STOCK “MARKETING” This presentation knowledges you BASICS OF SHARES AND INVESTMENTS IN SHARES. 2. CALCULATION OF SENSEX IN STOCK MARKET.

What is stock? Stock is a share in the ownership of company. Technically, u will be having a right in company’s assets and earnings. Stock is a share in the ownership of company. Technically, u will be having a right in company’s assets and earnings. As a owner, u will be getting a share in profits also. These are termed as “ DIVIDENDS” As a owner, u will be getting a share in profits also. These are termed as “ DIVIDENDS”

SHARES,EQUITY ALL ARE VARIOUS NAMES GIVEN FOR “STOCK” SHARES,EQUITY ALL ARE VARIOUS NAMES GIVEN FOR “STOCK” EVERY STOCK IS REPRESENTED BY A CERTIFICATE “ STOCK CERTIFICATE OR SHARE CERTIFICATE”. NOW, MATERIALISATION HAS BECOME INTO DEMATERIALISATION(DEMAT) THEN TURNED INTO REMATERIALISATION(REMAT) EVERY STOCK IS REPRESENTED BY A CERTIFICATE “ STOCK CERTIFICATE OR SHARE CERTIFICATE”. NOW, MATERIALISATION HAS BECOME INTO DEMATERIALISATION(DEMAT) THEN TURNED INTO REMATERIALISATION(REMAT)

AS A SHAREHOLDER, U NEED NOT SAY THE DAY- TO- DAY RUNNING OF THE BUSINESS.MANAGEMENT HAS TO WORK FOR THE MAXIMISATION OF VALUE OF SHAREHOLDERS, IF IT DID NOT DO SO, THEY CAN BE REMOVED BY “ VOTING” IN THE AGMs. AS A SHAREHOLDER, U NEED NOT SAY THE DAY- TO- DAY RUNNING OF THE BUSINESS.MANAGEMENT HAS TO WORK FOR THE MAXIMISATION OF VALUE OF SHAREHOLDERS, IF IT DID NOT DO SO, THEY CAN BE REMOVED BY “ VOTING” IN THE AGMs.

SHARES WILL BE HAVING LIMITED LIABILITY AND SO NOBODY WILL TOUCH UR PERSONAL ASSETS IF SOMETHING HAPPENS TO THE COMPANY. SHARES WILL BE HAVING LIMITED LIABILITY AND SO NOBODY WILL TOUCH UR PERSONAL ASSETS IF SOMETHING HAPPENS TO THE COMPANY. U CAN GET THESE SHARES EITHER FROM PRIMARY OR FROM SECONDARY MARKETS ( BSE AND NSE) U CAN GET THESE SHARES EITHER FROM PRIMARY OR FROM SECONDARY MARKETS ( BSE AND NSE)

WHY PROMOTERS WILL SHARE THEIR EFFORTS WITH SHARE HOLDERS? RAISING OF MONEY CAN BE DONE IN TWO WAYS FOR ANY COMPANY. RAISING OF MONEY CAN BE DONE IN TWO WAYS FOR ANY COMPANY. 1. EQUITY FINANCING( ISSUE OF SHARES) 2. DEBT FINANCING ( ISSUE OF BONDS).

IN DEBT FINANCING, UR PRINCIPAL AMOUNT WILL BE GUARANTEED WITH SOME INTEREST AGREED UPON. IN DEBT FINANCING, UR PRINCIPAL AMOUNT WILL BE GUARANTEED WITH SOME INTEREST AGREED UPON. IN EQUITY, U MAY OR MAY NOT GET DIVIDENDS. THE NEXT OPTION AVAILABLE IS CAPITAL APPRECIATION OF SHARE WHICH WILL BE DONE BY INCREASE OR DECREASE THE PRICE OF SHARE VALUE. IN EQUITY, U MAY OR MAY NOT GET DIVIDENDS. THE NEXT OPTION AVAILABLE IS CAPITAL APPRECIATION OF SHARE WHICH WILL BE DONE BY INCREASE OR DECREASE THE PRICE OF SHARE VALUE.

WHY PEOPLE ARE CRAZY ABT SHARES? DIVIDENDS DIVIDENDS CAPITAL APPRECIATION CAPITAL APPRECIATION HIGH RETURNS HIGH RETURNS EASY LIQUIDITY EASY LIQUIDITY

WHY STOCK PRICES WILL CHANGE UP AND DOWN? The best reason for this is LAW OF DEMAND AND LAW OF SUPPLY The best reason for this is LAW OF DEMAND AND LAW OF SUPPLY IF DEMAND > SUPPLY—PRICES WILL INCREASE IF DEMAND > SUPPLY—PRICES WILL INCREASE IF SUPPLY >DEMAND ---PRICES WILL DECREASE. IF SUPPLY >DEMAND ---PRICES WILL DECREASE.

WHY DEMAND WILL BE LOW OR HIGH? BECAUSE OF THE LIKINGS OR DISLIKINGS OF A PARTICULAR STOCK BY PEOPLE. THESE BEHAVIOURS INTURN DEPEND ON “ EARNINGS” OF THE COMPNAY AS IN THE LONGRUN THEY BECOME THE JUST FACTORS. “EARNING SEASONS” ( QUARTER RESULTS) ARE THE FOREMOST FACTOR FOR KNOWING THE STOCK BEHAVIOUR.

HOW TO DECIDE THE BEST STOCKS TO PURCHASE? USE FUNDAMENTAL ANALYSIS OR TECHN ICAL ANALYSIS FOR THIS DECISION. USE FUNDAMENTAL ANALYSIS OR TECHN ICAL ANALYSIS FOR THIS DECISION. BOTH REPRESENT THE FUTURE VALUE OF THE SHARES BUT BASED ON DIFFERENT PARAMETRES. BOTH REPRESENT THE FUTURE VALUE OF THE SHARES BUT BASED ON DIFFERENT PARAMETRES.

FUNDAMENTAL ANALYSIS. Analysis of the company performance based on financial and economical grounds that predict the price movements. Analysis of the company performance based on financial and economical grounds that predict the price movements.

Study the overall economical changes,the particular compnay history, its past data, past performance,competency with their competetors,management experience etc..to understand better about company. Study the overall economical changes,the particular compnay history, its past data, past performance,competency with their competetors,management experience etc..to understand better about company. Based on these observations, fundamentalists will derive a value for the share which is called as “ INTRINSIC VALUE”. Based on these observations, fundamentalists will derive a value for the share which is called as “ INTRINSIC VALUE”.

If intrinsic value > the current price, go for purchasing of share as the price will increase in future and vice- versa. If intrinsic value > the current price, go for purchasing of share as the price will increase in future and vice- versa. We can even use some ratios and tools for analysing two companies of different industries for better decision. We can even use some ratios and tools for analysing two companies of different industries for better decision.

EARNINGS PER SHARE EPS = Net Earnings / Outstanding Shares EPS = Net Earnings / Outstanding Shares That means, it will give u an idea that for every share that u hold, how much earnings u r going to receive. That means, it will give u an idea that for every share that u hold, how much earnings u r going to receive.

It means….how much company is paying from its earnings for every share..!!!!! It means….how much company is paying from its earnings for every share..!!!!! Net earnings = Rs 1,00,000 Net earnings = Rs 1,00,000 Outstanding shares = Rs Outstanding shares = Rs EPS = Rs. 10..which means that for every one share u held in the company, u get Rs. 10/- as profit. EPS = Rs. 10..which means that for every one share u held in the company, u get Rs. 10/- as profit.

P/E RATIO..WHAT IS IT? The P/E looks at the relationship between the stock price and the company’s earnings. The P/E is the most popular stock analysis ratio, although it is not the only one you should consider. The P/E looks at the relationship between the stock price and the company’s earnings. The P/E is the most popular stock analysis ratio, although it is not the only one you should consider. P/E = MARKET PRICE OF SHARE / EPS P/E = MARKET PRICE OF SHARE / EPS

WHAT DOES P/E TELL U? It is nothing but how much the share holders are ready to pay per share for every one rupee of earnings from the company. It is nothing but how much the share holders are ready to pay per share for every one rupee of earnings from the company.

A high P/E indicates that investors are ready to pay high amount for the stock, which is adversable from market point of view. A high P/E indicates that investors are ready to pay high amount for the stock, which is adversable from market point of view. Better P/E ratio of 15 can be taken as benchmark for the assessing the company. Better P/E ratio of 15 can be taken as benchmark for the assessing the company.

PEG (Price to future growth ratio!) and what it tells you! A ratio that will help you look at future earnings growth is called the PEG ratio. A ratio that will help you look at future earnings growth is called the PEG ratio. PEG = (P/E) / (projected growth in earnings) Lower the P/E ratio, higher u r safe. Lower the P/E ratio, higher u r safe.

These 3 ratios will give you a basic idea on the performance of a share or performance of the market. These 3 ratios will give you a basic idea on the performance of a share or performance of the market. But, all investment flows, will attract some additional costs …visible and invisible But, all investment flows, will attract some additional costs …visible and invisible Inflation, brokerage and taxation are the 3 things which eat the money slowly without knowing to the customer. Inflation, brokerage and taxation are the 3 things which eat the money slowly without knowing to the customer.

RATE OF RETURN > ( INFLATION RATE+BROKERAGE ON TXN + TAX (STCG) TO GOVT).. RATE OF RETURN > ( INFLATION RATE+BROKERAGE ON TXN + TAX (STCG) TO GOVT).. THE INVESTMENT WILL BE MORE RETURN ORIENTED AND CAN EARN SOMETHING FOR UR MONEY. THE INVESTMENT WILL BE MORE RETURN ORIENTED AND CAN EARN SOMETHING FOR UR MONEY.

SENSEX-WHAT DOES IT MEAN? We can not study each and every stock in the market and hence we need an indicator which shows the performance of all stocks in the market. We can not study each and every stock in the market and hence we need an indicator which shows the performance of all stocks in the market. This indicator has to be formed from different sectors of company based on some criteria which is most reliable and which can be assumed for the whole market. This indicator has to be formed from different sectors of company based on some criteria which is most reliable and which can be assumed for the whole market.

SENSEX-WHAT DOES IT MEAN? SENSEX is the index which represents the trend of the stock market ( BSE) by taking 30 benchmark companies. SENSEX is the index which represents the trend of the stock market ( BSE) by taking 30 benchmark companies. S & P NIFTY INDEX is the benchmark index for NSE by taking 50 companies into consideration. S & P NIFTY INDEX is the benchmark index for NSE by taking 50 companies into consideration.

SENSEX has been calculated since 1986 and initially it was calculated based on the Total Market Capitalization methodology and the methodology was changed in 2003 to Free Float Market Capitalization. Hence, these days, the SENSEX is based on the Free Floating Market cap of 30 SENSEX Stocks traded on the BSE relative to the base value which is 100( ) and it is calculated for every 15 seconds. SENSEX has been calculated since 1986 and initially it was calculated based on the Total Market Capitalization methodology and the methodology was changed in 2003 to Free Float Market Capitalization. Hence, these days, the SENSEX is based on the Free Floating Market cap of 30 SENSEX Stocks traded on the BSE relative to the base value which is 100( ) and it is calculated for every 15 seconds.

What is market capitalsiation ? What is market capitalsiation ? MC = Market price of the company * No.of shares available in the company MC = Market price of the company * No.of shares available in the company

Free-float market capitalization takes into consideration only those shares issued by the company that are readily available for trading in the market. It generally excludes promoters' holding, government holding, strategic holding and other locked-in shares that will not come to the market for trading in the normal course. In other words, the market capitalization of each company in a free-float index is reduced to the extent of its readily available shares in the market. Free-float market capitalization takes into consideration only those shares issued by the company that are readily available for trading in the market. It generally excludes promoters' holding, government holding, strategic holding and other locked-in shares that will not come to the market for trading in the normal course. In other words, the market capitalization of each company in a free-float index is reduced to the extent of its readily available shares in the market.

HOW SENSEX IS CALCULATED? The formula for calculating the SENSEX = (Sum of free flow market cap of 30 benchmark stocks)*Index Factor Index Factor = PREVIOUS DAY SENSEX PREVIOUS DAY FFMC The formula for calculating the SENSEX = (Sum of free flow market cap of 30 benchmark stocks)*Index Factor Index Factor = PREVIOUS DAY SENSEX PREVIOUS DAY FFMC FFMC = MARKET CAPITALISATION*FF FACTOR. FFMC = MARKET CAPITALISATION*FF FACTOR.

Assume SENSEX has only 2 stocks namely SBI and RELIANCE. Total shares in SBI are 500 out of which 200 are held by Government and only 300 are available for public trading. RELIANCE has 1000 shares out of which 500 are held by promoters and 500 are available for trading. Assume price of SBI Stock is Rs.100 and Reliance is Rs.200. Assume SENSEX has only 2 stocks namely SBI and RELIANCE. Total shares in SBI are 500 out of which 200 are held by Government and only 300 are available for public trading. RELIANCE has 1000 shares out of which 500 are held by promoters and 500 are available for trading. Assume price of SBI Stock is Rs.100 and Reliance is Rs.200.

Then "free-Floating Market Cap" of these 2 companies = (300* *200) = = Rs Assume Market Cap during the year was Rs Then SENSEX = *100/25000 = 520. The methodology in the example is exactly followed to calculate the SENSEX, only difference being the inclusion of 30 stocks. Then "free-Floating Market Cap" of these 2 companies = (300* *200) = = Rs Assume Market Cap during the year was Rs Then SENSEX = *100/25000 = 520. The methodology in the example is exactly followed to calculate the SENSEX, only difference being the inclusion of 30 stocks.

SENSEX-SELECTION OF STOCKS LISTING HISTORY LISTING HISTORY TRADING FREQUENCY TRADING FREQUENCY RANK BASED ON MARKET CAP RANK BASED ON MARKET CAP MARKET CAP WEIGHT MARKET CAP WEIGHT HISTORICAL RECORD HISTORICAL RECORD INDUSTRY/SECTOR THEY BELONG INDUSTRY/SECTOR THEY BELONG

SENSEX EPS We all know Earnings per Share (EPS) is calculated for all the companies to show how much a company generates the net profit for every outstanding share. Likewise EPS is calculated for SENSEX as well so that we can have a better understanding about the market. Let’s see how it is calculated. All you need for this calculation is EPS of all the 30 SENSEX stocks along with their Free Float Adjustment Factor. We all know Earnings per Share (EPS) is calculated for all the companies to show how much a company generates the net profit for every outstanding share. Likewise EPS is calculated for SENSEX as well so that we can have a better understanding about the market. Let’s see how it is calculated. All you need for this calculation is EPS of all the 30 SENSEX stocks along with their Free Float Adjustment Factor.

EXAMPLE Take HDFC Bank for the example. Present EPS for HDFC Bank is Rs. 44 and Free Float Adjustment Factor is Free Float Adjustment factor of 0.85 just means 85% of the total outstanding shares are held by Non-Promoters and are available in the market for trade. Multiply the EPS with Adjustment Factor which is 44*.85 = This 37.4 is the contribution of HDFC Bank towards SENSEX EPS. Likewise we need to calculate for all 30 stocks and add it together to get the final value of SENSEX EPS. Take HDFC Bank for the example. Present EPS for HDFC Bank is Rs. 44 and Free Float Adjustment Factor is Free Float Adjustment factor of 0.85 just means 85% of the total outstanding shares are held by Non-Promoters and are available in the market for trade. Multiply the EPS with Adjustment Factor which is 44*.85 = This 37.4 is the contribution of HDFC Bank towards SENSEX EPS. Likewise we need to calculate for all 30 stocks and add it together to get the final value of SENSEX EPS.

SENSEX PE PE Ratio is calculated for companies which show what the investors are ready to pay for every rupee of earnings. If we calculate the same thing by taking into account all the 30 SENSEX stocks, then we will end up with SENSEX PE. How to calculate? Consider the same HDFC Bank. Multiply the Market Price of HDFC Bank with number of shares outstanding which should be equal to Market Capitalization. PE Ratio is calculated for companies which show what the investors are ready to pay for every rupee of earnings. If we calculate the same thing by taking into account all the 30 SENSEX stocks, then we will end up with SENSEX PE. How to calculate? Consider the same HDFC Bank. Multiply the Market Price of HDFC Bank with number of shares outstanding which should be equal to Market Capitalization.

Market Capitalization = Share Price * Total Shares Then calculate the Net Profit by multiplying the EPS with Total Shares. Do this for all the 30 SENSEX stocks. SENSEX PE = Sum of Market Capitalization of 30 SENSEX Stocks divided by Sum of Net Profit of all the 30 SENSEX Stocks. Market Capitalization = Share Price * Total Shares Then calculate the Net Profit by multiplying the EPS with Total Shares. Do this for all the 30 SENSEX stocks. SENSEX PE = Sum of Market Capitalization of 30 SENSEX Stocks divided by Sum of Net Profit of all the 30 SENSEX Stocks.