Satish Stock

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An Introduction to Stocks

Satish Prasad



What is a Stock?

Stock is a share in the ownership of acompany.

It represents a claim on the company'sassets and earnings

Whether you say shares, equity orstock, it all means the same thing.



What is a stock market?

Place where business of buying andselling stock takes place

The stock market is not a specificplace, though some people use the

term "Dalaal Street´



Types of stocks

Equity

Preference



Market Segments

Primary market

-Channel for creation of new securities

Secondary market

- where previously issued securities

and financial instruments such asstock, bonds, options, and futures arebought and sold.



Stock exchange (India)

The Bombay Stock Exchange (BSE)

National Stock Exchange of India Ltd

(NSE) India Infoline is a member of both BSE

and NSE



Major exchanges (world)

New York Stock Exchange (NYSE)

American Stock Exchange (AMEX)

National Association of

Securities Dealers AutomatedQuotations (NASDAQ)



BSE

BSE is the oldest stock exchange in Asia and has the greatestnumber of listed companies in the world, with 4700 listed as of August 2007.

On 31 December 2007, the equity market capitalization of the

companies listed on the BSE was US$ 1.79 trillion,

largest stock exchange in South Asia and the 12th largest inthe world.

over 7700 scripts on the stock exchange.

The BSE SENSEX (SENSitive indEX), also called the "BSE 30",

BSE On-line Trading (BOLT) facilitates on-line screen basedtrading in securities.

BOLT is currently operating in 25,000 Trader Workstationslocated across over 359 cities in India.



NSE

It is the largest stock exchange in India in terms of dailyturnover and number of trades, for both equities andderivative trading.

NSE has a market capitalization of around Rs 47,01,923 crore

(7 August 2009) with listed 1587 companies.

The NSE's key index is the S&P CNX Nifty, known as the Nifty,an index of fifty major stocks weighted by marketcapitalization.

NSE is mutually-owned by a set of leading financial

institutions, banks, insurance companies and other financialintermediaries.

it is the second largest stock exchange in South Asia. NSE isthe third largest Stock Exchange in the world in terms of thenumber of trades in equities. It is the second fastest growing

stock exchange in the world with a recorded growth of 16.6%.



Market Timings

Trading on the Indian equities segmenttakes place on all weekdays. No trading onSaturday, Sunday and Published IndianStock Market Holidays declared by theIndian Stock Exchange in advance.

Market timings (Indian Standard Time) :

-Market Opens at : 09:00 hours-Market Closes at : 15:30 hours

The closing session is held between 15.50 hours

and 16.00 hours in NSE and 15.40 hours and16.00 hours in BSE



WORK DAY SCHEDULE

Session Timing

Beginning of the Day Session 9.00 am

Position Transfer Session 15:30 - 15:50

Closing Session 15:50 - 16:05

Option Exercise Session 16:05 - 16:35

Margin Session 16:35 - 16:50

Query Session 16:50 - 17:35

End of Day Session 17:35



Trading on BSE and NSE

BSE and NSE provide trading facility on

two segments ,which are

- Cash Segment and- Derivative Segment

NSE also has another segment called

WDM,Wholesale Debt Market.



Markets of NSE

Equity

Futures and Options

Retail Debt Market Wholesale Debt Market

Currency futures

NSE became the first stock exchange to getapproval for Interest rate futures asrecommended by SEBI-RBI committee



NEAT-F&O



NEAT- Cash



What Causes Stock Prices to

Change?

Supply and Demand

Earnings (expectations)

Sentiments, attitudes, & sense of greed

Economic Indicators

Follow the leader Manipulation

LOTS of different theories



SENSEX

Top 30 companies form together thepremier index called SENSEX. In SENSEXdifferent weights are allocated to eachcompany. These companies represent all the

major sectors of Indian economy.



Index

Number which measures the change ina set of values over a period of time.

Stock index represents the change invalue of a set of stocks whichconstitute the index

A good stock market index is onewhich captures the behavior of theoverall equity market

It has to be well diversified yet highlyli uid



Importance of a Market Index

A market index is very important for itsuse as

a barometer for market behavior

as a benchmark portfolio performance

a passive fund management in indexfunds

an underlying for index futures and

options



Type of Indexes

Price weighted index

Equally weighted index

Market capitalization weighted index



Indices of BSE

SENSEX from 1986 onwards.

BSE National Index from 1989, but changedBSE-100 in 1996.

BSE-200 and DOLLEX-200 from 1994.

BSE-500 and five sectoral indices in 1999.

BSE-PSU and DOLLEX-30 & BSE-TECk from

2001. BSE uses Price-Earning Ratio, the Price to

Book Value Ratio and the Dividend YieldPercentage on day-to-day basis of all itsma or indices



Indices of NSE

S&P CNX Nifty (Standard & Poor's CRISILNSE Index)

CNX Nifty Junior

CNX 100 (= S&P CNX Nifty + CNX Nifty Junior )

S&P CNX 500 (= CNX 100 + 400 major

players across 72 industries) CNX Midcap (introduced on 18 July 2005

replacing CNX Midcap 200)



The Risk / Return Tradeoff

³principle that potential return riseswith an increase in risk´

Low risk with lower returns, high risk withhigh returns

Important to know your personal risktolerance when choosing investments

Balance between risk and reward





Mutual Funds

Funds in which investment professionals manageyour money and decide on the investments

These funds often amount to millions and billions of dollars and come in a variety of types

Advantages

Simplicity / Professional Management /Diversification / Liquidity / Usually Low Risk

Disadvantages

Fees (and lots of them)



Questions & Answers

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