Stock Exchange of India

ContentsContents• Meaning of stock market• Dealing on stock exchange• Functions , Importance ,Terms used in stock market• Types of operators • Trading• NSE of India (Features)• BSE of India (Features)• Buying & selling Procedures• Stock market indices & Quotations• 7 way to survive stock market correction• Conclusion

“More rational traders More Will be rational trading”

Meaning of stock marketMeaning of stock market

• Securities :-New issue market

-The stock exchange

• Meaning of Stock.

• A Stock exchange or securities market is an organised market where listed securities are purchased & sold for investment or speculation.

“More rational traders More Will be rational trading”

Dealing on stock exchangeDealing on stock exchange

• SEBI (Securities & exchange board of India) in 1988

• SCRA (Securities contracts (Regulation) Act) in 1956

In force February 20, 1957

“More rational traders More Will be rational trading”

Terms used in stock marketTerms used in stock market

• Sensex• Nifty• Squaring off• Rally• Crash• Correction• Bonus shares• Dividend• Book closure date

“More rational traders More Will be rational trading”

Functions of stock marketFunctions of stock market((To create link between seller & buyerTo create link between seller & buyer))

• Measure of safety & Fair Dealing.

• Act of Magic.

• Flow of capital to the most Profitable channels.

• Inducement to companies to raise their standard of performance.

• Guidance on cost of capital.“More rational traders More Will be rational trading”

Importance of stock marketImportance of stock market

• It provides necessary mobility to capital & directs the flow of capital into profitable & successful enterprise. It is the barometer of general economic progress in the country & exerts a powerful & significant influence as depressant or stimulant of business activity.

“More rational traders More Will be rational trading”

Types of operatorsTypes of operators

• Brokers:1. Buys/sells on behalf of outsider

2. Charges Brokerage

3. Not specialize in particular security

• Jobbers: (Mumbai stock exchange-Tarawaniwala)

1. Buys/sells on his own behalf

2. Profit from price difference

3. Specializes in one security

4. Not prohibited from selling/buying securities on behalf of others

“More rational traders More Will be rational trading”

Types of operatorsTypes of operators• Bulls: (Tejiwala)

1. Expects rise in price

2. Buys securities to sell them in future

3. Conditions when dominated----”BULLISH MARKET”

4. Bull’s liquidation

Eg-

1000 shares @ Rs. 50/-(BUYS)

At settlement date price increased to Rs. 70/-

Sale price : Rs. 70

Purchase price : Rs. 50

Difference : Rs. 20

Profit : 1000 shares @ Rs. 20 each= Rs. 20,000

“More rational traders More Will be rational trading”

Types of operatorsTypes of operators• Bears: (Mandiwala)

1. Expects fall in price

2. Sells securities for future delivery

3. Conditions when dominated----”BEARISH MARKET”

4. Bear’s Covering

Eg-

1000 shares @ Rs. 50/-(SELLS)

At settlement date price decreased to Rs. 40/-

Sale price : Rs. 50

Purchase price : Rs. 40

Difference : Rs. 10

Profit : 1000 shares @ Rs. 10 each= Rs. 10,000

“More rational traders More Will be rational trading”

TradingTrading

• Open outcry system

1. Trading post

2. Jobber

• Screen-based system

1. Informational efficiency

2. Full view of market

“More rational traders More Will be rational trading”

NSE of IndiaNSE of India

• Type : Stock Exchange• Location : Mumbai, India• Owner : National Stock Exchange of India • Key people : Ravi Narain (Managing Director)• No. of listings : 1587• Market Cap : US$ 1.46 trillion • Indexes : S&P CNX Nifty

CNX Nifty Junior S&P CNX 500

“More rational traders More Will be rational trading”

Features Features • The NSE is a ringless, national , computerised exchange.

• NSE has two segments: WDM CM

• The trading members in capital Market are connected to the central computer in Mumbai using VSATs.

• Opt for order-driven system.

• Confirmation slip.

• Identity is not revealed.

• NSE guaranteed by National securities clearing corporation (NSCC). (Eg.- A buys from B)

“More rational traders More Will be rational trading”

BSE of IndiaBSE of India

• Type :Stock Exchange• Location :Mumbai, India• Owner :Bombay Stock Exchange • Key people :Rajnikant Patel (CEO)• No. of listings :~4,800• Market capital :US$ 1.61 trillion

• Indexes :BSE Sensex

“More rational traders More Will be rational trading”

FeaturesFeatures

• BSE switched from open outcry system to screen-based system in 1995.

• Jobber play an important role (bid price ,,,,,,,ask price).

• Investors have to transact via a jobber/broker.

“More rational traders More Will be rational trading”

Buying sharesBuying shares• Procedure for buying shares:

1. Locating a Broker(Client registration form & member-constituent form)

2. Placement of order(Limit order or market order: -Day order -week order -month orderOpen order)

3. Execution of order (contract note)

“More rational traders More Will be rational trading”

Selling sharesSelling shares• Procedure for selling shares:

1. Placement of order (Sale order ;limit order & market order)

2. Execution of order (contract note)

3. Internet Trading(ICICI Web trade)

“More rational traders More Will be rational trading”

Individual stock QuotationIndividual stock Quotation

Co., (Prev.cl.), open ,High ,Low ,Close

[vol., Val. Rs ‘000s , Trades] P/E M Cap. 52-Wk H/L

Bajaj Auto (932.65) ,937 ,948 , 931 , 932.85

[46436, 43591.29 ,1384] 12.7 (9438.6) 1200/692

(932.80) ,940 ,949 , 931 , 933.20[138630,130216.84 , 4404] 12.7 (9438.6) 1200/692

“More rational traders More Will be rational trading”

Stock market IndicesStock market Indices

• Equal-weighted index : arithemetic average of price relatives of the sample shares in a certain year with reference to base year.

• Value-weighted index : aggregate market capitalisation of the sample shares in a certain year in relation to the base year.

“More rational traders More Will be rational trading”

Data for constructing Stock market IndicesData for constructing Stock market Indices

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Share Price in Base year

Price in year t

Price Relative

No. of outstanding shares

Market capitalisation in base year

(1x4)

Market capitalisation in t year

(2x4)

1 2 3 4 5 6

A 50 70 142 10 500 700

B 40 50 125 20 800 1000

C 100 90 90 5 500 450

357 1800 2150

Equal-Weighted index:Equal-Weighted index:

(357/3)

Value-weighted index:Value-weighted index:

(2150/1800)x100

Seven ways to survive a Stock Market Seven ways to survive a Stock Market

CorrectionCorrection

1. Stop Listening To Analysts

2. Stop Staring At Your Portfolio Every Thirty Minutes.

3. Be Patient

4. Speak To Actual Investors With Experience

5. Stop Following Crazy Tips

6. Understand Market Cycles

7. Follow The Guru“More rational traders More Will be rational trading”

ConclusionConclusion

• The functioning of stock exchange are characterized by many shortcomings with long delays ,lack of transparency in procedures and vulnerability .So, number of measures were taken with the objective to provide effective control of the stock exchange operations ,protect the investors interest ,check trading.

“More rational traders More Will be rational trading”

Thank You