The document provides information about the Indian stock market including key stock indices like the BSE Sensex and NSE Nifty. It discusses the top companies comprising these indices by weightage. It also covers topics like stock exchanges, depositories, transaction processes, factors affecting stock prices, and different types of trading. The document provides an overview of important stock market concepts for investors.

1. By
Bhanu Pratap Ojha
A
Journey
into
Stock Markets

2. STOCK MARKET

3. STOCK EXCHANGES IN INDIA
BSE NSE

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

5. Name of company Weightage
RIL 13.10
Infosys Tech 9.37
L&T 8.44
ICICI Bank 7.67
HDFC 5.71
ITC 5.46
Bharti Airtel 4.87
HDFC Bank 4.64
SBI 4.13
ONGC 3.67
BHEL 3.26
HUL 2.50
TCS 2.25
Tata Steel 1.88
Tata Power 1.78
Name of Company Weightage
Maruti Suzuki 1.75
Sterlite Industries 1.71
Grasim Industries 1.69
NTPC 1.69
RCOM 1.61
Jaiprakash Associates 1.60
M&M 1.56
Wipro 1.53
Reliance Infra 1.49
DLF 1.41
Hero Honda 1.25
Tata Motors 1.22
Hindalco 1.09
Sunpharma 0.82
ACC 0.75

6. NSE NIFTY 50
The 50 stocks that were most favored by
institutional investors in the 1960s and 1970s.

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
company
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
BPCL 0.52
Name of
Company
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 exchanges of
these securities take place.
• National Securities Depository Limited
• Central Depository Services Limited

11. Depository Participant
In India, a Depository Participant (DP) is
described as an agent of the depository. They
are the intermediaries between the depository
and the investors.

12. Transaction Process
(How To Start Trading And Investing)
• We need to have a DEMAT account.
• We need to have a Trading account.
• And of course money 

13. Rules for earning money in
the market
• Rule 1: Never lose
your money in the
market.
• Rule 2: Never forget
Rule 1.

14. Settlement Procedure
For Cash Markets
• 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. Classification of Companies
Sector Capitalisation Groups

17. Sectoral Indices
• Realty
• PSU
• Auto
• Power
• Consumer Durables
• Oil & gas
• Bankex
• FMCG
• Capital Goods
• Metal
• Teck
• IT

18. Capitalisation
• 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. Control Mechanism
• 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. Why 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’s have to file DRHP(Draft red herring
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 appetite.

23. IPO – Grey Market
• 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. Kinds of Trading
• Intra-day Trading
• Delivery based Trading

25. Intraday Trading
• Buying and Selling on the same day.
• Brokerage will be different for intra-day and
delivery based trading, intra-day being lesser

26. Delivery Trading
• Buying and Selling are on different days
• Brokerage will be higher than intra-day
• Delivery charges

27. Short Selling
• Selling the shares which you don’t have
• Ex: Lets consider a company Reliance
• Its priced at Rs 1,000/-. 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. Short Covering
• Assume you sold 10 RIL shares in morning at Rs 10,000/- and by
evening as you had thought, it had Fallen down to Rs 9,000/-
• Now you buy back those 10 shares what you had sold.
• So the difference in amount per share 10,000 – 9,000 = 1,000
• 100 * 10 = 1000, Profit is yours.
• This process of buying back is called Short covering.

29. Consequences if not covered
• You will become a defaulter.
• Lets understand this with an Example.
• Assume you short sold on Monday, as you haven’t short
covered it, you need to deliver it on Wednesday(T + 2). But
you don’t have the shares to deliver. So NSE or BSE will 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. How to Select Stocks
• Fundamental Analysis
• Technical Analysis

31. What is Fundamental Analysis?
• Analyzing a 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.
• Analyzing a 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. What is Technical analysis
• Forecasting the future direction of prices through
the study of past market data, primarily price and
volume

33. Basics in Technical analysis
Support
Resistance
Stop Loss

34. Effects on Prices of Shares:-
• Bonus
• Split
• Right Issues
• Buyback

35. Foreign Markets
• Dowjones
• Nasdaq
• Nikkei
• Shanghai

36. Derivatives
• 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.

37. Derivatives
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/-

38. Premium & Discount
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

39. M2M adjustments
• 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

40. Options
• 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

41. Contd……
• If the price in cash markets
• Price of Call Option also (vice versa)

42. Hedging
• 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

43. • 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
Hedging Example

44. • 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
Hedging Example

45. Speculation
• 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 it to
make profit

46. Example…
• Speculator believes Price of foreign currency
• Purchases the currency
• Holds it
• Resale later
• Profit on each unit of foreign currency

47. Arbitrage
• 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

48. How a stock price changes

49. Things to be avoided while trading
& investing
• 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.

50. Attributes of good investors
• One should be a good Manager and not day
trader.
• A well diversified portfolio.
• Investment in good shares.
• Have patience.