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Equity Market (English Medium)

RAVINDRA BHARTI EDUCATION INSTITUTE PVT. LTD. WE BELIEVE IN EXCELLENCE AN ISO 9001:2015 CERTIFIED INSTITUTE REVISED EDITION – 08 Revision Date : 1st Jan 2023

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Table of Contents 1 Basics Of Stock Market.........................................................................8 1.1 What Is a Share :............................................................................8 1.2 Investment :.................................................................................11 1.2.1 Fixed Income Instrument:.....................................................11 1.2.2 Equity :...................................................................................12 1.2.3 Precious Metals :...................................................................12 1.2.4 Real Estate :...........................................................................12 1.2.5 Mutual Fund :........................................................................13 2 Primary Market...................................................................................13 2.1 Why A Company Is Listed On A Stock Market.............................13 2.2 What Is An IPO.............................................................................14 2.2.1 IPO – Initial Public Offer........................................................14 2.2.1.1 Eligibility norms for making an IPO.................................15 2.2.2 What Is Share Price –.............................................................17 Face Value & Premium.....................................................................17 2.2.3 Face Value:............................................................................17 2.2.4 Premium:...............................................................................17 2.2.5 Types Of IPO..........................................................................18 2.2.5.1 Fix Price IPO -..................................................................19 2.2.5.2 Book Building IPO -.........................................................19 3 of 65

2.2.6 Rules and Guidelines of SEBI Related to IPO.........................20 2.2.7 How To Select An IPO............................................................21 2.2.8 IPO Application Procedure....................................................22 3 Demat Account...................................................................................23 3.1 Saving Bank Account:...................................................................24 3.2 Trading Account:..........................................................................24 3.3 Demat Account:...........................................................................25 3.3.1 Demat Transaction................................................................25 3.3.2 What does T+2 Settlement Mean?.......................................26 3.4 Stock Broker.................................................................................27 4 Secondary Market..............................................................................30 4.1 Market Timing..............................................................................30 4.1.1 Pre-Open Session -................................................................30 4.1.2 Regular Trading Session:.......................................................31 4.1.3 The Closing Session...............................................................31 4.2 Block Deals:..................................................................................32 4.2.1 Block Deal Session Timings:...................................................32 4.3 Bulk Deal......................................................................................33 5 Stock Exchange and Market Regulatory.............................................34 5.1 National Stock Exchange (NSE) Of India......................................34 5.2 Bombay Stock Exchange (BSE) Of India.......................................35 4 of 65

5.3 Regional Stock Exchanges (RSE):..................................................36 5.4 Securities and Exchange Board of India - SEBI.............................36 5.4.1 Role and Responsibilities of SEBI...........................................37 5.5 What are the Powers of SEBI.......................................................38 6 Indices :...............................................................................................40 6.1 NIFTY-50.......................................................................................40 6.2 SENSEX.........................................................................................41 6.3 Categorization Of Companies Listed on Stock Markets...............42 6.4 Categorization Of Stock By Market Capital..................................43 6.5 Categorization Of Stock By Sector...............................................46 7 Market Participants............................................................................51 7.1 Retail Participant:.........................................................................51 7.2 NRI (Non-Resident Indian) -.........................................................51 7.3 Domestic Institutional Investor DII -............................................51 7.4 AMC - Asset Management Company -.........................................51 7.5 FII - Foreign Institutional Investor -..............................................52 8 Corporate Action & Its Impact On Stock Price...................................53 8.1 DIVIDENDS...................................................................................53 8.2 BONUS SHARES............................................................................54 8.3 STOCK SPLIT.................................................................................54 8.4 RIGHTS ISSUE...............................................................................55 5 of 65

8.5 BUYBACKS....................................................................................56 8.6 Important Dates...........................................................................57 8.7 Ex Date –......................................................................................57 8.7.1 Record Date /........................................................................57 BC Open -BC Close –.........................................................................57 8.7.2 ND Open /ND Close –............................................................58 9 Investment Vs Trading........................................................................60 9.1 Investment :.................................................................................60 9.1.1 Investment In Delivery Based Trading –................................60 9.1.2 Exchange Traded Fund (ETF).................................................61 9.1.2.1 Types of ETF....................................................................63 9.2 Trading :.......................................................................................67 9.2.1 Intraday Trading:...................................................................68 9.2.2 Positional Trading:.................................................................70 9.2.3 Margin & Exposure................................................................71 9.2.4 Square Off :............................................................................72 9.3 Some Valuable Advice..................................................................73 9.4 Volume Analysis...........................................................................74 9.5 Market Position............................................................................75 9.5.1 Long Position :.......................................................................76 9.5.2 Short Position :......................................................................77 6 of 65

9.5.3 Trade Auction & It’s Penalty..................................................77 9.5.4 BTST.......................................................................................78 10 Trading Tips......................................................................................79 and Benefits of Investment.....................................................................79 10.1 Trading Tips................................................................................79 10.2 Benefits Of Investment..............................................................82

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1 Basics Of Stock Market 1.1 What Is a Share : What is meant by Share? Word Share is self explanatory. It means, a person who holds a share by way of investment has part of ownership in the company. This means you own a company to the extent you hold shares. For example, if a person holds 1.0% shares then he is owner of company to the extent of 1.0%. Company distributes its profit to its share holders in proportion to the shares held by shareholders. This profit is distributed in the form of Dividend. Since you have decided to enter in the Stock Market; therefore, you must remember one thing that Stock Market must be your secondary source of income rather than primary source of income. You are required to desist from the practice that bread and butter or day to day expenses of your family shall be born on the income generated from stock market. Many people are of the view that if I leave my job or business and start trading in stock market then I shall become rich and wealthy, had it been so simple then whole lot of people would have been doing trading in stock market leaving all other activities. Why to put in efforts when money can be made by easy means. It is therefore, imperative that whatever we earn through our job or business, we must selectively invest in shares of different companies, mutual funds so that the same grows to a gig corpus over a period of time. 8 of 65

There are two ways to invest – One is Trading and the other is Investment. We see around many people, who have earned big profit by making Long Term Investment. There are only a few who had made it big by way of Trading. As you are entering into the world of Stock Market, I would like to make few things very clear – First of all, you have to decide whether you want to become a Trader or an Investor or both. I personally make this suggestion to you that you should make a beginning from investment. This is because when we take informed decision after studying fundamentals of a company to buy shares in delivery, we are not concerned for the drop in share price. We have made full payment for the shares and taken its delivery. So we can hold these shares till the price recovers as there is no time limit to exit our such position. However, those who are more inclined towards Trading do not like the idea of investment. Still, I will advise you to focus on investment rather than trading. This is based on my personal experience of last so many years. In spite of all this, if some one is keen on trading then it is my strong recommendation to follow golden rule of 80:20. 80:20 rule means, from your disposal income use 80% for investment and remaining 20% in trading. This way you can balance your portfolio. Let us assume that you lost 20% amount through trading, still you can make up to the extent of 20-25% through 9 of 65

investment. This way you will at least recover your loss made in trading through investment. On the contrary, if you made some profit in trading, only then you shall continue trading. For example – You have a portfolio of Rs 5Lakh. Out of which, 80% i.e. Rs 4 Lakh is in investment and remaining 20% i.e. Rs 1 Lakh is in trading. In case you are making profit through trading on Rs 1 Lakh corpus then and only then you shall continue to do trading. Many times it so happens that we make profit in trading and therefore in pursuit of getting rich quickly, we take out money from investment and put it in trading. This is strictly not Allowed. Continue to do trading and transfer excess money to investment. If you intend to increase the amount for trading then you should also increase proportionate amount for investment as well so that the ratio of 80:20 is maintained. In case you suffer loss in trading then please do not put more money in trading. In trading, there is greater need to follow rules and maintain discipline. And if you feel that you can follow strategy with discipline then you may continue to do trading. However, if you feel that you are not able to maintain discipline then you won't be able to follow strategy resulting in loss. In such a situation, you shall not do trading. 1.2 Investment : Everyone is attracted towards stock market to make money. We need to make investment to get returns. Let us 10 of 65

go through some of the available options in stock market where we can get better returns. 1.2.1 Fixed Income Instrument: There is very little risk involved in this asset class. However, we only get fixed returns by investing in this asset class. Often returns in this asset class are not adequate to beat the inflation though we get fixed returns. 1. Fixed Deposit 2. Government Bonds 3. Corporate Bonds 1.2.2 Equity : Though there is risk involved in this asset class. However, we can earn better returns after beating inflation. By investing in this asset class, we can earn good returns. We can buy and sell shares of companies which are listed on the stock exchanges. 1.2.3 Precious Metals : In this asset class you can invest in precious metals like Gold and Silver. Investment in this asset class can bring very good returns in the long run. 1.2.4 Real Estate : In Real Estate asset class you can invest in Apartment, Commercial buildings, Plot etc. You may earn two types of income viz. Rental and Capital Appreciation.

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1.2.5 Mutual Fund : In this asset class you can invest in stock market through experts in the market who provide different mix of shares by creating a portfolio. You may have heard about SIP, Lump sum etc. 2

Primary Market

Companies require funds for capital expenditure for business expansion. Therefore, the company offers to general public to buy shares for the first time. This is called Initial Public Offering i.e. IPO. Through IPO, general public buy shares directly from the company that is why it is called Primary Market. 2.1 Why A Company Is Listed On A Stock Market Companies require funds for capital expenditure for business expansion. Public companies can turn to investors to raise capital. This may be needed for either of the following reasons – 1. Expansion 2. Debt free In a listed company, investors can trade the stock daily – and in an easier way than in unlisted companies. Investors are further promised continuous access to information concerning all factors that may affect the valuation of the company. As the stock is traded in a marketplace, the company is given a fair market value. 2.2 What Is An IPO A company wishing to raise funds so by offering shares to the general public for the first time. This is called an IPO 12 of 65

or Initial Public Offering. This provides an opportunity to the general public to directly participate in the offering. By looking closely to the business of the company and its potential to grow, any ordinary investor can buy shares.

2.2.1 IPO – Initial Public Offering An Initial Public Offering (IPO) refers to the process of offering shares of a private company to the public in a new stock issuance. Public share issue, allows a company to raise capital from public investors. The transition from a private to a public company is an important time for private investors to fully realize gains from their investment as it typically includes share premiums for current private investors. It also allows public investors to participate in the offering. 2.2.1.1 Eligibility norms for making an IPO There are strict guidelines set by the Govt. of India for a company to raise capital through IPO. SEBI has stipulated the eligibility norms for companies planning an IPO which are as follows: Entry Norm I (Profitability Route) a) Net tangible assets of at least Rs. 3 crore in each of the preceding three full years of which not more than 50% are held in monetary assets. However, the limit of 50% on monetary assets shall not be applicable in case the public offer is made entirely through Offer for Sale. b) Minimum of Rs. 15 crore as average pre-tax operating profit in at least three years of the immediately preceding five years. 13 of 65

c) Net worth of at least Rs. 1 crore in each of the preceding three full years. d) If there has been a change in the company’s name, at least 50% of the revenue for preceding one year should be from the new activity denoted by the new name e) The issue size should not exceed 5 times the pre-issue net worth Alternative routes To provide sufficient flexibility and also to ensure that genuine companies are not limited from fund raising on account of strict parameters, SEBI has provided the alternative route to the companies not satisfying any of the above conditions, for accessing the primary market, as under: Entry Norm II (QIB Route) Issue shall be through book building route, with at least 75% of net offer to the public to be mandatory allotted to the Qualified Institutional Buyers (QIBs). The company shall refund the subscription money if the minimum subscription of QIBs is not attained. Once you apply for shares through IPO and you are successful to get shares then you become shareholders of the company to the extent of shares held by you. When a company issues an IPO, its share price and lot size is decided by the company in consultation with Stock Exchange, Merchant Banker. Shares are allotted in multiples of lot size.

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2.2.2 What Is Share Price – Face Value & Premium Once the shares are allotted to investors company is listed on the stock exchange. After listing the company on the stock exchange shares of the company can be sold or bought. The price at which the share is bought or sold on the stock exchange is called CMP or the Current Market Price. CMP has two parts Face Value and Premium CMP = Face value + Premium Price of share can be any price which is determined by market forces while buying and selling of shares. However, it can be minimum of Rs 0.05 and there is no upper limit. e.g. on 4th October 2022 market price of MRF was Rs 82825.45. 2.2.3 Face Value: Face Value means nominal or Rupee value of share as stated by the issuer. i.e. this is the original cost of the stock as printed/or listed on the share certificate. Generally it is Rs 1, Rs 2, 5 or 10. This remains fixed till the time stock is split. 2.2.4 Premium: We often see that the Face Value of stock as determined by the company is Rs 1, 2, 5 or 10. Then what is the reason that we are ready to buy the same stock at Rs 200 or 250 or any other price?? By raising capital, company is planning to expand its business, create even bigger market and increase its 15 of 65

profitability. Therefore, the company charges more for the share whose face value is fixed. This additional price we pay over the Face Value is termed as Premium. This is true for both markets for Primary as well as secondary market. Examples – • SBIN – State Bank Of India Market Price = Rs 532.70 If Face Value = 1, Then Premium = 531.70 • Infy – Infosys Ltd. Market Price = Rs 1429.40 If Face Value = 5, Then Premium = 1424.40 2.2.5 Types Of IPO There are two common types of IPO: a Fixed Price Issue IPO and a Book Building Issue IPO. A company can use either type separately or combined. By participating in an IPO, an investor can buy shares before they are available to the General public in the stock market. 2.2.5.1 Fix Price IPO In a Fix Price IPO offering price is fixed for all the investors. 2.2.5.2 Book Building IPO In Book Building IPO, a price range is given instead of fixed price. The lower price is termed as Floor Price and upper price is termed as Cut-Off Price. Difference between Floor price and Cut off price should not be more than 20%. Examples: 16 of 65

Dmart: Price Range: 295 – 299, It was listed at price Rs 603 i.e. at more than twice the offering price. And it is trading at Rs 4479 as on October 4th 2022. CDSL: Price Range: 145 – 149 It was listed at price Rs 149 and it is trading at Rs 1256.45 as on 4th October 2022. Following information is provided at the time of IPO – Price Band: 295 – 299, Face Value – 10, Tick Size – 1, Market Lot – 50 Note: Maximum Subscription Investor is Rs 2,00,000/-

Amount

For

Retail

Price Range – This is the price band for which one can apply in an IPO. Face Value – Original price or the base price of share Tick Size – This is the incremental price for which one can apply. Lot Size – One can apply in the multiples of lot size.

2.2.6 Rules and Guidelines of SEBI Related to IPO Let us have a look at some of the rules and guidelines given by SEBI related to IPO – 17 of 65

• As per SEBI minimum 25% shareholding must be with general public. • IPO must get fully subscribed otherwise all money raised is to be refunded. • Company is required to provide correct information in IPO Prospectus otherwise SEBI may initiate action against the company for any wrong or misleading information. Action may be initiated before or after the launch of IPO. • Once the Red Herring Prospectus (RHP) is approved by SEBI; IPO must be launched within one year. RHP consists of all the mandatory information which includes all information of the company right from startup to till date. It also contains information of promoters regarding their professional career as well as education. • IPO is kept open for 3 working days. If IPO is not fully subscribed during this period then it may be extended by another 2 days. 2.2.7 How To Select An IPO As retail investor it is not possible for you to conduct detailed research, however you may consider following tips – 1. Long Term Investment: If you are considering for long term investment then you may look at the following points – 1. Company's last 5 year Profit and Loss 2. Understand company's Products and Services 18 of 65

3. Market reputation for the quality of products and services 4. Whether the IPO gets oversubscribed on the first or 2nd day. This shows its demand. If you do not get it through IPO, you can always buy it in the secondary market. 2. Short Term Investment: Even if you are considering for short term investment still you may look at the following points – 1. Understand company's Products and Services 2. Market reputation for the quality of products and services 2.2.8 IPO Application Procedure ✔ Goto

✔

Https://www.angelbroking.com

Click on Login option

✔ Enter

mobile no & input the OTP received on your mobile. ✔ Input

the 4 digit Pin/login ID.

✔ Click

on product menu from right hand bottom side.

✔ Then

select Initial Public Offering.

✔ From option Live & upcoming choose the one which you want to apply. ✔ Select the subscribe option if you want to apply for that IPO.

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✔ Select UPI ID, select the no of lots you wish to apply, then select place a bid option. ✔ For further procedure you will get notification on your mobile to complete the payment. ✔ Complete the payment & you will receive the message & mail confirming your payment is received. Money in your bank account is blocked till the time allotment is done. Money gets transferred on successful allotment or else block is released. Follow-On Public Offering (FPO): any company which is already listed on the exchange can also raise fund through public for its capital needs. This arrangement is called Follow On Public Offer (FPO). FPO is also subject to necessary approval from SEBI and stock exchanges.

3

Demat Account

What is a Demat Account? Why is it required? Where do we open this account? What sort of transactions are allowed in Demat account? These are some of the questions raised in our mind. Basically, a Demat Account is for storing your shares & is similar to a bank Account which is used for storing your money. Like bank account, a Demat account holds the certificates of your financial instruments in electronic form like shares, bonds, Government Securities, Mutual Funds and Exchange Traded Funds (ETFs).

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Demat account is opened with a stock broker. Three different accounts are linked to facilitate transactions between these three accounts – 1. Savings bank Account 2. Trading Account 3. Demat Account

Saving Account (SBI, ICICI,Axis)

Trading Account (Angel, Globe, IIFL)

Demat Account (CDSL, NSDL)

3.1 Saving Bank Account: Savings bank account can be opened in any bank as you are aware of it. This is required for your financial transactions like depositing and withdrawal of money etc. 3.2 Trading Account: Trading account is opened with our stock broker like Angel One, Motilal Oswal, IIFL, Sharekhan etc. Trading account is linked to your savings account and Demat account. Trading account allows only monetary 21 of 65

transactions on the platform provided by the broker like ODIN etc. 3.3 Demat Account: Demat account is like a locker you have with your bank or security vault where in you keep important things. In Demat account you keep shares or securities in electronic form (de-material form). Demat account is linked to Trading account so that whenever you buy or sell shares, these are stored in Demat account. Demat account is with CDSL (Central Depository Services Limited) or NSDL (National Depository Services Limited). Demat account is mandatory for buying and selling of shares. 3.3.1 Demat Transaction Let us now understand how the transaction take place to facilitate buying, selling and safe keeping of shares. To start any transaction in trading account one need to have money in the account. This is achieved by transferring amount from Savings bank account to Trading account. This is called Pay-in. Amount in trading account changes as per profit or loss made for buying and or selling of shares. You may transfer money from trading account back to savings bank account. This is called Payout. You can buy or sell shares, do Intraday transactions or deal in Future and Option. Shares bought on delivery basis are transferred to Demat account. 3.3.2 What does T+2 Settlement Mean? Whenever you buy or sell a stock, bond, exchange traded fund, or mutual fund, there are two important dates to 22 of 65

understand: the transaction date and the settlement date. 'T' is the transaction date. The abbreviations T+1, T+2 and T+3 refer to the settlement dates of security transactions that occur on a transaction date plus one day, plus two days, and plus three days, respectively. As its name implies, the transaction date represents the date on which the actual trade occurs. For instance, if you buy 100 shares of a stock today, then today is the transaction date. This date doesn't change whatsoever, as it will always be the date on which you made the transaction. As its name implies, the transaction date represents the date on which the actual trade occurs. For instance, if you buy 100 shares of a stock today, then today is the transaction date. This date doesn't change whatsoever, as it will always be the date on which you made the transaction. In order to clear the transfer of a security from a seller to a buyer, it must go through a settlement process, which creates a delay between the time a trade is made ('T') and when it settles. For shares it is T+2 in India. Knowing the settlement date of a stock is also important for investors or strategic traders who are interested in dividend-paying companies because the settlement date can determine which party receives the dividend. That is, the trade must settle before the record date for the dividend in order for the stock buyer to receive the dividend.

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3.4 Stock Broker Stock brokers buy and sell stocks and other securities on behalf of clients; those clients might be individuals or institutions. Stock brokers receive a commission which is compensation for making the transaction for the client. Due to the complicated nature of investments and other factors, stock brokers must pass exams in order to become licensed to legally buy and sell securities. Despite the heavy regulation of the industry stock brokers work in, there are no required degrees someone must obtain to become a stock broker. As long as the proper licenses are obtained, a stock broker can have only a high school diploma. However, most stock brokers choose to earn a degree in order to compete in a very competitive market. Here’s what students can expect from the career and the degree pursuit. Summary: 1. Stock Broker is a licensed agent who does buying selling of shares on behalf of clients. 2. Charges commission for the same which is termed as brokerage. 3. Also provide advisory as to when shall you buy /sell or hold a particular stock. Standard Brokerage ✔ Intraday – 0.05% + GST ✔ Delivery – 0.50% + GST ✔ Future

– Rs 50 per Lot + GST 24 of 65

✔ Option

– Rs 50 per Lot + GST

(This is also dependent upon your brokerage plan and Margin Money.) Exercise: Name recently launched Two IPO's 1. IPO Name 2. IPO Type 3. Company Product & Services 4. Issue Price 5. Listed Price 6. Last Traded Price 7. Face Value, Premium 8. ROI as Per CMP

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4

Secondary Market

First time shares are issued by the company through IPO. Once these shares are allotted then to buy and sell these shares a platform is needed which is provided by stock exchanges. Companies are required to be listed on theses exchanges so that the shares of these companies can be traded. The secondary market is where investors buy and sell shares they already own. It is what most people typically think of as the "stock market," though stocks are also sold on the primary market when these are first issued. 4.1 Market Timing There is fixed time for the market and only during specified time shares can be bought or sold. This timing is divided into three sessions – 4.1.1 Pre-Open Session Before actual transactions or trade take place there is a window during which only Buy / Sell orders can be placed. These orders can be modified or canceled. However, transaction will occur only after the market has opened. Pre-open Session Timings: 1. Order Entry & Modification Open: 09:00 Hrs 2. Order Entry & Modification Close: 09:08 Hrs 4.1.2 Regular Trading Session: In the Regular Trading Session one can buy/ sell share of any listed company in Intraday, Delivery or Future &

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Option category. This is a Live session for which timing is as below – 1. Normal / Limited Physical Market Open: 09:15 Hrs 2. Normal / Limited Physical Market Close: 15:30 Hrs 4.1.3 The Closing Session Closing session is very important session especially for those who trade on Intraday basis because it is utmost necessary to square off the position before close of market. When some one fails to square off the position then the trade may go in for auction or it may attract heavy penalty. This is also Live session and the timing for this session is as below : 1. Closing session is held between 15:40 and 16:00 Hrs If you come to know after closing session that you have failed to square off your Intraday position, then you may do so by calling your broker and avoid penalty. 4.2 Block Deals: Block deal is a trade, with a minimum quantity of 5 lakh shares or minimum value of Rs. 5 crore, executed through a single transaction, on the special "Block Deal window". The window is opened for only 15 minutes 2 times a day during trading hours. Usually block deal happens when two parties agree to buy or sell securities at an agreed price between themselves and inform the stock exchange. The orders in a block deal are not shown to the people who trade from normal trade window. 27 of 65

Stock exchanges should disclose the information on block deals to the public on the same day after market hours. This should contain information bits like name of the scrip, name of the client, quantity of shares, traded price and so on. 4.2.1 Block Deal Session Timings: 1. Morning Block Deal Window: This Window Shall Operate Between 08:45 AM To 09:00 AM 2. Afternoon Block Deal Window: This Window Shall Operate Between 02:05 PM To 2:20 PM 4.3 Bulk Deal Bulk deal is a trade, where total qty bought or sold is more than 0.50% of the number of equity shares of a listed company. The trades are reflected in the daily transactions. E.g. GSK Pte Ltd. had sold their entire stake of @ 5.7% in open market through bulk deal in HUL (Hindustan Unilever) on 7th May 2020. You can see the reflection in the volumes also. https://www1.nseindia.com/products/content/equities/equities/bulk.htm

5

Stock Exchange and Market Regulatory

Stocks are bought and sold in the market where the exchange of stock take take place. This is called Stock exchange. There all 23 stock exchanges in India. Two major and most popular exchanges are NSE and BSE.

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5.1 National Stock Exchange (NSE) Of India NSE or the National Stock Exchange is the largest stock exchanges in India. In fact it is the biggest in terms of daily trading and turn over. Established in 1992, National Stock Exchange technically the most advanced exchange in India.

is

Some key information of NSE is as below – ✔ NSE

website is www.nseindia.com

✔ Nifty 50 is an Index of NSE which was started in 1995. ✔ More

than 2000 companies are listed on NSE and you can buy and sell shares of these companies. ✔ As

of October 2022, 195 stocks and 4 Indices are allowed to be trade in derivative market. ✔

Corporate office of NSE is in Mumbai at Bandra.

5.2 Bombay Stock Exchange (BSE) Of India Bombay Stock Exchange is the oldest stock exchange of Asia. BSE was established in 1875. This is one of the two premier stock exchanges in India. Some key information of BSE is as below – ✔ Website

of BSE is www.bseindia.com

✔ Sensitive index of BSE is SENSEX which reflects the state of economy of the country. This is the benchmark equity Index. SENSEX was started in 1986. ✔

More than 4500 companies are listed in BSE. 29 of 65

✔ BSE is the first exchange in India to start Equity Derivatives. ✔ Corporate office of BSE is located in Mumbai and is a landmark building. 5.3 Regional Stock Exchanges (RSE): Different regions of the country having substantial commercial activity are having Regional Stock Exchanges (RSE). Regional stock exchanges in India started spreading its business operation from 1894. The first RSE in India was set up at Ahmadabad Stock Exchange (ASE) followed by Calcutta Stock Exchange (CSE) in 1908. Exercise : Provide List Of All Regional Stock Exchanges 5.4 Securities and Exchange Board of India - SEBI SEBI Stands For Securities Exchange Board Of India. The Securities and Exchange Board of India was established on April 12, 1992 in accordance with the provisions of the Securities and Exchange Board of India Act, 1992. The basic functions of the Securities and Exchange Board of India is to protect the interests of investors in securities market, to promote the development of securities market and to regulate the securities market. 5.4.1 Role and Responsibilities of SEBI Being a statutory regulatory body entrusted with the responsibility to regulate the Indian capital markets, it monitors and regulates the securities market and protects the interests of the investors by enforcing certain rules and regulations.

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The objective of SEBI is to ensure that the Indian capital market works in a systematic manner and provide investors with a transparent environment for their investment. To put it simply, the primary reason for setting up SEBI was to prevent malpractices in the capital market of India and promote the development of the capital markets. Mutual Funds are managed by Asset Management Companies (AMC) which need to be approved by SEBI. A Custodian who is registered with SEBI holds the securities of various schemes of the fund. The trustees of the AMC monitor the performance of the mutual fund and ensure that it works in compliance of SEBI Regulations. The functions and powers of SEBI have been listed in the SEBI Act,1992. SEBI caters to the needs of three parties operating in the Indian Capital Market. These three participants are mentioned below: 1. Issuers of the Securities: Companies that issue securities are listed on the stock exchange. They issue shares to raise funds. SEBI ensures that the issuance of Initial Public Offerings (IPOs) and Follow-up Public Offers (FPOs) can take place in a healthy and transparent way. 2. Protects the Interests of Traders & Investors: It is a fact that the capital markets are functioning just because the traders exist. SEBI is responsible for safeguarding their interests and ensuring that the investors do not become victims of any stock market fraud or manipulation.

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3. Financial Intermediaries: SEBI acts as a mediator in the stock market to ensure that all the market transactions take place in a secure and smooth manner. It monitors every activity of the financial intermediaries, such as broker, sub-broker, NBFCs, etc

5.5 What are the Powers of SEBI In order to have regulatory controls, Securities and Exchange Board of India has the following three powers: 1. Quasi-Judicial: With this authority, SEBI can conduct hearings and pass ruling judgments in cases of unethical and fraudulent trade practices. This ensures transparency, fairness, accountability and reliability in the capital market. SEBI PACL case is an example of this power. 2. Quasi-Legislative: Powers under this segment allow SEBI to draft rules and regulations for the protection of the interests of the investor. One such regulation is SEBI LODR (Listing Obligation and Disclosure Requirements). It aims at consolidating and streamlining the provisions of existing listing agreements for several segments of the financial market like equity shares. This type of regulation formulated by SEBI aims to keep any malpractice and fraudulent trading activates at bay. 3. Quasi-Executive: SEBI is authorized to file a case against anyone who violates its rules and regulation. It is empowered to inspect account books and other documents of companies as well, if it finds traces of any suspicious activity. 32 of 65

6

Indices :

A stock index or stock market index is a measurement of a section of the stock market. It is computed from the prices of selected stocks (typically a weighted average). It is a tool used by investors and financial managers to describe the market, and to compare the return on specific investments. A good index captures all aspects of financial markets to provide and indication where the market is heading. There are many Indices available, some are common for the whole market where are others are sector specific. 6.1 NIFTY-50 The NIFTY 50 is a well diversified 50 stock index and it represent important sectors of the economy. It represents the weighted average of 50 Indian company stocks in 13 sectors and is one of the two main stock indices used in India, the other being the BSE Sensex The base period selected for NIFTY 50 index is the close of prices on November 3, 1995, which marks the completion of one year of operations of NSE's Capital Market Segment. The base value of the index has been set at 1000 and a base capital of Rs 2 Lakh Crore. The NIFTY 50 Index represents about 66.8% of the free float market capitalization of the stocks listed on NSE as on March 29, 2019. The total traded value of NIFTY 50 index constituents for the six months ending March 2019 is approximately 53.4% of the traded value of all stocks on the NSE. 33 of 65

Value of NIFTY 50 as on Dec 2019 is above 12,000. This means that NIFTY has grown more 12 times in 24 years. 6.2 SENSEX The BSE SENSEX (also known as the S&P Bombay Stock Exchange Sensitive Index or simply the SENSEX) is a freefloat market-weighted stock market index of 30 wellestablished and financially sound companies listed on Bombay Stock Exchange. The 30 component companies which are some of the largest and most actively traded stocks, are representative of various industrial sectors of the Indian economy. Published since 1 January 1986, the S&P BSE SENSEX is regarded as the pulse of the domestic stock markets in India. The base value of the SENSEX was taken as 100 on 1 April 1979 and its base year as 1978–79. On 25 July 2001 BSE launched DOLLEX-30, a dollar-linked version of the SENSEX. Value of SENSEX as on Dec 2019 is above 40,000. This means that SENSEX has grown more 400 times in 40 years. 6.3 Categorization Of Companies Listed on Stock Markets There are many different classification systems that analysts, journalists, investors, and other market participants use to navigate, aggregate, and benchmark companies. For instance, an investor interested in comparing a company’s price-earnings ratio to its industry peers 34 of 65

require a way to quickly find the most similar companies. Mutual funds and exchange-traded funds (ETFs) tracking a specific industry similarly require a list of companies to build a portfolio. Classification/ categorization systems provide a standardized way to accomplish these goals and countless others. Since there are many different ways to classify companies, there are several different classification standards that have been developed over the years. Let’s take a look at some of the most popular categorization of companies listed on Stock Exchanges, that are in use today. 6.4 Categorization Of Stock By Market Capital There are thousands of companies that are listed with the NSE and they are divided into different categories primarily depending on market capitalization. Market capitalization is the primary factor for categorically dividing the listed stocks at the stock exchanges all over the world. Basically market capitalization is calculated by multiplying the current market price of the stock with the number of outstanding stocks in the market. While calculating the market capitalization of a company the bonds of that company at the debt market is considered as well. The market capitalization of a company is an indication of the financial position of the company. It also gives an idea of the fact that how big is the company. Primarily the stocks that are listed in the National Stock Exchange are divided into three different categories on 35 of 65

the basis of the market capitalization – large cap, mid cap and the small cap. There are certain criteria that are decided by the NSE authorities to determine which stocks will fall in the large cap segment and which one will come under the small cap category. Based on the guideline and parameters of trading by the SEBI authorities, the stocks listed at the BSE are divided. That means there are different trading guidelines and rules for each of the categories of stocks listed at the BSE or Bombay Stock Exchange. Other factors like the number of years of listing of the company are considered for determining the authenticity of the company and the business potential of the company. Primarily there are five groups in which the listed stocks are divided and they are A, B, T, Z, and F. The ‘A’ group comprises stocks that have fairly good growth rate. These companies offer dividend to the investors and have good capital appreciation over the time. The stocks that are listed with ‘A’ category have the facility to carry forward to the next settlement cycle. This is an advantage from the margin and derivative trading point of view. The category ‘B’ is basically a subset of all the listed stocks and the stocks listed in this category have greater market capitalization that the rest of the stocks.

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The trading of the stocks that are listed in the ‘T’ category needs to be settled on the same trading day (Intraday) and the deals can not be carried forward. This is done by BSE to restrict any unwanted movement in these scripts. The stocks in the ‘Z’ group are marked for not complying with the rules and regulations of the stock exchange and these stocks are often suspended from trading. The ‘F’ group is reserved for the stocks listed at the debt market. Summary Market Capitalization = No Of Shares x Price Per share = 1 Cr no. of shares x 1000 CMP = 1000 Cr Free Float Market Capitalization = Total Mcap – Promoters Mcap = 1,000 Cr – 300 Cr = 700 Cr Groups

Criteria

A

Large Cap

Mcap ≥ 20,000 Cr

B

Mid Cap

Mcap Between 5,000cr To 20,000

S

Small Cap

Mcap ≤ 5,000 Cr

T

Trade To Trade

Penny Stock, Stock Operators, Stock Manipulators

Z

Blacklisted Company, Fraud

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6.5 Categorization Of Stock By Sector Classification systems are extremely important for analysts, investors, journalists, and other market participants looking to break down companies into various sectors. Investors should understand these Sectors, especially when investing in index funds that use them to build their underlying portfolios. Industry classification categorize companies into industrial groupings based on similar production processes, products, or nature of business. Different classification is used on the basis of different criteria at different platforms. Main purpose of Industry Classification is to provide a set of activity categories that can be utilized for the collection and reporting of statistics according to such activities. An industry group is not the same as a market sector. GICS categorization system includes 11 sectors, 24 industry groups, 68 industries, and 157 sub-industries. Therefore, a market sector is typically broader than an industry group: Industrial Sectors – 1. Communication Services 2. Consumer Discretionary 3. Consumer Staples 4. Energy 5. Financial 38 of 65

6. Health Care 7. Industrial 8. Information Technology 9. Materials 10. Real Estate 11. Utilities Industrial Groups: Group

Companies for example

1. Automobiles and Components –

Tata Motors, Maruti, Hero Honda, GNA axles

2. Banks

HDFC bank, ICICI bank, SBI

3. Capital Goods

L&T, Havells India, Finolex Cables, BHEL, BEML

4. Commercial and Professional Services

Delta Corp, IRCTC, Info Edge

5. Communication Services

BSNL, Vodafone, Tata Teleservices

6. Consumer Durable and Apparel

Bajaj Electric, VIP Clothing, Rajesh Exports

7. Consumer Services

E commerce companies

8. Diversified Financials

Credit card companies,

9. Energy

Reliance Energy, Tata Power

10. Food, Beverage, and Tobacco

Food chains, ITC, VBL

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Group

Companies for example

11. Food and Staples Retailing

KRBL, Daawat

12. Health Care Equipment and Services

Apollo Hospital, Fortis

13. Household and Personal Products

P&G, Colgate

14. Insurance

HDFC Life, ICICI Lombard, SBI Life

15. Materials

Aro Granite, Kajaria

16. Media and Entertainment

ZEE, Balaji Telefilms

17. Pharmaceuticals, Biotechnology, and Life Sciences

Cipla, Divi’s Lab, Sun pharma

18. Real Estate

HUDCO, DLF, Godrej Properties

19. Retailing

V2 Retail, V Mart, Future Retail, Aditya Birla F,

20. Semiconductors and Semiconductor Equipment

Ineda Systems, SmartPlay Technologies

21. Software and Services

Wipro, TCS, HCL, KPIT

22. Technology Hardware and Equipment

TVS Electronics, Redington, D-link India

23. Transportation

VRL Logistics, TCI, 40 of 65

Group

Companies for example Interglobe Aviation

24. Utilities

GAIL, MGL

Exercise: Stock Name, LTP, MCAP, Free Float MCAP, Group, Sector 1. Nifty 50 2. Nifty Next 50 7

Market Participants

Various entities who buy or sell shares i.e. participate on stock market can be categorized as under – 7.1 Retail Participant: In this category, ordinary citizens of India carry out activities. 7.2 NRI (Non-Resident Indian) In this category, non-resident citizens of India carry out activities. 7.3 Domestic Institutional Investor DII Here Domestic Financial Institutions like LIC, Muthoot Finance, Bajaj Finserv etc carry out activities. 7.4 AMC – Asset Management Company Mutual fund companies like ICICI Prudential, HDFC Mutual Fund, Aditya Birla Sun Life etc participate.

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7.5 FII – Foreign Institutional Investor Companies based in Foreign companies participate in the market in this category. Exercise : 1. Prepare a list of at least 10 AMC 2. Case Study On FII & DII 8

Corporate Action & Its Impact On Stock Price

Investors need to understand the impact of corporate actions—events initiated by a company that impact its share price—to get their investment strategy right. A good understanding of these actions gives a clear picture of the company’s financial health, its ethical business conduct, and also helps determine whether to buy or sell a particular stock. Given below are corporate action and how they impact share price –

8.1

DIVIDENDS

Dividends are a form of regular income paid to shareholders by a company out of its profits and reserves. Also, when a company does not find any appropriate investment opportunity to deploy its funds, it declares a dividend to share its profits/reserves with the shareholders. Dividend is usually quoted per share or as a percentage of the face value of the share. For instance, if a company declares a dividend of Rs 10 per share, whose face value is Rs 10, the dividend is 42 of 65

100%. Investors’ dividend income above Rs 10 lakh is taxed at 10%. Companies are required to pay a Dividend Distribution Tax (DDT) at 20.93%. Impact: Share price usually declines in line with the level of dividend paid per share.

8.2

BONUS SHARES

These are additional shares gifted by a company to its shareholders. A 1:1 bonus issue implies that shareholders get one additional share for each share that they already hold. Generally, when a company faces liquidity issues or is not in a position to distribute the dividends, it issues bonus shares out of its profits or reserves. E.g. if Bonus share issue ie 1:3 means 1 bonus share will be issued against the 3 shares held by existing shareholder. Impact: The share price falls in the same proportion as the bonus issue ratio.

8.3

STOCK SPLIT

It refers to a split in the stock into two or more equal portions. Stock splits are generally announced by companies to make their shares affordable to small retail investors and thus make them more liquid. Once liquidity increases, more buyers and sellers trade in the stock, which, in turn, helps discover its true value. The stock is split keeping in mind its face value—not market value. For instance, if the stock’s face value is Rs 10, and there is a 1:1 split, its face value will change to Rs 5. Accordingly, the market value also gets adjusted. Stock 43 of 65

splits make sense only when the share price of a company is quite high, say above Rs1,000-1,500. In other cases, the investor has to question the logic of the company for a stock split—in an era where investors can buy even one share from the market. Impact: The share prices gets slashed in the accordance with the split ratio.

8.4

RIGHTS ISSUE

In a rights issue, fresh shares are issued by a company to its existing shareholders. But unlike bonus shares, they come at a price— usually a discounted price. To illustrate, a 1:5 rights issue implies that you are entitled to buy one additional share for every five shares you hold. Cashstrapped companies generally turn to a rights issue to raise money. It could either be for debt reduction or to finance the company’s expansion. Do check out the reason for rights issue before you opt for it, also make sure the company has a strong earnings visibility and a credible management. The tax treatment is similar to that of bonus shares. Impact: The share price falls in the same proportion as the rights issue.

8.5

BUYBACKS

It is an event when the company purchases its shares from shareholders, usually at a premium to the market price. Companies go for buybacks to consolidate their stake in the enterprise and for greater control, to support 44 of 65

the share price from declining, to improve earnings per share (as it reduces the number of outstanding shares in the market), or/and to build investor confidence in the promoters. Before you participate in buyback opportunities, ascertain the reasons why a company is doing it. We have seen IT companies like TCS and Wipro which have underperformed the indices over the last year doing buybacks. The tax treatment in the case of buybacks through a stock exchange is same as during a usual sale: Short-term capital gains are subject to 15% tax, while long-term capital gains are taxable above gains of INR 1.00 Lakhs for running financial year. Impact: A buyback may lead to a short-term spike in the share price.

*As on 28 April 2017. 8.6 Important Dates Now we know that corporate actions do impact stock price. Only those Share holder will get Dividend or Bonus who are registered with the company on a particular date. So these are important dates as given below – 45 of 65

8.7 Ex Date – For instance, Ex date is 8th March and if you want to take advantage of corporate action then you need to purchase stock before 8th March so that it is transferred to your Demat account before record date. 8.7.1 Record Date / BC Open -BC Close – The record date, or date of record, is the cut-off date established by a company in order to determine which shareholders are eligible to receive a dividend or distribution. The determination of a record date is required to ascertain who exactly a company's shareholders are as of that date, since shareholders of an actively traded stock are continually changing. The shareholders of record as of the record date will be entitled to receive the dividend or distribution, declared by the company. • The record date is the cut-off date used to determine which shareholders are entitled to a corporate dividend. • The record date will usually be the day following the ex-dividend date, which is the trading date on (and after) which the dividend is not owed to a new buyer of the stock. • To be eligible for the dividend, you must buy the stock at least two business days before the record date.

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8.7.2 ND Open /ND Close – No-delivery period means that trading during the record date would not result in any delivery of share. However, w.e.f. 1st Aug 2009, SEBI has done away with the practice of keeping shares under no-delivery during the record date for corporate announcements like bonus or dividend. Exercise: Latest 10 Corporate Actions With Ex Date 9

Investment Vs Trading

While doing stock market investment you can trade in two different ways. You can either do Intraday trading or can opt for delivery based investment. Delivery based trading wherein we hold our stocks for longer duration is termed as Investment. 9.1 Investment : In case of delivery based investment or long term investment, you can sell the stocks as and when you wish to sell or buy them. 9.1.1 Investment In Delivery Based Trading – Delivery based trading means buying shares and holding them for certain period of time is called delivery based trading. The shares you bought will be in your Demat account.

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Once you take delivery of shares you can hold them as long as you want. To take delivery of shares, you must have sufficient funds in your account. You don’t get any margin to buy shares in delivery. If you have Rs.50,000 means you can buy shares worth of Rs.50,000 and not more than this. Advantages Of Delivery Based Trading With delivery based trading, you can always hold a stock till it reaches the expected price. The long term investment can always get you dividend. You can also benefit from Rights issue, split shares, bonus stock and other benefits that the company announces. Disadvantage Of Delivery Based Trading In delivery trading you pay higher brokerage. Your investment is always susceptible to market crashes, business cycles and other factors. Whatever it is, as an investor, you should know which stock is for Intraday trading and which one is to hold as long term investment. 9.1.2 Exchange Traded Fund (ETF) An exchange-traded fund (ETF) is a type of security that involves a collection of securities—such as stocks—that often tracks an underlying index, although they can invest in any number of industry sectors or use various strategies. 48 of 65

ETF's are in many ways similar to mutual funds; however, they are listed on exchanges and ETF shares trade throughout the day just like ordinary stock. ETFs are just what their name implies: baskets of securities that are traded, like individual stocks, on an exchange. Unlike regular open-end mutual funds, ETFs can be bought and sold throughout the trading day like any stock. Most ETFs charge lower annual expenses than index mutual funds. However, as with stocks, one must pay a brokerage to buy and sell ETF units, which can be a significant drawback for those who trade frequently or invest regular sums of money. ✔ ETF share prices fluctuate all day as the ETF is bought and sold; this is different from mutual funds that only trade once a day after the market closes. ✔ ETFs can contain all types of investments including stocks, commodities, or bonds. ✔ ETFs offer low expense ratios and fewer broker commissions than buying the stocks individually. An ETF is a type of fund that holds multiple underlying assets, rather than only one like a stock. Because there are multiple assets within an ETF, they can be a popular choice for diversification. ✔

✔ This is specifically useful to those people who find it laborious and difficult to create their own portfolio.

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9.1.2.1 Types of ETF There are various types of ETFs available to investors that can be used for income generation, speculation, price increases, and to hedge or partly offset risk in an investor's portfolio. Below are several examples of the types of ETFs – 1. Equity 2. Debt 3. Gold 4. International Indices 9.1.2.1.1 Equity ETF : Equity ETF can be traded on stock markets similar to equity. Cost of trade on ETF is much lower as compared to mutual funds. Since ETF's are tracking underlying indices, therefore it is equivalent to trade on indices. Since Index trading is not allowed in equity therefore ETF's provide similar opportunity. Some of the Equity ETF's are given below – List Of Equity ETFs Listed On NSE Issuer Name

Name

Symbol

Edelweiss NIFTYEE Edelweiss AMC Exchange Traded S Scheme - Nifty ICICI Prudential ICICI Prudential INIFTY AMC Nifty ETF

Underlyi ng

Launch Date

Nifty 50 Index

8-May15

Nifty 50 Index

20-Mar13

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9.1.2.1.2 Debt ETF : Debt Exchange Traded Funds (ETFs) are simple investment products that allow the investors to take an exposure to the fixed income securities. These debt ETFs combine the benefits of debt investments with the flexibility of stock investment and the simplicity of mutual funds. These Debt ETFs trade on the cash market of the National Stock Exchange, like any other company stock, and can be bought and sold continuously at live market prices. Debt ETFs are passive investment instruments that are based on indices and invest in securities in same proportion as the underlying index. Because of its index mirroring property, there is a complete transparency on the holdings of an ETF. Further due to its unique structure and creation mechanism, the ETFs have much lower expense ratios as compared to mutual funds. Some of the Debt ETF's are given below – List Of Debt ETFs Listed On NSE Issuer Reliance Nippon Life Asset Management Limited Reliance Nippon Life Asset Management Limited

Name

CPSE ETF Reliance ETF Dividend Opportunitie s

Symbol

CPSEETF RELDIVO PP

Underlying

Nifty CPSE Index Nifty Dividend Opportu nities 50

Launch Date

14-Mar

14-Apr

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9.1.2.1.3 Gold ETF : Gold Exchange Traded Funds (ETFs) are simple investment products that combine the flexibility of stock investment and the simplicity of gold investments. ETFs trade on the cash market of the National Stock Exchange, like any other company stock, and can be bought and sold continuously at market prices. Gold ETFs are passive investment instruments that are based on gold prices and invest in gold bullion. Because of its direct gold pricing, there is a complete transparency on the holdings of an ETF. Further due to its unique structure and creation mechanism, the ETFs have much lower expenses as compared to physical gold investments. Some of the Gold ETF's are given below – List Of Gold ETFs Listed On NSE Issuer

Name

AXIS MUTUAL AXIS GOLD ETF FUND CANARA CANARA ROBECO GOLD ROBECO MF ETF IDBI AMC

IDBI GOLD ETF

Symbol AXISG OLD CANG OLD

Underl Launc ying h Date NovGold 10 Gold

Mar12

IDBIGO Gold LD

Nov11

9.1.2.1.4 International Indices Global Equity Exchange Traded Funds (ETFs) are simple investment products that allow the domestic investors to take an exposure to international indices. These ETFs trade on the cash market of the National Stock 52 of 65

Exchange, like any other company stock, and can be bought and sold continuously at market prices. ETFs are passive investment instruments that are based on indices and invest in securities in same proportion as the underlying index. Because of its index mirroring property, there is a complete transparency on the holdings of an ETF. Further due to its unique structure and creation mechanism, the ETFs have much lower expense ratios as compared to mutual funds. Some of the International Indices ETF's are given below – Issuer

Name

Symbol

Underlyi ng

Launch Date

MOTILAL OSWAL AMC

MOST SHARES NASDAQ 100

N100

NASDAQ 100

29MAR-11

HNGSNG BEES

HANGSE NG

10-MAR

RELIANCE NIPPON RELIANCE LIFE ASSET ETF HANG MANAGEMENT SENG BEES LIMITED 9.2 Trading :

Intraday trading is typically completed within a day that means you have sell the stocks that you have purchased that day before the closing of the exchange. Even if you do not sell the stocks by yourself, they will automatically square off before the closing of the exchange. In share market each and every trader has an option to choose the type of trading from the two main available 53 of 65

option i.e, Intraday and Positional. It is not necessary to choose one of them, the trader can choose both options for the trading with his single Demat Account. But trader has to choose his type of trading according to his investment decision, which will help to create wealth. 9.2.1 Intraday Trading: As a trader in the stock market, one can buy or sell shares from the secondary market to achieve short term goals. As the name Intraday define itself that a trader can open a position and close that position in same day. It is also known as 'Day Trading' and it is simple in which trader is allowed to buy or sell contracts or shares for the short duration of time. That means traders cannot hold the position overnight. Margin required for Intraday trading is as low as 20% or even less. For instance, you want to buy stock having its share price at Rs 1000. For 100 shares you need Rs 1,00,000 on delivery basis. For the same stock for 100 shares at 20% margin you need only Rs 1,00,000 x 20/100 = Rs 20,000 only. Risk involved is high as it is required to be squared off the same day. However, you can earn decent amount by having discipline. Advantages Of Day Trading – In day trading you can buy stocks without paying for the full price of the stocks. The market makers allow you pay only a part of the price to hold the shares. 54 of 65

So, you can gain more by investing less. In day trading you can always short sell the stocks that mean you can always sell the stocks before buying them and then buy the stocks before the closing of the market. This is one benefit that can give you profit even when the price of the stock is sure to fall. The brokerage of the Intraday trading is always lower than the delivery trading. In day trading you are getting the profit on the very day. So, you investment is for a few hours only. Therefore, even if the stock price rises, a little your profit percentage is significant. You get back the money each day after the market closes and hence you can always start afresh the next morning. Disadvantages Of Intraday Trading The biggest disadvantage of Intraday trading is the time frame. You have to sell the stocks within a day. So, if the stock loses price you are sure to lose money. 9.2.2 Positional Trading: Position trading involves holding trades for weeks or months. Position trader refers to an individual who holds an investment for an extended period of time with the expectation that it will appreciate in value. The average time frames for holding positions can be measured in weeks to months. They are less concerned with short-term fluctuations and the news of the day unless it impacts the long term view of their position. 55 of 65

For Position trading you need technical analysis, fundamental analysis, or a combination of both to make trading decisions. To be successful in Position trading one has to identify the entry / exit levels and have a plan in place to control risk via stop-loss levels. • You can do Positional Trading in Derivative segment viz Future & Option. • 10-20% margin is required. • Need to control risk by way of Stop Loss. 9.2.3 Margin & Exposure SPAN Margin is the minimum requisite margins blocked for futures and option writing positions as per the exchange’s mandate and ‘Exposure Margin’ is the margin blocked over and above the SPAN to cushion for any MTM losses. Do note both SPAN and Exposure margin are specified by the exchange. So at the time of initiating a futures trade, the client has to adhere to the initial margin requirement. The entire initial margin (SPAN + Exposure) is blocked by the exchange. Total Margin = SPAN Margin + Exposure Margin The Exposure margin for index futures contracts is 3% of the value of the contract. For Instance, if the value of a NIFTY futures contract is Rs. 5,00,000 then the Exposure margin applicable on it will be 3% of Rs. 5 Lakhs i.e. Rs. 15,000. Total share price is not required to be paid for Intraday or Positional Trading. We can buy or sell stock •

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by paying just 10 – 20% of contract value, which is called Margin Money. Some brokers allow 4 times or even 10 – 20 times of margin money to buy shares. •

•

This multiple is called Exposure.

Intraday Margin is to be used only for Intraday trading. •

Risk is high in Intraday trading as we can build large position on low investment. In case the market moves in the opposite direction then we may incur huge loss. •

We have to square off our position at the close of market unless we have adequate margin to carry forward the position. •

9.2.4 Square Off : Squaring off is a trading style used by investors/traders mostly in day trading, in which a trader buys or sells a particular quantity of an asset (mostly stocks) and later in the day reverses the transaction, in the hope of earning a profit (price difference net of broker charges and tax). For example: Person A buys 100 shares of Reliance from the NSE through a broker for a price or Rs 10 per share. Later in the day, Person A sells all the shares for Rs 12 per share and by paying broker charges of Rs 10. The net profit A earns is Rs (200-10)=Rs 190. 57 of 65

Therefore, the trader has basically squared off his position. 9.3 Some Valuable Advice You must consider Investment or Trading in stock market as a Secondary source of income rather than Primary source of income. If it had been so simple and straight forward to make money then every one would have left their job / business and deal in stock market. There is an important golden rule for on how much to spend in investment and how much in trading from the available disposable money. The rule is Investment and Trading amount shall be in the ratio of 80:20. This has been explained earlier as well. 9.4 Volume Analysis Volume analysis is the examination of the number of shares or contracts of a security that have been traded in a given time period. Volume analysis is used by technical analysts as one of many factors that inform their trading decisions. By analyzing trends in volume in conjunction with price movements, investors can determine the significance of changes in a security's price. There are two indicators designed specifically to support investors that incorporate volume into their trading decisions. The Positive Volume Index (PVI) and Negative Volume Index (NVI)

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Up volume generally refers to an increase in the volume of shares traded with increase in share price. This is indicates Demand. Down volume occurs when the share price decreases with a high volume of trading. This indicates supply. There could be various reasons for Demand or supply scenarios as below – 1. News – Positive news for the company or the sector (to which it belongs) will attract more investors leading to demand for such stock. As a result, the price and volume both will increase. On the other hand, negative new for the company or its sector results opposite impact of fall in prices with increased volume. 2. Reserve Bank Of India (RBI) Monetary Policy – Periodically RBI declares its monetary policy. REPO rate, Reverse REPO rate, CLR, SLR etc are declared. Also outlook of economic situation is summarized. This has a very strong bearing on the movement of the market. Key takeaways are – 1. Global Economy Impact 2. Govt Policy 3. Quarterly Results 4. Company Policy 5. Company Management 6. Budget Announcement

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9.5 Market Position A position is the amount of a security, commodity or currency which is owned by an individual, dealer or an institution. Whichever segment (Equity, Future, Option) of the market one is trading has to understand which position to maintain in order to reap profit. There is either a Bullish or a Bearish trend in the market. In bullish market one can make profit by taking Long Position. Similarly, in a bearish market one can take Short Position to make profit. So what is a Long or Short Position? 1. Long Position 2. Short Position 9.5.1 Long Position : When a Trader has bought stock and owns it, it is called as Long Position. In this case, trader needs to sell this stock to square off the position. For instance you purchase SBIN stock at Rs 250 and you are yet to sell it. That means, you had maintained Long Position in SBIN. In bullish market a trader can make profit by maintaining Long position. Example: Scrip: Entry: Target: Stop Loss:Sell

SBIN Buy @ Rs.250 Sell @ Rs 260 @ Rs 245 60 of 65

9.5.2 Short Position : When a Trader has sold stock which he does not hold, it is called as Short Position. In this case, trader need to buy this stock at a later time to square off the position. For instance you sold SBIN stock at Rs 260 which you did not own. To square off this position you need to buy this stock. That means, you have maintained Short Position in SBIN. In bearish market a trader can make profit by maintaining Short position. Example: Scrip: Entry: Target: Stop Loss:Sell

SBIN Sell @ Rs.250 Sell @ Rs 240 @ Rs 255

9.5.3 Trade Auction & It’s Penalty Short position is allowed for one day in Intraday trade. Short position is not allowed in delivery based trade. For any violations penalty as the norms decided by stock exchanges is applied. In cash market the trade may go for auction resulting in huge loss to the investor. 9.5.4 BTST BTST (Buy Today, Sell Tomorrow) is a facility that allows clients to sell shares before these are credited into a Demat account or take the delivery of shares. The decision has to be made in 2 days. 61 of 65

The reverse of BTST is called STBT i.e. Sell Today, Buy Tomorrow. This facility is offered by most of the stock brokers in India In a normal equity delivery trade (buy/sell of stocks using CNC order), the transaction is complete in T+2 days where T is the day of trading. The buyer gets shares in his Demat account and the seller gets money in T+2 days. So, if you buy some shares of a company on Tuesday, the shares will be credited in your Demat account on Thursday. While counting T+2 days, holidays in exchanges are excluded. So, if there's a holiday in between then the delivery period is extended.

10 Trading Tips and Benefits of Investment 10.1 Trading Tips 1. Market Cap – Choose a company having large market capitalization. You may choose a company either from Large Cap or Mid Cap to have lower risk. 2. Daily Volume – Choose stock where daily volume is more than Rs10Lakh. High volume is associated with more volatility and easy liquidity. 3. Daily Movement – Daily movement of 1% more is ideal for earning good profit in Intraday trade. However, you may consider stocks with price movement of more than 0.50%.

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4. Daily Gainers / Losers List – List is generally available for Daily Gainers / losers. This provide easy selection of stocks. 5. Eye on SGX Nifty – Singapore market opens 2 hrs before Indian market. SGX Nifty provide early market trend on how will Indian market will open. 6. Entry Time – Watch stock movement during 1st half an hour and only then enter into the market as volatility during this time is very high due to squaring off of previous days open positions by active traders. 7. Exit Time – Exit from the market half an hour before the close of market. This is necessary for automatic square off of open position or the trade being going for auction. 8. Sector support – Keep a watch on the movement of sector as a whole where in you are considering to invest. Generally companies follow the trend of the sector. 9. Do Paper Trade / Dummy Trade – We recommend you to carry out paper trade and check the results before actually entering the market. Dummy trade will improve your self confidence and avoid panic reactions. 10. Chart Analysis – We advise you not to become speculators in the market. Please use Technical Analysis, Follow Discipline to earn money on a consistent basis. 11. Be updated with stock market news – As the markets are volatile, you should always be aware of what’s happening in the market or else you may face 63 of 65

loss. Have a habit of reading about stocks and the market regularly. 12. Use stop loss strategy – Always use stop loss to limit your risk.

10.2 Benefits Of Investment Capital Appreciation

Liquidity at Ease

 Dividend  Bonus

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 Rights

Voting Rights / AGM Present

 Loan Facility

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