stock markets basics
Post on 15-Jul-2015
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SHARE MARKET FUNDAMENTALS
What is a Share?Share is nothing but the Ownership of the company divided into small parts and each part is called as Share or Stock.
A Share market is the place where buying and selling of shares takes place.Basic FactThere is no official arbiter of stock prices, no person or institution that decides a price.
The market price of a stock is simply the price at which a willing buyer and seller agree to trade.IMPORTANT ABBREVIATIONSNSE-National Stock ExchangeBSE-Bombay Stock ExchangeSENSEX-Stock Exchange Sensitive IndexNIFTY -National Stock Exchanges FiftyIPO-Initial Public OfferingFPO-Follow-on Public OfferingTwo types of IndicesNifty andSensexStock exchangesMainly there are two exchanges in India.NSE - Nifty is listed with NSE.BSE - Sensex is listed with BSE.
Nifty - Nifty consist of a group of 50 shares.Sensex - Sensex consist of a group of 30 shares.
CASH MARKETCash marketis a public financialmarketin which financial instruments or commodities are traded for immediate delivery. It contrasts with a futuresmarket, in which delivery is due at a later date.Type of MarketsBasically there are two types of markets.1. Primary market2. Secondary marketPrimary MarketA primary market is a place where companies, government and other corporate bodies sell new shares and other financial products which are also called as financial products.Secondary marketA market place where actual share trading (buying and selling) takes place is called secondary market.Meaning of Bid and Ask priceBid PriceThe bid price is the price at which buyers are ready to buy shares.The bid price is also called as buying price.
Ask PriceThe Ask price is the price at which sellers are ready to sell shares.The ask price is also called as selling price or offer price
Types of InvestmentBasically there are three types of investment methods.i. Short term investmentii. Mid term investmentiii. Long term investment
i)Short term investmentInvestment done from couple of weeks to couple of months is called short term investment.It is done based on breaking news, or based on charts of technical analysis.ii)Mid term InvestmentInvestments done from couple of months to couple of years is called mid tem investment.It is done based on analysis of quarterly financial results or based on fundamental analysis.
iii)Long term investmentInvestment done from one year to couple of years like 3 years, 5 years, 10 years etcLong term investment is basically done after thoroughly analyzing the fundamentals of the company and its future growth prospects.
The total dollar market value of all of a company's outstanding shares.
Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share.
The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures.
Outstanding sharesare common stock authorized by the company, issued, purchased and held by investors.
LARGE CAP,MID CAP,SMALL CAPLarge Cap - Big Cap'A term used by the investment community to refer to companies with a market capitalization value of more than $10 billion. Large cap is an abbreviation of the term "large market capitalization".
'Small Cap'Refers to stocks with a relatively small market capitalization. The definition of small cap can vary among brokerages, but generally it is a company with a market capitalization of between $300 million and $2 billion.
MID CAPA company with a market capitalization between $2 and $10 billion, which is calculated by multiplying the number of a company''''s shares outstanding by its stock price.
A listed company, either in BSE or NSE, declares their performance every quarter through out the day.Based on the performance of quarterly results market judge how the company is performing and if analysis shows that the company is doing well then its share prices goes up and if analysis found that company is not performing, as per expectation, then its share prices falls.First quarter duration - April to JuneSecond quarter duration - July to SeptemberThird quarter duration - October to DecemberForth quarter duration - January to March
Results declaration in - April
Fourth quarter is considered as end of financial year end.How does Share Price ChangesEvery time a stock is sold, the exchange records the price at which it changes hands. If, a few seconds or minutes later, another trade takes place, the price at which that trade is made becomes the new market price, and so on.How sensex is calculatedThe formula for calculating SENSEX = (sum of free flow market capital of 30 blue chip companies) X index factorWhere in:Index factor= 100/ market capital in 1978-1979Where 100 is the index value in 1978-1979
FREE-FLOAT MARKET CAPITALIZATIONIt is defined as the value of the shares readily available in the market for public trading excluding the promoters equity holding through FDI route, holding by private corporate and holding by employees welfare funds.
BENEFITS OF DEMAT ACCOUNTEasy and convenient way to hold securitiesImmediate transfer of securitiesNo stamp duty on transfer of securitiesSafer than paper-shares (earlier risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc. are mostly eliminated)Reduced paperwork for transfer of securitiesReduced transaction cost
Fees Involved in DEMAT AccountAccount opening FeeAnnual Maintenance FeeCustodian FeeTransaction Fee