The document discusses various topics related to stock trading, including the differences between debt and equity, what a stock is, how stock markets and indices work, different types of traders and trading strategies, and fundamental and technical analysis. It provides details on how the two major Indian stock indices, Sensex and Nifty, are calculated based on the market capitalization and share prices of their constituent stocks. The benefits of listing a company's stock on an exchange are also covered.

1. STOCK TRADING
BY
KUSHAL WALIA AND SAHIB SINGH

2. INTRODUCTION
 DEBT VS EQUITY
 Debt = Bond and Loans
 Equity = shares
 Issuing stock is advantageous for the company
because it does not require the company to pay
back the money or make interest payments along
the way.
 WHAT IS A STOCK?
 stock is a share in the ownership of a company.
 represents a claim on the company's assets and
earnings.
 As you acquire more stock, your ownership stake
in the company becomes greater.

3. STOCK MARKET(1)
STOCK CERTIFICATE
PRIMARY MARKET
where securities are created via IPO
SECONDARY MARKET,
investors trade previously issued securities.

4. STOCK MARKET(2)
BULL MARKET
When everything in the economy is great
BEAR MARKET
When everything in the economy is bad. Recession,
unemployment and prices falling.
CHICKENS
Are afraid to lose anything. Invest very securely.
PIGS
High risk takers, want to make a lot in a short time.

5. TRADING(1)
ONLINE & OFFLINE TRADING
Doing stock trading with help of computer, Internet
connection and with demat account is called
Online Stock Trading.
Doing stock trading with the help of broker or
through phone is called Offline trading.
o DAY TRADERS, SWING TRADERS AND
INVESTORS
o Day traders exchange securities everyday.
o Swing Traders change securities every few weeks.
o Investors change securities after few years

6. TRADING(2)
METHODS OF BUYING/SELLING STOCKS
MARKET ORDER
The market order gets immediately executed at
the current available price.
LIMIT ORDER
The buying or selling price has to be mentioned
and when the stock price comes to that price
then you will execute your order with the
mentioned price.

7. INTRADAY & DELIVERY
TRADING
INTRADAY
When you buy and sell a
stock within the same
day,
Lower brokerage is
charged.
You receive margin
benefits on Intraday
Trading
DELIVERY
When you purchase
shares and hold them
overnight, then you take
delivery of the shares
Most brokers charge a
higher brokerage
You have to pay the full
value of the shares and
the shares get credited
to your account.

8. IMPORTANT TERMS
OPEN
HIGH
LOW
CLOSE
BID
OFFER
VOLUME, BID
QUANTITY, OFFER
QUANTITY
NET CHANGE

9. STOCK QUOTE

10. PRICE OF A SHARE
IPO price decided by the company and merchant bank.
Supply and demand in the market determines stock price.
Price times the number of shares outstanding (market
capitalization) is the value of a company. Comparing just
the share price of two companies is meaningless.
Theoretically, earnings are what affect investors' valuation
of a company. Remember, it is investors' sentiments,
attitudes and expectations that ultimately affect stock
prices.

11. FUNDAMENTAL &
TECHNICAL ANALYSIS
FUNDAMENTAL
Fundamental analysis
is used for long-term
analysis and long-term
returns.
TECHNICAL
Technical analysis is
made for day traders
and short-term
traders.

12. STOCK MARKET INDEX
Index denotes the direction of the entire market. Index
consists of High market capitalization and High liquidity
shares.
HIGH MARKET CAPITALIZATION SHARES
HIGH LIQUIDITY SHARES
Shares in the market with high volumes.
TWO TYPES OF INDICES
NIFTY, listed with NSE.
SENSEX, listed with BSE

13. BSE INDEX: SENSEX
CALCULATED SINCE 1986
INITIALLY BASED ON TOTAL MARKET
CAPITALIZATION
CHANGED TO FREE FLOATING MARKET
CAPITALIZATION IN 2003
BASED ON 30 SENSEX STOCKS TRADED ON THE
BSE
BASE VALUE IS 100 (1978-79)
CALCULATED EVERY 15 SECONDS

14. HOW IS SENSEX
CALCULATED?
FORMULA FOR SENSEX = (SUM OF FREE FLOW
MARKET CAP OF 30 BENCHMARK STOCKS) *
INDEX FACTOR
WHERE,
INDEX FACTOR = 100/MCV (1978-79)
MCV = MARKET CAP VALUE &
100 = INDEX VALUE DURING 1978-79

15. EXAMPLE
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 200. Then Free Float Cap of these
two company =

16. =(300*100+500*200)
= 30,000+1,00,000
= 1,30,000
Assume market cap during the year 1978-79 was
25000
Then SENSEX = 1,30,000*100/25000
= 520
The methodology in the example is exactly followed to
calculate the SENSEX . Only difference being the
inclusion of 30 stocks.

17. NSE INDICES
S&P CNX Nifty 50 :Owned and managed by India
Index Services and Products (IISL)
S&P CNX Nifty 50: Base Period: 3/11/1995, base
value: 1000, base capital: INR 2.06 trillion.
CNX Nifty Junior
CNX 100 (= S&P CNX Nifty 50 + CNX Nifty Junior)
S&P CNX 500 (=CNX 100+ 400 top players across
72 industries)
CNX Midcap

18. HOW IS NIFTY
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 IS SAME

19. BENEFITS OF STOCK
EXCHANGING TO THE
COMMUNITY
It assists the economy’s development by providing a
body of interested investors.
It encourages capital formation.
Uploads position of superior firms and assists them in
raising capital.
Government can undertake important projects,
raising funds via sale of its securities.

20. BENEFITS TO THE
COMPANY
A company whose share is quoted on the exchange
enjoys better reputation and credit
The market of such a company is naturally widened.
The market price of securities is likely to be higher
than its earning, dividends and property value. This
raises the bargaining power of the company in event
of a merger or a takeover.

21. THANK YOU