Getting Started With Indian Stock Market Gale - in - PDF

GUIDE TO INVESTING IN INDIAN STOCK MARKETS v2018r0
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“Give. The world will give you back a Thousand
times over.”

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TABLE OF CONTENTS
Why do we need to invest? 5

Investment scenario in India 7
Investing in financial assets over physical
assets – a ground reality 9
Why should you have an investment
advisor? 11
Why do young Indians love to invest in stock
market? Relevance and importance 13
How can one start investing in stock
markets? 14
How to choose a stockbroker 14
Documents required for opening a trading and Demat
account 18
Step by Step practical process to buy shares in primary
and secondary market 21
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Step By Step Practical Process to Buy or Sell Shares and
Derivatives in Secondary Market 24
Types of securities available for investment
in India 27
Invest directly in the stock markets is better
compared to the mutual fund route 31
Difference between a full-service broker and
a discounted service broker and which type
of broking service suits you better 33
Basics of Fundamental analysis 35
Basics of Technical analysis 38
Conclusion 41
Top Articles from Gale.in 42
How not to use intuition in stock market
decisions? 43
SCAMS THAT RATTLE THE INDIAN
STOCK MARKET 46
How can I master the skill to predict the
behavior of Indian stock market? 49
Do you regret selling any stock? 51
Stock market basic tip. All stocks that goes
down will not be coming back and vise
versa. 52

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What’s this Ichimoku technique people are
talking about nowadays? 55
Priority Exclusive Content 59
[Priority Exclusive] Understanding Sector
leaders and Building a portfolio. 60
How to pick Stocks for maximum returns in
Indian Stock market? 64
Services and offers from Gale.in 67
Offers on Demat & Trading account: 68

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Why do we need to invest?
As humans, we want financial security, financial

independence and increase our wealth. Even if you
have enough wealth to last you a lifetime and attain
all your goals, you must take this one factor into
account and that is INFLATION.
Inflation means an increase in the price of products or

services or alternatively said, it reduces your buying
power. Historically
speaking, it is
observed that
inflation levels were
very high in 2014 and
have touched 12%.
However, these days
inflation has
drastically fallen to 2% to 3% overall and appx 5% in
some sectors. So, if we want to stay in the same house
and drive the same vehicle and maintain the same
standard of living, we cannot afford just to save
money and not invest in financial assets. Now, not all
of us are born with a silver spoon and have enough
money, we do have dreams, ambitions and want a
decent sum of money for it and savings alone cannot
build your wealth.

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Just try to synthesize this situation where you have
invested your money in a savings account earning a
return of 3.5% and the inflation in the housing sector
is 5% (assuming you want to make a down payment
for your house you wish to buy). Do we realise that
the real return on this is actually -1.5% (negative). So
essentially even by investing in a savings account, you
are still losing money (1.5%) and not earning 3.5%
interest.
Real Return = annual return % - inflation
It is a proven fact that higher the return you are

seeking for, higher the risk you will need to take. So,
essentially, even if you are risk averse person or have
a lot of wealth, you are forced to invest your money so
that your money earns more money

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Investment scenario in India
As Indians, we were always taught how to save
money and we were never taught how to invest
money. Whatever little investment we did, we
invested only in physical assets like gold and real
estate and a very little portion of it went into
insurance and bank deposits as well. This created a
portfolio for us that was heavily tilted on physical
assets and very safe financial products. Investment in

physical assets accounted for more 66% of the total
household savings in 2012-13.
Indian households in contrast to the rest of the world

are putting a huge portion of their investments in
non-financial assets like stocks, bonds, debentures,
mutual funds etc. It was considered that high inflation

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rates were the prime reason for households ignoring
investments in financial assets. Recent trends have
seen fall in interest rates, stagnant or falling land
prices, legal issues with buying houses, gold not being
a safe haven anymore, black money issues
surrounding gold and land. All this has made the
Indian households think different and look for other
lucrative places of investment especially in financial
assets.

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Investing in financial assets over physical
assets – a ground reality
The long-awaited shift in

the household savings
from physical assets to
financial assets started a
couple of years ago.
According to RBI, the
share of financial
instruments such as
equity, mutual funds, bonds and bank deposits in the
household sector’s rose to 34.4% of gross savings in
2015-2016. This is up from 31.3 % a year ago.
Furthermore, investment in household as a
percentage of total physical assets has dropped to
56.8%. A recent clean money drive and

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demonetisation have actually helped and kicked more
household savings into financial assets.
We can see that returns on investment in financial

assets over a longer period of time will always be
superior to returns on physical assets. The above chart
was prepared as per July 2017 post which the Sensex
has reached record levels and has given returns in
excess of 20% this year. All this just points us to the
fact that we cannot ignore the financial markets and
have to invest in them to maintain a decent standard
of living.

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Why should you have an investment advisor?
There are many events in

life that make us nervous
or make us doubt
ourselves if we have the
funds to cope with the
event. Events like getting
married, having a baby,
buying a house or quitting
a job, are life-changing
decisions and in this
situation, if we get our
finances wrong it can lead to
disastrous consequences. Another reason you may
need an investment advisor is when you are juggling
multiple financial and dynamic goals. If you are
overwhelmed with finances or just want to cross
verify your understanding or are unsure of things,
you may want to take help of an investment advisor.
“People who are confident and think they may not

need an investment advisor are intelligent enough to
use one”
The investment advisor is actually your planning

partner. It is always advisable to have an investment

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advisor who advises you at the holistic level and not
just at the financial level. There are a lot of personal
details you will need to share with the investment
advisor like how much you earn, what are your
expenses, assets, liabilities, future expenses, family
planning etc, so choose someone carefully,
trustworthy with a good reputation. Try to avoid
investment advisors that have conflicts interests as
well. The investment advisor is someone who will
discuss and inform you how he plans to achieve your
goals.

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Why do young Indians love to invest in stock
market? Relevance and importance
The mind-set of young Indians has changed and they

have adopted more of the western culture. The young
Indian today strives to enjoy his life more and prefers
to spend money on a vacation or expensive hobbies
rather than build a house like the Indian middleclass
people generally did. One thing that has dramatically
changed is their
willingness to take risks.
The young Indian today is
brave and not afraid to
take risks and in return
works harder to enjoy the
returns.
Young Indians have realised that investments in

traditional products like bank deposits and gold is not
the right way forward. The reason being that interest
rates have been falling consistently, gold is not a safe
haven like before due to the returns and land prices
are stagnant with long gestation period. Investing in
the stock markets have provided handsome return
like in the graph we saw earlier. This shift in
mentality combined with the ability to take risks has

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made young Indians invest heavily in the stock
markets.
How can one start investing in stock markets?

First, you need to choose a stockbroker and then
submit documents for opening a trading and Demat
account and then you can buy or sells shares in the
primary or secondary market.
How to choose a stockbroker

The regulator has made it mandatory that buying and
selling of stocks must be conducted by a licensed
Trading Member or a stockbroker. But finding a good
stockbroker takes some evaluation, the correct choice
while choosing a correct stockbroker is absolutely
necessary. Few steps that one needs to consider while
making the choice would be –
 A thorough background check – this would include

the requirement of the broker to be licensed and
authorized as per the law and regulations
prescribed by the regulatory authorities. In our
case, the stockbroker has to be registered with SEBI.
The registration number of a Stockbroker begins
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with IN, the third symbol is the segment in which
the stockbroker is registered, B – Cash market, F –
Futures and Options, E- currency, S – sub broker.
The fourth and fifth will be a numeric number, Like
23 – NSE, 01 – BSE, 26- MSEI etc. Next five digits is
the Stockbroker code and last 2 digits are check
digits.
 Then a proper evaluation of the credentials,
relevant experience needs to be carried out. One
needs to get the past records checked, if possible,
have a word with the existing clients.
 With proper due diligence, you must try to talk
with a few stockbrokers, this is important as you
need to be sure about entrusting somebody with
your money, which needs to be judiciously
invested. So the level of comfort and transparency
needs to be established. This can be achieved
through a proper communication with the
stockbrokers. During the communication, few
things need to be clarified like
a. Speed of order execution
b. Additional services like research, IPO,
mutual fund, advisory etc
c. Brokerage and other charges

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d. Depository services
e. Margin trading facility
f. Online and mobile trading options
g. Number of branches
h. Call and trade facility
 In today’s fast world brokers’ should give online

access to their clients to check their accounts and
analyse their portfolio through the online tools.
 One can also rely on word of mouth, get referrals
from people who are into investments through
brokers, try to understand their views and
preferences and on the basis of that shortlisted
brokers can be interviewed
These points can ensure that you can achieve

immense money growth but a wrong choice of broker
can make you lose your money too. So you need to
follow the steps carefully mentioned above so that
there is no financial loss while investing.
In case you have issues or doubts in your mind, SEBI

has a toll free number 1800 22 7575 and 1800 266 7575.
You may call this number and clarify doubts. Also, if
you have a complaint against Stockbrokers, first
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intimate their compliance officer in writing giving 7
days’ time. If the complaint is unresolved then
escalate it to SEBI on their dedicated portal for
complaint called SCORES (SEBI’s complaints
redressal System)

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Documents required for opening a trading
and Demat account
For any person to trade on securities market

especially, in the equities market, they need to open
two accounts in order to start trading. One is the
trading account through which a person can execute
trades in his account. Another account is the Demat
account. A Demat account is just like a bank account
but this is to keep your securities. You can keep your
shares, bonds, mutual funds, ETF etc. in your Demat
account.

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Basic requirements required to open any account is a
 Proof of identity
 Proof of address
 Bank account and a PAN (Permanent account
number). You will also need passport size
photo as well.
When you approach a Broker with these documents,

you will be given a booklet to sign. Yes, you read it
right, it’s not just a form, and it’s a booklet. The
technical name of the booklet is the CLIENT
REGISTRATION FORM. Thanks to the ever
vigorously working regulator that it has narrowed to
a booklet, else in the earlier 2000’s it used to be a book
and not a booklet. This is the first step for you to foray
into the securities market. The biggest and the most
common mistake that even the most experienced
investor do is to sign the form without reading and
still worse is signing the blank form.
We get to hear a lot of complaints that it’s a booklet

and who has the tie to read the entire booklet before
signing. My advice to you is to take the form home,
read it, understand it, asks doubts if any and then sign
the documents. After you sign the documents, you are
entitled to get a free copy of the form within 7 days of
opening the account. If the broker prohibits you to
take the blank form or is in a rush (like always) then
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take a picture with your mobile phone but please do
not sign without reading.
To let you in on a little secret, the entire booklet need

not be signed to open the account. If you just pay a
little attention you will realise that many pages of the
booklet have the clause voluntary written very boldly.
But only if you give time, will you be able to
comprehend that those documents are inserted for
your convenience and are not mandatory.
We will explain an important concept that you need to

be aware of. The Power of Attorney (POA), this is a
very important document. Every time you sell a
script, you have to sign and provide the broker a DIS
(Delivery Instruction slip) that is like a cheque book
for shares and submit to the broker. The broker will
then get the authority to take those shares from your
demat account and submit it to the exchange you sold
it on i.e NSE or BSE. Now for the sake of convenience,
you can provide a power of attorney where the broker
can access only those securities that you have sold on
NSE or BSE and then submit it to the exchange. For
those who don’t trade frequently, do not sign the
POA. This is to prevent any unauthorised trade on the
exchange and a subsequent transfer of shares to the
exchange without your knowledge.

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Step by Step practical process to buy shares in
primary and secondary market
A primary market is a market that deals with

issuance of new
securities. It is a
place where
corporate
entities can
raise long-term
funds from the
public. In a primary market, institutions can raise
funds through bond issues and corporations can raise
capital through the sale of new stock through an
initial public offering. In the primary market, funds
can be raised through various issues such as
 Public issue
 Right issue
 Preferential issue
 Bonus issue
An issue that is made to the public and either be

Initial Public offering (IPO) or further public
offering (FPO). Both IPO and FPO can either be a
fresh issue of shares or offer for sale shares. Step –
1 – Open a Demat account

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Gone are the days where one used to get share
certificates and buying and selling physical shares
were allowed. These days, shares can be bought or
sold only in dematerialized form.
Dematerialization means converting your physical
shares to electronic form. We need to understand
some basics here. There are two depositories in
India namely – Central Depository Services Ltd
(CDSL) and National Securities Depository Ltd
(NSDL). Each depository has many participants
registered with them and they are called the
Depository participants (DP). For ease and
convenience, you may consider them as banks.
Just like you have a bank account to keep your
money, you have a Demat account to keep your
shares. Most of the stockbrokers are also
Depository participants as well. So you need to
open a Demat account with the DP.
 STEP – 2 – Application form and ASBA

 You can generally find the application form of the
company with any broking house or even at the
street corner of a financial market hub. Those who
have trading account with the brokers and trade
online will have an online access to place these

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orders. SEBI has introduced ASBA – Application
supported by blocked amount. This means that the
application money to buy the shares does not get
debited from your account until the shares are
issued. One you apply for the shares, a block is put
on the funds which you cannot withdraw. Once the
shares are issued, the amount is debited and if the
shares are not issued for any reason the block is
removed. So you do not have to run-around for any
refunds.
 Step -3 – Allotment of shares, listing, and trading

• Allotment of made by the company on the basis of
certain rules formed by SEBI
• SEBI ensures every retail applicant gets allotted a

minimum bid lot, subject to availability of shares
in aggregate
• The rest is based on the proportion of the number

of shares applied
• If there is oversubscription, based on the number

of shares in the retail category, the bidders shall
be selected on basis of draw of lots

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• Shares are then listed on the stock exchange by the
12th day of close of the issue and then trading
starts. You may hold the shares or sell it as per
your convenience.
Step By Step Practical Process to Buy or Sell

Shares and Derivatives in Secondary Market
A secondary market is a place where investors can

buy or sell shares, bonds and derivative instruments
that have already been issued by the company or
public institutions or the government. The secondary
market is also called the aftermarket.
 Step – 1 – Open a Demat account

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 Step – 2 – Open a trading account
To invest or trade in the secondary market, one
has to open a trading account with a
stockbroker. You cannot buy or sell directly in
the market it has to be through the stockbroker,
also called as the trading member. The
Stockbroker obtains registration from SEBI
(Securities and exchange board of India) so
ensure that they have a valid SEBI registration
number. There are largely two exchanges on
which you can buy or sell the shares and
bonds. They are National Stock Exchange
(NSE) and Bombay Stock exchange (BSE). All
the stockbrokers get their SEBI registration
through the stock exchanges. Once you open a
trading account with the stockbroker, you can
start placing orders either through telephone,
by email, by visiting their branch. But these
days’ people are internet savvy and for their
ease and convenience they can opt for online
trading through computer or mobile as well.
Caution
Unlike bank account opening forms that has 2 pages,

the account opening form of the trading and demat
account is a booklet which requires many signatures.
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Do not sign blank on these forms. Read the terms and
conditions, understand them; ask for doubts and only
the sign the forms. Also, in case you choose not to opt
for some services or do not know how to use the
internet, do not leave blank spaces; do strike off those
particular details in the account opening form. You
are entitled to get a free copy of the account opening
form. Take your time to understand fees/ charges etc.
Incase you wish to execute the power of attorney,
please understand it properly. Please do not opt for
electronic contract note if you are not familiar with
computers. Ensure that you sign after reading the
voluntary clauses. Finally, ensure that you fill
application form completely.

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Types of securities available for investment in
India
The securities market is a small part of the entire

financial market. Securities markets would include
but not restricted to equity markets, derivatives
markets, currency markets, bond markets etc.
Securities market is a place where securities are
bought and sold at prices can be determined by
market forces.
Generally, we have heard people saying that if you

want handsome returns you must invest in the
securities market. Another spectrum of investors will
say that securities market is a gamble and it is risky.
Let me tell you that both of these facts are not true.
Securities market have a wide variety of investable
products with varying degree of risks and returns.
Securities market have products that are as safe as
your savings account / fixed deposits. On the other
hand, you have very high-risk products such as the
derivative market.
One thing is for sure that securities market is not a

gamble at all. Equity markets are the only place where
all the participants can be winners and earn wealth. It
is not a zero-sum game at all. If you have a view on
anything i.e the economy, the listed company, the
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currency, etc; derivatives markets is a place that
provides you an opportunity to earn if you have a
view.
There are 2 main types of securities – Equity and debt.

Remember that the risk and returns for each type of
security vary. Both categories have high to low-risk
products and high to low historical returns.
Equity Debt
Under Equity, we have
 Equity shares - An equity share means ownership

of the shareholder to the extent of money paid.
The shareholder is entitled to get any increase in
share value, bonus, dividends, and voting rights
but has to suffer losses if the company does not do
well.

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 Warrants - A warrant gives a person a right, but
not the obligation, to buy or sell a security at a
predetermined price
 Mutual funds – A mutual funds collects money on
behalf of investors and invests in securities.
Investment can be done in any of the securities or
a combination of securities for any tenure.
 Exchange traded funds – An ETF is basically a
mutual fund that trades like a share. Mutual
funds can be bought and sold at any time of the
day but the value you will get will be the day end
price. They do not fluctuate during the day like a
share. Shares on the other hand do not provide
the diversification and cost benefits. ETF gives
you both
 Derivatives – It derives its price from another
underlying asset. It is a contract between two
parties to buy or sell securities at pre-determined
prices. Here the variety of products is endless.
Under Debt, we have
 Government securities – It is a bond given by the

government with a promise to repay you at
maturity
 Bonds – A bond is a debt instrument wherein you
loan money to a corporate or government

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 Debentures - A debenture is also a debt
instrument wherein you loan money to a
corporate but it is not backed by any asset
whereas a bond is backed by a physical asset.
 Mutual fund - A mutual funds collects money on
behalf of investors and invests in securities.
Investment can be done in any of the securities or
a combination of securities for any tenure
 Security receipts - a receipt or security, issued by a
securitisation company to a qualified institutional
buyer pursuant to a scheme, evidencing the
purchase and giving undivided right, title or
interest in the financial asset involved in the
securitisation.

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Invest directly in the stock markets is better
compared to the mutual fund route
Since you have professionals handling Mutual funds,

it is widely believed that it is a safer option. However,
a recent report in the Economic times revealed that
direct holding in stocks by individuals is 22% of the
total market capitalisation while direct holding in
stocks by mutual funds is only 5% of the total market
capitalisation. It was also observed that the direct
holding in stocks was primarily practiced by rich
people and the middle class people chose mutual
fund route. This means we have lost out on great
opportunities by choosing the mutual fund route. If
we dwell deep you will see that there are a lot of
common factors in direct investing and mutual fund
route. But what you will notice is what more
advantages you can get by direct investing that you
will not get when you choose the mutual fund route.
First we will see the common factors. In both the type

of investing (direct investing and Mutual fund route)
you can concentrate and invest in sectors, SIP options
are available, returns are tax free after a year, tax
benefits are available, there is high liquidity, and
investment options in international markets are
available.
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Further, these are the benefits that you can get by
choosing the direct investment route over mutual
fund route.
 Complete control over stock selection

 Buying and selling is possible at any time of the
day unlike mutual funds (only day end NAV)
 Entry or exit from 1 or 2 stocks
 Speculative trading is possible
 Short selling is possible. This is where the
maximum opportunities are missed by mutual
funds.

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Difference between a full-service broker and a
discounted service broker and which type of
broking service suits you better
In today’s world there

are two kinds of brokers
in the stock markets and
they are full-service
brokers and discounted
brokers. The name full-
service broker gives you
a clue that they provide a
suite of all services you may require and discounted
brokers provide some important services but charge
less. So here is a full list of details you need to know
about them and choose the one that fits your need
better.
Full-service Brokers Discount Brokers

Brokerage Brokerage is charged as a Flat fee of Rs 10 to
% of turnover. Generally Rs 20 per trade
0.1% to 0.5% of the turnover.

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Order Orders can be placed by Orders can be
execution offline (telephone) and placed only online
online (mobile, app, trading (mobile, app, trading
software) software)
Service Provides advisory services Focuses mainly on
and research reports, trading
research calls,
recommendations, funding,
etc
Branches Large number of
They do not have
branches in different cities.
much branches.
Customer Physical presence of
Online presence of
service customer service customer serive
Products shares, Futures, Options, shares, Futures,
to trade Commodities, currencies,
Options,
mutual funds, IPOs, FDs, Commodities,
bonds, insurance, etc currencies, mutual
funds, IPOs, bonds
Account 3-in-1 Account Not available
type (Saving+demat+trading)
Suitability Suitable for people who Suitable for people
want advisory services, who want to pay less
research calls, personal brokerage, are
touch, physical presence of comfortable with
customer service, are not online trading, have a
comfortable with online financial advisor and
trading and do not have do not worry about
financial advisor physical presence of
the broker
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Basics of Fundamental analysis
Now, with most things set in place, the final step you
need to do start trading is to analyse your stocks
through fundamental or technical analysis.
Beginning with fundamental analysis, the main aim of

this analysis is to find out the intrinsic value of the
share or the bond which means to see if the price of
the stock or the bond in the market is overpriced or
under-priced. If the stock is overpriced in the market
then you will sell the share or its future or the stock
option available in the market with the hope that the
share price will correct in the near term and trade at
lower price levels. If the stock is under-priced in the
market then you will buy the share or its future or the
stock option available in the market with the hope
that the share price it will increase in the near term
and trade at higher price levels.
There is no hard and fast rule to do Fundamental

analysis but everyone agrees that there are some key
components to doing a good fundamental analysis
that involves many qualitative factors and
quantitative factors. From a top down approach,
following are the components

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 Economic forecast – Now, we all know that if the
economy of the country does well then most of
the sectors within the economy and most of the
companies within the sectors will do well (barring
exceptions). So we must have a good idea about
the economy.
 Interest Rates – Although there is no direct co-

relation between the stock markets and the
interest rates, there is definitely change in the
prices of the stocks due to change in interest rates.
 Group selection – In ever economy we know that

some sectors will do better than other due to the
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economic and political factors influencing the
sector.
 Company selection – Some companies have the

great vision and better leaders who foresee
changing trends and revolutionise the way the
industry works. We need to choose those type of
companies.
 Business Plan - The business plan, model or

concept of the company you wish to invest in
must be sustainable for a long period of time. We
need to ask that if the business make sense? Is it
feasible? Is there a market? Can a profit be made?
 Management - To lead the business the company

must have top-quality management who have a
great track record and are honest people. You
must judge their capabilities, strengths, and
weaknesses to see if they are the right people with
the right mind-set and leadership capacities that
can run the company.
 Financial Analysis – The step will provide you the

means to calculate the intrinsic value of the
security. Ratios like Earnings per Share, Price to
Earnings Ratio, Projected Earnings Growth, Price
to Sales ratio, Price to Book ratio, Dividend

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Payout Ratio, Dividend Yield, Book Value, Return
on Equity, etc.
Do remember that this list is only inclusive and not an

exclusive list but this will lay a great foundation for
your foray into the stocks markets.
Basics of Technical analysis
Another method of investing is the technical analysis.

Technical Analysis is forecasting the price of a share
based on the examination of previous price
movements. Technical analysis does not provide you
with the exact future price of the stock but it provides
you the likely price of the future price of the stock.
Technical analysis uses a wide variety of charts that
show price over time. Technical analysis can be done
for shares, indices, commodities, futures, etc where
price is subjected to the forces of supply and demand.
The Dow Theory laid down the foundations of the

modern technical analysis. Three theorems of Dow
stood out which are Price Discounts Everything, Price
Movements are not totally random, “What” Is more
important than “Why”.

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A large part of the macroeconomic analysis that we
discussed during the fundamental remain constant for
technical analysis as well. Once the analysis gets
down to the micro level of the determining the future
price movement, that is when we do the technical
analysis.
The three important

technical indicators to
identify market trends CHARTS
MOVING
and predict future AVERAGES
stock prices are
charts, moving MOMENTUM
INDICATORS
averages and
momentum
indicators.
 Charts - Price and Technical Analysis

volume charts are
the most used
tools for technical analysis. A volume chart shows
the number of shares of a company that were
traded during the day. For the purpose of
technical analysis, you can select a traditional line
graph or a bar charts or a candlestick chart. Charts
are used together with trend lines. Trend lines
gives you a likely movement of a stock price.

39 | P a g e
 Moving averages - They are calculated to remove
any sharp fluctuations in the price of the stock
chart and eliminate outliers, if any. To make a
smooth trend line an average of a few days price
is calculated like five day moving average pattern
etc. This kind of moving average is called simple
moving average (SMA). We can also use
exponential moving average (EMA) or linear
weighted average (LWA).
 Momentum indicators - These are statistical

figures that are calculated based on price and
volume data of stocks. They act as supporting
tools to charts and moving averages. After you
have formed an opinion about a stock price, you
can use further use the momentum indicator to re-
check your analysis. Some momentum indicators
are leading indicators and others are lagging
indicators.
With this we have covered the very basics of technical

analysis. So, now you may take a gauge of which type
of analysis suits you better, then study about them in
depth and then venture into the world of investing.

40 | P a g e
Conclusion
Inflation and our mind-set to live a better standard of

living are the main triggers that push us to invest.
With physical assets providing negative or low
returns, investing in financial assets has become
imperative. With the help of an investment advisor,
our willingness to take risks and get better returns
make investing in stock markets becomes a natural
choice. Wisely select a stockbroker, open trading and
demat accounts and be careful of the traps that you
may fall in. Armed with the knowledge of
fundamental and technical analysis you are ready to
embark on the journey of making your financial
dreams come true.
!!! HAPPY INVESTING!!!

41 | P a g e
Top Articles from Gale.in

42 | P a g e
How not to use intuition in stock market
decisions?
Simple algorithms are invariably better at predictions than

humans, whether it is health diagnosis, the weather or
workplace performance. Would it be any different for stock
investment analysis?
A percentage of professional investors find it hard to

believe that an algorithmic system can be a better predictor
than years of investing experience. Sometimes this may
seem true, but in the long run, the intuition system will have
more fails than the algorithm system.
Of course, investors will have to make decisions along the

way, as algorithms cannot predict the changes in
circumstances or events outside the stock market that may
influence investor or even company decisions.
The biggest plus for not using intuition in stock market

decisions is that using an algorithm-based approach takes
all the emotion out of the equation. Emotions play a part in
every aspect of our lives, so why should investing be any
different? It is no different when it comes to investing in the
stock market, but if you take a rule-based approach using
computer models and algorithms then you relieve yourself
from the making decisions under stressful situations.
Taking emotions or intuition out of the process of stock

market investing will always be the correct approach
because most of the time it is hard to see past our inbuilt
43 | P a g e
biases. This would be idealistic but unfortunately, as
humans, we bring emotion into everything we do. The best
advice that can be offered in this argument would be to look
at the model predictions and then look at the information
that your intuition is telling you and try to decide
somewhere logically in the middle.
Misplaced priorities can be the biggest downside of using

intuition in stock market decisions. Humans invariably put
more time and effort into making small decisions and less
time and effort in the big decisions. Don’t buy shares just
because a friend or relative has made a lot of money on
those shares in the past. Humans are overconfident and tend
to place too much bearing on the value of our opinions
compared to friends and acquaintances. This is a form of
intuition which at best is misguided. You may be lucky and
have a win on the stock market this way but in the long
term, it will be a costly exercise. You should have simple
rules that you use for investing, for example, buy when the
stock price is low, not because I like the company or sell
the stock when it exceeds a price that I think is above its
value.
Quite a lot has been written about the intuitive powers of

investment experts. The intuition of experts is useless. Most
of the time the expert’s intuition is just plain expensive
guesswork, but backed by years of experience can be
successful, but not as often as a computer model. If you
want to invest in the stock market, you should simply invest
in index fund stocks rather than follow the intuition of an
expert.

44 | P a g e
The stock market just by its very nature is unpredictable.
Algorithmic models can usually be correct, but even a
computer model will get things wrong occasionally.
Intuition can be just as fickle because as humans we can
only look to the past for guidance and then guess what may
happen given a certain set of circumstances. It is the same
for an algorithm, if this happens, then do that is the simplest
form of this. The difference is that algorithms perform these
tasks without the emotion. In the long term, this will save
you money and hopefully make you money as well, but
who knows, it is all guesswork.

45 | P a g e
SCAMS THAT RATTLE THE INDIAN
STOCK MARKET
SCAMS THAT RATTLE THE INDIAN STOCK

MARKET Photo by Got Credit
Many Indians have begun to invest in securities of business

enterprises and companies, with the aim of making profit.
Investing in securities such as stocks, bonds, future etc is
good as one can get to make a living from it. However,
there are times when investing in such securities can go all
wrong. An example is the case stock exchange scam. There
are various scams in the Indian stock market that has led
various investors to lose their money. Most of these scams
are common, yet people still fall prey to them. Some of
these scams that rattle the Indian stock market include:

46 | P a g e
1. Tips and recommendation fraud: This is a very
common scam that rattles the Indian stock market.
Fraudsters try to attract investors and traders by
convincing them that they are able to provide profit of up
to 10% per day and 40% per month. Furthermore, they
assure investors that they would provide more than 90%
accuracy on tips and recommendation. One should take
note that is it quite infeasible for profit of 40% to be
made in a month constantly. Even Warren Buffet that
was a legendary investor only had 22% profit in a year
and was still among the richest persons in the world.
The fraudsters also claim that they have provided at least

40% return to their previous clients. When investors
demand for trial tips before they subscribe to the tips and
recommendation program, they agree to it easily. Most
people that try out the trials usually fall victims of the
fraudsters. It should be noted that the trial tips provided the
fraudsters are usually accurate. This is to win the assurance
of the victims, hence making them susceptible to their ploy.
Victims would later pay high amount of money for the tips
and recommendation and later receive tips that work
nothing.
2. Pump and dump: This is a kind of fraud whereby

fraudsters try to increase the price of micro cap stocks by
feeding investors and traders with wrong information.
By feeding investors with fake news, they try to inflate
the price of the stocks. The fraudsters would purchase
cheap penny stock in large volumes. Afterwards, they
would send misleading messages to various investors
recommending them to purchase the stocks. People
47 | P a g e
begin to buy the stocks and because of the high demand
of the stocks, the price of the stocks would increase.
When the price of the shares has gotten to a good price,
the fraudsters would sell their stocks and make good
money.
The fraudsters would stop sending misleading messages

after they have sold their stocks at high prices.
3. Fake message in the name of brokers: Many investors

in India invest on stocks upon the advice and
recommendations of brokers. Most investors do not
make research on the stocks as they blindly believe
every recommendation given to them. Fraudsters realize
this and send recommendations as brokers to people,
telling them to purchase a particular stock. Due to the
fact that the recommendation is false, stock prices would
begin to fall and investors would lose money.
Why do fraudsters send the fake messages?
Before hand, the fraudsters would send recommendations to

their paid subscribers purchase the same stock. Then they
would try to increase the prices of stocks by sending
misleading messages as brokers. When the price of stock
begins to increase, they would suggest to their paid
subscribers to sell their stocks and receive good returns.
The paid subscribers would be satisfied with the
recommendation and continue with the subscription. In the
end, retail investors would lose their money for following
the fake recommendations.

48 | P a g e
How can I master the skill to predict the
behavior of Indian stock market?
Short Answer: Technical Analysis.
Technical Analysis is the study of Market Psychology.

Market Prices are governed by Greed and Fear. Most of the
retain investor are eaten up in the market due to greed and
fear.
You get a buy call on Breakout, but you will not know to
exit the stock on reversal before the target is met.
Sometimes you tend to sell the stock very early on fear.
49 | P a g e
When the market falls for 2 days or 3 days, retain investors
sell off in panic just to watch the market recover on the next
day.
Learn Technical analysis and understand candlesticks and

indicators. Learn about support and resistance, Learn about
reversals on support and resistance. Learn about breakouts
and Breakdowns. Learn to buy on dips, learn to book profits
on rallies. learn to place the right stop-loss. Learn to
manage risk.
There is no need to master a special skill to predict the

market movement. Just learn to understand the Technical
charts and put proper risk management in place.
“History will always repeat itself.”

50 | P a g e
Do you regret selling any stock?
Back in 2013, i was a half knowledge investor.
I had purchased TVS Motors at 32 and sold some at 50,

some at 70, some at 90. It’s near 600 now. (2000%)
I had purchased Ashok Leyland at 13 and Sold at 19. It’s

above 100 now.
I had purchased Aurobindo Pharma at 190 (95 post bonus

1:1), Sold at 30% profits. It peaked near 900.
Gabriel was near 17 Rs. Sold at 50% profits. It is now near

166.
In stocks, experience gained is more valuable than profits.
Moral: Just don’t sell quality stocks until its fundamental

really changes. There is no peak or bottom for a stock.
Each stock has a value based on its fundamentals.

51 | P a g e
Basic tips on Stock market for retain investors.
All stocks that goes down will not be coming
back and vise-versa.
A member had asked a question,
How do people lose money in the stock market? If i buy

stocks today, and after some days the value of stocks go
low, then I can wait for some more time me until stocks go
up. What is the thing that make people lose money ?
Stock market is not a water tank, where level of water goes

up and down when the pump is on and while the water is
used respectively.
It is a demand for a portion of the business a company does.
The value of the stock (PE, price to earnings per share) is

fixed based on numbers like BV (Book Value), Profitability
Ratio (like Margins, Return on Capital Employed), Debt to
Equity ratio, etc and also has factors like the industrial
outlook in the future, the pricing power, etc
The above arbitrary PE multiplied by the EPS is the value

of the stock. EPS is derived from the quarterly results
(profits/equity capital).
Let’s give an example:
Bhansali Engg:

52 | P a g e
Industrial P/E = 25.
EPS in the year 2014: 0.09
Fair value in 2014= 25×0.09 = 2.25
Fair Value in 2015= 25×0.33= 8.25
Fair Value in 2016= 25×1.01= 25
EPS in the year: 2017: 2.1
Fair Value in 2017= 25×2.1= 50
Do you think when you buy the stock in 2014 at 2.25, you
can sell it now at 50 and buy back when it goes to 2.25? No,
the stock will never go back to even 25.
Going through quarterly results,
EPS for Q4= 0.91
Suppose the company can post an EPS of 0.91 in all four of

its upcoming quarters. The EPS becomes 3.6.
Then the fair value of the stock in one year is 3.6 x 25 = 90.
I had recommended buying Bhansali Engg on June 5th.

53 | P a g e
Strong set of numbers from Bhansali Engg. Buy at 40 &
dips. Tgt 50. SL 35.
Target was hit in 4 days.
The stock is trading above 200 as on 10th January 2018.
Sometime such good companies create a demand in the

stock. The fair value in the future can be attained in short
term. If the stock reaches the value of 90 in 3 months, the
PE Ratio spikes to 45 from 25, then profits can be booked
and bought once PE Ratio corrects to 30 and 25. We know
the PE Ratio will drop due to good results, still it is the
gamble that people take in the large capital stocks.
If the earnings are not as per expected the stock will dip. If
the stock is not performing for life or if it is performing for
life we ‘re never going to see the stock prices again.
Penny stocks are not going back to 100s, Penny stocks that
have gone to 100s are not going to come back.
Every quarterly result is important. Most of the stocks will

never see a new 52 week low and some will never see a
new 52 week high again in life.
However, Performance matters.

54 | P a g e
What’s this Ichimoku technique people are
talking about nowadays?
Ichimoku Technique is a kind of candle stick indicator that helps

in finding future support, trend change, short term support,
medium term support, pullback and breakout.
There are few indicators in the charts whose names are

confusing and the way they are formed are not much important
if you have the indicator and understand what they signify. You
will break your head understanding it for long hours and even
days.
I will try to explain Ichimoku technique in less than 15 mins with

example.

55 | P a g e
The below chart is Latest NIFTY 15 mins chart (15 mins chart
for Short term traders) It has Ichimoku Indicator overlayed on
it.
There are 3 lines and a cloud in Ichimoku system:
1. Blueline (Short term support indicator): You can find that

the NIFTY is finding short term support on this line.
2. Redline (Medium Term Support Indicator): Redline is

medium term support indicator and has lots of significance. If
Redline is trending up then the stock is bullish. If the Redline
is facing down, the stock is bearish. If the Redline is straight
for a while, It acts as a magnet to the stock. Stock will be
pulled to the Redline.
3. Greenline (Breakout Indicator): Greenline is Breakout

Indicator and it lags 14–21 sessions on charts. You can see
the greenline is running one day delay. If the Greenline is
moving away from the candle sticks into a fresh blank zone, it

56 | P a g e
indicates breakout. If it moves down, its a breakdown
indication. If it moves up, its a upside breakout Indicator. An
upside Breakout is shown the image above with a light green
arrow, Breakout is seen in 3 different places on the chart but
at the same price and time.
4. Cloud (Future support and resistance cloud): We have seen

that the Greenline lags in the charts, Here The cloud leads in
the chart by 14–21 sessions. If the cloud is green, the Stock is
bullish and If the cloud is red, the stock is Bearish. Cloud twist
or the colour change indicate change in trend. Cloud provides
strong support to the stock. If the stock breaks past the
cloud, it indicates Stoploss has been hit and fresh trend
reversal is happening.
You can see in the above charts, a Cloud twist, Greenline

breakout and Candle stick breakout from the cloud aroud
10110. NIFTY has rallied 150 points from then. (Breakouts are
indicated in Light Green color.)

57 | P a g e
Example 2:
Another example to show Breakdown that was happening in

NIFTY at 10350 on 29th November 2017. NIFTY has corrected
300 points after the breakdown.
Note: All the lines and clouds are formed based on some
formula of averages of highs and lows of last few candles.
I personally use Tradingview for technical charts. (It’s free for

End of Day analysis.)
Above charts are from Live stock, index, futures, Forex and
Bitcoin charts on TradingView with Ichimoku indicator layed on
15 mins charts of NIFTY.
To learn the depth of Ichimoku lines and cloud, you can always
buy this book from Amazon.How to Make Money Trading the
Ichimoku System.

58 | P a g e
Priority Exclusive Content

59 | P a g e
[Priority Exclusive] Understanding Sector
leaders and Building a portfolio.
There is a common Myth in the stock market that the bigger

known brands with larger Market Capital are the sector leaders
and most of the retail investors build a portfolio with such
stocks such as MRF, TCS, Infosys, Bata, HUL, SBI, ICICI Bank, etc. I
am not here to say it’s wrong. I am here to say it can be done
better. There are lots of smaller stocks in the sector with better
fundamentals and better future outlook; there are stocks in
which the management is so good that they care about
investors.
Stocks with Better Margins and Growth in the sector are the
best bets.
I will try to explain it today with an example from Tyre Space.
If you are to invest in the leader of Tyre space, which stock will
you choose?
Most of them will name MRF. Stock has given approx. 800% in
last 7-8 years.
If I say there is a stock in Tyre space that has given approx.

1300% in last 7-8 years!
Yes its Balakrishna Industries.

60 | P a g e
Comparing Returns from Balakrishna Ind and MRF over a Period
of 7-8 years.
Basic fundamentals of Balkrishna Ind. You can see its PE is

trading with a Premium to its Industrial Average.

61 | P a g e
Profitability Ratio of Balakrishna Ind. Stunning Margins in FY17.
The company is gradually reducing Debt to Equity ratio.
Valuation ratio is currently okay, little on the higher side. You

can see EV/EBITDA, Earning Yield and Price to book at its best
until FY17.
Find the best stocks within a sector by sorting it out with Higher
Margin%.
Then Check for
 PE closer to Industrial Average PE,
 Book value below 4 or lesser than its peers,
 any dividend% other than zero,

62 | P a g e
 Return on Networth/Equity and Return on Capital
Employed more than 15% or better than its peers,
 Debt to Equity lesser than 2.
 EV/EBITDA Less than 8 or better than its peers.
 Earnings Yield above 0.07.
 Market cap above 200 Crores.
This article is not to recommend a buy in Balkrishna Ind, it is to

educate you find the best stock in a sector by finding stocks with
better margins% and good volume growth.
However, the stock had return close to 50% since this article
was published (as on First week of January 2018)

63 | P a g e
How to pick Stocks for maximum returns in
Indian Stock market?
Make a portfolio of certain stocks with the following

criteria:
Stock must be in top 3 Margin% in its industry. (Stock

having strong margins are the industrial leaders with
demand for investment.)
Stock must be in top 3 ROCE/ROE in its industry. (Stocks

with better ROCE/ROE are the stocks with best
management and can help investors with Good returns.)
Stock must be having low PE ratio in its industry. (Stock

with low PE ratio has not priced-in the future returns of the
company, more chances to find quality investors and have
more changes to post multibagger returns on quality
results.)
Stock must have low Price to Book in its industry. (P/B is

one of the evaluation factors to identify if the stock has run
up too much in recent times. Avoid P/B above 10–12)
Stock must have low EV/EBITA (Stock given multibagger

returns in short span will have this value higher. Less the
value, more space the stock has to rally in the near future.
Avoid EV/EBITA above 20.)
The above Portfolio will give you maximum returns.

64 | P a g e
There are 3 phases in a stock’s multibagger rally.
 Rally to cover basic EPS of the share.

 Rally to cover the Next one year EPS of the share.
 Rally to cover the next 3 years EPS of the share.
Let me explain in Brief,
Let us assume a stock is trading at 120, Industrial PE: 12

and EPS over last 4 quarters as Rs. 3 each quarter. Annual
EPS is 12.
Current Trailing PE is 120/12= 10 which is cheaper

compared to Industry. Stock can rally 20%.
Once a quarterly results come with an EPS of 4. Then

Trailing EPS becomes 13.
Current Trailing PE becomes 120/13= 9.23. Which is

cheaper compared to other Stocks in the industry with
upside of 30%.
Some investors think what if the stock can post same results
for next 3 quarters with EPS of 4 per quarter. Then Annual
EPS becomes 16.
PE after 9 months becomes= 120/16 = 7.5. Which is

cheaper compared to the industrial PE of 12 and has upside
of 60%.
After 3 months:

65 | P a g e
If the results show growth in sales, profits and EPS for the
quarter is posted at 5.
PE for the annualized EPS of 5 become= 120/20=6. Which

is cheaper to its industry and has 100% upside.
Just in 4th month, the stock has 100% upside.
This is how our stock picks like Bhansali Engg, Sanwaria

Agro, etc rallied more than 300%.
So, where you should invest? You should invest in a

fundamentally good stock where it already has a 20%
upside compared the industry.
We have done such research and have made a list of stocks

in our Priority list and making efforts to add at-least 2-3
such stocks every month to our Priority list.
Our Priority Stocks are up at an average of 30% while the

NIFTY is up just 7% and the Small cap is up only 15%.

66 | P a g e
Services and offers from Gale.in

67 | P a g e
Offers on Demat & Trading account:
1. Free Zerodha account (Cashback 100% account opening fee

from Gale.in, Cashback after account opening.)
Beginners with investment less than Rs. 2,00,000 can start with
Zerodha. Zerodha offers free equity Delivery and Flat Rs. 20 on
trades.
2. Free Angel Broking account with 50% off on Brokerage. (waive-

off first year Account Maintenance charges with investment of
Rs. 50,000 within first 15 days of account opening and free
lifetime Account Maintenance charges with Investment of Rs.
3,00,000 within First 15 days of account opening.)
Investors with investment more than Rs. 2-3 lacs can opt for
Angel Broking account. It offers quality platform at a reasonable
price.
You can enrol here below:
http://gale.in/free-trading-and-demat-account-opening-100-
cashback-from-gale-in/
This book is Version 2018 Revision 0 (v2018r0).

You can kindly email your inputs to improve the
book to admin@gale.in.

68 | P a g e

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GUIDE TO INVESTING IN INDIAN STOCK MARKETS v2018r0

GUIDE TO INVESTING IN INDIAN STOCK MARKETS v2018r0

Why do we need to invest? 5

GUIDE TO INVESTING IN INDIAN STOCK MARKETS v2018r0

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As humans, we want financial security, financial

Inflation means an increase in the price of products or

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Real Return = annual return % - inflation

It is a proven fact that higher the return you are

GUIDE TO INVESTING IN INDIAN STOCK MARKETS v2018r0

assets and very safe financial products. Investment in

Indian households in contrast to the rest of the world

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The long-awaited shift in

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We can see that returns on investment in financial

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There are many events in

“People who are confident and think they may not

The investment advisor is actually your planning

GUIDE TO INVESTING IN INDIAN STOCK MARKETS v2018r0

GUIDE TO INVESTING IN INDIAN STOCK MARKETS v2018r0

The mind-set of young Indians has changed and they

Young Indians have realised that investments in

GUIDE TO INVESTING IN INDIAN STOCK MARKETS v2018r0

How can one start investing in stock markets?

How to choose a stockbroker

 A thorough background check – this would include

GUIDE TO INVESTING IN INDIAN STOCK MARKETS v2018r0

 In today’s fast world brokers’ should give online

These points can ensure that you can achieve

In case you have issues or doubts in your mind, SEBI

GUIDE TO INVESTING IN INDIAN STOCK MARKETS v2018r0

For any person to trade on securities market

GUIDE TO INVESTING IN INDIAN STOCK MARKETS v2018r0

When you approach a Broker with these documents,

We get to hear a lot of complaints that it’s a booklet

To let you in on a little secret, the entire booklet need

We will explain an important concept that you need to

GUIDE TO INVESTING IN INDIAN STOCK MARKETS v2018r0

A primary market is a market that deals with

An issue that is made to the public and either be

GUIDE TO INVESTING IN INDIAN STOCK MARKETS v2018r0

 STEP – 2 – Application form and ASBA

GUIDE TO INVESTING IN INDIAN STOCK MARKETS v2018r0

 Step -3 – Allotment of shares, listing, and trading

• SEBI ensures every retail applicant gets allotted a

• The rest is based on the proportion of the number

• If there is oversubscription, based on the number

GUIDE TO INVESTING IN INDIAN STOCK MARKETS v2018r0

Step By Step Practical Process to Buy or Sell

A secondary market is a place where investors can

 Step – 1 – Open a Demat account

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Unlike bank account opening forms that has 2 pages,

GUIDE TO INVESTING IN INDIAN STOCK MARKETS v2018r0

The securities market is a small part of the entire

Generally, we have heard people saying that if you

One thing is for sure that securities market is not a

There are 2 main types of securities – Equity and debt.

Under Equity, we have