The document discusses key concepts related to stock markets and shares. It defines that shares represent fractional ownership of a company and stocks refer to the total number of shares a person owns. The major stock exchanges in India are BSE and NSE. A stock market allows for trading of company shares and derivatives. It functions as an important source for companies to raise capital and for public trading of companies. Stockholders are individuals or entities that own company shares and have associated rights.
3. What is Share ?
Shares represent a fraction of ownership in a business.
This fraction comprised of smallest unit(s) of
ownership.
Thus share is a unit issued by a company that may be
bought or sold on or off an exchange.
What is Stock ?
Stocks in the reference of stock market are the
total number of shares a person has in one
company or many companies.
4. What is a Stock Market ?
A stock market or equity market is a market for the
trading of company stock(shares) and derivatives at an
agreed price.
It is an organized market where securities of govt,
semi-govt bodies and corporate enterprises are
brought or sold.
5. Function & Purpose of Stock Market
• The stock market is one of the most
important sources for companies to
raise money.
• This allows businesses to be publicly traded, or raise additional
capital for expansion by selling shares of ownership of the
company in a public market.
• In the stock market only those securities listed in the stock
exchange are transacted.
6. Who is Stockholder ?
A stockholder (or shareholder) is an
individual or company(including a
corporation) that legally owns one
or more shares of a company.
Shareholders vary from individual
stock investors to large hedge
fund traders.
7. Continued…
Stockholders are granted privileges depending on
the class of stock, including right to vote on
matters
such as elections to the board of directors, the
right
to share in distributions of the company’s income,
the right to purchase new shares issued by the
company, and the right to a company’s assets
during a liquidation of the company.
8. Then who is stakeholder ?
A person, group or organization that has interest or concern
in an organization.
Stakeholders can affect or be affected by the
organization's actions, objectives and policies.
Some examples of key stakeholders are creditors, directors,
employees, government (and its agencies),
owners (shareholders), suppliers, unions, and
the community from which the business draws its resources.
9. TradiNg
The shares of a company are in general be transferrable from one
shareholder to another. This leads to buying and selling of shares
termed as trading.
Investors usually buy and sell shares on the exchanges through
stock brokers registered with the exchange.
10. Ways of Buying & Selling shares
o Through a stock broker: They arrange the transfer of
stock from a seller to a buyer. Both the buyer and the seller
of the share pay a commission known as brokerage to the
broker
o Directly from the company:-
1. If at least one share is owned, most companies will allow purchase of shares
directly from the company through their investor relations departments.
2. A direct public offering is an initial public offering(IPO) in which stock
is purchased directly from the company, usually without the aid of brokers.
11. Investment Strategies
Buying
Buying stock on margin means buying stock with
money borrowed against the stocks in the same
account, hoping for the price to rise.
The trader eventually sells back the stock, making
money if the price rose in the meantime and
losing money if it fell.
12. Continued...
Selling
In selling, the trader borrows stock then
sells it on the market, hoping for the
price to fall.
The trader eventually buys back the stock,
making money if the price fell in the
meantime and losing money if it rose.
Stop-loss: It is an order placed with a broker to sell/buy a stock when it
reaches a certain price. It limits an investor’s loss in a stock.
13. Market Conditions
Bull Market: It is a market
condition in which prices of
securities or group of securities
are rising or are expected to
rise.
Bear Market: It is a market
condition in which prices of
securities or group of securities
are falling or are expected to
fall.
15. What are Listing requirements ?
A company may list its shares on an exchange by meeting & maintaining
the listing conditions of a particular stock exchange.
• Examples include minimum number of shares outstanding, minimum
market capitalization, and minimum annual income.
• These requirements vary from exchange to exchange.
Example: Bombay Stock Exchange(BSE) has requirements for a
minimum market capitalization of Rs. 25 crore and minimum
public float equivalent to Rs. 10 crore .
16. MARKET CAPITALIZATION
Market capitalization is the measure
of the size of a business enterprise.
It is calculated as the current stock
price multiplied by the number of
outstanding shares. It is commonly
referred as market cap.
The companies were divided into
large-cap, mid-cap, and small-cap
based on the size of market
capitalization.
Large-cap: $10billion-$100billion.
Mid-cap: $1billion-$10billion.
Small-cap: $100million-$1billion.
17. Stock market index
The movements of the prices in a market
or section of a market are captured in price
indices called stock market indices.
Such indices are usually market
capitalization weighted, with the weights
reflecting the contribution of the stock
to the index.
Examples: of index include Sensex, Nifty,
Dow-jones, Nasdaq, Nikkei etc.
18.
19. Importance and role of the stock markets
Raising capital for businesses.
Government capital-raising for
development projects.
Mobilizing savings for investment.
Facilitating company growth
through acquisitions.
Creating investment opportunities
for small investors.
Barometer of the economy.
