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Tag: Capital Market

A Quick Way to Solve a Problem with Trade Capture in Trade Life Cycle

Posted on by Imarticus Learning

In the economic market, “Trade Capture” means booking / capturing the trade into the structure used within the financial organization. At times, this may arise multiple times based on the intricacy of the trades and the capacity of the systems to be able to capture the economic, non-economic, and static details depending on the deal.
The rewarding trade capture within a trading system occurs when the trade facts are sent to the back office instantly, through an interface for operational processing. Most of the time, the trade details are recorded manually by the traders, when an STO (Securities Trading Organisation) does not have a trading system. This requires either collection by or distribution to the middle office or settlement department for operational processing. In such conditions, the traders are required to manage their trading positions manually, keeping it trendy with any latest trades.
The entire steps from the stage of order receipt and trade execution to the trade settlement are known as the “Trade Cycle”. This can be categorized into various stages as listed below.
Front Office
The front office, commonly referred to as the Trading Floor, performs two main function –

  • Trade Capture

The trade gets initiated in the front office using the trading app, in accordance with the retail price of the instrument. Still, the buyer will have an opportunity to cite an offer to the selling party. The trade gets executed, only if the counterparty agrees to the trade details and is willing to enter the deal. Once the trade gets executed, it gets captured using a Trade Capture system, which gives the go-ahead to all the necessary trade information and assigns a trade confirmation number or a trade reference number. This number is unique and used for all the upcoming trade events such as amendments, cancellation and so on. This unique number indicates the booking confirmation and is sent to both sellers and buyers as an acknowledgment.
Middle Office
The Middle Office plays a very important part of the exception management. At this stage, three important steps are accomplished such as –

  • Validation
  • Booking
  • Confirmation

By using the Order Management System (OMS), the tradesman works on the deal and the trade gets enhanced by the static data such as the Standard Settlement Instructions (SSI), Custodian Details, City Holidays, Special Instructions and so on. These static data details are vital for the execution and settlement of the trade. The allocation of the trade happens in the Middle Office, gets published in the Back Office, and finally considered live and operational.

Back Office
The Back office is considered the “backbone” of the entire trade life cycle. It mainly performs three vital functions such as –

  • Clearing
  • Settlement
  • Accounting

This stage covers the significant operational activities such as record keeping, order confirmations, trade settlement, and regulatory reporting. Most of the time, the back office tasks are deployed to low-priced sources for its specific management activities, with a view to reducing the company costs, thus increasing their productivity by delivering better operational value.
The next activity soon after the trade execution is to capture the entire trade details, regardless of the base it is recorded without any hindrances. The trade which is executed initially is captured in the front office where the primary details of each Asset Management in trade are being recorded.

Conclusion
The complete Trade Life Cycle is a jumble of complex functions where the trade undergoes a stream of several events. There is a lot of manual involvement in all these events and this increments the time spent for processing and settlement of various functions.

 

What are the careers in a capital market?

Posted on by Imarticus Learning

In every economy, there are typically two types of financial markets; one is the capital market and the other is the money market. The function of both the markets is the same; both act as a link between the investors and the wealth creators. The fund gathered in this process is used to create wealth in the economy in the long run.

The former market deals in commodities and financial instruments in the form of long-term securities having a maturity of more than a year. A capital market is known for making the transactions between the investors and the companies smoother.

The money market is known for buying and selling securities that have short-term maturities, like less than a year, e.g. treasury bills and commercial papers.

Two types of capital markets

Let’s take a look at the two major types of capital markets:

  • Primary market – It is the most important type of capital market. Its key function is the formation of capital for the government, institutions, companies, etc. It aids investors in investing their savings and extra funds in companies that plan to start new projects or enterprises expanding their companies.
  • Secondary market – This is commonly known as the stock market. Here, the investors indulge in buying and selling securities in the form of debentures, shares, bills, bonds, etc.

The basic difference between the two markets is that the primary market issues only new securities whereas the secondary market deals with existing securities. No fresh issues are made in the secondary market.

Career opportunities in the capital market

When we talk of the capital market, there are unlimited rewarding career opportunities for individuals from different backgrounds, irrespective of age, gender, educational qualification to a certain level and area of interest. Also, liberalization in the Indian economy gives rise to opportunities in the capital markets for both national and international players. So, considering all these aspects, we can conclude that there are strong choices of a career in the capital market for people who want to pursue a future in this field.

Some of the sector-wise positions in the capital market are: 

  • Commercial Banking
  • Credit Analysis
  • Compliance
  • Real Estate
  • Portfolio Management
  • Risk Management
  • Insurance
  • Actuary
  • Underwriting
  • Government Contracting
  • Government Contract Analysis
  • Government Acquisition

Few popular certification courses on capital market

 In order to build a successful career in capital marketing, one can pick the most suitable capital market course from the list below:

  • Currency and interest rate derivatives – This unique industry-recognized certification course helps to boost one’s career with valuable practitioner visions.
  • Exchange-traded derivatives – If our target is the financial services, then this course can give a great shape to a career with its practical knowledge on currency futures and options.
  • Financial markets AML compliance – This program is basically based on AML (Anti Money Laundering) standards delivered by the regulatory bodies.
  • FLIP – NCFM: Capital Markets Fundamentals International – This is India’s only online course on the US, UK Financial Markets that can help you acquire a FLIP NCFM certification. It works best for IT and KPO professionals.

Conclusion

The capital market is basically a branch of finance and anyone having an interest in this field can consider taking up a career by opting for the right course. Like most other professions, even a career in the capital market requires a certain skill set together with some basic attributes. Since capital markets deal with several activities associated with both the investors and the borrowers, the career scopes are also very diverse.

The Importance of Financial Risk Management

Posted on by Imarticus Learning

Managing financial risk is an essential component of any successful business. Specialized financial risk management teams are hired to guide a company through the financial market’s turbulent waters and create strategies to avoid losses and maximize profits as much as possible. Although seemingly scientific, the process is convoluted and never exact, therefore requirement an excellent amount of expertise in financial markets.

Firstly, what is financial risk management training? It’s the approach used to reduce adverse financial effects that emerge from risks and uncertainties. In simpler terms, it’s the process of putting in place strategies that work to protect money when unforeseen events occur in a business, as they tend to do. There are generally four types of risk today:

  • Market risk
  • Liquidity risk
  • Operation risk
  • Credit risk

These are almost never mutually exclusive but often overlap in scenarios, which makes financial risk management planning that much more complex and important.

Here are a few reasons why financial risk management is important:

Reduces financial disasters

Every business seeks an upward spike in the revenue and profits graph, no matter what industry they belong to. However, every business has a set of risks they are likely to face– planning for these makes the firm less likely to fall prey to losses as an effect of these risks. Financial risk management in these scenarios could range from the prevention of unsound investments to putting out products that are unlikely to sell or be profitable.

Predicts bountiful opportunities

In tandem with reducing financial disasters, financial risk management also aims to identify what investments, plans, and strategies are going to be most profitable for a business. This enables firms to act quickly and wisely to capitalize on benefits in good time– naturally, any profitable investment will also benefit stakeholders. No matter how quick or drawn out the decision maybe, if it’s financial in nature, the risk management team was sure to have been involved.

Keeps ahead of the competition

Competition is everything in the market, and one financial stumble can cost a business dearly. A business with a strong, well-formulated financial risk management plan is accounting for a multi-player field that is not always level. It’s also preparing in advance for any stumbling blocks to avoid losing pace and allowing competitors to get ahead.

Assesses internal and external risks

Risks can be internal or external. Some examples of external risks are market fluctuations, political unsettlement, inflation and deflation, and interest rates among others. Internal risks include security breaches, non-compliance, and information leaks. In business, internal risks can largely be controlled by way of strategies and implementations– however, in that sense, external risks can’t be controlled and are therefore harder to recover from. It’s always better to prepare for this uncertainty with a bullet-proof game plan that protects finances come what may.

Conclusion

In the past few years, several companies have introduced strong risk management teams to protect finances and prevent losses to the company through untoward incidents or ill-thought-out strategies. Therefore, risk management jobs are always in demand– it’s a field that keeps on growing, due to its very dynamic nature and the pushes and pulls of external risks that are seemingly unrelated but very influential.

Financial risk management plans function as the GPS of a company, guiding them towards their future financial objectives while taking the fastest, smoothest route.

Ways Trade Execution Can Improve Your Capital Market Business!

Posted on by Imarticus Learning

What exactly is Trade?
Trade is the exchange of items between two or more parties backed up by purchasing power. In a layman’s language, buying and selling of products and services are known as Trade.

What are Capital Markets?
Capital market is the kind of financial market where securities such as long-term debt, equities, etc. are traded frequently. This is a volatile market as the value of these securities and the interests and dividend rates involved with them keep fluctuating.

The capital market is further broken down into two categories: Primary Market & Secondary Market. The primary market is the capital market where new securities are bought and sold and the Secondary market is the one where the already issued securities are exchanged by various investors and companies.

Trade Execution and the Capital Market 
Whenever there is an exchange, trade comes into the picture, even in case of financial instruments. Financial instruments are heavily traded all around the globe every second. And with such exchange of securities, the trade aspect has to be clearly defined and should not be eclipsed by the volume of transactions. The capital market runs on the game of exchange. Such exchanges are facilitated by smooth trade execution, Asset Management Allocation, and a well-versed post-graduate diploma in Banking and Finance.The trade life cycle has to be optimized and every step has to deliver some value to make the process smooth and glitch-free. Mentioned below are the stages of the Trade Life cycle and how their execution leads to improvement in the capital market business.

  • Order Initiation

The order is initiated when the stocks of various companies are made to float in the market. Such a process can be called as “Security Existence Awareness”. Then an individual buyer or a company shows its intention to buy particular security with the help of their registered stock brokers. The brokers perform the buying and selling function for their respective clients in exchange for a small fee. After the order is placed, the brokers process the transaction, delivers the security or collect the money and transfer the benefit to his client.

  • Order Processing and Managing Potential Risks

A capital market is a place with fluctuating value. And with fluctuation, risks dawn in. To process the order, the broker must have a clear picture of the funds residing in his client’s account and also of the securities the client is interested in. If both the scenarios fall in line, the broker generates the receipt and processes the orders. If any default on the part of the client, the broker will have to keep a window up for such loopholes and manage the associated risks carefully. Also, the broker has to recover the additional charges from their clients efficiently.

  • Order Matching and Trade conversion

On the verification of what is required by the client, the particular securities are sent to exchange for verification of various details and allotment of the respective securities. The brokers charge a brokerage for executing the security trade function effectively and efficiently. The receipt of the order confirmation is then sent to the client and the details of the client are recorded by the broker for the allotment of a unique customer ID.

An agency that is commonly known as the custodian then intervenes in the settlement of any security deal. The custodian receives the details of the order from the exchange. This includes details like the type, price of the security, etc. This is done to make the custodian aware of an upcoming securities exchange. It is the job of a custodian to validate the details of the transaction and then show a green flag to the broker. This complicated process can be made much easier by proper capital market training.

  • Trade Settlement and Clearance

The trade is then settled after 2 days of a valid transaction. This is commonly known as a T+2 settlement. The clearance provider then informs the restrictions of the particular transactions which is followed by the settlement of balances. The securities are then allocated to the client in his DMAT account and the share value is credited to the companies raising capital. After completion of such a transaction, it is recorded by the Exchange offices.

What Are Some Technologies That Can Prove Beneficial For Retail Banking?

Posted on by Imarticus Learning

What Are Some Technologies That Can Prove Beneficial For Retail Banking?

Financial institutions annually spend huge amounts running into billions of dollars a year on upgrading technology and undertaking system integration work. This is not a fad but an essential for their survival. But, in comparison to the newer banks and the capital market courses the technology of the new age is not only nimble and lightweight but is also more adaptable and faster than the older banks’ legacy systems.

Some areas where technology definitely impacts the banking services can briefly be summarized as below.

A. Customer authentication: Imagine a dual-control process with multi-factor authentication taken care of in a bank. It is possible only when the technologies keep pace with the customer demands and is possible only with the application of the latest developments in big data analytics, AI and ML.

B. Data Security: Data is being generated by the fraction of a second and its sheer volumes are nowhere better known than in retail banking. Storage of data is another sector where banks need to tread carefully because of the increased KYC norms. Innovations in cybersecurity, cloud storage, and such areas are not only essential but mandatory for compliance or regulatory norms and to gain customer trust, loyalty and confidence. Such futuristic technologies suitable for retail banking can be learned in Capital Market Courses.

C. Legal and KYC requirements: With financial markets tightening the noose around fraudulent investors and borrowers the regulatory environment is much more stringent than ever before. The bank’s documentation, its process, and technology have all been under regular scrutiny in recent times. It would be impossible if not for Regtech innovators and technology stepping in to make it feasible.

D. Integration with legacy technology: Banks are big acquisition businesses and this means mergers of legacy technology of the two entities. When such legacy systems are to be transitioned to a newer uniform technological platform it involves huge costs. Technology can definitely help integrate the legacy systems at reduced costs and without changing the existing infrastructure.

The areas and developments that will see changes:

Citing a 2018 outlook report from SIFMA there are four trends that will definitely see benefits and change in retail banking. They are:

1. AI will aid and enhance the processes of decision-making and investments.

2. Automatic processing and AI will see a huge change.

3. Blockchains and capital market courses will lead to technological innovations to make retail banking and the capital markets more investor-friendly and efficient.

4. Data security and protection will increase in importance.

How do the banks benefit?

According to the experts, bankers, analysts, consultants, etc that spoke to The Financial Times, the top 5 areas that have the potential to be successfully transformed by blockchains are

Settlement and Clearing:

The bank network is a tangled network of securities, investments, and loans that need to be recorded, settled and cleared on a daily basis. And, this costs billions of dollars annually to run. Accenture says that this area of settlement and clearing could save investment banks up to USD 10bn if they use blockchain technology for efficient settlement and clearing operations.

Payments:

Payments systems from the central banks globally are moving to explore blockchain technology and shifting payments system processes to blockchains and issue digital tokens that can be used on the stock markets and cashed in at the central banks. Commercial banks also have pushed forward with their own projects instead.

Trade finance:

LCs, trade finance, bills of lading, etc are still paper-transactions sent through post or fax globally. According to the R3 MD, Charley Cooper, this is an obvious area where banks can benefit from blockchains.

Customer Identity Verification:

Lenders are in reality trusted custodians of investor’s money and regulators will hold the banking agents responsible for authentication of records and checking the customer’s identity. This area is a vital banking-risk that blockchain-processing can easily overcome. It is an era of start-ups in the KYC blockchain-enabled systems. Some of them are Blockstack, Cambridge Blockchain, Credits, and Tradle.

Syndicated loans:

It takes a long 19 days for US companies to raise syndicated funds from banks. Early repayments and foreclosures are still done on paper. To address the efficiency of this area Credit Suisse and 19 similar-minded financial institutions formed a work-consortium with the blockchain enablers to put the syndicated loans Synaps on a blockchain framework.

Conclusions:

Taking capital market courses at Imarticus Learning can help you learn and reskill on such futuristic technologies for retail banking. Hurry and enroll. For more detailed information regarding this and for further career counseling, you can also contact us through the Live Chat Support system or can even visit one of our training centers based in – Mumbai, Thane, Pune, Chennai, Banglore, Hyderabad, Delhi, Gurgaon, and Ahmedabad.

The Future of Jet Airways

Posted on by Imarticus Learning

 

What does the future hold for Jet Airways, the once-blue-eyed boy of the aviation industry? In April 2019 the airline temporarily closed operations for want of funds to keep flying.

Currently,

  • The sale of stakes is being considered crucial to the future of Jet Airways by its lenders.
  • The Union government is playing the revival plan of Jet Airways close to its heart while the banks have shown no interest in infusing funds or revival of the flailing Jet Airways.
  • The future of over 15000 employees is uncertain and their employee’s union threatens to approach the Labour Commissioner.

While the government, lending banks and the regulators of civil aviation struggle to discover solutions for the revival of Jet Airways and a quick resolution to the uncertainty of the fate of its large number of employees, India’s 3rd largest civil aviation market shareholder and domestic airline Jet Airways seems to be quietly sinking into a situation of no return.

Who is impacted?

According to Martin Consulting’s Mark Martin, once an airline stops operations, it is assumed it will not restart, as in the case of Kingfisher Airlines who closed down on October 20th, 2012. Very sad indeed! Jet Airways is known for breaking the state’s monopoly in the aviation industry to emerge as the airlines of everyone’s choice including the PM Narendra Modi.

The President, Jet-Airways All-India Staff, and Officers Association, the pilots’ union of Jet Airways and the National Aviator’s Guild (NAG) approached the police over dues in employees salaries and criticized the banks for the lack of infusing 1,500 CR Rs after agreeing to do so. The banks, however, refuted the allegations and stated they never had agreed to it.

The second week of April saw an employee protest in the form of a human chain outside the Jet Airways HQ and Jantar Mantar(New Delhi) to draw the government’s attention to their plight. Many had not received their salaries since January they stated. Unfortunately, the move came at a time when the BJP government was seeking a second term in office and the focus of voters was high on the government’s promises for economic growth and creation of jobs. However, the Narendra Modi led government did come to power and any action by it was just too late!

The AS2 3502 was the last Jet Airways flight on the Amritsar-Mumbai sector before running out of cash to meet even its daily operational expenses. Banks had refused its emergency funds plea of 400 Cr Rs fearing the money could not be recovered later. From 119 flights on its rolls, the giant had lenders, lessors of aircraft, and banks refusing to step in. The SBI led bank-consortium to preferred the bids from investors for a take-over instead.

The bidders:

The operational suspension does not augur well and the major bidders of NIIF, Etihad Airways, PJSC, Indigo Partners and TPG Capital were tight-lipped regarding the huge costs in dues accumulated. Every day counts and when it is a too-little-and-too-late variety of funding, Jet Airways may never recover. The only achievement of the bid process was to determine the Jet Airway’s fair-market-value!

The Regulators stance:

The DGCA, MoCA and such regulators are involved in ensuring the customers do not suffer and all rules on cancellations, refunds, and alternative flight bookings are strictly implemented. Pradeep Singh Kharola- Secretary, Civil Aviation claimed India was deficient by 17 planes and that 30 planes were to be inducted shortly. He stated that Air India was being ramped up and that the carriers had assured the government that the fares would be reasonably maintained. The issue needed to be resolved by the lenders and Jet Airways he felt.

Conclusion:

With Kharola allotting the Jet Airways parking slots to other carriers and lending agencies of aircraft appropriating their planes the curtains are down for Jet Airways. The bidding process has failed and the banks are trying to recover their dues. No one is really trying to revive Jet Airways and in all probability, it may never return to its days of glory.

Studying about debt restructuring, M and As and banking deals is interesting and part of the banking courses at the reputed Imarticus Learning Academy. Their excellent placement track record puts them in the elite league. Check them out today.

The Trade War Between the USA and China and Impact on India

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The year 2019 saw the Indian economy overcome short term setbacks like the GST and demonetization to emerge with an uptick 0f 7.5% in its growth rate. The Indian rupee also emerged as the strongest in Asian markets adding cheer and optimism among investors, general public and stock markets. The tariffs imposed by the USA on China and the escalated tension between the two countries is, however, causing much concern especially with reference to the impact on the Indian economy and the trade-war that augurs poorly for global relationships and economies.
To be able to wisely analyze, plan and offset the effects of such a full-blown war in trading it is essential to understand the factors underlying the present situation.

The reasons:

Towards the beginning of the year, President Donald Trump of USA submitted China to allegations of trade practices that were unfair and claimed violations of intellectual property norms. This was followed by duty and tax impositions of 10% on aluminium and 25% on steel from all countries with the exemption of Mexico and Canada. The US being a huge Chinese goods consumer the imposition of such duties caused deterioration in relationships and impacted the Asian markets too.
An estimated one-sixth of the total 635 US $ business faced such tariffs. However round one did not cause the bells to toll. Again in round-two, Trump imposed 200 billion US $ tariffs on exports from China. This measure was seen as stoking the escalating fire between the two economic giants and places them on the rim of a huge trade war chasm.
In India, the tremors of the escalation of a trade-war were felt in the economic dynamics. This is so because a shortage of raw material or products means a price escalation for the final consumer. The tariffs and tax increase also ups the prices for them. 
Effects on the Indian Economy:
Here are some of the predictable outfalls for the Indian economy.
The rupee value falls:
India does get affected by the worsening relationships and trade war escalations between two giants of the USA and China. Trump in late June went ahead with round two impositions of tariffs. In Indian markets, this negatively affected the trade deficit, and the rupee plummeted to an all-time low against the US dollar. 

The stock indices decline:

The key parameters namely the Sensex and Nifty declined due to the caution of the investors in trading and withdrawal of foreign investors funds from trading. Both the BSE and NSE indices saw regular downward plunges fearing a trade war between the two mights of China and USA. 

The imposition of duties:

In response to the imposed duty and tariffs on steel and aluminium, India owed 241 million US $ in taxes alone. In response and retaliation, India too imposed duties on US imports of 30 goods and products imported by it. The sum total of this exercise was that the US needed to pay 238million US $ to India in a counter move to increased tax debts. The manufacturing industries will see setbacks due to non-availability of materials and higher costs and the end users will suffer.

The requisite plan and strategy: 

In the given circumstances the CEOs of Indian industries have to work hard to keep the economy stable and growing. The possible trade war if it happens will temporarily set all Asian countries back. The possibility of restoring a global trading forum would need to be explored by the newly elected government. 
The trade war can cause a disturbance in the Asian region’s power equations spawning geopolitical pressures, economic setbacks and stock market crashes. What impacts Asia will also have global effects on all economies and hence will need astute planning and a non-military strategy to counterbalance it. 
Do you want to be able to understand such complex global trading relationships and the financial measures that can impact the economy or be provided as plausible solutions? Do finance and investment banking courses at Imarticus Learning where the live market simulations and practical sessions will help you quickly assimilate complex financial and market concepts. Hurry and cash in on their assured placements strategy that will ensure you are not caught unawares in the stock markets.

The Impact of Elections on The Capital Markets

Posted on by Imarticus Learning

 
Every investor is watching the capital and stock markets carefully ever since the 17th Lok Sabha elections were announced. How the markets will react to the election announcements and what will be the fallouts of the declaration are the top questions on all financial analysts minds.
The stock markets are very sensitive and fluctuate with changes in policy, governmental investments, and general economic stability indices. Elections would mean there would be a policy change that could be or may not be friendly for investors, may cause temporary economic instabilities, and are generally indicators of economic stability. The people’s verdict and the new government will thus definitely influence the stock markets pan India and globally too and depends heavily on the policies, reforms introduced by it and the stability of the government at the helm for the next 5-year plan.
Let us have a quick look at the factors and effects in the two stages of the election announcement.
The pre-election phase:
This phase is purely speculative and perceptive. The outgoing BJP government did bring in investor and consumer-friendly reforms like digitization of payments, GST and black-money removal among others. The demonetization and GST reforms did run into snags and hurdles. But the overall perception of the governmental policy was that it was investor and reforms friendly. Hence markets responded positively. In the run-up phase to elections, it appears the stock markets respond positively to news that the BJP will score another term. 
Foreign-investor sentiments also play a big role in economic development and stock market fluctuations. The press-sentiment reflected globally influences investor sentiment. A stable and long-lasting government sans fractured mandates is always good for institutional foreign investors and investments from them. Stocks tend to decline when foreign investors perceive a threat to their investments and withdraw their investments. Fluctuations occur due to change in perceptions and speculations that run rife in the pre-election stage.
During the last election, the stock markets reacted violently plunging downwards when the favored BJP lost the key bastions of Madhya Pradesh, Chhattisgarh, and Rajasthan. Thankfully the effects were short-lived and the stock markets recovered when news emerged of defeat margins being low and the mandate clear.
The recent India Pakistan tensions and skirmishes also affected the stock markets when the NSE and Sensex nose-dived after the Pulwama attacks. The markets rallied when a BJP-win was predicted after its counterinsurgency strikes which boosted positively the public sentiments and perceptions of the BJP government. 
Thus fluctuations should be considered the rule and not the exception in the pre-election phase.
Post-election results stage:
A clear mandate from the people always augurs well for the stock market prices to rise and stabilize. The results will decide if BJP will win the confidence of the voters and allow their implemented measures for economic reforms to yield fruit. It is predicted that the stock markets, foreign investments, Sensex and Nifty will surge upwards if BJP does win the elections with an unambiguous mandate for a second term as they did in 2014.
If the mandate is a wee bit short of a clear majority and the BJP does manage to form a stable government at the center, one can expect volatility in stock markets till stability is established with the new coalition government formation.
When the people’s mandate is ambiguous and fractured the stock markets will continue a fluctuation filled run up and until people see a stable government formed at the center. Then recovery will be slow and cautious and investors will follow the wait and watch policy. Especially the foreign investments pattern will take a hit. 
Concluding notes:
In parting, it is a fact that stock markets fluctuate and rely on perceptions of a stable government at the center. How the results will pan out is mere guesswork. However, analysis and trends do predict a second consecutive win for the BJP and this is good for the stock market prices. 
Are you interested in being able to analyze stock market trends and financial investment patterns? If so, do a skill- course with Imarticus Learning who offers a variety of financial globally certified and industry accepted degree and diploma courses. Their syllabus is comprehensive and teaching methodology excellent. They even have an assured placement program in place. Why wait when you too can cash in on a career in data analytics and finance?

The impact of elections on the capital markets

Posted on by Imarticus Learning

Every investor is watching the capital and stock markets carefully ever since the 17th Lok Sabha elections were announced. How the markets will react to the election announcements and what will be the fallouts of the declaration are the top questions on all financial analysts minds.
The stock markets are very sensitive and fluctuate with changes in policy, governmental investments, and general economic stability indices. Elections would mean there would be a policy change that could be or may not be friendly for investors, may cause temporary economic instabilities, and are generally indicators of economic stability. The people’s verdict and the new government will thus definitely influence the stock markets pan India and globally too and depends heavily on the policies, reforms introduced by it and the stability of the government at the helm for the next 5-year plan.
Let us have a quick look at the factors and effects in the two stages of the election announcement.
The pre-election phase:
This phase is purely speculative and perceptive. The outgoing BJP government did bring in investor and consumer-friendly reforms like digitization of payments, GST and black-money removal among others. The demonetization and GST reforms did run into snags and hurdles. But the overall perception of the governmental policy was that it was investor and reforms friendly. Hence markets responded positively. In the run-up phase to elections, it appears the stock markets respond positively to news that the BJP will score another term.
Foreign-investor sentiments also play a big role in economic development and stock market fluctuations. The press-sentiment reflected globally influences investor sentiment. A stable and long-lasting government sans fractured mandates is always good for institutional foreign investors and investments from them. Stocks tend to decline when foreign investors perceive a threat to their investments and withdraw their investments. Fluctuations occur due to change in perceptions and speculations that run rife in the pre-election stage.
During the last election, the stock markets reacted violently plunging downwards when the favored BJP lost the key bastions of Madhya Pradesh, Chhattisgarh, and Rajasthan. Thankfully the effects were short-lived and the stock markets recovered when news emerged of defeat margins being low and the mandate clear.
The recent India Pakistan tensions and skirmishes also affected the stock markets when the NSE and Sensex nose-dived after the Pulwama attacks. The markets rallied when a BJP-win was predicted after its counterinsurgency strikes which boosted positively the public sentiments and perceptions of the BJP government.
Thus fluctuations should be considered the rule and not the exception in the pre-election phase.
Post-election results stage:
A clear mandate from the people always augurs well for the stock market prices to rise and stabilize. The results will decide if BJP will win the confidence of the voters and allow their implemented measures for economic reforms to yield fruit. It is predicted that the stock markets, foreign investments, Sensex and Nifty will surge upwards if BJP does win the elections with an unambiguous mandate for a second term as they did in 2014.
If the mandate is a wee bit short of a clear majority and the BJP does manage to form a stable government at the center, one can expect volatility in stock markets till stability is established with the new coalition government formation.
When the people’s mandate is ambiguous and fractured the stock markets will continue a fluctuation filled run up and until people see a stable government formed at the center. Then recovery will be slow and cautious and investors will follow the wait and watch policy. Especially the foreign investments pattern will take a hit.
Concluding notes:
In parting, it is a fact that stock markets fluctuate and rely on perceptions of a stable government at the center. How the results will pan out is mere guesswork. However, analysis and trends do predict a second consecutive win for the BJP and this is good for the stock market prices.
Are you interested in being able to analyze stock market trends and financial investment patterns? If so, do a skill- course with Imarticus Learning who offers a variety of financial globally certified and industry accepted degree and diploma courses. Their syllabus is comprehensive and teaching methodology excellent. They even have an assured placement program in place. Why wait when you too can cash in on a career in data analytics and finance?
Reference:

L&T and Mindtree – Hostile Takeover or Investment Strategy

Posted on by Imarticus Learning

Understanding the market trends and bids for hostile takeovers or investment strategy is of prime importance in investment banking and financial careers, which are evidence and data based on their forecasts. The L&T case study is an interesting example of how one can use the strategy effectively in takeover bids or in placing investment bids based on smart predictions and forecasts of the capital markets.
The L&T group is well known in the capital markets with L&T‘s construction division securing the order for the 2nd phase of Bangalore Metro and L&T Infotech completing the acquisition of four companies including Neilson and partners of Germany. L&T Infotech went public in the year 2016, and its latest move to spur its growth by the acquisition of MindTree is hotly debated in trading circles.
Markets are abuzz with rumours of VG Siddhartha the Cafe Coffee Day founder and largest stakeholder in Mindtree striking a deal for selling his 20% stake in MindTree to L&T Infotech. For L& T the Mindtree acquisition will give it global presence and the much-needed portfolio expansion of its investment strategy and a potential area for expansion into IT services, media and technology industries the forte of Mindtree which reported a Q3 profit with a 35 percent increase in consolidated and net profit.
Is it a hostile take-over?
According to Mint, its inside sources claim to have knowledge of India’s giant construction and engineering company, and that Siddhartha is all set to seal a binding deal closure in the nearby future which triggered a hostile bid for the takeover of MindTree. L&T has offered to up its stakes to 51 percent to ensure a loss of control by the current management team of Mindtree.
The promoter’s of Mindtree and its founding members Subroto Bagchi, Krishnakumar Natarajan, Rostow Ravanan and N.S. Parthasarathy is an unhappy lot, with a collective stake of a mere 13.32 percent and are set on resisting such a move which is evident from their resistance to the M&A offers in the recent past. Large fund operators in the private equity market like Baring PE Asia and KKR & Co are also not so shy in showing interest in acquiring MindTree.
CCD founder VG Siddartha’s story:
Early investor Siddhartha acquired an interest in Mindtree in 1999 and systematically built up his investments to a large holding of 3.3 percent of the stakes with 54.69 lakh shares by 2018 Q4.
His firms Coffee Day Enterprises Ltd owned more than a 10.63 percent stake of 1.74 Cr shares of  MindTree and Coffee Day Trading Ltd, accounted for 6.45 percent of the shareholding. Ashok Soota, the former chairperson and shareholder, were effectively bought out by systematically planned buying of a stake in MindTree by Siddhartha. It is of interest to note that management rights are not included in the large stakeholding and Siddhartha vacated the MindTree board last year.
Is it just a smart investment strategy?
Per the daily Mint’s reporting, Siddhartha the CCD founder borrowed a sum of 3,000 Cr Rs by pledging his entire personal and firms holdings in Mindtree to various foreign and domestic lenders. His repayments of loans have been irregular, and it is anticipated that lenders may invoke the share pledges if he fails to repay and regularise his borrowings from the capital markets.
This move will impact the bid by L&T to take over Mindtree’s control. L&T hence quickly offered to step in with a letter-of-comfort providing a two-month moratorium on the pledge invocation measures initiated by the lenders. L&T Infotech, which is into digital and technology consultancy solutions, is making a smart move in getting market antitrust approvals from its market represented areas like the US, India and European Union countries.
Conclusion:
Mindtree, with its profitable and robust presence in the fields of technology and media, was ripe for a potential sale of stake by Siddartha. It could be an ingenious investment strategy to bail him out with the two-year moratorium. But the resistance of stakeholders and voting partners of MindTree add credence to a hostile takeover bid.
Whether it is a hostile take-over or investment strategy, these trends are best evaluated by doing a Capital Market Course with reputed training partners like Imarticus Learning. It is crucial that you know how to use predictive analysis, data analytics and big data if you are a career aspirant in the investment banking field of capital, equity, and debt markets. Hurry and enroll!