Money Investment
In Share Market
HUL 221 TARUN YADAV
Economics P2008CS1036
Date- 1 October,2010 Computer Science & Engg.
IIT-ROPAR
MOTIVE
After 15 minutes you will be able to understand the pages of
newspaper, which are always neglect by most of you.
The pages related to share market are always non-sense to
you until you don’t know basic of share market.
In this presentation I will introduce the basic terminologies
and concepts related to share markets.
So Please pay attention for 10 minutes, it will benefit to all of you.
MONEY
• Money and desire to get more money is the root cause of the rising of
investment market.
• This desire involves you in the investment market. Investment can be of
any type you can invest in saving account with fix interest rate or can buy
property or can invest where you get profit.
• But we want to get more money in less time so we try to invest where we
can get profit in a little time.
PEOPLE NEED your MONEY
• Some people need your money to grow their corporations up and they
attract you with attractive benefits like giving bonus or % from profit or
partnership in company.
So, finally some people need money, some willing to invest money; both are
ready but we need some intermediate node to fulfill their wishes like bond
or some authorized letter.
Terminologies
Stock v/s Share? (Confusion)???
A share is a unit of account for various financial
instruments including stocks, mutual funds, limited
partnerships.
In British English, the usage of the word share alone to refer
solely to stocks is so common that it almost replaces the word
stock itself.
So, don’t confuse both are same.
Terminologies
What are the shares?
A share represents partial ownership of a company. Companies
issue shares to raise capital and investors who buy share are actually
buying a portion of the company.
Ownership, even a small share, gives investors rights to
a say in how the company is run and a share in the profits
(if any).
The more shares you own, the more of the company
you own.
Terminologies
What is the share/stock MARKET/EXCHANGE?
A common platform where buyers and sellers come
together to transact in stocks and shares.
In India there are two share markets.
But in market an individual investor needs brokers .
Terminologies
Brokers
Because stocks must be bought and sold on a stock
exchange, an individual investor needs a broker to
make transactions for him.
The buyer or seller is also represented by a broker and
each broker receives a commission on the sale.
Terminologies
BULL:
A particular kind of investor who purchases shares
in the expectation that the market price of that
company's share will increase.
He sells his stock at a higher price and pockets the
profit.
Simply , the bulls buy at a lower price and sell at a
higher price.
Terminologies
Bear:
Bull's counterpart is the bear.
A bear sells stocks first that he owns or borrows
and then purchases the same quantity of shares at a
lower price.
Terminologies
Bulls are happy when the market move upwards.
Bears are happy in a falling market.
Terminologies
Stock Indices:
Stock index is a statistical average of a
particular stock exchange or sector.
Indices are composed of stocks which have
something in common –
1.They are all part of the same exchange;
2.They are part of the same industry; or
3.They represent companies of a certain size or
location.
Terminologies
Sensex:
It is an index that represents the direction of the
companies that are traded on the Bombay Stock Exchange
(BSE) . The word Sensex comes from sensitive index.
The Sensex captures the increase or decrease in prices
of stocks of companies that it comprises.
Calculation(presentation by Shoeb Ahmad)
Terminologies
Nifty:
It is the Sensex's counterpart on the National
Stock Exchange, NSE.
The only difference between the two indices
is that the Nifty comprises of 50 companies and
hence is more broad-based than the Sensex.
Terminologies
Crash:
As the word suggests, crash refers to a fall
in the value of Sensex and Nifty. Bears are
happy in crash.
Correction :
A correction (or a measured fall) in the
Sensex and Nifty takes place when these
indices rise for a few days and then retrace or
shave off some of these gains.
Terminologies
Bonus shares:
These are the free shares that a listed
company gives its shareholders.
Dividend:
It is again a way of rewarding a company's
shareholders. A dividend is generally issued
as a percentage of the face value of a share.
Face value is the nominal price of a
company's share.
Motivation to Invest
Why to invest in share market?
1. More profit than saving accounts.(in lesser time)
2. Company gives the holder rights to participate in
major decisions the company faces.
Although risk is more in share market.
Profit from the market
Profit come in terms of :
1.Increase in price of shares:
2.Getting the dividend:
3.Bonus share:
Working
Handle the shares
MONEY to investor
Contacts to
SHAREHOLDER
+DESIRE Brokers gets the profit BROKER
Issue share to investor
Talk to company
Brokers gets the profit
COMPANY
Working
You have money + want to invest.
You go to the broker.
Broker makes the deal.( between you and company)
Now your are owner of some part of company.
Company uses your money for more production
facility.
With more production and in good market condition
company makes profit and rises its market values, so the
share values rises.
Now you can sell the shares to get profit or can hold
the share and wait for more profit.
References
1.www.free-uk-shares.co.uk
2.Google search
3.Presentation by Shoeb Ahmad
THANK YOU…
Indian Share Markets
Bombay Stock Exchange(BSE):
BSE is known to be the oldest stock exchange in the entire
Asian region. The main index of BSE is known as the BSE
SENSEX or simply SENSEX (Sensitivity Index). It is an index
which comprises of 30 financially sound company scrip's.
National Stock Exchange(NSE):
National Stock Exchange (NSE) is considered to be the leader in the
stock exchange scenario in terms of the total volume traded. The
leading index of NSE is known as Nifty 50 or just Nifty. It comprises
of 50 diversified benchmark Indian company scrip's.
BACK
Factors affecting stock Prices
1.Performance of company
2.Rumor in market
3.Political issues
4.Demand and supply
5.Earning per share
BACK
HOW IS SENSEX CALCULATED ?
The Sensex is calculated taking into consideration stock
prices of 30 different BSE listed companies. It is
calculated using the “free-float market capitalization”
method.
This is a world wide accepted method as one of the best
methods for calculating a stock market index.
FREE-FLOAT MARKET
CAPITALIZATION
The market cap of a particular company, is calculated as:
(current share price) * (number of shares issued by the
company)
o Only the “open market” shares that are free for trading by
anyone, are called the “free-float” shares.
FREE-FLOAT MARKET
CAPITALIZATION
Free-float market cap=(market cap)* (free-float
factor)
o Free –float factor= (float shares)/(outstanding
shares)
EXAMPLE
Say there are only two companies listed in BSE:
1.Reliance 2.SBI
Value of each share=Rs.200 Value of each share=Rs.100
Total issued shares=1000 Total issued shares=500
Total open shares = 500 Total open shares= 300
Free- float factor = 0.5 Free- float factor =0.6
Free-float market cap = Free-float market cap=
(200*1000*0.5)=Rs.100000 (100*500*0.6)=Rs.30000
Free float market cap of the two companies=Rs 130000/-
Assume Market cap in 1978-1979= Rs 25000/- & Sensex (base)=100
SENSEX=(130000*100)/25000= 520
BACK
