Basics of Stock Market For Beginners Lecture 1 By CA Rachana Phadke Ranade

0:17 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. CA Rachana Ranade, naam toh sunai hoga. Okay. So I cleared CA 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

1:02 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 CID Pune. CID means proper CID of Pune. And second one was for Indian Army Southern Command. After 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 2 or 3 questions they might give me an answer but it would be a very

1:51 vague answer as such they would not give me pin pointed 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 that from the very start like we study in school from A, B, C, D If someone is studying, 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 days 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 kept a batch in the morning. who have been my students sometime and they said that in

2:38 the morning we have to go for college maybe they work in 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 are a chartered accountant why do you really want to attend this basics of stock market batch believe it or not I met so many CAs 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 funds will do it. 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.

3:25 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 to buy this share. It will go up, it will go up. Who knows where it goes up? And many 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 can't we study on our own yes absolutely yes so that is why we want to start from the basics and even if you

4:14 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 should see the area. You will decide to build a building here. What next? Foundation. You have to lay out the base. But before laying out the base, you will find that the land is not even. Land might be uneven. There will be some unwanted plants. around you. So first you have to remove all the

5:00 unwanted things and then build a solid foundation. So these unwanted things which are in your mind about stock markets, you have to remove them first. Okay, as you must have heard definitely, the stock market is a gamble. Many people say that. It's a gambling game. So is it really a gambling game? Can 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, different myths in our mind about the stock market. You understand the term myth? Myth means what? Wrong assumptions. All these have to be removed from our mind first. Uneven land is to make the land even. Unwanted plants to be removed from the side. That's how we are going to start. Okay. So let's go through one by one. We are going to

5:49 start off with busting the myths of stock market. You understand bust? Bust means blow up. Hathaus got 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

6:39 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? There is one more similar term to Sensex, Nifty. 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 the stock market. This is way back in 1991. The one that you see in the extreme left, that is 1991. And this is 2018, I got the data. Now if you see here, see

7:25 all these small hiccups, uneven land up, could that happen in the short term? 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. What is happening in the long run? Is it growing? has it steadily risen from what is this on the y-axis here you can see 5000 what is this 5000 sensex was it 5000 was it 5000 also was below 5000 in 1991 and today any idea roughly roughly 35

8:11 000 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 is 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. Can you see that market was roughly, it will go roughly below this. So maybe somewhere around 17,000. Okay, when? Roughly around 2008 beginning.

8:59 Something happened here and it went directly below 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 ICICI, like we have HDFC. 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. So you can imagine something like this. HDFC pulls down the shutter today evening and tomorrow morning it doesn't

9:45 open. And you can imagine so many people's funds are locked in that. And when there is a problem, it comes in wholesale. So there it is, in itself, Satyam 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 eight thousand nine thousand points on sensex 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 so zero Would it

10:30 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 we 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. Okay. Now if you see here, the main trend started again, which year you can see this is 2014. So was Modi the one who said that now I'm going to take stock market to 35,000? No, no, no, of

11:19 course not. But then why? I mean, what is the connection between Modi or NDA for that matter? National what? National Democratic Alliance. Correct. So BJP has 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. More foreign investment. Many people thought that there will be some positive changes

12:10 in the economy. Any other reason? Let me tell you the first reason. 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 formed 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

12:56 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 class. because there's a repeat election this year now 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'm not saying it's bjp or it is congress which has actually impacted the market no it's not because bjp won it's not because congress lost i'm 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

13:44 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 cheesy market may 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 is no problem in 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

14:31 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 at least have a look at this list of successful billionaire indian investors 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

15:17 I regret that I started investing in stock market at a very late age. So, he is saying that we are 21 years old. Still we have not even started investing in stock markets. So, he has become a fraud. Let's talk about Indian. Rakesh Jhunjhunwala. How many of you have heard this name? Yes, one, two. 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 one or two 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

16:06 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 cube all over for the for the perfect say why 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 the to do so Cooper oh yeah and capital gain because as you may have bought the share at 100 and you sold it at 150 and So that's a gain. 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

16:55 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? Can we use the same strategy? We will have two or four zeros less. 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

17:45 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 correct 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

18:33 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 these are the financial instruments on which you get interest. I want a quick feedback for this. Can interest vary on fixed deposit? Can

19:23 bank say this time you will get 4%? Next year you will get 4.5%? Next year you will get 5%? Can bank vary? Can 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%. Can they now say in between somewhere around October? We are very sorry to inform that now the rates have been revised to 5%. Can they say that? No. Now they can't say that. They will have to pay you at the rate of 7%

20:12 at least till your FD matures. Let us say it matures on 30th April. Is this okay? They can't change the interest rate in between only. But wait, can they declare 5% 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

20:59 simple question. Can banks say that this time business didn't go well, this year will not give interest, next year will give a little bit more interest. Can 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, dividend is given on 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

21:48 have tripled their sales. Still can the company say, "No dividend." Can they say that? Then can shareholders say, "Oh, will you eat it yourself?" "What will we get?" "Baba ji's." Is there any company who has earned a lot of profit and has refused dividend? Apple, 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, "Achchalo, we'll give you dividend. Dividend at the rate of 5%. 5% dividend we'll give you." But then they asked a question to the investors, "Do you have the

22:33 capacity to reinvest this money?" understand this carefully assume that they gave 5% dividend so every shareholder got 55 rupees I mean dollars let us say that 55 dollars now the management or you can imagine the board of directors in one of the meetings 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 we'll 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 You will say, "I don't know about this, what are you asking about that?" FD rates in USA are around 2-3%. But their loans are also very lesser. You will get a loan in roughly 4%

23:19 also. Which is around 10% in itself. So then Google asked, "You have the capacity to reinvest this money only at the rate of 2%?" So how much money will grow at this rate? 2%. 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. Can they expand their operations? Can they invent new and new products and gain share out of that? Yes. These days, Google Home is powered by Alexa and whatnot. Alexa, you have seen Coffee with Karan, right?

24:06 Alexa turn on rapid fire lights. Alexa turns on the rapid fire lights. There is a big thing which even Google has contributed to this. Now, whatever product Alexa sells, whatever product Google Home sells, can I say Google is going to get profited with that? Obviously yes. 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? Ek bar fir 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

24:56 agar share price increase hogaya, to return to investors will increase. So let us understand, originally assume, 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? 23%. How much did we get? 10%. So you don't have the right to give a dividend. Google said so. That if we give

25:41 dividend to you, you will not be able to invest it in a better manner. We will be able to reinvest. We will be able to give you better returns. So, we have learnt an important concept for those who are learning this for the first time. Interest versus 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 LTCG. What was LTCG?

26:29 Long term capital gain. When do you say long term? 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'm sure you might have those who those who come from ca background you have learned this in intermediate but that you had learned 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

27:18 are students right now. Your income is definitely less than 2 lakh 50 thousand up to 5 lakhs. Your income is less than 5 lakhs. So you can enjoy. Can you invest in FD? Can you get interest and still not pay even 1 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, take interest or take dividend? What is the tax treatment for dividend? Taxable or tax free? It's tax free. There are certain limits for that. Again, we are not going to dig down so much deep in the first

28:05 session itself. But dividend, prime of AC, is tax free. So if you are in 30% tax slab or 20% tax slab, you are a tax free person, does not matter, whatever dividend you get, Are you going to pay even one rupee tax? Legally or illegally? Legally. So see, we have learnt two important things about the share market. Which ones? One is dividend and the other is LTCG. 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 was the first terminology I talked about

28:54 right now? LTCG Long Term Capital Gain. LTCG Long Term Capital Gain. Tell me quickly what is LTCG? Yes, that is it. What is the meaning? Okay, so if a person holds shares for more than one year and earns profit

29:45 and earns profit. It is known as LTCG, Long Term Capital Gain. Okay? What is the second concept? Dividend. You 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 3D8s, right? 3D8s says the definition of a book. paper jacket and bound this that this that sorry easy meaning what is

30:31 dividend can 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 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 dividend or

31:18 not. Is this okay? Okay. 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. It's going to be a face value concept. Okay. So before we move on to that, what is the very important point to write now? tax free yes so write down the third important point dividend and ltcg dividend and ltcg are tax free for individuals dividend and ltcg are tax free for individuals

32:04 subject to limits subject to limits okay i'm going to ask you it's your choice but i always feel that you know when you come in the class you are a student Then you should not get that feeling that I am in the final or I am not. So shall I give you homeworks? Something you go and at least do a Google search. So this is exactly your homework. Limit. Is there any limit? So I'll 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

32:53 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. If I earn 1 lakh rupee dividend, will that be tax free? For 1 lakh, yes. And for 1 crore, no. So there has to be some defined limit. Are you getting my point? There has to be some limit which is defined. Yes. Similar question, copy paste for LTCG. 100 crore LTCG, 1 crore LTCG, 1 lakh LTCG. So there has to be some limit. you just have to google and find out till what dividend is exempt and till what ltcg is exempt

33:41 this will take not more than five minutes okay but you'll get that feeling homework yes so everyone is going to give me an answer tomorrow for this very good important concept one more dividend is paid on what your concept is 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

34:30 are giving 100 percent dividend management says this 100 percent dividend and those investors who are not really sure do you think 100 percent dividend is possible yes it's 100 percent of what is the question 100% of what? Is it 100% of market value? If it was, everyone would have danced. Like you know, there's a share. Have you heard of Britannia? Do you eat biscuits? Britannia. Do you know the roughly, not exactly, roughly current market price of Britannia? My biscuit. Rs. 5, Rs. 10. What is its share

35:16 value? What is the share value of the Britannia company? Any idea? It's roughly around Rs. 3,100 per share. per share 3100 rupees now you can imagine management says 100 dividend on 3100 no no no no no on the face value the important is what is face value i'm going to come to that i'll use the face value face value is two rupees okay face value is two rupees market value is 3100 rupees so whenever company says two we are declaring hundred percent dividend means 2 rupees divided.

36:02 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. Do you understand promoter? 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. You can write it down. Because you are going to come across these terms so frequently on business channels. Promoters. Promoter is a person who starts the company. So tell me who is the promoter of Reliance Industries? Dhirubhai Ambani. But wait now. He is the promoter. It means he

36:47 has become the very first one. Now he is 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? Can 4-5 people start a 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 do ideas today only, you will get scared. That was the basics. Who is a promoter again? A person or group of persons who start the company. Yathak, okay? So you can imagine something like this. We all

37:36 start a company. 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 ABC Limited. We have deposited 1 lakh rupees in the bank account of ABC Limited. Do you want a proof that we have invested 1 lakh rupees in this company? Yes, Bindas has put it. 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're you all might say see I've come up with the initial proposal. I'm some milk a company start carrying it Hmm, but right now I'm saying company other start coming to pay Salaga initial contribution

38:21 like a guy Hmm. So I say everyone has to give one one lakh rupees now the very first question you are going to ask me is that if we have these one lakh rupees we have if we invested in a bank you would have got interest correct if you had invested this one lakh rupees in the bank you would have got interest but then I'm saying don't invest in the bank give it to me and 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? We can get dividend because you all will be the shareholders of the company. But to become a shareholder, we should get shares first. Shares should be

39:09 allowed first. Right? So now what happens? Let us take an example. Company's name is ABC Limited. Okay, let us say there is one person who has invested 1 lakh rupees. So would he ask for some receipt? Give him his receipt. What is this receipt? You said it. That receipt is nothing but a share certificate. Okay, so here you can see there will be a share certificate which mentions name of the holder. Okay, how much money will he get? How much money will he get? How much are the shares? For that, the face value should be there. So, the face value is

39:54 clearly written. Face value is 2 rupees. Who decided this? We all decide this. Very important. This is not covered in the CIS syllabus. Who decides the face value? The law decides. No. Can there be multiple face values of different companies? Means what? Let us understand. Not all companies have a face value of 2 rupees. A company's share can be 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? Promoters. We all will

40:42 have a meeting together and we all will decide. We are giving 1 lakh rupees agreed. What are we going to get in return? You are going to get in return shares. How much will be the value of one share? 2 rupees is what we have decided mutually. We have decided this together. Is this okay? Yes. So what will be written on this? Face value 2 rupees. Will it be written as 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 2 rupees. How much

41:33 shares she has got? 50,000. Will we all have such kind of a share certificate? Yes. Now you will say madam please. Nowadays there is no such thing as share certificate. Everything is in the DMAT form. Correct? I will give you example of our own academy. Expert Professional Academy. Private Limited. Private Limited means that is also a company. Think about it now. It's also a company. So do you think there will be shares of Expert Academy? Obviously yes. Will that also have a face value? Yes, it 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,

42:18 show me a share certificate?" Can I show you a physical 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, you are a bit confused, 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

43:05 to come slowly. If companies listed on the stock exchange then you need dematerialized securities, demat securities. Okay. Now, let's talk about something else. 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. Do it in demat now. You can come across a document. I am telling you the name of the document. The name of the document is

43:51 annual report. Okay, there is a document called annual report. It's like a report card. In simple words, it's like a report card of the company. Okay, it's like annual reporting. In that, 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 Kirloskar 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. It was that time, so obviously he got in physical. He hates the stock market and it's always a tendency that

44:39 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 he said 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 only condition is that i'll then transfer it in my name okay but it'll 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 was he going

45:28 to survive 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 went on air this was CNBC TV 18 you might have heard about this channel have you heard about Cartoon Network? by the way 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. What kind of paper is this? Share certificate. Okay. And he said, these shares, if I'm not mistaken, it was MRF or some, maybe if I'm not mistaken, it was MRF only. And some MRF, I can

46:14 see some hundred or thousand 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 35,000 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's saying that I find some papers. Iska kuch paisa milega kya? What? That's a share certificate. Okay. Now I hope you understand this. Is even today's share certificate in physical format yes

47:00 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. You must have a stock broker. You must have an account with some broker. If you don't have an account, you can open with one. 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. So now quickly

47:46 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. Who are the original shareholders of the company? Promoters 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 denge abhi. And we say we will give 1000% dividend. Means how much rupees? 1000% dividend means how much rupees? 2 rupees kaise hogare 1000%? 1000% not 100%. 1000% means 20 rupees, not your mathematics class. 100% is 2

48:37 rupees, 1000% will be 20 rupees. Is this okay? So concept of face value is clear? Yes? Can you now visualize a share certificate also? Absolutely? And all big companies, listed companies, is there a possibility that very minute number of shares but will still be in the physical form? Where will you understand whether it is like this or not? Annual report, I talked about this like a report card. In the annual report, you will 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

49:23 means physical form. It is material, right? So material. It is a materialized share. We have dematerialized it. We have removed the material from it. That's why it became E share. It has become an electronic share. Can we take this journey back also? From E share to a physical share? Yes, that is known as remat. It is rematerialization. But no one will do this. Because we are moving from physical shares to demat shares. But there is a concept known as remat also. Rematerialization of shares. Concept is clear? Yes, everyone? I will also show you some actual share certificate tomorrow. This is my homework. I'll get a photocopy or a photograph of one

50:09 share set and 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 he's talking about Rakesh Jhunjhun. Who is he? He is a chartered accountant. So the first example should come from a chartered accountant. How can I start with non-finance people? I am a Chartered Accountant, so I will start with CSA first. So Rakesh Jhunjhunwala, Chartered Accountant. Ramdev Agarwal. Have you heard about this person? Ramdev Agarwal. Motilal Oswal. Motilal Oswal is a stockbroker. He is the founder. Better name for founder? Promoter

50:59 of Motilal Oswal. Okay, he is also a Chartered Accountant. Now we are going down to the list of successful billionaires and we are moving from finance to non-finance now. Parag Parekh. You might not have heard his name but I hope he has a lot of headings. He is a billionaire investor. Look at his degree. He has a master's degree in commerce and economics. He has a master's degree but in commerce and economics, not a chartered accountant. Vijay Kedia. Our fantastic degree. B.Com. Everyone studies for at least one hour on the exam day. He studies that much. And do we still get a distinction? Yes. That's enough. He

51:44 is a B.Com. And still among the list of successful billionaires in India. Poringeweliath, you should watch CNBC. 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 see in between, everyone will say buy this share, sell this share. And we'll say, "Oh, you're 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

52:30 shares. And you'll get to see many of these people who actually come up on television and discuss some shares. That's actually value addition. And Poringju Eliyat, who is he? He's a law graduate. Now he doesn't have any direct financial relation. Next, Ramesh Damani. Look at the specialization. HR specialization. And I deliberately put his network. 1.24 billion USD. So, multiplied by 70, we will get Indian rupees. Okay. Disclaimer, all the data I got about their net worth, 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

53:15 responsible for that. This is the data of the internet. Okay. And the amazing person, Mr. Radhakishan Damani. Check out his net worth. 7.1 billion. How much was it above? 1.24 billion US dollar, this is 7.1 billion US dollar and he is an undergraduate. Correct. You know who is Radhakrishan Dabani? Heard about his name? D-Mart. He goes for shopping. Now try to implement this in your day to day life. When you go to D-Mart, ask any employee, who started D-Mart? There will be some person who started D-Mart, right? He is Radhakrishan Dabani.

54:01 Okay. is such a fantastic investor believe it or not Rakesh Jhunjhunwala who is the 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

54:48 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. De Mart, he first launched after studying Walmart. Walmart, have you heard about this? Yes. It's a huge chain of shopping malls in USA. And he studied how it works 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 De Mart

55:33 actually started. Do you know the story of Demat? What is the current market price of Demat? Anyone knows? No? I haven't taken the concept of IPO yet. But just see what you understand today. Otherwise, the concept of IPO is going to come in the future. The IPO price of Demat was Rs. 299 per share. Okay, I'm telling you in very simple words right now IPO price concept coming back to our own company. What was the name of our company? ABC. 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

56:21 company. Now a company which started as ABC Private Limited, now we move up to ABC Limited or Public Limited. The name itself suggests ABC Private Limited, now ABC Public Limited. Will there be limited number of investors? Yeah, there will be 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 listed on the stock market okay this

57:07 process i'm going to explain thoroughly tomorrow but as a brief journey journey starts with a generally 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 be a part of D-Mart Coming back to our example now Listen carefully, listen carefully How much was the face value of your ABC? 2 rupees 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

57:53 5 years that we have started this company. Now company is becoming big. Success is happening to the company. 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 D-Mart now. Assume face value of D-Mart was 2. If I am not mistaken it was 10. But let's continue it 2. But they said those who come to our company, we are going to offer them at 2. 299 per share. If you want to take, take it. If not, don't take it. Your choice. There might be some investors who might have said, "Oh, 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. It's

58:42 been established a little. 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 whatever you are issuing at premium means what is it higher than the face value 2 rupees is being given 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

59:32 know any shareholder of demart invested in this ip of 299 standing right in front of you i had purchased at 299 and day one of listing listing in coming days but it gets listed on the stock exchange on bsc nsa 600 rupees and many of my friends immediately sold it on the same day double return less than less than one month 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 refer is my money recovered completely so just as an example mankishal man is so shares at 299 if i sell 50 can i say my basic cost is

1:00:23 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. 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 telling you an example. You must know these fascinating stories about stock market. And then only you will get more and more interest in this. So, what was the concept just now? It was about face value. What is this called? Issue price. Okay, all this is going to come. But I am just giving you one rupee.

1:01:12 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 net worth 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 you are not from finance background. Is it possible? Very much yes. So I hope you are convinced. Hashtag convinced. that 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

1:02:01 now look at myth number three 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 stipend is not available for 1000 rupees 2000 rupees is enough 3500 rupees what will happen to that 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? That at least you need 1 lakh rupees. Is there anything like that? Can you start even with 100 rupees? Yes, you can start

1:02:51 with 100 rupees also. No problem about that. I'll tell you a fantastic story. Have you heard of Puringju Eliyath? Don't say no, it was mentioned in the previous slide. 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, class topper, school topper. His

1:03:36 teachers told his parents that you should not stay in the small village in Kerala. You should go into the cities, give him good education. He will definitely become a much, much brighter kid. The parents 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. After shifting to city, he started his education. After graduation, he joined Ernakulam telephone exchange as an operator, not stock exchange. 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 "Kerna" something like that. That's where he had joined. But when he started working

1:04:26 there, simultaneously was also completing his law graduation. Graduation studies were going on. He completed his law graduation from Ernakulam stock, from Ernakulam 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 Parikh Securities. Parag Parikh Securities is nothing but a stockbroker. You know any stockbroker by the way? Abhi abhi main ek naam liya tha thodi der pehle. Motilal Oswal, that is one stockbroker. Any other stockbroker you know? Angel Broking is a stockbroker. Any other?

1:05:15 Sher Khan is a stockbroker. Any other? Edelweiss is a stockbroker. Any other? Zerodha is a stockbroker. These are different stockbrokers. Parag Parekh securities is also a stockbroker. So, he joined here and after Parag Parekh securities he worked with Jiojeet. Jiojeet is also again a stockbroker. Now, he started enjoying the stock market. 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. Starting your own venture is not a joke when you are a law graduate. I've got

1:06:05 nothing to do with stock market. So you can imagine how much self-study he 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 the story I had heard, there are two three points which I have not put in the slide. So I'll just tell you orally that when he started working, slowly slowly slowly started investing. And his funda of investing is that try to search companies which are undervalued, invest in them

1:06:54 and when they reach their actual value, that is the time you should sell them. Now what is undervalued, what is not, 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 funda is. And with this investment funda, he became so famous and he became so rich that you remember in the beginning of the story i told you that his parents had sell 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

1:07:41 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. Poringeweliya 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. There are thousands of success stories. I have just talked about one. And there are thousands of failure stories also. You might have seen in the newspaper also whenever market falls There are such stories also I am not going to tell you

1:08:30 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 Poynjuweliath 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's no bar that you should have a lot of money for that but now i'll tell you the problem with his investment psychology okay problem is that he keeps on investing in very small and unknown companies please understand this last part very carefully okay

1:09:17 he he always believes in investing in what small and unknown companies and then he says When it reaches its true potential, when 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 research and find out all the small companies which are undervalued. If we invest in large companies, can you get good returns? Can you get mind-blowing returns? Large companies. Yes or no? You are not saying. I'll give you a simple example. You need proof for everything. And which is the company that I'm going

1:10:03 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. Common 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

1:10:49 me, is there any death for their basic product? No death for the basic product. And if their product, if they come up with newer and newer products, if they innovate more and more, Don't you think their sales are going to increase slowly and steadily? Yes. Again, if the sales increase slowly and steadily, then ideally, profit will increase slowly and steadily. And after that, share price will also increase slowly and steadily. So for that, I have taken one small chart for you. I will tell you what all these figures are in rupees and crores. We are going to do the last 15 minutes, so I want 100% attention. You have 2-3 new terminologies. The very first terminology is turnover. Turnover is nothing but sales. And here you

1:11:38 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 do 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'll say top line growth and bottom line growth. What is this? Top line? Top line is nothing but turnover in simple words.

1:12:23 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? What will be the bottom line? Profits. Bottom line is profit. Generally, profit after tax. Okay, now let us see what has happened. Always remember whenever you're doing any analysis, at least do an analysis for past five years. Try to see their growth story. Starting with how

1:13:09 much? 2014. I've taken the data till 2018. 2019 March, a little bit left now. So I can't tell you 2019 figures. See their growth. Turnover story started with 2014, not started but how much is 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. How much is the profit? It has gone to 370. 622, 763, 844 and 948. I'm

1:13:56 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's a direct relation. Is there a possibility in some cases turnover might increase but profit might decrease? Think about it. Can it be like this? Turnover increased, sales increased. but profit decreased or losses increased. It can happen. When could it happen? When your expenses increase out of proportion. Your expenses

1:14:41 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

…