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STOCK MARKET MECHANISMby

Mr Fahim Akhtar

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STOCK MARKET MECHANISMTopic

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

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A place where big fishes eat small

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Puzzling function

A place where one is always

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Trading stock is a science and equally art too

Something that may be studied or learned like

systematized knowledge

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Expression or application of human creative skill &

imagination

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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

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

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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Possibility of high returns

Easy liquidity Unbeatable tax

benefits Income from

dividends

Benefits of investment in stocks

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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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StockStockLow Low Price Price

HighHigh

PricePriceGain / Gain / lossloss

%age %age gaingain

Engro FoodsEngro Foods20.620.6

Aug 2012Aug 2012154.7154.7

May 2013May 2013 125125 770770

Pak Pak PetroleumPetroleum

100100

20082008200200

20092009 100100 100100

Lucky Lucky CementCement

103103

June 2012June 2012206206

June 2013June 2013 103103 100100

Jahangir Jahangir Siddiqui Siddiqui CompanyCompany

3.93.9

2 jan 122 jan 1213701370

31 Jan 31 Jan 20082008

1366.1366.11

Bank of Bank of PunjabPunjab

88

April April 20132013

1616

June 2013June 2013 88 100100

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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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