Simple Explanation Of Stock Market
Summary
TLDRThis video script explains the basics of the share market, IPOs, and stock exchanges using a Pani Puri business analogy. It covers how businesses raise funds through loans, angel investors, venture capitalists, and IPOs. It also discusses the role of Sensex and NIFTY in reflecting market trends and the importance of research and reliable sources in investing in the stock market.
Takeaways
- đ The script introduces basic financial concepts like the share market, Sensex, IPO, and stock exchange to newcomers.
- đĄ It uses the analogy of a Pani Puri business to explain the process of raising capital through loans, angel investors, and venture capitalists.
- đŠ The video clarifies that banks may not always provide loans, and they come with interest and immediate EMI obligations.
- đ€ Angel investors invest without expecting to be repaid, instead taking a share of the business's profits.
- đŒ Venture capitalists are companies that invest large sums in startups and businesses, buying shares in exchange for funding.
- đ The script emphasizes the importance of finding angel investors and venture capitalists through research and financial advisors.
- đ It explains that IPO (Initial Public Offering) is a way for companies to raise funds publicly by selling shares for the first time.
- đ The process of launching an IPO involves hiring an underwriter, meeting eligibility criteria, and getting approval from SEBI.
- đ The script notes that the performance of a company's shares in the market does not directly affect its operations but can impact its reputation and loan terms.
- đŻ It distinguishes between retail investors, institutional investors, and adviser rating agencies as the main entities influencing share values.
- đ The importance of conducting thorough research and relying on trustworthy sources before investing in the share market is highlighted.
- đ± Lastly, the script outlines the steps for investing in the share market, including setting up a savings account, Demat account, and trading account, which can all be done through mobile apps.
Q & A
What is the basic concept behind the share market and related terms like Sensex, IPO, and stock exchange?
-The share market is a platform where buyers and sellers trade company shares. Sensex is an index representing the top 30 companies listed on the Bombay Stock Exchange, reflecting market trends. An IPO, or Initial Public Offering, is when a company raises capital by offering shares to the public for the first time. A stock exchange is a marketplace for the trading of company shares.
What does it mean when Sensex goes up by 100 points and NIFTY goes down?
-When Sensex goes up by 100 points, it indicates that the overall value of the top 30 companies it represents has increased. Conversely, if NIFTY goes down, it suggests that the top 50 companies it represents have collectively lost value. These movements reflect market sentiment and investor confidence in those specific companies.
Why would a business owner consider taking a loan from friends and family or seeking an angel investor?
-A business owner might consider taking a loan from friends and family or seeking an angel investor when they need funds to expand their business but do not have sufficient capital themselves. Angel investors provide funds in exchange for a share in the business, unlike loans which must be repaid with interest.
What is the role of venture capitalists in a business expansion?
-Venture capitalists are firms that invest in startups or businesses, providing large amounts of capital in exchange for shares. They help businesses expand by offering financial support beyond what angel investors can provide, especially when the business aims to scale up significantly.
Why would a company go public with an IPO?
-A company would go public with an IPO to raise capital for further expansion, such as entering new markets or launching new products. Going public allows the company to offer shares to the public, thus diversifying its investor base and potentially increasing its market value.
What is the process for a company to launch an IPO?
-The process for launching an IPO involves hiring an underwriter or investment banker, who reviews the company's profile and determines the amount of funds needed and the number of shares to be offered. The company must meet eligibility criteria, register with SEBI, and get approval before applying to a stock exchange to set the share price and launch the IPO.
Why is the approval of SEBI necessary for an IPO?
-SEBI's approval is necessary to ensure that the company meets all legal and regulatory requirements for a public offering. This approval process protects investors and maintains the integrity of the financial markets.
What factors determine the value of a company's shares in the stock market?
-The value of a company's shares is influenced by various factors, including the company's performance, market conditions, investor sentiment, and the actions of retail investors, institutional investors, and adviser rating agencies.
How does the fluctuation of a company's shares affect the company indirectly?
-Fluctuations in a company's share price can affect its reputation and the perceived value in the market. Additionally, if the company has taken loans secured by its shares, a drop in share price may require the company to provide additional shares as collateral to the bank.
What are the three types of entities that influence the share market?
-The three types of entities that influence the share market are retail investors, who buy or sell shares based on market trends; institutional investors, who trade in bulk and can significantly impact a company's share price; and adviser rating agencies, which provide predictions and analyses that can sway investor decisions.
What are the three accounts needed for trading in the share market, and how do they function?
-The three accounts needed for trading in the share market are a savings account, a Demat account, and a trading account. The savings account holds the investor's cash, the Demat account stores the shares purchased, and the trading account facilitates the buying and selling of shares. Funds are transferred from the savings account to the trading account to execute trades, and the shares are then held in the Demat account.
Outlines
đ Introduction to Stock Market Basics and IPOs
This paragraph introduces the viewer to the basic concepts of the stock market, including terms like Sensex, IPO, and stock exchange. It uses an analogy of a Pani Puri stall in Delhi to explain the process of business expansion and the need for capital. The analogy covers taking loans from friends, dealing with banks and their interest rates, and the involvement of angel investors and venture capitalists. It also touches on the concept of going public through an IPO, the role of underwriters and investment bankers, and the regulatory approval required from SEBI. The paragraph concludes with the importance of a product's power over money in business and the process involved in an IPO, including share pricing and the risks of launching an IPO.
đŠ Understanding Stock Market Dynamics and Share Valuation
The second paragraph delves into the dynamics of the stock market, explaining how companies are affected indirectly by share price fluctuations. It discusses the impact of a company's reputation and the use of shares as security for bank loans. The paragraph also introduces the concepts of FPO (Follow-on Public Offering) and the factors that determine share prices, such as retail and institutional investors and adviser rating agencies. It emphasizes the importance of research and relying on credible sources for investment decisions, warning against the pitfalls of following unverified market tips and the strategies of fraudulent experts. The paragraph concludes with a cautionary tale about the potential for deception in the stock market and the importance of due diligence before investing.
đ± Navigating the Stock Market with Technology and Investment Accounts
The final paragraph provides a practical guide for individuals interested in investing in the stock market without external assistance. It outlines the three essential components for trading: a savings account, a Demat account, and a trading account, using a relatable example of buying a shirt from a shop. The paragraph explains the function of each account and how they interact during the process of share trading. It also mentions the availability of Demat and trading apps, the KYC process, and the ease of connecting a savings account for trading purposes. The paragraph concludes by assuring the viewer that with the right apps and information, they can manage their investments independently from home, and if needed, customer support is available for guidance.
Mindmap
Keywords
đĄShare Market
đĄSensex
đĄIPO (Initial Public Offering)
đĄStock Exchange
đĄAngel Investor
đĄVenture Capitalist
đĄFPO (Follow-on Public Offering)
đĄRetail Investors
đĄInstitutional Investors
đĄAdviser Rating Agencies
đĄDemat Account
Highlights
Introduction to basic concepts of the share market, Sensex, IPO, and stock exchange for beginners.
Explanation of market movements using the example of Sensex and NIFTY index fluctuations.
The Pani Puri corner analogy for understanding business expansion and investment needs.
Differentiating between loans and angel investments in business funding.
Role of venture capitalists in providing large-scale funding for business growth.
Importance of financial advisors and investment bankers in securing funds for business.
Process of a company going public through an Initial Public Offering (IPO).
The significance of SEBI approval in the IPO process and its regulatory role.
How the pricing of shares during an IPO affects market reception and success.
The impact of market conditions on the timing and success of an IPO launch.
Understanding the secondary market for buying and selling shares post-IPO.
The role of stock exchanges as platforms for share trading and their historical development.
How Sensex and NIFTY indices are calculated and their influence on market perception.
The selection criteria for companies included in Sensex and NIFTY indices.
Factors affecting share value including retail investors, institutional investors, and adviser rating agencies.
The importance of research and relying on credible sources for share market investment.
The dangers of following unverified market tips and the potential for scams.
Overview of the necessary accounts for share market transactions: Savings, Demat, and Trading Accounts.
A practical guide on how to invest in the share market using mobile applications.
Transcripts
See, the share market, Sensex, IPO, stock exchange
What are the basic concepts behind all these?
Sensex has gone up by 100 points, and NIFTY has gone down.
So what is the meaning of this?
In this video, we will discuss all the things in such a way that the person who has not
heard of these things for the first time will understand it and can go online without
any help and invest in the share market. Let's understand this with an example
Assume, there is a Pani Puri corner in Laxmi Nagar, Delhi
And you have such a formula for making Pani Puri which is liked by many people
Now as soon as you set up your stall, all your Pani Puri gets sold within an hour
And you went home with your profit.
One day you thought if the people are liking it so much so I should
try to make as many as possible and make seating arrangements for more people
by opening a shop then more money can be earned but for all these things and shop
will need an arrangement of money. So if you have money then you can invest
And if you don't have it then you have to take a loan from your friends and family
So what you did is you took a loan and invested it
and when your business started running smoothly then you paid back the amount
But after this too people aren't stopping, they are liking your product more than ever
Now you are thinking that if people are liking it so much
Then why not start selling in the whole of Delhi?
Profit will be much good.
But now you will need very much money because you have to buy shops in Delhi,
employ people and your friends aren't able to arrange this much money
So you have one option that you go to a bank for the money
The first thing is that you may or may not get a loan from the bank and the second thing
If you'll get a loan then you've to pay 12 to 13% of interest and
your EMIs will also start from the next month itself and it takes time to build up a business
The EMI of the bank will be on your head when you are thinking of implementing the plan in Delhi
And this may also happen
that instead of increasing the profit you end up decreasing it.
In this case, there's one more option in the market i.e. angel investor
These angel investor
doesn't give you
money as a loan and you don't have to give it back.
But they will take shares of your business in exchange for the money
That means partnership in your business.
Assume you made a deal
that you will get 1 crore Rs for a 10% partnership so then whatever you'll earn
you have to give 10% of that to an angel investor
Angel investors don't need to work with you but they'll invest money
and will take 10% from your profit by just sitting at home.
Now you have made your name in Delhi and people are liking your product very much
After this, you thought that we should expand it to more states, so it will take more
money in this case. And this much money will be out of angel investor's hand
In this case, the venture capitalist can help you.
Venture capitalists are a type of companies whose work is to
find startups and businesses, provide them with the funds
And buy their shares. Venture capitalists have the capability of investing a big amount
Now you'll say your product is also going great and you too have a very good idea
Where can we find these angel investors and venture capitalists?
You have to make a search and hire a good financial advisor or investment banker
They will make you a
very good file and take you to the next level
If your business has the capability then you'll get the funds
And these angel investors and venture capitalists don't just give their money
Your revenue details get checked thoroughly and you have to give a proper presentation.
Assume, you took money from an angel investor by giving 10% shares
And took money from venture capitalists by giving 10% shares and after this too your
product is not stopping, people are demanding more and more. Now you are thinking
of taking it to an international level and opening up branches all over India.
And the money that will be needed for this will not be in hands of investors or venture capitalist
And in this case,
you'll have to go public for money in exchange for your shares.
Whenever a company goes to the public for raising money for the first time is called IPO
Initial Public Offering
The company whose name has public limited in its name means the company
has taken money from the public in exchange for shares and you
can buy its shares in the market. You started the Pani Puri business alone
but your product had the capability
and all the people are earning from it. You gave them a partnership
And all of them are earning. So that's why in business your product should have the
power more than money. And the IPO that you bring doesn't mean
that you'll go to people and announce a loud speaker
There's a process for IPO.
First, you've to hire an underwriter or an investment banker
He will review your company profile, how much fund is needed, and how many shares you'll give
After that, he will check eligibility, etc like there's an eligibility
that your daily turnover should be more than 10 lakhs and there are many more things
They check these things. After checking all these things, you've to do the registration
and your file will get approved by SEBI Your IPO will not come without the approval of SEBI.
After that, you have to put an application on a stock exchange
You've to do the pricing of the shares that you've thought of putting in IPO
You'll have to decide its price.
Like when Paytm launched its IPO then the value of its 1 share
was 2150 Rs.
And they raised 18300 crores of a fund by this.
If you are launching IPO then it's all up to you that
How much do you want to fix the value of your shares?
But you shouldn't fix it very high because if people aren't taking it, 90 % of them aren't taking
your shares then your IPO will not move forward. It costs 6 to 7 crores in launching IPO
Marketing and other fees will go all waste.
And it also builds a bad reputation for the company that's why you've to keep the share rate
such that people will subscribe to your shares. That's why companies bring IPO in such times
When a market is up and the purchasing power of the people is high
You may have seen that IPOs weren't coming during the COVID
and those which were about to come were put on hold
Sometimes companies launch 1 lakh shares in IPO
And the buyers are 5 lakh, in this case, the public gets IPO in a lottery system
After raising money from IPO
the company gets to work and starts making its profit after that
whether the share market will go up or down or the share of that company will fluctuate
The company doesn't have anything to do with it.
If it wants to be in the share market again then it had to do it through IPO
When a company brings IPO for the second time then it's called FPO
Now you'll say that we have seen in movies and news
that when a company's shares fluctuate, the owners start panicking
See, the company gets affected but not directly
It gets affected indirectly
The price of the company's shares reflects the overall reputation of the company
When they will take money from the market for any work, the current rate is a type of a
base for any company. The second thing is if a company takes a loan from the bank
Then it puts its shares as a security with the bank. Assume you've deposited 1000 Rs
shares in Bank then according to that the bank will give you 600 to 650 Rs a loan
Now due to any reasons, the price of the shares falls then the bank will ask the company to
give them more shares because the price of the shares has fallen
That's why company owners get panicked if the price of the shares goes down
There's one more thing when the company brings IPO again which is called FPO
At that time, it will not be able to fix the rates of the shares. The base of FPO will be
the rates at that particular time. See, the company raises funds by bringing IPO
and gets busy in their work but the public that has bought the shares of IPO waits
for the company to earn profit and they will get benefit from that.
But there is one more way if you failed to buy shares at the time of IPO, the people
who've bought the shares at the time of IPO, you can bargain and buy the shares from them
The place where all this bargaining happens is called the stock exchange
In 1875, a person named Prem Chand
started Bombay Stock Exchange, where an area gets decided
And people used to gather there and bargain.
And used to buy or sell the shares among them through papers.
This was getting very famous and the government after seeing its success brought
computerized system in 1992 for the whole process which is called National Stock Exchange
And in the coming days, BSE also made its system computerized.
And nowadays it's as if you can buy or sell shares by just clicking on your mobile
Nowadays there are many exchanges like Jaipur Exchange, Kolkata Exchange But NSE and BSE are very famous.
As were discussing the Bombay Stock Exchange, National Stock Exchange
You may have heard that today Sensex has gone up by 100 points
or NIFTY has gone down by 50 points.
So what does this mean? What happens when they go up or down?
See you have surely heard of TV's TRP, in this device is placed on some TVs in an area
that what people are watching. It is not placed on all TVs
Because this much is not possible
that device are put in all the TVs in India and check what they are watching
That's why some samples are taken and based on that an assumption is made
that what people are watching in the whole of India.
In this way TRP is decided and because its difficult to track all the companies
So what the Bombay Stock Exchange does it track the top 30 companies and predict market
Which is given the name Sensex and National Stock Exchange
takes the sample of the top 50 companies and predicts the market which is called NIFTY
Mostly this happens that
the market goes where the top companies of Sensex and NIFTY are going
But the market doesn't need to go where these companies are going
It may also happen that Sensex is going up but the stock that you are having is going down
So this may also happen. Now you may think which companies get selected in
Sensex and NIFTY, 30 big companies are selected in Sensex and 50 big companies in NIFTY
Now, which are these big companies? What is the definition of a big company?
How this is decided? The total number of shares of a company and their price
If we multiply it, then whatever amount comes
The company whose amount is higher will be the big
In this way, the top 30 and top 50 are selected, and the top 30 and 50
companies in Sensex and NIFTY
keeps changing. If a share of any company
is going down then it gets removed
from the top 30 or top 50.
Now the thing is, why the value of any share is high or low?
There are mainly three entities in the share market
due to which the value
of shares of companies gets higher or lower. The first is retail investors
The second is institutional investors and the third is adviser rating agencies
People like you and I are called retail investors who buy or sell shares according to market
The second is institutional investors, they pick shares in bulk
of any company or a particular sector like Index Fund
Or mutual funds and the third is adviser rating agencies
They predict whether the economy is going up or down or which sector will boom
Which sector will go down? These 3 entities decide where will the market go.
You have to do research and trust only reliable sources if you want to invest
in share market.
And this is a long-term game if you'll enter in share market after dreaming about Mungerilal
Then you will bear the loss for sure.
And the tips we get from the market and the fake experts
Don't get stuck in all this. Trust only reliable agencies and sources
Otherwise, the local tips which we keep getting
Don't depend on them. Let me explain to you with an example, assume I have reached
4000 people and made a list of them. Made two groups of 2000 people
And divided them into two groups.
Told one group that the market will go up and the market will go down to another group
One thing will happen out of two. Either the market will go up or down.
After this, assume the market will go up, so I will leave the group for which
the prediction was wrong and the group for which the prediction was right
I will move forward with it.
And in that group, I will make two groups of 1000 people and do the
same thing and the group for which the prediction will be right
I will take it and divide it in two.
After doing this continuously there will be at least 250 people for whom the prediction
may have been right for 4 times. They will think of me as the Guru of the share market.
After that, I will tell those 250 people
to deposit 50000 Rs and you'll become rich because I know everything about the market.
Some people flee after taking money. So don't get caught
in all these matters and if you want to invest then do research or trust reliable companies
If you want to invest money in the share market
without any help
Then all the work could be done from home itself you just need a mobile phone.
For buying or selling shares in the share market
Three things are needed
1. Savings Account
2. Demat Account
3. Trading Account
I will explain these 3 with an example.
Assume you go to a shop
And takes money from your wallet and buys a shirt
And keep that shirt in a bag
So your wallet is your savings account
The bag in which you've kept your shirt is Demat account
And you are acting as a trading account
You transfer money from your saving account to your trading account and buys shares from that
And those shares get saved in your Demat account.
The way that your saving account shows you the bank balance, in the same way
The Demat account shows how many shares of which company you have.
You just have to type "Demat app" or "trading app", and many apps will show up
Install these apps
Complete your KYC
The trading account and Demat account will open from your mobile
And your savings account will also get connected. After that too if you don't understand
then the customer care number will be given on that particular app, step by step process
is mentioned there. You want to take IPO,
buy or sell shares, everything will be done by that app from home.
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