stock market

1. Presented to
Prof R. S.
Verma
A
Jou r n e y
i n t o
Stock Markets
Presented By,
Rohit Mundhara P-
21 Jignesh
Thakkar P-36
Nahush Mhaskar
P-19
Aditi
Sabaria
C-
31

2. STOCK MARKET

3. STOCK EXCHANGES I N I N D I A
BSE NSE

4. BSE SENSEX 3 0
• Started on 01 January, 1986
• Value-weighted index
• Consists of the 30 largest
and most actively traded

5. Name of
company
Weightag
e
RI
L
13.1
0
Infosys Tech
9.3
7
L&T 8.44
ICICI Bank
7.6
7
HDFC 5.71
ITC
5.4
6
Bharti Airtel 4.87
HDFC Bank
4.6
4
SBI 4.13
ONGC
3.6
7
BHEL 3.26
HUL
2.5
0
TCS 2.25
Tata Steel
1.8
8
Name of
Company
Weightag
e
Maruti
Suzuki
1.7
5
Sterlite Industries
1.7
1
Grasim Industries 1.69
NTPC
1.6
9
RCOM 1.61
Jaiprakash Associates
1.6
0
M&M 1.56
Wipro
1.5
3
Reliance Infra 1.49
DLF
1.4
1
Hero Honda 1.25
Tata Motors
1.2
2
Hindalco 1.09
Sunpharma
0.8
2

6. NSE NIFTY 5 0
The 50 stocks that were most favored by
institutional investors in the 1960s and1970s.

7. Name of company Weightage
RIL 11.23
Infosys Tech 8.02
L&T 7.23
ICICI Bank 6.58
HDFC 4.89
ITC 4.67
Bharti Airtel 4.17
HDFC Bank 3.98
SBI 3.53
ONGC 3.15
BHEL 2.87
HUL 2.14
TCS 1.93
Tata Steel 1.61
Jindal Steel 1.58
Tata Power 1.53
Name of Company Weightage
Maruti Suzuki 1.50
Axis Bank 1.48
Sterlite Industries 1.46
Grasim Industries 1.45
NTPC 1.45
RCOM 1.38
M&M 1.34
Wipro 1.31
Reliance Infra 1.27
DLF 1.21
Unitech 1.19
GAIL 1.19
Hero Honda 1.07
Tata Motors 1.04
Idea Cellular 1.01
Cipla 1.00

8. Name of
compan
y
Weightage
Hindalco 0.93
Cairn 0.90
Rel Capital 0.79
SAIL 0.75
PNB 0.71
Sun Pharma 0.70
ACC 0.64
Ambuja Cement 0.64
Siemens 0.61
ABB 0.61
Name of
Compan
y
Weightage
HCL Techno 0.50
Power Grid 0.49
Reliance Pow 0.46
Suzlon Energy 0.44
Ranbaxy Lab 0.39
Tata Comm 0.27
NALCO 0.22

9. HOW THE INDICES ARE CALCULATED?
1. Find out the “free-float market cap” of all the 30 companies
that
make up the Sensex!
2. Add all the “free-float market cap’s” of all the 30 companies!
3. Make all this relative to the Sensex base. The value you get
is the Sensex value!

10. Depository
A bank or company which holds funds or securities
deposited by others, and where exchangesof
thesesecurities take place.
• National Securities Depository Limited
• Central Depository ServicesLimited

11. Depository P a r t i c i p a n t
In India, aDepository Participant (DP) is
described as anagent of the depository. They
arethe intermediaries between the depository
andthe investors.

12. T r a n s a c t i o n Process
( H o w To S t a r t T r a d i n g A n d I n v e s t i n g )
• We need to have a DEMAT
account.
• We need to have a Trading
account.

13. R u l e s for e a r n i n g m o n e y i n
t h e m a r k e t
• Rule 1: Never
lose your
money in the
market.
• Rule 2: Never
forget Rule 1.

14. S e t t l e m e n t P r o c e d u r e
For C a s h M a r k e t s
• Settlement is done on T+2 basis for cash
markets.
• Trades entered in to on a particular day are
settled on third day.
• Eg. If u purchase shares on Monday, the
settlement day would be Wednesday.

15. FACTORS AFFECTING STOCK
MARKET
• Economic Factors
• Market trends & Rumours
• Global Market indicators
• Govt Policies and
Regulations
• Company wide factors

16. C l a s s i f i c a t i o n of C o m p a n i e s
Secto
r
Capitalisatio
n
Group
s

17. S e c t o r a l I n d i c e s
• Realt
y
• PSU
• Auto
• Powe
r
• Bankex
• FMCG
• Capital
Goods
• Metal
• Consumer Durables •
Teck
• Oil & gas • IT

18. C a p i t a l i s a t i o n
• Large Cap - Above 750 cr.
• Mid Cap : Between Rs 75 cr. and Rs
750 cr.
• Small Cap : Below Rs. 75 cr.

19. Groups
• A : It is the most tracked class of scripts
consisting of about 216 scripts.
• B
• S
• T : Traded on trade to trade basis.
• Z : companies which have failed to comply with its
listing requirements.

20. C o n t r o l M e c h a n i s m
• Circuit is the price limit or range, outside which
the stock price can't go.
• For example, let's say closing price of X stock
yesterday was 100 Rs. The applicable circuit
limit for X is 5%. In this circumstances, the
price of X can't go above 105 (5% above
previous close) and below 95 (5% below
previous close).

21. W h y IPO’s?
• Raise Capital to meet working capital, debt
repayment, expansion, and a host of other
uses.
• Company valuations are done on the basis of
which the share value is calculated.
• It is offered to all categories of investors like
Retail Investors, Private Placements, FII’s, Mutual
funds, LIC,GIC

22. IPO’s
• Issue is either brought as a book building issue
which is priced at a price band OR is brought at
fixed price
• Company’shaveto file DRHP(Draftredherring
prospectus) with Sebi as a guide line.
• After DRHP the IPO is given ratings by ICRA &
CRISIL depending on the valuations, business risk,
future growth policies of the company, Investor risk

23. IPO – Grey M a r k e t
• Before listing of IPO there is a market value which
exists
amongst the brokers who do business in GREY
MARKET were the premiums are predefined
depending on the demand and supply availability
• This orders are booked in advance and settled on the
date of listing and the difference if any is settled in cash
• Highest ever Grey market premium for any IPO was for
Reliance Power which was 100%

24. K i n d s of T r a d i n g
• Intra-day
Trading
• Delivery based
Trading

25. I n t r a d a y T r a d i n g
• Buying and Selling on the same day.
• Brokerage will be different for intra-day
and delivery based trading, intra-day
being lesser

26. Delivery T r a d i n g
• Buying and Selling are on different
days
• Brokerage will be higher than intra-
day
• Delivery charges

27. S h o r t S e l l i n g
• Selling the shares which you don’t have
• Ex: Lets consider a company Reliance
•Its priced at Rs 2,500/-. You know it’s going to fall that day
because of some reason. But you don’t have any shares with
you of Reliance.
• But still you can sell the shares, this is called as short selling.

28. S h o r t C o v e r i n g
• Assume you sold 10 RIL shares in morning at Rs 2,500/-
and by evening as you had thought, it had Fallen down
to Rs 2,400/-
• Now you buy back those 10 shares what you had sold.
• So the difference in amount per share 2,500 – 2,400 =
100
• 100 * 10 = 1000, Profit is yours.
• This process of buying back is called Short covering.

29. C o n s e q u e n c e s if n o t c o v e r e d
• You will become a defaulter.
• Lets understand this with an Example.
• Assumeyou short sold on Monday, asyou haven’t short
covered it, you need to deliver it on Wednesday(T + 2).
But you don’t have the sharesto deliver. SoNSEor BSEwill
buy the shares on behalf of you in auction market, and
deliver it to the buyer in (T + 3 days).
• You will have to pay penalty

30. H o w t o Select Stocks
• Fundamental
Analysis
• Technical
Analysis

31. W h a t is F u n d a m e n t a l Analysis?
• Analyzinga stock based on the
fundaments of the country, the sector, and
the company individually.
• It includes going through balance sheet
and profit-loss statement of the
individual company and checking
various ratios.

32. F u n d a m e n t a l Basics
• EPS
• PE
• MPS/B
• Interest Coverage
• Debt – Equity
Ratio

33. W h a t is T e c h n i c a l a n a l y s i s
• Forecasting the future direction of prices
through the study of past market data,
primarily price and volume

34. Basics i n T e c h n i c a l a n a l y s i s
Support
Resistan
ce Stop
Loss

35. Effects o n Prices of Shares:-
• Bonus
• Split
• Right Issues
• Buyback

36. What Does Record Date
Mean?
The d
a
t
e
Re
s
t
ea
b
cl
i
s
h
oe
d
rb
dyan Di
s
s
u
ae
rotf
aesecurity
for the purpose of determining the
holders who are entitled to receive a
dividend or distribution.

37. F o r e i g n M a r k e t s
• Dowjone
s
• Nasdaq
• Nikkei
• Shangha
i

38. E c o n o m i c T i m e s & CNBC

39. CNB
C

40. D e r i v a tives
• NSE is the largest derivatives exchange in
India
• Derivatives contracts have a maximum of
3months expiration cycle
• Contracts are available for trading
with: 1 month
2month
3 months expiry
• Turnover of derivatives market is 75,000cr.

41. De riv ativ es
Scrip Name Lot Size Margin Total
Ambuja Cements 4124 Rs 88,913/- Rs 4,08,276/-
Hindalco 3518 Rs 1,05,311/- Rs 3,59,891/-
Reliance 150 Rs 65,147/- Rs 2,97,750/-
Reliance Power 2000 Rs 72,410/- Rs 3,20,000/-
Suzlon 3000 Rs 83,280/- Rs 2,85,450/-

42. P r e m i u m & D i s c o u n t
Scrip Name Spot
Price
Future
Price
Pre/Disc
Suzlon 95.25 95.15 0.10 Discount
Reliance 1980.85 1985.10 4.25 Premium
Hindalco 104.10 102.30 1.80 Discount
Nifty 4619 4621 2 Premium

43. M2M a d j u s t m e n t s
• Assume,
• You Bought 1 lot of Suzlon (i.e 3000 Shares @ 100/- = 300000/-)
• Margin money Rs 60000/- (i.e @ 20% of 300000/-)
• Now on the Other day if Price Goes down to 90/-
• Then you will have to pay M2M loss of Rs 10/- per
share i.e Rs 30000/-
• And If the Price increases to 110/- then we will get M2M profit
credited in our A/c.
• i.e Now we will get the M2M profit Rs 60000/- Credited in our A/c

44. O p t i o n s
• Call Option – An option to buy is called
Call Option
• Example:
• Price of Reliance in Cash markets is 1000/-
• Price in Futures is 1020/-
• Trader will not block his money in cash
markets
• Rather he will buy a call option in futures
market
• Pay the premium of Rs30 per share

45. C o n t d ……
• If the price in cash markets
• Price of Call Option also (vice
versa)

46. H e d g i n g
• Hedging means insuring against a negative
event
• It is done to reduce exposure to various risks
• Hedgers try covering the risks
• Hedgers try to reduce the risks
associated with uncertainty

47. • Infosys bags a deal worth $ 100000 from US
Company
• Rate of $ is Rs 48/-
• Amount to be realised after 2 months
• But Infosys estimates Dollar will fall to Rs 44/-
• Hence to reduce the loss Infosys will Hedge its
Position by selling $ 100000 in Future Markets
H e d g i n g E x a m p l e

48. • After Two months Infosys gets the Payment
• Dollar price is Rs 44/-
• So Infosys will bear a loss of Rs 4 per $ in
Cash Markets
• and will gain a Profit of Rs 4 per $ in Future
Markets
• In this way Infosys have Reduced the Risk of $
Price Fluctuation
H e d g i n g E x a m p l e

49. Specu l a t i o n
• Opposite of hedging
• Speculators are risk lovers
• Speculators make bets or guesses
• A hedger seeks to cover a foreign exchange
risk
• A speculator accepts and seeks out to accept

50. E x a m p le…
• Speculator believes Price of foreign
currency
• Purchases the currency
• Holds it
• Resale later
• Profit on each unit of foreign currency

51. A r b i t r a g e
• When the futures price deviates substantially
from its fair value arbitrage opportunities arise
Spot Markets(Cash) Futures
Purchase@1000/- Sell@1025/-
Hold for 1 month
The spot and futures price converge
Closes@1015/- Closes@1015/-
Profit booking of Rs.15 Profit booking of Rs.10

52. H o w a stock price c h a n g e s

53. T h i n g s t o b e a v o i d e d w h i l e t r a d i n g
& i n v e s t i n g
• Never risk more than 10% of your trading capital
in a single trade.
• Always use stop loss orders.( Here you should
know your loss you can give in a situation
where the trade starts going against you.)
• Never do overtrading.
• Don't enter a trade if you are unsure of the
trend.

54. • When in doubt, get out, and don't get in
when in doubt.
• Only trade active stocks
• Distribute your risks equally among different
markets.
• Extra money from successful trades should be
placed in a separate account.
• Never average a loss.
T h i n g s t o b e a v o i d e d w h i l e
t r a d i n g & i n v e s t i n g

55. • Never get out of the market because you have
lost patience, or get in because you are
anxiously waiting.
• Avoid taking small profits and large losses.
• Avoid getting in and out of the market too soon.
• Be willing to make money from both sides of
the market.
• Never buy or sell just because the price is low or
high.
T h i n g s t o be a v o i d e d w h i l e
t r a d i n g & i n v e s t i n g

56. • Never change your position without a
good reason.
• Don't try to guess tops or bottoms.
• Don't follow a blind man's advice.
• When you lose don't blame it on luck.
T h i n g s t o be a v o i d e d w h i l e
t r a d i n g & i n v e s t i n g

57. A t t r i b u t e s of g o o d investors
• One should be a good Manager and not
day trader.
• A well diversified portfolio.
• Investment in good shares.
• Have patience.