#Stock-Market  #Basic-of-SM  #Finance 

Sub-Prime Crisis(2007–2008)

  • Movie: The Big Short
  • Prime borrower –> Borrower who is capable to repay loan
  • Subprime borrowers –> those with poor or no credit history

Overview

  • The Federal Reserve lowered the federal funds rate from 6.5% in May 20001 to 1% in June 2003.
  • Low interest rate –> Peop,e took mortgage loans –> to have own home
  • Loans are turned into mortgage-backed securities and collateralized debt obligations (CDOs)
    • Then Bank sold to –> Investment-Banker(like Lehman Brothers)
    • Now will Peopel –> direcly pay to Investment-Banker
    • Bank is middle-man (get some interest)
  • The Federal funds rate had reached 5.25% in June 2004
    • Due to increase in rates –> Sub-prime borrowers cound’t pay their loans
    • Leands to one subprime lender after another filed for bankruptcy.

Market Capitalization (M Cap)

  • Total MCap of the Company as on given time
  • M Cap = No. of shares * Market price of Share

Free float M Cap

  • Excluding
    • Promoter stake
    • Govt, Strategic investots stake
    • Lock-in shares
  • Included (free float)
    • FIIs, DIIs stake
    • HNI, Retail investor stake
  • Free float M Cap = No. of free floating shares * Market price of shares

Slabs of M Cap

  • Slabs changes with time
  • Large Cap
    • Old: M Cap > 10,000 crores
    • New: Top 100 companies by M Cap
  • Mid Cap
    • Old: M Cap of 500 to 10,000 crores
    • New: Companies rank b/w 100-250 by M Cap
  • Small Cap
    • Old: M Cap < 500 crores
    • New: Companies rank below 250 by M Cap
  • NOTE:
    • Generaly BlueChip stocks comes under Large Cap

Top companies in india by M Cap

* Reliance Ind
* TCS
* HDFC Bank
* HUL
* HDFC

Types of Orders Based on Quantity

  • AON (All or None)
  • MF (Minimum Fill order)
  • DQ (Disclosed Quantity)
    • This type of order enables the buyer/seller to disclose only a part of the total quantity order
    • Used when you have a Big quantity to Buy/Sell
    • Generally used by large Investors

Market Indices (Index)

  • Indices are comprised of TOP companies in all major sectors.
  • Re-balancing on a Semi-annual basis, (intimation 4 weeks in advance)

Advantage

  • Benchmark for Equity funds
  • Indicator of Economy
  • Historical & Latest comparison
  • Index investment

Types of indices

  • Broad Market benchmark
    • Nifty 50
    • Sensex
  • Sectoral index
    • Nifty Auto index
    • Nifty IT
    • Nifty FMGC
  • Market cap index
    • Nifty Smallcap
    • Nifty Midcap
  • Thematic index
    • Nifty Consumption
    • Nifty PSU

Top Index

  • Nifty 50
    • Index of NSE
    • Top 50 company
    • N-SE + F-IFTY --> N-IFTY
    • Base value: 1000
    • Base Year: 1995
  • Sensex 30
    • Index of BSE
    • Top 30 Company
    • Sens-itivity + Ind-ex --> Sensex
    • Launched : 1986
    • Price: 585
      • Back dated launch 1979(base yr) at 100
    • Base value: 100
    • Base Year: 1979
  • Increase in M Cap of nifty50 stock will result in increase of NIFTY
  • (New M Cap - Old M Cap)/Old M Cap

India Index Service & Products(IISL)

  • Group company of NSE
  • Owns and Manages 67 indices under NIFTY Brand
  • These indices are Product of IISL, so you can BUY/SELL these in the F&O segment.
  • Inclusion and Exclusion of a company in NIFTY is decided by IISL
  • Lot Size: 75 shares (Need to buy in lot size)
    • Price around 8 lakh (for NIFTY 50)
    • But can be bought by using margin –> by paying 10% of the Price

Stock weight in Index

  • Methodology to calculate stock’s contribution to the index is based on:
    • Free float M Cap
    • Price weight
    • Equal weight

World Indices

  • Japan - Nikkei
  • Hong Kong - HangSeng
  • France - CAC
  • Germany - DAX
  • USA - NASDAAQ

Terms

  • bid-ask spread
    • Diff b/w best Buying and Selling price
  • Block/Bulk Deal
    • Large no of shares change Hands
    • Need to give Disclosure
    • Monitored by Market Servilance team of BSE, NSE, and SEBI
  • Ring Trading (Illegal)
    • Speculation/SattaBazi

Reference