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Basics of Stock Market

For Beginners Lectures By


CA Rachana Phadke
Ranade ( Notes)

• • Myths about Stock Market –


• Investments in Stock Market are very risky.
• You need to have very strong knowledge about Finance
• Fixed  Deposit(FD) earns you  Interest
• Interest is Fixed
• Taxable
• Obligated to give Interest
• Dividend
• Return on Investment in Shares
• Tax free, to a limit.
• Company’s decision whether to declare dividend or not
• LTCG
• Long Term Capital Gains
• If a Person holds shares  for more than an year and earns profit
• Tax free, to a limit.
• Face Value vs Market Value
• Market Value is the market share rate as of today on the
exchanges
• Face Value is the original price at which Promoters of the
company brought the stock
• Promoter is a person or a group  of persons who  will  start the
company
• Stock Split
• Face value of the Share is Split
• Number of Shares will increase proportionately
• Share Price will decrease proportionately
• Example
Original FV –  2 Rs
Revised FV =  1 Rs
No. of Shares = 50,000
Revised Shares = 1,00,000
Value =  1,00,000 ( Intact : Face value X  No. of Shares)
Original Market Price = 5000
Revised Market Price = 2500
• Who decides Share Prices?
• Market Forces
• Bonus/ Split / Rights  – Key Dates
• Bonus Shares –  Free Shares issued by the company to the
Investors.
• Face Value remains intact,  no. of shares change and the total
value remains intact. Market value changes, so more people can
now buy shares.
• cum ( cumulative) – dividend :  before issue of dividend
• ex(   ) – dividend : after issue of dividend
• Announcement Date : Date on which company announces
bonus / split / rights
• Record Date : Date on which you must have shares in your
DeMat Account to enjoy bonus date
• cum-basis : When a security is traded in cum price, it means
that it incorporates the benefit of corporate action in its price
• ex-basis :  When the security is traded in ex price, it means that
the buyer has no longer the benefit of corporate action
• Ex-Bonus Date : Date on which Shares start trading at the
revised price, and no shares purchased after this date will be
eligible for upcoming bonus
• Price Adjustment :  Price adjustment done by stock market to
traded price on the last day on which a security is traded  on
cum basis in the market, after the close of trading hours.
•  Key Terminology from moneycontrol.com website
• LTP :  Latest/ Last  Traded Price
• Demand and Supply for a stock will determine the stock price
on BSE/ NSE. So, it may happen that the same stock is trading
at different price on different exchange.
• Stock Market Timings are 9:15 am to 3.30 pm.
• 9:00 am to 9:15 am :  Pre-Opening Market Session
To absorb the volatility which arises, if markets open at 9:15 am
directly
9:00 am to 9:07 am :   Placing buy/ sell orders
9:08am to  9:11 am  : Order Matching
• 9:15 am to 3:30 pm : Market Session
• 3:30 pm to 4:00 pm :  Brokers Session
• 4.00 pm to  9:00 am next day : After market hours session
• Gap Up Opening : If the share price opens at a price higher than
the closing price of previous day
• Gap Down Opening : If the share price opens at a price lower
than the  closing price of previous  day.
• Unch :  Unchanged,  markets  opening at the exact same price
as closing price of the previous day.
• The market value at which  a stock opens, is dictated by the
trading orders placed during After Market hours.
• Corporate Actions
• Bonus
• Stock Split
• Rights
• AGM/ EGM
• Board Meetings
• How can a person start investing? You need –
• DeMAT account : Account to store the dematerialized shares
• Trading Account : Account to buy/ sell the dematerialized
shares
• Savings Account : Account that holds the money
• 3 in 1 account is common, offered by Banks with Securities arm
• PAN Card, Address Proof,  Duly Signed and Cancelled
Personalized  Cheque & a Passport Size Photo
• Types of Securities Market –
• Primary Market :
A Share getting listed on Share Market.  A Private Limited
Company can have maximum of 200 shareholders.
Investors pa