A Journey into Stock Markets

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

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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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Stock ExchangeEx : NSE,BSE

People using terminal provided by their brokers

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

hadFallen 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 =

100100 * 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 ofRIL 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 stocksTuesday : Ram sold stocksWednesday: 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

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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 size25By Trilok H G

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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