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Basics of Stock Market | EP1 | Basic Course of Stock Market for Beginners - YouTube
Channel: Convey by FinnovationZ
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If you are from a non-finance background or,
if you don't know anything about stock market
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Either way, it's okay. I guarantee that
once you finish watching this video
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You will be able to understand the Stock Market.
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And after watching the whole series
you will be among 2% of the people
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Who have a good understanding about
Investments and the Stock Market.
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In this series, we will discuss Stock Market
from the beginner to the expert level.
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That means, from the basic level
to the advanced level.
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Before we begin, I have a question for you.
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When you were in 5th or 6th grade,
what did you usually do?
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You probably would study and wait for a break or,
watch WWE and try some moves on your siblings.
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But today I will tell you about an 11-year-old
boy, who had completely different interests.
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This boy, at 11 years of age, used to deliver
newspapers, collect Coke bottles, and
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Do other odd jobs and business.
He started earning very young.
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With that money, he began setting
up other small businesses.
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For example, he installed penny
weighing machines in barbershops.
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He got the idea from a book named,
"One Thousand ways to make $1000."
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Ever since he was a kid, he enjoyed running
his own business and investing his money.
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As a kid, he even bought himself some land
and started investing in Bonds and Stock market.
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He also told his sister that by the time
he was 30 that, he would be a millionaire.
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At 30 years, the boy became a millionaire.
Till today, on his stock market investments,
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He has earned a compounded interest return of 21%.
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He is the world's 4th Richest Person and, his
net worth is $100 Bn, which is ₹ 7,40,000 crores.
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I'm sure you by now you know who I am
talking about, it is Mr Warren Buffett.
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Peter Lynch, Carlos Slim Helu, Ray Dalio also
started investing when they were young,
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And today, they are billionaires.
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We don't usually get such success stories
from India and, the reason behind it is that,
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According to S&P's report, 76% of the
Indian Adults are not financially aware.
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Our attempt through this beginner to expert
level series and other investment series is,
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To make all of India more financially aware.
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Hello, I am Prasad. Welcome to today's
video. To learn about finance, stock markets,
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Mutual funds and investments for
free, subscribe to the channel.
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And click on the bell icon so that you
get notifications for all our videos.
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To learn about the stock market, you
have to watch the entire series.
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Because having half knowledge is dangerous.
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I will tell you a story now, listen carefully
as I will explain the stock market in it.
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So in the story, we will talk about 'Wipro.'
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Wipro started in Maharashtra's Amalner
district by Mohamed Hashem Premji in 1945.
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When he needed money to expand the
business, he raised it through stock market.
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Similarly, when Dhirubhai Ambani
needed money for his business in 1977
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He thought about raising money from stocks.
Back then, few people invested in stocks,
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So Dhirubhai Ambani went from city to city,
convincing people to invest their money.
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With the business performance 'Reliance' had,
investors made lakhs and crores worth of profits.
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If the stock market didn't exist then, people
like Dhirubhai Ambani and Hashem Premji
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And many such Businessmen would have
found it difficult to expand their business.
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And because investors, (public)
helped businessmen like Dhirubhai Ambani
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By investing in their business, that is
why Businessmen respect their investors.
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Dhirubhai Ambani used to book huge grounds
to organize meetings with his ShareHolders
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and he always treated them with special respect.
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So the question is, What is stock market
and what is its purpose?
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As we've seen, when Dhirubhai Ambani
and Mohamed Hashem Premji
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Needed money to expand their business
they had taken money from the stock market.
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In simple terms, the stock market is
a platform to expand the businesses.
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Companies take money from the people and,
in turn, make them a shareholder in the company.
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In 1946, when Wipro took money from the stock
market, they took money directly from the public
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and in turn, gave them shares in the company.
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This way, they got money to expand and, investors
got shares in Wipro, making them part owners.
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The stock market helped companies get
money to run and expand their businesses
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And the common public got an
opportunity to invest in the company.
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Otherwise, if you think about it, if
the stock market wasn't there
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Then the public today would not have
been able to invest in these companies.
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The stock market has given people
this profitable opportunity.
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Now let's talk about those investors who
had invested in these companies.
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Until 1980, Wipro was in the Non-IT business.
In 1980, they decided to move to the IT sector.
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Let's assume you like this decision of theirs and
after doing a complete analysis of the company
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You think Wipro will do well in the coming years.
Because of this, let us think that in 1980,
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you invest 10k in Wipro. That era is
not the same as today's online era so,
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There used to be share certificates and, to buy
shares, you would have to go to the Stock Exchange.
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If we talk about today, everything is online. In 1996,
physical shares got replaced by Demat accounts.
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Since then, everything has been online.
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Like how you need a savings account
to keep money in a bank, similarly,
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To invest in the share market,
you will need a Demat account.
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In India, there are more than 300
SEBI registered stock brokerage firms.
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In any one of those, you will
have to open a Demat Account.
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After opening a Demat account, the brokerage
firm will provide you with a user ID and password.
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You can then go to the brokerage firm's
app or website and easily buy or sell shares.
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You can open a Demat account with
Upstox and start your investment journey.
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Upstox has no delivery brokerage charges and
their remaining brokerage charges are less too.
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To open a free Demat account in
this Ratan Tata funded company,
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Click on the link given in the description and
the comment section and start the process.
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If you use the link in the comments and
description to create a free account,
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You will get an Amazon Gift Card voucher
worth ₹150 to buy anything from Amazon.
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So we are assuming here that,
in 1980 you invested 10k in Wipro.
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Infosys also started around the 1980s and,
it raised money from the stock market in 1993.
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Let's assume you also invested
10k in 1993 in Infosys.
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Since then, from the 10k investment in Wipro,
you would have got a dividend worth ₹175 crores.
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And on your Infosys investment of 10k,
you would have got a dividend worth lakhs.
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Now the question arises,
What is a dividend?
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A lot of times, companies share a part
of their profit with their shareholders,
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Which is known as a dividend.
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Wipro, in the financial year of 2019-20, had
a profit worth ₹9,722 crores, out of which
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₹571 Crores worth of profits were
shared with the shareholders.
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That means they gave their shareholders
a dividend worth ₹571 Crores.
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Some companies give dividends once a year,
some of them give it 2-3 times a year.
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Giving a dividend is not
compulsory for any company.
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To give a dividend or not depends
on the company's Board of Directors.
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If the company's Board of Directors decides
to give the dividend, then investors will get it.
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If the Board of Directors decide
that, instead of giving dividends,
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The money will be re-invested into the company
then, the investors will not get a dividend.
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For example, Infosys, Wipro, Reliance Industries and
such companies have a record of giving dividends.
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On the other hand, Avenue Supermart or what
we know as DMart, has never given dividends.
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Giving dividends does not make a company good,
not giving them does not make a company bad.
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After understanding dividends,
let us move ahead in our story.
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In 1980, when you invested 10k in Wipro,
you got 100 shares for that investment.
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And those are now equal to
around 2 Crore shares of Wipro
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Similarly, in 1993 when you invested
in Infosys, the share price was ₹95,
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So for your 10k investment,
you got 105 shares of Wipro.
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Those shares have turned
into 17,604 shares.
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Now the question here is if the share
prices go up or down, it's understandable.
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But here, the shares that
you bought are going up.
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That happened because since 1980,
Wipro and since 1993, Infosys have
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Split their stocks multiple times and
have given bonus shares as well.
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So let us understand this interesting
concept of stock split and bonus share,
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Which will resolve a lot of your
queries about the stock market.
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First, let us understand Stock Split.
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When a company's share price goes up rapidly,
common investors can no longer afford them.
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At such a time, some companies split the stocks
so common investors can buy the shares too.
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For example, Eicher Motors, which
manufactures Royal Enfield Motorcycles,
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Its share price in 2002 was around ₹100-200.
Now until August 2020, it was ₹22,190.
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In this case, Eicher Motors thought
that with the share prices going up,
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many investors may not be able to
buy their shares and, that is why,
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the company split their stocks 1:10, so one
share of ₹22190 splits into ten shares of ₹2219.
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So whoever had Eicher Motor shares worth
₹22190, they would get ten shares worth ₹2219.
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It's the same thing but, the stock
split makes it easier for those
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investors to invest in the company who
could not buy one share worth ₹22190.
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It is not necessary that every company
will split its stocks if the prices are high.
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There are many companies whose share
prices are high but, they still don't stock split.
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Such as MRF Limited. Many of you must
know of this company since you were kids.
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Many of you, just like me, must
have bought an MRF bat as a child.
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Because we used see MRF written
on Sachin Tendulkar's bat.
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MRF is one of India's largest
tyre manufacturing companies.
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MRF's share prices in 2021 are around ₹82000.
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According to the prices, MRF is
India's most expensive share.
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MRF has never split its stocks.
In 1993, the share price of one stock was ₹11.
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And today, it is ₹82000. Similarly, Mr Warren
Buffett's holding company, Berkshire Hathaway's
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Class A-shares have never split. Today,
the price of each share is $395000.
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When converted to Indian Rupee,
it comes up to ₹2.8 Crores.
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That means if you want to buy Berkshire Hathaway's
one class A-share, you will have to pay ₹2.8 Crores.
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So this way, some companies never stock split.
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Some people have misunderstandings here
they think if a company's share price is high,
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the company is big and, if the share
price is low then, the company is small.
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But this is not the case. MRFs share
prices are the highest in India but,
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that does not mean MRF is
the biggest company in India.
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Right now, in 2021, Reliance
Industries is India's biggest company.
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But Reliance Industries price for a
share is ₹2000, which is less than MRFs.
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So how is Reliance Industries
India's biggest company?
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The company size, whether it is big or
not, doesn't depend on its share price,
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It depends on the company's market
capitalization and, the formula for that is,
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Share price multiplied by
the total number of shares.
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Just having a high share price doesn't work,
the company's total shares should be high too.
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As you can see here, Reliance Industries one
share is ₹2,000 but the total number of shares
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are worth ₹633.92crores, with this the company's
market capitalization comes up to ₹12,67,840 crores.
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On the other hand, MRFs each share price is ₹82,000
and the total number of shares are worth ₹42,41,143.
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If you multiply them both, the company's market
capitalization comes to ₹34,777 crores.
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So you can see here that Reliance's Market
capitalization is thirty-seven times more than MRFs.
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As you see here that MRFs share price is much
higher than Reliance but Reliance industries
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total number of shares is a lot higher than MRFs.
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Similarly, if we take Warren Buffett's, Berkshire
Hathaway, the price of one of its share is ₹2.8crores.
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And Apple's share price as of
now is $125, which is around ₹9,000.
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But if we look at market capitalization then,
Berkshire Hathaway's market capitalization is
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$611 billion, which is ₹45 lakh crores. Whereas
Apple's market capitalization is $2.23 trillion,
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Which in Indian rupee is equivalent
to the number on the screen.
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Now you try to understand
how large this figure is.
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So here, Apple's share price is a lot
lesser than Berkshire Hathaways
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But Apple's market capitalization is almost
three times that of Berkshire Hathaway's.
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We find out from this that Apple's size is
three times greater than Berkshire Hathaway's.
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So the company's size is known
from its market capitalization.
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If a company's market capitalization
is high it means it's a big company.
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And if the company's market capitalization
is less it means it is a small company.
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Based on market capitalization, companies
are generally divided into three parts.
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Large-cap companies, mid-cap
companies and small-cap companies.
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The big companies are called -
large-cap or blue-chip companies.
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Such as TCS, Infosys, Reliance
Industries, HDFC Bank, Wipro, etc.
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Generally, the companies whose market
capitalization is more than ₹1 lakh crores
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They are called large-cap companies.
Most of them have a good financial backup,
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Because of which they can
easily sustain a recession.
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Medium-sized companies are
called mid-cap companies.
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Such as MRF, Tata power, etc.
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Companies whose market capitalization
is between ₹20,000 Crore to ₹1 lakh crore
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are called Mid-cap companies and, the small
companies whose market capitalization is
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Below ₹20,000 crores are
called small-cap companies.
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I will tell you the names of some companies,
you have to find out their market capitalization
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and accordingly, find out if they are a
large-cap, mid-cap or small-cap company.
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and you must comment below to tell me the answer.
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ICICI Bank, L&T InfoTech and Bandhan Bank.
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Find the market capitalization and size of these
three companies and answer in the comments.
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The criteria I told you for
market capitalization that,
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Market capitalization above 1 Lakh crore is a
large-cap company is not a fixed criterion.
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It is for better understanding.
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Let's come back to the Wipro
and Infosys investment story.
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Wipro and Infosys have split
their stock multiple times.
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Because of which the total number of shares
you had in the start have increased.
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Wipro, from 1980 to 2021, has split its stock twice.
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Similarly, Infosys from 1993 to 2021
has split its stock once.
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Both the companies have also
given bonus shares mamy times times.
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To understand Bonus shares, we must
understand face value and some other concepts.
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So further in the series, we will
understand bonus shares in detail.
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I will tell you an interesting
thing related to the Wipro story.
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If you held those ₹10k shares of Wipro till today,
their value would have been ₹750 crores.
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Similarly, if you held those Infosys shares worth
₹10K till today, their value would be ₹4.5 crores.
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So the question arises, how did the share
price of Wipro and Infosys increase so rapidly
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And generally how the share prices
of companies go up and down?
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We will talk about all of
this in the next episode.
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We will also learn another
important thing, which is,
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that to get success in stock market
you don't have to be 100% accurate
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Even with a 10% success rate, you can
make a lot of profit from the stock market.
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How? We will understand this
in detail in the next episode.
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and we will also learn about other
things related to the stock market.
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To know Wipro's full story watch the next episode.
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Don't forget to join us on 'Telegram' we upload
interesting things related to investment.
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You can find the Telegram link in the
description and the comment box.
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If you find this video valuable,
Share it with your friends,
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On your WhatsApp groups
and all social media platforms.
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Tell your friends about the series so they
can learn about the stock market for free.
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Thank you for watching today's video and, for
Joining our Convey family and being a Convey Warrior.
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