STOCK EXCHANGE EASY WAY TO EARN

MONEY,

EASY WAY TO LOOSE MONEY

CONCEPTS : A stock exchange can be defined as highly organized financial market for buying and selling stocks (Shares, Debentures, Bonds, etc), where price is determined through supply-demand mechanism.

According to Securities Contract (Regulation) Act, 1956, Stock exchange means an association, organization or body of individuals, whether incorporated or not, established for the purpose of assisting, regulating and controlling business in buying, selling and dealing in securities.

An organized market for buying and selling of listed securities. Listed securities are those shares, debentures, bonds, etc., which are included in the trading list of a recognized stock exchange.

INVESTING IN SHARES :

Represents ownership in a company.

Earn return in two ways : (i) price of shares rises overtime. (ii) Dividends are paid to shareholders.

Right to vote for directors and on certain issues.

Two types of shares : Equity Shares & Preference shares.

FEATURES : It is an organized securities market.

Component of capital market, i.e., market for long term finance.

Voluntary association of persons desirous of dealing in securities.

Only the members can trade in securities.

Dealings in stock exchange are under certain accepted code of conduct.

WHICH COMPANIES ONE CAN TRADE

Ones which are listed in the stock exchange.

IPO

Secondary Market

ADR, GDR in foreign markets.

KINDS OF TRADING

11

DELIVERY BASED TRADING

INTRA-DAY TRADING

Buying and Selling on the same day

12

DELIVERY BASED TRADING

Buying and Selling are on different days

Brokerage will be higher than intra-day

Their will be minimum delivery charges

13

Suppose, You buy the share on Monday.

It will be delivered to you on Wednesday.

Settlement period (T + 2) normally.

14

STOCK EXCHANGE

The stock exchange was established by “East India company” in 18th century . In India it was established in 1850 with 22 stock brokers opposite to town hall Bombay .This stock exchange is known as oldest stock exchange of Asia.

Initial members WERE

D.S.Prabhudas &companyJamnadas Morarjee Champak lal Devidas

Brymohan Laxminarayan

BOMBAY STOCK EXCHANGE

It is oldest and first stock exchange of India established in the year 1875. First it was started under baniyan tree opposite to town hall of Bombay by 22 stock brokers.

NATIONAL STOCK EXCHANGE OF INDIA(NSE OR NSEI)

The NSE of India is the leading stock exchange of India, covering 370 cities and towns in the

country. It was established in1994 as a TAX company. It was established by 21 leading financial institutions and banks like the IDBI,ICICI,IFCI,LIC,SBI,etc.

Features of NSEI Nation wide coverage i.e., investors from all over country Ring less i.e., it has no ring or trading floor Screen-based trading i.e., trading in this stock exchange is done electronically. Transparency, i.e., the use of computer screen for trading makes the dealings in securities transparent. Professionalization in trading, i.e., it brings professionalism in its functions

STRUCTURE OF SECURITIES MARKET

SECURITIES MARKET

EQUITY DEBT DERRIVATI

VES

GOVT. SECURITI

ES

CORPORATE

DEBT

MONEY MARKET

FUTURES

OPTIONS

PARTICIPANTS IN THE SECURITIES MARKET

Regulators. CLB, RBI, SEBI, SEC. Stock Exchanges. Listed Securities. Brokers. Underwriters. Bankers to an issue. Credit Rating Agencies. Mutual Funds. Registrars. FIIs. Investment Bankers.

PRIMARY EQUITY MARKET

Public Issue (Equity Shares)

Rights Issue

Private Placement (Book Building)

Preferential Allotment

BUYING & SELLING OF SHARES IN THE SECONDARY MARKET

Locating a Broker.

Placing an order.

Execution of the order.

Internet Trading.

SPECULATION & SPECULATORS

Speculation is the practice of engaging in risky financial transactions in an attempt to profit from fluctuations in the market value of a financial instrument, rather than attempting to profit from the underlying financial attributes such as capital gains, interest or dividends.

Speculators who purchase or sell the shares or other securities without the transfer of shares or other securities and make profit from anticipated change in the prices.

TYPES OF SPECULATORS

BULL {TEJIWALA}

He is a speculator who expects rise in prices of securities in future.

He buys securities with a view to sell them in future at a higher price.

A bull speculator tries to raise the price of securities by placing big purchase orders.

When the conditions in the stock exchange are dominated by bulls it is called Bullish market.

When the prices fall and bulls have to sell at a loss, it is called Bull Liquidation.

BEAR {MANDIWALA}

He is a speculator who expects a fall in prices.

He sells securities for future delivery.

He sells with a hope to buy the securities at a lower price before the date of delivery.

When the market is dominated by bears, it is called Bearish Market.

When the prices rise and bears have to make purchases, it is called Bear Covering.

SHORT SELLING

BROKER and JOBBER

BROKER: He is one who acts as an intermidiary on behalf of others. A broker in a stock exchange is a commission agent who transacts business in securities on behalf of non members.

JOBBER: He is not allowed to deal with the public directly .He deals with brokers who are engaged with the investors . Thus, the securities is bought by the jobber from members and sells to members who are operating on the stock exchange as broker.

JOBBER BROKER A jobber is an independent

dealer in securities, purchasing or selling securities on his own account

A jobber deals only with the brokers ,does not deal with the general public

A jobber earns profit from his operations i.e., buying and selling activities

Each jobber specializes in certain group of securities

A broker deals with the jobber on behalf of his clients. in other words, a broker is a middleman between a jobber and clients

A broker is merely an agent, buying or selling securities on behalf of his clients

A broker gets only commission for his dealings

The broker deals in all types of securities

DIFFERENCES BETWEEN A JOBBER AND A BROKER

SPOT DELIVERY

FORWARD DELIVERY

SPOT DELIVERY :

Securities sold by a member on the stock exchange will be delivered on the spot or immediately after the transaction is made.

Settlement is done on the same day or on the next day.

The seller delivers the security and the buyer makes the payment on the date of contract or on the next day.

FORWARD DELIVERY :

A forward delivery contract is one which has to be settled on the fixed settlement date.

Forward delivery contracts are generally made for speculative purposes.

In very few cases actual delivery of securities is made.