What is a stock ? A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings. There are two main types of stocks : common and preferred They are also known as "shares" or "equity".
Types Of Markets • Primary Market • Secondary Market • Third Market • Fourth Market
Principal terms • IPO • Issue Price • Face Value • Share Premium • Dividend • Portfolio • Price Appreciation • Capital Gain / Loss
Principal terms (contd.) • Dematerialisation • Depositories • Depository Participant • Institutional Investor • Bonus Shares • Convertible Debentures • Blue Chip Shares • Penny Stocks
Principal terms (contd.) • Float / Floating Stock • Market Capitalisation • Bigger Fool Theory • Forwards / Futures • Derivatives • Call / Put Option • Mark To Market / Margin Money
Principal terms (contd.) • Stop Loss • Circuit Breaker • Short Selling • Bulls • Bears • Chickens • Pigs
Types Of Stock Analysis There are 2 main types of stock analysis : Fundamental Analysis Technical Analysis
Fundamental Analysis Fundamental analysis maintains that markets may misprice a security in the short run but that the "correct" price will eventually be reached. Profits can be made by trading the mispriced security and then waiting for the market to recognize its "mistake" and re-price the security. Fundamental analysis includes : Economic analysis Industry analysis Company analysis
Fundamental Analysis The Salient Features are as follows : • 2 basic approaches : Top–down or Bottom-up • Used within different portfolio management styles : • Buy and Hold Investors • Value Investors • Contrarian Investors • To determine future growth rates for buying ‘high-priced growth stocks’ • To correctly value ‘good’ and ‘bad’ companies
Technical Analysis Technical Analysis is a method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity. It disregards the intrinsic value of a stock.
Technical Analysis • It is based on the following assumptions : • Market action discounts everything • Prices move in trends • History tends to repeat itself • Criticisms : • Empirical evidence • Efficient Market Hypothesis • Random Walk Hypothesis
Technical Analysis Basic Charting Concepts : • Resistance • Support • Breakout • Trending • Average true range • Chart pattern • Dead cat bounce • Momentum
Bombay Stock Exchange Ltd (BSE) In 1957, it became the first stock exchange to be recognized by the Indian Government under the Securities Contracts Regulation Act. It is the oldest stock exchange in Asia (established in 1875) and is currently located on Dalal Street, Mumbai. It is the 6th largest stock exchange in Asia and the 14th largest in the world with equity market capitalization of US$1 trillion as of December 2011.
Bombay Stock Exchange Ltd (BSE) There are over 5,112 listed Indian companies and over 8,196 scrips on this exchange as of December 2011. It has also introduced the world's first centralized exchange-based internet trading system, BSEWEBx.co.in to enable investors anywhere in the world to trade on the BSE platform. BSE launched SENSEX (BSE 30), a free-float market capitalization-weighted stock market index on January 2, 1986, with a base value 100 and base year 1978-1979.
Bombay Stock Exchange Ltd (BSE) The SENSEX consists of 30 well-established and financially sound companies listed on BSE Ltd. These Companies represents various industrial sectors of the Indian economy. The market capitalization of the SENSEX was about 29,275 billion while its free-float market capitalization was 14,660 billion as of April,2012. The Top 3 influential scrips on it are : RIL ITC Infosys
Bombay Stock Exchange Ltd (BSE) In January 1989, BSE National Index was introduced, which was renamed as BSE-100 Index from October 14, 1996 and launched it’s dollar-linked version on May 22, 2006. On July 25, 1990, the SENSEX touched the four-digit figure for the first time and closed at 1,001. SEBI was formed officially by the Government of India in 1992 with SEBI Act 1992 being passed by the Parliament of India. On March 7, 2007, Singapore Exchange Limited entered into an agreement to invest in a 5% stake in BSE Limited
Important Facts First in India to introduce Equity Derivatives. First in India to launch a Free Float Index. First in India to launch US$ version of BSE Limited. First in India to launch Exchange Enabled Internet Trading Platform. First in India to obtain ISO certification for a stock exchange. 'BSE On-Line Trading System' (BOLT) has been awarded the globally recognised Information Security Management System standard BS7799-2:2002 First to have an exclusive facility for financial training. First in India in the financial services sector to launch its website in Hindi and Gujarati. Shifted from Open Outcry to Electronic Trading within just 50 days. First bell-ringing ceremony in the history of the Indian capital markets (listing ceremony of Bharti Televentures Ltd. on February 18, 2002)
National Stock Exchange Ltd (NSE) It was incorporated in November 1992 as a tax-paying company and in April 1993, it was recognized as a stock exchange under the Securities Contracts Regulation Act, 1956. It is the 16th largest stock exchange in the world and largest in India by daily turnover and number of trades, for both equities and derivative trading. It is the second fastest growing stock exchange in the world with a recorded growth of 16.6% and over 1,640 listings as of December 2011. In 1996, the NSE launched S&P CNX Nifty (Nifty 50) Nifty 50 is the largest single financial product in India, with an ecosystem comprising : ETFunds (onshore and offshore), ETFutures & Options, other index funds and OTC derivatives (mostly offshore). From June 26, 2009, the computation for calculating Nifty Index was changed to free float methodology from full market capitalization methodology.
National Stock Exchange Ltd (NSE) The base period for the S&P CNX Nifty index is November 3, 1995. The base value of the index has been set at 1000, and a base capital of Rs 2.06 trillion. In December 1996, CNX Nifty Junior was launched. It consists of 50 companies representing approximately 10% of the traded value of all stocks on the NSE. In June 2005, Futures & options in BANK Nifty Index was launched on National Stock Exchange. In 2007, the NSE launched derivatives on Nifty Junior & CNX 100 and derivatives on Nifty Midcap 50. In August 2009, Interest Rate Futures was launched on this exchange.