115 - Indian Stock Market - Sumit Dwivedi

First Step Guide To
Stock Market!!!
ICFAI BUSINESS SCHOOL
Sumit Dwivedi
STOCK MARKET
WORKING
REGULATORY FRAMEWORK
WHY DO PEOPLE BUY SHARES?
WHY STOCK MARKET IS SO VOLATILE?
HOW TO MAKE MONEY IN STOCK MARKET?
ROLE OF STOCK MARKET IN ECONOMY
INTRODUCTION
Stock
market??
The market for long term securities like bonds,

equity stocks is divided into PRIMARY MARKET and
SECONDARY MARKET.
PRIMARY MARKET
Deals with the new issues of securities.
SECONDARY MARKET
Deals with outstanding securities.
Also known as STOCK MARKET.
JARGON OF EQUITY
MARKET
SECURITY
BOND
STOCK
1)COMMON STOCKS
2)PREFERRED STOCKS
SHARE
MUTUAL FUNDS.
PAR VALUE vs. MARKET VALUE
BULLISH vs. BEARISH
How Does The Stock Market

Function?
Stock exchanges
Brokers
Registrars
Depositories and their participants
Securities and Exchange Board of India (SEBI)
MARKET INDICES
Stock market indices are the barometer of the stock
market.
BSE SENSEX,NSE-Nifty etc are some of the market indices.
Their usefulness:
Indices help to recognize broad trends in the market.
The investor can use the indices to allocate the funds
rationally among the stocks.
Technical analysts use these indices to predict the future
market.
Indices function as a status report on the general
economy.
JOB OF THESE INDICES
These indices have just one job: To capture the

price movement. So a stock index will reflect the price
movements of shares while a bond index captures the
manner in which bond prices go up or down.
WHO SELECTS THESE STOCKS?

They are selected by the Index committee.
Some of the criteria they follow include :
1)Market capitalization.
2)Liquidity.
3)Continuity.
4)Industry representation.
5)Listed history.
COMPUTATION OF STOCK
INDEX
A stock market may either be a price index or a wealth
index. In India most of the indices are using wealth index for
computation of stock market.
Face value=Rs.10/No. of
Market
Market
Market
Market
Compan
y
shares
Price
on
09/02/0
6
cap
(Rs.)
Price
on
18/02/0
6
cap
(Rs.)
TATA
10
20/-
200/-
30/-
300/-
INFOSY
S
20
30/-
600/-
40/-
800/-
IBM
20
100/-
2000/-
150/3000/-
TOTAL
MARKE
T CAP
2800/-
4100/-
Base value=100/Index present value=

(100*4100)/2800=
146.428
SO HOW DOES ONE BUY

SHARES?
There are basically two ways in which you can invest in
shares:
Purchase shares from
the primary market
(i.e. IPO's)
Trade in the
secondary
market, i.e.
stock exchanges.
WHY STOCK PRICE RISES?

The price of every stock increases or decreases for the
following possible reasons:
News about company.

News about the country.
Exchange rate regime.
Depends on demand
and supply for that stock.
Why Must I Invest In

Shares?
Why need I invest ?
So what are the various
investment options ?
Why shares ?
Other Benefits Of Investing In

Shares?
Because they can make big money on it. Compared to your
investments in fixed deposits in banks it makes more profits ,but
the bad news is that you are also expected to bear the losses ,if
any.
1) Possibility of high returns
2) Easy liquidity
3) Unbeatable tax benefits
4) Income from dividends
What Are The Expenses During a

Transaction?
Capital gains tax
Securities transaction
tax
Brokerage
Depository fees
WHY STOCK MARKET IS SO

VOLATILE?
Acceptance of globalisation,internationalisation and
integration of the Indian market with the world markets.
Introduction of flexible exchange rate regime.
Intro of new, innovative ,hybrid financial instruments.
Human element.
Technological changes.
HOW TO MAKE MONEY IN

STOCK MARKET?
Patience, Profound Knowledge.
Best Guess.
Diversification .
Portfolio
Management.
ROLE OF MARKET ACTIVITIES

IN ECONOMY
In theory they are required to facilitate, support, enable the
healthy growth and functioning of primary markets but in
practice they are not .
The current focus of thinking on the SENSEX, market
capitalization etc.reflects an excessive preoccupation with the
secondary market activity.
Beyond a point, the expansion of the secondary markets may
reduce the volume of activity not only on the new issue market
but also in the banks, other financial institutions, gold, real estate
and commodities.
The multiple serious problems visiting the stock market caution
us against too much optimism and enthusiasm about the stock
market.
DRAWBACKS OF INDIAN STOCK

MARKET
Unethical practices.
Big irrational greed, excessive speculation.
Lack of protection to interests of the genuine and small
investors .
Trading is extremely thin and restricted.
Structural and organisational imbalance in the growth of the
stock market.
Volatility of the market has increased over the years.
REMEDY
So in order to make it flawless system authorities should initiate
certain measures such as
Single authority
Demutualization.
Prescribing capital adequacy norms.
Stricter registeration of brokers
Margin requirements .
ACKNOWLEDGEMENTS
I owe special thanks to Deep kiran and Sveta Shenoy for their
help.
References:
www.sharekhan.com
www.investopedia.com
Thank You!
Brijesh Gupta

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First Step Guide To

ICFAI BUSINESS SCHOOL

The market for long term securities like bonds,

How Does The Stock Market

JOB OF THESE INDICES

These indices have just one job: To capture the

WHO SELECTS THESE STOCKS?

Base value=100/Index present value=

SO HOW DOES ONE BUY

WHY STOCK PRICE RISES?

News about company.

Why Must I Invest In

Other Benefits Of Investing In

What Are The Expenses During a

WHY STOCK MARKET IS SO

HOW TO MAKE MONEY IN

ROLE OF MARKET ACTIVITIES

DRAWBACKS OF INDIAN STOCK

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