Lecture on Basics of Stock Market by CA Rachana Ranade

Introduction

• Speaker: CA Rachana Ranade
• Qualification: Cleared CA in Nov 2008
• Experience: 10+ years, 100+ sessions on investment awareness (e.g. CID Pune, Indian Army Southern Command)
• Objective: Systematic, standardized course on basics of stock market (10-day course, 1.5 hours daily), addressing lack of formalized content on platforms like YouTube

Reasons for the Course

• Many professionals, including experienced CAs, lack basic knowledge of direct stock market investment
• Need for systematic and standardized learning from the basics

Participants and Initial Questions

• Small poll: A few participants already investing
• Importance of self-study and taking buy/sell decisions independently

Foundation and Myths Busting

Building a Solid Foundation

• Remove misconceptions and myths before building knowledge
• Key Myths to Address: Stock market is a gambling game, very risky

Myth 1: Stock Market Investments are Very Risky

• General public perception: Stock market is very risky
• Personal view: Risky to some extent but can be understood and managed
• Long-term Perspective: Historical performance of Sensex (1991-2018) shows long-term growth despite short-term volatility
  • Example: Sensex growth from below 5000 in 1991 to around 35000 in 2019
  • 2008 Financial Crisis impact and recovery
• Short-term vs Long-term: Short-term can be volatile, but long-term trends show growth

Concepts Introduced

Sensex and Nifty

• Sensex: Index of Bombay Stock Exchange (BSE)
• Nifty: Index of National Stock Exchange (NSE)

Importance of a Stable Government

• Example: 2014 election impact on Sensex rise
• Stable government is a positive factor for stock market

Myth 2: Need Strong Finance Knowledge to Invest Successfully

• Examples of successful investors with non-finance backgrounds
  • Rakesh Jhunjhunwala (Chartered Accountant)
  • Ramdev Agarwal (Chartered Accountant)
  • Parag Parekh (Master’s in Commerce and Economics)
  • Vijay Kedia (B.Com)
  • Porinju Veliyath (Law Graduate)
  • Ramesh Damani (HR Specialist)
  • Radhakishan Damani (Undergraduate, founder of D-Mart)
• Common sense and basic analytical skills are essential

Myth 3: Small Investors can’t make Money

• Porinju Veliyath’s Story: From a farming background in Kerala to a successful billionaire investor
• Start with small amounts; no large capital needed

Key Financial Concepts

Interest vs Dividend

• Interest on Fixed Deposits (FD) is fixed once declared
• Dividend depends on company’s decision and is not mandatory
• Tax Treatment: Dividend and Long-Term Capital Gain (LTCG) are generally tax-free up to certain limits

Face Value and Market Value

• Example: Understanding stock prices in relation to face value
• Issue Price: Higher than face value during Initial Public Offering (IPO)
• Example: D-Mart IPO at Rs. 299, listing at Rs. 600, current market price ~Rs. 1100

Understanding Britannia as an Example

• Growth in Turnover and Profit from 2014 to 2018
• Stock Split: Reducing face value to make shares more affordable for small investors
• Importance of both past performance and future prospects

Homework and Additional Notes

• Limits on tax-free dividend and LTCG
• Promoters: Initial individuals who start the company
• Difference between FDs and shares in investment context
• Takeaways: Broaden perspective on stock market investment, using logical analysis and real-world examples