Nifty near all time high!

Blog meant for 13 September Wednesday 2017

Dear Friends,

The rally continued in global Stock Markets today also as all Asian markets rose. Nifty closed at 10093, up by 87 points. It is very close to its life time high of 10137. There is possibility of some resistance around 10100 mark since it is a psychological mark.

The European markets are majorly positive tonight and the US markets are mildly positive as of now.

The technical analysis is as follows.

THE HOLDS ARE- ASIAN PAINT, HDFC, HINDALCO, MARUTI, RELIANCE, TITAN, VEDANTA, YESBANK, LARSEN,  HDFC BANK, ACC

DON’T BUYS ARE- INFOSYS,  SBI, M&M

WAIT TO BUY – TCS

Let us see if markets can touch its all time high tomorrow or whether some profit booking takes place.

—————–

Question of the Day – What is share buy back?

Answer –

Public limited companies have an option of distributing its profits in a few different ways.

1. Dividend Payment – A portion of the profits of a year is paid by the company to its shareholders. The percentage of dividend is calculated on the face value of the share. For example, if a company announces 50% dividend, it is 50% on the face value of the share. If the face value of the share is Rs.10, then 50% of Rs.10 which is Rs.5 per share is paid as dividend to shareholders. The percentage of dividend is never calculated on the Market price of the share

2. Share Buy back – When a company has lot of idle funds with it and it cannot find any profitable investment opportunity to expand its business etc, then it may decide to return the excess funds to the shareholders so that they can be free to invest their money wherever they choose to. For example, recently TCS & Infosys have announced share buybacks to its shareholders.

In Share buybacks, the company buys backs its own shares from the shareholders so as to reduce the idle funds available with it and also to make it more profitable for existing shareholders in the future.

Usually share buy backs are made at a price much higher than the current market price of the share. For example, Infosys share are trading at around Rs.900 per share now and they have announced for a share buyback at Rs.1150 per share. The date of the buy back has not yet been finalised with the Infosys board.

Shareholders who do not wish to hold shares of that company can sell their shares at a higher price back to the company. This gives the shareholders some additional money compared to if they sold immediately in the market.

By doing share buy backs, companies are returning some of the company’s profits back to its shareholders (owners), to give them the freedom to use the money in whatever way they want.

Usually all the shares that the shareholders hold will not be bought back by the company. Companies specify the ratio of how many shares they will buy back for shares held the shareholders. For example, a company may announce that the will buy back 3 shares for every 10 shares held by a shareholder.

Shareholders do not need compulsorily sell shares during a buy back. They can continue to hold the shares too.

Hence, whenever a share buy back is announced, investors have to decide whether they want to Sell or continue to Hold shares of that company.

———
All the best!

Dr.Bharath Chandra & Rohan