This is a synopsis of workshop on stock markets in IITD.It is also follow up article on the previous discussion on workshop.
Ms. Renu Bhandari started with a note of How investment plays a vital role in managing our credits and therefore our lives.Ma'am highlighted that most of the people (as hightlighted in our previous discussions)do not have the required knowledge and know how of how to invest well in markets and therefore incur losses.She emphasised the fact that it was important to spend time before investing our money.
Also ,she highlighted the success of NSE in bringing a revolutionary change in the stock markets.Also, we got to know that trade has grown from 2 crores per day in 1990s to 2lakh crores per day today.This sudden change in 20 years has been due to three main reasons:
1.Technology
2.Good Practices(Transparency)
3.Liquidity
As desribed in the workshop there was an OPEN OUTCRY SYSTEM in earlier times under which there were brokers who met clients and placed orders.She explained that such a system was not at all transparent as brokers could take undue advantage of the less information which was there in the market with their customers.Also earlier there were 22-23 stock exchanges based on regional stock exchange.
Due to transparent practices of NSE,now low spread i.e. less difference between the price quoted by the buyer and seller is ensured.Also, it is now much easier to enter and exit out of the markets as compared to earlier times.
On,the basis of ranking,NEWYORK STOCK EXCHANGE and NASDAQ are at first and second positions respectively and NSE is at third.Ms.Bhandari said that NSE was third because it had less volume of trade but in terms of technology it is far ahead of them.Demat(dematerialised) settlement has been ensured by NSE.Moreover there are 1500+ brokers registered with NSE.
COST-BENEFIT ANALYSIS OF DIFFERENT INVESTMENTS (by Ms. Bhandhari):
First of all let us consider the safest investment.If we keep money in banks we will end up with 3-4% per annum.But if we invest in fixed deposits then we will end up getting 8-10% per annum.Now government also taxes on this income earned through interest rates.So from FDs we get 6-7% net income.But on the other hand, considering inflation scenario which is as high as 10.2 % we are at as our basket or purchasing power is becoming small.
MAIN STEPS BEFORE INVESTING:
1.Identify surplus funds:
First of all it is necessary for all investors to look at how much he needs to save and how much to invest from the savings obtained after all expenditures on health,parties or any other leisure or necessary activities.
2.Identifying products:
Identification of products mainly depends on our age and our risk appetite.Risk appetite is your capacity to take risk.Our risk appetite depends on our lifestyle and our income.identification of a product is a very important job as there are different products available in the markets.For e.g. equity markets which allow for higher risks with high return.Then there are purely safe fixed deposits and there are mutual funds with moderate risks.
3.Choosing Intermediary:
It is required of each customer to check whether their chosen intermediary is registered with exchange and SEBI or not.Also, it is important to complete all registration formalities.Moreover,ma'm also advised beware of intermediaries promising very high returns.
4.Track markets:
Lastly it is important for us to identify depending on time what and how much should we buy or sell.Moreover from the time we have bought stocks we should keep track of the markets and respond immediately according to our targets of stoploss and bookprofits.
Also,two types of markets primary markets and secondary markets were also discussed.
IPOs:
IPOs (Initial Public Offer ) is used by companies for collecting funds for expanding and diversifying their business.Price of an IPO is decided by two ways as highlighted in workshop.First, it could be a fixed price which was decided on by the company and other groups of traders and merchants.Secondly,its price could be decided by book bidding in which based on demand and supply company along with merchants decide the price.IPOs come under primary markets.
Also one question which was asked by Ms.Bhandari by a student was that,how can investors track their companies ,meaning thereby what are the indicators for investors?
In response she said,there were many methods by which we could check.For e.g. we could look at the liabilities and debts of the company and see whether they are increasing or decreasing.Also we can look at company's balance sheet and balance reports for tracking them.
MFs(Mutual Funds):
Investment in Mutual Funds consists of moderate return with moderate risk. In mutual funds we can have a good investment by investing for considerable period of time i.e. 3-5 years.Also,concept of SIPs was highlighted in the workshop.SIP which is systematic investment plan consists of investing monthly(like Rs. 5000 every month).So,because in mutual funds there are intelligent choices ,about buying and selling of stocks,made by investors in mutual fund companies therefore there less risk of incurring losses(moreover informed choices are themselves ensured and it is not necessary for people to track different companies).Investors in Mutual Funds ,from the money they raise ,they buy different stocks according to the analysis of different companies and thus book profit or losses.So,there is relatively lesser risk.
There are two options for suscribing mutual funds.First is buying mutual funds through agents .Second is filling up form with cheque in favour of AMC(Asset Management Company).Also if we want to redeem funds we could do so and we would get the payment based on the NAV at the end of day of mutual fund market i.e. 3 pm. MFs are also advantageous because we direct our investments directly from MFs to stock markets without redeeming our purchase and just by directly asking the mutual fund company to give our shares of stocks in the basket of stocks that we have purchased.
At the end ,ETFs (Exchange Traded Funds) were dicussed.These are an investment funds traded on stock exchanges much like stocks.These are most popular type of exchange traded products .Exchange traded products are derivatively priced security which trades intra-day on NSE.
Also Ms. bhandhari explained us what is meant by 1 ETF.1 ETF of gold means price of 1 gram of gold.In general 1ETF means 1/10th of the price of the stock.Also she told us about Nifty50 which includes best 50 stocks.Thus investing in NIFTY50 reduces the risk because if some stocks fall then some rise too.
Although, time was less, everything was clearly explained by ma'am.Altogether event provided us with greater insight to the markets and was an overall a good experience .
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