STOCK MARKET

WHAT IS STOCK MARKET• The market in which shares of publicly held companies

are issued and traded either through exchanges or over-the-counter markets.

• Also known as the equity market, the stock market is one of the most vital components of a free-market

economy, as it provides companies with access to capital in exchange for giving investors a slice of ownership in

the company.

• The stock market makes it possible to grow small initial sums of money into large ones, and to become wealthy without taking the risk of starting a business or making

the sacrifices that often accompany a high-paying career.

NEW YORK STOCK EXCHANGE

•Considered the largest equities-based exchange in the world based on total market capitalization of its listed securities.

•NYSE became a public entity in 2005 following the acquisition of electronic trading exchange Archipelago.

•It is the world's largest stock exchange by market capitalization of its listed companies at US$19.69 trillion as of May 2015.

The Nasdaq Stock Market (NASDAQ) trades more U.S. equities than any other U.S. exchange.

NASDAQ is renowned for its high performance INET technology and has proven reliability with 99.99 % uptime. The index crossed the 1,000 mark for the f first time in July 1995, soared in the l following years and peaked at over 4,500 I in March 2000, before slumping almost 8 0 80% by October 2002 in the subsequent c correction. Market cap: $3.9 trillion

R

National Association of Securities Dealers Automated Quotations

Tokyo Stock ExchangeIt had 2,292 listed companies with a combined market capitalization of US$4.09 trillion as of April 2015.

The TSE is incorporated as a kabushiki gaisha with nine directors, four auditors and eight executive officers. 

The exchange is home to the largest and best-known Japanese giants with a global presence, including Toyota, Honda and Mitsubishi.

London Stock ExchangeMarket cap: $3.6 trillion

EuronextMarket cap: $2.9 trillion

Hong Kong Stock ExchangeMarket cap: $2.7 trillion

WHAT IS SHARES/STOCKSStock is a share in the ownership of a company. Stock represents a claim on

the company's assets and earnings. As you acquire more stock, your ownership stake in the company becomes greater. Whether you say shares, equity, or stock, it all means the same

thing.

Shares, also known as stocks or equities, are the unit of investment in individual companies. They have a nominal value, for example 5p, which when multiplied by the total number of shares issued forms the issued shared capital.The nominal value bears no resemblance to the market price, which will rise or fall according to the laws of supply and demand, driven by the attractiveness of the company and its performance.

How Does aStock Market Work

The stock market works by buyers and sellers (traders) who bid on shares of stocks. These are a small piece of ownership of a public corporation. Stock prices usually reflect investors' opinions of what the company's earnings will be.Traders who think the company will do well in the future bid the price up, while those who think it will do poorly bid the price down. Sellers try to get as much as possible for each share, hopefully making much more than what they paid for it. Buyers try to get the cheapest price, so they can sell it for a profit later.Average investors can't trade on the stock market directly. Instead, they must hire a broker-dealer to execute the trades. There's a wide variety of choices: >Feeonly financial advisers who charge an annual fee (usually 1% of assets). >Online dealers like E-Trade who charge a small fee per transaction.  >Large banks, like Goldman Sach or Well Fargo Advisers, provide financial . Planning in addition to executing trades.  >Small brokers just execute orders. .

Simple Diagrammatic Representation of how a Stock Market Works

Some Common TermsUsed In Stock MarketArbitrage

-The simultaneous purchase and sale of identical or equivalent financial instruments or futures in order tobenefit from a discrepancy in their price relationship.Ask-Also called an “offer”. Willingness to sell a contract at a given price.At-the-money-When the price of the underlying security is equal to the strike price, an option is at-the-money.Bear-One who expects the prices to decrease.Bear Market-A market in which prices are declining/falling.Bid-The price that the market participants are willing to pay.Blue Chip Stocks-Stock in a well-established, financially-sound, and stable company that has demonstrated its ability to paydividends in both good and bad times.Book Building-The process of optimum price discovery in which the company decides the price of the security by askingvarious investors about how much and at what price would they invest in the company’s equity.Bull-One who expects prices to rise.Bull Market-A market in which prices are rising.

Buy On Close-To buy at the end of a trading session at a price within the closing range.Buy On Opening-To buy at the beginning of a trading session at a price within the opening range.Call-A call option gives the buyer the right but not the obligation, to buy the underlying security at a specificprice for a specified time. The seller/writer of a call option has the obligation to sell the underlying security should the buyer chose to exercise his option to buy..Cash Settlement-Payment for transaction on the due dateClose Position-Getting out of a position in a particular stock or security.Cost of carry-Cost of financing an assetDay Order-Any order to buy or sell a security that automatically expires if not executed on the day the it is placed.Day Trading-Traders who take positions and liquidate them prior to the close of the same trading day.Derivatives-A derivative instrument is an instrument which derives its value from the value of one or more underlying which can be commodities, precious metals, currency, bonds, stock, stock indices etc.Exercise Or Strike Price-The price at which the holder of the option may buy or sell the underlying asset upon the exercise of an option.Expiration Date-The last day on which an option may be exercised. Also, the last day of trading for a futures contract.

Benefits Of Stock Trading1. Work at homeComputers and internet has promoted online stock trading and taken the markets to a new level. Now you can trade in stocks from the comfort of your home. With just a computer and an internet connection, now trade stocks at just a click of your mouse. Make money even at home along with your family life. This is one of the chief stock trading benefits.2. Low commissionsGone are the days when you were at the mercy of few stock brokers who would charge hefty large commissions on any trade done. With the advent of computers and internet, myriads of stock brokerage firms have mushroomed all over the world. Competing with each other to get the maximum clients, they offer low commissions, latest trading technologies and other facilities to attract clients. Low commission is one of the main benefits of stock trading.

3. No time barAnother advantage of online stock trading is that it has removed all time constraints and restrictions. You can trade stocks any time of the day and night at your convenience.4. Make money in minutesYou can make a lot of money within a matter of minutes, if you are well educated about the trends in stock market. The time it takes to execute the trade online is the same as just clicking your mouse.

WHY DO COMPANIES ISSUE STOCKS AND SHARES?

Why would the founders of a company want to share the profits of their company with other people if they could keep all the profits themselves? The reason is that companies need to raise money to expand. To do this, companies either need to borrow money, or sell part of the company. This selling off part of the company is known as issuing stock. At some point every company needs to raise money. To do this, companies can either borrow it from somebody or raise it by selling part of the company, which is known as issuing stock. A company can borrow by taking a loan from a bank or by issuing bonds.

NSE–National Stock Exchange of India Ltd.

The National Stock Exchange (NSE) is India's leading stock exchange covering various cities and towns across the country. NSE was set up by leading institutions to provide a modern, fully automated screen-based trading system with national reach. The Exchange has brought about unparalleled transparency, speed & efficiency, safety and market integrity. It has set up facilities that serve as a model for the securities industry in terms of systems, practices and procedures.

NSE has played a catalytic role in reforming the Indian securities market in terms of microstructure, market practices and trading volumes. The market today uses state-of-art information technology to provide an efficient and transparent trading, clearing and settlement mechanism, and has witnessed several innovations in products & services viz. demutualisation of stock exchange governance, screen based trading, compression of settlement cycles, dematerialisation and electronic transfer of securities, securities lending and borrowing, professionalisation of trading members, fine-tuned risk management systems, emergence of clearing corporations to assume counterparty risks, market of debt and derivative instruments and intensive use of information technology.

Market cap. US$ 1.65 trillion (23 Jan.2015)