CAPITAL MARKET

• Capital market is the market for long term fund.

• Capital market refers to the market for facilitating
borrowing and lending of long term funds.
• It is a part of financial system which is concerned
with raising capital funds in the form of shares,
debentures, bonds etc.
• It provides financial intermediation by channelising
idle savings of people to long term productive
investment.
 Capital
Market

Industrial Govt. Long term

Securities Securities Loans
Market Market Market

Primary Secondary
Market Market
 Popular Securities issued in capital market
• Equity shares – It is the ownership shares purchased with the
intention of getting dividend and capital appreciation.
• Preference shares – These are shares having preferential right
for the payment of dividend and repayment of capital at the
time of winding up.
• Debentures – These are debt securities issued by companies to
raise capital from the public and institutions
• Bonds – Bonds are debt securities (similar to debenture) issued
by public sector companies and banks.
• Guilt edged securities – These are long term debt securities
issued by the Central or state Government. As the payment is
guaranteed by the government, there is no risk of default.
Industrial Securities Market
• It is the market for industrial securities such as
equity shares, preference shares, debentures, bonds
etc.
• It is the market where industrial and other business
organisations raise capital through issuing securities.
• Industrial securities market is classified into
• Primary Market
• Secondary Market
Primary Market (New Issue Market)
•Primary market is a market for new issue
of securities
•In primary market, investors buy securities
directly from the company issuing them.
•IPO, FPO, Bonus issue, Right issue etc., are
the examples of primary market issues.
 Secondary Market (Stock Exchanges)
• It is the market for buying and selling second hand securities
• Securities which are already issued in primary market are
traded in secondary market.
• It provide marketability and liquidity to securities market
investment.
• Stock exchange is the secondary market for trading industrial
securities. Trading is undertaken through members of stock
exchanges called brokers.
• There are seven active stock exchanges in India (Aug 2023) out
of which six are permanent.
Government Securities Market
• It is the market for gilt edged securities or
government securities.
• A Government Security (G-Sec) is a tradeable
instrument issued by the Central Government
or the State Governments.
• Long term government securities include
government bonds and dated securities
Long term loans Market
•It is the market where long term loans are
made available to corporates.
•Commercial banks, developmental
financial institutions etc., supply long term
loans to corporate customers
 PRIMARY MARKET
(NEW ISSUE MARKET)
 Functions(Roles) of New Issue Market
1. Origination:
• It is the work before the issue is actually floated.
• It refers to the work of analysis and processing of
new project proposal (technical, economic and
financial viability).
• The proposal is analysed in terms of the nature of
security, size of issue, timing of issue, pricing and the
floatation method.
2. Underwriting
•Underwriting refers to guaranteeing to
subscribe an agreed number of shares
if it is not subscribed by the public.
•The new issue is to be underwritten
with a merchant banker or other
institution.
3. Distribution
•Distribution refers to the issue or
sale of shares including the
allotment procedures
•This role is performed by merchant
bankers, brokers and other
intermediaries.
Methods of Floating New Issue
New issue can be made through the following
methods
• Public Issue – IPO and FPO
• Private Placement
• Right issue
• Bonus issue
• Offer for sale
• Bought out deal
• Employees stock options plan/schem (ESOP/ESOS)
1. Public Issue
• It is the process of offering securities by a
company to the general public for subscription.
• Under this technique, the company issues a
prospectus or a guideline to the public, inviting
proposals for the subscription.
• Public issue may be in the form of Initial Public
Offering (IPO) and Follow on Public Offering
(FPO)
Application Supported by Blocked Amount (ASBA)
• The SEBI has introduced new facility ‘Application
Supported by Blocked Amount to apply for IPO from
sept. 2008 onwards.
• The ASBA allows subscribers to public issues to have
their application money blocked in the account in a
bank so that they have to pay only upon allotment of
shares.
•Application money shall be debited only if the
investor get allotment.
•The banks offering ASBA are called Self –Certified
Syndicate Banks (SCSBs)
Initial Public Offering (IPO):
• It is the first time issue of securities to the public by an unlisted
company.
• It is the process of raising capital by issuing its shares to the general
public
• The price is fixed by the company in consultation with merchant
banker
• After IPO, the company will become listed and the shares of the
company will be made available for trading in the secondary market.
• In order to make IPO, the company has to publish prospectus
(invitation to subscribe shares) and the same shall be filed with SEBI.
Further (Follow on) Public Offering (FPO):
•An already listed company may need further
capital even after IPO.
•If an already listed company makes further
issue of securities after IPO, it is called
Follow-on Public Offering.
•It is the public issue of additional or further
shares of a listed company.
2. Private Placement –
•Private placement is the issue of securities
(by a listed/unlisted company) privately to a
selected group of persons.
• In private placement, shares are not sold
through public offering.
•Shares may be sold to selected individual
investors or institutional investors through
an offer letter.
Sweat equity
• A sweat equity share is an equity share issued by the
company to employees or directors at a discount or
for consideration other than cash
• Issued for providing know-how or making available
rights in the nature of intellectual property rights or
value additions.
3. Right Issue
• Right issue is the direct offer of shares to all the existing
shareholders of the company in proportion to their current
holding.
• It is mainly applicable in FPO.
• Each and every shareholder has a pre-empty right to get shares
when the company issue further shares after IPO.
• Company set a time limit for shareholders to apply. The
shareholder needs to pay the price fixed by the company. It is
generally issued at a discount.
• As per section 62 of CA 2013, it is mandatory for all private,
public, listed and unlisted companies.
4. Bonus Issue (scrip issue/Capitalisation issue)
• Issue of fully paid shares to the existing shareholders at
free of cost is called bonus issue.
• It is the distribution of dividend in the form of shares.
• Bonus issue can be made only from free reserves (created
from revenue profit) and share premium collected in cash.
• In order make bonus issue, there should not be any
default on the part of the company in payment of
statutory dues to employees
• There should be a gap of at least 12 months between the
public issue and bonus issue.
5. Offer for Sale
• It is the process whereby the promoters of public
companies sell their shares and reduce their holding.
• The shares held by the promoters are offered for sale
directly to the public through a bidding process in the
stock exchange.
• The money raised in offer for sale will go to the
promoters who have sold the shares and not to the
company.
• It is used as a method to comply with minimum public
shareholding norm.
 6. Bought out deal
• A bought out deal is a process in which a company offers securities or
shares to the public, through a sponsor or investment banker.
• It is the selling of shares to an investment banker who offer it to the
public at a later date.
• The sponsor can be a bank, any financial institution or even an
individual.
• It is allowed for private limited companies only.
• A bought out deal helps the company in saving time as well as the
costs involved in a public issue
7. Employees Stock Option Scheme
• Introduced in India in the year 1985
• Under this scheme, the shares are offered to the
permanent employees of a company.
• The employee can join the scheme voluntarily.
• Employee is required to pay an initial contribution and
the remaining amount may be collected from the
employee in successive periods.
• There may be lock periods for the sale of such shares
 Methods of Pricing a Public Issue
• There are two methods of pricing a public issue
• Fixed Price issue
• Book Building
1. Fixed Price Issue : The shares are offered at a fixed
price fixed by the company in consultation with
merchant banker. For example: Issue price is ₹. 50
per share
 Methods of Pricing a Public Issue
2. Book Building: The method of offering shares by
providing a price range is called book building
method. For example: Issue price is ₹50 to 55.
• The lowest price in the price range is known as the Floor
price and the highest price in the price range is known as
Cap price. The applicant can quote any price within the
price range given.
• Based on the demand and supply of the shares, the final
price is fixed. The final price at which the allotment is
made is called Cut off price.
 Three main parties in Stock Market (3 ‘i’s )
1. Issuers : Joint stock companies, Government, banks etc., who
issue securities such as shares, debentures, bonds etc., to raise
money
2. Investors : Retail, Non-institutional and Institutional investors
• Retail Individual investor (RII) – Resident, NRI and HUF who apply
for securities for less than 2 lacks.
• Non-Institutional investors – who apply for more than 2 lakhs
• Qualified Institutional Bidders (QIB) SEBI registered institutions such
as banks, FIIS, Mutual funds etc.
• Anchor Investor is a QIB who apply for 10 crores or more
3. Intermediaries: Entities Who Connect Investors with Issuers
Intermediaries in New Issue Market
• The intermediaries that function in the primary market are
• Merchant Bankers
• Book running lead managers
• Registrar and Transfer Agents (RTA)
• Underwriters
• Bankers to the issue
• Stock brokers
• Depository and Depository participants
• Debenture trustees
• Portfolio managers
• Primary Dealers
Merchant Bankers
• While making public issues, the issuer will appoint a
merchant banker to manage the issue.
• Merchant bankers are institutions who help issuers
for the management of all aspects of public issue.
• Their services include advising the issuer regarding
the pricing of the issue, preparation of the issue
document (prospectus), application for listing of
securities, advertising the issue, finalizing the
allotment etc.
 Functions of Merchant Banker
1. Management of Public Issue:
Merchant bankers manages all aspects of the issue such as
• Advising the timing of issue, pricing of the issue etc.,
• Preparation of offer documents such as prospectus
• Filing of draft offer documents with SEBI
• Inviting applications
• Advertising the issue
• Allotment of shares
• Assistance for listing of shares etc.
2. Corporate advisory services:
Merchant bankers provides variety of advisory services
to their corporate clients that include
• Financial structuring – determination of the right debt
equity ratio
• Source of funds – helps to find cheaper source of funds
• Issue management – advising various aspects of the issue
• Project counselling – identification & evaluation of
projects
• Risk management
• Legal compliances etc.
3. Placement and distribution
Merchant bankers helps to distribute
•Equity shares
•Debentures and bonds
•Mutual fund products
•Fixed deposits
•Insurance products
•Money market instruments etc.
4. Underwriting:
•Underwriting is a service that guarantees to
buy securities if it is not subscribed by the
public.
•Under writer charges underwriting
commission to guarantee the subscription.
•Merchant bankers act as underwriters of
public issues.
5. Loan Syndication
• Loan syndication is a process of pooling loans
from multiple financial institutions to finance a
single project.
• Merchant bankers help corporate borrowers to
arrange loans from multiple borrowers for single
projects.
• They help to raise both rupee and foreign
currency loans
6. Other functions
•Portfolio management
•Brokerage services
•Services to public sector units
•Leasing services
•Money market operations
•Offshore financing etc.
Book running Lead Managers
• They are specialized merchant bankers
appointed by the company for
• Drafting issue document
• Compliance with requirement of SEBI
• Compliance with requirement of stock exchanges
• Compliance with other laws
• Finalizing the basis of allotment etc.
Registrar and Transfer Agents (RTA)
• Registrars are SEBI registered entities that provide services
relating to share registry maintenance and share transfer
activities.
• Their functions include
• Collecting the application from investors
• Maintain a record of applications and money received from investors in a
primary issue
• Assist company to determine the basis of allotement
• Management of the allotment process – send allotment letter, refund process
etc.
• Assist mutual fund companies in record maintenance
Underwriters
• Underwriter is an intermediary who guarantees
to buy agreed number of securities if it is not
subscribed by the public.
• Under writer charges underwriting commission
to guarantee the subscription.
• Merchant bankers, commercial banks,
developmental financial institutions etc., act as
underwriters.
Bankers to the Issue
• These are banks that are specifically appointed by the issuer for
managing the sale proceeds of the issue of securities.
• They are engaged in acceptance of applications (through ASBA
mechanism) along with application money from investors
• They are also responsible for the refund (unblocking) of
application money to unsuccessful applicants.
• Banks participating in ASBA mechanism is called Self Certified
Syndicate Banks (SCSB)
Stock Brokers
• Stock brokers are the trading members of stock
exchanges
• All secondary market transactions have to be
conducted through stock brokers.
• Trading account is opened with stock broker.
• Demat account can also be opened with stock brokers
if they are DP.
Depository & Depository Participants
• Depository is an organisation that holds financial securities in a
dematerialized form on behalf of the investors.
• India has only two depositories
• National Securities Depositories Ltd (NSDL)
• Central Depository Services Ltd (CDSL)
• To avail of the services of a depository, an investor has to open a
demat account with the Depository through a depository participant.
• Depository Participants are the members of depositories
• Investors approach DPs to open Demat account.
 Stock exchange/Secondary market
• Securities issued by a company for the first time are offered to the
public in the primary market. Once the IPO is done and the stock
is listed, they are traded in the secondary market.
• It is a secondary market for second hand securities (securities
which have already issued through IPO or FPO).
• In the secondary market, one purchases securities from other
investors who willing to sell the same.
• It provide liquidity and marketability to stock market investment.
• Only the members (Brokers) can deal in. An investor can trade in
securities through the stock exchange with the help of SEBI’s
registered brokers only.
• There are four active stock exchanges in India.
 Primary v/s Secondary Market : Key Differentiation
Features Primary Market Secondary Market
Definition Securities are issued for the Trading of already issued securities
first time to public
Also known as New Issue Market Post Issue Market
Type of Listed and unlisted Listed companies only
Primary market Secondary market
Company companies
Pricing Prices are determined by Prices are determined by market (demand
Issuer company and supply forces)
Key Merchant Bankers , RTAs Stock Brokers, CLEAING MEMBER,
Intermediaries AND DEPOSITORIES. DEPOSITORY PARTICIPANTS
Purpose To raise capital for Provide marketability and liquidity to
expansion, diversification, investors and traders in stock market.
etc.
 Major Stock exchanges in India
No Name of Stock exchange Type
1 BSE Ltd (1875) Permanent
2 National Stock Exchange (1992) – Permanent
NSE Ltd
3 Calcutta Stock Exchange (1908) Permanent
4 Metropolitan Stock Exchange of ----------
India (2008)
Largest stock exchanges in the world
• New York Stock Exchange (USA)
• NASDAQ (USA)
• Japan Exchange group (Japan)
• Shanghai Stock Exchange (China)
• Euronext (EU)
• London Stock exchange (UK)
• Hong Kong Stock exchange (Hong Kong)
 Bombay Stock Exchange
• Established in 9-7-1875 in the name of ‘Native
share and stock brokers association’
• Recognised by Indian Government in 1957.
• First stock exchange in Asia
• It is the exchange with largest listing in India.
• Located at Dalal street, Mumbai, Maharashtra.
• Started electronic trading (BOLT) in 1995
• Major index is BSE SENSEX (Index of 30 securities)
National Stock Exchange of India (NSE)
• Established in 1992
• Recognised as a stock exchange in 1993.
• First electronic exchange in India
• Set up by a group of leading financial institutions in
India & abroad.
• Electronic Trading system of NSE is known as NEAT
(National Exchange for Automated Trading)
• Key index of NSE is NIFTY FIFTY (Index of 50 stocks)
 Functions of Stock exchanges
1. Marketability and Liquidity:
• The main function of stock market is to provide ready market for
sale and purchase of securities. The presence of stock exchanges
gives assurance to investors that their investment can be converted
into cash whenever they want.
2. Economic Barometer:
• A stock exchange is a reliable barometer to measure the economic
condition of a country. The rise or fall in the share prices and stock
indices indicates the boom or recession cycle of the economy.
 Functions of Stock exchanges
3. Valuation or pricing of Securities:
• The stock market helps to value the securities on the basis of demand
and supply factors. The securities of profitable and growth oriented
companies are valued higher as there is more demand for such
securities. Valuation of securities helps creditors, investors and
government in performing their respective functions.
4. Safety of transactions:
• In stock market only the listed securities are traded. Listed companies
have to operate within the strict rules and regulations of exchanges
and SEBI. Therefore the transactions in stock exchanges are safe and
secure.
 Functions of Stock exchanges
5. Contributor to Economic Growth:
• Investors will invest in primary market only if there is an active
secondary market. A well-functioning stock market is crucial to
economic development because it helps businesses to easily
acquire funds from the public.
6. Making the public aware of equity investment:
• Stock exchange helps in providing information about investing in
equity markets and to encourage people to invest in securities.
 Functions of Stock exchanges
7. Offers scope for speculation:
• By permitting healthy speculation of the traded
securities, the stock exchange ensures liquidity
and marketability to the listed securities.
8. Spreading of Equity Cult (interest):
• Stock exchange encourages people to invest in
ownership securities by regulating trde and by
educating public about investment.
 Functions of Stock exchanges
9. Better Capital Allocation:
• The shares of profit making companies are quoted at higher prices
and are actively traded so such companies can easily raise fresh
capital from stock market. The general public hesitates to invest in
securities of loss making companies. So stock exchange facilitates
allocation of investor’s fund to profitable channels.
10. Encourages investment and savings:
• The stock market offers attractive opportunities of investment in
various securities. These attractive opportunities encourage
people to save more and invest in securities rather than investing
in unproductive assets.
Listing of Securities
• Listing refers to include the securities of companies on the official list
of stock exchanges for trading.
• Only the shares of listed companies are traded through stock
exchanges.
• A company seeking listing of its securities is required to submit
application to the stock exchanges where it proposes to have its
securities listed.
• Listed companies are responsible to adhere the rules and regulations
of exchanges and SEBI.
Requirements for listing
• The issuer should be a company established by the Companies Act
1956/2013
• Listing requirements varies from exchange to exchange.
• Requirements include
• minimum paid up capital
• maximum paid up capital
• market capitalization
• profitable track record etc.
• Company has to make an application to the intended stock exchanges
before public issue.
Advantages of Listing
• Liquidity and marketability of shares
• Exit route for promoters and existing investors
• Increased trust of shareholders
• Easy transferability of shares
• Supervision and control of exchanges and regulator
• Fair price for securities
• Transparency (Timely disclosure of corporate information)
• Better image of the company
• Helps for fund raising in primary market
Methods of trading in Stock exchanges
On the basis of trading mechanism
• Manual trading
• Visit broker office
• Trade by call
• Trade by email
• Online trading
• Broker website
• Broker app
Methods of trading in Stock exchanges
On the basis of term of investment
• Intra-day trading
• Buying and selling on the same day.
• Speculative in nature
• Leverage is offered by the broker
• Trader uses technical analysis
• Swing trading
• Buying and selling for short periods (hold securities for few days)
• Delivery based trading
• Long term investment in securities
• Investor became the owner of the business
• Aim is wealth maximisation
 Online trading

• Online Trading is a method that facilitates buying and selling of

securities through an electronic interface.
• Online Trading has simplified a complex process into a few clicks.
• In India, live online trading is offered in between 9.15 am and 3.30
pm.
• Online trading is subject to low transaction cost.
• Online trading can be done through
• Broker website – login to the trading website offered by the broker
• Broker apps – Install and login to the trading apps provided by broker.
 Benefits of Online trading
• It is convenient – Demat and trading account can be opened
online and transaction can be done with the help of mobile
devices
• It is cheaper – Brokerage and other charges are low in online
trading
• Monitor investments anytime: Online trading apps/terminals
enables investors to monitor their investment at any time.
• Eliminates more middleman: The only middleman needed for
online trading is broker.
• Investor has greater control – Investors can buy and sell
whenever they wish
 Benefits of Online trading
• Faster Transactions – Transactions can be completed within
seconds.
• Informed decisions: Online trading platforms offer investment
advice, fundamental analysis and technical analysis tools.
• Transparent – Online trading is more transparent to the
investor.
• Accessible from anywhere: Online trading platforms can be
operated from anywhere in the globe with an internet
connection.
• Real time- Trades are executed in real time.
 Stock Index (Indices)
• It is the numerical indicator of the performance of stock
market or a section of the stock market.
• Indices act as a representative of the entire market or a
segment of the market.
• Index enable the investor to measure and compare the
performance, price movements and return of different
sectors/investments.
• It is computed from the prices of selected stocks.
• Example: BSE Sensex, BSE 100, NSE Nifty fifty, Nifty bank
etc.
Major Indices in the world
• BBC Global 30 – World stock market index
• 30 largest companies in Europe, Asia & Americas
• S&P Global 1200 – Global stock index covering 31 countries & 70% global
market capitalisation
• Amex Composite – Composite Value of all of the stocks traded on the
American stock exchange.
• Dow Jones Industrial Average – US 30
• NYSE Composite – covers all common stock listed on NYSE
• NASDAQ Composite – index of all common stocks and securities traded on
NASDAQ stock market
• BSE Sensex
• NSE Nifty fifty
BSE Sensex
• It is the benchmark index of BSE Ltd.
• The Sensex is comprised of 30 of the largest and
most actively traded stocks listed on the BSE Ltd.
• The Sensex is reviewed semiannually each year in
June and December.
• Base value of Sensex is 100 and the base year is
1978-79
• Other indices of BSE are BSE 100, BSE Small cap,
BSE Midcap, BSE large cap, BSE 200 etc.
Nifty Fifty
• It is the benchmark index of National Stock
Exchange Ltd.
• The Nifty is comprised of 50 of the largest and most
actively traded stocks listed on the NSE Ltd.
• The Nifty is reviewed semiannually each year
• Base value of Nifty is 1000 and the base year is
1995
• Other indices of NSE are Nifty 100, Bank Nifty, Nifty
Large cap, Nifty small cap, Nifty mid cap etc.
Venture Capital Fund Company
• It is a financial institution which provide capital fund to risky projects
of business firms.
• Regulated by Venture Capital fund regulation 1996 of the SEBI.
• Venture capital fund is invested as equity shares and not as any type
of loan.
• Venture capital fund is a private equity capital provided as seed
funding at early stages of companies with high growth potential.
• Apart from capital VCFC provide technical and managerial expertise.
• Eg. Accel partners, Blume ventures, Brain capital
 Features of Venture Capital
• Venture capital finances new ventures with high risk.
• Venture capital provides financing in the form of private
equity
• It makes long term investments
• It seeks high return on its investments
• They will participate in the management of the company
in which it invest.
• It provide technical and managerial expertise to the
business.
• Venture capital funds lacks liquidity
Additional Reading
Dematerialisation Vs Rematerialisation
• Dematerialisation is the process of converting the
physical securities into electronic format.
• Rematerialization is the process of
converting securities held in a electronic form in a
demat account in to paper form i.e. physical
certificates
• The client has to submit the rematerialisation request
to the DP with whom he has an account.
 Demat account
• Dematerialised account provide the facility of
holding shares and securities in electronic
format.
• Demat account service is provided by
depositories through DP and stock brokers.
• Four major charges for Demat account are
account opening fee, annual maintenance fee,
custodian fee and transaction fee.
• In addition to the demat account, the investor
has to open a trading account with the broker.
 Rolling settlement
• It is the process of settling security trades on successive
dates of the trading day.
• It was introduced in India in 2000. Initially the settlement
period was T+5
• It was made compulsory in 2001.
• Now it is T+1 with effect from 2022 in a phased manner
• T + 1 (trade day + 1st working day after the trade)
• If security is bought on Monday, settlement on Tuesday
Members in Stock Exchange
Broker:
• Broker is a person who transact business
in securities on behalf of his clients and
receives commission for his services. He
deals between the jobbers and clients.
• Two types, Full service brokers (traditional
brokers) and discount brokers (online
broker)
Full service broker –
• In addition to trading facility, they offer wide array of
services such as financial planning, tax advise,
research, portfolio updates etc.
• They have many branches.
• Brokerage as a percentage of trade value.
Discount broker-
• Just provide trading platform.
• No branches & operates via online.
• They charge low brokerage (flat rate per trade
irrespective of the order value)
Jobber:
• "Jobber" is a British term for what in the
United States is "market maker.“
• They are professional independent
brokers engaged in buying and selling of
specified securities in their own name.
• Jobbers cannot deal on behalf of public
and are barred from taking commission.
They are working for profit.
Sub-brokers/Remisiers:
• Sub-brokers are agents of stock brokers.
• Since they are not members of a stock exchange, he
cannot directly deal in securities.
• He helps clients to buy and sell securities only
through the stock broker.
Tarawaniwalas – A special Jobber in BSE
• They act both as Brokers and jobbers.
• Basically he is a jobber with permission to act as
broker.
Authorised Clerks (member assistants)
• One who is appointed by the stock broker to assist
him in the business of securities trading.
Investor and Speculator
• Investor invest money is securities for long term and focussed on
income (dividend) and capital appreciation.
• Mostly uses fundamental analysis to select stock
• Speculator buy and sell shares short term and focussed on profits
(difference in price)
• Mostly uses technical analysis to select stock.
Speculators in stock market
Bull: (Fearless Speculator) - Tejiwala
• A speculator who expects a rise in
prices of securities in the future.
• In anticipation of price rise, he make
purchases of securities with the
intention to sell at higher prices in
future.
Bear (Fearful speculator) -
Mandiwala
•A speculator who expects a fall in
prices of securities in the future.
•In anticipation of price fall, he sell
securities at present with a view
to purchase them at lower prices
in future.
Stag (cautious speculator)
• Stag is a cautious speculator. He applies shares in
new companies (IPO/FPO) and expect to sell them at
a higher price (with premium) if he gets the
allotment.
Lame Duck (Failed speculator)
• A bear finds it difficult to fulfil his commitment.
• An ineffective trader who bankrupted due to his
debts in stock market.
Cornering
• Cornering the market consists of obtaining sufficient control of a
particular stock, commodity, or other asset in an attempt to
manipulate the market price
• Cornering the market" refers to the process of acquiring enough
shares of a certain security or asset with the intention of illegally
manipulating its price.
Price Rigging
• 'Price Rigging' An illegal action performed by a group of conspiring
businesses that occurs when the firms agree to artificially
inflate prices in an attempt to recognize higher profits at the expense
of the consumer.
• In stock market, a group of person agreed simultaneously to buy and
sale stock in circulation in bulk quantities which aggregately inflate
the price.
• SEBI has so far banned about 1500 entities who manipulated prices of
listed companies.
POSITION
• An amount of money committed to an investment in
anticipation of favourable price movement
• If the investor bought and own shares, he is said to be
in a long position.
• If the investor sell (owes the stock to some one) but
does not actually own them, he is said to be in short
position.
Margin Trading /Buying on margin
• Buying on margin is borrowing money from a broker to purchase
stock.
• In India, it is the process whereby individual investors buy more
stocks than they can afford to.
• In order to trade with a margin account, you are first required to
place a request with your broker to open a margin account.
Algo Trading
• Algorithmic trading (automated trading, black-box trading or
simply algo-trading) is the process of using computers programed to
follow a defined set of instructions (an algorithm) for placing a trade
in stock market.
• It is the trade automatically executed by computer programmes.
Types of stocks
Blue Chip stock
• stocks of large, stable companies that have a long history of stable
earnings and dividends
Income stock
• Stocks having growing returns in dividends. These companies have a
high dividend payout ratio
Cyclical stock
• Stock fluctuate with the economic cycles, going up
strongly when the economy is growing and declining
as the economy declines.
• Most of these companies supply capital equipment
for businesses
Defensive shares
• Stocks that are resistant to the economic cycles
Growth stocks
• Stocks of companies that reinvest most of their
earnings into their businesses, because it can yield a
higher return in the form of capital gains compared to
dividends.