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STOCK MARKET BASICS FOR

COMPLETE BEGINNERS

SARANYA GOPIKRISHNA B.E., MBA (FINANCE)

NSE CERTIFIED TECHNICAL ANALYST

5 YRS EXPERIENCE IN STOCK MARKET


ARE YOU A COMPLETE BEGINNER ?

OR

DO YOU HAVE SOME BASIC KNOWLEDGE ABOUT STOCKS ?


SESSION OUTLINE

1 WHY SHOULD WE INVEST IN STOCK MARKET ?

2 WHAT IS STOCK MARKET ?

3 WHY DOES A COMPANY ISSUE SHARES ?

4 WHAT ARE THE BENEFITS OF BUYING SHARES ?

5 HOW TO SELECT THE STOCKS FOR INVESTMENT ?

6 HOW TO PLACE YOUR FIRST ORDER ?


CAN YOU GUESS ?

How much % of Indians invest in the stock market ?

1 12.5 %

2 55 %

3 2.5 %
WHICH IS THE BEST WAY TO GET RICH ?
WHICH IS THE BEST WAY TO GET RICH ?

MAKE YOUR MONEY WORK FOR YOU !


8
9
HOW MUCH MONEY CAN YOU EARN BY
INVESTING Rs. 1000 / MONTH IN
STOCKS ?

AMOUNT : Rs. 1000


CHECK RESULT
DURATION : 20 YEARS
BURSTING THE MYTHS
MYTH

STOCK MARKET IS RISKY .

FACT

1. MEDIUM RISK FOR LONG-TERM


2. LEARN THE BASICS TO REDUCE RISK
MYTH

WE NEED MORE MONEY TO INVEST


IN STOCKS

FACT

YOU CAN INVEST AS LITTLE AS 100 RS PER MONTH.


MYTH

WE CAN MAKE QUICK MONEY IN THE


STOCK MARKET

FACT
JUST LIKE EVERY OTHER PROFESSION , STOCK
MARKET ALSO REQUIRES QUALITY EDUCATION
AND THERE IS NO SHORTCUT FOR QUICK MONEY..
LET’S SUMMARIZE !!

● Stocks are the best money making tool .


● FD vs Stocks . Why stocks are better than FD .
● Returns after 20 years for 1000 Rs investment every
month.
● Bursting the myths .
SESSION OUTLINE

1 WHY SHOULD WE INVEST IN STOCK MARKET ?

2 WHAT IS STOCK MARKET ?

3 WHY DOES A COMPANY ISSUE SHARES ?

4 WHAT ARE THE BENEFITS OF BUYING SHARES ?

5 HOW TO SELECT THE STOCKS FOR INVESTMENT ?

6 HOW TO PLACE YOUR FIRST ORDER ?


5
5000 COMPANIES 3000 COMPANIES
LISTED LISTED
SECTORAL INDICES

Sectoral indices are calculated using the share


prices of top companies in the sector.
Example :
● Nifty IT ( IT companies )
● Nifty Bank ( banks)
● Nity FMCG ( FMCG companies)
● Nifty pharma ( Pharmaceutical companies)
● Nity Metal (steel and other metal related companies )
● Nity Auto ( automobile companies )

www.moneycontrol.com
TOP- DOWN VS BOTTOM- UP INVESTING

TOP - DOWN INVESTING

This method allows investors to analyze


the market from the big picture all the
way down to individual stocks.

BOTTOM - UP INVESTING

This method begins with individual


stocks' fundamentals and eventually
expands to include the global economy.
TOP DOWN APPROACH

HAND SANITISERS , HAND WASH , SOAP

INSTEAD OF BUYING THE PRODUCTS ,


PERSONAL HYGIENE SEGMENT
LET’S TRY BUYING THE COMPANIES
THAT MANUFACTURES THEM !
FMCG SECTOR

TOP 5 COMPANIES

HINDUSTAN UNILEVER LTD.


BOTTOM UP APPROACH

Investment in Coal India looks


promising by looking through the
company’s financial statements

COAL INDIA

We can then proceed to perform


industry analysis

ENERGY SECTOR

And then we move on to the broader


economy INDIAN ECONOMY
LET’S SUMMARIZE !!

● Stock market is similar to a supermarket , and the stocks


of the companies are sold instead of their products.
● NSE vs BSE
● Nifty and sensex
● Sectoral indices
● Top down approach vs Bottom up approach
7-DAYS QUIZ CONTEST

How many companies are listed in NSE and BSE ?

1 5000 & 2000

2 5000 & 3000

3 3000 & 5000

Comment your answers below !


QUIZ TIME

Sensex is calculated using the share prices of 50 companies and


Nifty is calculated using the share prices of 30 companies.

1 True

2 False
QUIZ TIME

Arrange the sectoral indices for the following companies:


Tata Motors , Dabur , Tata steel

Nifty Auto , Nifty Energy ,


1 Nifty Metal

Nifty Auto , Nifty FMCG ,


2
Nifty Metal

3 Nifty Midcap , Nifty Auto ,


Nifty Metal
QUIZ TIME

In this method , we start from the Economic factors


and move towards the company analysis.

1 Top Up method

2 Top Down method

3 Bottom up method
QUIZ TIME

I would love to invest in Tata motors , because of it’s Electrical


Vehicles Segment . Now which method should I follow ?

1 Top Up method

2 Top Down method

3 Bottom up method
SESSION OUTLINE

1 WHY SHOULD WE INVEST IN STOCK MARKET ?

2 WHAT IS STOCK MARKET ?

3 WHY DOES A COMPANY ISSUE SHARES ?

4 WHAT ARE THE BENEFITS OF BUYING SHARES ?

5 HOW TO SELECT THE STOCKS FOR INVESTMENT ?

6 HOW TO PLACE YOUR FIRST ORDER ?


WHAT DOES A COMPANY DO IN CRISIS ?
BORROW MONEY
ISSUE SHARES TO
FROM BANKS OR
THE PUBLIC
COMPANY - ISSUE SHARES

INVESTORS OWNER

25 % OWNERSHIP 75 % OWNERSHIP

STOCKS VS SHARES : Stocks is a broader term , Shares is a narrow term.


IPO ( INITIAL PUBLIC OFFERING ) : ISSUING SHARES TO THE PUBLIC FOR THE FIRST TIME.
25 % OWNERSHIP 75 % OWNERSHIP
STOCKBROK RAISING MONEY FROM PUBLIC THROUGH IPO :
HOW TO APPLY FOR IPO ?

ASBA METHOD :

ASBA abbreviated as Application Supported by the Blocked Amount, is the simple


application process using which investors can apply for an IPO.

STEPS :

● Login to your Net Banking account

● Go to the option of “ASBA”

● If you are applying for the 1st time you need to register by entering the details
like PAN.

● You will also need to enter the 16 digit “Demat Account” number where the
shares will be transferred if the allotment is successful.

Website to check IPO details : https://www.chittorgarh.com/


LET’S SUMMARIZE !!

● Company will issue shares when they are in need of


money (IPO )
● Primary market vs Secondary market
● How to apply for IPO?
QUIZ TIME

If the person ‘A’ has shares of multiple companies , then he


can call them collectively as__________

1 Multiple Shares

2 Stocks

3 Multiple stocks
QUIZ TIME

Full form of ASBA

Application Supported by
1
the Blocked Amount

Application Supported by
2
the Blocked Account

3 Account Supported by the


Blocked Amount
QUIZ TIME

The person ‘A’ has applied for the IPO of “ CompanyXYZ“ . He has been
allotted with the shares and he sold the share for some profit on the first
day of listing . It is termed as ………

1 Capital gains

2 Listing gains

3 IPO gains
QUIZ TIME

If I’m applying for an IPO ( Initial Public Offering ) , in


which the lot size is 1200 . Can I buy 2100 shares ?

1 YES

2 NO

3 MAY BE
QUIZ TIME
SESSION OUTLINE

1 WHY SHOULD WE INVEST IN STOCK MARKET ?

2 WHAT IS STOCK MARKET ?

3 WHY DOES A COMPANY ISSUE SHARES ?

4 WHAT ARE THE BENEFITS OF BUYING SHARES ?

5 HOW TO SELECT THE STOCKS FOR INVESTMENT ?

6 HOW TO PLACE YOUR FIRST ORDER ?


● Once the stocks are listed in stock exchange , people can trade
them.

● When a person buys shares , he will get shares , the ownership


rights and other benefits like dividend , bonus etc.
Story for illustration purposes only
By the end of this section, your audience
should be able to visualize:

➔ What
What is the pain you cure with your
solution?

➔ Who
Show them a specific person who
would benefit from your solution.
LINK :
https://www.moneycontrol.com/india/stockpricequote/personal-care/hindustanunilever/HU#advchart
3. Examples
People need to understand how rare or
frequent your examples are.

Pick 1 or 2 statistics and make them as


concrete as possible. Stats are generally not
sticky, but here are a few tactics:

➔ Relate
Deliver data within the context of a
story you’ve already told

➔ Compare
Make big numbers digestible by putting
them in the context of something
familiar
Source: travel.trade.gov
4. Closing
Build confidence around your product or idea
by including at least one of the these slides:

➔ Milestones
What has been accomplished and what
might be left to tackle?

➔ Testimonials
Who supports your idea (or doesn’t)?

➔ What’s next?
How can the audience get involved or
find out more?
Good luck!
We hope you’ll use these tips to go out and
deliver a memorable pitch for your product
or service!

For more (free) presentation tips relevant to


other types of messages, go to
heathbrothers.com/presentations

For more about making


your ideas stick with
others, check out our book!
Good luck!
We hope you’ll use these tips to go out and
deliver a memorable pitch for your product
or service!

For more (free) presentation tips relevant to


other types of messages, go to
heathbrothers.com/presentations

For more about making


your ideas stick with
others, check out our book!
Good luck!
We hope you’ll use these tips to go out and
deliver a memorable pitch for your product
or service!

For more (free) presentation tips relevant to


other types of messages, go to
heathbrothers.com/presentations

For more about making


your ideas stick with
others, check out our book!
LET’S SUMMARIZE !!

Benefits we will get after we buy the shares


● Capital gains
● Dividend
● Bonus shares
● Stock split
● Rights issue
● Buybacks
QUIZ TIME

If the Company “ XYZ” distributes it’s profits to it’s shareholders


annually , then it is termed as ………

1 Final Dividend

2 Interim Dividend

3 Quarterly Dividend
QUIZ TIME

If my company “Stockbrok” declares bonus shares to


it’s shareholder in the ratio of 5:1 , then the
shareholders will get __________

1 1 free share for every 5


shares

2 5 free shares for every 1


share

3 6 shares totally
QUIZ TIME

If my company “Stockbrok” (trading at 1000Rs) declares stock split


in the ratio of 1:10 , then the shareholders will get __________

1 10 shares of 1000Rs each

2 10 shares of 100Rs each

3 10 shares of 500Rs each


QUIZ TIME

The person ‘A’ holds 9 shares of the company “Stockbrok” . The


company has declared rights issue to it’s shareholders in the ratio
of 1: 10 . Does the rights issue apply to the person ‘A’ ?

1 Yes

2 No

3 Maybe
QUIZ TIME

If my company “ Stockbrok “ has huge future prospects and I want


to enjoy the profits of my company . So i’m deciding to buy the
shares back from my shareholders. This process is called …….

1 Buybacks

2 Return back

3 Sellback
SESSION OUTLINE

1 WHY SHOULD WE INVEST IN STOCK MARKET ?

2 WHAT IS STOCK MARKET ?

3 WHY DOES A COMPANY ISSUE SHARES ?

4 WHAT ARE THE BENEFITS OF BUYING SHARES ?

5 HOW TO SELECT THE STOCKS FOR INVESTMENT ?

6 HOW TO PLACE YOUR FIRST ORDER ?


WHAT DO YOU WISH FOR?

PASSIVE INCOME WEALTH CREATION


OR

SHORT -TERM INVESTMENT LONG-TERM


INVESTMENT
PASSIVE INCOME OR
WEALTH CREATION

DAY TRADING INVESTING


TRADING
SWING TRADING
68
69
FUNDAMENTAL ANALYSIS

It is the art of evaluating the intrinsic value of a stock to find long-term investing
opportunities.

STEP 1: SELECT STOCKS USING SCREENER.IN

STEP 2 : BASIC DETAILS ABOUT THE COMPANY

Before you invest in a company , you must know few basic details about company .
These includes

● Chief Executive Officer (CEO)


● Business Model ( Strategy used by the company to increase profits)
● SWOT Analysis (Strength,Weakness,Opportunities and Threats)
● Competitive Advantage over its competitors (or Economic MOAT)
● Future prospects (future plans that will make the company sustain in the
market)
How to select stocks using screener.in ?

Screener.in helps to analyse fundamentals of stocks before making any investment


decision.

While we are selecting stocks for investment , what kind of criteria we will have in
our mind ?

1 -> It should be safe ( well established companies - blue chip companies - large cap
companies )

2 ->Debt must be very low or zero debt.

3 -> Undervalued stocks ( bargain price)

4 -> Want to get some benefit (high dividend paying stocks )

5 ->Affordable (within the budget )


TO FIND LARGE CAP COMPANIES :

Market capitalization: It refers the total market value of a company’s


outstanding shares.

Market capitalisation = Number of outstanding shares * Current market


price of each share

● Small cap companies: Market capitalization < 8,500 Cr


● Mid cap companies: Market cap- between 8,500 Cr and 28,000 Cr
● Large cap companies: Market cap > 28,000 Cr

Can you guess the query to find the list of mid-cap companies with
market capitalisation greater than 10,000?
MARKET CAPITALISATION > 10,000
HOW TO FIND DEBT-FREE COMPANIES?

If you are investing in a company for the long-term, make sure that it’s
debt-free. Or at least that it doesn’t have more debts than its asset.

● If the debt to equity ratio is equal to zero, it means that the companies
are basically debt-free.
● If the debt to equity is equal to 1, it means that the debt is equal to
equity.
● If the debt to equity is less than 1, it means that the debt is lesser than
equity.

Can you guess the query to find the list of blue chip companies
with low debt-equity ratio ?
HOW TO FIND LOW PE STOCKS?

● It is used to find out whether the stock is overvalued or undervalued.

● PEs below 20 may provide good investment opportunities; lower the PE


below 20, more attractive the investment potential.

● But it is sector specific , if some sector is going rapidly like IT sector , then
the top companies would be having PE > 20

● So ideally , PE Ratio of a company must be lower than the other companies


in the same industry.

Can you guess the query to find the list of blue chip companies
with low debt-equity ratio and low PE ?
HOW TO FIND HIGH DIVIDEND STOCKS?

● To find the list of high dividend stocks, you can use dividend yield in the
query.
● Dividend yield: A stock’s dividend yield is calculated as the company’s
annual cash dividend per share divided by the current price of the stock
and is expressed in annual percentage.
● If you want to find the list of all the companies whose dividend yield is
greater than 4%, you can write the following query:
Dividend yield > 4

Can you guess the query to find the list of blue chip companies
with low debt-equity ratio , low PE and paying high dividend?
IMPORTANT RATIOS :

● Current ratio ( >2 is good ) : It is useful in helping you measure


liquidity.

● Quick ratio( >1 is good ) ; It represents a company's ability to pay


current liabilities with assets that can be converted to cash quickly.

● Return on equity > 18% : It measures profitability and how effectively


a company uses shareholder money to make a profit.The higher the
ROE, the better the company is at generating profits using
shareholder equity.
Sample Query
You can create your own screen based on your needs.

Now let’s assume you are looking for long-term investment and you want stocks
which are less risky and give stable returns.
(Let’s assume you are looking for stocks with Rs.300 price range)

You can try out this sample query :

Market Capitalization >30000 AND


Debt to equity <1 AND
Price to Earning <20 AND
Dividend yield >2 AND
Return on equity >20 AND
Return on assets>5 AND
Current price <1000 AND
Current ratio >1 AND
Quick ratio >1

https://www.stockbrok.com/select-stocks-using-screener-website/
QUIZ TIME

The Company A has Market cap of 25,000 crores.


In which category , does it belong to ?

1 Small Cap

2 Mid Cap

3 Large Cap
QUIZ TIME

If there are 2 companies ,Company A and Company B .


Company A has PE ratio of 70.12
Company B has PE ratio of 19
In which company will you invest ?

1 Company A

2 Company B
QUIZ TIME

If there are 2 companies , Company A and Company B


Company A has Debt- equity ratio <1
Company B has Debt- equity ratio >1
In which company will you invest ?

1 Company A

2 Company B
QUIZ TIME

If there are 2 companies , Company A and Company B


Company A has Dividend yield > 3
Company B has Dividend yield < 2
In which company will you invest ?

1 Company A

2 Company B
QUIZ TIME

If there are 2 companies , Company A and Company B


Company A has Return on Equity > 20
Company B has Return on Equity <10
In which company will you invest ?

1 Company A

2 Company B
WILL YOU INVEST IN COAL INDIA ?
WILL YOU INVEST IN RELIANCE COMMUNICATION ?
WILL YOU INVEST IN NMDC ?
SOME TIPS :

● Diversify your portfolio

● Buy at ATL ( all time low) , sell at ATH ( all time high )

● Sector rotation

● Dollar cost averaging method to buy our favourite


stocks.

● Managing risk using stop loss


GOLDEN RULES FOR INVESTING

WARREN BUFFETT’S SUCCESS MANTRA

87
RISK MANAGEMENT :

Capital 10,000Rs. Stockbrok is trading at 100Rs. Risk per trade is 1% (for beginners)

I’m willing to lose only 1% of 100 Rs. So I risk only 1Rs per share.
And my stop loss is at 99Rs.

How much quantity should we buy ?

Risk per trade : 1 % ( for beginners) = 1% of 10,000 = 100 Rs.

Calculate Quantity
Qty = Risk per trade / ( Entry - SL )
= 100 / (100-99 ) = 100

So you can buy 100 shares of “stockbrok” with 10,000Rs capital and when the stock reaches
99 Rs you can safely exit. So that you will never lose more than 100 Rs. in a trade.
LET’S SUMMARIZE !!

● Investing vs Trading
● Day Trading vs Swing Trading
● Some Tips
QUIZ TIME

If I want to buy shares and hold it for few days and sell them to get
some profit , then I’m called as ……..

1 Day trader

2 Intraday trader

3 Swing trader
QUIZ TIME

If I have the capital of 1Lakh Rs. , then how much is my Risk per
trade as a beginner …………

1 1000Rs.

2 10,000Rs.

3 100Rs.
QUIZ TIME

Capital =1 Lakh Stock Price = 210Rs Stop Loss = 200 Rs.

Quantity = risk per trade /(Entry-Stop loss)

Calculate the Number of shares , a beginner can buy ?

1 1000 shares

2 100 shares

3 200 shares
SESSION OUTLINE

1 WHY SHOULD WE INVEST IN STOCK MARKET ?

2 WHAT IS STOCK MARKET ?

3 WHY DOES A COMPANY ISSUE SHARES ?

4 WHAT ARE THE BENEFITS OF BUYING SHARES ?

5 HOW TO SELECT THE STOCKS FOR INVESTMENT ?

6 HOW TO PLACE YOUR FIRST ORDER ?


94
Types of order :

● Market order ( Buying at


the curent market price)

● Limit order (buying at the


specified price )

● After market order


LET’S SUMMARIZE !!

● Stock brokers
● Types of accounts
● Share Market timings
QUIZ TIME

Which of the following account stores your shares in an electronic


format ?

1 Trading account

2 Demat account

3 Savings account
QUIZ TIME

If I place order for buying shares at 7P.M. , then it is said to be …………

1 After Mark Order

2 Access Market order

3 After Market order


QUIZ TIME

If “ Stockbrok “ is trading at 210Rs. , but I want to buy at 200Rs. So, I


specify the price of 200Rs ,while placing the order . This order is called as
______

1 Specific order

2 Limit order

3 Market order
THANK YOU !

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