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Greetings of  the  day  to  all  the  members of CCI Family. 

After writing exams in Nov’13, I thought to start with a series on “A to Z of Finance”. After reading many novels, Articles and browsing net I finally feel that it’s the right time to convert my ideas into writing.

So as was promised to many members on the club that I will share knowledge relating to Finance, so here I come with the First part of my exclusive series i.e.

Introduction –  

The series will comprise of :

- A journey into stock market

- Mergers & Acquisitions

- Tips for Investing

- And many more

In this Article I will be discussing the basics of stock market.:

- Things to be avoided

- Factors affecting stock market

- Derivatives

- Grey Market

- Other factors affecting the market    

# Read the article very patiently, step by step try to analyze the points &in case you feel stuck start reading it again from the beginning.      

Stock Exchanges in India –  

- Bombay stock exchange (BSE)

- National stock exchange (NSE)  

BSE – Started on 1 January 1986

- Consists of 30 largest and most actively traded stocks.

- E.g. RIL, L&T, HUL, TCS, etc.  

NSE – Known as NIFTY 50

- E.g. SBI, ONGC, TCS, HERO, etc.  

Depository and Depository Participants –  

- Depository means a bank or company which holds securities deposited by others and where exchange of these securities take place.  

- National securities Depository Limited (NSDL)

- Central Depository securities Limited (CDSL)      

- Depository participants are an agent of the Depository.

- They are intermediaries between the Depository and investors.

- Modex, Sherkhan, Edelwis, etc.  

Settlement Procedure –  

- Settlement is done on a T + 2 basis for cash markets.

- Trades entered into on a particular day are settled on a third day. E.g. if stocks are purchased on Tuesday they must be settled on Thursday. Above mentioned procedure is also known as “Rolling Settlement”  

Factors affecting Stock Market –  

- Economic factors

- Market Trends & Rumours (Speculation)

- Insider Trading

- Government policies & Regulations

- Other factors  

Medium of approaching Capital market –  

- Equity shares

- Debentures

- ADR’S/ GDR’S

- Derivatives  

IPO’s (Initial Public Offer) –  

- It is a process through which companies raise capital to meet working capital, debt repayment, expansion, etc.

- It is offered to all the categories like Retail investors, Private placements, FI’s, etc.

- Issue is brought as a book building issue which is priced at a price band or at a fixed price.

- Companies have to file Draft Red Hearing Prospectus (DRHP) After DRHP the IPO is given credit rating by ICRA & CRISIL depending on the valuations, risk, growth policies of the company.  

Grey Market –  

- It is also known as “Fictitious Market”.

- Before listing of IPO’s there is a market value which exists among the brokers who do business in Grey market and the premiums are predefined depending upon the demand & supply. Highest ever grey market premium for any IPO was for Reliance Power i.e. 100%  

Selection of stocks -        

- Fundamental analysis

- Technical analysis  

Fundamental analysis –  

- Analyzing a stock on the basis of fundaments of the country, the sector and the company individually.

- It includes going through the Balance sheet and Profit & loss of the said company & checking various ratios.

- Checking of EPS, PE Ratio, MPS, Interest coverage, etc.  

Technical Analysis –  

- Forecasting the future directions of prices through the study of past market data primarily price & volume.

- Checking of support, resistance, stop loss, etc.  

Foreign Markets –  

- Dowjones

- Nasdaq

- Nikkei

- Shanghai      

Derivatives –  

- NSE is the largest derivative exchange in India.

- They have a maximum of 3 months expiration cycle.

- Contracts are available for trading with 1, 2 & 3 months.  

Things to be avoided –      

- Don’t follow a bind man’s advice.

- Avoid getting in & out of the market too soon.

- Only trade active stocks.

- Never invest without putting a stop loss.

- Never do overtrading.

- When in doubt get out and don’t get in when in doubt.  

So this brings an end to my article. In this article I have covered the basics of some vital concepts which you all should be aware of.

In my next Article I would be discussing tips for investing in stock market.  

I guess many of you might be aware of the above facts but I couldn’t ignore the above as these are necessary for my series.  

So be patient and be ready for the next part.  

About the Writer –  

CA Final Student

CIMA Management Level  

B.Com (P)  

# Any sought of queries or suggestions for the remaining parts are most welcome. Feel free to contact me at sanyam.arora27@ gmail.com


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Category Shares & Stock, Other Articles by - SANYAM ARORA  



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