Stock market fundamentals in India

Stock market: As a layman what would you think of this term? A market where stock is kept?  Well you are correct if you are a layman and do not have any knowledge about stock market.
Stock market is a market where shares of listed companies are traded. Trade takes place when buying and selling take place. In general a trade can only be executed when someone buys and someone sells. If  trade takes place in an open market where physical things are bought or sold it may be called a market where real things are traded with a fixed price or a bargain price but unlike such material market stock market is a trading platform where non-physical things are traded, stored in DP account ( like real things of trade are kept in the warehouses ). DMAT or DP account may be called the warehouse for investors in the stock market.
 
Network
When it comes to distribution/marketing of things from the warehouse to the ultimate consumers we know that trade can take place though various intermediaries. To simplify in FMCG trade some company manufactures and distributes it through the consumers through intermediaries like super stockiest, stockiest, wholesalers, retailers and then it passes on to direct consumers.
 
In a DOT COM era now trade takes place in a slightly different way but the fundamentals remain same. Trade can also take place through a trading website which has a facility to buy/sell traded things with the help of a shopping cart interface.
 
Almost all trades take place when a buyer and a seller agree upon a price. Market is only a place to trade or what we call an interface. Stock markets operate on different fundamentals. Every stock market has metrics and indexes to measure performance. Unlike other markets why stock markets are very sensitive?
 
If you have any experience in stock or commodity trading you can understand how mysteriously you become richer from rich and poorer from poor. Yes here I mean to say when money comes in self-esteem rises and when goes out the reverse happens. Stock market is a mystery market as everything happens quickly; either price of stocks goes up dramatically or falls sharply.
 
What controls the price fluctuations?
 
If Prices of a certain stock will go up in the near future or not depends upon the performance of the company concerned. For example if RIL declares that it will set a couple of more factories, manufacture more and hire more people we can safely buy the stock of the company. Such news can give the market a very positive sentiment and ultimately the RIL stock will go up as the market opens.
Mostly sentiments move the market and the wise trader knows how to play with market sentiments. Stock market is not as simple as I described my way it is far more complex.
 
Most of the time ups and downs in the market are controlled by international factors. For instance IT stock movements depend upon the US market to a great extent where as it is observed that if the commodity market is on arise then the stock market is slightly down because of the fact that either the big investors are busy in putting their money heavily in the market that shows the sign of profit.
 
Most of the time big investors such as FIIs and fund houses rule the market as they invest or trade is huge volumes. Retailers should be careful before investing or trading in stock. Do research about the company’s growth in terms of financial parameters before investing.
 
For better result invest in good stocks, do not put all your money in one stocks and buy IPOs of good companies for short or long term profit.
 
Before buying agro based stocks check about the rain fall data, monsoon report of the year. If the monsoon of a particular year is good agro yield will be presumed to be good and then the market will show positive sentiments.
 
As the market is very sensitive a bad news or rumor on TV or print media can affect the market adversely. There are many tricks of the trade indeed; in the later chapters we will discuss few more fundamentals of stock trading.
 Written By Dipti Prasad Padhi

By : | Category : Business and Economy| Date : November 11,2011

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