Bse Nse India Stock Market-report

8/3/2019 Bse Nse India Stock Market-report

1/28

BSE STOCK MARKET

GOVERNMENT ENGINEERING COLLEGE, RAJKOT. Page 1

By: panchani rohit kumar m.

5th

semester


2/28

BSE STOCK MARKET


This is to certify that Mr.

PANCHANI ROHIT M. having

Roll_no:080200107036 respectively. Branch: COMPUTER

ENGINEERING Semester 5th has satisfactorily completed the

project work in the subject Seminar within the four walls of the

institute.

Subject of Seminar: BSE-NSE STOCK MARKET

Date of Submission:

Guided By:- Head of Department

T.R. SHYARA M. P. JANI


3/28

BSE STOCK MARKET


ABSTRACT

BSE and NSE stock market is Indian stock market.BSE means Bombay stock exchange

and NSE means national stock exchange. We will see that requirement of persons to open an

account in particular stock broker. Stocks means simply share of particular company. We will

that what is sensex and nifty. We will see that which factors affected in stock. How the stock

prizes decide and how that prize change in every seconds. All control is done by SEBI means

security exchange board of India.

We will see use of computer in stock market that how the transaction is done in particular

accounts. OBIN and NIT is very popular and mostly used in stock market to transaction .how

to analysis done through computer software.useing chart analyses analysis that what is prizeof particular stock in future.

We will see that what is requirement of company that publish the stock. What and how is

income of Indian government from stock market. We will see that why government of India

give permission to stock market. We will see how many sectors available in stock market.

What is rate of brokerage rate, servicetax, transaction tax etc.


4/28

BSE STOCK MARKET


Acknowledgement

With immense pleasure, I would like to present this report on my project AI. I am

thankful to all who have helped me a lot for successful completion and for providing valuable

guidance throughout my project work. So I take this opportunity to thank people who have

made this project a success.

I heartily offer sincere thank to Miss T R SHYARA for providing their expert

guidance to me. I sincerely thank to her unconditional support during whole session of my

study and development. She had provided me a favorable environment. Without her support I

would not have achieved my goal.

This project has given me immense acknowledgement to use in my future ventures

and many moments to cherish.


5/28

BSE STOCK MARKET


INDEX

1.Introduction 4

2.History 6

3.Demate Account 9

4.Stock and future 12

5.Dividends 14

6.How to trade stock 16

7.Factor affecting 17

8.Mistake by trader 23

9.Basic stock investing rules 25

10. BIBLIOGRAPHY 28


6/28

BSE STOCK MARKET


INTRODUCTION

In finance a share is a unit of account for various financial instruments including

stocks, mutual funds, limited partnerships, and REIT's. In British English, the usage of the

word share alone to refer solely to stocks is so common that it almost replaces the word stock

itself.

In simple Words, a share or stock is a document issued by a company, which entitles

its holder to be one of the owners of the company. A share is issued by a company or can be

purchased from the stock market.

By owning a share you can earn a portion andselling shares

you get capital gain. So,your return is the dividend plus the capital gain. However, you also run a risk of making a

capital loss if you have sold the share at a price below your buying price.

A company's stock price reflects what investors think about the stock, not

necessarily what the company is "worth." For example, companies that are growing quickly

often trade at a higher price than the company might currently be "worth." Stock prices are

also affected by all forms of company and market news. Publicly traded companies are

required to report quarterly on their financial status and earnings. Market forces and general

investor opinions can also affect share price.

Quick Facts on Stocks and Shares

Owning a stock or a share means you are a partial owner of the company, and you get

voting rights in certain company issues Over the long run, stocks have historically averaged

about 10% annual returns However, stocks offer no guarantee of any returns and can lose

value, even in the long run Investments in stocks can generate returns through dividends,

even if the price

In simple Words, a share or stock is a document issued by a company, which entitles its

holder to be one of the owners of the company. A share is issued by a company or can be

purchased from the stock market.

By owning a share you can earn a portion and selling shares you get capital

gain. So, your return is the dividend plus the capital gain


7/28

BSE STOCK MARKET


STOCK MARKET

Fig=1,BSE=Bombay stock exchange

Fig=2,NSE=National stock exchange

The stock market is an avenue or place for investors who want to sell or buy stocks, shares or

other things like government bonds. we take an example BSE and NSE two are stock market

in India BSE in situated at Mumbai and NSE is situated at new Delhi.


8/28

BSE STOCK MARKET


HISTORY

Fig=3 Bombay stock exchange

The BSE Sensex or Bombay Stock Exchange Sensitivity Index is a value-weighted

index composed of 30 stocks that started January 1, 1986. The Sensex is regarded as the pulse

of the domestic stock markets in India. 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 fifty per cent 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.

At a regular intervals, the Bombay Stock Exchange (BSE) authorities review and

modify its composition to be sure it reflects current market conditions. The index is

calculated based on a free-float capitalization method; a variation of the market cap method.

Instead of using a company's outstanding shares it uses its float, or shares that are readily

available for trading. The free-float method, therefore, does not include restricted stocks, such

as those held by promoters, government and strategic investors..

Initially, the index was calculated based on the full market capitalization method.

However this was shifted to the free float method with effect from September 1, 2003.

Globally, the free float market capitalization is regarded as the industry best practice.

As per free float capitalization methodology, the level of index at any point of time

reflects the free float market value of 30 component stocks relative to a base period. TheMarket Capitalization of a company is determined by multiplying the price of its stock by the


9/28

BSE STOCK MARKET


number of shares issued by the company. This Market capitalization is multiplied by a free

float factor to determine the free float market capitalization. Free float factor is also referred

as adjustment factor. Free float factor represent the percentage of shares that are readily

available for trading.

The Calculation of Sensex involves dividing the free float market capitalization of 30

companies in the index by a number called Index divisor.The Divisor is the only link to

original base period value of the Sensex. It keeps the index comparable over time and is the

adjustment point for all Index adjustments arising out of corporate actions, replacement of

scrips, etc.

The index has increased by over ten times from June 1990 to the present. Using

information from April 1979 onwards, the long-run rate of return on the BSE Sensex works

out to be 18.6% per annum, which translates to roughly 9% per annum after compensating for

While BSE is now synonymous with Dalal Street, it was not always so. The firstvenues of the earliest stock broker meetings in the 1850s were in rather natural environs -

under banyan trees - in front of the Town Hall, where Horniman Circle is now situated. A

decade later, the brokers moved their venue to another set of foliage, this time under banyan

trees at the junction of Meadows Street and what is now called Mahatma Gandhi Road. As

the number of brokers increased, they had to shift from place to place, but they always

overflowed to the streets. At last, in 1874, the brokers found a permanent place, and one that

they could, quite literally, call their own. The new place was aptly, called Dalal Street (

Brokers' Street

In 2002, the name "The Stock Exchange, Mumbai" was changed to Bombay Stock

Exchange. Subsequently on August 19, 2005, the exchange turned into a corporate entity

from an Association of Persons (AoP) and renamed as Bombay Stock Exchange Limited

BSE, which had introduced securities trading in India, replaced its open outcry system

of trading in 1995, with the totally automated trading through the BSE Online trading

(BOLT) system. The BOLT network was expanded nationwide in 1997.

Prominent Position

The journey of BSE is as eventful and interesting as the history of India's securities

market. In fact, as India's biggest bourse, in terms of listed companies and market

capitalization, BSE has played a pioneering role in the development of the Indian securities

market. It is surely BSE's pride that almost every leading corporate in India has sourced

BSE's services in capital raising and is listed with BSE.

Even in terms of an orderly growth, much before the actual legislations were enacted,BSE had formulated a comprehensive set of Rules and Regulations for the securities market..


10/28

BSE STOCK MARKET


It had also laid down best practices which were adopted subsequently by 23 stock exchanges

which were set up after India gainedits independence.

Several Firsts

At par with the international standards, BSE has in fact been a pioneer in severalareas. It has several firsts to its credit even in an intensely competitive environment.

1. First in India to introduce Equity Derivatives.

2. First in India to launch a Free Float Index

3. First in India to launch US$ version of BSE SENSEX

4. First in India to launch Exchange Enabled Internet Trading Platform

5.

First in India to obtain ISO certification for a stock exchange

6. 'BSE On-Line Trading System (BOLT) has been awarded the globally

recognised the Information Security Management System standard

BS7799-2:2002.

7. First to have an exclusive facility for financial training

8. First in India in the financial services sector to launch its website in Hindi and

Gujarati

9.

First bell-ringing ceremony in the history of the Indian capital markets (listingceremony of Bharti Televentures Ltd.on February 18,2002


11/28

BSE STOCK MARKET


DEMAT ACCOUNT

Demat refers to a dematerialized account.

Though the company is under obligation to offer the securities in both physical and

demat mode, you have the choice to receive the securities in either mode.

If you wish to have securities in demat mode, you need to indicate the name of the

depository and also of the depository participant with whom you have depository accountin

your application just as you have to open an account with a bank if you want to save your

money, make cheque payments etc, Nowadays, you need to open a demat account if you want

to buy or sell stocks.

Requirement of open Demat account

1 Pan card no

2 Address proof

3 Passport photos

4 Bank account &chequebook copy5 Parents photos

6 Last bank-entry

How to open demat Account

Opening an individual Demat accountis a two-step process: You approach a DP and

fill up the Demat account-opening booklet. The Web sites of the NSDL and the CDSL list the

approved DPs. You will then receive an account number and a DP ID number for the

account. Quote both the numbers in all future correspondence with your DPs.So it is just like

a bank account where actual money is replaced by shares. You have to approach the DPs

(remember, they are like bank branches), to open your demat account.

Let's say your portfolio of shares looks like this: 150 of Infosys, 50 of Wipro, 200 of

HLL and 100 of ACC. All these will show in your demat account. So you don't have to

possess any physical certificates showing that you own these shares. They are all held

electronically in your account. As you buy and sell the shares, they are adjusted in your

account. Just like a bank passbook or statement, the DP will provide you with periodic

statements of holdings and transactions.


12/28

BSE STOCK MARKET


DEMAT ACCOUNT OPENING COST AND OTHER

CHARGES

The cost of opening and holding a Demat account. There are four major charges

usually levied on a Demat account: Account opening fee, annual maintenance fee, custodian

fee and transaction fee. All the charges vary from DP to DP.

Depending on the DP, there may or may not be an opening account fee. Private

Banks, such as ICICI Bank, HDFC bank and UTI bank, do not have it. However, players

such as Karvy Consultants and the State Bank of India charge it. But most players levy this

when you re-open a Demat account, though the Stock Holding Corporation offers a lifetime

account opening fee, which allows you to hold on to your Demat account over a long period.This fee is refundable.

Demat account other charge

1: Annual maintenance fee: This is also known as folio maintenance charges, and is

generally levied in advance.

2: Custodian fee: This fee is charged monthly and depends on the number of securities

(international securities identification numbers ISIN) held in the account. It generally

ranges between Rs. 0.5 to Rs. 1 per ISIN per month.

3: Transaction fee: The transaction fee is charged for crediting/debiting securities to and

from the account on a monthly basis. While some DPs, such as SBI, charge a flat fee per

transaction, HDFC Bank and ICICI Bank peg the fee to he transaction value, subject to a

minimum amount.

4: The fee also differs based on the kind of transaction (buying or selling). Some DPs charge

only for debiting the securities while others charge for both. The DPs also charge if your

instruction to buy/sell fails or is rejected.

In addition, service tax is also charged by the DPs.

All banks decide different charge of that DP.


13/28

BSE STOCK MARKET


Stocks and Futures - What is the Difference?

In some ways they are similar, but only minutely so. So let's consider some of the

major differences between the two.

Most individuals have likely traded stocks at one time or another. Usually, it is to buy

in order to 'own' a percentage of a particular company or to liquidate such partial ownership.

They pick up a phone to call a broker or go online to purchase or sell. The order is facilitated

through an 'exchange', such as the New York Stock Exchange for example.

Buying and selling Futures is similar in this respect. You can call a broker or go

online to buy or sell Futures contracts. The order is then facilitated througha commodity

exchange, such as the Chicago Merchatile Exchange for example. Yet while buying a stock

gives you part ownership in a company or portfolio of companies (as in a fund), buying a

Futures contract does not give you ownership of a commodity or product. Rather, you are

simply entering into a contract to purchase the underlying commodity at a certain price at a

future time, noted by the contract. For example, buying one May Wheat at 3.00 simply

creates a contract between you and the seller (whom you need not know as this is taken care

of via the exchange) that come May you will take delivery of 5000 bushels of Wheat at $3

per bushel, regardless of what the price of Wheat at market happens to be come May. As aspeculator simply trading to make a profit from trading itself and with no interest in actually

taking delivery of product, you will simply sell your contract prior to delivery at the going

market price and the difference between your buy price and sell price is either your profit or

loss.

When you buy a stock, you are part owner of a company. When you buy a

Futures contract, you simply are entering a contract. With stocks, you will pay for the

stock at the time of your purchase plus broker commissions. When buying a futures

contract, you are simply entering the buy side of a contract and no monies is paid other than

commissions to your broker.

Stock exchanges and commodity exchanges are both membership organizations

established to act as middlemen between the buys and sells of all types of traders, from

business entities to the individual small trader. The stock exchange act to bring capital from

investors to the businesses that need that capital. They facilitate the transfer of property rights

(ownership in the various companies offering stock).The commodity exchange act to bring

people willing to assume risk for the opportunity to make a substantial amount of money for

taking such risk. This helps transfer the price risk associated with ownership of various

commodities, such as Soybeans, or a service, like interest rates, from producers.


14/28

BSE STOCK MARKET


To buy stocks, you only need enough money in your account to purchase the stock

outright plus commissions. Once you make the purchase, the money is removed immediately

to make the purchase. With trading futures, since you are not actually purchasing anything

but simply entering a contract to do so at a later time (which you will exit prior to avoid

delivery), the broker will require a certain amount of margin (good faith deposit to cover anypossible losses) in what is called a 'margin account'. Each commodity has a different

minimum margin requirement depending on several factors. Your broker may use the

exchange calculated margin or require a different margin of their own. If the value of the

commodity were to decrease and you are on the buy side of the contract, then your contract

has lost value and your broker will notify you if your unrealized losses exceeds have gone

beyond your minimum margin requirement. This is called a 'margin call'. Naturally you

would want to have more capital than simply the margin amount when trading futures to

avoid these broker calls. The broker has the right (and likely will) liquidate your position if

you are getting too close to not having enough to cover the losses in order to protect

themselves.

With buying stocks outright, there is no potential for a margin call. You simply own

the stock outright. So perhaps you may be wondering why anyone would bother buying

futures contracts rather than stocks. The major answer is: LEVERAGE.

Leverage gives the trader the ability to control a large amount of money (or

commodity worth a lot of money) with very little money. For example, if Live Cattle futures

requires a minimum margin of $800 to trade a single contract, and a single contract represents

40,000 lbs at the current market price of say 75, you would be controlling $30,000 worth for

a leverage of over 35:1. This is appealing to many traders and justifies the risk. What is thatrisk? Just as leverage can work in your favor, it can work against you at the very same ratio.

Known as a 'two-edged sword'.

You can increase the leverage of trading stocks if you trade with a margin account.

This usually allows you to purchase stocks on margin at the usual rate of 50%. So for every

dollar you have you can purchase $2 worth of stock. The leverage is 2:1. How this works is

that the broker is actually 'lending' you the other 50%. Of course by purchasing stock with

margin you can lose more than you have due to the leverage. And in this case you can end up

getting a 'margin call' from your broker if your stock losses too much value. But trading

stocks comes no where close to the kind of leverage you get trading Futures.

When you look at these two trading vehicles, the bottom line comes to MARGIN and

LEVERAGE.


15/28

BSE STOCK MARKET


DIVIDENT

Even those people who have made investments that paid dividends may still be a little

confused as to exactly what dividends are, however after all, just because a person hasreceived a dividend payment doesn't mean that they fully appreciate where the payment is

coming from and what its purpose is.

If you have ever found yourself wondering exactly what dividends are and why

they're issued, then the information below might just be what you've been looking for.

Defining the Dividend

Dividends are payments made by companies to their stockholders in order to share a

portion of the profits from a particular quarter or year. The amount that any particularstockholder receives is dependent upon how many shares of stock they own and how much

the total amount being divided up among the stockholders amounts to. This means that after a

particularly profitable quarter a company might set aside a lump sum to be divided up

amongst all of their stockholders, though each individual share might be worth only a very

small amount potentially fractions of a cent, depending upon the total number of shares

issued and the total amount being divided. Individuals who own large amounts of stock

receive much more from the dividends than those who own only a little, but the total per-

share amount is usually the same.

When Dividends Are Paid

How often dividends are paid can vary from one company to the next, but in general

they are paid whenever the company reports a profit. Since most companies are required to

report their profits or losses quarterly, this means that most of them have the potential to pay

dividends up to four times each year. Some companies pay dividends more often than this,

however, and others may pay only once per year. The more time there is between dividend

payments can indicate financial and profit problems within a company, but if the company

simply chooses to pay all of their dividends at once it may also lead to higher per-share

payments on those dividends.

Why Dividends Are Paid

Dividends are paid by companies as a method of sharing their profitable times with

the stockholders that have faith in the company, as well as a way of luring other investors into

purchasing stock in the company that is paying the dividends. The more a particular company

pays in dividend payments, the more likely it is to sell additional common stock after all, if

the company is well-known for high dividend payments then more people will want to get in

on the action. This can actually lead to increases in stock price and additional profit for the

company which can result in even more dividend payments.


16/28

BSE STOCK MARKET


Getting the Most Out of Your Dividends

In order to get the most out of the dividends that you receive on your investments, it is

generally recommended that you reinvest the dividends into the companies that pay them.

While this may seem as though you're simply giving them their money back, you're receiving

additional shares of the company's stock in exchange for the dividend. This will increase

future dividend payments (since they're based upon how much stock that you own), and can

set you up to make a lot more money than the actual dividend payment was for since

increases in stock prices will affect the newly-purchased stock as well


17/28

BSE STOCK MARKET


How to trade stock

The stock market system is an avenue of how to trade stock for listed corporations. As a

corporation is formed, its initial shareholders are able to acquire shares of stock from the

point of subscription when a company is created. When a company starts to be traded to the

public, the primary market comes in where those who subscribe to the initial public offering

(IPO) takes on the shares of stock sold from point of IPO. When those who bought into a

company at IPO point of view decides to sell their shares of stock to other people, they can

do so by going to the stock market.

The stock market is a secondary market for securities trading wherein original or secondary

holders of a companys shares of stock can sell their stocks to other individuals within the

frame work of the stock market system.

The stock market has buyers of stocks or those who wants to own a part of the company but

wasnt able to do so during the initial public offerings made by the company to the public

when it has decided to list itself as a publicly listed company. The secondary market or the

stock market allows other individuals to sell shares of the company when the initial

shareholders may have realized that they want to sell their shares after gaining either

significant profit or realized significant loss from point of acquiring a company from its IPO

price.

As the stock market has developed and progressed over the years, the ways of how to trade

stock from one individual to another has become more complicated and more challenging to

be regulated. Technology has aided in providing more efficient ways of transactions. Front

and backend solutions are put into place that helps direct the exchange of shares of stock in

timely and secure manner.

Public education over how the stock market works is one of the primary concerns of the

investing public in order to promote the trading activities of the stock market to other

individuals who may also benefit from doing transactions over this secondary type of equities

market.

With the abundance of relevant company information on performance of publicly listed

companies, this information will help the investors to become more aware of the directions of

the companies where they have share of stocks on and this will also aid them in how to trade

stock and where to direct their investment strategies


18/28

BSE STOCK MARKET


Factor affecting to stock

1 EPS

2 PRICE TO EARNING RATIO

3 PEG

4INFLACTION

EPS

Even comparing the earnings of one company to another really doesnt make any

sense, if you think about it. Earnings will tell you nothing about how many shares thecompany has. Because you do not know how many shares a company has, you do not know

how many parts that companies earnings have to be divided into. If the company has more

shares, the earnings will be divided into more parts.

For example, companies A and B both earn Rs.100, but company A has 10 shares

outstanding, so each share holder has in effect earned Rs.10.

On the other hand, if company B has 50 shares outstanding and they too have earned Rs.100

then each shareholder has earned Rs.2. So you see it is important to know what is the total

number of outstanding shares are as well as the earnings.

Thus it makes more sense to look at earnings per share (EPS), as a comparison tool.

You calculate earnings per share by taking the net earnings and divide by the outstanding

shares.

EPS=NetEarnings/OutstandingShares

So looking at the EPS ratio, you should go buy Company A with an EPS of 10, right?

EPS is not the only basis of comparing two companies, but it is one of the methods used.

Note that there are three types of EPS numbers:

Trailing EPSlast years numbers and the only actual EPS

Current EPSthis years numbers, which are still projections

Forward EPSfuture numbers, which are obviously projections

EPS doesnt tell you whether its a good stock to buy or what the market thinks of it. For that

information, we need to look at some other ratios next....


19/28

BSE STOCK MARKET


Price to earnings ratio

Price to earnings (P/E) ratio & what it means?

If there is one number thatpeople look at than more any other number, it is the Price

to Earning Ratio (P/E). The P/E is a ratio that investors throw around with confidence as if ittold the complete story. Of course, it doesnt tell the whole story (if it did, we wouldnt need

alltheothernumbers.)

The P/E looks at the relationship between the stock price and the companys earnings.

The P/E is the most popular stock analysis ratio, although it is not the only one you should

consider.

You calculate the P/E by taking the share price and dividing i t by the companys EPS

P/E=StockPrice/EPS

For example: A company with a share price of Rs.40 and an EPS of 8 would have a P/E of:

(40/8)=5

What does P/E tell you?

Some investors read a high P/E as an overpriced stock.

However, it can also indicate the market has high hopes for this stocks future and has

bid up the price.

Conversely, a low P/E may indicate a vote of no confidence by the market or it

could mean that the market has just overlooked the stock. Many investors made their fortunes

spotting these overlooked but fundamentally strong stocks before the rest of the market

discovered their true worth.

In conclusion, the P/E tells you what the market thinks of a stock. It tells you whether

the market likes or dislikes the stock. If things are vague and unclear to you, do not worry.

The next ratio will make everything you read till now make sense..

PEG

PEG (Price to future growth ratio!) and what it tells you!

The market is usually more concerned about the future than the present, it is always looking

for some way to figure out what is going to happen in the companies future.

A ratio that will help you look at future earnings growth is called the PEG ratio.

You calculate the PEG by taking the P/E and dividing it by the projected growth in earnings.

PEG=(P/E)/(projected growth in earnings)


20/28

BSE STOCK MARKET


For example, a stock with a P/E of 30 and projected earning growth next year of 15% would

have a PEG of 30 / 15 = 2.

What does the 2 mean?

Technically speaking: The lower the PEG number, the less you pay for each unit offuture earnings growth. So even a stock with a high P/E, but high projected earning growth

may be a good value.

So, to put it very simply, we are interested in stocks with a low PEG value.

Just for the sake of understanding, consider this situation, you have a stock with a low

P/E. Since the stock is has a low P/E, you start do wonder why the stock has a low P/E. Is it

that the stock market does not like the stock? Or is it that the stock market has overlooked a

stock that is actually fundamentally very strong and of good value?

To figure this out, you look at the PEG ratio. Now, if the PEG ratio is big (or close to

the P/E ratio), you can understand that this is probably because the projected growthearnings are low. This is the kind of stock that the stock market thinks is of not much value.

On the other hand, if the PEG ratio is small (or very small as compared to the P/E

ratio, then you know that it is a valuable stock) you know that the projected earnings must be

high. You know that this is the kind of fundamentally strong stock that the market has

overlooked for some reason.

Important note: You must understand that the PEG ratio relies on the projected %

earnings. These earnings are not always accurate and so the PEG ratio is not always accurate.

Having understood these basic three ratios, you probably have started to understand

how these ratios help you understand a stock and what is valuable and what is not.

In the next section we shall look at some of the things that every investor must know

about. Something that SILENTLY eats into the profits of each and every investor and how to

beat it...

INFLATION

Inflation is an economic concept. What the cause of inflation is, is not important to us

from the point of view of this article. What is important to us is the effect of inflation! The

effect of inflation is the prices of everything going up over the years.

A movie ticket was for a few paise in my dads time. Now it is worth Rs.50. My dads

first salary for the month was Rs.400 and over he years it has now become Rs.75,000. This is

what inflation is, the price of everything goes up. Because the price goes up, the salaries go

up.

If you really thing about it, inflation makes the worth of money reduce. What you

could buy in my dads time for Rs.10, now a days you will not be able to buy for Rs.400 also.

The worth of money has reduced! If this is still not clear consider this, when my father was a

kid, he used to get 50paise pocket money. He used to use this money to go and watch a movie(At that time you could watch a movie for 50paise!)


21/28

BSE STOCK MARKET


Now, just for the sake of understanding assume that my dad decided in his childhood to save

50paise thinking, that one day when he becomes big, he will go for a movie. Many years

pass. The year now is 2006. My dad goes to the theater and asks for a ticket. He offers the

ticket-booth-guy at the theater 50paise and asks for a ticket. The ticket booth guy says, I amsorry sir, the ticket is worth Rs.50. You will not be able to even buy a paan with the

50paise!!

The moral of the story is that, the worth of the 50paise reduced dramatically. 50paise

could buy a whole lot when my dad was a kid. Now, 50paise can buy nothing. This is

inflation. This tells us two important things.

Firstly: Do not keep your money stagnant. If you just save money by putting it your

safe it will loose value over time. If you have Rs.1000 in your safe today and you keep it

there for 10years or so, it will be worth a lot less after 10 years. If you can buy something for

Rs.1000 today, you will probably require Rs.1500 to buy it 10 years from now. So do not

keep money locked up in your safe.

Always invest money.

If you cant think where to invest your money, then put it i n a bank. Let it grow by

gaining interest. But whatever you do, do not just lock your money up in your safe and keep

it stagnant. If you do this, you will be loosing money without even knowing it. The more

money you keep stagnant the more money you will be loosing.

Secondly: When investing, you have to make sure that the rate of return on your

investment is higher than the rate of inflation.

W h a t i s t h e r a t e o f i n f l a t i o n ?

As we said earlier, the prices of everything goes up over time and this phenomenon is

called inflation. The question is: By how much do the prices go up? At what rate do the

prices do up?

The rate at which the prices of everything go up is called the "rate of inflation". For

example, if the price of something is Rs.100 this year and next year the price becomes

approximately Rs.104 then the rate of inflation is 4%. If the price of something is Rs.80 then

after a year with a rate of inflation of 4% the price go up to (80 x 1.04) = 83.2

So, when you make an investment, make sure that your rate of return on the

investment is higher than the rate of inflation in your country. In our county India, for the

year 2005-2006 the rate of inflation was 4% (Which is really low and amazing!). This rate

keeps changing every year. The finance minister generally gives the official statement on the

inflation rate of the country for a particular year.


22/28

BSE STOCK MARKET


What is the rate of return?

The rate of return is how much you make on an investment. Suppose you invest

Rs.100 in the market and over a year, you make Rs.120, then you rate of return is 20%.

If you invest Rs.100 in the market today and you make money at a 3% "rate of return"

in one year you will have Rs.103. But now, since the rate of inflation is at 4%, an item

costing Rs.100 today will cost Rs.104 a year from now. So what you can buy with todays

Rs.100, you will only be able to buy with Rs.104 a year from now.

But the Rs.100 that you invested has grown only at a 3% rate of return and so it is

worth Rs.103. In effect, you are loosing money!

So in conclusion, the rate of return on your investments, have to be higher than the

rate of inflation.

From the above paragraphs you can note how silently, inflation eats into your money.

You would not even know about it an your money would sit loosing value for no fault of

yours. But inflation is not the only thing you should be considering, there are other things toothat eat into you money. The first thing is brokerage and the second thing is taxation


23/28

BSE STOCK MARKET


MISTAKE BY TREADER

MISTAKE ONE

Lack of Knowledge and No Plan

It amazes us that some people expect to trade the stock market successfully withoutany effort. Yet if they want to take up golf, for example, they will happily take some lessonsor at least read a book before heading out onto the course.

The stock market is not the place for the ill informed. But learning what you need isstraightforwardyou just need someone to show you the way.

The opposite extreme of this is those traders who spend their life looking for the Holy

Grail of trading! Been there, done that!

The truth is, there is no Holy Grail. But the good news is that you don't need it. Our

trading system is highly successful, easy to learn and low risk.

MISTAKE TWO

Unrealistic Expectations

Many novice traders expect to make a gazillion dollars by next Thursday. Or they

start to write out their resignation letter before they have even placed their first trade!Now,don't get us wrong. The stock market can be a great way to replace your current income and

for creating wealth but it does require time. Not a lot, but some.

So don't tell your boss where to put his job, just yet!

Other beginners think that trading can be 100% accurate all the time. Of course this is

unrealistic. But the best thing is that with our methods you only need to get 50-60% of your

trades "right" to be successful and highly profitable.

MISTAKE THREE

Listening to Others

When traders first start out they often feel like they know nothing and that everyone

else has the answers. So they listen to all the news reports and so called "experts" and get

totally confused.And they take "tips" from their buddy, who got it from some cab driver

We will show you how you can get to know everything you need to know and so

never have to listen to anyone else, ever again!


24/28

BSE STOCK MARKET


MISTAKE FOUR

Getting in the Way

By this we mean letting your ego or your emotions get in the way of doing what you

know you need to do.

When you first start to trade it is very difficult to control your emotions. Fear and

greed can be overwhelming. Lack of discipline; lack of patience and over confidence are just

some of the other problems that we all face.It is critical you understand how to control this

side of trading. There is also one other key that almost no one seems to talk about. But more

on this another time

MISTAKE FIVE

Poor Money Management

It never ceases to amaze us how many traders don't understand the critical nature of

money management and the related area of risk management.This is a critical aspect of

trading. If you don't get this right you not only won't be successful, you won't survive!

Fortunately, it is not complex to address and the simple steps we can show you will

ensure that you don't "blow up" and that you get to keep your profits.

MISTAKE SIX

Only Trading Market in One Direction

Most new traders only learn how to trade a rising market. And very few traders know

really good strategies for trading in a falling market.If you don't learn to trade "both" sides of

the market, you are drastically limiting the number of trades you can take. And this limits the

amount of money you can make.

We can show you a simple strategy that allows you to profit when stocks fall.

MISTAKE SEVEN

Overtrading

Most traders new to trading feel they have to be in the market all the time to make any

real money. And they see trading opportunities when they're not even there (weve been there

too).

We can show you simple techniques that ensure you only "pull the trigger" when you

should. And how trading less can actually make you more


25/28

BSE STOCK MARKET


BASIC STOCK TRADING RULES

There are many important things you need to know to trade and invest successfully in

the stock market or any other market. 12 of the most important things that I can share with you

based on many years of trading experience are enumerated below.

1 Buy low-sell high. As simple as this concept appears to be, the vast majority of investors

do the exact opposite. Your ability to consistently buy low and sell high, will determine the

success, or failure, of your investments. Your rate of return is determined 100% by when you

enter the stock market.

2. The stock market is always right and price is the only reality in trading. If you want to

make money in any market, you need to mirror what the market is doing. If the market is

going down and you are long, the market is right and you are wrong. If the stock market isgoing up and you are short, the market is right and you are wrong.

Other things being equal, the longer you stay right with the stock market, the more money

you will make. The longer you stay wrong with the stock market, the more money you will

lose.

3. Every market or stock that goes up will go down and most markets or stocks that

have gone down, will go up. The more extreme the move up or down, the more extreme the

movement in the opposite direction once the trend changes. This is also known as "the trend

always changes rule."

4. If you are looking for "reasons" that stocks or markets make large directional moves,

you will probably never know for certain. Since we are dealing with perception of markets-

not necessarily reality, you are wasting your time looking for the many reasons markets

move.

A huge mistake most investors make is assuming that stock markets are rational or that they

are capable of ascertaining why markets do anything. To make a profit trading, it is only

necessary to know that markets are moving - not why they are moving. Stock market winners

only care about direction and duration, while market losers are obsessed with the whys.

5. Stock markets generally move in advance of news or supportive fundamentals -

sometimes months in advance. If you wait to invest until it is totally clear to you why a stock

or a market is moving, you have to assume that others have done the same thing and you may

be too late.

You need to get positioned before the largest directional trend move takes place. The market

reaction to good or bad news in a bull market will be positive more often than not. The

market reaction to good or bad news in a bear market will be negative more often than not.


26/28

BSE STOCK MARKET


6. The trend is your friend. Since the trend is the basis of all profit, we need long term trends

to make sizeable money. The key is to know when to get aboard a trend and stick with it for a

long period of time to maximize profits. Contrary to the short term perspective of most

investors today, all the big money is made by catching large market moves - not by day

trading or short term stock investing.

7. You must let your profits run and cut your losses quickly if you are to have any chance

of being successful. Trading discipline is not a sufficient condition to make money in the

markets, but it is a necessary condition. If you do not practice highly disciplined trading, you

will not make money over the long term. This is a stock trading system in itself.

8. The Efficient Market Hypothesis is fallacious and is actually a derivative of the perfect

competition model of capitalism. The Efficient Market Hypothesis at root shares many of the

same false premises as the perfect competition paradigm as described by a well known

economist.

The perfect competition model is not based on anything that exists on this earth. Consistently

profitable professional traders simply have better information - and they act on it. Most non-

professionals trade strictly on emotion, and lose much more money than they earn.

The combination of superior information for some investors and the usual panic as losses

mount caused by buying high and selling low for others, creates inefficient markets.

9. Traditional technical and fundamental analysis alone may not enable you to consistently

make money in the markets. Successful market timing is possible but not with the tools of

analysis that most people employ.

If you eliminate optimization, data mining, subjectivism, and other such statistical tricks and

data manipulation, most trading ideas are losers.

10.Never trust the advice and/or ideas of trading software vendors, stock trading system

sellers, market commentators, financial analysts, brokers, newsletter publishers, trading

authors, etc., unless they trade their own money and have traded successfully for years.

Note those that have traded successfully over very long periods of time are very few in

number. Keep in mind that Wall Street and other financial firms make money by selling you

something - not instilling wisdom in you. You should make your own trading decisions based

on a rational analysis of all the facts.

11. The worst thing an investor can do is take a large loss on their position or portfolio.

Market timing can help avert this much too common experience.

You can avoid making that huge mistake by avoiding buying things when they are high. It

should be obvious that you should only buy when stocks are low and only sell when stocks

are high.

Since your starting point is critical in determining your total return, if you buy low, your longterm investment results are irrefutably better than someone that bought high.


27/28

BSE STOCK MARKET


12. The most successful investing methods should take most individuals no more than four

or five hours per week and, for the majority of us, only one or two hours per week with little

to no stress involved


28/28

BSE STOCK MARKET

BIBLIOGRAPHY

1 www.bseindia.com

2 www.sharemarketbasics.com
http://www.bseindia.com/http://www.bseindia.com/http://www.sharemarketbasics.com/http://www.sharemarketbasics.com/http://www.sharemarketbasics.com/http://www.bseindia.com/

Bse Nse India Stock Market-report

Documents