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Thursday, February 2, 2017
Tuesday, December 8, 2009
THE DEADLY ART OF STOCK MANIPULATION
RULE NUMBER ONE:
ALL SHARP PRICE MOVEMENTS -- WHETHER UP OR DOWN --ARE THE RESULT OF ONE OR MORE (USUALLY A GROUP OF) PROFESSIONALS MANIPULATING THE SHARE PRICE.
RULE NUMBER TWO:
IF THE MARKET MANIPULATOR WANTS TO DISTRIBUTE (DUMP)HIS SHARES, HE WILL START A GOOD NEWS PROMOTIONAL CAMPAIGN.
RULE NUMBER THREE:
AS SOON AS THE MARKET MANIPULATOR HAS COMPLETED HIS DISTRIBUTION (DUMPING) OF SHARES, HE WILL START A BAD NEWS OR NO NEWS CAMPAIGN.
RULE NUMBER FOUR:
ANY STOCK THAT TRADES HUGE VOLUME AT HIGHER PRICES SIGNALS THE DISTRIBUTION PHASE.
RULE NUMBER FIVE:
THE MARKET MANIPULATOR WILL ALWAYS TRY TO GET YOU TO BUY AT THE HIGHEST, AND SELL AT THE LOWEST PRICE POSSIBLE.
RULE NUMBER SIX:
IF THIS IS A REAL DEAL, THEN YOU ARE LIKELY TO BE THE LAST PERSON TO BE NOTIFIED OR WILL BE DRIVEN OUT AT THE LOWER PRICES.
RULE NUMBER SEVEN:
CONVERSELY, YOU WILL OFTEN BE THE LAST TO KNOW WHEN THIS DEAL SHOWS SIGNS OF FAILURE.
RULE NUMBER EIGHT:
THE MARKET MANIPULATOR WILL COMPEL YOU INTO THE STOCK SO THAT YOU DRIVE UP ITS PRICE SHARES.
RULE NUMBER NINE:
THE MARKET MANIPULATOR IS WELL AWARE OF THE MOTIONS YOU ARE EXPERIENCING DURING A RUN UP AND A COLLAPSE AND WILL PLAY YOUR EMOTIONS LIKE A PIANO.
FINAL RULE:
A NEW BATCH OF SUCKERS ARE BORN WITH EVERY NEW PLAY.
ALL SHARP PRICE MOVEMENTS -- WHETHER UP OR DOWN --ARE THE RESULT OF ONE OR MORE (USUALLY A GROUP OF) PROFESSIONALS MANIPULATING THE SHARE PRICE.
RULE NUMBER TWO:
IF THE MARKET MANIPULATOR WANTS TO DISTRIBUTE (DUMP)HIS SHARES, HE WILL START A GOOD NEWS PROMOTIONAL CAMPAIGN.
RULE NUMBER THREE:
AS SOON AS THE MARKET MANIPULATOR HAS COMPLETED HIS DISTRIBUTION (DUMPING) OF SHARES, HE WILL START A BAD NEWS OR NO NEWS CAMPAIGN.
RULE NUMBER FOUR:
ANY STOCK THAT TRADES HUGE VOLUME AT HIGHER PRICES SIGNALS THE DISTRIBUTION PHASE.
RULE NUMBER FIVE:
THE MARKET MANIPULATOR WILL ALWAYS TRY TO GET YOU TO BUY AT THE HIGHEST, AND SELL AT THE LOWEST PRICE POSSIBLE.
RULE NUMBER SIX:
IF THIS IS A REAL DEAL, THEN YOU ARE LIKELY TO BE THE LAST PERSON TO BE NOTIFIED OR WILL BE DRIVEN OUT AT THE LOWER PRICES.
RULE NUMBER SEVEN:
CONVERSELY, YOU WILL OFTEN BE THE LAST TO KNOW WHEN THIS DEAL SHOWS SIGNS OF FAILURE.
RULE NUMBER EIGHT:
THE MARKET MANIPULATOR WILL COMPEL YOU INTO THE STOCK SO THAT YOU DRIVE UP ITS PRICE SHARES.
RULE NUMBER NINE:
THE MARKET MANIPULATOR IS WELL AWARE OF THE MOTIONS YOU ARE EXPERIENCING DURING A RUN UP AND A COLLAPSE AND WILL PLAY YOUR EMOTIONS LIKE A PIANO.
FINAL RULE:
A NEW BATCH OF SUCKERS ARE BORN WITH EVERY NEW PLAY.
Friday, October 16, 2009
Who Was Mr. Harshad Mehta: The Big Bull?
Do we care to know the truth of anything happening around us? did we care to know the biggest scam of Indian stock exchange? Do we care to know about Mr Harshad Mehta? Why he is known as big bull? What price he paid for being big bull?What he did? How he did? And why he did it? How it happened???
Caution: stock market investment is subject to market risk. Please read the offer document carefully before investment.
The above line comes in front of our life many times during our life time. But do we really care for it? Do we care to know the truth of anything happening around us? did we care to know the biggest scam of Indian stock exchange? Do we care to know about Mr Harshad Mehta? Why he is known as big bull? What price he paid for being big bull?What he did? How he did? And why he did it? How it happened???
If u have desire to know about some truth about The Biggest Indian Stock Exchange Scam , Hold your questions… and read the following article :
Read more in Investing
« Investing: The Key to Making Money in The Long Run
Bring in Currency by Way of Terse Sales »
“ Its all about Being Big Bull”
Fundamental of Big Bulls:
Name: Mr Harshad Shantilal Mehta
Family: Gujarati Jain family
Father : Mr Shantilal Mehta , a small businessman
Harshad Mehta‘s childhood was spent in Mumbai … Later, the family moved to Raipur , Madhya Pradesh. Somehow Harshad Mehta did not find his future in Raipur and could not stay away from Mumbai’s shiny life style.
After coming to Mumbai Harshad Mehta joined his 1st job as dispatch clerk in the New India Assurance Company. But his 1st love is always Stock market.
Harshad Mehta’s first love was stock exchange. During his work at new india insurance he has started investing in stock market with his brother Ashwin Mehta. And after sometimes he has managed to get BSE broker’s card. Who knows at that time that it was starting of great Indian scam!!
Growth period of Big Bull:
After investing in stock exchange Harshad Mehta found some wrong patter on trades in stock exchange. He found that companies are not rising and falling as oer their fundamentals, and he started manipulating one stock named ACC. It was rising , rising and rising only. But Harshad Mehta had reason for all the questions for its rising. Its “Replacement Price Theory”. He was successful in explaining this theory to Indian public.
But the fact had another side too. Mr Mehta started buying this ACC at mid 1990 and then he made it public. It was Harshad Mehta’s trademarked style. He used to study fundamentals, he used to buy in big quantity and then he used to make is public. And demand of that stock used to rise like anything after recommendation of this Big Bull !!
Boom Period of Big Bull’s life:
Year 1991. Mr Harshad Mehta is noow darling of Indian media. He was dream seller. He was not only Harshad Mehta now.. but he was The Harshad Mehta. Boss of “Growmore Research and Asset Management “. People know this personality as “ The Big Bull” of Indian stock exchange. Harshad Mehta thought different then others. The basic concept behind his view was very optimistic and somehow it was good for Indian money market too. He used to explain people that if fundamental of some company is good it should go up and should always goes up. But excess of anything is evil. The dream of great Indian story was becoming greed generator for Indian public and for Mr Harshad Mehta too. At his peak, he lived almost like a celebrity in a 15,000 sq ft house, which had a swimming pool ,beautiful golf patch. He also had a crush for flashy luxurious cars and no wonder he used to have some of the best car of 1990’s in his huge parking.
Recession Period in Big Bull’s life:
His flashy life and charismatic personality was a problem for many Indian and international personalities. In 1992, 1st article came out against this dream merchant and the story was about 600+ Crores rupees scam !! it was written in article that Harshad Mehta had swiped 600 Crores. rupees from SBI. No one had clue at that time that it was starting of the most dramatic scam of Indian stock exchange. But fact was unknown till now . the amount is much more than what was said in that news article.
As per that article Mr Harshad Mehta used “Ready Forward Deal” for this scam. As per this deal he used to take some short term loan from banks and used this money in stock exchange to rise the price is the security. Pure manipulation. As per Indian law it was not allowed to give such RF loan to any individual person by bank. So it was clear that more than one banks were involved in this scam. With this money mr Harshad Mehta used to make waves in Indian stock exchange. He was using this banks illegally to manipulate the stock exchange mechanism.
He used the money he borrowed from lending bank on behalf of borrowing bank. And he invested that money in stock market. in this process the borrowing and lending banks knows only broker and may not know the name of the other party. And Harshad Mehta used this fact very well for his own personal benefit.
Another “technique” of rising money in stock exchange is “Bank Receipt”(BR). In BR one bank sells its government securities to another bank after particular time in future, and it gets payment from the lending bank. During that time if the borrower bank is returning money back they can get their government security back. And in this scam Mr Harshad Mehta played very crucial role along qith two small banks Bank of Karad and Metropolitan Co-op. Bank.. He used to get money from borrowing bank and it was used in stock market. at time of settlement he sell its security in which he earned lots of profit and he return the money back to the bank. Master mind at its best.(or worst?). But the game was not possible in case if share prises going down. And this is the reason behind Harshad Mehta’s dream for constant and one side growth.
Depression of Big Bull’s life:
Mr Harshad Mehta had one habit of showing off. Larger than life kind of personality can make the worst enemies for you. When he came to know this truth it was too late. When he got some finest luxurious car of the world and he was giving some picture pose of him feeding bears in zoo, some big names like Anand Rathi and Krishnakant Damani were hurt badly it was not a good news for the big bull. Whole bear cartel is against Harshad Mehta now. Everyone knew that Harshad Mehta is getting money from somewhere. but from where? The bear cartel has exposed the truth behind the constant rise of this big bull. They have used almost all the resources they have. It was surprising to point out here that even this bear cartel was using same “technique” as Harshad Mehta used. But the difference was , public appearance. Bears cartel used the money from overseas banks where as Harshad Mehta used Indian banks for his growth. And this act was “crime” as per Indian law books.
And on one not so fine day it was headline of Indian news paper regarding 4000 crore rupees scam in Indian stock market. Now Harshad Mehta was in trouble. As the scam was exposed the banks receipts (BR) value became almost zero. And it was enough reason for crash of some financial institutes which would lead Indian financial crises. Bear cartel was behind Harshad Mehta now. They filed as many cases as hey can against Harshad Mehta . They have used all their sources and made sure that Harshad Mehta would not get any bail.
Indian Stock Market crashed like anything. It was one of the worst time Indian market have seen till day. Indian public faced tough times. Many suicidal notes were found near dead bodies of Indian stock traders. The big bull, The dream merchant, The Harshad Mehta is now The most hated person!! 4000 crore scam ,many financial firms were involved, many political parties were involved, many big names involved in the same case, but surprisingly only one man was trapped. Harshad Mehta.
End of The Big Bull:
Late 2001, place : Thane jail. The jail superintendent came to know about end of the bull era with news of Harshad Mehta’s death. Reason was heart attack. But it was shocking to know that before he died, he was proved innocent in all other cases against him, and found guilty in only one case..!!! That is how it happened. The chair person of Growmore Research and Asset Management died. And one Bull Run came to end.
Moral of the Article :
Caution: stock market investment is subject to market risk. Please read the offer document carefully before investing.
Caution: stock market investment is subject to market risk. Please read the offer document carefully before investment.
The above line comes in front of our life many times during our life time. But do we really care for it? Do we care to know the truth of anything happening around us? did we care to know the biggest scam of Indian stock exchange? Do we care to know about Mr Harshad Mehta? Why he is known as big bull? What price he paid for being big bull?What he did? How he did? And why he did it? How it happened???
If u have desire to know about some truth about The Biggest Indian Stock Exchange Scam , Hold your questions… and read the following article :
Read more in Investing
« Investing: The Key to Making Money in The Long Run
Bring in Currency by Way of Terse Sales »
“ Its all about Being Big Bull”
Fundamental of Big Bulls:
Name: Mr Harshad Shantilal Mehta
Family: Gujarati Jain family
Father : Mr Shantilal Mehta , a small businessman
Harshad Mehta‘s childhood was spent in Mumbai … Later, the family moved to Raipur , Madhya Pradesh. Somehow Harshad Mehta did not find his future in Raipur and could not stay away from Mumbai’s shiny life style.
After coming to Mumbai Harshad Mehta joined his 1st job as dispatch clerk in the New India Assurance Company. But his 1st love is always Stock market.
Harshad Mehta’s first love was stock exchange. During his work at new india insurance he has started investing in stock market with his brother Ashwin Mehta. And after sometimes he has managed to get BSE broker’s card. Who knows at that time that it was starting of great Indian scam!!
Growth period of Big Bull:
After investing in stock exchange Harshad Mehta found some wrong patter on trades in stock exchange. He found that companies are not rising and falling as oer their fundamentals, and he started manipulating one stock named ACC. It was rising , rising and rising only. But Harshad Mehta had reason for all the questions for its rising. Its “Replacement Price Theory”. He was successful in explaining this theory to Indian public.
But the fact had another side too. Mr Mehta started buying this ACC at mid 1990 and then he made it public. It was Harshad Mehta’s trademarked style. He used to study fundamentals, he used to buy in big quantity and then he used to make is public. And demand of that stock used to rise like anything after recommendation of this Big Bull !!
Boom Period of Big Bull’s life:
Year 1991. Mr Harshad Mehta is noow darling of Indian media. He was dream seller. He was not only Harshad Mehta now.. but he was The Harshad Mehta. Boss of “Growmore Research and Asset Management “. People know this personality as “ The Big Bull” of Indian stock exchange. Harshad Mehta thought different then others. The basic concept behind his view was very optimistic and somehow it was good for Indian money market too. He used to explain people that if fundamental of some company is good it should go up and should always goes up. But excess of anything is evil. The dream of great Indian story was becoming greed generator for Indian public and for Mr Harshad Mehta too. At his peak, he lived almost like a celebrity in a 15,000 sq ft house, which had a swimming pool ,beautiful golf patch. He also had a crush for flashy luxurious cars and no wonder he used to have some of the best car of 1990’s in his huge parking.
Recession Period in Big Bull’s life:
His flashy life and charismatic personality was a problem for many Indian and international personalities. In 1992, 1st article came out against this dream merchant and the story was about 600+ Crores rupees scam !! it was written in article that Harshad Mehta had swiped 600 Crores. rupees from SBI. No one had clue at that time that it was starting of the most dramatic scam of Indian stock exchange. But fact was unknown till now . the amount is much more than what was said in that news article.
As per that article Mr Harshad Mehta used “Ready Forward Deal” for this scam. As per this deal he used to take some short term loan from banks and used this money in stock exchange to rise the price is the security. Pure manipulation. As per Indian law it was not allowed to give such RF loan to any individual person by bank. So it was clear that more than one banks were involved in this scam. With this money mr Harshad Mehta used to make waves in Indian stock exchange. He was using this banks illegally to manipulate the stock exchange mechanism.
He used the money he borrowed from lending bank on behalf of borrowing bank. And he invested that money in stock market. in this process the borrowing and lending banks knows only broker and may not know the name of the other party. And Harshad Mehta used this fact very well for his own personal benefit.
Another “technique” of rising money in stock exchange is “Bank Receipt”(BR). In BR one bank sells its government securities to another bank after particular time in future, and it gets payment from the lending bank. During that time if the borrower bank is returning money back they can get their government security back. And in this scam Mr Harshad Mehta played very crucial role along qith two small banks Bank of Karad and Metropolitan Co-op. Bank.. He used to get money from borrowing bank and it was used in stock market. at time of settlement he sell its security in which he earned lots of profit and he return the money back to the bank. Master mind at its best.(or worst?). But the game was not possible in case if share prises going down. And this is the reason behind Harshad Mehta’s dream for constant and one side growth.
Depression of Big Bull’s life:
Mr Harshad Mehta had one habit of showing off. Larger than life kind of personality can make the worst enemies for you. When he came to know this truth it was too late. When he got some finest luxurious car of the world and he was giving some picture pose of him feeding bears in zoo, some big names like Anand Rathi and Krishnakant Damani were hurt badly it was not a good news for the big bull. Whole bear cartel is against Harshad Mehta now. Everyone knew that Harshad Mehta is getting money from somewhere. but from where? The bear cartel has exposed the truth behind the constant rise of this big bull. They have used almost all the resources they have. It was surprising to point out here that even this bear cartel was using same “technique” as Harshad Mehta used. But the difference was , public appearance. Bears cartel used the money from overseas banks where as Harshad Mehta used Indian banks for his growth. And this act was “crime” as per Indian law books.
And on one not so fine day it was headline of Indian news paper regarding 4000 crore rupees scam in Indian stock market. Now Harshad Mehta was in trouble. As the scam was exposed the banks receipts (BR) value became almost zero. And it was enough reason for crash of some financial institutes which would lead Indian financial crises. Bear cartel was behind Harshad Mehta now. They filed as many cases as hey can against Harshad Mehta . They have used all their sources and made sure that Harshad Mehta would not get any bail.
Indian Stock Market crashed like anything. It was one of the worst time Indian market have seen till day. Indian public faced tough times. Many suicidal notes were found near dead bodies of Indian stock traders. The big bull, The dream merchant, The Harshad Mehta is now The most hated person!! 4000 crore scam ,many financial firms were involved, many political parties were involved, many big names involved in the same case, but surprisingly only one man was trapped. Harshad Mehta.
End of The Big Bull:
Late 2001, place : Thane jail. The jail superintendent came to know about end of the bull era with news of Harshad Mehta’s death. Reason was heart attack. But it was shocking to know that before he died, he was proved innocent in all other cases against him, and found guilty in only one case..!!! That is how it happened. The chair person of Growmore Research and Asset Management died. And one Bull Run came to end.
Moral of the Article :
Caution: stock market investment is subject to market risk. Please read the offer document carefully before investing.
“Magic Figures”: Index Calculator
We have seen many enthusiastic people on television channels who jump here and there when sensex crosses 10,000 or 20,000 mark, or nifty cross some magic figures like 5555 or 4994!! (many people can feel the thrill even while reading these numbers!! Reason: They are magic figures!) Such high level of enthusiasm related with those Magic Figures we can see on streets also, especially when name of the street is called “Dalal Street”! Have you ever wondered how those numbers are calculated? How do we calculate indexes like sensex and nifty? That is the topic of this article. Unique, informative and fresh! This article will explain the calculation of index.
Stock market!! This word is one of the most thrilling words who know it. But stock market is just an idea. To measure stock exchange, we have some indicators like, sensex and nifty. We have seen many enthusiastic people on television channels who jump here and there when sensex crosses 10,000 or 20,000 mark, or nifty cross some magic figures like 5555 or 4994!! (many people can feel the thrill even while reading these numbers!! Reason: They are magic figures!) Such high level of enthusiasm related with those Magic Figures we can see on streets also, especially when name of the street is called “Dalal Street”!
Have you ever wondered how those numbers are calculated? How do we calculate indexes like sensex and nifty? That is the topic of this article. Unique, informative and fresh! This article will explain the calculation of index.
Read more in Investing
« What You Need to Know Before Opening a Brokerage Account
Option Trading Strategies : Part Two »
SENSEX
Sensex is the most common word in Indian stock exchange. Very few traders know that sensex stands for “sensitive index”. (don’t worry if you don’t know about it. It will not affect your portfolio anyhow. ) It represents Bombay stock exchange stocks. sensex is calculated using 30 market leader companies in Bombay stock exchange. Weight of 30 companies may differ. Base value for sensex is 100. And base year is 1978-1979. Since 1986 sensex calculation is in practice. Earlier it was calculated using total market capitalisation method. But since 2003 it is calculated using free float market capitalisation method. Sensex is calculated for every 15 seconds.
NIFTY
Nifty is the most frequently used word in Indian stock exchange. (this statement is not based on any research!! Sometimes common sense if enough, not research is needed.) Nifty represents 50 large companies from 24 different sectors of National Stock Exchange. These 50 companies represent almost 50% of total volume of national stock exchange. base value for index is 1000 for nifty. Base year is 1995. Nifty is calculated for every 15 seconds.
There are some criteria for stocks to be included in sensex or nifty.
1. Company should have one year history on bse as a listed company.
2. Company’s market capital should be among the top 100 market capital number of BSE listed companies. And each company should more than 0.5% of total market capitalisation of sensex.
3. Company should be market leader in the particular sector.
4. Company should have well past record.
5. Company should be traded in each and every day of last one year. (Of course, holidays are not included in “each and every day”.)
OK. After knowing the criteria for eligibility, now question should be there in your mind what is market capitalisation? Well, before calculating nifty and sensex, one should know some important terms used in the formula. (Well, do not expect the formula so easily.)
Two important factors for the calculation are market capitalisation & free float market capitalisation.
* Market Capitalisation:
In simple word, market capitalisation is total worth of particular company. It represents issued shares of the company.
Market capitalization= No of shares outstanding x market price of share
* Free Float Market Capitalization:
In simple words, free float market capitalization is shares available to trade by anyone. Free float market capitalisation is the total worth of all shares of a company which are available for trading in the open market. These shares are those shares which are not held by government or promoter of the company, held through FDI, held by private corporate bodies, held by employee welfare trust or held by any private corporate / individual bodies.
Free float market capitalization =
No. of outstanding share x market price of share
Free float factor =
No of shares available for trading in the open market /Total No of outstanding shares of the company.
For example: if one company named ABC has 1000 shares, and government is holding 300 shares, promoter holding is 500 shares, and 200 shares are available in market. And price of 1 share is 10 Rs.
In this case,
Market capitalisation of the company is 1000 X 10 = 10,000
Free float market capitalisation of company is 200 X 10= 2,000
Calculation of SENSEX and NIFTY
Sensex is calculated using free float market capitalization of 30 major BSE listed companies and by using base value 100 (base year: 1978-79). Nifty is calculated using free float market capitalisation of 50 companies of NSE using based value 1000 (base year: 1995).
Let’s understand the same with help of example: suppose BSE index (SENSEX) consist of only two stocks such as ‘ABC’ and ‘XYZ’
Company ‘ABC’:
1000 outstanding shares
500 are available for trading in open market.
Market price of share is Rs.100.
Company ‘XYZ’:
2000 outstanding shares
1000 available for trading in open market shares
Market price of share is Rs.50.
Calculation of Market Capitalization :
ABC: 1000 x 100 = 1,00,000
XYZ: 2000 x 50 = 1,00,000
Now ,Sum of market cap of companies,
Total market capital = ABC+XYZ = 100,000+100,000 = 200,000
Calculation of Free Float market capitalization:
ABC: 500 x 100 = 50,000
XYZ: 1000 x 50 = 50,000
Now, Sum of free float market cap of companies,
Total free float capitalisation = A+B = 50000+50000 = 100000
Formula for Sensex calculation:
SENSEX = (sum of free float market cap of 30 major companies of BSE) X
Index value in 1978-79 / Market cap value in 1978-79.
Assume market cap during 1978-79 is 2000. Now, as per formula:
100000 X 100 / 2000 = 5000
Value of sensex is 5000.
Formula for Nifty calculation:
NIFTY = (Sum of free flow market cap of 50 major stocks of NSE) X
Index value in 1995 / market cap value in 1995
Assuming the market cap value during 1995 is 20,000
Now, put the market cap value of the A and B in formula
100000 x 1000 / 100000 = 1000
Value of nifty is 1000
I hope you like this article. That is how we calculate our index.
Stay with us for more article on stock exchange. If you like the article please do not forget to give your valuable comments below this article.
Playing with number is fun, and stock market is all about number. So let’s play…
with your permission .. i would like to say… Astalavista !!
Stock market!! This word is one of the most thrilling words who know it. But stock market is just an idea. To measure stock exchange, we have some indicators like, sensex and nifty. We have seen many enthusiastic people on television channels who jump here and there when sensex crosses 10,000 or 20,000 mark, or nifty cross some magic figures like 5555 or 4994!! (many people can feel the thrill even while reading these numbers!! Reason: They are magic figures!) Such high level of enthusiasm related with those Magic Figures we can see on streets also, especially when name of the street is called “Dalal Street”!
Have you ever wondered how those numbers are calculated? How do we calculate indexes like sensex and nifty? That is the topic of this article. Unique, informative and fresh! This article will explain the calculation of index.
Read more in Investing
« What You Need to Know Before Opening a Brokerage Account
Option Trading Strategies : Part Two »
SENSEX
Sensex is the most common word in Indian stock exchange. Very few traders know that sensex stands for “sensitive index”. (don’t worry if you don’t know about it. It will not affect your portfolio anyhow. ) It represents Bombay stock exchange stocks. sensex is calculated using 30 market leader companies in Bombay stock exchange. Weight of 30 companies may differ. Base value for sensex is 100. And base year is 1978-1979. Since 1986 sensex calculation is in practice. Earlier it was calculated using total market capitalisation method. But since 2003 it is calculated using free float market capitalisation method. Sensex is calculated for every 15 seconds.
NIFTY
Nifty is the most frequently used word in Indian stock exchange. (this statement is not based on any research!! Sometimes common sense if enough, not research is needed.) Nifty represents 50 large companies from 24 different sectors of National Stock Exchange. These 50 companies represent almost 50% of total volume of national stock exchange. base value for index is 1000 for nifty. Base year is 1995. Nifty is calculated for every 15 seconds.
There are some criteria for stocks to be included in sensex or nifty.
1. Company should have one year history on bse as a listed company.
2. Company’s market capital should be among the top 100 market capital number of BSE listed companies. And each company should more than 0.5% of total market capitalisation of sensex.
3. Company should be market leader in the particular sector.
4. Company should have well past record.
5. Company should be traded in each and every day of last one year. (Of course, holidays are not included in “each and every day”.)
OK. After knowing the criteria for eligibility, now question should be there in your mind what is market capitalisation? Well, before calculating nifty and sensex, one should know some important terms used in the formula. (Well, do not expect the formula so easily.)
Two important factors for the calculation are market capitalisation & free float market capitalisation.
* Market Capitalisation:
In simple word, market capitalisation is total worth of particular company. It represents issued shares of the company.
Market capitalization= No of shares outstanding x market price of share
* Free Float Market Capitalization:
In simple words, free float market capitalization is shares available to trade by anyone. Free float market capitalisation is the total worth of all shares of a company which are available for trading in the open market. These shares are those shares which are not held by government or promoter of the company, held through FDI, held by private corporate bodies, held by employee welfare trust or held by any private corporate / individual bodies.
Free float market capitalization =
No. of outstanding share x market price of share
Free float factor =
No of shares available for trading in the open market /Total No of outstanding shares of the company.
For example: if one company named ABC has 1000 shares, and government is holding 300 shares, promoter holding is 500 shares, and 200 shares are available in market. And price of 1 share is 10 Rs.
In this case,
Market capitalisation of the company is 1000 X 10 = 10,000
Free float market capitalisation of company is 200 X 10= 2,000
Calculation of SENSEX and NIFTY
Sensex is calculated using free float market capitalization of 30 major BSE listed companies and by using base value 100 (base year: 1978-79). Nifty is calculated using free float market capitalisation of 50 companies of NSE using based value 1000 (base year: 1995).
Let’s understand the same with help of example: suppose BSE index (SENSEX) consist of only two stocks such as ‘ABC’ and ‘XYZ’
Company ‘ABC’:
1000 outstanding shares
500 are available for trading in open market.
Market price of share is Rs.100.
Company ‘XYZ’:
2000 outstanding shares
1000 available for trading in open market shares
Market price of share is Rs.50.
Calculation of Market Capitalization :
ABC: 1000 x 100 = 1,00,000
XYZ: 2000 x 50 = 1,00,000
Now ,Sum of market cap of companies,
Total market capital = ABC+XYZ = 100,000+100,000 = 200,000
Calculation of Free Float market capitalization:
ABC: 500 x 100 = 50,000
XYZ: 1000 x 50 = 50,000
Now, Sum of free float market cap of companies,
Total free float capitalisation = A+B = 50000+50000 = 100000
Formula for Sensex calculation:
SENSEX = (sum of free float market cap of 30 major companies of BSE) X
Index value in 1978-79 / Market cap value in 1978-79.
Assume market cap during 1978-79 is 2000. Now, as per formula:
100000 X 100 / 2000 = 5000
Value of sensex is 5000.
Formula for Nifty calculation:
NIFTY = (Sum of free flow market cap of 50 major stocks of NSE) X
Index value in 1995 / market cap value in 1995
Assuming the market cap value during 1995 is 20,000
Now, put the market cap value of the A and B in formula
100000 x 1000 / 100000 = 1000
Value of nifty is 1000
I hope you like this article. That is how we calculate our index.
Stay with us for more article on stock exchange. If you like the article please do not forget to give your valuable comments below this article.
Playing with number is fun, and stock market is all about number. So let’s play…
with your permission .. i would like to say… Astalavista !!
History of The Indian Stock Exchange:
INDIAN STOCK EXCHANGE. A few men, started one association under a banyan tree for trading some commodity/security in 1875 !! Who knew at that time that it would grow and would become NSE/BSE? Interesting?
Read some finest events and milestones of Indian Stock Exchange.
To study the history of the capital market in India we have to look back in eighteenth century when East India Company started security trading in India. Security trading in India was unorganised during that time. Until the end of nineteenth century, scene was same. Two chief trading centres were Calcutta and Bombay now known as Mumbai and Kolkata. (It has to be mentioned, if you do not want apologize later). Out of them Bombay was main trading port. During American civil war (1860), Bombay was at important centre where essential commodities were traded. Because of heavy supply those days prices of stocks enjoyed boom period. Probably, the first Indian stock exchange boom period. It lasted for almost 5 years. After those booming period Indian stock exchange faced the first bubble burst on July 1st 1965.
During that time trading in stock market was just a concept, a thought, an idea. It was limited to 12-15 brokers only. There market was situated under a banyan tree in front of the Town hall in Bombay. These brokers organised an association, of course informal in nature, in 1875. Name of the association was “Native Shares and Stock Broker Association”. Very few visionary could feel that it was starting of the great history of Indian stock exchange. After 5 decades of the incidence, the Bombay stock exchange was recognized in May 1927 under the Bombay Security contracts Control Act, 1925. But still the exchange was not well organised as British Government was not willing to see India as rising nation.
Read more in Investing
« Reading a Mutual Fund Prospectus
Portfolio Rebalancing as an Investment Strategy »
After independence, 1st priority of Indian government was development of the agriculture sector and public sector undertakings. Public sector undertakings were healthier for sure but they were not listed in stock exchange. In first and second five year plan, capital market was not a goal for Indian government. Moreover, the controller of capital issues closely controlled many factors for new issues. It was one reason and big enough to de-motivate Indian corporate to stay away from the idea of going public.
In 1950s, some good companies listed in the exchange were brokers’ favourite. Some of them were Century Textile, Tata steel, Bombay dyeing, Kohinoor mills. They were favourite not because of any technical or fundamental reason. The brokers enjoyed trading in these scripts as it was operated by operators. Slowly the stock exchange was given one new name “Satta Bazaar”! But surprisingly, despite of speculation, defaults cases were very few. In 1956, the government passed the Securities Contract Act.
In 1960s, Indo China war happened. And it was starting of bearish phase in stock exchange. This bearish trend was aggravated by the ban in 1969 on forward trading and badla. Badla was technically contracts for clearing. Financial institutes helped to boost the sentiment by injecting liquidity in the market. In 1964, the first Indian mutual fund came in market, named the Unit Trust Of India.
In 1970s , badla trading was resumed again under another form of hand delivery contracts. But in 1974, 6th of July was the day when capital market got one bad news. Government introduced the Dividend Restriction Ordinance; this rule was restricting the payment of dividend by companies to 12 per cent of the face value or one-third of the profits of the companies that can be distributed. (Whichever was lower.)!! Stock market crashed again. Stocks went down by 20% and the market was closed for nearly a fortnight. The sentiment of stock market was same until the optimism came in market with when the MNCs were forced to dilute majority stocks in their company in favour of Indian public. Many MNCs left India. But 123 MNCs offered shares were lower than its intrinsic value. It was the first time Indian public had opportunity to invest in some of the finest MNCs. In 1977, Mr Dhirubhai Ambani knocked the door of Indian stock exchange and it was probably the turning point not only for Indian stock exchange but for Indian economy.
In 1980s, Indian stock exchange witnessed blasting growth period. Indian public discovered lucrative opportunities in stock exchange. It was the time when people who did not even now what is stock exchange, investing in the same. The growth doubled with the government liberalization process in mid 1980s. It was the time when convertible debentures and public sector bonds were popular in market. New stock market entries like Reliance and LNT re-defined Indian stock market scenario. Such factors enlarged volume in stock exchange. 1980s can be characterized by huge increase in the number of stock market, listed companies and market capitalisation.
The 1990s can be described as the most important decade in the history of Indian stock market. Everyone was talking about liberalisation and globalisation. The Capital Issue Act of 1947 was replaced in 1992. SEBI was emerged as a new regulator of the market. FII is coming to India and re-rating India as one of the most attractive market in world. Number of new stock exchanges was rising in county. Private sector mutual funds were welcome in market. Some very big scams of Indian scam history took place in 1990s. The impact of such incidence was very deep. Indian investors drove their money out of market for some years. Positive side , these scams opened Indian government eyes. New technology new systems were introduced in Indian stock exchange. The Bombay stock exchange had two new competitors in market. OTC was established in 1992 and NSE was established in 1994. The national security clearing corporation (NSCC) and National securities depository Limited (NSDL) were established in 1995 and 1996 respectively. In 1995—1996 Option trading service was started. Rolling settlement was introduced in India in early 1998. Number of participation in stock exchange was rising with new segments for trading, new products and new technology. 1990s is known as era of Indian IT companies too. Wipro, Infosys, Satyam were some of the favourite stocks. Telecom and Media sector also rising during the same time.
Indian market welcomed Y2K with scam of Ketan Parekh. After that scam Badla system was banned in Indian market and rolling settlement was introduced in all scripts. Future trading was started in June 2000. In February 2000, Internet trading was permitted, all these events changed picture of old stock market. In 2001, UTI suspension of sale and re-purchase of its famous scheme US-64. It created panic in market. One big incidence of VSNL disinvestment took place in February 2002. In 2003, the government took decision to privatize PSU banks and it was market buster again. In 2000s, FII money started coming in Indian market like never before. NSE volume crossed BSE volume during the same time. Global meltdown hit Indian market in late 2007 and throughout 2008. Big Satyam Scam was exposed in 2008 again and it hit investor’s spirit badly. Since 2nd quarter of 2009 we have been watching up move trend for market again, after positive election result in India. Investors are again coming in market.
It has been a long volatile journey for the Indian capital market. Now the capital market is organized, matured, fairly valued, nicely regulated and more global. The Indian market is one of the most attractive markets today which gives stable high rate of return compared to other countries. In terms of technology Indian equity market is one of the best in the world too. Computer and telecom sector advances and Internet is shattering geographic boundaries. Internet is giving wide range of investors and Internet is also used to provide better level of information. The best example, we can say because of Internet I am able to write this article and you are reading this article on this site.
If you like the article, do not forget to give your valuable comment for the same. Stay with us for more on Indian stock market.
Time to say “Astalavista” !!!
Read some finest events and milestones of Indian Stock Exchange.
To study the history of the capital market in India we have to look back in eighteenth century when East India Company started security trading in India. Security trading in India was unorganised during that time. Until the end of nineteenth century, scene was same. Two chief trading centres were Calcutta and Bombay now known as Mumbai and Kolkata. (It has to be mentioned, if you do not want apologize later). Out of them Bombay was main trading port. During American civil war (1860), Bombay was at important centre where essential commodities were traded. Because of heavy supply those days prices of stocks enjoyed boom period. Probably, the first Indian stock exchange boom period. It lasted for almost 5 years. After those booming period Indian stock exchange faced the first bubble burst on July 1st 1965.
During that time trading in stock market was just a concept, a thought, an idea. It was limited to 12-15 brokers only. There market was situated under a banyan tree in front of the Town hall in Bombay. These brokers organised an association, of course informal in nature, in 1875. Name of the association was “Native Shares and Stock Broker Association”. Very few visionary could feel that it was starting of the great history of Indian stock exchange. After 5 decades of the incidence, the Bombay stock exchange was recognized in May 1927 under the Bombay Security contracts Control Act, 1925. But still the exchange was not well organised as British Government was not willing to see India as rising nation.
Read more in Investing
« Reading a Mutual Fund Prospectus
Portfolio Rebalancing as an Investment Strategy »
After independence, 1st priority of Indian government was development of the agriculture sector and public sector undertakings. Public sector undertakings were healthier for sure but they were not listed in stock exchange. In first and second five year plan, capital market was not a goal for Indian government. Moreover, the controller of capital issues closely controlled many factors for new issues. It was one reason and big enough to de-motivate Indian corporate to stay away from the idea of going public.
In 1950s, some good companies listed in the exchange were brokers’ favourite. Some of them were Century Textile, Tata steel, Bombay dyeing, Kohinoor mills. They were favourite not because of any technical or fundamental reason. The brokers enjoyed trading in these scripts as it was operated by operators. Slowly the stock exchange was given one new name “Satta Bazaar”! But surprisingly, despite of speculation, defaults cases were very few. In 1956, the government passed the Securities Contract Act.
In 1960s, Indo China war happened. And it was starting of bearish phase in stock exchange. This bearish trend was aggravated by the ban in 1969 on forward trading and badla. Badla was technically contracts for clearing. Financial institutes helped to boost the sentiment by injecting liquidity in the market. In 1964, the first Indian mutual fund came in market, named the Unit Trust Of India.
In 1970s , badla trading was resumed again under another form of hand delivery contracts. But in 1974, 6th of July was the day when capital market got one bad news. Government introduced the Dividend Restriction Ordinance; this rule was restricting the payment of dividend by companies to 12 per cent of the face value or one-third of the profits of the companies that can be distributed. (Whichever was lower.)!! Stock market crashed again. Stocks went down by 20% and the market was closed for nearly a fortnight. The sentiment of stock market was same until the optimism came in market with when the MNCs were forced to dilute majority stocks in their company in favour of Indian public. Many MNCs left India. But 123 MNCs offered shares were lower than its intrinsic value. It was the first time Indian public had opportunity to invest in some of the finest MNCs. In 1977, Mr Dhirubhai Ambani knocked the door of Indian stock exchange and it was probably the turning point not only for Indian stock exchange but for Indian economy.
In 1980s, Indian stock exchange witnessed blasting growth period. Indian public discovered lucrative opportunities in stock exchange. It was the time when people who did not even now what is stock exchange, investing in the same. The growth doubled with the government liberalization process in mid 1980s. It was the time when convertible debentures and public sector bonds were popular in market. New stock market entries like Reliance and LNT re-defined Indian stock market scenario. Such factors enlarged volume in stock exchange. 1980s can be characterized by huge increase in the number of stock market, listed companies and market capitalisation.
The 1990s can be described as the most important decade in the history of Indian stock market. Everyone was talking about liberalisation and globalisation. The Capital Issue Act of 1947 was replaced in 1992. SEBI was emerged as a new regulator of the market. FII is coming to India and re-rating India as one of the most attractive market in world. Number of new stock exchanges was rising in county. Private sector mutual funds were welcome in market. Some very big scams of Indian scam history took place in 1990s. The impact of such incidence was very deep. Indian investors drove their money out of market for some years. Positive side , these scams opened Indian government eyes. New technology new systems were introduced in Indian stock exchange. The Bombay stock exchange had two new competitors in market. OTC was established in 1992 and NSE was established in 1994. The national security clearing corporation (NSCC) and National securities depository Limited (NSDL) were established in 1995 and 1996 respectively. In 1995—1996 Option trading service was started. Rolling settlement was introduced in India in early 1998. Number of participation in stock exchange was rising with new segments for trading, new products and new technology. 1990s is known as era of Indian IT companies too. Wipro, Infosys, Satyam were some of the favourite stocks. Telecom and Media sector also rising during the same time.
Indian market welcomed Y2K with scam of Ketan Parekh. After that scam Badla system was banned in Indian market and rolling settlement was introduced in all scripts. Future trading was started in June 2000. In February 2000, Internet trading was permitted, all these events changed picture of old stock market. In 2001, UTI suspension of sale and re-purchase of its famous scheme US-64. It created panic in market. One big incidence of VSNL disinvestment took place in February 2002. In 2003, the government took decision to privatize PSU banks and it was market buster again. In 2000s, FII money started coming in Indian market like never before. NSE volume crossed BSE volume during the same time. Global meltdown hit Indian market in late 2007 and throughout 2008. Big Satyam Scam was exposed in 2008 again and it hit investor’s spirit badly. Since 2nd quarter of 2009 we have been watching up move trend for market again, after positive election result in India. Investors are again coming in market.
It has been a long volatile journey for the Indian capital market. Now the capital market is organized, matured, fairly valued, nicely regulated and more global. The Indian market is one of the most attractive markets today which gives stable high rate of return compared to other countries. In terms of technology Indian equity market is one of the best in the world too. Computer and telecom sector advances and Internet is shattering geographic boundaries. Internet is giving wide range of investors and Internet is also used to provide better level of information. The best example, we can say because of Internet I am able to write this article and you are reading this article on this site.
If you like the article, do not forget to give your valuable comment for the same. Stay with us for more on Indian stock market.
Time to say “Astalavista” !!!
Sunday, March 22, 2009
How Share price goes up in stock markets
Once upon a time in a village a man appeared who announced to the villagers that he would buy monkeys for Rs. 10. The villagers seeing that there were many monkeys went out in the forest and started catching them. The man bought thousands at 10 and as supply started to diminish and villagers started to stop their effort he announced that now he would buy at 20 rupees.This renewed the efforts of the villagers and they started catching monkeys again. Soon the supply diminished even further and people started going back to their farms. The offer rate increased to 25 and the supply of monkeys became so that it was an effort to even see a monkey let alone catch it.The man now announced that he would buy monkeys at 50! However, since he had to go to the city on some business his assistant would now buy on behalf of the man.
In the absence of the man, the assistant told the villagers, "Look at all these monkeys in the big cage that the man has collected. I will sell them to you at 35 and when the man comes back you can sell it to him for 50".The villagers queued up with all their saving to buy the monkeys.Phir no woh aadmi mila na us ka assistant.........Sirf bandar hee bandar.........This is the story repeated in Stock Market as well.
In the absence of the man, the assistant told the villagers, "Look at all these monkeys in the big cage that the man has collected. I will sell them to you at 35 and when the man comes back you can sell it to him for 50".The villagers queued up with all their saving to buy the monkeys.Phir no woh aadmi mila na us ka assistant.........Sirf bandar hee bandar.........This is the story repeated in Stock Market as well.
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