Module 01

What Are Stocks?

Exchanges, listings, indices — understand what you're actually buying when you buy a share.

What You Actually Own

A share (or stock) is a fractional ownership stake in a company. Buy 100 shares of Infosys, and you own a tiny slice of that company — its earnings, assets, and future growth.

  • Equity = ownership. Shareholders are last in line if a company liquidates, but first to benefit when it grows.
  • Face value: the nominal value of a share (usually ₹1 or ₹10). Irrelevant to market price.
  • Market price: what buyers and sellers agree to in real time on the exchange.

BSE and NSE

  • BSE: oldest in Asia, 5,000+ listed companies, benchmark is Sensex (30 stocks).
  • NSE: higher trading volume, benchmark is Nifty50 (50 stocks).
  • Most stocks are listed on both. SEBI regulates both exchanges.
  • Trades settle T+1 (next business day since 2023).

Large-cap vs Mid-cap vs Small-cap

  • Large-cap: Top 100 by market cap (TCS, HDFC, Reliance). Stable, lower return.
  • Mid-cap: Rank 101–250. Higher growth potential, higher volatility.
  • Small-cap: Rank 251+. Highest risk and potential reward. Poor liquidity.
💡 For beginners: Start with a Nifty50 index fund, not individual stocks. You own all 50 top companies with one investment and zero analysis required.
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MARKET CAP PYRAMID SMALL CAP (251+) Highest risk · Rank 251+ MID CAP (101–250) Higher growth · 7+ yr horizon LARGE CAP (Top 100) TCS · HDFC · Reliance · Infosys RISK ↑ Nifty50 = Top 50 Large-caps
5,000+
BSE listed cos
T+1
Settlement days
50
Nifty50 stocks
30
Sensex stocks
📌 Golden Rule
Start with index funds, not individual stocks.
Module 02

Reading a Stock

P/E, EPS, market cap, book value — decode every number on a stock screener.

Market Capitalisation

Market Cap = Share Price × Total Shares Outstanding

  • Market cap tells you the total price tag the market puts on a business.
  • A ₹10 share can be a larger company than a ₹5,000 share — depends on shares outstanding.

P/E Ratio (Price-to-Earnings)

P/E = Share Price ÷ EPS

  • P/E of 20 means you're paying ₹20 for every ₹1 of annual profit.
  • Nifty50 long-run average P/E: ~20–22. Above 25 = expensive, below 15 = cheap historically.
  • Compare P/E within the same sector only — banking at 15 vs IT at 30 is normal.

EPS (Earnings Per Share)

EPS = Net Profit ÷ Total Shares

  • Rising EPS = company is growing profit. The most important number to track over time.
  • EPS growing 15–20% consistently over 5 years = strong business.

Book Value and P/B Ratio

  • Book Value = Total Assets − Total Liabilities.
  • P/B < 1: buying ₹1 of assets for less than ₹1. Common in banks and PSUs.

Dividend Yield

  • Yield = Annual Dividend ÷ Share Price × 100
  • Coal India: ~8%. Growth companies like Zomato: 0%.
💡 Free tools: Screener.in (best for fundamentals), Tickertape.in. Don't pay for data until you're serious.
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P/E RATIO GAUGE CHEAP FAIR RICH 0 15 25 40 Nifty50 avg P/E ~20–22 IT sector: P/E 28–35 (normal) Banking: P/E 10–18 (normal)
<15
Cheap P/E
15–25
Fair P/E range
>25
Expensive P/E
~22
Nifty50 avg
📌 Golden Rule
Compare P/E within same sector only — never across industries.
Module 03

Fundamental Analysis

Revenue, margins, ROCE, moats — learn to judge if a business is worth owning.

Reading a Profit & Loss Statement

  • Revenue: total sales. Growing revenue is the foundation of everything.
  • EBITDA: operating profit before interest, tax, depreciation. Shows core business health.
  • PAT (Net Profit): what's left after everything. This drives EPS.
  • Look for consistent growth in all three over 5–10 years.

Key Profitability Ratios

  • ROCE = EBIT ÷ Capital Employed. Above 15% = good. Above 20% = excellent.
  • ROE = Net Profit ÷ Shareholders' Equity. Above 15% consistently = strong business.

Economic Moats

  • Pricing power: can raise prices without losing customers. Asian Paints.
  • Switching costs: TCS clients don't switch IT vendors easily.
  • Network effects: more users = more valuable. UPI, exchanges.
  • Cost advantage: IRCTC — government monopoly on rail ticketing.
  • Brand: consumers pay premium. HUL, Titan, Nestle India.

Debt and Balance Sheet

  • Debt-to-Equity: below 1 is generally safe. Above 2 is risky.
  • Interest Coverage = EBIT ÷ Interest. Below 3 = danger zone.
💡 Quick filter: ROCE >15% + Revenue growing >10% for 5 years + D/E <1 + no promoter pledging. This eliminates 80% of stocks immediately.
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P&L PROFITABILITY CHAIN REVENUE (100%) Top line · Total Sales EBITDA ~30% Operating profit NET PROFIT ~15% PAT · After tax ROCE >15% ✓ ROE >15% ✓ D/E <1 ✓
>15%
Good ROCE
>15%
Good ROE
<1
Safe D/E ratio
>3×
Interest cover
📌 Golden Rule
Businesses with moats compound wealth. Commodity businesses don't.
Module 04

Technical Analysis Basics

Candlesticks, support/resistance, RSI — use charts to time your entry and exit.

Candlestick Charts

  • Each candle = one period (day/week/hour). Shows Open, High, Low, Close.
  • Green candle: Close > Open (price went up). Red candle: Close < Open (price went down).
  • Wicks (shadows) show the high and low beyond the candle body.

Support and Resistance

  • Support: price level where buying repeatedly stops a decline.
  • Resistance: level where selling repeatedly stops a rise.
  • When resistance breaks with volume, it becomes the new support.

Moving Averages

  • 20-day MA: short-term trend. Stock above 20DMA = short-term uptrend.
  • 200-day MA: long-term trend. Stock above 200DMA = bull phase.
  • Golden cross: 50DMA crosses above 200DMA = bullish signal.

RSI (Relative Strength Index)

  • Ranges from 0–100. Measures momentum.
  • Above 70: overbought. Below 30: oversold — potential bounce.

Volume — The Lie Detector

  • High volume on a breakout = genuine move. Low volume = weak, likely to fail.
💡 FA vs TA: Use fundamental analysis to decide what to buy. Use TA to decide when to buy. Long-term investors need TA less.
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CANDLESTICK CHART Resistance ▲ Support ▼ ↑ Breakout! Bullish Bearish
<30
RSI oversold
>70
RSI overbought
200
Key MA (days)
Vol
Confirms breakout
📌 Golden Rule
A breakout on low volume is a trap. Wait for high-volume confirmation.
Module 05

Building Your First Portfolio

Diversification, position sizing, sector allocation — build a portfolio that can actually grow.

Diversification

  • Own 15–20 stocks across 5–7 sectors to eliminate company-specific risk.
  • Correlation matters: 5 IT stocks move together. Mix IT + banking + pharma + FMCG + infra.
  • Beyond 25 stocks, diversification benefit shrinks — you're building a worse index fund.

Position Sizing

  • No single stock should exceed 10% of your equity portfolio.
  • High-conviction: 7–10%. Normal: 4–6%. Speculative: 1–2%.
  • If a stock doubles, trim it back to your target allocation.

Core vs Satellite

  • Core (70%): Large-cap stocks or Nifty50 index fund. Stable, low-maintenance.
  • Satellite (30%): Mid-caps, small-caps, sector bets. Higher risk/reward.
  • Beginner: 100% core until you have ₹5L+ invested and understand each business.

When to Sell

  • Thesis broken: the reason you bought no longer holds.
  • Fundamentals deteriorating: ROCE falling for 3+ years, debt rising.
  • Never sell just because the price fell. Price ≠ value.
💡 Honest advice: Most investors underperform a simple Nifty50 index fund. If you're not willing to read annual reports, buy index funds. That's rational, not a cop-out.
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SECTOR ALLOCATION IT 28% Banking 25% Pharma 17% FMCG 15% Infra 15% No single stock >10% of portfolio
15–20
Ideal stock count
5–7
Sectors minimum
70%
Core (large-cap)
10%
Max per stock
📌 Golden Rule
Diversify by sector, not just by number of stocks.
Module 06

Investor Psychology & Common Mistakes

FOMO, panic, anchoring — the behavioural traps that destroy returns and how to avoid them.

FOMO (Fear of Missing Out)

  • Buying after a 50% rally because "it keeps going up." You're buying what someone else is selling.
  • Rule: Never chase. If you missed a move, wait for the next entry.

Panic Selling

  • BSE Sensex has crashed 20–50% at least 10 times in 30 years. It recovered every time.
  • Selling at the bottom locks in losses and ensures you miss the recovery.
  • Solution: only invest money you won't need for 5+ years.

Overtrading

  • Every trade costs: brokerage, STT, exchange charges, GST, and STCG tax.
  • 100 trades/month can easily cost 1–2% of portfolio value before any losses.

Anchoring

  • "It was ₹500, now ₹200 — it must go back." The market doesn't know what you paid.
  • Ask: if I didn't own this, would I buy it today? If no, sell.

Recency Bias

  • Long-run Nifty50 CAGR: ~12–13%. Don't extrapolate the last 12 months forever.
💡 The simplest edge: Don't lose money. Investors who avoid big mistakes and hold quality companies for 10+ years outperform 95% of traders.
🎉

Course Complete!

You've finished Stock Market for Beginners. Ready for the next step?

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INVESTOR EMOTION CYCLE Time ↑ Euphoria SELL Denial Anxiety Panic BUY Hope
10+
Sensex crashes >20%
100%
Times it recovered
12%
Nifty long-run CAGR
5yr+
Min holding horizon
📌 Golden Rule
Euphoria = best time to sell. Panic = best time to buy. Do the opposite of the crowd.
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