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Stock Market
1.1 Stock Plain and simple, a stock is a share in the ownership of a company. A stock represents a claim on the company's assets and earnings. As you acquire more stocks, your ownership stake in the company becomes greater. (Note: Sometimes different words like shares, equity, stocks etc. are used. All these words mean the same thing.) 1.2 Share Market A Share market or Stock market, is a private or public market for the trading of companystock and derivatives of company stock at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.
The stocks are listed and traded on stock exchanges which are entities a corporation or mutual organization specialized in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together. Stock market is known as the cradle of capitalism. It is a place where companies come to raise their share capital and investors go to invest their surplus funds. Stock market essentially discharges the functions of "the invisible hand" that channels investment into the most productive ventures so as to optimize the overall productivity of the economy. Stock Market is a place where financial instruments like shares, debentures, commercial papers, bonds etc. are bought and sold. Stock markets are popularly known as stock exchanges. There are many popular stock markets in the world. NASDQ, Tokyo Stock Exchange, London Stock Exchange are the most popular of the lot. There are many participants in a stock market. Investors, Speculators, Arbitrators, Traders are different type of participants of a Stock Market Brokers are intermediaries who bring together various participants in a Stock Market.
Shares in the Share Market are either traded through:(a) Stock Exchange (b) Over-the -Counter (OTC) (a) Stock Exchange
These are organized market places where stocks, bonds are other equivalents are traded between the buyers and sellers where exchange acts as counter-party to both the participants in case of any default. The contracts are standardized and not customized ones. For example, NYSE, NASDAQ, NSE, NIKKEI, etc.
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Share Trading are done in three ways:(a) Offline Share Trading (b) Online Share Trading (c) Open Outcry Trading (a) Offline Share Trading In this form of trading the customer either goes to the share broker's place and sits before the share trading terminal and asks the dealer to place orders in his account. or rings the share broker, asks the share quotes and other relevant informations, and accordingly places orders over the phone. (b) Online Share Trading The client could avail the share market and could place his order on his own from any place he wants, provided he has a computer with an Internet connection. (c) Open Outcry Trading Here, the investors put their orders through the brokers and these share brokers in turn place and execute orders on behalf of them on the floor of the exchange. These brokers gather in a particular place on the trading floor known as Trading Post. There is a person called as the Specialist present in the trading post who does the matching of the buy and sell orders. This type of auction method is called Open Outcry Method. 2. Online Share Trading Online Share Trading is becoming the order of the day in share trading. Now-a-days one could hardly see a person going to the stock exchange floor and placing his order. Electronic media has played an important role in flourishing the share market. In case of online share trading an investor could place his order from his own house if he has internet connection.
There are two types of trading that can be done through online share trading 1. Intra-day Trading 2. Delivery Trading 2.1 Intra-day Trading They enter and exit out of the market like the thief in the night. Traders continuously have a watch on the market during the trading hours and the moment they see any opportunity arising they pounce on it for scalping the profit out. These types of trading generally are risky in nature. They buy and sell stocks during the same day. Intraday Traders are of two types:a. Scalp Traders b. Momentum Traders a. Scalp Traders :Investors who perform many trades per day for scalping out small profits out of the bidask spread from each trade are known as scalp traders. b. Momentum Traders :Investors who pounce on those stocks which move significantly in one direction and book desired profit are called momentum traders. They do this within a day.
2.2 Delivery trading :The investor buys the share for holding purposes. The brokerage charges are a bit more than the intraday ones. Delivery Traders are : a.Technical Traders b. Fundamental Traders c. Swing Traders a. Technical Traders :They believe that buying/selling signals are present within the graphs and charts of the stock. b. Fundamental Traders :They perform trade on the basis of study of fact-sheets of the company like historical profit graph, balance sheet, anticipated earning reports, stock splits, mergers and acquisitions, etc. c. Swing Traders They are basically fundamental traders who take delivery of trades for a span of short period generally more than one day. In this electronic form of trading, the shares are not in the physical form for their inconvenience to handle. So, they are now converted to dematerialized form . So, one investor does not have to worry about the safety of the physical shares because the bought shares get transferred to the respective D-mat account. Thus, online share trading has helped the investors a lot as it is hassle-free and time efficient. For the intraday traders the brokerage costing is minuscule in comparison to the delivery trades.
STOCK EXCHANGE
What is Stock Exchange? Definition of Stock Exchange: The securities regulations act of 1956 defined stock exchange as an association, organisation, or an individual which is established for the purpose of assisting, regulating, and controlling business in buying, selling and dealing and dealing in securities. Meaning: This comes under treasury sector, which provides service to stock brokers & traders to trade stocks, bonds and securities. A stock exchange helps the companies to raise their fund. Therefore the companies needs to list themselves in the stock Exchange and the shares will be issued which is known as equity or a ordinary share and these shareholders are the real owners of the Board of Directors of the Company are elected out of these Equity Shareholders only. FEATURES OF STOCK EXCHANGE It is an organised market. It is a securities market. It is an important constituent of capital market i.e. market for long term finance It is a voluntary association of person desirous of dealing in securities. In a Stock Exchange, only the members can deal in i.e. buy and sell securities The members of a stock exchange can buy and sell securities as brokers for & on behalf of their clients. The dealings in a stock exchange are under certain accepted code of conduct i.e. rules and regulations
IMPORTANT FUNCTION OF STOCK EXCHANGE Provide central and convenient meeting places for sellers and buyers of securities Increase the marketability and liquidity of prices of securities Contribute to stability of prices of securities Equalization of price of securities Smoothen price movement Help the investor to know the worth of their holdings Promote the habit of saving and investment Help capital formation help companies and government to raise funds from the investors Provide forecasting service
HISTORY OF STOCK EXCHANGE The Stock Exchange was established by East India Company in 18th century. In India it was established in 1850 with 22 stock brokers opposite to town hall of Bombay. This stock exchange is known as oldest exchange of Asia.
BROKER AND JOBBER BROKER: He is one act as aintermediary on behalf of others. A broker in a stock exchange is a commission agent who transacts business in securities on behalf of non-members. JOBBER: He is not allowed to deal with the public directly .He deals with brokers who are engaged with the investors. Thus, the securities are bought by the jobber from members and sells to members who are operating on the stock exchange as broker. SPECULATION AND SPECULATOR SPECULATION: It is the transaction of members to buy or sell securities on stock exchange with a view to make profits to anticipated raise or fall in price of securities. SPECULATOR: The dealer in stock exchange who indulge in speculation are called speculator. They do not take delivery of securities purchased or sold by them, but only pay or rescue the difference between the purchase price and sale price. The different types of speculators are BULL BEAR STAG LAME DUCK
BULL (TEJIWALA)
He is speculator who expects the future raise in price of securities he buys the securities to sell them at future date at the higher price. He is called as bull because his activities resembles as a bull, as the bull tends to throw its victims up in the air through its horns. In simple the bull speculator tries to raise the price of securities by placing a big purchase orders.
BEAR {MANDIWALA} He is speculator who expects future fall in prices; he does an agreement to sell securities at future date at the present market rate. He is called as bear because his altitude resembles with bear, as the bear tends to stamp its victims down to earth through its paws. In simple the bear speculator forces of prices of securities to fall through his activities.
STAG {DEER} He operates in new issue of market. He is just like a bull speculator. He applies large number of shares in the issue market only by paying, application money, and allotment money. He is not a genuine investor because; he sells the allotted securities at the premium and makes profit. In simple he is cautious in his dealings. He creates an artificial rise in prices of new shares and makes profits.
LAME DUCK He is speculator when the bear operator finds it difficult to deliver the securities to the consumer on a particular day as agreed upon, he struggles as a lame duck in fulfilling his commitment. This happens when the prices do not fall as expected by the bear and the other party is not willing to postpone the settlement to the next period.
IN INDIA
List of Stock Exchange in India
Sr. No. 1 Name of the Exchange Ahmedabad Stock Exchange Ltd. Address: Kamdhenu Complex Opp, Sahajanand College, Panjarapole, Ambawadi, Ahmedabad - 380001 2 BSE Ltd. Address: P J Tower, Dalal Street, Mumbai 400023 3 Bangalore Stock Exchange Ltd. Address: Stock Exchange Towers, 51, 1st Cross, J C Road, Bangalore - 560027 4 Bhubaneswar Stock Exchange Ltd Address: Stock Exchange Bhavan, P- 2, Jayadev Vihar, P. O. Chandrasekharpur, Bhubaneswar - 751023 5 Calcutta Stock Exchange Ltd. Address: 7, Lyons Range, Kolkata - 700001 6 Cochin Stock Exchange Ltd Address: MES Dr P. K. Abdul Gafoor Memorial Cultural Complex, 36/1565, 4th Floor, Judges Avenue, Kaloor, Cochin 682017 07-NOV-2013 PERMANENT 04-JUN-2014 PERMANENT PERMANENT Valid Upto PERMANENT
Delhi Stock Exchange Ltd.,The Address: DSE House, 3/1, Asaf Ali Road, New Delhi - 110002
PERMANENT
Gauhati Stock Exchange Ltd.,The Address: Saraf Building Annexe, A T Road, Gauhati - 781001
30-APR-2013
Inter-Connected Stock Exchange of India Limited Address: International Infotech Park, Tower 7, 5th Floor, Sector 30, Vashi, Navi Mumbai - 400703
17-NOV-2013
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Jaipur Stock Exchange Ltd Address: Stock Exchange Building, JLN Marg, Malviya Nagar, Jaipur - 302017
08-JAN-2014
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Ludhiana Stock Exchange Ltd.,The Address: Feroze Gandhi Market, Ludhiana - 141001
27-APR-2014
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MCX SX Exchange Limited Address: 102A Land Mark, SurenRoad,Chakala,Andheri (East), Mumbai 400093
15-SEP-2014
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Madhya Pradesh Stock Exchange Ltd Address: Palika Plaza, Phase II, 201, 2nd Floor, MTH Compound, Indore 452001
PERMANENT
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Madras Stock Exchange Ltd. Address: P O Box no 183, New No: 30 (old No: 11) Second Line Beach, Chennai - 600001
PERMANENT
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Magadh Stock Exchange Ltd. "SEBI vide order dated September 3, 2007 refused to renew the recognition granted to Magadh Stock Exchange Ltd."
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Mangalore Stock Exchange As per Securities Appellete Tribunal order dated October 4, 2006, the Mangalore Stock Exchange is a de-recognized Stock Exchange under Section 4 (4) of SCRA
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National Stock Exchange of India Ltd. Address: BandraKurla Complex, Bandra (East) Mumbai 400051
PERMANENT
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OTC Exchange of India Address: 92, Maker Towers 'F', Cuffe Parade, Mumbai - 400005
22-AUG-2014
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01-SEP-2014
Address: Shivleela Chambers, 752, SadashivPeth, RB KumthekarMarg Pune 411030 20 The Vadodara Stock Exchange Ltd. Address: Fortune Tower, Sayajigunj, Vadodara - 390005 21 U.P. Stock Exchange Limited Address: Padam Towers, 14/113, Civil Lines, Kanpur - 208001 22 United Stock Exchange of India Limited Address: 25th Floor, Phirozejeejeebhoy Towers, Dalal Street, Fort, Mumbai 400001 21-MAR-2014 02-JUN-2014 03-JAN-2014
Market(Equities) segment of the NSE commenced operations in November 1994, while operations in the Derivatives segment commenced in June 2000. 5.2 NSE has the following major segments of the capital market: (a) Equity (b) Futures and Options (c) Retail Debt Market (d) Wholesale Debt Market (e) Currency futures 5.3 Working Hours NSE's normal trading sessions are from 09:55am to 03:30pm on all days of the week except Saturdays, Sundays and holidays declared by the Exchange in advance.
Features of NSEI
Nationwide coverage i.e., investors from all over country Ringless i.e., it has no ring or trading floor Screen-based trading i.e., trading in this stock exchange is done electronically. Transparency, i.e., the use of computer screen for trading makes the dealings in securities transparent. Professionalization in trading, i.e., it brings professionalism in its functions
Features of OTCEI
1. It is a nation-wide stock exchange. Its operational areas cover entire India. 2. It is a ringless stock exchange. The trading ring (i.e., trading place) commonly found in a traditional stock exchange is not found in the OTCEI. 3. It is a computerized stock exchange
Advantages of OTCEI
1. 2. 3. 4. 5. It helps the investors to have easy and direct access to the stock exchange It helps investors to get fair prices for their securities It provide safety to the investors To provide computerized trading system To provide investors a convenient,effcient and transparent mode of investment
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The SEBI was constituted on 12th April,1988 under a resolution of the Government of India. On 31st January, 1992, it was made a statutory body by the Securities and Exchange board of India Act, 1992. The Companies (Amendment) Act, 2000 has given certain powers to SEBI as regards the issues and transfer of securities and non-payment of dividend
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Function Of SEBI
Regulating the business in stock exchange and any other securities markets. Promoting and regulating self-regulatory organization. Registering and regulating the work of collective investment scheme, including mutual funds. Prohibiting fraudulent and unfair trade practices relating to securities market. Promoting education, and training of intermediaries of securities market Power of SEBI Power to approve the bye-laws of stock exchange Power to inspect the books of accounts Power to grant license to any person for the purpose of dealing in certain areas. Power to delegate powers exercisable by it. Power to try directly the foliation of certain provision of the company Act
Returns for every possible 15 yr period starting from Apr '79 to Aug '04 35.00 30.00 25.00 20.00 15.00 10.00
Mar-94
Mar-95
Mar-96
Mar-97
Mar-98
Mar-99
Mar-00
Mar-01
Mar-02
Mar-03
The Nifty is an indicator of all the major companies of the NSE. If the Sensex goes
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Mar-04
The Sensex is an indicator of all the major companies of the BSE. If the Sensex goes up, it means that the prices of the stocks of most of the major companies on the BSE have gone up. If the Sensex goes down, this tells you that the stock price of most of the major stocks on the BSE have gone down. Just like the Sensex represents the top stocks of the BSE, the Nifty represents the top stocks of the NSE. Just in case you are confused, the BSE is the Bombay Stock Exchange and the NSE is the National Stock Exchange. The BSE is situated at Bombay and the NSE is situated at Delhi. These are the major stock exchanges in the country. There are other stock exchanges like the Calcutta Stock Exchange etc. but they are not as popular as the BSE and the NSE. Most of the stock trading in the country is done though the BSE & the NSE.
Besides Sensex and the Nifty there are many other indexes. There is an index that gives you an idea about whether the mid-cap stocks go up and down. This is called the BSE Mid-cap Index. There are many other types of indexes.
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NIFTY is an indicator to checkout in NSE Working hours: From 9:30 to 3:30 from Monday to Friday How stock exchanges get money
They get their money by listing fees paid by the corporation to have their company traded.
Demat account
In India, a demat account, the abbreviation for dematerialised account, is a type of banking account which dematerializes paper-based physical stock shares. The dematerialised account is used to avoid holding physical shares: the shares are bought and sold through a stock broker. This account is popular in India. The Securities and Exchange Board of India (SEBI) mandates a demat account for share trading above 500 shares. As of April 2006, it became mandatory that any person holding a demat account should possess a Permanent Account Number (PAN), and the deadline for submission of PAN details to the depository lapsed on January 2007. Procedure 1.
2. 3. 4.
Fill demat request form (DRF) (Obtained from a depository participant or DP with whom your depository account is opened). Deface the share certificate(s) you want to dematerialise by writing across Surrendered for dematerialisation. Submit the DRF & share certificate(s) to DP. DP would forward them to the issuer / their R&T Agent. After dematerialisation, your depository account with your DP would be credited with the dematerialised securities.
Required Documents for Demat Account The extent of documentation required to open a demat account may vary according to your relationship with the institution. If you plan to open a demat account with a bank, a savings, current and, or other account for which the holder have been issued a check book, such holder has an edge over the nonaccount holder. In fact, banks usually offer additional incentives to customers who open a demat account with them. Along with the application form, your photographs (with co-applicants) and proof of identity/residence/date of birth have to be submitted. The DPs also ask for a DP-client agreement to be executed on non-judicial stamp paper. Here is a broad list: 1. A canceled check, preferably MICR 2. Proof of Identification 3. Proof of Address 4. Proof of Pan card (mandatory) 5. Recent photographs (one and/or more)
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For proof of identification and, or address self-attested facsimile copies of PAN card, Voters ID, Passport, Ration card, Drivers license, Photo credit card, Employee ID card, Bank attestation, latest IT returns and, or latest Electricity/Landline phone bill are sufficient. While they only ask for photocopies of the documents, they will need the originals for verification.
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