How to Buy/Sell Shares?
• Trading account + De-mat(Dematerialized) account.
• De-mat like Savings account.
• Normal broker vs Discount broker.
Financial Instruments Traded in Stock Market?
• Bonds
• Secondary Market
• Mutual Funds
• Derivatives
What is SEBI ?
• Stock market is risky. They need to be regulated.
• The Security and Exchange Board of India (SEBI) is man dated to
oversee the secondary and primary market in India since 1988 when
the Government of India established it as the regulatory body of
stock markets.
• SEBI became an autonomous body through the SEBI A/c of 1992
What does SEBI Do?
• SEBI became an autonomous body through the SEBI Act of
1992.
• Protecting the interests of investors in stocks.
• Promoting the development of the stock market.
• Regulating the stock market.
Why to invest in stock market?
• Inflation is rising day by day and FD’s Interest cannot beat it.
• Stock market gives higher returns.
• Stock market has strong history.
Market concepts
• Dividends
• Market capitalization
• Rolling settlements
• Short-selling
• Circuit filters and trading bands
• Margin trading
WHAT ARE DIVIDENDS?
• When the company makes profits, you often receive a part of
it. This is the idea behind dividends. Every year, companies
distribute a small amount of profits to investor as dividends.
This is the primary source of income for long-term
shareholders-those who don’t sell the stock for years
together.
WHAT IS MARKET CAPITALIZATION?
• Value of one share also differs from that of another company’s
stock. Market capitalization smoothens out these differences
• It also decides the weightage of a stock in the index. This
means, bigger the company’s market value, the more its price
fluctuations affect the value of the index.
WHAT ARE ROLLING SETTLEMENTS?
• Settlements is the process whereby payment is made by the
buyers, and shares are delivered by the sellers.
• A rolling settlement implies that all trades have to be settled by
the end of the day. hence, the entire transaction- where the
buyer pays for securities purchased and seller delivers the
shares sold-have to be completed in a day.
• We have adopted the T+2 settlements cycle. This means that a
transaction conducted on Day 1 has to be settled on the Day
1+2 working days. This is when funds are paid and securities
are transferred. Thus, ‘T+2’here, refers to today +2 working
days. Saturdays and Sundays are not considered as working
days.
• Note: Our market probably adopt T+1 day settlement in future,
we can Google it if any change in rolling settlement.
WHAT IS Pay-In and Pay-out?
• Providing of securities or funds to Exchange/Clearing Corp
oration is called ‘pay-in’.
• Receiving securities or funds from Exchange/Clearing
corporation is called ‘pay-out
Settlement through AUCTION (1)
• Sometimes trades don’t get settled because of short or bad
delivery or company objection.
• In such cases, trade is settled is through auction of
securities.
Settlement through AUCTION (2)
• An Action Tender Notice is issued by the Exchange to the members
informing them about the names of the scrip short or not delivered.
• The auction for the undelivered quantities is conducted on T+3 day
between 11:00 a.m. and 12 noon for all the scrip under Compulsory
Rolling Settlements except those in “Z” group and scrip on “trade to
trade” basis which are directly closed-out.
• A member-broker who has failed to deliver the securities of a particular
company on the pay-in day is not allowed to offer the same in auction.
The members, who participate in the auction session, can download the
Delivery Orders in respect of the auction obligations on the same day, if
their offers are accepted. The members are required to deliver the
shares in the Clearing House on the auction Pay-in day, i.e., T+4.
• Pay-out of auction shares and funds is also done on the same day, i.e.,
T+4.