In last post I shared the history of Stock Market which is very important to know according to me in order to understand and do fundamental analysis of Stock Market. Moving further in this post I will share the history of Indian Stock Market which will help you in getting the fundamentals of Indian Stock [...]
Before we get into the nitty gritty of Fundamental analysis of Stock Market or Technical analysis of Stock Market, according to me we must understand what the fundamentals of Stock Market are or how this Stock Market thing originated. Every day when we see or listen news about Stock Market or talk about it, usually [...]
Before we get deep into understanding the fundamental analysis of stock market, it’s very important to understand what stock market is all about. Well for most of the people or to the new investors, the stock market may feel like a gambling place. They think that people who are incline towards gambling bet there money [...]
In last post I shared the history of Stock Market which is very important to know according to me in order to understand and do fundamental analysis of Stock Market.
Moving further in this post I will share the history of Indian Stock Market which will help you in getting the fundamentals of Indian Stock Market and will help you in understanding how Indian Stock Market originated.
However, if I would say that I am telling you about history of Indian stock market, then in reality it would be little misleading because there are more than 21 stock markets which are currently working in India. But still I will try my best to narrate this amazing journey of Indian Stock Market.
The history of Indian stock market goes back to around 200 years ago, at that time East India Companies was the dominant institution and it was involved in the transfer of loan securities but around the close of 18th century it moved towards its end.
As with the time things started changing and the fundamentals of Indian Stock Market too and by 1830’s business on Banks and Cotton presses took place in Bombay.
In starting years the number of broker were limited to around half a dozen but around 1850’s due to rapid development of commercial enterprises share broking business attracted many people towards it and the number of brokers increased to around 60.
The main turning point came in stock broking business when in 1860-61 the American Civil War broke out and the supply of cotton from United States to Europe was stopped, this we can say started “Share Mania “ in India and the number of stock brokers were increased from 60 to around 250.
However, when American Civil War ends in 1865 it brought a slump in India Stock Market and many stock brokers faced financial crises and the brokers who thrived out of civil war in 1874 found a place in a street where they can assemble and transact broking business.
So, in the end in 1887, they formally established in Bombay, the ‘Native Share and Stock Brokers Association’ which is alternatively known as “The Stock Market” and this alternatively helped in creating the fundamentals of Indian Stock Market.
My friends this is just the trailer of grand movie called “The Indian Stock Market”, there are many characters involved in this movie and all of them are still playing a major role.
I will tell one by one about them and their role in future posts, comments and suggestion from you all are most welcome.
Before we get into the nitty gritty of Fundamental analysis of Stock Market or Technical analysis of Stock Market, according to me we must understand what the fundamentals of Stock Market are or how this Stock Market thing originated.
Every day when we see or listen news about Stock Market or talk about it, usually we talk about the companies listed on BSE (Bombay Stock Exchange), NSE (National Stock Exchange) or NYSE (New York Stock Exchange) etc. We see that these days’ smart investors “invest” money in market via stock market for but there was the time when Stock Market wasn’t the synonym with “investing”.
In this article I will try to provide some insight in the evolution of stock markets which will work as a base and eventually help you in understanding Fundamental analysis of Stock Market and Technical analysis of Stock Market.
Initially in early days in Europe moneylender started trading debt with each other, a lender with high interest rate or high risk loan might exchange it with other money lender. Eventually with the time there business evolves and they started buying and selling government debt issues to the customers or we can say to the first investors.
The first stock exchange was originated in Antwerp in 1531 and all the moneylenders and brokers meet there and make deals on government, business and even individual’s debt issues.
It’s hard to think about it but in this early stock exchange there was very less involvements of fundamental analysis of stock market which any smart investor will take care very much while investing money in Stock Market these days.
Another hard to digest fact is that not single transactions of shares of any company takes effect in that Stock Market and most of the brokers and moneylender exchange or do business by selling debt bonds to each other.
In early days business of bringing spices from other countries mainly from Asian countries was very profitable. However, there were so many risk associated with this business like sea pirates, poor navigation, bad whether etc due to which it becomes a very high risk and reward investment.
So, in order to decrease risk ships owners started seeking investors who can invest their money for the voyage and if ships completes the voyage successfully they share the percentage of profit with those investors.
But most these investments last for single voyage and it was difficult for the ship owner to find investors for next voyage. But in 1600s, the French, British and Dutch governments all gave charters to the companies with East India in their names and when East India Companies formed it changed the rule of the business.
The main difference was that East India Companies was the charter that had stocks and they pay dividend based on the profits they had earned from their all the voyages and also this was the first modern Joint Stock Companies where people actually started implementing little bit of fundamental analysis of Stock Market.
The East India Companies issued stocks on papers, and if investors wants’ he can sell it to other investor. But there was not any stock exchange at that time and investor would have to track broker to carry out the trade. In early day most brokers and investors in England did their business from the coffee shops around London.
Any my friends this is how Stock Markets originated and people started buying and selling shares of the companies which eventually based on the fundamental rules or we can say fundamental analysis of Stock Market.
Before we get deep into understanding the fundamental analysis of stock market, it’s very important to understand what stock market is all about.
Well for most of the people or to the new investors, the stock market may feel like a gambling place. They think that people who are incline towards gambling bet there money on random stocks in stock market and some wins and some lose based upon their luck.
But my friends in reality stock market in not a legalized betting place, the more you will read and learn about the fundamental analysis of stock market the more you will come to know about its functionality and how important for any investor to invest some part of their hard earned money into stock market.
In a very simple form we can say that in stock market people buy and sell shares. The reason behind buying and selling shares of any company is depends upon the fundamental analysis of stock market and technical analysis of stock market about which I will explain in upcoming posts.
Moving further in a very basics structure when we buy shares of any company it means we are buying little share in the ownership of that company, after buying shares you are entitled for small fraction of assets and earnings of that company. Everything that company owns like (buildings, equipments, trademarks, patents etc) will come under Assets and all the money that company in bringing in by selling its services, products etc will come under Earnings.
I am sure at this time one question must be ringing bells in your mind that why would any company wants to sell its Shares. The reason behind selling shares is to generate money for expansion or to cover start up cost, and by keeping legal aspect of business in mind a company can generate money by two ways either by taking loans from banks (which is called Debt Financing) or via selling shares (which is called Equity Financing).
In case of debt financing the disadvantage is that company needs to return loan amount back to the lending bank along with certain amount of interest rate. But in case of equity financing there are less legal obligations and company do not need to pay any interest and also no need to return money at all.
The best part of equity financing for any company is that it help them to distribute the risk of doing business with large pool of people who have bought shares of that company. Moreover the Debt financing and Equity financing plays a major role while doing the fundamental analysis of stock market and companies listed with it.
So guy’s I hope now you got a little bit understanding about Stock Market. In future posts initially I will focus more on explaining different aspects of fundamental analysis of stock market because according to me they play a major role when and investor decides to invest money in the stock market.
