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Stock Market

Terminology

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What is a stock ?A type of security that signifies ownership in acorporation and represents a claim on part of the corporation's assets and earnings.

There are two main types of stocks : commonand preferred

They are also known as "shares" or "equity".

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Types Of Markets

• Primary Market

• Secondary Market

• Third Market

• Fourth Market

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Principal terms

•

IPO• Issue Price

• Face Value

• Share Premium

• Dividend

• Portfolio

• Price Appreciation

•

Capital Gain / Loss

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Principal terms (contd.)

• Dematerialisation

• Depositories

• Depository Participant

• Institutional Investor 

• Bonus Shares

•Convertible Debentures

• Blue Chip Shares

• Penny Stocks

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Principal terms (contd.)

•

Float / Floating Stock• Market Capitalisation

• Bigger Fool Theory

• Forwards / Futures

• Derivatives

• Call / Put Option

• Mark To Market / Margin Money

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Principal terms (contd.)

•

Stop Loss• Circuit Breaker 

• Short Selling

• Bulls

• Bears

• Chickens

• Pigs

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Types Of Stock

AnalysisThere are 2 main types of stock analysis :

1) Fundamental Analysis

2) Technical Analysis

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Fundamental Analysis

Fundamental analysis maintains that markets may misprice

a security in the short run but that the "correct" price will

eventually be reached. Profits can be made by trading the

mispriced security and then waiting for the market torecognize its "mistake" and re-price the security.

Fundamental analysis includes :

1) Economic analysis

2) Industry analysis

3) Company analysis

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Fundamental Analysis

The Salient Features are as follows :

• 2 basic approaches : Top –down or Bottom-up

• Used within different portfolio management styles :

1) Buy and Hold Investors

2) Value Investors

3) Contrarian Investors

4) To determine future growth rates for buying ‘high-

priced growth stocks’ 

5) To correctly value ‘good’ and ‘bad’ companies 

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Technical Analysis

Technical Analysis is a method of evaluating

securities by analyzing statistics generated by

market activity, such as past prices and volume.

Technical analysts do not attempt to measure a

security's intrinsic value, but instead use charts

and other tools to identify patterns that can

suggest future activity. It disregards the intrinsic

value of a stock. 

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Technical Analysis

It is based on the following assumptions :

• Market action discounts everything

• Prices move in trends

• History tends to repeat itself 

Criticisms :

• Empirical evidence

• Efficient Market Hypothesis

• Random Walk Hypothesis

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Technical Analysis

Basic Charting Concepts :• Resistance

• Support

•

Breakout• Trending

• Average true range

• Chart pattern

• Dead cat bounce

• Momentum

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Bombay Stock Exchange Ltd (BSE) 

In 1957, it became the first stock exchange tobe recognized by the Indian Governmentunder the Securities Contracts Regulation Act.

It is the oldest stock exchange in Asia(established in 1875) and is currently locatedon Dalal Street, Mumbai.

It is the 6th largest stock exchange in Asia andthe 14th largest in the world with equity marketcapitalization of US$1 trillion as of December 2011.

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Bombay Stock Exchange Ltd (BSE) 

There are over 5,112 listed Indian companies andover 8,196 scrips on this exchange as of December 2011.

It has also introduced the world's first centralizedexchange-based internet trading system,BSEWEBx.co.in to enable investors anywhere inthe world to trade on the BSE platform.

BSE launched SENSEX (BSE 30), a free-floatmarket capitalization-weighted stock market indexon January 2, 1986, with a base value 100 and baseyear 1978-1979.

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Bombay Stock Exchange Ltd (BSE) 

The SENSEX consists of 30 well-established and

financially sound companies listed on BSE Ltd.

These Companies represents various industrialsectors of the Indian economy.

The market capitalization of the SENSEX wasabout 29,275 billion while its free-float marketcapitalization was 14,660 billion as of April,2012.

The Top 3 influential scrips on it are :1) RIL2) ITC3) Infosys

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Bombay Stock Exchange Ltd (BSE) 

In January 1989, BSE National Index was introduced,which was renamed as BSE-100 Index from October 14,1996 and launched it’s dollar-linked version on May 22,2006.

On July 25, 1990, the SENSEX touched the four-digitfigure for the first time and closed at 1,001.

SEBI was formed officially by the Government of Indiain 1992 with SEBI Act 1992 being passed by the

Parliament of India.

On March 7, 2007, Singapore Exchange Limited enteredinto an agreement to invest in a 5% stake in BSELimited

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First in India to introduce Equity Derivatives.

First in India to launch a Free Float Index.First in India to launch US$ version of BSE Limited.First in India to launch Exchange Enabled Internet TradingPlatform.First in India to obtain ISO certification for a stock exchange.

'BSE On-Line Trading System' (BOLT) has been awarded theglobally recognised Information Security Management Systemstandard BS7799-2:2002First to have an exclusive facility for financial training.First in India in the financial services sector to launch its

website in Hindi and Gujarati.Shifted from Open Outcry to Electronic Trading within just 50days.First bell-ringing ceremony in the history of the Indian capitalmarkets (listing ceremony of Bharti Televentures Ltd. onFebruary 18, 2002)

Important Facts

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It was incorporated in November 1992 as a tax-paying

company and in April 1993, it was recognized as a stockexchange under the Securities Contracts Regulation Act, 1956.It is the 16th largest stock exchange in the world and largest inIndia by daily turnover and number of trades, for both equitiesand derivative trading.It is the second fastest growing stock exchange in the world

with a recorded growth of 16.6% and over 1,640 listings as of December 2011.In 1996, the NSE launched S&P CNX Nifty (Nifty 50)Nifty 50 is the largest single financial product in India, with anecosystem comprising : ETFunds (onshore and offshore),

ETFutures & Options, other index funds and OTC derivatives(mostly offshore).From June 26, 2009, the computation for calculating NiftyIndex was changed to free float methodology from full marketcapitalization methodology.

National Stock Exchange Ltd (NSE)

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The base period for the S&P CNX Nifty index is November 3, 1995. The base value of the index has been set at 1000,and a base capital of Rs 2.06 trillion.

In December 1996, CNX Nifty Junior was launched. Itconsists of 50 companies representing approximately

10% of the traded value of all stocks on the NSE.

In June 2005, Futures & options in BANK Nifty Index waslaunched on National Stock Exchange.

In 2007, the NSE launched derivatives on Nifty Junior &CNX 100 and derivatives on Nifty Midcap 50.

In August 2009, Interest Rate Futures was launched onthis exchange.

National Stock Exchange Ltd (NSE)

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