Why there is a PRICE RISE or PRICE FALL?

Lets understand basic Demand – Supply situations

- If there are more buyers of the stock Zang than sellers, then the price will go UP (i.e. Demand > Supply )

- If there are more sellers of Zang equity than buyers, the price will go DOWN (i.e. Supply > Demand )

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To understand it intuitively

As a seller of oranges, I have a daily customer base of 10 people, all buying 11 oranges daily at Re 1 per orange. On any given day, there will be an additional sales of 50 oranges with a chance of 10%, 30 oranges with 20%, 10 oranges with chance of 40%, and zero additional oranges sold with 30% chance.
The optimum number of oranges that I must carry every day, so as to maximize my profit (110*1 + 2*(50*0.1+30*0.2 + 10*0.4)) assuming that to the floating population I sell one orange @ Rs 2/- is 125.

So I expect to make Rs. 140/- per day .

SITUATION 1:
Today I could get only 110 oranges from the wholesaler, now at what price will I sell each orange – I can still sell to my sure customers @ Re 1 due to the daily relationship, but then I lose out on Rs 30/-, NOW WHAT??

Well I should increase the price of one orange, so that I will still make Rs 140/- , but should sell to my regular customers only, or sell a lesser quantity to my regular customers, and overcharge the floating population

Click to ENLARGE

Either ways what has happened is that - there are more buyers than sellers, so I’m able to sell one orange at a higher price.

SITUATION 2:
Now, talking the other way – another orange seller comes and sets shop adjacent to me, but with just 50 oranges (and I still have 110).
If I still insist on selling my oranges at Rs. 1, I will not be able to sell them all, so what price should both of us charge?

The total amount the buyer are ready to spend is Rs 140. The price should be such that
(110 + 50)* Price = Rs 140; i.e Rs 0.875 per orange.

Click to ENLARGE

There are more sellers than buyers, so I’m have to sell one orange at a lower price.

Equity Talk - How a company becomes a Stock?

4-STEPS to jump into the market

STEP 1 : PAN Card
It is mandatory to have a PAN card (since Jan 2007) before you start investing. You can apply for a PAN Card online and get it within a week. Even a new born baby is eligible for a PAN Card!

STEP 2: Bank account with a cheque book
Deposits/Withdrawals will be directly made from here. Also your passbook can serve as your address proof for STEP 3.

STEP 3: De-mat (dematerialised) Account
You can open this with any broking house. Your account will be with NSDL/CDSL which are stock depositories. Demat account is to avoid holding paper-based physical stocks.

STEP 4: Trading Account
You can open this with any broking house. It is a list of stocks you hold. You can have more than one trading account.

These four steps are necessary to trade in the equity(stocks) market. To start investing in Mutual Funds, you can stop at Step 2.

A broking house is a phone call away. FYI: I have accounts with the following broking houses
Shreyas - SSK Enterprises, +91-44-43585640/41/42
Kotak - DivyaSwaroopa, +91-98840 48960

What are YOUR investment options?

महूरत session : DIWALI special

On that Subh Mahurat, we start our blog sessions.

Mahurat trade is the auspicious stock market trading session lasting just an hour on Diwali. Brokers will make token buys and push the market up during this pilot session. So the volumes (or amount of money traded in the market) is quite low. Ideally retail investors (like you), should not trade heavily in this session.

And with Foreign Investors (FII's) pouring in funds and the phenomenal rise of the NIFTY and SENSEX (~45%) this year, the Mahurat session may lose its significance.

Mahurat session : 6 - 7pm (after the Lakshmi Puja)