Everyday Intraday Tips
Share Market Awareness & Terminology
What is the share market?
Share Market- A share market only allows trading of shares. The key factor is the stock exchange – the basic platform that provides the facilities used to trade company stocks and other securities. A stock may be bought or sold only if it is listed on an exchange. Thus, it is the meeting place of the stock buyers and sellers.
Share:---- A unit ownership proportional to the investment made in a company. What is an ‘Equity’/Share? Total equity capital of a company is divided into equal units of small denominations, each called a share. For example, in a company the total equity capital of Rs 2,00,00,000 is divided into 20,00,000 units of Rs 10 each. Each such unit of Rs 10 is called a Share. Thus, the company then is 11 said to have 20,00,000 equity shares of Rs 10 each. The holders of such shares are members of the company and have voting rights.
Primary market :- The primary market is where securities are created. It's in this market that firms sell (float) new stocks and bonds to the public for the first time. An initial public offering, or IPO, is an example of a primary market.
Secondary Market:- It is the market where investors buy securities from other investors, and not from the issuing organization. The sale proceeds from the secondary market go to the investor, and not the issuing company.
What is Sebi? What is the main role of Sebi?
The SEBI was established in 1988 but was only given regulatory powers on April 12, 1992, through the Securities and Exchange Board of India Act, 1992. It plays a key role in ensuring the stability of the financial markets in India, by attracting foreign investors and protecting Indian investors. Sebi Controls The Share Market in India. Initially SEBI was a non statutory body without any statutory power. However, in 1992, the SEBI was given additional statutory power by the Government of India through an amendment to the Securities and Exchange Board of India Act, 1992.
Timing of Indian share Market
Equity- 9:15 am to 03:30pm Monday to friday
Commodity Market Agri Commodities 10am to 5 pm
Bullion, Metals, Crude Oil and Internationally linked Agri Commodities 10:00 am to 11:30pm
the client code modification will be allowed only from 11.55 p.m . up to 11.59 p.m.
What is BSE and NSE? The two largest and most prominent stock exchanges in India are the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). While the BSE has the distinction of being the oldest stock exchange in Asia, established in 1875, the NSE has quickly grown to prominence since its creation in 1992.
What is BSE and NSE index? Indices are nothing but indicators of market movement. Sensex is the benchmark index of S&P BSE (Bombay Stock Exchange), whereas NIFTY is benchmark index of NSE (National Stock Exchange). NIFTY is also known as CNX NIFTY or NIFTY 50.
How the Sensex is calculated?
One can identify the booms and busts of the Indian stock market through Sensex. Sensex is calculated using the "Free-float Market Capitalization" methodology. As per this methodology, the level of index at any point of time reflects the Free-float market value of 30 component stocks relative to a base period. The index is computed by weighted average market capitalization. ... In order to understand how the underlying stocks affect the index, the market weight (index weight) needs to be calculated. This is done by dividing the market capitalization of a company on the index by the total market capitalization of the index.
What is the difference between Sensex and Nifty? -- The main difference between SENSEX and Nifty is that SENSEX is the stock market index for BSE Limited, while Nifty is the stock market index for National Stock Exchange (NSE). Another is that SENSEX is comprised of 30 stocks, while Nifty is comprised of 50 stocks.
What is the full form of nifty?
Full form of NIFTY is “National Stock Exchange Fifty” – it is the broad index of NSE. NIFTY normally comprises of 50 stocks but right now there are 51 stocks. ... It is owned and managed by India Index Services and Products Ltd. (IISL).
What is nifty 50/100/500 in India? ----The NIFTY 50 is a diversified 50 stock index accounting for 12 sectors of the economy. NIFTY 100 is a diversified 100 stock index representing major sectors of the economy. NIFTY 100 represents top 100 companies based on full market capitalization from NIFTY 500. This index intends to measure the performance of large market capitalization companies.
What is nifty free float Midcap 100 index?
The objective of the NIFTY Free Float Midcap 100 Index is to capture the movement and be a benchmark of the midcap segment of the market. Market Representation. The NIFTY Free Float Mid cap 100 Index represents about 11.8% of the free float market capitalization of the stocks listed on NSE as on March 31, 2017.
What is meant by free float market capitalization?
Free float is a term in stocks trading. It describes the proportion of shares of a publicly traded company that is traded in the stock market . Note that not all free float shares may be actively circulating on the market at any given time as many traders purchase shares as a long-term investment.
What are depositories?
Depository in simple terms is a institution which holds your securities in a dematerialised form. In this case a Depository is an institution which holds your Shares, Government Bonds, Mutual funds etc on your behalf. Like a Bank is to your Fixed Deposits, Cash and Recurring Deposits, a Depository is to your Shares, Holdings, Government Bonds etc. . There are 2 Central Depositories in India
1) Central Depository Services India Limited (CDSL)
2) National Securities Depository Limited (NSDL)
Stock Exchanges in India (Equity Market)
A. Ahmedabad Stock Exchange Ltd.
B. BSE Ltd. PERMANENT
C. Calcutta Stock Exchange Ltd.
D. Magadh Stock Exchange Ltd.
E. National Stock Exchange of India Ltd.
Commodity derivative exchanges (Derivative- Gold,Copper,Oil,etc nature provided) we will discuss separately.
Ace Derivatives and Commodity Exchange Limited India Pepper & Spice Trade Association Indian Commodity Exchange Limited Multi Commodity Exchange of India Ltd. National Commodity & Derivatives Exchange Ltd. National Multi Commodity Exchange of India Limited. Rajkoversal Commodity Exchange Ltd. Universal Commodity Exchange Ltd.
Equity Market- A market that gives companies a way to raise needed capital and gives investors an opportunity for gain by allowing those companies' stock shares to be traded. Also called stock market.
Commodity Market:- A commodity market is a market that trades in primary economic sector rather than did products.
Soft commodities- are agricultural products such as wheat, coffee, cocoa, fruit and sugar.
Hard commodities- are mined, such as gold and oil.
Metals (such as gold, silver , platinum and copper)
Energy -(such as crude oil, heating oil, natural gas and gasoline)
Livestock and Meat (including lean hogs, pork bellies, live cattle and feeder cattle)
Agricultural (including corn, soybeans, wheat, rice, cocoa, coffee, cotton and sugar)
Profit or loss for every 1 Rupee movement in the commodity.
|MCX NCDEX Lots size|
|Qutation||Symbol||Tick size||Trading Unit||Lot size||Delivery center|
|Metal futures- Mega|
|Gold Guinea||8gm||GOLD GUINEA||1||8gm||1||Ahmedabad|
|Gold PETAL||1gm||GOLD Petal||1||1gm||1||Mumbai|
|Natural Gas||1 mmBtu||NATURAL GAS||0.1||1250mmbtu||1250||Hazira|
|Agriculture Futures -Cereals & Pulses & soft|
|Agriculture Futures – Spices|
Agriculture Futures -Oil & Oil seeds
|Ref. Soya Oil (NCDEX)||10Kg||REFSOYOIL||0.05||10MT||1000||Indore|
|Mustard seed (NCDEX)||1 Quintal||RMSEED||1||10MT||100||Jaipur|
|Castor seed (NCDEX)||1Quintal||CASTORDSA||1||10MT||100||Deesa|
|Agriculture Futures -Industrial commodities|
|Cotton (MCX)||1Bale||COTTON||1||25 bales||25||Rajkot|
|Mentha Oil (MCX)||1Kg||MENTHAOIL||0.1||360Kg||360||Chandausi|
|Rubber (NMCE)||1 Quintal||RUBBERF||1||1MT||10||Kochi|
|Coffee (NMCE)||1 Quintal||COFERF||0.5||1.5MT||15||Kushalnagar|
|Agriculture Futures – Others|
The currency market is the largest and most liquid financial market in the world. You can trade in currencies listed or authorized by your exchange to trade.
Advantages of Currency Trading in India
Easy Accessible to small traders, the minimum size of the GBPINR futures contract is GBP 1,000. Similarly EURINR future contract is EURO 1000, USDINR future contract is USD 1000 and JPYINR future contract is YEN 1,00,000. These are well within the reach of most small traders. As the Losses or profit in the futures contracts market are also paid or collected on a daily basis, so scope of accumulation of losses for investors gets limited.
Higher Leverage in Lower margin
Direct interaction between traders on the exchange platform
Opportunity to Hedge foreign currency exposure risk
Low Brokerage, Lower taxation ( No need to pay Securities Transaction Tax)
Currency Trading has minimum insider trading risk due to the large size of CURRENCY market and its decentralized nature
More Safe rather than other investment.
In India both the RBI & SEBI govern it.
Currency Futures are cash settled thus providing convenience to the traders.
Listing of Companies on Stock Exchange
In corporate finance, a listing refers to the company's shares being on the list (or board) of stock that are officially traded on a stock exchange.
Initial Public Offerings (IPO's) - A primary market is one that issues new securities on an exchange. The primary markets are where investors can get first crack at a new security issuance. The issuing company offers its equity to investors or groups and receives cash proceeds from the sale, which is then used to fund operations or expand the business. It is the largest source of funds with long or indefinite maturity for the company.
Follow on Public Offer (FPO):- FPO (Follow on Public Offer) is a process by which a company, which is already listed on an exchange, issues new shares to the investors or the existing shareholders, usually the promoters. FPO is used by companies to diversify their equity base.
Offer For Sale : OFS stands for Offer for Sale & serves the same purpose as traditional mechanism of Follow-On Public Offer (FPOs). OFS enables promoters to dilute their holdings in listed companies in a transparent manner with a wider participation through exchange based bidding platform.
Broker/Brokerage forms: A broker is an individual person who arranges transactions between a buyer and a seller for a commission when the deal is executed. A broker who also acts as a seller or as a buyer becomes a principal party to the deal.
Demat Account: A Demat Account is an account that allows investors to hold their shares in an electronic form. Stocks in Demat account remain in dematerialized form. Dematerialization is the process of converting physical shares into electronic format.
Trading account:-- Yes. A trading account is used to place buy or sell orders in the stock market. The demat account is used as a bank where shares bought are deposited in, and where shares sold are taken from.
Brokerage: It is a commission that a broker charges on trade buy and sell of Shares or Commodity.
Bull or Bullish: A particular kind of investor who purchases shares in the expectation that the market price of that company's share will increase( go up).
Bear:- A particular kind of investor who Sales shares in the expectation that the market price of that company's share will fall(decrease).
Squaring off : A process whereby investors/traders buy or sell shares and later reverse their trade to complete a transaction is called squaring off of a trade. Example:- If you purchase 50 shares of say Infosys and sell them later before the market closes then you have squared off your buy position.
Rally :- The word suggests the gain made by the Sensex or Nifty during the course of the day. If such gains are made on a regular basis then market participants like investors, brokers etc call it as a market rally.
Crash :- crash refers to a fall in the value of Sensex and Nifty. or price of Shares.
Correction:- A correction (or a measured fall) in the Sensex and Nifty takes place when these indices rise for a few days and then retrace or shave off some of these gains. Fall of Market after big hike or fall in price of any share after big hike. hike means go up.
Bonus shares: These are the free shares that a listed company gives its shareholders.
Dividend:- It is again a way of rewarding a company's shareholders. A dividend is generally issued as a percentage of the face value of a share. Face value is the nominal price of a company's share. Like bonus shares, dividend amount also comes from a company's free cash reserves.
Book ateThis is the date on which a company closes its books for business after it announces a bonus or dividend. The company's registrar keeps a track of who owns how many shares of that particular company.
Beta: A measurement of the relationship between the price of a stock and the movement of the whole market. If stock XYZ has a beta of 1.5, that means that for every 1 point move in the market, stock XYZ moves 1.5 points and vice versa.
Blue Chip Stocks:- These are the large, industry leading companies. They offer a stable record of significant dividend payments and have a reputation of sound fiscal management. The expression is thought to have been derived from blue gambling chips, which is the highest denomination of chips used in casinos.
Day Trading(Intraday Trading):- The practice of buying and selling within the same trading day, before the close of the markets on that day.
Exchange:- An exchange is a place in which different investments are traded. The most well-known in the United States are the New York Stock Exchange and the Nasdaq. BSE, NSE.
Execution:- When an order to buy or sell has been completed . If you put in an order to buy 50 shares, this means that all 50 shares have been bought.
Margin:- A margin account lets a person borrow money from a broker to purchase an investment. The difference between the amount of the loan, and the price of the securities, is called the margin.
Order:- An investor’s bid to buy or sell a certain amount of stock or option contracts. You have to put an order in to buy or sell 200 shares of stock.
Hedge:- Hedge: This is used to limit your losses. You can do this by taking an offsetting position. For example, if you hold 50 shares of kbc, you could short the stock or futures positions on the stock.
Moving Average:- A stock’s average price-per-share during a specific period of time. Some time frames are 50 and 100 day moving averages.Portfolio:- A collection of investments owned by an investor. You can have as little as one stock in a portfolio to an infinite amount of stocks.
Quote:- Information on a stock’s latest trading price. This is sometimes delayed by 20 minutes unless you are using an actual broker trading platform.
Sector:- A group of stocks that are in the same business . An example would be the “Technology” sector including companies like infosys, quick heal.
Stock Symbol:- A one-character to three-character, alphabetic root symbol, which represents a publicly traded company on a stock exchange. vedanta’s stock symbol is Vedl.
Volatility:- This refers to the price movements of a stock or the stock market as a whole.lumes.
Volume:- Refers to the quantity of Shares.
Yield:- This usually refers to the measure of the return on an investment that is received from the payment of a dividend.
Spread:- This is the difference between the bid and the ask prices of a stock, or the amount someone is willing to buy it and someone is willing to sell it.
Averaging Down :- This is when an investor buys more of a stock as the price goes down. This makes it so your average purchase price decreases.
Averaging UP :- This is when an investor Sells more of a stock as the price goes UP. This makes it so your average purchase price decreases.
Averaging: The process of gradually buying more and more securities in a declining market (or selling in a rising market) in order to level out the purchase (or sale) price.
Bid and offer:- Bid is the price at which the market maker buys from the investor and offer is the price at which he offers to sell the stock to the investor. The offer is higher than the bid.
A debt security, or an IOU , issued by a company or government agency is called a bond. A bond investor lends money to the issuer and, in exchange, the issuer promises to repay the loan amount on a specified maturity date; the issuer usually pays the bondholder periodic interest payments over the period of the loan.
Bourse:- The floor of a Stock Exchange.
buyer:- who is willing to buy the shares.
Seller:- Who is willing to Sell the Shares.
Buy and Hold: Buy and hold is a technique of investing and profiting in stock market. A stock is bought and held almost indefinitely, assuming that all financial markets, in spite of good times and bad times, give a good rate of return on investment , in the long run. It is a long term investment strategy.
Call: The demand by a company or any other issuer of shares for payment, like demand for full payment on the due date. A call by a company should not be confused with a call option.
Call Option: This is the right, but not the obligation, to purchase shares at a specified price at a specified date in the future.
Capital Gain: The amount by which an investment's selling price exceeds its purchase price.
Capitalization: The total value of the company in the stock market.
Capital loss: The negative difference between the selling price of the stock and purchase price of the stock.
Capital Market: A market where debt or equity securities are traded.
Cash markets: The markets where securities have to be delivered by the seller and cash to be paid by the buyer immediately.
Circuit breaker: When a stock price increases or decreases by a certain percentage in a single day it hits the circuit breaker. Once the stock hits the circuit breaker, trading in the stock above (or below) that price is not allowed for that particular day.
Clearing House: Each Exchange maintains a clearing house to act as the central agency for effecting delivery and settlement of contracts between all members. The days on which members pay or receive the amounts due to them are called pay-in or pay-out days respectively.
Closing Price: The last traded price of a security at the end of a trading day.
Commission: A fee charged by a broker or distributor for his/her service in facilitating a transaction.
Consideration: Consideration is the total purchase or sale amount associated with a transaction.
Contract:-- This is the agreement between a buyer and a seller of a security, on any securities market.
Cum-bonus:- The share is described as cum-bonus when a potential purchaser is entitled to receive the current bonus.
Cum-rights:--- The share is described as cum-rights when a potential purchaser is entitled to receive the current rights.
Custodial fees:-- The fees charged by the custodian for keeping the securities.
Debenture: Debenture is a certificate, issued against a loan raised by a company, paying a fixed rate of interest and is secured on the assets of the company.
Derivatives:Instruments derived from securities or physical markets. The most common types of derivatives that ordinary investors are likely to come across are futures , options , warrants and convertible bonds.
Diversification:--- Investing in a basket of shares with different risk-reward profile and correlation so as to minimize unsystematic risk.
Earnings Per Share (EPS): This measure expresses how much the company is earning for every share held. It is calculated by dividing pre tax profit by the number of shares in issued. Earnings per share is more important than the overall reported profit figure, because the EPS provides a better measure of profitability.
Futures:--- A contract for the purchase and sale of a commodity, financial instrument or index at a fixed price at a fixed date in the future. Futures markets were created to allow producers or consumers to hedge the risk of the possible price change in the future.Fundamental analysis:- Fundamental analysis is a method to determine the health of the financial statements and focuses on the strengths and weaknesses of the underlying company and is unconcerned about daily price movements and volume variations.
Gaps:--- Gaps are continuation chart pattern, formed by an unfilled space between trading session. Gaps are referred as Tasuki, meaning window in candlestick charting.
Good Till Cancellation:-- GTC or Good Till Cancellation is an attribute attached to a buy or sell order, to keep the order in system until it gets executed or canceled.
Good Till Day: GTD or Good Till Day is an attribute attached to a buy or sell order, to keep the order in system, until a date if not canceled or executed. They are also known as GTT orders, meaning Good Till Time.
Hedging:--- Offsetting or guarding against investment risk. A perfect hedge is a no-risk-no gain precaution. A conservative strategy for reduction of risk through futures, options or some other derivative, by opening an opposite position to that already held in the underlying market. Taking positions in securities so that each offsets the other.
Limit Order:--- Limit order is an attribute attached to a buy or sell order, which will allow you to trade at your price or a better price.
Line Charts: Line charts are stock charts used in charting and study of chart patterns in technical analysis. These charts are created by connecting a series of data points together to form a line. This is the basic type of chart common in many fields.
Market Trends:- Market trends signifies the movement of the stock prices, in any one direction compared to its historical prices. Understanding the trend of a stock is the first step in technical analysis.
Money Management:-- It is a process of managing capital, to reduce the risk and increase the reward.
Price Action Trading:-- Price Action Trading is a technique of day trading and profiting in stock market. This is a simplistic and minimalism approach to trading. Such traders are referred as Price action Traders.
Share certificate:-- This is a legal document which can be used as proof of ownership of a shareholding.
Security:-- A Security is a valid and unique combination of Symbo and Series. Securities are traded in the Capital Market. Shares and Debentures are some examples of securities.
Stock:-- A financial instrument that signifies an ownership of a company, and represents a claim on its proportional share in the company's assets and profits.
Stock Chart:-- A stock chart is a visual representation of data, in which the data is represented by symbols such as lines in a line chart, bars in a bar chart or candles in a candlestick chart.
Stock Trading:-- Buying and selling of securities and commodities.
Stock Trading Orders:-- Stock Trading Orders are a set of instructions, given to the stock broker, regarding buying or selling a stock.
Stop Limit Order:-- Stop Limit order is an attribute attached to a buy or sell order, so that the order gets executed as a limit order, only after the price has reached a specific trigger price.
Stop Loss Order:- Stop Loss order is an attribute attached to a buy or sell order, so that the order gets executed as a market order, only after the price has reached a specific trigger price.
Swing Charts:---- Swing charts are stock charts used in charting and study of chart patterns in technical analysis. They plot the price swings of a stock disregarding time factor. They are also called as Gann charts because their construction is based on W.D.Gann's method of trading.
Technical Analysis:-- Technical analysis is a security analysis based on stock's market data like , price and volume, and open interest in case of futures.
Technical Indicators: Technical Indicators in stock trading shows you the direction of the market, when probably to buy or sell, when probably to book profit and importantly when not to do anything. They are derived from the price and volume values.
Value Investing:-- Value Investing is a method of stock trading, where in investment is made in undervalued companies which have high intrinsic value.
White Candles:--- White Candles or white candlesticks are bullish lines in candlestick and candle volume charts. They signify that the closing is higher than opening for that time period.
Trend Trading:-- Trend Trading is a technique of stock trading, where a trade is entered after confirmation of a trend and is carried on to the end of the trend.
What is Investment?
The money you earn is partly spent and the rest saved for meeting future expenses. Instead of keeping the savings idle you may like to use savings in order to get return on it in the future. This is called Investment.
Why should one invest?
One needs to invest to: earn return on your idle resources generate a specified sum of money for a specific goal in life make a provision for an uncertain future
When to start Investing? --- The sooner one starts investing the better. By investing early you allow your investments more time to grow, whereby the concept Basics of Financial Markets of compounding (as we shall see later) increases your income, by a accumulating the principal and the interest or dividend earned on it, year after year. The three golden rules for all investors are: Invest early Invest regularly Invest for long term and not short term
What care should one take while investing?
Before making any investment , one must ensure to:
1. obtain written documents explaining the investment
2. read and understand such documents
3. verify the legitimacy of the investment
4. find out the costs and benefits associated with the investment
5. assess the risk-return profile of the investment
6. know the liquidity and safety aspects of the investment
7. ascertain if it is appropriate for your specific goals
8. compare these details with other investment opportunities available
9. examine if it fi ts in with other investments you are considering or you have already made
10. deal only through an authorized intermediary
11. seek all clarifications about the intermediary and the investment
12. explore the options available to you if something were to go wrong, and then, if satisfi ed, make the investment. These are called the Twelve Important Steps to Investing.
Short-term fi nancial options :--- Savings Bank Account Money Market or Liquid Funds are a specialized form of mutual funds that invest in extremely short-term fi xed income instruments and thereby provide easy liquidity . Unlike most mutual funds, money market funds are primarily oriented towards protecting your capital and then, aim to maximise returns. Money market funds usually yield better returns than savings accounts, but lower than bank fi xed deposits. Fixed Deposits with Banks
What are various Long-term fi nancial options available for investment? Post Office Savings Schemes, Public Provident Fund, Company Fixed Deposits, Bonds and Debentures, Mutual Funds etc.
Public Provident Fund:- A long term savings instrument with a maturity of 15 years and interest payable at 8% per annum compounded annually. A PPF account can be opened through a nationalized bank at anytime during the year and is open all through the year for depositing money. Tax benefi ts can be availed for the amount invested and interest accrued is tax-free. A withdrawal is permissible every year from the seventh fi nancial year of the date of opening of the account and the amount of withdrawal will be limited to 50% of the balance at credit at the end of the 4th year immediately preceding the year in which the amount is withdrawn or at the end of the preceding year whichever is lower the amount of loan if any.
Company Fixed Deposits: These are short-term (six months) to medium-term (three to fi ve years) borrowings by companies at a fi xed rate of interest which is payable monthly, quarterly, semi10 annually or annually. They can also be cumulative fi xed deposits where the entire principal alongwith the interest is paid at the end of the loan period. The rate of interest varies between 6-9% per annum for company FDs. The interest received is after deduction of taxes. Bonds: It is a fi xed income (debt) instrument issued for a period of more than one year with the purpose of raising capital. The central or state government, corporations and similar institutions sell bonds. A bond is generally a promise to repay the principal along with a fi xed rate of interest on a specifi ed date, called the Maturity Date.
Mutual Funds: These are funds operated by an investment company which raises money from the public and invests in a group of assets (shares, debentures etc.) in accordance with a stated set of objectives. It is a substitute for those who are unable to invest directly in equities or debt because of resource, time or knowledge constraints.
What is a ‘Debt Instrument’? Debt instrument represents a contract whereby one party lends money to another on pre-determined terms with regards to rate and periodicity of interest, repayment of principal amount by the borrower to the lender. In the Indian securities markets, the term ‘bond’ is used for debt instruments issued by the Central and State governments and public sector organizations and the term ‘debenture’ is used for instruments issued by private corporate sector.
Derivative:- Derivative is a product whose value is derived from the value of one or more basic variables, called underlying. The underlying asset can be equity, index, foreign exchange (forex), commodity or any other asset. Derivative products initially emerged as hedging devices against fl uctuations in commodity prices and commodity-linked derivatives remained the sole form of such products for almost three hundred years. The fi nancial derivatives came into spotlight in post-1970 period due to growing instability in the fi nancial markets. However, since their emergence, these products have become very popular and by 1990s, they accounted for about twothirds of total transactions in derivative products.
An Index An Index shows how a specified portfolio of share prices are moving in order to give an indication of market trends. It is a basket of securities and the average price movement of the basket of securities indicates the index movement, whether upwards or downwards.
Dematerialization: It is the process by which physical certifi cates of an investor are converted to an equivalent number of securities in electronic form and credited to the investor’s account with his Depository Participant (DP).
functions of Securities Market
Securities Markets is a place where buyers and sellers of securities can enter into transactions to purchase and sell shares, bonds, debentures etc. Further, it performs an important role of enabling corporate, entrepreneurs to raise resources for their companies and business ventures through public issues. Transfer of resources from those having idle resources (investors) to others who have a need for them (corporate) is most efficiently achieved through the securities market. Stated formally, securities markets provide channels for reallocation of savings to investments and entrepreneurship. Savings are linked to investments by a variety of intermediaries , through a range of financial products, called ‘Securities’.
Which are the securities one can invest in? Shares Government Securities Derivative products Units of Mutual Funds etc. , are some of the securities investors in the securities market can invest in.
Role of the ‘Primary Market
The primary market provides the channel for sale of new securities. Primary market provides opportunity to issuers of securities; Government as well as corporates , to raise resources to meet their requirements of investment and/or discharge some obligation. They may issue the securities at face value, or at a discount/premium and these securities may take a variety of forms such as equity, debt etc. They may issue the securities in domestic market and/or international market.
Need to issue shares to the public:- Most companies are usually started privately by their promoter(s). However, the promoters’ capital and the borrowings from banks and fi nancial institutions may not be suffi cient for setting up or running the business over a long term. So companies invite the public to contribute towards the equity and issue shares to individual investors. The way to invite share capital from the public is through a ‘Public Issue’. Simply stated, a public issue is an offer to the public to subscribe to the share capital of a company. Once this is done, the company allots shares to the applicants as per the prescribed rules and regulations laid down by SEBI.
Meant by Market Capitalization:--- The market value of a quoted company, which is calculated by multiplying its current share price (market price) by the number of shares in issue is called as market capitalization. E.g. Company A has 120 million shares in issue. The current market price is Rs. 100. The market capitalisation of company A is Rs. 12000 million.
What is a Prospectus :--- A large number of new companies float public issues. While a large number of these companies are genuine, quite a few may want to exploit the investors. Therefore, it is very important that an investor before applying for any issue identifi es future potential of a company. A part of the guidelines issued by SEBI (Securities and Exchange Board of India) is the disclosure of 23 information to the public. This disclosure includes information like the reason for raising the money, the way money is proposed to be spent, the return expected on the money etc. This information is in the form of ‘Prospectus’ which also includes information regarding the size of the issue, the current status of the company, its equity capital, its current and past performance, the promoters, the project, cost of the project, means of fi nancing, product and capacity etc. It also contains lot of mandatory information regarding underwriting and statutory compliances. This helps investors to evaluate short term and long term prospects of the company.
Meant by Secondary market :--- Secondary market refers to a market where securities are traded after being initially offered to the public in the primary market and/or listed on the Stock Exchange. Majority of the trading is done in the secondary market. Secondary market comprises of equity markets and the debt markets.
Contract Note :-- Contract Note is a confi rmation of trades done on a particular day on behalf of the client by a trading member. It imposes a legally enforceable relationship between the client and the trading member with respect to purchase/sale and settlement of trades. It also helps to settle disputes/claims between the investor and the trading member. It is a prerequisite for filing a complaint or arbitration proceeding against the trading member in case of a dispute. A valid contract note should be in the prescribed form, contain the details of trades , stamped with requisite value and duly signed by the authorized signatory. Contract notes are kept in duplicate , the trading member and the client should keep one copy each. After verifying the details contained therein, the client keeps one copy and returns the second copy to the trading member duly acknowledged by him.
Precautions सावधानीय़ाँ :- must one take before investing in the stock marketsछ- Here are some useful pointers to bear in mind before you invest in the markets: Make sure your broker is registered with SEBI and the exchanges and do not deal with unregistered intermediaries. Ensure that you receive contract notes for all your transactions from your broker within one working day of execution of the trades. All investments carry risk of some kind. Investors should always know the risk that they are taking and invest in a manner that matches their risk tolerance. Do not be misled by market rumors, luring advertisement or ‘hot tips’ of the day. Take informed decisions by studying the fundamentals of the company. Find out the business the company is into, its future prospects, quality of management , past track record etc Sources of knowing about a company are through annual reports, economic magazines, databases available with vendors or your financial adviser. If your financial adviser or broker advises you to invest in a company you have never heard of, be cautious. Spend some time checking out about the company before investing. Do not be attracted by announcements of fantastic results/news reports, about a company. Do your own research before investing in any stock. Do not be attracted to stocks based on what an internet website promotes, unless you have done adequate study of the company. Investing in very low priced stocks or what are known as penny stocks does not guarantee high returns. Be cautious about stocks which show a sudden spurt in price or trading activity. Any advise or tip that claims that there are huge returns expected, especially for acting quickly, may be risky and may to lead to losing some, most, or all of your money.
ईपीएफ क्या है कर्मचारी भविष्य निधि (ईपीएफ) निजी क्षेत्र के कर्मचारियों को रिटायरमेंट बेनिफिट पहुंचाने के लिए और बेहतर तरीके से बचत करने का साधन है जिसमें आम जमा योजनाओं से बेहतर ब्याज मिलता है और इनकम टैक्स पर भी छूट मिलती है. इस योजना में आपका एम्प्लायर भी अपना योगदान करता है और आपकी सैलेरी में से भी योगदान काटा जाता है. रिटायरमेंट के समय ब्याज सहित एक मुश्त राशि आपको मिल जाती है.
म्यूचुअल फंड क्या है Mutual Fund :- निवेशकों की एक बड़ी संख्या के द्वारा जमा पैसा राशी को म्यूचुअल फंड कहते हैं जिसे एक फण्ड मे ं डाल दिया जाता है। फण्ड मेनेजर इस पैसे को विभिन्न वित्तीय साधनों में निवेश करने के लिए अपने निवेश प्रबंधन कौशल का उपयोग करता है.
Mutual Fund Unit:- जब बहुत से निवेशक मिल कर एक फण्ड में निवेश करते हैं तो फण्ड को बराबर बराबर हिस्सों में बाँट दिया जाता है जिसे इकाई या यूनिट Unit कहते हैं.
EPS क्या है और कैसे गिनें प्रति शेयर आय ---- कंपनी की कुल शुद्ध लाभ से हर शेयर के हिस्से में कितनी रकम आयेगी उसे ही Earning per Share प्रति शेयर आय यानि EPS कहते हैं। इसे गिनेंगे शुद्ध लाभ / कुल शेयरों की संख्या यदि 10 करोड़ रु की पूंजी वाली कंपनी जिसके 10 रु की कीमत वाले 1 करोड़ शेयर हों और वह कंपनी 20 करोड़ रुपये का शुद्ध लाभ कमाती है तो उसकी प्रति शेयर आय 20 रुपये होगी: 20 करोड़ / 1 करोड़ = 20 यदि कोई कंपनी केवल तिमाही नतीजे ही घोषित करती है तो उन नतीजों के आधार पर कंपनी के पूरे साल के प्रति शेयर आय की भी गणना की जा सकती है।
PE Ratio पी ई रेश्यो क्या :- PE Ratio यह जानने का तरीका है कि कंपनी की आय का जो हिस्सा प्रति शेयर को प्राप्त होगा उसके अनुपात में शेयर की बाजार में कीमत क्या है. PE Ratio जानने के लिए सबसे पहले गिनते हैं EPS यानि प्रति शेयर आय. उसके बाद एक शेयर की कीमत से EPS को विभाजित करके PE Ratio निकाल सकते हैं. पी ई रेश्यो =शेयर की बाजार में कीमत/प्रति शेयर आय PE Ratio = Merket Price / EPS अब इसे एक उदहारण से समझते हैं. मान लीजिये अबस कंपनी के दस रुपये मूल्य के 100000 शेयर हैं. कंपनी की वार्षिक आय है रुपये 2,00,000. अब शेयर का EPS होगा 2,00,000/100000 = रु 2. अब यदि शेयर का बाजार में मूल्य रु 18 है तो शेयर का PE Ratio होगा: PE Ratio = 18/2 =9.
The net asset value (NAV) :--- of a mutual fund indicates the price at which the units of that mutual fund are bought or sold. It represents the fund's market value after subtracting the liabilities. Net Asset Value, या NAV का अर्थ है कुल संपत्ति का मूल्य. किसी भी Mutual Fund म्यूचुअल फण्ड में नेट एसेट वैल्यू , या एनएवी का मतलब नकदी सहित पोर्टफोलियो के सभी शेयरों के बाजार मूल्य के कुल योग में से देनदारियों को घटाने के बाद बकाया जो भी बचे उसे इकाइयों की कुल संख्या से विभाजित करके प्राप्त किया जाता है.
Book Value:- Book value of an asset is the value at which the asset is carried on a balance sheet and calculated by taking the cost of an asset minus the accumulated depreciation. बुक वैल्यू वास्तव में कंपनी के खातों में वह वैल्यू है जो की किसी कंपनी को यदि बेचा जाए तो उसकी संपत्तियों से देनदारियां घटा कर प्रति शेयर कितना भुगतान प्राप्त होगा. किसी शेयर की बुक वैल्यू उसकी शेयर कैपिटल और जनरल रिज़र्व के जोड़ को कुल शेयरों की संख्या से विभाजित करके भी प्राप्त किया जा सकता है.
Face Value :- It Represent to the value of any Share at which this is issued at IPO time. फेस वैल्यू Face Value यानी अंकित मूल्य शेयर की वास्तविक कीमत होती है जो कि शेयर प्रमाण पात्र पर अंकित रहती है. यदि अबस कंपनी की कुल शेयर पूँजी दो करोड़ रुपये है और वह दस रुपये प्रति शेयर के बीस लाख शेयर जारी करती है तो दस रुपये अबस कंपनी के शेयर की फेस वैल्यू यानी अंकित मूल्य होगी. फेस वैल्यू को पार वैल्यू Par Value या केवल पार भी कहते हैं.
Stock Split :-A stock split is a corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares. Stock Split तब होता है जब कोई company नये स्टॉक जारी करने के लिए और उसे अपने जो भी स्टॉकहोल्डर्स हे उनको बाटने का निर्णय करती हे ।इन कंपनी के बोर्ड ऑफ डायरेक्टर्स द्वारा यह निर्णय लिया जाता है। जब ऐसा होता है तो शेयरधारक के पास जो भी शेयर्स होते हे वो अब ज्यादा हो जाते हे हे लेकिन उनका मूल्य आधा हो जाता हे । आपके स्टॉक का कुल मूल्य नहीं बदलता है। उदाहरण के लिए, यदि पास Stock Split के पहले 100 शेयर होते हैं और कीमत RS. 500 . प्रति शेयर थी, तो Stock Split के बाद आप RS. 250 प्रति शेयर पर 200 शेयर होंगे ।
Reverse Split:- रिवर्स Split कभी-कभी कोई कंपनी रिवर्स स्प्लिट जारी करेगी। जब ऐसा होता है तो शेयरधारक के पास अधिक मूल्य पर कम शेयर होंगे। उदाहरण के लिए, एक विशिष्ट रिवर्स विभाजन 1 विभाजन के लिए 1 है। उदाहरण के लिए, यदि कोई कंपनी rs 1 शेयर पर ट्रेडिंग कर रहा है और आपके पास 100 शेयर हैं, तो 10 स्प्लिट के लिए 1 के बाद, आपके पास rs 10 शेयर पर 10 शेयर होंगे। एक कंपनी एक रिवर्स विभाजन का प्रदर्शन कर सकती है, जब उनकी शेयर की कीमत बहुत कम स्तर पर आ गई है और वे संभावित निवेशकों के लिए और अधिक सम्मानजनक दिखाई देने के लिए शेयर की कीमत में वृद्धि करना चाहते हैं। इसके अलावा, कुछ एक्सचेंज एक स्टॉक को सूचीबद्ध नहीं करेंगे, जब कीमत 30 दिनों के लिए एक निश्चित स्तर से कम हो जाएगी।
Bonus Shares/ Issue :- Bonus shares are additional shares given to the current shareholders without any additional cost, based upon the number of shares that a shareholder owns. These are company's accumulated earnings which are not given out in the form of dividends, but are converted into free shares. किसी भी share holder को जब कोई company उसके share holder के द्वारा खरीदे हुए share के ऊपर share देती है तब उस दिये हुए शेयर को bonus share कहा जाता है। bonus share मिलने से share holder के उस share की संख्या बढ़ती है। जो संख्या उसने already खरीद रखी है।
Settlement:- The process that follows a transaction when the seller delivers the security to the buyer and the buyer pays the seller for the security. It happens in Indian Share Market after T+2 days base means T- Trading day + 2 days later.
Assets: Everything a company or person owns, including money, securities, equipment and real estate. Assets include everything that is owed to the company or person. Assets are listed on a company's balance sheet or an individual's net worth statement.
Bid:--- The highest price a buyer is willing to pay for a stock. When combined with the ask price information, it forms the basis of a stock quote.
Bid Size: The aggregate size in board lots of the most recent bid to buy a particular security.
Bonds: Promissory notes issued by a corporation or government to its lenders, usually with a specified amount of interest for a specified length of time.
Book: An electronic record of all pending buy and sell orders for a particular stock.
Booked Orders: Orders that do not trade immediately upon entry. These orders are also known as outstanding orders.
Buy-In: If a broker fails to deliver securities sold to another broker on the settlement date, the receiving broker may buy the securities at the current market price of the stock and charge the delivering broker the cost difference of such a purchase.
Call Option: An option which gives the holder the right, but not the obligation, to buy a fixed amount of a certain stock at a specified price within a specified time. Calls are purchased by investors who expect a price increase.
कॉल ऑप्शन धारक को समापन अवधि से पहले किसी भी समय स्ट्राइक मूल्य पर अंतनिर्हित स्टॉक खरीदने का अधिकार देता है. समान्य तौर पर, अंतनिर्हित साधनों का मूल्य बढ़ने पर कॉल ऑप्शन का मूल्य भी बढ़ता है.
A put option is an option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time. This is the opposite of a call option, which gives the holder the right to buy shares. पुट ऑप्शन समापन दिनांक को या उसके पहले स्ट्राइक मूल्य पर धारक को अंतर्निहित शेयर बेचने का अधिकार प्रदान करते हैं. अंतर्निहित साधनों का मूल्य कम होने पर पुट ऑप्शन का मूल्य बढ़ता है. पुट ऑप्शन वह है जिसमें कोई व्यक्ति बाद में होने वाली मूल्य गिरावट के लिए कोई स्टॉक सुनिश्चित कर सकता है. यदि आपके स्टॉक का मूल्य कम होता है, तो आप अपना पुट ऑप्शन लेकर इसे पूर्व में निर्धारित मूल्य स्तर पर बेच सकते हैं. यदि स्टॉक मूल्य ऊपर जाता है, तो आपको बस केवल चुकायी गई प्रीमियम राशि की हानि होती है.
Cash Dividend / Distribution: A dividend/ distribution that is paid in cash.
Certificate: The physical document that shows ownership of a bond, stock or other security
Closing Transaction:- An order to close out an existing open futures or options contract.
Ex Dividend: The holder of shares purchased ex dividend is not entitled to an upcoming already-declared dividend, but is entitled to future dividends. वह तारीख जिस पर या उसके बाद खरीदे गए शेयर पर खरीदार को लाभांश नहीं मिलता। सामान्य तौर पर शेयर बाजार में इसे एक्स डेट के नाम से जाना जाता है। इसे नकद लाभांश के अलावा अन्य स्थितियों जैसे स्टॉक स्प्लिट और स्टॉक बोनस में भी इस्तेमाल किया जाता है।
Ex Right: The holder of shares purchased ex rights is not entitled to already-declared rights, but is entitled to future rights issues.
Exchange-Traded Fund (ETF): A special type of financial trust that allows an investor to buy an entire basket of stocks through a single security, which tracks and matches the returns of a stock market index. ETFs are considered to be a special type of index mutual fund, but they are listed on an exchange and trade like a stock. ETF यानी Exchange Traded Fund एक्सचेंज ट्रेडेड फण्ड वास्तव में इंडेक्स फण्ड होते हैं जो कि स्टॉक एक्सचेंज में शेयरों की तरह ही ख़रीदे और बेचे जाते हैं. विश्व भर में ETF यानी Exchange Traded Fund एक्सचेंज ट्रेडेड फण्ड रिटेल निवेशकों और संस्थागत निवेशकों में बहुत ही लोकप्रिय निवेश का साधन है. हम यह कह सकते हैं कि यह एक सस्ता निवेश का साधन है क्योंकि इस फण्ड में चार्जेज आम तौर पर दुसरे फंड्स के मुकाबले कम होते हैं. आप इन्हें अपने ब्रोकर से अथवा सीधे फण्ड हाउस से भी खरीद सकते हैं. जहां म्यूच्यूअल फण्ड दिन के आखिर में NAV पर लिए जाते हैं, ETF ट्रेडिंग के घंटों में ही उस समय के ट्रेडिंग के वास्तविक कीमतों पर ख़रीदे और बेचे जा सकते हैं. यानि ETF में डे ट्रेडिंग भी संभव है.
Exercise: The act of an option holder who chooses to take delivery (calls) or make delivery (puts) of the underlying interest against payment of the exercise price.
Filing Statement: A disclosure document submitted by a listed company to outline material changes in its affairs. Filing statements are not used for the purposes of a financing.
Futures:- Contracts to buy or sell securities at a future date.
Growth Stock:- The shares of companies that have enjoyed better-than-average growth over recent years and are expected to continue their climb.
Income Stock:- A security with a solid record of dividend payments and which offers a dividend yield higher than the average common stock.
Inflation:- An overall increase in prices for goods and services, usually measured by the percentage change in the Consumer Price Index.
Inside Information:- Non-public information pertaining to the business affairs of a corporation that could affect the company's share price should the information be made public.
Insider:- All directors and senior officers of a company, and those who are presumed to have access to inside information concerning the company. An insider is also anyone owning more than 10% of the voting shares of a company.
Insider Trading:- There are two types of insider trading. The first type occurs when insiders trade in the stock of their company. Insiders must report these transactions to the appropriate securities commissions. The other type of insider trading is when anyone trades securities based on material information that is not public knowledge. This type of insider trading is illegal.
International Securities Identification Number (ISIN):-- The international standard that is used to uniquely identify securities. It consists of a two-character alphabetic country code specified in ISO 6166, followed by a nine-character alphanumeric security identifier (assigned by a national security numbering agency), and then an ISIN check-digit.
Investment:- The purchase or ownership of a security in order to earn income, capital or both. Investments may also include artwork, antiques and real estate.
Investment Adviser: A person employed by an investment dealer who provides investment advice to clients and executes trades on their behalf in securities and other investment products.
Last Trading Day:--- The last day on which a futures or option contract may be traded.
Limit Order: An order to buy or sell stock at a specified price. The order can be executed only at the specified price or better. A limit order sets the maximum price the client is willing to pay as a buyer, and the minimum price they are willing to accept as a seller.
After Market Order :- Stock market opens at 9.15 am on weekdays and closes at 3.30 pm but using this option you may order to buy or sell any shares after working hours of market.
Listed Stock:-- Shares of an issuer that are traded on a stock exchange. Issuers pay fees to the exchange to be listed and must abide by the rules and regulations set out by the exchange to maintain listing privileges.
Market Order:- An order to buy or sell stock immediately at the best current price.
One-Sided Market:-- A market that has only buy orders or only sell orders booked for a particular security.]
Open Order:- An order that remains in the system for more than a day. See Good-Till-Cancelled or Good-Till-Date.
Over-The-Counter (OTC) Market:- The market maintained by securities dealers for issues not listed on a stock exchange. Almost all bonds and debentures, as well as some stocks, are traded over-the-counter. An OTC market is also known as an unlisted market.
Penny Stock:- Low-priced speculative issues of stock selling at less than Re. 1 a share.
Position Limit:-- The maximum number of futures or options contracts any individual or group of people acting together may hold at one time.
पैनी स्टॉक्स Penny Stocks आम तौर पर उन शेयरों को कहा जाता है जो शेयर बाजार में बहुत ही कम कीमतों पर उपलब्ध होते हैं.
Premium:- Price of An option contract.
Real Estate Investment Trust (REIT): Typically, a closed-end investment fund that trades on an exchange and uses the pooled capital of many investors to purchase and manage income properties. Equity REITs primarily own commercial real estate, such as shopping centres, apartments, and industrial buildings. By taking advantage of the trust structure, REITs offer tax advantages (beyond traditional common equity investments) to investors and provide a liquid way to invest in real estate, which otherwise is an illiquid market.
Redeemable Security: A security that carries a condition giving the issuer a right to call in and retire that security at a certain price and for a certain period of time.
Risk: The future chance or probability of loss.
Short Selling:-- The selling of a security that the seller does not own (naked or uncovered short) or has borrowed (covered short). Short selling is a trading strategy. Short sellers assume the risk that they will be able to buy the stock at a lower price.
Positions Limit: Maximum number of futures and options contract that any individual investor can hold at any given point of time.
Disclaimer :- All Information provided here is for Educationanl purpose only. The information contained herein is subject to change without prior notice. While every effort is made to ensure the accuracy and completeness of information contained, the Everyday Intraday Tips makes no guarantee and assumes no liability for any errors or omissions of the information. No one can use the information as the basis for any claim, demand or cause of action.
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