Bombay Stock Exchange (BSE)

Overview
Founded: 1875
Location: Mumbai, India
Index: SENSEX
Market Cap: One of the largest stock exchanges in the world
by market capitalization.
Listing: Over 5,000 companies
Key Points
Oldest Stock Exchange: The BSE is Asia's oldest stock
exchange.
SENSEX: The S&P BSE SENSEX (Sensitive Index) is a free-float
market-weighted stock market index of 30 well-established
and financially sound companies listed on the BSE.
BSE SME: A platform for small and medium-sized enterprises
(SMEs) to raise equity capital.
Trading Platforms: Provides multiple trading platforms
including BOLT (BSE Online Trading).
National Stock Exchange (NSE)
Overview
Founded: 1992
Location: Mumbai, India
Index: NIFTY 50
Market Cap: One of the largest stock exchanges in India by
market capitalization.
Listing: Over 1,600 companies
Key Points
NIFTY 50: The NSE's benchmark index comprising 50 of the
largest and most liquid stocks.
Technology: The NSE was the first exchange in India to
introduce a fully automated electronic trading system.
Market Segments: Includes segments such as equity,
derivatives, debt, and currency.
INFINI: NSE's platform for new initiatives including market
infrastructure, innovations, and investor services.
Comparison: BSE vs. NSE
Feature BSE NSE
Founded 1875 1992
Key index Sensex Nifty 50
Market cap Large Largest in India
Number of listings Over 5,000 Over 1,600
Trading hours sme BOLT Fully automated
platform (NIB)
Pre-open session 9.00 AM 9.15 AM
Regular Trading 9.15 AM 3.30 PM
Session
Post- closing 3.40 PM 4.00 PM
session

Key Indices
BSE SENSEX: Tracks the performance of 30 financially sound
companies.
NSE NIFTY 50: Tracks the performance of 50 large-cap
companies.
Regulatory Body
Both exchanges are regulated by the Securities and Exchange
Board of India (SEBI), which oversees the securities market to
protect investor interests and promote the development of
the market.
 “The name of the first share trading association in India
was “ Native share and stock Broker’s association” which later
come to be known as Bombay Stock Exchange
Indian share market ( capital market ) is Divided into tow
segment’s
1 Primary Market :-
( New Issues Market ) IPO, Shares, Debentures, Gov
Bond’s, CDS, CP, S
2 Secondary Market :-
Secondary market consists of tradin in the shares of
listed companies

Stock Market
A stock market, equity market or share market is the
aggregation of buyers and sellers of stock’s, shares.

Which represent ownership claims on businesses

These may include securities listed on a public stock
exchange, as well as stock that is only trades privately, such as
shares of private companies which are sold to investors
tharough equity crowdfunding platforms.

Investment is usually made with an investment strategy

in mind.
 Stock can be categorized by the country where the
company is domiciled.

For Exp……………
Nestle and Novartis are domiciled in switzeland and
traded on the six swiss exchange so they may be considered
as part the swiss stock market.
Although the stocks may also be traded on exchanges in
others countries, for example
As American depositary receipts ( ADRS ) on U.S stock
markets.
All companies need money to run their business.
Sometimes the profit acquired from selling good’s or services
is not sufficient to working capital requirement’s.
So, companies invite normal people like you and me to
put some money in their company so that they can rum it
efficiently and in return investors get a share of whatever
profit they make.
Basic principle

How to make maney in the stock market

Warren buffett at age of 11 bought his first stock.
Rakesh Jhunjhunwala started in the stock market with
5000 how pro rs 20000 cr.
Jatin khemani bought his first stock at age of 21 and now
they have generated 900% returns in the last four year’s.
I have seen that people who lose money in the stock
market want to get rich on their first day.
They are ignorant, who tried to get rich in a day without
any prepation and hence they loose all their money in the
stock market.
Have a disciplind approach for investment. Try and avoid
the herd mentality warren buffet said, that one needs to be
fearful when the others are greedy and needs to be greedy
when others are fearfull.
“Always invest your surplus fund’s”
“Never let your emotions influence the judgement”
“Price is what you pay. Value is what you get”
“Risk comes fram not knowing what you’r doing”
Nifry 50 sensex 30

 Nifty 50 constitutes of the top 50 companies

that are actively traded in NSE.
 Sensex comprises the top 30 companies actively
traded in BSE.
 Nifty is a broader market index that covers 24
sectors.
 Sensex covers 13 sectors.
 Nifty stands for national stock exchange fifty
and is the equity benchmark index of the
national stock exchange (NSE) in 1996 and it’s or
aliases are nifty 50 and CNX Nifty.
 Sensex is the portmanteau between sensitive
and index and is the market index
 It is also known as S & P BSE Sensex
 Nifty – It’s base number is 1000
 Sensex – It’s base number is 100
 Nifty owned and managed by index and services
and products limited. ( iisl ) an NSE Subsidiary.
 Sensex owned by the Bombay Stock Exchange.
 Why invest in the stock market ?

Only option you have is to invest smartly If you invest

in a bank fixed deposit (FD) you get returns ranging from 5%
to 7% mayimum
If you invest in good company they gives you return
of 15% to 30%

Bank (FD) Stock Market

5% to 7% 15% to 30%
Now, the reason why the stock market gives such
high returns is that it takes your money and from your money
to creates more money.
What is SEBI ?

Securities and Exchange Bard of India

SEBI is the regulatory body for securities and
commodity market in india under the jurisdiction of ministry
of finance government of india.
It was established on 12 april 1988 and gived
statutory powers on 30 january 1992 thraugh the sebi act
1992
SEBI act 1992 by the Indian parliament sebi has it’s
headquarters at the business district of bandra kurla complex
in Mumbai.
SEBI is the securities market regulator to oversee any
fraudulent transactions and ativites made by any of the
parties, companies, investors, traders brokers and the likes.
What is the stock market and How does it work ?

 Shares :-
A shares is a unit that represents part of the
ownership of a company, when you buy shares of
companies like.
Reliance, Infosys, Tcs, Asian Paints and many
more you are becoming a part owner of that company.
It might be (0001%) or less ownership you
become the owner of a part of a company

 There are two things Good thing and bad thing

(A) Good thing

Because tomorrow if the company parforms well
and it’s stock prices increase then the price of your
stocks will also go up

Let see an example :-

Let’s assume that the you buy the one share of the
reliance right now 1500 Rs.
Suppose you buy 10 shares. So you pay 15,000 Rupees
from your pocket and in return you get 10 sharess of the
reliance.
(A) Good Thing

Reliance

1 share = Rs. 1500

Total Inv 10 Rs. 1500 = 15000

Now Reliance share price Rs- 2200

Inv. Current value – 2200
Rs. 2200
Total _ 7,000/-
(B) Bad thing

Reliance

1 share = 1500
10 share = 15000
 Because tomorrow, if the company perform bad
and it’s stock price decrease then the price of your
stocks will also go down.
Let see an example :-
Let’s assume that the buy the one share of the
reliance right how 1500 rs.
Suppose you buy 10 shares. So you pay 15000
rs. From your pocket and in return you get 10 shares of
the reliance.
Now reliance share price
Rs 12200 ( 10 shares)
Total loss = 2800
So when you’s buying the shares of a company
not only are you sharing the good will, but you are also
sharing risk with that company has proved if you want
to make money in the stock market, you should not
make any rash decisions.
How does a company list it’s shares?
Impartant aspect of share market basic is initial
public offoring ( IPO )
The first time a company offers it’s shares to the
public, it is called an IPO
Securities and exchange board of india ( SEBI )
our market,s regulator laid out a few rules and
regulations for a company to it’s ( IPO ) on exchanges
wich company to it’s ( IPO ) on exchanges wich they
have to comply with before being eligible for listing
What are stock exchanges and many exchanges are
there?

Stock exchange is a place or a platform where

traders and buyers come together to buy and sell
stocks.
There are tow primary stock exchang in the
country :-
Bombay stock exchange (BSE)
National stock exchange (NSE)
What are nifty and sensex ?
All companies who want to get listed aproach
either NSE, BSE or Both.
All stock exchanges need equity benchmarkes
to signify the trend in the stock market in the best way
possible.
Both BSE and NSE have 100 s and 1000 s of
companies listed on them.
But if you have to pick the top 30 stocks or look
at what the bottom 100 are doing, it will be difficult for
you to siphon through this huge number of companies
listed.
What indices like nifty and sensex do is to group
them together.
Nifty 50

Nifty 50 is a callection of the top 50

Companies listed on NSE and Sensex is a
collection of the top 30 stocks listed on BSE by way of
market capitalisation.
The top companies are the one’s that influence
the stock market the most and influence the country’s
economy the most.
Hence an index with the top and largest
companies is the best gauge for how the entire stock
market.
There is also BSE 30, BSE 500, Nifty mid cap BSE
small cap and many more such indices.
However, Nifty 50 and sensex are primary
benchmarks.
There are sectoral indices as well, Nifty pharma,
BSE Bank ex, Nifty psu and many such sectoral indices
that group the top stocks in each sectors which helps
us to understand how the sector is doing.
In short :-
Indices tell us in a short concise and easy way
how is the market doing.
History:
Launch: The NIFTY 50 was launched on April 22, 1996.
Base Year: The base year for the index is 1995, and the
base value is set at 1000.
Evolution: Over the years, the NIFTY 50 has grown to
become one of the most tracked indices in the Indian
stock market.
Composition:
Sectors: The NIFTY 50 comprises companies from
various sectors, including financial services, energy, IT,
consumer goods, and pharmaceuticals.
Selection Criteria: Companies are selected based on
market capitalization, liquidity, and trading frequency.
Calculation:
Method: The index is calculated using the free-float
market capitalization-weighted method.
Rebalancing: The index is reviewed and rebalanced
semi-annually, with changes implemented in March
and September.
Significance:
Benchmark: It serves as a benchmark for mutual funds,
ETFs, and other investment products.
Economic Indicator: The performance of the NIFTY 50 is
often seen as an indicator of the health of the Indian
economy.
Performance Tracking:
Indices: In addition to the NIFTY 50, NSE also provides
other indices such as NIFTY Next 50, NIFTY 100, and
sector-specific indices.
Data: Historical data, charts, and performance metrics
for the NIFTY 50 are available on the NSE website and
various financial news platforms.
Top Companies (as of the latest available data):
Reliance Industries Ltd.
Tata Consultancy Services (TCS)
HDFC Bank
Infosys
Hindustan Unilever
Investment Products:
ETFs: Various exchange-traded funds (ETFs) track the
NIFTY 50, offering investors a way to invest in the index.
Index Funds: Mutual funds also offer index funds based
on the NIFTY 50.
Recent Performance:
The NIFTY 50 has shown significant growth over the
years, reflecting the overall growth of the Indian
economy.
Performance data, including annual returns and
volatility, can be tracked through financial news
websites and stock market apps.
Resources:
NSE Website: Detailed information, including the latest
index value, historical data, and constituent companies,
is available on the NSE India website.
Financial News: Websites like Moneycontrol, Economic
Times, and Bloomberg provide analysis and updates on
the NIFTY 50.
SENSEX

History:
Launch: The NIFTY 50 was launched on April 22, 1996.
Base Year: The base year for the index is 1995, and the
base value is set at 1000.
Evolution: Over the years, the NIFTY 50 has grown to
become one of the most tracked indices in the Indian
stock market.
Composition:
Sectors: The NIFTY 50 comprises companies from
various sectors, including financial services, energy, IT,
consumer goods, and pharmaceuticals.
Selection Criteria: Companies are selected based on
market capitalization, liquidity, and trading frequency.
Calculation:
Method: The index is calculated using the free-float
market capitalization-weighted method.
Rebalancing: The index is reviewed and rebalanced
semi-annually, with changes implemented in March
and September.
Significance:
Benchmark: It serves as a benchmark for mutual funds,
ETFs, and other investment products.
Economic Indicator: The performance of the NIFTY 50 is
often seen as an indicator of the health of the Indian
economy.
Performance Tracking:
Indices: In addition to the NIFTY 50, NSE also provides
other indices such as NIFTY Next 50, NIFTY 100, and
sector-specific indices.
Data: Historical data, charts, and performance metrics
for the NIFTY 50 are available on the NSE website and
various financial news platforms.
Top Companies (as of the latest available data):
Reliance Industries Ltd.
Tata Consultancy Services (TCS)
HDFC Bank
Infosys
Hindustan Unilever
Investment Products:
ETFs: Various exchange-traded funds (ETFs) track the
NIFTY 50, offering investors a way to invest in the index.
Index Funds: Mutual funds also offer index funds based
on the NIFTY 50.
Recent Performance:
The NIFTY 50 has shown significant growth over the
years, reflecting the overall growth of the Indian
economy.
Performance data, including annual returns and
volatility, can be tracked through financial news
websites and stock market apps.
Resources:
NSE Website: Detailed information, including the latest
index value, historical data, and constituent companies,
is available on the NSE India website.
Financial News: Websites like Moneycontrol, Economic
Times, and Bloomberg provide analysis and updates on
the NIFTY 50
When can you conduct stock market transaction

To know about the stock market basics in india

You should also know when you are permitted
to buy and sell shares
The stock market business hours in india run
from 9.15 a.m to 3.30 p.m. there are a few days in the
country when the stock market holidays or market shut
Few examples of market holiday are hoil,
id,independence day, republic day etc.
How do you make maney ?

Naturally when you buy shares at a lower price

and sell it at a higher price, you earn the capital gain.
However there are two ways you can do this
and if you are a beginner, it is especially important for
you to know the difference between stock trading
basics and stock investment basics.

There are two ways

A) Stock Investors :-
Stock investors are those who keep their
money in the stock for a longer period of time,
sometimes even years.
Returns are compounded over a period of
time.
Investors use fundametal analysis they
look at the growth trajectory of the company.
Because your investment literally grows
with the company in the long term.
B) Stock Traders :-
Stock traders generally buy and sell with
in the same trading session
Traders use technical analysis to understand
which stocks to invest in traders look for short and
quick gains stock trading basics will require you to
learn technical indicators like momentum
oscillators, bollinger band’s chart and more.
How do you stort trading or investing

You need to open a demat and trading account.

Mast investment platforms and brokers these
days provide you with demat cum trading account.
Trading account is used for just the
transactions, buying and selling.
Generally if you are a trader you don’t really
need to open a demat account because if you are
buying and selling within the same day a trading
account will sufficent
Demat account is where your shares are stored
in elecronic form.
Generally takes 2 working day’s for shares to
get dematerialised and transferred to your demat
account.
So after that if you buy or sell your shares it
gets debited or credited from your account.
Difference Between CDSL and NSDL

 CDSL :- Central Depositories Services India Ltd.

 NSDL :- National Securities Depository Ltd.

CDSL and NSDL are both government registered

share depositories in India.
Share depositories hold shares in an electronic
form.
In enrlier days where share trading was
available only in offine mades. Shares were held in the
form of physical paper certificates.
CDSL and NSDL are to shares what banks are to
cash and fixed deposits.
Bank’s help you to keep your cash in electronic
form as opposed to physical cash in your almirahs and
share depositories help you in strong shares in a
dematerialised form.
CDSL and NSDL are national share depositories
incorporated by the markets regulator securities by the
exchang bard of India ( sebi )
They hold your shares, debentures,mutual
funds.
 Each of the depositories is linked to one stock
exchange.
We have 2 ( Two ) exchange in the country that
conduct stock trading NSE and BSE
How Does Online Stock Trading Works.

Stock Depositories
Exchanges NSDL
CDSL

Clearing
Stock Brokers
House

 Registered Depository Participants –

( DPS ) and (DP ID )
Client – ID
NSDL :-
NSDL is an abbreviation for National
Securities Depository Securities Depository
Limited.
It is an Indian central securities repository
that permits the electronic storing and trading of
securities.

Year of Establishment :- 1996

Market Share :- Greates market share in terms of

the number of DEMAT accounts.

Depository participants ( DP’S ) :- Mare Dp’s then

CDSL

Operating markets :- The principal functioning

market for NSDL is the National Stock Exchange
(NSE)

DEMAT Account Number Format :- The NSDL code

is a 14 Character numeric code that begins with in.
 CDSL :-
CDSL is an abbreviation for central
depository services Limited.
It is an Indian central securities depository
that offers depository
services to the Indian securities market.

Year of Establishment :- 1999

Market share :- lower market share in terms of the

number in terms of the number of DEMAT accounts.

Depository Participants (DP’S) :- Fewer Dp’s than

NSDL

Operating markets :- The principal functioning market

for CDSL is the Bombay Stock Exchange (BSE)

DEMAT Account Number Format :- The CDSL DEMAT

account number is a numeric code of 16 digits.
Equity

Stocks and equity are same as both represent

ownership in an entity and are traded on the stock
exchanges.
Equity by definition means ownership of assets
after the debt is paid off.
Stock generally refers to traded equity.
 Stock is the type of equity that represent equity
investment.

When you buy the stock, you expect returns in the

from of dividend.
Equity can also mean stock or shares.
 Equity – value of the shares issued by a company.
Also known as ordinary shares, these are the
main source of capital for an organization.
In fact they are the most common type shares
issued to the public.
Equity Trading
Cash Trading

Equity = Script = Share = Company

Equity Market Value and Book Value

The book value does The market price pre

not change constantly share depends on a lot
of variables like market
sentiments demand and
supply social and
economic conditions.
It keeps on changing
constantly.

The Book Value :-

The book value of a company is like its
shareholder’s equity. It is the amount that the
shareholders would get if the company were to be
liquidated it is calculated using the formula –
 Book Value –
Book value, also known as net asset value, is a
measure used in accounting to represent the value
of a company's assets as recorded on its balance
sheet, minus its liabilities. It is essentially the net
worth of the company from an accounting
perspective. Here's how it's calculated:
Assets: Include cash, inventory, property,
equipment, and other items of value owned by the
company.
Liabilities: Include loans, accounts payable,
mortgages, and other debts the company owes.
Equity: The difference between assets and
liabilities, representing the ownership value held
by shareholders.
Book Value =
Total Assets – Intangible assets – Total liabilites
Book Value =
Rs 100 cr – 5 cr – 65 cr = 30 cr.
Book Value and calculated by the financial
statement record and the balance sheet equation
Limitations
Historical Cost: Assets are recorded at their historical
cost, not their current market value, which can
sometimes misrepresent their actual worth.
Intangible Assets: Book value often excludes intangible
assets like patents, trademarks, and brand value, which
can be significant for some companies.
Market Value: It may differ significantly from the
company's market value, as the latter reflects future
growth prospects and current investor sentiment

The Market Value

Market Value – Equity as market value.

Market value on the other hand is the market
capitalization of the company.
It is the value at which its shares are being
traded in the market.
In the share market, market value refers to the
total value of a company's outstanding shares of
stock, commonly known as market capitalization. It
is calculated by multiplying the current market
 price of a company's stock by the total number of
outstanding shares. The formula is:
Market Value (Market Capitalization) = Current Share
Price × Total Number of Outstanding Shares
For example, if a company has 1 million shares
outstanding and its current share price is $50, the
market value would be:
50 (dollars per share)×1,000,000 (shares)=50,000,000
dollars
Market value in the share market is influenced
by various factors, including:
Company Performance: Earnings reports, revenue
growth, profit margins, and other financial metrics.
Industry Conditions: Trends and developments within
the company's industry.
Economic Indicators: Interest rates, inflation, and
overall economic growth.
Investor Sentiment: Market perceptions, investor
confidence, and speculative activities.
News and Events: Announcements of mergers,
acquisitions, or significant product launches.
Global Factors: International market trends,
geopolitical events, and changes in foreign exchange
rates.
The formula for calculating the market value is
–
Market value = market price per share * total
number of shares being traded in the market
15 * 3cr – 45 cr

Mutual Fund :-
A mutual fund is an investment vehicle that pools
money from multiple investors to purchase a
diversified portfolio of securities such as stocks, bonds,
money market instruments, and other assets. Mutual
funds are managed by professional portfolio managers
who make decisions about how to allocate the fund's
assets in order to achieve the fund's investment
objectives.

Here are some key points about mutual funds:

Diversification: By investing in a mutual fund, investors

can achieve diversification, which helps spread risk
across different securities and asset classes.

Professional Management: Mutual funds are managed

by professional fund managers who have expertise in
selecting and managing investments.

Liquidity: Mutual funds are typically liquid investments,

meaning investors can buy and sell shares at the fund's
net asset value (NAV) at the end of each trading day.

Types of Mutual Funds:

Equity Funds: Invest primarily in stocks.

Bond Funds: Invest in bonds and other debt
instruments.
Money Market Funds: Invest in short-term, high-quality
investments issued by government and corporate
entities.
Balanced Funds: Invest in a mix of equities and fixed-
income securities.
Index Funds: Track a specific index, such as the S&P
500.
Sector Funds: Focus on a specific sector of the
economy, such as technology or healthcare.
Costs: Investors in mutual funds may incur various fees,
including expense ratios (annual fees to cover the
fund's operating expenses), sales loads (commissions
paid when buying or selling shares), and other
administrative fees.

Returns: The returns on mutual funds can come from

dividends on stocks, interest on bonds, and capital
gains from the sale of securities. The returns can vary
based on the performance of the underlying assets and
the fund manager's decisions.

Regulation: In many countries, mutual funds are

regulated by government agencies to protect investors
and ensure transparency. In the United States, for
example, mutual funds are regulated by the Securities
and Exchange Commission (SEC).

Mutual funds can be a convenient way for individual

investors to gain exposure to a diversified portfolio of
assets without having to manage the investments
themselves.

Types of Fund Based on Investment

Object’s :-
Growth funds Income funds
Liquid funds Tax saving funds

1)Growth Funds :-
The main objective of growth funds is capital
appreciation. These funds put a significant portion
of the money in stocks.
These funds can be relatively more risky due to
high exposure to equity and hence it is good to
invest in them for the long- term. But if you are
nearing your goal, for example, you may want to
avoid these funds.
2) Income Funds :-
 As the name suggests, income funds try to
provide investors with a stable incom.
These are debt funds that invest mostly in
bonds, government securities and certificate of
deposits etc.
They are suitable for different - term goals and
for investors with a Lower - Risk appetite.
3) Liquid Funds :-
Liquid funds put money in short – term money
market instruments like treasury bills, certificate of
deposits, term deposit, commercial papers and
soon.
Liquid funds help to park your surplus money
for a few days to a few months or create an
emergency fund.
4) Tax Saving Funds :-
Tax saving funds offer you tax benefits under
section 80c of the Income tax act.
When you invest in these funds, you can claim
deductions up to rs. 1.5 lakh each year.
Equity linked saving scheme ( ELSS ) are an
example of tax saving funds.
SIP systematic Investment plans

One of the best features about investing in mutual

funds is that you don’t need a large amount of money to
start investing.

Most fund house in the country allow investors to

begin investing with as little as rs. 500 per month through
systematic investment plans.
Now, this might seem like a ting amount to begin
your investment journey but when you invest consistently
over a considerable period you can achieve a substantial sum.
Sip is a method of investing in mutual funds where
you invest a specific amount at fixed intervals.
This way you can avoid timing the market and
increase your wealth steadily.
Exp-
Let’s imagine you invest 5000 per month in an equity
fund for 15 years.
The fund offers an annual return of 12% at the end of
the investment period, you have over rs. 25 lakh.
If you would be continued the same amount for
another tenyears you get a total sum almost rs. 95 lakh.
This is the power of compounding.
 How to Invest in mutual funds
1. Sign up for a mutual fund account on web or app.
2. Complete your kyc formalities.
3. Enter the necessary details as required
4. Identify the funds you wish to invest based on your
financial goals.
5. Select the fund and transfer the required amount
6. You can also create a standing instruction with
your bank in case you invest in a SIP each month.

PE – Ratio

The price – earning ratio, also known as P/E

Ratio
P/E is the ratio of a company’s share price to
the company’s earnings per share.
The ratio is used for valuing companies and to
find out whether they are overvalued or undervalued.
 Share Price
P/E = _______________________
Earnings per share
The price to earnings ( PE) ratio is the
proportion of a company’s share price to it’s earnings
per share.
A high P/E ratio could mean that a company’s
stock is overvalued or that investors expect high
growth rates.
Companies with no earnings or are losing
money don’t have a P/E ration because ther’s nothing
to put in the denominato
P/E ratios are most valuable when comparing
similar companies in the same industry or for a single
company over time.

CMP :- Current market price of a share

P.E Ratio :- Earning per share

Price to Earning Ratio is one of the most widely-

used metrics analysts and investore across the world.
 It signifies the amount of money an investor is
willing to invest in a single share of a company for rs – 1
of it’s earning.
For instance if a company has a P/E Ratio of 20
investors are willing to puy Rs – 20 in its stock for rs – 1
of their current earnings.
Hence, when a company demonstrates high PE
Ratio, it means that either the company is overvalued
or is on a trajectory to growth.
Another interpretation of a high P/E ratio could
be that such a company is expected to have increased
revenue in the future and speculation of the same by
analysts and investors has led to a surge in it’s current
stock price.
On the other hand a low price to earning ratio
signiffies undervaluation of stock, due to cny systematic
or unsystematio risk of the market.
Considerinh a different interpretation of a low
P/E ratio, it could also signify that a company shall
perform poorly in the future due to which it’s stock
price are falling in the present.
Types of P/E Ratio

1. Forward P/E Ratio :-

It is calculated by dividing the prices of single
unit of stock of a company and the estimated
earnings of a company derived from its future
earnings guidance. As such a ratio is based on the
future earnings of a company it is also called an
estimated P/E Ratio investors use price to earnings
ratio to assess how a company is expected to
perform in the future and it’s estimated growth
rate.

2. Trailling P/E Ratio :-

Trailling P/E Ratio is the most commonly used
metrics by investors ; wherein past earnings of a
company over a period is considered.
It provides a more accurate and objective view
of a company’s performance

Investment in Investment in
Bank Shares

FD Shares
Year 2000 10 Years Year 2000
SBI – Share Price
 Rs – 22
Inv – 5,00,000 Inv – 5,00,000

Total – 30,00,000 Share’s – 22,7275

SBI share splited 10%

30,00,000 + CMP
Three million + Dvident
Total – 82,999,100
Eighty two milion, nine
Hundred ninety nine
Thousand, one hundred.
Power of compounding
Parameters Fundamental Technical
Analysis analysis
Process of
calculating
intricsic value of
a stock by
Definition analyzing all the
factors which
may affect the
stock future in
price
Examination of Examination of
economic market
Methodology outlook, psychology by
industry trends, studying the
financial data price
and movements on
competitor,s charts.
performance.
Time Long term view Short term
view
Finding intrinsic Finding right
Purpose value of share time to enter
or exit a stock
Used by Used by
Usage investors for traders for
long term earning
wealth creation regular income
Financial
statement like
annual reports charts
Souree of data
balance sheet
profit loss
account cash
flow statement
and company
annoucements.
Concepts used Growth Dow theory
estimates wave theory
return on equity trend support
( R.E ) return of resistance,
 assets (R.A) chart patterns,
technical
indicators etc.

Fundamental analysis V/S technical analysis

Technical analysis is an art of examin ing past

price movement of a stock to forecast future price
movements. It helps to identify trading
opportunities by analyzing statistical trends
gathered from trading activity, such as price
movement and volume.
Unlike fundamental anlaysis, in technical
analysis it doesn’t matter whether a stock is
undervalued or overvalued in fact the only thing
that matters is the past trading data (price and
volume) of a stock and what information this data
can provide about the future movement in the
stock price i.e, whether the stock is overbought or
oversold and whether price will go up or down.
Technical analysts believe that everything from
company’s fundamentals to the broad market
factors and the market psychology, are already
priced into the stock.
 Technical analysis is good to find the entry and
exit time in a stock for intraday or short term as it
mainly analyzes investor’s current and past
behavior towards a stock. However, if you want to
find a multi bagger stock to invest from long term
point of view, then fundamental analysis is the
best tool that you cam utilize.
John murphy – the famous american financial
market analyst once said

“ The fundamentalist studies the cause of the

market movements while the technician stuelies
the offect”
In short the main difference between
fundamental analysis and technical analysis is its
ideology.
Fundamental analysis is concerned with “WHY”
For Ex. Why the price of a stock will goup or
down in wheres ;
Technical analysis is concerened with “ Why”
What was the past price and volume pattern of
a stock and what is the corrent price and volume
patteern.

EIC ANALYSIS
 Now that we have understood what what is
fundamental analysis we should try to understand
how we can use it for investing is stock.
A fundamental analyst or an investor who relies
on fundamental analysis tries to forecast future
stock prices, by calculating its intricsic value.
This is done by examination of the underlying
forces that affect the well being of the economy,
industry group and companies.
Such a type of analysis in known as EIC
Analysis or Economy - Industry - Company analysis.
Such an approach is a top – down approach of
fundamental analysis.

Generally stock price move up when there is

expansion of the economy and when there is recession
in the economy, the price of most of the stocks move
downward so it is always advisable to start by analyzing
the economy.
After analyzing the overall state of economy,
next you need to analyze various sectors or industries
and try to find out sectors or industries which are likely
to benefit most in the given circumstances.
After identifying sectors which can perform well
in current set of conditions it is the time for narrowing
down the companies in thase sectors before you
proceed ot a more detailed analysis.
Company analysis is the final stahe of
fundamental analysis wherein investor analyses both
qualitative and quantitative aspects of various
companies and select a few companies which are good
from a medium to long investment point of view.
At the economy level, fundamental analysis
involves analysis of economic data to assess the
present and future growth of the nation’s economy.
At the industry level, fundamental analysis
involves analysis of supply and demand aspects of
products offered to assess the present and future
growth of the industry.
At the company level, fundamental analysis
invelves analysis of supply and demand aspects of
products offered to assess the present and future
growth of the industry.
At the company level, fundamental analysis
involves analysis of financial data of the company,
management, business concept and competiton to
assess the present and future growth potential of the
company in which you are thinking to invest money.

 Economic Factors to watch out

 Some of the important economic factors
which a fundamental analyst or a long term investor
needs to analyze include –
1 Political stability
2 Gross domestic product ( GDP )
3 Industrial production ( IIP ) data
4 Consumer spending
5 Inflation
6 Interest rates
7 Agriculture and monsoon
8 Government budget and deficit
9 Corporate tax structure
10 balance of payment, forex reserves & exchange
rate
11 infrastructure facilites
12 demographic factors
13 sentiments

Economic cycle :-
 Economic cycle is the natural fluctuation of
economy between periods of expansion ( growth )
and contraction ( recession ).
Every country goes through the economic cycle
and the phases of the cycle at which a country is in
has direct impact both on industry and individual
companies operating in them.
The four phases of an economic cycle are –
1 Expansion phase ( Growth )
2 Recession phase ( contraetion )
3 Depression phase
4 Recovery phase

Industry analysis
 An industry life cycle typically consists of five
stages –
1 startup stage
2 growth stage
3 consolidation stage
4 maturity stage
5 decline stage

each stage is ill ustrated below in terms of

revenues, cash and profits.

Industry analysis is a market assessment tool

used by businesses, analysts and value or long
term investors to understand the profit potential
of an industry and the amount of competition
present init.
This is done by studying – dominant
companies within a given industry, demand supply
mechanics within the industry, whether the
industry is growing, potential opportunities and
future outlook of the industry and other social,
political and economic factors.

Company analysis
 Company analysis is the final stage of
fundamental analysis wherein investor analyses both
qualitative and quantitative aspects of various
companies and select a few companies which are good
from a medium to long term investment point of view.

Aualitative Aspects :-

These are non – numerical characteristics of a

business or a company and mainly revolve around
company’s competitive advantage and how the
company is managed.
Warren buffett has always been concerned
about two things- economic moat and the
management of the company. According to him, the
future of any company rests upon the quality
competence and vision of its management.
A good management can help a company a
company perform well even in tough times while a
company run by a poor management can fail to
perform even during good times.
Corporate history is filled with many such
examples.
 There is no magic formula or thumb rule for
evalueeting promoters or management of a company,
bt there are numbes of faetors to which you should pay
attention to analyze about the quality of management.

1) Economic moat of the company :-

1. High level of cash on hand
2. Consistent earnings even during bael economic
times.
3. Product Dominance in market
4. Powerful intellectual property
5. High brand recognition
6. Better financial performance compared to
competitors in the same industry.
2) Promoters or management background
3)Corporate governance
4)Promoters salaries
5)Related party transactions
6)Annual report
7)Shareholders and management
8)Financial statement
9)Blance – sheet

 What is options trading

 Option trading gives the buyer the right but
not the obligations suggest that most traders suffer
losses in options trading due to a severe gap in
knowledge & understanding of these derivatives.

It is always advised that one should never place

An options trade without adequate
Knowledge.

Options trading gives the buyer the right but not

the obligation to buy call option or sell put option a
certain underlying asset at a predetermined price
within a stipulated period. Options trading involves
strategies that provide traders with various market
positions to make gains or mitigate the spot market
risk.
Options trading provides an opportunity for
traders to make gain from the change in the stock price
without paying the purchase price in full, where only a
premium amount has to be paid.
Therefore, it is a type of trading that provides
the flexibility of not purchasing securities at a certain
price for some time.
 There are two types of options
that traders need to learn about :-

Call option :-
It is an option that gives the holder a right but
not an opligation to buy an asset at a particular
price before the date of expiry.

Put option :-
It is an option that provides the holder with a
right and not an obligation to sell an asset at a
particular price before the date of expiry.

How does options trading work ?

 Whenever an options trader is buying or selling
options, receives a right, but not an obligation, to
exercise an option before expiration.
The purchase and sale of an option contract do
not mandatorily need to be executed ; if the
position gets. Unfavorable, one can simply avoid
executing.

Advantages of options trading

1. Cost – efficiency :-
Options have great leveraging power,
allowing investors to obtain an option position
similar to a stock position, but at significant cost
saving. This makes options trading a more
affordable way to invest in the market.
2. Risk reduction :-
 Options contracts can provide investors
with risk – reduction strategies. Used as a
hedging device, options can help investors
protect their portfolios against advese market
movements.

3. Flexibility :-
Options give traders and investors more
flexible and complex strategies such as spread
and combinations that can be potentially
profitable under and market scenario. This
flexibility allows traders to customize their
trades according to their specific needs and risk
tolerance.

4. Higher percentage returns :-

Options have the potential to deliver
higher percentage returns than other forms of
trading.
This is because options allow traders to
price movements in the underlying asset.