Stock Market Mechanism by Fahim Akhtar

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STOCK MARKET MECHANISM
by
Mr Fahim Akhtar
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STOCK MARKET MECHANISM
Topic
Introduction
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
General perception

How stock forms

Stock market index

Features of market

Some abnormal gainers / losers

Why investors mostly loose
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A gamble or a casino
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A place where big fishes eat small
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Puzzling function
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A place where one is always
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Trading stock is a science and equally art too
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Something that may be studied or learned like systematized
knowledge
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Expression
or
application
of
human
creative
skill
&
imagination
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A company is desirous to expand the business.
Options for generating the required funds:
Get from some one amongst FNF

Borrow from bank

Get maximum financers from general public
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 Company is registered under company ordinance
 IPOs ( Initial Public Offering ) is offered
 IPO given normally multiples of 500
 Fund raised through IPO utilized in business
 Stock trades in stock exchange
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 Registered company engages in business
with funds generated
 Company reports profit quarterly
 Earnings and profitability is disbursed amongst
all stake holders including those holding share
during specified time
 Company earns more, shares goes up and in
case of loss share sinks
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
Company doing good or bad business

Financial results and bright or depressive
expectations

Players go for buying seeing rapid growth or selling
anticipating depressed earnings

New innovative product launched / business explored

Some incentives / taxation affecting stock
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
Growth in earnings and profitability

Better management

Cheaper inputs and raw material

Demand going up for product or service

News and rumours
Stocks mostly moves in speculation and attempt to
discovers the right price
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Fundamental analysis is gauged on historical and
present data, but with the goal of making financial
forecast .

A company stock valuations and predict its probable
price

Make a projection on its business performance

Evaluate its management and make internal business
decisions
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A place where buyer and seller meet and trade stocks
under regulations set
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Bulls indicate market is positive
Bear indicates selling pressure
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A stock index or stock market index is a method of
measuring the value of a section of the stock market
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
Opportunities & Better returns

Pronounced risk factor

Speculation, rumours and news orientation

Diverse type of participants

Connectivity with other financial markets

Dependence on commodity move

Fiscal, monitory and taxation policy effects

Sector performance and incentives by government
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Benefits of investment in stocks




Possibility of high
returns
Easy liquidity
Unbeatable tax
benefits
Income from
dividends
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Market has a trend of crashes every 3-4 years
The reasons for 2008 crash were
 Poor law and order after assassination of lady PM
 Bad economic outlook
 Panic selling by funds and foreigners
 Recession
 Market manipulation
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Stock
Low Price
High
Price
Gain /
loss
%age gain
20.6
Aug 2012
154.7
May 2013
125
770
Pak Petroleum
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2008
200
2009
100
100
Lucky Cement
103
June 2012
206
June 2013
103
100
3.9
2 jan 12
1370
31 Jan
2008
8
April 2013
16
June 2013
Engro Foods
Jahangir
Siddiqui
Company
Bank of
Punjab
1366.1
8
100
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 Best selling products
 Persistent growth
 Efficient management
 Good products in pipeline to launch
 Eps not too good but expected to go higher
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 Greed and Fear
 Lack of knowledge
 Rely over brokers and friends
 Lack of analytical skills
 Poor comprehension of / with changing
indicators
 Insider trading
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 Plan your Investment
 Go for long term Investment
 Control your fear and greed
 Decide right entry and exit in market
 Diversify your portfolio
 Always keep some reserve cash
 Learn science and develop art of investment
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