Indian Stock Market1

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Transcript of Indian Stock Market1

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Indian Stock MarketIndian Stock Market

Market of ³Hope, Discipline &

Greed´

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What is Stock ?What is Stock ?

stock is a share in thestock is a share in the

ownership of a company. Stock represents a claimownership of a company. Stock represents a claimon the company's assets and earnings.on the company's assets and earnings.

As one acquire more stock , his/her ownership stakeAs one acquire more stock , his/her ownership stakein the company becomes greater.in the company becomes greater.

Whether one say share, equity, or stock, it all meansWhether one say share, equity, or stock, it all meansthe same thing.the same thing.

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Classification of stocksClassification of stocks

StocksStocks areare classifiedclassified asas

1.1. CommonCommon Stock Stock::-- CommonCommon sharesshares representrepresent

ownershipownership inin aa companycompany andand aa claimclaim (dividends)(dividends) onon

aa portion portion of of profits profits.. InvestorsInvestors getget oneone votevote per  per shareshare

toto electelect thethe board board members,members, whowho overseeoversee thethe major major 

decisionsdecisions mademade by by managementmanagement

2.2. PreferentialPreferential StocksStocks::-- PreferredPreferred stock stock representsrepresents

somesome degreedegree of of ownershipownership inin aa companycompany but but usuallyusually

doesn'tdoesn't comecome withwith thethe samesame votingvoting rightsrights..

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WhatWhat isis StockStock

MarketMarket ??AA stock  stock marketmarket isis aa

marketmarket for for thethe tradingtrading of of 

 publicly publicly heldheld companycompany

stock stock andand associatedassociatedfinancialfinancial instrumentsinstruments

(including(including stock stock options,options,

convertiblesconvertibles andand stock  stock 

indexindex futures)futures)..

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What is Indian Stock Exchange ?What is Indian Stock Exchange ?

Formal organizations, approved and

regulated by the Securities and Exchange

Board of India (SEBI), that are made upof members who use the facilities to

exchange certain common stocks.

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INDIAN STOCK EXCH ANGESINDIAN STOCK EXCH ANGES

Two National Level Exchanges are

1.  National Stock Exchange (NSE)

2. Bombay Stock Exchange (BSE)

Total 22 Exchanges are there in India National

and Regional level, all exchanges conducts100% computerized trading.

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BSE Bombay Stock Exchange

Established In 1875 As"The Native Share AndStock BrokersAssociation".

Oldest Stock ExchangeIn Asia.

Around 4990Companies Are Listed.

Daily TradedCompanies Are Around3500

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�The BSE or Bombay stock exchange sensitive Index is a

value weighted index. Composed of 30stocks with the baseApril 1979=100.

It consists of the 30 largest and most actively tradedstocks, representative of various sectors, on the BSE.

�These companies account for around one fifth of themarket capitalization of the BSE.

�The abbreviated from sensex was coined by Deepak mohoni around 1990 while writing market analysiscolumns for some business newspaper.

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SENSEXSENSEX

Sensex is an index, an index is basically anSensex is an index, an index is basically an

indicator.indicator.

It gives a general idea about whether most of It gives a general idea about whether most of the stocks have gone up or most of the stocksthe stocks have gone up or most of the stocks

have gone down. The sensex is an indicator of have gone down. The sensex is an indicator of 

all the prices of the major companies of theall the prices of the major companies of the

BSE(Bombay stock exchange)BSE(Bombay stock exchange)

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OBJECTIVE OF SENSEXOBJECTIVE OF SENSEX To measureTo measure

market movementsmarket movements

Benchmark for Benchmark for 

funds performancefunds performance

For index basedFor index based

derivativesderivatives

 products products

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HOW SENSEX IS C ALCULATEDHOW SENSEX IS C ALCULATED

SensexSensex isis calculatedcalculated usingusing aa ³market³market-- capitalizationcapitalization

weighted´weighted´ methodologymethodology..

AsAs per   per thisthis methodology,methodology, thethe levellevel of of indexindex atat anyany

 point point of of timetime reflectreflect thethe totaltotal marketmarket valuevalue of of 3030

componentscomponents stock stock relativerelative toto aa base base period period.. (the(the

marketmarket capitalizationcapitalization of of aa companycompany isis determineddetermined by bymultiplyingmultiplying thethe price price of of itsits stock stock by by thethe number number of of 

sharesshares issuedissued by by thethe company)company)..

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NSE National Stock Exchange

The NSE of India limited was created on the basis of The NSE of India limited was created on the basis of 

the report of the high powered study group onthe report of the high powered study group on

establishment of new stock exchanger, whichestablishment of new stock exchanger, which

recommended promotion of NSE by financialrecommended promotion of NSE by financialinstitution to provide access to investors from allinstitution to provide access to investors from all

across the country on an equal footing.across the country on an equal footing.

In 1992, NSE was incorporated as a tax payingIn 1992, NSE was incorporated as a tax paying

company unlike other stock exchange in the country.company unlike other stock exchange in the country.

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�In April 1993,NSE was recognized as a stock exchange

under the securities contract(regulation) act,1956.

�The capital market (equities) segment commenced

operation Nov. 1994 and operations in derivativessegment were started in June 2000.

 NSE launched s&p CNX NIFTY

in April 1996.NSE isone largest interactive VSAT based stock exchange in the

world. Presently it supports 3000 VSATS.

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OBJECTIVE OF NSEOBJECTIVE OF NSE

Establishing nationwide trading facilities for all types of Establishing nationwide trading facilities for all types of 

securities .securities .

Ensuring equal access to investors all over the country throughEnsuring equal access to investors all over the country throughan appropriate telecommunication network.an appropriate telecommunication network.

Providing fair , efficient & transparent securities market usingProviding fair , efficient & transparent securities market using

electronic trading system.electronic trading system.

Meeting international benchmark and standards.Meeting international benchmark and standards.

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NIFTYNIFTY

 Nifty is an indicator of all the major companies Nifty is an indicator of all the major companies

of NSE.of NSE.

The Nifty index is a composite of the top 50The Nifty index is a composite of the top 50

stocks listed on the National stock exchange.stocks listed on the National stock exchange.

It is a simplified tool which helps investors &It is a simplified tool which helps investors &

ordinary people alike, understand whatordinary people alike, understand what

happens in the stock market & by extension,happens in the stock market & by extension,the economy.the economy.

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REGULATOR Y BODYREGULATOR Y BODY

SEBI ± Securities & Exchange Board of India

Established In 1992, As Per Securities & Exchange

Board Of India , Act. To Protect The Interests Of Investors

To Regulate The Securities Market.

To Promote The Development of the Securities

Market

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Listing means admission of securities toListing means admission of securities todealings on a recognised stock exchange. Thedealings on a recognised stock exchange. The

securities may be of any public limitedsecurities may be of any public limited

company, Central or State Government, quasicompany, Central or State Government, quasi

governmental and other financialgovernmental and other financialinstitutions/corporations, municipalities, etc.institutions/corporations, municipalities, etc.

The objectives of listing are mainly to :The objectives of listing are mainly to :

 provide liquidity to securities; provide liquidity to securities;

mobilize savings for economic development;mobilize savings for economic development;

 protect interest of investors by ensuring full protect interest of investors by ensuring full

disclosures.disclosures.

LISTING OF COMPANIES

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The Bombay Stock Exchange (BSE) has a dedicatedThe Bombay Stock Exchange (BSE) has a dedicatedListing Department to grant approval for listing of Listing Department to grant approval for listing of 

securities of companies in accordance with thesecurities of companies in accordance with the provisions of the Securities Contracts (Regulation) provisions of the Securities Contracts (Regulation)Act, 1956, Securities Contracts (Regulation) Rules,Act, 1956, Securities Contracts (Regulation) Rules,1957, Companies Act, 1956, Guidelines issued by1957, Companies Act, 1956, Guidelines issued bySEBI and Rules, ByeSEBI and Rules, Bye--laws and Regulations of BSE.laws and Regulations of BSE.

BSE has set various guidelines and forms that need toBSE has set various guidelines and forms that need to be adhered to and submitted by the companies. These be adhered to and submitted by the companies. Theseguidelines will help companies to expedite theguidelines will help companies to expedite the

fulfilment of the various formalities and disclosurefulfilment of the various formalities and disclosurerequirements that are required at various stages.requirements that are required at various stages.

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Public IssuesPublic Issues

Initial Public Offering(IPO)Initial Public Offering(IPO)

Further Public Offering(FPO)Further Public Offering(FPO)

Preferential IssuesPreferential Issues

Indian Depository ReceiptsIndian Depository Receipts

 Amalgamation Amalgamation

Qualified Institutions PlacementsQualified Institutions Placements

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A company intending to have its securities listed on BSE hasA company intending to have its securities listed on BSE has

to comply with the listing requirements prescribed by it. Someto comply with the listing requirements prescribed by it. Some

of the requirements are as under of the requirements are as under 

Minimum Listing Requirements for New CompaniesMinimum Listing Requirements for New Companies

Minimum Listing Requirements for Companies already ListedMinimum Listing Requirements for Companies already Listed

on other Stock Exchangeson other Stock Exchanges

Minimum Requirements for Companies Delisted by BSEMinimum Requirements for Companies Delisted by BSE

seeking relisting on BSEseeking relisting on BSE

Permission to Use the Name of BSE in an Issuer Company'sPermission to Use the Name of BSE in an Issuer Company's

ProspectusProspectus

Submission of Letter of ApplicationSubmission of Letter of Application

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Allotment of Securities

Trading Permission

Requirement of 1% Security

Payment of Listing Fees

Compliance with the Listing Agreement

Cash Management Services (CMS) - Collection of 

Listing Fees

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Some commonly used terms in stockSome commonly used terms in stockexchangeexchange

BidBid--Ask SpreadAsk Spread

TheThe bid bid price price isis thethe currentcurrent price price atat whichwhich buyers buyers areare willingwillingtoto buy buy aa stock stock.. TheThe ask  ask price price isis thethe currentcurrent price price atat whichwhich

sellerssellers areare willingwilling toto sellsell..T

herefore,T

herefore, thethe bid bid--ask ask spreadspread isis thethedifferencedifference between between thethe bid bid price price andand thethe ask ask price price..

BlueBlue ChipChip StocksStocks

BlueBlue chipchip stocksstocks areare thethe onesones thatthat everyoneeveryone wantswants:: stocksstocks ininnationallynationally or or internationallyinternationally recognizedrecognized companiescompanies withwith aa proven proven recordrecord of of investmentinvestment returnreturn andand aa goodgood likelihoodlikelihood of of futurefuture profit profit..

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ShortShort TermTerm GainGain

TheThe termterm ShortShort TermTerm GainGain refersrefers toto thethe dividendsdividends receivedreceived by by anan investor investor onon stocksstocks thatthat havehave been been heldheld for for 1212 monthsmonths or or lessless..

OptionOption

TheThe rightright givengiven toto anan investor investor toto buy buy or or sellsell stocksstocks atat aa givengiven

 price price prior  prior toto aa deadline,deadline, after after whichwhich thethe optionoption expiresexpires.. ThereThereisis nono obligationobligation toto buy buy or or toto sellsell..

BearBear andand BullBull MarketsMarkets

AA bear   bear marketmarket isis characterizedcharacterized by by generallygenerally downwarddownwardtrendingtrending prices prices whenwhen thethe sellingselling volumevolume isis highhigh.. Conversely,Conversely, aa

 bull bull marketmarket isis whenwhen prices prices areare movingmoving upup andand everybodyeverybody isis ininaa buying buying moodmood..

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Stock Stock ValueValue

AccordingAccording toto investinginvesting guruguru WilliamWilliam Bernstein,Bernstein, thethe best best

immediateimmediate symbolsymbol for for aa stock'sstock's valuevalue isis itsits price, price, because because aa price price ostensiblyostensibly representsrepresents thethe overalloverall consensusconsensus of of thethe stock stock 

market'smarket's appraisalappraisal of of thethe stock'sstock's truetrue valuevalue..

ShortShort SellSell

AA shortshort sellsell isis whenwhen anan investor investor sellssells aa stock stock thatthat hehe doesn'tdoesn'tyetyet own,own, withwith thethe intentionintention of of buying buying itit inin thethe futurefuture atat aa lower lower 

 price price.. ThisThis isis aa riskyrisky tradingtrading strategy,strategy, sincesince itit dependsdepends onon

futurefuture unknownsunknowns..

ArbitrageArbitrage

AnAn arbitragearbitrage isis aa transfer transfer of of assetsassets between between marketsmarkets by by sellingselling

aa particular  particular stock stock onon oneone marketmarket andand buying buying itit onon another another 

marketmarket..

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Dividend

A dividend is the money that is made from the investment. The

amount of dividend to be paid out on a stock is decided by the

company's Board of Directors, and is usually paid to investors on

a quarterly basis.

Volume

Volume is the measurement of the amount shares traded over a

given time period. In general, price movements that occur on high

volume are considered more significant than price movements thatoccur on low volume.

Mutual FundA mutual fund is a managed fund that invests in stocks, bonds and

other financial instruments. When an investor purchases shares in a

mutual fund, they gain exposure to all the instruments in which the

fund invests.

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THREE WAYS TO INVEST IN SH ARESTHREE WAYS TO INVEST IN SH ARES

PRIMARY MARKET:-

Where Company Directly Allots His Equity

Shares To Investors.

SECONDARY MARKET:- Where Allotted Share

in Public Issue Are Bought And Sold

by Investors With The Help Of Stock Brokers

at VariousStock Exchanges.

FUTURE & OPTIONS:- Its a derivative segment 

of Underlying securities.

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PRIMAR Y MARKETPRIMAR Y MARKET

The primary market is where securities are createdThe primary market is where securities are created(by means of an IPO).(by means of an IPO).

Initial Public Offering (IPO) is the first sale of stock Initial Public Offering (IPO) is the first sale of stock 

 by a company to the public. by a company to the public.

A company can raise money by issuing either A company can raise money by issuing either debt or debt or equity. If the company has never issued equity to theequity. If the company has never issued equity to the

 public, it's known as an IPO. public, it's known as an IPO.

This market is known as primary MarketThis market is known as primary Market

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SECONDAR Y MARKETSECONDAR Y MARKET

A market on which an investor purchases an assetA market on which an investor purchases an asset

from another investor rather than an issuingfrom another investor rather than an issuing

corporation.corporation.

In this market Brokers becomes intermediate bodyIn this market Brokers becomes intermediate body

 between buyer and seller. between buyer and seller.

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FUTURES & OPTIONSFUTURES & OPTIONS

In finance,In finance, a security whose price is dependent upona security whose price is dependent uponor derived fromor derived from one or more underlying assets.one or more underlying assets.

The derivative itself is merely a contract between twoThe derivative itself is merely a contract between two

or more parties.or more parties.

ItsIts value is determinedvalue is determined by fluctuations by fluctuations in thein theunderlying asset.underlying asset. The most common underlyingThe most common underlying

assets includeassets include stocks, bonds,stocks, bonds, commodities,commodities, currencies.currencies.

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TYPES OF ORDERSTYPES OF ORDERS

ON MARKET ORDER 

LIMIT ORDER 

IMMEDIATE OR CANCEL (IOC) ORDER 

STOP LOSS ORDER 

TRAILING STOP LOSS ORDER 

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Basic requirement forBasic requirement forInvesting in stocksInvesting in stocks

Demat AccountDemat Account

Saving Bank AccountSaving Bank Account

Permanent Account Number (PAN)Permanent Account Number (PAN) Trading Account with Recognized Stock Trading Account with Recognized Stock 

Broker Broker 

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Trading AccountTrading Account

A Trading account is required if an individual wishesA Trading account is required if an individual wishes

to trade, i.e. buy and sell shares in the stock to trade, i.e. buy and sell shares in the stock 

exchange.exchange.

A Trading account can also be opened with mostA Trading account can also be opened with most

 banks and financial institutions, after filling up the banks and financial institutions, after filling up the

required forms and providing identity and addressrequired forms and providing identity and address

 proofs. proofs.

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FACTORS INFLUENCING CH ANGE INFACTORS INFLUENCING CH ANGE INSTOCK PRICESTOCK PRICE

DEMAND & SUPPLYDEMAND & SUPPLY

PROFITSPROFITS

DIVIDENDSDIVIDENDS

BONUS SHARESBONUS SHARES

ECONOMIC NEWSECONOMIC NEWS

POLITICAL NEWSPOLITICAL NEWS

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SECTORS OF INVESTMENTSECTORS OF INVESTMENT

INFRASTRUCTURE i.e. metals/cement/energyINFRASTRUCTURE i.e. metals/cement/energy

CONSTRUCTION & ENGINEERINGCONSTRUCTION & ENGINEERING

AUTO & AUTO ANCILLARIESAUTO & AUTO ANCILLARIES

TEXTILESTEXTILES BANKING AND FINANCIAL SERVICESBANKING AND FINANCIAL SERVICES

CONSUMER GOODSCONSUMER GOODS

TECHNOLOGY AND TELECOMTECHNOLOGY AND TELECOM

RETAILINGRETAILING

PHARMACEUTICALS & HEALTHCAREPHARMACEUTICALS & HEALTHCARE

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REASON TO INVEST IN INDIANREASON TO INVEST IN INDIANSTOCK MARKETSTOCK MARKET

Fast growing economyFast growing economy

The Indian democracy allows for steady growth andThe Indian democracy allows for steady growth and

development in the country.development in the country.

Increased GDP; large foreign currency reserveIncreased GDP; large foreign currency reserve

Growing potential in the infrastructure sector andGrowing potential in the infrastructure sector and

multinational companies.multinational companies.

Strict monitoring and stringent rules by SEBI.Strict monitoring and stringent rules by SEBI. Easy accessibility and transparency in the marketEasy accessibility and transparency in the market

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STOCK MARKET WISDOMSTOCK MARKET WISDOM

INVEST FOR REAL RETURNSINVEST FOR REAL RETURNS

(Do what your passion is. If it's stocks, only then do it else look (Do what your passion is. If it's stocks, only then do it else look 

for something else)for something else)

KEEP AN OPEN MINDKEEP AN OPEN MIND

(Don¶t fear about making mistakes but learn from the mistakes)(Don¶t fear about making mistakes but learn from the mistakes)

 NEVER FOLLOW THE CROWD NEVER FOLLOW THE CROWD

(Respect others opinions but take your decisions)(Respect others opinions but take your decisions)

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AKANKSHA

PANDYA

ANUBHA

GUPTA

VISHAL

ARORA

TANMOY

DHARA

SHILPA

SABBERWAL

TH ANKING YOU ALL