STOCK MARKETSTOCK MARKET

INTRODUCTIONINTRODUCTION

• STOCK MARKET is a public entity for thetrading of company stock (share) andderivatives at an agreed price.

• The purpose of a stock market is tofacilitate the exchange of securitiesbetween buyers and sellers, thus providingmarket place.

1.What is a stock exchange?It is a corporation or mutual organization which provides facilitiesfor stock brokers and traders, to trade company stocks and othersecurities. Its index, or market indicator is known as the Sensex.

2. Who is a broker?A stockbroker is person who is licensed to trade in shares. Brokers alsohave direct access to the share market and can act as your agent in share

transactions.

3. What is a Demat A/C?

Investors who wish to trade in the market need to have adematerialized, or demat, account. In India, the government hasmandated two entities –National Securities Depository, or NSDL, andCentral Depository Services (India), or CDSL – to be the custodian ofdematerialized securities.

FUNCTIONS OF BROKERSFUNCTIONS OF BROKERS

• Receive and track orders

• Find other parties

• Negotiate prices

• Server as focal point trading

• Execute orders

TERMS TO RELATETERMS TO RELATE

• SENSEX• NIFTY• BULL• BEAR• CRASH• DIVIDENT• SQUARING OFF• RALLY

STOCK MARKET INDEXSTOCK MARKET INDEX

• All India All Industries Share Price Indexcombined and published by the EconomicTimes on daily basis.

• S&P CNX Nifty combined and publishedby NSE India on daily basis.(50 STOCKS)

• BSE Sensex combined and publishedby BSE on daily basis.(30 STOCKS)

BUYING SHARESBUYING SHARES

• PRIMARY MARKETS – part of capitalmarkets that deals with the issue of newsecurities (directly from the company).

• SECONDARY MARKETS –here securitiesare sold by and transferred from oneinvestor to another (from existingshareholder)

PLAYERS IN THE STOCKPLAYERS IN THE STOCKMARKETMARKET

• Brokers- members of the stock exchangeauthorized to trade

• Stock exchange• Clearing corporation• Banks• Depository participants

DEMATERIALISATION OFDEMATERIALISATION OFSHARES:SHARES:

• Trading in the shares of the Company iscompulsory in dematerialized form for allinvestors.

The Company has, therefore, enlisted its shareswith both the depositories, viz, NationalSecurities Depository Limited (NSDL) andCentral Depository Services India Limited(CDSL).

WHAT IS DEMATERIALISATION?WHAT IS DEMATERIALISATION?

• Dematerialisation is a process by which the physicalshare certificates of an investor are taken back by theCompany and an equivalent number of securities arecredited in electronic form at the request of the investor.

• An investor will have to first open an account with aDepository Participant so that the dematerialisedholdings can be credited into that account.

• This is very similar to opening a Bank Account.

WHAT IS A DEPOSITORY?WHAT IS A DEPOSITORY?

• A Depository (NSDL & CDSL) is anorganisation like a Central Bank where thesecurities of a shareholder are held in theelectronic form at the request of theshareholder through the medium of aDepository Participant.

WHO IS A DEPOSITORYWHO IS A DEPOSITORYPARTICIPANT?PARTICIPANT?

• A Depository Participant (DP) is your representative( agent ) in the depository system providing the link

between the Company and you through the Depository.

• While the Depository can be compared to a Bank , DPis like a branch of your bank with whom you can havean account.

• According to SEBI guidelines, Financial Institutions likebanks, stockbrokers etc . can become participants in thedepository.

SECONDARY MARKETSECONDARY MARKET

1. TRADING- Cash tradingSpot trading

Forward ,Future (Derivative trade)

2. Clearing &Settlement

TRADINGTRADING

• The NSE trading system called 'NationalExchange for Automated Trading' (NEAT ) is afully automated screen based trading system.

• It is on line and nationwide trading system.

• It adopts the principle of an order drivenmarket.

TRADING MECHANISM SYSTEMTRADING MECHANISM SYSTEM

• In this system a member can punch intothe computer quantities of securities andprices at which he likes to transact.

• The transaction is executed as soon as itfinds a matching sale or buy order from acounter party.

International Aspects of StockInternational Aspects of StockMarketsMarkets

• European markets becoming an increasing forcewith introduction of a common currency, theEuro

• International stock markets allow investors todiversify by holding stocks issued bycorporations in foreign countries

• Increased risk due to less complete informationabout foreign stocks, foreign exchange risk, andpolitical risk

WORLD CAPITAL MARKETWORLD CAPITAL MARKET

• Why Raise Funds Outside DomesticMarkets?

• Domestic market not sufficiently developed to supply thefunds needed

• Reduced costs (assumes markets not completelyintegrated)

• Diversify funding sources

• Foreign currency exposure management

How to receive income fromHow to receive income fromshares?shares?

We invest in shares to make money – eitherthrough a share’s capital growth, i.e. the amountby which the share price increases in value overtime, or through the dividends it pays to itsshareholders.

How to make investment decisions?How to make investment decisions?• To cope with volatility, it is important to have a disciplined and

systematic approach to equity investment.

• Set your own rules and more importantly, follow them religiously.

• Indeed, the mantra for successful equity investment is a well thoughout, disciplined investment strategy.

2) How to track your investments? (Portfolio tracker) :

The Portfolio Manager tracks and monitors all your investments, cashflow and assets, through live price updates.

• With the Portfolio help, you can not only view your investments ateach stage, but can use this record of your holdings to base anyfuture investments decisions.

CONCLUSIONCONCLUSION• More over investing in stock market is a kind of investment that

one cannot learn or understand only through theoreticalknowledge, its simply a game in which one can accelerate onlythrough market based practical knowledge and fairinvestment strategy.

• Before one examines a company or start up a new firm, it isimportant to understand the nature of businesses and the stockmarket. This is the cornerstone of learning to invest well.

• At last the stock market can be a great source of confusion formany people. An average person may believe that investing isa form of gambling; they are certain that if you invest, you willmore than likely end up losing your money. But at the sametime any one with a small investment can make a good profit ifhe/she have good knowledge of