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A Journey into Stock

Markets

School of Economics, Davv

Presented ByAshwin Mandowara


Manvi Upadhyay
Nitesh Gupta
Priyanka Parte
Surbhi Jain
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What to expect?

What is Stock?
How trading happens?
How to trade in stocks?
Kinds of Trades
Basic Terms and terminologies

School of Economics, Davv

What is a Stock

Its 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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Prerequisites for Trading

We need to have DP(DEPOSITORY


PARTICIPANT) account.

We need to have a Trading account.

And of course money

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How Trading Happens?

People using
terminal
provided by their
brokers

Stock Exchange
Ex : NSE,BSE

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Which companies one can trade

Ones which are listed in that exchange

IPO
Secondary market

More of IPO later

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Kinds of Trading

Intra-day Trading
Delivery based Trading

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Intra-Day Trading

Buying and Selling on the same day

Brokerage will be different for intra-day


and delivery based trading, intra-day
being lesser
ExampleVolume 1 lac
Intraday Brokerage 30 rs(Generally .03 pasia of volume)
Delivery Brokerage 300 Rs (Generally .30 pasia of volume)

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Delivery Based Trading

Buying and Selling are on different days

Brokerage will be higher than intra-day

Their will be minimum delivery charges

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How does it happen

Ex :
You buy the share on 27/11/2015(Today).
It will be delivered to you on
29/11/2015(Day after tomorrow)
settlement period (T + 2) normally.

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What is short selling?

Selling something which you dont have.


Ex: Lets consider a company RIL.
Its priced at Rs 1000/- before opening.
You know its going to fall that day
because of some
reason. But you dont 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 1000/-. By evening as you had thought,
it had
Fallen down to Rs 900/-. Now you buy back
Those 10 shares what you had sold.
So the difference in amount, 1000 900 =
100
100 * 10 = 1000, is yours. This process of
buying
back is called short covering.
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What if you dont Short Cover?

You will become a defaulter.

Lets understand this with an Example.


Assume you short sold on Monday, as you
havent short covered it, you need to deliver
it on Wednesday(T + 2). But you dont 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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Question
Assume Ram bought on Monday 100 shares
of
RIL at Rs1000/- , on response to some good
news it rose high on Tuesday to say Rs
1100/-.
So Ram is in a whooping profit of (100 *
100)
Rs 10,000/- in a day.
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Economics, Davv
Ram plans to sell

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DAY

PRICE

Monday

1000

Tuesday

1100

Wednesday 1120
Thursday

1170

Friday

1050
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Ram actually ended up in


loss!!!
( I was a victim of such a trade when I executed my 2 nd
trade 2 years back )

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How to select stocks?

Fundamental Analysis

Technical Analysis

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What is fundamental Analysis?

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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3 Important Ratios

EPS :
shares

PE :

P/BV
value

PAT Dividend/ No of

Present share Price / EPS

Present share price / Book

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BULL {TEJIWALA}

He is speculator who expects the future raise in price of securities


he buys the securities to sell them at future date at the higher price.

He is called as bull because his activities resembles as a bull , as


the bull tends to throw its victims up in the air through its horns. In
simple the bull speculator tries to raise the price of securities by
placing a big purchase orders.

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BEAR {MANDIWALA}
He is speculator who expects future fall
in prices , he does an agreement to sell
securities at future date at the present
market rate .

He is called as bear because his


altitude resembles with bear , as the
bear tends to stamp its victims down to
earth through its paws . In simple the
bear speculator forces of prices of
securities to fall through his activities.

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What is Technical analysis

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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Basic definitions in Technical


analysis

Support : Where one buys

Resistance : Where one sells

Some Examples
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Technical Analysis

Up Trend-Line

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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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Contd

Face Value

Premium

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Some tips for primary


market

Please Read IPO document carefully.

Read about the promoter's group.

Understand their business, and compare


them
With the companies listed already in
market

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Other facts

Market Cap

Dividend

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Buy Back

Bonus

Split

Record Date (Bonus/Dividend allotment


date)

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What is an Index

What is NIFTY, SENSEX

How are they Calculated?

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Some Tips to newbies

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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