This is the html version of the file http://www.bits-goa.ac.
in/Departments/Humanities/forex/All%20about
%20STOCK%20MARKET.PPT.
Google automatically generates html versions of documents as we crawl the web.
First step to Investing in
Stock market!!!!
INDIAN STOCK MARKET
BY:
DARA RAJESH
VISHAL UGLE
BIRLA
INSTITUTE OF
TECHNOLOGY &SCIENCE ,PILANI
GOA
CAMPUS
STOCK MARKET
WORKING
REGULATORY FRAMEWORK
WHY DO PEOPLE BUY SHARES?
WHY STOCK MARKET IS SO
VOLATILE?
HOW TO MAKE MONEY IN STOCK
MARKET?
ROLE OF STOCK MARKET IN
ECONOMY
INTRODUCTION:
The market for long term securities like
bonds,
equity stocks is divided into PRIMARY
MARKET and SECONDARY MARKET.
PRIMARY MARKET
Deals with the new
issues of securities.
SECONDARY MARKET
Deals with
outstanding securities.
Also known as
“STOCK MARKET”.
Stock market??
JARGON OF EQUITY
MARKET:
SECURITY
BOND
STOCK
1)COMMON STOCKS
2)PREFERRED STOCKS
SHARE
MUTUAL FUNDS.
PAR VALUE vs. MARKET VALUE
BULLISH vs. BEARISH
How does the stock market
function?
Stock exchanges
Brokers
Registrars
Depositories and their participants
Securities and Exchange Board of India
(SEBI)
MARKET INDICES:
Stock market indices are the
barometer of the stock market.
BSE SENSEX,NSE-50 etc are some of
the market indices.
Their usefulness:
Indices help to recognize broad trends
in the market.
The investor can use the indices to
allocate the funds
rationally among the stocks.
Technical analysts use these indices
to predict the future
market.
Indices function as a status report on
the general
economy.
JOB OF THESE INDICES:
These indices have just one job:
To capture the price movement. So a stock
index will reflect the price movements of
shares while a bond index captures the
manner in which bond prices go up or
down.
WHY STOCK PRICE
RISES?
The price of every stock
increases or decreases for the following
possible reasons:
News about company.
News about the country.
Exchange rate regime.
Depends on demand
and supply for that stock.
WHO SELECTS THESE
STOCKS?
They are selected by the Index
committee.
Some of the criteria they follow
include :
1)Market capitalization.
2)Liquidity.
3)Continuity.
4)Industry representation.
5)Listed history.
Why must I Invest in
Shares?
Why need I invest?
So what are the various investment
options?
Why shares?
Other benefits of
investing in shares?
Because they can make big
money on it. Compared to your
investments in fixed deposits in banks it
makes more profits ,but the bad news is
that you are also expected to bear the
losses ,if any.
1) Possibility of high returns
2) Easy liquidity
3) Unbeatable tax benefits
4) Income from dividends
What are the expenses
during a
transaction?
Capital gains tax
Securities transaction
tax
Brokerage
Depository fees
SO HOW DOES ONE BUY
SHARES?
There are basically two ways in which
you can invest in shares:
Purchase shares from
the primary market
(i.e. IPO's)
Trade in the
secondary
market, i.e.
stock exchanges.
COMPUTATION OF STOCK
INDEX:
A stock market may either be a
price index or a wealth index. In India
most of the indices are using wealth index
for computation of stock market.
4100/-
2800/-
TOTAL MARKET CAP
3000/-
150/-
2000/-
100/-
20
IBM
800/-
40/-
600/-
30/-
20
INFOSYS
300/-
30/-
200/-
20/-
10
TATA
Market cap
(Rs.)
Market Price on
18/02/06
Market cap
(Rs.)
Market Price on
09/02/06
No. of
shares
Company
Face value=Rs.10/-
Base value=100/-
Index present value=
(100*4100)/2800=
146.428
WHY STOCK MARKET IS
SO
VOLATILE?
Acceptance of
globalisation,internationalisation and
integration of the Indian market with the
world markets.
Introduction of flexible exchange rate
regime.
Intro of new, innovative ,hybrid
financial instruments.
Human element.
Technological changes.
HOW TO MAKE MONEY
IN STOCK MARKET?
patience, profound knowledge.
Best guess.
Diversification .
Portfolio
management.
ROLE OF MARKET
ACTIVITIES IN
ECONOMY:
In theory they are required to facilitate,
support, enable the healthy growth and
functioning of primary markets but in
practice they are not .
The current focus of thinking on the
SENSEX, market capitalization
etc.reflects an excessive preoccupation
with the secondary market activity.
Beyond a point, the expansion of the
secondary markets may reduce the
volume of activity not only on the new
issue market but also in the banks,
other financial institutions, gold, real
estate and commodities.
The multiple serious problems visiting
the stock market caution us against
too much optimism and enthusiasm
about the stock market.
DRAWBACKS OF
INDIAN STOCK
MARKET:
Unethical practices.
Big irrational greed, excessive
speculation.
Lack of protection to interests of the
genuine and small
investors .
Trading is extremely thin and
restricted.
Structural and organisational
imbalance in the growth of the
stock market.
Volatility of the market has increased
over the years.
REMEDY:
So in order to make it flawless system
authorities should initiate certain
measures such as
Single authority
Demutualization.
Prescribing capital adequacy norms.
Stricter registeration of brokers
Margin requirements .
ACKNOWLEDGEMENTS:
We owe special thanks to Dr. Patnaik sir
and Dr.Monika Sethi madam for their
help and encouragement.
REFERENCES:
“Securities analysis and Portfolio
management”
by
Punithavathy pandian
“Financial institutions and Markets”
by L M Bhole
www.sharekhan.com
www.investopedia.com
