Paper Trading App or Platform in India : pros & Cons

When a trader/investor is learning to trade, it is advised not to put their money in the financial market at the beginning itself, but rather, paper trade for some time. This is always a good idea. It might even save the said trader a lot of money in the long run. This brings us to the question- what is paper trading?

What is Paper Trading?

Before an investor starts using their capital to open a position, they need to know how to navigate the financial markets. ‘Paper trading’ is one of the methods they can use to do this. A paper trade is a simulated trade that allows an investor to practice buying and selling without risking real money. In simple terms, it means practicing one’s strategy or whatever it is without the use of real money.

The term dates back to a time when young budding traders would practice on paper before risking money in live markets. While learning, a paper trader records all trades by hand to keep track of hypothetical trading positions, portfolios, and profits or losses. Today, most practice trading involves the use of an electronic stock market simulator, which looks and feels like an actual trading platform.

The development of online trading platforms and software has increased the ease and popularity of paper trading. Today's simulators allow investors to trade live markets without the commitment of actual capital and the process can help to gauge whether investment ideas have merit.

You can speak to us to know the platforms where you can trade without the worry of losing any money. This is by large the most popular virtual trading game for the Indian market. 

To get the most benefits from paper trading, an investment decision and the placing of trades should follow real trading practices and objectives. The paper investor should consider the same risk-return objectives, investment constraints, and trading horizon as they would use with a live account. For example, it would make little sense for a risk-averse long-term investor to practice numerous short-term trades like a day trader.

Investors and traders can use simulated trading to familiarize themselves with various order types such as stop-loss, limit orders, and market orders. Charts, quotes, and news feeds are available on many platforms as well.

Paper Trade Accounts vs. Live Accounts

Paper trading may provide a false sense of security and often results in distorted investment returns. In other words, nonconformity with the real market happens because paper trading does not involve the risk of real genuine capital erosion. Also, paper trading allows for basic investment strategies—such as buying low and selling high—which are more challenging to adhere to in real life but are relatively easy to achieve while paper trading.

The fact is that investors and traders are likely to exhibit different emotions and judgment when risking real money, which may lead them to different behaviour when operating a live account

Advantages

Traders don’t have to risk their own money:

The most obvious advantage is that first-time traders don’t have to risk their own capital to get their hands dirty. Now if they don’t have to risk their own money, they can do whatever they want. They can get in thousands of shares or get out of thousands of shares they can put all weird and wacky positions that they have no clue about or just get used to the panels. It’s a good way to familiarise themselves with the stock markets. When they don’t have to risk real cash or real capital it allows them to just experiment with things and just get the hang of things.  Not having to risk real money is one of the first advantages of paper trading.

Make trade stress free:

Since no real money is involved, the stress is reduced. They can trade stress-free because there are not risking their own real hard-earned money or capital. Newbie traders can go ahead and play around and dabble around and execute and make trades without that emotion killing them with how going to bed and not being able to sleep so they do not worry about losing any money and because of that their emotions should be nice and level.

There are lots of people out there that when they trade, they trade stressfully. They trade with a lot of stress and baggage. When one paper trades, because it’s not real money they do not have all that weight pulling on them because again it’s not real money.

So, they can trade naturally without worrying about the loss of capital and this allows them to make judgments and decisions clear-minded and also allows them to practice appropriately if they are just getting started in the market.

Get comfortable with the platform:

It does allow one to get comfortable but not only comfortable in their trading it allows an individual to get comfortable with their platform. So, if a person is starting with a new platform and if the tools are a little more confusing it allows them to get comfortable with, it allows them to play around and click on things to see what does what, how things work, how things function to see if they are comfortable with that panel.

Not everyone is going to be as tech-savvy as Bill Gates or Mark Zuckerberg so they are going to need to play around with the panel and get the feel of how things work in a trading platform because it’s a lot different.

Builds confidence:

It allows the trader to build confidence so this one ties into the stress factor. Because they are trading without any stress, it also allows them to build some of that confidence so as they start making some profitable paper trade it gives them a boost of confidence.

The more confident the trader feels about trading, the more clear-minded will they feel and when they’re clear-minded and relaxed, it’s like playing a sport when you relax you’re able to be in the zone, you’re able to trade in the zone and you’re able to make things as good as you normally would trade.

Test trading strategies:

Paper trading allows traders to test strategies systems and see the probability of success. When traders start paper trading options, it allows them to see, if a particular strategy works as well for a real account and if they do, they can go ahead and now add this additional strategy to their actual trading account. They can trade stocks and can trade options then they continue this process as they learn a new strategy or a new technique or new system they can go ahead and add those to the buckets of already successful techniques that they have.

Just starting with one is a great point that’s all a trader needs but if he continues to add and build upon that using paper money and paper trading allows him to see the percentage of success and it allows him to test out those strategies without any risk.

Disadvantages

Market Conditions are not always real-time:

The market conditions are not necessarily always real. Sometimes paper trading is going to be delayed or behind maybe 15 minutes or it’ll be an hour delayed or maybe even one day delayed and even if the trader has real-time with his paper trading account or software or he’s using just pen and paper to record his trades, his still market conditions are not the same because they also affect him.

When they affect a trader, this also impacts his stress, it impacts his emotions so the conditions overall aren’t going to be the same when he is trading paper money as he would be trading with real money. When it comes to real money that stress factor that I talked about earlier in the advantages that his trading without that stress is really important to learn to deal with.

It’s those emotions, it’s learning how to control his emotions and being disciplined in his trade, it’s one of the things that a trader need to learn in trading. Most people aren’t going to be honest with their emotions, with their behaviour.

That is one of the main disadvantages to paper trading is that a trader doesn’t get these real-life situations of learning how to deal with the losses, learning how to deal with the stress or the emotions. It’s not necessarily going to be extremely stressful but one still has to learn how to deal with those emotions of euphoria, over excitement or just happy state of mind or some of those times where those trades don’t work out in his favour and he might have to take a loss. Unfortunately, with fake money, we don’t get that one-to-one relationship or that feeling as much as we would with a real account because when real money is on the line, we’re more connected to it.

Slippage and Commissions:

Sometimes we might get that slippage cost or an additional little cost that we might have to deal with whether it’s having a broker minimum that we have to hit minimum rates or fees within our broker that we might have to pay for and that’s all part of the trading.

As a business, one has to think about all these things and a lot of times with just paper trading it just gives a little narrow view of this and we don’t take into account all the other factors such as minimum training requirements, meaning the minimum amount of trade that we have to do, the commission or the slippage costs so all these little things can come up.

Missing out on profit potential:

Another disadvantage of paper trading is missing out on future profit potential. For example, we entered into an options contract of 120 shares and its price increased by Rs 100, we could have made a profit of Rs12000 and just because we were paper trading, we missed out on the profit. Those missed opportunities or opportunities that we could have hopped onto and made real money from are not going to happen if we are paper trading. That’s another disadvantage but that’s part of the learning process.

Picking weak stocks just to make a trade:

Another disadvantage regarding paper trading is picking weak stocks to trade or not healthy opportunities. They tend to get sloppy so kind of tying it into the emotion factor you’re looking to do a trade just to do a trade because it’s not real money the conditions are not real it’s paper money.

When you’re looking to just do a trade, just to do a trade maybe it allows you to learn about the platform maybe it allows you to learn about execution but when you’re just doing a trade the conditions aren’t real but now you’re getting sloppy, you’re choosing week stocks or you’re choosing weak entries and exit point you’re looking to just do the by order and the sell order.

Trading isn’t just hitting the mouse or hitting a key on the keyboard. It isn’t just placing that order and it isn’t just exiting that order because that’s what most people think about when it comes to trading, they think they need to closely be putting an order in, when in fact a lot of trading is about being disciplined to stick into that trade, to stay in that trade and continue waiting and riding that stock to the upside or being disciplined waiting for your entry point or exit point.

Formfitting:

Paper traders select perfect sections and exits, missing the minefield of snags created by the cutting-edge PC driven condition. These shakeout levels turn out to be very evident to genuine members who have watched many in fact sound positions go up on fire when calculations move into savage mode and search out their stops.

Be wary of the pitfalls of paper trading as in majority of the cases it will give you positive results as it lacks the troughs and crests in the price movement and one is not emotionally attached to the trade as no money is at risk.

You can make hassle-free money using our Bank Nifty Options tip or Best intraday tip to make money in the stock market.

Have a look at the latest revised ratings.

Fitch Ratings has taken rating action on the long-term issuer default ratings of four Indian non-bank financial institutions in light of the companies' performance amid the coronavirus pandemic. 

• IIFL Finance 'B+' rating maintained on rating watch negative. 
• Manappuram Finance affirmed at 'BB-'; rating watch negative removed; outlook stable. 
• Shriram Transport Finance affirmed at 'BB'; rating watch negative removed; outlook negative.

Get the latest daily stock tips or Bank Nifty option tips and make money like true professionals

Bank Nifty Options Tips for Intraday Trading

Until now what we know is that derivatives are essentially types of contracts that derive their value from their underlying assets, the bank nifty index being the underlying here and that the price movements in the underlying effect the price movements in the derivatives.

Although they share some similarities, the differences between futures and options significantly impact their risk/reward profiles. In general, futures are more efficient and control larger amounts of underlying assets, whereas options are more flexible and affordable.

For revision purposes, we shall have a look at what we studied previously. Options and futures are similar trading products that provide investors with the chance of making money and hedging current investments. An option gives the buyer the right, but not the obligation, to buy or sell an asset at a specific price at any time during the life of the contract. Meanwhile, a futures contract gives the buyer the obligation to purchase a specific asset, and the seller to sell and deliver that asset at a specific future date unless the holder's position is closed before expiration.

Key differences

Apart from the fundamental difference, other things set both options and futures apart. Here are some other major differences between these two financial instruments. Despite the opportunities to profit with options, investors should be wary of the risks associated with them. Also, both options trading and futures trading can be equally risky if one’s ability to produce fairly accurate analysis and outlook of their underlying asset is no good. 

Options

Because they tend to be fairly complex, options contracts tend to be risky. Both call and put options generally come with the same degree of risk. When an investor buys a stock option, the only financial liability is the cost of the premium at the time the contract is purchased.

However, when a seller opens a put option, that seller is exposed to the maximum liability of the stock’s underlying price. If a put option gives the buyer the right to sell the stock at 500 per share but the stock falls to 100, the person who initiated the contract must agree to purchase the stock for the value of the contract, or 500 per share.

The risk to the buyer of a call option is limited to the premium paid upfront. This premium rises and falls throughout the life of the contract. It is based on several factors, including how far the strike price is from the current underlying security's price as well as how much time remains on the contract. This premium is paid to the investor who opened the put option, also called the option writer.

The Option Writer

The option writer is on the other side of the trade. This investor has unlimited risk. Assuming in the example above that the stock goes up to 1000. The option writer would be forced to buy the shares at 1000 per share to sell them to the call buyer for 500 a share. In return for a small premium, the option writer is losing 500 per share.

Either the option buyer or the option writer can close their positions at any time by buying a call option, which brings them back to flat. The profit or loss is the difference between the premium received and the cost to buy back the option or get out of the trade.

Futures

Options may be risky, but futures are riskier for the individual investor. Futures contracts involve maximum liability to both the buyer and the seller. As the underlying stock price moves, either party to the agreement may have to deposit more money into their trading accounts to fulfill a daily obligation. This is because gains on futures positions are automatically marked to market daily, meaning the change in the value of the positions, up or down, is transferred to the futures accounts of the parties at the end of every trading day.

Futures may not be the best way to trade stocks, for instance, but they are a great way to trade specific investments such as commodities, currencies, and indexes. Their standardized features and very high levels of leverage make them particularly useful for the risk-tolerant retail investor. The high leverage allows those investors to participate in markets to which they might not have had access otherwise

The margin requirements for major commodity and currency futures are well-known because they have been relatively unchanged for years. Margin requirements may be temporarily raised when an asset is particularly volatile, but in most cases, they are unchanged from one year to the next. This means a trader knows in advance how much has to be put up as an initial margin. On the other hand, the option premium paid by an option buyer can vary significantly, depending on the volatility of the underlying asset and broad market. The more volatile the underlying or the broad market, the higher the premium paid by the option buyer.

This is a substantial advantage of futures over options. Options are wasting assets, which means their value declines over time—a phenomenon known as time decay. Several factors influence the time decay of an option, one of the most important being time to expiration. An options trader has to pay attention to time decay because it can severely erode the profitability of an option position or turn a winning position into a losing one. Futures, on the other hand, do not have to contend with time decay.

This is another major advantage of futures over options. Most futures markets are very deep and liquid, especially in the most commonly traded commodities, currencies, and indexes. This gives rise to narrow bid-ask spreads and reassures traders they can enter and exit positions when required. Options, on the other hand, may not always have sufficient liquidity, especially for options that are well away from the strike price or expire well into the future. 

Futures pricing is intuitively easy to understand. Under the cost-of-carry pricing model, the futures price should be the same as the current spot price plus the cost of carrying (or storing) the underlying asset until the maturity of the futures contract. If the spot and futures prices are out of alignment, arbitrage activity would occur and rectify the imbalance. Option pricing, on the other hand, is generally based on the Black-Scholes Model, which uses a number of inputs and is notoriously difficult for the average investor to understand.

We would say that for beginners, Options Trading is less risky than Futures Trading for a number of reasons.  

• Firstly, bigger rewards come with bigger risks. Futures trading is capable of producing return on investment and leverage far greater than can be attained in options trading.  
• Secondly, when an investor buys a call and put option, his maximum risk is limited only to the amount of money he used when buying those options. The worst that can happen is that his prediction is wrong and the options simply expire worthlessly. He doesn’t lose more money than that. However, in futures trading, he is subjected to unlimited liability and will be expected to "top up" his daily losses by the end of each day in what is known as a margin call. This daily loss continues as long as the stock continues to go in the wrong direction.
• Thirdly, in futures trading, if that initial few days of the drop is serious enough, he would be forced by margin call to top up his losses and if he doesn't have the money to do so, the position is liquidated and he ends up owing money to his broker even if the stock does go up after a few days more. However, if he bought call options, he loses nothing even if the stock drops for a few days before rising
• Fourthly, there are literally hundreds of options strategies an investor can use to profit from as many as all 3 directions simultaneously. Such versatility is lacking in futures trading of course. In futures trading, it usually is a single directional bet unless one uses some arbitrage strategies which also exist in options trading anyways. 
• Generally, option premiums are smaller than futures margins. As such, an investor can obtain an option position similar to a stock position, but at huge cost savings.
• More leverage. Option contracts for a given underlying are listed with many different strike prices and expiration dates, meaning that there is a large array of premiums available to options traders. In other words, you can control the amount of leverage you are willing to use. Futures contracts have no premiums, and leverage depends only on margin requirements.
• Flexibility. Long option positions are not obligated to exercise their options. Physically settled futures are always exercised at expiration.

In conclusion, we can say that, both options and futures are designed to be hedging tools, not speculative tools and futures trading has been extremely valuable in the area of commodities hedging where farmers secure the price of their produce early through buying futures contracts hence hedging against the risk of a drop in price. When used speculatively, futures are capable of producing a fortune overnight but it is also capable of wiping out a fortune and put an investor in debt overnight. As such, it is definitely riskier than simply buying stock options. Having reviewed the primary advantages of options, it's evident why they seem to be the center of attention in financial circles today. With online brokerages providing direct access to the options markets and insanely low commission costs, the average retail investor now has the ability to use the most powerful tool in the investment industry just like the pros do.

So, if you want to make money quickly and in a lesser time frame during the course of the day, then none can beat our Bank Nifty Option Tips as it performs like a precision-guided rocket and remember that Bank Nifty option trading can be undertaken in less than Rs 10,000 per lot. Are you ready to capture your profit?

Intraday Bank Nifty Future & Option Tips Chain for Today& Tomorrow : Whatsapp Group  & Telegram Channel working Explained

NIFTY 50 is a benchmark-based index and also the flagship of NSE, which showcases the top 50 equity stocks traded in the stock exchange out of a total of 1600 stocks. It is a blended word – National Stock Exchange and Fifty coined by NSE.

These stocks span across 12 sectors of the Indian economy which include – information technology, financial services, consumer goods, entertainment and media, financial services, metals, pharmaceuticals, telecommunications, cement and its products, automobiles, pesticides and fertilizers, energy, and other services.

NIFTY 50 follows the trends and patterns of blue-chip companies, i.e. the most liquid and largest Indian securities.

NIFTY contains a host of indices – NIFTY 50, NIFTY IT, NIFTY Bank, and NIFTY Next 50; and is a part of the Futures and Options segment of NSE which deals in derivatives.

The index reflects the general market trend for a period of time. The index is a broad representation of the country’s state of the economy. A stock market index that is up, indicates people are optimistic about the future. Likewise, when the stock market index is down it indicates that people are pessimistic about the future.

We need the index to benchmark the performance of a trader or investor. Usually, the objective of market participants is to outperform the Index.

Trading on the index is probably one of the most popular uses of the index. Majority of the traders in the market trade the index. They take a broader call on the economy or general state of affairs and translate that into a trade.

Investors also use the index to hedge their portfolio.

Bank Nifty

It represents the 12 most liquid and large capitalised stocks from the banking sector which trade on the National Stock Exchange. The Bank Nifty on NSE represents the mood specific to the banking industry. It tracks the performance of the Indian banking sector. These 12 banks represent more than 90% of the free float Market capitalisation of the banking sector in India.

The composition doesn’t always remain the same as the stocks that do not perform well and in turn, lose their market capitalisation are replaced by other banks stocks performing better and having their market capitalisation more than these underperformers.

It is computed using free-float market capitalization method with a base date of Jan 1, 2000, indexed to the base value of 1000, wherein the level of the index reflects the total free-float market value of all the stocks in the index relative to a particular base market capitalization value. In other words, the weights are assigned based on the free-float market capitalization of the company, the larger the market capitalization, the higher is the weight. Free float market capitalization is the product of the total number of shares outstanding in the market, and the price of the stock. The method also takes into account constituent changes in the index and importantly corporate actions such as stock splits, rights, a new issue of shares etc. without affecting the index.

NIFTY Bank Futures & Options

NIFTY Bank Futures:

The futures instrument is a derivative contract that derives its value from an underlying asset. In the context of Bank Nifty futures, the underlying is the Nifty Bank Index itself. Hence the Nifty Bank Futures derives its value from the Nifty Bank Index. This means if the value of Nifty Bank Index goes up, then the value of Nifty Bank futures also goes up. Likewise, if the value of Nifty Bank Index declines, so would the Index futures.

The underlying index is for obvious reasons Bank Nifty.

Bank Nifty futures contracts have a maximum of a 3-month trading cycle - the near month (one), the next month (two) and the far month (three). That means we can buy a contract in January that Expires in March. A new contract is introduced on the trading day following the expiry of the near month contract. The new contract will be introduced for a three-month duration. This way, at any point in time, there will be 3 contracts available for trading in the market i.e., one near a month, one mid-month and one far month duration respectively.

Bank Nifty futures contracts expire on the last Thursday of the expiry month. If the last Thursday is a trading holiday, the contracts expire on the previous trading day.

The value of the futures contracts on Bank Nifty may not be less than Rs. 5 lakhs at the time of introduction. The permitted lot size for futures contracts & options contracts shall be the same for a given underlying or such lot size as may be stipulated by the Exchange from time to time.

Currently, the bank nifty futures have a lot size of 25 shares. It implies, one has to buy or sell a minimum quantity of 1 lot containing 25 units and in multiple of the same.

The exchange has set 8% Margin For Bank Nifty Future

The price step in respect of Bank Nifty futures contracts is Re.0.05.

The base price of Bank Nifty futures Contracts on the first day of trading would be the theoretical futures price. The base price of the contracts on subsequent trading days would be the daily settlement price of the futures contracts.

NIFTY Bank Options:

An option gives a person the right but not the obligation to buy or sell something. An option is a contract between two parties wherein the buyer receives a privilege for which he pays a fee (premium) and the seller accepts an obligation for which he receives a fee. The premium is the price negotiated and set when the option is bought or sold. A person who buys an option is said to be long in the option. A person who sells (or writes) an option is said to be short in the option.

American and European are the most common option styles. In American Option, Buyer gets an option to exercise at any time up to the expiration date. In European options, Option can be exercised only on the expiration date itself. The options contracts are European style and cash-settled and are based on the bank nifty index.

Due to the simplicity of its expiry, European options are easier to price and analyze than American options, and properties such as the price of an American option are frequently derived from those of its European counterparts. Till 2010, in India, all options were of American style but while options were/are very popular with investors because of the limited downside (only in case of buying) in 2011 NSE decided to shift from American style to European options.

Like stocks prices, the Option prices too can be put to technical/quant analysis to arrive at different options trading strategies based on trader’s individual philosophy and risk appetite.

Just like the bank nifty futures, the underlying index is Bank Nifty.

Bank NIFTY monthly options contracts have a maximum of a 3-month trading cycle - the near month (one), the next month (two) and the far month (three). On the expiry of the near month contract, new contracts are introduced at new strike prices for both calls and put options, on the trading day following the expiry of the near month contract. The new contracts are introduced for a three-month duration.

Bank Nifty weekly options contracts have 7 weekly expires excluding the expiry week of a monthly contract. A new serial weekly options contract is introduced after the expiry of the respective week’s contract.

Bank Nifty monthly options contracts expire on the last Thursday of the expiry month and weekly options contracts expire on every Thursday of the week. If the last Thursday is a trading holiday, the contracts expire on the previous trading day.

The value of the options contracts on Nifty may not be less than Rs. 5 lakhs at the time of introduction. The permitted lot size for futures contracts & options contracts shall be the same for a given underlying or such lot size as may be stipulated by the Exchange from time to time.

The price step in respect of Bank Nifty options contracts is Re.0.05.

The number of contracts provided in options on the index is based on the range in the previous day's closing value of the underlying index.

The base price of the options contracts, on the introduction of new contracts, would be the theoretical value of the options contract arrived at based on the Black-Scholes model of calculation of options premiums.

In Bank nifty Options, traders have to pay only the Premium Amount, there will Be no Margin Situation In Buying Bank nifty Options But For Selling Bank nifty Options, Traders Have To Pay Bank nifty Future Margin Plus Bank nifty Options Premium.

Get Best Bank Nifty Option Tips which perform like a rocket from the word go and you can trade in a single lot of Bank Nifty in less than Rs 10,000 and profit potential is huge per lot using our Bank Nifty tips as we are a SEBi regd investment advisory services.. 

Bank Nifty Tips Whatsapp group & Telegram Channel

People are searching on the net for WhatsApp group and telegram channels for the Bank Nifty trades and our caution to such people is that these channels are run by unregistered entities and you can suffer lot of losses by not following the SEBI regd advisory services

PMC Bank Scam, News, Full Form & Collapse Reason

We came across an interesting writeup that why one must keep on going as the aim is to be in the game and is very aptly applicable for the stock traders too.

In it, Dory shares some sage advice with Nemo’s father about what to do when life gets you down. “Just keep swimming, just keep swimming, just keep swimming.” You can watch the video below:

It is a thought we’ve shared with folks over the years. Sometimes, the only way is through and thus in the stock market, the importance of stop-loss comes into play as the aim is to be in the market.

And, in the long run, it helps if we manage to show up regardless of the noise around us (and let’s face it – there’s always noise)… and keep swimming.

This advice is applicable even when you face any difficulty in life and you must keep going without giving up in life.

Get Best Intraday tips and start making money in the market without any tension.

Portfolio management services (PMS) Provider

Let us see this with an example.

Let's see the charges:

(a) Portfolio management services initial charges say 2% which is on your capital.

(b) Profit-sharing and let's say is 20% of your profit.

Now let's say that PMS made a profit of 10%

The initial charges of 2% are actually working out 20% of your profit as this initial 2% is on the capital

Add to it profit-sharing which says 20%

So, you are paying 20%+20% charges out of your profit which works out to 40% of your profit

Thus you are only left with a
6% return and that too for telling those PMS guys to invest in HDFC bank for the long term.

Instead, concentrate on day trading tips or Bank Nifty option tips and capture your profit everyday in the intraday market as profit in hand is the actual profit.

Incorporated in 1993, Madras based Equitas Small Finance Bank Ltd (ESFBL) in Fiscal 2019 was the largest small finance bank in India considering banking outlets and the 2nd largest small finance bank considering assets under management and total deposits. Unlike other microfinance companies, it has a diversified loan portfolio and less dependence on the microfinance business. With the main focus on financially unserved and underserved customers, the bank offers a wide range of banking products and services.

The company provides microfinance loans promoting financial inclusion, housing finance, vehicle finance, and MSE finance. Equitas Small Fin Bank offers financial products according to customers' income profile, type of security available, and nature of business.

Apart from this, the bank also provides current accounts, salary accounts, savings accounts, other deposit accounts, ATM-cum-debit cards, mutual fund products, third party insurance, and issuance of FASTags.

ESFBL follows credit assessment procedures through a risk management framework which is analyzed by its Risk Management Committee. As on 30th Sep 2019, it has the largest distribution channel among Small Finance Banks (SFBs) including 853 Banking Outlets and 322 ATMs in India across 15 states and union territories.

Imp point is that the bank has reduced its IPO size and we will keep you updated with the latest news for the bank and do not forget to check the equity intraday tips and make money on daily basis.

Insider Trading

What is insider trading?

History and Development of Insider Trading Laws in India

The history of Insider Trading in India goes back to the 1940s with the formulation of government committees such as the Thomas Committee of 1948, which evaluated inter alia, the regulations in the US on short swing profits under Section 16 of the Securities Exchange Act, 1934. Thereafter, provisions relating to Insider Trading were incorporated in the Companies Act, 1956 under Sections 307 and 308, which required shareholding disclosures by the directors and managers of a company. 

Due to inadequate provisions of enforcement in the companies Act, 1956, the Sachar Committee in 1979, the Patel Committee in 1986 and the Abid Hussain Committee in 1989 proposed recommendations for a separate statute regulating Insider Trading.

International Overview of Insider Trading Regulations

Different countries have diverse enactments and codes of conduct to curb the ill practice of Insider Trading. While the US and the UK have comprehensive legislation and monitoring bodies in this regard, countries like Germany rely on a voluntary code of conduct. 

United States:

The United States has been the most successful in prohibiting insider trading and the first country to tackle insider trading effectively. The market crash due to protracted lack of investor’s confidence in the securities market and then the great depression in the US economy led to the enactment of the Securities Act, 1933 in which the provisions relating to prohibition of fraud in the sale of securities were included, which were greatly braced by the subsequent Act viz. Securities Exchange Act, 1934. 

United Kingdom: 

Insider trading was first exposed in the UK in Para 22 of the White Paper on the Conduct of Company Directors 19776. However, the United Kingdom first legislated against this practice in the year 1980 and broadcasted its first enforcement in the year 1981 which preceded the enactment of the Company Securities (Insider Trading) Act, 1985 or the English Act which principally regulates the practice of Insider Trading today. The Act prohibits an individual from dealing on a recognized stock exchange in the securities of the companies which are listed, with which he is or has been, in the past six months, connected and by virtue of his connection, has acquired unpublished price sensitive information. The contravention of the provisions of the Act involves both civil and criminal liabilities. 

One interesting aspect of the Act in the UK is that the prohibition extends to dealing in the securities of a company, apart from that with which the individual is connected, if the information relates to another company or any other transaction involving both companies. Furthermore, the recipient of such an unpublished price sensitive information is also prohibited from dealing, with the exception of certain circumstances. 

It is seen by practical examples that the success of Insider Trading laws in the UK has been pretty low. Most of the defendants have been acquitted on technicalities owing mainly to the rigidity in the definition of Insider Trading and partly because of the inadequate powers granted to the Securities and Investments Board (SIB). Another aspect that emphasis should be laid on is the undesirable degree of burden of proof required to prove any case of Insider Trading. 

Germany: 

In Germany, a voluntary code of conduct is emphasized upon, which is to be strictly followed by the Companies, Stock Exchange dealers and banks so as to preclude the wrong use of confidential inside information by the persons concerned. This code has astonishingly been very successful as there has been no major Insider Trading scandal notwithstanding the flourishing market and the ever-increasing take-over bids.

Insubstantial Investigative Infrastructure

Proving Insider Trading is a bizarrely difficult task owing to the lack of material proof in a majority of cases. Insider Trading cannot be proved beyond reasonable doubts unless there is substantial material proof supporting it or when the insider himself confesses in an admissible form, to have indulged in the dealing of confidential information for personal gains, which is very rare a possibility and is not expected to happen in the practical world. Indulging in buying and selling of Securities is a legal practice. It is only what’s in the mind of the dealer that constitutes the basis of its legality.  

Lowering down the degree of proof required to prove a case of Insider Trading would be unaccounted for, as Indian Judiciary has always believed in acquitting 100 guilty offenders in an attempt not to convict one innocent person. Even though the removal of the words, by virtue of such connection came as a relief to SEBI and simplified its task of proving an insider trading case to a great extent, it is still recommended that the SEBI should be granted slightly extended powers for more exhaustive and efficacious investigation of cases involving Insider Trading, which would definitely help impart justice and convict every such violator of the Insider Trading regulations by providing greater degrees of positive evidence supporting every such conviction thus proving every case beyond reasonable doubts. Because despite of not having to prove the connection of the accused with the company, most of the cases are not established owing to the lack of evidence gathered against the accused. 

Furthermore, it is advised that the SEBI should be provided downright assistance of the official government investigative agencies like Central Economic Intelligence Bureau (CEIB) to investigate into the matters relating to Insider Trading so as to improve the standards of investigation and hasten up the process of gathering proof against the insider. SEBI already has access to the CBI (Central Bureau of Investigation) whenever it seeks help in investigation and collection of evidence. But any additional help would prove to be useful and very much welcome by SEBI. Such a practice of official governmental assistance in an investigation into Insider Trading matters has also proved to be extremely successful and efficient in the United States, where The Federal Bureau of Investigation (FBI) aids the Securities and Exchange Commission (SEC) in inspecting the cases of Insider Trading in a more comprehensive and yet expeditious way. It has, therefore, shown a higher rate of indictments in the recent past.

Remedy for Investors

Talking about the SEBI regulations in India, another glaring loophole is of the absence of an adequate remedy available to the investors at large. The insider is more often than not, acquitted scot-free. Even in the cases where they are convicted, they are required to pay a sum of money much less than the number of profits that they might have actually made or they have to undergo a prohibition of dealing in securities for a time period stipulated in the order. The end result is that the insider walks away satisfied with the profits he eventually is left with. If this trend continues, then the investors would be apprehensive about investing in the securities market. Although it sounds practically impossible to provide a remedy for the investors, owing to the difficulty in calculating the comparative losses suffered by each and every investor, SEBI should work out a way in which such aggrieved investors may be refunded the losses that they might have suffered due to any act of insider trading. 

In order to provide compensation to the investors, the first step would be to ascertain the number of aggrieved investors and also to calculate how much losses they might have suffered comparatively, due to an act of insider trading. It is thus suggested that after convicting a person of insider trading and ordering him to pay the penalty in consequence of his indictment, a public notice to be issued for a certain period of time, asking the aggrieved investors to demand compensation for the losses that they might have suffered due to a biased trading activity by the insider. The compensation would be paid out of the amount recovered from the person indicted. The investors not acknowledging such a notice would simply lose their right to ask for repayment. 

After the number of investors has been ascertained, SEBI would have to calculate and decide how much money does each investor individually deserves to get. Calculating this amount can prove to be a tedious task but very useful howsoever. SEBI has the records of the scrip at the time the insider trading activity happened and also the present scrip for the same securities. It can thus calculate the difference in the two and further determine the investors’ individual holdings in the securities both at the time of dispute and presently and thus award them compensation accordingly. 

Another question that arises is that if the price of the securities had fallen after the insider trading activity happened, then how and what to pay the investors? The answer is simple. In case the price of the securities on the present date is lesser than on the date in dispute, then it is almost impossible to provide the investors with any kind of remedy. Therefore, there won't be any need of issuing a public notice or even calculating the amount. 

These suggestions, however, are very crude, and SEBI can effectively introduce new regulations providing a remedy for the innocent investors aggrieved of the acts of insider trading.

Famous Cases of Insider Trading

Dilip Pendse:

Dilip Pendse served as the Managing director of Nishkalpa, a subsidiary of TATA Finance Ltd. As of March 2001, Dilip made a loss of 79.37 crores. This information was to be made public only a month later on April 30th. This information was price sensitive as it would lead to a fall in prices if leaked. Dilip Pendse was in access to this information due to the role he played within the company.

During this period Dilip leaked this price-sensitive information to his wife. In between this period, 90,000 shares which were held by his wife and a company jointly run by his wife and her father in law in Nishkalpa were sold to avoid losses. Dilip Pendse, his wife, and the company jointly owned by his wife and her father in law were found guilty of insider trading.

A penalty of Rs 500,000 was imposed on each of them and Dilip Pendse was banned from capital markets for three years

Rajesh Jhunjhunwala:

Rakesh Jhunjhunwala was investigated by the SEBI in January 2020 on account of alleged insider trading. These allegations were based on the trades made by him and his family in the IT education firm Aptech. Aptech is the only firm in Jhunjhunwala’s portfolio in which he owns managerial control. SEBI also questioned Jhunjhunwalas wife, brother, and mother in law. This, however, is not the first time that Rakesh Jhunjhunwala has been embroiled in insider trading controversy.

In 2018 too he was questioned over suspicion of insider trading in the shares of the Geometric. Rakesh Jhunjhunwala settled the case through a Consent order mechanism. In a consent order, SEBI and the accused negotiate a settlement to avoid a long-drawn litigation process.

Martha Stewart:

Martha Stewart is a prominent TV personality who has also won an Emmy for her work on the ‘Martha and Snoops Dinner Party’. In 2001 Martha Stewart owned up to 4000 shares of the BioPharma Company ‘ImClone Systems’. Her broker received a tipoff that the CEO of ImClone Systems sold all his holdings held in ImClone. The CEO did this as he received information that the FDA was about to reject one of ImClone’s cancer treatment drugs. Shortly after this news became public the shares of ImClone dropped 16% in one day.

Martha Stewart was able to save herself from losses amounting to $45,676. In 2004, Martha Stewart was convicted as the trade was made on the information that the CEO sold his stake, which was non-public info. Martha Stewart and her broker were announced guilty. She received 5 months in a federal correction facility and fined $30,000. The CEO of ImClone Systems was also convicted and sentenced for 7 years with a fine of $ 4.3 million.

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The world came to a standstill in April of 2020. It is probably the greatest challenge we have ever faced since World War II. This infection’s impact can be seen in almost all spheres of life be it business, economy, culture, ecology, politics, and several other areas. It has left us wondering what recovery from this pandemic would look like. Thousands of people have lost their jobs and several others have had their income cut due to the virus. The daily wage workers lost all forms of employment due to the lockdown and were seen migrating on foot to their homes thousands of kilometres away. The GDP fell more than 23% and it has been described as the worst recession since the great depression of the 1930s. International travel came to a stop and which led to huge losses to already ailing airlines.

However, just like every coin has two sides, the pandemic has given us some positive news as well. In the middle of all the sad and depressing news, there are few good news as well. In this article, I will be mainly focusing on a few of the positive aspects of the coronavirus pandemic.

Fewer Deaths Due to Road Accidents

Road accidents in India are a huge menace and have claimed over 1.5 lakh lives in the country in the year 2018 alone. The biggest reason for these accidents is over-speeding of vehicles. Human error, road environment, and the condition of the vehicle are other major reasons causing road accidents. India ranks 1st in the number of road accident deaths across the 199 countries reported in the World Road Statistics followed by China and the United States. As per the WHO Global Report on Road Safety of 2018, India accounts for almost 11% of the accident related deaths in the World. This figure accounts for almost 65% of the total deaths in the country. Accordingly, it is safe to say that the major reason for deaths in India is road accidents.

Majority of Indians were locked in their respective homes due to the country-wide lockdown and the roads were completely empty. That is why the number of deaths due to road accidents had come down suddenly.

When the Covid-19 lockdown was as its peak, there were 20,300 fewer deaths in crashes or accidents on Indian roads. According to the quarterly data provided by states and UTs to the Supreme Court committee on road safety, between April and June this year, 20,732 lives were lost in road crashes compared to 41,032 during the same period in 2019, which was a fall of 49.47%.

In general, just in the first six months of the year, road deaths declined by as much as 23,400 deaths. While more than 85% of these lives were saved when the lockdowns were at their peak, the data also shows that the fatalities reduced by 8% before the lockdown was imposed i.e. the period between January to March compared to last year. Not only the fatalities, but there was also an overall decrease in accidents across the country during the lockdown. Total crashes reduced by more than 63,000 in the period between April and June.

Due to the nation-wide lockdown period, the number of persons who suffered road injuries also decreased by over 69,000.

If we talk numbers, Uttar Pradesh reported the maximum decrease in loss of life by 3,275 during the lockdown, followed by Tamil Nadu with 2,193 lesser deaths, Maharashtra had 1,617 lesser death, Rajasthan’s death toll decreased by 1,484 and Madhya Pradesh reported 1,449 lesser deaths due to road accidents. The national capital, Delhi also reported 217 fewer deaths.

Before the lockdown too, the number of road accidents fell by more than 6,500, while road injuries declined by 4,457 between the Jan and March period. Road safety experts have said this reduction in deaths, accidents and injuries were due to two reasons; enactment of the amended Motor Vehicle Act with provision for high penalty and the lockdown due to pandemic. The act, with several provisions for improving road safety and a special focus on tougher penalties, which includes higher fines, jail term, suspension of licenses and cancellation of registration for major traffic violations, was passed by the Parliament last year.

Non- COVID Related Deaths Decreased, Emergency Cases Lower

When coronavirus cases first emerged in India, authorities acted swiftly. They halted public transit, scrambled to stockpile medical gear and ordered more than 1.3 billion residents to stay indoors. Everyone braced for the worst.

The fear was that if COVID-19 were to spread through India's densely crowded cities, especially its slums, millions could die. The toll could be much worse than in Europe or the United States, where there are many more doctors and hospitals per capita.

But about five weeks later, parts of the country are were seeing a dramatic drop in mortality. Funeral directors and ambulance drivers were bewildered. Instead of seeing a deluge of COVID-19 patients, many say their facilities were less crowded.

The outcome of the pandemic is marked by a gradual reduction of deaths due to other illnesses. The toll due to general illnesses has reduced. This is what data from various hospitals and health departments have shown.

It isn’t just fewer accidents. In these Covid times, the number of emergency cases rushed to hospitals too has come down drastically and so have the number of deaths. This fall in the number of heart attacks, strokes and emergency procedures is not a trend unique to India. 

Doctors have put forward several possible explanations for this some obvious — like less stress and reduced pollution — and others not so obvious like fewer medical interventions, including unnecessary procedures. According to the data from Brihanmumbai Municipal Corporation, the number of people who died owing to diabetes, hypertension and heart problems in March was 729 in 2017, 833 in 2018, 937 last and just 595 in March this year.

Parts of India recorded dramatic falls in the number of deaths at a time when funeral parlours were bracing for a surge amid the coronavirus crisis. According to experts, the trend suggested that deaths from COVID-19, which are recorded separately and generally announced before overall mortality data, were not being under-reported as has happened in other countries. But emergency room doctors, officials, and crematoriums noted that strict lockdowns had cut the number of road traffic accidents and deaths on India’s packed railways, and may also be deterring relatives from reporting a family death.

Meanwhile, deaths in some countries were rising sharply, in India, where overall data is unavailable, the opposite seemed to be happening in some places, leaving hospitals, funeral services and cremation sites wondering what is going on.

According to municipal data, Central Mumbai, home to some 12 million people, saw the number of deaths fall by about 21% in March compared with the same month of 2019.Overall deaths fell by as much as 67% in Ahmedabad, the biggest city of Gujarat, over the same period. Data from at least two other cities, along with accounts from state health officials, show a similar pattern. Half a dozen funeral businesses and crematoriums also reported slumps in business, especially in April.

A recent Reuters also report found a similar trend in many cities across India with fewer burials and cremations during the lockdown period than during the same period last year. Several doctors in their discussion groups and on Twitter have remarked on the sudden reduction in emergency admissions by 50-60% even though the emergency services of most large hospitals have stayed open. They felt that the difficulty in transportation and moving around alone could not explain this sufficiently. So, what explains it? 

Lack of unanticipated exertion in daily life, reduced work-related stress, drop in pollution, not eating out and hence cutting out trans fats, and people getting to spend more relaxed time with families would definitely have helped bring down emergencies, such as acute coronary events or stroke. It can’t be that people are staying back home despite an emergency, as they would definitely rush to a hospital, are some of the reasons given by doctors to explain this phenomenon.

Decline in Elective Surgeries

There has been a drastic fall in the crime and suicide rate during the lockdown period. Since most people were at home the vehicular traffic on road was minimal and due to which the accidents were very few and burglars did not dare to break-in into the houses. But on a larger picture, the prime reason for fewer crimes was mass deployment of police forces and visible policing. This was emergency like situation, as experienced during war times. This was also probably the largest deployment of forces 24/7 during a specific period and for a specific reason since the last few decades. This visible policing had a huge impact say some officers.

Several state police have confirmed that there has been a significant fall in the number of murders, suicides, and unnatural deaths between the March and April period alone, the period of the first phase of lockdown, as opposed to the same period last year.

Numerous states saw a 40% fall in murder cases in the period between March and April this year as opposed to the same period last year. Similarly, there has been a 70% fall in rape cases and a 100% fall in cases of violence against women and children.

According to the police, there were eight murders in Kerala in the period this year as opposed to 13 last year. The number of missing cases in the same period this year is 132 compared to 851 last year. Suicides have come down from 445 in 2019 to 192 this year. Unnatural deaths in the same period last year was 1052, compared to 630 this year.

There has been a decline in the industrial accidents as well. Metro cities like Bangalore received at least 10 industrial accidents in the same period last year, and since all activities came to a halt, there were no such accidents reported.

Decline in Respiratory Diseases

The number of deaths related to respiratory diseases has also fallen drastically owing to improvement in air quality, according to data from several hospitals throughout the country.

Thanks to the global lockdown of the majority of human industrial activities, the substantial reduction in air pollution in the urban areas, a well-known inducer of nonspecific airway inflammation, may have a positive effect on seasonal allergic diseases.

Especially in the most industrialized areas, the atmospheric concentration of some greenhouse gases, mostly nitrogen dioxide (NO2), has substantially decreased when compared with the previous years. In the same period, we are facing the usual raise in the concentrations of outdoor aeroallergens such as seasonal pollens.

However, the expected benefits of improved outdoor air quality on the aggravation of allergic disorders may also be linked to other phenomena that should be separately analysed. First, a near-universal face masking policy has been implemented in the vast majority of the countries since the beginning of the pandemic. Although primarily worn to protect themselves and others from severe acute respiratory syndrome coronavirus 2 transmission, masks are also able to reduce the airway exposure to inhaled aeroallergens depending on the presence and on the type of a filter.

Second, the urgent need for social distancing has prompted most of the world’s population to be confined at home. Indoor air can also be full of several biological aeroallergens (such as those derived from moulds or domestic pets) and chemical toxicants (tobacco, cooking smoke, or cleaning products, which, ironically, are being used more often to achieve environmental sanitization).

When inhaled, such molecules have also been shown to worsen inflammatory conditions such as asthma or allergic rhinitis. Therefore, the important changes not only in outdoor air quality and pollution but also in our current forcefully indoor lifestyle may yield contradictory effects on the allergic population.

To conclude, while the virus may have a tremendous negative impact on numerous areas, it has also saved many lives. Be it from road accidents, suicides, avoiding unnecessary surgeries, eating good or even respiratory diseases. Like every coin has two sides, there is a silver lining to the pandemic too.    

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