1- What is Investment?
The money you earn is partly spent and the rest saved for meeting future expenses. Instead of keeping the savings idle you may like to use savings in order to get return on it in the future. This is called Investment.

2- Why should one invest?
One needs to invest to:

• Earn return on your idle resources
• Generate a specified sum of money for a specific goal in life
• Make a provision  for an uncertain future

One of the important reasons why one needs to invest wisely is to meet the cost of inflation. Inflation is the rate at which cost of living increases.

3- When to start investing?
The three golden rules for all investors are:

• Invest early
• Invest regularly
• Invest for long term and not short term.

4- What are options available for investment?
One may invest in:

• Physical assets like real estate, gold/jewellery, commodities etc.

               And /or

• Financial assets such as fixed deposits with banks, small saving instruments with post offices, insurance/provident/pension fund etc. or securities market related instruments like shares, bonds, debentures etc.

5- What is meant by a Stock Exchange?
The Securities Contract (Regulation) Act, 1956 SCRA defines ‘Stock Exchange’ as any body of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities.

6- What is an Equity/Share?
Total equity capital of a company is divided into equal units of small denominations, each called a share.

7- Are investments in shares safe?

8- What is an Index?
An Index shows how a specified portfolio of share prices is moving in order to give an indication of market trends. It is a basket of securities and the average price movement of the basket of securities indicates the index movement, whether upwards or downwards. An index is a summary measure that indicates changes in value(s) of a variable or a set of variables over a time or space. It is usually computed by finding the ratio of current values(s) to a reference (base) value(s) and multiplying the resulting number by 100 or 1000. For instance, a stock market index is a number that indicates the relative level of prices or value of securities in a market on a particular day compared with a base-day price or value figure, which are usually 100 or 1000.

9- What is meant by Securities?
It includes instruments such as shares, bonds, scrip’s, stocks or other marketable securities of similar nature.

10- What is the function of Securities Market?
It is a place where buyers and sellers of securities can enter into transactions to purchase and sell shares, bonds, debentures etc.

11- Which is the securities one can invest in?

• Shares
• Government Securities
• Derivative Products
• Units of Mutual Funds etc. are some of the securities investors in the securities market can invest in.

12- Who is the participants in the Securities market?
The securities market essentially has three categories of participants, namely, the issuers of securities, investors in securities and the intermediaries, such as merchant bankers, brokers etc.

13- Why is intermediaries such as merchant bankers, brokers etc. required?
You get guidance if you are transacting through an intermediary. For example you need to transact through a trading member of a stock exchange if you intend to buy or sell any security on stock exchanges. You need to maintain an account with a depository if you intend to hold securities in demat form. You need to deposit money with a banker to an issue if you are subscribing to public issues.

14- What are the segments of Securities Market?
It has two interdependent segments: the primary (new issues) market and the secondary market. The primary market provides the channel for sale of new securities while the secondary market deals in securities previously issued.

Q15- What is an Initial Public Offer (IPO)?
An IPO is the selling of securities to the public in the primary market. It is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public.

16- What is meant by Secondary Market?
It refers to a market where securities are traded after being initially offered to the public in the primary market and/or listed on the Stock Exchange. Majority of the trading is done in the secondary market. It comprises of equity market and the debt market.

17-What is the role of Primary and Secondary Market?
In the primary market, securities are offered to public for subscription for the purpose of raising capital or fund. Secondary market provides an efficient platform for trading of securities of general investor. It is an equity trading venue in which already existing/pre-issued securities are traded among investors. Secondary market could be either auction or dealer market. While stock exchange is the part of an auction market, Over-the-Counter (OTC) is a part of the dealer market.

18- What is the role of a Stock Exchange?
The stock exchanges provide a trading platform where buyers and sellers can meet to transact in securities. The trading platform provided by NSE is an electronic one.

19- What are the products dealt in the Secondary Markets?

• Shares
• Bond

20- What is Equity?
When you buy a share of a company you become a shareholder in that company. Shares are also known as Equities.

21- Why should one invest in equities in particular?
Equities have the potential to increase in value over time. It also provides your portfolio with the growth necessary to reach your investment goals.
Therefore,

• Equities are considered the most challenging and the rewarding, when compared to other investment options.
• Research studies have proved that investments in some shares with a longer tenure of investment have yielded far superior returns than any other investment.

22- Which are the factors that influence the price of a stock?
Broadly there are two factors: stock specific and market specific.
The stock-specific factor is related to people’s expectations about the company, its future earnings capacity, financial health and management, level of technology and marketing skills.
The market specific factor is influenced by the investor’s sentiment towards the stock market as a whole. This factor depends on the environment rather than the performance of any particular company. Events favorable to an economy, political or regulatory environment like high economic growth, friendly budget, stable government etc. can fuel euphoria in the investors, resulting in a boom in the market. On the other hand, unfavorable events like war, economic crisis, communal riots, minority government etc. depress the market irrespective of certain companies performing well.

23- What is a portfolio?

24- What is Commodity Exchange?
A Commodity Exchange is an association, or a company of any other body corporate organizing futures trading in commodities.

25- What is meant by Commodity?

26- What is the Nifty Index?
S&P CNX Nifty (Nifty), the most popular and widely used indicator of the stock market in the country, is a 50-stock index comprising the largest and the most liquid stocks from about 22 sectors in India. These stocks have a MCap of more than 55% of the total MCap of the Indian stock market. The index as introduced in 1995 by the National Stock Exchange (NSE) keeping in mind it would be used for modern applications such as index funds and index derivatives besides reflecting the stock market behavior. NSE maintained it ill July 1998, after which the ownership and management rights were transferred to India Index Services & Products Ltd. (IISL), the only professional company in India which provides index services.

27- What is SENSEX?
SENSEX is a scientifically designed, 30 stock index, representing a sample of large, liquid and representative companies. The base yea of SENSEX is 1978-79 and the base value is 100.

28- What is Mutual Fund?
A Mutual Fund is a body corporate registered with SEBI that pools money from individuals/corporate investors and invests the same in a variety of different financial instruments or securities such as equity shares, Government securities, Bonds, debentures etc. It can be thus considered as financial intermediaries in the investment business that collect funds from the public and invest on behalf of the investors. It is a substitute for those who are unable to invest directly in equities or debt because of resource, time or knowledge constraints.

29- How Mutual Fund Works?
Mutual Funds issue units to investors. The appreciation in portfolio of securities in which the Mutual Fund has invested the money leads to an appreciation in the value of the units held by an investor. Mutual Fund units are issued and redeemed by the Fund Management Company based on the fund’s net asset value (NAV), which is determined at the end of each trading session.

30- What is NAV?
NAV or Net Asset Value of the fund is the cumulative market value of the assets of the fund net of its liabilities. NAV per unit is simply the net value of assets divided by the number of units outstanding. Buying and selling into funds is done on the basis of NAV-related prices.

31- How is NAV calculated?
NAV is calculated as the value of all the shares held by the fund, minus expenses, divided by the number of units issued.

32- What are the benefits of Mutual Fund?

• Professional Money Management
• Buying in small amounts
• Diversification

33- What is Margin?
An advance payment of a portion of the value of a stock transaction. The amount of credit a broker or lender extends to a customer for stock purchase.

34- What is Margin Trading?
Margin trading was introduced by SEBI to curb speculative dealings in shares leading to volatility in the prices of securities. It acts as a check on the tendency of clients to manipulate markets by placing orders on brokers without having adequate money or securities to backup the transaction. It also acts as a curb on short selling and short buying.

35- What are the various types of Margin?

• Initial margin means the minimum amount, calculated as a percentage of the transaction value, to be placed by the client, with the broker, before the actual purchase.
• Maintenance margin means the minimum amount, calculated as a percentage of market value of the securities, calculated with respect to last trading day’s closing price, to be maintained by client with the broker.

36- What is Trend Line?
When the price of shares moves in a particular direction which persists for a period of time, a price line is regarded as established. When the movement is upward, the trend is called BULLISH and when the movement is downward it is called BEARISH. Bear market is a weak or falling market characterized by the dominance of sellers. Whereas Bull market is a rising market with abundance of buyers and relatively few sellers.
Secondary movements that reverse the uptrend temporarily are known as reactions. The movements that reverse the down trend temporarily are known as rallies. When an uptrend breaks in the downward direction, it is called trend reversal.

37- What is Trading Volume?
Trading volumes confirm whether the rise or fall in prices is in line with the trend. The high trading volume is built on rising prices; similarly the high trading volume is also linked with fall in prices. They respectively reflect a BULLISH trend and a BEARISH trend.

38- What is Turnover and Outstanding Position?
The net turnover and outstanding positions in various scrip’s show the extent of BULLISH interest in them and are used along with trading volume to judge the intensity of the phase whether BULLISH or BEARISH. In a BULL phase there will be a sharp rise in the daily turnover of key scrip’s and in a BEAR phase the reverse will be the case.

39- What is Short Selling?
Short selling shall be defined as selling a stock which the seller does not own at the time of trade.

40- What is Settlement?
Settlement is the process of netting of transactions and actual delivery/receipt of securities and transfer deeds against receipts/payment of agreed amount. It is necessary to make a settlement to know the net effect of a series of transaction during a given period.

41- What is Settlement date?
Settlement date is the date specified for delivery of securities between securities firms. For administrative convenience, a stock exchange divides the year into a number of settlement periods so as to enable members to settle their trades. All transactions executed during the settlement period are settled at the end of the settlement period.

42- When Settlement does happen?
Settlement is on a rolling basis, i.e. there is no account period settlement. Under rolling settlement all open positions at the end of the day mandatory result in payment/ delivery ‘n’ days later. Currently trades in rolling settlement are settled on T+2 basis where T is the trade day. 

43- How to go about systematically analyzing a company?

• Industry Analysis:
• Corporate Analysis:
• Financial Analysis

44- What is the importance of a Stock Index?
A stock index is important for its use:
1. As the lead indicator of the performance of the overall economy or a
Sector of the economy.
2. as a barometer for market behavior.
3. as a benchmark for portfolio performance.
4. as an underlying for derivatives like index futures and options.

45- What are the Attributes of an index?
Attributes of an index
A good stock market index should have the following attributes:
(a) Capturing behavior of portfolios
(b) Including liquid stocks
(c) Maintaining professionally

Important stock indices
The prominent stock market indices are presented in the following Table:
Table: Important Indices in the World