Stock market Basics
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The document provides an overview of the stock market, including its definition, history, and key terminologies. It highlights the structure of stock exchanges in India, particularly the Bombay Stock Exchange and the National Stock Exchange, and discusses different types of stocks and their classifications. Additionally, it addresses trading mechanisms such as dematerialized accounts and reasons for investing in stocks through dividends and capital gains.
Stock market Basics
- 1. Stock Market Presented by- • Vignesh Dongare • Priyanka Acharya • Sreya Bhattacharya • Dinesh Naval • Rubina Mohammed
- 2. What is stock market? • A portion of ownership in a corporation. It is a way for a corporation to raise money. Also known as shares or equities. • Stock exchange is where stockbrokers and traders can buy and sell shares, bonds and other securities. • As of 2016, 60 stock exchanges in the world. • Few leading stock exchanges in the world: New York Stock Exchange (NYSE) National Association of Securities Dealers Automated Quotations (NASDAQ) National Stock Exchange (NSE) Bombay Stock Exchange (BSE)
- 3. Terminologies • Stock market condition: Bear Market Bull Market • Bid • Ask • Bid-ask spread • Liquidity • Limit order • Trading volume • Exchange-Traded Funds • Intra-day trading • Market capitalisation • Dividends • Good-till-cancelled order
- 4. History • Corporate shares started being traded in the 1830s in Bombay (now Mumbai) with the stock of Bank and Cotton presses. • The simple and informal beginnings of stock exchanges in India take one back to the 1850s when 22 stockbrokers began trading opposite the Town Hall of Bombay under a banyan tree. The tree still stands in the area which is now known as Horniman Circle. • as the number of brokers increased, finally settling in 1874 at what is known as Dalal Street. • This as yet informal group known as the Native Share and Stockbrokers Association organized themselves as the Bombay Stock Exchange (BSE) in 1875 • The BSE is the oldest stock exchange in Asia and was the first to be granted permanent recognition under the Securities Contract Regulation Act, 1956.
- 5. History (Continued) • SEBI was born in 1988 as a non-statutory body. It was made a statutory body in 1992. • After the Harshad Mehta scam in 1992, there was a pressing need for another stock exchange large enough to compete with the BSE and bring transparency to the stock market. This gave birth to the National Stock Exchange (NSE). It was incorporated in 1992, become recognized as a stock exchange in 1993, and trading began on it in 1994. • It was the first stock exchange on which trading took place electronically. In response to this competition, BSE also introduced an electronic trading system known as BSE On-line Trading (BOLT) in 1995.
- 6. Stock Exchanges in India • At present, a total of 7 stock exchanges are recognized in India regulated by Security Exchange Board of India (SEBI). • Two major stock exchanges in India- BSE and NSE. Bombay Stock Exchange (BSE) • Founded: 09th July 1875 • No. of Listings: 5439 • Index: SENSEX • Market Cap: US$3.6 trillion National Stock Exchange (NSE) • Founded: 1992 • No. of Listing: 1952 • Index: NIFTY 50 • Market Cap: US$3.1 trillion
- 7. Types of Stock • Income Stock: stock that pays dividends at regular times in a year • Growth Stock: pays few to no dividends. All profits are reinvested in the business. Owners of growth stock are interested in making money through capital gains.The company determines what stock it offers. • Common Stock: stockholders are voting owners of the company. • But, most people own such a small percent of a company’s shares, they do not wish to vote on company decisions. • Preferred Stock: stockholders do not vote in company decisions, but receive dividends before owners of common stock.
- 8. Sectors representing BSE 6.16% 5.69% 5.69% 15.18% 4.19% 43.45% 15.01% 1.38% 1.10% 1.89% Automobile Cigrarettes Consumer goods Energy Engineering Financial services Information Technology Metals & Mining Pharma Telecom
- 9. Sectors representing NSE 37.87% 13.97% 12.59% 10.49% 8.90% 4.00% 3.87% 2.88% 1.89% 1.77% 0.72% 0.65% 0.61% Financial services Energy IT Consumer goods Automobile Construction Metals Pharma Cement & Cement products Telecom Media and Entertainment Services Fertilisers & pesticides
- 10. Dematerialized account (DEMAT) • Account to hold financial security in electronic form. • Maintained by two depository organizations in India. National Securities Depository Limited Central Depository Services Limited • How to open a Demat account? 2. Submit a duly filled account opening form and KYC form. Documents like PAN card, cancelled cheque need to be submitted. 3. Instruction slips are also given by DP which are used for depository service like transfer, purchase, etc. 4. Demat Account with any DP can be applied for online as well. 1. Decide on a Depository Participant (DP). (authorized bank, financial institution or broker).
- 11. How to select a broker for trading? • Look at commissions on the investments you'll use most. • Look for brokers with a track record of reliability. • Pay attention to account minimums. • Watch out for account fees. • Look at the pricing and execution fine print. • Consider tools, education and features.
- 12. Why should I buy stock? Stockowners can earn a profit in two ways: 1. Dividends: portions of a corporation’s profit. They are paid out to stockholders of many corporations every quarter (3 months). The higher the corporate profit, the higher the dividend. If a corporation makes no profit, there is no dividend. The second way stockholders earn money: 2. Capital Gain: When a stock holder sells stock for more than he or she paid for it. Ex. I buy a share of XYZ Co. stock for Rs10. The value of the stock increases to Rs.10, and I sell it for a profit of Rs.10. When a stock holder sells stock for less than he or she paid, it is a capital loss.
- 13. Stock market classifications On the basis of ownership •1. Preferred & common stocks. •2. Hybrid stocks. •3. Stocks with embedded- derivative options. On the basis of market capitalization 1. Small- cap stocks. 2. Mid-cap stocks. 3. Large-cap stocks. On the basis of dividend payments 1. Income stocks. 2. Growth stocks. On the basis of risk 1. Blue-chip stocks. 2. Beta stocks On the basis of price trends 1. Cyclical stocks. 2. Defensive stocks.
- 14. Stock market crashes • A rapid and often unanticipated drop in stock prices. • Side effect of major catastrophic event, economic crisis, or the collapse of a long-term speculative bubble. • Famous stock market crashes: The Great Depression, 1929 Black Monday of 1987 The 2001 dotcom bubble burst The 2008 financial crises The 2020 COVID-19 pandemic Stock market crash of 1987
- 15. Live Trading
- 16. Thank You!