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Finance, Biscuits and the things in between

By Aayush Upadhyay

1st Apr 2022

3 mins read

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About 3 seconds would be our bet. That is all it takes.

The first two go into gathering some magic, it seems, but that last one...

One last second in Chai, and Parle-G is now this tender deliciousness from Gordon Ramsay in a Wonderland.

Reader, not a lot is needed. A good meal, a brisk walk, a small conversation, or a little knowledge sometimes is enough to change trajectories.

When one hears the term personal finance, not everything makes sense. Infact one realises money is a concept borderline intimidating.

Now that the first paychecks are in line for many of you, here is just enough finance knowledge to give you that Parle-G moment.

The Indian Stock Market

A majority of you while growing up would remember pitching in money with your cricket buddies to buy a ball called “Rocky”. Rocky was the elite breed after the ₹15 “Jumper”. Anyways, if you can relate to anything similar, you already understand what equity is.

The fact that you and your friends invested money to buy that ball means that you all hold equity in that ball, or are part-owners. Now, things are great until there are a handful of investors, but when thousands and thousands of people invest in a company, there should be something that gives them their ownership and acts as proof of it.

That something is a stock (loosely). If you hold one stock of a company, you own a part of it. To put things into perspective, If you held one share of Infosys Ltd. on the 7th of February 2022, you theoretically own 0.0000000237 % of the company!

Share certificates are issued against these stocks, which acts as the final proof of ownership.

These certificates used to be in paper format back in the day, but now they are stored in a dematerialized (digitized) form in your Demat accounts.

Rest is simple. The market where you buy and sell these stocks is, guess what, the Stock market or the Stock exchange. And finally, a broker is the licensed entity that facilitates this trade. A stockbroker can be an individual or an online platform like Zerodha, Upstox, etc.

How does the Stock Market work?

In India, we have two major Stock Exchanges: the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). These exchanges have indices associated with them: S&P  Bombay Stock Exchange Sensitive Index or SENSEX for BSE and NIFTY for NSE. The indexes are just fancy averages. SENSEX tracks the movement of the top 30 heavily traded and financially sound companies on the BSE, and NIFTY does the same for the top 50 in NSE.

These indexes give us an insight into how India’s economy is performing on average.

Phew, that was a bulky paragraph. Did you lose interest? If not, then great. If yes, then the companies suffer the same fate. The reason why stock prices keep fluctuating is simple - demand-and-supply. People want to buy more stocks, but there is less of them; hence the price rallies upwards. When the opposite happens, it rallies downwards.

You must have seen these charts at multiple places by now, correct? They are called candle-stick charts. And these are the last piece in our finance-101 puzzle.

Each candle symbolizes this price movement of the stock in a particular time frame. You can choose what timeframe suits you. Say you choose 1 minute. Here is what might have happened.

At the start of the minute, suppose the price of the stock was  ₹100 At the 30th second, it rallied up to ₹ 107  At the 45th second, it went down to ₹ 98 And at the end of the minute, it was at  ₹ 102.

This would mean the price opened lower and closed higher, or in simple words, profit. Hence the candle is green. It would have been red if the opposite had happened.

Perfect, this was it. Just enough to change the trajectory.

Do smile at Young, Dumb, and Broke next time you vibe to Khalid because you’re no longer falling for the latter two.

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Made with ❤️ in India