Simple Explanation Of Stock Market

Summary

This 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

• 📈 The script introduces basic financial concepts like the share market, Sensex, IPO, and stock exchange to newcomers.
• 💡 It uses the analogy of a Pani Puri business to explain the process of raising capital through loans, angel investors, and venture capitalists.
• 🏦 The video clarifies that banks may not always provide loans, and they come with interest and immediate EMI obligations.
• 🤝 Angel investors invest without expecting to be repaid, instead taking a share of the business's profits.
• 💼 Venture capitalists are companies that invest large sums in startups and businesses, buying shares in exchange for funding.
• 🌐 The script emphasizes the importance of finding angel investors and venture capitalists through research and financial advisors.
• 🔎 It explains that IPO (Initial Public Offering) is a way for companies to raise funds publicly by selling shares for the first time.
• 📊 The process of launching an IPO involves hiring an underwriter, meeting eligibility criteria, and getting approval from SEBI.
• 📉 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.
• 🎯 It distinguishes between retail investors, institutional investors, and adviser rating agencies as the main entities influencing share values.
• 📚 The importance of conducting thorough research and relying on trustworthy sources before investing in the share market is highlighted.
• 📱 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

00:00

📈 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.

05:00

🏦 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.

10:00

📱 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.

Keywords

💡Share Market

The share market, also known as the stock market, is a platform where shares of publicly held companies are issued and traded. It is a central place where buyers and sellers meet to exchange securities. In the video, the share market is the main theme, illustrating the process of investment and how it can be accessed by individuals for trading stocks.

💡Sensex

Sensex, short for the Sensitive Index, is a stock market index of 30 companies listed on the Bombay Stock Exchange. It is used to gauge the overall performance of the BSE and is a key indicator of the market's health. The script mentions 'Sensex has gone up by 100 points' to illustrate market movements.

💡IPO (Initial Public Offering)

An IPO refers to the process by which a private company goes public by offering its shares to be traded on a stock exchange for the first time. The video script explains the IPO process as a way for companies to raise capital by selling shares to the public, like in the case of Paytm's IPO mentioned in the transcript.

💡Stock Exchange

A stock exchange is a centralized venue for the trading of company stocks and bonds. The video discusses stock exchanges such as the Bombay Stock Exchange and National Stock Exchange, where shares are bought and sold, and where companies can list their shares for trading.

💡Angel Investor

An angel investor is a high-net-worth individual who provides capital to startups or small businesses in exchange for ownership equity or convertible debt. In the script, angel investors are introduced as an alternative to bank loans for businesses looking to expand, as they invest without requiring repayment but instead take a share in the business.

💡Venture Capitalist

Venture capitalists are professional investors who provide capital to early-stage, high-potential, growth companies in exchange for equity. The video explains that venture capitalists can invest large amounts of money in businesses that show promise, helping them to scale up their operations.

💡FPO (Follow-on Public Offering)

A Follow-on Public Offering is a public offering made by a company that has already gone public once. It is used by companies to raise additional funds after their initial public offering. The script mentions FPO in the context of a company raising funds for further expansion after its initial IPO.

💡Retail Investors

Retail investors are individual investors who buy and sell securities for their personal accounts. The video script describes retail investors as a key entity influencing the share market, as they make investment decisions based on market trends and personal research.

💡Institutional Investors

Institutional investors refer to entities like banks, insurance companies, pension funds, and mutual funds that purchase securities. In the script, institutional investors are highlighted as significant players in the stock market who buy and sell shares in large quantities.

💡Adviser Rating Agencies

Adviser rating agencies are organizations that provide analysis and predictions about the economy and various sectors. They are mentioned in the script as entities that influence the share market by guiding investors' decisions based on their forecasts.

💡Demat Account

A Demat account is an account that holds shares in electronic form, rather than in the form of physical certificates. The video script explains that a Demat account is necessary for investors to hold the shares they purchase, similar to a bag in the example of buying a shirt from a shop.

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.