ValuePickr Forum

Investing Basics - Feel free to ask the most basic questions

Not responding to your specific query, but you may find a structured process like this very useful:

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This cooperative bank offers fixed interest rates upto 12% p.a
http://iccsl.in

Check Plan FG5:
http://iccsl.in/fixed-deposit/

Is this safe investment? Or not?

Indian Cooperative Credit Society Ltd (comes under MSCS: Multi State Cooperative Societies)

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No, they are offering this rate because it’s not safe. Secondly, avoid cooperative banks. We have seen enough scams. If you are looking for a higher FD rate, a good small finance bank is a better option. Not without risk too, but certainly a better option than a co-operative bank.

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I recently read this article on ETF and Index Funds It plays on Michael Burry’s prediction of Index Funds creating a bubble, not different from the one in 2008. Anyone who has watched the Big Short (and if you haven’t I highly recommend it for your next movie night!) knows that this guy is pretty legit! My knowledge on this topic is fairly rudimentary, so I would love to here some discussions on this. Heres the article:

What is the smartest / best way to think of stock inventory brought at various prices over a long period of time. Over a longer period of time falling prices LIFO would seem like you are minimizing the losses and FIFO would seem like you are making larger losses (hence lower tax liability). And vice versa if i would think of selling in batches and use FIFO or LIFO. while i read somewhere that one could instruct the broker to sell the specific stocks hence one can take advantage of tax implications, i have not tried to do this but would like to know if someone here has experiences to share. To illustrate the problem, i have acquired PEL over last 11 years from the price of 360 all the way to 2400 (the highest price at which i acquired) and recently i subscribed to the rights @1300. i recently sold a part of my holding, now if i think of it as i sold the shares i acquired through rights (LIFO) i would see it as profit booked. But if i think of my holdings at an average cost or specific inventory i might show it as a loss or profit booked.

Maybe someone else can talk to you about the tax impact of using LIFO Vs FIFO.

But generally speaking, regardless of when you buy a stock or how much you have bought in the past, each and every transaction should be looked at separately.

Let’s say I buy 100 Quantities of Stock X at Rs. 70. I think anything within Rs. 80 is a good price to pay for Stock X, but not a penny more. Then a few months later, Stock X is at Rs. 100. Out of FOMO, I buy 20 more Quantities in Stock X. Now, my Average Price becomes Rs. 75, which is still within Rs. 80. But, my latest transaction of Rs. 100 was against my consideration that Rs. 80 was the purchase price limit. So I should admit to myself that I was wrong and be careful next time.

TLDR: Consider every single one of your investment transactions separately and make sure you’re not paying more than what you think the investment is worth (Ideally you should try to pay considerably lesser than what it is worth).

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You cannot do this unless they are in separate Demat Accounts.

In each demat account, FIFO will always be applied for calculating tax

https://www.incometaxindia.gov.in/communications/circular/910110000000000355.htm

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I have a pretty basic question here. It’s related to Net fixed assets of a company and capex.

Let’s say a company has NFA of 120cr (previous year 100cr). It has depreciation of 5cr (previous year 3 cr). And CWIP of 8cr (previous year 6 cr).

If I want to calculate how much capex the company actually did this year, what would be the formula? Do I need to consider depreciation in the calculation as well?

I saw somewhere it was
Increase in NFA 120 - 100 = 20 (A)
Depreciation for the year = 5 (B)
CWIP = 8 ©

So the total capex is A + B + C = 33cr.

Is this calculation correct? If so, why are we adding depreciation instead of deducting it?

I just made up these numbers and included prev year numbers for the sake of completeness.

Can somene please explain how derivatives (futures and options) affect stock price? Say for example someone sells a stock in the futures market. What makes the price in cash market go down?

Also, why do some stocks see a significant difference between futures price and cash market (for eg, Yes Bank a week ago was trading at 37 in cash segment while it was at 28rs or so in the futures segment).

Total capex is usually mentioned in the Cash Flow statement.

If you are taking Capex from the Cash Flow statement, then no. However, total capex usually includes New Capex + Maintenance Capex. A thumb rule is to assume that Maintenance Capex is roughly equal to the Depreciation.

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Can anyone help me how can I find the price data of benzene for India?

Export/Import rate & Quantity of benzene is available in screener.in premium account.

Hello,
I want to understand what are the various ways in which a promoter can decrease his shareholding in a company.
Two ways I am aware of are direct stake sale and pledging shares which later get sold (like in case of yes bank).
What are some other ways (especially ones which are more difficult to spot by retail investors).

Thanks

i am just curious as to why you wouldnt pick this up directly from cash flow statement > cash flow from investing > purchase of fixed assets ?
This would include maintainence capex + growth capex as noted by @VijayShetty
and then you could simply subtract depreciation from it to arrive at growth capex.

Another way : QIP or Rights or other type of equity infusion by allocating to non promoters (where equal participation by promoters not there) which will increase total number of shares but with same holding for promoter and in effect reducing percentage of promoter holding. (Eg: Piramal promoter holding reduced from 54% in 2014 to 46% now )

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i have a basic question regarding COGS :
COGS = Beginning Inventory + Purchases - Ending Inventory

Now, if my (Ending inventory) is more than (Beginning Inventory + purchases), then the COGS value will be negetive
but this doesnt seem logical to me !
how can cogs be negetive ?

can someone help pls ?

How can Ending inventory be more than Beginning Inventory + P?

Take Beginning Inventory = B
Ending Inventory = E
Purchases = P

If you sell 0 items, then E = P + B
Even if you sell 1 item, E = P + B - 1
If you sell 2 items, E = P + B - 2

If P & B are both greater than or equal to Zero, Ending inventory cannot be greater than P + B
It can never be

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Theoretically it is possible in case of revaluation of closing stock (value wise not unit wise). However, in 99.99% case, if this happens, it is a red flag… account issues…

Where did you find this? One needs a proper context to answer this. Please share the source where you find such a case so that one can understand better.

apologies !
as a novice, i was looking at wrong numbers and inputs which was giving me -ve answer.

Thanks a lot for replies.