A Journey into Stock Markets 1

 What is Stock?  How trading happens?  How to trade in stocks?  Kinds of Trades  Basic Terms and terminologies 2

 Technical indicators  Strategies  Futures and options 3

 It’s a means to own a company.  It is a kind of security. (The definition of ‘Securities’ as per the Securities Contracts Regulation Act (SCRA), 1956, includes instruments such as shares, bonds, scrips, stocks or other marketable securities of similar nature in or of any incorporate company or body corporate, government securities, derivatives of securities, units of collective investment scheme, interest and rights in securities, security receipt or any other instruments so declared by the Central Government.) 4

 We need to have DP(DEPOSITORY PARTICIPANT) account.  We need to have a Trading account.  And of course money 5

6 Stock Exchange Ex : NSE,BSE People using terminal provided by their brokers

 Ones which are listed in that exchange  IPO  Secondary market  ADR, GDR in foreign markets  More of IPO later… 7

 Intra-day Trading  Delivery based Trading 8

 Buying and Selling on the same day  Brokerage will be different for intra-day and delivery based trading, intra-day being lesser 9

 Buying and Selling are on different days  Brokerage will be higher than intra-day  Their will be minimum delivery charges 10

 Ex : You buy the share on Monday. It will be delivered to you on Wednesday’s settlement period (T + 2) normally. 11

 Selling something which you don’t have. Ex: Lets consider a company RIL. Its priced at Rs 2,500/- before opening. You know it’s going to fall that day because of some reason. But you don’t have any shares with you of RIL. But still you can sell the shares, this is called as short selling. 12

Contd… Assume you sold 10 RIL shares in morning at Rs 2,500/-. By evening as you had thought, it had Fallen down to Rs 2,400/-. Now you buy back Those 10 shares what you had sold. So the difference in amount, 2,500 – 2,400 = * 10 = 1000, is yours. This process of buying back is called short covering. 13

 You will become a defaulter.  Lets understand this with an Example. Assume you short sold on Monday, as you haven’t short covered it, you need to deliver it on Wednesday(T + 2). But you don’t have the shares to deliver. So NSE or BSE will buy the shares on behalf of you in auction market, and deliver it to the buyer in (T + 3 days). In auction market max price is 10% higher than in normal market. 14

Assume Ram bought on Monday 100 shares of RIL at Rs 2,500/-, on response to some good news it rose high on Tuesday to say Rs 2,600/-. So Ram is in a whooping profit of (100 * 100) Rs 10,000/- in a day. Ram plans to sell it. Will he get that profit for sure? 15

Monday : Ram bought stocks Tuesday : Ram sold stocks Wednesday: Stocks wont get delivered to him, as they were short sold. Thursday: Ram needs to deliver the stocks, as he has sold on Tuesday, But he don’t have Them now, as they were short sold, So he becomes a defaulter. Friday : Ram gets the delivery of short sold stocks 16

DAYPRICE Monday2500 Tuesday2600 Wednesday2620 Thursday2670 Friday

Ram actually ended up in loss!!! 18

 Fundamental Analysis  Technical Analysis 19

 Analyzing a stock based on the fundaments of the country, the sector, and the company individually.  It includes going through balance sheet and profit-loss statement of the individual company and checking various ratios. 20

 EPS : PAT – Dividend/ No of shares  PE : Present share Price / EPS  P/BV Present share price / Book value 21

 Example : Enron, Satyam  IT industry off recent 22

 Forecasting the future direction of prices through the study of past market data, primarily price and volume. In its purest form, technical analysis considers only the actual price and volume behavior of the market or instrument. 23

 Support : Where one buys  Resistance : Where one sells Some Examples… 24

A Brief into Primary Market  Retail  Fixed Price and Book Building Process  Lower band and Upper Band and Cut off price  Lot size 25

 Face Value  Premium 26

 Read about the promoter's group.  Understand their business, and compare them With the companies listed already in market 27

 Market Cap  Dividend 28

 Buy Back  Bonus  Split  Rights issue  Record Date  Non Delivery Period 29

 What is NIFTY, SENSEX  How are they Calculated? 30

 Execute couple of paper trades before you actually execute the real trade, we have many simulators and games available now  Always follow strict entry and exit points  Always execute a limit order  Never buy and sell for full amount in one go, Spread it across a range, it will give much better bottoms and tops  Never average a losing trade 31

HAPPY TRADING 32