Stock Market Basics

What is a Stock?

 Stock is a share in the ownership of a company.

It represents a claim on the company's assets and
earnings

 Whether you say shares, equity or stock, it all

means the same thing.
What is a stock market?

 Place where business of buying and selling stock

takes place

 The stock market is not a specific place, though

some people use the term "Dalaal Street”
Types of stocks

 Equity
 Preference
Market Segments

 Primary market
-Channel for creation of new securities

 Secondary market
-The new securities issued in the primary
market are traded the secondary market
Stock exchange

 The Bombay Stock Exchange (BSE)

 National Stock Exchange of India Ltd (NSE)
 India Infoline is a member of both BSE and NSE
Market Timings

Trading on the equities segment takes place on all

days of the week (except Saturdays and Sundays and
holidays declared by the exchange in advance)

The market timings of the equities segment are:

Normal market open : 09:55 hours

Normal market close : 15:30 hours

The closing session is held between 15.50 hours and

16.00 hours in NSE and 15.40 hours and 16.00 hours
in BSE
Trading on BSE and NSE

 To provide Transparency,Efficiency and Depth to

market, BSE and NSE provide Screen Based
Trading on Trading Platforms called ‘BOLT’ and
‘NEAT’.
 These platforms provide Trading Facility to
Brokers,Sub-brokers and their clients through
thousands of trading terminals spread throughout
the nation.
Trading on BSE and NSE

 BSE and NSE provide trading facility on

two segments ,which are
- Cash Segment and
- Derivative Segment
 NSE also has another segment called WDM,
Wholesale Debt Market.
NEAT-F&O
NEAT- Cash
BOLT
Index

 Number which measures the change in a set of

values over a period of time.
 Stock index represents the change in value of a set
of stocks which constitute the index
 A good stock market index is one which captures
the behavior of the overall equity market
 It has to be well diversified yet highly liquid
Importance of a Market Index

A market index is very important for its use as

 a barometer for market behavior

 as a benchmark portfolio performance
 a passive fund management in index funds
 an underlying for index futures and options
Major Indices in India

 S&P CNX Nifty

 Sensex
Circuit Breakers

 An index based market-wide circuit breaker

system applies at three stages of the index
movement either way at 10%, 15% and 20%.
 The breakers are triggered by movement of either
S&P CNX Nifty or Sensex, whichever is breached
earlier
Circuit Breakers

As an additional measure of safety, individual scrip-

wise price bands has been fixed as below:
 Daily price bands of 2% (either way) on a set of
specified securities
 Daily price bands of 5% (either way) on a set of
specified securities
 Daily price bands of 10% (either way) on another set
of specified securities
Circuit Breakers

 Price bands of 20% (either way) on all remaining

securities (including debentures,warrants,
preference shares etc. which are traded on CM
segment of NSE),
 No price bands are applicable on scrips on which
derivative products are available or on scrips
included in indices
Order Management

 Entering Order
 Order Modification
 Order Cancellation
Entering Order

 Active/Passive Order
 Order Book
 Symbol & Series
 Quantity
 Price
Types of Orders:

 Time Conditions
 Price Conditions
 Quantity Conditions
Time Conditions

 DAY
 IOC - An Immediate or Cancel
Price Conditions

 Limit Price/Order
 Market Price/Order
 Stop Loss (SL) Price/Order
Quantity Conditions

 Disclosed Quantity (DQ)

 All Or None (AON)
Clearing and Settlement
 Stock Markets follow a system of settling trades on T+2
basis,which means transactions done on Monday,are to be
settled by Wednesday by way of giving securities or funds.

 Providing of securities or funds to

Exchange / Clearing Corporation is called ‘Pay-In’.

 Receiving securities or funds from

Exchange / Clearing corporation is called
‘Pay-Out’.

Contd..
Clearing and Settlement

 Sometimes trades don’t get settled because of

short or bad delivery or company objection.
 In such cases ,trade is settled through auction of
securities.
 If a trade remains unsettled even after
auction,then Exchange carries ‘Close Out’
Margins and Risk Management

 It is of paramount importance that investors have

faith smooth functioning of stock Markets.
 Exchanges achieve this by putting in place a
comprehensive ‘Risk Management’ system and
margin requirements.
Frequently used terms

 Margin Money
 Bull and Bear
 Settlement Cycle
 Squared transaction
 Delivery Transaction
 Positions - ‘+’ (buy) & ‘ - ’(sell)

contd..
Frequently used terms

 Prices- Last traded price, closing price, opening

price,average price
 Pay-in & pay-out
 Bid and offer
 Short selling
 Long position
 Auction
 Settlement Number
Thank You