The Stock Markets

Road to the stock market 1. A company is created as single proprietorship or as a partnership.2. All partners put in some money.3. Company starts to grow, need arises to market products more.4. Company seeks bank loan and/or VC funding5. Companies growth is even more rapid so Company decides to

list6. It is determined that the partners will get a fixed number of

shares and another part is sold to outside people.8. Company gets listed in exchange.9. People can buy and sell in open market at whatever price is

prevailing at that time.10. Price keeps fluctuating based on perception and performance.

Stock ExchangeThere are 23 stock exchanges in India. Mumbai stock exchange (BSE) is the largest and has over 6000 stocks listed. BSE accounts for 66% of trading volume in the countrySome Stock Exchanges in India1. Bombay Stock Exchange2. National Stock Exchange (also in Mumbai)3. Bangalore Stock Exchange4. Calcutta Stock exchange5. Ahmedabad Stock exchange

Individual Stocks Stock symbol/Ticker Symbol

Bombay Stock Exchange has 30 companies listed under its SENSEX

Similarly Wall street has the DOW Jones Industrial average of

30 stocks Rise and Fall of individual stocks in this list affects the SENSEX

overall Other than individual stocks, what else is part of the exchange ?

Some companies in the Stock Exchange

ACCDLFHDFCCIPLA

Factors affecting stock pricesWhat affects Stock prices :1. Profitability of the company2. Future performance of the company3. Past performance of the company4. Any untoward recent incidents5. Inflation of the country6. Unforeseen events7. Price of dollar v/s Rupee8. Political scenario andSo on

The Ratios

What is the P/E RatioPrice Earnings

P/C Ratio

Determines value of stock

Why do companies list in the mkt.1. Assists the economy by providing a body for interested investors2. It helps good companies raise funds from the public3. Encourages capital formation4. Government can undertake huge projects in the country by raising capital through public issue.5. It benefits both the capital seeker as well as the capital giver? How does it benefit the capital giver6. Stock price being higher than earnings and property values, company enjoys better bargaining power when there is a merger or a takeover7. Better reputation and credit

Benefits for the Investors

1. Investment is liquid2. Can invest in a business opportunity upto the amount of risk one can afford to take3. Securities are collateral for loan4. Stock exchanges are usually a well controlled and well run unit and risk of losing money due to malpractice is low

Terms you should know• Shares• Dividends• Exchange Traded Funds (ETF)• Mutual Funds• Buy back shares• Bonus Shares• Share Split• Debentures/Bond – non collateralized loans/debts• Broker• Jobber – independently buys and sells securities and is not allowed to

deal with non members directly• SEBI – Securities and Exchange board of India. Issue securities,

approve laws, protect investors.• Derivatives - speculate on a share price reaching a particular value

at a particular time

Decrypting Stock Market News* India's benchmark BSE index falls 0.05 percent, whilethe 50-share NSE index loses 0.02 percent, marking asecond consecutive session of range-bound trading.* Flat movements track steady to lower Asian shares as signs of a slowdown in global growth continueto weigh. * State Bank of India extends falls to its lowest sincemid-May on continued fears about asset quality after reporting asurge in bad loans last week. Shares down 1.1 percent afterfalling 4.1 percent on Friday. * Deutsche Bank downgrades SBI to "hold" from "buy", callingApril-June "one of its worst quarters in terms of assetquality." * Shares in India's state-run producer Oil & Natural Gas Corp up 1.7 percent after the company reported over theweekend a higher-than-expected jump in quarterly profit.

A Portfolio

Graphs

QUESTIONS