BASICS DETAIL CONCEPTS
OF
INDIAN STOCK MARKET
BASICS OF STOCK MARKET
What is stock?
• An instrument – that signifies an ownership position (called equity) in a
corporation, and represents a claim on its proportional share in the
corporation’s assets and profits.
• For example, if a company has 1000 shares of stock outstanding and a
person owns 50 of them, then he/she owns 5% of the company.
• Before Trading or investing in share market it is essential that you are
well versed with the various concept related to share markets.
Why stock prices rise and fall (1)?
• New information about the company, new project, earnings,
regulations etc
Information is the key. It gives the market a reason to value a stock at a
particular price level.
The market will price a stock based on all information that the public is aware of.
As new information comes into the public realm, the market will adjust prices up
or down based on how the market perceives the information and it will affect the
future earning capacity of the company.
Why stock prices rise and fall (2)?
• Uncertainty
What profits a company will make in the future is far from certain. For this
reason, we should expect stocks to bounce/drop around a little bit because of
the nervousness of the market about the future of the company.
The uncertain future of the company will bring some volatility in share prices
even during a period in which there is no new information.
Why stock prices rise and fall (3)?
• Psychological Factors:
Human minds and behind the trading activity in the stock market. This means
the human characteristics are also factors which determine how the share
prices will move.
Understanding human psychology is extremely valuable when evaluating
trading opportunities because human psychology creates and accentuates
many of the opportunities that Professional traders can capitalize on.
What is Stock Market?
• A stock market is a place where the stocks and securities of various
companies are traded.
• “Stock exchange”- means anybody of individuals, whether
incorporated or not, constituted for the purpose of assisting,
regulating or controlling the business of buying, selling or dealing in
securities.
Why stock exchange?
• The purpose of a stock exchange is to facilitate the exchange of
securities between buyers and sellers and reduce the risks of
investing.
• 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. or
dealing in securities.
• India‘s popular Stock Exchanges are the Bombay Stock Exchange
and the National Stock Exchange.
What are market timings?
• Trading on the equities segment takes place on all days of the week
(except Saturdays and Sundays and holidays declared by the exchange in
advance)
• The market timings of the equities segment are:
Pre-market open: 9:00 AM
Pre-market close: 9:15 AM
Normal market open: 9:15 AM
Normal market close: 3:30 PM
• The closing session is held between 3:40 PM to 4:00 PM
What is pre market?
• 9:00 AM to 9:08 AM
• This is the order entry session.
• Buy and sell order can be placed.
• Modify or cancel his orders during this period.
• 9:08 AM to 9:12 AM
• This session is used for order matching and calculating the opening price of the
normal session.
• You cannot modify or cancel buy/sell order during this time.
• 9:12 AM to 9:15 AM
• This session is used as a buffer period.
• It is used for the smooth transition of pre-opening session to the normal session .
What is post closing session?
• 3:40 PM to 4:00 PM
• It is used closing price calculation
• The closing price of a stock is the weighted average of the prices
between 3:00 PM to 3:30 PM.
• For the indexes like Sensex & nifty, its closing price is the weighted
average of the constituent stocks for the last 30 minutes i.e. Between
3:00 PM to 3:30 PM.
Big Picture
Pre-open Post close
Continuous Closing
9:00 a.m. 9:15 3:40 p.m.
9:15 a.m. 3:30 a.m. 3:30 p.m.
a.m. 4:00 p.m.
3:40 p.m.
EQUITY
MARKET
All orders are
accumulated VWAP Execution of
Trades occur
and matched at closing trades at
continuously as orders
a single market price the closing
match on
opening price at calculatio price
price/time priority
the end of the n determined
session