PPT Stock Market

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First step to Investing in

Stock market!!!!

INDIAN STOCK MARKET

BY:

DARA RAJESH

VISHAL UGLE



BIRLA INSTITUTE OF

TECHNOLOGY &SCIENCE ,PILANI

GOACAMPUS

STOCK MARKET

WORKING

REGULATORY FRAMEWORK

WHY DO PEOPLE BUY SHARES?

WHY STOCK MARKET IS SO

VOLATILE?

HOW TO MAKE MONEY IN STOCK

MARKET?



ROLE OF STOCK MARKET IN

ECONOMY

INTRODUCTION:

The market for long term securities likebonds,

equity stocks is divided into PRIMARY MARKE T and SECONDARY MARKE T.



y PRIMARY MARKE T

Deals wit h t he new issues of

securities.

y SECONDARY MARKE T

Deals wit h outstandingsecurities.

Also known as ³ STOCK MARKE T´.

Stock market??

JARGON OF EQUITY

MARKET:

y SECURI T Y

y BOND



y STOCK

1)COMMON S T OCKS

2)PREFERRED S T OCKS

y SHARE

y MU T UAL FUNDS .

y PAR VALUE vs. MARKE T VALUE

y BULLISH vs. B EARISH



How does the stock market

function?y Stock exchanges y Brok ers y R egistrars y Depositories and their participantsy Securities and Exchange Board of India

(SEBI)

MARKET INDICES:

y Stock market indices are t hebarometer of t he stock market .

y B SE SENSEX,NSE-50 etc are some of t he market indices.

Their usefulness:



y Indices help to recognize broad trendsin the market.

y

The investor can use the indices toallocate the funds

rationally among the stocks.

y Technical analysts use these indices to predict the future

market.

y Indices function as a status report onthe general

economy.

JOB OF THESE INDICES:

These indices have just one job:T o capture t he price movement . So a stock



index will reflect t he price movements of shares while a bond index captures t he

manner in wh

ich

bond prices go up ordown.

WHY STOCK PRICE

RISES?

The price of every stock increasesor decreases for t he following possiblereasons:

y News about company. y News about t he country. y Exchange rate regime. y Depends on demand

and supply for t hat stock.



WHO SELECTS THESESTOCKS?

They are selected by t he Index committee.

Some of t he criteria t hey follow include :

1)Market capitalization.

2)Liquidity.

3 )Continuity.

4 )Industry representation.

5)Listed history.



Whymust I Inv

est in

Shar es?

y W hy need I invest?

y Sowhat a

re the va

rio

us investmentoptions?

y W hy shares?

Other benef its of investing in shar es?



Because t hey can make big moneyon it . Compared to your investments in

fixed deposits in banks it makes more profits ,but t he bad news is t hat you arealso expected to bear t he losses ,if any.

y 1) Possibility of high returns y 2) Easy liquidity y 3) Unbeatable tax benef its y 4) Income from dividends

What ar e the expenses dur ing a

transaction?

y Capital gains tax

y Securities transaction



tax

y Brok erage

y Depositor y f ees

SO HOW DOES ONE BUY

SHARES?

There are basically tw o ways in which y ou can invest in shares:

y Purchase shares from

the primar y mark et

(i.e. IPO's)

y Trade in the

secondar y



mark et, i.e.

stock exchanges.

COMPUTATION OF STOCK

INDEX:

A stock market may eit her be a price index or a wealt h index . In Indiamost of t he indices are using wealt h index

for computation of stock market .

4100/-

2800/-

TOTAL MARKET CAP

3000/-

150/-

2000/-

100/-



20

IBM

800/-

40/-

600/-

30/-

20

INFOSYS

300/-

30/-

200/-

20/-

10

TATA

Market cap

(Rs.)

Market Price on

18/02/06

Market cap



(Rs.)

Market Price on

09/02/06

No. of

shares

Company

Face value=Rs.10 /-

Base value=100 /-

Index present value=

(100*4100)/2800=

146.428

WHY STOCK MARKET ISSO



VOLATILE?

y Acceptance of globalisation,internationalisation and

integration of t he Indian market wit h t heworld markets.

y Introduction of flexible exchange rateregime.

y Intro of new, innovative ,hybrid financial instruments.

y Human element . y T echnological changes.

HOW TO MAKE MONEY IN STOCK MARKET?

y patience, profound knowledge.



y Best guess. y Diversification . y

Portfoliomanagement .

ROLE OF MARKET

ACTIVITIES IN

ECONOMY:

y In t heory t hey are required to facilitate,support, enable t he healt hy growt h and

functioning of primary markets but in practice t hey are not .

y The current focus of t hinking on t he

SENSEX, market capitalizationetc.reflects an excessive preoccupationwit h t he secondary market activity.



y Beyond a point, t he expansion of t hesecondary markets may reduce t he

volume of activity not only on t h

e newissue market but also in t he banks,ot her financial institutions, gold, real estate and commodities.

y The multiple serious problems visitingt he stock market caution us against

too much optimism and ent husiasmabout t he stock market .

DRAWBACK S OF

INDIAN STOCK

MARKET:

y Unet hical practices. y Big irrational greed, excessive

speculation.



y Lack of protection to interests of t hegenuine and small

investors .

y T rading is extremely t hin and restricted .

y Structural and organisational imbalance in t he growt h of t he

stock market .

y Volatility of t he market has increased over t he years.

REMED Y:



So in order to make it flawless system

aut horities should initiate certainmeasures such as

y Single aut hority

y Demutualization. y Prescribing capital adequacy norms. y Stricter registeration of brokers y Margin requirements .

ACKNOWLEDGEMENTS:

We owe special t hanks to Dr. Patnaik sirand Dr. Monika Set hi madam for t heir helpand encouragement .

REFERENCES:

³Securities analysis and Portfoliomanagement ́



by Punit havat hy pandian

³Financial institutions and Markets´

by L M Bhole

www.sharekhan.com

www.investopedia.com

PPT Stock Market

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