CHAPTER 1

INTRODUCTION
TO
STOCK MARKET
 WHAT IS STOCK MARKET ?

The market is which shares of publicly held companies are issued and traded either
through exchange or over -the-counter markets. Also known as equity market, the stock
market is one of the most vital component of a free-market economy,as it provide
companies with access to capital in exchange for giving investors a slice of ownership in
the company.A stock market is a marketplace for the purchase and sale of stocks. Because
it is the market for trading firm stocks, or corporate securities—both those listed on stock
exchanges and those that are only traded privately—it is also known as the industrial
securities market. "Stock Exchange" and "Stock Market" are frequently used
interchangeably. However, the two terms are not the same. A stock exchange is a company
that deals with connecting stock buyers and sellers. It makes up a sizable portion of the
stock market, but not all of it. Because a stock market comprises the market for newly
issued securities in addition to stock exchanges.
 CAPITAL MARKET

When trading stocks, bonds, currencies, and other financial assets, buyers and sellers
come together in capital markets, which are financial marketplaces. The bond and stock
markets are examples of capital markets. They aid in the entrepreneurship of those with
ideas and the expansion of small enterprises into larger ones.

Within the financial market, long-term debt or equity-backed securities are bought and
sold on the capital market. It gives companies and governments a way to raise money by
selling investors financial assets. An economy cannot run efficiently without its capital
market, which makes it easier for investors to transfer money to organizations that need it
for a variety of reasons.

Capital market have numerous participant including individual investors, institutional

investor such as pension fund and mutual fund, municipalities and government, companies
and organization and banks and financial institution. Suppliers of capital generally want
the maximum possible return at the lowest possible risk, while users of capital want to
raise capital at the lowest possible cost. The stock msrket fills under the capital market
structure.

The capital market is divided further into two markets :

• Primary market

• Secondary market
 Primary market
The capital market segment referred to as the primary market, or new issue market, is
where newly issued securities are first offered for sale to investors. It is the first location
where stocks, bonds, or other financial instruments are issued. The primary market is
essential to the process by which businesses, governments, and other organizations raise
money for projects, operations, or other financial requirements.

Important aspects of the primary market consist of:

• InitialPublic Offering (IPO): An IPO is a typical way for securities to be issued in the
main market. A private corporation initially makes its shares available to the general
public during an IPO. Direct purchases of these shares from the corporation are available
to investors, and the corporation receives additional capital from the revenues of the
transaction.

• Rights Issue: A rights issue is an additional means by which businesses can raise money
in the primary market. An option to buy more shares at a reduced price is granted to
current owners in a rights issue. As a result, the business is able to raise money from its
current investor base.

• Debt issue: The primary market handles the issue of debt securities, including bonds, in
addition to stocks. Bonds can be issued by businesses or governments to investors,
guaranteeing regular interest payments and the principle amount returned at maturity.

• Private Placements: Instead of being made available to the broader public, certain
securities are issued in a private placement to a certain set of institutional investors.
Companies that might not be able to meet the conditions for a public offering or those
looking to reach a more specific investor base sometimes employ private placements.

• Underwriting: Businesses frequently collaborate with investment banks or underwriters

to make the issuance of securities easier. After buying the securities from the issuer,
underwriters resell them to the general public. This procedure guarantees a more seamless
offering and helps the issuer control risk.

• Regulatory Compliance: To guarantee equity, openness, and investor protection, the

main market is governed by regulations. The issuing and selling of securities in the
primary market are governed by laws and rules set by regulatory authorities.

Direct purchase of securities from the issuer is an option available to investors in the
primary market. Following their sale on the primary market, the securities may be traded
on the secondary market, where current investors may purchase and sell them to one
another.
All things considered, the primary market plays a crucial role in promoting economic
growth by giving organizations a way to raise money and thrive.
 Secondary market

Investors trade existing securities that were previously issued in the main market on the
secondary market, sometimes referred to as the aftermarket. The secondary market offers a
venue for trading financial instruments that are already in existence, as opposed to the
primary market, which is where securities are issued for the first time.

Important attributes of the secondary market consist of:

• Liquidity: Offering investors liquidity is one of the secondary market's main purposes.
Investors can easily enter or leave positions since securities can be bought and sold fast.
This liquidity is essential to keeping the market functioning well and active.

• Pricing: The dynamics of supply and demand in the secondary market drive the prices
of securities. The market determines the fair market value of securities through
interactions between buyers and sellers. Investor decision-making is aided by this price
discovery mechanism.

• Gains and Losses for Investors: By selling securities in the secondary market for more
money than they were originally paid, investors might benefit from price appreciation. On
the other hand, if they sell for less, they can lose money. This chance for gain or loss gives
rise to opportunities for investing and speculating.

• Exchanges and Over-the-Counter (OTC) marketplaces: Secondary market

transactions can take place on OTC marketplaces or on official exchanges like the
NASDAQ or New York Stock Exchange (NYSE). OTC marketplaces provide direct
transactions between buyers and sellers, whereas exchanges offer a centralized
marketplace governed by set standards.

• Brokerage businesses: To help with their secondary market transactions, investors

usually work with brokerage businesses. These companies serve as middlemen, carrying
out buy and sell orders on behalf of clients and offering a range of services like financial
advising and research.

• Trading of Financial Derivatives: Trading of financial derivatives, such as futures and

options contracts, is another aspect of the secondary market. Derivatives are frequently
employed for speculative or hedging purposes, as they derive their value from an
underlying asset.

In order to give investors price discovery, liquidity, and a way to modify their portfolios,
the secondary market is crucial. By enabling investors to purchase or sell securities after
they are initially issued, it enhances the main market. In general, the efficiency and
stability of the financial system depend heavily on a functioning secondary market.
 How share price are set ?

When a company first lists its stock through an initial public offering (IPO), an
investment bank evaluates the company's current and projected performance and health to
determine the value of the IPO for the business.

The bank can determine the firm's net present value or compare the company to the
initial public offering (IPO) of a comparable company. Larger companies, especially well-
known private corporations, frequently use this valuation as the primary determinant of the
first share price when they go public.

Through a series of roadshows, the company and the investment bank engage with
investors in order to find the optimal IPO price. The exchange on which the company will
be listed will meet with the firm following the appraisal and roadshows to assess whether
the IPO price was reasonable.

Share prices of a company that has long-term earnings potential may rise as a result of
increased buyer interest.

Conversely, a company with a bad future can draw more sellers than buyers, which
could lead to lower prices. Prices typically increase when demand is high and there are
more buyers than vendors. When there is an excess of supply, or more sellers than buyers,
prices decrease.An ongoing increase in price is referred to as an uptrend, and an ongoing
decrease in price is referred to as a downtrend. A bull market is defined by persistent
uptrends, and bear markets are defined by persistent downtrends.

Increase in price of stock Decrease in price of stock

 MAIN STOCK EXCHANGE IN INDIA

In India mainly two stock exchange:-

• BSC ( BOMBAY STOCK EXCHANGE )

• NSC ( NATIONAL STOCK EXCHANGE )

BOMBAY STOCK EXCHANGE LIMITED

Bombay Stock Exchange Limited

INTRODUCTION

The corporate community has been talking a lot about India's economy. During the
last two years, this overseas industry has really taken off, beginning with information
technology and quickly progressing to outsourcing. India will appeal to investors and
firms wishing to expand abroad due to the growing trend of globalization and the high
demand for information technology and outsourcing. In addition to benefiting businesses
by bringing in capital, this development will boost India's economy by lowering
operational costs and increasing income. India is gaining from this shift in focus from the
domestic front to outsourcing. The Bombay Sensex is rising together with India since it
reflects the health of the economy.

The oldest stock exchange in Asia is thought to be the Bombay Stock Exchange. Its
origins can be traced back to the 1850s, when a stockbroker from Parsi and four Gujaratis
would get together in front of Mumbai's Town Hall under banyan trees. Due to the steadily
rising number of brokers, the meetings' locations were frequently altered. After relocating
to Dalal Street in 1874, the company officially changed its name to "The Native Share &
Stock Brokers Association" in 1875. Subsequently, the name was altered to the BSE, or
Bombay Stock Exchange. The BSE building was constructed in 1930 in what is now
Mumbai's downtown. The top stockbroker of the time, Premchand Roychand, contributed
to the establishment of customs, norms, and protocols for stock trading in Bombay stock
exchangeUnder the Securities Contracts Regulation Act, the Government of India
 recognized the Bombay Stock Exchange as the nation's first stock exchange in 1956. In
1995, the Bombay Stock Exchange transitioned to an electronic trading system. In April
1979, the Bombay Stock Exchange Sensitive Index was made up of thirty stocks. 30
stocks from different industries make up one-fifth of the Sensex's market capitalization.
There are 10,000 listed Indian companies on the Bombay Stock Exchange at the moment.
This exchange has the most firms in total than any other. Given that stock information is
accessible in 417 Indian cities and towns, the BSE's technology is becoming more
sophisticated (BSE Sensex).

On January 15, 1992, the finance minister's liberal economic strategy caused the
Sensex to surpass 2000 rupees (BSE Sensex). Because it enabled trade with other nations
and opened the economy to new ideas, this mark looked significant. India's import and
export businesses started transacting and making money.

Because the BJP led the alliance that won a majority in the country's election, the
Sensex surpassed 5000 rupees on December 30, 1999 (BSE Sensex). This was a
significant movement because the BJP alliance placed a high priority on recovering the
economy. With the economy starting to turn toward information technology, India was
starting to flourish and look forward to a more bright future. Not only did this field aid in
India's growth and development, but it was also in demand, and other nations started to
make use of its advantages. The Sensex was rising and India was starting to boom. The
"InfoTech" boom began on January 2, 2004, with India emerging as the primary hub of
this industry. India was not just improving the domestic services within the
nation,however, the use of information technology started to spread globally. Businesses
were starting to establish a base of operations in India. In addition to the nation, the stock
market was receiving billions of dollars in investments. The robust movement attracted
foreign investors to India's economy.
Beyond the information technology industry, other sectors began to benefit from the
boom as well, including telecom and energy. In addition to communications, Reliance
began to expand into the energy sector. Initiated by Dhirubhai Ambani in the early 1980s,
the company did not begin to grow until 1999 (Reliance Industries Limited). and took
control of the market share in telecom and energy, Reliance was With the company
dominating the energy and telecom markets in India and growing rapidly, Reliance was
reaching new heights and breaking records.Dhirubhai Ambani had high expectations and a
clear vision for the success of his company, but he passed away on July 6, 2002, therefore
he was unable to see Reliance's destiny. His sons, Mukesh and Anil Ambani, took over the
company after their father passed away. Their goal was to continue their father's legacy
and realize his aspirations. Regretfully, Anil and Mukesh had divergent perspectives and
split up. On June 20, 2005, the corporation (Reliance Industries Limited) was divided into
three groups: Reliance Info com, Reliance Industries Limited, and Reliance Energy
 Key point about Bombay Stock Exchange

• History:- With its long history, BSE was instrumental in the growth of the Indian capital
market. The Native Share and Stock Brokers' Association was its original name, and it
later changed to become the Bombay Stock Exchange.

• Indices:- The S&P BSE Sensex is the most widely followed of the major market
indices offered by BSE. The 30 biggest and most frequently traded stocks on the BSE are
included in the Sensex.

• Listing:- Thousands of businesses from a wide range of industries, including

manufacturing, technology, finance, and more, are listed on the BSE. In order to raise
capital from the public, companies list their shares on the exchange.

• Exchange:- A trading platform for stocks, derivatives, mutual funds, and other financial
instruments is offered by the BSE. Exchange traders must abide by strict guidelines
established by market regulators.

• Technology:- BSE has incorporated cutting-edge technology into its trading and
settlement procedures, much like other significant stock exchanges. Electronic trading
systems have been implemented in an effort to improve market efficiency and
transparency.

• Rules: The Securities and Exchange Board of India (SEBI), the main regulatory body
overseeing the Indian securities market, provides the regulatory framework within which
the BSE operates.

• Education of Investors:- Programs for investor awareness and education are actively
supported by the BSE. It offers resources and information to assist investors in making
wise choices.

Anyone interested in trading, investing, or the workings of the Indian financial markets
must have a basic understanding of the Bombay Stock Exchange. It's crucial to remember
that stock investing involves risk, and before making any decisions about their money,
people should do extensive research or consult a professional.
 NATIONAL STOCK EXCHANGE

National Stock Exhange of India Limited

INTRODUCTION

The National Stock Exchange of India (NSE) is India's largest stock exchange and
the third largest stock exchange in the world by trading value. NSE is headquartered in
Mumbai and incorporated as a tax-paying company in November 1992 with the support of
leading financial institutions on behalf of the Government of India. In April 1993, NSE
was recognized as a stock exchange under the Securities Contracts (Regulation) Act, 1956.
NSE He started operations in the Wholesale Debt Market (WDM) sector in June 1994.
The Capital Markets (Equities) Division of NSE commenced operations in November
1994 and the Derivatives Division commenced operations in June 2000. NSE has played a
catalytic role in reforming the Indian securities market in terms of microstructure, market
practices and trading volumes. NSE has set up the trading system as a nation-wide fully
automated screen-based trading system. Its mission is to create a world-class stock
exchange and use it as a vehicle for industry-wide change through competitive pressure.
NSE is based on a demutualization model, where ownership, management and commercial
rights are in the hands of three different groups of people. This completely eliminated any
conflicts of interest.

The Organization:

The National Stock Exchange of India has agreed to the report of a high-powered
study group on setting up new stock exchanges, which recommended promotion of a
national stock exchange by financial institutions (FIs) to provide access to investors from
across the country. has an origin. At par. Based on this recommendation, NSE was
promoted by leading financial institutions on behalf of the Government of India and was
incorporated as a tax-paying company in November 1992, unlike other stock exchanges in
the country.
 NSE Objectives:

 • Establishment of a nationwide trading facility for all types of securities

• Provide equal access to investors across the country through appropriate

telecommunications networks

• Providing a fair, efficient, and highly transparent securities market using electronic
trading systems 

• Enable shortening of payment cycles and reservation processing 

• Compliance with international benchmarks and standards

• Within a very short period of time, NSE has been able to achieve its founding objectives.
Indian capital markets have come a long way from 12 years ago in terms of market
practices, infrastructure, technology, risk management, clearing and settlement, and

investor services. To ensure business continuity, NSE has built a full-fledged BCP site that
has been operational for the past seven years.
 NSE Group:

NSCCL

IISL

NSCIT

NSDL

DotEx Intl. Ltd.

• NSCCL:-

National Securities Clearing Corporation Ltd. (NSCCL) is a wholly owned

subsidiary of NSE and was incorporated in August 1995. Created to build and maintain
trust in securities clearing and settlement. Facilitate and maintain short and consistent
payment cycles. We provide counterparty risk guarantees and operate a strict risk
limitation system. NSCCL started clearing operations in April 1996. NSCCL carries out
clearing and settlement of trades executed in the equity and derivatives sector and operates
the Subsidiary General Ledger (SGL) for settlement of trades in government securities. It
assumes each member's counterparty risk and guarantees financial settlement. It also
handles settlement of trades on other exchanges such as Indian over-the-counter
exchanges. NSCCL has successfully modernized clearing and settlement processes and
brought Indian financial markets in line with international markets.
 It was set up with the following objectives:

- Create and maintain confidence in the clearing and settlement of securities.

- Promote and maintain short and consistent payment cycles. 

- To provide insurance against counterparty risk. 

- Operate a strict risk containment system.

NSCCL started its clearing business in April 1996. Since then, the company has
completed over 1,800 of his settlements (equity segment) without any delays or
disruptions

Clearing:-

Settlement is the process of identifying debts, which are then settled through
settlement.

NSCCL has two categories of clearing members: trading members and custodians. If
the Custodian confirms this to the NSCCL, the Trading Participant may transfer its
obligations to the Custodian. Transactions for which the trading member wishes to convey
commitment to the custodian will be forwarded to the custodian by NSCCL for
confirmation. The custodian must confirm transactions on her T+1 day basis.

Once the above activities are completed, NSCCL will commence clearing functions.
Determine counterparty obligations using the concept of multilateral netting. Therefore,
clearing members will be responsible for depositing or withdrawing funds and securities
separately. Accordingly, the member's deposit and withdrawal obligations for funds and
securities are determined and transferred by date T+1, allowing the obligation to be settled
on the settlement date (T+2).
 • IISL:-

India Index Services & Products Ltd. (IISL) is a joint venture with the National
Stock Exchange of India. (NSE) and CRISIL Ltd. (formerly Credit Rating Information
Services of India Limited). IISL was established with the purpose of providing the capital
markets with a variety of index and index-related services and products.
IISL has entered into a consulting and licensing agreement with Standard & Poor's
(S&P), the world's leading provider of investable equity indices, for the co-branding of
IISL's equity indices.

IISL;- Product & services

ISL offers a wide range of products and services that are important support tools for the
stock market. We provide reliable, accurate and valuable index data and index-related
services to meet the needs of various user segments. Our specialty is Indian stock market
based indices that can be used for benchmarking, trading and research. Use of IISL data,
names, and indexes requires a license or subscription.

• NSDL:-

To solve the myriad problems associated with trading in physical securities, NSE has
partnered with Industrial Development Bank of India (IDBI) and Unit Trust of India(UTI)
to promote dematerialization of securities. Together they founded National Securities
Depository Limited (NSDL), India's first depository bank.

NSDL commenced operations in November 1996 and since then has built an
international standard national infrastructure for conducting transactions and settlements
in electronic form, thereby ensuring the safety of investors in connection with
counterfeit/bad/stolen securities.

• DotEx International Limited;-

 The National Stock Exchange's data and information sales products are provided
through a separate company, DotEx International Ltd., which is a wholly owned subsidiary
of NSE and is a professional body dedicated solely to this purpose.”

• NSC.IT Ltd:-

NSE.IT is a wholly owned subsidiary of the National Stock Exchange of India (NSE)
and is the information technology arm of India's largest stock exchange. NSE is a major
technology user and has state-of-the-art infrastructure and capabilities. NSE.IT has
extensive expertise gained over the past six years through operating the trading and
clearing infrastructure of the country's largest exchange. NSE.IT is uniquely positioned to
provide products, services and solutions to the securities industry. World-class products,
services and solutions have long been sought after in trading, broker front-end and back-
office, clearing and settlement, web-based trading, risk management, treasury
management, asset liability management, banking and insurance. Ta. ,Such. NSE.IT's
expertise in these areas is paramount. The company will also provide consulting and
implementation services in areas such as data warehousing, business continuity planning,
Stratus mainframe facility management, site maintenance and backup, real-time market
analysis, and financial news through NSE-Net. NSE.IT is an export oriented unit of STP
which plans to provide various IT services all over the world in the coming days. In the
near future, the company plans to release new products for broker back-office operations
and extend NeatXS/Neat iXS to support straight-through processing over the Internet.
 DERIVATIVE

INTRODUCTION
BSE launched its first listed index derivatives contract on June 9, 2000, namely H.
Capital Market Benchmark Index - BSE Sensex Futures. This transaction was initiated by
Professor J.R. Mr. Varma is a member of SEBI and chairman of the committee responsible
for developing risk mitigation measures for the derivatives market. His historic first trade
of 5 pieces in the June series took place on June 9, 2000 at 9:55:03 am with M/s Kami &
Maulik Securities Pvt. Ltd. Instead of. GmbH. and M/s Emceez Share & Stock Brokers
Ltd. at the rate of 4755.

A derivatives market is a financial market for derivatives, financial instruments such

as futures contracts and options that are derived from other forms of assets.
The market can be divided into two parts: listed derivatives and over-the-counter
derivatives. Although many market participants operate in both areas, the legal nature of
these products varies widely, as does the way they are traded.
 As part of its product innovation, the exchange started trading index options on
Sensex on June 1, 2001. On July 9, 2001, stock options on 31 stocks were introduced, and
on November 9, 2002, individual stock futures were introduced.
September 13, 2004 marked another milestone in the history of Indian capital
markets. It is the day the Bombay Stock Exchange launched Weekly Options, a unique
product unmatched in the domestic and international derivatives markets. In addition to the
main index Sensex, the BSE has allowed trading of weekly stock options contracts for four
major companies: Reliance, Satyam, State Bank of India, and Tisco.

Types of products:-

Index Future

A futures contract is a standardized contract to buy or sell a specific security at a

future date at an agreed upon price. Index futures, as the name suggests, are futures on an
index. H. Since the underlying asset is the index itself and index futures are cash settled,
there is no underlying asset that needs to be delivered to meet the obligation. As with other
derivatives, the value of the contract is derived from the underlying index. The underlying
index in this case is a variety of permitted indices, as approved by regulatory authorities
from time to time.

Index Option

An option contract gives its holder the right, but not the obligation, to buy sell something
at a specific price on or before a specific date. Index options are generally European style.
A European-style option is an option contract that can only be exercised on the expiry
date. The indexes underlying the index options are a variety of permitted indexes, each of
which has been approved by a regulatory authority.

• Stock Futures:-

A stock futures contract is a standardized contract to buy or sell a specific stock at an

agreed upon price at a future date. Stock futures, as the name suggests, are futures on
stocks. H. The underlying assets are stocks. The value of the contract comes from the
underlying equity. Individual stock futures are cash settled.
• Stock Options:-

An individual stock option is an option contract whose underlying asset is an individual

stock. Based on eligibility criteria and subject to regulatory approval, stocks are selected
for option implementation. These contracts are settled in cash and are American-style. An
American-style option is an option contract that can be exercised on or before expiration.

WHO ARE INVESTORS ?

Investors are individuals or organizations that have a financial interest in a start-up or

existing company. They are usually willing to pool a large portion of their wealth as
capital (in the form of cash, physical assets, patents, and goodwill) in hopes of high returns
from their business in a defined future. Usually this "ordained future" lasts for more than a
year, and in some cases it can last for 15-20 years. However, the idea of investing in a new
company is a risky venture, as there is no guaranteed return.
 Investors approach different companies through different channels. The main channel
is to buy private equity in companies. Although expensive, pre-listed shares can be very
valuable and offer high yields if the portfolio company shows success with its business
idea and execution. Returns will further increase if a successful company registers its IPO
on the secondary capital market (stock market).

As the amount purchased increases, stock prices tend to rise due to increased demand.
As soon as the investor feels that he has achieved his profit goal, he deducts his share from
the total investment. Typically, these goals are up to 5,000-6,000% of your initial
investment. Due to the high return on initial investment, many investors with different
motivations and goals invest large amounts in start-up companies, for example 20-30% of
a company's total capital needs. These are mainly done by financial institutions and angel
investors. However, a retail investor typically does not invest more than his 0.0001-0.01%
of a company's market capitalization.

What do investors invest In ?

• Stock

• Bonds

• Mutual fund & Exchange-Traded fund(ETF)

• Hedge fund

• Real estate

Investors are individuals or institutions that invest money with the expectation of a
return. They invest in a variety of assets such as stocks, bonds, and real estate. Investors
tend to take a longer-term view than traders, who may hold positions for no more than a
few days. Beginners should invest in low-cost index funds first before identifying
individual stocks and other successful securities.
 Types of investors
Meaning:-

An investor is an individual, institution, or company that allocates capital with the

expectation of a return from the investment. Investors invest money in a variety of
financial instruments, such as stocks, bonds, real estate, mutual funds, and other assets,
with the goal of increasing capital value, generating income, or both.

Types:-

Long term investors:

• Value Investor: Focuses on finding undervalued stocks, believing that the market will
recognize their true value over time.
• Dividend Investor: Prefers stocks that pay regular dividends and seek income with
potential capital appreciation. Short-term investors.

Short term investors:-

• Day Trader: Buys and sells stocks on the same trading day in order to profit from
short-term price movements.
• Swing traders: Take advantage of price movements to hold stocks for short to medium
term periods, usually days to weeks.

Risk-averse investors:

• Conservative Investor: Prefers low-risk investments such as blue-chip stocks and

bonds, and prioritizes capital preservation over high returns.
• Income Investors: They aim for regular income through dividend and interest
payments and often choose securities that produce stable income.

Risk-tolerant investors:

• Aggressive Growth Investor: Willing to accept greater risk for the potential for higher
returns, they often invest in high-growth, volatile stocks.
• Speculator: May adopt high-risk, high-return strategies based on short-term market
trends and speculative information.
 Passive investors:

• Index investors: Invest in index funds or exchange-traded funds (ETFs) that track a
specific market index and aim to replicate its performance.
• Buy-and-hold investors: Take a long-term approach and buy stocks with the intention
of holding them for the long term, regardless of short-term market fluctuations.

Institutional investor:

• Mutual Fund: A pooled fund managed by a professional fund manager that invests in a
diversified portfolio of stocks.
• Hedge Fund: An actively managed fund that uses various strategies, such as short
selling and leverage, to achieve higher returns.

Socially Responsible Investor (SRI):

• Ethical investor: considers environmental, social, and governance (ESG) factors in

investment decisions and aligns their portfolio with their values.
• Individual Investor: An ordinary individual who invests in the stock market, often
through an online brokerage platform.

These categories are not mutually exclusive and investors may have characteristics of
more than one type. Additionally, an investor's strategies and preferences may change over
time depending on market conditions and personal financial goals.
 WHAT ARE STOCK MARKET INDICES ?

INTRODUCTION:-

An index represents the sum of the prices of several different stocks, and movements in
the index are the net effect of movements in each component. The most important stock
market indexes include the Dow Jones Industrial Average (DJIA) and the S&P 500.

The DJIA is a price-weighted index of 30 major U.S. companies. Due to its weighting
scheme and the fact that it consists of only 30 stocks (out of thousands of stocks to choose
from), it is not a good indicator of stock market performance. The S&P 500 is a market-
capitalization weighted index of the 500 largest companies in the United States, which is a
more meaningful metric.

Indices can be broad-based, such as the Dow Jones or S&P 500, or focused on a
particular industry or market sector. Investors can trade the index indirectly through
futures markets or exchange-traded funds (ETFs), which operate similarly to stocks on a
stock exchange. Market indices are common measures of stock market performance. Most
market indexes are weighted by market capitalization. This means that each index
constituent's weight is proportional to its market capitalization. However, be aware that
some of these, such as DJIA, are price-oriented. In addition to the DJIA, there are other
indexes that are widely followed in the United States and internationally.

• S&P500

• Nasdaq Composite Russell index (Russell 1000, Russell 2000)

• TSX Composite (Canada)

• FTSE index (UK)

• Nikkei 225 (Japan)

• Dax index (Germany)

• CAC 40 Index (France)

• CSI 300 Index (China)

• Sensex (India)
CHAPTER :- 2