AN OVER VIEW OF

INDIAN SHARE MARKET

DAVID ASHIRVADAM
ShareKhan Pvt Ltd

STOCK MARKET OR
SHARE MARKET
Stocks are issued by companies in order to raise capitals
and are bought by investors in order to acquire a portion
of the company.
A Stock market is the place where buying and selling of
stocks takes place. Nowadays due to internet and
advanced technology buying and selling of stocks takes
place anywhere in India and also from foreign country,
there is no need to be physical present in exchanges like
NSE and BSE. Stock markets are perfect competitive
market.

Who is a shareholder?
A shareholder (or stockholder) is an individual or
company (including a corporation) that legally owns
one or more shares of a company.
Shareholders are granted privileges depending on the
class of stock, including the right to vote on matters
such as elections to the board of directors, the right to
share in distributions of the company's income, the
right to purchase new shares issued by the company,
and the right to a company's assets during a liquidation
of the company.
Shareholders vary from individual stock investors to
large hedge fund traders.

Why does a company issue shares to the

public?
A company may want additional capital to invest in new
projects.
The promoters may simply wish to reduce their holding,
freeing up capital for their own private use.
Once a company is listed, it will be able to issue further
shares via a rights issue, thereby again providing itself
with capital for expansion without incurring any
debt.
Financing a company through the sale of stock in a
company is known as equity financing.

Importance and role of the stock markets

Raising capital for businesses

Government capital-raising for development projects
Mobilizing savings for investment
Facilitating company growth through acquisitions
Creating investment opportunities for small investors
Barometer of the economy

Types of Market
1. 1. Primary Market
1.

The first group of investors to whom a new issue of a security is sold.

2.

The primary market consists of the issuer and the first buyers of the issue.

3.

The primary market can be a time more volatile than the secondary market because it is
difficult to determine the underlying value of new issues.

2. Secondary Market
1.

A market where investors purchase securities or assets from other investors, rather than
from issuing companies themselves.

2.
The national exchanges - such as the New York Stock Exchange
and the NASDAQ are secondary markets.

Big Stock Markets

NYSE ( New York Stock Exchange)
NASDAQ-America
Dow Jones
Tokyo Stock Exchange
London Stock Exchange
Bombay Stock Exchange, India
National Stock Exchange, India

Big Stock Markets

Stock Exchanges in India

There are 22 stock exchanges in India. But, two of them
are biggest.
NSE (National stock exchange) - is the 9th largest stock
exchange in the world by market capitalization and largest
in India by daily turnover and number of trades, for both
equities and derivative trading.
BSE (Bombay stock exchange) - is the oldest stock
exchange in Asia with a rich heritage of over 137 years of
existence.

Bombay Stock Exchange

Location: Mumbai
Index: Sensex (SENSitve indEX)

Consist of group of 30 Stock

Members: 852
Date of Launch: 03 January 1986
Base period:1978-79
Base Index Value:100

Sectoral indices
Timing: 09.30 AM 03.30 PM
Listed Co. : over 6000

National Stock
Exchange

Location: Mumbai
Index: Nifty (National Stock Exchange Fifty)
Consist of group of 50 Stocks
Date of Launch: April 1994
Base period: 1993-94
Base index value: 1000
Members 726

Stock Broker
A stockbroker is person who is licensed to trade
in shares.
Brokers also have direct access to the share
market and can act as your agent in share
transactions.
For this service they charge a fee i.e. brokerage.
They can also offer additional services like
advice on shares, debentures, government
bonds and listed property trusts and non-listed
investment options (cash management trusts,
property and equity trusts.

TRADING IN STOCK MARKET

The market regulator, the Securities and
Exchange Board of India (SEBI), has made it
compulsory to open the demat account
if you want to buy and sell stocks.
A person want to buy/sell stocks in the stock
market has to first place his/her order with a
broker or can do themselves using online
trading systems.
The stocks purchased will be sent to the
your demat account. This process is called
Rolling Settlement Cycle.

What is Demat account?

DEMAT stands for DEMATerialization. It
is process in which physical paper
shares are converted into paperless
(computerized) form.
In India there are two Depository
organizations called NSDL (National
Securities Depository Ltd.) &CDSL
(Central Depository Services India Ltd.)
Brokers and most of Banks provides
facility to open demat account.

Important terms in stock

market and in stock
trading
Open- The stock price in beginning of
Day(i.e. in morning).
High - The stock price reached at the
highest level in a day.
Low - The stock price reached the lowest
level in a day.

Important terms in stock market and

in stock trading
Close - The stock price at which it remains after
the end of market timings or the final price of
the stock when the market closes for a day.

Volume - Volume is nothing but quantity.
Bid - The Buying price is called as Bid price.
Offer - The selling price is called offer price.

Investment in Short
term, Mid term and Long
term trading
Short Term Trading Stock trading done from one week to
couple of months is called short term.

Mid term Trading Stock trading done from one month to

couple of months, say six to eight
months is called mid term trading.

Investment in Short term, Mid term and Long term trading

Long term trading Stock trading done form couple of months

to couple of years is called long term
trading.
Companies whose fundamentals are good
and have good future plans then the stocks
of these companies are used for long term
trading.
Generally traders having good capital go
for long term trading.

Stock Market Conditions

There are two ways to describe the general
conditions of the stock market:

1)BULL MARKET
2)BEAR MARKET

Bull Market A Bull Market indicates the constant upward

movement of the stock market. A particular
stock that seems to be increasing in value is
described to be bullish.

Stock Market Conditions

BEAR MARKET
A bear market indicates the continuous
downward movement of the stock market. stock
that seems to be decreasing in value is described
to be bearish.

How Sensex Index is calculated

The formula for calculating the sensex =
(sum of Free Float Market capitalization of 30 benchmark
stocks)* Index Factor
Where;
Index Factor = 100/market cap value in 1978-79.

Example on Sensex Index

calculation
Assume sensex has only 2 stocks namely
SBI and RELIANCE. Total shares in SBI are
500 out of 200 are held by government and
only 300 are available for public trading.
Reliance has 1000 shares out of which 500
are held by promoters and 500 are
available for trading. Assume price of SBI
stock is Rs. 100 & Reliance is RS. 200.

Example on sensex
calculation
Solution
Then Free Float Cap of these two company
= (300*100+500*200)
= 30,000+1,00,000
= 1,30,000
Assume market cap during the year 1978-79 was
25000
Then SENSEX = 1,30,000*100/25000
= 520

How Nifty Index is calculated

The National Stock Exchange (NSE) is
associated with Nifty
The calculation of Nifty is same as we
calculated SENSEX. But with two key
differences.
1. Base year is 1995 and base value is 1000
2. Nifty is calculation based on 50 stocks.
everything else remaining the same in nifty
index calculation as well.

Example of Nifty Calculation

Assuming Base index=1000 , Market Cap index consist
of 5 stocks, then
Company

Current Market
Capitalisation
In Lakhs)

(Rs.

Base Market
Capitalisation
(Rs. In Lakhs)

Reliance

16,68,791.1

16,54,247.5

AB & U

8,72,686.3

8,60,018.25

INFOSYS

14,52,587.65

14,65,218.8

HLL

26,75,613.3

26,69,339.55

Tata Tea

6,60,887.75

6,62,559.3

Total

73,30,566.1

73,11,383.4

Cont..
Index= ( Current Market Capitalisation )
Base Market Capitalisation
Multiply by Base Value
Index=

73,30,566.1 *1000
73,11,383.4

Index=

1002.62

Important Indices in the world

Name of
Index

Country

Weight

No. Pf
Stock

Base
Year

Base
Value

S & P CNX
Nifty

NSEIL,
India

Market Capitalisation

50

1995

1000

SENSEX 30

BSE,
India

Market Capitalisation

30

1978-79 100

NASDAQ
100

NASDAQ
, USA

Market Capitalisation

100

1985

125

FTSE 100

UK

Market Capitalisation

100

1984

1000

Hang Seng

Hong
Kong

Market Capitalisation

33

1964

100

Dow Jones

USA

Price

30

1928

Nikkei 225

Tokyo

Price

225

1949

Benefits of investing in shares

Possibility of increase in
value of share
Income from dividends
Easy liquidity
Tax benefits on income
earned such as exemptions
U/s 10(34) for dividends,
Sec 54 for calculating STCG
& LTCG

CAUSES OF PRICE FLUCTUATION

1.DEMAND AND SUPPLY
2.BANK RATE
3.SPECULATIVE PRESSURE
4. ACTIONS OF UNDERWRITERS AND OTHER
FINANCIAL INSTITUTIONS
5.CHANGE IN COMPANYS BOARD OF DIRECTORS

Cont
6. FINANCIAL POSITION OF THE COMPANY
7. TRADE CYCLE
8. POLITICAL FACTORS
9. SYMPATHETIC FLUCTUATIONS
10. OTHER FACTORS:
A. EXPECTED MONSOON
B. PERSONAL HEALTH OF HEAD OF
GOVERNMENT OR
CHAIRMAN OF THE
COMPANY
C. OIL PRICES IN THE INTERNATIONAL
MARKET

Thank
You!