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BASICS OF STOCK MARKET

❖ Share = Stock = Equity = Cash Market = Ownership = Stock
Partnership
❖ Stock is a kind of Asset
❖ It is dematerialized to remove paperwork, that is why now
we have a DEMAT ACCOUNT
❖ IPO = Initial Public Offering
❖ NSE = National Stock Exchange (We will trade in NSE)
(More volume)
❖ BSE = Bombay Stock Exchange (Ignore)
❖ Fundamental Analysis we do this analysis when we want
to invest in long-term the movement in the stock market is
mostly due to news we will not trade based on news
❖ Technical Analysis we will do this for trading purpose
❖ Index Every country has its own Index of top best-
performing companies Nifty50 is an index of the top 50 best-
performing companies of India
❖ Bullish market - When Index price is rising
❖ Bearish market - When index price is falling
❖ Sideways market - Price moving in a range

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❖ Types of trading styles Intraday - 9:15am to 3:15pm Swing

Trading - More than 1 day - up to 3 months Investing – 3
years+
❖ Your trading style depends on your trading capital and your
nature. You have to evaluate yourself
❖ Types of participants in the stock market Retail Investor
(Public) High Net worth Investor - H.N.I Institutional Investor -
FII(Foreign) & DII(Domestic)
❖ Short Selling Selling at a higher price & then Buying at a
lower price

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FAQ’s
1. What is Nifty50?
The NIFTY 50 is a benchmark Indian stock market index
that represents the weighted average of 50 of the largest
Indian companies listed on the National Stock Exchange. It
is one of the two main stock indices used in India, the other
being the BSE SENSEX. The Nifty 50 refers to the fifty most
popular large-cap stocks that traded at high valuations in
the 1960s and 1970s. Due to their proven growth records
and continual increases in dividends, the Nifty Fifty were
viewed as "one-decision" picks: investors were told to buy
and never sell. In 1996, the Nifty 50 gained an additional
meaning in the financial industry. It refers to the NIFTY 50
Index on the National Stock Exchange of India.
2. What is a Stock?
A stock is a general term used to describe the ownership
certificates of any company. A share, on the other hand,
refers to the stock certificate of a particular company.
Holding a particular company's share makes you a
shareholder.
3. What is IPO?

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An initial public offering (IPO) refers to the process of

offering shares of a private corporation to the public in a
new stock issuance. Public share issuance allows a company
to raise capital from public investors. The transition from a
private to a public company can be an important time for
private investors to fully realize gains from their investment
as it typically includes share premiums for current private
investors. Meanwhile, it also allows public investors to
participate in the offering.
4. Do the companies change in Nifty50?
Nifty 50 gets shuffled two times in a year, in March and in
July. Reshuffle news comes out before months and
sometimes it gets delayed. In September when Future &
Options expire, from the very next day, the reshuffle gets
effective. The new companies which have newly entered
will become effective from 25th September as the F&O is
expiring on that date. From the very first day index will
start trading and consider the weight of the new shares.
5. What is a broker?
Brokerage firms and broker-dealers are also sometimes
referred to as stockbrokers. This includes both full-service
brokers and discount brokers, who execute trades but do
not offer individualized investing advice. Most online
brokers are discount brokers, at least at their basic levels of

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service, in which trades are executed for free or for a small

set-price commission. Many online brokers now offer
premium-level services with higher fees.
6. What Causes Stock Prices to Change?
Stock prices change every day by market forces. If more
people want to buy a stock (demand) than sell it (supply),
then the price moves up. Conversely, if more people
wanted to sell a stock than buy it, there would be greater
supply than demand, and the price would fall.
7. Can we buy Nifty?
Nifty 50 is an Index comprising of 50 stocks and can't be
bought.
8. What is short selling?
Short selling occurs when an investor borrows a security
and sells it on the open market, planning to buy it back later
for less money. Short-sellers bet on, and profit from, a drop
in a security's price. Short selling has a high risk/reward
ratio: It can offer big profits, but losses can mount quickly
and infinitely.
9. What is Sensex?
Sensex, otherwise known as the S&P BSE Sensex index, is
the benchmark index of India's BSE, formerly known as the

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Bombay Stock Exchange.) The Sensex is comprised of 30 of

the largest and most actively traded stocks on the BSE,
providing a gauge of India's economy. The index's
composition is reviewed in June and December each year.
Created in 1986, Sensex is the oldest stock index in India.
Analysts and investors use it to observe the cycles of India's
economy and the development and decline of particular
industries.
10. What is FII, FPI & DII?
Foreign institutional investors (FII) or foreign portfolio
investors (FPI) refer to investors from other countries
putting money in Indian stock markets. ... Domestic
institutional investors (DII) comprise local mutual funds,
insurance companies, local pension funds, and banking and
financial institutions.
11. Can we buy some stocks in both NSE & BSE?
The exchange which you choose to invest in stocks does not
matter. Both BSE and NSE are equally good and offer a
robust technology platform for buying and selling stocks.
However, investors should note that there is always a minor
price difference between NSE and BSE. For example, if XYZ
stock is trading at Rs.100 on NSE the price displayed could
be Rs.99.

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12. What benefits the stock market gives to the

company?
Listing stimulates liquidity, giving shareholders the
opportunity to realize the value of their investments. It
allows shareholders to transact in the shares of the
company, sharing risks as well as benefitting from any
increase in the organizational value.
13. Will there always be somebody selling/buying in
every stock?
If the stock has low liquidity, yes there could be times
when there are no buyers or sellers at a specific price, so if
you put a limit order to buy or sell at a price with no other
corresponding sellers or buyers, then your order may take a
while to get executed or it may not be executed at all. You
can usually tell if a stock has low liquidity by the small size
of the average daily volume, the lack of order depth, and
the large size of the gap between bids and offers. When
there are no buyers, you can't sell your shares, and you'll be
stuck with them until there is some interest from other
investors.

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14. What are the types of analysis?

❖ Fundamental Analysis
The goal of fundamental analysis is to determine
whether a company’s future value is accurately
reflected in its current stock price. Fundamental
analysis attempts to estimate the value of a particular
stock based on a variety of factors, such as the current
finances of the company and the prevailing economic
environment. Fundamental analysis also may include
speaking with a company’s management team and
assessing how the company’s products are received in
the marketplace. When a fundamental review is
complete, the analyst may decide the stock is an
attractive opportunity because the market has
underestimated its future prospects. The analyst also
may determine the stock to be a “hold” or a “sell” if the
value is fully reflected in the price.
❖ Technical Analysis
Technical analysts evaluate recent trading
movements and trends to attempt to determine what’s
next for a company’s stock price. Generally, technical
analysts pay less attention to the fundamentals
underlying the stock price. Technical analysts rely on
stock charts to make their assessment of a company’s
stock price. For example, technicians may look for a

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support level and resistance level when assessing a

stock’s next move. A support level is a price level at
which the stock might find support and below which it
may not fall. In contrast, a resistance level is a price at
which the stock might find pressure and above which
it may not rise.
15. What are Different kinds of trading?
❖ Intraday Trading - Day traders are active traders
who execute intraday strategies to profit off of price
changes for a given asset. Day trading employs a wide
variety of techniques and strategies to capitalize on
perceived market inefficiencies. Day trading is often
characterized by technical analysis and requires a
high degree of self-discipline and objectivity.
❖ Swing Trading - Swing trading involves taking
trades that last a couple of days up to several months
in order to profit from an anticipated price move.
Swing trading exposes a trader to overnight and
weekend risk, where the price could gap and open the
following session at a substantially different price.
Swing traders can take profits utilizing an established
risk/reward ratio based on a stop loss and profit
target, or they can take profits or losses based on a
technical indicator or price action movements.

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❖ Investing - Position trader refers to an individual

who holds an investment for an extended period of
time with the expectation that it will appreciate in
value. Position traders are trend followers. A
successful position trader has to identify the
entry/exit levels and have a plan in place to control
risk, usually via stop-loss levels.
16. What is the Margin amount and how it is useful
in trading?
Margin trading is a legitimate risk and rewards
investing proposition. Margin (Leverage) offers
flexibility to traders, who use the strategy to take
advantage of market opportunities by borrowing
money from their brokerage firms to buy stocks that
they may otherwise not be able to afford.
17. What are the three types of market conditions?
❖ Bullish ❖ Bearish ❖ Sideways (Choppy)
18. What is a consolidation?
Consolidation in Technical Analysis and Trading
Consolidation is also a technical analysis term
referring to security prices oscillating within a
corridor and is generally interpreted as market
indecisiveness. Put another way, consolidation is used
in technical analysis to describe the movement of a

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stock's price within a well-defined pattern of trading

levels

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