A Journey into Stock Markets

By Trilok H G 1
 What is Stock?
 How trading happens?
 How to trade in stocks?
 Kinds of Trades
 Basic Terms and terminologies

By Trilok H G 2
 Technical indicators
 Strategies
 Futures and options

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 It’s a means to own a company.
 It is a kind of security.
(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.)
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 We need to have DP(DEPOSITORY
PARTICIPANT) account.

 We need to have a Trading account.

 And of course money 

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People using
terminal Stock Exchange
provided by their
brokers Ex : NSE,BSE

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 Ones which are listed in that exchange

 IPO
 Secondary market

 ADR, GDR in foreign markets

 More of IPO later…

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 Intra-day Trading
 Delivery based Trading

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 Buying and Selling on the same day

 Brokerage will be different for intra-day and

delivery based trading, intra-day being lesser

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 Buying and Selling are on different days

 Brokerage will be higher than intra-day

 Their will be minimum delivery charges

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 Ex :
You buy the share on Monday.
It will be delivered to you on Wednesday’s
settlement period (T + 2) normally.

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 Selling something which you don’t have.
Ex: Lets consider a company RIL.
Its priced at Rs 2,500/- before opening. You
know it’s going to fall that day because of some
reason. But you don’t have any shares with
you of RIL.
But still you can sell the shares, this is called as
short selling.

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Contd…

Assume you sold 10 RIL shares in morning at

Rs 2,500/-. By evening as you had thought, it had
Fallen down to Rs 2,400/-. Now you buy back
Those 10 shares what you had sold.
So the difference in amount, 2,500 – 2,400 = 100
100 * 10 = 1000, is yours. This process of buying
back is called short covering.

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 You will become a defaulter.

 Lets understand this with an Example.

Assume you short sold on Monday, as you
haven’t short covered it, you need to deliver it
on Wednesday(T + 2). But you don’t have the
shares to deliver. So NSE or BSE will buy the
shares on behalf of you in auction market, and
deliver it to the buyer in (T + 3 days). In
auction market max price is 10% higher than in
normal market.
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Assume Ram bought on Monday 100 shares of
RIL at Rs 2,500/- , on response to some good
news it rose high on Tuesday to say Rs 2,600/-.

So Ram is in a whooping profit of (100 * 100)

Rs 10,000/- in a day.

Ram plans to sell it.

Will he get that profit for sure?
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Monday : Ram bought stocks
Tuesday : Ram sold stocks
Wednesday: Stocks wont get delivered to him,
as they were short sold.
Thursday: Ram needs to deliver the stocks, as he
has sold on Tuesday, But he don’t have
Them now, as they were short sold,
So he becomes a defaulter.
Friday : Ram gets the delivery of short sold stocks
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DAY PRICE
Monday 2500
Tuesday 2600
Wednesday 2620
Thursday 2670
Friday 2550
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Ram actually ended up in loss!!!
( I was a victim of such a trade when I executed my 2nd trade 2
years back  )

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 Fundamental Analysis

 Technical Analysis

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 Analyzing a stock based on the fundaments of
the country, the sector, and the company
individually.

 It includes going through balance sheet and

profit-loss statement of the individual
company and checking various ratios.

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 EPS : PAT – Dividend/ No of shares

 PE : Present share Price / EPS

 P/BV Present share price / Book value

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 Example : Enron, Satyam

 IT industry off recent

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 Forecasting the future direction of prices
through the study of past market data,
primarily price and volume. In its purest form,
technical analysis considers only the actual
price and volume behavior of the market or
instrument.

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 Support : Where one buys

 Resistance : Where one sells

Some Examples…
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 A Brief into Primary Market
 PE Firms

 QIP, HNI, Retail

 Fixed Price and Book Building Process

 Lower band and Upper Band and Cut off price

 Lot size
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 Face Value

 Premium

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 Please Read DRHP

 Read about the promoter's group.

 Understand their business, and compare them

With the companies listed already in market

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 ADR , GDR

 Market Cap

 Dividend

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 Buy Back

 Bonus

 Split

 Rights issue

 Record Date

 Non Delivery Period

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 What is NIFTY, SENSEX

 How are they Calculated?

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 Execute couple of paper trades before you
actually execute the real trade, we have many
simulators and games available now
 Always follow strict entry and exit points
 Always execute a limit order
 Never buy and sell for full amount in one go,
Spread it across a range, it will give much
better bottoms and tops
 Never average a losing trade

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Q&A

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HAPPY TRADING

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