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BASICS OF STOCK
MARKET 2.0
Lecture – 1 Busting the Myths
Myth #1: Investments in Stock Market are very risky
‘Risk comes from not knowing what you are doing’- Warren Buffet
Risk is a part of your life be it you life or markets. However, with proper training and
education about the stock market one can learn to manage the risk.
There are low, medium and high risk investments, so instead of writing off market
as “too risky,” why not explore how risk works and what it could mean for you?
That’s the big takeaway here: Risk creates the potential for returns.
www.rachanaranade.com
Myth #2: You need to have very strong knowledge
about Finance
• Vijay Kedia: BCom

• Porinju Veliyath: Law Graduate
• Ramesh Damani: HR specialization
• R K Damani: Undergraduate
• Warren Buffet: Started investing at the age of 11
Myth #3: Small investors cannot make money from
the Stock market.
It is said that you need to work non-stop for 10 years and then you become an
overnight success. Similar is the case with Stock Markets.
What one looks at is the current success of a famous investor, what he does not
look at the long hours study and discipline he has followed to get the success.
I am sure almost all of you have heard this saying – “Little drops of Water make the
mighty Ocean”. This saying is so true and relavant that we have it in Marathi and
Hindi too. “थेंबे थेंबे तळे साचे”, “बूँद बूँद से सागर बनता है ”.
Let us have a look at few examples that work on this concept. It will clear the myth
that small investors cannot make money from the stock market.
Year 2021 Closing Price
January 493
Assume you bought 1 share of February 545
Amrutanjan Ltd. at the end of each
month for a year. March 567
April 636
May 708
• Total investment – Rs. 8,619 June 701
• Avg price – Rs. 718.25 July 682

• Returns – 30% August 716
September 835
October 912
November 889
December 935
Assume you make a SIP in ICICI Prudential Nifty Index Fund for 1 year
• SIP - Rs. 1000
• SIP period - 30th Dec 2020 to 30 Nov 2021
• Returns - 10%
Myth #4: Renowned companies can never give strong
returns
Let us understand with an example of SBI:
Particulars Mar 2016 Mar 2017 Mar 2018 Mar 2019 Mar 2020 Mar 2021 ~ CAGR
Sales 220,633 230,447 228,970 253,322 269,852 278,115 5%
Net Profit 12,225 241 -4,556 2,300 19,768 22,405 13%

Source: Screener
Rs. In Crores
Closing price as on last trading day of Mar
What do you think?

Sales has grown at 5% CAGR and NP at 13% in last 6 years
Do you think these are enough? Let’s have a look at the stock price CAGR
Myth #5: 25 din mein paisa double
• SBI Stock Price CAGR in last 6 years - 22%
• Average FD rate at SBI - 7%
Stock has grown almost 3x of an FD at SBI. But is that enough?
What we need to understand here is that one of the primary motives of investing in
stock market is to beat inflation. Stock market is not a 25 din mein paisa double
machine.
If you still think it is. Let me tell you a fact –
• About 99.7% of Warren Buffet’s immense wealth was earned after his 52nd birthday.
Buffets portfolio has yielded ~20% CAGR over the last 53 years. Now does the 20%
CAGR in SBI appear good?
✓ #SetRightExpectations
Myth #6: Stock market is not for women
➢ If I can, so can you!
Examples - Bhagyashree Phatak Ajji, Scientist Ajji, Kalpana Morparia, Radhika Gupta
✓ #YehMarketSabkaHaiBoss
BASICS OF STOCK
MARKET 2.0
Lecture – 2 Understanding Stock Market
What is a Stock?
• It is a security which represents fraction ownership

in a company.
E.g.:
• You have bought a Pizza for yourself
• Your 3 friends see that and want a share in it.
• You tell them that you got the Pizza for Rs. 300 and
it has 10 pieces, so you are ready to share 1 piece
for Rs. 30 each.
In this example 1 piece of Pizza represents 1 part of
ownership of that Pizza
image: Freepik.com
What is Stock Market?
• The Stock market is a market that exist

for issuing, buying, and selling stocks.
• It is a place where shares of Publicly
Listed Companies are traded.
• It is a meeting place for Stock buyers and
Stock sellers.
image: Freepik.com
Stock Exchanges in India
How many Stock Exchanges are there in India?
Which are the famous stock exchanges across the globe? (Refer table on next slide)
Stock exchanges across the Globe
Country Stock Market Indices Opening Time Closing Time
India BSE Sensex 9:15 AM 3:30 PM
India NSE Nifty 9:15 AM 3:30 PM
US NASDAQ Nasdaq Composite 7 PM 1:30 AM
US NYSE DJIA 7 PM 1:30 AM
London Stock
UK FTSE 100 1:30 PM 10 PM
Exchange
Tokyo Stock
Japan Nikkei 225 5:30 AM 11:30 AM
Exchange
Hong Kong Stock
Hong Kong Hang Seng 6:45 AM 1:30 PM
Exchange
Shanghai Stock Shanghai
China 7 AM 12:30 PM
Exchange Composite Index
Why does the Stock Market exist?
One of the most important benefit of

stock market is that it provides a
Market place and Liquidity.
The purpose of a stock exchange is to

facilitate the exchange of securities
between buyers and sellers, thus
providing a marketplace.
image: Freepik.com
Why invest in stock market?
Let us start with the help of an example:
Which asset class has performed better

in last decade?
Winners in last 23 years:
• Gold - 7 times
• FD - 5 times
• Property - 0 times
• Equities - 10 times
1) To beat inflation:
Inflation is here to stay and the only way to beat it is through investing. Inflation
Rate in India averaged 5.9% from 2012 until 2021. Average FD rate and Savings a/c
interest rate in India is around 4-5%.
Do you think that with 4-5% interest can you sustain through inflation of around 6%
in India? Obviously, NO! So, to beat this devil called Inflation, we have stock market
which has given a CAGR of ~13% in last 10 years.
2) To reap the benefits of Compounding:
Compounding is the 8th wonder of the world. Let us understand with an example,
if you set aside Rs. 5,000/m from the age of 25, earning interest @ 12% p.a., at the
age of 60 years you will have with you funds worth more than Rs. 3 Cr. However, if
you start at the age of 40 with the same amount and interest rate, the fund
accumulated will amount to only near Rs. 50 lakh.
Hence, it is always advisable to start savings early to enjoy the benefits of power of
compounding.
3) To meet your financial goals
Now that you have understood about inflation and compounding, you can connect
why investing is important to aid wealth creation in order to meet your financial
goals like buying a house, car, child education and even retirement.
Monthly
Age ROI Time Period Amount
Investment
15 3,410.36 12% 45 50,00,000
25 6,253.44 12% 35 50,00,000
35 11,764.56 12% 25 50,00,000
45 24,318.37 12% 15 50,00,000

Note: Assumed average Inflation rate of 6%
Who are the participants in Stock Market?
Buyers & Stock

Regulator Brokers
Sellers Exchanges
Depository Clearing
Depositories
Participants Houses
Clearing and Settlement
• Clearing involves the identification of the buyer’s and the seller’s obligation
• Settlement involves the actual performance of the obligation.
Settlement takes place after 2 working days from the trade date. When you buy the
shares on T day, you receive them in your Demat account only on T+2 by evening.
Example:- If an investor buys the shares on Monday, Monday will be T, Tuesday will
be T+1 and Wednesday will be T+2. Thus he will get delivery by Wednesday
evening.
• T+1 settlement :- BSE and NSE have jointly introduced the T+1 settlement cycle in
phases from 25/02/2022, beginning with the bottom 100 stocks by market
capitalization. From March 2022, on the last Friday of every month, the next 500
stocks from the bottom will be subject to T+1 settlement. The phase wise
implementation is expected to give all market participants ample time to shift to
the shorter cycle.
Types of Capital Market
1. Primary Market
It is a marketplace where companies issue shares for the first time to the public.
Because of this, it is also known as the New issue market. Here, the transaction
happens between a buyer and the company issuing the security. When a company
comes up with an IPO (Initial Public Offer), it takes place in this market.
2. Secondary Market
It is a marketplace where already-issued securities from the primary market are
bought and sold. Hence, it is also known as the after-market. Here, new securities
are not created, unlike the primary market.
BASICS OF STOCK
MARKET 2.0
Lecture – 3 Primary Market
Life cycle of a Company
Pre-Seed Seed Series A

Funding Funding Funding
Series C Series B
IPO
Funding Funding
Why do companies go for an IPO?
Debt
Expansion Visibility
repayment
General
Exit for early
corporate
investors (OFS)
purposes
What are the different types of IPO issues?
There are two types of issues:

1. Fixed Price IPO – In a Fixed price issue the company decides the price of the
share issue and the number of shares being sold.
2. Book Building IPO – A Book building issue helps the company discover the price
of the issue. The company decides a price band and it gives the investor an
option to choose the price at which he/she wishes to bid for the company
shares.
IPO Process
1. Appointment of Investment Banker
2. Preparation of Draft Red Herring Prospectus (DRHP) by Book Running Lead Managers
(BRLM)
3. Review and approval of DRHP prospectus by SEBI
4. Submission and approval of DRHP from Stock exchanges and Registrar of the issue
5. Roadshows
6. Release of Issue date, Issue price band, and Red Herring Prospectus (RHP)
7. Issue opens for investor bidding
8. Registrar finalizes the basis for allotment
9. Allocation of Shares
10. Listing
Common IPO Jargons
1. Fresh issue vs OFS 7. GMP

2. Issue size 8. QIB
3. Price band 9. HNI/NII
4. Under subscription 10. RII
5. Oversubscription 11. DRHP & RHP
6. Issue price/ Cut-off price 12. ASBA
13. Promoter
Categories of Investors
1. Retail Individual Investors (RII) - Resident Individual Investors, Non-Resident
Individual Investors and Hindu Undivided Families fall under this category. They
can apply maximum Rs. 200,000 in an IPO and have a reservation of up to 35%
in the IPO.
2. High Net Worth Individual (HNI) - Individuals who invest more that Rs. 200,000
in an IPO.
3. Domestic Institutional Investor (DII) - An institutional investor investing in the
securities of the home country in the domestic market. Example :- Mutual Fund
Houses, Insurance Companies, etc.
4. Foreign Institutional Investor (FII) - An institutional investor investing in the
markets other than the country in which it is registered.
BASICS OF STOCK
MARKET 2.0
Lecture – 4 Secondary Market
Price difference between BSE and NSE
Let us understand this with a small example:

Suppose there are two vegetable vendors in your colony.
Both sell the same vegetables tomato, potato, etc. and both are in the same
proximity. Both of them might be procuring vegetables from the same wholesaler.
Still we find a difference of Rs.2 - Rs.5 in the prices of vegetables.
This difference basically arises because of the volume of vegetables they sell and
also on the number of customers which affect the demand and supply.
This same principle applies to BSE and NSE also. Volume and Number of traders are
the two main reasons affecting the demand and supply and thus the share prices
on BSE and NSE differ.
What is OHLC?
• Opening Price - The opening price is the very first price of the stock on the start
of a regular trading session.
• High Price - The highest price at which a stock traded during the day.
• Low Price - The lowest price at which a stock traded during the day.
• Closing Price - The closing price of a stock is the last traded price at the end of a
regular trading session.
What is Gap up and Gap down?
A gap is a separation in the chart of a security where the price has either increased
or decreased from the previous day’s close with no trading occurring in between.
If the share price opens at a higher price than the previous day’s closing price, then
it is a “Gap up” opening.
If the share price opens at a lower price than the previous day’s closing price, then
it is a “Gap down” opening.
A gap up or a gap down opening can be seen when any news or event occurring
during after market hours changes market fundamental and causes a flood of
buyers or sellers into the security.
E.g.: A company releases its periodical results at 5:00 pm (after market hours). A
positive report might cause a gap up opening and an unsatisfactory result might
cause a gap down opening.
What is Market cap?
Market capitalization or market cap is the total value of a firm fixed by the market.
Market cap is calculated by multiplying the total number of shares outstanding and
the current market price
Market cap is further divided into 3 parts:
Large Cap Mid Cap Small Cap
What is the need of Market Cap?
It is a basic parameter and is widely used in valuation calculations like market cap
to sales. Instead of the share price, market cap is used commonly while comparing
similar companies.
E.g.:
1) Which among the 2 do you think is a bigger company? (In bracket – share price)
ICICI Bank (Rs. 754)
HDFC Ltd (Rs. 2,380)
2) Which among the 2 do you think is a bigger company? (In bracket – share price)
3M India (Rs. 22,100)
Shree Cements (Rs. 25,050)
How to identify different Market caps?
In 2017, SEBI vide its circular defined all the three caps in order to ensure
uniformity in respect of the investment universe.
In para 8 of this circular, SEBI has laid down that AMFI shall prepare the list of
stocks in consultation with SEBI and Stock Exchanges - Bombay Stock Exchange
(BSE), National Stock Exchange (NSE) and Metropolitan Stock Exchange of India
(MSEI)
As given in the circular –
• Large Cap: 1st-100th company in terms of its market cap
• Mid Cap: 101st-250th company in terms of its market cap
• Small Cap: 251st company onwards in terms of its market cap
Link for Circular:
https://www.amfiindia.com/Themes/Theme1/downloads/1507291273374.pdf
Where to find Market Cap list?
Link - https://www.amfiindia.com/research-information/other-data/categorization-
of-stocks
This list is updated every six months based on the data as on the end of June and
December of each year.
As per latest data available:
• Large Cap cutoff – Rs. 47,757.10 Cr (JSW Energy Limited)
• Mid Cap cutoff – Rs. 16,164.71 Cr. (CG Power and Industrial Solutions Ltd.)
The data is available on the AMFI website within 5 calendar days from the end of
the 6 months period (Jan to Jun, Jul to Dec).
WHAT ARE BLUE CHIP STOCKS?
Blue chip stock is a stock of typically financially

sound companies that have had a healthy
operation for many years and have dependable
earnings
Generally, a blue-chip stock is a market leader
in its sector. There is no exact definition of a
blue chip stocks.
Have you ever wondered why is it called Blue
chip and not any other colour chip? Or why
even a Chip and why not a Gem?
image: Freepik.com
Corporate Actions
A corporate action is an event initiated by a company that will bring an actual

change to the securities issued by the company.
Examples of Corporate actions:
Stock Right
Dividend Bonus Buy Back
Split Issue
Market Timings - BSE
The regular trading hours of BSE are from 9:15 AM to 3:30 PM (Monday to Friday).
A 15 minute pre-market session is from 9:00 am – 9:15 am. It absorbs the heavy
fluctuation in the market. This session is further divided as follows:
9:00 am – 9:07 am - Order Placement./Order Entry.
9:08 am – 9:15 am - Order Matching Period.
• The further time details are as follows:
9:15 am – 3:30 pm – Market hours (for retail investors).
3:30 pm – 3:40 pm – VWAP closing price calculation.
3:30 pm – 4:00 pm – Execution of trades at the closing price determined.
4:00 pm – 9:00 am next morning – After market hours/After market orders.
• The block deal trading session (35 minutes) will start with the commencement of
the continuous session.
Market Timings - NSE
The regular trading hours of NSE are from 9:15 AM to 3:30 PM (Monday to Friday).
A 15 minute pre-market session is from 9:00 am – 9:15 am. It absorbs the heavy
fluctuation in the market. This session is further divided as follows:
9:00 am – 9:08 am - Order entry and modification
9:09 am – 9:15 am - Order Matching Period.
• The further time details are as follows:
9:15 am – 3:30 pm – Market hours (for retail investors).
3:40 pm – 4:00 pm – Closing Session.
4:00 pm – 9:00 am next morning – After market hours/After market orders.
• Block Deal Trading Session -
Morning Window: 08:45 AM - 09:00 AM
Afternoon Window: 02:05 PM - 02:20 PM
BASICS OF STOCK
MARKET 2.0
Lecture – 5 Documentation & Orders
Documentation
When we buy something from Dmart or Big Bazaar we get a receipt, which is a
proof that we own the goods and have paid for the goods. But what about shares?
When we hit the buy button and transfer our funds to the broker, what is the proof
that we own the shares?
Two documents act as a proof in this case :-
1. Share Certificate.
2. Contract Note.
Share Certificate
A share certificate is a written document indicating the ownership of the number of
shares specified in the certificate by the individual/HUF/corporation specified in
the certificate. The certificate is issued by the “Issuer” and is signed on its behalf.
• The following details are mentioned on a share certificate:-
1. Certificate number
2. Date
3. Company name and Identification number
4. Shareholder’s name and address
5. Number of shares
6. Type of share
7. Amount paid
Contract Note
A document listing all the transactions done by a broker on behalf of a client on a
particular date is a contract note.
• The following details of a transaction should be checked by the client:-
1. Client code
2. Date
3. Type of transaction - Purchase/Sale
4. Name of the company
5. Buy/Sell Quantity
6. Gross rate/Trade price per unit
7. Brokerage per unit
Charges Involved
An investor needs to pay different charges like brokerage, STT, etc., to execute
trades in the stock market. Although these charges are fixed, the amount is
variable. The actual amount to be paid on account of these charges depends on the
base value of the trade executed and broker’s policies.
• Brokerage - Brokerage is the commission of the broker to carry the trade on
behalf of the investor.
• Securities/Commodities transaction tax - This is a tax charged by the government
to trade in securities.
• Transaction charges - Charged by the exchange (BSE, NSE, MCX) on the value of
your transactions.
• Stamp Charges - Charged by the Government of India as per the Indian Stamp
Act, 1989.
• GST - Tax levied by the government on the services rendered by the broker.
Currently, GST is charged @ 18% on (brokerage + transaction charges).
• DP (Depository Participant) charges - DP charges are charged by the depository
(CDSL) at 13.5 + GST per scrip (company stock or ETF) when an investor sells
stock, regardless of the quantity sold. These are charged only on selling
transactions and not on buying transactions.
• Pledging charges - It is charged on the shares pledged by investor with the broker.
The charges are not fixed and can vary from broker to broker.
• AMC (Account Maintenance Charges) - Fees charged by the broker from the
investor to maintain the Demat and trading account. These are not fixed and can
vary from broker to broker).
• Off-Market Transfer Charges - An investor can transfer his shares to a specific
person via off-market transfer. For this the investor will have to submit a DIS
(Delivery Instruction Slip) and submit it to the broker. The charges for this
transaction are not fixed and vary from broker to broker.
What are the different types of Orders?
1) Regular Order:
Here you can put an MIS (Margin Intraday Square up – Intraday trading) or CNC
(Cash and Carry, i.e. for holding it in your account)
Again there are further 4 types of order instruction you can put -
1. Market: It will buy the stock at the CMP
2. Limit: It will wait for the stock to arrive at the given level and then put the
buy order
3. SL
4. SL-M
(Stop loss is nothing but an order that if the price comes down or goes up to a
given level sell/buy the stocks in the portfolio. More on it later)
2) CO (Covered order):
Covered order is when you put a buy/sell order along with a stop loss. You cannot
cancel this stop loss. So, you know the maximum loss in advance. CO is only for
Intraday and cannot be used on BSE, and across F&O segment
3) AMO (After Market Orders):
If you wish to put an order after the market are closed you can place an order using
this option. For Equity the timings are - 3:45 PM to 8:57 AM for NSE and 3:45 PM to
8:59 AM for BSE. All Equity AMOs are sent to the exchange by the broker at 9 am
the next day.
4) GTT (Good Till Triggered):
Order that will remain active until it is triggered. The trigger is valid for 1 year. So,
anytime the price condition within this period is met, your order will be placed and
executed, provided there are enough funds in the trading account, and your limit
price order is filled on the exchange
What are stop loss orders?
A stop-loss order is a buy/sell order placed to limit the losses when you fear that
the prices may move against your trade.
E.g.: if you have bought a stock at Rs 100 and you want to limit the loss at 95, you
can place an order in the system which ensures that the stock will be sold as soon
as it goes down to 95. Such an order is called 'Stop Loss', as you are placing it to
stop a loss more than what you are ready to risk.
• If you have a buy position, then you will keep a sell SL
• If you have a sell position, then you will keep a buy SL
There are 2 types of Stop-Loss orders:
1. SL order (Stop-Loss Limit) = Price + Trigger Price
2. SL-M order (Stop-Loss Market) = Only Trigger Price
What is Short Selling?
If your analysis tells you that the price of the security can decline from its current
market price then you can enter a short sale.
Therefore, Short sell is preferred for traders if they are bearish about the market or
a stock.
In a short sale we can sell the security first and buy back later on.
In equity market, you cannot carry forward the trade as the short positions cannot
be held overnight. So if you don’t exit (Buy) the securities before 3:20 PM then they
will be auto squared off.
What is an Auction Market?
If a person does a short sell and does not
square off his position, then his shares are
auctioned.
Brokers participating in the auction market
in post-market hours i.e. (3.30 pm - 4.00
pm) on behalf of their client.
Any loss arising due to such a transaction

will be borne by the short seller and any
profit will be transferred to IEPF (Investors
Education and Protection Fund)
image: Freepik.com
Price Time Priority
BASICS OF STOCK
MARKET 2.0
Lecture – 6 Indices
What are Market Wide Circuit Breakers?
This is basically a range provided for each index.
It contains a Trigger Limit. (Upper & Lower). The index cannot fall below the lower
limit or climb above the upper limit.
These limits are based on the previous day's closing price.
The market-wide circuit breakers are triggered by movement of either the BSE
Sensex or the Nifty 50, whichever is breached earlier.
If the stock or index touches any of the upper or lower limits, trading is suspended.
The amount of time for which trading is stopped depends on the extent of breach.
The greater the change in prices, the longer the halt.
E.g.: Upper Breaker: UPA Govt. 2nd tenure win (18th May 09),
Lower breaker: Harshad Mehta: Scam 1992 (22nd April, 1992), Corona (2020).
What are Price Bands?
Stocks have price bands, which act in the same way like Market Wide Circuit
Breakers.
Also, price bands are controlled by the stock exchange, while circuit breakers are
set by SEBI. The market regulator has set circuit filters only for the Sensex and Nifty
benchmarks. The exchange will not accept orders that are set outside the minimum
and the maximum price range. There are certain exceptions to Price Bands too.
Daily price bands are applicable on securities as below:
• Daily price bands of 2% or 5% or 10% (either way) are set for different stocks
• No price bands are applicable on scrips on which derivative products are
available*
• Price bands of 20% (either way) on all remaining scrips (including debentures,
preference shares, etc.).
*Scrips on which no derivatives products are available but which are part of Index
Derivatives, are also subjected to price bands.
What is Pledging of shares?
Pledging simply means taking loans against the shares that one holds. Shares are
considered a type of asset and hence can act as a collateral for raising loans.
Promoters of a company can pledge shares to raise funds for various purposes and
even individual investor can pledge shares for taking loans for various activities.
Generally, pledging of shares is considered as the last resort for the promoters to
raise funds. Raising funds by issuing debt or equity is comparatively safer than
pledging shares held by promoters.
If a promoter fails to pledge additional shares to match the loan value, the bank has
the right to sell them in the open market to recover the balance. This leads to two
events –
1. Decreases in the promotor’s shareholdings
2. Additional shares being infused into the market
These events eventually result in a decrease in stock value and a change in the
shareholding pattern.
What is Free float market cap?
Market capitalisation is the outstanding number of shares of a company multiplied
by its current market price.
In free float market capitalisation, the value of the company is calculated by
excluding shares held by the promoters. These excluded shares are the free float
shares.
Free float market cap = share price x (no of issued shares – shares held by
promoters)
Stocks that have small free float are likely to see higher price volatility as it takes
fewer trades to move the share price. On the other hand, in the case of a larger
free float, volatility is lower.
Both NSE and the BSE use the free float market capitalisation method to calculate
their benchmark indices Nifty and Sensex respectively and assigning weight to
stocks in the index. So a company with a higher free float has a higher weightage on
the indices.
What is Nifty 50 Index?
The NIFTY 50 is the flagship index on the National Stock Exchange of India Ltd.
(NSE)
Nifty 50 indicates the indicative price movement of the 50 major companies in
India according to its free float market cap.
It is owned and managed by NSE Indices Limited, India’s first specialized company
focused on an index as a core product
A company whose shares are part of an index such as the Nifty, BankNifty, Sensex,
etc. is called a Constituent.
Each constituent must typically have to meet certain requirements pertaining to
market capitalization, market exposure, and liquidity before being added to an
index.
Requirements for a stock to be included in the Index
1. Constituents of NIFTY 100 index that are available for trading in NSE’s Futures &
Options segment
2. The company’s trading frequency should be 100% in the last six months. i.e. it
should have traded on all trading days in last 6 months. (Why will it not trade?
Illiquidity)
3. The security should have traded at an average impact cost of 0.50 % or less
during the last six months for 90% of the observations for a portfolio of Rs. 10
crores
• The largest 50 stocks that meet the criterion go into the index
• Index is re-balanced on semi-annual basis. The cut-off date is January 31 and July
31 of each year. (More on this later)
Nifty 50 Composition
Data as on January 31, 2022
Rebalancing of Indices
Index Rebalancing refers to the process of readjusting the weights of the
composition of index portfolios.
Most indices have fixed schedules that they follow to rebalance their constituents.
These however may vary from index to index.
The Nifty 50 Index rebalances its portfolio on March 31st and September 30th. BSE
on the other hand revises the Sensex semiannually in June and December
Companies that meet the criteria are allowed to remain in the index. Companies
that fall short are removed from the index and are replaced by other companies
that meet the criteria.
Other reasons for rebalancing could be Delisting of shares; M&A; Corporate
actions.
Here is the history of Rebalancing in Nifty 50 Index -
https://en.wikipedia.org/wiki/NIFTY_50#Index_changes
What is the use of Indices?
1) Index as a Benchmark:
Investors use indices as a benchmark to gauge the performance of any one stock,
bond or mutual fund against overall market performance.
Portfolio tilted towards Banking stocks then true benchmark to compare
performance should be Bank Nifty, Portfolio heavily diversified towards Blue chip
stocks then true benchmark to compare the performance should be Nifty50.
2) Index as an Indicator:
How do we know if overall stock market is doing well or not doing well?
Best way to understand this is to go ahead and analyse almost all 5000 companies
listed on BSE and NSE and then conclude if market is doing well or not.
Truly this is not practical and hence only handful of companies are seen and based
on their performance it is concluded if market is doing well or not.
Sectoral Indices
Indices are basically hypothetical portfolios created by the stock exchange which
include only the top companies listed on the respective exchange.
By analysing a handful of companies we would understand if the market is doing well
or no.
Similarly there are sectoral indices that tracks the performance of certain sectors.
This is helpful to understand sector and its performance. Sectoral indices provide
concise summaries and comparative data for specific sectors or industries.
It enables investors to monitor a stock’s performance against its specific sector.
You can find the list of Sectoral indices here:
https://www1.nseindia.com/products/content/equities/indices/sectoral_indices.htm
BASICS OF STOCK
MARKET 2.0
Lecture – 7 History of Indian Markets
The Harshad Mehta Peak (1986-1992)
Harshad Mehta started trading actively in 1986.
He started his own brokerage firm “GrowMore Research and Asset Management.”
When Sensex was around 600 points.
In around April 1992, journalist Sucheta Dalal started uncovering the scam leading
to one of the greatest stock market fall.
By April 1993, the market fell by ~56% from the peak of 4546 to 1980
But, by Sep 1994, the market again recovered and went past the 4562 level.
The Dot-Com Bubble (1995-2000)
The Dot-com bubble aka the dot-com boom, the tech bubble, the internet bubble,
and many more such names. It was a stock market bubble caused by excessive
speculation of Internet related companies in the late 1990s, a period when there
was a massive growth in the use and adoption of the Internet.
The excessive expenditure and resulting cash burning led to the bursting of the
bubble in March 2000. Between 1996 and its peak in March 2000, the NASDAQ
Composite stock market index rose 400%, only to fall 78% from its peak by October
2002.
Similar movement was observed in the Indian Stock Markets because of its
dependence on the US stock market.
From late 1995 to March 2000 Sensex jumped from 2800 to 6150 (+119%). By Sep
2001 market corrected to the levels of 2600 levels. But again, it recovered and
jumped back to 6150 by Jan 2004.
The Global Financial Crisis (2007-2008)
The financial crisis of 2008 was a severe worldwide economic crisis.
Predatory lending targeting low-income homebuyers, excessive risk-taking by
global financial institutions, and the bursting of the United States housing bubble
led to the Global Financial Crisis.
The Sensex had reached an all-time high of 21,206 points in January 2008 from a
low of 6,150 points in January 2004, a gain of massive ~240% in a period of just 4
years.
From January 2008 to March 2009, the Sensex fell to 8,300 levels, a fall of around
60%.
But this time the recovery was even faster as Sensex clocked the 21,000 mark by
Nov 2010 only.
Covid – 19 (2019 – 2020)
The first lockdown in 2020 is a recent example of fall in the stock market.
The pandemic induced lockdown led the market to fall from a peak of 42,150
points in January 2020 to a bottom of 25,700 points in March 2020. A fall of ~40%.
Spread of the corona virus was the main reason behind this fall as opposed to
financial reasons in the previous market falls.
The recovery was even shorter this time as the market crossed the 42,150 mark by
Nov 2020 and as of Sep 2021, it made a new high of 62,250.
Impact of General Elections on Sensex - 1991
Congress won the elections and formed the government.

During this tenure they did lot of reforms and it attracted lot of foreign investors.
Impact of General Elections on Sensex – 1996-98
India saw 3 PMs during this time. As govt had no stability,

Indian market struggled with Asian financial crisis during this time and hence lack
of confidence was evident among investors.
NDA came in power. This was the first non-INC government to complete the full term.
But market suffered due to global factors & the dot com bubble in just a few months post
elections.
Congress back in power. Market fell 15% in first week after election results.
And then resumed its rally.
Congress once again won the elections. Market which was on the path to
recovery after the 2008 Financial Crisis gained 17% in single day. Big gap up!
NDA came in power with full majority. Riding on high hopes from the
government about reforms and stability, market did well post elections.
NDA came back to power with full majority. Reforms and stability was again the main
reason behind markets doing well post elections in 2019 until the pandemic hit.
Impact of War scenarios on market
When you look at the history of geopolitical events, they tend to have a short-term
impact on the markets, and as long as they don't drive you into recession, the
markets tend to rebound.
Truist Advisory Services had reviewed 12 historical events, including the 2003 Iraq
War, 1979 Iranian hostage crisis and the 1962 Cuban missile crisis. The S&P 500 was
higher a year after those events in 9 out of 12 times, with an average gain of 8.6% -
perhaps not surprising for an index that has gained about 4,000% since 1980.
CFRA's research has showed that disturbances from geopolitical events have been
comparatively short-lived. The firm analyzed 24 events since World War II, finding
the S&P 500 fell on average of 5.5% from peak to trough in the aftermath of those
events. The market took an average of 24 days from the start of the event to reach
a bottom, but it recouped those losses later within an average of 28 days.
BASICS OF STOCK
MARKET 2.0
Lecture – 8 Bonus Lecture
Documents required for opening Demat Account
1. Identity Proof - Driving License, Voter ID, Aadhar Card.
2. Address Proof - Passport, Voter ID, Aadhar, Ration Card.
3. Income Proof - This is required only if you want to trade in F&O segment. ITR
Acknowledgement can be submitted.
4. Bank Account Details - Cancelled Cheque, Bank Statement, First page of
passbook
5. PAN Card
6. Photo of Signature
How to start investing?
To start investing, an individual needs a demat account, a trading account and a
savings bank account.
A demat account and trading account is to be opened with a broker like zerodha,
upstox, groww, etc., and a savings bank account can be opened with any bank.
The process of opening a demat account is simple.
You need to download the app, keep the documents ready, and fill in the required
details.
You can use the following links to download the Apps:
Zerodha: https://link.rachanaranade.com/Zerodha
Upstox: https://link.rachanaranade.com/Upstox
Introduction to Fundamental Analysis
Introduction to Technical Analysis

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BASICS OF STOCK

• Vijay Kedia: BCom

• Total investment – Rs. 8,619 June 701

• Avg price – Rs. 718.25 July 682

Sales 220,633 230,447 228,970 253,322 269,852 278,115 5%

Net Profit 12,225 241 -4,556 2,300 19,768 22,405 13%

What do you think?

➢ If I can, so can you!

• It is a security which represents fraction ownership

• Your 3 friends see that and want a share in it.

• The Stock market is a market that exist

How many Stock Exchanges are there in India?

One of the most important benefit of

The purpose of a stock exchange is to

Let us start with the help of an example:

Which asset class has performed better

45 24,318.37 12% 15 50,00,000

Buyers & Stock

Pre-Seed Seed Series A

There are two types of issues:

1. Fresh issue vs OFS 7. GMP

Let us understand this with a small example:

Market cap is further divided into 3 parts:

Large Cap Mid Cap Small Cap

Blue chip stock is a stock of typically financially

A corporate action is an event initiated by a company that will bring an actual

Any loss arising due to such a transaction

Data as on January 31, 2022

Congress won the elections and formed the government.

India saw 3 PMs during this time. As govt had no stability,

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