A,B,C,D… OF STOCK MARKET

Presented by Mr. Nilesh Karhade
1st Year MBA++ Dept. of Management Sciences University of PUNE Year – 2008-09

Agenda
The Stock Market is a very broad term which involves trading of variety of entities. This presentation provides basics of some of the terms & understanding of stock market at macro level. In this we will focus on only shares in BSE Introduction to stock

Types of Share
About Stock Market Types of Market Major Stock Exchanges The role of Stock Exchanges

Bombay Stock Exchange

Introduction to Stock
A stock is a small share that represents a partial ownership of a company.

Stocks are issued by companies in order to raise capital.

Stock is also referred to as equity, & it is limited to particular number of shares.

Types of Share
Defensive Shares – These are the shares of stabilized & mature companies. Over the years these companies have standard practices for dividend payments. Cyclical Shares – These are the shares of companies engaged in trade cycle. During boom they do extremely well & during recessionary phase, they hit the bottom. Discount Shares – These are the shares whose market price is lower than the par value or book value. Growth Shares – These are the shares of those companies whose assets, sales turnover & profits are growing rapidly.

How capital is raised through shares/stocks?

Issued Capital

Reserved Capital

1. Registration for Authorized Capital.
Paid up capital

2. Amount divided into number of small units/shares. 3. The units which are issued for sale out of authorized capital are called Issued Capital or Initial Public Offering.

How capital is raised through shares?

Issued Capital

Reserved Capital

Paid up capital

4. Out of Issued Capital, units which are actually sold are called Paid-up Capital.
5. Shareholders

How capital is raised through shares?

Issued Capital

Reserved Capital

Paid up capital

Example –
Authorized Capital – Rs. 1 Crore Issued Capital – Rs. 50 Lakhs

Paid-up Capital – Rs. 35 Lakhs

About Stock Market
“Stock market” is a term used to describe the physical location where the buying and selling of stocks take place. The correct term to be used in pertaining to the physical location for trading stocks is “stock exchange.” The Stock market in India consists of about approx. twenty two stock exchanges. The stock exchanges constitute a market where securities issued by the Central & State Govt., Public bodies & Joint Stock companies are traded.

Types of Market
Primary Market – In this new issues of equity & debt are arranged either publicly or privately. Secondary Market – The market where existing securities are traded. Future Market – It is a market of contracts where goods are bought & sold at specified prices & times. Options Market – It is similar to future market i.e. it is a contract that gives the right, & not the obligation, to trade a stock at a certain price before the specified date.

What is Bulls & Bears Market?

Bulls Market - Bull markets occur when a particular nation experiences high economic production, low unemployment level, and low inflation rates.

What is Bulls & Bears Market?

Bears Market – It follow the down trends in the economy. Such indicators of economic downfall are increased unemployment and inflation. These causes the fall of stock prices.

Major Stock Exchanges
Market Value Region Stock Exchange (trillions of US dollars) 0.94 4.39 1.4 2.29 20.7 1.453 1.61 2.97 1.26 1.46 3.02 0.741 4.63 2.12 4.21 1.83 Total Share Turnover (trillions of US dollars) 0.349 12.4 0.476 1.36 28.7 1.003 0.263 1.7 1.66 0.564 3.56 1.86 5.45 3.64 9.14 2.49 Africa Americas Americas Americas Americas/Europe Asia-Pacific South Asia Asia-Pacific Asia-Pacific South Asia Asia-Pacific Asia-Pacific Asia-Pacific Europe Europe Europe JSE Securities Exchange NASDAQ São Paulo Stock Exchange Toronto Stock Exchange NYSE Euronext Australian Securities Exchange Bombay Stock Exchange Hong Kong Stock Exchange Korea Exchange National Stock Exchange of India Shanghai Stock Exchange Shenzhen Stock Exchange Tokyo Stock Exchange Frankfurt Stock Exchange (Deutsche Börse) London Stock Exchange Madrid Stock Exchange (Bolsas y Mercados Españoles)

Europe
Europe Europe Europe

Milan Stock Exchange (Borsa Italiana)
Moscow Interbank Currency Exchange (MICEX) Nordic Stock Exchange Group OMX1 Swiss Exchange

1.13
0.9652 1.38 1.33

1.98
0.4882 1.6 1.58

Ref. – www.wikipedia.org

The Role of Stock Exchanges
Raising Capital for Business – It facilitates companies to raise capital through selling of shares to the investing public. Mobilizing savings for investment – When people invest in shares it leads to most rational allocation (agriculture, commerce, industry), as otherwise it remains idle in deposits with banks.

Bombay Stock Exchange

Frankfurt Stock Exchange

Hong Kong Stock Exchange

London Stock Exchange

The Role of Stock Exchanges
Facilitating company growth – Companies views acquisition as an opportunity to expand their horizon. Stock market is one of the simplest and most common ways for a company to grow by acquisition or fusion.

Creating investment opportunities for small investors – It enables small investor to invest in shares as per their affordability.

Madrid Stock Exchange

Mexican Stock Exchange

Osaka Securities Exchange

Philippine Stock Exchange

The Role of Stock Exchanges
Government capital-raising for development projects – It may decide to borrow money for several projects (sewage & water treatment, housing) by selling securities known as bonds. Barometer of the economy - Movement of share prices and in general of the stock indexes can be an indicator of the general trend in the economy.

Shanghai Stock Exchange

SWX Swiss Exchange

Tokyo Stock Exchange

Toronto Stock Exchange

Bombay Stock Exchange
Established as "The Native Share & Stock Brokers' Association" in 1875 Oldest stock exchange in Asia. Today, BSE is the world's number 1 exchange in terms of the number of listed companies & worlds 5th in transaction numbers.

BSE has two of world's best exchanges, Deutsche Börse and Singapore Exchange, as its strategic partners.

Bombay Stock Exchange
The BSE Index, SENSEX, is India's first stock market index that enjoys an iconic stature , and is tracked worldwide.

SENSEX
BSE Sensex is a value-weighted index composed of 30 stocks. It consists of the 30 largest and most actively traded stocks, representative of various sectors.
SENSEX 24 Sep 08 / 16:45

SENSEX is calculated using the "Free-float Market Capitalization" methodology The base period of SENSEX is 1978-79 and the base value is 100 index points.
SENSEX is calculated every 15 seconds.

How Stocks are priced?
Latest Change symbol price BCE BGM IBM MSFT 31.15 17.06 79.82 24.67 net -0.5 -0.3 -0.3 -0.3 % -1.5 -1.6 -0.4 -1.2 time 16:57 15:54 16:01 16:00 52 Weeks high 31.75 17.3 80.68 25.05 low 31.1 17 79.6 24.7 volume 3,643,000 207,400 4,999,200 73,696,700 high 33 26.9 99.1 27.9 low 27.2 17.1 71.9 23.8

Stock Quote Table

First Column indicates abbreviation of name of company.

Latest Price indicates current price or closing price of the day (if in newspaper)
Change (net) is difference between the previous day closing price & current stock quote.

How Stocks are priced?
Latest Change symbol price BCE BGM IBM MSFT 31.15 17.06 79.82 24.67 net -0.5 -0.3 -0.3 -0.3 % -1.5 -1.6 -0.4 -1.2 time 16:57 15:54 16:01 16:00 52 Weeks high 31.75 17.3 80.68 25.05 low 31.1 17 79.6 24.7 volume 3,643,000 207,400 4,999,200 73,696,700 high 33 26.9 99.1 27.9 low 27.2 17.1 71.9 23.8

Stock Quote Table

High indicates the highest price while low indicates lowest price of the stock sold. Volume describes the no. of shares traded for that day. The 52- week high & low shows the highest & lowest prices in the previous year.

How Stocks are priced?

PE – Price to Earning ratio. Price per share divided by earning per share.

References
1. Stock market in India by D. R. Veena 2. Investment management by Dr. Mittal & Dr. Agarwal 3. The working of stock exchanges in India by H.R. Machiraju 4. The investment game how to win by Prasanna Chandra

5. Managing Investment by Prasanna Chandra
6. Managerial Economics by Dr. Mukund Mahajan 7. www.bseindia.com 8. www.stockmarketbasics.com 9. www.wikipedia.org

10. www.sharekhan.com

Thank You!!

Questions??