GCRG MEMORIAL TRUST’S GROUP OF INSTITUTION

Assignment on
Investment Analysis &
Portfolio Management
MBA 3rd SEMESTER
RANJEET SINGH
18-Dec-22
Q. No.1: Discuss the various types of orders an investor can place in stock market.

Ans: Types of Orders The orders can be categorised as:

1) Market Order: It is the type of order where the broker is intimated to

purchase or sell a certain quantity of the shares on behalf of the investor
immediately. Broker in this case is expected to adhere to due diligence and
get the best price for the investor as and when placing of the order is done.
When the investor places an order, it is quite certain the shares will be
purchased but there can be a slight variation in the price. Market orders are
also referred to as the day orders which means the validity of the orders last
only for that particular day.
2) Limit Order: In this type of order, when an order is placed by the investor,
certain limit is also specified with instructions to make the contract at the
price specified or even lower than the specified price. However, in case of a
sell order the limit is to sell the securities at the specified price or higher than
that price. So, in a way, both at the time of purchase or sale a limit is
specified to execute the transactions. In case, the desired price never occurs,
the contract is not executed. Thus, this does not guarantee a contract.
3) Stop Order: In this case, a stop price needs to be specified by the investor. If
the contract is for a sale, the price must be less than the market price,
similarly, in case of a purchase; it must be above the market price. At a later
stage, if someone trades in the same security, and the stop price is reached,
the contract is executed. So, stop order basically denotes a market order that
is conditional.
4) Stop Limit Order: It is an improvement over the stop order. The investors
under this are provided more specifically the associated price alongside a
stop order. Apart from one, the investor is specified two prices i.e. a stop
price and limit price. As and when some other investor trades or reaches at
stop price, a limit order gets created alongside a limit price. So, it can be said
that a stop order is merely a limit order with further condition.
5) Day Order: Under this, usually an order is placed to purchase or sale at a
certain price or even better than that price. If, during the day the price not

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 reached, the order expires. All orders placed with the broker, usually adopts
the nature of day order unless the same is instructed to be GTC.
6) Good - Till - Cancelled (GTC) Order: It is similar to a day order, but the
difference being that the same remains open till execution or cancelled by
the investor himself. These types of orders require a semi - annual
confirmation. However, the dates are communicated by the stock exchange.
These orders are also referred as the open orders.
7) All - or - None Order (AON): In this type of order, the investor wishes that
the entire lot of the order for purchase or sell to be executed. This requires
close monitoring by the floor broker so that the exact quantity is booked at
the desired price of the customer. Such orders need too much time for
execution.
8) Immediate - or - Cancel (IOC): This type of order requires immediate
execution and even if the execution is partial, the same is acceptable. The
part of the order that could not be executed gets cancelled.

Q. No.2: Discussed the functions of New Issue Market.

Ans: Functioning of New Issue Market

New issue market performs the following functions:

1) Origination: It signifies that the issue is being carried out for the first time i.e.,
its origin with the primary market. The proposal for issue is further analysed by
considering the size of issue, nature of security, floatation methods that are
used and the timing when the issue was carried out. Origination is carried out
before an issue is brought in the market. So, it basically includes the home
assignments that are done to ensure whether the ideal time exists for issuing
new securities in the market. The factors that can influence and affect the issue
are considered beforehand to judge the viability of the project Financial viability
and economic viability are some of the major areas that have to be looked upon
while deciding about the issue.

The conditions that are to be considered for an issue are:

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 i) Time of Floating of an Issue: It comprises of the market sentiments and
the present prevailing conditions. Timing is very important as it can affect
the volume that is i subscribed by the public.
ii) Type of Issue: Type of issue i.e., whether the issued security is preference,
equity, bond or a debenture also decides the success of an issue to a large
extent.
iii) Price: The price at which the issue is quoted in the market also influences
the success of the issue. Some of the existing firms who have a reputation
of distributing the dividend may even have a very high amount of premium
while the ones who are issuing for the first time have to be at par with the
market. There always exists a danger of price being over - or under -
charged. This situation has to be eliminated.
2) Underwriting: Under the underwriting agreements, services of the underwriters
(institution or broking firm) are hired who agree to sell the shares of the
company and even subscribe them in case the same are not taken up by the
public.
3) Distribution: Finally, the distribution of the shares is put into execution. It
means selling of shares and debentures to the public. This is often carried out by
the agents and the brokers on behalf of the company. A list of frequent buyers is
maintained by them, and they are contacted for sale of the securities.

Q. No.3: Discuss the relationship and difference between Primary and Secondary
Market.

Ans: Relationship between Primary and Secondary Market:-

1. The primary/new issue market cannot function without the secondary

market. The secondary market or the stock 5-market provides liquidity for
the issued securities. The issued securities are traded in the secondary
market offering liquidity to the stocks at a fair price.

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 2. The new issue market provides a direct link between the prospective
investors and the company. By providing liquidity and safety, the stock
markets encourage the public to subscribe to the new issues. The
marketability and the capital appreciation provided in the stock market are
the major factors that attract the investing public towards the stock market.
Thus, it provides an indirect link between the savers and the company.
3. The stock exchanges through their listing requirements, exercise control over
the primary market. The company seeking for listing on the respective stock
exchange has to comply with all the rules and regulations given by the stock
exchange.
4. Though the primary and secondary markets are complementary to each
other, their functions and the organizational set up are different from each
other. The health of the primary market depends on the secondary market
and vice versa.

Difference between Primary and Secondary Market:-

Primary Market Secondary Market

1. A primary market is defined as the
market in which securities are
created for first-time investors.
2. The company issues the shares,
and the government interferes in
the process.
3. The primary market is called as a
new issue market.
4. The buying and selling of shares
takes place among the investors
and the companies.
5. The primary market provides
finance to the companies who
want expansion and growth.
6. Underwriters are involved in the
intermediary process.
7. The prices in the primary market
1. On the other hand, the
secondary market is defined as a
place where the issued shares
are traded among investors.
2. There is no interference of the
government or the company.
3. The secondary market is an
aftermarket.
4. The trading take place only
among the investors.
5. The secondary market does not
provide financing to the
companies.
6. Brokers are involved in the
intermediary process.
7. On the other hand, the prices

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 do not fluctuate, i.e., they are
fixed.
8. The products in a primary market
are limited, i.e., they include IPO
and FPO.
9. The purchase process happens
directly in the primary market.
10.The frequency of buying and
selling is limited, i.e., the investors
can invest once in the market.
11.The beneficiary in the primary
market is the company.
12.The primary market is not
organized.
13.The companies issuing shares and
debentures have to follow all
regulations.
14.The major disadvantage of the
primary market is that it is very
time-consuming and costly.
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fluctuate a lot in the secondary
market because of the demand
and supply.
8. Shares, debentures, warrants,
derivatives, etc., are the kind of
products offered in the
secondary market.
9. The company issuing the shares
do not involve in the purchasing
process.
10.On the other hand, the
frequency of buying and selling is
quite high, i.e., the investors can
trade as many times as they wish
to.
11.The beneficiary in the secondary
market is the investor.
12.The secondary market has an
organized setup.
13.The investors in the secondary
market follow the rules provided
by the stock exchanges and the
government.
14.The major disadvantage of the
secondary market is that the
investors can incur huge losses
due to price fluctuation.