Demystifying StocksStock Market Indices

Stock market and share market essentially mean the same thing. Both terms describe an exchange in which buyers and sellers of

stock or shares may trade in a market with high liquidity.

Share:

Share is a unit issued by a company at the time of raising fundfrom the market. It is a certificate issued to a person whoapplies for it and is given at a value predetermined by thecompany.

It is the smallest unit of ownership that may be bought or soldon or off an exchange. This is referred to as share trading.

Stock:

Stock, with reference to the stock market are the total number ofshares a person has in one company or in many companies. Stocks can be traded publicly on the stock market.

Stock Market• Stock market is an organized market, where securities of

government, semi government bodies and corporate enterprises are bought or sold.

• It is established for the purpose of assisting, regulating and controlling business in buying selling and dealing in securities.

• In the stock market only those securities listed in the stock exchange are transacted.

• Individuals alone can buy and sell securities.

Types of Stock Market

Primary Market

The first group of investors to whom a new issue of a security or share is sold.

The primary market consists of the issuer and the first buyers of the share issue.

The primary market can be at times more volatile than the secondary market because

it is difficult to determine the underlying value of new issues.

Secondary Market

A market where investors purchase securities, assets, or shares from other investors,

rather than from issuing companies themselves.

The national exchanges - such as the New York Stock

Exchange and the NASDAQ are secondary markets.

Market ConditionsBull Market:A financial market conditions in which prices of securities or group of securitiesare rising or are expected to rise. Bull markets are characterized by optimism,Investor confidence and expectations that strong results will continue.

Bear Market:It is a market condition in which the prices of securities are falling. As investors anticipate losses in a bear market and selling continues, pessimism only grows

Types of Stocks

BLUE CHIP :

Carry the highest value.Large, established firms Long record of profit growth, dividend payout and a good reputation

PENNY :

Low-priced, speculative stocks ; very risky. Stocks issued by companies with erratic history of revenues and earnings.

INCOME :

Stocks that pay higher-than-average dividends over a sustained period. Dividends tend to be paid by established companies with stable earnings

VALUE :

Stock that is currently selling at a low price. Companies with good earnings and growth potential but stock prices do not reflect this are considered value companiesThese stocks are only temporarily out of favour and may experience growth.

• Company decide to go public and raise fund from the market and decide upon the Total amount to be raised from the Market.

• They get clarification from SEBI.

• This amount is broken down in number of shares by deciding the Face Value. As per the norms of the SEBI the FV is to be multiple of 5. Normal practice is keeping this at Rs10.

• Then the No of shares to be introduced in the Market is decided.

• Depending upon the response of the Stock as IPO, when it is opened on Secondary Market the price is decided.

• The combined collection of the firm from IPO and Secondary Market operations becomes the Market Capitalisation of the firm, from which a share of Profitability is distributed among the share holders in the form of Dividend

Procedure for listing in Stock Exchanges

• Market capitalization is often called as market cap is a measurement of the size of a business enterprise.

• It is the total dollar market value of all of a company's outstanding shares calculated by multiplying a company's shares outstanding by the current market price of one share.

• The companies were divided into large-cap, mid-cap, and small-cap based on the size of market capitalization.

Large-cap: $10 billion–$100 billion. Mid-cap: $1 billion–$10 billion. Small-cap: $100 million–$1 billion.

Market Capitalization

Market Capitaliza-tion

large capmid cap small cap

10 Largest Stock Markets Rank Exchange Name Country

1 New York Stock Exchange United States

2 Tokyo Stock Exchange Japan

3 NASDAQ United States

4 Euro next Belgium, France, Holland, Portugal

5 London Stock Exchange United Kingdom

6 Shanghai Stock Exchange China

7 Hong Kong Stock Exchange Hong Kong

8 Toronto Stock Exchange Canada

9 BM & FBovespa Brazil

10 Bombay Stock Exchange India

• Bombay Stock Exchange• National Stock Exchange• Regional Stock Exchanges Ahmadabad Bangalore Bhubaneswar

CalcuttaCochinCoimbatoreDelhiGuwahatiHyderabadJaipurLudhianaMadhya PradeshMadrasMagadhMangaloreMeerutOTC Exchange Of IndiaPuneSaurashtra KutchUttar PradeshVadodara

Stock Markets in India

Bombay Stock ExchangeType Stock Exchange

Location Mumbai, India

Founded 1875

Owner Bombay Stock Exchange Limited

Key people Ashishkumar Chauhan (Interim CEO)

Currency Indian rupee

No. of companies listed 5133 (May 2012)

Website www.bseindia.com

BSE SENSEX:The Bombay Stock Exchange SENSEX also referred to as BSE 30. It is a free-float market capitalization weighted index of 30 well-established and financially sound companies listed on Bombay Stock Exchange.

BSE Mid-Cap:BSE Mid-Cap tracks the performance of scrips between 80 & 95% of aggregate market capitalisation.It is also introduced to track the performance of companies with relatively smaller market capitalization.

BSE Small-Cap:BSE Small-Cap index tracks the performance of remaining 5% scrips (95-100%).It is introduced to track the performance of companies with relatively smaller market capitalization.

BSE-500:It represents more than 93% of the listed universe Companies with large market capitalization.

BSE Indices

National Stock ExchangeType Stock Exchange

Location Mumbai, India

Founded 1992

Owner National Stock Exchange of India Limited

Key people Ravi Narain (MD)

Currency Indian rupee

Number of securities available for trading 3,041

Record Market Cap 75,60,607 crores (May 2012)

Website www.nse-india.com

S&P CNX Nifty:It is Standard & Poor's CRISIL NSE Index 50. Nicknamed Nifty 50 or simply Nifty . It is the leading index for large companies on the National Stock Exchange of India. The S&P CNX Nifty stocks represent about 60% of the total market capitalization of the National Stock Exchange.

CNX Nifty Junior:It represents the next range of liquid securities after S&P CNX Nifty. It representing approximately 10% of the traded value of all stocks on the National Stock Exchange of India.

S&P CNX 500:The S&P CNX 500 is India’s first broad-based stock market index of the Indian stock market. The S&P CNX 500 represents about 96% of total market capitalization and about 93% of the totalturnover on the National Stock Exchange of India (NSE).

CNX 100:The CNX 100 Index represents about 78% of the free float market capitalization of the stocks listed on NSE as on March 30, 2012.

NSE Indices

CNX Midcap:The medium capitalized segment of the stock market is being increasingly perceived as an attractive investment segment with high growth potential. The primary objective of the CNX Midcap Index is to capture the movement and be a benchmark of the midcap segment of the market.

Nifty Midcap 50:The medium capitalized segment of the stock market is being increasingly perceived as an attractive investment segment with high growth potential. The primary objective of the Nifty Midcap 50 Index is to capture the movement of the midcap segment of the market. It can also be used for index-based derivatives trading.

S&P CNX Defty:Almost every institutional investor and off-shore fund enterprise with an equity exposure in India would like to have an instrument for measuring returns on their equity investment in dollar terms. To facilitate this, a new index the S&P CNX Defty-Dollar Denominated S&P CNX Nifty has been developed. S&P CNX Defty is S&P CNX Nifty, measured in dollars.

NSE Indices

S&P CNX Nifty Dividend:Dividends are an important component of the total return on equities. The S&P CNX Nifty Dividend index is designed to track the total dividend from the constituents of the S&P CNX Nifty index. The value of the dividend index is expressed in terms of index points. It enables the investor to take a view on dividends for S&P CNX Nifty securities independent of the price movement

India VIX:Volatility Index is a measure of market’s expectation of volatility over the near term. Volatility is often described as the “rate and magnitude of changes in prices" and in finance often referred to as risk. Volatility Index is a measure, of the amount by which an underlying Index is expected to fluctuate, in the near term, (calculated as annualized volatility, denoted in percentage e.g. 20%) based on the order book of the underlying index options.

NSE Indices

The stock market indexes are useful in a number of ways tostock investors

1. The market indexes provide an historical perspective of stock market performance.

2. It provide a yardstick with which investors can compare the performance of their individual stock portfolios.

3. It acts as a forecasting tool. Studying the historical performance of the stock market indexes, investors can forecast trends in the market

Importance Of Indices

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