Transcript Stock Market Terminology - Best Coaching Institute For CAT

Stock Market
Terminology
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What is a stock ?
A type of security that signifies ownership in a
corporation and represents a claim on part of
the corporation's assets and earnings.
There are two main types of stocks : common
and preferred
They are also known as "shares" or "equity".
Types Of Markets
• Primary Market
• Secondary Market
• Third Market
• Fourth Market
Principal terms
• IPO
• Issue Price
• Face Value
• Share Premium
• Dividend
• Portfolio
• Price Appreciation
• Capital Gain / Loss
Principal terms (contd.)
• Dematerialisation
• Depositories
• Depository Participant
• Institutional Investor
• Bonus Shares
• Convertible Debentures
• Blue Chip Shares
• Penny Stocks
Principal terms (contd.)
• Float / Floating Stock
• Market Capitalisation
• Bigger Fool Theory
• Forwards / Futures
• Derivatives
• Call / Put Option
• Mark To Market / Margin Money
Principal terms (contd.)
• Stop Loss
• Circuit Breaker
• Short Selling
• Bulls
• Bears
• Chickens
• Pigs
Types Of Stock Analysis
There are 2 main types of stock analysis :
1) Fundamental Analysis
2) Technical Analysis
Fundamental Analysis
Fundamental analysis maintains that markets may misprice
a security in the short run but that the "correct" price will
eventually be reached. Profits can be made by trading the
mispriced security and then waiting for the market to
recognize its "mistake" and re-price the security.
Fundamental analysis includes :
1) Economic analysis
2) Industry analysis
3) Company analysis
Fundamental Analysis
The Salient Features are as follows :
• 2 basic approaches : Top–down or Bottom-up
• Used within different portfolio management styles :
1) Buy and Hold Investors
2) Value Investors
3) Contrarian Investors
4) To determine future growth rates for buying ‘highpriced growth stocks’
5) To correctly value ‘good’ and ‘bad’ companies
Technical Analysis
Technical Analysis is a method of evaluating
securities by analyzing statistics generated by
market activity, such as past prices and volume.
Technical analysts do not attempt to measure a
security's intrinsic value, but instead use charts
and other tools to identify patterns that can
suggest future activity. It disregards the intrinsic
value of a stock.
Technical Analysis
It is based on the following assumptions :
• Market action discounts everything
• Prices move in trends
• History tends to repeat itself
Criticisms :
• Empirical evidence
• Efficient Market Hypothesis
• Random Walk Hypothesis
Technical Analysis
Basic Charting Concepts :
• Resistance
• Support
• Breakout
• Trending
• Average true range
• Chart pattern
• Dead cat bounce
• Momentum
Bombay Stock Exchange Ltd (BSE)
In 1957, it became the first stock exchange to
be recognized by the Indian Government
under the Securities Contracts Regulation Act.
It is the oldest stock exchange in Asia
(established in 1875) and is currently located
on Dalal Street, Mumbai.
It is the 6th largest stock exchange in Asia and
the 14th largest in the world with equity market
capitalization of US$1 trillion as of December 2011.
Bombay Stock Exchange Ltd (BSE)
There are over 5,112 listed Indian companies and
over 8,196 scrips on this exchange as of December
2011.
It has also introduced the world's first centralized
exchange-based internet trading system,
BSEWEBx.co.in to enable investors anywhere in
the world to trade on the BSE platform.
BSE launched SENSEX (BSE 30), a free-float
market capitalization-weighted stock market index
on January 2, 1986, with a base value 100 and base
year 1978-1979.
Bombay Stock Exchange Ltd (BSE)
The SENSEX consists of 30 well-established and
financially sound companies listed on BSE Ltd.
These Companies represents various industrial
sectors of the Indian economy.
The market capitalization of the SENSEX was
about 29,275 billion while its free-float market
capitalization was 14,660 billion as of April,2012.
The Top 3 influential scrips on it are :
1) RIL
2) ITC
3) Infosys
Bombay Stock Exchange Ltd (BSE)
In January 1989, BSE National Index was introduced,
which was renamed as BSE-100 Index from October 14,
1996 and launched it’s dollar-linked version on May 22,
2006.
On July 25, 1990, the SENSEX touched the four-digit
figure for the first time and closed at 1,001.
SEBI was formed officially by the Government of India
in 1992 with SEBI Act 1992 being passed by the
Parliament of India.
On March 7, 2007, Singapore Exchange Limited entered
into an agreement to invest in a 5% stake in BSE
Limited
Important Facts
First in India to introduce Equity Derivatives.
First in India to launch a Free Float Index.
First in India to launch US$ version of BSE Limited.
First in India to launch Exchange Enabled Internet Trading
Platform.
First in India to obtain ISO certification for a stock exchange.
'BSE On-Line Trading System' (BOLT) has been awarded the
globally recognised Information Security Management System
standard BS7799-2:2002
First to have an exclusive facility for financial training.
First in India in the financial services sector to launch its
website in Hindi and Gujarati.
Shifted from Open Outcry to Electronic Trading within just 50
days.
First bell-ringing ceremony in the history of the Indian capital
markets (listing ceremony of Bharti Televentures Ltd. on
February 18, 2002)
National Stock Exchange Ltd (NSE)
It was incorporated in November 1992 as a tax-paying
company and in April 1993, it was recognized as a stock
exchange under the Securities Contracts Regulation Act, 1956.
It is the 16th largest stock exchange in the world and largest in
India by daily turnover and number of trades, for both equities
and derivative trading.
It is the second fastest growing stock exchange in the world
with a recorded growth of 16.6% and over 1,640 listings as of
December 2011.
In 1996, the NSE launched S&P CNX Nifty (Nifty 50)
Nifty 50 is the largest single financial product in India, with an
ecosystem comprising : ETFunds (onshore and offshore),
ETFutures & Options, other index funds and OTC derivatives
(mostly offshore).
From June 26, 2009, the computation for calculating Nifty
Index was changed to free float methodology from full market
capitalization methodology.
National Stock Exchange Ltd (NSE)
The base period for the S&P CNX Nifty index is November
3, 1995. The base value of the index has been set at 1000,
and a base capital of Rs 2.06 trillion.
In December 1996, CNX Nifty Junior was launched. It
consists of 50 companies representing approximately
10% of the traded value of all stocks on the NSE.
In June 2005, Futures & options in BANK Nifty Index was
launched on National Stock Exchange.
In 2007, the NSE launched derivatives on Nifty Junior &
CNX 100 and derivatives on Nifty Midcap 50.
In August 2009, Interest Rate Futures was launched on
this exchange.
List of Major Stock Exchanges Of The World
Rank
Economy
Stock Exchange
Location
Market Cap Trade Value
(US $ Billions) (US $ Billions)
3
United States
Europe
United States
Europe
Japan
4
United Kingdom
London Stock Exchange
London
3,266
2,837
5
China
Shanghai Stock Exchange
Shanghai
2,357
3,658
6
Hong Kong
2,258
1,447
7
Canada
Toronto Stock Exchange
Toronto
1,912
1,542
8
Brazil
São Paulo
1,229
931
9
Australia
Sydney
1,198
1,197
10
Germany
BM&F Bovespa
Australian Securities
Exchange
Deutsche Börse
Frankfurt
1,185
1,758
11
Switzerland
SIX Swiss Exchange
Zurich
1,090
887
12
China
Shenzhen Stock Exchange
Shenzen
1,055
2,838
13
Spain
BME Spanish Exchanges
Madrid
1,031
1,226
14
India
Bombay Stock Exchange
Mumbai
1,007
148
15
South Korea
Korea Exchange
Seoul
996
2,029
16
India
NSE
Mumbai
985
589
17
South Africa
JSE Limited
Johannesburg
789
372
18
Russia
MICEX
Moscow
771
514
1
2
NYSE Euronext (US &
New York City
Europe)
NASDAQ OMX (US & North
New York City
Europe)
Tokyo Stock Exchange
Tokyo
Hong Kong Stock Exchange Hong Kong
14,242
20,161
4,687
13,552
3,325
3,972
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