Brif Introduction about Indian Share Market

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STOCK MARKET
Presented By
Dhanashri Academy
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INDEX

• Definition of Stock and Stock market
• Types Of Stock Exchange
• Stock exchange in World and India
• Trading In Stock Market
• Demat Account
• Importance Of Stock Market in stock trading
• Investment in various types of trading
• Stock Market Conditions
• Calculations Of Indices
• Benefits of Investing in shares
• Causes Of Price Fluctuation

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STOCK MARKET OR SHARE MARKET

• Stocks are issued by companies in order to raise
  capitals and are bought by investors in order to
  acquire a portion of the company.
• A Stock market is the place where buying and
  selling of stocks takes place. Nowadays due to
  internet and advanced technology buying and
  selling of stocks takes place anywhere in India
  and also from foreign country, there is no need
  to be physical present in exchanges like NSE and
  BSE. Stock markets are perfect competitive
  market.

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Types of Market

• 1. Normal Market
• Order Traded in regular lot Size
• For demat shares, lot size is 1 share
• 2. Odd Lot Market
• Used for limited physical Market
• Order not traded in regular lot Size but both
  price quantity should tally with each other.

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• 3. Spot Market
• Different settlement periods depends on
  normal orders
• Sell Purchases takes place on same date.
• 4. Auction Market
• Initiated by exchange on behalf of members
• for settlement related reasons
• Reasons are shortage and bad deliveries
• Loss is recovered from members

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Big Stock Markets

• NYSE ( New York Stock Exchange)
• NASDAQ-America
• Dow Jones
• SP 500
• Tokyo Stock Exchange
• London Stock Exchange
• Bombay Stock Exchange, India
• National Stock Exchange, India

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Stock Exchanges in India

• There are 22 stock exchanges in India. But, two
  of them are biggest.
• NSE (National stock exchange) - is the 9th
  largest stock exchange in the world by market
  capitalization and largest in India by daily
  turnover and number of trades, for both equities
  and derivative trading.
• BSE (Bombay stock exchange) - is the oldest
  stock exchange in Asia with a rich heritage of
  over 137 years of existence.

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Bombay Stock Exchange

• Location Mumbai
• Index Sensex (SENSitve indEX)
• Consist of group of 30 Stock
• Members 852
• Date of Launch 03 January 1986
• Base period1978-79
• Base Index Value100
• Sectoral indices
• Timing 09.30 AM 03.30 PM
• Listed Co. over 6000

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National Stock Exchange

• Location Mumbai
• Index Nifty (National Stock Exchange Fifty)
• Consist of group of 50 Stocks
• Date of Launch April 1994
• Base period 1993-94
• Base index value 1000
• Members 726

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Stock Broker

• A stockbroker is person who is licensed to trade
  in shares.
• Brokers also have direct access to the share
  market and can act as your agent in share
  transactions.
• For this service they charge a fee i.e.
  brokerage.
• They can also offer additional services like
  advice on shares, debentures, government bonds
  and listed property trusts and non-listed
  investment options (cash management trusts,
  property and equity trusts.

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TRADING IN STOCK MARKET

• The market regulator, the Securities and Exchange
  Board of India (SEBI), has made it compulsory to
  open the demat account if you want to buy and
  sell stocks.
• A person want to buy/sell stocks in the stock
  market has to first place his/her order with a
  broker or can do themselves using online trading
  systems.
• The stocks purchased will be sent to the your
  demat account. This process is called Rolling
  Settlement Cycle.

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What is Demat account?

• DEMAT stands for DEMATerialization. It is process
  in which physical paper shares are converted into
  paperless (computerized) form.
• In India there are two Depository organizations
  called NSDL (National Securities Depository Ltd.)
  CDSL (Central Depository Services India Ltd.)
• Brokers and most of Banks provides facility to
  open demat account.

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Important terms in stock market and in stock
trading

• Open- The stock price in beginning of
  Day(i.e. in morning).
• High -  The stock price reached at the highest
  level in a day.
• Low -  The stock price reached the lowest level
  in a day.

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Important terms in stock market and in stock
trading

• Close - The stock price at which it remains
  after the end of market timings or the final
  price of the stock when the market closes for a
  day.             Volume - Volume is nothing but
  quantity.
• Bid  - The Buying price is called as Bid price.
• Offer - The selling price is called offer price.

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Investment in Short term, Mid term and Long
term trading

• Short Term Trading - Stock trading done from one
  week to couple of months is called short term.
• Mid term Trading - Stock trading done from one
  month to couple of months, say six to eight
  months is called mid term trading.

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Investment in Short term, Mid term and Long
term trading

• Long term trading - Stock trading done form
  couple of months to couple of years is called
  long term trading.Companies whose fundamentals
  are good and have good future plans then the
  stocks of these companies are used for long term
  trading.Generally traders having good capital go
  for long term trading.

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Stock Market Conditions

• There are two ways to describe the general
  conditions of the stock market
• 1)BULL MARKET
• 2)BEAR MARKET
• Bull Market -
• A Bull Market indicates the constant upward
  movement of the stock market. A particular stock
  that seems to be increasing in value is described
  to be bullish.

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Stock Market Conditions

• BEAR MARKET
• A bear market indicates the continuous downward
  movement of the stock market. stock that seems to
  be decreasing in value is described to be
  bearish.

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How Sensex Index is calculated

• The formula for calculating the sensex
• (sum of Free Float Market capitalization of 30
  benchmark stocks) Index Factor
• Where
• Index Factor 100/market cap value
  in 1978-79.

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Example on Sensex Index calculation

• Assume sensex has only 2 stocks namely SBI and
  RELIANCE. Total shares in SBI are 500 out of 200
  are held by government and only 300 are available
  for public trading. Reliance has 1000 shares out
  of which 500 are held by promoters and 500 are
  available for trading. Assume price of SBI stock
  is Rs. 100 Reliance is RS. 200.

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Example on sensex calculation

• Solution
• Then Free Float Cap of these two company
• (300100500200)
• 30,0001,00,000
• 1,30,000
• Assume market cap during the year 1978-79 was
  25000
• Then SENSEX 1,30,000100/25000
• 520

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How Nifty Index is calculated

• The National Stock Exchange (NSE) is
  associated with Nifty
• The calculation of Nifty is same as
  we calculated SENSEX. But with two key
  differences.
• Base year is 1995 and base value is 1000
• Nifty is calculation based on 50 stocks.
• everything else remaining the same in nifty
  index calculation as well.

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Example of Nifty Calculation

• Assuming Base index1000 , Market Cap index
  consist of 5 stocks, then

Company Current Market Capitalisation (Rs. In Lakhs) Base Market Capitalisation (Rs. In Lakhs)
Reliance 16,68,791.1 16,54,247.5
AB U 8,72,686.3 8,60,018.25
INFOSYS 14,52,587.65 14,65,218.8
HLL 26,75,613.3 26,69,339.55
Tata Tea 6,60,887.75 6,62,559.3
Total 73,30,566.1 73,11,383.4
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Cont..

• Index ( Current Market Capitalisation )
• Base Market Capitalisation
• Multiply by Base Value
• Index 73,30,566.1 1000
• 73,11,383.4
• Index 1002.62

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Important Indices in the world
Name of Index Country Weight No. Pf Stock Base Year Base Value
S P CNX Nifty NSEIL, India Market Capitalisation 50 1995 1000
SENSEX 30 BSE, India Market Capitalisation 30 1978-79 100
NASDAQ 100 NASDAQ , USA Market Capitalisation 100 1985 125
FTSE 100 UK Market Capitalisation 100 1984 1000
Hang Seng Hong Kong Market Capitalisation 33 1964 100
Dow Jones USA Price 30 1928
Nikkei 225 Tokyo Price 225 1949
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Benefits of investing in shares

• Possibility of increase in value of share
• Income from dividends
• Easy liquidity
• Tax benefits on income earned such as exemptions
  U/s 10(34) for dividends, Sec 54 for calculating
  STCG LTCG

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CAUSES OF PRICE FLUCTUATION

• 1.DEMAND AND SUPPLY
• 2.BANK RATE
• 3.SPECULATIVE PRESSURE
• 4. ACTIONS OF UNDERWRITERS AND OTHER FINANCIAL
  INSTITUTIONS
• 5.CHANGE IN COMPANYS BOARD OF DIRECTORS

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Cont

• 6. FINANCIAL POSITION OF THE COMPANY
• 7. TRADE CYCLE
• 8. POLITICAL FACTORS
• 9. SYMPATHETIC FLUCTUATIONS
• 10. OTHER FACTORS
• A. EXPECTED MONSOON
• B. PERSONAL HEALTH OF HEAD OF GOVERNMENT OR
  CHAIRMAN OF THE COMPANY
• C. OIL PRICES IN THE INTERNATIONAL
  MARKET

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