STOCK MARKET MECHANISM

by Mr Fahim Akhtar

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STOCK MARKET MECHANISM

Topic Introduction

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

A place where big fishes eat small

Puzzling function

A place where one is always

Trading stock is a science and equally art too

Something that may be studied or learned like systematized knowledge

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Expression imagination

or

application

of

human

creative

skill

&

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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 20.6 Aug 2012 100 2008 103 June 2012 3.9 2 jan 12 8 April 2013

High Price 154.7 May 2013 200 2009 206 June 2013 1370 31 Jan 2008 16 June 2013

Gain / loss %age gain

Engro Foods
Pak Petroleum Lucky Cement Jahangir Siddiqui Company Bank of Punjab

125
100 103 1366.1

770
100 100

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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