Brief Summary
This video is an introductory session on the basics of the stock market by CA Rachana Phadke Ranade. It aims to demystify common misconceptions about stock market investments and provide a foundation for beginners. The session covers myths such as the stock market being too risky, requiring strong financial knowledge, being inaccessible to small investors, and renowned companies not providing strong returns. Key concepts like Sensex, Nifty, long-term capital gains (LTCG), dividends, face value, promoters, and stock splits are explained.
- Investments in the stock market are not always risky, especially in the long term.
- Strong financial knowledge is not mandatory to succeed in the stock market.
- Small investors can also make money from the stock market.
- Renowned companies can also give strong returns.
Introduction
CA Rachana Ranade introduces herself and the basics of the stock market course. She shares her background as a chartered accountant and her experience in conducting investment awareness sessions for various organizations, including CID Pune and the Indian Army Southern Command. She notes that many people lack a comprehensive understanding of the stock market, despite its widespread awareness. The course aims to provide a systematic and standardized approach to learning about the stock market from scratch, addressing the need for formalized content.
Busting the major myths of Stock Market
The session aims to dispel common misconceptions about the stock market. It emphasizes the importance of removing preconceived notions and wrong assumptions to build a solid foundation for understanding the market. The approach involves addressing these myths one by one to provide a clearer perspective on stock market investments.
Myth #1: Investments in Stock Market are very risky
The first myth addressed is the perception that stock market investments are very risky. While acknowledging the inherent risks, the session presents a chart illustrating the past performance of the Sensex from 1991 to 2018. It highlights that while short-term fluctuations and downturns are possible, the long-term trend shows steady growth. The 2008 US subprime crisis is mentioned as an example of a significant market crash, but it also emphasizes the market's ability to recover and bounce back over time.
Past Performance of the SENSEX
Analyzing the Sensex's historical performance, the discussion points out that despite short-term volatility, the market has generally grown over the long term. The impact of political stability, such as the election of a stable government in 2014, is discussed as a positive factor influencing market trends. The importance of understanding market dynamics and historical patterns to make informed investment decisions is highlighted.
Myth #2: You need to have very strong knowledge about Finance
The second myth is that strong financial knowledge is essential for success in the stock market. While a finance background can be helpful, the session emphasizes that many successful investors come from non-finance backgrounds. Examples of successful Indian investors like Rakesh Jhunjhunwala, Ramdev Agarwal, and Radhakishan Damani are mentioned, with varying educational backgrounds to illustrate this point.
What is Long Term Capital gains tax?
Long Term Capital Gains (LTCG) tax is explained. LTCG refers to the profit earned from selling shares held for more than one year. Previously, this gain was tax-free, making it an attractive strategy for investors. The concept is clarified with an example of buying shares at ₹100 and selling them at ₹150 after a year, resulting in a ₹50 gain.
What is the difference between the Interest and Dividend?
The difference between interest and dividends is explained. Interest is the return on investments like fixed deposits (FDs) and debentures, while dividends are returns on share investments. Interest rates on FDs are fixed at the beginning and cannot be changed by the bank in between, whereas dividend payments are not mandatory for companies and can vary.
What is the taxation rate for Dividend and LTCG?
Dividends and LTCG are tax-free for individuals, subject to certain limits. The audience is given homework to find out the exact limits for tax exemption on dividends and LTCG.
What is Face Value?
Face value is the original price at which shares are bought by the company's promoters. It is used to calculate dividends, with companies often declaring dividends as a percentage of the face value. For example, a 100% dividend on a face value of ₹2 means a dividend of ₹2 per share.
Who is a Promoter?
A promoter is a person or group of people who start a company. They are the original shareholders and receive share certificates as proof of their investment. The face value of the shares is decided by the promoters.
What is a Share Certificate?
A share certificate is a receipt given to shareholders as proof of their investment in the company. It includes the name of the holder, the face value of the shares, and the number of shares held. The face value is determined by the promoters and can vary between companies.
Why is a Demat required?
Demat (dematerialization) is required for companies listed on stock exchanges like the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). Demat accounts hold shares in electronic form, making trading easier. While most shares are in demat form, some physical share certificates still exist. The presenter shares a story about a person who found old share certificates and discovered they were worth a significant amount. The deadline for converting physical shares to demat form is mentioned as April 2019.
Myth #3: Small investors cannot make money from the Stock market.
The third myth is that small investors cannot make money from the stock market. The story of Poringju Eliyath, a successful billionaire investor from a poor background, is shared to illustrate that it is possible to gain from the stock market with a small amount of money. Eliyath's strategy of investing in undervalued companies and holding them until they reach their actual value is highlighted.
Myth #4 Renowned companies can never give strong returns
The fourth myth is that renowned companies can never give strong returns. The example of Britannia is used to demonstrate that well-established companies can also provide good returns. The session emphasizes the importance of using common sense and analyzing a company's fundamentals, such as turnover and profit growth, before investing.
What is Turnover?
Turnover is sales.
What is the difference between Turnover and Profit?
The difference between turnover and profit is explained. Turnover is the total sales revenue, while profit is the revenue remaining after deducting all expenses. The terms "top line" (turnover) and "bottom line" (profit) are introduced.
What is Topline?
Top line is turnover in simple words.
What is the Bottom line?
Bottom line is profit.
What is a Stock Split?
The concept of stock split is explained. A stock split is when a company increases the number of its shares to boost the stock's liquidity. For example, if a company splits its stock 2-for-1, each shareholder will receive two shares for every one share they owned, and the price of each share is halved. This makes the stock more affordable and accessible to small investors. The example of Britannia's stock split in August 2018 is used to illustrate how the face value and market price are adjusted.
