In the earlier articles we learned how a business works , now lets see some basic terms used in stock market and how you can use these terms to set a criteria to determine whether a stock is worth investing.
Before we start , please download the Moneycontrol App on your mobiles or just go through moneycontrol.com to learn more about the stock markets.
Click on this dropdown everyday to see which stocks are in news , why they are in news and the subsequent direction of stock price with respect to the news. This is a great step to learn how markets react to different news.
Lets take the case of Infosys , you search for Infosys on the search bar in Moneycontrol.com and you get the below:
Okay , so the infosys stock has a code in BSE which is 500209 , NSE code is INFY and the ISIN stands for International Security Identification Number. Sector is Software.
The price in two exchanges is shown accordingly. (We have 20 regional exchanges as well , but the main volume and trade happens in BSE and NSE)
So you would be thinking the price discrepancy of 10 paise between BSE and NSE. Shouldn’t the price be same when it is the same Infosys share? So the thing is BSE and NSE calculate the price of a particular share with respect to the demand and supply. So if demand more and supply less , price will go up and if the demand is less and supply is more, naturally the price will come down. So as you can see BSE has lesser volume and NSE has around 3 times more volume than that of BSE. So thus it can be inferred that the demand is slightly more than the supply in BSE than that of NSE and thus BSE price is more.
- Price is shown in green if price is going up , with the rupee gain in number and percentage in green color beside it.( in BSE 3.05 rupee gain , 0.32% gain is there , so it is shown in green color)
- Price is shown in red if price is going down , with the rupee loss in number and percentage in red color beside it.
- Volume is nothing but the addition of quantity of total shares bought and sold. So if 10 shares are bought and 10 shares sold , volume is 20.
- Previous Close is the price at which the share price ended on the previous trading day. If today is tuesday , then Monday’s closing price is given.
- Open price is the price at which the share started trading.
- Bid Price(qty) is nothing but people who want to buy shares are quoting their price and quantity. Should their bid match with the sellers ask price , the trade will happen.
- Ask Price (qty) is nothing but people who want to sell shares are quoting their price and quantity. Should their ask match with the buyers bid price , the trade will happen.
- Always notice bid is less and ask is high. Because Bidders want shares at low prices and Askers/Sellers want their shares to be sold at high prices.
- Market Depth shows total buy quantity and total sell quantity which tells the sentiment of investors. If buy is more then its bullish , if sell is more then its bearish.
- 52 Week Low high means the maximum and minimum price of the stock in the given 52 week or 1 year time frame.
- L/U price band stands for Lower and Upper Price Band. Its the minimum price and the maximum price to which the share can fall or rise , post which the trading in that particular stock will be halted. Check this site to see how much time the trading will be halted: https://www.nseindia.com/products/content/equities/equities/circuit_breakers.htm . This is done so as to cool down the market and stop speculation.
When you scroll down you would see a table like this , this shows the standalone results. Standalone results mean the financials of Infosys only.
But what we need to see is the Consolidated financials. Consolidated Financials show the result of Infosys combined with its subsidiary companies. These days big companies have a lot of subsidiaries so it makes sense to always look at consolidated results.
- Market Capitalization is the price of one share multiplied by the number of shares. Basically it tells what the company is worth.
- EPS – Earnings per share. This shows Profit after tax divided by number of shares. If a company has a profit after tax of 100 rupees and if it has 100 outstanding shares, EPS will be one rupee.
- Price to earnings is a ratio which shows how much a person pays for a share for the underlying earnings. For instance P/E here is 15. the calculation is Current market price : Earnings per share ( 950 divided by 62).
- P/C stands for The ratio of put trading volume divided by the call trading volume. For example, a put/call ratio of 0.74 means that for every 100 calls bought, 74 puts were bought. ( more on this in the subsequent posts)
- Book Value is the net asset value of a company, calculated as total assets minus intangible assets (patents, goodwill) and liabilities. It shows what each share is actually worth.
- Price to book just shows how much overpriced or underpriced the current price of share is with relation to the book value or net value of each share. In this case it is 3. Because Book value is 300 and Current market price of each share is 950.
- Dividend Percentage is the calculation of dividend payout as per the Face Value of share. So since is it 500% , the dividend paid out per share was 25 rupees.
- Dividend Yield is the calculation of dividend payout as per the current market price of share. So since it is 2.73% , it means 25 rupees was paid dividend per share. (2.74% of 950)
- Face Value: A share of stock has a market value and a face value. The market value represents the current value that one share of stock trades at. The face value, also known as par value, is the legal capital of the share. The face value of stock has no effect on the value of the stock but has legal and accounting consequences for the company. A company determines the face value of stock before distributing shares. The face value of a share of stock doesn’t change, while the market value can vary based on company performance. A company can’t sell stock for less than face value, but it can sell it for more. The difference between what shareholders pay for a share and the face value is referred to as additional paid-in capital. Usually maximum face value is 10 and minimum face value is 1. Infosys’s face value in beginning was 10 , but then it went for split so its face value halved(that is they split a share of face value of 10 rupees into 2 shares of 5 rs face value. When that happens market price of the one shares halves as the one share now becomes two shares)
- Industry P/E : This just shows the average P/E for the whole industry which is computer softwares industry in this case. This is just a comparison indicator to gauge whether a particular company trades at a premium or discount with respect to the whole sector.
- Deliverables: As we all know there are 2 types of trades viz Intraday (buying and selling at the end of the day)and delivery ( for long term). Deliverables shows how many shares are being bought for long term or shares which are being taken for delivery. So here 60% shares are being taken for delivery and 40% being traded as intraday trades. So even this is an indicator to gauge how investors are feeling regarding the share. Here they are thinking about long term since 60% are taking delivery. But again this is just a percentage for a single day and hence this is not a perfect indicator to conclude something.
I have covered all the basic terms which are used in Stock markets. In the next chapter I will cover more on navigating on Moneycontrol , looking at the financials and some more complex sounding but easy accounting terms.
I hope you liked the article,