stock market indicators

8/8/2019 Stock Market Indicators

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B Y

R a g h u n a n d a nH e l w a d e

Stock Market Indicators


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INTRODUCTION

The securities market has two interdependent andinseparable segments, the new issues (primarymarket) and the stock (secondary) market.

Secondary market refers to a market where securitiesare traded after being initially offered to the public inthe primary market and/or listed on the Stock

Exchange.


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Stock Market

SECONDARY MARKET

Over the-countermarket

Exchange tradedmarket

E.g. OTCEI E.g. NSE, BSE


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PARTICIPANTS

Issuers

Investors

Intermediaries

Regulators


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INVESTORS

Merchant Bankers

Mutual Funds

Financial Institutions

Foreign Institutional investors (FIIs)

Individual investors


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y Merchant Bankers :

carry out activity of the issue management, to act asadviser, consultant, manager, underwriter, portfoliomanager.

y Mutual Funds :

A mutual fund is a professionally managed type ofcollective investment scheme that pools money from

many investors and invests it in stocks, bonds, short-term money market instruments and other securities.


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INTERMEDIARIES

y R&T Agents - Registrars to Issue

y Custodians

y Depository

y DepositoryParticipants (DPs)

y Stock Brokers

y Clearing Banksy Professional Clearing Member

y Clearing Member


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Intermediaries

R&T Agents - Registrars to Issue :

The R&T Agent is appointed by the Issuer to act onits behalf to service the investors in respect of all

corporate actions like sending out notices and othercommunications to the investors as well as despatchof dividends and other non-cash benefits.

Stock Brokers :

Stockbrokers are the intermediaries who are allowedto trade in securities on the exchange of which theyare members. They buy and sell on their own behalfas well as on behalf of their clients.


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Cont..

Custodians :

An organization which helps register and safeguard thesecurities of its clients.

Keeps track of corporate actions on behalf of its clients.

Depository :

A depository is like a bank wherein the deposits aresecurities (viz. shares, debentures, bonds, governmentsecurities, units etc.) in electric form.

Depository Participant (DP) :Agents of depository are called DepositoryParticipant.


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Cont..

y Clearing Banks :

(a)Clearing banks are a key link between the clearingmembers and NSCCL for funds settlement.

(b)Every clearing member is required to open adedicated clearing account with one of the clearing

banks. Based on his obligation as determinedthrough clearing, the clearing member makes funds

available in the clearing account for the pay-in andreceives funds in case of a pay-out.


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Cont..

y ProfessionalClearing Member:Professional Clearing Member (PCM) may clear andsettle trades executed for their clients.APCM has no trading rights but has only clearing rights,

i.e. he just clears the trades of his associate tradingmembers and institutional clients.y Clearing Members:

They are responsible for settling their obligations asdetermined by the NSCCL.

They have to make available funds and/or securities inthe designated accounts with clearing bank/depositories,as the case may be, to meet their obligations on thesettlement day.


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REGULATORS

y Securities and Exchange Board of India (SEBI)

y Reserve Bank of India (RBI)

y Department of Company Affairs (DCA)

y Department of Economic Affairs (DEA)


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Securities and Exchange Board IndiaLimited

The SEBI Act, 1992 was enacted to empower SEBIwith statutory powers for -

(a) protecting the interests of investors in securities.

(b) promoting the development of the securities market

(c) regulating the securities market

(d) It can conduct enquiries, audits and inspection ofall concerned participants and adjudicate offences


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StockMarket related Terms

Stock exchange :Any body of individuals whether incorporated or notconstituted for the purpose assisting, regulating orcontrolling the business of buying, selling or dealing insecurities.

Index :Shows how a specified portfolio of share prices are movingin order to give an indication of market trends

Its a basket of securities and the average price movement ofthe basket of securities indicates the index movementwhether upwards or downwards.

E.g. SensexNIFTY


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Cont..

y Sensex :It is an index that represents the direction of thecompanies that are traded on the Bombay StockExchange BSE. The word Sensex comes from sensitive

indexThe Sensex captures the increase or decrease in prices ofstocks of companies that it comprises

y Demutualization :Legal structure of an exchange whereby the ownership,

the management and trading rights at the exchange aresegregated from one another.e.g. NSE and OTCEI


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y Dematerialisation :

Dematerialisation is the process by which physical certificates of aninvestor are converted to an equivalent number of securities inelectronic form.

y Rematerialisation :Conversion of securities of electronic form to physical form.

Delivery instruction slip (DIS) :

To give the delivery one has to fill a form called Delivery Instruction Slip

(DIS). DIS may be compared to cheque book of a bank account.y Contract note :

Confirmation of trades done on a particular day on behalf of the clientby a trading member.


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y Book closure date :

This is the date on which a company closes its books forbusiness after it announces a bonus or dividend.

The company's registrar keeps a track of who owns how many

shares of that particular company.

Any investor having shares in his/her demat account before thisdate becomes eligible for the bonus issue or the dividenddeclared.

y

o Delivery periodDuring this period only trading is permitted in the security.

However these trades are settled only after no delivery period isover


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y Bull :

A particular kind of investor who purchases shares in theexpectation that the market price of that company's share willincrease.

y Bear :

Bull's counterpart is the bear.

ISIN :

ISIN (International Securities Identification Number) is a unique

12 digit alpha-numeric identification number allotted for asecurity (E.g.- INE383C01018).

Equity-fully paid up, equity-partly paid up, equity withdifferential voting /dividend rights issued by the same issuer willhave different ISINs


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y Squaring off :A process whereby investors/traders buy or sell shares and laterreverse their trade to complete a transaction is called squaring off ofa trade.If you purchase 50 shares of say Infosys and sell them later before

the market closes then you have squared off your buy position.

y Rally :As the word suggests the gain made by the Sensex or Nifty duringthe course of the day. If such gains are made on a regular basis thenmarket participants like investors, brokers etc call it as a market

rally.

y Crash :As the word suggests, crash refers to a fall in the value of Sensex andNifty.


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Clearing, settlement

Clearing corporation :

Clears and settles all transactions.

Provides financial guarantee for all transactions executedon the exchange.

E.g. NSCCL.

Rolling settlement :

All open positions at the end of the day mandatorilyresults in payment

T+2 basis


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Pay in :

Securities sold delivered to exchange and funds forsecurities purchased made available to exchange.

Pay out :Securities purchased are delivered to buyer andfunds for securities sold are given to the seller.

Auction :

On account of non delivery of securities by thetrading member on the pay in day securities are putup for auction by the exchange.


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