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Old 31st January 2018, 15:54   #196
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Default Re: Guide: Investing in shares of the automotive sector

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Originally Posted by vikash49 View Post
My dad has 500 shares of Blue Dart from the original allotment in 1994. Now the question is, will it be a wise move to trade them for another equity (with better earning potential and dependability) like say, Maruti Suzuki and forget about them for say like another 5yrs? Or should he hold on to them for some more time?
Blue Dart too is one of those stocks whose valuations cannot be justified with traditional parameters. This report by ICICIDirect makes an effort but they are making estimates based on how this company might perform in FY25-FY30 time period.
http://content.icicidirect.com/maili...art_Q2FY18.pdf

My suggestion:

1) For now, hold on to Blue Dart shares
2) Sell Blue Dart shares in blocks of 25 units
3) Buy into a new stock idea (or an existing one in your portfolio) with the proceeds
4) Perhaps you could space your Blue Dart sales once every two or three months

This gives you enough time to figure out which stock to buy.

OR

Utter an expletive or two, sell all Blue Dart shares and use the proceeds to buy a Jeep Compass!
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Old 31st January 2018, 16:31   #197
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Default Re: Guide: Investing in shares of the automotive sector

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2) Sell Blue Dart shares in blocks of 25 units
4) Perhaps you could space your Blue Dart sales once every two or three months
Makes sense. How about he start an SIP of 1Lac per month and sell 20-25 shares of Blue Dart each month to fund the SIP?

Whats you take on Maruti Suzuki with a long therm prospective?


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Utter an expletive or two, sell all Blue Dart shares and use the proceeds to buy a Jeep Compass!
Hahaha! I must say, I'm tempted!
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Old 1st February 2018, 15:17   #198
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Default Re: Guide: Investing in shares of the automotive sector

Hi Smartcat -

This was coming your way -

Fellow BHPians would be thankful if you can provide an insight on the implications of 10% tax on Long Term Capital Gains and how this should/might impact short/long term investments.

Thanks as always
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Old 1st February 2018, 15:50   #199
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Default Re: Guide: Investing in shares of the automotive sector

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Originally Posted by vikash49 View Post
Whats you take on Maruti Suzuki with a long therm prospective?
A company like Maruti is considered to be a "secular growth story" (phrase used by experts on TV!) whose earnings are expected to grow every single year for a long time. Ideally, I would like to buy such stocks at less than 20 PE (making an assumption that they will grow at 20% CAGR over long term).

But right now, Maruti is trading at almost 40 PE and has been up 50% in the past 6 or so months. I wouldn't make a fresh investment at these levels. However, if you do not own Maruti stock, make a small investment now and buy more if the stock falls.


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Originally Posted by Torquedo View Post
Fellow BHPians would be thankful if you can provide an insight on the implications of 10% tax on Long Term Capital Gains and how this should/might impact short/long term investments.
Lots of confusion but from what I understand -
  • Let's say you invested Rs. 10 Lakhs in stocks 2 years back.
  • Let's assume that the portfolio value as on 31st Jan 2018 is Rs. 18 Lakhs.
  • The gains of Rs. 8 Lakhs remains tax exempt.
  • Let's assume that this Rs. 18 Lakhs becomes Rs. 21 Lakhs in a year and you liquidate your entire portfolio.
  • Long term capital gains in the above example is Rs. 3 Lakhs (21 minus 18)
  • Up to Rs. 1 Lakh, long term gains are tax free.
  • So net long term taxable income is Rs. (3 - 1) = Rs. 2 Lakhs
  • LTCG is 10%
  • You pay a tax of Rs. 20,000.

Have I missed something here?

Last edited by SmartCat : 1st February 2018 at 15:54.
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Old 1st February 2018, 16:18   #200
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Default Re: Guide: Investing in shares of the automotive sector

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Originally Posted by smartcat View Post
  • Let's say you invested Rs. 10 Lakhs in stocks 2 years back.
  • Let's assume that the portfolio value as on 31st Jan 2018 is Rs. 18 Lakhs.
  • The gains of Rs. 8 Lakhs remains tax exempt.
  • Let's assume that this Rs. 18 Lakhs becomes Rs. 21 Lakhs in a year and you liquidate your entire portfolio.
  • Long term capital gains in the above example is Rs. 3 Lakhs (21 minus 18)
  • Up to Rs. 1 Lakh, long term gains are tax free.
  • So net long term taxable income is Rs. (3 - 1) = Rs. 2 Lakhs
  • LTCG is 10%
  • You pay a tax of Rs. 20,000.

Have I missed something here?
Yes, this is my understanding too, broadly. The 31st Jan price is the highest price the stock reached ON 31st. It'll be a pain to calculate this for each stock if one own a lot
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Old 1st February 2018, 16:18   #201
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Default Re: Guide: Investing in shares of the automotive sector

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Originally Posted by smartcat View Post

Lots of confusion but from what I understand -
Spot, spot on. I wish you were my teacher in High School, things would have been a lot simpler to comprehend.

Another one that I have is, so from today on-wards, if a person starts investing in equities, he/she shall be paying up 10% on LTCG for gains beyond 1L, irrespective of the period that they hold them.

Have I got it right ?

If I have, for small retail investors the lure of holding back their portfolios for longer terms makes little sense now, the STCG stands at 15%, it is a different ball game if you think that the stock shall multiply over the years.

Any investment, change of portfolio, selling mantras with this change would be really beneficial for us

Thanks much.

Last edited by Torquedo : 1st February 2018 at 16:20.
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Old 2nd February 2018, 12:17   #202
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Default Re: Guide: Investing in shares of the automotive sector

Quote:
Originally Posted by smartcat View Post

Lots of confusion but from what I understand -
  • Let's say you invested Rs. 10 Lakhs in stocks 2 years back.
  • Let's assume that the portfolio value as on 31st Jan 2018 is Rs. 18 Lakhs.
  • The gains of Rs. 8 Lakhs remains tax exempt.
  • Let's assume that this Rs. 18 Lakhs becomes Rs. 21 Lakhs in a year and you liquidate your entire portfolio.
  • Long term capital gains in the above example is Rs. 3 Lakhs (21 minus 18)
  • Up to Rs. 1 Lakh, long term gains are tax free.
  • So net long term taxable income is Rs. (3 - 1) = Rs. 2 Lakhs
  • LTCG is 10%
  • You pay a tax of Rs. 20,000.
Have I missed something here?
Additionally, if you liquidate your shares by 31st March 2018, you don't have to pay any LTCG tax (even for the gains from January 31st, 2018) as the above rule is valid only from the next financial year.
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Old 2nd February 2018, 12:46   #203
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Default Re: Guide: Investing in shares of the automotive sector

I am surprised about Tata Motors being so volatile, despite other auto stocks doing well. Any reason?

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Originally Posted by nikipedia87 View Post
Additionally, if you liquidate your shares by 31st March 2018, you don't have to pay any LTCG tax (even for the gains from January 31st, 2018) as the above rule is valid only from the next financial year.
Is this the reason for sensex falling today?
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Old 2nd February 2018, 15:18   #204
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Default Re: Guide: Investing in shares of the automotive sector

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Originally Posted by jetsetgo08 View Post
I am surprised about Tata Motors being so volatile, despite other auto stocks doing well. Any reason?



Is this the reason for sensex falling today?
Not only today, but since Jan 31st, 1 day before the budget.
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Old 2nd February 2018, 16:16   #205
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Default Re: Guide: Investing in shares of the automotive sector

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Is this the reason for sensex falling today?
Very much. Wide scale selling (especially among midcaps and small caps) resulted in Sensex seeing the 5th most steep fall in the last 10 years today, with over 850 points down. Absolute blood bath.
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Old 2nd February 2018, 19:44   #206
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Default Re: Guide: Investing in shares of the automotive sector

Fantastic opportunity to buy / average shares I believe. Again, terming this the steepest fall based on points is unreasonable - it should be based on the percent as that's more relative.
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Old 4th February 2018, 14:00   #207
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Default Re: Guide: Investing in shares of the automotive sector

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Originally Posted by jetsetgo08 View Post
...

Is this the reason for sensex falling today?
Quote:
Originally Posted by babhishek View Post
Not only today, but since Jan 31st, 1 day before the budget.
Budget (& particularly LTCG) per se is not the reason for the fall.
This is broad based selling due to hardening interest rates all over the world and current expensive valuations.
LTCG does add to the mix, possibly making the fall in Indian indices a bit more pronounced.
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Old 5th February 2018, 18:52   #208
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Default Re: Guide: Investing in shares of the automotive sector

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Originally Posted by Torquedo View Post
If I have, for small retail investors the lure of holding back their portfolios for longer terms makes little sense now, the STCG stands at 15%
I think a small retail investor can still avoid the tax if he doesn't have a Long term Capital Gain greater than Rs. 1 lakh in a Financial Year.

That being said, let's say there is a gain of 3 lakhs in a fiscal year:
1. If its short term gain, you are taxed @15% on entire 3 lakhs, which gives a tax outflow of Rs. 45k
2. If this is a long term gain, then you are taxed only on 3 -1 = 2 lakhs @10% which makes you tax outlflow as 20k.

In this case, the LTCG tax is less than half the STCG tax.

So to summarize, there is surely a tax to be paid , but IMHO it doesn't seem to negate the tax benefit offered to small retail investors for holding on to the shares for longer term.
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Old 27th February 2018, 19:03   #209
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Default Re: Guide: Investing in shares of the automotive sector

@Smartcat, Quoting you from a different thread, "If you develop an interest in stock picking, you can invest in high dividend yielding stocks yourself. Large investment in a high dividend stock will give you 5% or 6% returns tax free dividends. Plus you get capital appreciation. When you invest in such stocks, you get an extra source of income in the form of dividends".

Can you give a list of high dividend yielding stocks?
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Old 27th February 2018, 19:31   #210
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Default Re: Guide: Investing in shares of the automotive sector

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@Smartcat, Quoting you from a different thread, "If you develop an interest in stock picking, you can invest in high dividend yielding stocks yourself. Large investment in a high dividend stock will give you 5% or 6% returns tax free dividends. Plus you get capital appreciation. When you invest in such stocks, you get an extra source of income in the form of dividends". Can you give a list of high dividend yielding stocks?
Go to www.screener.in and in 'Query Builder', type the following -

Market Capitalization >100 AND
Dividend yield >4 AND
Dividend Payout Ratio >15 AND
Dividend Payout Ratio <100

This lists out all stocks with dividend yield of 4% or above. From the automobile sector, the following stocks offer high dividend yield -

HPCL 5.1%
BPCL 5.1%
IOC 5%
Greaves Cotton 4.3%

5% dividend yield means if you had invested Rs. 1 Lakh in IOC, you would have received Rs. 5,000 as dividends in your account. You can choose stocks from other sectors too. Remember that high dividend yield stocks are 'slow movers'. You can expect around 10% per annum in capital appreciation and 4% to 6% returns per annum as dividends.

Such stocks are ideal if you want tax free secondary source of income. Cash flow from dividends will nicely supplement your salary income - but only if your stocks portfolio is big enough. For that, you need to invest regularly every month for something like 10 years or more. Like rental income, dividend income from a company too will rise over time.

Last edited by SmartCat : 27th February 2018 at 19:48.
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