for first time investors to get knowledge about stock market and some basic rule of investing in markets.

1. THE INSTITUTE OF CHARTERED
ACCOUNTANTSOF INDIA
PRESENTING ON:
STOCK MARKETS
SUBMITTED BY:
PRAKASH GURNANI

2. Index
Serial number Title slide number
1 What is a share? 6
2
Why does a company issue
shares to public?
7
3 Stock market 8
4 History of stock market 9
5 Features of stock market 10
6
Ways of buying and selling
shares
11
7 How trading happens 12
8
Instruments traded on
stock exchange
15
2

3. Serial number Title Slide number
9 Top stock markets of world 16
10 Speculation 19
11
When to invest in a
particular stock?
-fundamental analysis
-Technical analysis
25
12
Stock exchanges in India
- BSE
-NSE
29
13
Stock market indices
-SENSEX
-NIFTY
37
14
10 Golden rules of
investing in stock market
44
3

4. • Share is a unit issued by a company at the time of raising fund from the
market. It is a certificate issued to a person who applies for it and is given
at a value predetermined by the company.
• It is the smallest unit of ownership 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 in many companies.
4

5. Why does a company issue shares to
the public?
• A company may want additional capital to invest in
new projects.
• The promoters may simply wish to reduce their
holding, freeing up capital for their own private use.
• Once a company is listed, it will be able to issue
further shares via a rights issue, thereby again
providing itself with capital for expansion without
incurring any debt.
• Financing a company through the sale of stock in a
company is known as equity financing.
5

6. STOCK MARKET
The stock market refers to the collection of
markets and exchanges where the issuing
and trading of equities, bonds and other
sorts of securities takes place, either
through formal exchanges or over-the-
counter markets.
Also known as the equity market, the
stock market is one of the most vital
components of a free-market economy, as
it provides companies with access to
capital in exchange for giving investors a
slice of ownership.
6

7. History of Stock Market
• 1602, Dutch East India company established Amsterdam Stock
Exchange and they were the first company to issue stocks and
bonds.
• The first shares on the Amsterdam
Stock Exchange . It was the first
company to issue stocks and bonds.
7

8. FEATURES OF STOCK MARKET
STOCK
MARKET
LIQUIDITY
TAX FRIENDLY
TRANSPARENCY
OPPORTUNISTIC
SCALEABILITY
AFFORDABILITY
8

9. Ways of buying and selling shares
• 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 commission known as brokerage to the broker.
• Directly from the company:
1. If at least one share is owned, most companies will allow the
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 the stock is purchased directly from the company,
usually without the aid of brokers.
9

10. HOW TRADING HAPPENS?
People using
terminal provided
by their brokers.
STOCK EXCHANGE
EX: NSE, BSE
10

11. 11

12. • 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.
HOW TRADING HAPPENS?
12

13. Instruments traded on stock exchange
The Capital Market facilitates trading
in the following instruments:
Shares
• Equity Shares
• Preference Shares
Debentures
• Partly Convertible Debentures
• Fully Convertible Debentures
• Non Convertible Debentures
Units of Mutual Funds
13

14. TOP STOCK MARKETS OF THE WORLD
1. New York Stock Exchange ( NYSE): The NYSE is far and away the largest
stock exchange on the planet. Weighing in at over $19 trillion, this giant
is nearly three times the size of its closest competitor.
2. NASDAQ: The second largest stock exchange in the world. It is home to
more than 3000 listed companies, , it was the world’s first electronic
stock market .
3. London stock exchange: Located in the city of
London, the LSE is the oldest stock exchange in
the world. It was established over 200 years ago,
in 1801, and has a market capitalization of $6
trillion.
4. Tokyo tock exchange: With over 2000 listed companies,
the Tokyo Stock exchange is the largest of its kind in Asia
14

15. 5. Shanghai Stock Exchange (SSE):Headquartered in Shanghai, this stock
exchange is one of two independent stock exchanges in China, the other
located in Shenzhen.
6. Hong Kong Stock Exchange (SEHK): The Hong Kong Stock Exchange is the
third largest exchange in Asia and has a market cap of $3 trillion. Some
of the biggest stocks listed on the exchange include PetroChina, the
Industrial & Commercial Bank of China and China Mobile.
7. Euronext: Euronext was formed in
2000 after a huge merger between
the stock exchanges in Amsterdam,
Brussels and Paris.
8. Shenzhen Stock Exchange (SZSE):
With a market capitalization of around $2 trillion, the SZSE is the eighth -
largest exchange in the world. Many of the companies listed on this
exchange are ones in which the Chinese government has a
controlling stake in.
15

16. 9. Toronto Stock Exchange (TSX) : The Toronto Stock Exchange is the third-
largest exchange in North America and lists various ETFs, income trusts
and investment funds along with conventional securities
10. Frankfurt Stock Exchange (FWB) : Frankfurt Stock Exchange, owned and
operated by Deutsche Börse AG. This exchange also has a long history, as
its founding dates back to the 16th century, when a bourse was
established to set up fixed currency exchange rates
16

17. SPECULATION
• Speculation is the practice of engaging in risky
financial transactions in an attempt to profit from
short or medium term fluctuations in the market value
of a tradable good.
• Speculation can in principle involve any tradable
good or financial instrument.
17

18. Speculators:
• Many speculators pay little attention to the fundamental
value of a security and instead focus purely on price
movements.
Four kinds of speculators operate in the Indian Stock
Exchange. They are known as :
Bull Bear Stag
Lame
Duck
18

19.  BULL
A Bull also called as Tejiwala is an operator who is hopeful of
price rise in the near future. In anticipation of price rise he makes
purchases of shares and other securities with the intention of
selling them at higher prices in future.
He being a speculator has no intention of taking delivery of
securities but deals only in difference of prices.
19

20.  BEAR
A bear does not have securities at present but
sells them at higher prices in anticipation that
he will supply them business purchasing at
lower prices in the future.
20

21.  STAG
A stag is that type of speculator who treads his
path very carefully. He applies for shares in
new companies and expects to sell them at a
premium if he gets an allotment. He selects
those companies whose shares are most in
demand and are likely to carry a premium. He
sells the shares before being called to pay the
allotment money.
21

22.  LAME DUCK
A Lame Duck is nothing but
a stressed bear. When a bear
finds it difficult to complete
his promise he is labeled as
a lame duck.
22

23. When to invest in a particular stock?
Fundamental analysis:
refers to analyzing companies by their financial
statements found in SEC Filings, business trends,
general economic conditions and the growth
prospects of company's market segment. A few
parameters which are looked upon include Price
to Earnings (PE) Ratio, Price to Book Value ratio,
Equity to Debt ratio.
23

24. Fundamental analysis
sliabilitie-assetsTangible
tionCapitalizaMarket
Ratio/ BP
shareperEarningsAnnual
shareperPrice
Ratio/ EP
24

25. Technical analysis:
Studies price actions in markets through the use
of charts and quantitative techniques to attempt
to forecast price trends regardless of the
company's financial prospects. A few examples
include Trend lines, Bollinger Bands, Oscillators
etc.
25

26. Technical analysis:
UPTREND-LINE DOWNTREND-LINE
26

27. Stock exchanges in INDIA
• There are a total of 22 stock exchanges in
INDIA. But, two of them are biggest. They are:
BSE (Bombay stock exchange) - is the oldest stock
exchange in Asia with a rich heritage of over 137
years of existence.
NSE (National stock exchange) - is one of the
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.
27

28. 28

29. BSE
( BOMBAY STOCK EXCHANGE)
• Bombay Stock Exchange, commonly referred to as the BSE, (Bombay
Share Bazaar) is a stock exchange located on Dalal Street, Mumbai,
Maharashtra, India.
It is the oldest stock exchange
in Asia. The equity market
capitalization of the companies
listed on the BSE was US$1 trillion
as of December 2011, making it
the 6th largest stock exchange
in Asia and the 14th largest in
the world.
The BSE has the largest
number of listed companies in the
world.
29

30. HISTORY OF BSE:
As we read in the history of Indian stock exchange; the stock exchange,
Mumbai, popularly known as "BSE". BSE was established in 1875 as
"The Native Share and Stock Brokers Association".
It is the oldest one in Asia, even older than the Tokyo Stock Exchange,
which was established in 1878. It is a voluntary non-profit making
Association of Persons (AOP) and has converted itself into demutualized
and corporate entity.
30

31. Major Companies In BSE:
Bharat Heavy Electricals
Bharat Petroleum
Birla Corporation
HDFC Bank
Hindustan Motors
ICICI Bank
Infosys Technologies Limited
State Bank of India
Tata Motors
Wipro Technologies
31

32. Operation hours of Bombay Stock
Exchange :
Session Timing
Pre-open Trading Session 09:00 - 09:15
Trading Session 09:15 - 15:30
Position Transfer Session 15:30 - 15:50
Closing Session 15:50 - 16:05
Option Exercise Session 16:05
32

33. NSE
(NATIONAL STOCK EXCHANGE)
• The National Stock Exchange (NSE) (Rashtriya Share Bazaar) is
stock exchange located at Mumbai, Maharashtra, India. It is in
the top 20 largest stock exchanges in the world by
market capitalization and
largest in India by daily
turnover and number of
trades, for both equities
and derivative trading.
33

34. • The NSE's key index is the S&P CNX Nifty, known as the
NSE NIFTY (National Stock Exchange Fifty), an index of
fifty major stocks weighted by market capitalization.
• NSE is mutually owned by a set of leading financial
institutions, banks, insurance companies and other financial
intermediaries in India but its ownership and management
operate as separate entities.
34

35. STOCK MARKET INDICES
• Stock market indices are useful in understanding the level of prices and
the trend of price movements of the market.
• A stock market index is
created by selecting a
group of stocks that are
capable of representing the
whole market or a specified
sector or segment of the
market.
• The change in the prices of
this basket of securities is
measured with reference to a
base period.
• There is usually a provision for giving
proper weights to different stocks
on the basis of their importance in the
economy.
• A stock market index act as the indicator of the performance of the
economy or a sector of the economy.
35

36. STOCK MARKET INDICES:USEFULNESS
.
Help to recognize broad trends in the
market.
.
Used to predict future market trends.
..
It serves as a basis for investors to allocate
their funds.
36

37. SENSEX
(STOCK EXCHANGE SENSITIVE INDEX)
• It consists of the 30 largest and most actively
traded stocks, representative of various
sectors, on the Bombay Stock Exchange.
• These companies account for around one-
fifth of the market capitalization of the BSE.
• The base value of the Sensex is 100 on April 1,
1979, and the base year of BSE-SENSEX
is 1978-79
37

38. SENSEX ( CONTINUED)
• Launched on full market capitalization method
and from September 01, 2003, calculation
method shifted to free-float market
capitalization.
• The free-float method, therefore, does not
include restricted stocks, such as those held by
promoters, government and institutional
investors
38

39. NIFTY
• NIFTY was coined fro the two words ‘National’
and ‘FIFTY’. The word fifty is used because;
the index consists of 50 actively traded stocks
from various sectors
• Nifty index is a bit broader than the Sensex
which is constructed using 30 actively traded
stocks in the BSE.
39

40. NIFTY(CONTINUED)
• The base year is taken as 1995
• The base value is set to 1000
• Nifty is calculated on 50 stocks actively traded
in the NSE
• 50 top stocks are selected from 24 sectors.
40

41. STOCK EXCHANGE AND THEIR INDICES NAME:
COUNTRY STOCK EXCHANGE NAME INDICES NAME
INDIA NATIONAL STOCK EXCHANGE S&P NIFTY
INDIA BOMBAY STOCK EXCHANGE SENSEX
HONG KONG HONG KONG STOCK EXCHANGE
HANG SENG
USA NEW YORK STOCK EXCHANGE NYSE
KOREA KOREAN STOCK EXCHANGE KRX 100
RUSSIA RUSSIAN STOCK EXCHANGE RTS INDEX
41

42. 10 golden rules of investing in stock markets
• The lure of big money has always thrown investors into the
lap of stock markets. However, making money in equities is
not easy. It not only requires oodles of patience and
discipline, but also a great deal of research and a sound
understanding of the market, among others.
• Added to this is the fact that stock market volatility in the
last few years has left investors in a state of confusion. They
are in a dilemma whether to invest, hold or sell in such a
scenario.
• Although no sure-shot formula has yet been discovered for
success in stock markets, here are some golden rules
which, if followed prudently, may increase your chances of
getting a good return.
42

43. 1. Avoid the herd mentality
• No need to say that you should always avoid having the herd
mentality if you don't want to lose your hard-earned money in
stock markets. The world's greatest investor Warren Buffett
was surely not wrong when he said, "Be fearful when others
are greedy, and be greedy when others are fearful!"
43

44. 2. Take informed decision
• Proper research should always be undertaken before investing
in stocks. But that is rarely done. Investors generally go by the
name of a company or the industry they belong to. This is,
however, not the right way of putting one's money into the
stock market.
44

45. 3. Invest in business you understand
• Never invest in a stock. Invest in a business
instead. And invest in a business you
understand. In other words, before investing
in a company, you should know what business
the company is in.
45

46. 4. Don't try to time the market
• "So, you should never try to time the market. In fact, nobody
has ever done this successfully and consistently over multiple
business or stock market cycles. Catching the tops and
bottoms is a myth. It is so till today and will remain so in the
future. In fact, in doing so, more people have lost far more
money than people who have made money," says Anil
Chopra, group CEO and director, Bajaj Capital.
46

47. 5. Follow a disciplined investment
approach
• Historically it has been witnessed that even great bull
runs have shown bouts of panic moments. The
volatility witnessed in the markets has inevitably made
investors lose money despite the great bull runs.
• However, the investors who put in money
systematically, in the right shares and held on to their
investments patiently have been seen generating
outstanding returns. Hence, it is prudent to have
patience and follow a disciplined investment approach
besides keeping a long-term broad picture in mind.
47

48. 6. Do not let emotions cloud your
judgment
• Many investors have been losing money in stock markets due
to their inability to control emotions, particularly fear and
greed. In a bull market, the lure of quick wealth is difficult to
resist. Greed augments when investors hear stories of
fabulous returns being made in the stock market in a short
period of time
48

49. 7. Create a broad portfolio
• Diversification of portfolio across asset classes and
instruments is the key factor to earn optimum returns on
investments with minimum risk. Level of diversification
depends on each investor's risk taking capacity.
49

50. 8. Have realistic expectations
• There's nothing wrong with hoping for the 'best' from your
investments, but you could be heading for trouble if your
financial goals are based on unrealistic assumptions. For
instance, lots of stocks have generated more than 50 per cent
returns during the great bull run of recent years.
50

51. 9. Invest only your surplus funds
• Never invest more than 20 percent of your
savings at a time in stock market.
51

52. 10. Monitor rigorously
• We are living in a global village. Any important event
happening in any part of the world has an impact on our
financial markets. Hence we need to constantly monitor our
portfolio and keep affecting the desired changes in it.
• If you can't review your portfolio due to time constraint or
lack of knowledge, then you should take the help of a good
financial planner or someone who is capable of doing that.
52

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