Module 1 Introduction to Stock Markets

Chapter 6

The Stock Markets

363

6.1 – Overview

Having understood the IPO process and what really goes behind the company’s transition from primary to secondary market we are now set to explore the stock markets a step further.

By virtue of being a public company, the company is now liable to disclose all information related to the company to the public. The shares of a public limited company are traded on the stock exchanges on a daily basis.

There are few reasons why market participants trade stocks. We will explore these reasons in this chapter.

Ch-6-title

6.2 – What really is the stock market

Like we discussed in chapter 2, the stock market is an electronic market place. Buyers and sellers meet and trade their point of view.

For example, consider the current situation of Infosys. At the time of writing this, Infosys is facing a succession issue, and most of its senior level management personnel are quitting the company for internal reasons. It seems like the leadership vacuum is weighing down the company’s reputation heavily. As a result, the stock price dropped to Rs.3,000 all the way from Rs.3,500. Whenever there are new reports regarding Infosys management change, the stock prices react to it.

Assume there are two traders – T1 and T2.

T1’s point of view on Infosys – The stock price is likely to go down further because the company will find it challenging to find a new CEO.

If T1 trades as per his point of view, he should be a seller of the Infosys stock.

T2, however views the same situation in a different light and therefore has a different point of view – According to him, the stock price of Infosys has over reacted to the succession issue and soon the company will find a great leader, after whose appointment the stock price will move upwards.

If T2 trades as per his point of view, he should be a buyer of the Infosys stock.

So at, Rs.3, 000 T1 will be a seller, and T2 will be a buyer in Infosys.

Now both T1 and T2 will place orders to sell and buy the stocks respectively through their respective stock brokers. The stock broker, obviously routes it to the stock exchange.

The stock exchange has to ensure that these two orders are matched, and the trade gets executed. This is the primary job of the stock market – to create a market place for the buyer and seller.

The stock market is a place where market participants can access any publicly listed company and trade from their point of view, as long as there are other participants who have an opposing point of view. After all, different opinions are what make a market.

6.3 – What moves the stock?

Let us continue with the Infosys example to understand how stocks really move. Imagine you are a market participant tracking Infosys.

It is 10:00 AM on 11th June 2014 ,and the price of Infosys is 3000. The management makes a statement to the press that they have managed to find a new CEO who is expected to steer the company to greater heights. They are confident on his capabilities and they are sure that the new CEO will deliver much more than what is expected out of him.

Two questions –

  1. How will the stock price of Infosys react to this news?
  2. If you were to place a trade on Infosys, what would it be? Would be a buy or a sell?

The answer to the first question is quite simple, the stock price will move up.

Infosys had a leadership issue, and the company has fixed it. When positive announcements are made market participants tend to buy the stock at any given price and this cascades into a stock price rally.

Let me illustrate this further :

Sl No Time Last Traded Price What price the seller wants What does the buyer do? New Last Trade Price
01 10:00 3000 3002 He buys 3002
02 10:01 3002 3006 He buys 3006
03 10:03 3006 3011 He buys 3011
04 10:05 3011 3016 He buys 3016

Notice, whatever prices the seller wants the buyer is willing to pay for it. This buyer-seller reaction tends to push the share price higher.

So as you can see, the stock price jumped 16 Rupees in a matter of 5 minutes. Though this is a fictional situation, it is a very realistic, and typical behavior of stocks. The stocks price tends to go up when the news is good or expected to be good.

In this particular case, the stock moves up because of two reasons. One, the leadership issue has been fixed, and two, there is also an expectation that the new CEO will steer the company to greater heights.

The answer to the second question is now quite simple; you buy Infosys stocks      considering the fact that there is good news surrounding the stock.

Now, moving forward in the same day, at 12:30 PM ‘The National Association of Software & Services company’, popularly abbreviated as NASSCOM makes a statement. For those who are not aware, NASSCOM is a trade association of Indian IT companies. NASSCOM is considered to be a very powerful organization and whatever they say has an impact on the IT industry.

The NASSCOM makes a statement stating that the customer’s IT budget seems to have come down by 15%, and this could have an impact on the industry going forward.

By 12:30 PM let us assume Infosys is trading at 3030. Few questions for you..

  1. How does this new information impact Infosys?
  2. If you were to initiate a new trade with this information what would it be?
  3. What would happen to the other IT stocks in the market?

The answers to the above questions are quite simple. Before we start answering these questions, let us analyze NASSCOM’s statement in a bit more detail.

NASSCOM says that the customer’s IT budget is likely to shrink by 15%. This means the revenues and the profits of IT companies are most likely to go down soon. This is not great news for the IT industry.

Let us now try and answer the above questions..

  1. Infosys being a leading IT major in the country will react to this news. The reaction could be mixed one because earlier during the day there was good news specific to Infosys. However a 15% decline in revenue is a serious matter and hence Infosys stocks are likely to trade lower
  2. At 3030, if one were to initiate a new trade based on the new information, it would be a sell on Infosys
  3. The information released by NASSCOM is applicable to the entire IT stocks and not just Infosys. Hence all IT companies are likely to witness a selling pressure.

So as you notice, market participants react to news and events and their reaction translates to price movements! This is what makes the stocks move.

At this stage you may have a very practical and valid question brewing in your mind. You may be thinking what if there is no news today about a particular company? Will the stock price stay flat and not move at all?

Well, the answer is both yes and no, and it really depends on the company in focus.

For example let us assume there is absolutely no news concerning two different companies..

  1. Reliance Industries Limited
  2. Shree Lakshmi Sugar Mills

As we all know, Reliance is one the largest companies in the country and regardless of whether there is news or not, market participants would like to buy or sell the company’s shares and therefore the price moves constantly.

The second company is a relatively unknown and therefore may not attract market participant’s attention as there is no news or event surrounding this company. Under such circumstances, the stock price may not move or even if it does it may be very marginal.

To summarize, the price moves because of expectation of news and events. The news or events can be directly related to the company, industry or the economy as a whole. For instance the appointment of Narendra Modi as the Indian Prime Minister was perceived as positive news and therefore the whole stock market moved.

In some cases there would be no news but still the price could move due to the demand and supply situation.

6.4 – How does the stock get traded?

You have decided to buy 200 shares of Infosys at 3030, and hold on to it for 1 year. How does it actually work? What is the exact process to buy it? What happens after you buy it?

Luckily there are systems in place which are fairly well integrated.

With your decision to buy Infosys, you need to login to your trading account (provided by your stock broker) and place an order to buy Infosys. Once you place an order, an order ticket gets generated containing the following details:

  1. Details of your trading account through which you intend to buy Infosys shares – therefore your identity is revealed.
  2. The price at which you intend to buy Infosys
  3. The number of shares you intend to buy

Before your broker transmits this order to the exchange he needs to ensure you have sufficient money to buy these shares. If yes, then this order ticket hits the stock exchange. Once the order hits the market the stock exchange (through their order matching algorithm) tries to find a seller who is willing to sell you 200 shares of Infosys at 3030.

Now the seller could be 1 person willing to sell the entire 200 shares at 3030 or it could be 10 people selling 20 shares each or it could be 2 people selling 1 and 199 shares respectively. The permutation and combination does not really matter. From your perspective, all you need is 200 shares of Infosys at 3030 and you have placed an order for the same. The stock exchange ensures the shares are available to you as long as there are sellers in the market.

Once the trade is executed, the shares will be electronically credited to your DEMAT account. Likewise the shares will be electronically debited from the sellers DEMAT account.

6.5 – What happens after you own a stock?

After you buy the shares, the shares will now reside in your DEMAT account. You are now a part owner of the company, to the extent of your share holding. To give you a perspective, if you own 200 shares of Infosys then you own 0.000035% of Infosys.

By virtue of owning the shares you are entitled to few corporate benefits like dividends, stock split, bonus, rights issue, voting rights etc. We will explore all these shareholder privileges at a later stage.

6.6 – A note on holding period

Holding period is defined as the period during which you intend to hold the stock. You may be surprised to know that the holding period could be as short as few minutes to as long as ‘forever’. When the legendary investor Warren Buffet was asked what his favorite holding period was, he in fact replied ‘forever’.

In the earlier example quoted in this chapter, we illustrated how Infosys stocks moved from 3000 to 3016 in a matter of 5 minutes. Well, this is not a bad return after all for a 5 Minute holding period! If you are satisfied with it you can very well close the trade and move on to find another opportunity. Just to remind you, this is very much possible in real markets. When things are hot, such moves are quite common.

6.7 – How to calculate returns?

Now, everything in markets boils down to one thing. Generating a reasonable rate of return!

If your trade generates a good return all your past stock market sins are forgiven. This is what really matters.

Returns are usually expressed in terms of annual yield. There are different kinds of returns that you need to be aware of. The following will give you a sense of what they are and how to calculate the same…

Absolute Return – This is return that your trade or investment has generated in absolute terms. It helps you answer this question – I bought Infosys at 3030 and sold it 3550. How much percentage return did I generate?

The formula to calculate the same is [Ending Period Value / Starting Period Value – 1]*100

i.e [3550/3030 -1] *100

= 0.1716 * 100

= 17.16%

A 17.6% is not a bad return at all!

Compounded Annual Growth Rate (CAGR) – An absolute return can be misleading if you want to compare two investments. CAGR helps you answer this question – I bought Infosys at 3030 and held the stock for 2 years and sold it 3550. At what rate did my investment grow over the last two years?

CAGR factors in the time component which we had ignored when we computed the absolute return.

The formula to calculate CAGR is ..

CAGR

Applying this to answer the question..

{[3550/3030]^(1/2) – 1} = 8.2%

This means the investment grew at a rate of 8.2% for 2 years. Considering the fact that Indian fixed deposit market offers a return of close to 8.5% return with capital protection an 8.2% return suddenly looks a bit unattractive.

So, always use CAGR when you want to check returns over multiple years. Use absolute return when your time frame is for a year or lesser.

What if you have bought Infosys at 3030 and sold it at 3550 within 6 months? In that case you have generated 17.16% in 6 months which translates to 34.32% (17.16% * 2) for the year.

So the point is, if you have to compare returns, its best done when the return is expressed on an annualized basis.

6.8 – Where do you fit in?

Each market participant has his or her own unique style to participate in the market. Their style evolves as and when they progress and witness market cycles. Their style is also defined by the kind of risk they are willing to take in the market. Irrespective of what they do, they can be categorized as either a trader or an investor.

A trader is a person who spots an opportunity and initiates the trade with an expectation of profitably exiting the trade at the earliest given opportunity. A trader usually has a short term view on markets.  A trader is alert and on his toes during market hours constantly evaluating opportunities based on risk and reward. He is unbiased toward going long or going short. We will discuss what going long or short means at a later stage.

There are different types of traders :

  1. Day Trader – A day trader initiates and closes the position during the day. He does not carry forward his positions. He is risk averse and does not like taking overnight risk. For example – He would buy 100 shares of TCS at 2212 at 9:15AM and sell it at 2220 at 3:20 PM making a profit of Rs.800/- in this trade. A day trader usually trades 5 to 6 stocks per day.
  2. Scalper – A type of a day trader. He usually trades very large quantities of shares and holds the stock for very less time with an intention to make a small but quick profit. For example – He would buy 10,000 shares of TCS as 2212 at 9:15 and sell it 2212.1 at 9.16. He ends up making 1000/- profit in this trade. In a typical day, he would have placed many such trades. As you may have noticed a scalp trader is highly risk averse.
  3. Swing Trader – A swing trader holds on to his trade for slightly longer time duration, the duration can run into anywhere between few days to weeks. He is typically more open to taking risks. For example – He would buy 100 shares of TCS at 2212 on 12th June 2014 and sell it 2214 on 19th June 2014.

Some of the really successful traders the world has seen are – George Soros, Ed Seykota, Paul Tudor, Micheal Steinhardt, Van K Tharp, Stanley Druckenmiller etc

An investor is a person who buys a stock expecting a significant appreciation in the stock. He is willing to wait for his investment to evolve. The typical holding period of investors usually runs into a few years. There are two popular types of investors..

  1. Growth Investors – The objective here is to identify companies which are expected to grow significantly because of emerging industry and macro trends. A classic example in the Indian context would be buying Hindustan Unilever, Infosys, Gillette India back in 1990s. These companies witnessed huge growth because of the change in the industry landscape thereby creating massive wealth for its shareholders.
  2. Value Investors – The objective here is to identify good companies irrespective of whether they are in growth phase or mature phase but beaten down significantly due to the short term market sentiment thereby making a great value buy. An example of this in recent times is L&T. Due to short term negative sentiment; L&T was beaten down significantly around August/September of 2013. The stock price collapsed to 690 all the way from 1200. At 690 (given its fundamentals around Aug 2013), a company like L&T is perceived as cheap, and therefore a great value pick. Eventually it did pay off, as the stock price scaled back to 1440 around May 2014.

Some of the really famous investors the world has seen – Charlie Munger, Peter Lynch, Benjamin Graham, Thomas Rowe, Warren Buffett, John C Bogle, John Templeton, etc.

So what kind of market participant would you like to be?


Key takeaways from this chapter

  1. A stock market is a place where a trader or an investor can transact (buy, sell) in shares
  2. A stock market is a place where the buyer and seller meet electronically
  3. Different opinions makes a market
  4. The stock exchange electronically facilitate the meeting of buyers, and sellers
  5. News and events moves the stock prices on a daily basis
  6. Demand supply mismatch also makes the stock prices move
  7. When you own a stock you get corporate privileges like bonus, dividends, rights etc
  8. Holding period is defined as the period during which you hold your shares
  9. Use absolute returns when the holding period is 1 year or less. Use CAGR to identify the growth rate over multiple years
  10. Traders, and investors differ on two counts – risk taking ability and the holding period.

363 comments

  1. asif says:

    under 6.7 The formula to calculate CAGR is mentioned 3550/3030]^(1/2) – 1} = 8.2%, im unable to understand how we get this 8.2??

    • Karthik Rangappa says:

      It is a straight forward calculation.

      Ending Value is 3550
      Beginning Value is 3030
      No of years = 2

      Formula is [Ending Value/Beginning Value] raised to the power of (1/Number of years) minus 1. Which is nothing but –
      [3550/3030]^(1/2) – 1
      =0.082 or when expressed in percentage terms is 8.2%

      • vko says:

        Or use the “rate” function in Excel instead of manually calculating with the CAGR formula on paper. In this example, the rate function would be =rate(2,,-3030,3550). If will give the same answer as the formula above.

        • Karthik Rangappa says:

          Yup, I’ve never used Rate function…so was not sure about it.

        • Nagesh Cavatur says:

          The correct function in excel, for calculating CAGR is the XIRR function.
          Syntax

          XIRR(values, dates, [guess])

          The XIRR function syntax has the following arguments:

          ## Values Required. A series of cash flows that corresponds to a schedule of payments in dates. The first payment is optional and corresponds to a cost or payment that occurs at the beginning of the investment. If the first value is a cost or payment, it must be a negative value. All succeeding payments are discounted based on a 365-day year. The series of values must contain at least one positive and one negative value.

          ## Dates Required. A schedule of payment dates that corresponds to the cash flow payments. Dates may occur in any order. Dates should be entered by using the DATE function, or as results of other formulas or functions. For example, use DATE(2008,5,23) for the 23rd day of May, 2008. Problems can occur if dates are entered as text. .

          ## Guess Optional. A number that you guess is close to the result of XIRR.

      • Dinakar says:

        Hi Karthik, can I have list that shows historical market time changes and ipo listing timings.

        • Karthik Rangappa says:

          IPO timing is roughly around the market open. Back in the days, markets would open at 9:55 AM, then for a brief time it was at 9:30 AM, and finally moved to the current 9:15 AM slot. There have been no changes apart from this (at least for the last 12-13 years).

          • Kartik Bansal says:

            Hi
            I am also at learning stage. What is this pre-opening time? How it works? Who buys and sells because we try to sell and buy order is rejected. Need to understand the concept for first 15 minutes.

          • Karthik Rangappa says:

            Pre-opening is b/w 9:00 AM to 9:15 PM, a period of 15 minutes before the markets open. Traders can place their trades to buy and sell during this period. The collective bids and asks so collected in this way determine the opening price of the stock/index.

      • Karan Pradhan says:

        Simply Multiply the result by 100 & you will get to see the expected answer.

    • Sneh Gupta says:

      Another way to look at this is let say you got x% returns each year. 3550 3030
      So, your amount after two year should be 3030 * (1 +x/100)^2 which is 3550..
      (1 + x/100)^2 = 3550/3030
      x = 100 * ((3550/3030)^(1/2) -1)
      x = 8.214%
      CAGR is simply x.

  2. N says:

    Thanks. Great initiative by Zerodha.

  3. kashish shambhwani says:

    the formula for CAGR is quite complex.
    i would recommend others to use the SAME formula in a simplified manner
    FV=Pv*(1+r)to the power n (power of n is on 1+r)

    Fv=future value
    pv=present value
    r=cagr
    n=time period/no of years
    in context to the example given above
    FV=3550
    PV=3030
    n=2
    cagr=missing.

    hope it helps

    • Karthik Rangappa says:

      The formula you have suggested helps in calculating the Future Value. However in order to calculate the CAGR, which the growth rate at which the investment is growing one has to apply the formula suggested in the tutorial.

      Btw the formulas are essentially the same, it is just a matter of rearrangement 🙂

  4. Anishcharith says:

    In the above example of Infosys , and bad news from NASSCOM if all the people having its shares want to sell it and there are no buyers what happens?

    • Karthik Rangappa says:

      Remember different opinions is what makes a market. Hence this will not happen (at least in liquid stocks).There will always be buyers and sellers in liquid stocks.

      • Prasanjeet Gupta says:

        What happens in circuit?

        • Karthik Rangappa says:

          Circuit is when the stock hits either the maximum or minimum price threshold for the day. This is when traders refer to it as “stock has hit the circuit”. You make be interested to note, that F&O stocks do not have a circuit limit.

  5. Chandan says:

    If the news is good all around the market, no bad news and people will be buying Infosys stock (for eg.) than why would some sell the stock. Hard to understand, pls explain

    • Karthik Rangappa says:

      Remember, news per se is relative. What I perceive as good news maybe be perceived as bad news by you.At every price point a market participant will have an opinion. So no matter what happens there will be opinions formed and as long as opinions are formed, markets function. For example when Modi was elected PM, everyone knew it was good news, but why were people reluctant to buy? Like wise in individual stocks.

      • Chandan says:

        I agree with you that there is a difference in everyone’s perception but just wanted to understand that if there is a new that Infosys gets a big order than obviously people will buy that share and only from those who are selling it. So was just asking what can be the reason for some negativity about that share (other than people who want money n are selling it coz buyers are paying)

        • Karthik Rangappa says:

          In fact that is the only reason. When good news hits the market people want to buy. When they are eager to buy they are willing to pay any price, hence the stock price keeps going up (think about it). So the sellers see this as an opportunity to get attractive prices for the shares that they already own. The point I’m trying to make is – for any news there will be both buyers and sellers on the news. This is how markets function, and will continue to function.

        • Ashutosh Pohary says:

          Hi Chandan. I’ll try and explain to you the difference in perception of a stock with the help of an example which I find very interesting and relevant for this thread. Long back when Mark Cuban was a budding entrepreneur he created Broadcast.com. Broadcast.com used to broadcast audio commentary of events such as American football, basketball, fashion shows, etc. over the internet which could be heard by anyone with an internet connection across the globe. Think about listening to the commentary of cricket world cup finals between India and West Indies in 1983 over the internet. It was something big at the time and caught the eye of many tech giants. Cuban made a strong selling pitch to one such giant, Yahoo. Yahoo bought Broadcast for staggering $5.6 billion. Now as an investor or a trader of stocks of Yahoo this move would be a leap towards big things (read: Positive news) and traders would buy more of Yahoo stocks. While a tech analyst would have suggested otherwise (read: Negative news). The reason being Yahoo didn’t have the capability to integrate Broadcast with their own system and that could be a struggle for Yahoo. And that’s exactly what showed in the later term of business at Yahoo. Yahoo failed terribly with their billion dollar acquisition. Broadcast, as unique as it was, did not find a match with Yahoo. This was just the start of Yahoo going down. Because Yahoo was so focused on integrating and developing Broadcast they took their eyes off their core business, Search. This gave an opportunity to an underdog to rise in the Search market. You know who I’m referring to? I am sure you’d have guessed. Google. I don’t know if Google traded publically at the time when this happened. But if I was a trader that time, after knowing that the Yahoo’s no longer focusing on Search, the first thing I would have done would buy some Google stocks because Google was trying to make it big in the Search market. And with one competitor out of the race things looked bright for Google. All about perception.

        • RD2640 says:

          I understand what you want to ask. The thing is as given in tutorial also, there are different type of participant – trader and investor. Lets concentrate on trader, now we have three type of trader – day trader, scalper and swing trader. In a highly liquid stock, you will find scalper also there. Now what he will do, he will buy sell, sell buy, buy sell, sell buy. Irrespective of fundamental news, he will see momentary technical and transact. Hence he is looking after only 10-20 paise. Now other say investor or swing trader/ day trader will find scalper there to transact with him.

  6. aphatak says:

    Karthik, I think Chandan has a valid point here and his I think his query still remains unaddressed.
    1.We see some examples where a stock is traded with ‘only buyers’ OR ‘only sellers’ e.g on moneycontrol. What does this exactly mean. 2.Also, if a there is a heavy buying on a particular stock, how would there be enough sellers to it?
    3.What happens when there is more selling than buying or vise a versa. Does the order get executed ? fully or partially?

    • Karthik Rangappa says:

      Got it. See, assume there only 500 shares in the market, and there is some good news about this stock. Assume I own 50 out of the 500 shares, which I have bought at 100. Now because of this good news people are willing to pay 120 for this stock…so I see this as an opportunity to sell my 50 shares…which I do, price goes to 120, at 120, some one else is willing to pay 125 for the share…and hence if you own 100 shares you maybe willing to sell it. This continues to a point where there are people willing to buy the shares but there could be no one willing to sell…then the stock gets frozen as there are only buyers, no sellers. Likewise if the opposite happens there will be only sellers, no buyers. This usually happens where there is excess demand/supply for the stock and the public float in the market is very little.

      However this may not happen on a large stock like say ITC or Reliance as there is so much liquidity that it is really difficult for the stock to get frozen. This is pretty much like a vegetable market…there could be a totally 15kgs of Onions in the market (supply)…if the demand is for 15 kgs, then there is a balance…but if the demand is for 20 kgs, then there is heavy buying, likewise if the demand only for 10 kgs, there is heavy selling.

      • Hitendra says:

        But if that share’s CMP is 100, then buyer would buy only at that price……how could he pay 120…!!!!
        and even if he willing to pay any price(like 120 here), then how can BSE/NSE would know that…!!!!!

        • Karthik Rangappa says:

          You place the order via a limit order and thats how the exchanges will know what price you are willing to transact at 🙂

          • varun Singh says:

            And looking at our limit will NSE/BSE increase the stock price.?
            Also does actual growth or profit increase the stock price if suppose the sentiment part due to good/bad news is not considered??

          • Karthik Rangappa says:

            Nah, NSE/BSE is just the market, they don’t play a role in the price increase. Increase/decrease in price is a function of the market sentiment.

  7. aphatak says:

    Many thanks Karthik.

  8. sagar says:

    i will join u r course

    • Karthik Rangappa says:

      Sagar, there is no course as such. Everything is put on Varsity for free, you can read through it whenever you want. If you have any questions then leave a query and one of us will try and answer the same for you.

  9. Souvik says:

    I couldn’t understand 1 thing. In the process of trading of shares in the secondary market, suppose the price of the share has gone up. The promoters & the holders will be definately get benefit from this price escallation but how the company is benefitted due to increase in share price?

  10. Vikas.ghode says:

    I khow it’s a fool question , but i want to know how from rise & fall of shares, company gets money.? When people buy they earn/loose money buy selling. But how company gets profit& what is the procedure for comp.to get money from share market? Also this blog is too good, why dont you make a book of it, &sell to make ur advtsmt? I no, this way u wont get customers’ numbers, but you can still connect with pepl.using whatsapp help service.

    • Karthik Rangappa says:

      We are in fact converting the content in to PDF formats..so the same should be out soon 🙂

      1) Companies benefit when the go public in the primary market – so this is when they benefit the maximum as they raise public money via an IPO
      2) The day to day fluctuations in the secondary does not really matter to the compnay

      • DJ says:

        So Why would companies like Infosys and Reliance care about their stock price if they don’t gonna get any profit as they couldn’t go for IPO.

        • Karthik Rangappa says:

          Like I said, the promoters and their investors net-worth are linked to the share price of the company. So they need to ensure their company does well and the stock price increase.

          • Karthik Kallakuri says:

            Anyone who buys a share holds a part of the company. So if company is not doing well it also means that his/her share (the part that they own, as an example 0.000035% holding in infy in section 6.5) is also not doing well and similarly if the company is doing well then my share is also doing well. Thus inherently stock price is quite linked with company performance of which him/her holds a share.

          • Karthik Rangappa says:

            Thats right, Karthik. I’m not sure if I’m missing the query in your comment.

        • sweta says:

          If the share prices go up the evaluation of the company is higher, which is beneficial to the company in following ways (may be more ways too):
          1. If any of the promoters, Investors or stakeholders wants to liquidify his stakes (partially or fully), he gets more value.
          2. With higher evaluation, it would be tougher for competitors to take over the company or out the company in the mkt.
          3. Company is better ranked on many of the factors in its segment.

  11. Ankush Agrawal says:

    SO is The Price Displayed on the Trading Screen is Last Traded Price?
    If Yes!, Then if LTP is 100rs and some one places an order to sell at 200rs and on the other hand his friend places an order to buy at 200rs and the trade gets executed, then will the price of stock rise to 200rs?

  12. Ankush Agrawal says:

    Appreciate your prompt reply, Can you please elaborate on how does exchanges prevent such activities?
    Also Wanted to know whether while placing a limit order, is there any restriction on the amount you can deviate from the market price?

    • Karthik Rangappa says:

      Every stock outside the derivative basket has a price limit within which it can move. The maximum a stock can move for the given day is 20% …so based on the individual stock’s volumes, volatility etc limits are set – for example a certain stock can move anywhere between -5% to +5%…while another stocks can move between -10% to +10%. So max for any stock is -20% to +20%. However stocks in the derivative segments do not have such restriction. They can move by any extent. Keeping this in perspective I guess its always safe to place limit orders within -5 t +5 %. However getting a fill at such deviations maybe a challenge.

  13. rishubh says:

    I have a doubt. How can people make losses in the market? Coz people can buy stock and they can hold and sell whenever the price of the stockgoes higher. Right?

    • Karthik Rangappa says:

      Its easier said than done :). A wise man once said “Markets can stay irrational longer than you can stay solvent”.

      • Amit Deshpande says:

        Hi Karthik,

        I do agree with Rishubh , Could you please try to explain this with an example ?

        • Karthik Rangappa says:

          Well, this is based on the assumption that one day the price of the stock will eventually raise and until then you have the staying power. Consider stocks like Reliance Power, Suzlon, JP Associates, IVRCL, GMR, Unitech….investors in these stocks are yet to see gains and its already been many many many years.

          • gohan chpk nani says:

            as you said the loss will be there in stock market until the staying power! so i have an a doubt that what should we consider here the staying power as shares or share price, investment ??

            can you explain about the investment how do we really invest based on what either company capital, or share which we buy, and when we can come out from the market ?

            plz give me clarity for each one

          • Karthik Rangappa says:

            It is a combination of your risk appetite and the available cash. Everything about investments is discussed here – https://zerodha.com/varsity/module/fundamental-analysis/

      • Ram Babu says:

        Really this platform is being used as an effective brainstorming technique. Different perceptions of varied investors can be understood , discussed and a final conclusion can be drawn.

        Really appreciate Karthik for quick relplies and discussions.

  14. Victor says:

    Got a question sir.
    I saw the volume section,100+100=100 . If im selling the shares,then you are buying.What about the beginning ,when the company just gets into the stock market and decides to sell its shares to get money.In the beginning when noone owns its shares.At that time,if i hit buy,will i be buying the stocks directly from the company itself? (As there is no individual person selling them).

    And,i googled it a few times but couldnt get a satisfactory answer.But mostly websites says,when im making profits in the market,someone is losing money.His loses makes my profits.Consider that beginning situation or a situation when everyone is buying and noone is selling.Stocks are going up and EVERYONE is buying.Obviously,they are making profits and noone is losing money as noone is selling.So where does the profit money comes from? From the company itself?

    IN SIMPLE WORDS,if i WIN,then will i have to make sure that SOMEONE IS LOSING? Do all the profits come from the losing ppl? Or do my profits also come from COMPANY’s profits(As it is selling its products).

    • Karthik Rangappa says:

      When the company debuts its shares on the stock exchange they opt for the IPO route. You can read about IPOs here http://zerodha.com/varsity/chapter/the-ipo-markets-part-1/

      When a company is doing IPO, basically the company is selling its shares (in large quantities) to the public (buyers). Once the public buys these shares then it gets traded from one person to another. Also, the concept of one person winning and the other person losing is applicable to derivatives markets and not really the spot markets.

      • DJ says:

        Is there any other way ,company can hit stock market rather than IPO? if yes then please give such example of those companies.

        • Karthik Rangappa says:

          Sometimes the IPO can be forced upon by virtue of a corporate action like a merger, amalgamation etc. Will try and share a few examples.

  15. Ragavendran says:

    In an situation trader intended to buy 1000 shares but sellers in the market are selling only 750 shares, then what will happen to the remaining 250 shares?

  16. Anant Gupta says:

    Excellent Initiative!!

  17. JOEL THOMAS says:

    how much time does it take for a buyer to buy from the no.of shares

  18. Waseem says:

    Suppose I place an order to buy 100 shares of a company. For the sake of argument lets say there are not sellers that day. What happens to my order right after the Stock Exchange close? Will my order persist and possibly be fulfilled next day in case there are sellers? Or will it expire?

    Also can I retract my order after I place it but before it is fulfilled?

    • Karthik Rangappa says:

      If the order is not full filled then the order by end of day then it wont be carried forward for the next day. All pending orders are cancelled by end of day. Which means you will have to place a fresh order the next day.

      Yes you can modify your order before it gets fulfilled. No problem with that.

  19. Durjoy says:

    At 20% CAGR,stock price would increase to very high levels in 20 or more years.Then how would they still be affordable to the public?

    • Karthik Rangappa says:

      Well, thanks to corporate actions like splits,bonus etc :). Having said that 20% CAGR for 20 years is not an easy return to achieve!

  20. Deepali says:

    HI,
    Very nice article!
    I have a very basic question, once IPO is is given the share started trading in secondary market..And in secondary market there are 2 types of people i.e. Buyer and Seller. If Seller is selling infosys share @3030 rs and buyer is buying it at same price…suppose now buyer wann to sell it @3050 when it goes up to another buyer…In this case how company is getting money from these trades? or it is just once share is trading in secondary market….only buyer and seller are responsible for profit and sell?

    Can you please elaborate if share price goes up or down how companys contribution in this and how valuation calculated?

    Thanks,
    Deepali

    • Karthik Rangappa says:

      Companies does not benefit much from day to day variation in stock price movements. If the stock price moves up, the shareholders (including promoter’s) wealth goes up …and if price moves down the shareholder’s wealth comes down.

  21. Krishna says:

    Hi Karthik,

    Thank you first of all very much for this valuable guide, its by far the best when it comes to simplicity.

    I have been wanting to ask this question right from the time I started thinking about trading. In this article, you have mentioned about stock price movement, what makes it move. But I still didn’t understand, how the movement happens… for example the buyer or the seller doesn’t have the option to change the price of the stock right, if ABC stock shows as Rs. 50/per share and the during the day it someone wants to buy or sell when it is at Rs. 50, then according to my understanding, the person trying to buy or sell will only be able to sell as to what is shown on Rs. 50. So how does it start moving up or down based on demand in market, if we can’t change the price on our trading tools.

    I hope I have not confused you

    • Karthik Rangappa says:

      Krishna – I’m glad you liked Zerodha Varsity 🙂

      As far as your query goes – if ABC is at 50, then it is not necessary for you to buy it at 50. You can always put a limit order at 49 and hope to buy it at that price. Limit order is a feature on your trading terminal using which you can specify the price you want to transact. Now if someone else is desperate to sell it and opts to sell it at 49, then it would match your buy order at 49 and therefore in the whole process the price would have moved by 1 point i.e from 50 to 49.

      Now here is the thing you need to remember – on a day to day basis prices moves based on demand and supply. Demand and supply is a function of greed and fear (both a form of desperation)..and as long as markets are open these human emotions will continue to influence the stock prices, and therefore the stock price moves.

      • Krishna says:

        Thank you very much for that Karthik… I have always wondered what makes the price go up and down, I thought there was some software which was doing it based on some criteria. I never knew that it was the people who are buying and selling the stocks that make the price go up and down.

  22. dk3293 says:

    karthik do you have a youtube channel.

  23. ashwini tiwari says:

    Hi kartik.
    Thank you for developing such a helpful platform for new traders like me.I am in process of opening account with zerodha.
    I have few queries. What is meaning of derivative trading. and why there is so much of price difference in shares of companies like lnt shares around 1300-1500 AND ntpc at 150-250 and few companies even below 100.

  24. m v nagaraja says:

    I am planning for start trading in F &O from coming week onwards. I donot know anything about put and call options. Can you guide with example please. I have already account with you and doing very good volumes and my account id is dn 1456

  25. m v nagaraja says:

    please guide me in put and call options with eg. I want to start F & O from next week onwards

  26. Manjunath says:

    Hello Sir,
    I opened an account with Zerodha and will start with options. I have gone through the articles provided on Options and they provided great deal of insight. However, these days i was wondering whether i can buy(read about ETF’s) gold just like a share/stock and redeem with real gold? I tried to find over the net but in vain. Any inputs from your end will be greatly appreciated.

  27. Manjunath says:

    Thank you Sir.Can i buy E-Gold through zerodha? if yes, how do i but it?

  28. Milan says:

    Hello sir…. please explain me given image i have sent attached .png file
    here icici securities advice sell of “eClerx Servi ” and Targt of 1 year.
    how can i sell today and buy after 1 year to settle… is it possible ?

    • Karthik Rangappa says:

      This is not really a trading call. They mean to say that their outlook on the stock is bearish…hence they are advising clients to sell from their Demat account. Also if you do not have an account with Zerodha yet, maybe you should consider one 🙂

      https://zerodha.com/open-account

      • Milan says:

        Thanks for prompt response………..
        i’m new to Trading.
        So they mean to say this stock is bearish for one year and don’t jump into it.
        i misunderstood as settlement like option & future trading.
        I have acount with Zerodha Only…….

        but zerodha not provide any research / advice … so i follow icici direct and agnel broking advice. but trade with zerodha only.

  29. Surdev says:

    Hi Karthik,
    I would like to appreciate you for the efforts you have taken to help the beginners. Thank you very much. This article was very elaborate but still I have a doubt sir. Please tell me how the company gets benefited from stock markets after 2 years of issuing IPO(in terms of money). Having said that day to day market does not really affect company,this doubt originated.Thanking you in advance.

    • Karthik Rangappa says:

      After the IPO, the worth of the promoters shares are also linked to the price of the stock. Stock price goes up only if the company makes progress…higher the stock price then the worth of the promoters also goes up. So it does make sense for the company to ensure they do the right things so that the stock price grows steadily.

  30. aehsan4004 says:

    there are a few “LTD.” companies whose stock is neither listed on NSE /BSE .

    eg. GOEL SCIENTIFIC GLASS LTD. , etc etc

    how is this possible ?

    since the stock is not listed on exchange , how to buy stock of these kind of companies ?

    • Karthik Rangappa says:

      ‘LTD’ means a company whose owners are legally responsible for its debts only to the extent of the amount of capital they invested. Such companies can be listed or unlisted. However all listed companies are LTD in nature.

      • aehsan4004 says:

        so if the invest capital is lets say 1 crore in 2007 , for 1 lac shares of rs.100 each .
        in 2015 share valuation becomes rs. 300, the legal obligation towards debt will stay same 1 crore or the new share valuation 3 crore ?
        what happens when share valuation decreases to lets rs.70 , the new legal debt. obligation stays same 1 crore or reduces to 70 lacs ?

  31. Samir Palit says:

    May be a silly question: can I buy an instrument (say equity) at a price higher than the market price? if so, will it increase the market price of the instrument? I know that it is possible to place an order that the broker will execute if the price strikes a particular point but that still means buying the instrument at market price at a later point in time when the market price reaches the target price. Probably in real life no one would like to buy an instrument at a price higher than the market price – just wanted to know if this is possible.

    • Karthik Rangappa says:

      No, this wont happen even if you place an order to buy at a higher price you will get it at the best buying price in the market.

  32. Keshav says:

    This is very nice and easily the most accessible collection of materials I’ve found so far. Thank you. My feedback/request is to list recommendations to good texts, bloggers/tweeters to follow etc.

  33. Sajeev says:

    Hi Sir,
    Suppose I place an order(buy or sell) for 100 rs using ‘limit’ option in equity, will the order executed exactly for 100 rs or is there possibility of any change in executable price?

    • Karthik Rangappa says:

      Limit order will trigger only when it hits the price you’ve set….not any other price.

      • Sajeev says:

        Thanks so much…

      • Kenil says:

        Suppose a share is trading at 100.75.I placed a limit order to buy share at 100.60. But a little later suddenly share price jumps directly to 100.50. Will my trade would get excuted or not as price is being not matched in above situation ?

        • Karthik Rangappa says:

          If the jump is sudden, then you may not get filled. It’s always good to double check the fill.

          • sweta says:

            Karthik, please correct me if I’m wrong. What I understand from limit order is to buy at 100.6/- or less in this example.

          • Karthik Rangappa says:

            No, limit means you are limiting the price of the transaction to a certain price. Nothing above or below that price.

  34. Atul Sagar says:

    What happens if I have to buy a stock but no one is willing to sell it at that price on the stock exchange maybe because the stock is about to rise.My question is how price of stock increases, is it the buyer who increases the bid or does the seller asks for a higher bid or the stock exchange handles the issue?For example I want to buy a stock of XYZ company at Rs. 56 but there no one is willing to sell it for Rs.56.How will this transaction go through?

  35. Vishal Saini says:

    Great work..:)
    1 Could you explain any situation in which seller would be ready to sell his/her shares at price lesser than listed price?
    2 Situation in which buyer would be ready to buy shares at higher price than listed price?
    Novice..Ignore if they do not make sense..:)

    • Karthik Rangappa says:

      Well, the price is market determined…even if you want to sell for a lesser price (for example share is traded at 75, but you want to sell for 65 or buy for 95) then it wont happen. You will get a price in and around 75…this is valid as long as you route the transaction via markets.

  36. vinod says:

    sir, as u said in given example that 8.2% CAGR, does that mean that for 1st year i got 8.2% and second year another 8.2% i.e a total of 16.2% in 02 years??

  37. vinod says:

    doesn’t it then mean that in first year 8.2% rate of return and second year 8.2% which makes the rate of return as 16.4% in two years on my principle amount. kindly clarify.thanks and sorry for my foolish question

    • Karthik Rangappa says:

      No, CAGR of 8.2% means that the invested amount is growing at an average rate of 8.2%. However if you look at the exact yearly returns it could be different…year one could be 20%, year two could be -2.5%, year 3 could be 10% so on and so forth. But when you calculate the average growth rate, it would be 8.2% year on year growth.

  38. vinod says:

    thanks sir. i m new to share market and zerodha is my first broker. your courses are the best and u reply promptly.thanks a lot.feel priviledged to b assosiated with zerodha

  39. Hitesh says:

    Thanks for such a nice and lucid explanation 🙂 You never really explained what is meant by stock. Is it same as share?

    • Karthik Rangappa says:

      Good question 🙂

      Investopedia says – For example, “stock” is a general term used to describe the ownership certificates of any company, in general, and “shares” refers to a the ownership certificates of a particular company. So, if investors say they own stocks, they are generally referring to their overall ownership in one or more companies.

  40. shine says:

    Dear Zerodha
    Being a beginner I have a question regarding placing order.

    if there are following offers are available company “x” at a point of time
    500 Qty offer price-200
    300 Qty offer price-205
    500 Qty offer price-208
    Can i place an order for 1000 shares of company “x” without specifying a price(let it be executed at available offer price)?
    And would it be considered as a single order by broker(for brokerage charges)?

    • Karthik Rangappa says:

      Yes you can place the order…its called the market order. Broker will consider this as 1 order.

      • shine says:

        Thank you Karthik for the reply.
        this means this single order placed for market price for 1000 Qty, would be executed as a single order with three different prices
        (500 Qty offer price-200,300 Qty offer price-205,200 Qty offer price-208), right?

  41. Sagar Sudhir Bahegavankar says:

    This is very useful information in very clear language. My query is if I want to buy 200 shares at 100Rs each and in market 198 shares are available at Rs 100 price and only two shares are available at Rs 101 price, then what happens?

    • Karthik Rangappa says:

      This depends on the kind of order you have placed, if its a market order then you will get 98 shares @ 100, 2 at 101. If its a limit order then you will only get [email protected], 2 will remain pending.

  42. ajiket says:

    Dear Sir,could you kindly explain the 6 months answer for calculating CAGR
    …i think ans is 37%..

  43. Soham Malakar says:

    Hi,
    I’m new into trading and in the process to open a trading account in Zerodha. Thanks for this wonderful introduction.
    I have one doubt. Under “6.3 – What moves stock” You have shown a chart where the sellers are free to define the price at which they want to sell them. However, when we trade share, we can only see a fixed price of a particular share, based on which we need to buy and sell.
    So, how does the price of a particular share gets changed ?

    • Karthik Rangappa says:

      Well, its like this – consider TCS is trading at 2550…you as a seller of the stock want a slightly higher price, say 2560. You enter this price and wait for a buyer to buy at your price. Assume someone actually buys it from you at 2560…then the last traded price changes from 2550 to 2560.

      • shankar says:

        Hi,
        Doesn’t this kind of ability leads to manipulation? For example, I have 1000 stocks of value rs 100 which reduced to 99. I make my friend to buy 100 of it at rs 101. which makes the last trade amount to be 101. Wont this enable me to sell the remaining number of shares at higher price?

        • Karthik Rangappa says:

          Yes, but the question is how will you do this? The orders are matched based on price and time priority.

  44. NareshS says:

    Hi Karthik
    What happens to the derivative segment when the stock is split or merged or any other kind of capital reconstruction?.
    Say a company is trading at Rs 1000/-
    I buy a call at strike price of 1000. Company announces stock split in 1:1, so new Market Value will be 500?
    Will I be doomed for not keeping myself up to date with the internal reconstruction of the company?
    Similarly What happens when you short and price goes up as a result of merging two shares?

  45. Bharat says:

    What if I want to sell/buy shares of say A company and there is no buyer/seller ?
    What will happen then?
    Assuming that company A’s share are plummeting and i am making losses(as a person who wants to sell shares)

    • Karthik Rangappa says:

      You can buy or sell only of there is a counterpary willing to take the opposite side. The ease at which you can buy or sell is called liquidity, if there is no liquidty then there is a chance of you getting stuck. Hence it is important to ensure that the stocks that you trade has sufficient liquidity.

  46. Praveen says:

    Hi Karthik ,

    Varsity is very resourceful and easy to understand in layman terms. My question is how the intermediate instructions like depositories, stock exchange gets profit, generate Money fir their operations and their services. Eg:: stock brokers will charge commission from traders having account . But we don’t pay anything to NSDL or CSDL , . Who runs stock exchange either govt and any other private people. I have read that BSE is private and BSE is govt owned. But SEBI is govt run public institution. Now where these BSE, BSE, SEBI, , depositories, earn money for their service.

    • Karthik Rangappa says:

      Praveen – Depositories do charge a small fee when you debit shares from your DEMAT account. Check this – https://zerodha.com/charges

      Stock exchanges are private bodies run under tight government (SEBI) regulations. In fact all financial intermediaries are run under tight government regulations.

      I’d suggest you check the charge list to get a sense of who charges how much.

  47. raj says:

    hi karthik – its really great in you to respond throughout the years for your posts. can you explain how to identify if a stock has sufficient liquidity or not with any indicators, or params.

    • Karthik Rangappa says:

      Raj – one simple way to look for liquidity is to identify how tight the bid and ask prices are. The smaller the the bid-ask spread, the higher is the liquidity.

  48. P.shunmuga perumal says:

    Consider a xyz company if I buy 51% share of the company then I can enter into a board of that xyz company another doubt also if I buy a share of ABC company and company has been taken by bank due to loan then what will happen to my share

    • Karthik Rangappa says:

      Yes, with any large shareholding (need not be 51%) you can command a board seat.

      In this case, you will still be a shareholder, but the majority ownership would have changed.

  49. VIVEK K says:

    If I have some stock which is trading so high that no one wants to buy it, then what is the use of having such stock, because unless you sell it you are not going to get your investment back. Or, the company buys back their own stock from you?

    • Karthik Rangappa says:

      Irrespective of the stock price, if the company is solid fundamentally, then there will be an active order book for it. Take MRF Ltd as an example. So always stick to fundamentally good stock, and the liquidity will follow through.

  50. Anindya Ghosal says:

    Hi Karthik,
    As you have mentioned when NASSCOM announced the 15% drop in customer’s IT budget it is viable decision to sell. But who excatly will be the buyers in this case as everyone with Infosys shares will look to sell and the ones without the would like to refrain from buying any shares?

    • Anindya Ghosal says:

      and one more thing, do these prices fluctuate only on the basis of assumptions, like, maybe the company is going to do well or maybe it’s going to worsen? does the actual financial scenario of the company play no role?

    • Karthik Rangappa says:

      Different opinions is what makes a market. So at any given point there will be people with opposite views in the market.

  51. Navin Nayak says:

    Hi Karthik,

    Amazing initiative and really informative tutorials.
    I have one question regarding Intra-day trading. The capital gains made from Intra-Day would be taxable as per tax bracket or since these are equities it would be 15%?

    Also can Loses from intra-day be used to offset Short term capital gains?

  52. sahilkala says:

    Hi Karthik,
    I need clarification on a hypothetical situation: Say I have 10 shares of xyz company which is currently trading at 100 Rs. Say I place a limit sell order for 2 shares with selling price as 110 Rs. And also place a limit purchase order for 2 shares at 110 Rs. Will the Last Trading Price jump to 110 Rs ?

    • Karthik Rangappa says:

      No it wont. Following things you need to consider –

      1) 10% jump may not be allowed by exchanges as there are circuit limits for non derivatives stocks
      2) If the stock is liquid then there would be many more competitive bids and asks
      3) Lastly, your order will be net off with each other 🙂

  53. Valentine Gerard says:

    In the previous articles in one of the comments you said that the holding period should be a minimum of two days but in this article you say that the holding period could be even for 5 minutes…. So which is true…?? Could you explain??

  54. Tushar Khandelwal says:

    What if i want to sell a share of Infosys at 1350.5. But the buyers are willing to pay 1350 and 1351. No buyer at 1350.5. Will the trade execute?If so, How?

    • Karthik Rangappa says:

      For a trade to occur, the price has to match between the buyer and the seller. So, in the example you’ve mentioned the trade would not occur.

  55. Gaurav says:

    As it is shown in example that :- selling price are 3002,3006,3011……..which are higher than buying prices.But how these selling prices evolve at a higher value than buying prices in Real Stock Market ?
    How it raise from 3000 to 3002 ?
    How it happens exactly ?
    Can you elaborate please ?

    • Karthik Rangappa says:

      As the expectation increases, the price of the stock increases. This is natural, as traders are willing to pay higher today, for much better price tomorrow.

  56. Amit Jain says:

    If i purchase PC jewellers tomorrow, will i get bonus share on 6th July.

  57. Ravi says:

    Appreciate your effort Karthik and Varsity is very usefull and easy to understand.
    My question:-
    Apologies if my question is so silly but I am very new to stock market. Consider a xyz company, if i buy 1000 shares and then due to an emergency, i need to sell all those 1000 but i could not find any buyers, in that case, could i sell to the company where the share belongs. Is there any way for that?

    • Karthik Rangappa says:

      No Ravi, you will have to sell the shares in the market. You will always find sellers and buyers for shares (especially if you are dealing with smaller companies). You may end up in situations where there are no buyers or sellers only if the company is really small and obscure. For top 500 companies, you will not find yourself in this situation.

  58. Ravi says:

    Thanks Karthik,

    Thanks Karthik, One final doubt, If the share is stuck in the obscure company, then when/how will be the shares be cashed back by the company. [Any examples, Just curious to know].

    Appreciate your help.

    Thanks
    Ravi.

  59. nikhil says:

    hi karthik,
    i checked in zerodha brokerage calculator by entering the values you have mentioned in scalper. It ended up showing me a net loss of
    5500 thousand in intraday equity. Can you provide me with the solution of how this can be solved?

    Thank you.

  60. Saurav says:

    Hi, karthik
    Today i saw the market depth of bombay dyeing. I can’t able to find any offer price and offer quantity all are zero(0), but there is lot of bid price and bid quantity. How can i buy it. I have to bid more or something else through which, i could buy it. But it shows vol traded quantity which is more than 50000. What should i conclude from these, i couldn’t be able to buy this share.

  61. Narendra says:

    Is it necessary for a publicly traded company to disclose salaries of employees? How would the investors know that the employees are getting paid more than they should be?

  62. rohit sharma says:

    Hi karthik Sir,
    I have some doubts and questions
    (1) I heard that Sebi is planning to extend trading time, on 11/sep sebi conduct meeting, may I know what was the outcome of that meeting (no business channel covered that news)
    (2)Weekly contracts on nifty are going to be started, these contracts are future contracts or options like banknifty?
    (3) I am big fan of Zerodha, I want to know what is stand of my broker on time extension, is zerodha in favour or not?
    Thanks

  63. Arpit says:

    Hi karthik sir!
    I wanted to ask that what the day traders or scalp traders do when (suppose today) the shares go down?
    For ex if the shares went to, let’s say, 2990.
    Do they wait for the shares to go up or they take up the losses?

  64. Kshitij Saxena says:

    What if in the example of TCS the investor does not get 10000 buyers when he sells to ger 1000 rupees profit?

  65. Divyarishi says:

    It takes 2-3days to process a transaction i.e. to get the shares in our trading account or to receive the payment then how do intra day stock traders manage to buy and sell the stocks on the same day???

    • Karthik Rangappa says:

      It takes T+2 days ….i.e trade + 2 days.

      When you want to do intraday, you simply have to buy stock today and sell it the same day.

  66. Kshitij Nirgude says:

    Hi Karthik,Your tutorials are really awesome, and i am developing a lot of interest in the stocks market.
    I just have one query..

    As you said, a positive news rises the stock’s price, because there are buyers who want to buy the stock at any cost, and thus the sellers take advantage of this, and set higher selling prices. -And thats how the stock price rises.

    Now, if there is any negative news, buyers will buy the stocks, but.. sellers will try to sell the stock at the maximum possible price only! (why one will set the selling price @95 rupees when the current stock is running at 100?)

    Hence, if the seller sets the price to be Rs100, he will meet a buyer, no doubt!
    But, the stock price should go down because of the negative news, and the “less demand, more supply principle”.

    I am not getting exactly how the price will go down.

    • Kshitij Nirgude says:

      P.S. : The table which explains the price rise is really helpful.
      If you can, please explain the price drop with some similar table.

      Thanks!

      • Karthik Rangappa says:

        Like I said, when negative news hits the market, sellers really want to sell out, they do not really care about the current price since they fear that the price will drop further. Hence the perceive the current price as something worth selling at. This is how the price continues to drops.

        • Atul sanap says:

          but if seller will sell the stock someone will buy the share then how can we say that the price goes down ? if always someone is their to buy the share ,i’m really confused sir please help me out.

          • Karthik Rangappa says:

            This depends on what price the seller is willing to sell. If he is desperate to sell at any price, then naturally the buyers would want to buy at lesser and lesser price, and therefore the price goes down.

    • Karthik Rangappa says:

      Happy to note that, Kshitij.

      In case of negative news, the sellers would want to get rid of the stock at the earliest. They would not want to hold onto for long, hence the price drops.

  67. Ragav says:

    Hi, kudos to ur team..
    I have a questions..I am beginner
    1. How can I buy ipo in primary market? ( During this primary market the ipo index is not listed in nse BSE but how can I buy shares?
    2. Consider this scenario if I sell 100 shares of Infosys at ₹360. to make gain I have to buy it below ₹360..so what is the time period to buy it.( Did I need to buy within a day or else wait for next day to come below ₹360)

  68. Naman says:

    In the above example of scalping, the trader buys 10,000 shares of TCS at Rs 2212 and sells at Rs 2212.1. You said that he made a profit of Rs 1000 but the brokerage calculator shows the LOSS of rs 6340.

  69. P.s.perumal says:

    How many percent of share is required by a shareholder to appoint a board director

  70. Ron Kalra says:

    Hi Karthik,
    I’m writing this on 25/10/2017. Sorry to ask you a very stupid question. Today i saw most of the PSU banks have gained due to some government aid annoucement or for whatever reasons. Now my question is that the gains are as high as 20% ( sbin ) and in some cases it went to 30% ( PNB ). According to my knowledge if any stock gains/loss ( +/-) 10% then the trading for that particular stock is halted automatically for that particular day. So, how come these stocks gained 20%, 30%.

    Also i was looking at sbin oct 300 ce and at one point of time it was as high as 20,000% ??? I mean is this really true ?? Is it really possible to make that much percentage in one particular day in options.

    Many thanks in advance

    • Karthik Rangappa says:

      Ron, stock circuits, in general, are there to prevent excessive moves in stocks so that investors are protected against such moves. However, market participants can protect themselves from such excessive moves by hedging themselves in F&O. Hence there are no circuit limits for F&O stocks and they can move to whatever extent. The stock which is not there in F&O has circuit limits.

      And yes, 20K% is true, options can do this magic 🙂

  71. Sachin Singh says:

    1) What’s your opinion on penny stocks? Obviously, the pro here is that one buys these stocks cheap & even if there’s a slight increase in price, there can be good profit. Con would be the lack of liquidity I guess.
    2) Post-market hours, sometimes there can be some news which dramatically affects the price of a particular stock. Suppose, the news is positive & the stock price will increase the next day. So, how does it work exactly? Do people place their bids & it gets accepted in the order which they have placed (first-cum-first-served)? If someone reads the news late & wants to place an overnight order, will his chances of getting the stock at a lower price be relatively less since he’s placing the order late?

    Thanks!

    • Karthik Rangappa says:

      1) The perception of cheap or expensive should not be a function of the stock price. It should stem from business valuations. For example, a stock could be trading at 2500/- but from a valuation perspective, it could be trading at 10x earnings, whereas its real worth could be 20x, this according to me a cheap. Regarding penny stocks, chasing them is like buying a lottery ticket and hoping it turns into a jackpot.
      2) In the event of a positive news, the buyers would want to sell their shares at a higher price, and they know that the buyers would be willing to buy it at a higher price. This drives the prices higher at the opening. Likewise for sell orders. Please note, placing the order early does not really help, placing the order at the right price does.

  72. Nikhil says:

    Hats off to you. The explanation is really good however I have doubts.
    1. Stock price shown is the last traded price . Am I right ?
    2.Let us say the price for any stock is 100 and I place an order of 10 share , is it possible that my order may not get fullfilled? because 10 shares are not available at that price or my oder will be placed partially?
    3.In the above scenario do I have the option to buy/sell in the trading terminal for lower/higher price than shown for a particular stock ?

    • Karthik Rangappa says:

      1) Yes
      2) If the stock is not liquid, then yes, there is a chance that it may not get filled
      3) Yes, but remember, for the trade to go through there has to be a counterparty available.

  73. Shanmukh says:

    “17.16% in 6 months which translates to 34.32% (17.16% * 2) for the year” – Here, compounding is not used when extending for the year. Shouldn’t it be [(1.1716)^2 – 1]*100 %. = 37.2%?

    • Karthik Rangappa says:

      If its return for under a year, then compounding is not required.

      • Shanmukh says:

        Why? If it grows with 17.6% for six months, then assuming if same 17.6% growth happens for next six months, compunding should be used right?

        • Karthik Rangappa says:

          Compounding as a concept works best when you intend to measure the year on year growth. If you are measuring returns within a year, then take absolute returns.

  74. Ashutosh says:

    Hi Karthik,
    Appreciate the initiative and the content of varsity.

    1 issue which i have faced while analyzing Petronet LNG that is they had a stock split 2/1 on 03-Jul-2017, which is should be captured accurately in Kite also but it showing as sudden drop in share price.

    As i am new in trading and learning from varsity and questionnaire, need you help on the same.

  75. deepak says:

    Day trader buys 100 shares at 2212 at 9:15 AM and sells it at 2220 at 3:20 PM and making a profit of “Rs 800” , How? (Sorry , new to this)

  76. Shashank Verma says:

    Can we say that total number of stocks in market available at a time is equal to summation of
    1) No of stocks authorized by a company for sale.
    2) No of stocks put by investors (like normal people, company e.t.c) for sale in the market how already have stocks of that company and now want to sell it.

    Hope I made my question clear.

    • Karthik Rangappa says:

      Yes, in other words, this is called the ‘Free Float of the Company’.

      • Dinesh Kumar says:

        I have a question. What is the free float of a company? Is it the value of number of Shares which nobody owns? What should be any person’s expectations from intraday trading in terms of % return?

        • Karthik Rangappa says:

          Free float is the total outstanding shares held by the public – or available in the stock market. Higher the free float, higher is the liquidity, hence easier to buy and sell shares for intraday.

  77. Dheeraj Moudgil says:

    Hi,
    I have a doubt here after reading above article. Its written the price moves because of expectation of news and events and buyer buys the share at whatever price the seller wants in case of positive sentiment. Lets consider a positive scenario, A stock with price 100 is trading and then comes a good news for the company. The seller now wants to sell the share at 105 and buyer buys it for 105. Now seller has sold the share to buyer getting his principal amount and profit of 5 rupees. What did company got here?

  78. Harsha says:

    Hi,
    A simple doubt. Price of a particular stock in NSE at time t say 500. Let’s assume after some time the price reaches to 550 due to aggresive buyers[buyers given market orders]. But even in BSE the price would move nearly 550. There is no way that equal proportions of buyers/sellers available in both NSE and BSE for each and every stock. But still the stocks in NSE and BSE moves proportionately. I am not able to get the logic of price action in BSE.

    • Karthik Rangappa says:

      It is not about the number of buyers or sellers, it is more about the price they are willing to pay. Hence the price moves in tandem.

  79. Esvar says:

    It is said the secrets of a public company should be revealed right. What exactly does that mean ?
    Thank you.

  80. Yashwik Ahuja says:

    Can we control the markets for like a very short period using demand and supply theory?
    for eg. if i want a share price to rise…..we can convince other traders to buy that share which would significantly raise its demand thus leading to increase in share price.
    ?

    • Karthik Rangappa says:

      Technically yes, you are your associates can keep buying the share at every fall, this will support the price and the stock may go up. However, this is easy said than done as it would involve lots of money.

  81. Ranjith says:

    Hi Karthik,
    Firstly I would like to appreciate your efforts to explain it in a simple manner.

    1) My question is why are we calculating Returns, absolute and CAGR. What is its use?

    2) What happens in a situation where we want to sell at the certain price and there no buyers? Will it get expired after some time?
    Thanks in advance 🙂

    • Karthik Rangappa says:

      1) To understand how well your investments are performing. For example, you bought a stock at 200, now its trading at 220, translating to a return of 20%, which is better than a fixed deposit. If you were not able to calculate the return, how else would you benchmark it to FD?
      2) No, in this case, your order will not go through.

  82. Atul sanap says:

    Hi sir , the example mentioned of scalper ,as he buys and sells the trade within a minute but is it possible to do such kind of tarding in such less time ?

  83. Sourav says:

    Is day trading as a lone wolf a viable career? Or it should be done by people working at proprietary trading firms? Do ‘people’ day trade or is it the algorithms?

    • Karthik Rangappa says:

      Depends on you actually. I used to day trade with a bunch of people, it used to be fun. I’ve day traded alone, and I remember enojying that phase as well 🙂

  84. Aravind says:

    I have one doubt.
    In your example, where I try to buy 200 shares of Infosys at 3030. So the algorithm tries to find sellers who are willing to sell at 3030. What if there are many sellers and each are trying to sell at different price. For e.g. one may think of selling at 3032 and one may try to sell at 3035. And how does the stock exchange software handle this situation?
    Can you please explain.

    • Karthik Rangappa says:

      Aravind, this is done by the order matching systems at the exchange. If you have expressed interest in buying a share at a certain price (via limit order), then you will get to buy it at the same price, the order will remain in the system till this match happens, and if the match does not happen within the day, the order will get cancelled out.

  85. Bhavik says:

    Hello sir i have a one query about margin/leverage provided on intraday equity by zerodha.
    Why zerodha or any broker give margin to their customer?
    If we have only 5000rs in account then why broker give up to 20× margin?
    Any extra charge for margin facility?
    How margin works on exchange?

    • Karthik Rangappa says:

      No extra charges as such for providing margins. Margins are provided to ensure your maximize bet, assuming your point of view is right. But please do remember, in case the bet goes wrong, you can lose quite a bit with margins.

  86. rajesh solaskar says:

    Dear Karthik sir
    I want to know more about zerodha opentrade. 1) can I place the order as the star (which one I am following) placed for him? 2) How popular is the opentrade facility in zerodha clients? 3) can it be usefull to increase my profitabilty?

  87. Prakhar says:

    Sir which module should I refer to understand mutual funds?

  88. Vijeeth says:

    Hi,

    can anyone clarify who exactly is rising the daily share value ? Is it Investors or Traders ?

    Let us take a scenario below.

    There is a positive news in the market for Infosys.
    Currently it is getting traded at 3030.
    There is one seller who wants to sell it at 3050.
    There is one buyer who wants to buy it at 3050.

    In this instance will the current share value(3030) get updated to 3050.
    If yes why the buyer is giving a value of 3050 here instead of 3030 ??

    • Karthik Rangappa says:

      This is a collective effort of all market participants.
      Yes, in a sense what you have outlined is the way it works. So a trade will happen at 3050 and the share price will jump from 3030. Buyer is willing to pay 3050 because he fears no one will sell him at 3030 and he also expects the price to go much higher than 3050. This is bullish sentiment 🙂

  89. Anish says:

    Dear Karthik ,

    I have one doubt. Iam very new to this platform and i want to do trading and efforts you guys are taking are wordless.
    As per my understanding while trading one is earning money due to other’s greedy or fear, correct.
    So what are the benefits company gives to the public for buying that company’s shares.
    I never heard like people telling that they are getting profits from their company ( may be some companies are giving like dividends ).
    So company just gives a play ground to play with peoples fear and greedy .
    Please clarify , i think i may be wrong

    Anis

    • Karthik Rangappa says:

      Anish, here is the thing. The share are listed and you can buy them today with a hope that the company does great business and their profits increases over the years. If this happens then the share prices also increase and therefore your initial investment will be highly profitable and creates wealth for you. This is how long-term investment works.

      Meanwhile, on a daily basis, the stock price fluctuates. This fluctuation gives certain trading opportunities and people end up trading the stock. So essentially you can either invest or trade or do both.

  90. Arun Venkatesh Murthy says:

    Thanks a lot for these beautifully written articles team. Based on my understanding only in primary market aka IPO , the company actually makes money. Once the stocks are listed, however high/low the prices climb/decent that institution does NOT gain/lose anything, it only effects the personal gains of shareholders. So for example Infosys stock prices just trade on the news about Infosys, but Infosys has absolutely nothing to gain from it except perhaps as a marketing number. So my question is isn’t stocks shallow, they are based out of nothing , I don’t understand why people buy or sell it, it’s just like any crypto currency or betting people take on cricket match or whatever. I don’t understand how the secondary market participants are helping the economy grow, it’s more like one gains the money the other looses by being on the unfortunate end of the bet. Let me know if my understanding is far from truth

    • Karthik Rangappa says:

      What you’ve said is partially true. The company makes money at the time of going IPO by means of raising the funds. Once the shares are listed, there are shareholders of the company, literally millions of them. The share will perform well if the company performs well. If this happens, then the wealth is created for the shareholders, which is, in turn, beneficial for the economy in multiple ways.

      Meanwhile, people also trade the stock to take advantage of multiple gyrations in the stock. This is perfectly legit. However, these short-term trading activities does not really help the company.

      • Arun Venkatesh Murthy says:

        Thanks for the quick response. Yes I agree shareholders make money in stock market
        But increase in stock prices won’t allow the companies to raise more capex, so company per se won’t make money but their share holders do. I feel regardless of short/long term trades or even investments won’t improve the prospects of the company isn’t it , only it’s shareholder’s wealth improves. I have this follow up questions
        a) how can company raise more capex, after getting listed, if it does not have any reserves , only internal accurals and debt ?

  91. Pravin says:

    Hello sir ….Really frustrated with trading don’t no what to do .Here are my trading details
    ..On 29 th may everreday batteries reported a considerable loss in annual report so I decided to short it in next morning as soon as market open on 30 th may it open 6% gap down , i take short trade hear at price of 240 but it moves in up direction so I exit my position at price of 247 …
    Couple days back ashok Leyland reported a good set of number so i am expected that stock will move upward so I decided to buy it in next morning as soon as market open but hear on next day it moves in downward direction again I am exit my position with loss …..So plz help me ….What is wrong with these trade …What i am missing here ….Or my thinking process is wrong ….

    • Karthik Rangappa says:

      Pravin, remember this – anything that seems to be logical and straightforward is already factored in the market. What you know, everyone knows. So a counter reaction is quite expected. This will make sense to you as you spend more time, gaining more experience in the market.

  92. Satish says:

    Why is Swing Trader more open to Risk even though he/she can hold a trade for considerable amount of time.

    • Karthik Rangappa says:

      The only difference between day trading and swing is that the overnight risk that swing trading carries.

  93. Kirankumar Muley says:

    Dear Sir,
    E.g. Current XYZ company’s share price is 50/- and they announce to buy back at 200/- and I’ve 100 shares at 150/-.
    How this works? How i can sell my 100 shares at 200/- , because current share price is 50/-?
    or as company starts buying its share, slowly price increases to 200?
    Sorry if my question looks stupid.

    • Karthik Rangappa says:

      When a company announces a buyback, they will do so at a specific price. In this case, Rs.200/. If you intend to participate in the buyback, you will have to do so at the specified buyback price.

  94. Monalisa says:

    Disclaimer: This question might be irrelevant, but I have been thinking on this doubt from past few days. Lets say company ‘X’s current stock price is 60. Normally the trend as per history is between 50-65. The historical data shows that maximum price in last 10 years was 80. But on the other hand, company’s VP along with few other old employees working for more than 3-4 years says that the price might exceed 110, in coming 3-4 years.

    So the question here is, in such cases shall one rely on the historical data or on the internal news?

  95. Tapan says:

    Hey Karthik,
    I had a fundamental question. How are the changes in stock prices quantified from the demand and supply observations? eg. in the infosys example, why 3016 and not 3015? Who decides these prices?

  96. Senthil Kumar N says:

    Hi Karthik – I recently read articles that BSE is going to allow startups to raise funds and NSE has already allowed it some 2 years back, how is it possible when they are not listed nor they will be issuing an IPO like other companies..?

    • Karthik Rangappa says:

      The platform allows you to list with lesser compliance requirements. The NSE platform is called ‘Emerge’, check this – https://www.nseindia.com/emerge/

      • Senthil Kumar N says:

        Thanks Karthik.. If we as a person buy in those stocks will we become part of VC or PE or how will it be accounted for ? How do we identify and buy in those shares ? is the normal demat & trading account enough ?

        I hope one of this might become future Infy or Page ind

  97. prabhas says:

    Are wrren buffets principles are applicable in indian stock market….can we get companies with lower values of P/E and P/BV in indian markets??

  98. Chanu says:

    Hi Karthik, The Bids and offer shown in kite are only of Zerodha’s User or they include other brokers offer bid also?

  99. Chanu says:

    Pls post your analysis and view on today’s HDFC AMC .
    Also DO’S N DONTS as trader.

  100. Divyanka says:

    Sir are their any type of packages to start trading at zerodha? Or we can start with whatever amount we want and services?

  101. Prakash says:

    I am not able to understand how the investments made before IPO by the investors and the investments made by people in stock market.

    1.When the company gets profit, it’s generally shared to all share holders. So the profit is equally shared by the people who invested in secondary markets also?

    2. What if a single person holds all of the stocks (for example) and wants to sell his share , should promoter buy it mandatorily?

    3. How exactly the investors before IPO and people who invested in stock markets differ as investors

    Could you please shed some light on this?

    • Karthik Rangappa says:

      1) Not equally, but to the extent of the shareholding
      2) No, he can offer it in the market
      3) An investor is an investor, does not really matter at which point he gets in.

  102. Omkar Pandit says:

    How to calculate CAGR for 14months or 19months or 29months?

  103. Siddharth says:

    A basic question, if I plan to hold a stock for a short period say less than a year for its price, what would be the tax implication
    and Zerodha brokerage charges?

  104. Robin says:

    Thanks for this article. your articles are so clear, simple and easy to understand.

    Could you tell few successful indian stock traders names? I know you are one of them. Do you take any classes, i’m willing to join.

  105. Vivek aanand says:

    Is there any Whatsapp group regarding stock market training of zerodha… Pls help karthik rangappa sir and all my frnds… Reply plzz… I’m a beginner.. And don’t know how to trade

  106. Sreeniketh H says:

    I have two questions

    1. Is it correct that the stock price seen is the value of the last trade occured?
    2. You mentioned about buyers bidding for X amount, and sellers offering to sell for Y. Going through the comments, I see that I can offer/bid through the platform using limit orders. Are limit orders the only way to do this?

    • Karthik Rangappa says:

      1) Yes, the price that you see today is the price at which the stock traded last
      2) Yes, else your order would go as a market order and you would trade at the best possible rate available.

  107. Divyanshu says:

    Hey Kartik. I have a doubt.
    Say there is a good news regarding a company. Now the share price of that company will go up. I don’t understand that how do you fix the amount by which the share price will go up. Say it is trading at 120 before now after good news it is trading at 122, so how did it get decided that after a good news it will be traded at 122.

  108. NAJEEB T P says:

    My passion to learn a bit more about market dynamics and its scientific facts came up with an interesting finding and thought I will jot it here for a general awareness.The underlying search was to find out whether the market motion is a diffusion process like particle motion or a demand and supply concept or a mean reversion based valuation process.In a nutshell, on a microscopic view, it is a diffusion process, on a normal view it is a demand and supply process and in a telescopic view it is a valuation process.The underlying motion is connected to the option motion based on the square root of time principle.The variables, underlying value, underlying price underlying log return, underlying volatility and option sensitivity are interconnected by motion principles based on square-root law and time lengths.
    For eg if the underlying price is 100 and the daily underlying volatility is 2.506935 percent then ATM option price ought to be 1 on a daily time length provided the volatility is constant.The same option would be 2 on a 4-day time length, 4 on a 16-day time length and.5 on a quarter day time length and 4 divisor factor rule.Similarly, the underlying volatility is also based on this square root of principle rule which expresses in option volatility.It may seem Greek initially but in reality it is how market dynamics works.I have created a black box excel sheet spread for easy understanding and it will be very useful guide for those who trade options.This excel sheet will help you to buy options on leptokurtotic moves and sell options on mesokurtic and platy kurtotic moves.Markets are nothing but a mix of irrational randomness and rational calculus as the 3 nobel laurates for economics of 2013 said.

  109. Arun says:

    Good article

  110. Janat says:

    Can there be a situation where there is no buyer-seller match? For example, say someone wants to sell MRF shares ( LTP 63,899.90) but no one is willing to purchase at such a high price. What happens then? Will the trade be denied outright or will it remain pending?

    • Karthik Rangappa says:

      Yes, quite possible. It will remain pending in the system till the end of the day or till you find a counterparty, whichever is earlier.

  111. yashwanth reddy says:

    Suppose a company’s share price is 2000 at 10:00 am. After 2 hours the share price changes to 2020.
    who will decide the share price in that short span of time?? Is it the company ??

  112. Darshan says:

    Excellent @varsity & Zerodha team.
    If the LTP of x stock say around 10.00 am is 100 and there are very good news regarding the company, and if i have 1000 shares that i would like to sell on the same day before day trading closes, is there is any specific % that i need to quote the selling price, since we do not know at what price the stock maybe traded last, so if i believe that stock might close at 200 can i put in a sell trade at 11.00 am at price 200/- wherein the LTP is 100/- or i need to keep on checking the price in regular intervals.?

  113. Prabhu says:

    Hi,

    Recently Bharti announced rights issue in the ratio of 19:67. I have only 60 shares as on record date. Will I be eligible for applying for rights issue?

  114. Bala says:

    Hello sir, as you said, when I buy 100 stocks for 3000rs, the amount for that is debited from my account and credited to the person who sold this 100 stocks to me. Then how can a company rise funds from this as the main purpose of giving IPO is to rise some funds for the company. But here the money is circulating between the traders. How is this possible?

  115. Madhukar says:

    Hi Karthik I have a problem with kite,I am unable exit the empty positions.why it is so? Today I sold Dabur shares in intraday and bought them back again .after that I wanted to sell some more shares,so I did it from MarketWatch but as the positions are not exited price is averaged and I had a loss.

    • Karthik Rangappa says:

      Madhukar, after buying back, did you ensure the position was completely squared off?

      • Madhukar says:

        Yes , I squared it off . I had a loss because of confusion created by this averaging and the show of total P&L in kite mobile.when I want to remove position it is showing ” can’t exit empty position” .is it only for me ?or is it the disadvantage of kite mobile? or am I missing something?

        • Karthik Rangappa says:

          There is no disadvantage as such, you will have to just figure how the system works 🙂
          You need to keep an eye on the open quantity, Madhukar. As long as you have a non zero quantity, you have a position open and the P&L is applicable.

          • Madhukar says:

            Yeah really I am not understanding how this kite mobile works (in showing positions). can anyone please explain this scenario ,suppose I bought 100 shares of a company at 50 rs ,now in positions it shows the company name ( and a figure + 100 above it) average price as 50 ,LTP and live p&L according to LTP .if you click on the scrip ,under symbol B “add” is written under symbol S “exit” is written .now to sell those shares you have to click on S symbol .after selling is over ,now in positions it shows the company name ,average price as 0 ( zero) ,LTP and P& L . This much I understood , there is no problem in it . But now if I want to remove that scrip , there is no option of removing that scrip from positions . May be there is no problem for other users with the scrip not removable but to me it is a big problem . Why? Because after some time if I buy that same 100 stocks again this time at 54 rs ,it will show the average price as 52 and it will show the total P& l of the previous and present trades . what can I do ? I have to adjust or is there any solution for it?

          • Madhukar,
            The buy average price is averaged over the multiple times you buy/sell that instrument. This is the expected behavior as we are required to show the weighted average of the total trades taken for the day. The only alternate you is to track your most recent buy average from the orderbook.

  116. Ashwani says:

    sir
    after the mkt is closed ,price shown in kite (nse) is differnet than nse website price and moneycontrol(nse)?

  117. Ashwani says:

    sir
    most website shows stocks charts of 2000-2001 onwards ,
    where we can find charts of 1990’s and 1980’s

    thank you

  118. Ashwani says:

    sir , it shows from 2000’s not before .

  119. Clinton Lobo says:

    Hi, I have a quite a few queries on CAGR.
    I wanted to know how the CAGR gains are reflected in our demat account. Is it calculated only after selling the shares ? Or is it calculated dynamically as time progresses as current value ?

    For shares which are inherited/gifted, will CAGR be calculated from the original purchase date of the share or from the date of transfer of the shares ? What is the role of depository participants in CAGR calculation ? Is CAGR calculated by the company whose shares have been purchased ? After transferring the shares is the purchase date entered into the Zerodha critical in determining the CAGR calculation ?
    Thanks for your help.

    • Karthik Rangappa says:

      The one you see in your DEMAT is the absolute gains and not really CAGR. For now, you will have to calculate the CAGR on your own. It is quite straight forward, as explained in this chapter.
      For inherited shares, it makes sense to calculate from the time you inherited. Depositary participants can do this math for you. Also, the purchase date is critical, without which the CAGR cannot be calculated.

  120. Clinton Lobo says:

    Thanks for your reply. I came across an answer on taxation of inherited shares in economic times dated 3rd Jan 2018 (http://www.ecoti.in/ys366Z). It says to consider the past date and price. I suppose this is only considering the tax on the shares and not CAGR ? So while entering discrepancy in Zerodha what is recommended to put as purchase date and price ?

  121. Pratik Shah says:

    Dear Karthik,

    That cartoon at start made me chuckle. That is a great piece of humor. Thanks for this wonderful information you are sharing. Absolutely amazing!

Post a comment