First step to Investing in

Stock market!!!!
Submitted to : Submitted By :
Pf. Harpreet Singh Lakshman Kansal
Prateek Gupta
Amardeep Tomar
Gaurav Kumar
Shruti Gupta
Shilpa Jain
Sujit Gupta
 STOCK MARKET

WORKING
REGULATORY FRAMEWORK
WHY DO PEOPLE BUY SHARES?
WHY STOCK MARKET IS SO VOLATILE?
HOW TO MAKE MONEY IN STOCK MARKET?
ROLE OF STOCK MARKET IN ECONOMY
 INTRODUCTION:
Stock
market??

The market for long term securities like bonds,

equity stocks is divided into PRIMARY MARKET and
SECONDARY MARKET.

PRIMARY MARKET
Deals with the new issues of securities.

 SECONDARY MARKET
Deals with outstanding securities.
Also known as “STOCK MARKET”.
JARGON OF EQUITY MARKET:
• SECURITY

• BOND

• STOCK
1)COMMON STOCKS
2)PREFERRED STOCKS

• SHARE

• MUTUAL FUNDS.

• PAR VALUE vs. MARKET VALUE

• BULLISH vs. BEARISH

 How does the stock market function?
Stock exchanges
Brokers
 Registrars
Depositories and their participants
Securities and Exchange Board of India (SEBI)
MARKET INDICES:

Stock market indices are the barometer of the stock

market.
BSE SENSEX,NSE-50 etc are some of the market indices.

Their usefulness:
 Indices help to recognize broad trends in the market.
 The investor can use the indices to allocate the funds
rationally among the stocks.
 Technical analysts use these indices to predict the future
market.
 Indices function as a status report on the general
economy.
JOB OF THESE INDICES:

These indices have just one job: To capture the

price movement. So a stock index will reflect the price
movements of shares while a bond index captures the
manner in which bond prices go up or down.
 WHY STOCK PRICE RISES?
The price of every stock increases or decreases for the
following possible reasons:

 News about company.

 News about the country.
 Exchange rate regime.
 Depends on demand
and supply for that stock.
 WHO SELECTS THESE STOCKS?
They are selected by the Index committee.
Some of the criteria they follow include :
1)Market capitalization.
2)Liquidity.
3)Continuity.
4)Industry representation.
5)Listed history.
 Why must I Invest in Shares?

Why need I invest?

So what are the various

investment options?
Why shares?
 Other benefits of investing in shares?

Because they can make big money on it. Compared to your

investments in fixed deposits in banks it makes more profits ,but
the bad news is that you are also expected to bear the losses ,if
any.

 1) Possibility of high returns

2) Easy liquidity
3) Unbeatable tax benefits
4) Income from dividends
What are the expenses during a
transaction?

 Capital gains tax

 Securities transaction
tax
 Brokerage
 Depository fees
How Do One INVEST

OPTIO
FUTUR NS
MARGI E
N/
INTR BTST
ADAY
CA
SH
 SO HOW DOES ONE BUY
SHARES?

There are basically two ways in which you can invest in

shares:

 Purchase shares from

the primary market
(i.e. IPO's)

Trade in the
secondary
market, i.e.
stock exchanges.
Trading Window
Trader Work Station
Types Of Market

Normal Odd Lot

Market Market

Retail Debt Auction

Market Market
Market Phases

Opening
phase
Surcon

 Open
Phase

Market
Close
Features Of Market Inquiry

 Market  Market
By Order By Price

Previou Outstand
s Trade ing Order
Types Of Trade Books

 Regular Special
Terms Book
Lot Book

Stop Loss
Book

Negotiated  Auction , Odd Lot

, Ret Debt Book
Trade Book  ,
Order Type

Order Type

 Time  Price
Condition Condition
Transaction Cycle
Settlement Procedure In NSE
Explination
• Trade details from Exchange to NSCCL (real-time and end of day tradefile).
• NSCCL notifies the consummated trade details to CMs/custodians who
affirm back. Based on the affirmation, NSCCL applies multilateral netting
and determines obligations.
• Download of obligation and pay-in advice of funds/securities.
• Instructions to clearing banks to make funds available by pay-in time.
• Instructions to depositories to make securities available by pay-intime.
• Pay-in of securities (NSCCL advises depository to debit pool account of
custodians/CMs and credit its account and depository does it).
• Pay-in of funds (NSCCL advises Clearing Banks to debit account of
custodians/CMs and credit its account and clearing bank does it).
• Pay-out of securities (NSCCL advises depository to credit pool account of
custodians/CMs and debit its account and depository does it).
• Pay-out of funds (NSCCL advises Clearing Banks to credit account of
custodians/CMs and debit its account and clearing bank does it).
• Depository informs custodians/CMs through DPs.
Circuit Breakers In Market

• In case of a 10% movement in either of these indices, there would

be a one-hour market halt if the movement takes place before 1:00
p.m.
• In case the movement takes place at or after 1:00 p.m. but before
2:30 p.m. there would be trading halt for ½ hour. In case movement
takes place at or after 2:30 p.m. there will be no trading halt at the
10% level and market would continue trading.
• In case of a 15% movement of either index, there should be a two-
hour halt if the movement takes place before 1 p.m. If the 15%
trigger is reached on or after 1:00 p.m. but before 2:00 p.m., there
should be a one-hour halt. If the 15% trigger is reached on or after
2:00 p.m. the trading should halt for remainder of the day
• In case of a 20% movement of the index, trading should be halted
for the remainder of the day.
LEGAL FRAMEWORK
the th th Pre
Sec
th
e e ven
uriti e tion
es Co De
Co m
S po
of
Mo
ntra pa E sit ney
cts BI Lau
(Re
nie ori
s A es nde
gul
ring
atio Ac ct, Ac Act
n) t, t,
Act, 19 ,
19 19 200
195 92 2
6, 56 96
Securities Contracts (Regulation) Act, 1956

It gives Central Government regulatory

jurisdiction over
(a) stock exchanges through a process of
recognition and continued supervision
(b) contracts in securities
(c) listing of securities on stock exchanges. As
a condition of recognition, a stock exchange
complies with conditions prescribed by
Central Government.
SEBI Act, 1992

• Protecting the interests of investors in

securities
• Promoting the development of the
securities market
• Regulating the securities market.
• Conduct enquiries, audits and
inspection of all concerned and
adjudicate offences under the Act.
Depositories Act, 1996

• Making securities of public limited

companies freely transferable subject to
certain exceptions
• Dematerialising the securities in the
depository mode
• Providing for maintenance of ownership
records in a book entry form.
Companies Act, 1956

• Deals with issue, allotment and transfer of securities

and various aspects relating to company
management.
• It provides for standard of disclosure in public issues
of capital, particularly in the fields of company
management and projects, information about other
listed companies under the same management, and
management perception of risk factors.
• It also regulates underwriting, the use of premium
and discounts on issues, rights and bonus issues,
payment of interest and dividends, supply of annual
report and other information.
Prevention of Money Laundering Act, 2002

• The primary object of the Act is to prevent money-laundering

and to provide for confiscation of property derived from or
involved in money-laundering.
• The term money-laundering is defined as whoever acquires,
owns, possess or transfers any proceeds of crime; or knowingly
enters into any transaction which is related to proceeds of crime
either directly or indirectly or conceals or aids in the
concealment of the proceeds or gains of crime within India or
outside India commits the offence of money-laundering.
• The Act also casts an obligation on the intermediaries, banking
companies etc to furnish information, of such prescribed
transactions to the Financial Intelligence Unit- India, to appoint a
principal officer, to maintain certain records etc.
COMPUTATION OF STOCK INDEX:

A stock market may either be a price index or a wealth

index. In India most of the indices are using wealth index for
computation of stock market.
No. of Market Market Market Market
Face value=Rs.10/-
Compan Price cap Price cap
y shares on (Rs.) on (Rs.) Base value=100/-
09/02/0 18/02/0
6 6
TATA 10 20/- 200/- 30/- 300/- Index present value=
INFOSY 20 30/- 600/- 40/- 800/-
S (100*4100)/2800=
IBM 20 100/- 2000/- 150/-
3000/- 146.428
TOTAL 2800/- 4100/-
MARKE
T CAP
 WHY STOCK MARKET IS SO
VOLATILE?
Acceptance of globalisation,internationalisation and
integration of the Indian market with the world markets.
Introduction of flexible exchange rate regime.
Intro of new, innovative ,hybrid financial instruments.
Human element.
Technological changes.
 HOW TO MAKE MONEY IN
STOCK MARKET?

patience, profound knowledge.

Best guess.
Diversification .
Portfolio
management.
ROLE OF MARKET ACTIVITIES
IN ECONOMY:
 In theory they are required to facilitate, support, enable the
healthy growth and functioning of primary markets but in
practice they are not .
The current focus of thinking on the SENSEX, market
capitalization etc.reflects an excessive preoccupation with the
secondary market activity.
Beyond a point, the expansion of the secondary markets may
reduce the volume of activity not only on the new issue market
but also in the banks, other financial institutions, gold, real
estate and commodities.
The multiple serious problems visiting the stock market caution
us against too much optimism and enthusiasm about the stock
market.
DRAWBACKS OF INDIAN STOCK
MARKET:

Unethical practices.
Big irrational greed, excessive speculation.
Lack of protection to interests of the genuine and small
investors .
Trading is extremely thin and restricted.
Structural and organisational imbalance in the growth of the
stock market.
Volatility of the market has increased over the years.
REMEDY:

So in order to make it flawless system authorities should initiate

certain measures such as

 Single authority
 Demutualization.
 Prescribing capital adequacy norms.
 Stricter registeration of brokers
 Margin requirements .