 A stock market or equity market is a market for the

trading of company stock (shares) and derivatives at

an agreed price.
 The size of the world stock market was estimated at
about $36.6 trillion USD at the beginning of October
2008.
 Shares represent a fraction of ownership in a business.
The common feature of all these is equity
participation. Different classes of shares havedifferent
voting rights.
 Ownership of shares is documented by a legal
document that specifies the amount of shares owned
by the shareholder, and other specifics of the
shares, such as the par value or the class of the shares
(if any).
 These days these stock certificates have been
dematerialized.(No physical document!)
 A shareholder (or stockholder) is an individual or
company (including a corporation) that legally owns
one or more shares of a company.
 Shareholders are granted privileges depending on the
class of stock, including the right to vote on matters
such as elections to the board of directors, the right to
share in distributions of the company's income, the
right to purchase new shares issued by the
company, and the right to a company's assets during a
liquidation of the company.
 Shareholdersvary from individual stock investors to
large hedge fund traders.
 A company may want additional capital to invest in
new projects.
 The promoters may simply wish to reduce their
holding, freeing up capital for their own private use.
 Once a company is listed, it will be able to issue further
shares via a rights issue, thereby again providing itself
with capital for expansion without incurring any
debt.
 Financing a company through the sale of stock in a
company is known as equityfinancing.
 The shares of a company are in general be transferrable
from one shareholder to another . This leads to buying
and selling of shares termed astrading.

 Investors usually buy and sell shares on the exchanges

through a stock brokers registered with the exchange.
 A company may list its shares on an exchange by
meeting and maintaining the listing requirements ofa
particular stock exchange.
 At any given moment, the price is strictly a result of
supply and demand. The supply is the number of
shares offered for sale at any one moment. The
demand is the number of shares investors wish to buy
at exactly that sametime.
 Actual trades are based on an auction market model
where a potential buyer bids a specific price for a stock
and a potential seller asks a specific price for the stock.
(Buying or selling at market means you will accept any
ask price or bid price for the stock, respectively.) When
the bid and ask prices match, a sale takes place.
 The set of conditions imposed by a given stock exchange
upon companies that want to be listed on that exchange.
 Examples include minimum number of shares
outstanding, minimum market capitalization,and
minimum annual income.
 These requirements vary from exchange to exchange.
Example: Bombay Stock Exchange (BSE) has
requirements for a minimum market capitalization of Rs.25
Cr and minimum public float equivalent to Rs.10 Cr
whereas the London Stock Exchange has requirements
for a minimum market capitalization (£700,000) .
 Through a stock broker: They arrange the transfer of stock
from a seller to a buyer. Both the buyer and the seller of the
share pay commission known as brokerage to the broker.
 Directly from thecompany:
1. If at least one share is owned, most companies will allow
the purchase of shares directly from the company
through their investor relationsdepartments.
2. A direct public offering is an initial public
offering(IPO) in which the stock is purchaseddirectly
from the company, usually without the aid of brokers.
 Margin Buying
Buying stock on margin means buying stock with money
borrowed against the stocks in the same account. These
stocks, or collateral, guarantee that the buyer can repay the
loan; otherwise, the stockbroker has the right to sell the
stock to repay the borrowed money. The broker usually
charges 8-10% interest on margin borrowing.
 Short selling
In short selling, the trader borrows stock (usually from his
brokerage) then sells it on the market, hoping for the price
to fall. The trader eventually buys back the stock, making
money if the price fell in the meantime and losing money if
it rose.
 Fundamental analysis refers to analyzingcompanies
by their financial statements found inSEC
Filings, business trends, general economicconditions
and the growth prospects of company's market
segment. A few parameters which are looked upon
include Price to Earnings (PE) Ratio, Price toBook
Value ratio, Equity to Debtratio.
 Technical analysis studies price actions in markets
through the use of charts and quantitative techniques
to attempt to forecast price trends regardless of the
company's financial prospects. A few examplesinclude
Trend lines, Bollinger Bands, Oscillatorsetc.
 P ricepershare
P/ E Ratio
AnnualEarningspershare

MarketCapitalization
P / B Ratio
T angibleassets- liabilities
Up Trend-Line
Bollinger Bands
 The movements of the prices in a market or section of
a market are captured in price indices called stock
market indices. Such indices are usually market
capitalization weighted, with the weights reflecting
the contribution of the stock to the index. Examples of
index include Sensex, Nifty, DJIA, S&P500, Nikkei etc.
 The constituents of the index are reviewed frequently
to include/exclude stocks in order to reflect the
changing business environment.
 Raising capital for businesses
 Government capital-raising fordevelopment
projects
 Mobilizing savings for investment
 Facilitating company growth throughacquisitions
 Creating investment opportunities forsmall
investors
 Barometer of the economy
 Sometimes the market seems to react irrationally to
economic or financial news. This may 'temporarily'
move financial prices away from their long term
aggregate price 'trends'. (Positive or up trends are
referred to as bull markets; negative or down trends
are referred to as bear markets). Over-reactionsmay
occur—so that excessive optimism (euphoria) may
drive prices unduly high or excessive pessimism may
drive prices unduly low.
 A stock market crash is often defined as a sharp dip
in share prices of equities listed on the stock
exchanges. In parallel with various economic factors, a
reason for stock market crashes is also due to panic
and investing public's loss of confidence. Often, stock
market crashes burst speculative economic bubbles.
 Famous stock market crashes have lead to the loss of
billions of dollars and wealth destruction on a massive
scale.
 Questions?