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Basics concepts

The Sensex is an indicator of all the major companies of the BSE. The Nifty is an indicator of all the major companies of the NSE. If the Sensex goes up, it means that the prices of the stocks of most of the major companies on the BSE have gone up. If the Sensex goes down, this tells you that the stock price of most of the major stocks on the BSE have gone down. Just in case you are confused, the BSE, is the Bombay Stock Exchange and the NSE is the National Stock Exchange. The BSE is situated at Bombay and the NSE is situated at Delhi. These are the major stock exchanges in the country. There are other stock exchanges like the Calcutta Stock Exchange etc. but they are not as popular as the BSE and the NSE.Most of the stock trading in the country is done though the BSE & the NSE. Besides Sensex and the Nifty there are many other indexes. There is an index that gives you an idea about whether the mid-cap stocks go up and down. This is called the BSE Mid-cap Index. There are many other types of indexes. sensex is the index of BSE,it has 30 listed companies,and Nifty is the index of NSE,it has 50 listed companies.

Getting Started in Share Market Trading. Things you should know It is very interesting to invest in shares, though most of the people would like to start with small money. First of all, you need to know a little bit in detail about the stock market, then about the shares and the mode of their trading. What are the risks involved and how to be smart in dealing with shares? Stock Market It is the place where the shares of listed companies are bought and sold. In India, you have BSE and NSE as two big stock exchanges. Shares are bought and sold by you and me only through approved brokers. Approved brokers are mostly banks like the ICICI, HDFC, IDBI, UTI Bank, SHCI, are to name a few. First you need to open an account with a bank, that has the Demat account facility. Go to the respective bank and open a Savings account with deposit of around Rs. 10,000. Tell the bank that you want to deal in shares and ask them to open a Demat account. It will be done automatically after signing a few forms. A Demat account is nothing, but the account where the shares bought by you will be kept separately. Only you could operate that account online, through Internet. You could open the online facility offered by the ICICI, HDFC or ShareKhan or others and buy shares you wish and decide the quantity and the price. Here the bank will act as a broker. You online order for purchase would be carried out by the bank. They charge broker commission, much less compared to private brokers.

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It is very important for you to have enough balance to your credit in your savings account. As and when you buy on line, your Demat account will be credited with those shares. The money for the purchase will be automatically deducted from your account by the bank. You also have to keep looking for opportunities to sell the shares that you have already bought and kept in your Demat account. For buying and selling, it is necessary to familiarize which shares to be bought at what prices and sell them at what price. As and when you decide to sell (depending on the price quoted in the market) you could sell them through online trading system. The moment you sell your Demat account will be debited with the number of shares sold by you. Your account will be credited with the amount for which you have sold. Depending on the amount of profit earned, tax will also be deducted by the bank (TDS). The bank will give you a TDS certificate by the year end, i.e., March 31, of that year which you could attach with the return to justify the tax payment. When the shares could be bought or sold? Always sell the shares when the price is up and buy when the price is down. Every body had to adapt to this formula. What profit should it give you? You buy a share for a particular price. Take the amount as investment. Any bank will lend you at ten per cent interest. It will give you 24 per cent return if the share price rises in such a way. Do not wait for the market to crash and start searching for buyers for the price you quote. After selling, never look back and repent for what profit you have earned, had you delayed the sale. Be happy that it did not happen otherwise. This is the best way, to sell. If you want to buy, look for 52 week low, look for the peer companies, their price and compare it with the company you want to buy. Look for the prospectus, future plans and the profit the company ought to make in the next year. Take the perception or a change and buy. You cannot take profit in the buys. Losses do occur as long as you are at decent surplus for which you have no reason to be unhappy.

Happy Investing

Demat refers to a dematerialised account. Though the company is under obligation to offer the securities in both physical and demat mode, you have the choice to receive the securities in either mode. If you wish to have securities in demat mode, you need to indicate the name of the depository and also of the depository participant with whom you have depository account in your application.

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It is, however desirable that you hold securities in demat form as physical securities carry the risk of being fake, forged or stolen. Just as you have to open an account with a bank if you want to save your money, make cheque payments etc, Nowadays, you need to open a demat account if you want to buy or sell stocks. So it is just like a bank account where actual money is replaced by shares. You have to approach the DPs (remember, they are like bank branches), to open your demat account. Let's say your portfolio of shares looks like this: 150 of Infosys, 50 of Wipro, 200 of HLL and 100 of ACC. All these will show in your demat account. So you don't have to possess any physical certificates showing that you own these shares. They are all held electronically in your account . As you buy and sell the shares, they are adjusted in your account. Just like a bank passbook or statement, the DP will provide you with periodic statements of holdings and transactions. Is a demat account a must? Nowadays, practically all trades have to be settled in dematerialised form. Although the market regulator, the Securities and Exchange Board of India (SEBI), has allowed trades of upto 500 shares to be settled in physical form, nobody wants physical shares any more. So a demat account is a must for trading and investing. Most banks are also DP participants, as are many brokers. You can choose your very own DP. To get a list, visit the NSDL and CDSL websites and see who the registered DPs are. A broker is separate from a DP. A broker is a member of the stock exchange, who buys and sells shares on his behalf and on behalf of his clients. A DP will just give you an account to hold those shares. You do not have to take the same DP that your broker takes. You can choose your own

1. 2 ) Types of business (companies) I. Limited Company : This is a business owned by a group of people who do not want to have unlimited personal liability for the debts of the business. This is because the company has its own legal identity, separate and distinct from the owners. Liability is defined as limited because the maximum that the owners can lose is the money that they have invested in the business. The owners are not personally responsible for the debts of the business so personal assets such as homes and personal bank accounts are safe. Private Limited (Plc) Companies

A private limited company is owned privately by a small group of people such as a family. They are not

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allowed to offer shares (in the company) to the general public and can operate through just one director. A private limited company cannot trade its shares on the stock market. . Although private limited companies are usually small in size, they are expensive to set up and have to produce proper accounts. Furthermore unlike a sole trader, private limited companies have to pay auditors, hold meetings as stipulated in the Companies Act and share profits between all of the shareholders. Public Limited companies (Ltd)

A public limited company is able to trade on the stock market but in order to gain plc status the company must achieve the following; Minimum share capital of 50000 Minimum of two directors Its name must contain plc or private limited company Secure a trading certificate from the Companies House Partnerships: When two or more people join forces to own and run a business, their business is known as a partnership and they are called partners. Partnerships often occur in professional services such as doctors, solicitors etc. Partnerships will either adopt the name of the partners or trade under a suitable trading name. Sole Trader A sole trader business is a business owned by one person, although the organisation may employ more than one person. The sole traders business will trade under the owners name or a name chosen by the sole trader. To safeguard against legal proceedings the sole trader should ensure that they dont use a name registered to someone else. Franchisers A Franchise is an organisation utilising a business idea belonging to another. The Franchise owner will pay the owner (of the business idea) money to use their business idea. The person selling the idea is known as the Franchisor and the person purchasing the right to use the business idea (and/or trade under the name of another organisation) is known as the Franchisee. Co-operatives In 1844 28 weavers from Rochdale set up a society to buy food and sell to its members at the same price that the food would be sold to shops. This is known as selling wholesale and enabled the weavers to combat the high food prices that had prompted them to set up their society. This type of society is known as a cooperative and allowed the members to buy food cheaper than that sold in the shops. Co-operatives are governed by the Industrial and Provident Societies Acts. Profit made by the co-operative is distributed amongst the members (owners) of the co-operative. It is estimated that by 1990 there were 80 cooperatives in existence. A well known example of a co-operative is Co-Op (Co-Operative Wholesale Society) which now trades as the supermarket chain Co-Operative Pioneer or as Leos Basics of Mutual Funds Money is merely a piece of paper until you realise the importance of saving and making it grow spirally. There is plethora of investment avenues available at present, but what suits your objective is the one you should opt for. On a broader picture, a common man can think of two options, either invest in shares

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offering glamorous returns with an associated unknown risk or invest in the regular income debt options offering lesser but safer returns. Now the question arises: Is there a way in middle so that you get good returns like equity and safety of investment like fixed income options. Yes, a Mutual fund is what you should look for. Why Mutual funds? What if you are a novice in the world of stock markets but still want to invest? What if you dont have enough risk appetite for the investments you want to make? What if you dont have time and skill to manage your portfolio and want some professionally qualified people to invest on your behalf? What if you are a novice in the world of stock markets but still want to invest? What are Mutual funds? As implicit by name, mutual fund is a fund mutually held by the investors who are the beneficiaries of the fund. It is a type of Investment Company which collects money from so many investors in common pool and then invests this capital raised in variety of options like bonds, equity, gold, real estate etc . At the core of it are professionally qualified people called fund managers analysing the markets conditions and making investment decisions with an objective of maximization of profit. Substantially all the earnings of a MF are passed on to the investors in proportion to their investments. In lieu of the services offered, the mutual fund also charges some fees from the investors. The diagram below clearly indicates that investors invest in mutual fund that further makes investment in various options.

Having been through basics, one can infer that investing in mutual funds is an easy way of playing safe in equity especially you being unaware of tactics of stock markets because it provides professional expertise of fund managers who make investment decisions based on constant study and market research. Besides this, it offers benefits like diversification of portfolio. Since mutual fund is a collective investment vehicle, they have an option to invest in different sectors of market like retail, real estate in addition to options like debt and commodities market. This reduces the risks to which an individual investor would have been exposed if a particular sector is in period of downfall. The simplicity of investment and various benefits offered have made them so popular that can be seen from their growth in past. They came into picture in 1963 with 67bn assets under management (AUM) compared to current figures of 4609.49bn with total of 35 mutual funds available at present and still expected to grow in years to come

Why Companies Buy Back ?

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Buy-Back is a corporate action in which a company buys back its shares from the existing shareholders usually at a price higher than market price. When it buys back, the number of shares outstanding in the market reduces and hence the market capitalisation as per below relation: Market capitalisation = Market value * Number of shares outstanding From a corporate point of view what could be a better investment than investing in its own shares. But why would a company invest in itself is what many of us will ponder about. Here is the answer!! Firstly, consider a company which possesses huge cash reserve but has no upcoming projects to invest into. In that case the company may plan to invest in itself and offer the existing shareholders an option to sell their shares to the company at an attractive price. It is similar to reinvesting its cash in itself which also aims at bringing in dilution in the markets as outstanding shares in the market are reduced. Secondly, a company may also go for buybacks with an aim of projecting better valuation of their stocks when they think it is undervalued in the market. The reason is companies buy its shares at higher price than current market price which indicates that its worth in the market is more than the present value. This in turn shoots up companys stock prices post buy back. Thirdly, some companies may also use it as a tool to change their capital structure i.e. debt-equity ratio in specific. By buying back the shares from open market, a company may increase its reliance on the debt financing rather than equity financing. Moreover interest payment on debt is tax deductible. So after tax cost of debt is quite lesser than shareholders return on equity. Fourthly, companies also go for buyback with intent of projecting better financial ratios as indicated below: EPS: Earnings per share = Earnings/ Shares outstanding Since outstanding shares reduce, the companys earnings are now divided amongst less number of shares for calculating EPS value. From investors point of view, higher the earnings per share, better it is as an investment option. Thus even though the earnings of a company are still the same, but EPS value post buyback is increased. RoA and RoE When a company buys its stock, the cash assets on its balance sheets reduce. This increases the return on the assets value. And further due to reduction in the outstanding shares in the market, the RoE value also shoots up. This is all about the companys intent of investing its cash in itself, but from the investors perspective, buybacks are most of the times euphoric. The reason is : either they will end up making profit by selling them to company at an attractive price or it leads to higher stock price due to reduction in outstanding shares in the open market . But as a common investor, what one should be careful about is the fundamentals of the company going for any corporate action. Trading types: Day trading, swing trading, position trading: Share Market Trading can be classified into either of these categories - Day Trading, Swing Trading and Position Trading. However, the common factor among all types of traders is that Stock market traders keep up with the news. The businesses and industries react to government actions, changes in oil prices, economic forecasts and world events. The successful stock market trader stays informed about the circumstances outside a company that could cause price fluctuations for the stock.

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Day trading conditions the most intense approach to stock market trading. To be on top of the fluctuations in stock prices, day traders spend hours together in monitoring the market. Day traders could make dozens of trades any day, sometimes in a matter of minutes hoping to grab the wave of price change. They avoid the risks of long term buy and hold. Day trading could be exciting, the fast pace attracting risk takers. Yet this strategy for stock market trading is only effective for day traders, who apply analysis rather then emotion to trading decision. Savvy day traders could turn profits quick. Emotional traders usually lose fast and leave disenchanted. Swing trading uses a slightly longer time horizon than day trading, watching a stock for weeks or months before trading. This type of stock market trading relies on careful monitoring of fundamental and technical analysis. Swing traders often specialize in a certain business or industry so that they become experts in the movement within those stocks. They also have more time to study the company financial reports and industry forecasts. Since swing trading does not require hours of daily monitoring, it is a good strategy for the trader who wants to make money from stock market trading without turning it into a full time job. Even the study of reports could be done during the daily commute or lunch hour so that the swing trader stays well informed. Position trading works well for investors who want to be involved in the stock market trading, but run short of time. Stocks are being held for months awaiting any changes in the trend. Position traders keep up with the fundamental and technical analysis as well as news events but apply a long term strategy to their stock market trading

What is dividends: Dividends are payments made by companies to their stockholders in order to share a portion of the profits from a particular quarter or year. The amount that any particular stockholder receives is dependent upon how many shares of stock they own and how much the total amount being divided up among the stockholders amounts to. This means that after a particularly profitable quarter a company might set aside a lump sum to be divided up amongst all of their stockholders, though each individual share might be worth only a very small amount potentially fractions of a cent, depending upon the total number of shares issued and the total amount being divided. Individuals who own large amounts of stock receive much more from the dividends than those who own only a little, but the total per-share amount is usually the same. When Dividends Are Paid How often dividends are paid can vary from one company to the next, but in general they are paid whenever the company reports a profit. Since most companies are required to report their profits or losses quarterly, this means that most of them have the potential to pay dividends up to four times each year. Some companies pay dividends more often than this, however, and others may pay only once per year. The more time there is between dividend payments can indicate financial and profit problems within a company, but if the company simply chooses to pay all of their dividends at once it may also lead to higher per-share payments on those dividends. Why Dividends Are Paid Dividends are paid by companies as a method of sharing their profitable times with the stockholders that have faith in the company, as well as a way of luring other investors into purchasing stock in the company that is paying the dividends. The more a particular company pays in dividend payments, the more likely it is to sell additional common stock after all, if the company is well-known for high dividend payments then more people will want to get in on the action. This can actually lead to increases in stock price and additional profit for the company which can result in even more dividend payments. Getting the Most Out of Your Dividends

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In order to get the most out of the dividends that you receive on your investments, it is generally recommended that you reinvest the dividends into the companies that pay them. While this may seem as though you're simply giving them their money back, you're receiving additional shares of the company's stock in exchange for the dividend. This will increase future dividend payments (since they're based upon how much stock that you own), and can set you up to make a lot more money than the actual dividend payment was for since increases in stock prices will affect the newly-purchased stock as well.

Bull market vs. bear market Share Market Basics - Explained There are two classic market types used to characterize the general direction of the market. Bull markets are when the market is generally rising, typically the result of a strong economy. A bull market is typified by generally rising stock prices, high economic growth, and strong investor confidence in the economy. Bear markets are the opposite. A bear market is typified by falling stock prices, bad economic news, and low investor confidence in the economy. A bull market is a financial market where prices of instruments (e.g., stocks) are, on average, trending higher. The bull market tends to be associated with rising investor confidence and expectations of further capital gains. A market in which prices are rising. A market participant who believes prices will move higher is called a "bull". A news item is considered bullish if it is expected to result in higher prices.An advancing trend in stock prices that usually occurs for a time period of months or years. Bull markets are generally characterized by high trading volume. Simply put, bull markets are movements in the stock market in which prices are rising and the consensus is that prices will continue moving upward. During this time, economic production is high, jobs are plentiful and inflation is low. Bear markets are the opposite--stock prices are falling, and the view is that they will continue falling. The economy will slow down, coupled with a rise in unemployment and inflation. A key to successful investing during a bull market is to take advantage of the rising prices. For most, this means buying securities early, watching them rise in value and then selling them when they reach a high. However, as simple as it sounds, this practice involves timing the market. Since no one knows exactly when the market will begin its climb or reach its peak, virtually no one can time the market perfectly. Investors often attempt to buy securities as they demonstrate a strong and steady rise and sell them as the market begins a strong move downward. Portfolios with larger percentages of stocks can work well when the market is moving upward. Investors who believe in watching the market will buy and sell accordingly to change their portfolios.Speculators and risk-takers can fare relatively well in bull markets. They believe they can make profits from rising prices, so they buy stocks, options, futures and currencies they believe will gain value. Growth is what most bull investors seek. What is a Bear Market? The opposite of a bull market is a bear market when prices are falling in a financial market for a prolonged period of time. A bear market tends to be accompanied by widespread pessimism.A bear market is slang for when stock prices have decreased for an extended period of time. If an investor is "bearish" they are referred to as a bear because they believe a particular company, industry, sector, or market in general is going to go down.

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Diff. btw Equity Capital and Preference capital?

Equity share holders are the owners of the company. They have the right to receive dividends. Preference share holders has the preference to get fixed rate of interest of profit for their shares. )Preference Shares have 2 preferences first payment of dividend in every year in which dividend is proposed & first share capital of preference shares will be payab;e @ winding up or liquidation of the company,where as equity share holders dividend after preference share holders & even share capital capital is also paid after paying to preference share holders. 2)preference share holders are not owners of the company and do not enjoy any voting right. Where as Equity Shares has voting right & they are the real owners of company. 3)Preference Shares have a finite tenure and carry a fixed rate of dividend where as dividend to equity shares is payable rest of the dividend payable after preference share holders. Broadly speaking, preference share is a part of the share capital of a company which fulfils the following two conditions: 1. In case of payment of dividends, it carries a preferential rights over equity shares for payment of a fixed rate/amount of dividends. 2. In case of winding up or repayment of share capital of the company, a preferential right over the Equity shares for repayment of paid-up amount of shares. And for Equity shares comprising in the share capital of a Company, the law provides the definition as "all share capital which is not preference share capital". In India, Section 85 and 86 of the Companies Act 1956 deal with the share capital and the kind of shares a company can issue. n case of closing of co., account of holders of PS is settled first. Holders of ES are settled in the last. PS can be redeemed at any time. ES are like deepak, light in all situations. preference share holders get first preference while distributing the dividents, but they have not voting rights in the copmany. if the co. decides to distribute divident, it is first given to the PS holders, n the normal share holders get the remaining, but again normal share holders get voting rights Preferred stock usually carries no voting rights,[1][2] but may carry priority over common stock in the payment of dividends and upon liquidation. Types of Preferred Stock In addition to the straight preferred, as just described, there is great diversity in the preferred stock market. Additional types of preferred stock include: Prior Preferred Stock: Many companies have different issues of preferred stock outstanding at the same time and one of them is usually designated to be the one with the highest priority. If the company has only enough money to meet the dividend schedule on one of the preferred issues, it makes the dividend payments on the prior preferred. Therefore, prior preferred have less credit risk than the other preferred stocks but it usually offers a lower yield than the others.

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Preference Preferred Stock: Ranked behind the company's prior preferred stock (on a seniority basis), are the company's preference preferred issues. These issues receive preference over all other classes of the company's preferred except for the prior preferred. If the company issues more than one issue of preference preferred, then the various issues are ranked by their relative seniority. One issue is designated first preference, the next senior issue is the second and so on. Convertible Preferred Stock: These are preferred issues that the holders can exchange for a predetermined number of the company's common stock. This exchange can occur at any time the investor chooses regardless of the current market price of the common stock. It is a one way deal so you cannot convert the common stock back to preferred stock. Participating Preferred Stock: These preferred issues offer the holders the opportunity to receive extra dividends if the company achieves some predetermined financial goals. The investors who purchased these stocks receive their regular dividend regardless of how well or how poorly the company performs, assuming of course, the company does well enough to make the annual dividend payments. If the company achieves predetermined sales, earnings or profitability goals, the investors receive an additional dividend. Can companies listed in BSE can be listed in NSE also NSE-national stock exchange that is very biggest one compare than bombay stock exchange. ya bcoz of sebi is watch dog that is organasied blue chip companies we can listed in Nse also

How company raises money: RAISING OF MONEY CAN BE DONE IN TWO WAYS FOR ANY COMPANY. 1. EQUITY FINANCING( ISSUE OF SHARES) 2. DEBT FINANCING ( ISSUE OF BONDS). IN DEBT FINANCING, UR PRINCIPAL AMOUNT WILL BE GUARANTEED WITH SOME INTEREST AGREED UPON. IN EQUITY, U MAY OR MAY NOT GET DIVIDENDS. THE NEXT OPTION AVAILABLE IS CAPITAL APPRECIATION OF SHARE WHICH WILL BE DONE BY INCREASE OR DECREASE THE PRICE OF SHARE VALUE. WHY PEOPLE ARE CRAZY ABT SHARES? DIVIDENDS CAPITAL APPRECIATION HIGH RETURNS EASY LIQUIDITY