index and stock price movement

Topics: Stock, Stock market, Stock broker Pages: 25 (7187 words) Published: February 25, 2014


A COMPARATIVE STUDY ON INDEX AND STOCK PRICE MOVEMENT OF VARIOUS INDUSTRIES IN EQUITY MARKET AT SHAREKHAN

CHAPTER – 1 INTRODUCTION

CHAPTER: 1
1.1 INTRODUCTION
1.1.1 INDEX AND STOCK PRICE MOVING AVERAGE
Individual stock price is compared with the stock market indices. The moving average of stock and index are compared. If the NSE index is above stock’s moving average line, the particular stock has bullish trend. The price may increase above the market average. If the nifty or sensex is below the stock’s moving average, the bearish market can be expected. NIFTY AND SENSEX

NIFTY is an Index computed from performance of top stocks from different sectors listed on NSE (National stock exchange). NIFTY consists of 50 companies from 24 different sectors. .   The companies which form index of NIFTY may vary from time to time based on many considered by NSE. 

1.1.3 Equities
Shares are bits of equity. When companies start up they need cash for an office and employees. Perhaps the entrepreneur and sole owner behind the business puts in his lifetime savings of ₤50,000. That money represents is equity stock. But it is not enough to cover his costs so he goes to the bank. Which lends him another ₤50,000? he still owns 100% of his business but it is now financed 50% through equity(his savings) and 50% through debt(bank loan). Later, he needs more money to finance growth-a second employee perhaps. He can either ask the bank for more money or ask someone else to put some more “equity” into the business. In the case of larger companies they commonly decide to float the company on the stock exchange, giving the general public and institutional investors the opportunity to put more equity into the business by buying shares. There are two important differences to note between banks and shareholders. The first is that banks are entitled to a fixed rate of return on their loan but shareholders are not. If the company has a bad year the banks get paid but the shareholder may not get their dividend. Second, banks take priority for payment over shareholders in case of bankruptcy. If the company goes bust the banks are entitled to any proceeds from the sale of company assets, to cover there is nothing left over, then the shareholder get nothing and lose their investment. Equity also called stocks. A security representing ownership rights in a company. A stockholder is entitled to share in the company’s profits, some of which may be paid out as dividends.

Ordinary shares of a publicly listed company. It represents a proportion of ownership in a corporation and entities holders carry the right to company’s assets only after creditors and preference-share holders are fully paid. Physical investments. Often used instead of the more accurate term- Equity shares- to describe the risk capital of a company (shares).

The term “stock” is often used loosely to include equities, and other products which are traded or tracked in a manner similar to equities. We use the term equities when we want to make it clear that we are only talking about real stocks.

1.2 INDUSTRY profile The Brokerage Industry
The stock-broking business has undergone a sea change over the last decade. The three main factors behind the changes in the stock-broking business are: First, the shift from floor-based to screen-based trading in 1994. This brought transparency into trade execution and raised the confidence of investors. The result has been lower transaction charges and...
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