Novice traders might experiment with each of these techniques, but they should ultimately settle on a single niche, matching their investing knowledge and experience with a style to which they feel they can devote further research, education and practice

Is Foreclosure Ever a Good Idea?

By Shirley Pulawski

Over the last few years, since the crash of the housing bubble and in this troubled economy, many homeowners have homes worth significantly less than what they paid, greatly diminished incomes, and other issues. Foreclosing on a home has major ramifications that can last for years, but for some, foreclosure may seem like the only option. Here, we take a look at some of the details and alternatives.

Many Americans bought homes during the housing bubble which are now worth much, much less than the asking price at the time. There are many reasons home prices have fallen, resulting in underwater mortgages. As an example, entire neighborhoods were built in a booming frenzy by construction companies during the bubble. In some of these areas, the construction created a glut of housing, and many houses stayed vacant. The homeowners who bought into these ghost towns are faced with empty neighborhoods and homes valued at far less than what they owe. Other more established neighborhoods emptied out as homeowners defaulted on sub-prime mortgages, causing homes in the entire neighborhood to fall in value. The homes are hard to sell, even at a loss, and can be just as hard to rent out to others.

And it’s no secret that incomes around the country have dropped. Most everyone knows someone who has lost a job and taken a pay cut upon returning to work. Mortgage payments which were easy to meet under better wages have now become increasingly harder to pay, and many homeowners are finding themselves struggling to stay on top of the bills.

So, while some bought homes they couldn't quite afford, lured by low interest rates and all-too-willing, unscrupulous lenders and they ended up in default. However, for many Americans, home purchases that seemed like a wise investment at the time have turned into financial disasters. Many are wondering what to do next with a mortgage that is too high, homes that won’t sell for enough to pay for the mortgage, or homes which are simply unlikely to sell at all.

Foreclosure is one way out of the game, but with steep implications. It can completely destroy one’s credit rating for years to come, and make it difficult to get a needed loan later on. It could hurt a family’s chance of renting if a credit report is part of the applicant screening process, thereby limiting rental options. Any open lines of credit may be lowered once the default goes on record, and some credit card companies may change other terms. Further, there can be steep tax implications come April 15.

If a homeowner is already behind on payments, these ramifications may already apply.

The advantages of foreclosure include being able to stay without paying rent for a while. In some states, this could be a year or longer, which could buy time to catch up financially, find better employment, or otherwise develop ways to increase income. During that time, it might also be possible to negotiate new terms with the bank, especially if the home is in a difficult housing market. However, we’ve all heard the horror stories about cut-throat practices by some lenders who have foreclosed on homes illegally, so it is still very risky.

An alternative to foreclosure is a short sale, although the negative impact to credit scores can be just as bad as a foreclosure on record. A short sale is an agreement with the bank to sell the house for less than what is owed, and the homeowner can be allowed to walk away with minimal cost, or given terms to pay back the deficiency which the homeowner can more easily handle financially.

Often, people facing these difficult choices are advised to seek other alternatives. If it’s possible to secure more affordable living quarters (perhaps with a family member, for example), renting out the house can be an option bring in income and avoid foreclosure. However, this route can bring its own problems as well, especially if the tenants prove to be troublesome. The home will still require maintenance and homeowners fees.

While advice to rent the home out can be thrown around liberally and by people who mean well, it's not always an option. Some homeowners associations may have restrictions on renting, or it may even be banned, so it may not even be possible to rent the home. Even without a homeowner’s association, many municipalities have laws which restrict rental terms. For example, in many college towns, year-round residents have worked to pass laws that keep homes from becoming college flop houses by encouraging local government to pass laws allowing no more than two unrelated adults to live in one single-family home, or similar laws. Research on local laws will be required to determine if renting is actually an option.

Of course, none of these tips can replace legal advice from a qualified lawyer. Laws vary greatly by state and region, and the unique set of circumstances any homeowner is in vary as well, so there are no simple solutions when the mortgage has turned into a monster. Foreclosure can be a way out from under an enormous burden, but not without long-term consequences. It’s important that anyone considering foreclosure consider all the options open to them and seek the advice of qualified professionals.

Will the US follow Cyprus in time to come

It was not too long ago when the economy of Cyprus flirted with the danger of going 'bankrupt'! Despite being barely a US$ 23 bn economy, the possibility of sovereign bankruptcy sent shivers down global markets. Imagine if that were to happen with a US$ 15.6 trillion economy! The largest and most powerful in the world! Yes, we are indeed referring to the US and its abysmal state of affairs. 

Now consider the statistics. Cyprus had fiscal deficit of 4.9% and bank assets comprised 716% of its GDP in 2012. The US had fiscal deficit of 7% and bank assets comprised nearly 170% of its GDP in 2012 (including off balance sheet items). In fact the top 6 banks in the US alone cornered assets valued at 93% of its GDP. The risk of debt default and collapse of the banking system in the US is therefore hardly worth neglecting. 

But that is exactly what the Obama government has been doing so far. Infatuated to the US Fed's money printing policies, the government kept ignoring the warnings of debt ceiling. The debt ceiling limit of US$ 16.699 trillion was breached in May 2013 itself. However, the Treasury chose to adopt extraordinary measures to keep paying its bills. Until the US government finally pulled down the shutters this week, for the first time in 17 years. To get out of this situation, the US government will have to make drastic cut in expenditure or raise taxes or both. In the worst case, it will have to default on debt obligations, which could also lead to a Cyprus-like sovereign crisis. The downside of being the largest economy in the world is that a Cyprus-like bailout will be very difficult for the US to come through. 

Thus whether or not the US does a 'Cyprus', the US' debt ceiling is itself an alarm bell for the world economy. Traditionally the US has been able to borrow cheap in the international markets. But a default could damage confidence and drive up the cost of borrowing for Americans. The ripple effect could create a chaotic situation in the international debt market as well. 

Investors therefore need to make not just their stocks and gold but also their debt investments with extreme caution. The word 'impossible' can no longer be associated to the risks in global and domestic economy. 

Debt is a doubled-edged sword

Debt is a doubled-edged sword. On the positive side, it can accelerate growth and development. But if not controlled well, it can lead to severe financial crises. And history is proof. Almost all financial crises have their roots in excessive debt. 

This is what worries people about China. The rapid pace at which it has grown its economy is indeed commendable. But now, it is sitting on a massive debt pile. And there is no quick fix solution for such a debt problem. 

An article in CNN Money validates our concerns. In the aftermath of the 2008 financial crisis, Chinese policymakers eased credit and doled out several stimuli. And now, the dragon economy is finding it tough to curb the fast mushrooming corporate and government debt. 

Take the local government debt for instance. As per certain estimates, local debt stood at close to 20 trillion yuan at the end of last year. That's nearly one-third the size of China's GDP. 

What is even more worrying is that this figure has almost doubled in just 3 years. The latest set of numbers from a nationwide government debt audit is expected shortly. We wouldn't be too surprised if we witness a major financial crisis in China anytime soon. 

IMF's GDP forecast for 2013 and 2014

IMF's GDP forecast for 2013 and 2014 is a mixed bag. While growth in 2013 for most of the countries is nothing much to write about, the scenario in 2014 is not very compelling either. Countries such as China, Japan and Brazil are expected to record lower GDP growth in 2014 as compared to 2013. Others are expected to do better. India in particular is estimated to grow by 5.1% in 2014 as against 3.8% in 2013. This year has been a challenging one for the country as economic activity has remained sluggish, rupee has weakened and consumption has dwindled. But the monsoons have been good. And while growth of 5% is nowhere to what it was before the global crisis, considering various challenges, it is certainly an improvement. 

IMF's GDP forecast for 2013 and 2014

Source: The Economist

Fed's QE to rise to US$ 1 trillion a month

The US government averted a potential default by raising the debt ceiling. This means that the quantitative easing (QE) program will continue at least for the time being. 

But the US Fed had stated (earlier) that it will roll back the QE over a period of time. So what will actually happen? Marc Faber is of the opinion that the QE program will never really end. He has stated that the Fed will eventually raise the program to US$ 1 trillion a month! 

It is currently at US$ 85 bn a month. He feels that this is necessary as the US has basically put itself in a box like situation. The economy cannot grow without the QE funds. Unfortunately the economy has not really displayed any spectacular growth with the QE funds either. 

The reason for this is that the funds have helped only a selected section of people and not the economy at large. We have stated several times that the US is in a catch 22 like situation. The cheap funds have become akin to a drug. And the withdrawal from it would be even more painful than the addiction itself. 

Why foreign businesses are moving from India?

Partnerships are critical for expansion. In order to expand into different geographies most corporates partner with a local or a regional player. This helps them navigate regional waters more smoothly. Local players are aware about regional dynamics while the foreign partner may bring in strong technical knowhow. 

However, partnerships also cause friction. And this is what has been happening as far as partnerships between Indian and foreign corporates are concerned. Take the case of Bharti-Walmart for example. Both have decided to part ways due to growing differences over the way the business needs to be managed. In fact, this is not a one off case. There have been quite a few exits in the past on similar grounds. 

Difference of opinion is one reason why exits have happened. But the fact is that trust deficit between partners is also on the rise. From the foreign partner's perspective, doing business in India has become much riskier than ever before. For one, the foreign partner does not control the domestic business. It is generally being done by the local player. Thus, the foreign partner cannot keep an eye on day to day operations. Also, if the domestic player gets involved in any kind of engagement which is unethical, it can impact the foreign parent's brand name. 

Take the case of Australia's fastest growing coffee chain, Di Bella. In this case, both the foreign and Indian partners are involved in a legal battle blaming each other for professional and personal misconduct. Further, foreign players are increasingly becoming circumspect of tying up with domestic players because of corporate governance issues. 

This again brings to the fore the corruption menace prevalent in India. Further, with rising bureaucratic interference, the ease of doing business in India has also deteriorated. In fact, noted industrialists have been vocal in raising their voice on this matter. Some have also expressed their willingness to move overseas. 

This trend of partnership friction has its roots in corruption, inept bureaucracy and poor working environment. If the situation does not improve, more frictions could certainly happen. This will not only lead to withdrawals by foreign partners but will also make others, who are planning to enter into India, more nervous. 

Does friction between local and overseas partners on business issues signify that foreign capital will be hard to come by in future?

Stock Recommendation : Adani Enterprises ltd.

Stock Recommendation : Adani Enterprises ltd.
This counter having posted swing low around 126 level formed a base around 145 level.

On a weekly chart the counter managed to close above its downtrend line.
With other indicators looking positive we expect counter its medium term up trend.
Recommend Buy at 164 with closing stop loss of 144 target 195-205 in a medium short term.

Shall we expect some returns from equities.

Equities as an asset class are risky in nature; which is why one expects higher returns - as compared to relatively safe instruments such as bonds and fixed deposits - from them. But then, what should be the ideal return that one should target? One may hear multiple responses to such a question. Some of which include capital doubling every year, every three years, every five years, etc. 

At the end of the day, one needs to be realistic about the same. 

Over the years, many models and tools have been derived which the investing community uses to come up with answers to the question - what returns one should expect from equities. 

Given the riskiness of equities, what these tools essentially try to arrive at is the additional premium that equities need to compensate for their riskiness and volatility. All this is in comparison to a safe asset class such as along term government bond. To calculate such premiums, many factors need to be taken into consideration depending on the model used. These include assumptions on GDP growth, target inflation, expected yield on indices, earnings growth forecast, amongst others. In short, a good number of assumptions are to be taken just to arrive at this figure of risk premium. Broad calculations on these can give results varying from 8% to 20%. More so, as one keeps tweaking such assumptions, the number could move higher. 

Since there are complications behind each factor - which in itself require many assumptions, we believe one can keep things simple by calculating the compounded returns the benchmark index, BSE-Sensex. This needs to be done over a long period. For instance, the index has returned 14.2% on a compounded basis for more than two decades. As the index represents the top blue chip safe stocks in the entire stock universe, we believe this would be a good figure for expected return target. 

One thing that needs to be kept in mind here is that the above calculation takes into consideration the historical data. Having said that, the same is calculated over a very long term period thereby taking into account the many cycles and volatility that the market has witnessed over the years. 

Home Loan Prepayment : Important Things to Consider

1. Reduction of Interest Payouts – The most obvious benefit out of prepayment is that your interest payout reduces. Prepayment of home loan results in an immediate reduction of the outstanding principal on the home loan which results in less interest being accrued on the loan account. For example, if you have an outstanding loan of Rs. 10 lacs at 10% interest, you would be annually paying approx Rs. 1 lac interest. If you prepay the loan by Rs. 1lac, your interest would reduce from Rs. 1 lac to Rs. 90K per year – approx 10 K saving per year for the duration of the loan.

2. Prepay – without reducing the tenure – Generally when you are going to prepay your home loan, you have two options. Either you can reduce the number of home loan installments or keep the number of installments same but reduce the monthly mortgage payments (EMIs). For example, if you prepay your home loan by Rs. 100,000, you may be provided two options :

a) Instead of paying your monthly EMI (e.g. Rs. 10K per month ) for original tenure of 120 months, reduce the tenure of the same monthly EMI of Rs. 10K to 110 months (illustrative) OR

b) Keep the original number of EMIs the same, e.g. 120 months, but reduce the monthly EMI per month from Rs. 10K to Rs. 9.5K, i.e. a reduction of Rs. 500 per month in monthly cash outflow.

I prefer the second option, as it results in improving the monthly cash flows by a lesser per month cash outflow and easing the family budgets. Any further cash savings on a monthly basis can then be used to further prepay the loan if needed.

Stock Recommendation Dabur

The counter seems to have formed a strong base around 166 level as it is witnessing regular bonce back from the said level.
The counter formed a strong bullish candle followed by a sort of pin bar candle on a daily chart.
Besides the counter is trading very close to its all time high.
Considering all these facts and with indicators looking quite bullish ,
We are of the opinion that the counter is all set to touch new heights in near future.
Recommend buy at 171.7 with closing stop loss of 166 target 185-192 in short term.

Stock Recommendation EMCO LTD.

The counter after a long consolidation managed to close above rs.14.5 mark with decent volumes.
With other indicators too looking quite bullish further upside in a short term can't be ruled out. Recommend Buy at 14.75
with strict Stop Loss of 12.5
Target 18-29 in a short term.

7 new bank licence coming soon

Despite being acutely affected by the economic slowdown, this sector remains in the wish list of government and private sector alike. The licenses for new banks in India have been under deliberation for a while now. RBI governor Dr Rajan has committed to issuing the licenses by end of the fiscal. And despite the RBI's initial reservations about allowing too many entities to foray into banking it seems the number is not too small. As per Economic Times, the RBI has decided to issues banking licenses to 7 applicants. More importantly, in the RBI's own words, the entities fetching the license will not be 'look-alikes'. The RBI had earlier proposed differentiated licensing. This is a practice already followed in the US and Singapore. Differentiated licensing could enable specialists such as infrastructure lenders or gold loan companies to do niche lending. Such banks get a regulatory treatment different to what it is for existing banks. For now, nothing except the number of licenses to be issued is finalized. However, we believe that the new entities will not immediately have a meaningful impact on the level of competition in the sector. In fact, it will be at least two years before that is the case. Meanwhile, the inefficient entities need pull up their socks. 
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Can India survive QE tapering by Fed?

For years, emerging-market currencies benefited from the US Fed's ultra-low interest rates and easy-money policies. Since the time the US Fed adopted near zero interest rate, cheap money in the developed markets found its way to emerging markets, particularly ones in Asia. 

But this trend showed a sharp reversal when Fed Chairman Ben Bernanke signaled the move to exit quantitative easing (QE). More than US $47 bn has been withdrawn from global funds' investments in emerging market stocks and bonds since May 2013. The largest reaction of this was on the currencies of current-account-deficit (CAD) countries. These include the Indian rupee, Brazilian real and Turkish lira. These currencies were most vulnerable to Fed guidance because they rely so heavily on foreign capital flows to fund their current account gaps. This sell-off reminded everyone of the 1997 Asia financial crisis. But, according to CNN Money, the present situation is very different. 

The depreciation in Asian currencies is not a reflection of their regional economic weaknesses. The economic fundamentals of the region have strengthened due to the prudent economic policies implemented since the 1997 crisis. Similarly, Asian companies and financial institutions have built stronger balance sheets and healthier gearing levels. This has made them more resilient against market volatility. Asian policy makers are also more proactive and pre-emptive in managing asset price inflation and consumer credit. 

Additionally, Asian economies have benefitted from rising intra-regional trade, investments and consumer affluence. These trends will continue to drive the region's economic growth and cushion it from possible global capital outflows. It is true that QE pullback announcement has put pressure on Asian currencies. But it is more due to the result of improving growth prospects in the US. As a result money is starting to return back to the US. 

The US Fed's decision to postpone the "tapering" of its easy money policy has given emerging Asia valuable breathing space. But with continued uncertainty over the Fed's actions, how long before the Asian market sell-off begins afresh? 

It remains to be seen to what extent a scaling back of QE will impact financial market conditions in emerging Asia. What is clear, however, is that asset prices that have become unnaturally inflated by cheap money will correct. Whether or not in the proportion of 1997 crisis, the correction will be painful, for Asia in general and India in particular. 

Do you think Asia can survive the QE tapering by Fed?
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Inflation by WPI and CPI

The Reserve Bank of India (RBI) in its September quarter review surprisingly increased the repo rate onconcerns over inflation. One macro issue in India that deserves renewed attention is the preference for the wholesale price index over the consumer price index for tracking inflation. Indeed, the WPI is given much greater importance than the CPI by the Reserve Bank of India for calibrating its monetary policy. This is a serious policy faux pas. Or core inflation - defined as non-fuel, non-food inflation? In the past, WPI and CPI inflation moved closely together, so ambiguity on which rate to focus on was not such an issue. But over the last five years they have consistently diverged - largely due to food inflation, which has a much bigger weight in the composition of the CPI Index. India's use of WPI inflation for monetary policy is in contrast to the reliance on CPI inflation by central banks and governments in other countries. Perhaps the RBI should rethink the way it gauges inflation. 

Inflation by WPI and CPI

Source: Business Standard

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Can the auto industry recover this fiscal?

Things have never been so bad for the Indian auto industry. For instance, as per SIAM, car sales in India have fallen 4.7% in the first six months of this fiscal. This is the sharpest decline in half-year sales since 2002-2003. Indeed, auto sales were subdued in FY13 and the trend is expected to continue for FY14 too as slowdown in the economy, higher interest costs and fuel costs take its toll. Besides cars, commercial vehicles have been particularly hit hard as the fortunes of this segment are closely linked to that of the Indian economy. The silver lining in the cloud this fiscal has been healthy monsoons. And so there are hopes that this should raise incomes which will spur some demand for cars. But a broader recovery this fiscal looks doubtful. 

Meanwhile, many of the auto companies have gone in for price hikes despite such difficult conditions to pass on costs related to the steep depreciation for the rupee. Most of them are focusing on product launches as well. While the latter may not do much in terms of bolstering the fortunes of the sector in a weak environment, we believe that in the longer term product launches are essential on account of the stiff competition in the auto space. 

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Basic Things To Know Before Buying Travel Insurance

If you are planning to travel abroad, then don’t forget to take travel insurance. When you go to an unknown place, you might never know what might come-up next.

You might be able to deal with situations where you lose your air ticket or any cancellation of the ticket. But circumstances like accidents, loss of your wallet, passport or other important documents might result in havoc.

Here are few things you must know about buying travel insurance, as listed by Economic Times.

1. Personal Details

Personal details like name, passport number, date of birth, contact details are the most necessary ones. Along with that other information like journey details, such as the place you are visiting, visa, trip duration, dates of travel and numbers of travelers are also important to get the travel insurance.

2. Cover Insurance

The insurance company provides you with various plans, each offering a different kind of benefits. When you are choosing travel insurance, make sure that pick the one that rightly suits you.

3. Premium

The premium of your travel insurance varies depending on various factors like the place you are going to visit and the duration you are going to stay there.

4. Policy

You can either apply for the policy by meeting a policy agent directly or through online. If you are applying online, you will get a conformation letter immediately to your personal e-mail along with the policy document.

The policy will have all the personal information of the policy holder like name, policy number, and other details for claim submission

Trade deficit: Where to from here?

India's trade deficit declined to US$ 6.8 bn during the month of September 2013. This is the lowest figure since March 2011. The same was largely on account of a sharp 18.1% reduction in imports - due to lower crude prices and gold and silver imports. On the other hand, merchandise exports increased by 11.2%. But the key question here is, is this a reason for India to cheer? Well, not entirely as this may not be a sustainable trend. Crude prices - which are not in our control - were lower last month and helped the country report better numbers. Further, while the investment scenario in the country may be dull at the moment, as and when things take turn for the better, companies will look at importing more capital equipment which would change the trade deficit scenario entirely. The long term solution we believe is to boost exports, by making India more competitive on a global scale.

Trade deficit: Where to from here?

Data Source: Mint

Buy Stock :ABAN OFFSHORE ABAN (NSE Code)

Buy Stock : ABAN (NSE Code) 
SIGNAL : MULTIPLE TOPS CROSSED WITH HIGH VOLUME. 
Stop Loss : 220 
Target : 254 (Short term) 

Stocks down by more than			Stocks up by more than
15% in the past one month			15% in the past one month
GITANJALI	-27.38%		HGS	72.01%
PLETHICO	-21.85%		TVSMOTOR	51.66%

Disclaimer : Trade at your own risk. You are solely responsible for your decision to invest in the stock market or buy or sell any specific shares. The Publisher and the Author accept no liability for any losses or damages of any kind that may result from your investments in the stock market

Importance of credit score in improving chances of getting a loan

Many Financial Experts share  several tips on how to improve one's credit score and brighten prospects of getting a bank loan. Originally propagated by credit information companies like Credit Information Bureau (India) Ltd (Cibil), Experian and Equifax as part of their campaign to educate the average individual about the importance of a good credit history, the dos and don'ts list has acquired a demonic flavour at the hands of some of these experts. For example, a 35-year-old executive at a private firm was told by his financial adviser that he should consider taking a loan just because it will improve his credit score. Another was asked to get rid of his multiple credit cards to boost his credit score.

The expert wouldn't budge even after the person explained to him that he was using those cards for specific purposes like air travel, buying petrol, eating out and so on and that he gets discounts and other benefits on those cards. Also, those cards were issued to him free by the banks he had accounts with. "Even I was told recently that I should go for a loan because it will enhance my credit score and my chances of getting a loan from a bank in future," says Gaurav Mashruwala, a certified financial planner. "Somehow the Gujju blood in me doesn't buy the argument that I should pay interest now on a loan to get a loan in future."

Enter Credit Score

What's the score is almost always about cricket in this country. However, loan seekers have started dealing with another score --credit score -- in the past few years. Cibil was launched in 2000, but in the  past three to four years the company has managed to get into the consciousness of loan seekers with their credit score and credit information report.

"When we started out there was very little consumer awareness about the importance of having a good credit history or a good credit score. Our efforts were to fill this gap through a series of educative articles in the media," says Harshala Chandorkar, senior vice-president, consumer relations, Cibil. However, these seemingly simple pointers (minus the valuable details) have become almost a mission statement for some selfstyled advisers.

Bankers' Day at Work

Mashruwala says he finds it incredible that banks wouldn't go beyond credit score while assessing loan applications. "I don't think any bank would overlook the history of your relationship with it," he says. Rajesh Kumar, senior executive vice-president and head of debt management, risk intelligence and business analytics at HDFC Bank, clears the air: "The objective of a bank's credit appraisal process is to evaluate the capacity and the intention of a customer to repay a loan as per the agreed terms." He goes on to explain the process in detail: the bank collects information, relevant documents from the applicant and the credit information from bureaus.



This information is then processed against the predefined credit policy of the bank and, depending on the type and quantum of loan, typically banks collect the applicant's personal information. "This provides insights into the applicant's capacity to repay a loan. The credit bureau report provides details of the applicant's existing and closed loans, card details like amount sanctioned, tenure and promptness of repayment.


This clearly indicates the intention of the applicant, in terms of discipline towards debt obligations," he adds. Jairam Sridharan, head of consumer lending and payments at Axis Bank, says it is always a combination of factors that helps secure a loan. "Of course, a credit score of above 650 would definitely help, but a bank will also look into a host of other factors, including age, growth profile of the individual, demographic profile, the profile of the assets..."

Fixing the Problem

"Typically, banks inform the customer about the reasons for the rejection of her loan. If the customer finds that the reason given is wrong information about poor credit repayment in the past, then she needs to contact the credit bureau and the lender who reported the same and get the same rectified," says Kumar of HDFC Bank.

"The regulators have put in place a well-established process with clear timelines to help the customer carry out the rectification." Jairam says individuals shouldn't look for oversimplified methods to improve credit scores. "Individuals should remember that if they have a loan for an extended period of time, they should make payments on time." Chandorkar also asks individuals to pay attention to the details.

At the end of it, it all boils down to good financial habits, say financial advisers. Multiple credit cards won't spoil your chances of getting a loan, but your spending and repayment habits definitely can. Similarly, entertaining every other offer for a personal loan won't automatically disqualify for a loan, but you may have to do some explaining to the bank. This is because your credit history will show that you are always looking for credit. Always remember that there are credit information companies maintaining your record of payments on loans and credit cards, and submitting it to banks and other lenders on a monthly basis. And that eventually settles your credit score.  

Top Seven Reasons Why I Use My Credit Card for Everything

I charge absolutely everything to my credit card. Everything. Even $3 purchases if I can. Why, you ask, in a world where credit cards are "evil," would I do such a thing?
I am a credit card junkie (and have been for many years) for a number of reasons:

7. It builds up a great credit rating.

By charging and paying off up to thousands of dollars in expenses each month, I have built up a rock-solid credit rating — the best one possible. So whenever I have sauntered into the bank for a loan, I have been accepted right away, and at the lowest possible interest rates, with no security deposits required.

6. It's quick and easy.
Swiping a card these days is often as quick as (if not faster than) paying with cash and counting out coins.

5. It's great for accounting and spending reports.

Since I don't dole out cash, or make purchases on my debit card (and I rarely use checks), all my monthly spending is nicely bundled into one report — my monthly credit card statement. Not only that but my current credit card of choice actually categorizes my spending for me, so at a glance I can see how I've spent my pennies for the month and year-to-date.

4. I don't need to carry cash.

Trips to the bank machine are few and far between, as $60 can last months depending on my spending needs.

3. Automated billing is great.

Cell phone bills, utilities, cable, you name it. If I can sign up for automatic billing, I do. It doesn't mean I don't look at each carrier's statement to ensure the charge is correct. But it does mean that on a monthly basis I don't have to worry about paying any bills (other than my credit card!) - they're already paid.

2. Almost everybody takes Visa.

From the coffee shop to the grocery store to online spending to travelling, to…well…everywhere. I have Visa, MC, and AmEx, but I find that Visa is most widely accepted worldwide.
And my number one reason for charging everything to my credit card (drum roll, please):

1. Frequent flyer miles.

Since I started to charge all expenses to my credit cards, I have collected and redeemed miles for everything from fancy dinners to sports gear, to multiple flights all around the world. Hey — just for spending money I would always have spent, I've been able to take advantage of all sorts of free swag. What's better than free?
Note: The trick to a spending plan such as the one I have laid out here is a rock-solid budget. I never (read: never ever) spend beyond my ability to pay off the bill in full each month

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What would happen when the US starts tapering off its Quantitative Easing (QE) program?

What would happen when the US starts tapering off its Quantitative Easing (QE) program? The flood of money that has entered the emerging markets would start to pull back. And when that happens, prices of all asset classes are expected to fall. We have already seen this happening when the US Fed announced a possibility of a taper. Therefore it is indeed a scary thing to imagine what would happen when the actual tapering off starts. This is something that is worrying nearly all the emerging markets and India is no exception. To all these countries, the International Monetary Fund (IMF) has a simple advice. It is encouraging these countries to give the flexibility to domestic investors to invest abroad . The funds so invested could be repatriated when times take a turn for the worse. This would help support the country's currency and capital markets especially during events that lead to an exodus of foreign capital.

On the face of it, this sounds like a simple and easy to follow advice. But the technicalities are complicated. For India to do so, it would have to open up its capital account. This is something that has been discussed in the past but has not been implemented so far. The problem for India is the pitfall related to freeing the capital account. For although it allows for free inflow of funds, it also allows for a free outflow of funds. And it is the latter that has been more worrisome for India. With the economy in the condition that it is, and the investor confidence sinking on a daily basis, policy makers would be worried about an immediate outflow of funds if they open up the capital account. However, for long term stability, this is a pre-requisite. Therefore policy makers would do well to enact policy reforms and implementation to strengthen the economy from within.

Penetration of ATMs in India remains low

Offering adequate financial services to an economy like India is no mean task. One reason for this is high illiteracy. Then again, even amongst those literate, there is very little knowledge about financial services and products. It is the metros and Tier 1 cities which typically tend to have adequate financial services, with the rural regions lagging far behind. That is why Indian banks have no choice but to bear the burden of reaching out to the hinterlands. One of the parameters for gauging the development of financial services in the country is the number of automated teller machines (ATMs) set up. As today's chart of the day shows, these were quite poor in India in 2012 when compared to its peers in the BRIC region.

Penetration of ATMs in India remains low

Data Source: The Economist

What would happen if the Indian govt. shuts down?

For the first time in 17 years, the US government has faced a shutdown. This has been on account of an impasse between the Democrats and the Republicans on the broader fiscal policy. The key issue of the funding bill has been the healthcare law otherwise known as Obamacare. Because of the government's relentless bailouts, overall government debt has risen to unsustainable levels. The healthcare law is expected to pile on the pressure on finances. This law in particular has largely been unpopular with the Republicans. The latter has been gunning for a cut in government spending and are pushing the Democrats to affect a cut. But they are in no mood to relent. And so the shutdown is expected to continue until such time an agreement between the two parties is reached.

As far as the impact goes, as per an article on Firstpost, as many as 1 m government employees could face unpaid leaves or missed paydays as part of the spending cuts. Overall, the credibility of the US government will be called into question. As reported in Bloomberg, a partial shutdown of the federal government would cost the U.S. at least US$ 300 m a day in lost economic output. The impact is likely to accelerate if it continues as it depresses confidence and spending by businesses and consumers. This does not bode well for an economy which is already reeling under recession and stagnant growth.

Now what would happen if a similar scenario was to play out in India? After all, a political impasse in India is nothing new. It is something which the country is witnessing even now. So what will happen if the Indian government shuts down? Considering the current sorry state of affairs, it may not be such a bad thing we believe. The government at present has failed to do anything concrete or meaningful for the economy. For most of its tenure, it failed to move on the reforms front. Later some measures were announced, but the implementation of the same remains largely hazy. Scams and large scale corruption, blatant bureaucracy, stained finances and perpetual bickering with the Opposition has rendered the government largely ineffective. So if it is not going to do anything, then maybe a shutdown is not such a bad idea. What is more, if this results in bureaucratic government staff going on unpaid leaves, it is actually a boon. It may do quite a bit in lowering the government's overall unproductive expenditure. On a more positive note, who knows, but such an experience might just kick it into action.

Do you think that the Indian government shutting down might be a good thing for India?

Why you should use a credit card

Why you should use credit cards 
Credit cards provide us with the privilege of responsible short-term borrowing. Yes, they can be abused, but when used wisely and responsibly, credit cards provide valuable benefits, including:

Convenience. With plastic, there's no need to carry wads of cash with you everywhere you go.

Peace of mind. Unlike credit cards, if you lose your wallet, the cash in it is gone forever. Worse, those seen with large sums of cash are more vulnerable to being robbed. I hate being robbed. In fact, it's happened to me twice.

Expense tracking. Credit card companies send monthly statements of all your purchases that make it very easy to track your expenses.

Consumer protection. How many times have you bought something on the Internet and never received  it? Or didn't get what was advertised and the merchant refused to give you your money back? A simple call to your credit card issuer is usually all that's required to fix the problem.

Insurance benefits. Often, credit card companies offer product insurance if an item is stolen, and many offer free rental car insurance and attractive travel insurance.

Extended warranties. Some credit card companies will offer extended warranties on certain items.

Credit history. When they're used responsibly, credit cards help establish your credit history and build your FICO scores,  which is especially valuable if you need longer-term credit extended to you. Those with high FICO scores get the most favorable interest rates, which can mean savings of tens or hundreds of thousands of dollars over the life of a loan

Rewards. Whether it's cash back, airline miles, free gasoline or other incentives, plenty of credit cards offer rewards. I've received thousands of dollars in cash and other perks over the years by simply using my credit card to make purchases

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Indian farmers lost money in bubble burst

Another bubble burst. No this time it's not about asset classes such as real estate or gold or else. It's the farming business. The breeding of an Australian bird-Emu has met its end. Now, "Emu" is a large flightless bird resembling an ostrich and tasting like beef. Farmers across the world including India made some quick and high bucks with Emu farming. Emu raising for its meat, eggs and oil was a lucrative business opportunity some 5 years ago.

However, today the picture is grim. The herd mentality instinct led to mad rush of farmers in this business. Therefore, the feed costs tripled in a period of 3 years. And with the exploding emu population, the price of emu meat fell almost 25% in the same period. Buyers diminished. And farmers lost their money. Hence, killing the birds was the only option left to the farmers in order to reduce their losses. Not just that. The economics pertaining to this business also failed. Few entrepreneurs accepted deposits from the investors to capitalize on emu farming. Almost as high as 75% returns were promised. People were taken on a ride with tall assurances of investments doubling in 3 to 6 months. But the emu scandal plagued by auctioning of emus at fire-sale prices played spoilsport. Payments stopped and investors' concerns surmounted. Thus, oversupply, increased costs and greed led to the fall of the emu farming business. With more than half of India's emu farmers leaving the business and the investors losing money, the emu business is in a state of limbo.    

RBI asks temples to declare gold holdings

The Indian Government, saddled with twin deficits, has now turned to the Gods for help. It is perhaps with this intention that the Reserve Bank of India has sent notices to richest Indian temples to disclose their gold holdings. It is important to note here that gold is the second biggest imported item in the country after oil. Hence, high gold imports are a key culprit behind the record trade deficit. Now most of this gold is either hoarded or some part is donated to temples. As per the World Gold council report, the gold that lies with Indian temples is estimated at US$ 84 bn. Just to give you an idea, this is 56% higher than annual value of gold imports in FY13.

While the central bank is calling it a data collection exercise, the Hindu temples are in no mood to entertain. One may argue that the gold lying with the temples is unproductive and it will do the nation some good to bring it back into circulation. However, one must not forget that the Government has no right on this gold, unless the religious institutions volunteer. The mess that the economy is in these days is because of the rampant corruption and mismanagement of public funds by the Government. There is no guarantee that the temple gold will not be subject to the same kind of corruption and mismanagement. Instead of eyeing the temple's gold, the Government should perhaps put in efforts to bring back the black money that has been stashed abroad.

Washington's impending shut down

You would think that political deadlock and playing the blame game is something that is prevalent in only India. But that appears to not be the case. Indeed, the US is facing a political crisis too as both the parties are not able to come to an agreement over the country's broader fiscal policy. And that is why there is the possibility of Washington facing a shut down from today. This means that due to the automatic spending cuts, many government agencies are expected to close down. And the non essential government staff will be forced to go on an unpaid leave. The spending cuts also seem to have impacted anti-poverty programmes and early childhood education among others. On top of that, the healthcare law 'Obamacare' has also been the subject of dispute between the parties. US has been plagued with the problems of recession, massive debt burden and unemployment for quite some time now. Relentless money printing by the US Fed has done almost nothing to jump start the economy. The only thing it has done is to take government debt to unsustainable levels. So spending cuts will have to be the norm if there is any hope of bringing the debt down. Anything else will only delay the issue further before it blows up on the US economy.    

Will Shanghai's free trade zone be a game changer?

Do you know what's the best way to launch a big bang project? Especially one that has not been tried before and is a game changer of sorts? Well, the best approach in a situation like this would be to undertake a small pilot testing. In other words, the idea is to launch on a small scale first so that any glitches are taken care of before the final, large scale roll out. And it looks like China has taken this advice really to heart. As per CNN, the dragon nation has launched a new free trade zone in Shanghai over the weekend. Although no details are out yet, the new zone is expected to make it easier to do business in a small part of China. In other words, it is an attempt to move from an economic model that has so defined China over the past two decades. After years of explosive growth, the current growth model of mass manufacturing is in grave danger of burning itself out. And therefore the Government is making a desperate attempt to wean away from it and replace it with a more liberalised, free market approach. While the policymakers' heart is in the right place, its success or failure will play a significant role in shaping China's coming decades we believe.      

Writing off by Banks

The problem of banks having to write off NPAs has become so acute for India that even rating agencies have sounded alert. And it is not very difficult to figure out why. As per data from International Monetary Fund (IMF), Indian banks sport the least equity capital buffer amongst banks in Asia. This means that the Tier I (only equity) capital less net non performing assets is the least for banks in India. In the event of a deluge in NPA, the possibility of equity capital getting eroded is highest in the case of Indian banks. While the RBI is not yet calling NPAs a systemic risk for Indian banking, the problem is conspicuous in the case of few PSU banks.

Indian banks sport least capital buffer for writing off NPAs

Source: IMF