STOCK MARKET

By ATUL KACHAVA

FINANCIAL MARKET
A financial market is a broad term describing any
marketplace where buyers and sellers participate in the trade
of assets such as equities, commodities, bonds, currencies and
derivatives.

Type of financial market

Money Market: The money market is a segment of the financial market in which
financial instruments with high liquidity and very short maturities are
traded.
Certificate of deposit (CDs), banker's acceptances, Treasury bills,
commercial paper, municipal notes, RBI funds and repurchase
agreements (repos).
Capital Market: A capital market is one in which individuals and institutions trade
financial securities.
Capital market consists of stock, bonds, fixed deposit, etc.
Capital markets include Primary Market and Secondary Market.

 Primary Market: A primary market issues new securities on an exchange. Companies,

governments and other groups obtain financing through debt or equity based
securities.
o Initial Public Offering IPO
The first sale of stock by a private company to the public. IPOs are often
issued by smaller, younger companies seeking the capital to expand, but can
also be done by large privately owned companies looking to become publicly
traded.
o Follow On Public Offer FPO
an issuing of shares to investors by a public company that is already listed
on an exchange
Secondary market: The secondary market is where investors purchase securities or assets from
other investors, rather than from issuing companies themselves.

Stocks and Shares

Share market: The share market, by definition, is a place where the collective shares or
shares of different companies are traded. In the share market the other
forms of securities and derivatives are also sold.
o Ordinary Shares. (Ordinary shares are any shares that are not preferred
shares and do not have any predetermined dividend amounts.)
o Preference Shares. (Shares of a companys stock with dividends that are
paid out to shareholders before common stock dividends are issued.)
Stock Market: The stock market is the market in which shares of publicly held companies
are issued and traded either through exchanges or over the counter market.
If you buy a share of a company, you are buying a piece of the company.
When you own more than one share in a company or several companies,
these are called stocks, because "stock" generally refers to a portfolio of
shares.

Stock exchange
A stock exchange or bourse is an exchange where stock brokers and traders can buy and/or
sell stock (also called shares), bond, and other securities.
BSE: The Bombay Stock Exchange is an Indian stock exchange located at Mumbai.
Established In 1875.
Sensex: Sensex is an abbreviation of the Bombay Exchange Sensitive Index (Sensex) the benchmark index of the Bombay Stock Exchange (BSE). It is composed of 30 of the
largest and most actively-traded stocks on the BSE. Complied in 1986.
NSE: The National Stock Exchange of India Limited (NSE) is India's largest financial
market. Established in1992, located in Mumbai. The NSE has developed into a
sophisticated, electronic market, which ranks third in the world for transacted volume.
The NSE conducts transactions in the wholesale debt, equity and derivative markets.
NIFTY: 50 index is National Stock Exchange of India benchmark stock market
index for Indian equity market. Foundation in 1995.
SEBI: The Securities and Exchange Board of India (SEBI) is the regulator for the
securities market in India. It was established in the year 1988 and given statutory
powers on 12 April 1992 through the SEBI Act, 1992.

ANALYSIS

The methods used to analyze securities and make investment

decisions fall into two very broad categories: Fundamental
analysis and Technical analysis.
Fundamental analysis involves analyzing the characteristics of
a company in order to estimate its value.
Technical analysis takes a completely different approach, it
doesn't care one bit about the "value" of a company or a
commodity. Technicians (sometimes called chartists) are only
interested in the price movements in the market.

Fundamental Analysis
A method of evaluating a security that entails attempting to measure its
intrinsic value by examining related economic, financial and other
qualitative and quantitative factors. Fundamental analysts attempt to study
everything that can affect the security's value, including macroeconomic
factors (like the overall economy and industry conditions) and companyspecific factors (like financial condition and management).
The various fundamental factors can be grouped into two categories:
quantitative and qualitative.
Quantitative: capable of being measured or expressed in numerical terms.
Qualitative: related to or based on the quality or character of something,
often as opposed to its size or quantity.

Economic Indicators
To access the general economic situation of the nation
Economic indicators are snippets of financial and economic data published
regularly by governmental agencies and the private sector.
Gross Domestic Product .
Unemployment Rate.
Consumer price index .
Inflation.
Gov. Rate and Policy.
Monsoon And Agriculture.
Infrastructure Facilities.
Budget.
www.tradingeconomics.com/india/indicators
www.forexfactory.com
News paper.

 Gross Domestic Product (GDP).

Gross domestic product (GDP) is the monetary value of all the finished goods
and services produced within a country's borders in a specific time period.
GDP = C + G + I + NX
Where C is equal to all private consumption, or consumer spending, in a nation's
economy, G is the sum of government spending, I is the sum of all the country's
investment, including businesses capital expenditures and NX is the nation's total net
exports, calculated as total exports minus total imports (NX = Exports Imports).
Consumer price index .
The consumer price index (CPI) is a measure that examines the weighted
average of prices of a basket of consumer goods and services, such as transportation,
food and medical care. The CPI is calculated by taking price changes for each item
in the predetermined basket goods and averaging them; the goods are weighted
according to their importance.
Inflation.
Inflation is the rate at which the general level of prices for goods and
services is rising and, consequently, the purchasing power of currency is
falling .central banks attempt to limit inflation, and avoid deflation, in order to
keep the economy running smoothly.

Rate and Policy

Cash Reserve Ratio
Cash Reserve Ratio is a certain percentage of bank deposits which banks are required to
keep with RBI in the form of reserves or balances.
Statutory Liquidity Ratio
Every financial institution has to maintain a certain quantity of liquid assets with them
selves at any point of time of their total time and demand liabilities. These assets have to be kept
in non cash form such as precious metals, approved securities like bonds etc.
Bank Rate Policy
Also known as the discount rate, is the rate of interest charged by the RBI for providing
funds or loans to the banking system.
Repo Rate
Repo rate is the rate at which RBI lends to its clients generally against government
securities. Reduction in Repo rate helps the commercial banks to get money at a cheaper rate and
increase in Repo rate discourages the commercial banks to get money as the rate increases and
becomes expensive.
Reverse Repo Rate
Reverse Repo rate is the rate at which RBI borrows money from the commercial banks.
The increase in the Repo rate will increase the cost of borrowing and lending of the banks which
will discourage the public to borrow money and will encourage them to deposit. As the rates are
high the availability of credit and demand decreases resulting to decrease inflation.

Industry
Customer.
Industry growth.
Competition.
Regulation.
Market share.
Market share is the percentage of an industry or market's total sales that is
earned by a particular company over a specified time period. Market share is
calculated by taking the company's sales over the period and dividing it by the
total sales of the industry over the same period
economictimes.indiatimes.com/industry

Company
Business plan.
Management
Auditors report
Financial analysis(P/L, Balance)
Ratio.
www.moneycontrol.com
www.google.com/finance

Financial analysis
Net sales.
Net sales are the amount of sales generated by a company after the deduction of returns,
allowances for damaged or missing goods and any discounts allowed.
Net Profit.
Net income (NI) is a company's total earnings or profit. Net income is calculated by taking
revenues and adjusting for the cost of doing business, depreciation, interest, taxes and other
expenses.
Loans.
Depreciation.
Depreciation is an accounting method of allocating the cost of a tangible asset over its useful
life. Businesses depreciate long term assets for both tax and accounting purposes
Book value.
Book value is the value at which an asset is carried on a balance sheet. To calculate, take the
cost of an asset minus the accumulated depreciation. The net asset value of a company,
calculated by total assets minus intangible assets (patents, goodwill) and liabilities.
Face value.
Face value is the nominal value or dollar value of a security stated by the issuer. For stocks, it
is the original cost of the stock shown on the certificate.
http://www.moneycontrol.com
Company annual report.

Ratio
Earning per share(EPS).
Price to earning (P/E).
Dividend payout ratio.
Quick ratio.
Debt ratio.
Debt/equity ratio.
Beta.
ROA
ROE
http://www.moneycontrol.com

Technical analysis
Despite all the fancy and exotic tools it employs,
technical analysis really just studies supply
anddemand in a market in an attempt to
determine what direction, or trend, will continue in
the future.
Some rely on chart pattern, other use technical
indictor and oscillators and most use some
combination of two.
http://www.investing.com
http://www.google.com/finance

DAILY SENSITIVE PRICE

OPEN This is the first trading price of the day

CLOSE This is the last trading price of the day
LOW This is the lowest trading price of the day
HIGH This is the highest trading price of the day

VOLUME this the number of total shares treaded end of the

day.
BID: Thebid price represents the maximum price that a
buyer or buyers are willing to pay for a security.
ASK: The ask price represents the minimum price that
aselleror sellers are willing to receive for the security.

Chart
In technical analysis, charts are similar to the
charts that you see in any business setting. A
chart is simply a graphical representation of a
series of prices over a set time frame
Chart Types:There are four main types of charts
Line Chart
Bar Charts
Point and Figure Charts
Candlestick Charts

Line Chart
The most basic of the four charts is the line chart
because it represents only the closing prices over
a set period of time.

Bar Charts
Thebar chartexpands on the line chart by adding
several more key pieces of information to each
data point. The chart is made up of a series of
vertical lines that represent each data point.

Point and Figure Charts

The point and figure chart is not well known or
used by the average investor but it has had a long
history of use dating back to the first technical
traders.

Candlesticks
The candlestick chart is similar to a bar chart, but
it differs in the way that it is visually constructed.

PRICE STYLES
JAPANESE CANDLESTICKS: It shows shares all
sensitive figures & specially open and close
relation.
Green candle (white) is shows closing price is
HIGHEST PRICE
higher than the opening price.
UPPER SHADAWO

BULL

CLOSING
PRICE
REAL BOADY
OPENING
PRICELOWER SHADAWO
LOWEST
PRICE

PRICE STYLES
Red candle (black) is shown closing price is
lower than the opening price.
HIGHEST PRICE

OPENING PRICE

BEAR
CLOSING PRICE
LOWEST PRICE

DOJI
Bulls and bear are equaling.

DOW THEORY
THE MARKET IS COMPRISED OF TWO
TRENDS.
At any given time in the stock market, two forces are in effect: the Primary
trend & Secondary trend.
The primary trend can either be a BULLISH (rising) market or a BEARISH
(falling) market.
The Primary trend usually lasts more than one year and may last for several
years.
If the market is making successive Higher-Tops & Higher Bottoms the
primary trend is UP.
If the market is making successive Lower Tops & Lower Bottoms ,the
primary trend is DOWN.
Secondary trends are intermediate, corrective reactions to the Primary trend.
It retraces One third to two thirds of the previous Primary trend.

THE VOLUME CONFIRMS THE TREND.

The Dow Theory focuses primarily on price
action. Volume is used only to confirm uncertain
situations.
If the primary trend is up, volume should
increase during market advances.
If the primary trend is down , volume should
increase during market declines.
In the secondary trend of primary trend up,
volume is flat or lower than average volume.
In the secondary trend of primary trend down,
volume is flat or lower than average volume.

Chart Patterns
There are two types of patterns within this area of
technical analysis,reversalandcontinuation. A
reversal pattern signals that a prior trend will
reverse upon completion of the pattern.

19
0
P 18
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R 17
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13
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12
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11
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V 10
O100
0 K
L
75 K
U
M 50 K
E 25 K

IF THE PRIMARY TREND IS UP

TIME

19
0
18
0
17
0
16
0
15
0
14
0
13
0
12
0
11
0
10
125
0 K
100 K
50 K
25 K

IF THE PRIMARY TREND IS UP

ITS SECONDARY TREND

24
0
22
0
20
0
18
0
16
0
14
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12
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80

UP
TREND
164T

B/O
11 T
6

20

B/O

80B

60
40

21 T
8

34B

120B

222T
B/O
180B

UP
24
0 HIGHER
TRENDTOPS
22
21
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8
20 HIGHER
0 BOTTOMS
164T
18
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11 T
120
B
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80B

60
40
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34B

222T

180B
BREAK
OUT

NECK LINE

42
0
40
0
38
0
36
0
34
0
32
0
30
0
28
0
26
0
125 K
100 K
50 K
25 K

IF THE PRIMARY TREND IS DOW

ITS SECONDARY TREND

37
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376T

DOWEN
B/O
32 T TREND
4

28
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B/O

250T

B/O
18
9

179T

B/O
130B

B 126

37
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376T

DOWEN
32 T TREND
LOWER TOPS
4

28
2

LOWER
BOTTOMS
250T
NECK LINE

18
9

179T

B
130B

B126

BREAK
OU
T

Support and Resistance

One type of universal support and resistance that
tends to be seen across a large number of
securities is round numbers

Methods to Establish Support and

Resistance?
Support and Resistance are like
mirror images and have many

common characteristics.

Highs and Lows

Support can be established
with the
previous sensitive lows
Resistance can be
established by
using the sensitive reaction
highs.

17
0
16
0
15
0
14
0
13
0
12
0
11
0
10
0
90

HEAD &
SHOULDER
14 T0 1

L. S.

60

HEA
D
120 T
DAYS

80
70

16 T0 2

SUPPORT
LINE

15 T- 3
0

R. S.

BREAK
OUT
P.T. _____
T.T. _____

INVERTED
640
HEAD
&
620
SHOULDER
600

105 T
DAYS

580
560
540RESISTANCE
LINE
52
0
500
480
460
440
420

BREA
KOU
52 B-T
0 3
P.T. _____

50 B0 1
46 B0 2

T.T. _____

Cup and Handle

Acup and handlechart is a bullish continuation
pattern in which the upward trend has paused but
will continue in an upward direction once the
pattern is confirmed.

DOUBLE
310
TOP
300
290

30 T0 1

30 T0 2

280
270
260
250
240
230
220
210SUPPORT
200LINE

90 T DAYS

BREAK
P.T. _____
OUT
T.T. _____

TRIPPLE
310
TOP
30 T300
0 1
290

30 T0 2

30 T0 3

280
270
260
250
240
230
220
210SUPPORT
200LINE

90 T DAYS

BREAK
P.T. _____
OUT
T.T. _____

1150
110
0
1050

ROUNDING
TOPS

1000

950
900
850
800
750
700
650
600

BREAK
OUT
P.T. _____
T.T. _____

230
220
21
0
200

ROUNDING
BOTTOM

RESISTANCE
LINE

190
180
170
160
150
140
130
120

BREA
KOU
T
P.T. _____
T.T. _____

P.T. _____

320

UP
FLAG

310
300

T.T. _____

180 T
DAYS

290
280

29 T
0

270
260

26 B
0

250
240
230
220
210

SUPPORT
LINE
21 B
0

BREAK
OUT

52
T
520
0
510
500

150 T
DAYS

DOWN FLAG

490
480
470

47 T
0

P.T. _____
T.T. _____

460
450
440

44 B
0

430
420
410

SUPPORT

BREAK

Triangles
The three types of triangles, which vary in
construct and implication, are the
symmetrical triangle,ascendinganddescending
triangle

Indicators
An indicator is a mathematical calculation that
can be applied to a security's price and/or volume
fields. The result is a value that is used to
anticipate future changes in prices.
There are two main types of indicators:leading
andlagging. A leading indicator precedes price
movements, giving them a predictive quality,
while a lagging indicator is a confirmation tool
because it follows price movement. A leading
indicator is thought to be the strongest during
periods of sideways or non-trending trading
ranges, while the lagging indicators are still useful
during trending periods.

Volume
Volume is simply the number of shares or
contracts that trade over a given period of time,
usually a day. The higher the volume, the more
active the security. To determine the movement of
the volume (up or down), chartists look at the
volume bars that can usually be found at the
bottom of any chart

Moving Averages
Simple Moving Average (SMA)
This is the most common method used to
calculate the moving average of prices. It simply
takes the sum of all of the past closing prices over
the time period and divides the result by the
number of prices used in the calculation.
Exponential Moving Average (EMA)
This moving average calculation uses a smoothing
factor to place a higher weight on recent data
points and is regarded as much more efficient
than the linear weighted average.

MACD
Themoving average convergence divergence
(MACD) is one of the most well known and used
indicators in technical analysis. This indicator is
comprised of two exponential moving averages,
which help to measuremomentumin the security.
The MACD is calculated by subtracting a 26-day
moving average of a security's price from a 12day moving average of its price. The result is an
indicator that oscillates above and below zero.

Relative Strength Index

Therelative strength index(RSI) is another one of
the most used and well-known momentum
indicators in technical analysis. RSI helps to signal
overbought and oversold conditions in a security.
The indicator is plotted in a range between zero
and 100. A reading above 70 is used to suggest
that a security is overbought, while a reading
below 30 is used to suggest that it is oversold.

Stochastic Oscillator
Thestochastic oscillatoris one of the most recognized momentum
indicators used in technical analysis. The idea behind this indicator is
that in an uptrend, the price should be closing near the highs of the
trading range, signaling upward momentum in the security. In
downtrends, the price should be closing near the lows of the trading
range, signaling downward momentum.

The stochastic oscillator is plotted within a range of zero and 100 and
signals overbought conditions above 80 and oversold conditions below
20. The stochastic oscillator contains two lines. The first line is the %K,
which is essentially the raw measure used to formulate the idea of
momentum behind the oscillator. The second line is the %D, which is
simply a moving average of the %K. The %D line is considered to be
the more important of the two lines as it is seen to produce better
signals. The stochastic oscillator generally uses the past 14 trading
periods in its calculation but can be adjusted to meet the needs of the
user.

'Bollinger Band
A Bollinger Band is a band plotted two standard
deviations away from a simple moving average,
developed by famous technical traderJohn
Bollinger
In this example ofBollinger Bands, the price of
the stock is banded by an upper and lower band
along with a 21-daysimple moving average.