Basics of Stock Market Lecture Notes

Introduction

• Instructor: Rachana Ranade
• Chartered Accountant since January 2009
• Conducted over 100 sessions on investment awareness, including:
  • Sessions for CsID Pune
  • Indian Army Southern Command
• Designed a 10-day course on stock market basics

Importance of Stock Market Education

• Many people know about the stock market but lack detailed understanding.
• Common misconceptions exist about the stock market being risky or a gamble.
• Aim of the course is to teach systematic and standardized knowledge from the basics.

Course Structure

• Duration: 10 days, 1.5 hours daily
• Content will be recorded for those unable to attend live sessions.

Myths about Stock Market

Myth 1: Stock Market Investments Are Very Risky

• General belief is that stock market investments are risky; however:
  • Historical data shows long-term growth in markets.
  • Sensex growth from below 5000 in 1991 to approximately 35,000 in 2018.
  • Short-term volatility exists but long-term investments can yield positive returns.

Myth 2: You Need Strong Financial Knowledge to Succeed

• While having finance background helps, many successful investors did not have formal finance education:
  • Examples: Warren Buffet, Rakesh Jhunjhunwala, and others.
  • Understanding of fundamentals and analysis matter more than formal education.

Myth 3: Small Investors Cannot Make Money

• Small investments can lead to significant profits:
  • Example of successful investors starting with minimal funds.
  • Importance of researching and investing in undervalued companies.

Myth 4: Only Renowned Companies Provide Strong Returns

• Successful investments can be made in both large and small companies:
  • Focus on common sense and everyday products.
  • Example: Britannia’s consistent growth and products.

Key Concepts in Stock Market

• Foundation of Investing: Understanding the market structure.
• Long-Term vs. Short-Term Investments: Importance of holding shares.
• Face Value vs. Market Value: Understanding share pricing and splits.
• Dividend vs. Interest: Dividends paid by companies vs. interest from fixed deposits.
• Stock Splits: How companies might reduce stock prices to attract more investors without losing value.

Examples of Successful Investors

• Rakesh Jhunjhunwala (Chartered Accountant)
• Parag Parikh (Started from humble beginnings)
• Radhakrishan Damani (Owner of DMart)

Study and Research

• Importance of analyzing financial statements for investment decisions:
  • Top line (turnover) and bottom line (profit) growth.
  • Case study of Britannia: consistent growth in turnover and profits over 5 years.

Conclusion

• Course aims to dispel myths and provide foundational knowledge.
• Encourages active participation and inquiry.
• Homework assigned: Research limits of tax-free long-term capital gains and dividends.

Next Session

• Follow-up on assigned homework and deeper exploration of stock market mechanisms.