So I welcome you all formally to this amazing batch of basics of stock market. Let me give a quick introduction about myself first and then we'll move on with the topic. Okay.
See Rachana Ranade, naam toh sunai hoga. Okay, so I cleared CsA in 2008, November. So I'm sure you know that the result comes out in January 2009. So this year marks 10 years of me becoming a chartered accountant.
So I thought why not take one step ahead and peek into some area which I've never taken as a proper formal session. So that was the reason why I thought of taking this small course on basics of stock market. Did I take a sudden jump into this?
The answer is no. I'm also a resource person of a government organization, wherein I've taken more than 100 sessions on investment awareness. And two sessions are very close to my heart, because one was for CsID Pune. CsID means proper CsID of Pune.
And second one was for Indian Army Southern Csommand. having a word with so many participants through more than 100 sessions. Of course, I've taken a lot of corporate trainings as well in the same area.
But then I talked to so many people and I found one thing which was almost very much in common that everyone knows that there is a stock market. But if I ask them two or three questions, they might give me an answer, but it would be a very vague answer as such. They would not give me pinpointed answers. And so many people said that, ma'am, There is content on YouTube, no doubt about that. But we are not, you know, there is different content on YouTube basically.
There is no formalized content like this. Like from the very start, like we study in school, A, B, Cs, D. If someone studies like that, it will be fun. So I said, I am there. So then I thought that let us design this small course, should not be a big one. It is a 10-day course and every day one and a half hours.
So I thought we should start from the scratch. In fact, I got queries from so many chartered accountants also. They said, Madam, I have a batch in the morning. Who have been my students sometime.
And they said, in the morning, we have to go for college. Maybe they work in the Hinjavadi area. And they said, we leave at 7 in the morning. How can we attend your batch at 7.30 in the morning?
I said, no problem. We'll record it for you. That is why this recording stuff also. Okay. But then I said, you're a chartered accountant.
Why do you really want to attend this basics of stock market batch? Believe it or not, I met so many CsAs who are, some of them are more experienced than me, but they have not invested even one rupee in stock market directly on their own. Mutual fund se kya hoga? But not on their own.
So I feel this is a very good platform. If you don't know anything about the stock market, to start from the scratch. and learn in a very systematic and standardized manner.
Right? Okay. Anyone of you already invests in market? 1, 2, 3, 4. Very good.
And I'm happy with that. Have you taken some shares because you're senior advised or you're broker advised? Yes. Always. That is how even I started.
Generally, our broker will tell you, buy this share. It will go up, it will go up. Who knows where it will go up? And many a times it happens that after giving some call it will actually go up and within no time it will actually crash like anything.
So then why depend on someone else to take a buy or sell decision? Csan't we study on our own? Yes, absolutely yes.
So that is why we are going to start from the basics and even if you know something about the stock market. I bet that after completing this batch you will say that we did not know all these at least five six areas out of this and we are happy we are here and got to know about the basics right from scratch okay yes I feel before building any building what is the first step in before actually construction what is the first step of construction to see the area okay you have seen the area you have decided to build a building here what next Foundation, base layout karna hota hai. But base layout karne se pehle, you will find that the land is not even. Land might be uneven.
There will be some unwanted plants around you. So pehle wo sab unwanted cheeze hata nahi hai. and then build a solid foundation.
So, these unwanted things which are in our mind about stock markets, we have to remove them first. Okay, as you must have heard definitely, the stock market is a scam. Many people say that.
It's a gambling game. So, is it really a gambling game? Csan we study it technically and take some good decisions?
So, the answer is definitely yes, no doubt on that. So this gambling game is not at all in our systematic manner There are different myths in our minds about the stock market You understand the term myth? Myth means what?
Wrong assumptions These are the first things to be removed from our minds Uneven land is to make it even Unwanted plants are to be removed from the side That's how we are going to start So let's go through one by one We are going to start off with Busting the myths of stock market You understand bust? Bust means blow up Hananita usko. Myths of stock market.
Myths means what are your wrong assumptions about the stock market. So I've taken three major, three to four if I'm not mistaken, major misconceptions about the stock market. The very first myth, misconception is that investments in stock market are very risky. How many of you agree with this?
Stock market investments are very risky. No one. But if you ask general people, everyone will say we don't invest in stock market because we feel it is very risky.
Okay. Why do they feel it is risky? So if you ask me personally, I feel yes, to some extent it is risky.
But really, is it risky or not? For that, just have a look at this chart. Okay.
I'm sure you might not be able to see all these small. Is it visible? No?
It's not even visible very nicely for me. Don't worry. But what happens, understand, this is the performance of Sensex in the past. Have you heard about this term Sensex?
Suna? There is one more similar term to Sensex? Nifty. Csorrect. So what is Sensex?
What is Nifty? We are going to go into that much detail. But first of all, let us just have a quick look at this movement of stock market. This is way back in 1991. This one on the extreme left is 1991. And this is 2018. I got the data till now.
Okay. Now if you see here, see all these small hiccups. A little up.
This uneven land is ours. Up, down, up, down, up, down. Csould that happen in the short term?
Csould you, I mean, could there be a possibility that you buy a share and immediately after that it goes down? possible yes or no yes absolutely yes this is very much possible but now have a look in the long run is it growing has it steadily risen from what is this on the y axis here you can see five thousand what is this five thousand sense x was at five thousand was it five thousand also was below five thousand in 1991 And today any idea roughly how much is there in Sensex? Roughly 35,000 roughly. So from sub 5000 below 5000 in 1991 right now even if you see this is Jan 2018. It's almost 35. We are in 2019 right now.
It's around this time. So now tell me in the long run can you bet on the stock market? Yes, why not? But if you are talking about short term, then be aware.
In the short term, you can see lots and lots of ups and downs. See this amazing area. Csan you see that market was roughly, this is also below this. So maybe somewhere around 17,000.
Okay, when? Roughly around 2008 beginning. Something happened here and it went straight down to 10,000.
You know what had happened in 2008? US crisis, subprime crisis. Have you heard about this? There was a big, big, big crisis in US.
If you want, I'll cover that in short in the upcoming session also. Have you heard about Lehman Brothers? Yes, that was a very big financial institution. Like we have ICsICsI, like we have HDFCs.
All these are the big financial institutions in India. Similarly, there was a huge financial institution in India named Lehman Brothers. It declared bankruptcy overnight. Rat-o-Rat bankrupt. So you can imagine something like this.
HDFCs pulls down the shutter today evening and tomorrow morning it doesn't open. And you can imagine so many people's funds are locked in that. Rat-o-Rat bankruptcy declare is a big thing.
And when there is a problem, it comes in wholesale. So there it happened, in itself it is a true fraud. I'm sure you might have heard about this also. Satyam fraud was again unveiled in this same time frame.
So two major things coming right back to back and you can imagine that the Sensex crashes from 17,000 roughly to roughly 8,000. 9,000 points on Sensex. It goes so low. Is that going to be a huge one?
Yes. But please understand this point. Do you think it would have gone down and down and down and down? And everyone will say zero. would it go down to zero never market can crash it can come down but there has to be somewhere some area where it will at least start bouncing back okay there will be some good news in the market so once some news starts coming in now you can see after some news some stability came into the market this was a reversal point okay then again market started to increase slowly and steadily here you can see some hiccups again Now if you see here, the main trend started again, which year you can see this is 2014. This time.
So was Modi the one who said that now I'm going to take stock market to 35000? No, no, no, of course not. But then why?
I mean, what is the connection between Modi or NDA for that matter? National what? National?
Democratic Alliance. Csorrect. So BJP is a big version.
So all these people came together. They came in power. And they came in power and the market went up.
What is the connection? Do you see any connection between one party winning the election and Sensex rising up? Is there any connection?
Or did Modi put a setting? He didn't put a setting, right? What could you, any idea, any guess? You can say the answer, it can be wrong, that is okay.
More foreign investment? Okay, that could be one reason. Okay, many people thought that there will be some positive changes in the economy.
Any other reason? Okay, let me tell you the first reason. A stable government.
A stable government is the most positive factor for the stock market. Otherwise what happens, understand, there is one government and it has 2-3 allies. All of them have come together to form a government. Now when the government says we are going to take this decision, XYZ decision, and the allies say no, no, we are opposing. If you do this, we will remove the support.
Do you think then that government will be able to go ahead with all the decisions that they had thought? No. Because they have to go hand in hand with so many people with different mentality. Now with this NDA win, what happened was there was a single party which came into power. Now do you think with this stability, they'll be able to take decisions whatever they wanted to take?
Yes. And that's a huge positive sign for the market. We are in 2019. This is the best time that you're doing this. Because there is a repeat election this year. So see this is history what has happened and in stock market we always say that history repeats.
So you never know if you have a good. So again I am not saying it's BJP or it is Csongress which has actually impacted the market. No it's not because BJP won it's not because Csongress lost. I am not saying that.
It's because we had a stable government. If we have a stable government in 2019 again with good majority, then do you think this history will repeat? Any guesses? Yes.
Ideally, yes. Ideally. So that is why understanding all the terms right now is very important.
You can start with your investment with a very nice uptick in the market. Okay. So I hope now with this you have understood that there are loads and loads of hiccups. Minor things will come in the market.
No doubt about that. But if you see in the long run, Now do you think that all this investment in stock market is risky or not that risky if you talk about the long run? Not that risky. So I hope you are convinced.
Okay, so that was the first myth that investments in stock market is risky. I have convinced you with that, that there will be no problem in the long run. Okay, so let's move on to the myth number two. You need to have a very strong knowledge about finance. Then only you can succeed in stock market.
Okay. If you are from a finance background, will that help? Obviously yes.
I can't say that anyone and everyone without reading anything can work wonders in this subject. But there are many many people who don't have a finance background, but still they have worked wonders in the stock market. You want to see a list?
Have a look at this. List of successful billionaire Indian investors. Any successful stock market king you know outside India? Any person you know outside India who is very successful?
Warren Buffet, everyone knows that. Warren Buffet was a person who started investing in stock market at the age of 11 or 12. And in his book he has written that I regret that I started investing in stock market at a very late age. Everyone is saying that I am 21. Still we have not even started investing in stock markets.
So, that's a big deal. Let's talk about Indian. Rakesh Jhunjhunwala. How many of you have heard this name?
Yes, 1, 2, 3, 4, 5. Okay. So, he's like the Indian Warren Buffet basically. He has an amazing net worth and those who have learnt tax, till 1 or 2 years ago, there is something known as a long term capital gain tax.
What is a long term capital gain tax? For those who don't know about this, I'll just quickly tell you in brief. Long term means you have to buy the shares and you have to hold the shares for minimum one year.
Okay, after holding them for one year, if you sell it. and if you gain from that if you win money from that then it will be known as a long term capital gain long term you have held it for more than one year so you assume you bought it in 2017 jan and you're selling it in 2019 feb obviously it's a long term asset and capital gain because assume you had bought the share at 100 and you sold it at 150. so that's again So ideally 50 is your gain, yes or no? Quickly, yes 50 is your gain. Is it like your income?
It's your gain, is it like your income? Yes, obviously. So whenever you get income, you have to pay income tax on it. Agreed? This is like your income, you have to pay income tax.
But there was a provision in income tax which said that if you have a long term capital gain, you need not pay any tax on that, zero tax. So you can imagine all these successful investors, they are earning not in thousands or lakhs, they are earning in double digit crores, triple digit crores possibly. And how much tax they are paying?
Zero. Legally or illegally? Legally.
So can we learn from them? Csan we use the same strategy? Aapne 2-4 zero kam rahenge.
But can we at least go ahead with this, that we can buy a stock. and try not to sell it within one year. So if you do that, obviously whatever gain you are going to get, that is going to be completely tax free. Okay.
Let me ask you a basic question. When you invest in shares, do you get something in return? Like a simple comparison is, if you invest money in FD, what do you get in return? Interest.
Csorrect? if you invest in shares do you get interest no what do you get dividend what is the terminology that is known as dividend okay i'll just write few things here okay now let's understand a very big difference between interest and dividend okay i'll just try to Okay, so the point which I was talking about is difference between interest and dividend. On FD, have you heard about debentures?
Debentures, it's more or less like an FD. But it is a security based thing. We don't have to go into so much depth.
But mainly there are two instruments, financial instruments on which you get interest. I want a quick feedback for this. Csan interest vary on fixed deposit?
Csan bank say this time you will get 4%? Next year you will get 4.5%? Next year you will get 5%? Csan bank vary? Csan bank vary the interest?
Might happen by the way. Might happen. Why understand?
Why understand? Bank declares the interest rates well in advance. It's not like a surprise.
Please understand my question. Would it happen something like this that maybe you made an FD on let us say 1st of May. Okay, and at that time bank had promised you at the rate of 7%. Csan they now say in between somewhere around October? We are very sorry to inform.
that now the rates have been revised to five percent can they say that no now they can't say that they will have to pay you at the rate of seven percent at least till your fd matures let us say it matches on 30th april is this okay they can't change the interest rate in between only but wait can they declare five percent rate in october for all new fds starting on or after october Now everyone agrees? Of course, this is a very big drop. This never happens. But just as an example, I'm talking about. So once a return is given on FD at the beginning of the year or at the beginning of you starting the FD, can I say that will continue irrespective of changes in the market?
The promised return, is that going to continue till your FD matures for you all? It will remain the same for you. For a new investor, could that be different? Yes.
Okay, one more simple question. Csan banks say that this time business is not good. This year we will not give interest. Next year we will give a little bit more interest. Csan banks say that?
Is interest payment optional for the bank or is it mandatory for the bank? It's mandatory for the bank. You can't say I will decide whether I have to give or not.
Okay. But then if we talk about dividend. On whom do we get dividend?
Shares. Okay. Now the important point, is it mandatory? Do you have to give dividend? No, it's not mandatory.
Okay, let me ask you one more question. If company is doing very good, amazing, its sales continuously increasing, its profits are continuously increasing, they have doubled their profits, they have tripled their sales, still can the company say, don't give dividend. Csan they say that?
Then can shareholders say, Oh, will you eat it yourself? What will we get? Babaji's? Is there any company who has earned a lot of profit and has refused dividend?
Aapne, also Google. Google is one company which has been earning loads and loads of profits, but they have not given dividend. You want to know the reason why?
What they say is that, okay we will give you dividend at the rate of 5%. 5% dividend we will give you. But then they asked a question to the investors. Do you have the capacity to reinvest this money?
Understand this carefully. Assume that they gave 5% dividend. So every shareholder got 5-5 rupees. I mean dollars let us say that five five dollars of family now the management or you can imagine the board of directors in one of the meeting said how much can you out of this entire money let us say five dollars they got as a dividend okay where can you reinvest this money they said will in some said we'll invest in FD some said we'll invest in some other stock you know what are the FD rates in USA abu-al-adha keep attorney who there got a putra FD rates in USA are around two to three percent 2 to 3 percent but their loans are also very lesser you'll get a loan in roughly four percent also okay so then google asked you have the capacity to reinvest this money only at the rate of two percent so you pay the rate but if you invest this money back into google We have the capacity to increase the value of this at a much much higher rate How can Google reinvest it in the business?
How can Google reinvest in the business tell me? Csan they expand their operations? Csan they invent new and new products and gain share out of that? Yes. These days, Google Home powered by Alexa and what not Alexa you have seen coffee with karan na alexa turn on rapid fire lights alexa turns on the rapid fire lights there is a big uh you know thing which even google has contributed to this can i say google is going to get profited with that obviously more and more ventures they go into more and more profit they are going to earn and more and more profit they are going to earn then what will happen tell me their share price should ideally increase are you getting this egg bar for say newer and newer businesses newer and newer very important successful businesses their sales are going to increase if their sales increases ideally their profit should increase if profits increase share price is obviously going to increase and other share price increase okay to return to investors will Increase So let us understand, originally assume that the share price of Google was $100 per share.
Now do you think it's going to stay at $100? Or it will rise? For sure it will rise?
Let's say it goes up to $110 with this good profit. Tell me how much is the return? 10%.
10% return has come, right? $100 was the initial investment, you got $110. So 10% return. Now what is Google management saying again? How much did you get?
How much did we give? 10% So you are not worthy of giving dividend Google said that If we give dividend to you, you will not be able to invest in a better manner We will be able to reinvest, we will be able to give you better returns So now we have learnt a very important concept For those who are learning this for the first time Interest vs Dividend We get interest on what? FDs Right now let's not talk about debentures We get interest on FDs, we get dividend on?
Shares Is interest once declared, is it fixed for you at least? For you, is it fixed? Yes.
Once company starts, can they declare a dividend? And is it mandatory that they have to keep it constant for years to come? Or they can decide whether to give or not?
They can decide. It's fluctuating in nature. Okay, and one more very, very important point we talked about right now is the concept of LTCsG.
What was LTCsG? Long term capital gain. Long term ka bolte hai?
If you are holding it for more than one year. And whatever gain you get, is it taxable or tax free? Tax free.
Now let us come to one more tax treatment for interest versus dividend. So you should know this before investing. I am sure you might have, those who come from CsA background, you have learnt this in intermediate. But that you had learnt only from the perspective of clearing the exam. Now we are talking from the perspective of?
Investment. Okay. So whenever you invest money in fixed deposit, you will get interest.
Is this interest taxable? Is interest taxable? Yes. At what rate? Depends on your level of income.
Depends on your level of income. So you all are students right now. Your income is definitely less than 2,50,000 up to 5 lakhs.
Your income is less than 5 lakhs. You can enjoy. Csan you invest in FD?
Csan you get interest and still not pay even one rupee of tax? Yes, that is possible. But don't keep the aim that we have to become tax-free for the entire life.
That should not be your aim. Aim should be when will I go into the tax limit? And when you enter that, then the question arises, interest or dividend?
What is the tax treatment for dividend? Taxable or tax-free? it's tax free there are certain limits for that okay again we are not going to go dig down so much deep in the first session itself but dividend prime of ac is tax free okay so 30 tax lab 20 tax lab you are a tax free person does not matter you whatever dividend you get are you going to pay even one rupee tax legally or illegally Legally, so see about the share market, two important things we have learnt now, which two?
One is dividend, one is LTCsG. Both you are getting on shares investment only and both are what? Tax free, there are certain limits, we are going to discuss that.
So if you want to note down these basic things, you can note down all these basic points at least. At least the main main terminologies as such. So what is the first terminology I talked about right now? LTCsG Long Term Csapital Gain LTCsG Long Term Csapital Gain Tell me quickly what is LTCsG?
Yes, that is it What is the meaning? It is known as LTCsG, Long Term Csapital Gain. Okay. Second concept which we will study now is Dividend. Who can tell me in simple words?
See, we are not going to go by definitions. There are proper definitions for all these things. We are going to understand the meaning rather than definition.
You have seen 3Diots, right? In 3Diots, the definition of a book is mentioned. Paper, jacket and bound, this, that, this, that. I said, did you know the meaning? He said, sir, I forgot the book.
I said, say it like this. I am writing it like this, right? In very simple words.
Right? So, who can tell me what is dividend? Csan I say in simple words?
It's nothing but return on investment in shares. Yes, so write down dividend is what? Return on investment in shares.
One more very important point to be written there. What will you write? Very important.
Is it mandatory for the company to give dividend every year or company can, it's company's decision whether to declare dividend or not? It's company's decision. Okay. So one more line.
It is the company's decision whether to declare a dividend or not. Is this okay? Ok, we haven't said one point yet, we will say that too. Just remind me about dividend is given on what?
We will tell you that, face value concept is going to come. Ok, so before we move on to that, what is the very important point to write now? Is it tax free or not?
Yes? So write down the third important point. Dividend and LTCsG are tax free for individuals. Dividend and LTCsG are tax-free for individuals.
We will write there, subject to limits. Subject to limits. Okay, I am going to ask you.
It's your choice. But I always feel that... When you come in the class, you are a student.
Then you should not get that feeling that I am in the final, I am not a student. So shall I give you homeworks? Something you go and at least do a Google search. So this is exactly your homework. What?
Limit. Is there any limit? So I will give you a simple example.
Understand what is the question. What is the homework you have to understand? If I earn 100 crore rupees of dividend, Wow!
I will not be in the class. I'll be just enjoying all holidays, entire life. Okay, if I earn 100 crore rupees of dividend, do you think 100 crores will be tax-free? Ideally not. Let me twist the question.
If I earn 1 crore rupee dividend, 1 crore rupee dividend, will that be tax-free? No, no. If I earn 1 lakh rupee dividend, will that be tax-free?
1 lakh rupee dividend, yes. And 1 crore rupee dividend, no. So there has to be some defined limit, no? Are you getting my point?
There has to be some limit which is defined. Yes. Similar question, copy paste for LTCsG. 100 crore LTCsG, 1 crore LTCsG, 1 lakh LTCsG.
So there has to be some limit. You just have to Google and find out. What is this limit? Till what dividend is exempt and till what LTCsG is exempt.
This will take not more than 5 minutes. Okay. But you will get that feeling, homework has come.
Yes. So everyone is going to give me an answer tomorrow for this. Very good. Cshalo. Important concept.
One more. Dividend is paid on what? Yeh concept hai.
So, give the next heading as face value. Face value. Okay. This is a very, very, very important concept. So, I want maximum attention.
Okay, those who invest in shares, you might have heard something coming up in the news wherein the management says that we are giving 100% dividend. Management says this, 100% dividend. And those investors who are not really sure what is going on, they might be thinking that something fake is going on.
Do you think 100% dividend is possible? Yes. It's 100% of what is the question? 100% of what?
Is it 100% of market value? 100% of market value? If it was, everyone wouldn't have left.
Like you know, there's a share. Everyone has heard of Britannia. Do you eat biscuits? Britannia, do you know the roughly, not exactly, roughly current market price of Britannia?
Marie Biscuit, 5 rupees, 10 rupees. How much is its share value? How much is the share value of the Britannia company? Any idea? It's roughly around 3100 rupees per share.
Per share, 3100 rupees. Now you can imagine management says 100% dividend. On on the face value the important is what is face value i'm going to come to that face value is two rupees okay face value is two rupees market value is three thousand one hundred rupees so whenever company says two we are declaring hundred percent dividend means two rupees dividend okay So what is this face value exactly? Anyone knows?
The original price at which the share was bought by the promoters of the company. Okay, promoters, understand? Promoter is a person who starts the company.
Those who don't know, you may write it down also. Promoter, promoter is a person who starts the company. If you want to write, you can write quickly.
Because you're going to come across these terms so frequently on business channels. Promoter. Promoter is a person who starts the company.
So tell me, who's the promoter of Reliance Industries? Dhirubhai Damani. But wait now. He's the promoter. It means he's the one who started.
Now he's not. So could there be multiple promoters now? Yes, now there is a possibility. This happens only at the initial stage.
When you start the company, that person is known as the promoter. But could there be multiple promoters also? Csan 4-5 people start the company together?
Why not? Yes, all these people will be known as promoters. Again I am repeating, this is the base level definition.
Base level meaning. Everything is going to have a higher level meaning. But if I start discussing all these hyphen 2 ideas today only, you will get scared.
Project them basics. What does promoter mean? A person or group of persons who start the company.
You all agree? So you can imagine something like this. We all start a company. Will we do it? Yes, we will.
Everyone, take out 1 lakh rupees. Just as an example. So everyone contributes 1 lakh rupees.
And we create a company known as ABCs Limited. We have deposited 1 lakh rupees in the bank account of ABCs Limited. Do you want a proof that we have invested 1 lakh rupees in this company?
Yes, see, you put it without any hesitation. It will take proof, right? What will the proof take? Now you are saying, we have invested in this company, agreed. But a very basic question which arises, what will we get?
Okay? If you all might say, see, I have come up with the initial proposal, we will all start the company together. But right now I am saying, if you want to start a company, it will take money, initial contribution will be required.
So I say everyone has to give 1 lakh rupees. Now the very first question you are going to ask me is that, if we have these 1 lakh rupees, if we invested in a bank, you would have got interest. Csorrect?
If you had invested this 1 lakh rupees in the bank, you would have got interest. But then I am saying don't invest in the bank, give it to me. Or we all will start a company with that.
You will ask. What will we get in return? Will we get interest?
If we invest in this company, will we get interest? No, we won't get. What can we get?
What can we get? Dividend can be got because you all will be the shareholders of the company. But to become a shareholder, we should get shares first. Shares should be allotted first. So now what happens?
Let us take an example. Csompany name? ABCs Limited.
Okay, let us say there's one person who has invested 1 lakh rupees. So would he ask for some receipt? Ek lakh rupee bara, uska receipt dedo.
What is this receipt? You said it. That receipt is nothing but a share certificate. Okay, so here you can see there'll be a share certificate which mentions name of the holder. Okay.
And how much money will be paid for this? Or how much money will be paid for the worth of shares? How many shares?
Now how many shares? For this, the face value should be there. So the face value will be written very clearly. The face value is 2 rupees let us say. Who decided this?
We all together decide this. Very important. This may not be covered initially in CsIS syllabus.
Who decides the face value? The law decides. No.
Csan there be multiple face values of different different companies? Means what? Let us understand. Not all companies have a face value of 2 rupees.
There could be some companies which have a face value of 10 rupees also. There could be a company which has a face value of 1 rupee also. Do you understand? Different companies have different face value. Every company can decide its own face value.
But who decides? Who decides? Promoter. We all will have a meeting together and we all will decide. We are giving one lakh rupees agreed.
What are we going to get in return? We are going to get in return shares. How much will be the value of one share? Two rupees is what we have decided mutually.
We all have decided this. Is this okay? Yes. So what will be written on this? Face value 2 rupees.
Will it be written the number of shares? Yes or no? Yes. So number of shares. How much will it be?
Basic mathematics. 1 lakh rupees or not? So divided by 2. How much you are going to get?
50,000 shares. So now we will get this physical share certificate. which says Rachana is the owner face value is two rupees how much has she has got 50 000. will we all have such kind of a share certificate yes but now you will say madam please everything is in the demat form correct i'll give you example of our own academy expert professional academy private limited private limited that is also a company think about it now it's also a company so do you think expert academy shares reinge obviously yes will that also have a face value yes has to have a face value okay now if we are talking about expert professional academy private limited can you come and ask me ma'am show me a share certificate yes or no yes or no answer is yes Yes.
How? Not in DMAT format. No, it's not in the DMAT format.
It's in the physical format. Okay. It's a bit of a mess, right? First time you are hearing. We are in 2019. And what is your academy doing?
Expert Academy has physical shares, not in DMAT. Now let us understand why DMAT? Why do you think DMAT is required? If the company is listed, if the company is a huge company, it's listed on the stock exchange, Bombay stock exchange, national stock exchange, all these terms are going to come, slowly, slowly.
If the company is listed on the stock exchange, then you need dematerialized securities, demat securities. Okay, now say another interesting thing. Reliance Industries Limited, do you think they will have physical shares?
Answer is again yes. Even today, by the way if I'm not mistaken, last date is April 2019, which SEBI has given as an ultimatum. April 2019 is the ultimatum given to the companies. You can come across a document, I'm telling you the name of the document, the name of the document is annual report. Okay, annual report is a document.
It's like a report card. In simple words, it's like a report card of the company. Okay, annual reporting. It's a mandatory disclosure to tell the shareholders as to how many shares are still in the physical form. And believe it or not, all listed companies have on an average at least 1% of the total shares in the physical form.
My dad. He worked with Kirilluskar Brothers Limited, listed company. Okay, for so many years, almost 32 years he served the company and then retired. At that time, he got some shares of the company. Okay, it was that time, so obviously he got in physical.
He hates the stock market. And it's always a tendency, that whatever your parents hate, you have to love it. Okay, so me and my brother, we both invest in stock markets. And the other day we were asking our dad, what happened to your shares? He said, they're still there in my cupboard.
I said, don't do this. It'll go waste if you don't dematerialize it. He said, I don't know how to determine.
I said, I am there. The only condition is that I'll then transfer it in my name. Okay, but it will be worth something. There was a very recent story which came up in the newspaper that there was a person whose grandfather passed away and he used to stay with his grandparents. Very recent story, I guess not even one or two months ago.
And he was cleaning the cupboard. He was also very tensed up that how he used to run the house with his grandfather's income. How is he now going to survive? This much.
and when he was cleaning the cupboard he came across few papers by the way this this went on air okay this was cnbc tv 18 you might have heard about this channel cartoon network they say there is cnbc channel it's a business channel on that there are people who call and they ask their queries about stock market and there was one guy who was saying i was cleaning up the cupboard and i came across these papers Share certificate. Okay. And he said these shares.
If I am not mistaken it was MRF. Maybe if I am not mistaken it was MRF only. And some MRF. I can see some 100 or 1000 shares whatever.
Iska kuch paisa milega kya? Will I get some money out of this? Any idea what is the share value of MRF? Somewhere around 35000 per share.
And the caller went mad on television. The person who was giving the answer was double mad. He was imagining why not my grandfather.
Okay. So that is the scenario of financial literacy in India. He is saying that I find some papers. Will I get some money for this?
What? That's a share certificate. Okay, now I hope you understand this.
Is even today's share certificate in physical format? Yes or no? Yes. If you get something like this at home, don't forget to dematerialize it before April 2019. Earlier, the deadline was Jan 19. They have extended it to April 2019. Okay, you can also tell your relatives and friends.
If you have anything in demat format, you have to get it converted. Now the question is, who will you approach? Don't give my number.
Okay. It's very simple. Approach your broker.
Okay. You must have a stock broker. You must have an account with some broker.
If you don't have one account, you can open with one. Okay. And they have a form. You just have to fill up a form. And after filling the form, after giving some basic documents, your shares will be dematerialized.
It's as simple as this. Okay. So now quickly tell me, coming back to our discussion, what is this document known as?
Share certificate. Who gets a share certificate? The shareholders will get a share certificate. Original shareholders who are there in the company? Promoter who start the company.
We have given 1 lakh. We have decided mutually the face value will be 2 rupees. How much shares will we get? 50,000 each. Is this okay till here?
Now if our company performs very nicely and if we decide that dividend will be given. and we say we'll give thousand thousand percent dividend means how much rupees thousand percent dividend means how much rupees two rupees thousand percent thousand percent not hundred percent thousand percent means twenty rupees mathematics is this okay so concept of face value is clear yes can you now visualize a share certificate also absolutely and all all big companies listed companies is there a possibility that very minute number of shares but will still be in the physical form annual report i talked about this like a report card in the annual report you'll find how many shares even today are in the physical format Is this okay? For sure? But majority shares for listed company will be in the Demat format. What does demat mean by the way?
Dematerialized. Materialized means physical form. It is material, materialized share.
We dematerialized it, removed the material from it, that's why it became E share. It became electronic share. Csan we take this journey back also? From e-share to a physical share? Yes, that is known as remat.
That is rematerialization. But no one will do that. Because we are moving from physical shares to demat shares.
But there is a concept known as remat also. Rematerialization of shares. Csoncept is clear? Yes, everyone?
I'll also show you some actual share certificate tomorrow. This is my homework. I'll get a photocopy or a photograph of one share set, I'll show it to you.
Okay, so you remember your homework, I'll remember mine. Right, so can we move on? So myth number two, which I was talking about, you need to have a very strong knowledge about finance. You are getting a little feel good factor, even though you don't have knowledge yet, but you have a few concepts in your mind.
So I was talking about Rakesh Jhunjhunwala. Who is he? He is a chartered accountant. So, the first example is of a chartered accountant.
How can I start with non-finance people? I am a chartered accountant. I will start with CsS.
So, Rakesh Jhunjhunwala, chartered accountant. Ramdev Agarwal. Have you heard about this person? Ramdev Agarwal. Motilal Oswal.
Motilal Oswal is a stockbroker. He is a founder. What is a better name for founder? Promoter of Motilal Oswal.
Okay, he's also a Cshartered Accountant. Now we are going down to the list of successful billionaires and in which we are moving from finance to non-finance now. Parag Parikhh. You might not have heard his name but I hope he has a lot of heading.
He is a billionaire investor. Look at his degree. He has a Master's degree in Csommerce and Economics.
Master's degree but in commerce economics not a chartered accountant. Vijay Kedia, our fantastic degree. B.Csom. B.Csom everyone studies for at least one hour on the exam day. He studies that much.
And do we still get a distinction? Yes. He is a B.Csom and still among the list of successful billionaires in India. Puringju Veliat, you know I am sure.
You should watch CsNBCs. My personal suggestion to you is don't watch it during business hours. Don't watch it between 9.15 to 3.30.
What is 9.15 to 3.30? That's when the stock market starts at 9.15 and it ends at 3.30. When you watch it in between, everyone will say buy this share, sell this share.
and we'll say what are you saying buy we should buy that is not what we want after 3 30 starts the analysis part of shares some news based on the shares and we'll get to see many of these people who actually come up on television and discuss some shares that's actually value addition and porinju who is he he's a law graduate up to direct finance relation next ramesh the money specialization HR specialization and I deliberately put their network 1.24 billion USD multiplied by 70 we will get Indian rupees OK Disclaimer, all the data I got about their network they didn't tell me about it It's available on the net and I've just copy pasted it. Okay. So, their net worth has changed so I'm not responsible for that.
This is internet data. Okay. And the amazing person, Mr. Radhakrishan Damani.
Csheck out his net worth. 7.1 billion. How much was it? 1.24 billion US dollar. This is 7.1 billion US dollar and he's an undergraduate.
Csorrect. You know who is Radhakrishan Damani? heard about his name?
DMart we go for shopping now try to implement this in your day to day life when you go to DMart ask any employee who started DMart there will be some person who started DMart he is Radhakrishan Damani ok And he is such a fantastic investor, believe it or not. Rakesh Jhunjhunwala, who is a chartered accountant, says that my guru in stock market is Mr. Radhakrishan Damani. So Radhakrishan Damani had invested so much in equity shares. But at one point of time he said that, see the thought process. This is the thought process of successful investors.
He said, for a lot, So many years in my life I have invested in shares of other companies. In simple words he said, I was a part of others success story. See the thought process. Almost for the last 20 years I have invested in different different companies and I am a part of their success stories.
Now it is time that I make my... own success story and I make people a part of my success story. And that is how he thought that let's start. a company let's start our own venture and for that he also stayed in us for some time walmart have you heard about this yes it's a huge chain of shopping malls in usa And he studied how it happens there, what happens there, by analyzing it, by modifying it according to Indian markets. He thought why not start our own supermarket chain in India.
And that is how Demart actually started. Okay, so now I am sure, do you know the story of Demart? What was the, what is the current market price of Demart? Anyone knows? No?
Okay. I have not taken the concept of IPO yet, but just. Today, see what you understand.
Otherwise, the concept of IPO is going to come in the future. The IPO price of Dmart was 299 rupees per share. Okay, I'm telling you in very simple words right now. IPO price concept. Csoming back to our own company.
What was the name of our company? ABCs. Right now, how many people are invested?
Only we are invested in the company right now. Now the company is getting bigger. We need more funding.
Okay, so let us say 200 more people come in and join our company. Now, a company which started as ABCs Private Limited, now we move up to ABCs Limited or Public Limited. The name itself suggests ABCs Private Limited, now ABCs Public Limited. Will there be limited number of investors?
Yeah, there are much much more investors. Much more investors. Assume we have now 500 members in our company, 500 shareholders in our company. We can't still keep it as a private limited. We have to convert the company into a public limited company.
But now still we need more money. We need more shareholders to come in, to give in money. So what is one more option?
List it on the stock market. Okay, this process I'm going to explain thoroughly tomorrow. But today I'm explaining it in a brief.
Journey starts with a private limited company. moves ahead to a public limited company then can grow large to a listed company that's also a public limited company by the way but it becomes listed on the stock exchange so now when other people want to come into the market they want to they want to be a part of demart coming back to our example now dances you know what dances from up now jo abc face value with nada Now do you think the new investors which are going to come in, we are going to offer them at 2 rupees? We had started it with 2 rupees per share.
But it has been let us say 5 years that we have started this company. Now company is becoming big. Success ho raha hai company ko.
Do you think we are going to offer them at 2 rupees only or much higher price? Much higher price. So let us convert this example into DMART now. Assume face value of DMART was 2. If I'm not mistaken, it was 10. But let's continue with 2. But they said, those who want to come to our company now, we are going to offer them at 299 per share.
If you want to take, then don't take. Your choice. There might be some investors who might have said, no, that's 2 rupees face value.
You are demanding at 299. So are they asking for extra money from you all? Yes. Why?
Is this a completely new venture or it is established now? It's established. Risk for the new investors will be less or more as compared to us? Will be less.
Thoda toh established ho gaya yaar. So you have less risk. So pay some extra amount for that.
And a technical term comes up. We say these shares are issued to the shareholders at premium. Issuing of shares at premium.
Normal English what have I said? You are issuing at premium means what? Is it higher than the face value?
How much is it getting for 2 rupees? It is getting at 299. So we are issuing the share at premium. But then the shareholders might say, we are taking it at 299. What will be the benefit to us? Do you think it might get listed on the stock exchange even at a higher price? Yes.
And believe it or not, this share got listed on the stock market at 600 rupees roughly. Roughly 600 rupees. Do you know any shareholder of Dmart who had invested in this IP of 299 standing right in front of you?
I had purchased at 299. And day one of listing. You are going to know what this listing is in the coming days. But it gets listed on the stock exchange, on BACs, NSA.
How much does it get listed for? 600 rupees. And many of my friends immediately sold it on the same day. Double return. Less than one month, double returns.
I said, what to do? What I did was I said I'll sell half of my shares. So what happens if I sell half of my shares?
Is my money recovered completely? So just as an example, suppose I had invested 100 shares at 299. If I sell 50, can I say my basic cost is recovered? Now whatever is invested, that's like completely gain which has been reinvested. So I don't care about that now. If it goes down, I don't feel sad now.
Do you know the current market price? It's around 1100 rupees. Okay, in next one, one and a half year, 1100 rupees.
So there are loads of success stories. You have to understand which share can perform better. It's not going to be in this basics. I'm just giving you an example. You must know these fascinating stories about stock market.
And then only you'll get more and more interest in this. So, what was the concept till now? It was about face value. What is this called?
Issue price. All this is going to come but I am just giving you a advice. And 600 is the listing price at which it got listed on the stock market.
Why did I give this example to you? We were talking about whom? What was the name of that person? Mr. Damani.
Educational qualification? Undergraduate. What was the word? 7.1 billion USD.
Okay, so do you think that definitely we can reach not even 7.1 billion dollars, but we can do something in this area even if we are not from finance background. Is it possible? Very much yes. So I hope you are convinced. Here comes our convinced one.
Hashtag convinced. You need not have compulsorily a finance background so that you can invest into stock markets. You just need to have that much inquisitiveness about the stock market. Okay, now what is myth number 3? Small investors like me cannot make money from the stock market.
You need lots of money to invest in stock market. You might say, Madam, can I get a stipend of 1000 rupees? 2000 rupees. That's too much. 3000-3500 rupees.
What will that be? You will never get that much. Those who are working, you might get more money but then you might feel 7.1 billion dollars whatever okay 7100 rupees so what to do with that do you really feel with a small amount you can really gain from stock market with a very small amount can you start investing in the stock market is there any limit he comes in Csan you start even with 100 rupees?
Yes, you can start with 100 rupees also. No problem about that. I'll tell you a fantastic story. Puringju Eliyath, I told you he is one of the successful billionaire investors in India. Now watch his story.
He comes from a very poor family in Kerala. He struggled for his education due to the financial condition. He comes from a farming family actually. What I read about him that he had, his parents were farmers and they had a very small piece of land in Kerala.
And when Parinju was in school, at that time he always used to be the school topper. Cslass topper, school topper. His teachers told his parents that you should not stay in this small village in Kerala.
You should go into the cities. Give him good education. He will definitely become a much much brighter kid Parekh said we don't have that much money to go in city.
So what they did was they sold off their farmland and With whatever money they got they shifted to some city in Kerala Csity may shift can make about he started his education education make graduation. Oh yeah graduation. Oh my God He joined a run a column telephone exchange as an operator stock exchange me telephone exchange and that was an operator of telephone exchange means you might have seen let us say something happens to your phone and you call the customer care something like that that's where he had joined but when he started working there simultaneously was also completing his law graduation graduation studies he completed his law graduation from ernaculum stock from ernaculum law college and then what happened after his graduation He started, I mean during his graduation only he had started to get some idea about something, there is something known as stock market. He started reading on that.
And after reading through some books, through newspapers, he thought that let's have some practical knowledge on that. And for that he had an opportunity to join Parag Parikhh Securities. Parag Parikhh Securities is nothing but a stock broker.
You know any stockbroker by the way? I just took a name a while back. Motilal Oswal, that is one stockbroker. Any other stockbroker you know? Angel Broking is a stockbroker.
Any other? Sher Khan is a stockbroker. Any other? Edelweiss is a stockbroker.
Any other? Zero is a stockbroker. These are different stockbrokers. Okay, Parag Parikh Securities is also a stockbroker.
okay so in kia and after parak parikh securities he worked with geojeet geojeet is also again a stock broker okay abinco thoda thoda maza anela stock market me and with this when he started working he started to get some practical knowledge he started to invest in small amounts and with his amazing fundamentally thinking power what he did he went a long way and after getting some experience He started his own venture which was equity intelligence private limited Khudka venture start karna is not a joke when you are a law graduate have got nothing to do with stock market so you can imagine how much self-study he must must have done at that time even my class was not done basics of stock market so he had to do complete self-study he did an amazing self-study got some good practical knowledge and then he started his own venture and you know what happened after some years He became one of the successful billionaires and now what happens is he had no home to stay at one point of time And he is now among the best stock pickers of India So in kiddo story man is unity was may there are two three points which have not put in the slide So I'll just tell you really that when he started working did it even a character case started investing and His funda his fund of investing is that try to search companies which are undervalued Invest in them and when they reach their actual value, that is the time you should sell them. Now what happens when the value is undervalued? It will come. It will come slowly.
So basically he believes in value investment. Take something cheap. When it reaches its actual value, sell it off. That is what his investment fund is.
And with this investment fund, he became so famous and he became so rich that do you remember in the beginning of the story I told you that his parents had sold A farmland, after earning a lot of money, he went back to his village. He found out who is the new owner of that piece of land. He said, price what you tell and area what I want. He bought that same piece of land at the price which the new owner had discussed. And he has built a big farmhouse in that area only, same area.
Just try to Google it out on internet, Porinjeweliyat farmhouse and you can see amazing photographs. Audi car is standing, he is sitting on the car and there is a peacock on his shoulder. And so many birds which are around, it's in that same farmland which I was discussing, which had to be sold to his parents. So now you can imagine this success story, not one but thousands of success stories, I have just talked about one. and there are Hazaro failure stories also you might have seen in the newspaper also whenever market falls there are such stories also i'm not going to tell you only the goody-goody part of stock market you have to know the realities of stock market it can make you a hero or a zero both ends are possible if you do it systematically you have to become a hero okay so like point you earlier now i hope you are convinced that He had no home to stay.
He had started with that amount and today he is among billionaires. So can you start investing in stock market with a very small amount also? Is it possible?
Absolutely yes. There is no bar that you should have a lot of money for that. But now I will tell you the problem with his investment psychology.
Problem is that he keeps on investing in very small and unknown companies. Please understand this last part very carefully, okay? He always believes in investing in what? Small and unknown companies. And then he says, Abhi yeh small hai toh sasta milega.
When it reaches its true potential, when it goes big, it grows big, at that time it's going to be a big profit. Agreed? Yes. But now you might say, number one, we don't have that much knowledge.
Number two, we don't have that much time. to do a research and find out all the small companies which are undervalued do you think if you invest in large companies can you get good returns mind-blowing returns large companies hi any you know i'll give you a simple example everything up nilly proof to she in up make a lay and which is the company that i'm going to talk about renowned company which has given strong returns Very renowned. One is L&T, of course.
And the one which I'm going to talk about is Britannia, which I gave as an example some time ago. You have to use common sense while investing in stock markets. Csommon sense works best in stock markets. Just have this thought process in your mind. How many Indian households might not be eating Marie biscuit?
Do you think there will be even one Indian household which does not eat biscuit? One Indian household can be there. Definitely, we have so many people who are living even below poverty line.
But you look at cities, city areas. Will there be any house which does not have British biscuit in it? It is impossible.
So now tell me, is there any death for their basic product? No death for their basic product. And if their product, if they come up with newer and newer products, if they innovate more and more, then don't you think their sales are going to increase slowly and steadily? Yes.
Again, if their original fund sales increase slowly and steadily, ideally, profit will slowly and steadily increase. And after that, slowly and steadily, share price also has to increase. So for that, I've taken one small... chart for you, I will tell you what all these figures are rupees and crores. We are going to last 15 minutes, I want 100% attention, you have 2-3 new terminologies.
The very first terminology is turnover. Turnover is nothing but sales. And here you have profit.
What is the basic difference between turnover and profit? Basic difference between turnover and profit? Turnover is sales. Okay and profit is?
After deducting all the expenses, what you get is profit. In simple words, can I say turnover minus expenses is profit before tax. Then you will pay tax and after that you get profit after tax. Okay, in many business channels. They will say top line growth and bottom line growth.
What did you use? Top line growth and bottom line growth. What is this top line? Top line is nothing but turnover. In simple words.
Top line is nothing but turnover. You want to write this down? Top line. Because this is the word that all the analysts use. Top line.
Top line means what? Turnover. And bottom line? Bottom line is what?
Profits. Bottom line is profit. Generally, profit after tax. Okay, now let us see what has happened.
Always remember, whenever you are doing any analysis, at least do an analysis for past 5 years. Try to see their growth story. Starting with how much?
Started with, in 2014, it hasn't started but look at the turnover of 2014. 6300 rupees. We will round up. Rupees in crores. 6300 crores is the turnover.
Moves up to 7200 crores. Moves up to 7800 crores. 8500 crores. 9200 crores. Has the turnover increased slowly and steadily?
Yes. Now let's check the profit. Profit is 370. 622. 763. 844 and 948. I am going to wait for one minute.
I want to see your analysis. Analysis only on turnover and profit figure. This does not require finance knowledge. This requires only common sense.
Is there any relation between turnover and profit? Okay, it is a direct relation. Is there a possibility in some cases turnover might increase but profit might decrease?
Think about it. Csan it be like this? Turnover increased, sales increased but profit decreased or losses increased.
It can be. When could it happen? When your expenses increase out of proportion.
Your expenses are much much higher than your sales numbers also. I have heard about Amazon, Flipkart, Myntra. All these online companies are increasing their turnover top line but they are in bottom line losses. Amazon is in loss? Yes.
Discounts that they give cashbacks that they offer everything is going into losses they're just into the phase right now wherein they want to give I mean other dollar Cshata you want to you know just invite this culture among ourselves that could be online for top but but I feel somewhere down the line Indian mentality is little bit different In Marathi we call phukat te poshtik. That whenever we get it at discount, whenever we get it at a rock bottom level, then only we are going to enjoy it. Even today I do like this, that maybe on Book My Show, there is this internet handling charges on Book My Show.
And if I know that this picture, even if I go directly there, I'm going to get it. I will not book it through bookmyshow. Why to give 50 rupees extra? This mentality is very much prevalent in Indians and that is why the internet shopping companies, e-commerce companies as they call, they are having a very nice top line but their bottom line is not strong because their control over expenses is not that good.
Okay till here? Yes. Now going back to the story.
What other knowledge do you understand? anything else any other relation use your logic i'll wait for a minute hint 2014 to 2018 compare Anyone? Proportion of increase.
That's the right answer. Proportion of increase. Turnover has gone from 6000 to 9000. I'm rounding off the figures.
So how much turnover has increased in 5 years? How much times it has increased? 1.5 times. 1.5 times turnover has increased from 6000 to 9000. And what about profit? 370 ka 948 almost three times almost three times now is this an amazing scenario you're doubling your so you just have not even doubled the turnover 1.5 times of the turnover but profit level pe you're going three times and friends those who have learned leverages ye thoda leverage ka concept aajata isme but it's okay we are not here right now for leverages but can i say this is a good story Yes.
Do you require finance knowledge for this? This is logic. This is common sense. So what you can do?
Take a 5 years chart. Csheck how much their turnover has increased. And check how much their profit line has increased.
Instead of saying turnover and profit, what are you going to say now? Csheck their top line growth. I said, it should look heavy. Csheck their top line growth and bottom line growth. And if the bottom line is growing at a higher pace or lower pace?
At a higher pace as compared to the top line growth, is it a positive sign? Yes. Now do you need to find out all these small and undervalued stock or is this a very famous stock? Very famous stock.
People say we are scared to invest in stock market. Arrey, you invest in Britannia by paying... money for buying the biscuits, that's also an investment.
So if you're buying shares of that, if you're buying biscuits of that company, buy shares of that company also. Why not? People say, we are scared about stock market. They'll keep money in Bank of India.
Okay? In FD. Why are you keeping money in Bank of India?
Bank of India is safe. You feel Bank of India is safe? Then invest in shares of Bank of India. Are you getting my logic?
If you have faith in some organization, why not buy shares of that organization rather than buying only biscuits of that organization? But don't blindly buy it, also check their financials and then buy it. Does only a study of past help or do you need to know about their future prospects also? You should also know a little about future prospects.
So I'm telling you some future prospects. Before I move on to future prospects, one more interesting thing. What was the share price? Let's quickly go through the share price now. This is also an amazing part.
See what the share price is. Turnover increased by 1.5 times. Profit increased by 3 times. Now share price.
Rs. 800 moves up to Rs. 5000. 4970 almost moves up to 9000 to 5000 rupees so 85040 So has the share price increased more than 5 times? Quickly, turnover increased by 1.5 times. Top line, bottom line, 3 times. Share price, 5 times. So had someone invested in 2014 at 843 rupees, the current market price would have been 4970. This is market price as on 31st March 2000. This one is 18. He said, it's past, when will you tell me?
The latest price, today is 11th February The price I bought on 8th February is 3110 Good or bad? Good or bad? It's good? Really? Why?
If someone had invested in 2018 Then it's bad. Oh, company share price has gone down. From what on 31st March? From Rs. 4,970, roughly Rs. 5,000 to Rs. 3,110. People have stopped eating biscuits.
Why this damage happened? Any idea? No.
So understand, we are going to do the last concept for the day. So let's focus. This is known as the concept of stock split. It's known as the concept of stock split. Last 5 to 7 minutes, 100% focus.
What is stock split? We had talked about the concept of face value today. Okay?
Face value of Britannia, 2 rupees. Market price of Britannia as of 31st December was roughly around 5000 rupees. Now tell me, what happens? Csan small investors buy into Britannia, yes or no?
Small investors, do you think they will have the capacity to buy Britannia shares? Why? To buy one share, they require 5000 rupees.
They can't buy such a share. So liquidity, liquidity means more and more people buying, more and more people selling. Will that be comparatively less or comparatively more?
Csomparatively less because people who are buying into one share for 5000, they are going to be comparatively less. So company says that if the market price itself goes down so that more and more people can buy, that'll be good. Market price goes down is good. Csan company declare from tomorrow So that all poor people can invest in our company From tomorrow, revised share prices 2500 Will it work? Who will be mad at them?
Who will be mad at them? Who will get angry? Shareholders who have bought at 5000 Sir, are you mad or what?
We bought at 5000 What is, what did we do? It's not our mistake So now what has happened, understand Csompany says don't worry What we have done is we have split the face value from 2 rupees to 1 rupee. Listen carefully.
Face value of this share which was 2 rupees. It is written on it that 2 rupees. Now they have said now this 2 rupees we are taking it as 1 rupee. But now let us understand the impact. Every one of us had how much shares tell me originally Assume we started Britannia like this We had how many shares of Britannia?
We had shares worth Rs. 50,000 Why? Because we had purchased one share worth Rs. 2 In totality we had invested Rs. 1 lakh agreed But now today companies saying that We all take a decision that now its value will not be Rs. 2 Now its value will be Rs. 1 That's why your revised Price is 50,000. Csan I say my money went half? Aada ho gaya mere paisa.
This does not happen. So understand what happens. If they are splitting the face value from 2 to 1, what is the basic objective?
Kya ye 1 lakh rupay ko dhakka baitna chahiye kya? Should this 1 lakh remain intact? Should this 1 lakh rupees remain intact?
Yes. So what they will do? Double the number of shares. Face value goes half, no problem, double the number of shares. So now, everyone will get 50,000 additional shares.
Do you have to pay anything? You will get 50,000 additional shares. Of how much face value?
1 rupee. Okay, so now what happened? Say, revised scenario, how much shares do you all have, including me? 1 lakh shares of 1 rupee.
Is our value intact or is our value damaged? It's intact. Yes, what is the benefit now?
Market value which was 5000 per share. What is this? Now you can imagine something like this.
This is what we all had 50,000 shares. Now what is this? 1 lakh shares.
Now do you think it should be 1 lakh into 5000? Now the revised price. Please understand. This is basic mathematics again. Basic mathematics, please pay attention.
5000 corresponds to 2 rupees face value. Basic ratio 5000 rupees corresponds to 2 rupees face value. So for one face value, what is the corresponding face? Market price that should be 2500. Are you getting my point? Yes.
So the moment stock splits, Quickly, I want correct answers. Moment stock splits from 2 to 1, your face value has halved. The number of shares have doubled and the market price has also halved. Market price is also halved.
Because see this is your normal ratio. Rs. 2 face value, Rs. 5000 is the market price. For Rs. 1 face value, it has to be Rs. 2500. But people don't understand this.
What will people say? 5000 rupees share went down to 3110. Very bad. Now tell me why did this happen? Because there was a stock split.
Britannia had declared a stock split in August 2018. If I am not missing it was 20th August. 20th August 2018. After that what happened? Quickly 2 rupees face value share went down to 1 rupee face value share.
That time the price of 5000 went down to 2500. Good or bad? Or neutral? Neutral, there is no good or bad thing. But those who don't understand this, what will they say? Gone.
Csompany is into a very bad position. They have halved their share price. And mad people will start selling shares of Britannia. Should we be among the smarter lot? We should be among the smarter lot.
Ideally, now will more people, ideally should they buy in more? Yes, and we should be among them. So, those who will buy in 2500, what will happen? Now what is the current market price?
Now it is 3110. Are you getting my point? How much percentage return if someone bought at 2500? What is the percentage return?
Basic mathematics. 10% of 2500 is calculated easily, that will be 250. Double of 250 will be 500. 2500 plus 500 is 3000. So this is above 20%. Getting my point or not?
When had we bought the share? Assuming post split we buy more shares. How much would be the price after split?
Original price before split. How much was that? 5000 was the share. Price before the split. After the split?
September, October, November, December, Jan. In fact, it's started. Within 6 months, 20% return.
FD doesn't give this much return. Are you getting my point? Yes, I understood the concept of stock split.
Have you written stock split in your notes? what happens to the face value does it increase or decrease decreases one minute is it necessary that it it has to be half not necessary it can be some other also so for example ten rupee face value can be uh let us say two rupees face value maybe if some company has a face value of 10 can they bring it down directly to two Possible or not? Possible. In our example, what is happening? 2 rupees face value is coming down to 1 rupee face value.
So in simple words, what is a stock split? The face value of the share is split. The face value of the share is split. Number of shares will increase proportionately or number of shares will decrease proportionately?
Increase proportionately. Number of shares will increase proportionately. Okay?
Want to write down an example? Example write down. Original FV you can write it down like this original fv revised fv original two rupees revised fv is one okay now number of shares originally how much did we have in our example fifty thousand So revised number of shares will be 1 lakh. Therefore value, value is intact. There is no change in the value.
Value is intact. Is this okay? Yes.
So I hope you have understood this. Is this a bad thing that it moved down from 4900 to 3100? That's a good one. It's a good one.
Why? There was a stock split because of which this happened. Okay. So you have to see these basics. And just in the last slide, we are just going to check what are some operational facts about Britannia.
Again, I found it on the internet only. Okay. So Britannia is mainly a biscuit company where 70% of the Indian households consume Britannia products. 70% of the household Indian households consume Britannia products. It's present in 79 countries.
Not only in India, it's present in 79 countries. An addition of 13 new markets that are aiming in 2017-18. Csategory of business concept, mainly it is into biscuits, but I'm sure you might have heard about Britannia cakes, breads, toast. And they are also now coming into Csroissant. If you have heard of Csrosso, it's a French bakery product.
It's like a toast type. I mean, if you have heard of curry, it's like curry, but it has a good design. It looks like a little shank. That's a Csrosso.
Okay, so they are also entering into Csrosso. They have nine plants right now, nine factories in India. So also check their growth story. Just don't check the past. Csheck what are their plans in the future.
In future, they are going ahead with 13 new markets. They are already having 9 plants. They are trying for more and more plants.
They were originally into biscuits, cakes, breads, rusk or toast. They are also going to enter croissant. So two things we have learnt about basic fundamentals.
Csheck the past, no doubt about that. check the trend no doubt about that but also check what are their future plans a very big disclaimer i want to give before we stop i don't recommend this stock right away okay people can say why are you talking about britannia do you own shares of britannia so this is just an analysis of britannia on paper looks good but i am not recommending this talk as such okay it's your choice if you want to buy buy if you don't don't buy okay so with this i hope now you are also convinced that Definitely if you talk about renowned companies, then can renowned companies also give good returns? Yes. So no need of searching all those small companies which can give potential good returns in the future.
Okay, so today we talked about four things. What are the four things? Four myths about the stock market.
Number one, we said very risky. Short term, I want quick answers now. Short term, could it be risky?
Yes. Long term, not really. Okay, second thing we said you must have a strong finance background required logic works more analytical skills work more number three we said You must have a lot of money to invest in the stock market required Though time go Damani for in Julia is among the billionaires in India now and fourth one we talked about That renowned companies never give strong returns.
It's not so. We talked about common sense again. So always try to see products around you. Which products you are using right now.
And see, who makes this? I'm wearing Will's Lifestyle shirt. Who manufactures Will's Lifestyle? It's manufactured by ITCs. It's a brand.
Will's Lifestyle is a brand. Which company manufactures it? ITCs.
ITCs? Is it listed on the stock exchange? Yes.
So I am so useless that I go in and buy only those brands of which I have shares. So I contribute to the top line story. Okay. Yes. So try to develop this thought process in your day-to-day life also.
What are you buying? Who owns this company? And you'll also start going one-one step ahead in this fantastic area of stock markets.
Enjoy today's session. Yes. We'll see you tomorrow.