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History of Indian Financial Market

The history of Indian capital markets dates back 200 years towards the end of the 18th century when India was under the rule of the East India Company.

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Indian Financial Market in Comparison to Global Markets today

India's share of market capitalization as that of the world stands at 2.6%.

Among major economies of the world, it is the fastest growing economy at 7.4%.

With nominal GDP estimated at 2.5 Trillion $, it is the sixth largest economy in the world. The demography of India augurs well for it's economy and Financial Markets. More than 65% of the population is below the age of 35. The next few years will have a huge demand for workforce in capital markets. From stockbrokers, analysts, mutual fund distributors to investment advisers.

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Stock Market Training

Many Stock Market Participants fail to draw a distinction between investing and trading. They tend to mix both and call themselves investors when stock prices plunge and traders when stock prices rise. Investing is long term which is driven by fundamentals and trading is short term which is price driven. Our aim is to help you in understanding Financial Markets, the traps most of the investors/traders fall prey to, and how to avoid them. Our Flagship program, Stock Market Training is designed to educate you from basics to advanced level. Success in Markets can be attributed to contrarian thinking, patience, and discipline. To consistently outperform markets one needs to do a lot of research and invest in high conviction bets. We help you in inculcating those qualities in real time scenarios using our unique platform.

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Head & Shoulders Pattern

A Head and Shoulders (Top) is a reversal pattern which occurs following an extended uptrend forms and its completion marks a trend reversal.

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What is catching a falling knife?

In Stock Market Parlance catching a falling knife refers to averaging down a stock. It is also known as doubling up. In this strategy the trader/investor is lured into adopting this by the cosmetic effect of averaging price coming down whereas the actual loss remains the same, other things remaining same.

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Black Monday Revisited

In finance, Black Monday refers to Monday, October 19, 1987, when stock markets around the world crashed. The crash began in Hong Kong and spread west to Europe, hitting the United States after other markets had already sustained significant declines. The Dow Jones Industrial Average (DJIA) fell exactly 508 points to 1,738.74 (22.61%). In Australia and New Zealand, the 1987 crash is also referred to as "Black Tuesday" because of the time zone difference.

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Black Swan Event Ahead?

“When you develop your opinions on the basis of weak evidence, you will have difficulty interpreting subsequent information that contradicts these opinions, even if this new information is obviously more accurate.”

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Convexity of Bond

Convexity is a measure of the curvature, or the degree of the curve, in the relationship between bond prices and bond yields. Convexity demonstrates how the duration of a bond changes as the interest rate changes. Portfolio managers will use convexity as a risk-management tool, to measure and manage the portfolio's exposure to interest rate risk.

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Box Spread

A box spread strategy is an option arbitrage which combines bull call spread and bear put spread. These vertical spreads must have same expiration and same strike prices.

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Dow Theory

Dow Theory is named after Charles H Dow, who is considered as the father of Technical Analysis. Dow Theory is very basic and more than 100 years old but still remains the foundation of Technical Analysis.

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Growth stocks Vs Value Stocks
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Long Term Capital Management (LTCM)

Long-Term Capital Management (LTCM) was a large hedge fund led by Nobel Prize-winning economists and renowned Wall Street traders. The firm was wildly successful from 1994-1998, attracting more than $1 billion of investor capital with the promise of an bond arbitrage strategy that could take advantage of temporary changes in market behavior and, theoretically, reduce the risk level to zero.

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Historical Volatility

Historical volatility (HV) is a statistical measure of the dispersion of returns for a given security or market index over a given period of time. Generally, this measure is calculated by determining the average deviation from the market price of a financial instrument in the given time period. Using standard deviation is the most common, but not the only, way to calculate historical volatility. The higher the historical volatility value, the riskier the security. However, that is not necessarily a bad result as risk works both ways - bullish and bearish.

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Delta

Delta is one of four major risk measures used by option traders. Delta measures the degree to which an option is exposed to shifts in the price of the underlying asset (i.e. stock) or commodity (i.e. futures contract). ... Generally speaking, an at-the-money option usually has a delta at approximately 0.5 or -0.5.

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Gambler’s Fallacy

The gambler's fallacy, also known as the Monte Carlo fallacy or the fallacy of the maturity of chances, is the mistaken belief that, if something happens more frequently than normal during a given period, it will happen less frequently in the future (or vice versa). In situations where the outcome being observed is truly random and consists of independent trials of a random process, this belief is false. The fallacy can arise in many situations, but is most strongly associated with gambling, where it is common among players.

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Modern Portfolio Theory-Harry Markowitz

MPT shows that an investor can construct a portfolio of multiple assets that will maximize returns for a given level of risk. Likewise, given a desired level of expected return, an investor can construct a portfolio with the lowest possible risk. Based on statistical measures such as variance and correlation, an individual investment's return is less important than how the investment behaves in the context of the entire portfolio.

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relative strength index

RSI is a momentum oscillator generally used in sideways or ranging markets where the price moves between support and resistance levels. It is one of the most useful technical tool employed by many traders to measure the velocity of directional price movement.

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Put Call Parity

Put-call parity is a principle that defines the relationship between the price of European put options and European call options of the same class, that is, with the same underlying asset, strike price, and expiration date.

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Relative valuations of Bonds and Equities

The PE Ratio (Price-earnings multiple) is one of the most commonly used valuation tool for equities. To ascertain if equities are relatively more attractive than bonds we need to do simple arithmetic.

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The greatest trade ever

John Paulson bet against over inflated housing market in US in 2007 and bought credit default swaps against mortgages. His fund made 15 B $ in a single year.

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The Warren Buffett Indicator

A ratio above 100% is considered overvalued and a ratio below 100% undervalued. In the year 2000 this ratio for US Economy was 153% a sign of overvaluation. Subsequently the dot com bubble burst leading to sharp fall in the Market. This ratio can be used for any economy across timeframes and also across geographies.

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Traits of a Multibagger

Companies that are leaders in niche area and have a tiny market cap.

Warren Buffett said “Time is the friend of a wonderful company, enemy of the mediocre”. If you have the patience to wait for the business to grow and the market to subsequently realize its potential, you are sitting on a huge multi-bagger. This reminds me of the domestic consumption story. If one looks back at the market-cap of Cera Sanitaryware, Symphony or La Opala, it’s clear they were just too miniscule when compared to the scale they catered to, with an efficient supply chain and distribution network in place. Eventually, tailwinds prevailed, and the market catapulted them into a different orbit.

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Treynor Ratio

The Treynor reward to volatility model (sometimes called the reward-to-volatility ratio or Treynor measure), named after Jack L. Treynor, is a measurement of the returns earned in excess of that which could have been earned on an investment that has no diversifiable risk.

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Types of Options
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What is Beta?

A beta coefficient is a measure of the volatility, or systematic risk, of an individual stock in comparison to the unsystematic risk of the entire market. In statistical terms, beta represents the slope of the line through a regression of data points from an individual stock's returns against those of the market.

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