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Basic of stock market part 1

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Basic of stock market part 1

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  1. Basic of stock market A complete guide for the beginners. Part - 1

  2. What is Stock Market? • In simple language stock market is a market where, one can buy or sell shares of publicly listed company. • At first new security is being sold in primary market through IPO, then it is traded in secondary market, where one investor buy shares from another investor, it is free market economy. • Primary market is where shares are listed for trading for the first time, here recognized stock exchanges are the primary market where a company enlist it’s share for trading. • Secondary market is where listed shares are bought and sold between investors through exchanges.

  3. IPO (Initial public offering): When a company needs money for its business (purpose is growth) it sell shares to rise the fund through recognized exchanges for the first time is called IPO. Latter if the company needs more fund, it can sell more shares through the recognized exchanges to its shareholder is called FPO. • Who can buy shares from IPO? An individual, a HUF, a corporate …. A body who is owning a Demat account can apply for IPO. Remember If you have only demat account you can buy shares in IPO but if you wish to sell those shares latter you must have a Trading account too. • Who decide the share price in IPO? It is the company who decide the IPO price, they can use Fixed Price Issue or Book Building Issue or combination of both.

  4. Fixed price issue: When company decided to sell shares at a fixed price is called fixed price issue. During application, an investor must pay entire amount he is applying for in upfront. If the investors don’t get any share, he will receive back the entire amount. • Book building issue: When company is not determined about the share price they offer for a range. Lowest price of the range is called Floor price where highest price of the range is called Cap price. If you bid at highest price and Final issue price is lower than Cap price, then you will get back the excess amount you have paid, allotment chances for highest price bidder is higher, this facility is called cut off price.

  5. Retail Individual Investors: Maximum amount of investment is Rs200000.00, can bid at cut off price. 35% of total offer are reserved for RII. Non-Institutional Investors: Minimum amount of investment is more than Rs200000.00, can not bid at cut off price. 15% of total offer are reserved for NII. Qualified Institutional Bidder: Institutional firm, can not bid at cut off price. 50% of total offer are reserved for QIB. Anchor Investor: Any investor who are making more than 10Cr application are called anchor investors. Upto 60% of QIB reserved can be allotted to this anchor investors.

  6. How are IPO allotted?: Application Situation Successful bids > Shares offered in IPO Successful bids < / = Shares offered in IPO Successful bids > Shares offered in IPO Successful bids >> Shares offered in IPO

  7. Aboutdemataccount. • Demat account is a store where you can keep all your securities, bond, mutual fund and insurance in electronical format. • Even a minor having with PAN Card and can also open a demat account under legal guardian. • 2 types of demat account are available. NSDL & CDSL. • NSDL & CDSL are called depositary. • Institutions, which act a role of mediators between investors and depositary are normally known as depository participant. One can open a Demat account with any DP. • An individual can open maximum 20 demat account with different DP.

  8. Trading Account • Trading account is mainly a bridge between your bank account and demant account. • You must open a trading account along with demat account if you wan to buy or sell shares from secondary market. • Open trading account with broker, who can open you DP also. • It is preferred to open Demat + Trading account under a same broker.

  9. Document require for Trading + Demat account. • A passport-size photograph. • A copy of your PAN card. • Identity proof such as Aadhaar card, passport, voter ID card, driving license, PAN card or any other authorized photo identity. • Address proof such as ration card, passport, voter ID card, driving license, bank passbook, electricity bill, self-declaration from the High Court or Supreme Court, identity card or address proof given by recognized authority. • A Bank proof such as Cancelled personalized cheque with clearly visible A/c no, IFSC Code, MICR code.

  10. Choosing a broker Brokers Traditional Brokers Discount Broker

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