The investment is the area of interest for the auditors, analysts and accountants. Finance professionals are inclined towards investment, regulatory changes, compliances, tax laws and legal laws. Chartered accountants handle the quarterly, half-yearly and annual results. The financial results and auditors’ reports are the parameters to know the growth and risk factors in the company. Chartered accountants excel in multiple professions related to finance. The role of a chartered accountant in the investment category is an interesting perspective.
On the verge of answering the question, the blog engages the readers with the latest news on SEBI about investments and the future of investments. The blog intrigues the readers with information on the difference between derivatives and stocks and the new rule of SEBI. SEBI revised the rules for the entry and exit of derivatives. Financial investments are in the form of equity shares, stocks, derivatives, commodities and mutual funds. The announcement came on August 30. SEBI implement the new norms immediately in the market.
Can a CA become a full-time investor?
The CA course prepares a student for the audit job. Stock trading or investment is a branch of finance-related subjects. CA course gives the knowledge to understand finance, audit, tax, and investment. A trader requires time to practice in the live markets and understand the market patterns. The first requirement is time. Secondly, a practising chartered accountant works for clients in public and private limited companies. In this case, the company’s confidential information is in the hands of the auditor. So, trading is against professional ethics for an auditor. Chartered accountants invest money in long-term investments like equity markets and mutual funds. ICSI and NSE offer certification courses for stock analysts. Qualifications like CFA, CA, CMA, MBA, CMT, FRM and CFP add credibility to the equity analyst profession. Trading F&O and equity is not a speculative business. Trading intraday is a speculative business.
Full-time investors or traders work for a long time and it is a risk-oriented job. The return on the investment shows the skills of the candidate. If the candidate can generate reasonable returns, trading is the best option for a chartered accountant. After gaining experience in stock trading, the candidates get connections and network with people of like mind. So, the knowledge from the trading can be communicated to other investors through blogs and YouTube videos. These digital sources offer other monetising opportunities. RR Academy students work in different domains. The intense knowledge of the students in audit helps for understanding investment, finance, tax and legal subjects.
The new rule of SEBI:
SEBI introduced changes to the criteria of derivatives. The regulator increased the median quarter Sigma order to 75 lakhs. The regulator also increases the market-wide position limit to 1,500 from 500 crore. The average daily delivery value in the last six months of the companies is set as 35 crore. The existing stocks receive a gestation period of six months. SEBI had introduced a successful formula for the stock derivatives. The eligibility to perform in the derivative segment is now measured in the number of entities trading the derivative, the duration of trade with the review period, the turnover, and the notional interest. The regulator checks the data of performance for the continuous six months. If any stock is in the bracket of poor performance, the stock cannot participate in the fresh contracts. The unexpired contracts get permission to trade in the market. The new strikes apply to the existing contracts. The Product success framework is calculated on the 15th of each month.
The new rules made around 18 stocks as excluded stocks in the F&O segment. Around 80 stocks qualify for the same segment. SEBI is likely to review the exclusions list by December 2024. The changes and exclusions take effect from February 2025.
The prominent stocks in the list of inclusion according to the new rule of SEBI are as follows: Varun Beverages, Yes Bank, Life Insurance Corporation of India, Avenue Supermarkets, BSE, CDSL, Adani Energy Solutions, Adani Total Gas one 97 communications, Tata technologies, BEML, SN E-commerce ventures, Tata Elxsi, Cyient, and IIFL.
The stocks that are on the edge of removal from the segment are as follows: Sun TV network, Abbott India, Metropolis Healthcare, Granules India, Bata India, Can Fin Homes, United Breweries, Mahanagar Gas, IDFC, City Union Bank and Dr lal path labs.
Difference between derivatives and stocks:
Financial instruments are swaps, futures, forwards and options. All these financial instruments are traded through the stock market. Stocks transfer the value of the company. Derivatives transfer the performance and it is used for future operations. Derivatives are used for speculation, future price movements, and hedging risk. The derivatives are in the form of stocks, commodities, bonds, and currencies. Stocks are traded through exchange. Derivatives are traded through the exchange and also with over-the-counter options. OTC derivatives are traded between two parties. The exchange-traded derivatives are traded using standardised contracts.
The F&O shares expire within a one, two or three-month period. On last Thursday, the contract expires. The holder can sell the contract before the expiry date.
In a globalised world, the derivatives increase competition, technological advancement, and changes in the rules and regulations. As a result of the focus towards the risk factor, the derivatives are likely to become more standardised and transparent. The investors in the stock markets want to manage the complexity and risk in the market. The demand of investors is shaping the financial markets.
Conclusion:
Commodities and derivatives deal with physical commodities. The equity markets deal with material forms of value. Commodities market process immediate delivery. Derivative markets process contracts with future delivery. Equity markets transfer the value and ownership to the investors. A chartered accountant with an investment interest understands the market movement, risk factors, financial instruments and corporate stories. Equity market analysts have theoretical and practical knowledge of the stock market.