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Stock market.

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The presentation is brief introduction to Stock market in India and gives a method of calculation of Sensex and Nifty.

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Stock market.

  1. 1. Presented By : SHUBHAM BHUTADA Aurangabad (MH)
  2. 2. INDEX Definition of Stock and Stock market Types Of Stock Exchange Stock exchange in World and India Trading In Stock Market Demat Account Importance Of Stock Market in stock trading Investment in various types of trading Stock Market Conditions Calculations Of Indices Benefits of Investing in shares Causes Of Price Fluctuation
  3. 3. STOCK MARKET OR SHARE MARKET • Stocks are issued by companies in order to raise capitals and are bought by investors in order to acquire a portion of the company. • A Stock market is the place where buying and selling of stocks takes place. Nowadays due to internet and advanced technology buying and selling of stocks takes place anywhere in India and also from foreign country, there is no need to be physical present in exchanges like NSE and BSE. Stock markets are perfect competitive market.
  4. 4. Types of Market 1. Normal Market : Order Traded in regular lot Size For demat shares, lot size is 1 share 2. Odd Lot Market : Used for limited physical Market Order not traded in regular lot Size but both price & quantity should tally with each other.
  5. 5. 3. Spot Market : Different settlement periods depends on normal orders Sell & Purchases takes place on same date. 4. Auction Market : Initiated by exchange on behalf of members for settlement related reasons Reasons are shortage and bad deliveries Loss is recovered from members
  6. 6. Big Stock Markets  NYSE ( New York Stock Exchange)  NASDAQ-America  Dow Jones  S&P‘ 500  Tokyo Stock Exchange  London Stock Exchange  Bombay Stock Exchange, India  National Stock Exchange, India
  7. 7. Stock Exchanges in India There are 22 stock exchanges in India. But, two of them are biggest. NSE (National stock exchange) - is the 9th largest stock exchange in the world by market capitalization and largest in India by daily turnover and number of trades, for both equities and derivative trading. BSE (Bombay stock exchange) - is the oldest stock exchange in Asia with a rich heritage of over 137 years of existence.
  8. 8. Bombay Stock Exchange • Location: Mumbai • Index: Sensex (SENSitve indEX) • Consist of group of 30 Stock • Members: 852 • Date of Launch: 03 January 1986 • Base period:1978-79 • Base Index Value:100 • Sectoral indices • Timing: 09.30 AM – 03.30 PM • Listed Co. : over 6000
  9. 9. National Stock Exchange • Location: Mumbai • Index: Nifty (National Stock Exchange Fifty) • Consist of group of 50 Stocks • Date of Launch: April 1994 • Base period: 1993-94 • Base index value: 1000 • Members 726
  10. 10. Stock 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 i.e. brokerage. • 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.
  11. 11. TRADING IN STOCK MARKET • The market regulator, the Securities and Exchange Board of India (SEBI), has made it compulsory to open the demat account if you want to buy and sell stocks. • A person want to buy/sell stocks in the stock market has to first place his/her order with a broker or can do themselves using online trading systems. • The stocks purchased will be sent to the your demat account. This process is called Rolling Settlement Cycle.
  12. 12. What is Demat account? DEMAT stands for DEMATerialization. It is process in which physical paper shares are converted into paperless (computerized) form. In India there are two Depository organizations called NSDL (National Securities Depository Ltd.) &CDSL (Central Depository Services India Ltd.) Brokers and most of Banks provides facility to open demat account.
  13. 13. Important terms in stock market and in stock trading Open- The stock price in beginning of Day(i.e. in morning). High - The stock price reached at the highest level in a day. Low - The stock price reached the lowest level in a day.
  14. 14. Important terms in stock market and in stock trading Close - The stock price at which it remains after the end of market timings or the final price of the stock when the market closes for a day. Volume - Volume is nothing but quantity. Bid - The Buying price is called as Bid price. Offer - The selling price is called offer price.
  15. 15. Investment in Short term, Mid term and Long term trading Short Term Trading - Stock trading done from one week to couple of months is called short term. Mid term Trading - Stock trading done from one month to couple of months, say six to eight months is called mid term trading.
  16. 16. Investment in Short term, Mid term and Long term trading Long term trading - Stock trading done form couple of months to couple of years is called long term trading. Companies whose fundamentals are good and have good future plans then the stocks of these companies are used for long term trading. Generally traders having good capital go for long term trading.
  17. 17. Stock Market Conditions There are two ways to describe the general conditions of the stock market: 1)BULL MARKET 2)BEAR MARKET Bull Market - A Bull Market indicates the constant upward movement of the stock market. A particular stock that seems to be increasing in value is described to be bullish.
  18. 18. Stock Market Conditions BEAR MARKET A bear market indicates the continuous downward movement of the stock market. stock that seems to be decreasing in value is described to be bearish.
  19. 19. How Sensex Index is calculated The formula for calculating the sensex = (sum of Free Float Market capitalization of 30 benchmark stocks)* Index Factor Where; Index Factor = 100/market cap value in 1978-79.
  20. 20. Example on Sensex Index calculation Assume sensex has only 2 stocks namely SBI and RELIANCE. Total shares in SBI are 500 out of 200 are held by government and only 300 are available for public trading. Reliance has 1000 shares out of which 500 are held by promoters and 500 are available for trading. Assume price of SBI stock is Rs. 100 & Reliance is RS. 200.
  21. 21. Example on sensex calculation Solution – Then Free Float Cap of these two company = (300*100+500*200) = 30,000+1,00,000 = 1,30,000 Assume market cap during the year 1978-79 was 25000 Then SENSEX = 1,30,000*100/25000 = 520
  22. 22. How Nifty Index is calculated The National Stock Exchange (NSE) is associated with Nifty The calculation of Nifty is same as we calculated SENSEX. But with two key differences. 1. Base year is 1995 and base value is 1000 2. Nifty is calculation based on 50 stocks. everything else remaining the same in nifty index calculation as well.
  23. 23. Example of Nifty Calculation • Assuming Base index=1000 , Market Cap index consist of 5 stocks, then Company Current Market Capitalisation (Rs. In Lakhs) Base Market Capitalisation (Rs. In Lakhs) Reliance 16,68,791.1 16,54,247.5 AB & U 8,72,686.3 8,60,018.25 INFOSYS 14,52,587.65 14,65,218.8 HLL 26,75,613.3 26,69,339.55 Tata Tea 6,60,887.75 6,62,559.3 Total 73,30,566.1 73,11,383.4
  24. 24. Cont…….. Index= ( Current Market Capitalisation ) Base Market Capitalisation Multiply by Base Value Index= 73,30,566.1 *1000 73,11,383.4 Index= 1002.62
  25. 25. Important Indices in the world Name of Index Country Weight No. Pf Stock Base Year Base Value S & P CNX Nifty NSEIL, India Market Capitalisation 50 1995 1000 SENSEX 30 BSE, India Market Capitalisation 30 1978-79 100 NASDAQ 100 NASDAQ , USA Market Capitalisation 100 1985 125 FTSE 100 UK Market Capitalisation 100 1984 1000 Hang Seng Hong Kong Market Capitalisation 33 1964 100 Dow Jones USA Price 30 1928 Nikkei 225 Tokyo Price 225 1949
  26. 26. Benefits of investing in shares • Possibility of increase in value of share • Income from dividends • Easy liquidity • Tax benefits on income earned such as exemptions U/s 10(34) for dividends, Sec 54 for calculating STCG & LTCG