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 A stock market or equity market is a market for the

trading of company stock (shares) and derivatives at an agreed price.  The size of the world stock market was estimated at about $36.6 trillion USD at the beginning of October 2008.

such as the par value or the class of the shares (if any). and other specifics of the shares. Shares represent a fraction of ownership in a business. The common feature of all these is equity participation.  These days these stock certificates have been dematerialized.(No physical document!) .  Ownership of shares is documented by a legal document that specifies the amount of shares owned by the shareholder. Different classes of shares have different voting rights.

 Shareholders are granted privileges depending on the class of stock. the right to purchase new shares issued by the company. and the right to a company's assets during a liquidation of the company. the right to share in distributions of the company's income. .  Shareholders vary from individual stock investors to large hedge fund traders. including the right to vote on matters such as elections to the board of directors. A shareholder (or stockholder) is an individual or company (including a corporation) that legally owns one or more shares of a company.

 Financing a company through the sale of stock in a company is known as equity financing. freeing up capital for their own private use. it will be able to issue further shares via a rights issue. . thereby again providing itself with capital for expansion without incurring any debt. A company may want additional capital to invest in new projects.  The promoters may simply wish to reduce their holding.  Once a company is listed.

 A company may list its shares on an exchange by meeting and maintaining the listing requirements of a particular stock exchange. .  Investors usually buy and sell shares on the exchanges through a stock brokers registered with the exchange. The shares of a company are in general be transferrable from one shareholder to another . This leads to buying and selling of shares termed as trading.

respectively. the price is strictly a result of supply and demand. At any given moment. The demand is the number of shares investors wish to buy at exactly that same time. (Buying or selling at market means you will accept any ask price or bid price for the stock. The supply is the number of shares offered for sale at any one moment.) When the bid and ask prices match. a sale takes place.  Actual trades are based on an auction market model where a potential buyer bids a specific price for a stock and a potential seller asks a specific price for the stock. .

.000) . and minimum annual income.  These requirements vary from exchange to exchange. Example: Bombay Stock Exchange (BSE) has requirements for a minimum market capitalization of Rs.10 Cr whereas the London Stock Exchange has requirements for a minimum market capitalization (£700. The set of conditions imposed by a given stock exchange upon companies that want to be listed on that exchange.  Examples include minimum number of shares outstanding. minimum market capitalization.25 Cr and minimum public float equivalent to Rs.

If at least one share is owned. 2. Both the buyer and the seller of the share pay commission known as brokerage to the broker. usually without the aid of brokers. A direct public offering is an initial public offering(IPO) in which the stock is purchased directly from the company. most companies will allow the purchase of shares directly from the company through their investor relations departments. .  Directly from the company: 1. Through a stock broker: They arrange the transfer of stock from a seller to a buyer.

 Short selling In short selling. hoping for the price to fall. These stocks. or collateral. the stockbroker has the right to sell the stock to repay the borrowed money. The trader eventually buys back the stock. otherwise. Margin Buying Buying stock on margin means buying stock with money borrowed against the stocks in the same account. making money if the price fell in the meantime and losing money if it rose. . the trader borrows stock (usually from his brokerage) then sells it on the market. The broker usually charges 8-10% interest on margin borrowing. guarantee that the buyer can repay the loan.

general economic conditions and the growth prospects of company's market segment. Fundamental analysis refers to analyzing companies by their financial statements found in SEC Filings. Equity to Debt ratio. Price to Book Value ratio.  Technical analysis studies price actions in markets through the use of charts and quantitative techniques to attempt to forecast price trends regardless of the company's financial prospects. . Oscillators etc. A few examples include Trend lines. Bollinger Bands. business trends. A few parameters which are looked upon include Price to Earnings (PE) Ratio.

liabilitie s .Price per share P / E Ratio  Annual Earnings per share Market Capitaliza tion P / B Ratio  Tangible assets .

Up Trend-Line .


Bollinger Bands .

Nikkei etc. Examples of index include Sensex. . DJIA. with the weights reflecting the contribution of the stock to the index. Such indices are usually market capitalization weighted.  The constituents of the index are reviewed frequently to include/exclude stocks in order to reflect the changing business environment. The movements of the prices in a market or section of a market are captured in price indices called stock market indices. Nifty. S&P500.

 Raising capital for businesses  Government capital-raising for development     projects Mobilizing savings for investment Facilitating company growth through acquisitions Creating investment opportunities for small investors Barometer of the economy .

This may 'temporarily' move financial prices away from their long term aggregate price 'trends'. (Positive or up trends are referred to as bull markets. negative or down trends are referred to as bear markets). . Sometimes the market seems to react irrationally to economic or financial news. Over-reactions may occur—so that excessive optimism (euphoria) may drive prices unduly high or excessive pessimism may drive prices unduly low.

 A stock market crash is often defined as a sharp dip in share prices of equities listed on the stock exchanges.  Famous stock market crashes have lead to the loss of billions of dollars and wealth destruction on a massive scale. a reason for stock market crashes is also due to panic and investing public's loss of confidence. . In parallel with various economic factors. stock market crashes burst speculative economic bubbles. Often.

Questions? .