Basics ppt

1. Stock Market

● Key Exchanges: The Bombay Stock Exchange (BSE) and National Stock
Exchange (NSE) are the two main stock exchanges in India. The BSE is one of
the oldest stock exchanges globally, while the NSE is known for its advanced
technology and large trading volume.

● Function: The stock market allows companies to raise capital by selling shares
to the public in an initial public offering (IPO). Once listed, these shares can be
bought and sold by investors in the secondary market. Investors buy shares to
gain ownership in a company and potentially earn returns through dividends and
capital gains as the stock price rises.

● Importance: For companies, it is a major way to raise long-term funds for

expansion, projects, or debt repayment. For investors, the stock market provides
opportunities to invest in a wide range of companies and industries.

2. Debt Market

● Government Securities Market: This segment deals with bonds issued by

central and state governments. These bonds are low-risk investments since they
are backed by the government. The most common types of government bonds
are Treasury Bills (short-term) and Government Bonds (long-term). Investors
typically include institutional players like banks, mutual funds, and insurance
companies.

● Corporate Bond Market: In this market, companies issue bonds to raise capital.
These bonds typically offer higher interest rates than government bonds to
compensate for the increased risk. The corporate bond market is crucial for
companies looking to secure debt financing without diluting ownership (unlike
issuing equity).

● Importance: The debt market is essential for funding long-term infrastructure

projects, government spending, and corporate expansion, offering investors
steady income through interest payments.

3. Derivatives Market

● Futures and Options: These are contracts derived from underlying assets like
stocks, indices, commodities, and currencies. A future is an agreement to buy or
 sell an asset at a future date at a predetermined price, while an option gives the
buyer the right, but not the obligation, to buy/sell an asset at a specific price
before a certain date.

● Uses: The derivatives market is mainly used for hedging and speculation.
Investors and companies use it to protect against price fluctuations (hedging).
For example, a company that exports goods may use currency futures to protect
itself from unfavorable currency exchange rate movements.

● NSE Dominance: The National Stock Exchange (NSE) is the largest exchange
for derivatives trading in India. It offers a range of products such as index futures,
stock futures, currency derivatives, and commodity futures.

● Importance: Derivatives help in risk management by allowing investors to lock in

prices and limit exposure to unpredictable movements in market prices.

4. Money Market

● Short-Term Instruments: The money market deals with short-term borrowing

and lending (typically less than one year). Common instruments include:

○ Treasury Bills (T-Bills): These are short-term securities issued by the

government to meet its immediate funding needs. They are sold at a
discount and redeemed at face value upon maturity.

○ Commercial Paper (CP): Issued by companies to meet short-term

obligations. It’s a low-risk investment for short periods, generally between
7 to 365 days.

○ Certificates of Deposit (CDs): Issued by banks for raising short-term

funds, usually for a period of 1 month to 1 year.

○ Interbank Call Money: Short-term loans between banks to manage their

liquidity requirements.

● Role of RBI: The Reserve Bank of India (RBI) closely monitors and regulates the
money market, ensuring liquidity and stability in the system. The RBI also uses
the money market to control inflation and manage the country’s monetary policy
through open market operations.

● Importance: The money market is crucial for managing liquidity in the financial
system. It allows banks and financial institutions to manage short-term funding
needs efficiently.
5. Foreign Exchange Market

● Currency Trading: The foreign exchange (forex) market allows for the buying
and selling of different currencies. It is essential for businesses and individuals
involved in international trade, investment, and travel.

● Key Participants: The forex market consists of authorized dealers (banks and
financial institutions) and other market participants, including exporters,
importers, and speculators.

● RBI's Role: The Reserve Bank of India plays a pivotal role in maintaining stability
in the currency exchange rate. The RBI intervenes in the forex market to curb
excessive volatility and maintain favorable balance-of-payments conditions.

● Importance: A stable forex market is vital for international trade and maintaining
the value of the Indian rupee. It also helps businesses manage risks related to
currency fluctuations.

6. Mutual Funds

● How Mutual Funds Work: Mutual funds collect money from multiple investors
and invest it in a diversified portfolio of assets like stocks, bonds, and money
market instruments. A professional fund manager oversees the investments and
decides how to allocate the funds based on the market’s performance and the
fund’s goals.

● Types of Mutual Funds:

○ Equity Mutual Funds: Invest primarily in stocks, offering higher potential

returns but also higher risk.

○ Debt Mutual Funds: Invest in bonds and other fixed-income securities,

offering lower risk and steady returns.

○ Hybrid Mutual Funds: Invest in both equity and debt instruments to

balance risk and return.

● Importance: Mutual funds offer individual investors the ability to diversify their
investments and participate in the stock or bond markets without needing deep
financial expertise. They provide a way for small investors to access professional
portfolio management.

7. Insurance Sector
 ● Life Insurance: Provides financial protection to the family of the insured person
in case of their death. It can also serve as an investment or savings vehicle,
depending on the policy (e.g., term insurance, endowment plans).

● General Insurance: Covers non-life risks such as property damage (e.g., home,
car insurance), health (e.g., medical insurance), and liability (e.g., business
insurance).

● Standalone Health Insurance: Focuses solely on providing medical coverage

and protection against rising healthcare costs.

● Regulator: The Insurance Regulatory and Development Authority of India

(IRDAI) supervises the insurance industry, ensuring that insurance companies
operate fairly and customers are protected.

● Importance: The insurance sector is vital for managing risk and providing
financial security to individuals and businesses. It also supports the economy by
enabling investment in long-term projects.

8. Non-Banking Financial Companies (NBFCs)

● What They Do: NBFCs offer financial services similar to banks, but they do not
have full banking licenses. They provide loans, asset financing, and wealth
management services, especially in areas where traditional banks may not have
a strong presence.

● Types of NBFCs:

○ Asset Finance Companies: Specialize in financing assets like vehicles,

equipment, or infrastructure projects.

○ Microfinance Institutions: Provide small loans to individuals or small

businesses, particularly in rural areas.

○ Housing Finance Companies: Focus on providing home loans.

● Importance: NBFCs play a crucial role in promoting financial inclusion by

reaching underserved populations in rural and semi-urban areas. They provide
credit to sectors and individuals that may not have access to traditional banking.

9. Regulatory Bodies
 ● SEBI (Securities and Exchange Board of India): Regulates the stock and
securities markets. Its primary function is to protect investor interests and ensure
fair and transparent practices by companies and market intermediaries.

● RBI (Reserve Bank of India): The central bank of India oversees the country’s
monetary policy, regulates banks, and ensures financial stability. It controls
inflation, manages foreign exchange reserves, and supervises the money
market.

● IRDAI (Insurance Regulatory and Development Authority of India):

Regulates the insurance industry, ensuring that insurance providers follow proper
practices and that policyholders' interests are safeguarded.

● PFRDA (Pension Fund Regulatory and Development Authority): Oversees

pension schemes like the National Pension System (NPS), ensuring secure and
regulated retirement savings for individuals.

Investing: Committing money to assets like stocks, bonds, or real estate with the goal
of making a profit over time. The focus is on long-term wealth building and achieving
financial goals.

Types of Investments:

● Stocks: Buying shares of a company.

● Bonds: Lending money to governments or corporations.

● ETFs (Exchange-Traded Funds): A fund that holds a basket of different

investments, traded like a stock.

● Mutual Funds: A pool of money from many investors used to buy a diversified
portfolio of stocks, bonds, etc.

● Cash Equivalents: Short-term, low-risk investments like treasury bills or money

market funds.

● Real Estate: Investing in property for rental income or capital appreciation.

● Commodities: Investing in physical goods like gold, oil, or agricultural products.

Factors ppt

1. Macroeconomic Factors (Big Picture Things that Affect the Whole

Market):

● Economic Indicators: Things like GDP, inflation, interest rates, and jobs impact
the market. If these are positive, stocks tend to go up because investors feel
good about the economy. If they're negative, investors get nervous, and stocks
might fall.

● Monetary Policy: When central banks change interest rates, it can affect the
stock market. Lower interest rates make borrowing easier and can boost the
economy, making stocks more attractive. Higher rates make borrowing more
expensive, slowing down the economy and possibly leading to lower stock
prices.

● Fiscal Policy: Government actions like taxes, spending, or debt can also
influence the stock market. Policies that help economic growth (like tax cuts) are
good for stocks, while policies that slow growth or add regulations can hurt stock
prices.

● Geopolitical Events: Political conflicts, wars, or trade disputes create

uncertainty, making investors more cautious. This can cause the stock market to
become more volatile.

● Global Economic Conditions: The economic health of other countries, trade,

and changes in currency values also affect local stock markets. For example, an
economic crisis in a big economy can drag down stock markets globally.

2. Microeconomic Factors (Things that Affect Specific Companies or

Sectors):

● Company Earnings: A company’s performance, especially its profits, directly

affects its stock price. Good earnings usually boost stock prices, while poor
earnings can cause them to drop.

● Industry and Sector Trends: Stocks in a specific industry can move together
based on trends. For example, new technology or changes in demand can push
an entire sector’s stock prices up or down.
 ● Corporate News and Events: Major company news like mergers, leadership
changes, or new products can impact stock prices. Good news typically raises
stock prices, while bad news can bring them down.

● Investor Sentiment: How investors feel about the market overall can push
prices up or down. If investors are confident, they buy more stocks, driving prices
up. If they’re worried, they sell, causing prices to fall.

● Market Liquidity: When there are many buyers and sellers in the market, prices
remain stable. When liquidity is low (fewer people buying or selling), stock prices
can be more volatile.

● Investor Behavior: People often make decisions based on emotions or biases

rather than facts. This can cause irrational market movements, like panic selling
or overbuying certain stocks.

3. Behavioral Components (How Human Emotions and Biases Affect

the Market):

● Investor Sentiment: Investors’ emotions, like optimism or fear, drive their

decisions. Positive feelings can cause market rallies, while negative feelings can
lead to market crashes.

● Herding Behavior: Investors often follow the crowd. This behavior can cause
market bubbles when too many people buy, or crashes when everyone sells at
once.

● Overconfidence Bias: Some investors overestimate their ability to predict the

market. They trade too much or take too much risk, which can increase market
volatility.

● Loss Aversion: People feel the pain of losing money more than the joy of
making it. This makes them hold onto losing stocks longer than they should,
hoping to avoid losses.

● Anchoring Bias: Investors tend to rely too much on the price they paid for a
stock, even when new information suggests they should sell or change their
strategy.

● Confirmation Bias: Investors often look for information that supports their
existing beliefs and ignore anything that challenges those beliefs.
 ● Availability Bias: People base their decisions on the most recent information
they have, even if it's not the most relevant. This can lead to short-term decisions
that ignore long-term trends.

4. Examples of Behavioral Factors:

● Dot-com Bubble (1990s): Investors bet on internet companies, even though

many of them weren’t profitable. They ignored the risks and drove prices too
high, leading to a market collapse.

● Housing Bubble (2007-2008): Many investors followed the crowd by investing in

risky mortgage-backed securities without fully understanding the dangers. This
contributed to the financial crisis.

● Bitcoin Mania (2017): Investors rushed to buy cryptocurrencies without fully

understanding them, driven by fear of missing out (FOMO).

● Market Panic (2008 Financial Crisis): During financial crises, investors tend to
panic and sell off stocks, which makes market declines worse.

● IPO Excitement: Investors sometimes buy stocks of newly public companies just
because of the hype, without considering long-term prospects.

● Performance Chasing: Some investors focus too much on recent top

performers, assuming they will continue to do well, ignoring the possibility of
market changes.

____________________________________________________________________________

Session 2 ppt

1. When to Start Investing:

● Start Early: The earlier you invest, the more time your money has to grow,
thanks to compounding (earning interest on both your initial investment and the
interest it earns).

● Invest Regularly: Consistently investing helps build wealth over time.

 ● Invest for the Long Term: Long-term investments are less risky compared to
short-term trading.

2. Regulations in India:

● Ministry of Finance: Oversees the financial markets, introduces reforms,

protects investors, and builds market institutions.

● SEBI (Securities and Exchange Board of India): Regulates the stock market,
protects investors, and ensures the securities market functions properly.

● RBI (Reserve Bank of India): Manages monetary policy, controls money supply,
and regulates banks and foreign exchange markets.

3. Important Laws:

● Depositories Act (1996): This law introduced electronic holding of securities,

allowing for shares and bonds to be held in demat (dematerialized) accounts,
instead of physical certificates.

● Securities Contracts (Regulation) Act (1956): Governs stock exchanges and

regulates the trading of securities. This act ensures the orderly functioning of
securities markets.

● SEBI Act (1992): This act established SEBI and gave it authority to regulate
stock markets and protect investor interests.

4. Key Financial Institutions:

● NSE (National Stock Exchange) and BSE (Bombay Stock Exchange): These
are the two main stock exchanges in India where stocks are bought and sold.
The Nifty 50 (NSE) and Sensex (BSE) indices track the performance of top
companies listed on these exchanges. The performance of these indices reflects
the overall health of the economy. When the prices of the companies in these
indices rise, the index goes up, and when they fall, the index goes down.

5. Stock Trading Basics:

● Stock Exchanges: These are the platforms where stocks are traded. They
provide the technology and infrastructure to match buyers with sellers and
ensure transparent transactions.
 ● Stockbrokers: These are authorized individuals or firms that act as
intermediaries between investors and stock exchanges. They help investors buy
and sell stocks and provide trading platforms. There are two types of brokers:

○ Full-service brokers: Provide a range of services including research,

advice, and financial planning (e.g., HDFC Securities, ICICI Direct).

○ Discount brokers: Offer basic services at lower costs (e.g., Zerodha).

● Depositories (NSDL, CDSL): These organizations hold stocks in electronic form

through demat accounts, eliminating the need for physical certificates. They
manage the transfer of stocks when trades are settled.

● Depository Participants (DPs): They act as intermediaries between the

depositories and investors. DPs are banks or brokerage firms that offer demat
account services, allowing investors to hold their stocks electronically.

● Registrar and Transfer Agents (RTAs): These are companies that handle
record-keeping for companies that issue stocks. They manage processes like
share transfers, dividend payouts, and other corporate actions.

6. Order Types in Stock Trading:

● Day Order: This is an order that is valid only for the day it’s placed. If the order is
not executed by the end of the trading day, it is automatically canceled.

● IOC (Immediate or Cancel) Order: This order must be executed as soon as it’s
entered. Any portion that can’t be matched immediately is canceled.

● FOK (Fill or Kill) Order: This order must be executed in full immediately. If the
whole order can’t be filled at once, it is canceled entirely.

● Limit Order: This is an order to buy or sell a stock at a specific price. The order
will only be executed at this price or better.

● Market Order: This is an order to buy or sell a stock at the best available price in
the market. Market orders are filled immediately but can be unpredictable in
volatile markets.

● Stop-Loss Order: This is an order to sell a stock once it reaches a certain price.
It’s a way to manage risk and limit losses.
7. Stock Trading Process:

● 1. Choosing a Broker: You must select a SEBI-registered broker to trade stocks.

The broker can be a full-service firm like HDFC Securities or a discount broker
like Zerodha.

● 2. Opening a Demat Account: A demat account is required to hold your stocks

in electronic form. You can open this account with a Depository Participant (DP),
which could be a bank or broker.

● 3. Placing an Order: Once your demat account is open, you can place buy or
sell orders with your broker. You can give instructions over the phone, online, or
through an app.

● 4. Executing the Order: Your broker will execute the order, and a contract note
will be issued. This note provides details of the trade, including the stock name,
price, quantity, and commission.

● 5. Settlement: This is the final stage, where the ownership of the stock is
transferred. There are two types of settlement:

○ On-the-Spot Settlement (T+2): The trade is settled two business days

after the trade (T+2).

○ Forward Settlement: The trade is settled on a future date (e.g., T+5 or

T+7).

____________________________________________________________________________

Session 3 ppt

1. Bidding in an IPO (Initial Public Offering):

● Issue Price: This is the price at which a company sells its shares to the public
when it goes public (IPO). It’s the first price the shares have when they start
trading on the stock market.

○ Fixed Price: The company decides the price before the IPO starts.
Investors know this price when they apply to buy shares.

○ Book Building: The price is not fixed beforehand. Instead, it is decided

based on demand during the IPO. If many people want the shares, the
price goes up.
 ● Float: This refers to the number of shares the company makes available for
public trading in the stock market. Usually, only a portion of the total shares is
offered in the IPO, while the company keeps the rest.

2. FPO (Follow-on Public Offering):

● An FPO is when a company that is already listed on the stock exchange issues
more shares to the public to raise additional money. This happens after the
company’s initial IPO. Companies use FPOs to raise more capital for business
expansion, debt repayment, or other financial needs.

3. T+2 Settlement (Trade Settlement Process):

● After a stock is bought or sold, the trade doesn’t settle immediately. There’s a
waiting period before the ownership of the stock and the payment are finalized.

○ T+2 Settlement means that the trade will be settled two business days
after the trade date (T). For example, if you buy a stock on Monday (T),
the transaction will be completed on Wednesday (T+2), when the seller
gets the money, and you get the stock in your account.

○ In the past, it took longer to settle trades (up to T+5), but with better
technology, the time has been reduced to T+2.

4. Role of Intermediaries in the Market:

● Market Makers: These are financial firms or traders who ensure there is enough
buying and selling activity in the market, making it easier for others to trade. They
do this by offering to buy shares (bid) at one price and sell them (ask) at another
price, earning a small profit from the difference (spread). Market makers help
keep the market stable by reducing price fluctuations between trades. They face
several costs:

○ Order-Processing Costs: The cost of running their operations, such as

maintaining offices, staff, and communication systems.
 ○ Risk-Bearing Costs: Market makers hold stocks in their inventory while
they wait to match buyers and sellers, and this can expose them to risk if
prices change suddenly.

○ Adverse-Information Costs: Market makers may lose money if they

trade with people who have better information, like traders who know
something that will affect the stock price before the market does.

5. Investment Banks:

● Financing Services: Investment banks help companies and governments raise

funds by issuing financial products such as stocks (equity), bonds (debt), and
other securities. They also help with private placements, which means selling
shares directly to selected investors rather than the public.

● Investment Services: Investment banks trade large amounts of stocks and

bonds, often dealing with big institutions. They also create a market for these
securities, making it easier for buyers and sellers to trade.

● Research: Investment banks analyze markets and companies, producing

detailed reports on economic conditions, company performance, and investment
opportunities. They maintain large databases to help them provide valuable
insights to their clients.

6. Security Analysts:

● Security Analysts research and analyze individual securities (like stocks or

bonds) to estimate whether they are good investments. They look at a company’s
financial reports, talk to executives, and study industry trends to make judgments
about the value of the security. Their goal is to provide recommendations on
whether to buy, hold, or sell a particular stock or bond.

7. Fraud by Intermediaries:

● Churning: This happens when a broker excessively trades on a client’s account

just to generate commissions, without any real benefit to the client. This leads to
 unnecessary transaction costs and sometimes results in unprofitable investments
for the client.

● Circular Trading: This is when an intermediary or a group of intermediaries

repeatedly buy and sell the same stock among themselves to create fake trading
volume. This artificial activity misleads the market and can cause the stock price
to rise, even though there’s no real demand for the stock.