[Quora]What is NIFTY/Sensex? How is it calculated? Based on what do the points in Sensex increase or decrease?

Sensex

What is Nifty/Sensex?
The Nifty and the Sensex are both stock indexes.
The Sensex is an index of 30 top( large, well-established and financially sound companies across key sectors) companies from the Bombay Stock Exchange, where as Nifty is an index of the 50 top companies traded in the National stock exchange.

How do you form an index:
The market capitalization of the index is found out based on the free float market capitalization(M) of individual companies.
M=( Total shares* Market price each share* Free float ratio).
The free float ratio is nothing but the percentage of the company’s outstanding shares that are present with the general public.
The total market cap for the Sensex is merely the summation of these 30 Ms.

How do you calculate the value of the sensex:

Day0: The base value of the stock index is 100 for the Indian exchanges(A standard default, set when the indices were made).  Let is assume that X=100crores (i.e the sum of all the market caps of the index is 100 crores)
Day1: On day 1 lets assume that X goes up to 105 crores. This is a 5% increase, and is reflected by the sensex going up to 105.

On any given day you can calculate the value of the Sensex by this formula

 

The value of either indices thus increases or decreases based on the performance of the stocks that are a part of that index.

Based on my Quora answer

[Quora] How would you explain the sub prime lending crisis and the ensuing recession to a 10 year old?

Let us think of the housing loans as cookies and the cookie salespeople as the banks.

In this virtual world of ours, for every box of cookies that the salesperson sells, the customer pays her a token, claiming that he will pay for the cookies in installments(of 10$ each) over the next year(=120$). Since she has to give the cookie company only 100$, this seems like a pretty good deal, so she sells the cookies.

Till this moment, the responsibility of choosing the “right customer” is on her, since if the customer refuses to pay(defaults), she loses the money she has paid to the cookie company and doesn’t make any profit.

Introduction to CDOs(Collateralized debt obligations)

The salesmen together sell 100 cookie boxes in our imaginary world.

Now, a smart guy from the locality enters and makes a deal with the sales people. Together they decide to sell these coupons that their customers give them, back to the public at 100$ with two offers to choose from

50 coupons(Group A )That will pay 9$ a month(108$) as and when the cookie customers pay back
50 coupons(Group B) That will pay 9.5$ a month(114$) as and when the customers pay back.

The catch is that the people who buy group A coupons get paid first, so for a given month, if 50 of the 100 customers don’t pay, the people from group B don’t get their money, but the ones from A do.
Think of it as a bucket with the installments from the customers as a water source.

The bubble:

Now a strange thing begins to happen. For ever cookie box that the salespeople sell, they get an assured 9$(on average), irrespective of whether the customer pays or not. This makes them sell cookies to people who are very unlikely to pay back! The demand for cookies begins to skyrocket as everyone begins to purchase more cookies. Everyone’s happy, but everything isn’t as rosy as it looks. It is the birth of a bubble

As the demand increases, so does the price of the cookies. The cookie company now sells the box for two times the price. However since people who aren’t capable of paying face no resistance from the sales force, the demand is unaffected.

The problem begins to surface when it is time to payback for the cookies. Since a lot of our cookie eaters didn’t have the money to pay for them, the funds begin to dry. The banks take back the cookies from the customers since they haven’t been able to pay.(assume that in our virtual world the people don’t eat cookies, just sniff them :P) This leads to a large supply of cookies in the market, and the prices drop. So the people who had bought the cookies at 240, will now get only 120 if they sell them in the open market. Knowing that paying installments worth 240 doesn’t make sense for a 120$ cookie box, they declare that they aren’t able to pay as well.

From there it is a downhill journey. People who had bought the cookies as well as the ones who had bought the coupons from the smart guy lose money, and the world faces one of the biggest recession in recent times.

Now if your 10 year old has lost faith in the world, show him this picture of a panda rolling downhill. Might just cheer him up!

From my Quora answer

 

[Quora]How can you explain the concept of stock market to a 7 year old?

Wow, this should be interesting.

Let’s assume seven year old Tom, a rather enterprising fellow that he is, wants to open a lemonade shop. The shop will run all through summer break( Around 60 days). Now he needs 100$ to buy the lemons, the ice, a small table and chair and a colourful canopy. But investing 100$ is kind of risky. So he goes to his classmates, and offers them a part of what he makes if they all chip in 1 $. Everyone who has chipped in the dollar gets a ticket- a share if you may.

 

The daily profit that Tom makes, will now be split into 100 parts, and each of his classmates will get 1/100th of the profit. The value of the ticket they hold therefore, will be equal to the the sum of these 1/100th amounts for all the subsequent days when his lemonade shop is working.(Neglecting time value of money.)

Now, if Tom makes a 20$ profit on his first day at work, each of his classmates will get 20 cents. Since his shop will be running for 60 days, they are bound to get a lot more(60*0.2=12$) than what they had invested. Now all his classmates want to buy more tickets at 1$ since they are hoping to get 12, and the value of each ticket begins to increase. Now, seeing Tom’s grand success Rita also starts a shop along the same street corner. Rita makes way better lemonades , and Tom’s profits slowly start falling. This causes a panic among the ones who have bought Tom’s ticket, wanting to sell it off while it is still high.

And the show, as they say, goes on…

From my Quora answer

Safe on the roof

A torch and a book was all she had. That, and the rusty old safe on the roof.

It would begin around 11, when he would come home. The noises, the utensils smashing against the wall, the screams and moans. The serene silence of the night, that cricket chirping monotone, broken by her mother’s sobs. And she would tug her book tightly, and hold on to the door of the safe.

It was dark in there, but it was darker outside.

Her father never even noticed her some nights. On others her mother would have to bear a few extra blows on account of her disappearance. But he never found out about this secret hideout, and he was too smashed to even try.

He hadn’t always been like this. He was a kind father and a loving husband. He would take them to the fairs and to the circus, and she would sit on his shoulders, eating her cotton candy, the world under her feet. Then, one day, a demon took him away.

It took him, into the shady taverns and the greasy whorehouses. Slowly it began eating on his soul, until finally he ceased to be the man he once was. Alcohol does that to people, turns simple kind men into monsters.

The tears had stopped coming now. She touched the cold rusty metal of the cupboard; and smiled, the saddest smile that a person could smile, thinking about how much it resembles her heart.

She sits there alone, waiting. Till it is completely silent, and then she waits some more.

The light scares her, darkness is safe.

Image credit: “safe” – © 2007 Paul Keller – made available under Attribution 2.0 Generic

The A to Z of what I learnt in college…

Avoid procrastination: It isn’t cool. It’s stupid.If there is something that needs to be done, do it. (PS: I am still working on this!)
Build friendshipsAfter everything that was learnt has been forgotten, after all that was earned has been lost, after moments are mere memories, these will stay.
Credibility is everything: If you have said you’ll do something do it. . Keep promises. People should know you are somebody they can rely on.
Debates> Discussions:  Discussions are formal, sophisticated and best for the conference rooms. I prefer debates. Only when ideas are challenged and attacked and tossed and turned, does real real thinking happen.
Ending what was begun : I started web designing, PSoC,finance and a hundred other things and quit midway when the novelty wore off. Not the wisest thing I’ve done. Always choose depth over breadth.
Fonts are important: Comic Sans MS is cool, but it is hard to take you seriously when your mail looks like it has been written by a 5 year old. Pick a set of formal fonts, and stick to them. I still use Cambria for headings and Callibri for text. Old (DoSM) habits die hard.
GPA matters: Atleast in the first few years after college.Yet it is probably the most commonly given, and most commonly ignored advice in BITSian history.
Humility will take you places : No matter how good or great you get, always stay grounded. Everyone you meet is better than you at atleast one thing. Respect them for it. If possible, learn that one thing.
It goes on: Robert Frost said he could sum up the essence of life with these three words. I think he was right.
Jaha tak ho sake pyaar-mohabbat se suljha: Those hallowed words I had heard from a department thirdie after a minor hassle during my first Waves on campus. It will surprise you how paths meet. As far as possible, try not to make enemies.
Keep Learning: 42% of college grads never read a book after college. There are courses online. There are books. There are people. Learning can happen anywhere. Extract every bit of it, from every place you can.
Life is not unfair. Life is indifferent: You will be tempted to play victim, and saying life is unfair is the easiest thing to do. The universe doesn’t hate you. It doesn’t give a damn about you.
Music- explore good music: Yaani,Beatles,LedZep,Doors,Floyd,Coldplay, the list can go on. DC overflows with music. Explore as much as you can. Create a playlist of favorites. It will help you, in good times and in bad.
No matter how good you are at something, there is always someone who is leagues better than you. 
Over those campus walls, and beyond the beaches, there is a world, explore it: Visit the lake behind campus. Just sit there for a while and enjoy the silence and nothingness. Go on the odd EPAC outing. Watch birds. Have fun.
Pursue your passion: As cliched as it may sound, college is a place where you find yourself. Try things. Find what you love. Be great at it.
Queer,scrappy,bitchy,arrogant,sloopy: You’ll meet them all. People tend to be different. Don’t try to change them, you will almost invariably fail. Learn to live with them. The real world will be pretty similar.
Room doors should always be open: When you aren’t studying, or doing anything that demands privacy, always keep your doors open. Wind and ideas are good for you. Let them flow.
Scrappy is good: Everything in life will not come easy. Fight for what you really want. Its okay to be obsessive, no matter what they say.
Teams are critical: No matter how self reliant or Howard Roarkish you are, a good team will always do wonders. In projects, in startups, in LIFE. As the old saying says if you want to go fast go alone, if you want to go far go together.
Use what talent you have: Never ever refrain from trying because you aren’t good enough. The woods would be very silent if no birds sang except the ones that sang best.
Vocabulary: Don’t use awesome and epic to describe every phenomenon on the planet. Read books.Pick the odd newspaper. Build a good vocabulary. You’ll need it.
Worry will get you nowhere: Give it your best, and lay back and enjoy the view. Li8, if used in the right sense is a wonderful thing.
Xerox copies of important documents can come in handy. Also, it is okay to come up with lame points when you can’t find a good x word.
You are probably getting tired of this by now: Know your audience. Present accordingly.
ZZZZZ: Sleep. Often and regularly. These things have a habit of catching up with you in the long run.

[Taken from my Quora answer: http://www.quora.com/Birla-Institute-of-Technology-and-Science-Pilani-1/What-are-the-best-life-lessons-that-you-learned-at-BITS-Pilani/answer/Ganesh-Nagarsekar ]

Watering a dead plant.

dead plant with dry leaves closeup isolated on white

He has made a habit of it,
Joining the broken branches with gum and glue,
and then staring at it wistfully,
as if it were new.

It is broken though,
and that way it will always be,
But what choice does the old man have,
he’s too old to plant a new tree.

He dreams about the plant that was,
tries to revive it, but he can’t,
so he sits there, rickety bones, sagging skin,
watering a dead plant.

And as the people pass that old man’s shanty,
they look at the naive old fool and smirk,
As he toils to make a dead thing alive,
make an engine-less tractor work.

And then when they are done smirking they ‘turn,
to their sour relationships and dead end jobs,
watering a dead plant of their own,
drowning their days amidst stifled sobs.

A girl walks by selling saplings new,
but no one pays her heed,
And the world goes on, watering a dead plant,
too afraid to plant a new seed.

the dog sleeps

It’s eleven at night
when I leave the room
the moon lonely, the stars alone.The lights in the houses are going out
darkness-beautiful
begins to sprout

Men collapse in bed
One more day of their life
successfully
sold

The children fall asleep
waiting
for stories
that will never be told

And by the street
I see a dog
Its chest rising
falling
in perfect rhyme

In a chaotic world
grinding to a halt
this picture
so
sublime

They work by the day
and worry by the night
the heart never at ease.

Men may have all the wisdom
But the dog sleeps in peace.

An attempt at trying to mimic Charles Bukowski’s writing style.