1 STOCK MARKET MECHANISM by Mr Fahim Akhtar FINANCIAL MARKET

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STOCK MARKET MECHANISM Topic Introduction

Sequence  General perception  How stock forms  Stock market index  Features of market  Some abnormal gainers / losers  Why investors mostly loose

5 Perception About Market A gamble or a casino

6 Perception About Market A place where big fishes eat small

7 Puzzling function Perception About Market

A place where one is always Perception About Market

9 Trading stock is a science and equally art too

Something that may be studied or learned like systematized knowledge

Expression or application of human creative skill & imagination

12 A company is desirous to expand the business. Options for generating the required funds:-  Get from some one amongst FNF  Borrow from bank  Get maximum financers from general public

13  Company is registered under company ordinance  IPOs ( Initial Public Offering ) is offered  IPO given normally multiples of 500  Fund raised through IPO utilized in business  Stock trades in stock exchange

 Registered company engages in business with funds generated  Company reports profit quarterly  Earnings and profitability is disbursed amongst all stake holders including those holding share during specified time  Company earns more, shares goes up and in case of loss share sinks

16  Company doing good or bad business  Financial results and bright or depressive expectations  Players go for buying seeing rapid growth or selling anticipating depressed earnings  New innovative product launched / business explored  Some incentives / taxation affecting stock

17  Growth in earnings and profitability  Better management  Cheaper inputs and raw material  Demand going up for product or service  News and rumours Stocks mostly moves in speculation and attempt to discovers the right price

Fundamental analysis is gauged on historical and present data, but with the goal of making financial forecast.  A company stock valuations and predict its probable price  Make a projection on its business performance  Evaluate its management and make internal business decisions

19 A place where buyer and seller meet and trade stocks under regulations set

20 Bulls indicate market is positive Bear indicates selling pressure

21 A stock index or stock market index is a method of measuring the value of a section of the stock market

 Opportunities & Better returns  Pronounced risk factor  Speculation, rumours and news orientation  Diverse type of participants  Connectivity with other financial markets  Dependence on commodity move  Fiscal, monitory and taxation policy effects  Sector performance and incentives by government

 Possibility of high returns  Easy liquidity  Unbeatable tax benefits  Income from dividends Benefits of investment in stocks

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Market has a trend of crashes every 3-4 years The reasons for 2008 crash were  Poor law and order after assassination of lady PM  Bad economic outlook  Panic selling by funds and foreigners  Recession  Market manipulation

26Stock Low Price HighPrice Gain / loss %age gain Engro Foods 20.6 Aug May Pak Petroleum Lucky Cement 103 June June Jahangir Siddiqui Company jan Jan Bank of Punjab 8 April June

27  Best selling products  Persistent growth  Efficient management  Good products in pipeline to launch  Eps not too good but expected to go higher

 Greed and Fear  Lack of knowledge  Rely over brokers and friends  Lack of analytical skills  Poor comprehension of / with changing indicators  Insider trading

 Plan your Investment  Go for long term Investment  Control your fear and greed  Decide right entry and exit in market  Diversify your portfolio  Always keep some reserve cash  Learn science and develop art of investment

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