Monday, January 22, 2007

Share Market..

I always wanted to invest my money on Shares...Though I have no money as of Now,Being so Bored I started collecting Information about the Sharemarket and those stuff,But I could'nt understand so many concepts in share markets.... I was reading Economic times and Business Today to know about share market ,the Real thing is one shouldn't read those without knowing the share market.After collecting few information I would like to post what i Learned..
First...I just now clearly learned What is a Share...The first time when a company needs a Huge capital, that a company’s certain %age of shares are issued to the public, it is by a process called the initial publicoffering (IPO). It is listed in market and its value varies accordingly by company's performance.


How can we invest in Shares.
The first way to Purchase shares is from the primary market (ie IPOs) I have seen these type of Ad everywhere almost once in week. Most IPOs these days do not have a fixed offer price. Instead they follow a method called the bookbuilding process, where the offer price is placed in a band or a range with the highest and the lowest value (refer to the newspaper clipping on this page).The public can bid for the shares at any price in the band specified. Once the bids come in, the company evaluates all the bids and decides on an offer price in that range. After the offer price is fixed, the company either allots its shares to the people who had applied for its shares or returns them their money.

The Other Way to Invest is By Seconday Markets....ie STOCK EXCHANGES

Once the offer price is fixed and the shares are issued to the people,stock exchanges enable the trading of shares for the general public. Once a stock is listed on an exchange, people can start trading in its shares. In a stock exchange the existing shareholders sell their shares to anyone who is willing to buy them at a price agreeable to both parties. Individuals cannot buy or sell shares in a stock exchange directly, they have to execute their transactions through authorised members of the stock exchange who are also called stock brokers.Even after these information I could'nt get some information. I went deeper into the working of the ShareMarket...but i could understand a little.. My dad said Sharemarket is a place where shares are sold and bought,Its like our koyambedu market..here vegetables ,there Share.Popular markets are NASDAQ,NYSE,BSE,NSE

What do the brokers do

After some work in net i found that,If you want to buy or sell a share, you should contact a broker. Each stock exchange has a limited set of brokers and these brokers contact each other using trading terminals to find out who is interested in the share you want to buy or sell. Brokers have terminals linked to the BSE or the NSE and they directly purchase or sell shares using these terminals.The entire transaction happens electronically or through websites like www.icicidirect.com,Sharekhan.com.Brokers may also authorise a sub-broker to conduct the transactions on behalf of them.Since brokers are providing a service they charge you for the same. Normally this payment is not a flat rate, but a commission of the transaction value.Some broking companies like Reliance Money has Flat rates like 500 per year.But there are some complaints about Reliance Money . Brokerages normally range from 0.5% to 1% for delivery-based transactions(long time transactions, will tell u later about this in brief) and from 0.10% to 0.25% for intra-day transactions.

Depositaries

Depositaries hold shares of investors, In India we have Two depositaries -National Securities Depository Ltd.,Central Depository Services Ltd. They hold shares and on request,in electronic form through a registered depository participant (DP). It can be compared with a bank as it holds securities in an account,transfers securities between accounts on the instruction of the account holder, facilitates the transfer of ownership without the account holder needing to handle securities and makes the safekeeping of shares easy.The agent through which a depositories interfaces with the investor is known as a depository participant. You can create a demat account with a DP some DP's are ICICI,AXIS(UTI),HSBC,I think SBI too, who will keep an account of all the shares you own. This is much like the banking system,where you just create an account and have a passbook which updates you on the money you own and the transactions you have made. In your demat account you own shares in an electronic format and your account gets updated as you buy and sell shares. Online trading account - We have to open an online trading account with any of the bank or financial trading system like ICICIdirect.com, 5paisa.com, Sharekhan.com etc. Their will be nominal annual charges. These charges vary from bank to bank but should not be more than Rs.1000 annually.After opening accounts with these DP's we can trade from our home.

Day trading and Delivery trading are the two main types of shares trading.
Day trading
Buying and selling of shares on daily basis is called day trading this is also called as Intra day trading. Whatever you buy today you have to sell it today very importantly during market hours that is 9.55 am to 3.30 pm (Indian time).
Delivery Trading
In Delivery Trading, as the name say, you have to take the delivery of shares and after getting these shares in you demat account you can sell them at anytime (or you can hold them till you want, there is no restriction). In delivery trading you need to have the amount required to buy share for example, if you want to buy 100 shares of Reliance at price 500 than you must have (100*500) Rs. 5000 in your account; once you purchased these shares will get deposited in your demat account (say after basically, trading day and 2 additional days). Then you can sell these shares when the price of these shares goes up or else you can sell whenever you want..

Some Jargons in Online Share trading

Open which means The first price at which the stock opens when market opens in the morning.
High it says,The stock price reached at the highest level in a day.
Low is the stock price reached the lowest level in a day.
Close ,the end The stock price at which it remains after the end of market timings or the final price of the stock when the market closes for a day.
Bid,The Buying price is called as Bid price.
Offer,The selling price is called offer price.
Bid Quantity ,The total number of shares available for buying is called Bid Quantity.
Offer Quantity ,The total number of shares available for selling is called Offer Quantity.
Transaction,One complete cycle of buying and selling of shares is called One Transaction.
Squaring off ,This term is used to complete one transaction. Means if you buy then have to sell (mean square off) and if you sell then you have to buy (means square off).
Limit Order ,In limit order the buying or selling price has to be mentioned and when the share price comes to that price then your order will get executed with the mentioned price by you
Market Order,When you put buy or sell price at market rate then the price get executes at the current rate of market. The market order get immediately executed at the current available price

The sample video for online share trading system of ICICI,Forgive me if the quality is bad....If u wish to upload this video in rapidshare or 4shared..Pls can tell me in comments







video



Though I managed to get all these Info,I could'nt how the SENSEX numbers are calculated and I don know what that mean....Even I dont know concretely How inflation is calculated....Hope i will find those answers in few days.

20 comments:

pradeep said...

nice one .........:-)
hope we start trading soon

boniface said...

Amar tis really amazing it aded to the knowledge which I already had,but I acquired everythin After joinin mba. iTS gr8 tat u kow all these now itself...
reg ur query.. Sensex represents How active t share market is.. if its high it means more no. of transactions had been made... higher the sensex, healthy s market.Sensex s calculated by free float market captalisation method.Its calculated based on the free float market captalisation of 30 companies in BSE n 10 in NSE. For details visit http://bseindia.com/about/abindices/bse30.asp

Greatbear said...

Nice 1 da... Waiting 4 a detailed insight soon.

Sunil said...

Good, you have got the basic fundas in of the market.
You cant learn swimming out of water , same way to understand the market u need to plunge into it.
Opena trading & DP account with a stock broker in your locality, apply for a couple of IPO's or buy 1 share of A group companies life infy, reliance, bharti airtel,etc and track the movement.
Register with moneycontrol.com and create a portfolio and follow it daily.
" WATECH CNBC/ NDTV PROFIT"

You shall find a faster way to learn.

Amarnath said...

thank u sunil

Laxman.M said...

welll done amar!

Oleg G. Kildyushov said...

Good articles.Thank you very much.
Best Wishes,
Oleg

Indian Stock Market said...

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3. There's also a latest fear that the Indian growth engine has taken a pause. Afterall if the GDP (industrial production) does not grow as expected, once cannot assign the same valuations to a stock

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Arish said...

Amar, this is very impressive article. You have included a lot of wonderful information. This is a good introduction chapter to investing in shares.

Personally I am an active share trader and I find this the most powerful investment method. However this is a method which should be used after gaining information. It also requires that we check the status of our investments regularly.

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Anonymous said...

As the guy above said

vimala rani said...

Thanks for share market updates and additional tips.....

BIGPROFIT BUZZ said...

Dear Visitor,
Would like to appreciate the effort of the webmaster for creating such a wonderful blog which is very helpful for the visitors.
Would like to add few notes here like if we are trading in Share market say specially in NSE and BSE which are one of the most popular stock exchanges of the world then we need to take care of the few things like

1. Always trade in limit
2. Do not make tade on emotional basis
3. Always try to get professional support before taking risk in stock market
4. Rely on professional research rather than speculation.

This is for sure if we follow above 4 points then we can always stay in good profit.


Regards
BIGPROFITBUZZ TEAM

BIGPROFITBUZZ said...

Dear Visitor,
Would like to appreciate the effort of the webmaster for creating such a wonderful blog which is very helpful for the visitors.
Would like to add few notes here like if we are trading in SHARE MARKET NSE BSE FREE INTRADAY TIPSspecially in NSE and BSE which are one of the most popular stock exchanges of the world then we need to take care of the few things like
1. Always trade in limit
2. Do not make tade on emotional basis
3. Always try to get professional support before taking risk in stock market
4. Rely on professional research rather than speculation.

This is for sure if we follow above 4 points then we can always stay in good profit.
Regards
BIGPROFITBUZZ TEAM

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