stock market

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stock market & Securities

Ashish Srivastava

Prepared Date: 12/12/12


2Overview

Stock Market Securities Structure of the Securities Market. Regulators SEBI & Its Role. Participants in Stock Market Primary & Secondary Market Stock Exchange Stock Market Indicator. Classification of Issue Way of entering in stock market. Market trending Sector Indicator. Factor Affecting Stock Market. Questions & Answer.


3Stock Market

The Organized Platform through which the buyers and sellers can trade in shares or other forms of securities like bonds, derivatives etc.

Also known as the equity market, it is one of the most vital areas of a market economy as it provides companies with access to capital and investors with a slice of ownership in the company and the potential of gains based on the company's future performance.

In Our Stock Market More Than 13,766 Stocks


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The definition of ‘Securities’ as per the Securities Contracts Regulation Act (SCRA), 1956, includes instruments such as shares, bonds, scrips, stocks or other marketable securities of similar nature in, or of any incorporate company, or body corporate, government securities, derivatives of securities, units of collective investment scheme, interest and rights in Securities, security receipt or any other instruments so declared by the Central Government.

Securities..


5Structure of The Securities Market

Securities Market

Equity Market Debt Market Derivatives Market

Gov. Securities

Market

Corporate Debt Market Money Market Options

MarketFuture Market


Regulators 6

The responsibility for regulating the securities market is shared by

1) Department of Economic Affaires (DEA)

2) Department of Company Affaires (DCA)

3) Reserve Bank Of India (RBI) 4) Securities & Exchange Board of India (SEBI)

Who Regulates the securities Market ?


Why Does Securities Market Need Regulator ?

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Financial regulation is a form of regulation or supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the integrity of the financial system. This may be handled by either a government or non-government organization.

Aim of Regulation

Market Confidence Financial Stability Consumer Protection Reduction of Financial Crime

Structure of Supervision

Supervision of Stock Exchange Supervision of Listed Companies Supervision of anti-money laundering Supervision of Investment Management Supervision of banks and financial

services providers


8What is SEBI and what its role?

Also…. Regulating the business in stock exchanges and any other securities markets Registering and regulating the working of stock brokers, sub–brokers etc. Prohibiting fraudulent and unfair trade practices Calling for information from, undertaking inspection, conducting inquiries and audits

of the stock exchanges, intermediaries, self –regulatory organizations, mutual funds and other persons associated with the securities market.

(a) protecting the interests of investors in securities. (b) promoting the development of the securities market and (c) regulating the securities market

The Securities and Exchange Board of India (SEBI) is the regulatory authority in India established under Section 3 of SEBI Act, 1992. SEBI Act, 1992 provides for establishment of Securities and Exchange Board of India (SEBI) with statutory powers for…


9Stock Exchange.

The stock exchanges in India, under the overall supervision of the regulatory authority, the Securities and Exchange Board of India (SEBI), provide a trading platform, where buyers and sellers can meet to transact in securities. The trading platform provided by NSE is an electronic one and there is no need for buyers and sellers to meet at a physical location to trade.

Two Online Stock Markets

Bombay Stock Exchange (Sensex 30 Stock Listed)

National Stock Exchange (Nifty 50 Stock)


10Participants.

Who are the participants in the securities Market ?

The securities market essentially has three categories of participants, namely,

1) The issuers of securities, such as corporate body or company's.

3) The intermediaries, such as merchant bankers, brokers etc.

2) Investors in securities like us. And


Segment of Securities MarketThe securities market has two interdependent segments…

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1. Primary Market

The primary market is that part of capital market which deals with the issuance of new securities. Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. The process of selling new issues to investors is called underwriting. In the case of a new stock issue, this sale is an Initial Public offering (IPO). Primary markets create long term instruments through which corporate entities borrow from capital market.

Features of primary markets are: In a primary issue, the securities are issued by the company directly to

investors. The company receives the money and issues new security certificates

to the investors. The primary market performs the crucial function of facilitating capital

formation in the economy. The financial assets sold can only be redeemed by the original holder. Primary issues are used by companies for the purpose of setting up

new business or for expanding or modernizing the existing business.


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The secondary market, also called aftermarket, is the financial market in which previously issued financial instruments such as stock, bonds, options, and futures are bought and sold. The term "secondary market" is also used to refer to the market for any used goods or assets, or an alternative use for an existing product or asset where the customer base is the second market (for example, corn has been traditionally used primarily for food production and feedstock, but a "second" or "third" market has developed for use in ethanol production).

2. Secondary Market

Activities

PRIMARY MARKET Appointment of merchant bankers Pricing of securities being issued Communication/ Marketing of the

issue Information on credit risk Making public issues Collection of money Minimum subscription Listing on the stock exchange(s) Allotment of securities in demat /

physical mode Record keeping

SECONDARY MARKET

Trading of securities Risk management Clearing and settlement of

trades Delivery of securities and

funds monitoring and control

conduit—by facilitating value-enhancing control activities


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There are two way of doing stock trading.

Stock Trading

Screen Based Trading

The trading on stock exchanges in India used to take place through openoutcry without use of information technology for immediate matching orrecording of trades. This was time consuming and inefficient. This imposedlimits on trading volumes and efficiency.

In order to provide efficiency,liquidity and transparency, NSE introduced a nationwide, on-line, fully automatedscreen based trading system (SBTS) where a member can punchinto the computer the quantities of a security and the price at which hewould like to transact, and the transaction is executed as soon as amatching sale or buy order from a counter party is found.


142- NEAT NSE is the first exchange in the world to use satellite communication technology for trading. Its

trading system, called National Exchange for Automated Trading (NEAT), is a state of-the-art client server based application.

An investor informs a broker to place an order on his behalf. The broker enters the order through his PC which runs under Windows NT and sends signal to the Satellite via VSAT/leased line/modem. The signal is directed to mainframe computer at NSE via VSAT at NSE's office. A message relating to

the order activity is broadcast to the respective member. The order confirmation message is immediately displayed on the PC of the broker. This order matches with the existing passive order(s), otherwise it waits for the active orders to enter the system. On order matching, a message is broadcast to the respective member. For all trades entered into NEAT system, there is uniform response time of less than one second.

NSE MAINFRAME Broker’s Premises

Satellite


Share Registrars

Aside from dealing with the companies' shareholders, share registrars may also deal with statutory bodies such as stock exchanges.

Share registrars also perform key roles during the companies' Initial Public Offering (IPO) of stocks and shares.

Share registrars are also tasked and authorized to transfer share electronically in demat account and dividend cheques to respective shareholders of the company.

Another responsibility of share registrars is to handle phoned, e-mailed, or faxed enquiries of investors. Share registrars are tasked by the company that hired them to provide assistance to shareholders. However, share registrars must be careful not to divulge confidential matters to shareholders as stated or instructed by the company. That's why share registrars will not provide or confirm Security Holder Reference Number (SRN) over the phone.

Aside from dealing with the companies' shareholders, share registrars may also deal with statutory bodies such as stock exchanges. Share registrars also perform key roles during the companies' Initial Public Offering (IPO) of stocks and shares. Share registrars are responsible for the lodging of prospectuses. Share registrars also coordinate with officials from stock exchanges and securities

Share registrars are involved in the registration of the buying and selling of shares and stocks. They enter into the shares registry pertinent data on the share trading activities of the company.


16Classifications of Issue

Issue

Public Issue

Initial Public Offering(IPO)

Fresh Issue

PreferentialRight Issue

Further Public Offering(FPO)

Offer For Sale Fresh Issue Offer For Sale


Derivatives17

A derivative is a broad term covering a variety of financial instruments whose values are derived from one or more underlying assets, market securities or indices. In practice, it is a contract between two parties that specifies conditions (especially the dates, resulting values and definitions of the underlying variables, the parties' contractual obligations, and the notional amount) under which payments are to be made between the parties. The most common underlying assets include: commodities, stocks, bonds, interest rates and currencies. There are two major variant of derivatives contract..

1) Future: are contracts to buy or sell an asset on or before a future date at a price specified today. A future is an agreement between buyer and seller. The Buyer agrees to pay a pre-specified amount for the delivery of a particular of an asset at a future date. The seller agrees to deliver the asset at the future date , in exchange fir the pre-specified amount of money

2) Options: are contracts that give the owner the right, but not the obligation, to buy or sell an asset. The price at which the sale takes place is known as the strike price, and is specified at the time the parties enter into the option. There are two classes of options

A) Call Option: A call option is where the buyer has the right to buy the asset at the exercise price , if he chooses to. The seller is obliged to deliver if the buyer exercises the option.

B) Put Option: A put option is where the buyer has right to sell the underlying asset at the exercise price . The seller of the put option is obliged to take delivery and pay the exercise price, if the buyer exercises the option.

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18How to invest in Stock Market?

1) Trading Account

An account similar to a traditional bank account, holding cash and securities, and is administered by an investment dealers like.

Two Account mandatory to enter in stock market


192) Demat Account

The term "demat", in India, refers to a dematerialized account for individual Indian citizens to trade in listed stocks or debentures in electronic form rather than paper, as required for investors by the Securities and Exchange Board of India (SEBI). In a demat account, shares and securities are held electronically instead of the investor taking physical possession of certificates. A demat account is opened by the investor while registering with an investment broker (or sub-broker). The demat account number is quoted for all transactions to enable electronic settlements of trades to take place. It has been monitor by following Depository Participants.

National Securities Depository Limited Central Depository Securities Limited


20Market Trend

A market trend is a putative tendency of a financial market to move in a particular direction over time. These trends are classified as secular for long time frames, primary for medium time frames, and secondary for short time frames. Traders identify market trends using technical

analysis, a framework which characterizes market trends as predictable price tendencies within the market when price reaches

support and resistance levels, varying over time.

The terms bull market and bear market describe upward and downward market trends, respectively, and can be used to describe either the market

as a whole or specific sectors and securities.

Bullish Market Bearish Market


21Sector Indicator

Banking sector Capital goods sector Cement sector Real estate sector Infrastructure sector Power sector Telecom sector Automobiles sector Metal sector Information technology sector


22Factor Affecting Stock Market

Stock market is something where you can never foretell what is going to happen in the market. You might get huge gain or incur losses when the stock market crashes. There are many factors affecting share prices. It is very hard to say just one or two factors affect the share prices. So, let us have a look at the factors that affect share prices. Below are few points which really affect the market.

Financial statement of companies. Growth of companies. Order book. Management. Demand & Supply. Market Cap. Earning Per share. Inflation. Politics . Impact of news: News is another factor that affects the share price. When there is positive news about a particular stock or company, people try to invest all their money in that particular stock or market. This leads to increase in the interest of buying the stock. But there are many circumstances where news could also bring a negative effect where it could ruin the prospect of the particular stock. So it is very important to know the overall news of a stock or company where you can invest your money so that it grows within a very short period of time


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Entities Evolved in stock/capital Market SEBI (Regulator) Stock exchanges Clearing corporations (cc)/ clearing houses (ch) Depositories and depository participants Custodians Stock-brokers and their sub-brokers Mutual funds Merchant bankers Credit rating agencies Financial institutions Foreign institutional investors Non-banking institutions Issuers/ registrar and transfer agents Investors


24Financial websites

www.moneycontrol.com www.howthemarketwork.com www.nseindia.com www.emfiindia.com www.valueresearchonline.com www.equitymaster.com www.stockinvest.in www.FinancialExpress.com

http://www.emfiindia.com/

http://www.valueresearchonline.com/

http://www.equitymaster.com/

http://www.stockinvest.in/

http://www.financialexpress.com/


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