APNI PATHSHALA by Ankit Avasthi Sir 1 “एक कदम उज्जवल भववष्य की ओर”

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Product Business
• Commodity means goods
• Like: Agricultural Commodity – wheat, rice
• Metal Commodity – Gold, Silver
• Fuel Commodity – Crude Oil
• Products are traded in commodity exchanges.
• Commodity exchange was banned in India in 1960 AD.
• Starting back in 1999 AD.
• Regulatory body- SEBI
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Following are the main commodity exchanges of India-

• National Multi Commodity Exchange: 2002 AD
• Headquarters- Ahmedabad
• First Commodity Exchange.
• Multi Commodity Exchange (MCX): 2003 AD
• Headquarters- Mumbai
• India's largest commodity exchange.
• National Commodity and Derivatives Exchange (NCDEX)
• Establishment- 2003 AD
• India's second largest exchange.
APNI PATHSHALA by Ankit Avasthi Sir 3 “एक कदम उज्जवल भववष्य की ओर”
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• Indian Commodity Exchange (ICEX)

• Established- 2009 AD
• Headquarters- Gurugram
• MCX-SX (Multi Commodity Exchange & Stock Exchange)-
• Established- 2013 AD
• Headquarters- Mumbai
• This is the first exchange in the country where along with
commodities, stocks (shares, loans) can also be traded.
• ACE Derivatives and Commodity Exchange
• Universal Commodity Exchange.
Benefits of Commodity Exchange
• Helpful in storing grains.
• Additional demand is created due to which farmers get better prices
for their crops due to higher prices of commodities.
• The monopoly of big businessmen ends.
• The risk of factionalism is reduced.
Disadvantages of Commodity Exchange
• Increase in inflation.
• Encouragement to betting.
APNI PATHSHALA by Ankit Avasthi Sir 4 “एक कदम उज्जवल भववष्य की ओर”
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Types of Exchanges/Deals in Stock Market

• SPOT Trading: If the agreement and execution of purchase and sale
of shares takes place at the same time then it is called SPOT Trading.
• 2 additional days are given to settle this.
• The ‘T+2’ rule works in this.
• FORWARD Trading: An agreement made in the present for the
purpose of future transaction is called FORWARD Trading.
• Its conditions are not predetermined.
• They do not have standard size.
• Its implementation takes place only on the scheduled date.
• These agreements are made outside the stock exchange.
APNI PATHSHALA by Ankit Avasthi Sir 5 “एक कदम उज्जवल भववष्य की ओर”
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FUTURE Trading
• This agreement is implemented in the future.
• These agreements are made through the stock exchange.
• Their terms and conditions are predetermined.
• Profit and loss are calculated daily.
• These agreements can be implemented even before the scheduled
date.

• FUTURE and OPTION (F&O): The agreement made in the present

for future transactions is called FUTURE and OPTION.
• The investor has to pay a nominal amount for the deal and the
investor has the option to cancel the deal, but the nominal
amount is not returned.
APNI PATHSHALA by Ankit Avasthi Sir 6 “एक कदम उज्जवल भववष्य की ओर”
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• SHORT Selling: If a person does not have shares but still he makes
an agreement to sell the shares and expects the shares to become
cheaper in the future and buys the shares at that time and supplies
them, it is called SHORT Selling.
• The buyer of the share buys the share thinking that he may get
the share at a higher price in the future.

Important vocabulary
• Junk Bonds: Those securities/bonds which are risky but yield high
profits are called junk bonds.
• Hundi: It was a short-term security of the medieval and British era.
• Hundi is used to transfer money from one place to another, as
a credit instrument to borrow money and as a bill of exchange
in trade transactions.
APNI PATHSHALA by Ankit Avasthi Sir 7 “एक कदम उज्जवल भववष्य की ओर”
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• Types of Hundi – Sahyog Hundi, Darshani Hundi, Term Hundi.

• At present Hundi is not valid.
• Blue Chip Company: Those companies whose M-Cap is high and
their shares are considered very safe to buy.
• The demand for their shares is high in the stock market. Their profits
are continuous and high.
• These are reputed companies.
• Like- 30 companies included in BSE Sensex.

Hot Money: That currency is called hot money which has a tendency to
migrate quickly in the financial market, that is, it gets transferred to the
place where there are chances of getting profit.
• Like- foreign currencies in stock market.
APNI PATHSHALA by Ankit Avasthi Sir 8 “एक कदम उज्जवल भववष्य की ओर”
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Underwriting: When a company issues an IPO, it gets its IPO

underwritten by some other financial institution, under which that
financial institution assures the investors that the company's project is
good and all its shares will be sold.
• If the shares are not sold then the institution itself guarantees
to buy the shares.

Book Building: This is essentially a price discovery method.

• The company conducts a survey in the market to determine the
price of IPO, it is called book building.
• Under this, the maximum and minimum price (price band) of
the IPO is provided by the underwriter.
• Like- IPO Price Band => Rs 50 - Rs 100
Average => IPO will be sold for Rs 70.
APNI PATHSHALA by Ankit Avasthi Sir 9 “एक कदम उज्जवल भववष्य की ओर”
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• Stag: Speculators/investors who buy and sell shares quickly to make

quick profits.
• Alpha Shares: Such shares which do not have any hindrance in
buying and selling are called alpha shares.
• Snowballing effect: After a small increase in the share price, due to
some circumstances, the share price increases so much that stop
orders start coming in for its buying and selling, then it is called
snowballing effect.
Companies
i. Small cap company =Less than Rs 2,500 crore
ii. Mid cap Company = Rs 2,500 crore to Rs 10,000 crore
iii. Large cap company = More than Rs 10,000 crores
APNI PATHSHALA by Ankit Avasthi Sir 10 “एक कदम उज्जवल भववष्य की ओर”
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Arbitrage: Buying shares from one stock market and selling shares in
another stock market is called arbitrage.
• The price of the same share may be different in different stock
markets.
• Arbitrage is done to make profit from this difference in prices.
Depository Receipt: It is a certificate issued by a bank.
• It represents shares of a foreign company traded on a local
stock exchange and gives investors the opportunity to hold
shares in equities of foreign countries.
• This gives them the option to trade in the international market.
• Curb Dealing: Deals done outside the stock exchange are called curb
dealing.
• Penny Stock: Stocks whose prices remain very low on the stock
exchange for a relatively long period of time.
• Speculators buy these shares and earn profits by selling them at a
higher price and the buyer of the shares suffers a loss.
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Mutual Fund: Mutual funds act as intermediaries between the general

public and the stock market.
• It collects public savings and invests them in the stock market.
• Earns profit from there and distributes it among investors.
• In return the mutual fund charges fees.
• There may also be losses in mutual funds.
• Mutual funds invest in the stock market by taking advice from
experts.
• Unit Trust of India (UTI)- 1964
• The country's first mutual fund.
• UTI scam was exposed in 2001.
• SBI Mutual Fund- 1986
• Note- In the economic reforms of 1991 AD, private sector was
allowed in mutual funds.
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• Venture Capital Fund: It is an investment vehicle through which

individuals invest and participate in newly formed start-ups as well
as small and medium-sized companies.
• These are a special type of investment funds that mainly target
firms with the potential to deliver high returns.
• Investing in these companies is risky.
• Because they have a team of experts.
• They invest only when they are assured of the success of the
company.
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Masala Bond:
• It is a bond issued in Indian currency by an Indian institution.
• In case of risk the investor has to bear the loss.
• Main objectives of Masala Bond-
• Financing infrastructure projects.
• Indian currency has to be internationalized.
• Note- The first masala bond was issued in 2014 by the World Bank
Group's International Finance Corporation (IFC) to finance
infrastructure projects in India.
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Electoral Bond:
• A bond which is used by individuals, institutions and organizations
to donate money to political parties is called electoral bond.
• Like a currency note, its value is written on this bond.
• The issuance of such bonds was announced by the Government
of India in the year 2017-18.
• These bonds are of Rs 1,000; Rs 10,000; Available at a price
of Rs 1 crore.
• Donors can donate to any party registered with the Election
Commission which has secured at least 1 percent of the total
votes in the previous elections.
• The names of those purchasing electoral bonds are kept
confidential.
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• The bonds are valid for 15 days from the date of purchase.
• These bonds can be purchased from selected branches of SBI
only.