A Primer on Investment in Shares/Stocks • Investment refers to the employment of funds to earn returns. • It requires sacrifice of present consumption to get return in future. Return >Inflation 10% > 6% • This ensure that we’ll have enough funds to purchase goods & service which were sacrificed earlier. Sunday, 16 May 2021
Role of Capital Market Income – Spending = Saving, Fixed Deficit Savings Deposits Surplus Intermediaries Individual , Bank, Stock Exchange, Companies, Insurance, NBFC, Post Sunday, 16 May 2021 office, PF etc.
Major Regulators in India Sunday, 16 May 2021
Financial Securities Equities Fixed Commodity Forex Income Sunday, 16 May 2021
Overview of Indian Financial Markets Money Capital Market Market Primary Secondary Market Market Sunday, 16 May 2021
Primary Market • Suppose XYZ having business of worth 1 crore, looking for expansion in business and for next project needed 20 lakhs rupees. What are the source of fund he can look for?? Loan from Bank Retained Earning Debt or Borrow Equity Share / Selling small portion Sunday, 16 May 2021
Primary Market Contd. Total 1 Sold 25% for Cr. 20 lakh XYZ is holding 75% now rest he made public as the part owner on company. Sunday, 16 May 2021
Public Offering Sunday, 16 May 2021
Initial Public Offering • Corporations generally contract with an investment bank to help them sell their securities to the public. • The investment bank then lines up subscribers who will buy the security. Investment bankers call this process book building. The book builder is called the book runner. • Investment banks often support their book building by providing investment information and opinion about the issuer to their clients and to the public • Before a public offering, the issuer typically provides detailed information about its business and inherent risks as well as the proposed uses for the money it hopes to raise. • This information is offered in the form of a prospectus to potential investors. Sunday, 16 May 2021
Initial Public Offering Cont.• The most common offering type for initial public and seasoned offerings is an underwritten offering. In an underwritten offering, the investment bank acts as an underwriter. • In the book building process, the right offering price is particularly important. If there are not enough buyers for all the securities that are for sale, the offering is said to be undersubscribed. • If there is more demand than securities for sale, the offering is said to be oversubscribed • In the case of oversubscription, the securities are often allocated by the investment bank to preferred clients or on a pro rata basis, by which all investors get a set proportion of the shares they ordered. Sunday, 16 May 2021
Pricing of Public Fixed price Issue decided by company with Fixed Price consultation of Lead manager. Book Building Process The objective of a book building process is to identify the price that the market is willing to pay for the securities Sunday, 16 May 2021 being issued by the company
Prospectu s Prospectus Fixed Price Book Building Process Red-Herring Prospectus Sunday, 16 May 2021
How this Public Offering Work ? Sunday, 16 May 2021
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IRCTC IPO – Book Running Lead Manager Syndicate Members Sunday, 16 May 2021
Listing of Securities on Stock Exchange Compan IPO Primary Sell Investor y Market Directly s Listin g Trading Share with each other Secondary Investors Market Sunday, 16 May 2021
IPO Sequence of Events Appoint Getting a Fix the Closure Merchant nod from price band banker SEBI Listin g Day Apply to SEBI with a DRH Book Building registration statement P Sunday, 16 May 2021
Secondary Market • The secondary market is that part of the financial market where previously issued securities and financial instruments are traded. • Secondary markets play a very important role in that they provide liquidity to investors who purchased their securities in the primary market. • Investors will hesitate to participate in the primary market if they cannot subsequently sell their holdings in the secondary market. Sunday, 16 May 2021
What really is the Stock Market – Secondary Market For example, consider the current situation of Nifty. At the time of writing this, India is facing issue of Unlock 1.0, due to this pandemic Nifty has fallen from 12400 to 7500. People is still in dilemma that we should open the normal routine or not. Assume there are two traders – T1 and T2 Sunday, 16 May 2021
So at, ₹9800 - T1 will be a seller, and T2 will be a buyer in Nifty. T1 Broker NS Broker T2 1 E 2 Sunday, 16 May 2021
What moves the Stock/Index?• Let us continue with the nifty example to understand how market really move. Imagine you are a market participant tracking nifty. • It is 10:00 AM on 9th June 2020 ,and the price of Nifty is 9800. The government makes a statement to the press that they will lift total lockdown from tomorrow. They are confident on that its now time to make move to revive economy and bring it on its feet. Two questions – 1. How will the price of Nifty react to this news? 2. If you were to place a trade on Nifty, what would it be? Would be a buy or a sell? Sunday, 16 May 2021
The answer to the first question is quite simple, the Nifty price will move up. When positive announcements are made market participants tend to buy the stock at any given price and this cascades into a stock price rally. Let me illustrate this further : Sl. Time Last Traded What price the seller What does the buyer New Last No Trade Price Price wants do? 01 10:00 9800.00 9802.00 He buys 9802.00 02 10:01 9802.00 9806.00 He buys 9806.00 03 10:03 9806.00 9811.00 He buys 9811.00 04 10:05 9811.00 9816.00 He buys 9816.00 Notice, whatever prices the seller wants the buyer is willing to pay for it. This buyer-seller reaction tends to push the share price higher. Sunday, 16 May 2021
So as you can see, the Nifty price jumped 16 Rupees in a matter of 5 minutes. Though this is a fictional situation, it is a very realistic, and typical behaviour of stocks. The stocks price tends to go up when the news is good or expected to be good. Now, moving forward in the same day, at 12:30 PM GDP data release which show -5.9% growth rate in India GDP in last quarter. By 12:30 PM let us assume Nifty is trading at 9890. Few questions for you.. • How does this new information impact Nifty? • If you were to initiate a new trade with this information what would it be? • WhatSunday, 16 May 2w021ould happen to the other stocks in the market?
What Happens After You Own A Stock?• Once the trade is executed, the shares will be electronically credited to your DEMAT account. Likewise the shares will be electronically debited from the sellers DEMAT account. • After you buy the shares, the shares will now reside in your DEMAT account. You are now a part owner of the company, to the extent of your share holding. To give you a perspective, if you own 200 shares of Infosys then you own 0.000035% of Infosys. • By virtue of owning the shares you are entitled to few corporate benefits like dividends, stock split, bonus, rights issue, voting rights etc. Sunday, 16 May 2021
The History Of Bombay Stock Exchange The Bombay stock exchange traces it’s history back to the 1850s, when 4 Gujarati and 1 Parsi stock broker would gather under a banyan tree in front of Mumbai's Town hall. The location of these meetings changed many times, as the number of brokers constantly increased. The group eventually moved to Dalal Street in 1874 and in 1875 became an official organization known as “The Native Share Stock Brokers Association.” Sunday, 16 May 2021
Former Stock Exchange• There are 23 stock exchanges in India. Among them, two are national level stock exchanges namely BSE and NSE. The rest 21 are Regional Stock • Exchanges (RSEs). Due to stringent norms introduced by SEBI, 20 RSEs in the country opted to exit the business. Ahmedabad Stock 2018 UP Stock Exchange 2015 Hyderabad Stock 2007 Exchange 2015 Exchange 2017 Vadodara Stock Delhi Stock Exchange 2015 Exchange 2014 Magadh Stock 2007 Exchange Guwahati Stock 2015 Bangalore Stock 2014 Exchange 2015 Exchange 2014 Mangalore Stock 2004 Exchange Jaipur Stock Exchange 2015 Cochin Stock Exchange 2005 2015 YTerivaaErnsxdcrhuamnagrSeetock clos2in0g10 Madhya Pradesh Stock Ludhiana Stock date. Exchange Exchange Madras Stock Exchange Bhubaneshwar Stock OTSCundEayx, 1c6hMaayn20g2e1 of India Exchange
List of Indian Stock Exchanges Sunday, 16 May 2021
Stock Indices Sunday, 16 May 2021
https://www.niftyindice s.com
An index is a compilation of stocks constructed in such a manner to track a particular market or sector. These stocks would be a part of some industry or sector.
Commonly Used Jargons Sunday, 16 May 2021
Market Capitalization Sunday, 16 May 2021
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Pric e Sunday, 16 May 2021 Consolida tion Range Bound Market/Bracketed Market Day
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Title Advance and Declines Sunday, 16 May 2021
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Top Gainers / Top Loser • A security that increases in price during the course of a single trading day is called a gainer. • A top gainer is a security that has a highest % increase in price. • A security that loses value during the course of a single trading day is called a loser. A loser is a security with a high price at the open or at the start of a trading day versus its price at the end of the trading day. Sunday, 16 May 2021
Circuit Breakers • The Exchange has implemented index-based market-wide circuit breakers. • The index-based market-wide circuit breaker system applies at 3 stages of the index movement, either way viz. at 10%, 15% and 20%. These circuit breakers when triggered bring about a coordinated trading halt in all equity and equity derivative markets nationwide. • The market-wide circuit breakers are triggered by movement of either the BSE Sensex or the Nifty 50, whichever is breached earlier. • The market shall re-open, after index based market-wide circuit filter breach, with a pre-open call auction session. The extent of duration of the market halt and pre-open session is as given below: Sunday, 16 May 2021
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Nifty Hits Lower Circuit For The First Time Since May 2009 Sunday, 16 May 2021
Long and Short Trades Sunday, 16 May 2021
Evaluating Companies and Share Performance Sunday, 16 May 2021
Valuation of Shares Fundamental Technical Analysis Analysis Generally Long Generally Short TermSunday, 16 May 2021 Term
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