Stock Market

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An Overview about Stock Market

What are Markets? What are shares? What is a stock exchange? Who is a broker? What is a Demat A/c? How to receive income from shares? How much should you invest? How to make investment decisions? How to track your investments? (Portfolio tracker)

1. What are Markets?

A stock market is a market for the trading of company stock/ shares, and derivatives. This includes securities listed on a stock exchange as well as those only traded privately. Market is a place where buyers and sellers of securities can enter into transactions to purchase and sell shares, bonds, debentures etc. 1.1 Primary markets: The primary market is that part of the capital markets that deals with the issuance of new securities. 1.2 Secondary markets: The secondary market is the financial market for trading of securities that have already been issued in an initial private or public offering. In the secondary market, securities are sold by and transferred from one investor or speculator to another.

2. What are shares?

A share is one of a finite number of equal portions in the capital of a company, entitling the owner to a proportion of distributed, non-reinvested profits known as dividends and to a portion of the value of the company in case of liquidation. Equity is a share in the ownership of a company. It represents a claim on the companys assets and earnings. As you acquire more stock, your ownership stake in the company increases. The terms share, equity and stock mean the same thing and can be used interchangeably.

3. What is a stock exchange?

A stock exchange, share market is a corporation or mutual organization which provides facilities for stock brokers and traders, to trade company stocks and other securities. The Bombay Stock Exchange Limited, or BSE has a nationwide reach with a presence in 417 cities and towns of India. Its index, or market indicator is known as the Sensex.

The Nifty, or simply Nifty, is the leading index for large companies on the National Stock Exchange of India. It consists of 50 companies representing 24 sectors of the economy, and representing approximately 47% of the traded value of all stocks on the National Stock Exchange of India.

4. Who is a broker?
A stockbroker is person who is licensed to trade in shares. Brokers also have direct access to the share market and can act as your agent in share transactions. For this service they charge a fee. They can also offer additional services like advice on shares, debentures, government bonds and listed property trusts and non-listed investment options (cash management trusts, property and equity trusts.

5. What is a Demat A/c?

Investors who wish to trade in the market need to have a dematerialized, or demat, account. In India, the government has mandated two entities National Securities Depository, or NSDL, and Central Depository Services (India), or CDSL to be the custodian of dematerialized securities.

7. How to receive income from shares? We invest in shares to make money either through a shares capital growth, i.e. the amount by which the share price increases in value over time, or through the dividends it pays to its shareholders. Dividends are payments made by companies to shareholders from their profits.

8. How much should you invest?

Asset allocator and other tools Benefits of Investing Early Risk vs Returns The Need To Diversify Financial Investment Options

9. How to make investment decisions?

The stock market has, perhaps, the most exciting investment opportunities for the investor community. At the same time, it could be unnerving and scary. In fact, equity investment has always remained a big challenge, not only for retail but institutional investors, too. In short, investing in equities can be a difficult proposition for retail investors. However, equity must form a part of every investors portfolio. The proportion could vary, depending on the investors age, monetary requirements, risk appetite, etc.

 To cope with volatility, it is important to have a disciplined and systematic approach to equity investment. Set your own rules and more importantly, follow them religiously. Indeed, the mantra for successful equity investment is a well thought-out, disciplined investment strategy. A long-term monetary commitment, adherence to discipline in investment and decisions based on company fundamentals are essential ingredients for successful equity investment.

10. How to track your investments? (Portfolio tracker)

The Portfolio Manager tracks and monitors all your investments, cash flow and assets, through live price updates. Investments like equity, mutual funds, assets, cash flows, borrowing and more can all be tracked. Displayed in real time, it is the most up-to-date and precise indicator of your net worth! With the Portfolio Manager, you can not only view your investments at each stage, but can use this record of your holdings to base any future investments decisions. The Portfolio Manager comes along with some useful tools to gain useful insight of volatile markets. These tools help you to track the trends of your current investments as well as some stocks that have caught your eye.

The Portfolio Tracker Track these things.

Transaction History Watch list News Asset Risk Industry Classification Quarterly Data Best Worst Investments Financial Data Consolidated Stocks Consolidated MF's

Definition of 'Price-Earnings Ratio - P/E Ratio'

Definition of 'Price-Earnings Ratio - P/E Ratio' A valuation ratio of a company's current share price compared to its per-share earnings.

Calculated as: Market Value per Share Earnings per Share (EPS) For example, if a company is currently trading at Rs43 a share and earnings over the last 12 months were Rs1.95 per share, the P/E ratio for the stock would be 22.05 (43/1.95).

 EPS is usually from the last four quarters (trailing P/E), but sometimes it can be taken from the estimates of earnings expected in the next four quarters (projected or forward P/E). Also sometimes known as "price multiple" or "earnings multiple".

 In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole story by itself. It's usually more useful to compare the P/E ratios of one company to other companies in the same industry, to the market in general or against the company's own historical P/E. It would not be useful for investors using the P/E ratio as a basis for their investment to compare the P/E of a technology company (high P/E) to a utility company (low P/E) as each industry has much different growth prospects.

How is P/BV calculated?

P/BV is a valuation ratio and is arrived at by dividing the market price of a share with the respective company's book value per share. Now, book value is equal to the shareholder's equity (share capital plus reserves and surplus). Book value can also be arrived at by subtracting current liabilities and debt from total assets. For the banking and finance companies, book value is calculated as 'share capital plus reserves minus miscellaneous assets not written off. This formula then takes care of the bank's NPAs and gives a correct picture.

Balance Sheet of Infosys

Liabilities Equity capital Reserves & surplus Current liabilities Amount 2,860 Assets Cash Amount 69,500 60,680 47,770 720 1,190 179,860

135,090 Other current assets 41,910 Fixed assets Investments Deferred tax assets 179,860

 If one were to take a look at Infosys' consolidated balance sheet for FY08, as mentioned above, book value will be arrived at by adding Rs 2,860 (equity capital) and Rs 135,090 m (reserves and surplus), which equals to Rs 137,950 . Conversely, when we deduct current liabilities from total assets, we shall arrive at a similar figure. Now, by dividing this book value (Rs 137,950 ) by the issued equity shares of the company (approx 572 ), we would arrive at the book value per share figure, which is Rs 241.2.