Basic of Stock Market and

how their Indices are

calculated

Presented by
Pavan Shah
How are the SENSEX 30 Stocks are
selected?
• Listing History
• Based on the Market Cap (Should be Among
top 100 co’s)
• Turnover (Should be Among top 150 co’s)
• Industry Leader
• Historical Record
 How SENSEX is calculated?

SENSEX =

Sum of free flow

market cap of 30 x Sensex’s value in 1978-79
stocks Mkt. Cap value in 1978-79

100 is the Sensex value during 1978-79.

 Example:
Assume SENSEX has only 1 stocks namely
RELIANCE.
Total No .Shares By Public By Promoters
500 300 200

Suppose The Mkt. Price of Reliance is

1000 Rs.
FFMC = 300 x 1000 = 300000

Suppose Mkt. Cap Value in 1978-79 is

25000
 Then Sensex = FFMC x Sensex value in
1978-79
Mkt. Cap value in 1978-79

= 300000 x 100
25000

= 1200
The methodology in the example is exactly
followed to calculate the Nifty , only difference
being the inclusion of 50 stocks.
The base value is 1000 instead of 100.
And the base year is 1995.
 TOP TEN SINGLE DAY FALLS
OF THE SENSEX :
1. Jan 21, 2008 --- 1,408 points
2. Mar 17, 2008 --- 951 points
3. Jan 22, 2008 --- 875 points
4. Feb 11, 2008 --- 833 points
5. May 18, 2006 --- 826 points
6. Dec 17, 2007 --- 769 points
7. Oct 17, 2007 --- 717 points
8. Jan 18, 2007 --- 687 points
9. Nov 21, 2007 --- 678 points
10. Aug 16, 2007 --- 642 points
 TOP TEN SINGLE DAY RISE OF
THE SENSEX :
1. May 18, 2009 --- 2110 points
2. Jan 25, 2008 --- 1139 points
3. Mar 25, 2008 --- 928 points
4. Nov 14, 2007 --- 893 points
5. Oct 23, 2007 --- 878 points
6. Jan 23, 2008 --- 864 points
7. July 23, 2008 --- 838 points
8. Oct 9, 2007 --- 788 points
9. Oct 31, 2008 --- 743 points
10. May 4, 2009 --- 731 points
 Classification of Companies

Capitalization Sector Group

 Capitalization

Large Cap
Mid Cap
Small Cap
1. Large Cap Stocks Mkt.
cap over 1000 cr.
i.e.- Ril, ONGC, SBI
2. Mid Cap Stocks Mkt.
cap between 200cr to 1000cr
i.e.- Apollo Tyres, Jet Airways
3. Small Cap Stocks Mkt.
cap less than 200cr.
i.e.- Balaji Telefilms
 Sectors

• Real estate • Banking

• PSU • FMCG
• Auto • Capital Goods
• Power • Metal
• Consumer • Tech
Durables • IT
• Oil & gas
 Groups

• A- High Mkt. cap & High turnover.

• B- Growing co’s, Mid cap co’s.
• S- low volume.
• T- No growth, No result.
• Z- Suspended from trading.
 ss of Trading
Ways

1. Online Share Trading.

2. Offline Share Trading.

Method of Buying & Selling

1. Market Order.
2. Limit Order.
 Types of Price
• Bid Price.
• Ask Price.
Kinds of Trading

• Intraday Trading
• Delivery Base.
 Two Kind of People in the Market

1. Investors
• Short term Investors.
• Long term Investors.

2. Traders
• Day Trader.
• Swing Trader.
Advantage of Day Trading

 Less Brokerage

 Short Selling

 Don’t Require To make Full Payment

Rules to Survive in the market
• Rule 1: Never lose your
money in the market.

• Rule 2: Never forget Rule 1.

Paper Trading For New Comers