The stock market is driven by supply and demand. The number of shares of stock dictates the supply and the number of shares that investors want to buy dictates the demand. It's important to understand the for every share that is purchased, there is someone on the other end selling that share (or vice versa). The stock market is really just a big, automated superstore where everyone goes to buy and sell their stock. The main players in the stock market are the exchanges. Exchanges are where the sellers are matched with buyers to both facilitate trading and to help set the price of the shares. The primary exchanges are the Nasdaq, the New York Stock Exchange (NYSE), all of the ECNs (electronic communication networks) and a few other regional exchanges like the American Stock Exchange and the Pacific Stock Exchange. Years ago, all of the trading was done through the traditional exchanges (like the NYSE, American and Pacific Exchanges) but now almost all of the trading is done through the Nasdaq, which uses ECNs and thousands of other firms with access to the Nasdaq to facilitate trading.
Here's an example of one of the many ways that the stock market works:
You open an account with E*Trade. You send E*Trade a check for $1,000. E*Trade deposits the check into a trading account that is listed under your name. You log onto E*Trade and place an order to buy 100 shares of a stock in Company A, which is currently trading at $5. E*Trade uses it's network to tell the Nasdaq and all of it's related networks that there is demand for 100 shares of Company A's stock. The Nasdaq finds someone who is willing to sell 100 shares of Company A and, instantaneously, they execute the trading of stock between you and the person selling the shares. The trade information is sent to a clearinghouse where the information is processed and the shares will now be registered to you. Basically, the clearinghouse will designate 100 shares of Company A to E*Trade and E*Trade will designate those 100 shares as yours. The actual stock certificates are typically held "in street name" and never really need to exchange hands (although you could request that the stock certificates be transferred to your name).
In a nutshell, that's how the stock market works. The stock market is really just like any other marketplace - it facilitates the exchange of goods between interested parties and works to reduce distribution costs and set prices.
Friday, January 8, 2010
Reliance shares choppy on sweetened Lyondell offer report
Shares in energy major Reliance Industries were choppy in early trade on Friday morning, after a newspaper report said the company has recently sweetened its offer to buy a controlling stake in bankrupt LyondellBasell.
Reliance's new offer has pushed its valuation of Lyondell to about $13.5 billion, up from $12 billion in an initial bid made in November, the Wall Street Journal reported, citing people familiar with the matter.
At 0335 GMT, Reliance, India's top listed firm, was trading flat at 1,105 rupees, after falling 0.5 percent earlier. The Mumbai market was up 0.2 percent.
Reliance's new offer has pushed its valuation of Lyondell to about $13.5 billion, up from $12 billion in an initial bid made in November, the Wall Street Journal reported, citing people familiar with the matter.
At 0335 GMT, Reliance, India's top listed firm, was trading flat at 1,105 rupees, after falling 0.5 percent earlier. The Mumbai market was up 0.2 percent.
Rupee drops tracking choppy stocks; mixed peers
MUMBAI 8 Jan. - The rupee weakened in early trade on Friday tracking mixed cues from other regional peers with a choppy start to the domestic share market providing little clarity on the direction of fund flows.
* At 9:22 a.m. the partially convertible rupee was at 45.74/75 per dollar, below its close of 45.68/69 on Thursday, when it rose to a high of 45.55, its strongest since Sept. 23, 2008.
* Asian currencies were mostly rangebound versus the dollar.
* The dollar dipped against the yen on Friday after Japanese Finance Minister Naoto Kan said markets should decide exchange rates. However, the index of the dollar against six major currencies was up 0.1 percent.
* Indian shares opened marginally lower but soon turned positive.
* At 9:22 a.m. the partially convertible rupee was at 45.74/75 per dollar, below its close of 45.68/69 on Thursday, when it rose to a high of 45.55, its strongest since Sept. 23, 2008.
* Asian currencies were mostly rangebound versus the dollar.
* The dollar dipped against the yen on Friday after Japanese Finance Minister Naoto Kan said markets should decide exchange rates. However, the index of the dollar against six major currencies was up 0.1 percent.
* Indian shares opened marginally lower but soon turned positive.
Indian shares down slightly; Techs, Reliance weak
Indian shares were trading 0.1 percent lower on Friday, as fears of rupee ppreciation pulled down outsourcers and energy giant Reliance Industries (RELI.BO: Quote, Profile, Research) slid after report it has sweetened its offer to buy a controlling stake in LyondellBasell.
Export focussed software companies edged lower, on expectations the rupee may strengthen further this year, on the back of high foreign inflows. Infosys Technologies (INFY.BO: Quote, Profile, Research) was down 1.4 percent while Tata Consultancy (TCS.BO: Quote, Profile, Research) and Wipro (WIPR.BO: Quote, Profile, Research) dropped 1.1 percent each. According to a Reuters poll, the Indian unit is seen picking up where it left off in 2009, rising another 4 percent on top of its 4.7 percent increase last year, its appreciation driven mainly by inbound portfolio investment.
"Rupee appreciation is clearly hitting IT stocks. This is a big negative for the pack," said Ambareesh Baliga, vice-president of Karvy Stock Broking. By 09:56 a.m. (0426 GMT), the 30-share BSE Index .BSESN was trading down 0.07 percent at 17,603.14, with 17 of its
components declining.
"Valuations are looking expensive, and we have reached dangerous levels. It is liquidity more than fundamentals, that is driving the market," said Baliga. "Investors should start exiting and book profits." Energy major Reliance Industries was down 0.2 percent at 1,103 rupees.
Reliance's has recently made a new offer has pushed its valuation of Lyondell to about $13.5 billion, up from $12 billion in an initial bid made in November, the Wall Street Journal reported, citing people familiar with the matter. Metals stocks dipped in line with a decline in base metal prices, which were hit by fear of tighter Chinese monetary policy.
Sterlite Industries (STRL.BO: Quote, Profile, Research) dropped 1.3 percent while Hindalco (HALC.BO: Quote, Profile, Research) and Tata Steel (TISC.BO: Quote, Profile, Research) declined 0.5 percent and 1 percent respectively. In the broader market, gainers led losers in a ratio of 2.5:1 in a volume of 130 million shares.
The 50-share NSE index .NSEI was down 0.1 percent at 5,289.85. STOCKS ON THE MOVE
* State-run oil marketing companies such as Bharat Petroleum (BPCL.BO: Quote, Profile, Research), Indian Oil Corp (IOC.BO: Quote, Profile, Research) and Hindutan Petroleum (HPCL.BO: Quote, Profile, Research) were up 0.7-1.2 percent, as oil prices edged lower. These companies are forced to sell fuel products at mandated discounts.
* Power gear maker BGR Energy (BGRE.BO: Quote, Profile, Research) rose 3.8 percent to
539.50 rupees, after it said it has entered in a technology collaboration pact with a U.S. firm for making and selling heat recovery steam generators.
Export focussed software companies edged lower, on expectations the rupee may strengthen further this year, on the back of high foreign inflows. Infosys Technologies (INFY.BO: Quote, Profile, Research) was down 1.4 percent while Tata Consultancy (TCS.BO: Quote, Profile, Research) and Wipro (WIPR.BO: Quote, Profile, Research) dropped 1.1 percent each. According to a Reuters poll, the Indian unit is seen picking up where it left off in 2009, rising another 4 percent on top of its 4.7 percent increase last year, its appreciation driven mainly by inbound portfolio investment.
"Rupee appreciation is clearly hitting IT stocks. This is a big negative for the pack," said Ambareesh Baliga, vice-president of Karvy Stock Broking. By 09:56 a.m. (0426 GMT), the 30-share BSE Index .BSESN was trading down 0.07 percent at 17,603.14, with 17 of its
components declining.
"Valuations are looking expensive, and we have reached dangerous levels. It is liquidity more than fundamentals, that is driving the market," said Baliga. "Investors should start exiting and book profits." Energy major Reliance Industries was down 0.2 percent at 1,103 rupees.
Reliance's has recently made a new offer has pushed its valuation of Lyondell to about $13.5 billion, up from $12 billion in an initial bid made in November, the Wall Street Journal reported, citing people familiar with the matter. Metals stocks dipped in line with a decline in base metal prices, which were hit by fear of tighter Chinese monetary policy.
Sterlite Industries (STRL.BO: Quote, Profile, Research) dropped 1.3 percent while Hindalco (HALC.BO: Quote, Profile, Research) and Tata Steel (TISC.BO: Quote, Profile, Research) declined 0.5 percent and 1 percent respectively. In the broader market, gainers led losers in a ratio of 2.5:1 in a volume of 130 million shares.
The 50-share NSE index .NSEI was down 0.1 percent at 5,289.85. STOCKS ON THE MOVE
* State-run oil marketing companies such as Bharat Petroleum (BPCL.BO: Quote, Profile, Research), Indian Oil Corp (IOC.BO: Quote, Profile, Research) and Hindutan Petroleum (HPCL.BO: Quote, Profile, Research) were up 0.7-1.2 percent, as oil prices edged lower. These companies are forced to sell fuel products at mandated discounts.
* Power gear maker BGR Energy (BGRE.BO: Quote, Profile, Research) rose 3.8 percent to
539.50 rupees, after it said it has entered in a technology collaboration pact with a U.S. firm for making and selling heat recovery steam generators.
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