[raj_chopada2001]

Originally Posted by Nikolai

Nothing is thaaaat random!!!

The reason why a stock price would rise or fall is due to perception of the company by the buyer of the stock.

The price of a stock is usually a multiple of its earnings. This multiple is called a P/E ratio. Usually, the P/E lies between 15-20. Anything above 20 means that the investors in the stock believe that the stock earnings will rise.

(remember, earnings are a step/hysteresis function of profitability!)

Now suppose the previous earning of a stock is rs. 20, p/e = 15; the stock price will be rs. 300. ok? this means the investors expect around rs. 20 as dividend from each share.

Now suppose the company lands a big contract, or the government reduces taxes on its products, or the company gets cheap raw materials, or it gets an excellent CEO, inter alia, the stock price will rise because the investors will expect a higher earning in their next dividend. In the same way, bad news will drive the stock price down.

In a perfect world, the share price would reflect perfectly on the company's financial health. However, the market may behave dynamically, acting independent of fundamentals.

One thing is sure, if the fundamentals of the company are strong, the stock wont fall for long.

'Market sentiment' is the term used to describe rumors that the buyers have heard or if some inside information has leaked out. Panic selling happens when some news leaks out that a share is bad and people try to sell their shares at whatever price possible thus creating more supply of shares than demand and thus the price of the share drops.

Conversely, if people start buying a share, creating more demand than supply, the share price goes up. This is the most basic funda. The price goes up when more people want the share (they'd want it if the company is promising). The share price goes down, when people are trying to get rid of their shares.

Please note that unless the number of people in the above cases is substantial, like a whole brokerage is trying to sell their shares, impact on the market share price is negligible.

Hi,

Good work
i m sorry i am not able to answer the Q becz i am busy now a days..

[jhaji]

@nikolai
you gave a good explanation...

@all
one more silly question....
please explain it with some examples...

whenever an ipo of a company comes in a market, they say that it will be issued by 100% book building process....
what do wo mean by book building process and what does it do here??

sorry for bothering you guys....
but i really get lost when i hear these terms..

[buck_was]

Originally Posted by jhaji

whenever an ipo of a company comes in a market, they say that it will be issued by 100% book building process....
what do wo mean by book building process and what does it do here??

When the issue price is fixed by a process of bidding, it is known as the book building process.. when the entire offer is thru bidding, it is called a 100% book built issue.. there can be issues where part of the offering maybe given at a fixed price, while the other part goes the book building route..

Coming to bidding, u can think of it as a form of auction, wherein the buyers (investors) have the choice to bid in a prescribed band of values.. (E.g. DLF had a price band of Rs 500-550)
The issue price is determined as per the demand of the issue.. is the issue gets fully subscribed at the upper band at least one time, only those who bid at the upper band shall be allotted the shares..

I guess, enuff of gyaan.. i have already gone beyond the ques asked..

You may refer to About Book Building

[buck_was]

In context of the above post..

Today it was announced that the DLF IPO has been priced (issue price) at Rs 525, though its price band was Rs 500-550.. this comes as a result of - there were not as many buyers for the issue at 550, as the company wud have liked.. and further, not all the buyers wud have bid at cutoff price (550, in this case).. hence the issue price of 525 (i.e. less than 550)..

Next Funda: In such cases, what happens in retail segment is FIRM ALLOTMENT.. that is whoever has bid for whatever number of shares at or above the determined issue price (525 in this case), shall get that number of shares..

[raj_chopada2001]

Hi,
From now onwards i am going to post financial terms
start from the basic like stock.. sensex.nifty....
basic related to stock . ratios etc...

[raj_chopada2001]

What are stocks? Definition:

Plain and simple, a “stock” is a share in the ownership of a company.

A stock represents a claim on the company's assets and earnings. As you acquire more stocks, your ownership stake in the company becomes greater.

Some times different words like shares, equity, stocks etc. are used. All these words mean the same thing.

[raj_chopada2001]

Earnings per share (EPS) ratio & what it means!



Even comparing the earnings of one company to another really doesn’t make any sense, if you think about it. Earnings will tell you nothing about how many shares the company has. Because you do not know how many shares a company has, you do not know how many parts that companies earnings have to be divided into. If the company has more shares, the earnings will be divided into more parts.

For example, companies A and B both earn Rs.100, but company A has 10 shares outstanding, so each share holder has in effect earned Rs.10.

On the other hand, if company B has 50 shares outstanding and they too have earned Rs.100 then each shareholder has earned Rs.2. So you see it is important to know what is the total number of outstanding shares are as well as the earnings.

Thus it makes more sense to look at earnings per share (EPS), as a comparison tool. You calculate earnings per share by taking the net earnings and divide by the outstanding shares.

EPS = Net Earnings / Outstanding Shares

So looking at the EPS ratio, you should go buy Company A with an EPS of 10, right? EPS is not the only basis of comparing two companies, but it is one of the methods used.

[buck_was]

Originally Posted by raj_chopada2001

Hi,
From now onwards i am going to post financial terms
start from the basic like stock.. sensex.nifty....
basic related to stock . ratios etc...

With all due regards for this good thread started and well-kept by u, don't you think this terms thing suits http://www.pagalguy.com/forum/your-i...f-the-day.html better? :neutral: