Getting Started in Stock Market

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•Introduction to Stock Market

•Primary & Secondary Market

•Demat and Trading Account

•Why Trade in Stock Market

•Investment and Types of Investors

•Trading Benefits

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Introduction to Stock Market

•The Stock market is financial market place which facilitates

transactions in long term securities including stocks, bonds and debentures etc.

•The stock market also enables government and corporate to raise long term funds from the public and institutions by offering new issues.

•The stock market has two segments. They are;

A. Primary Market; The activities of fund raising by way of selling of new share or bond issues are part of Primary Market.

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Introduction to Stock Market

•There are different kinds of issues brought to raise funds. The include;

•Initial Public Offer (IPO); It is an offer for sale of either fresh issues or existing securities or both for the first time to the public by the unlisted company which result into listing of company and trading of securities in secondary market.

•Follow On Public Offer (FPO); It is when already listed company makes an offer for sale of fresh issues of securities to the public or institution through offer documents.

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Demat and Trading Account

•Right issues; A proposal by listed company to issue a fresh

securities to its existing shareholders. The rights are offered in certain ratio to the number of securities held prior to the issues.

•Preference Issues; It is an issue of share to select group of people by listed companies in accordance of company Act 1956.

Preference shareholders enjoy preferential rights over

ordinary/equity shareholders in the matter of payment of dividend and return on capital on winding up of the company. But, preference shares cannot be traded and also holders of such shares have no voting rights.

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B

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Secondary Market; It refers to market where securities are traded after

being offered to the public and listed on the stock exchanges.

Secondary market provides general investors with an efficient electronic trading platform to trade in securities

Demat Account: Account where shares are stored in electronic form .

Trading Account: An account which is used to place orders for buying and selling of shares.

Trading account is a link between Bank account and Demat account.

When a trader intends to buy shares, he/she needs to first transfer funds from his/her bank account and then shares are transferred to his/her trading account which are then stored in your demat account as per instruction.

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•Similarly, When a trader intends to sell stocks, his/her trading

account takes back the shares from his/her Demat account and sells them in the buyer. The money is transferred to seller’s bank account after settlement as per instruction.

•Types of Trading: •Intraday

•Delivery

•Intraday Trading: The buying and selling of securities done on the same day before the markets close.

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•Delivery Trading: It refers to trading in which share is bought by making an upfront payment and the same is held in Demat account to be sold later.

•Example: If you have bought 50 stocks of some company on delivery basis, these stocks will be transferred to your Demat Account. You can keep them for a year or sell them the very next day/week.

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Equity Investments

•Equities have the potential to increase in value over time. It also

provides portfolio the growth, necessary to meet investors long term investment goals.

•Equities are considered the most challenging and rewarding when compared to other investment options.

•Research studies have proved that investments in some shares with a longer time-period have yielded far superior returns than any other investment.

•However, investing in equities does not mean that all equity

investment would generate similar kind of high returns. As a matter of facts, equities are high risk/high return investment avenue and one needs to study them carefully before investing.

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Types of Investors

•Stock market is market place for investors/traders with varied levels of risk appetite. It provides for cash and derivative segments wherein cash segment is best suited for investors while derivative is for

traders. Traders have got different forms. They are;

•Speculators: Speculators are people who bet on short term price movements and take trading positions accordingly with the hope of making a profit. Speculators try to encash on leverage facilities.

• Hedgers: Hedgers are market participants who wish to hedge price risk associated with already held stocks/assets by taking counter

positions in derivative segment.

•Arbitragers: An arbitrageur tries to encash on assets mispricing which may occur across exchanges and calendar periods.

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Trading Benefits

•Investing in the stock market provides many benefits to investors like

a) Compound Interest b) Time Value of Money c) Tax Deferral

d) Diversification

Compound Interest:

Compound Interest is a miracle of the financial world. Compound interest, when given time, helps your money grow faster and faster.

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Trading Benefits

•Time Value of Money:

The Time Value of Money is a simple concept which states that the more time you give your money to work for you, the more your money will make for you.

•Diversification:

Diversification enables you to spread your risk so you don’t have to put all of your hopes and dreams behind the success of a single investment.

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Advantages Investing in India

•World's largest democracy with 1.25 billion people in average age group of 30 years which shows the potential of consumer demand – the key to economic growth.

•Democratically elected majority and investors friendly government at the centre with intent to make India manufacturing hub by creating an enabling investment environment.

•According to IMF’s World Economic Outlook April, 2015, India ranks seventh largest economy in the world in terms of GDP at current

prices and is expected to grow at the fastest rate of 7.5 per cent in 2016.

•India is set to emerge as the world’s fastest-growing major economy by 2015 ahead of China, as per the recent report by The World Bank.

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•It’s a young country with a median age of 30 years by 2025: India's economy will benefit from this "demographic dividend".

•India has well regulated and vibrant financial system which is undergoing rapid expansion. The sector comprises commercial banks, insurance companies, non-banking financial companies, co-operatives, pension funds, mutual funds and other smaller financial entities.

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•The Indian government’s policy regime and a robust business

environment have ensured that foreign capital keep flowing into the country.

•The government has taken many initiatives in recent years such as relaxing FDI norms across sectors such as defense, PSU oil refineries, telecom, power exchanges and stock exchanges, among others.

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