Stock market A stock market is a physical place, where brokers gather to buy and sell stocks and other securities. It is also known as a stock exchange. A stock market enables the trading – buying and selling - of stocks. In some places, stock markets (Not Stock Exchange) still have a fixed location, but in the modern internet and technological world which we now live in, it can be a contd…..
Contd…. …network of computers enabling buying and selling of stocks at agreed prices.
introduction Sensex is an index, an index is basically an indicator. It gives you a general idea about whether most of the stock shave gone up or most of the stocks have gone down. The sensex is an indicator of all the prices of the major companies of the BSE(Bombay stock exchange) contd…
Contd… The SENSEX, short form of the BSE-Sensitive Index, is a "Market Capitalization-Weighted“ index of 30 stocks representing a sample of large, well-established and financially sound companies. It is the oldest index in India and has gained a unique place in the collective awareness of investors. The index is widely used to measure the performance of the Indian stock markets. contd…
Contd… SENSEX is considered to be the pulse of the Indian stock markets. As the oldest index of the Indian Stock market, it offers time series data over a fairly long period of time. (since 1978-79).
HOW SENSEX IS CALCULATED- Sensex is calculated using a “market- capitalization weighted” methodology. As per this methodology, the level of index at any point of time reflect the total market value of 30 components stock relative to a base period. (the market capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company).
Contd… This market capitalization is again multiplied by the free-float factor to determine the free-float market capitalization.
Objectives of sensex The Sensex is the benchmark index of the Indian Capital Markets with wide acceptance among individual investors, institutional investors, foreign investors and fund managers. The objectives of Sensex are following: To measure market movements Benchmark for funds performance For index based derivative products
To measure market movements Given its long history and its wide acceptance, no other index matches the SENSEX in reflecting market movements and sentiments. SENSEX is widely used to depict the mood in the Indian Stock markets.
B. Benchmark for funds performance The inclusion of blue chip companies and the broad and balanced industry representation in the SENSEX makes it the ideal benchmark for fund managers to compare the performance of their funds.
C. For index based derivative products Institutional investors, money managers and small investors all refer to the Sensex for their specific purposes The Sensex is in effect the substitute for the Indian stock markets. The country's first derivative product i.e. Index-Futures was launched on SENSEX
Graph showing the Performance of Sensex
NIFTY Nifty is an indicator of all the major companies of NSE. The Nifty index is a composite of the top 50stocks listed on the National stock exchange. It is a simplified tool which helps investors & ordinary people alike, understand what happens in the stock market & by extension, the economy.
BOMBAY STOCK EXCHANGE The BSE or Bombay stock exchange sensitive Index is a value weighted index. Composed of 30stocks with the base April 1979=100. It consists of the 30largest and most actively traded stocks, representative of various sectors, on the BSE. These companies account for around one fifth of the market capitalization of the BSE.
Contd… The index has increased by over13 times from June 1990 to today. using information from April 1979 onwards the long run rate of return on the BSE sensex can be estimated to be 0.52%per week (continuously compounded) with a standard deviation of 3.67%.this translates to 27%per annum, which translate to roughly 18% pa after compensating for inflation.
NATIONAL STOCK EXCHANGE The NSE of India limited was created on the basis of the report of the high powered study group on establishment of new stock exchanger, which recommended promotion of NSE by financial institution to provide access to investors from all across the country on an equal footing. In 1992, NSE was incorporated as a tax paying company unlike other stock exchange in the country.
Contd… The capital market (equities) segment commenced operation Nov. 1994 and operations in derivatives segment were started in June 2000. NSE launched s & p CNX NIFTY in April 1996.NSE is one largest interactive VSAT based stock exchange in the world. Presently it supports 3000 VSATS. In April 1993,NSE was recognized as a stock exchange under the securities contract(regulation) act,1956.
OBJECTIVE OF NSE Establishing nationwide trading facilities for all types of securities . Ensuring equal access to investors all over the country through an appropriate telecommunication network. Providing fair , efficient & transparent securities market using electronic trading system. Meeting international benchmark and standards.
MELT DOWN OF SHARE MARKET Inflation in India is high, this will make production cost high and net profit down of companies . Unstable political condition –Left parties threatening to withdraw support to the government and this cause a re-election and instability due to nuclear deal. contd…
Contd… International fuel price-Increasing fuel price is another reason for fall, this cause production cost high for companies. Slow down US growth , due to this many US investors withdraw their money from Indian market.
What are the topmost companies in Sensex? Top Five Sensex Stocks Weight % Reliance Industries 13.52 Infosys Technologies 9.74 ICICI Bank 7.20 Larsen and Toubro 7.13 HDFC Ltd 5.27
Contd… Top Five Sensex Sectors Weight % # Finance 22.15 Oil and Gas 17.51 Information Technology 14.58 Capital Goods 10.28 FMCG 7.46