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Introduction To Equity

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26 views

Introduction To Equity

Uploaded by

dcostaamanda48
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Introduction to Equity Markets

Agenda

Asset Classes
Understanding the Indian Equity Market

Why to Invest in Equity


How to Invest in Equity


Risks associated with Equity Market


Terminology


Asset Classes

An asset class refers to a group of assets with similar investment characteristics.
Asset Classes …. continued


Within an asset class, the financial securities exhibit similar risk and return patterns.
Understanding the Indian Equity Market
Equity means ‘stake’ or ‘share of ownership’ in a company.
Equity market is a place where stocks and shares of companies are traded and is

known as ‘Stock Exchange ‘


The Securities and Exchange Board of India (SEBI) is the regulatory body for
securities and commodity market in India under the jurisdiction of Ministry of

Finance, Government of India. It was established on 12th April 1992



There are two main Stock Exchanges operating in India
Bombay Stock Exchange established in 1875 (around 5000 stocks are listed)
National Stock Exchange established in 1992 (around 1600 stocks are listed)

The Equity market is classified into Primary Market and Secondary Market

The primary market refers to the market where securities are created and first issued.
(Initial Public Offering – IPO)

The secondary market is one in which they are traded afterwards among investors.
(Stock Market Trading)

Why to Invest in Equity

Top reasons for investing in Equity/Stocks
Beat Inflation: The stock market has historically provided returns that beat
inflation.

The possibility of getting higher returns to your investment.


Maintain good balance in your portfolio of investments


Earning from Equity Investment is mainly in two forms
Capital Appreciation of the Stock
Dividends (generally distributed annually)


How to Invest in Equity
The following three accounts are needed to deal in Equities
1)Bank Account with a Bank – Holds funds
2)Demat Account with a Depository – Holds stocks/share
3)Trading Account with Stock Broker – Execute stock buy/sell transactions

Settlement Cycle - Executed trades are settled on Trade + 2 working days


Risks and Mitigating Factors
Key Risks associated with Equity Markets
Stock Prices are sensitive to multiple factors: Political environment, Economy,

Industry and Company.



Lose Money !! - No Capital Protection
Risk of low dividends.
Risks can be broadly classified as Systematic Risk(arises due to the collapse of the

overall economy) and Unsystematic Risk(specific to industry or company)


Key Mitigating Factors


Maintain a well diversified Equity portfolio.

Actively monitor stocks.


Invest only in well researched stocks and for long term.


Do not invest based on rumors, hearsay or ‘tips’.



Terminology
Stock, Share, Equity or Scrip: They generally mean the same thing; represent the
ownership of a company.

Blue Chip Stocks: These are stocks of typically large, well-established and financially
sound and profitable companies that have operated for many years and that have dependable

earnings, often paying dividends to investors.

Large Cap, Mid Cap and Small Cap Stocks: Different categorisation of stocks based
on their market capitalisation(Outstanding shares x Market value). Large cap is 20000 Cr+;

Mid Cap is 5000 Cr to 20000 Cr and Small cap is less than 5000 Cr

Investing vs Trading: Investing takes a long-term approach to the markets. Trading


involves short-term strategies to maximize returns daily, monthly, or quarterly.

SENSEX(BSE) and NIFTY(NSE): These are indices of a stock market that are
calculated on the basis the price of a few stocks (around 30 to 50) and reflect overall market

sentiment and direction of price movements of products in that market.

Liquidity: It refers to the ease with which an asset or security can be converted into ready
cash without affecting its market price. The most liquid asset of all is cash itself.

Question and Answers

Thank You

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