Saturday, June 5, 2010


A stock market or equity market is a public market (a loose network of economic transactions, not a physical facility or discrete entity) for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.

The size of the world stock market was estimated at about $36.6 trillion US at the beginning of October 2008. The total world derivatives market has been estimated at about $791 trillion face or nominal value,11 times the size of the entire world economy.The value of the derivatives market, because it is stated in terms of notional values, cannot be directly compared to a stock or a fixed income security, which traditionally refers to an actual value. Moreover, the vast majority of derivatives 'cancel' each other out (i.e., a derivative 'bet' on an event occurring is offset by a comparable derivative 'bet' on the event not occurring). Many such relatively illiquid securities are valued as marked to model, rather than an actual market price.

The stocks are listed and traded on stock exchanges which are entities of a corporation or mutual organization specialized in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together. The stock market in the United States is NYSE while in Canada, it is the Toronto Stock Exchange. Major European examples of stock exchanges include the London Stock Exchange, Paris Bourse, and the Deutsche Börse. Asian examples include the Tokyo Stock Exchange, the Hong Kong Stock Exchangeand the Bombay Stock Exchange . In Latin America, there are such exchanges as the BM&F Bovespa and the BMV.


Established in 1875, the Bombay Stock Exchange is Asia's first stock exchange.In 12th century France the courratiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. Because these men also traded with debts, they could be called the first brokers. A common misbelief is that in late 13th century Bruges commodity traders gathered inside the house of a man called Van der Beurze, and in 1309 they became the "Brugse Beurse", institutionalizing what had been, until then, an informal meeting, but actually, the family Van der Beurze had a building in Antwerp where those gatherings occurred; the Van der Beurze had Antwerp, as most of the merchants of that period, as their primary place for trading. The idea quickly spread around Flanders and neighboring counties and "Beurzen" soon opened in Ghent and Amsterdam.

In the middle of the 13th century, Venetian bankers began to trade in government securities. In 1351 the Venetian government outlawed spreading rumors intended to lower the price of government funds. Bankers in Pisa, Verona, Genoa and Florence also began trading in government securities during the 14th century. This was only possible because these were independent city states not ruled by a duke but a council of influential citizens. The Dutch later started joint stock companies, which let shareholders invest in business ventures and get a share of their profits - or losses. In 1602, the Dutch East India Company issued the first share on the Amsterdam Stock Exchange. It was the first company to issue stocks and bonds.
The Amsterdam Stock Exchange (or Amsterdam Beurs) is also said to have been the first stock exchange to introduce continuous trade in the early 17th century. The Dutch "pioneered short selling, option trading, debt-equity swaps, merchant banking, unit trusts and other speculative instruments, much as we know them".There are now stock markets in virtually every developed and most developing economies, with the world's biggest markets being in the United States, United Kingdom, Japan, India, China, Canada, Germany, France, South Korea and the Netherlands.


       First of all, you need to know a little bit in detail about the stock market, then about the shares and the mode of their trading. What are the risks involved and how to be smart in dealing with shares?

■  Stock Market – It is the place where the shares of listed companies are bought and sold. In   India, you have BSE and NSE as two big stock exchanges.

■   Shares are bought and sold by you and me only through approved brokers.

■  Approved brokers are mostly banks like the ICICI, HDFC, IDBI, UTI Bank, SHCI, are to name a few.

■  First you need to open an account with a bank, that has the Demat account facility.

■  Go to the respective bank and open a Savings account with deposit of around Rs. 10,000.

■  Tell the bank that you want to deal in shares and ask them to open a Demat account. It will be done automatically after signing a few forms.

■  A Demat account is nothing, but the account where the shares bought by you will be kept separately.

■  Only you could operate that account online, through Internet.

■  You could open the online facility offered by the ICICI, HDFC or ShareKhan or others and buy shares you wish and decide the quantity and the price.

■  Here the bank will act as a broker. You online order for purchase would be carried out by the bank. They charge broker commission, much less compared to private brokers.

■  It is very important for you to have enough balance to your credit in your savings account.

■  As and when you buy on line, your Demat account will be credited with those shares. The money for the purchase will be automatically deducted from your account by the bank.

■  You also have to keep looking for opportunities to sell the shares that you have already bought and kept in your Demat account.

■  For buying and selling, it is necessary to familiarize which shares to be bought at what prices and sell them at what price.

■  As and when you decide to sell (depending on the price quoted in the market) you could sell them through online trading system.

■  The moment you sell your Demat account will be debited with the number of shares sold by you.

■  Your account will be credited with the amount for which you have sold.

■  Depending on the amount of profit earned, tax will also be deducted by the bank (TDS). The bank will give you a TDS certificate by the year end, i.e., March 31, of that year which you could attach with the return to justify the tax payment.

■  When the shares could be bought or sold?

 Always sell the shares when the price is up and buy when the price is down. Every body had to adapt to this formula.

■  What profit should it give you?

You buy a share for a particular price. Take the amount as investment. Any bank will lend you at ten per cent interest. It will give you 24 per cent return if the share price rises in such a way. Do not wait for the market to crash and start searching for buyers for the price you quote.

After selling, never look back and repent for what profit you have earned, had you delayed the sale. Be happy that it did not happen otherwise. This is the best way, to sell.

■If you want to buy, look for 52 week low, look for the peer companies, their price and compare it with the company you want to buy.

Look for the prospectus, future plans and the profit the company ought to make in the next year. Take the perception or a change and buy.

■You cannot take profit in the buys. Losses do occur as long as you are at decent surplus for which you have no reason to be unhappy.

No comments:

Post a Comment