Date January 21, 2008 Day Monday Place Dalal Street, Mumbai. Here there is darkness on every face. Some people have been completely ruined. The pockets of those who were millionaires till yesterday are completely empty today. This morning of the stock market earthquake will be called ‘Black Monday’ of the Indian stock market. Today, the market dropped 1408.35 points. This was the biggest decline in history in just one day. If this loss is measured in Indian currency then it is understandable. This stock market swallowed crores of rupees of investors in a single day. From small traders to big capitalists came under its influence. Everyone had their own assessments regarding this decline. Experts were blaming the recession in the American market for this reversal of the stock market. The situation became so bad that stock brokers took to the streets against SEBI. This ‘Black Monday’ shook the stock markets not only in Mumbai but all over the world. Many strong indices also came to the ground with a thud as soon as they opened. The fall in the index was not unexpected, because the entire week was disappointing for the stock market.
While on one hand the media all over the world was raising hue and cry over this decline, on the other hand it was nothing but an exciting news for the common man. Most people did not understand the meaning of such a huge loss. The distance from the world of the stock market did not allow people to get a true idea of this tragedy and this tsunami of the stock market could not connect people’s sympathy with experts, because for the common man all this is just a gamble. The common man knows very little about this world and has many prejudices. Although the information revolution has made its terminology quite popular, people are less familiar with its actual meaning. Many questions arise in the mind regarding the stock market. Answers to these questions can be found through Mansukhani’s success.
A story
To understand the incomprehensible puzzle of the stock market, the common man will have to understand Mansukhani’s story. Mannu Bhai is also a character in this story, who is a big industrialist and his company is considered prestigious in the stock market. This is the story of a common man like Mansukhani going equal to or beyond Mannu Bhai. As it was just told that Mansukhani is a common man, who does an ordinary job. In this income, they fulfill the needs of their family, but to make life happier, they feel the need of a source of additional income. They see the stock market as an alternative to additional income; But they are also hesitant in investing money, because they have no understanding of this sector. To solve this problem he turned to a stock market expert. They wanted to understand what a share is and how it is beneficial to invest in it?
Small owners of a big company
If you translate share into Hindi, it means to divide. In fact this is a process of sharing. Mannu Bhai can explain this. Mannu Bhai is a well-known businessman and has good business experience. They want to grow their business. They do not have enough money for this extension, but there is a good plan of action. Such a huge amount cannot be borrowed even from the bank. Now they have only one way to collect capital. They should make the common man a partner in their plan. He issues shares and asks the general public to participate in his scheme. Share is an offer from their company, which you can buy at a fixed amount. In this way a common man buys the stake of that company according to his capital and becomes a shareholder in the profit. Mansukhani will make his investment as a small shareholder in a similar company. But Mansukhani’s next question is that this stake must also have some conditions and are there different types of shares based on the same conditions?
Various types of stake
Mansukhani can buy two types of shares from a public limited company. The first type of share is called ‘preferred share’ and the second type of share is called ‘equity share’.
1. Preferential Share: Mansukhani gets the facility to receive dividend at a fixed rate on the preferred share. Such shareholder gets the first share of the profit. This shareholder i.e. Mansukhani is not considered a shareholder of the company. There are also three types of shares preferred on the basis of profit
A. Non-Cumulative Preferential Shares: If for some reason the company does not make profit in the first year and instead makes profit in the second year, then in this situation Mansukhani cannot claim to get profit in both the years.
B. Cumulative Preferential Shares: If for some reason the institution or company does not earn profit in the first year and becomes profitable in the second year, then Mansukhani can claim to get profit in both the years.
C. Redeemable Cumulative Preferential Shares: Such shareholder is returned his capital with dividend after a certain period of time. The association of these types of shareholders with the company is completely short-term. And depends on the wishes of the company.
2. Equity Share: This share is also commonly known as Ordinary Share. Equity determines the stake in a company. In fact, the equity shareholder is directly linked to the interests and disadvantages of the company and the profit and loss of the company has a direct impact on it. If Mansukhani buys such shares then his profit is linked to the profit of the company. If the company earns loss then the value of its shares is affected and Mansukhani suffers loss. If the company makes profit then Mansukhani also benefits. It is defined as membership of the company and it has the right to give its opinion and vote on the decisions of the company.
It is worth noting that their profits are distributed to equity shareholders even after giving their profits to preferred shareholders. Nowadays the word ‘share’ is also used to mean equity share.
Bonus share benefits
Mansukhani’s company has made huge profits this year. In such a situation, the company still has a lot of money left after distributing the dividend. To distribute this dividend, they are converted into equity shares and distributed among their shareholders in proportion. These additional shares are called bonus shares. In this process there is no change in the number of shareholders of the company, but the number of shares held by Mansukhani increases. The biggest advantage of bonus share is that the government does not have to pay tax on excess profits.
Issue of rights issue
The company in which Mansukhani has invested money issues new shares, but the company does not want to increase the number of shareholders. In such a situation, the company issues new shares to its old shareholders in proportion to their shares. These shares are provided to the shareholders at a price equal to the face value or less than the market value. Such shares are called ‘right issues’.
Market reputation and market value
There are two types of markets on the basis of buying and selling of shares. Any company issues its shares in the primary market or primary market only. From the time it comes to the stock market till it is allotted and listed, all the work is done in this market. Each share bears a fixed price, which is determined by the promoter of the company i.e. Mannu Bhai. The company issues shares in the primary market at this price. After this, there is a secondary market for further buying and selling. Simply put, if Mansukhani buys his shares directly from the company then this deal will be in the primary market. The deal of shares in the secondary market will be more than the face value. It depends on the market reputation of the company. The higher the market reputation of the company, the higher will be the market value of its shares. After understanding the shares, Mansukhani had the second problem that where are these shares bought and sold and what is its process? What does it mean to say, what is the stock market and how does it work?
Juggling in the market
Mannu Bhai or any company wants to issue its shares, but to sell these shares they will have to take the help of stock market. New and old securities and shares are sold and bought in the stock market. Mannu Bhai will raise capital by selling his shares through the stock market and his institution will be known as a public limited company. The shares of each public limited company are listed on the stock exchange. The person or organization starting this type of company is called company promoter or promoters. Mannu Bhai is the promoter or promoter of his company. The number of promoters or promoters may also be higher. These promoters determine the rules of the company. The number, percentage and value of shares etc. are also determined by these promoters. After the formation of the company, it is registered by the Registrar of Companies. Only after this a company gets the right to issue shares or debentures. There is a big difference between shares and debentures. The share determines ownership in the company, while a fixed interest is paid on the debenture. The shareholder is given his share on the basis of the profit of the company.
Banyan Tree And Stock Exchange
Buying and selling of shares in any market is determined by its demand and supply. The job of keeping records of this buying and selling is called barometer of the economy. It is believed that the world’s first stock market was opened in the city of Antwerp, Belgium, around the year 1531. But officially, the world’s first stock market was established in the year 1602 by the Netherlands in the city of Amsterdam. The first organized stock exchange in India appeared in the year 1875 as an association of local brokers of Bombay. It was named ‘Native Share and Stock Broker Association’. Before the establishment of this association, these brokers used to buy and sell shares while standing under a banyan tree. This unorganized market of shares had been operating in India since around 1840. B under this banyan tree.S.E. Was born. This banyan tree used to be near the townhall near the present Hernimal Circle. By the way, the brokers kept changing places according to numbers and needs and finally they came in the year 1874 and got a permanent place. This place is now known as ‘Dalal Street’.
After this, Stock Exchange was established in Ahmedabad in the year 1894. In this, shares of the local textile industry were bought and sold. In 1908, a stock exchange was also established in Calcutta. The Second World War had a considerable impact on the progress of the stock exchange. When the fighting started in 1939, there were just 7 stock exchanges in India and by the time the fighting was over in 1945 the number of exchanges had grown to 21. There are 24 exchanges operating in India today. In India, these exchanges are recognized under the Securities Contracts (Regulation) Act-1956. After this, exchanges are divided into three categories A, B and C on different grounds.
After getting so much information about the stock market, Mansukhani was now in a position to start investing. However they were still a little confused as to how to start. Some old friends, who were already working in this market, advised Mansukhani to open a demat account. Friends told that it is impossible to buy shares without demat account. This investment in stock market It is a mandatory condition to do so. Now it was important for Mansukhani to know what a demat account is and how this account is looked after.
Bankless account
Just as you need a bank for the operation and security of currency, similarly a demat account is required for buying and selling of shares in the stock market. Demat is used to mean ‘dematerialize’. This means that you have received a company’s assets non-verbally or indirectly. Demat account has been arranged to keep track of the same. This has also been done so that the possibility of property being fake, stolen or counterfeit during physical transactions is eliminated. Actually, it is a type of bank account, in which shares replace currency. To open a demat account, you will have to access the nearest depository. Demat account eliminates the requirement of original certificate. Whenever you buy or sell new shares, this account is corrected accordingly.
The puzzle of the depository
Since the 1992 share scandal, the government had been looking to find a way in which the trading of shares could be monitored and regularized. Keeping this in mind, the government decided to adopt the deposit policy (depository) system without physical exchange of share certificates. In this system, no certificate of any kind has to be kept to prove ownership of shares. Its purpose is related to the maintenance of ownership rights. SEBI has banned two depository companies, National Securities Depositories Limited (N.S.D.L.) and Central Depository Services India Limited (c. S. D. L. ) has been registered. Both these depositories look after the demat account. Mansukhani had now understood that the way to the stock market is through demat account. Mansukhani is successful in opening a demat account. From many big companies to small brokers investing in the stock market, they work to open demat accounts. After opening a demat account, Mansukhani faced another big problem as to which companies he should invest in, so that he can earn more money safely. Mansukhani contacted a broker or broker in this regard. It is the brokers who execute all the deals in the stock market. They act as a bridge between the buyer and seller of shares.
Investment strategy
Every exchange keeps an eye on the buying and selling work, hence it becomes necessary that all the buying and selling takes place through a certain channel or source about which the stock exchange knows and that too is committed to providing information to the exchange. yes. Brokers or brokers work in this channel. To become a broker, a person first has to register himself in the exchange in which he wants to work. After registration he can officially sell and buy shares. Any person can buy and sell shares with his help and in return the broker receives some amount as commission. The broker provides records of all such purchases to the exchange. Mansukhani was given some suggestions by the broker, after considering them for a few days, he divided his deposits into three parts. The first part he spent buying prestigious shares or bluechip shares.
Bluechip saving
Shares of such major popular companies, which have been continuously growing, growing for the last several years and are likely to grow further in the future, such companies are called Bluechips Companies and their shares are called Bluechips Shares. Mansukhani put the second part of the remaining money into mutual funds and the third part into an I.P.O. Invested in.
Profitable mutual funds
This is a way of investing in the stock market. In this method, big banks and investors collect money from the common man and invest it on the opinion of experts. The process has the least chance of making a loss, but the possibility of a 100 percent gain is an impossible bet here too..
I.P.O. First step of
This is the first step of a private company on the path of a public company. This is the first stock sale of a private company. After this the private company turns into a public company. I.P.O. It is mostly used by small and medium companies. But sometimes big companies also use it. In this proposal, a company takes its plan to the general public and invites them to invest in it. Well I.P.O. is considered a risky area, because the investor and especially the small investor do not know how this company will work next and what will be its market future? In this, money gets stuck for a long time and success is also uncertain.
Investing in these three parts reduced Mansukhani’s chances of loss and increased his chances of profit. The stock market formula is to never keep all your eggs in the same bag. Mansukhani’s decision proved beneficial. His morale increased and he started paying attention to some big deals. He now had so much money that he could even buy shares of some big companies with it. Ultimately they were successful in doing so. But one day his broker told that Sensex has come down, hence the prices of his shares have reduced and he is not in a position to take profit at the moment. Mansukhani was not able to understand how he suffered loss due to falling Sensex? He had some questions in his mind regarding Sensex. They still did not understand the mathematics of the index, because instead of getting entangled in this process, they were still taking decisions based on the broker’s suggestions and trading possibilities.
Market thermometer
The thermometer that measures market position is called index. The demand for shares of which stock exchange is high or low is determined by looking at the index. Exceeding or moving up the index means strengthening of the market. In this situation the demand for shares increases and their prices also increase. Lowering or falling index means weakening of the market. In such a situation, the demand for shares weakens and the prices of shares fall. Index does not affect the market, because it is affected by the market itself.
Sensex story
Sensex is an index of Bombay Stock Exchange. This index came into being in the year 1986. The full name of Sensex is Sensitive Index. ‘Sensex’ The term was first used by Deepak Mohani, an economic analyst. Sensex B.S.E. Is based on the share of 30 large companies of. Its base year is 1978-79. The base year means that in this year, Sensex calculations started at 100. Beginning of base year. Considered since April, 1979. Like other indices, Sensex rising means rising stock prices and Sensex falling points towards falling stock prices. Free float market capitalization v is used to calculate Sensex. It covers the largest 30 companies on the market. This is the most accurate and prevalent method of calculating indices.
Mathematics of market cap
The share price of a company is called market cap. This can be understood from the example of Mannu Bhai. Mannu Bhai has issued ten shares of his company in the market and his market price is 10 thousand rupees per share then the market cap of his company can be calculated by multiplying the price of his company’s shares by the number of shares. In simple words, if the market value of a company’s shares is multiplied by the shares of that company, then the product obtained is called the market cap of the company. On the basis of this market cap, companies are classified as Large Cap (large company), Mid Cap (medium company) and Small Cap (small company).
Free Float Market Cap vs Sensex
The free float market cap of the 30 companies to be included in the Sensex is drawn. After this, some calculations are done by adding the market caps of all these companies. Now it is calculated relative to the base year of Sensex. The result that emerges on this basis is the Sensex issue. For example, if the Sensex point for 100 crore was 4 then for 200 crore it would be set at 8 and for 400 crore it would be set at 16 points. The change in market cap may be due to increase in shares or increase or decrease in the value of shares.
Trust shares
B. S. E. has divided the shares into categories on the basis of companies and performance. These categories include A, B-One, B-Two, F, T, T-S and Z groups. The least reliable among these are the shares of Z Group, the companies which do not take care of the shareholders and do not take any action against the economy or violate the rules of the stock market, the shares of those companies are included in Z Group. Is. Investing in companies included in Z Group is not safe and they are more prone to losses. A Group companies are the best. Their market cap is high, hence it is safer to invest in companies of this group. After knowing the Sensex and the stock market, curiosity arose in Mansukhani’s mind. After all, thousands of investors like him transact lakhs and crores in this market, who keeps track of all this and if there is any fraud, then it should be investigated and investigated. Which organization works to keep an eye? To whom can they go with their complaint? In response to all these questions, a name came before him: St. Sebi.
Market watchdog
To control the exchanges currently operating in the country, the government established the Securities and Exchange Board of India or SEBI (Schwakd – Securities and Exchange Board of India). SEBI has been created to protect the interests of investors. Formation of this board S.A. This was done on the basis of the recommendations of the Chairman Committee of Dave. On January 30, 1992, this institution was granted statutory status with the aid of an ordinance. SEBI’s headquarters is located in Mumbai. SEBI focuses on keeping the work done in exchanges transparent and takes care of the interests of investors. SEBI also has the authority to determine rules for this interest.
From all this information, Mansukhani understood one thing that before investing in any field, it is necessary to get complete information about it, otherwise investing in the stock market will be like shooting arrows in the dark. After all this information comes experience. Advice from an experienced person in this field is also beneficial. That’s why Mansukhani kept taking advice from experts from time to time. The result of all this was that Mansukhani came to be considered a sensible investor. This wisdom put a store of money in front of him. Taking advantage of his reputation, he started an investment company, which used to invest people’s money in the stock market at a fixed commission. The experience once again paid off and Mansukhani succeeded once again. Mansukhani, riding on the horse of success, soon started working in a chemical factory. On the strength of her ability, she came to her company one day.P.O. Came in front of people with it. The buyer of a share today became the company owner and share seller. This is the magic of the stock market.
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