W hat is a stock m arket?

A stock market or equity market is a

market for the trading of company

stock (shares) and derivatives at an
agreed price.
The size of the world stock market
was estimated at about $36.6 trillion
USD at the beginning of October
2008.

W hat is a share/stock/equity?
Shares represent a fraction of ownership in

a business.
Ownership of shares is documented by a
legal document that specifies the amount
of shares owned by the shareholder, and
other specifics of the shares, such as the
par value or the class of the shares (if any).
These days these stock certificates have
been dematerialized.(No physical
document!)

W ho is a shareholder?

A shareholder is an individual or

company that legally owns one or

more shares of a company.
Shareholders vary from individual
stock investors to large hedge fund
traders.

R ights of shareholders
Shareholders (stockholders) have

ownership interest in the company

proportional to shares owned.
Large shareholder vs. small shareholders

Rights include
voting rights influence management

W hy does a com pany issue shares to the public?

A company may want additional

capital to invest in new projects.

The promoters may simply wish to
reduce their holding, freeing up
capital for their own private use.

H ow the m arket sets prices?

The price is set by the buyer willing

to pay the highest price

The market price will be set by the
buyer who can take best advantage
of the asset.

Trading

The shares of a company are in

general be transferrable from one

shareholder to another . This leads to
buying and selling of shares termed
as trading.
Investors usually buy and sell shares
on the exchanges through a stock
brokers registered with the
exchange.

K inds of Trading

Intra-day Trading
Delivery based Trading

Intra-D ay Trading

Buying and Selling on the same day

Brokerage will be different for intra-

day and delivery based trading,

intra-day being lesser

D elivery B ased Trading

Buying and Selling are on different

days
Brokerage will be higher than intraday
Their will be minimum delivery
charges

W hen to invest in a particular stock?

FUNDAMENTAL

ANALYSIS
TECHNICAL ANALYSIS

3 Im portant R atios

EPS :

PAT Dividend/ No of

shares
PE :
Present share Price /
EPS
P/BV
Present share price /
Book value

STO CKBRO KERS

An investor who wishes to buy stock

will most likely place an order with a

stockbroker. A stockbroker is an agent
licensed by the SEC to buy and sell
securities for clients.
A stockbroker who works for a fullservice brokerage firm provides
research information, suggests
investment strategies, and offers
advice on market conditions.

Stock M arket Index

The movements of the prices in a market or

section of a market are captured in price

indices called stock market indices. Such
indices are usually market capitalization
weighted, with the weights reflecting the
contribution of the stock to the index.
Examples of index include Sensex, Nifty, DJIA,
S&P500, Nikkei etc.
The constituents of the index are reviewed
frequently to include/exclude stocks in order
to reflect the changing business environment.

Im portance and role ofthe stock m arkets

Raising capital for businesses

Government capital-raising for

development projects
Mobilizing savings for
investment
Facilitating company growth
through acquisitions

TERM S O F STO CK EXCH AN G E

BULL
BEAR
DEPOSITORY
SCRIPT

Listing requirem ents

The requirements vary from

exchange to exchange. Example:

Bombay Stock Exchange (BSE) has
requirements for a minimum market
capitalization of Rs.25 Cr and
minimum public float equivalent to
Rs.10 Cr whereas the London Stock
Exchange has requirements for a
minimum market capitalization
(700,000) .

W ays ofbuying and selling shares

Through a stock broker.

Directly from the company.

CO N CLUSIO N
You can lose all of your investment with

stocks. The flip-side of this is you can

make a lot of money if you invest in the
right company.
Stock isequity, bonds aredebt.
Bondholders are guaranteed a return on
their investment and have a higher claim
than shareholders. This is generally why
stocks are considered riskier investments
and require a higher rate of return.

THANK YOU