Stock market Notes Part 1:
Stock Market: It is a place where buy/sell (trading) is done of various companies.
In India it is typically called as ‘Share Market or Stock Market’
Stock Exchange: Stock Exchange is an Exchange market for Buy/Sell of the companies, which is completely auction based, meaning the best buyer will get the shares, the best seller will sell the shares firstly.
The operation of all the exhanges like stocks, commodities, forex is of the same kind as explained above.
Almost Every country has got its own stock exchange(s).
Eg: In US:
It is ‘Nasdaq’, ‘Dow Jones’ and ‘S&P’
In India: Sensex, BSE, NSE
BSE – Bombay Stock Exchange (Sensex)
NSE – National Stock Exchange (Nifty)
Europe: CAC, DAX etc…
Asia: Hang Seng, Shangai, Nikkei etc….
In exchange, the important terms are:
1. Name: It could be the name of the company, commodities or instrument for which trading is going on.
2. Symbol: It is the small unique identification of the instrument.
3. Last Price: It is last traded price of the instrument – (LTP, CMP – Current Market Price)
4. % Change: The total change in the price over the last closing.
5. Bid Qty. (Buy Quantity) : The total number of shares being demanded by a person(s), for the maximum price, amongst all the buyers.
6. Bid Price (Buy Price) : The price of shares being demanded by a person(s) which is maximum amongst all the buyers.
7. Offer Qty. (Sell Quantity, Ask Quantity) : The total number of shares being Offered by a person(s), for the Least price, amongst all the Sellers.
8. Offer Price (Sell Price) : The price of shares being Offered by a person(s) which is least amongst all the buyers.
9. Prev. Close – Previous Close : It is the previous closing price of the instrument.
10. Open Price: It is the opening price of the instrument.
11. Avg. Price: It is the avg. price with regard to quantity and median price where transactions are done.
Avg. Price is actually weighted Avg.
12. Total shares traded: It is the total number of shares being traded till now for the day.
13. Turnover: It is Total Number of Shares Traded multiplied by the avg. price.
14. High: It is the highest price where the transaction is done.
15. Low: It is the lowest price where transaction is done.
SEBI: Security Exchange Board of India
It is the stock exchange market regulator, which creates laws and regulations, it acts as a medium between the traders and the company owners, it resolves investors complaints as well as that of Companies.
BSE and SEBI both are located in Mumbai besides each other, in Dalal Street. Even NSE is located in Nariman Point, Mumbai.
Nifty: The 50 companies representation in the NSE.
Sensex: The 30 companies representation in the BSE.
Promoters: Promoters of a company is the person, or group which have maximum share holdings in the company. The company is managed by them and they play a vital role in loyality, transparency and fair conduction of Business.
Note: Before buying any company shares, always look at the Promoters of the company and the share holding percentage.
Promoters must be having a good track record of being investor friendly, loyal, transparent and fair business practices.
IPO: Initial Public Offer.
IPO is coming up with an public offer to raise the capital for the business needs. This is the first time that the company issues shares and goes public.
After the IPO, the promoter holding gets diluted and part of the company is now public’s.
The IPO is conducted, organized and managed by the registrars of the company like ‘Karvy’.
1. Number of times the IPO subscribed is an important factor, the shares are alloted on quota basis that has: Retail, QIP (Qualified Institutional Placements), HNI (High Networth Individuals), Promoters, FII (Foreign Institutional Investors), Employees. Number of times IPO subscribed is the factor of total capital IPO subscribers are ready to pay divided by the capital raised by the company.
The number of shares that you would get upon allotment is nothing but the ipo subscription amount divided by the no. of times it was subscribed in that category.
Mostly the least number of subscription will be under the Retail category itself.
numbers of shares: 10 crore
price of shares: Rs. 100
Retail Investors: Investment is below 2 lac Rs.
HNI: Any indian’s investment above 2 lac Rs.
QIP: Private companies
FII: Foreign companies
ESOP: Employees Quota
The general scenario is that the Employees quota get least subscription.
Real-time Scenario is as such:
Retail Subscription: 10x
HNI : 15x
IPO is also called as ‘Primary Market’.
Before investing in IPO, the subscription factor is very much important, generally higher the subscription better is the company, better returns can be expected.
In India, IPO process goes on for about three weeks.
Step 1: Company Files for the DRHP (Draft Red Herring Prospects) – Meaning it is planning to come up with the ipo within few weeks.
Reference to check which companies are filing IPO: http://www.moneycontrol.com/ipo/
in this go to section: IPO snap shot.
2. IPO issues open: This is generally the time frame, where the IPO subscription is done, it is between 3 to 5 days, it is only during this period that you have to apply for the IPO, once this time is crossed you will not be able to apply for the IPO again.
To apply you will have to fill the IPO form, always fill the price at the higher end.
The forms are available with stock brokers and new banks and you can also download it online or even apply it online.
Reference: In the IPO snapshot box go to: ‘Issue Now Open’.
Price band: It is the range of share price for the IPO, always fill the ceiling price or high price while applying.
The priority of allotment is the according to the price, higher the price better is the priority.
3. Refund: This comes after 10 -12 days of applying for the IPO, if the amount left over after shares has been alloted to you.
4. Listing Date: It is the date where the stock is listed in the stock exchanges for trading, from here on you can sell your shares that has been alloted to you or buy more shares at the market price. It is generally after 10 days of shares allotment, during the date of listing there is no limit for the trading price at both the ends.