Introduction

to Stock
Markets
What is a
Stock/Share?
Common Stocks or equities
represent the ownership of a share
of a corporation.

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What are Stock
Markets?

Stock markets are venues where

buyers and sellers meet to exchange
equity shares of public corporations.

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From Ideation to IPO
Venture Capitalists provide a Investment Banks are a key
Start-up Idea series of funding for capital partner to the company to
expenditure. facilitate an IPO.
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Angel investors invest in a Private Equities invest huge

IPO
business in the pre-revenue stage. sums of money. They also have
a place on the company’s board.

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Who are these underwriting firms?
Investment Banks:

▸ Advises the issuing corporation on the prices it should charge for the securities
issued.

▸ Builds the company prospectus and handles all legal matters related to the IPO.

▸ Responsible for the marketing campaign of the issuing company.

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Initial Public Offering

▸ The process of offering the shares

of a private company when it’s
stocks are issued on the stock
market is known as an IPO.

▸ Eg: Nykaa, Zomato, Paytm etc.

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 IPOs and further……
Why are over-subscription and A company enters the stock market with
under-subscription bad for an IPO? a fixed number of shares.

▸ Oversubscription reflects a high

concentration of short-term
investors looking for a hot deal
rather than actually investing in Over-Subscription Under-Subscription
the share.
Demand > No. of Demand < No. of
shares shares
▸ Under Subscription reflects the
lack of interest of investors which
leads to negative publicity and
eventually failure of the IPO.
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 Pros and Cons of going Public
PROs CONs

▸ Raising Funds and ▸ Additional Regulatory

Publicity Requirements
▸ Risk management ▸ Transaction Costs
▸ Exit strategy ▸ Loss of Control

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Structure of the stock market

Primary Market Secondary Market

▸ The market in which securities ▸ The market where shares are
are floated for the first time by traded amongst the traders
a company. only. The price here may vary.

▸ Eg: Initial Public Offering ▸ Eg: trading at a stock

exchange

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 How are trades executed:

Investor willing to Stock broker is an authorised

buy/sell a share in entity which places the
the market. investor’s order.

The investor’s The investor’s funds

shares are stored in are stored in the
the demat account. trading account.

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Stock Brokers:

Seller
Market
Maker

Stock
Stock Broker ECN
Exchange

Internalization

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Depositories and Banks : An Analogy
Exchange

Banks
Depository
Bank
Demat Account
Account

Brokerage Account
Platform provided by broker

Depository is an organization which stores, safe-keeps and helps in transfer of

securities.
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Fundamental Analysis Technical Analysis
▸ It is a method to get a perception ▸ It is a method to analyze ongoing
of a stock’s intrinsic value by trends using graphs and price
analyzing the financial documents trends.
of a company. ▸ Historical trends are used to
▸ It gives us an idea of the “fair analyze future trading
market value” of a share. opportunities.
▸ Long -term investments. ▸ Short - term investments.
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Some Terminologies:
Bull Bear
A bull is an investor who A bear is an investor who has
has an optimistic sentiment a pessimistic sentiment
towards a security towards a security

Long Short
A long position conveys the A short position conveys the
investor’s bullish interest in investor’s bearish interest in
the security the security

Market sentiment refers to the overall attitude of investors toward a particular

security or financial market.
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 Shorting
For example, let's say a stock is
trading at $50 a share. You borrow
100 shares and sell them for
$5,000. The price suddenly declines
to $25 a share, at which point you
purchase 100 shares to replace
those you borrowed, netting $2,500
in the bargain.

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Price reaction to events:

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Malpractices in the stock market

Insider Trading Market Manipulation

Trading of a company’s Act of artificially inflating or

stock or other securities deflating the price of security
by individuals who have or otherwise influencing the
access to confidential info behavior of market for personal
of the company gains

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Why Stocks?
▸ High Risk, High Return
▸ Protect wealth from Inflation
▸ Dividends being a form of
passive income
▸ High Liquidity

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 Market Index
▸ Tracks the performance of a group stocks or investments in general
▸ A representative of the overall stock market or a particular industry.
Also gauges the economic environment of a country or sector

Benchmark indices Sectoral indices

▸ Contain the top ▸ Measures the
performing stocks of performance of a
leading companies particular sector.
▸ Used to gauge the ▸ Gauges the impact of
performance of the different factors on a
general market certain industry
▸ Eg NSE Nifty, Sensex, ▸ Eg NSE Pharma, Nifty
S&P 500 etc. FMCG, Nifty Auto etc.
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More Terms:
▸ Liquidity is the ease with which a security can be converted to cash.

▸ Bid price: The maximum price a trader is willing to pay for buying a particular
security.

▸ Ask price: The minimum price a trader is willing to ask for a security (sell a
security for).

▸ Bid-Ask Spread is the difference between the ask and bid prices of a stock.

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 Orders and their Types:
Order Book

Orders The list of pending limit

orders is called the order
book.

Market
Limit Order
Order Stop loss
Buy or sell Buy or sell It is the limit on the loss
orders that are orders that are of an investor in-case of
to be executed to be executed unfavourable
at the current only at a price circumstances.
market price. pre-defined by
the user.

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Thank you!