A

PRESENTATION

ON

STOCK EXCHANGE

OF

BBA

BATCH
2017-2020

SUBMITTED BY
Gourav Sahu
Akash Sahu
ENROLLMENT NO
(A80306417051)

SUBMITTED TO
Prof. Roopal Shrivastava
Associate Professor

AMITY UNIVERSITY CHHATTISGARH

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What is a Stock Market?
The stock market is a complex system where shares of publicly-traded
companies are issued, bought and sold. To some it is a nebulous, dark chasm
where people gamble. Actually, it is not gambling at all. Why? Let’s say you
put $100 on one roll of the dice. If you win, you win $X. If you lose, you lose
the entire $100. When you invest in stocks, you will win $X or lose $Y. It’s
rare to lose it all, unless of course you invest in a company that goes bust. You
could say that the stock market is a group of people pitting their expertise
against one another. We’ll touch on that in the next section.

The Stock Market is an Adversarial System of Trading

The stock market is a collection of millions of investors with diametrically
opposing views. This is because when one investor sells a particular security,
someone else must be willing to buy it. Since both investors cannot be correct,
it is an adversarial system. In short, one investor will profit and the other will
suffer loss. Therefore, it’s important to become well versed on the investment
you are considering.

What Makes Stock Prices Go Up and Down?

There are many factors that determine whether stock prices rise or fall. These
include the media, the opinions of well-known investors, natural disasters,
political and social unrest, risk, supply and demand, and the lack of or
abundance of suitable alternatives. The compilation of these factors, plus all
relevant information that has been disseminated, creates a certain type of
sentiment (i.e. bullish and bearish) and a corresponding number of buyers and
sellers. If there are more sellers than buyers, stock prices will tend to fall.
Conversely, when there are more buyers than sellers, stock prices tend to rise.

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Why is the Stock Market so Difficult to Predict?
Let’s assume stock prices have been rising for several years. Investors realize
that a correction will come and stock prices will tumble. What we don’t
understand is what will trigger the selloff or exactly when it will occur.
Therefore, some investors will sit on the sidelines holding cash, waiting for
the opportune time to get in. Those who are willing to assume the risk may
jump in because the return on cash is so low and it hurts to earn zero while
watching stocks move higher. This begs a couple of key questions. If you’re
on the sidelines, how will you know when to get in? If you’re already in, how
will you know when it’s time to get out? If the stock market was predictable,
these questions could easily be answered. However, it is not. There are
actually three issues an investor should consider. The first is understanding
the point at which stock prices are fairly valued. The second issue is the event
that will cause a downturn. The final issue is understanding the human
decision-making process. Let’s briefly look at these.

1. You own a part of the business

 When you invest in stocks, you do not invest in the market (despite
what you think). You invest in the equity shares of a company. That
makes you a shareholder; you now own a small part of that business
without having to go to work there.

 The good news is, since you own part of the company, you are entitled
to a share in its profits.

 The bad news is that you are also expected to bear the losses, if any.

 That is why investing in shares is risky. If the company does well, you
benefit. If it does not, you lose. There are no guarantees whatsoever.

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2. In the short-run, the price of the share can wildly fluctuate

 Let's say the company fixes the price of each share at Rs 10. This is
called the face value of the share.

 When the share is traded in the stock market, this value may go up or
down depending on supply of and demand for the stock.

 If everyone wants to buy the shares, the price will go up. If nobody
wants to buy the shares, and many want to sell them, the price will fall.

 The value of a share in the market at any point of time is called the
'price of the share' or the 'market value of a stock'.

 A share with a face value of Rs 10 may be quoted at Rs 55 (higher than

the face value) or even Rs 9 (lower than the face value).

 So you might have paid Rs 15 for a share which is now quoting at Rs

12. Don't panic and sell. If it is a good company, the share price will
eventually rise.

 The prices will get influenced by the market sentiment and the general
direction of the market. As a result, you may see short-term slumps.

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3. Always invest for the long-term

 The best way to make money is to buy low and sell high. This means
you should buy the share when the price is low and sell it when it is high.

 That is why you must buy in a bear market. This is a term used to
describe the sentiment of the stock market when it is low and the prices
of shares have generally fallen. The best time to sell is in a bull market,
when the sentiment is high and the prices of shares are rising.

 But it is very difficult to time the market. In fact, no one can do it. If we
could, we would all be millionaires, wouldn't we?

 That is why, when you invest in the market, it is best to invest for the
long-term. Hold on to your shares for a few years before you think of
selling them.

 Companies increase their sales and book higher profits over the years.
This will eventually reflect in the share price, so ignore the short-term
slumps.

 Once you decide that you are in for the long haul, you can ride over the
bear and bull runs with no stress at all. Over time, the price of your shares
will appreciate.

 If you are getting a good price for your stock, keep selling small amounts
at regular intervals. Keep booking profits.

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4. Decide how much you want to invest

 Always remember one basic rule in finance -- if something gives you

higher returns, that's usually because it carries a greater risk.

 That's the reason why not-so-good companies will pay you a higher
rate of interest for your deposits.

 The same reasoning goes for stocks too -- they give higher returns
than, say, bank fixed deposits because they are more risky. So the
amount of money you invest in the market depends on your capacity to
bear the risk.

 If you are young with a steady job, you can invest a larger proportion
of your income in the stock market than, say your parents who are
close to retirement. If you have a lot of debt to repay, avoid putting too
much of your money in stocks.

 It's best to decide how much of your savings you will allocate to
stocks, and stick to that plan. Don't get swayed by how much your
friend is investing.

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5. Don't rely solely on 'good advice'

 A smart investor should never invest buy shares of companies he

doesn't know much about. Relying on 'advice' from friends is not
always a great idea. Do some groundwork yourself.

 It doesn't matter who is buying the stock or who is recommending it.

Steer clear of such ways of making a fast buck. These tips will land
you in a soup.

 When you hear of a 'hot tip', dig further.

 Take a look at the company's profit and loss statement, which would
have been audited by chartered accountants. There is a wealth of
information here. To understand the information in a Profit & Loss
Account, read Want to buy a stock? Read this first.

 Do some basic calculations on your own. The Earnings Per Share (net
profit/ number of shares) and Price/Earnings ratio (market price/ EPS)
should give you a fair understanding. Read How to spot a good stock to
understand what these ratios mean and how to use them.

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 So now the big question is how to find a good stock?
Before investment in stock market we need to analysis 4 parameters
1. Quality
2. Valuation
3. Financial Trend
4. Technical Analysis
Quality

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Valuation

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Financial Trend

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 The Human Decision Process

This is the most interesting of the three. Inside every individual there is a
logical and an emotional component. We may analyse a situation using
our logical side but when it’s time to act, we refer to our emotions. For
example, when purchasing a car, we might research the engine, fuel
efficiency, amenities, or other items. But when it’s time to decide, we
often ask other types of questions. Such as, how do I look in the driver’s
seat? Does the car match my image? When making investment decisions,
since there is an investor on the other side ready to buy what you’re
selling or selling what you want to buy, you must be able to process the
relevant data and make a good decision. However, it’s impossible to
know everything you would need to know and process it without any bias.
For these and other reasons, we will make a sub-par decision at times.
This will occur even with the most analytical individuals.

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