CHAPTER 2E : Market Fundamentals - Bulls, Bears, Chickens and Pigs

On Dalal Street, the bears and bulls are in a constant struggle for profits.

The Bulls - A bullish market indicates that economy is running good, GDP (Gross Domestic Product) is growing, people are finding jobs, and stocks are rising. If a person is optimistic and believes that stocks will go up, s/he is called a "bull" and is said to have a "bullish outlook". 

The Bears - A bearish market indicates that economy is bad, recession is looming and stock prices are falling. In bearish markets some investors make money by short selling whereas others wait until they feel that the bear market is nearing its end, and then buy in anticipation of a bull market. If a person is pessimistic, believing that stocks prices are going to fall down, s/he is called a "bear" and is said to have a "bearish outlook". 

The Chickens - Chickens are afraid to lose everything. Their fear tops their need to make profits and so they invest only in money market securities or get out of the markets entirely.

The Pigs - Pigs are high-risk investors looking for that one big shot in a short span of time. Pigs buy on hot tips and invest in companies without doing their due diligence. They are impatient, greedy, and emotional about their investments, and they usually invest in high-risk securities. Professional traders love the pigs, as it's often from their losses that the bulls and bears reap their profits. 

What Type of Investor Will You Be?

There are ample of investment strategies in market. The bulls and bears constantly struggle, but they both make money with changing trends in the market. Even the chickens see some returns, though not a lot. The only loser in this market is the pig.

You have to make sure what type of investor will you be. Always remember the saying: "Bulls make money, bears make money, but pigs just get slaughtered!"

About DreamGains

DreamGains Financials India Private Limited formed in 2004 as an independent and privately owned company is build upon the principles of teamwork and partnership.It is a trusted name in the financial service arena and provides you with an entire gamut of services under one roof. It today has emerged as a premium Indian stock consultancy, with an absolute focus on business and a commitment to provide “Real value for money” to all its clients.

CHAPTER 2D : Market Fundamentals - Market Timings

Trade time: The normal trading time for Equity Market is between 09:15 am to 03:30 pm, Monday to Friday.

Pre-open session: This session is basically to decide the opening price of the markets in Normal trading session, where trading for only Nifty 50 shares takes place the session is from 09:00 am to 09:15 am, Monday to Friday.

Closing price calculation: The closing price of a stock is not the LTP ( Last traded price) of the stock but the average price between 03:00 pm to 03:30 pm, this calculation takes place between 03:30 to 03:40 pm, Monday to Friday.

Post close trading: The post close trading happens between 03:40 pm to 04:00 pm, basically used for squaring off some positions created by mistake, the prices in this segment do not change and trading is done only on the adjusted closing prices.

Trade time: The normal trading time for Commodity (MCX) Market is between 10:00 am to 11:30 pm, Monday to Friday.

Trade time: The normal trading time for Agri-Commodity (NCDEX) Market is between 10:00 am to 05:00 pm, Monday to Friday.

About DreamGains

DreamGains Financials India Private Limited formed in 2004 as an independent and privately owned company is build upon the principles of teamwork and partnership.It is a trusted name in the financial service arena and provides you with an entire gamut of services under one roof. It today has emerged as a premium Indian stock consultancy, with an absolute focus on business and a commitment to provide “Real value for money” to all its clients.

CHAPTER 2C : Market Fundamentals - Exchanges and Indices (Equity)

Stock Exchange

A stock exchange or share market is a corporation or mutual organization which provides facilities for stock brokers and traders, to trade company stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends.

There are 2 recognized Stock Exchanges in India for Share Trading:

A. BSE (Bombay Stock Exchange) is the oldest stock exchange in Asia with a rich heritage, now spanning three centuries in its 133 years of existence. What is now popularly known as BSE was established as "The Native Share & Stock Brokers' Association" in 1875, there are around 5000 + shares listed on BSE.

B. NSE (National Stock Exchange) was incorporated in November 1992 and currently has around 1500 shares listed and has a trading facility for Cash, Derivative and Currency derivative products. The highest turnover in Indian Equity markets happen on NSE currently.

These are an Electronic platform based trading exchanges graduated from the traditional OTC (over the counter) mode of trading.

Stock Market Index

A stock index or stock market index is a measurement of the value of a section of the stock market. It is computed from the weighted average prices of selected stocks. It is a tool used by investors and financial managers to describe the market, and to compare the return on specific investments.

Sensex and Nifty are the two major indices of Indian Share Market. The Sensex is an indicator of all the major companies of the BSE. The Nifty is an indicator of all the major companies of the NSE. If the Sensex goes up, it means that the prices of the stocks of most of the major companies on the BSE have gone up. If the Sensex goes down, this tells you that the stock price of most of the major stocks on the BSE have gone down. Same goes for Nifty and NSE.

Besides Sensex and the Nifty there are many other indexes. There is an index that gives you an idea about whether the mid-cap stocks go up and down. This is called the “BSE Mid-cap Index”. There is an index for the metal stocks. There is an index for the FMCG stocks. There is an index for the automobile stocks etc. There are many other types of indexes.

About DreamGains

DreamGains Financials India Private Limited formed in 2004 as an independent and privately owned company is build upon the principles of teamwork and partnership.It is a trusted name in the financial service arena and provides you with an entire gamut of services under one roof. It today has emerged as a premium Indian stock consultancy, with an absolute focus on business and a commitment to provide “Real value for money” to all its clients.

CHAPTER 2B : Market Fundamentals - Types of Capital Market

Primary Markets

The market system where the promoter/promoter group of the company sells his/ their shares for the first time to the public

IPO: Initial Public offer is the process of selling the shares of company from the primary or the initial owner to the public.

• A company can raise funds through 2 modes namely Equity and Debt.
• Hence, when one studies the balance sheet of any company, the capital structure will have two components namely Equity and Debt.
• The market in which the company can raise funds is the primary market.
• In the primary market the transaction of securities is unidirectional i.e. Company sells and the investor buys.
• Suppose the company wants to raise funds through the equity mode, It is usually done through a public issue or an IPO(initial Public offer).
• The companies have to follow a well-established legal procedure and involve a number of intermediaries such as underwriters, brokers, etc. who form an integral part of the primary market.
• The process of an IPO is not important in this training program but it is important to know that the IPO of a company is done through a collaboration with an underwriter(investment banker) and through this collaboration, the company releases a prospectus known as the DRHP (Draft Red herring prospectus).
• In brief the DRHP states all important details of the company like the future prospects, financial valuation, inherent risks, capital structure, future revenue sources, etc.
• These details are extremely important to be disclosed to the public prior to raising funds as mandated by SEBI. This is lieu with the complete disclosure norms set by SEBI to protect investors from fraudulent companies.

Secondary Markets

As the name suggests Secondary Markets is a market place where the trading of Equity share of a company takes place Second time, earlier in primary markets the seller was the Promoter group of the company now here the seller as well as the buyer are investors and the ownership of the share is in public’s domain.

Secondary markets are synonym to Stock exchanges in India as all the Secondary market activity takes place in Stock Exchanges.

About DreamGains

DreamGains Financials India Private Limited formed in 2004 as an independent and privately owned company is build upon the principles of teamwork and partnership.It is a trusted name in the financial service arena and provides you with an entire gamut of services under one roof. It today has emerged as a premium Indian stock consultancy, with an absolute focus on business and a commitment to provide “Real value for money” to all its clients.

CHAPTER 2A : Market Fundamentals - Participants of Market

I. Regulator is a body which regulates and overlook to the smooth Functioning of Financial Market Systems, they do recognize, allow, dis-allow other financial intermediaries for working in financial markets, redresal for the Investors, Creates / Modifies rules and regulations in financial markets.

A. SEBI: Securities Exchange Board of India is the Big Boss of Financial markets and the main regulator in the Capital Markets, SEBI regulates Equity Markets and Currency Derivative segments, came into power in 1992

B. RBI: Reserve Bank of India mainly controls the Banking and monetary systems in the Country making Monetary policies, looking after the working of Banks. They regulate Currency Derivative Segment along with SEBI

C. FMC: Forward Market Commission is the regulator for Commodity Derivatives in India

II. Exchanges provide a facility for Traders to exchange (Buy/ Sell) Securities, Commodity, Currency via an electronically driven platform.

A. Equity Exchanges

NSE- National Stock Exchange

BSE- Bombay Stock Exchange

B. Commodity Exchanges

MCX-Multi Commodity Exchange

NCDEX- National Commodity and Derivative Exchange

C. Currency Exchanges

MCX- SX

NSE Currency Derivative USE

III. Brokers/ Intermediaries are the body which acts as a interface between the Client and the Financial System and facilitates the proper trading in Financial Products like India Infoline, JM Financial, Sharekhan, Religare, ICICI Direct, Angel Broking, SMC Global Reliance Money to name a few.

Sub Broker: A sub broker is like a ' Franchisee' of a stock broker registered with SEBI and can act like and on behalf of a Broker i. e. Open Trading account and service clients, in turn he gets a sharing out of the total brokerage earned from the clients trading under the Sub Broker.

IV. Investors and Traders: These are the makers of the market, the real end client for whom the whole system exists. All the products and systems in Financial Markets are designed keeping in mind these real Investors and Traders of the System. These comprise of all the Indian Retail, HNIs, Institutional and Foreign Direct and Institutional Clients (FII) trading in the Indian Financial Markets for this Category of Participant in the Markets.

About DreamGains

DreamGains Financials India Private Limited formed in 2004 as an independent and privately owned company is build upon the principles of teamwork and partnership.It is a trusted name in the financial service arena and provides you with an entire gamut of services under one roof. It today has emerged as a premium Indian stock consultancy, with an absolute focus on business and a commitment to provide “Real value for money” to all its clients.

CHAPTER 1 : An Introduction to Indian Financial Market

What is a Financial Market?

A Financial Market like any other market is a System where Trading in Financial Instruments takes place. This System is now completely automated through Electronic Interfaces and consists of Many Buyers and Sellers with their individual objective of Entering in Financial Markets. This System is a Government Recognized System. It is a place where you give your money to a financial asset which can fetch you more returns or sometimes more safety than a conventional Bank account.

Capital Market operates through recognized exchanges whereas Money Market operates through phone lines, computers and internet.

Instruments for Capital Market - Equities, Bonds, Mutual Funds, Derivatives, Commodities, Currencies

Instruments for Money Market – Call Money, Repo (Reverse-Repo), T-Bills, Commercial Paper, Certificate of Deposit, Inter Corporate Deposits

Both money market and capital market have their own importance and benefits as one is primarily designed for long term planning and the other one for meeting short term commitments.

About DreamGains

DreamGains Financials India Private Limited formed in 2004 as an independent and privately owned company is build upon the principles of teamwork and partnership.It is a trusted name in the financial service arena and provides you with an entire gamut of services under one roof. It today has emerged as a premium Indian stock consultancy, with an absolute focus on business and a commitment to provide “Real value for money” to all its clients.

Play It The Jhunjhunwala Way!!

Rakesh Jhunjhunwala, born 5^th July 1960, a qualified Chartered Accountant, manages his own portfolio as a partner in his asset management firm, Rare Enterprises.

He made his first big profit of Rs 0.5 million in 1986 when he sold 5,000 shares of Tata Tea at a price of Rs 143 which he had purchased for Rs 43 a share just 3 months prior. Between 1986 and 1989 he earned Rs 2–2.5 million. His first major successful bet was iron mining company Sesa Goa (now Sesa Sterlite). He bought 400,000 shares of Sesa Goa in forward trading, worth Rs 10 million and sold about 2-250,000 shares at Rs 60–65 and another 100,000 at Rs 150–175. The price rose to Rs 2200 and he sold some shares.

Jhunjhunwala is the chairman of Aptech Limited and Hungama Digital Entertainment Pvt. Ltd. and sits on the board of directors of various Indian companies such as Prime Focus Limited, Geojit BNP Paribas Financial Services Ltd., Bilcare Limited, Praj Industries Limited, Provogue India Ltd., Concord Biotech Limited, Innovasynth Technologies (I) Limited, Mid Day Multimedia Limited, Nagarjuna Construction Company Limited, Viceroy Hotels Limited and Tops Security Limited.

Below is the list of stocks held as of October 2014 by Rakesh Jhunjhunwala, Rekha Jhunjhunwala or Rare Enterprise Equity:

Titan Company, Lupin, CRISIL, Rallis India, Delta Corp, Aptech, Geometric, NCC, Praj Industries, Firstsource Solutions, Escorts, TV18 Broadcast, Kesoram Industries, Pipavav Defense and Offshore, Prime Focus, Geojit BNP Paribas Financial, Anant Raj, Sterling Holiday Resorts, SpiceJet, A2Z Maintenance and Engineering, DB Realty, Viceroy Hotels, Autoline Industries, Bilcare, Ion Exchange (India), Hindustan Oil Exploration Company, Mcnally Bharat Engineering, Prozone Capital Shopping Centres, and, Adinath Exim Resources.

About DreamGains

DreamGains Financials India Private Limited formed in 2004 as an independent and privately owned company is build upon the principles of teamwork and partnership.It is a trusted name in the financial service arena and provides you with an entire gamut of services under one roof. It today has emerged as a premium Indian stock consultancy, with an absolute focus on business and a commitment to provide “Real value for money” to all its clients.