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Stock market
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- 2. “ There are onlytwo rules in stock market: 1. Never lose your money 2. Don’t forget the rule no.1 -Warren Buffett
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- 4. Introduction ▪ The stockmarket refers to the collection of markets and exchanges where the issuing and trading of equities (stocks of publicly held companies), 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.
- 5. Introduction Contd… ▪ AStock market is one of the most important sources for companies to raise money. This allows businesses to be publicly traded, or raise additional capital for expansion by selling shares of ownership of the company in a public market. ▪ An economy where the stock market is on the rise is considered to be an up-and- coming economy.
- 6. Indian Stock Exchanges Mostof the trading in the Indian stock market takes place on its two stock exchanges: ▪ The Bombay Stock Exchange (BSE) ▪ The National Stock Exchange (NSE).
- 7. Bombay Stock Exchange ▪Established in 1875, BSE (formerly known as Bombay Stock Exchange Ltd.), is Asia's first & the Fastest Stock Exchange in world with the speed of 6 micro seconds and one of India's leading exchange groups. ▪ Today BSE provides an efficient and transparent market for trading in equity, currencies, debt instruments, derivatives, mutual funds, etc. ▪ It has a global reach with customers around the world and a nation-wide presence. BSE systems and processes are designed to safeguard market integrity, drive the growth of the Indian capital market and stimulate innovation and competition across all market segments.
- 8. National Stock Exchange ▪The National Stock Exchange (NSE) is the leading stock exchange in India and the fourth largest in the world by equity trading volume in 2015, according to World Federation of Exchanges (WFE). ▪ NSE has a fully-integrated business model comprising our exchange listings, trading services, clearing and settlement services, indices, market data feeds, technology solutions and financial education offerings. ▪ NSE is a pioneer in technology and ensures the reliability and performance of its systems through a culture of innovation and investment in technology.
- 9. “ The fourmost dangerous words in investing are: ‘ this time it's different.’ ’’
- 10. Types Of Investmentsin Share Markets:
- 11. Types of Investments: ▪There are many types of investments and investing styles to choose from. Mutual funds, ETFs, individual stocks and bonds, closed-end mutual funds, real estate, various alternative investments and owning all or part of a business are just a few examples.
- 12. Stocks ▪ A stockis a type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings. ▪ There are two main types of stock: 1. Common Stock 2. Preferred Stock ▪ Common stock usually entitles the owner to vote at shareholders' meetings and to receive dividends. ▪ Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares.
- 13. Bonds ▪ A bondis a fixed income investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate. ▪ Bonds are used by companies, municipalities, states and sovereign governments to raise money and finance a variety of projects and activities. ▪ Bonds are used by companies, municipalities, states and sovereign governments to raise money and finance a variety of projects and activities.
- 14. Mutual Funds ▪ Amutual fund is an investment vehicle made up of a pool of moneys collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and other assets. ▪ Mutual funds are operated by professional money managers, who allocate the fund's investments and attempt to produce capital gains and/or income for the fund's investors. ▪ A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.
- 15. Exchange-Traded Fund ▪ AnETF, or exchange-traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ▪ ETFs experience price changes throughout the day as they are bought and sold. ETFs typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors. ▪ Because it trades like a stock, an ETF does not have its net asset value (NAV) calculated once at the end of every day like a mutual fund does.
- 16. Stock Exchanges andhow to purchase stocks?
- 17. Stock Exchanges They begansimply as meeting places where investors gathered to discuss companies and their shares, and to trade shares As they became more formal, these meeting places became the trading floors of exchanges, where traders made deals face to face. Today, many of these exchange floors have been replaced by sophisticated electronic dealing systems run on computer systems that now operate in major cities throughout the world. A stock exchange is simply a place where financial instruments can be bought or sold.
- 18. Working of StockExchanges A stock exchange is simply a place where financial instruments can be bought or sold. STOCK EXCHANGE Financial Instrument s BuyersCash Cash Financial Instrument s Sellers
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- 20. Brokers: A Broker isa person who is licensed to buy and sell stocks, provide investment advice, and collect a commission on each purchase or sale: ▫ Purchases stocks on an organized exchange (stock market) ▫ For example, certified individuals, banks etc ▫ Over ¾ of all stocks are bought and sold on an organized exchange
- 21. Organized Exchanges ▪ Minimumrequirements for a stock to ensure only reputable companies are used ▪ Each exchange has a limited number of seats available which brokerage firms purchase to give them the legal right to buy and sell stocks on the exchange ▪ Ex: NSE (National Stock Exchange of India), NYSE (New York Stock Exchange), NASDAQ etc.
- 22. Demat Account andTrading Account Bank saving A/c Trading A/C This is stock broker. Demat A/c This is where the stocks are kept
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- 25. Majorly throughcompany performance (earnings & profit (Called divident)), bonuses and rewards, and through trading financial instruments like stocks, bonds
- 26. WHAT MAKES A STOCKPRICE UP AND DOWN
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- 31. When to Investor Not?
- 33. Bulls:- Bullish characteristics arewhen the market is showing confidence, prices increase and market indicators rise. Conditions: ▪ Unemployment is low ▪ Stock Rising ▪ Prices going up Market Conditions: Bear:- Prices hover at the same level and then go down, indices fall and volumes are stagnant. Conditions: ▪ Unemployment is high ▪ Stocks decreasing ▪ Prices going down
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- 35. Stock Market Index ▪A stock market index is a method of measuring a section of the stock market. Many indices are cited by news or financial services firms and are used as benchmarks, to measure the performance of portfolios such as mutual funds. ▪ Stock market indices are calculated using Free Float Market Capitalisation. ▪ A stock market index acts the indicator of the performance of the economy or a sector of the economy
- 36. Free Float MarketCapitalization Free float concept is an index construction methodology which makes use of free float shares in the market and is used to calculate the market index. Free float market capitalization is the total worth of all shares of a company which are available for trading in the open market. These shares are called free float shares and are available for trading by anyone.
- 37. Example: Suppose BSE index(SENSEX) consists of only 2 stocks such as 'X' and 'Y' Company 'X' has 10000 outstanding shares out of which only 5000 are available for trading in open market. Market price of share is Rs.100 Company 'Y' has 5000 outstanding shares out of which 2000 shares are held by promoters and remaining 5000 are free float shares (open market shares). Market price of share is Rs.50. Here; Sum of free float market cap of company X and company Y is 500000+100000=600000 Assume market cap during 1978-79 is 500000 Now apply formula: SENSEX = (sum of free float market cap of 30 major companies of BSE) X Index vale in 1978-79 / Market cap value in 1978-79 Stocks Issued stocks Market Price Market Cap X 10000 100 1000000 Y 5000 50 250000 Stocks Open Market Stock Market Price Market cap X 5000 100 500000 Y 2000 50 100000
- 38. “ The bulls willmake money The bears will make money Only The pigs gets slaughtered
Editor's Notes
- #5 "stock" is a general term used to describe the ownership certificates of any company, and "shares" refers to the ownership certificates of a particular company. So, if investors say they own stocks, they are generally referring to their overall ownership in one or more companies. Technically, if someone says that they own shares - the question then becomes - shares in what company? Bottom line, stocks and shares are the same thing. The minor distinction between stocks and shares is usually overlooked, and it has more to do with syntax than financial or legal accuracy.
- #18 Only members of the exchange can access the electronic market (Member firms such as banks) Electronic systems such as SETS is used on the London Stock Exchange. SETS (Stock Exchange Trading System) matches buyers and sellers and executes a trade. The exchange makes arrangements to transfer share ownership and the cash.
- #19 Only members of the exchange can access the electronic market (Member firms such as banks) Electronic systems such as SETS is used on the London Stock Exchange. SETS (Stock Exchange Trading System) matches buyers and sellers and executes a trade. The exchange makes arrangements to transfer share ownership and the cash.
- #24 Account used for placing buy sell orders. The main transaction of shares is done through the trading account.
- #25 Account where you hold your shares in dematerialize form or in electronic form. It can be used only for saving of shares and not for transaction. Demat account is generally for the people who would like to invest in the market and hold the shares in the electronic form.