Functions Of The Stock Exchange
What is Stop Loss ?
An order to broker to buy or sell a
specified security when a specified price (called stop price) is reached.
What is Taxable ?
When used in connection with dividend
or interest, means that the dividend or interest will be paid after deduction of tax
payable by the company on its profits.
What is Technical Position ?
Condition of market created by various
internal factors, and opposed to external forces.
What is Underwriting ?
An Individual/Institution guaranteeing
procurement of subscription in part or in full of securities issue made to the public.
What is Yield ?
Dividend yield.
The dividend expressed as a percentage of current price.
Illustration : Rs. 32 is the purchase price
of a share of Rs. 10/- face value
Annual Dividend per share; Rs. 4/-
Yield = 4/32 x 100 = 12.5%
What is Market Capitalisation ?
Market Capitalisation is quite
different from its authorised and paid up capital.
Authorised Capital of a Company may be
50,00,000 equity shares of Rs. 10/- each or Rs. 5,00,00,000.
Its paid up capital may be 30,00,000 equity
shares of Rs. 10/- each of Rs. 3,00,00,000 i.e. it has issued 30,00,000 shares of Rs. 10/-
each which are held by various individuals or organisation.
If the market value of the share is Rs.
50/- an any day, then the market capitalisation of the Company will be Rs. 15,00,00,000
i.e. the number of issued shares multiplied by the marked price Rs. 50/-.
What is Insider Training ?
Insider Training is related to price
sensitive corporate informations which are available to a privileged few who are
called insiders for their exclusive gains against the knowledge of large number of share
holders of the company. The insiders are company directors, company executives,
companys auditor and bankers and business associates. These informations are
dividend declaration, bonus and rights issue, new projects, amalgamation and take over.
Insider information is illegal and the insiders may be penalised for the same.
What are Volatile Shares ?
Shares which are given to sharp
fluctuations in prices are called volatile shares. Volatile shares show a large variation
between the highest and lowest recorded prices in any period. Volatility is generally
measured by the percentage of variation of the highest recorded price over the lowest
recorded price.
Highest Price Lower Price
Volatility = _________________________
Lowest Price
Volatile shares present opportunities for
quick and large profit. Price is the value that the market puts on the entire company
volatile shares have a low market capitalisation.
What is Book Closure ?
The closure of membership register of a
company to take a record of the shareholders who is entitled to dividends or rights or
bonus issue. No transfer of membership is registered during the book closing period. Book
closing is now not compulsory for rights issue or bonus issue and interim dividend. For
AGM book closing is compulsory. Book closing can be done maximum for 30 days and not more
than 45 days in a year. No minimum period. New transfer deed is compulsory after the book
closure in case of AGM. All documents floating around the market should be lodged with the
company at least one day before the book closing.
What is Record Date ?
It is the cut off date for
determination on members for payment of interim dividend rights and bonus. New transfer
deed is not compulsory. The term indicates that there is no closure of Register of members
and the document can be lodged with the company on that day before the booking hours.
What is Bull and Bear ?
The operators in the specified group of
shares are divided into Bulls and Bears. These operators who believe that the share prices
will rise in the near future are called Bulls. He first buys and then sells. He purchases
at a lower price at the beginning of the settlement period in expectation of a price rise
and sells before the end of the settlement period. When the price moves up, the balance of
purchase and sale is his profit. If the price does not rise as expected, the bull can
postpone taking delivery till the next settlement period, by paying contango or seedha
badla charges to the seller. It is the interest charged by the badla financier and borne
by the buyer for the seller. The Bear is an operator who expects that the price will
decrease in the future. He is a pessimist. He first sells and then purchases at the end of
the settlement period. He sells first at a higher price and then purchases at a lower
price and the margin is his profit. In most of the cases, the bears sell the shares
without having actual physical possession as per stock exchange rules and this is called
short selling. At the end of the settlement period he purchases from the market to make
good the delivery and it is called short covering. If the bear postpones his transaction
till the next settlement period, he has to pay badla interest to the buyer which is called
backwardation charges. This happens when the shares are over-sold and the buyers are in a
demanding position. Usually a bear does not have to pay interest on his carryforward
business. On the contrary he receives a payment identical to that paid by the bull
operator. This is because a bull who has purchased shares but cannot pay for them is glad
to pay a small charges to a bear who has sold shares but cannot deliver them.
Speculative activity of the specified group
of shares is useful for the stock market in the sense that daily transaction becomes
voluminons and the scrips remain very liquid.
What is Reaction ?
When prices register a fall in an
otherwise rising market, the fall is called a reaction. It is caused by bulls offloading
their holding to book profit and is referred to as bull liquidation or profit taking.
What is Rally ?
The reverse position applies in a rally
i.e. when prices register a rise in a generally falling market. This is caused by squaring
up their sales and is called bear covering or squaring up.
What is Buying & Selling Procedure
in Stock Markets ?
A non-member cannot enter the trading
hall of the stock exchange and therefore, can purchase and sell shares and
securities only through members. The relationship between the client and the member is
just like an agent and the principal. The member acts as a custodian and handles the
shares and securities of his clients.
What is Contract Note ?
It is the best evidence about the
transaction between buyer or his broker and the seller and his broker. The court will not
accept any petition without the valid Contract Note. This document must be presented to
the Arbitration Sub-Committee as a proof for transaction. Contract Notes are of two types.
Form A Contract Note is issued by the broker for his transaction with his client. Form B
is the Contract Note between a member and another member. Validity period of a Contract
Note is 3 years from the date of the transfer deed stamped by the prescribed authority. It
is 29 days for Form B. All Contract Notes must be affixed with the brokers stamp for
50 paisa. Contract Notes without the brokers stamps are not valid documents. The
SEBIs guideline has directed at the brokerage must be shown separately on the
Contract Note.
What is CSE Index ?
In addition to the CSE 50 index, The
Calcutta Stock Exchange introduced from 6th April 1998 a more sensitive index,
the CSE 40 index, with 40 scrips in the index basket. The 31st day of March,
1996 is the Base Date for both the Index. The Base Value of the CSE 50 index is 100 and
the Base Value of the CSE 40 index is 2000. The CSE 40 index was introduced since it was
felt that it will have good investors recall and will indicate values which are co-related
to the existing popular indices such as BSE Sensex, NSE Nifty. The basket of CSE 40 was
selected from Specified Group scrips of the Exchange, having reasonably high market
capitalisation covering all major industry leaders. The index is based on the Standard
& Poors model.
Calculation :
The Central Trading Engine computes the
Current Market Capitalisation based on the current market rate of the scrips comprising
the index basket and compares it with the base date market capitalisation and calculates
the index using the following formula (Based on Standard & Poor).
Index
Value = |
Total
Current Market Value of Selected 40 Scrips
Total Base Year Market Value of the 40 Scrips |
X2000 |
|
The Scrips which are in the CSE 40
index basket are :-
ACC, Bajaj Auto, Balarampur Chini Mills,
Bata, BSES, Castrol, CESC, Colgate, EIH, Eveready Industries, Great Eastern Shipping,
Glaxo, Grasim, Gujarat, Ambuja Cement, Housing Development Finance Corporation, Hindalco,
Hindustan Lever, HPCL, IPCL, ICI, ICICI, India Hotels, Indian Rayon, Indo Gulf
Corporation, ITC, ITC Bhadrachalam, Larsen & Toubro, LML, UTI Master Share, MTNL,
Reliance Industries, Reliance Petroleum, SAIL, Satyam Computers, SBI, SPIC, Tata
Chemicals, Tata Tea, TELCO, TISCO.
The Base Year Market Capitalisation of
these 40 Scrips was Rs. 1,40,141.74 Crores.
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