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The entire Technical Analysis broadly divided in to Three types, one is purely chart analysis and second is chart analysis with the help of indicators (here indicators means leading indicators & lagging indicators) and third Theories.
PURELY CHARTS ANALYSIS:
For Chart Analysis we follow 3 types of charts.
Stage 1. Line Charts Analysis:– For Long term Trends Identification & Short term Trends identification
Stage 2. Bar Charts Analysis:- To know Trend reversals in short term
Stage 3. Candlestick Charts Analysis:- To know Trend reversal in short term
STAGE I: LINE CHARTS:
The Line charts drawn with the help of closing prices. These line charts are plotted on daily, weekly and monthly closing price basis.
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Definition of Company:
Company is an artificial person created by Law and having separated legal entity with a perpetual succession, common seal and liability is limited.
Company is having the following Characteristics:
Separate Legal Entity
A company is in law regarded as an entity separate from its members. It has an independent corporate existence.
Any of its members can enter into contracts with it in the same manner as any other individual can and he cannot be held liable for the acts of the company even if he holds virtually the entire share capital.
The company’s money and property belongs to it and not to the shareholders (although the shareholders own the company)
A company may be a company limited by shares or a company limited by guarantee. In a company limited by shares, the liability of members is limited to the unpaid value of the shares.
Being an artificial person a company never dies, nor does its life depend on the life of its members. Members may come and go but the company can go on forever. It continues to exist even if all its members are dead. The existence of company can be terminated only by law.
It means that a company’s existence persists irrespective of the change in the composition of its membership.
Since a company has no physical existence, it must act through its agents and all such contracts entered into by its agents must be under a seal of the company. The common seal acts as the official signature of the company.
Transferability Of Shares
The capital of a company is divided into parts called shares. These shares are, subject to certain conditions, freely transferable, so that no shareholder is permanently wedded to the company. When the join stock companies were established the great object was that the shares should be capable of being easily transferred.
As a company is a legal person distinct from its members, it is capable of owning, enjoying and disposing of property in its own name. Although its capital and assets are contributed by its shareholders, they are not the private and joint owners of its property. The company is the real person in which all its property is vested and by which it is controlled, managed and disposed of.
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Differences between Pvt. Limited Company and Public Limited Company as below:
|Basis for Comparison||Public Limited Company||
Private Limited Company
|Meaning||A public company is a company which is owned and traded publicly.||A private company is a company which is owned and traded privately.|
|Minimum paid up capital||Rs. 5 Lakh||Rs. 1 Lakh|
|Start of business||After receiving certificate of incorporation and certificate of commencement of business.||After receiving certificate of incorporation.|
|Issue of prospectus / Statement in lieu of prospectus||Obligatory||Not required|
|Public subscription||Allowed||Not allowed|
|Quorum at AGM||5 members must present in person.||2 members must present in person.|
|Transfer of shares||Free||Restricted|
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The Bombay Stock Exchange (BSE), India’s leading stock exchange, has classified Equity scrips into categories A, B1, B2, S, T, TS, & Z to provide guidance to the investors. The classification is on the basis of several factors like market capitalization, trading volumes and numbers, track records, profits, dividends, shareholding patterns, and some qualitative aspects.
As on February 2008 following criterion are used for classifying stocks into various categories by the Bombay Stock Exchange (BSE)
It is the most tracked class of scrips consisting of about 200 scrips. Market capitalization is one key factor in deciding which scrip should be classified in Group A.
At present there are 216 companies in the A group
The Exchange has introduced a new segment named “BSE Indonext” With Effect from January 7, 2005. The “S” Group represents scrips forming part of the BSE-Indonext segment. “S” group consists of scrips from “B1 & B2″ group on BSE and companies exclusively listed on regional stock exchanges having capital of 3 crores to 30 crores. All trades in this segment are done through BOLT system under S group.
The “Z” group was introduced by the Exchange in July 1999 and includes the companies which have failed to comply with the listing requirements of the Exchange and/or have failed to resolve investor complaints or have not made the required arrangements with both the Depositories, viz., Central Depository Services (I) Ltd. (CDSL) and National Securities Depository Ltd. (NSDL) for dematerialization of their securities.
All companies not included in group A, S orZ are clubbed under this category. B1 is ranked higher than B2.
B1 and B2 groups will be merged as a single Group B effective from March 2008.
It consists of scrips which are traded on trade to trade basis.
The “TS” Group consists of scrips in the BSE-Indonext segments which are settled on a trade to trade basis as a surveillance measure.
Besides these equity groups there are two other groups i.e. Fixed Income Securities (Group F) and Government Securities (Group G)
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sources: Article taken from http://finmanac.blogspot.com/
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At the time of applying for equity Shares, through Public Issue in Primary Market, SEBI has advised the Precautions to Investors, in the form of Know your client (KYC). These are as given below,
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Source : National Stock Exchange of India Ltd
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In India at present the main Commodity Exchanges and Traded products are given below:
|1||Multi Commodity Exchange of India Ltd., Mumbai*||Gold, Silver, Copper, Crude Oil, Zinc, Lead, Nickel, Natural gas, Aluminium, Mentha Oil, Crude_Palm_Oil, Refined Soya Oil, Cardamom, Guar Seeds, Kapas, Potato,
Chana\Gram, Melted Menthol Flakes, Almond, Wheat,
Barley, Long Steel, Maize, Soybean Seeds, Gasoline US,
Tin, Kapaskhali, Platinum, Heating Oil
|2||National Commodity & Derivative Exchange Ltd., Mumbai *||Guar Seed, Soy Bean, Soy Oil, Chana,RM Seed, Jeera, Turmeric, Guar Gum, Pepper, Cotton Cake, Long Steel, Gur, Kapas, Wheat, Red Chilli, Crude Oil, Maize, Gold,Copper, Castor Seeds, Potato, Barley, Kachhi Ghani Mustard Oil, Silver, Indian 28 Mm Cotton, Platinum|
|3||National Multi Commodity Exchange of India Limited, Ahmedabad||Rape/Mustard Seed, Guar Seeds, Nickel, Jute, Refined Soya Oil, Zinc, Rubber, Chana\Gram, Isabgul, Lead, Gold, Aluminium, Copper, Turmeric, Copra, Silver, Raw Jute, Mentha Oil.|
|4||Indian Commodity Exchange Ltd, Gurgaon *||Gold, Crude Oil, Copper, Silver|
|5||National Board of Trade. Indore.||Soy bean, Soy Oil|
|6||Chamber Of Commerce., Hapur||Gur, Mustard seed|
|7||Ahmedabad Commodity Exchange Ltd.||Castorseed|
|8||Rajkot Commodity Exchange Ltd, Rajkot||Castorseed|
|9||Surendranagar Oilseeds Association Ltd, S.Nagar||Cotton & Kapas|
|10||The Rajdhani Oil and Oilseeds Exchange Ltd., Delhi||Gur, Mustard Seed|
|11||Haryana Commodities Ltd.,Sirsa||Mustard seed, Cotton seed Oil Cake|
|12||India Pepper & Spice Trade Association. Kochi||Pepper Domestic-MG1,Pepper 550 G/L,|
|13||Vijay Beopar Chamber Ltd.,Muzaffarnagar||Gur|
|14||The Meerut Agro Commodities Exchange Co. Ltd., Meerut||Gur|
|15||Bikaner Commodity Exchange Ltd.,Bikaner||Guarseed,|
|16||First Commodity Exchange of India Ltd, Kochi||Coconut oil|
|17||The Bombay Commodity Exchange Ltd. Mumbai||Castor Seed|
|18||The Central India Commercial Exchange Ltd, Gwaliar||Mustard seed|
|19||Bhatinda Om & Oil Exchange Ltd., Batinda.||Gur|
|20||The Spices and Oilseeds Exchange Ltd., Sangli||Turmeric|
|21||The East India Jute & Hessian Exchange Ltd, Kolkatta||Raw Jute|
|22||The East India Cotton Association Mumbai.||Cotton|
You may also interested in reading about global commodity exchanges.
Forward contracts are often confused with futures contracts. The confusion is primarily because both serve essentially the same economic functions of allocating risk in the presence of future price uncertainty. However futures are a significant improvement over the forward contracts as they eliminate counterpart risk and offer more liquidity. Below Table lists the distinction between the forwards and futures contracts
|Trade on an organized exchange||OTC in nature|
|Standardized contract terms||Customized contract terms|
|More liquid||Less liquid|
|Requires margin payments||No margin payment|
|Follows daily settlement||Settlement happens at end of period|
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Types of Companies are divided on various basis classified below:
On the basis of incorporation, companies can be classified as:
(i) Chartered companies:
The crown in exercise of the royal prerogative has power to create a corporation by the grant of a charter to persons assenting to be incorporated. Such companies or corporations are known as chartered companies. Examples of this type of companies are Bank of England (1694), East India Company (1600). The powers and the nature of business of a chartered company are defined by the charter which incorporates it. After the country attained independence, these types of companies do not exist in India.
(ii) Statutory companies:
A company may be incorporated by means of a special Act of the Parliament or any state legislature. Such companies are called statutory companies, Instances of statutory companies in India are Reserve Bank of India, the Life Insurance Corporation of India, the Food Corporation of India etc. The provisions of the Companies Act 1956 apply to statutory companies except where the said provisions are inconsistent with the provisions of the Act creating them. Statutory companies are mostly invested with compulsory powers.
(iii) Registered companies:
Companies registered under the Companies Act 1956, or earlier Companies Acts are called registered companies. Such companies come into existence when they are registered under the Companies Act and a certificate of incorporation is granted to them by the Registrar.
On the basis of liability the company can be classified into:
(i) Companies limited by shares:
When the liability of the members of a company is limited to the amount if any unpaid on the shares, such a company is known as a company limited by shares. In a company limited by shares the liability of the members is limited to the amount if any unpaid on the shares respectively held by them. The liability can be enforced during existence of the company as well as during the winding up. Where the shares are fully paid up, no further liability rests on them.
(ii) Companies limited by guarantee:
It is a registered company in which the liability of members is limited to such amounts as they may respectively undertake by the memorandum to contribute to the assets of the company in the event of its being wound up. In the case of such companies the liability of its members is limited to the amount of guarantee undertaken by them. Clubs, trade associations, research associations and societies for promoting various objects are various examples of guarantee companies.
(iii) Unlimited companies:
A company not having a limit on the liability of its members is termed as unlimited company. In case of such a company every member is liable for the debts of the company as in an ordinary partnership in proportion to his interest in the company. Such companies are not popular in India.
On the basis of number of members the company can be classified into:
(i) Private company:
A private company means a company which by its articles of association:
(i) Restricts the right to transfer its shares
(ii) Limits the number of its members to 200 (excluding members who are or were in the employment of the company) and
(iii) Prohibits any invitation to the public to subscribe for any shares or debentures of the company.
(iv)Where two or more persons hold one or more shares in a company jointly, they are treated as a single member. There should be at least two persons to form a private company and the maximum number of members in a private company cannot exceed 200. A private limited company is required to add the words “Private Ltd” at the end of its name.
(ii) Public company:
A public company means a company which is not a private company. There must be at least seven persons to form a public company. It is of the essence of a public company that its articles do not contain provisions restricting the number of its members or excluding generally the transfer of its shares to the public or prohibiting any invitation to the public to subscribe for its shares or debentures. Only the shares of a public company are capable of being dealt in on a stock exchange.
(i) Foreign company:
It means a company incorporated outside India and having a place of business in India.
According to Section 591 a foreign company is one incorporated outside India:
(a) Which established a place of business within India after the commencement of this Act or (b) Which had a place of business within India before the commencement of this Act and continues to have the same at the commencement of this Act.
(ii) Indian Companies:
A company formed and registered in India is known as an Indian Company.
(i) Government Company:
It means any company in which not less than 51 percent of the paid up share capital is held by the Central Govt, and/or by any State Government or Governments or partly by the Central Government and partly by one or more State Governments. The subsidiary of a Government company is also a Government company.
(ii) Holding and subsidiary companies:
A company is known as the holding company of another company if it has control over another company. A company is known as subsidiary of another company when control is exercised by the latter over the former called a subsidiary company. A company is to be deemed to be subsidiary company of another
(a) If the other:
(a) Controls the composition of its Board of directors or
(b) Exercises or controls more than half of its total voting power where it is an existing company in respect where of the holders of preference shares issued before the commencement of the Act have the same voting rights as the holders of equity shares or
(c) In the case of any other company holds more than half in nominal value of its equity share capital or
(b) If it is a subsidiary of a third company which is subsidiary of the controlling company.
(iii) One man Company:
This is a company in which one man holds practically the whole of the share capital of the company and in order to meet the statutory requirement of minimum number of members, some dummy members hold one or two shares each. The dummy members are usually nominees of principal shareholder. The principal shareholder is in a position to enjoy the profits of the business with limited liability. Such type of companies are perfectly valid and not illegal.
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In Stock Market we generally used the abbreviations given in the List of Abbreviations as below:
|ASBA||Application Supported by Blocked Amount|
|ADRs||American Depository Receipts|
|AON||All or None|
|BOVL||Branch Order Value Limit|
|BSE||Bombay Stock Exchange|
|CADT||Client Allocation Details|
|CDS||Currency Derivatives Segment|
|CSD||Collateral Security Deposit|
|CDSL||Central Depositories Services Ltd.|
|CTCL||Computer to Computer Link|
|DEA||Department of Economic Affairs|
|DFDS||Demat Final Delivery Statement|
|DFRS||Demat Final Receipt Statement|
|DMA||Direct Market Access|
|DPG||Dominant Promoter Group|
|DvP||Delivery versus Payment|
|ECBs||External Commercial Borrowings|
|FCCBs||Foreign Currency Convertible Bonds|
|FII||Foreign Institutional Investors|
|FIPB||Foreign Investment Promotion Board|
|F&O||Futures and Options|
|FTP||File Transfer Protocol|
|FPO||Follow-on Public Offer|
|GDRs||Global Depository Receipts|
|HUF||Hindu Undivided Family|
|ICDR||Issue of Capital and Disclosure Requirements|
|IEPF||Investor Education and Protection Fund|
|IFSD||Initial Free Security Deposit|
|IOC||Immediate or Cancel|
|IPO||Initial Public Offer|
|IPF||Investor Protection Fund|
|ISC||Investor Service Cell|
|ISIN||International Securities Identification Number|
|KYC||Know Your Client|
|LTP||Last Trade Price|
|MBP||Market By Price|
|MAC||Membership Approval Committee|
|MCA||Member Constituent Agreement|
|MCA||Ministry of Corporate Affairs|
|MRC||Membership Recommendation Committee|
|MTM||Mark To Market|
|NEAT||National Exchange for Automated Trading|
|NCFM||NSE’s Certification in Financial Markets|
|NCIT||Non Custodian Institutional Trade|
|NISM||National Institute of Securities Market|
|NOC||No Objection Certificate|
|NSCCL||National Securities Clearing Corporation Ltd.|
|NSDL||National Securities Depository Ltd.|
|NSE||National Stock Exchange|
|O L||Odd Lot market|
|OTC||Over The Counter|
|OECLOB||Open Electronic Consolidated Limit Order Book|
|PAN||Permanent Account Number|
|PCM||Professional Clearing Member|
|PFRDA||Pension Fund Regulatory and Development Fund|
|RBI||Reserve Bank of India|
|RDD||Risk Disclosure Document|
|RDM||Retail Debt Market|
|SAT||Securities Appellate Tribunal|
|SBTS||Screen Based Trading System|
|SC(R)A||Securities Contracts (Regulation) Act, 1956|
|SC(R)R||Securities Contracts (Regulation) Rules, 1957|
|SEBI||Securities and Exchange Board of India|
|SLBS||Securities Lending and Borrowing Scheme|
|SGF||Settlement Guarantee Fund|
|SRO||Self Regulatory Organization|
|STT||Securities Transaction Tax|
|SURCON||Surveillance and Control|
|T+2||Second day from the trading day|
|TFT||Trade for Trade|
|TFTS||Trade for Trade Surveillance|
|UCC||Unique Client Code|
|UDR||Unique Documentary Requirement|
|UTI||Unit Trust of India|
|UOVL||User Order Value Limit|
|VaR||Value at Risk|
|VSAT||Very Small Aperture Terminal|
|WDM||Wholesale Debt Market|
Source : www.nseindia.com
Who Regulates Financial Market Entities like Banks, Trading Member, Auditor, Mutual Funds, Venture Capital Funds etc., given below is a list of types of companies/ intermediaries/service providers in the financial market. The names of the relevant bodies that regulate them are given in the second column.
Type of Entity Regulatory body
Banks – Issue Collection SEBI
Chit Funds REGISTRAR OF CHIT FUNDS
Collective Investment Schemes SEBI
Companies – All MCA/ROC
Companies – Listed MCA/ROC/SEBI/SE
Company Secretaries ICSI
Co-operative Banks RBI
Cost Accountants ICWAI
Credit Rating Agencies SEBI
Custodial Services SEBI
Debenture Trustees SEBI
Depository Participants SEBI/NSDL/CDSL
Foreign Investment Institutions SEBI
Housing Finance Companies NHB
Insurance Brokers/ Agents IRDA
Insurance Companies IRDA
Investment Bankers (Merchant Bankers) SEBI
Investor Associations SEBI
Media (Newspapers, Magazines, TV) MIB
Mutual Funds & Asset Management Companies SEBI
Mutual Fund Brokers/ Agents AMFI/SEBI
Non-Banking Financial Companies (NBFCs) RBI
Nidhi Companies MCA
Plantation Companies SEBI
Portfolio Managers SEBI
Registrars & Share Transfer Agents SEBI
Stock Brokers SEBI/Stock Exchange
Stock Exchanges SEBI
Venture Capital Funds SEBI
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Most companies only ever have one type of shares (or class of share). The shares are commonly called ordinary shares and will be the ones the company was incorporated with.
However, in general, if a company has more than one type of share the main differences between them will be found in one or more of the following areas:
Entitlement to dividends: Shares may have the right to normal dividends, preferential dividends (that is, the right to be paid a dividend before other share classes), a dividend only in certain circumstances or no dividends at all.
Entitlement to capital on winding up: If the company is dissolved any assets left after the company’s debts are paid can be distributed to shareholders. However, different share classes may have different rights to capital distribution – with some shares ranking first and others only paid if sufficient assets remain after others have received their full distribution of capital.
Voting rights: Usually, this is as simple as shares either carrying voting rights or not. However, weighted or tiered voting rights are also possible – so, for example, shares may carry extra voting rights in certain circumstances or on certain important matters affecting the company.
Types of Shares as below:
1. Ordinary shares
These carry no special rights or restrictions. They rank after preference shares as regards dividends and return of capital but carry voting rights (usually one vote per share) not normally given to holders of preference shares (unless their preferential dividend is in arrears).
Some companies create more than one class of ordinary shares – e.g. “A Ordinary Shares”, “B Ordinary shares” etc. This gives flexibility for different dividends to be paid to different shareholders or, for example, for pre-emption rights to apply to some shares but not others.
2. Deferred ordinary shares
A company can issue shares which will not pay a dividend until all other classes of shares have received a minimum dividend. Thereafter they will usually be fully participating. On a winding up they will only receive something once every other entitlement has been met.
3. Non-voting ordinary shares
Voting rights on ordinary shares may be restricted in some way – e.g. they only carry voting rights if certain conditions are met. Alternatively, they may carry no voting rights at all. They may also preclude the shareholder even attending a General Meeting. In all other respects they will have the same rights as ordinary shares.
4. Redeemable shares
The terms of redeemable shares give the company the option to buy them back in the future; occasionally, the shareholder may (also) have the option to sell them back to the company, although that’s much less common.
The option may arise at or after a specific date, between two dates or be effective at any time the shares are in issue. The redemption price is usually the same as the issue price, but can be set differently. A company can only redeem shares out of profits or the proceeds of a new share issue, which may restrict its ability to redeem shares even if the directors would like to exercise the option.
If a company chooses to have redeemable shares, it must also have non-redeemable shares in issue. At no point can all of its share capital be made up of redeemable shares.
5. Preference shares
These shares are called preference or preferred since they have a right to receive a fixed amount of dividend every year. This is received ahead of ordinary shareholders. The amount of the dividend is usually expressed as a percentage of the nominal value. So, aRs.10, 5% preference share will pay an annual dividend of Rs.0.50. The full entitlement will be paid every year unless the distributable reserves are insufficient to pay all or even some of it. On a winding up, the holders of preference shares are usually entitled to any arrears of dividends and their capital ahead of ordinary shareholders. Preference shares are usually non-voting (or only have a vote only when their dividend is in arrears).
6. Cumulative preference shares
If the dividend is missed or not paid in full then the shortfall will be made good when the company next has sufficient distributable reserves. It follows that ordinary shareholders will not receive any dividends until all the arrears on cumulative preference shares have been paid.
By default, preference shares are cumulative but many companies also issue non-cumulative preference shares.
7. Redeemable preference shares
Redeemable preference shares combine the features of preference shares and redeemable shares. The shareholder, therefore, benefits from the preferential right to dividends (which may be cumulative or non-cumulative) while the company retains the ability to redeem the shares on pre-agreed terms in the future.
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