Stock market

Key Terms
Equity Share

A unit representing the owners share in the profits of the company. Equity share holders get dividend. Equity shares are traded on stock exchange. A unit representing the owners share in the profit of the company: fixed dividend and dividend paid before paying the equity share holders A unit representing the lenders claim on the company.

Preference share

Bond/Debenture

Buying shares
Directly from the company: primary market From existing shareholders: secondary market

Primary Markets
Public issue

Fixed price issue Book building

Rights issue Bonus issue

Fixed price issue

A company invites the public to buy the shares of the company by announcing a fixed price per share. Example:Indian Bank Issue at Rs.90

Book building
DLF Issue in the price band of 450 - 550. You can apply for 10 shares minimum and in multiples of 10. You can quote a specific price or apply for shares at a cut-off price as decided by the issuers after all the applications are received.

Book building process

Red herring prospectus Application form Issue open Issue close Proportionate allotment Refund of nonallotment

Rights Issue
A company offers additional shares for the existing shareholders of the company.

Helps in retaining control of management Appeasement of existing shareholders by issuing shares at less than market price.

Bonus and Split

Bonus: A company issues shares to existing shareholders free of cost. Split: the face value of the shares is reduced hence giving more number of shares to shareholders.

Secondary Market
Stock Exchange: a place for buying and selling shares of those companies who have issued the shares.

STATISTICS
India - population 110 crores GDP $1000 bn x 43 = Rs. 43000 bn = Rs. 43,00,000 crores Active participants in stock markets: 20 lakhs

Turnover (12th July 2007)

Category
BSE Stocks NSE Stocks NSE F&O Total Indias GDP

No of Shares Value in Rupees (Cr) (Cr)

36.34 51.63 87.97 6,112.67 12,882.28 43,187.29 62,182.24 43,00,000

Players in the stock markets

Brokers: members of the stock exchange authorized to trade. Stock exchange Clearing corporation Banks Depository Participants

Depository system
COMPANY R&T AGENT
DP

Anoop

NSDL CDSL DP DP

DP DP DP Radhika

DP

CDSL 16 DIGIT NUMBER FIRST 8 DPID SECOND 8 CLIENT ID

NSDL DPID 8 DIGIT CLIENT ID 8 DIGIT

Delivery instruction the new age cheque

Trading mechanism
BANK BANK BANK BANK

SELL 100 INFY 2265

SELL ORDER

BUY ORDER

BUY INFY 100 AT 2265

Ashish BROKER B

NSE

BROKER A

Jayant

NSCCL
DEMAT DEMAT CM-BP-ID DEMAT DEMAT

Settlement Schedule

Stock Market Indices

NSE: Nifty (Base 1990-91) BSE: Sensex (Base 1978-79) Nifty Junior Dollex BSE200

Regulation
Finance Ministry: Overall Policy RBI: Banking system SEBI: Security markets AMFI: Mutual funds

Some common terms

P/E: Price to EPS ratio Book Value Face value Dividend yield Rally Correction Bull (Bullish) Bear (Bearish)

Some common terms contd..

Long Short Blue chip share Share groups

A, B1, B2, T, S, TS, Z

Market Capitalization Large cap, Mid cap, Small cap

Common terms contd

Delivery trading Intra-day trading Swing/position trading Stop loss Quarterly numbers Interest rates

Foreigners
Foreign Institutional Investors P-notes Hedge funds Foreign brokers Foreign portfolio managers

Locals
Institutions: LICs, GICs, Banks Mutual Funds Domestic Brokers Domestic large (HNI) Investors Market operators (Large, medium and small) Day traders

Conclusions
Individuals are small Institutions are many and do not hold sway over markets for long times Depth of the market is increasing rapidly Information revolution has brought in nearly strong efficient markets

Thank you