20 Equity Market

8/9/2019 20 Equity Market

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Introduction Indian Financial System

Efficient transfer of resources from those having idle resources to others who have apressing need for them is achieved through financial markets. Stated formally, Financial

Markets provide channels for allocation of savings to investment. The financial markets,

thus, contribute to economic development to the extent that the latter depends on the ratesof savings and nvestment

The Financial Markets have two ma!or components"

Money Market

#apital Market

Share

n simple $ords, a share or stockis a document issued by a company, which entitles its

holder to be one of the owners of the company. % share is issued by a company or can bepurchased from the stock market.

&y owning a share you can earn a portion and selling sharesyou get capital gain. So,

your return is the dividend plus the capital gain. 'owever, you also run a risk of making a

capital loss if you have sold the shareat a price below your buying price.

% company's stock price reflects what investors think about the stock, not necessarily

what the company is (worth.( For example, companies that are growing )uickly often

trade at a higher price than the company might currently be (worth.( Stock prices are alsoaffected by all forms of company and market news. *ublicly traded companies are

re)uired to report )uarterly on their financial status and earnings. Market forces and

general investor opinions can also affect share price.


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Quick Facts on Stocks and Shares

+wning a stock or a share means you are a partial owner of the company, and you

get voting rights in certain company issues

+ver the long run, stocks have historically averaged about - annual returns

'owever, stocks offer noguarantee of any returns and can lose value, even in the long run

nvestments in stocks can generate returns through dividends, even if the price

How does one trade in shares?

Every transaction in the stock exchangeis carried out through licensed members called

brokers.

To trade in shares, you have to approach a broker 'owever, since most stock exchange

brokersdeal in very high volumes, they generally do not entertain small investors. These

brokers have a network o sub!brokers who provide them with orders.

"emat #ccount "einition

"ematrefers to a dematerialised account.

Though the company is under obligation to offer the securities in both physical and

demat mode, you have the choice to receive the securities in either mode.

f you wish to have securities in demat mode, you need to indicate the name of the

depository and also of the depository participant with whom you have depository

account in your application.

t is, however desirable that you hold securities in demat orm as physical securities

carry the risk of being fake, forged or stolen.

/ust as you have to open an account with a bank if you want to save your money, make

che)ue payments etc, 0owadays, you need to open a demat account i you want to buy

or sell stocks.

H$% &$ $() # "(*#& #++$,)& ?

Opening an individual Demat accountis a two1step process" 2ou approach a 3* and fill

up the 3emat account1opening booklet. The $eb sites of the 0S34 and the #3S4 listthe approved 3*s. 2ou will then receive an account number and a 3* 3 number for the

account. 5uote both the numbers in all future correspondence with your 3*s.


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So it is !ust like a bank account where actual money is replaced by shares. 2ou have to

approach the "s6remember, they are like bank branches7, to open your demat account.

4et8s say your portfolio of shares looks like this" 9- of nfosys, 9- of $ipro, :-- of '44and -- of %##. %ll these will show in yourdemat account. So you don8t have to

possess any physical certificates showing that you own these shares. &hey are all held

electronically in your account. %s you buy and sell the shares, they are ad!usted inyour account. /ust like a bank passbook or statement, the 3* will provide you with

periodic statements of holdings and transactions.

Is a demat account a must? 0owadays, practically all trades have to be settled in

dematerialised form. %lthough the market regulator, the Securities and Exchange &oardof ndia 6SE&7, has allowed trades of upto 9-- shares to be settled in physical form,

nobody wants physical shares any more.

So a demat account is a mustfor trading and investing.

Most banksare also " participants, as are many brokers.

2ou can choose your very own 3*.

To get a list, visit the0S34and #3S4websites and see who the registered 3*s are.

% broker is separate from a 3*. % broker is a member of the stock exchange, who buys

and sells shares on his behalf and on behalf of his clients.

% 3* will !ust give you an account to hold those shares.

2ou do not have to take the same 3* that your broker takes. 2ou can choose your own.

DEMAT ACCOUNT OPENING COST AND OTHER CHARGES

#nnual maintenance ee-This is also known as folio maintenance charges, and is

generally levied in advance.

+ustodian ee-This fee is charged monthly and depends on the number of securities

6international securities identification numbers ; S07 held in the account. t generallyranges between


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The fee also differs based on the kind of transaction 6buying or selling7. Some 3*s

charge only for debiting the securities while others charge for both. The 3*s also charge

if your instruction to buy=sell fails or is re!ected.

n addition, service tax is also charged by the 3*s.

Online Stock Tradingis a recent way of buying and selling stocks. 0ow you can buy and

sell any stock over the nternet for a low price and you don>t need to call up a broker.

./ecognised Stock (xchange0 means a stock exchange, which is for the time being

recognised by the #entral ?overnment under Section @ of the S#6


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The


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b7 The details of the current position in the Market $atch defaults in the order entry

screen and the in)uiry selection screen. t is therefore possible to do )uick order entries

and in)uiries using this feature. The default details can also be overwritten.c7 Market $atch setup can be sorted alphabetically.

Outstanding Orders

The purpose of +utstanding +rders 6++7 is to enable the user to view the outstanding

orders for a security. %n outstanding order is an order that has been entered by the user,but which has not yet been completely traded or cancelled. The user is permitted to see

his own orders.

Order Status

The purpose of the +rder Status 6+S7 is to look into the status of one of dealer>s own

specific orders.

Snap Quote

The Snap 5uote is a feature available in the system to get instantaneous marketinformation on a desired security.

Market MovementThe purpose of the Market Movement screen is to provide information to the user

regarding the movement of a security for the current day.

Market Inquiry

The purpose of the Market n)uiry is to enable the user to view the market statistics, for aparticular market, for a security. t also displays the open price and previous close price

for a security.

Multiple Inde !roadcast and "rap#

This screen displays information of 0SE indices namely S* #0 0ifty, S* #0

3efty, #0 0ifty /unior, S* #0 9-- and #0 Midcap #0 T, &ank 0ifty and

#0 --. The indices are labeled vertically and the information is displayed against eachindex horiAontally. The data displayed for each index is as follows"

1 #urrent ndex

1 'igh ndex1 4ow ndex

1 +pen ndex

1 #lose ndex1 change in #urrent ndex 6w.r.t. previous close index7

1 9: week 'igh

1 9: week low


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!asket $rading

The purpose of &asket Trading is to provide 0E%T users with a facility to create offlineorder entry file for a selected portfolio.

Full Message DisplayThis option enables the display of all the system messages right from the start of the

+pening *hase.

Colour Selection

The user can customise the colours for various in)uiry and other trader workstation

screens as per choice. The backgro und and the foreground colours can be selected by

invoking the #olour Selection option.

Print System Messages On/Off

The 8*rint System Messages +0=+FF8 enables=disables printing of the system messages

as and when they appear in the messages window.

Market Movement

The purpose of the Market Movement screen is to provide information to the Gser

regarding the movement of a security for the current day.

Most Active Securities

This screen displays the details of the most active securities based on the total traded

value during the day.

Order imits

+rder limits is a facility to enable the user to specify maximum value per order and

maximum )uantity per order that can be entered from the trader workstation.

Order Attri!ute Selection

The order attribute selection enables user to set default parameters for two fields ;*


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The corporate manager can also authoriAe a branch with unlimited order entry by clicking

on JGnlimited>. The user can also print the details of a branch by selecting the *rint

option. Kiewing and modification is possible during market hours. % corporate managercan set the branch order value limit for any=all branches either before or during trading

hours. %lso, the corporate manager can view the set limit and the used limit any time

during the trading day. $henever the corporate manager modifies the branch order limitof any of his branches, the branch manager receives a message to that effect at his trader

workstation.

(xample - The corporate manager=branch manager can also print the user order value

limit details.

Example" M=s. %gre Financial Services, a trading member on the 0SE, has a branchorder value of


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RR3aily price bands of 9 6either way7 on securities as specified by the Exchange.

RR3aily price bands of - 6either way7 on securities as specified by the Exchange.

$ime 'onditions

DA)- %ll orders entered into the system are presently considered as 3ay orders only.IO'- %n mmediate or #ancel 6+#7 order allows the user to buy or sell a security as

soon as the order is released into the system, failing which the order is cancelled from the

system. *artial match is possible for the order, and the unmatched portion of the order iscancelled immediately.

*rice 'onditionsMarket- Market orders are orders for which price is specified as 8MT8 at the time the

order is entered. For such orders, the system determines the price. Stop%Loss- This facility

allows the user to release an order into the system, after the market price of the security

reaches or crosses a threshold price called trigger price. Example" f for stop loss buyorder, the trigger is


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7 :-- shares s accounts to the extent of payment obligations. The banksprocess these instructions, debit accounts of members and credit accounts of the 0S##4.


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*ay%out o, -unds and Securities" %fter processing for shortages of funds=securities andarranging for movement of funds from surplus banks to deficit banks through


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6B7 *ay1out of funds 60S##4 advises #learing &anks to credit account of

custodians=#Ms and debit its account and clearing bank does it7.

6-7 3epository informs custodians=#Ms through 3*s.

.d/ 'learing !anks" #learing banks are a key link between the clearing members and

0S##4 for funds settlement.

.e/ Depositories" % depository is an entity where the securities of an investor are held in

electronic form.

$ith effect from %pril , :--D the settlement cycle has been further reduced from TQD to

TQ:.

#ctivity "ay

Trading


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No%delivery *eriod

$henever a book closure or a record date is announced by a company, the exchange sets

up a 8no1delivery period for that security. 3uring this period, trading is permitted in the

security. 'owever, these trades are settled only after the no delivery period is over. Thisis done to ensure that the investor8s entitlement for the corporate benefits is clearly

determined.

I)&(/)#&I$)#; S(+,/I&I(S I"()&IFI+#&I$) ),*8(/

SE& being the 0ational 0umbering %gency for ndia has permitted 0S34 to allotnternational Securities dentification 0umber 6S07 for demat shares.

&/#"I)1 *(*8(/SHI

=32 S&$+4 8/$4(/S

% broker is an intermediary who arranges to buy and sell securities on behalf of clients

6the buyer and the seller7.%ccording to


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'ontract Note

#ontract note is a confirmation of trade6s7 done on a particular day for and on behalf of a

client.

!rokerage

The maximum brokerage chargeable by TM in respect of trades effected in the securitiesadmitted to dealing on the #M segment of the Exchange is fixed at :.9 of the contract

price, exclusive of statutory levies.

Sub%brokerage

Sub1broker is entitled to sub1brokerage not exceeding .9 of the transaction value.

+$/$/#&( HI(/#/+H5

The trading member has the facility of defining a hierarchy amongst its users of the0E%T system. This hierarchy comprises"

+orporate *anager

8ranch 2 8ranch s not generally concerned about short!term luctuationsin prices, because he>ll ridethem out over the long haul.

%n investorrelies mostly on Fundamental #nalysis, which is the analytical method of

predicting long1term prospects of a particular asset. Most investors adopt a @buy and

holdA approach to assets, which simply means they buy shares of some company and

hold onto them for a long time. This approach can be dangerousB even devastating, in anextremely volatile market such as today>s &SE or 0SE ndexs Show.

4et>s consider someone who bought shares of 2N #ompany at their peak value ofaround


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To help make their decisions, Traders rely on &echnical #nalysis, a form of marketing

analysis that attempts to predict short1term price fluctuations.

Trying to win in the stock market without a trading plan is like trying to build a housewithout blueprints 1 costly mistakes are inevitable.

%hy do you need a &rading lanO

1 3uring trading hours, emotions will turn smart people into idiots. Therefore, you have

to avoid having to make decisions during those hours. For every action you take during

trading hours, the reason should not be greed or fear. The reason should be because it isin the plan. $ith a good plan, your task becomes one of patience and discipline.

: 1 #onsistent results re)uire consistent actions 1 consistent actions can only be achieved

through a detailed plan.

%hat should be in your trading plan?

1 2our strategy to enter and exit trades

2ou have to describe the conditions that have to be met before you enter a trade. 2ou

also have to describe the conditions under which you will close a position. These

conditions may include technical analysis, fundamental analysis, or a combination of

both. They may also include market conditions, public sentiment, etc...

: 1 2our Money management rules to keep losses small 1 the goal of money management

is to ensure your survival by avoiding risks that could take you out of business. 2our

money management rules should include the following"

1 Maximum amount at risk for each trade.1 Maximum amount at risk for all your opened positions.

1 Maximum daily and weekly amount lost before you stop trading

D 1 2our daily routine 1 after the market closes, before it opens, etc...

@ 1 %ctivities you carry out during the weekend.

9 1 also like to include reminders that read every day

will follow a trading plan to guide my trading 1 therefore my !ob will be one of patience

and discipline.

1 will always keep my trading plan simple.

1 will take actions according to my trading plan, not because of greed, fear, or hope.1 will not deceive myself when deviate from my trading plan. nstead will admit the

error and correct it.


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will have a winning attitude.

1 Take responsibility for all your actions ; don>t blame the market or world events.

1 Trade to trade well and for the love of trading, not to trade often and not for the money.1 3on>t be influenced by the opinions of others.

1 0ever think that taking money from the market is easy.1 3on>t try to guess the future ; trading is a game of probabilities.

1 Gse your head and stay calm ; don>t get excited or depressed.1 'andle trading as a serious intellectual pursuit.

1 3on>t count how much money you have made or lost while you are in a trade 1 focus on

trading well.

% trading plan will not guarantee you success in the stock market but not having one will

pretty much guarantee failure.

InvestingCC %hat's that?

/udging by the fact that you8ve taken the trouble to navigate to this page my guess is that

you don8t need much convincing about the wisdom o investing.


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things you had always dreamed of doing with a little extra cash in your pocket. %lso, it8s

exciting to review your investment returns and to see how they are accumulating at a

faster rate than your salary.

%hen to Invest?

The sooner the better. &y investing into the market right away you allow your

investments more time to grow, whereby the concept of compounding interest swells

your income by accumulating your earnings and dividends. #onsidering theunpredictability of the markets, research and history indicates these three golden rules

or all investors

. nvest early

s tempting to wait for the Wbest timeA to invest, especially in a rising market,remember that the risk of waiting may be much greater than the potential rewards of

participating. Trust in the power of compounding. #ompounding is growth via

reinvestment of returns earned on your savings. #ompounding has a snowballing effectbecause you earn income not only on the original investment but also on the reinvestment

of dividend=interest accumulated over the years. The power of compounding is one of the

most compelling reasons for investing as soon as possible. The earlier you start investingand continue to do so consistently the more money you will make. The longer you leave

your money invested and the higher the interest rates, the faster your money will grow.

That8s why stocks are the best long!term investment tool. The general upwardmomentum of the economy mitigates the stock market volatility and the risk of losses.That>s the reasoning behind investing for long term rather than short term.

How much to invest?

There is no statutory amount that an investor needs to invest in order to generate ade)uate

returns from his savings. The amount that you invest will eventually depend on factorssuch as"

2our risk profile :. 2our Time horiAon D. Savings made


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Investmentis a term with several closely1related meanings in finance and economics.

t refers to the accumulation of some kind of asset in hopes of getting a future return from

it.

%ssets such as e)uity shares or bonds held for their financial return

6interest, dividends or capital appreciation7, rather than for their use in the organiAation>soperations.

/eturn on Investments

The money you earn or lose on your investment, expressed as a percentageof your original investment.

n Simple words, t is the amount received as a result of investing in particular ventures.

+ollective Investments Schemes

Funds which manage money for a number of investors and pool it together. This enables

investors to benefit from a larger number of individual investments and cost efficiencies.

Short!&erm Investments

Short1Term nvestments are generally investments with maturities of less than one year.

+apital Investments

nvestments into the fixed capital 6capital assets7, including costs for the new

construction, expansion, reconstruction and technical ree)uipment of the operatingenterprises, purchase of machinery, e)uipment, tools, accessories, pro!ect andinvestigation works and other costs and expenditures.

%hat is a Stock 8roker ?

% stock brokeris a person or a firm that trades on its clients behalf, you tell them what

you want to invest in and they will issue the buy or sell order. Some stock brokersalsogive out financial advice that you a charged for.

Stocks

% corporation is generally entitled to create as many shares as it pleases. (ach share is asmall piece o ownership. The more sharesyou own, the more of the company you own,and the more control you have over the company8s operations. #ompanies sometimes

issue different classes of shares, which have different privileges associated with them.

So a corporation creates some shares, and sells them to an investor for an agreed upon

price, the corporation now has money. n return, the investor has a degree of ownership in


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the corporation, and can exercise some control over it. The corporation can continue to

issue new shares, as long as it can persuade people to buy them. f the company makes a

profit, it may decide to plow the money back into the business or use some of it to paydividends on the shares.

%hat is a 8ull *arket?

% bull marketis a financial market where prices of instruments 6e.g., stocks7 are, on

average, trending higher. The bull market tends to be associated with rising investor

conidenceand expectations of urther capital gains.

%hat is a 8ear *arket?

The opposite of a bull market is a bear marketwhen prices are falling in a financial

market for a prolonged period of time. % bear market tends to be accompanied by

widespread pessimism.% bear market is slang for when stock prices have decreased for

an extended period of time. f an investor is (bearish( they are referred to as a bearbecause they believe a particular company, industry, sector, or market in general is going

to go down.

"eining the "ividend

"ividends are payments made by companies to their stockholders in order to share

a portion o the proitsfrom a particular )uarter or year.

+$**$) *IS(S %HI;( I)>(S&I)1

*IS( $)(

;ack o 4nowledge and )o lan

t amaAes us that some people expect to trade the stock market successfully without any

effort. 2et if they want to take up golf, for example, they will happily take some lessons

or at least read a book before heading out onto the course.

The stock market is not the place for the ill informed. &ut learning what you need isstraightforward ; you !ust need someone to show you the way.

The opposite extreme of this is those traders who spend their life looking for the 'oly?rail of tradingV &een there, done thatV

The truth is, there is no 'oly ?rail. &ut the good news is that you don8t need it. +ur

trading system is highly successful, easy to learn and low risk.

*IS( &%$


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Gnrealistic Expectations

Many novice traders expect to make a gaAillion dollars by next Thursday. 0ow, don8t get

us wrong. The stock market can be a great way to replace your current income and forcreating wealth but it does re)uire time. 0ot a lot, but some.

+ther beginners think that trading can be -- accurate all the time. +f course this is

unrealistic. &ut the best thing is that with our methods you only need to get 9-1C- of

your trades (right( to be successful and highly profitable.

*IS( &H/((

4istening to +thers

$hen traders first start out they often feel like they know nothing and that everyone else

has the answers. So they listen to all the news reports and so called (experts( and get

totally confused.

%nd they take (tips( from their buddy, who got it from some cab driverY

$e will show you how you can get to know everything you need to know and so never

have to listen to anyone else, ever againV

*IS( F$,/

?etting in the $ay

&y this we mean letting your ego or your emotions get in the way of doing what youknow you need to do.

$hen you first start to trade it is very difficult to control your emotions. Fear and greed

can be overwhelming. 4ack of disciplineU lack of patience and over confidence are !ust

some of the other problems that we all face.

t is critical you understand how to control this side of trading. There is also one otherkey that almost no one seems to talk about. &ut more on this another timeV

*IS( FI>(

*oor Money Management

t never ceases to amaAe us how many traders don8t understand the critical nature of

money management and the related area of risk management.

This is a critical aspect of trading. f you don8t get this right you not only won8t be

successful, you won8t surviveV


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Fortunately, it is not complex to address and the simple steps we can show you will

ensure that you don8t (blow up( and that you get to keep your profits.

*IS( SID

+nly Trading Market in +ne 3irection

Most new traders only learn how to trade a rising market. %nd very few traders know

really good strategies for trading in a falling market.

f you don8t learn to trade (both( sides of the market, you are drastically limiting the

number of trades you can take. %nd this limits the amount of money you can make.

$e can show you a simple strategy that allows you to profit when stocks fall.

*IS( S(>()

+vertrading

Most traders new to trading feel they have to be in the market all the time to make any

real money. %nd they see trading opportunities when they8re not even there 6we>ve been

there too7.

$e can show you simple techni)ues that ensure you only (pull the trigger( when you

should. %nd how trading less can actually make you more V

ONLINE TRADING Dos and Donts

&rading onlinehas become very popular in today>s time when you !ust need a trading

accountand after that you can trade comfortably while sitting at your home. %part from

comfort of trade it provides various facilities like"

2 0ase o, buying and selling o, s#ares3

2 Online receipt o, contract notes+ trade statement ,or t#e transactions32 Direct deposits o, dividends+ bonus amount etc to account3

2 4arious trading tools ,or ease o, making investment decision3

+ne click of mouse button is of ample importance while trading online because

sometimes it is what that draws a line between your winning or loosing the game.$rading online is very interestingbut you have to be a bit careful as well. The process of

trading is very easy but making money is a bit tricky. %ll you need is a trading account

and a little bit of caution to operate the same. &elow are somedo0s and don0ts while

trading online"


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rices change at the blink o eye and the transactions are not always in real time.

Moreover the speed of your internet might cause delay. So always make sure not to

change your decision until the last moment. Take time examining the stock and makedecision ahead of time so that you don>t loose while in panic.

%n important feature of stock markets is volatility 3So if you don>t keep a close eye onhow your stocks move while placing an order, you might land up in losses.

$nline trading is a matter o trust between you and your brokerbecause there is noin1person contact. &ut you can>t leave everything on trust. Make sure your broker

provides you detailed email statements and contract notes of executed trades.

$nline trading provides acility to place limit orders. f you don>t have sufficient time

to keep track of the stock prices, fix up a buy=sell price based on your !udgement and gofor limit orders. Moreover limit orders help you take ample advantage of volatile session

during the day.

n addition to the brokerage rate being paid, prudent investor should always be well

aware of the various Fees and commissionscharged by the broker for various servicesoffered like Mobile services, buy sell alerts, reporting, chart and other tools to facilitate

easy trade as they really affect your net earnings.

For novice tradersB it0s a suggestion to always trade with stop lossess. Set your stop

loss to level to avoid the risks associated.

Even though chances of default by a good brokerage firm are nil but a smart investor

should always keep track of credit=debit of money in their bank accounts or transfer of

shares to=from the demat a=c accordingly for each trade executed because technicalreasons might lead to discrepancy which cannot be avoided.

revention is always better than cure. Security is another important factor for online

traders. t is advisable always to follow security measures related to pass-ords andother personal informationwhile login into the websites to eliminate chances of theft ofidentity and information.

&rading *utual Funds on Stock (xchanges %hat the

Investor needs to 4now

&rading*utual Funds on Stock (xchanges %hat the Investor needs to 4now

S(8Ihas recently allowed allowed registered stockbrokers to transact mutual und

unitson behalf of their clients through the stock exchange mechanism. $hen the systems

are in place there are a few points the investor has to consider while investing in mutual

fundsthrough Stock Exchanges 60SE and &SE7
http://www.sharemarketbasics.com/blog/trading-mutual-funds-on-stock-exchanges-what-the-investor-needs-to-know/http://www.sharemarketbasics.com/blog/trading-mutual-funds-on-stock-exchanges-what-the-investor-needs-to-know/http://www.sharemarketbasics.com/Mutual-Funds/Mutual-Fund-Types.htmhttp://www.sharemarketbasics.com/Mutual-Funds/Mutual-Fund-Types.htmhttp://www.sharemarketbasics.com/blog/trading-mutual-funds-on-stock-exchanges-what-the-investor-needs-to-know/http://www.sharemarketbasics.com/blog/trading-mutual-funds-on-stock-exchanges-what-the-investor-needs-to-know/http://www.sharemarketbasics.com/Mutual-Funds/Mutual-Fund-Types.htmhttp://www.sharemarketbasics.com/Mutual-Funds/Mutual-Fund-Types.htm


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1 (xisting mutual und investorswho intend to buy more units will also benefit as this

system will allow them to keep track of all investments under a single statement.

1 The SE& circular on Friday also said that investors can hold units of mutual fundschemes in dematerialised form, and that the dematstatement given by the depository

participants would be deemed ade)uate compliance with SE& norms. &uying and sellingwill become more efficient and transparent , particularly if investors choose to transact

through a demat account.

1 Though cost seems to be a factor for those who do not have a demat account, the impact

&ill be minimal ,or t#ose o already are demat account #olders3

1 End1users can use the convenience o, t#eir neig#bouring broker5s o,,ice ,or t#eir

mutual ,und transactions. 'owever, once the broker starts acting as a distributor, there isan issue about what commission he might ask for and whether the client would be ready

to pay that or not.

1 n terms of convenience, the advantages are similar to investing online through the

%M#>s website Z reducing the clutter o paperwork and speedy execution3

1 Investing in SIs 6systematic investment plans7; % reading of the SE& circular on

entry loads suggests that the entry load will continue to apply on instalments of S*s

registered before %ugust :--B. %s long as this loophole remains unplugged, existing S*s

will be at a disadvantage to the ones registered after %ugust . The only way out is tostop the existing S*s and start afresh in the same scheme.For those with S*s, the only

way to benefit from the entry load waiver is to stop them and start new ones in the same

scheme.

1 Switching rom one scheme to another within the same und house ; %s per the newguidelines, no entry load will be charged for purchases, additional purchases and switch1

in accepted by any fund house with effect from %ugust , :--B.Similarly, no entry load

will be charged with respect to applications for registration under systematic transferplans.

Source " ET and 'indu &usinessline

"ay &radingis t#e act o, buying and selling securities intra%day &it# t#e epectation o,

making ,ast pro,its &it#in minutes to #ours.

3ay traders come in all shapes and forms, using mechanical to systematic day tradingsystems, and can place anywhere from one to thousands of trades per day.

Day trading strategies typically follow one of two approaches" beating the spread or

attempting to catch short term trends. The spread is the difference between what is

being offered for a stock 6the bid7 and the price being asked for the stock 6the ask7.

Spread trading attempts to !uy at the !id and sell at the ask* over and over again.
http://www.sharemarketbasics.com/blog/trading-mutual-funds-on-stock-exchanges-what-the-investor-needs-to-know/Facilitating%20transactions%20in%20Mutual%20Fund%20schemes%20through%20the%20Stock%20Exchange%20infrastructurehttp://www.sharemarketbasics.com/Demat-account.htmhttp://www.sharemarketbasics.com/Mutual-Funds/Systematic-Investment-Plan-Invest-Safely.phphttp://www.sharemarketbasics.com/blog/trading-mutual-funds-on-stock-exchanges-what-the-investor-needs-to-know/Facilitating%20transactions%20in%20Mutual%20Fund%20schemes%20through%20the%20Stock%20Exchange%20infrastructurehttp://www.sharemarketbasics.com/Demat-account.htmhttp://www.sharemarketbasics.com/Mutual-Funds/Systematic-Investment-Plan-Invest-Safely.php


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Follow these 8asic /ules while Investing

Most of us are confused where to put in our money and where not to invest our hard

earned money. fount the rules mentioned below )uite helpful. My suggestion is !ustfollow the directions given below and am sure, some of you may save lot of money

going down the drain. 'ere it is"

/ule 2- "on0t buy unlisted shares

There are over :-,--- public limited companies in ndia, of which only around L,--- arelisted on the country>s various stock exchanges. The first rule of profitable share

investment is to confine your buying to these L,--- listed companies only.

Stock exchanges do not permit trading in unlisted shares, nor do they permit their

registered members, i.e. brokers to deal in unlisted shares. Therefore, if you want to buyunlisted shares you won>t get the protection of the stock exchangeauthoritiesU nor will

you be able to use the services of your stockbroker in handling such transactions.Moreover, in the absence of stock exchange )uotations you won>t be able to assess whatthe market price of an unlisted share should be. %ll these factors create complications and

risks, which you are not likely to be in a position to handle. %s a basic rule, therefore, you

should avoid investing in shares of unlisted companies.

.o- does one kno- -hether a share is listed or nott>s simpleU all shares whose pricesare )uoted in daily newspapers or websites are listed shares. Gnlisted shares are )uoted.

Therefore, the fact that a share is 9uotedmeans that it must be listed. This is the easiest

and surest way of fining out whether a particular share is listed or not.

/ule


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)uoted price of each of share, but also the date when it was last transacted. This

information can help you to confirm whether a particular share is inactive. #heck out

&SE or 0SE $ebsites

Inactive s#arescan generally be bought at very low prices. This is obvious since such

shares generally find no buyers. nexperienced investors looking for bargains are oftenattracted to such shares by virtue of their low prices. This is how beginners are normally

trapped in to making disastrous investments, &eware of such bargainsV f you comeacross a bargain, remember there has to be catch in it somewhere. t is better to hunt for

value, and pay a fair for it than to look for such apparent bargains.

0very time you buy a s#are6 you must remember t#at one day you &ill &ant to sell it3 I,

you are likely to ,ace di,,iculty in selling it 7 don5t buy itV This is a sound investment

principle, which you should never lose sight of, no, matter how cheap or attractive a

particular investment may appear to be. 0ever allow yourself to get caught with illi)uid

share. They are only pieces of paper without any value. Shares have value only when

they are readily encashable.

+f course, it is possible that a share, which is inactive today, could become active

tomorrowU !ust as a share, which is active today, could become active tomorrow. t all

depends upon the degree of buying interest in a particular share. f buying interest buildsup in a share, it can easily move from the inactive to the active category.

/ule- = "on0t buy shares in closely held companies-

$hether a company is widely held or closely held depends upon the number of

shareholders it has. n this book, we will draw the line at 9,--- shareholders. Companies

-ith less than 0*111 shareholders -ill !e considered as closely held,

Shares of closely held companies tend to be less active than those of widely held ones

since they have a fewer number of shareholders and, thus, a smaller floating stock of

shares. Shares of such companies tend to be ignored by the general public. 4argeinstitutional investors also tend to avoid closely held companies. %s a result their shares

do not get sufficient price support, which they would otherwise have got if they had been

widely held. Moreover, it is always much easier to manipulate the share prices of aclosely held company than those of a widely held one.

Share prices of closely held companies also tend to be more volatile than others. $hen

they rise they rise very fast, and to a very high level. #onversely, when they fall they doso very fast and to a very low level. %s a result, it is generally very difficult to buy sharesin a closely held company when prices are rising, and very difficult to sell them when

prices are falling. nvesting in such shares re)uires a high degree of expertise, knowledge,

alertness and )uick thinking, which take years of active investing to ac)uire. $e would,therefore, strongly urge you to keep away from such shares.

Source " Karious $ebsites and &ooks on Share market &asics


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1etting Started in Share *arket &rading3 &hings you

should know

1etting Started in Share *arket &rading3 &hings you should know

t is very interesting to invest in shares, though most of the people would like to start with

small money.

First of all, you need to know a little bit in detail about the stock market, then about the

shares and the mode of their trading. $hat are the risks involved and how to be smart indealing with sharesO

Stock Market; t is the place where the shares of listed companies are bought and

sold. n ndia, you have &SE and 0SE as two big stock exchanges.

Shares are bought and sold by you and me only through approved brokers.

%pproved brokersare mostly banks like the ##, '3F#, 3&, GT &ank,S'#, are to name a few.

First you need to open an account with a bank, that has the "emat accountfacility.

?o to the respective bank and open a Savings account with deposit of around


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%s and when you buy on line, your Demat accountwill be credited with those

shares. The money for the purchase will be automatically deducted from your

account by the bank.

2ou also have to keep looking for opportunities to sell the shares that you have

already bought and kept in your 3emat account.

For buying and selling, it is necessary to familiariAe which shares to be bought at

what prices and sell them at what price.

%s and when you decide to sell 6depending on the price )uoted in the market7 youcould sell them through online trading system.

The moment you sell your 3emat account will be debited with the number of

shares sold by you.

2our account will be credited with the amount for which you have sold.

3epending on the amount of profit earned, tax will also be deducted by the bank

6&"S7. The bank will give you a T3S certificate by the year end, i.e., March D,

of that year which you could attach with the return to !ustify the tax payment.

8#en t#e s#ares could be boug#t or sold9

%lways sell the shares when the price is up and buy when the price is down.Every body had to adapt to this formula.

8#at pro,it s#ould it give you9

2ou buy a share for a particular price. Take the amount as investment. %ny bankwill lend you at ten per cent interest. t will give you :@ per cent return if the

share price rises in such a way. 3o not wait for the market to crash and start

searching for buyers for the price you )uote.

%fter selling, never look back and repent for what profit you have earned, had youdelayed the sale. &e happy that it did not happen otherwise. This is the best way,

to sell.

f you want to buy, look for 9: week low, look for the peer companies, their price

and compare it with the company you want to buy.

4ook for the prospectus, future plans and the profit the company ought to make inthe next year. Take the perception or a change and buy.

2ou cannot take profit in the buys. 4osses do occur as long as you are at decent

surplus for which you have no reason to be unhappy.


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Stock Quote lieline o an investor

Stock )uote is that magical figure that gives you all the information related to stock.

Stock )uotes can be obtained in newspapers and online but the most convenient place is

online as it is very close to real time information. $ebsite like 2ahooVFinance and rediffhelp you get real1time )uotes at a mouse1button click. 3ifferent sources provide different

sets of information. Some might provide with detailed information like corporate actions,

mutual fund activity in the shares in addition to some basic price information. &elow isthe list of common figures in the stock )uote details"

E

The highest=lowest price figures for past 9: weeks can help make a !udgement whether ornot you should invest in stock at current price .

"ays /ange" t is the price range within which a stock has traded on a day. t thus

consists of high=low price the stock has touched in a day.

(- t is the *rice to Earnings


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*ethods o buying and selling o shares3

Given below are the t!es o" orders which are #sed "or b#ing andselling o" shares$

*arket order- $hen you putbuy or sell price at market rate t#en t#e price gets

eecuted at t#e current rate in t#e market. The market order gets immediately executed

at the current available price.

n market order there is no need to mention the priceU the shares will get executed at the

best current available price.

f you wish to buy or sell shares at any specific price, i.e. market order is not suitable for

you then you have to go for limit order.

Market order is ,or t#ose o &ant to buy or sell immediately at t#e current availableprice3

;imit order; t>s totally different from market order. n this, the !uying or selling pricehas to !e mentioned and when the share price comes to that price your order will getexecuted at the price mentioned by you.

&ut here it>s not sure that the price will come to your limit order.

n day trading it0s riskybecause you have to close all your transactions before D.D- pm

and if in case the price doesn>t reach to your limit order, your order will be open and then

you have to go through 6bare7 heavy penalties. mportantly, limit order and stop loss

trigger price are used together.

Stop loss trigger price" Stop loss and trigger price are used to reduce the losses. This is a

very important term especially if you are day trading6intraday7. Stop loss, as the name

indicates, is used to reduce the loss.

2ou can use a pivot calculator for simple stop loss calculation for delivery based trading

and intraday stop loss depends on how much you are ready to lose ; the maximum

amount you are ready to lose1 it also depends on the price movements of the scrip for that

particular day

Source " Karious websites and books

$nline &rading *ore knowledge

Many nvestors in ndia preferdealing in shares through their brokers over the

Telephone and not trade onlinebecause of the security #oncerns.
http://www.sharemarketbasics.com/blog/methods-of-buying-selling-of-shares/http://www.sharemarketbasics.com/blog/tag/day-trading/http://www.sharemarketbasics.com/blog/online-trading-a-few-questions-answered/http://www.sharemarketbasics.com/blog/your-stock-exchange-broker-and-sub-broker/http://www.sharemarketbasics.com/blog/methods-of-buying-selling-of-shares/http://www.sharemarketbasics.com/blog/tag/day-trading/http://www.sharemarketbasics.com/blog/online-trading-a-few-questions-answered/http://www.sharemarketbasics.com/blog/your-stock-exchange-broker-and-sub-broker/


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$hile concerns about online security will always be there, rest assured that the

brokerages themselves have a very, very high stake in making you feel comfortable about

the level of security being used. #ll online brokerages have a portion of their websitedevoted to explaining the measures they employ to protect your transactions.

'ere are a few )uestions that you may have regardingOnline $rading in Stocks3

(s trading through the (nternet safe

The safety of transactions on the nternet depends on the encryption system used. The

better this transaction system, the more difficult it is for any person to hack the site.nternationally, the best system available today is the :I1bit encryption.

Secondly, you too can ensure the safety of the transactions online. 2ou normally get a

secured user id and password, the secrecy of which is to be maintained entirely by you.

Thirdly, if the transaction system re)uires no manual intervention, you further improvethe safety in the transactions. %mong ndian sites, very few are fully integrated online

trading sites. This enables the elimination of the possibility of any manual intervention,

which means orders are directly sent to the exchange ensuring that you get the best andright price.

Is trading through Internet "iicult ?

The experience of trading through nternet depends a great deal on the type of product

offered by the site. Say, for example, one of the issues bothering you may be getting tired

of the paperwork involved after every trade, in writing che)ues.

nonline trading sites, the greater the back1end integration of the system, the greater the

amount of work the sites do for you, therefore greater the convenience available to you.

n big financial institutions your broking account, bank account and "emat accountare

linked electronically. So when you punch in a buy or sell order, the system checks thefunds=shares availability and automatically credits=debits the accounts once the order is

executed by the exchange.

Is trading through Internet a costly aair?

The convenience provided by online trading is even then worth the costs involved.

%nd online trading sites are not that costly. For example, a trader can trade shares onmargin at rates as low as -.- and if one wishes to trade in cash, then the rates

applicable are as low as -.@.

'owever, it is important to compare various online trading sites on brokerage rates,

inclusive of all sub1charges.
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I am pretty satisied with my present broker who serves me o!line3 %hy should I

choose to go online to trade shares?

Many of those customers who have chosen to trade shares online today, had at one pointof time been trading through offline brokers, !ust like you are today. They took a chance

to go online and trade shares. %fter realiAing the advantages of trading shares online, theyhave shifted to online trading now. /ust try trading shares after opening an account with

any online trading site. 'owever, before choosing an online trading site, please compareall such websites and then make a decision.

How re9uently are the prices updated at all these online trading sites?

The tickers available at online trading sites provide instantaneous updates. %lso, some

websites can offer to transact in those shares instantaneously and with convenience.

How can I be sure that I shall be trading at a price I want to or at a price appearing

in the website?

The solution to your problem could be provided in different ways by different online

share trading sites. For any trade order, the customer is asked to click J*roceed> after hehas the opportunity to completely check the order verification form.

Moreover, you have the option of modifying or canceling the order till the moment the

order is executed at the exchange.

Finally, online trade conirmations reach our customers within @ minutes, while

contract notes are dispatched at the end of the day and reach within :@1DC hours.

Short Selling &he 8asics %hat is short Selling ?

Short selling is selling the shares which you do not own. The term WshortX here

signifies that you do not hold the shares being sold. The first thought popping up in yourmind would be ; where do these shares come from which you are selling without

possessing them in your portfolio of stocks. These come from your broker=brokerage firm

that lends you the shares in lieu of your investment as collateral. 2ou short sell these

shares but subse)uently you have to close the short by buying back the shares frommarket and then return it to your broker=brokerage firm. 2ou are also charged some

interest for the loan of shares you have taken. &elow diagram describes the flow of sharesinvolved in short selling
http://www.sharemarketbasics.com/blog/short-selling-the-basics-what-is-short-selling/http://www.sharemarketbasics.com/blog/short-selling-the-basics-what-is-short-selling/


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Short Selling

4ooking at the flow of shares in above flowchart, one would ponder why to borrowshares for selling in market and then transfer them back to the lenderO The logic behind

shorting is very simpleU earning proit margin. 4et>s see howOO

f you think a stock is overvalued and expect that the price would come down in future

for sureU you would wish to sell t#e s#ares at current levels at #ig#er price. So youborrow the shares and sell them at higher price. %nd when the stock actually falls as you

had speculatedU you buy it from market at lower price and return it to the lender and the

dierence between the selling price 6higher7 and buy price 6lower7 is what you

earned in the deal. So at the end you must close the short by paying back the shares and

this is called as Wcovering the shortX. 'oncluding t#is,investors o anticipate ,all in t#e

stock price go s#ort to take advantage o, market ,all3%n investor can hold the short for aslong as he wants but he is charged an interest as it is similar to a loan taken in the form of

shares. %lso if during the course of loan, the company declares dividend or rights issue, it

must be paid to the lender who is the actual owner of shares because you are !ust a

borrower.

Short selling is considered to destabiliAe markets directly or indirectly. n :--, the stock

prices crashed heavily owing to short selling by big operators after which SE& banned it.

%fter a gap of C years in 3ecember :--L SE& came up with updated norms of short

selling to cover the loopholes and ultimately institutional investor were also permitted toshort sell.

#oncluding this, short selling no doubt gives you an opportunity to earn profit by taking

advantage of downturn of markets, it might bring in huge loss to your investment if stockprice moves up. &ecause in real sense, shorting is a bet against the current market trend.

$hen stock is at current higher levels, you are expecting it to fall down and entering the

arena. Speculation is what makes shorting a riskier !ob. So beware of the dark side of

shorting before you actually go for itV
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>olatility o Stock *arkets and its causes

>olatility is one o the best phenomenon without which stock markets will loose its

charm. t is t#e tendency o, ,luctuation o, market indices over a period o, timeU more isthe fluctuation, higher is the volatility. The ups and downs o stock pricesis what that

adds spice to the market behaviour. This see1sawing effect has its own implications, bothgood and bad. ?ood, because prudent investors taking advantage buy on dips and sell onhighs for profit booking. +n the flip side, greater volatility lowers investor>s confidence

in the market prompting them to transfer their investment in less risky options due to

unexpected market behaviour.

'aving observed the past ma!or events of volatility, one can realise the root cause asWunanticipated in,ormationX breaking out in the market. 8#en t#is ne&s stabilises6

volatility vanis#es because t#e uncertainty related dies out3

Few examples from recent past"

[ ?ovt announced buying of shares=bonds of ndian companies through participatory

notes 6*07.

[ +// and repo rates hike by /8I.

[ Satyam iascoand 4ehman>s bankruptcy news.

[ Stringent I$ regulations.

[ ,S recession ear. /an :, :--I saw biggest ever fall of @-I points due to volatilityon account of GS fears of recession.

0ow the )uestion arises how this uncertainty leads to such aftershocks in market.

Firstly,investments by FIIshave a ma!or influence on movement of S()S(Dwhich

came into limelight during general elections of :--@. +wing to fear of reforms due to

new government there was continued selling pressure by Fs resulting in sharp decline inthe index. 4ater on when the news regarding these reforms stabilised, Fs started buying

back the shares they sold earlier. Thus aiming at pro,it booking and balancing t#e

port,olio, Fs keep relocating their funds from time to time. For example if they findgovt policies not in their favour, they would withdraw their investments from ndian

markets and invest in some other market leading to sudden crash in index.

Secondly, Indian markets are sensitive to global markets. t has been observed that

many times if 0%S3%5 closes high, SE0SE opens in green. So an unwanted newsbroke out in GS may show its effects in ndian markets leading to intra%day volatility.

Thirdly, company speciic news may cause volatile sessions in the market. From

recent example of Satyam computersltd, markets were highly volatile due to investor>ssentiment being in dilemma and anticipations about the future of company and related

conglomerates.
http://www.sharemarketbasics.com/blog/volatility-of-stock-markets-and-its-causes/http://www.sharemarketbasics.com/Terms/FII.phphttp://www.sharemarketbasics.com/Terms/BSE-Sensitive-Index-or-SENSEX.phphttp://www.sharemarketbasics.com/Terms/BSE-Sensitive-Index-or-SENSEX.phphttp://www.sharemarketbasics.com/blog/volatility-of-stock-markets-and-its-causes/http://www.sharemarketbasics.com/Terms/FII.phphttp://www.sharemarketbasics.com/Terms/BSE-Sensitive-Index-or-SENSEX.php


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Fourthly, olitical news and news related to inancetend to affect market sentiment.

4ike


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Mutual Funds &asics

'aving been through basics, one can infer that investing in mutual unds is an easy wayo playing sae in e9uity especially you being unaware of tactics of stock marketsbecause it provides professional expertise of fund managers who make investment

decisions based on constant study and market research. &esides this, it offers benefits likediversification of portfolio. Since mutual fund is a collective investment vehicle, they

have an option to invest in different sectors of market like retail, real estate in addition tooptions like debt and commodities market. This reduces the risks to which an individual

investor would have been exposed if a particular sector is in period of downfall. The

simplicity of investment and various benefits offered have made them so popular that canbe seen from their growth in past. They came into picture in BCD with CLbn assets

under management 6#,*7 compared to current figures of @C-B.@Bbn with total of D9

mutual funds available at present and still expected to grow in years to come.

4now how to deal with your 8roker or Sub!8roker

(very transaction in the stock exchange is carried out through licensed members

called brokers3

To trade in shares, you have to approach a broker 'owever, since most stock exchange

brokers deal in very high volumes, they generally do not entertain small investors. Thesebrokers have a network of sub1brokers who provide them with orders.

The general investors should identify a sub1broker for regular trading in shares and place

his order for purchase and sale through the sub!broker. The sub1broker will transmit theorder to his broker who will then execute it .

S(8Ihas laid down certain 1uidelines or "ealing with 8rokers Sub!brokers

.ere are the DOs

3eal only with S(8I!registered brokers:sub!brokers3

Ensure that the broker=sub1broker has a valid S(8I registration certiicate.

Ensure that the broker=sub1broker is permitted to transact in the market.

State clearly to the broker=sub1broker who will be placing orders on your behalf

nsist on client registration form to be signed by the broker=sub1broker before

commencing operations.

Enter into an agreement with your broker=sub1broker setting out the terms and conditionsclearly.
http://www.sharemarketbasics.com/blog/your-stock-exchange-broker-and-sub-broker/http://sharemarketbasics.com/Terms/Stock-Exchange.phphttp://sharemarketbasics.com/STOCK-broker.htmhttp://sharemarketbasics.com/what-is-a-share.htmhttp://sharemarketbasics.com/Terms/Securities-and-Exchange-Board-of-India-SEBI.phphttp://www.sharemarketbasics.com/blog/your-stock-exchange-broker-and-sub-broker/http://sharemarketbasics.com/Terms/Stock-Exchange.phphttp://sharemarketbasics.com/STOCK-broker.htmhttp://sharemarketbasics.com/what-is-a-share.htmhttp://sharemarketbasics.com/Terms/Securities-and-Exchange-Board-of-India-SEBI.php


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nsist on contract note= confirmation memo for trades done each day

nsist on bill for every settlement.

Ensure that broker>s name, trade time and number, transaction price and brokerage are

shown distinctly on the contract note.

nsist on periodical statement of accounts.

Issue c#eques+dra,ts in trade name o, t#e broker only3

Ensure receipt of payment= deliveries within @I hours of payout

n case of disputes, file written complaint to the broker=sub1broker, to the stock exchange

of which he is a member and to SE& within a reasonable time.

n case of sub1broker disputes, inform the main broker about the dispute within amaximum of C months.

Familiarise yourself with the rules, regulations and circulars issued by the stock

exchanges=SE& before carrying out any transactions.

%atch out or the "$)0&s

3on>t deal with unregistered broker=sub1broker

3on>t pay more than the approved brokerage to the intermediary.

3on>t undertake deals on behalf of others.

3on>t neglect to set out in writing orders for higher value given earlier over the phone.

3on>t sign blank delivery instruction slip6s7 while meeting security pay1in obligation

3on>t accept unsigned=duplicate contract note=confirmation memo

3on>t accept contract note=confirmation memo signed by any unauthorised person.

3on>t delay payment=deliveries of securities to the broker= sub1broker.

Don5t get carried a&ay by luring advertisements

3on>t be led by market rumours or get into shady transactions


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SI

Systematic Investment lan is a eature speciically designed or those who are

interested in investing periodically rather than making a lump sump investment3

It is Gust like a recurring deposit with the post oice or bank where you put in

a small amount every month3 &he dierence here is that the amount isinvested in a mutual und3

In simple words Systematic investment planB is a simpleB time!honored strategy

designed to help investors accumulate wealth in a systematic manner over the long!

term.

Stock *arket Quotes

W % stock brokeris one who invests other people>s money until its all gone.X 1$oody

%llen, %merican Film Maker

W %verage investorswho try to do a lot of trading will only make their brokers rich.X

1Michael /enson,Finance *rofessor 1'arvard.

W $e have two classes of orecasters" Those who don>t know and those who don>t know

they don>t know.X 1

1/hon enneth ?albraith.

W Most investorsdon>t even stop to consider how much business a company does. %ll

they look at are earning per share and net assets per share.X 1enneth 4 Fisher, StockMarket ?uru.

W 8ullsmake money. 8earsmake money. *igs get slaughtered.X 1%nonymous

W 8uy high and sell low. $hat investors should not do, but it happens far to often.X1%nonymous.

W f you>re going to panic, panic early.X 1%nonymous.

W *arkets change, tastes change, so the companies and the individuals who choose to

compete in those markets must change.X 1%n $ang.

W I never attempt to make money on t#e Stock Market3 I buy on t#e assumption t#at t#eycould close t#e market t#e net day t#e net day not reopen it ,or ,ive years3 X 1$arren

&uffet.

W Sometimes your best investmentsare the ones you don>t make.> 13onald Trump.
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W Investment *anagementU %n Exercise where you make ma!or decisions, in public, on

the basic of filmsy information in a system largely governed by chance, when you may be

wrong 9- of the time, Yand you have to go back and do it again.X 1s called a broker because after dealing with him you are.X 1%nonymous

W The road to success in investing is paved with independce of spirit, decisiveness and the

courage of one>s convictionX 1*eter 4. &ernstein.

Documents

20 Equity Market