Stock Market

Presented by:
Dileep Kumar
•The stock market is a market where people buy and sell parts
of companies. The parts being bought and sold are a financial
interest in the company called stocks.

•The companies involved must be publicly held companies, which

means that they have to be companies that sell stocks to public
investors on an open market.

•Companies that sell stocks to investors usually do so in order

to raise capital. The capital is then used for things such as
financing current operations and paying for expansion plans.

•If the company is able to turn the capital into profits, a share
of the profits is passed on to investors. Similarly, if the
company loses money, investors share the loss.
 Contd……
•An important aspect of the stock market is that it is made
up of a Primary market and a Secondary market.

•The Primary market is where securities are sold for a

company’s initial public offering, known as the IPO. The IPO
is the base price used when a private company makes the
first sale of its stock to the public. After doing so, it
becomes a publicly held company.

•The Secondary market, which is where investors trade in

companies that are already publicly held. The stock market
primarily deals with the secondary market.
 Role of Stock Market
•Raising Capital for business
•Mobilizing savings for investments
•Facilitating company Growth
•Profit shearing
•Creating Investment opportunities
•Government capital raising for Development projects
•Barometer of Economy
 Stock Market Index
A stock market index is a method of measuring a section of the
stock market.

Stock market indices may represent the performance of a whole

stock market - and by proxy, reflects investor sentiment on the
state of the economy.

For example The BSE Sensex or Bombay Stock Exchange

Sensitive Index is a value-weighted index composed of 30 stocks
started in April, 1984. It consists of the 30 largest and most
actively traded stocks, representative of various sectors, on the
Bombay Stock Exchange. These companies account for around one-
fifth of the market capitalization of the BSE.
 Role of SEBI
SEBI is regulator to control Indian Capital market.
•Power to make rules for controlling stock exchange
SEBI has power to make new rules for controlling stock
exchange in India. For example, SEBI fixed the time of 
trading 9 AM and 5 PM in stock market.
•To provide license to dealers and brokers :

SEBI has power to provide license to dealers and brokers

of capital market. If SEBI sees that any financial product
is of capital nature, then SEBI can also control to that
product and its dealers. One of main example is ULIPs case.
SEBI said, " It is just like mutual funds and all banks and
financial and insurance companies who want to issue it, must
take permission from SEBI."
 Contd….
To Control the Merge, Acquisition and Takeover the
companies :

Many big companies in India want to create monopoly in

capital market. So, these companies buy all other companies
or deal of merging. SEBI sees whether this merge or
acquisition is for development of business or to harm capital
market.

To audit the performance of stock market :

SEBI uses his powers to audit the performance of different

Indian stock exchange for bringing transparency in the
working of stock exchanges.
 Advantages & Disadvantages
•Superior long term performance - over the long term, stocks
have consistently provided better returns than any other
type of investment.

•Owning stocks allows the investor to participate in the

growth of the economy. When you buy shares of stock, you
actually become part owner of the company, and you
therefore are entitled to share in the good fortunes of that
company.

•Stocks can be an excellent choice for retirement vehicles,

especially for those with a long time to retirement. The
longer your time horizon, the more valuable stocks can be. A
long time horizon will help to even out the inevitable ups and
downs of the market.
• Stocks are volatile investments. The price of a single stock
can vary quite widely from day to day, and the factors that
cause these price fluctuations are beyond the control of the
investor.

• Buying and selling stocks costs money in the form of

brokerage commissions, and many brokerage firms charge
account maintenance fees as well. It is important to look for
low cost alternatives when buying and selling stocks.
Thank you