BSE or NSE which is better, NSE or BSE for beginners

How to choose between NSE and BSE, comparison between BSE and NSE.

The BSE is the oldest Stock exchange in India founded on July 9, 1875, in Dalal Street of Bombay: now Mumbai. The NSE, established in 1992, is the first electronic Stock Exchange in India. The NSE was the first Stock Exchange in India to have all computerised, screen-based electronic trading system. BSE also has an all-digital screen-based electronic trading system now. We will compare BSE an NSE from an individual investor’s point of view.

The short answer to ‘which is better BSE or NSE?’ is that both are excellent choices. Buying or selling shares in either the BSE or NSE is very easy and they both have good online services. So both NSE and BSE are perfect.

How many companies are listed in BSE and NSE

There are many more companies listed on BSE than in NSE. BSE has about 6000 listed Companies compared to less than 2000 listed Companies in the NSE as at the end of 2016. The market capitalisation of listed companies in BSE at the end of 2016 was about US$ 2 trillion compared to about US$ one trillion in the NSE.

Thus you will find many new Companies listed only on BSE and not listed on the NSE. For the individual investor in India, who wants to invest in shares of new companies, the BSE is a better choice. It will be very rare to find a Company that is only listed on the NSE and not listed in the BSE.

Difference between BSE and NSE

The main difference between BSE and NSE is that the trading volume of individual stocks in NSE is much higher than in BSE. The NSE is a better choice for those who want to do ‘Day Trading’ and risk doing Share Trading with Derivatives, Futures and Options. The NSE has better software for these high-risk online transactions. The BSE is for the more conservative investor who likes to invest and sit and watch his investments grow. It is for people with a more relaxed attitude to investing in shares.

About NSE, National Stock Exchange of India

The National Stock Exchange of India (NSE) is India’s largest Stock Exchange by value of shares traded per day and the third largest in the world. The NYSE: New York Stock Exchange is the biggest in the world.

The NSE main office is in Mumbai (Bombay) and incorporated in November 1992 as a tax-paying company. The promoters of NSE are some of India’s top financial institutions, banks and insurance companies.

NSE trading hours are from 9:00 am to 3:30 pm, Indian Standard Time, Mondays to Fridays except on holidays declared by the NSE or by the Government of India.

You can do trading on the NSE in the following:

  • Shares
  • Futures and Options
  • Retail Debt Market
  • Wholesale Debt Market
  • Currency Futures
  • Mutual Funds

NSE has set up one of the best online trading systems in the world. The main index of the NSE is the NIFTY. The full form of NIFTY is ‘S&P CNX Nifty’ a short-form or abbreviation for ‘Standard & Poor’s CRISIL NSE Index 50’.

The NIFTY value is an Index – just a numerical value. The NIFTY value is worked out by computers almost every second by using a formula which takes into consideration the share price and the market capitalisation of the 50 NIFTY Companies. Each of the 50 NIFTY Companies contributes a value to the NIFTY Index depending upon its Weightage or its free-floating market capitalisation. RIL: Reliance Industries Ltd. being the largest Company by market capitalisation contributes most to the NIFTY Index- about 11%.

The 50 Companies in the NIFTY are selected from leading Companies from 21 sectors of the Indian economy like Auto, Banking, Cement, Engineering, IT, etc. The NSE NIFTY is at its highest value ever in 2017 and hovering around 10,000. The market trend is more positive than ever.

NSE has also set up an index services firm known as India Index Services & Products Limited (IISL) and they manage the following Major NSE Indexes or indices of the NSE:

  • S&P CNX Nifty
  • CNX Nifty Junior
  • CNX 100
  • S&P CNX 500
  • CNX Midcap
  • Nifty Midcap 50
  • S&P CNX Defty
  • CNX IT Index
  • CNX Bank Index
  • CNX FMCG Index
  • CNX PSE Index
  • CNX MNC Index
  • CNX Service Sector Index
  • CNX Energy Index
  • CNX Pharma Index
  • CNX Infrastructure Index
  • CNX PSU BANK Index
  • CNX Realty Index
  • S&P CNX Nifty Shariah / S&P CNX 500 Shariah
  • S&P ESG India Index

How to find Multibagger stocks in India

Future multibaggers in Indian stock market

Finding multibagger stocks in India depends on your research skills. You need to find the stocks that are fundamentally good but are priced very cheap because of some negative news or because of the perception that the company has high debt. You need to find out if the company has products which are, or will be, in high demand. Also, you will need to do some research on the key persons managing the operations. Do a check on their background and find out if they have a history of performing well.

Investing in penny stocks in India

What is a Penny stock in India? The name Penny Stocks in India comes from the American stock market. A Penny in a Dollar is like a paisa in a Rupee. 100 penny makes a Dollar, and 100 paisa makes a Rupee. In the old days, most American stocks had a face value of one dollar. Shares of companies that were doing good used to trade for pennies. Thus the name ‘Penny Stock’ became associated with cheap stocks.

I recommend that everyone should invest a portion of their investment money in at least two shares with the aim hitting a multibagger share. You should not invest more than 5 to 10% of your money kept aside for investment. This is a gamble for multibaggers.

Some penny stocks can give very high returns. Most investor Gurus will tell you to stay away from penny stocks. But if you do your research well, you may be able to pick some Multibaggers from penny stocks. If say you choose a penny stock at Rs.2- and it becomes Rs.4, then it is a multi-bagger. Your investment has multiplied by two times. There will always be some stocks in India which are driven down by negative news, even though the fundamentals of the company are good. If you can grab such shares at their lowest price during the fall, and hold onto it for some time, then you could have a multi-bagger in your hand.

My picks of Multibagger Shares in India

I thought I will share with you my experience in trying to hit multibaggers. Below are some of the cheap stocks I bought and still holding, in the hope that it will become multi-baggers. Out of the five shares I invested in the hope of getting multibagger shares, three have gained. One share, V2 Retail has multiplied by almost 25 times. These are the shares I have gambled in:

3i Infotech: I bought this share at about Rs.2.50, now it is about Rs.4-. My reason for buying this share is because I felt that it has some good products like an ERP software called ‘Orion’, Insurance Management software ‘Premia’, Banking solution software called ‘Kastle’ and some other software solutions. I feel that in a few years that this company should do good. The problem is that I bought this share may be, three years back and it is still struggling, but I plan to hold onto it.

8K Miles Software Services Ltd: This stock was trading near Rs.1000- at he beginning of 2018, but towards the midde of the year it got into controversies like the Auditor of 8K Miles Media Ltd. resigning and shares of the chief promoter of 8K Miles group being sold. The share dropped to below Rs.100. As usual, I did my research on Companies whose shares hit 52 week lows. I found out that basically 8K Miles Software Services Ltd is a very good Company in the Cloud business and that they have partnerships with Amazon Web Services, Google and Microsoft. I did a lot more research and I was convinced that this Company would get back to its Rs.1000- level share price. So I invested heavily at around Rs.100- per share. Today it is at Rs.159- and climbing. Hope it gets to my target price of Rs.1000-.

Morepen Labs: I do not remember the exact date I bought this share, but it was more than four years ago at a price of under Rs.6-. Now it is trading at about Rs.18-. Already a multi-bagger at three times, but I plan to hold on to it hoping it will go much higher. The reason for my buying this stock is that I was impressed by their product lines. They have USFDA approved manufacturing facilities for some important bulk drugs, and they have a retail line ‘Dr Morepen’ for home self-care medical instruments like BP machines. They also own ‘Burnol’ a famous medicine for burns.

Opto Circuits: I bought this share at a price of Rs. 12- about three years ago. Now it is down at about Rs.9-, but I am betting that it will go up soon. Opto Circuits is an Indian Company with operations all over the world. Their product line includes internationally approved small medical devices and implants like Stents.

V2 Retail: V2 retail shares were purchased by me around four years ago at a price of Rs.16-. I sold majority of my shares at above Rs.400. Now it has dropped to Rs.270-. I plan to buy some more if it drops further. I have been fortunate with this share. V2 retail has a chain of department stores, and they are expanding rapidly.

How to select stocks for investment in India

How to find best shares to invest in India

These are some of the most important points to consider when researching an Indian Company to invest in their shares.

Ownership of the Company, Promoters share percentage

One essential aspect to consider when researching any Company in India to invest in is to look at the proportion of the promoters shareholding in the Company. If they have a large percentage of ownership, say over 50% of the shares, it means that the promoters are serious about the growth of the company. It is very unlikely they will syphon off funds from a company where they are in complete control. But the reverse is true if the promoters share in the company are less than 30%. You have to be careful in such companies and make sure that the management is an honest lot.

What is the reputation of the Company’s products in the market

Check if the company’s products are well known in the market. If the general feeling in the market is that the company’s products are good and reliable, then it is a good company to invest in. Are the products of the Company the leading brand in that sector. Examples of good brands in India where they are market leaders in their segment of the business are brands like Maruti in the Auto sector, SBI (State Bank of India) in the Banking Sector, HUL (Hindustan Unilever) in the FMCG (Fast Moving Consumer Goods) sector and so on. Share Prices of such Companies where they are market leaders are sure to be expensive, but their share prices keep increasing, and they pay handsome dividends each year.

Analysis of the Companies financial results and Peer Group Analysis

You should look at the Company’s Balance sheet which will be available online at the Company’s website. Sources like BSE or NSE will also provide information of any listed company. You should look at the top line and bottom line figures of the company and compare it with other companies in the same activity. This type of analysis is called a Peer Group Analysis. You should look at the EPS (Earnings per Share), P/E Ratio (Price to Earnings Ratio), EBITDA, (Earnings before interest, taxes, depreciation and amortization), Book Value, Top line total sales and Bottom line profitability of the Company. Compare all these values with the company’s competitors, the peer group. Year to year growth in sales and profitability means it is a good company to invest in.

Debt-to-Equity Ratio

Debt-to-Equity Ratio is defined as the total debts the Company to its total equity capital. A Company that has debts equal to its equity capital is said to have a 1:1 Debt-to-Equity Ratio. Be careful of investing in a Company that has a high Debt-to-Equity Ratio, that is debts of the Company should be minimal, in fact, look for Companies that have cash reserves on its books.

Price-to-Earnings Ratio (P/E)

Perhaps one of the most important parameters for you to decide whether the share price of the Company is too high. The P/E ratio is a comparison of the stock’s price to the Earnings per Share (EPS). Compare the P/E ratio of the Company with its Peer Group. A good company having a low P/E ratio is said to be a “Value” Company. Warren Buffett, one of the most successful investor in the world, uses “value” investing method. This has made him one of the richest men in the world by investing in “Value” shares.

Dividend History

A company which pays a regular dividend is a sign of a Company in good health.

Check if any Mutual Funds has made investments in the Company

If any of the Mutual Funds has made investments in the Company, then it is an indication of a good Company, since mutual funds have dedicated teams of Share and Company Analysts researching into Companies, and they invest only in good Companies.

Best Shares to Invest in India, Best Indian Shares to buy today

To find the best shares to invest in India requires a lot of research work. One of the best methods to find the best Indian Shares to buy today is to go to the NSE (National Stock Exchange) website and analysing the 50 Companies that are in the NSE NIFTY, Junior NIFTY, and other NSE Indexes. You can do this by visiting this NSE live market website. Here you see at the right side of each share, the so-called ‘sparklines’ of the 50 NIFTY companies. The Shares are given in the order of the biggest gainers of the day or whose shares have gone up most in value percentage wise at the moment of your entering that site.

There are several values shown, Under the ‘Today’ tab are shown a small graph called a ‘sparkline’ which represents the price of the Share Vs time of day. Under the ‘Open’ tab is the opening price, Under ‘High’ tab, is shown the days high price and under ‘Low’ tab is shown the days low price. ‘LTP’ stands for last traded price, ‘Change’ shows change from the closing price of the previous day, ’52w H’ and ’52w L’ stands for the High and Low prices during the last 52 weeks or 1 year.

If you click on any of the Company names in the first column on the NSE live market website, it takes you to the page of that Company on the NSE site. These individual pages of the Companies in the NSE NIFTY give a lot of information about that Company. This is an important page to do research on any Indian Company in the NSE NIFTY.

Keep studying the NSE NIFTY live price web page and keep visiting the individual companies pages. After a few days of this you will get to know the top Companies of India, and with time, you will be able to almost guess correctly which way the NIFTY index will move, just by studying this web page together with the market sentiment.

From the analysis of companies you do, make a list of the Companies that you think are good. Now you have to Google search each of the Companies you have selected. Most of the time the selected company’s website will be there in the search result. Make sure you go to their website and look at all their pages. Look at their ‘news’ page. Some important news which is not yet known to the general public may be there. Once that news appears in the press and is known widely, the Company’s share price will jump.

Also on the Google search page, click on the tab ‘News’ at the bottom of the search box. This will give you all the news items about the Company, and you should analyse it. At the bottom of the news result page, you will find a “Create Alert” button. Click on this and enter your details including emails. Then whenever there is important news about the selected Company, you will get an email. It is better if you create a ‘Gmail’ account and give that email address.

Researching and analysing Companies is a long drawn out, time-consuming process. If you do this research diligently, you will make good profits. After some time of following this procedure, you will become an expert in picking the right shares and knowing which are the best Shares to Invest in India.

Best stock research sites

We have below a list of the best share research sites, visit these websites regularly and read. These websites for Indian share research provide a lot of information. These are the recommended sites for share research in India. They are in alphabetical order:

Safe investment with high returns in India

Better to invest in shares, property or gold

Many young people yearn to have their own house or flat as soon as they start earning, and take loans to buy a house. The problem with such a decision is that they will have to pay monthly payments of EMI (equated monthly instalments).

We will discuss the question of what is better: invest in property or shares in India?

Let us assume one buys a house taking a bank loan. Let calculate the monthly interest on the loan amount to compare it with the monthly rent for a similar house. Usually, it will surprise you to know that the rent will be quite a bit less than the interest on the bank loan.

Let us work this out by an example. Say the apartment or house costs ₨ 50-lakhs (Rupees 5 Million) and you take a loan of ₨ 40 lakhs. The average interest rate for housing loans in India now is about 10%. So the annual interest cost of the loan will be ₨ 4 lakhs per year, which works out to about ₨ 33,000- per month. You can sure find a similar or a much better flat or house for rent at ₨ 25,000- per month.

Later on, if you want to sell the flat or house, you will need to advertise to find a buyer. Then go through the process of showing the house to many brokers and prospective buyers and bargain with them. When the deal finalized, you will get a good part of the money as Black Money in a suitcase. You will have to hide this money and always live in fear of robbers and the tax authorities.

Creating wealth through investments in Shares

Rather than going for a loan at a younger age, you could make investments in Shares or Mutual Funds. Some Mutual funds have some tax saving schemes. If you should choose some high-growth stocks and invest in them, within 10 to 15 years, you could have enough money to buy a good flat without any loan. To find the right companies to invest in India, you should do some research. Share Market in India today is starting to boom, so this is a good time to buy shares in India. Investing in shares of blue-chip Companies will get you long-term appreciation.

History of Share Prices in India compared to Dow Jones Index

The Dow Jones Industrial Average (DJIA) of USA is the most famous and one of the oldest Stock Indexes in the world. We will examine the performance of the DJIA with our Indian BSE SENSEX or the NSE NIFTY.

To show the growth in value of shares over time, we make use of Share Market Graphs. The year is on the horizontal X-axis and the value in the vertical Y-axis. The Dow Jones Industrial Average (DJIA) takes into account the Share value of the leading American Companies. The chart below shows the performance of DJIA from the year 1884 till 2011, that is over a period of 127 years. You can see the steady rise in its value over the years.

Please note that in the chart below, the ‘Y’ axis or the price or index value is to the logarithmic scale. This means that Y-axis rise in value is not linear. For example, if you look at the ‘Y’ axis, the distance between 2,500 and 5000 is almost the same as between 5,000 and 10,000. If it is on the linear scale the distance between 5,000 and 10,000 (10,000 – 5,000 = 5,000) should be double that of that between 5,000 and 2,500 (5,000 – 2,500 = 2,500).

So if the graph were plotted on the linear scale, the graph would be almost vertical, bearing witness to the phenomenal rise in the value of Stocks or Shares.

Historical Dow Jones Industrial Average (DJIA) 1884 to 2011

Historical Dow Jones Industrial Average (DJIA) 1884 to 2011

The period of the above graph, between the year 1884 and April 2011, saw two World Wars, the great depression of the early 1930’s and the financial meltdown of 2008-2009. The share prices did fall during the time of the world wars. After the world wars, share prices kept on rising. There is nothing in the world that can stop the steady increase of share prices in the course of time.

The occasional dips or crashes in share market may look like small dips in the graph, but at the time the dip was happening, it is a catastrophic experience. The small dips in the graph of over 127 years were given several nicknames. Names like ‘Black Monday’ for the 1987 stock market crash, ‘Black Tuesday’ and ‘Black Thursday’ for the stock market crashes of 1929. But like the dips during the great depression years of the early 1930’s, it is soon forgotten. The share prices keep on climbing with occasional dips. Everyone remembers the 2008 financial meltdown. But now in the graph, it is a minor correction, but in 2008 there was panic all over the world. Now stocks are rising everywhere in the world; it will keep on going up in the future. So we must look at these dips as a buying opportunity to create wealth for ourselves.

Indian Share Market Graph

Now let us see a similar Bombay Stock Exchange BSE SENSEX Graph, which has a much shorter history than the Dow Index. In the graph below see the BSE SENSEX values from 1991 till after 2013. You can see many dips in the graph, but the graph is rising over the years. Those dips in the upward journey of the BSE SENSEX were when the crashes happened. These crashes in the Indian share market looks like minor dips in the graph, but at that time it was headline news. The upward journey of the SENSEX graph will always continue.

BSE SENSEX index historical data 1991 to June 2013

Now in 2017, the share prices in India are at its highest level ever. The BSE SENSEX crossed 30,000 intraday in 2015 and now in 2017 is hovering around 32,000.

Gold price rise compared to share prices in India

Below we have a comparison chart of share prices vs gold prices in the Indian market.

We have two graphs of returns from Gold investment in India compared with investment in shares of the BSE SENSEX. The first map shows the returns from Gold Vs SENSEX from May 2013 to May 2014

Gold Vs SENSEX May 2013 to May 2014

In the above map, you can see that the returns from gold investments were better than the returns from share market in India. But this is only for a brief short period. Gold prices tend to rise, and stock prices tend to dip, in times of crisis like if there are fears of war. But these times of crisis always passes, and shares will overtake gold investments in profitability. We have one more chart of SENSEX VS gold Prices below which shows how SENSEX always outperforms the investment in Gold.

Gold Prices Vs Sensex Graph 1981 to 2008

The above graph shows the returns from Gold compared with the returns from the SENSEX over the period from 1981 to 2008, that is over a period of 27 years. Clearly, the SENSEX is better than Gold as an investment.

After 2008, even though the Gold prices rose dramatically, the BSE SENSEX of India outperformed Gold investments as is evident in the above Sensex Vs Gold Price Chart or Graph.

Why is it good to invest in share market in India

Is it a good time to invest in shares in India?

History has proven that shares or stocks are the best form of investment to get good returns on your money. So the answer to the question “Is it a good time to invest in shares in India?” Our answer will be, it is always a good time to invest in shares, especially in the Indian stock market. The value of good shares in a growing country like India will just continue to increase at a regular pace over the years and will give much better returns that other forms of investment like Bank Deposits, buying property or gold, etc. The trick is to invest in shares of good Companies.

The shares of good companies keep on appreciating in value every year. On top of this, they pay good dividends every year. When you need cash in an emergency, it is easy to sell some shares for the amount of money you need. This means you can sell the right quantity of shares to get the required cash.

Are Shares better than Bank FD

In fact, shares are better than putting your money in the bank FD. You must pick shares of companies that are part of a Country’s Share index. For example, from the BSE SENSEX, the 30 best shares of Companies in India. Or, you could choose from any of the 50 Companies included in the NSE NIFTY Index of India. These are all the best companies in India. The shares of these companies are going up in value all the time and they pay regular yearly dividends.

Share Market in India today is very mature. The values in Indian Share Market is sure to go up in the coming years. You should be investing in shares of blue chip Companies during your working years. This will be a good foundation for building a fortune for yourself by the time you retire. The trick is to make sure you buy shares of Indian Companies with a good future. This is what the rest of this site is about – How to pick the right shares of Indian Companies with a good future.

Shares Vs fixed deposit, is investing in shares better than FD in banks

To compared Bank Fixed Deposit Vs Share buying, let us take a real-life example. Say I had Rupees one lakh to invest in 2010 January. If I had put this ₨ 1 lakh in a Bank as fixed deposit with interest, of say 10%, compounding every year. Now in late 2017, after almost 8 years, the total money I will get back will be Rs.2,59,375. This figure arrived at by compounding or multiplying the 1 lakh by 1.1 (10% +), 9 times (9 years). So I will make Rs.1,59,375 interest income on an FD of Rs. 1 lakh kept for 9 years.

Now to compare what we will make in case we had invested this Rs. 1 lakh in the company Hindustan Unilever (HUL) in 2010. The price of Hindustan Unilever HUL shares on 7 May 2010 was ₨ 234.95. Assume we bought HUL shares at this price on this date with my Rs. 1 lakh. With One lakh and a price of 234.95, we would get 425 shares. Deducting about 3% commissions, taxes, etc. we will have in our hand at least 410 shares of HUL. The market price of HUL at closing on 2019 January 10 is ₨.1,786 -. The value of this 410 shares of HUL today, on 10 January 2019 is 410×1786= ₨ 7,32,260-.

Good companies pay dividends every year

Apart from the increase in the value of the HUL shares, HUL pays regular dividends. We will make calculation with the actual dividends HUL paid during the last 7 years plus.

YearSharesDividend per ShareIncome
20104106.52665
20114106.52665
20124107.53075
201341018.57585
2014410135330
2015410156150
2016410166560
2017410176970
2018410187380
48,380

The total income from the 410 share in HUL for the last 8 years is ₨ 48,380-. Thus in essence our 1 lakh investment in HUL in 9 years gave us a total return of ₨ 7,32,260+48,380 =7,80,640. From the Fixed Deposit in the Bank, we got ₨ 2,59,375-. In this case your return on investment in HUL is about 3 times what you would get if the money was kept as a Bank FD. So you can see that investments in shares of good Companies are better than putting money in Bank FD.

Now you may ask what about if I had put it into a property. Yes, maybe the property appreciation will be more, but what about all the problems of converting your property into money. You have to first find a finding a buyer. Since most property deals involve black money, you may get paid in a briefcase full of high-value currency notes. You have to live in fear and hide this money from robbers. You will be on the lookout list of income tax inspectors because you sold a property. Plus other problems like land tax, property tax and what not.

Sales of Shares takes place online and are very fast. Share sale money transfer to your bank account takes place within 24 to 48 hours.

Investments in Gold compared with the Indian share market

SENSEX, almost always gives better returns. See our page better-to-invest-in-shares-property-or-gold

Is share investment good

You can accumulate shares, by buying shares in small quantities. You can buy shares every month or whenever you have spare cash. Nowadays, in India, there are no physical share certificates as in the old days. Your holding of Shares is now kept in the ‘Demat’ form. How to open a Demat account is explained on our page on share market basics. With a Demat account, the process of buying or selling shares online is very simple. The shares you buy or sell gets credited or debited from your Demat Account. The Demat linked bank account gets debited when you buy shares and credited when you sell shares. Thus the process of investing in shares in India is very simple.

How to buy and sell shares for beginners in India

How to start buy and sell shares in India

‘Shares’, also known by the terms ‘Stocks’ or ‘Equity’, are issued by Companies when they need money to build their factories, buy machinery, etc. (Capital Expenditure: Capex) and Working Capital to buy raw materials, to pay workers, etc. Holding a company’s shares means that you are one of the many owners (shareholders) of a company. Shares, Stocks and Equity all mean the same thing. The difference between Shares and Stocks are, we commonly say ‘Shares’ of a particular company and ‘Stock’ as a collective term for Shares. For example, we use the term ‘Stock’ like in ‘Stock Exchange’. Stock may refer to the shares of many companies. Equity is the more technically correct term for Shares, but is rarely used.

How to start buy and sell Shares in India

To invest in the share market in India you must have the following

  1. A PAN and Adhaar Card
  2. A Bank Account – savings or current Account
  3. A Demat Account – What is a Demat Account is explained below

Shares have to be bought from one of the Stock Exchanges in India, like the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE). You cannot buy shares directly from the stock exchanges, but have to go through Stock Brokers. There are several large Share Brokrage houses like ICICI Direct, Kotak Securities, Stock Holding corporation of India Ltd. (SHCIL), Geojit, IndiaBulls, etc. With all the large share brokers you can buy and sell shares online. Instructions can be given online to buy or sell shares. The shares will be either credited or debited to your Demat Account.

What is a Demat Account?

A Demat Account is just like a bank account. In a demat account, instead of money, your shares get credited or debited.

Like Bank notes, Company shares are in the form of certificates. Each share certificate has a unique number ID and a face value. For example, if you hold 1000 numbers of shares of Rs.10- face value, each of those shares will have a unique Number and a value (Rs.10- face value). It is the share numbers and its value that gets recorded electronically. The Shares held electronically are said to be Dematerialized or ‘Demat’, the short form. The account in which Demat shares are held is known as a Demat Account.

The Dematted shares are held in either of two central depositories in India, The NSDL (National Securities Depository Limited) or the CDSL (Central Depository Services Limited). The share brokers who buy and sell shares for you, are agents of these Central Depositories. When you buy or sell shares, your share broker has online access to transact in your Demat shares held in the depository. When opening a Demat Account, you will have to fill up a form and tie one of your bank account with the Demat Account. All money to buy and sell shares has to be routed through this account.

What is meaning of IPO in share market

IPO stands for ‘Initial Public Offering’. When a new Company in India issues shares to the Public for the first time, it is called an ‘Initial Public Offering’ or IPO. The shares issued by an Indian Company in the Initial Public Offering or IPO are called ‘prime issues’ and are therefore referred to as the ‘primary market’.

IPOs are normally issued at their ‘face value’, that is the value written on each share certificate. In India most of the primary issue IPO face value is Rs.10-. Some times existing Companies can issue IPOs at a premium to their face value. An example of this is when an existing fully Government owned public enterprise offers their shares to the public.

Companies register themselves into a ‘Stock Exchanges’, like the ‘Bombay Stock Exchange – BSE’ or the ‘National Stock Exchange of India – NSE’. They do this in order for their shares to be publicly traded – or in other words to be bought and sold in the open market. Such dealings are usually carried out by registered stock brokers of these exchanges. The price of the shares of all the Companies registered in these exchanges are published online instantaneously during trading hours – usually from 9AM to 3.30PM on all working days. Anyone can visit the BSE or NSE websites and view these prices online instantaneously.

What is BSE SENSEX and NSE NIFTY

Stock market indexes like BSE SENSEX and NSE NIFTY are an indicator of the total stock valuations of selected stocks in that particular stock exchange. These indices are a numerical value arrived at by using formulas which takes into account the instantaneous stock value of the top companies included in the particular index. Some companies in the Index are given more weightage due to their importance in influencing the market sentiment.

The BSE SENSEX index is a daily value obtained by adding the daily share price of 30 BSE SENSEX listed companies in India. The selected companies in BSE SENSEX are companies who are judged to be well managed and stable. The NSE Nifty is index is a daily value obtained by adding the daily share price of 50 NSE listed companies from various industries sectors of India. In both the NIFTY and SENSEX , weightage is given to companies according to their total market worth.

Major Stock Market Indices of the world

Various Stock Market Indices, published in real time, gives us an indication of the Stock Market health of the various Nations and thus of the world. The most popular Market Indices of the world are the National Indices of Industrialized Countries like the American Standard and Poor’s ‘S&P 500’; The Dow Jones Industrial Average (Dow Jones Indices)‎ ‘DJIA’, the NASDAQ (National Association of Securities Dealers Automated Quotations); the Japanese ‘Nikkei 225’, the Russian ‘RTSI’, the Indian ‘SENSEX’ and ‘NIFTY’ and the British ‘FTSE 100’, etc.

The Share Market Live Chart India of NSE and BSE are online all the time during trading hours.

Meaning of words used in share market

Here are the meanings of some commonly used technical words in the share market in India. Words like P/E Ratio, EPS, EBITDA, Book Value, etc. Understanding the meanings of these technical terms used in Indian share market is an important first step in learning the share market in India.

What does EPS stand for in stock market

EPS is the short form of ‘Earnings Per Share’. The definition of EPS is the value obtained by dividing the net profit of a Company by the number of its Shares in the market. When comparing the EPS values of different companies, the face value of the shares being compared should be considered. The face values of shares of Indian Companies can vary from the usual Rs.10-, to Rs.5-, Rs.2-, Rs.1- or sometimes it is even Rs.100- or more. For example, an EPS of Rs.14- per share of a Rs.10- face value share will be equivalent to Rs.1.40 of a Rs.1- face value share.

What is P/E Ratio in share market

P/E Ratio stands for Price to Earnings Ratio. It can also be called the PE multiple. P/E Ratio is one of the most important parameters for comparison of the performance of different Companies. It is the value obtained by dividing the current market price of the share by its EPS or the Earnings per Share. The lower this value, the cheaper the share value is and this is how to compare P/E ratio of two companies.

How important is book value per share

The book value of the share of a company is the net asset value of the company divided by the number of shares in the market of that company. The book value per shore is an important signal of how good the share value of a company is. The market price for the Share you plan to buy should not be more than say about 1.4 times its book value. The lower this value the better. There are some exceptions to this rule, like in the case of some low capital companies with a high profitability.

How to analyse quarterly results of companies

The official financial year in India is from 1st April of every year to 31st March the following year. The financial year is divided into 4 quarters, each of 3 months. The first quarter of a financial year called Q1, is from 1st April till 30th June of the same year, Q2 is from 1st July till 30th September and similarly Q3 and Q4 follows.

To analyse the quarterly results of companies, you should look at the total sales figures and profit after tax each Quarter. Special attention to be given to compare the figures to the previous years same quarter results. This is because the performance of many companies are seasonal, so it is important to compare performance of the previous years same quarter. A positive growth in sales, with at least constant profitability margins, indicates a growing company and you can consider buying its shares.

What is moving average of stock

The moving average is the average price of a share during the last so many days. You will hear this term very often when listening to the business TV channels like ET Now, Bloomberg, CNBC TV18, NDTV Profit, etc. They usually talk about 20 day moving average or 200 day moving average. In case of, say the 20 day moving average, it is a Simple Moving Average, and is the value obtained by dividing the sum of the closing prices of the last 20 trading days by 20. In the case of a 200 day moving average, more weightage will be given to the more recent prices and this method is called the Exponential Moving Average (EMA). The moving averages are quoted only to give an idea of the past average prices to compare it with the present price, or to forecast trends in the market.

Topline and Bottom line of a company

Top Line refers to the total sales revenue income shown on the top of a Company’s income statement. Bottom Line refers to the net profit after deducting all expenses and shown at the bottom of the income statement.

What does CAPEX of a Company mean

CAPEX stands for Capital expenditures, that is money spent on items like Factory buildings, machinery, etc.

Meaning of OPEX of a Company

OPEX is the short form for operating expenses.

What does EBITDA stands for

EBITDA Stand for ‘Earnings before interest, taxes, depreciation and amortization’. EBITDA of a Company is a useful figure when you want to compare companies with each other. Different companies have different figures for taxes, repayment of loans, depreciation, etc. When the EBITDA of two companies are compared side by side, it gives us a feel of how profitable one company is compared to the other.

EBITDA Margin of a Company

EBITDA Margin is defined as the EBITDA of a company divided by its total revenue. The EBITDA margin gives us an idea of how much of the total income of the company is used up in expenses.