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How to start to open a Demat account? You have to approach a DP to open a Demat account. Most banks are DP participants so you may approach them. To have latest list of registered DP please visit websites www.nsdl.co.in and www.cdslindia.com. A broker and a DP are two different people. A broker is a member of the stock exchange, who buys and sells stocks on his behalf and also on behalf of his customers.. Following are the documents required to open Demat account. When you approach any DP, you will be guided through the formalities of opening an account. The DP will ask to provide some documents as proof of your identity and address. Below is a list but you may not require all of them. PAN card, Voter's ID, Passport, Ration card, Driver's license, Photo credit card Employee ID card, IT returns, Electricity/ Landline phone bill etc. Do you need any stocks to open a Demat account? No. You need not need any stocks to open a demat account. A demat account can be opened with no balance of stocks. And there is no minimum balance to be maintained either. You can have a zero balance in your account. How much it cost to open a Demat account? The charges for account opening, annual account maintenance fees and transaction charges vary between various DPs. To have latest charges please visit websites of www.nsdl.co.in and www.cdslindia.com Finally After successfully opening the demat account, the DP will allot Beneficial Owner Identification Number, which will be needed to mention for all your future transactions. If you want to sell your stocks, you need to place an order with your broker and give a 'Delivery Instruction' to your DP. The DP will debit your account with the number of stocks sold. You will receive the payment from your broker. If you want to buy stocks, inform your broker about your Depository Account Number, so that the stocks bought are credited into your account. Points to remember while opening online account Make multiple enquiries and try get low brokerage trading and demat account. Also discuss about the margin they provide for day trading. Discuss about fund transfer. The fund transfer should be reliable and easy. Fund transfer from your bank account to trading account and visa versa. Some online share trading account has integrated savings account which makes easy for you to transfer funds from your saving account to trading account. Very important is about service they provide, the research calls, intraday or daily trading tips. Also enquire about their services charges and any other hidden charges if any. And also see how reliable and easy is to contact them in case if any emergency. Emergency closing or squaring off trades in case of any technical or other problems
Bid Quantity - The total number of stocks available for buying is called Bid Quantity. Offer Quantity - The total number of stocks available for selling is called Offer Quantity. Buying and selling of stocks - Buy is also called as demand or bid and selling is also called as supply or offer.First selling and then buying (this only happens in day trading) is called as shorting of stocks or short sell. Stock Trading - Buying and Selling of stocks is called stock trading. Transaction - One complete cycle of buying and selling of stocks is called One Transaction. Squaring off - This term is used to complete one transaction. Means if you buy then have to sell (means square-off) and if you sell then you have to buy (means square-off). Limit Order - In limit order the buying or selling price has to be mentioned and when the stock price comes to that price then your order will get executed with the mentioned price by you Market Order- When you put buy or sell price at market rate then the price get executes at the current rate of market. The market order get immediately executed at the current available price
Following are the types of orders which are used for buying and selling of stocks. Market Order - When you put buy or sell price at market rate then the price get executes at the current rate of market. The market order get immediately executed at the current available price. In market order there is no need to mention the price; the stocks will get executed at the best current available price. If you wish to buy or sell stocks at any specific price then market order is not suitable for you then you have to go for limit order. Market order is for those who want to buy or sell immediately at the current available price. Limit Order Its totally different to market order. In limit order the buying or selling price has to be mentioned and when the stock price comes to that price then your order will get executed with the mentioned price by you. But here its not sure that the price will come to your limit order. In day trading its risk because you have to close all your transactions before 3:30 PM and if in case price doesnt reach to your limit order then your order will be open and then you have to go through (bare) the heavy penalties. Importantly limit order and stop loss trigger price are used together. Stop Loss Trigger PriceStop loss and trigger price are used to reduce the losses.
This is very important term especially if you are doing day trading (intraday). Stop Loss as the name indicates this is used to reduce the loss.
traders and short term traders. Technical analysis is nothing but study of charts, support and resistance levels, technical indicators and other parameters which are useful to analyze the stock price movements in short term or in day trading. There are several factors and terms in Technical analysis which will be discussed in detail in further topics.
PC without depending on your broker. You can also check the status of your amount on daily basis through you online trading system. Disadvantages of Online Trading In online trading system you may face problem of disconnection to internet due to which you will not be able to login to your online trading system and hence you cant do trading yourself. At such critical times you have to call trading system executive and do trading or square off your transactions. If may face other problems such as electricity cut-off, PC problem etc during online trading then immediately you have to contact your trading system executive and place orders or do trading.
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Stock Market of India Introduction Stock markets refer to a market place where investors can buy and sell stocks. The price at which each buying and selling transaction takes is determined by the market forces (i.e. demand and supply for a particular stock). Let us take an example for a better understanding of how market forces determine stock prices. ABC Co. Ltd. enjoys high investor confidence and there is an anticipation of an upward movement in its stock price. More and more people would want to buy this stock (i.e. high demand) and very few people will want to sell this stock at current market price (i.e. less supply). Therefore, buyers will have to bid a higher price for this stock to match the ask price from the seller which will increase the stock price of ABC Co. Ltd. On the contrary, if there are more sellers than buyers (i.e. high supply and low demand) for the stock of ABC Co. Ltd. in the market, its price will fall down. In earlier times, buyers and sellers used to assemble at stock exchanges to make a transaction but now with the dawn of IT, most of the operations are done electronically and the stock markets have become almost paperless. Now investors dont have to gather at the Exchanges, and can trade freely from their home or office over the phone or through Internet. History of the Indian Stock Market - The Origin One of the oldest stock markets in Asia, the Indian Stock Markets have a 200 years old history. 18th Century East India Company was the dominant institution and by end of the century, busuness in its loan securities gained full momentum 1830's Business on corporate stocks and shares in Bank and Cotton presses started in Bombay. Trading list by the end of 1839 got broader 1840's 1850's Recognition from banks and merchants to about half a dozen brokers Rapid development of commercial enterprise saw brokerage business attracting more people into the business 1860's 1860-61 The number of brokers increased to 60 The American Civil War broke out which caused a stoppage of cotton supply from United States of America; marking the beginning of the "Share Mania" in India 1862-63 1865 The number of brokers increased to about 200 to 250 A disastrous slump began at the end of the American Civil War (as an example, Bank of Bombay Share which had touched Rs. 2850 could only be sold at Rs. 87)
Pre-Independance Scenario - Establishment of Different Stock Exchanges 1874 With the rapidly developing share trading business, brokers used to gather at a street (now well known as "Dalal Street") for the purpose of transacting business.
1875
"The Native Share and Stock Brokers' Association" (also known as "The Bombay Stock Exchange") was established in Bombay
Development of cotton mills industry and set up of many others Establishment of "The Ahmedabad Share and Stock Brokers' Association" Sharp increase in share prices of jute industries in 1870's was followed by a boom in tea stocks and coal
1908 1920
"The Calcutta Stock Exchange Association" was formed Madras witnessed boom and business at "The Madras Stock Exchange" was transacted with 100 brokers.
When recession followed, number of brokers came down to 3 and the Exchange was closed down Establishment of the Lahore Stock Exchange Merger of the Lahoe Stock Exchange with the Punjab Stock Exchange Re-organisation and set up of the Madras Stock Exchange Limited (Pvt.) Limited led by improvement in stock market activities in South India with establishment of new textile mills and plantation companies
Uttar Pradesh Stock Exchange Limited and Nagpur Stock Exchange Limited was established Establishment of "The Hyderabad Stock Exchange Limited" "Delhi Stock and Share Brokers' Association Limited" and "The Delhi Stocks and Shares Exchange Limited" were established and later on merged into "The Delhi Stock Exchange Association Limited"
Post Independance Scenario The depression witnessed after the Independance led to closure of a lot of exchanges in the country. Lahore Estock Exchange was closed down after the partition of India, and later on merged with the Delhi Stock Exchange. Bnagalore Stock Exchange Limited was registered in 1957 and got recognition only by 1963. Most of the other Exchanges were in a miserable state till 1957 when they applied for recognition under Securities Contracts (Regulations) Act, 1956. The Exchanges that were recognized under the Act were: 1. 2. 3. 4. 5. 6. 7. 8. Bombay Calcutta Madras Ahmedabad Delhi Hyderabad Bangalore Indore
Many more stock exchanges were established during 1980's, namely: 1. 2. 3. 4. 5. 6. 7. 8. 9. Cochin Stock Exchange (1980) Uttar Pradesh Stock Exchange Association Limited (at Kanpur, 1982) Pune Stock Exchange Limited (1982) Ludhiana Stock Exchange Association Limited (1983) Gauhati Stock Exchange Limited (1984) Kanara Stock Exchange Limited (at Mangalore, 1985) Magadh Stock Exchange Association (at Patna, 1986) Jaipur Stock Exchange Limited (1989) Bhubaneswar Stock Exchange Association Limited (1989)
10. Saurashtra Kutch Stock Exchange Limited (at Rajkot, 1989) 11. Vadodara Stock Exchange Limited (at Baroda, 1990) 12. Coimbatore Stock Exchange 13. Meerut Stock Exchange At present, there are twenty one recognized stock exchanges in India which does not include the Over The Counter Exchange of India Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL). Government policies during 1980's also played a vital role in the development of the Indian Stock Markets. There was a sharp increase in number of Exchanges, listed companies as well as their capital, which is visible from the following table: S. No. 1 2 194 6 7 112 5 150 6 270 196 1 7 120 3 211 1 753 129 2 63 107 197 1 8 159 9 283 8 181 2 267 5 113 167 197 5 8 155 2 323 0 261 4 327 3 168 211 198 0 9 226 5 369 7 397 3 675 0 175 298
1985 14 4344
1991 20 6229
1995 22 8593
6174
8967
11784
5 6 7
Market value of Capital of Listed Cos. (Cr. Rs.) Capital per Listed Cos. (4/2)(Lakh Rs.) Market Value of Capital per Listed Cos. (Lakh Rs.) (5/2)
971 24 86
358
170
148
126
170
260
344
803
Trading Pattern of the Indian Stock Market Indian Stock Exchanges allow trading of securities of only those public limited companies that are listed on the Exchange(s). They are divided into two categories:
Types of Transactions The flowchart below describes the types of transactions that can be carried out on the Indian stock exchanges:
Act as an agent, 1. 2. 3. Buy and sell securities for his clients and charge commission for the same, Act as a trader or dealer as a principal, Buy and sell securities on his own account and risk.
Over The Counter Exchange of India (OTCEI) Traditionally, trading in Stock Exchanges in India followed a conventional style where people used to gather at the Exchange and bids and offers were made by open outcry. This age-old trading mechanism in the Indian stock markets used to create many functional inefficiencies. Lack of liquidity and transparency, long settlement periods and benami transactions are a few examples that adversely affected investors. In order to overcome these inefficiencies, OTCEI was incorporated in 1990 under the Companies Act 1956. OTCEI is the first screen based nationwide stock exchange in India created by Unit Trust of India, Industrial Credit and Investment Corporation of India, Industrial Development Bank of India, SBI Capital Markets, Industrial Finance Corporation of India, General Insurance Corporation and its subsidiaries and CanBank Financial Services.
Advantages of OTCEI 1. 2. 3. 4. Greater liquidity and lesser risk of intermediary charges due to widely spread trading mechanism across India The screen-based scripless trading ensures transparency and accuracy of prices Faster settlement and transfer process as compared to other exchanges Shorter allotment procedure (in case of a new issue) than other exchanges
National Stock Exchange In order to lift the Indian stock market trading system on par with the international standards. On the basis of the recommendations of high powered Pherwani Committee, the National Stock Exchange was incorporated in 1992 by Industrial Development Bank of India, Industrial Credit and Investment Corporation of India, Industrial Finance Corporation of India, all Insurance Corporations, selected commercial banks and others. NSE provides exposure to investors in two types of markets, namely: 1. 2. Wholesale debt market Capital market
Wholesale Debt Market - Similar to money market operations, debt market operations involve institutional investors and corporate bodies entering into transactions of high value in financial instrumets like treasury bills, government securities, commercial papers etc. Trading at NSE 1. 2. 3. 4. Fully automated screen-based trading mechanism Strictly follows the principle of an order-driven market Trading members are linked through a communication network This network allows them to execute trade from their offices
5. 6. 7.
The prices at which the buyer and seller are willing to transact will appear on the screen When the prices match the transaction will be completed A confirmation slip will be printed at the office of the trading member
Advantages of trading at NSE 1. 2. 3. 4. Integrated network for trading in stock market of India Fully automated screen based system that provides higher degree of transparency Investors can transact from any part of the country at uniform prices Greater functional efficiency supported by totally computerized network