I still feel it’s all got to do with expectation vs actuals.
We never really pay for actuals for anything for that matter.
If the market expects interest rates to fall to 4 percent 10 years down the line, it starts discounting that effect right now and bond prices will go up now and not when interest rates actually fall.
Just to relate it with one more example.
If somebody is paying 50 rupees per share of zomato, he is not paying for zomato performance right now. He must be expecting zomato to do exceeding well 10 years down the line. That’s how much is discounted by the market.
If you are paying for 15 years plus for your education, you are expecting your benefits to exceed the cost in future.
Making sense or am I complicating it more?
In March 2020, gilt funds value went up because nobody expected huge cuts in the interest rates. So that was a surprise. And soon after cuts everybody knew interest rates will be increased again. And then gilt started underperforming.
Very strange but just got an email from Zerodha stating that “The clearing corporation has stopped providing margin against the shares of 736GS2052 and has removed it from the approved list of securities for margin pledge.”
This is a Govt of India issued bond so why would the Clearing Corporation remove it from their list when the maturity is a long way away?
This can create a serious situation for someone who might not have ready cash available to meet the margin requirement for open positions once the auto-unpledge happens and the available margin reduces…
Did any one else get similar emails for this or any other GoI bonds? Any idea why this would happen?
Thinking of opening a treading account in my mother name since I am in highest tax bracket and a good chunk of profit goes in taxes. Now since my mother have no income, and I trade less, I assume profit will not cross 5 lakh in a year and so no tax outgo. In such scenarios, where one is not in tax bracket, which cash component will be best for pledging? GSEC or Debt MF or any other components?
