Institute of Career In Financial Market

ICFM - Institute of Career In Financial Market is a market leader in the

segment of financial market education. It is a unit of career pro ventures
limited, a diversified education corporate. At ICFM, we deliver the
cutting edge training to people willing to make career in financial
markets. Our programs are not ordinary "run of the mill" programs. Our
programs bring extensive focus on "next generation technologies" which
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Chapter 1.1: Basics Of Share Market Explained

WHY DO WE INVEST?
To make sure we have enough funds to be prepared for the future. Simply earning and saving is
not enough. Inflation the price-rise beast eats into the value of your money. To make up for
the loss through inflation, we invest and earn extra. This is the investment fundament. The stock
market is one such investment avenue. It has a history that goes way back to the 1800s.

Earlier, stockbrokers would converge around Banyan trees to conduct trades of stocks. As the
number of brokers increased and the streets overflowed, they simply had no choice but to
relocate from one place to another. Finally in 1854, they relocated to Dalal Street, the place
where the oldest stock exchange in Asia the Bombay Stock Exchange (BSE) is now located. It
is also Indias first stock exchange and has since then played an important role in the Indian
stock markets. Even today, the BSE Sensex remains one of the parameters against which the
robustness of the Indian economy and finance is measured.
So Lets Start With Share Market Basics.
WHAT IS SHARE MARKET?

A share market is where shares are either issued or traded in.

A stock market is similar to a share market. The key difference is that a stock market helps you
trade financial instruments like bonds, mutual funds, derivatives as well as shares of companies.
A share market only allows trading of shares.
The key factor is the stock exchange the basic platform that provides the facilities used to
trade company stocks and other securities. A stock may be bought or sold only if it is listed on an
exchange. Thus, it is the meeting place of the stock buyers and sellers. India's premier stock
exchanges are the Bombay Stock Exchange and the National Stock Exchange.
KINDS OF STOCK MARKET
There are two kinds of share markets primary and second markets
Primary Market:
This where a company gets
registered to issue a certain
amount of shares and raise
money. This is also called getting
listed in a stock exchange.
A company enters primary
markets to raise capital. If the
company is selling shares for the
first time, it is called an Initial
Public Offering (IPO). The
company thus becomes public.
.
Secondary Market:
Once new securities have been sold in
the primary market, these shares are
traded in the secondary market. This is to
offer a chance for investors to exit an
investment and sell the shares. Secondary
market transactions are referred to trades
where one investor buys shares from
another investor at the prevailing market
price or at whatever price the two parties
agree upon.
Normally, investors conduct such
transactions using an intermediary such as
a broker, who facilitates the process.
WHAT ARE THE FINANCIAL INSTRUMENTS
TRADED IN A STOCK MARKET?
Now that we have understood what a stock market is, let us understand the four key financial
instruments that are traded:
Four keys of financial instruments
Bonds:
Companies need money to undertake
projects. They then pay back using the
money earned through the project. One
way of raising funds is through bonds.
When a company borrows from the bank in
exchange for regular interest payments, it is
called a loan. Similarly, when a company
borrows from multiple investors in
exchange for timely payments of interest, it
is called a bond.
Mutual Funds:
These are investment vehicles that allow
you to indirectly invest in stocks or bonds. It
pools money from a collection of investors,
and then invests that sum in financial
instruments. This is handled by a
professional fund manager.
This is either through a rise in the value of
the units or through the distribution of
dividends-money to all unit-holders
Secondary Market:
The share market is another place for
raising money. In exchange for the
money, companies issue shares. Owning
a share is akin to holding a portion of the
company. These shares are then traded in
the share market. Consider the previous
example; your project is successful and
so, you want to expand it.
Derivatives:
The value of financial instruments like
shares keeps fluctuating. So, it is difficult
to fix a particular price. Derivatives
instruments come handy here.
These are instruments that help you
trade in the future at a price that you fix
today. Simply put, you enter into an
agreement to either buy or sell a share or
other instrument at a certain fixed price.
WHAT DOES THE SEBI DO?
Stock markets are risky. Hence, they need to be regulated to protect investors. The
Security and Exchange Board of India (SEBI) is mandated to oversee the secondary and
primary markets in India since 1988 when the Government of India established it as
the regulatory body of stock markets. Within a short period of time, SEBI became an
autonomous body through the SEBI Act of 1992.
 Chapter 1.2: Getting familiar with market-
related concepts
WHAT IS MARKET CAPITALIZATION?

Different companies issue varied amounts of shares when they get listed. The value of
one share also differs from that of another companys stock. Market capitalization
smoothens out these differences. It is the market stock price multiplied by the total
number of shares held by the public. It, thus, reflects the total market value of a stock
taking into consideration both the size and the price of the stock. For example, if a
stock is priced at Rs. 50 per share, and there are 1,00,000 shares in the hands of public
investors, then its market capitalization stands at Rs. 50,00,000.
WHAT DOES COST AVERAGING MEAN?

Rupee-cost averaging is a concept when you buy a stock in small bunches, instead of
buying in lump-sum. This helps reduce the average cost of your investment.
Let us use an example. Suppose you bought 100 shares of a company costing Rs. 10
each, your total investment cost is Rs. 1000. Instead of that, if you buy 50 shares for
Rs. 100 and 50 for Rs. 95, your total cost of investment would be lower. Not just that,
even your average cost per share would be lower. This is called rupee-cost averaging.

This concept comes handy when a stock falls after you have bought it. The fall in share
price gives you an opportunity to buy more and reduce your average cost of
investment. This way, when you finally sell the shares at some time in the future, you
end up making more profits.
 Chapter 1.3: HOW DOES SHARE MARKET
WORK?
Ask any layman about the share market investing, and they will tell you that they
dont know about stock trading. Yet, the stock market is one of the largest avenues
for investment. As many as rs. 6 lakh crore-worth stocks have been traded in the
two stock exchanges in india on some occasions. Stock market investing is often
called a gamble. It would cease to be a gamble if you understood the basics of the
share market.

In the previous section, you were introduced to the different market participants
and other share market basics. Lets try to stitch these narratives together and
understand how the stock market works.
STOCK MARKET PARTICIPANTS
 Once listed, the stocks issued can be
traded by the investors in the secondary
market. This is where most of the trading
happens. In this market, buyers and
sellers gather to conduct transactions to
make profits or cut losses.
Your broker passes on your buy order to
the exchange, which searches for a sell
order for the same share. Once a seller
and a buyer are fixed, a price is agreed
finalized, upon which the exchange
communicates to your broker that your
order has been confirmed.
Stock brokers and brokerage firms are
entities registered with the stock
exchange. They act as an intermediary
between you, as an investor, and the
stock exchange
The exchange ensures that the trade is
honoured during the settlement#.
Whether the seller has the required
stock to sell or not, the buyer will
receive his shares. If a settlement is not
upheld, the sanctity of the stock
market is lost, because it means trades
may not be upheld.
HOW YOUR ORDER IS PROCESSED
WHAT ARE STOCK INDICES?
From among the stocks listed on the exchange, some similar stocks are selected and
grouped together to form an index. This classification may be on the basis of the
industry the companies belong to, the size of the company, market capitalization or
some other basis. For example, the BSE Sensex is an index consisting of 30 stocks.
Similarly, the BSE 500 is an index consisting of 500 stocks.
The values of the grouped stocks are used to calculate the value of the index. Any
change in the price of the stocks leads to a change in the index value. An index is thus
indicative of the changes in the market.

Some of the important indices in India are:

1. Benchmark indices BSE Sensex and NSE Nifty
2. Sectoral indices like BSE Bankex and CNX IT
3. Market capitalization-based indices like the BSE Smallcap and BSE Midcap
4. Broad-market indices like BSE 100 and BSE 500
HOW IS INDEX VALUE CALCULATED?
Contact Details
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THANK
YOU....