PARONAT

Frequently Asked Questions

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  • Q1. Who is a broker?

    A broker is a member of a stock exchange, who is permitted to do equity trades in there. Broker is enrolled member of the exchange and is registered with SEBI.

    In other word broker is an intermediate person (or a company) between an investor and a stock exchange. They buy & sell shares and other securities for investors in stock market.

    Please note that an investor cannot direct deal with stock exchange.

  • Q2. What is Securities Transaction Tax (STT)?

    Securities Transaction Tax (STT) is a tax being levied on all transactions done on the stock exchanges.

    Securities Transaction Tax is applicable on purchase or sale of equity shares, derivatives, equity oriented funds and equity oriented Mutual Funds.

  • Q3. How is SENSEX decided?

    Sensex, a stock market indexes was launched in 1986 by BSE (Bombay Stock Exchange). It evaluates the fluctuations in stock prices of 30 big companies in terms of market value, turnover, profit etc. The value of the Sensex is calculated on every minute basis. If the Sensex is going up that means the stock price of most companies of BSE is increasing and if the Sensex is going down that means the share price of most BSE companies is decreasing. The base year of the Sensex is 1978-79 and the base index value was set at 100.

    How Sensex calculated with Example

    To start with, let's assume there are 2 companies X and Y listed on BSE and Sensex is currently on 30,000 points. Assume that the worth of 1 share of 'X' is Rs. 200 and it has a total outstanding share of 10000 whereas the worth of 1 share of 'Y' is Rs. 500 and its total outstanding share is 7500. So the total capitalization is:

    (200 x 10000)+(500 x 7500) = Rs. 57.50 lacs

    Now suppose the next day the share price of the 'X' company rises to 25% (200 + 25% of 200) which is 250, and the price of the 'Y' company's shares decreases to 10% (500-10% of 500s) which is 450. Now the total market capitalization of BSE at these new share prices will be:

    (250 x10000) + (450x 7500)= Rs. 58.75 lacs

    That means the total market capitalization rise from 58.75 lacs form the previous level of Rs. 57.50 lacs; which is showing a 2.17% increase in the market capitalization of the BSE.

    So due to this increase in price the Sensex will reach 30651, which is 2.17% higher than 30000.

  • Q4. What is Future and Option?

    Options

    Future Contracts

    Options are a type of derivatives deriving value from an underlying instrument.

    Future Contracts are a type of derivatives deriving value from an underlying instrument.

    Gives rights, not the obligation to the investor to buy or sell before the contract expires. Only buyer or seller has obligation to buy or sell.

    In future contracts, the buyers and seller must be agreeable on a specific future date for trading before the expiration date.

    Buy and sell at the strike price.

    Buy and sell at an acceptable future price.

    Helpful for retail investors to trade in a certain quantity.

    Helpful for institutional investors to trade in big quantity.

    Options are less Risky than Futures.

    Futures are comparatively riskier than Options

    Can provide unlimited profit but limited loss contract to buyers.

    Can provide unlimited loss and profit to the buyers.

  • Q5. What is the difference between BSE and NSE ?

    BSE (Bombay Stock Exchange) and NSE (National Stock Exchange) is the top leading stock exchanges in India.

    Key Differences:

    • BSE (incorporated in July 1875) is older than NSE (incorporated in Nov 1992).
    • According to the World Federation of Exchanges (WFE), in the top exchange ranking by market capitalization, BSE stands at 10th and NSE at 11th position as of 30th Nov 2018.
    • Electronic exchange system and BOLT electronic system are the online trading platforms belong to the NSE and BSE, respectively. They are online software to manage market positions with the help of financial intermediaries.

    The NIFTY benchmark index is for NSE and Sensex for BSE.

  • Q6. Why do share prices move up and down?

    The answer in two words is "Demand & Supply". Simply if there is more demand of a company shares and less people are willing to sell them, the share will move upwards. If there is a huge supply but no body is interested in buying shares at the current price, the share will move downwards.

    Now the major question is how does demand or additional supply comes in to the market and the answer is, there are many factors involve in this including company's financial result, overall economy situations, sector performance, government rules & regulations, major political & natural events, future of the company, upcoming products & services, company management changes, stock market frauds etc.

    Any of the above and many more factors affect demand & supply of a company stock and ultimately move it prices to go up & down.

    It's very hard to predict stock movement and require lots of research and expertise.