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MENTORING - Fundamentals - Market fundamentals - Coggle Diagram
MENTORING - Fundamentals - Market fundamentals
We have observed the company fundamentals, and then stock fundamentals to avoid risk.
Now, for a trader or an investor to execute with ease, one more thing needs to be focussed on deeply: that is stock market fundamentals.
Market fundamentals can also be called market temperature, tempo or market condition to do a trading business.
What are stock market fundamentals?
A stock market comprises stocks/ETFs and indices
A stock market also comprises various sectors, such as financials, oil and gas, fast-moving consumer goods et al
A stock market also comprises various styles
A stock market also comprises various factors (as in factor investing) such as volatility investing
A stock market comprises spot and derivatives segments
A stock market is always driven by the advances and declines at a particular point.
Advances are the number of stocks going up by tick. Declines are the number of stocks going down by tick.
The advance to decline ratio at any point in time is a good measure of direction of the flow of current in the market.
Now how do we track this advance decline ratio. For this we pick up the benchmark index and track the advances to decline ratio every minute or everytime we take the trade.
An index is a group of stocks that are used to understand the general market sentiment on a given day or at a given point in time.
How are the stocks grouped? They are just added if the index is a price-based index like Dow Jones. However, most indices now a days are market capitalisation weighted indices.
For example, in our Nifty 50, the top stocks with top market capitalisation are picked up and an index is formed with them.
Market capitalisation is volume * price. It is a value that is measured in Rs crore in India.
This is what we are going to use to refine our advance-decline analysis.
An index is formed based on the weightages as per the market capitalisation.
The next thing we should observe as part of market fundamentals is sector dynamics. What sector is moving well today.
A broad benchmark index is comprised of companies from various sectors. These sectors will also have their own indices. If you track these indices or sector performance, you can get an idea about market direction.
ASSIGNMENT: (a) Please find out the weightages of all stocks in Nifty 50; (b) Please find all the sectors within Nifty or on the NSE; (c) Please find all the indices listed on the NSE; (d) Please find the weightages of sectors in NSE; (e) Please find individual weightages of stocks in sector indices; (f) Please find free float vs normal market capitalisation of stocks on the NSE.
ASSIGNMENT: Please track the top five and bottom five stocks along with their weights and running weights every half hour or one hour.