The Stock Markets

Road to the stock market

1. A company is created as single proprietorship or as a

partnership.

2. All partners put in some money.

3. Company starts to grow, need arises to market products

more.

4. Company seeks bank loan and/or VC funding

5. Companies growth is even more rapid so Company decides to list

6. It is determined that the partners will get a fixed number of shares and another part is sold to outside people.

8. Company gets listed in exchange.

9. People can buy and sell in open market at whatever price is prevailing at that time.

10. Price keeps fluctuating based on perception and performance.

Stock ExchangeThere are 23 stock exchanges in India. Mumbai stock exchange (BSE) is the largest and has over 6000 stocks listed.

BSE accounts for 66% of trading volume in the country

Some Stock Exchanges in India

1. Bombay Stock Exchange

2. National Stock Exchange (also in Mumbai)

3. Bangalore Stock Exchange

4. Calcutta Stock exchange

5. Ahmedabad Stock exchange

Individual Stocks

Stock symbol/Ticker Symbol

Bombay Stock Exchange has 30 companies listed under its SENSEX

Similarly Wall street has the DOW Jones Industrial average of 30 stocks

Rise and Fall of individual stocks in this list affects the SENSEX overall

Other than individual stocks, what else is part of the exchange ?

Some companies in the Stock Exchange

ACCDLFHDFCCIPLA

Factors affecting stock prices

What affects Stock prices :

1. Profitability of the company

2. Future performance of the company

3. Past performance of the company

4. Any untoward recent incidents

5. Inflation of the country

6. Unforeseen events

7. Price of dollar v/s Rupee

8. Political scenario and

So on

The Ratios

What is the P/E Ratio

Price

Earnings

P/C Ratio

Determines value of stock

Why do companies list in the mkt.1. Assists the economy by providing a body for interested investors

2. It helps good companies raise funds from the public

3. Encourages capital formation

4. Government can undertake huge projects in the country by raising capital through public issue.

5. It benefits both the capital seeker as well as the capital giver

? How does it benefit the capital giver

6. Stock price being higher than earnings and property values, company enjoys better bargaining power when there is a merger or a takeover

7. Better reputation and credit

Benefits for the Investors

1. Investment is liquid

2. Can invest in a business opportunity upto

the amount of risk one can afford to take

3. Securities are collateral for loan

4. Stock exchanges are usually a well

controlled and well run unit and risk of

losing money due to malpractice is low

Terms you should know• Shares

• Dividends

• Exchange Traded Funds (ETF)

• Mutual Funds

• Buy back shares

• Bonus Shares

• Share Split

• Debentures/Bond – non collateralized loans/debts

• Broker

• Jobber – independently buys and sells securities and is not allowed to deal with non members directly

• SEBI – Securities and Exchange board of India. Issue securities, approve laws, protect investors.

• Derivatives - speculate on a share price reaching a particular value at a particular time

Decrypting Stock Market News* India's benchmark BSE index falls 0.05 percent, while

the 50-share NSE index loses 0.02 percent, marking a

second consecutive session of range-bound trading.

* Flat movements track steady to lower Asian shares

as signs of a slowdown in global growth continue

to weigh.

* State Bank of India extends falls to its lowest since

mid-May on continued fears about asset quality after reporting a

surge in bad loans last week. Shares down 1.1 percent after

falling 4.1 percent on Friday.

* Deutsche Bank downgrades SBI to "hold" from "buy", calling

April-June "one of its worst quarters in terms of asset

quality."

* Shares in India's state-run producer Oil & Natural Gas Corp

up 1.7 percent after the company reported over the

weekend a higher-than-expected jump in quarterly profit.

A Portfolio

Graphs

QUESTIONS