IT DEALS WITH THE ISSUE OF NEW OR FRESH CAPITAL AND IS THEREFORE ALSO REFERRED TO AS THE NEW ISSUE MARKET(NIM) The primary market performs the crucial function of facilitating capital formation in the economy Borrowers in the new issue market may be raising capital for converting private capital into public capital; this is known as "going public The financial assets sold can only be redeemed by the original holder
The securities are issued by the company directly to investors
The company receives the money and issues new security certificates to the investors
Used by companies for the purpose of setting up new business or for to the investors
Equity shares are those shares which are ordinary in the course of company's business. They are also called as ordinary shares. Equity shareholders are paid dividend out of the profits made by a company. Higher the profits, higher will be the dividend and lower the profits, lower will be the dividend.
Owned capital Fixed value or nominal value Transfer of shares Irredeemable Return on shares A debenture is a document that either creates a debt or acknowledges it
1. Debenture holders are termed as creditors of the company
2. They are paid a fixed rate of interest
3. Public issues of debentures requires that the issue be rated by a credit rating agency like crisi
4. Debenture holders do not have voting rights
5. They are the first receiver of claims from the company at the time of winding up
1. Secured and unsecured debentures
2. Registered and bearer debentures
3. Convertible and non-convertible
4. First and Second
Preference shares are shares that pay dividends at a specified rate and have a preference over ordinary shares in the payment of dividends and the liquidation of assets. They not carry voting rights. 1. Preference shareholders receive a fixed rate of dividend 2. They receive their capital after the claims of the companys creditors have been settled 3. They do not enjoy any voting rights
1. Cumulative and non-cumulative
2. Participating and non-participating
3. Convertible and non-convertible
1. Nominal, principal or face amount
2. Issue price
3. Maturity date
4. Indentures and Covenanats
Examples include zero interest bonds and deep discount bonds and others.
Examples
1. Zero interest bonds(zib)-ZIBs were first issued and introduced by mahindra & mahindra.No interest is paid on these. They are sold on at a discount from there maturity value and are redeemed at par at the end of 5 years. 2. Deep discount bonds(DDBs)-DDBs were first issued and introduced by the IDBI. They are almost identical to ZIBs except that they are issued for much longer periods and therefore have deep discounts on there face value.
1. Initial public offer(IPO)
--Public issue through prospectus --Offer for sale --Private placement
2. Rights issue(for existing companies)
3. Preferential issue
An initial public offering (IPO), referred simply as an "offering" or "flotation", is when a company (called the issuer) issues common stock or shares to the public for the first time. They are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately owned companies looking to become publicaly traded 1. The Issuer who is planning an offer nominates lead merchant banker(s) as 'book runners'
2. The Issuer specifies the number of securities to be issued and the price band for the bids
3. The Issuer also appoints syndicate members with whom orders are to be placed by the investors
4. The syndicate members input the orders into an 'electronic book'. This process is called 'bidding' and is similar to open auction
5. The book normally remains open for a period of 5 days
6. Bids have to be entered within the specified price band
7. Bids can be revised by the bidders before the book closes
8. On the close of the book building period, the book runners evaluate the bids on the basis of the demand at various price levels
9. The book runners and the Issuer decide the final price at which the securities shall be issued
10. Generally, the number of shares are fixed, the issue size gets frozen based on the final price per share
11. Allocation of securities is made to the successful bidders. The rest get refund orders
APPLICATION SUPPORTED BY BLOCKED AMOUNT 1. PUBLIC ISSUE THROUGH PROSPECTUS: Under this method, the company wanting to raise capital issues a prospectus to and attract the investing public.it invites prospective investors to apply for the securities
2. OFFER FOR SALE: Under this method the new securities are offered to the investing public not by the issuing company but by an intermediary who buys over the entire lot of securities at a fixed price and resells to the public at a higher price
3. PRIVATE PLACEMEMT: Here the entire lot of new securities is purchased by an intermediary at a fixed price, and sold not to the public, but to selected clients(ex-LIC,GIC,etc) at a higher price
1. This is the offer of new shares by a company to the existing shareholders.
2. The shareholders are offered the right to buy new shares in proportion to the number of shares they already possess
3. The shareholder may either accept the offer for himself or assign a part or all of his rights to another
This is the practice followed by a company to make preferential allotment of securities to selected persons, who are normally the promoters, etc. at a price unrelated to the prevailing market price. SHARE:A share is a unit of stock holding. STOCK:A stock is a form of investing in a company.
What are active Shares? Shares in which there are frequent and day-to-day dealings, as distinguished from partly active shares in which dealings are not so frequent.
A company's stock price reflects what investors think about the stock, not necessarily what the company is worth
Publicly traded companies are required to report quarterly on their financial status and earnings
Place where business of buying and selling stock takes place
Organized market for the sale and purchase of securities such as stocks and bonds.
1875 : 'The Native Share & Stock Brokers Association'.
1956 : Indian Government under the Securities Contracts Regulation Act.
1986 BSE Sensex
Sensex is an index
Index is basically an indicator
A means to measure overall performance of the exchange
SENSEX 30 STOCKS 1. RELIANCE IND 16. M& M 2. INFOSYS TECH 17. JINDAL STEEL P 3. ICICI BANK 18. HINDALCO 4. L & T 19. WIPRO 5. HDFC 20. STERLITE INDS 6. HDFC BANK 21. TATA POWER 7. ITC 22. MARUTI SUZUKI 8. SBI 23. NTPC 9. ONGC 24. HERO HONDA 10. BHARTI AIRTEL 25. RELIANCE INFRA 11. TATA CONSULT 26. CIPLA 12. HINDUSTAN UNILEVER 27. JAIPRAKASH ASSO 13. BHEL 28. DLF 14. TATA STEEL 29. RELIANCE COMM 15. TATA MOTORS 30. ACC
1. BANKING SECTOR 2. CAPITAL GOODS SECTOR 3. CEMENT SECTOR 4. OIL AND GAS SECTOR 5. INFRASTRUCTURE SECTOR 6. POWER SECTOR 7. TELECOMS SECTOR 8. AUTOMOBILE SECTOR 9. METAL SECTOR 10. INFORMATION TECHNOLOGY SECTOR
INFLATION MARKET TRENDS GLOBAL MARKET GOVERNMENT POLICIES FINANCIAL STATEMENTS OF COMPANIES
FACTORS AFFECTING STOCK PRICE
FINACIAL STATEMENT OF COMPANIES GROWTH OF COMPANIES ORDER BOOK MANAGEMENT LAND BANK POLICIES PLANS In April 1993, it was recognized as a stock exchange under the Securities Contracts (Regulation) Act, 1956.
Largest stock exchange in India
Mutually-owned by a set of leading Financial Institutions, Banks, Insurance Companies and other Financial Intermediaries in India
Promoted by leading Financial institutions at the behest of the Government of India
1. RELIANCE IND 26. NTPC 2. INFOSYS TECH 27. PUNJAB NATIONAL BANK 3.ICICI BANK 28. KOTAK MAHINDRA BANK 4. L& T 29. HERO HONDA 5. HDFC 30. RELIANCE INFRA 6.HDFC BANK 31. CIPLA 7.ITC 32. SUN PHARMA 8. SBI 33. CAIRN 9. ONGC 34. JAIPRAKASH ASSO 10. BHARTI AIRTEL 35. DLF 11. TATA CONSULT 36. UNITECH 12.AXIS BANK 37. SIEMENS 13.BHEL 38. IDEA CELLULAR 14. TATA STEEL 39. AMBUJA CEMENT 15. TATA MOTORS 40. SAIL 16. HINDUSTAN UNILEVER 41. RELIANCE COM 17. IDFC 42. ACC 18. M & M 43. BPCL 19. JINDAL STEE.L 44. ABB 20. HINDALCO 45. REL CAPITAL 21.WIPRO 46. HCL TECHNO 22. TATA POWER 47. RANBAXY LAB 23. STERLINE IND 48. POWER GRID 24. GAIL(I) 49. RELIANCE POW 25.MARUTI SUZUKI 50. SUZION ENRGY
Indices NSE also set up as index services firm known as India Index Services & Products Limited (IISL) and has launched several stock indices, including S&P CNX Nifty(Standard & Poor's CRISIL NSE Index) CNX Nifty J unior CNX 100 (= S&P CNX Nifty + CNX Nifty J unior) S&P CNX 500 (= CNX 100 + 400 major players across 72 industries) CNX Midcap (introduced on 18 July 2005 replacing CNX Midcap 200)
Classification of GROUPS in Equity Segments as A, B, S , T ,Z
Eligibility Criteria for A group Scrips should be listed for 3 months
Eligibility Criteria for S group Group consists of scrips in the segments which are on a trade to trade settled basis as a surveillance measure
Eligibility Criteria for T group It consists of scrips which are traded on trade to trade basis
Eligibility Criteria for Z group Scrips which fail to comply with its listing requirements
Eligibility Criteria for B group All companies not included in group A, S or Z are clubbed under this category
GROUPS
SCRIPS
A RIL, HDFC Bank
B Zee News, TVS Motors
S Bajaj Elec., India Gelatin
T Indiabull Retail
Z Bagadia Colour, Anil Modi Oil
Capitalisation or cap is market value of a stock, indicating the size of stock available Scrips are divided into various market caps
TYPES
SMALL CAP
Small companies that have potential to grow rapidly Best option for investors who wishes to generate significant gains in the long run MC in range of 3-5 crores.
MID CAP
Are of well known companies and known as seasonal players. Twin Advantage of acquiring stock with good growth potential as well as stability of larger companies. MC range in 5 crores - - - 10 crores
LARGE CAP
Large companies such as TATA, RELAINCE, ICICI Investors gain the advantages of reaping relatively higher dividend compare to smaller mid cap stocks. Also ensuring the long term preservation of their capital MC in range of more than 10 crores
ESTABLISHMENT OF SEBI PREAMBLE ..to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto
SEBI is a primary governing/regulatory body for the securities market in India The SEBI Governs the following
1. New Issues (Initial Public Offering or IPO) a statutory and autonomous regulatory board with defined responsibilities 2. Listing agreement of companies with Stock Exchanges 3. Trading Mechanisms 4. Investor Protection 5. Corporate disclosure by listed companies etc. Regulates the business in stock exchanges and any other securities markets Registering and regulating the working of stock brokers, sub-brokers, share transfer agents Prohibiting fraudulent and unfair trade practices relating to securities markets Promoting investors' education and training of intermediaries of securities markets;
1. It prohibits insider trading 2. Undertakes steps to educate investors 3. Registration of brokers and sub brokers in the market 4. Conducting enquiries and audits of stock exchange 5. Oversees the functions of the Stock markets and mutual funds and other investment instruments in India.
BROKER: A Broker is intermediary who arranges to buy and sell securities on behalf of client(buyer & seller)
According to SEBI rules,1992, A stockbroker means member of recognized stock exchange. (No broker is allowed to buy or sell or deal in securities, unless he/she or holds certificate of registration granted by SEBI)
1. He holds the membership of any stock exchange he shall abide by the rules, regulation & bye laws of the stock exchanges or stock exchanges of which he is member
2. In case of any change in status & constitution he shall obtain prior permission of SEBI to continue buy or securities sell
3. He shall pay registration fees in prescribed manner He shall take adequate steps of any grievance of invest or and keep SEBI informed about particular of complaint
1. He should be admitted as member of a stock exchange 2. He should have necessary infrastructure like adequate office space ,equipment & man power to effectively discharge his activities 3. He should have past experience in business of buying, selling and dealing in securities 4. He is being subject to any disciplinary proceeding under the rules, regulation and bye laws of a stock exchange with respect to his business as stock broker involving himself, partners. 1. Corporation, companies or institution or subsidiaries of such corporation, companies or institution set up for providing financial services
2. Such other person or entities as may be permitted from time to time by RBI/SEBI under securities contract rules,1957. Sub-broker is an important intermediary between stock broker and client in capital market segment Sub-broker means any person not being a member of stock exchange who acts on behalf of stock broker as an agent or otherwise assisting the investors in buying, selling or dealing in securities through stock brokers 1. A Sub broker may be an individual, a partnership firm or a corporate
2. In a case of corporate or partnership firm, the director or partners and in case of individual Sub Broker applicant, shall comply with following requirements
3. They shall be not less than 21 years of age
4. They shall not have been convicted of any Offence involving fraud or dishonesty
5. They should not have been barred by SEBI No Sub-broker is allowed to buy, sell or deal in securities ,unless he or she holds a certificate of registration granted by SEBI. Demat account is a safe and convenient means of holding securities just like a bank account is for funds. Today, practically 99.9% settlement (of shares) takes place on demat mode only. Thus, it is advisable to have a Beneficiary Owner (BO) account to trade at the exchanges. A maximum of three persons are allowed to open a joint demat account in their names.
A safe and convenient way of holding securities (equity and debt instruments both).
Transactions involving physical securities are costlier than those involving dematerialized securities (just like the transactions through a bank teller are costlier than ATM transactions). Therefore, charges applicable to an investor are lesser for each transaction.
Increased liquidity, as securities can be sold at any time during the trading hours and payment can be received in a very short period of time.
Any change in address or bank account details can be electronically intimated to all companies Securities are transferred by the DP itself, so no need to correspond with the companies. Shares arising out of bonus, split, consolidation, merger etc. are automatically credited into the demat account of the investor. Shares allotted in public issues are directly credited into demat account of the applicants in quick time.
Choose a DP Fill up an account opening form provided by DP, and sign an agreement with DP in a standard format prescribed by the depository. DP provides the investor with a copy of the agreement and schedule of charges for his future reference. DP opens the account and provides the investor with a unique account number, also known as Beneficiary Owner Identification Number (BO ID).
NSDL:NATIONAL SECURITY DEPOSITARY LIMITED
CDSL:CENTRAL DEPOSITARY SECURITY LIMITED
RAISE FUNDS
LARGER TIME FOR MATURITY
FINANCES FISCAL DEFICIT
ADVANTAGES ASSURED RETURNS
RISK FREE
HIGH LIQUIDITY DISADVANTAGES LIMITED RETURNS
NO VOTING RIGHTS IN COMPANYS GENERAL MEETING
NO DIRECT CLAIM TO THE FUTURE PROFITS
INTEREST IS A FIXED COST,RAISES BREAK EVEN POINT
TYPES OF DEBT INSTRUMENTS
1. GOVERNMENT SECURITIES
ISSUED BY THE RBI MATURITY OF 1-30 YEARS FIXED RATE OF RETURN TREASURY BILLS OF 91,182,364 DAYS- SHORT TERM
2. CORPORATE BONDS
ISSUED BY PSUs AND PRIVATE CORPORATIONS
TENURE UPTO 15 YEARS
HIGHER RISK,HIGHER RETURNS THAN G-SECS
3. COMMERCIAL PAPERS
SHORT TERM SECURITIES
ISSUED BY CORPORATE ENTITY
MATURITY 7-365 DAYS
Derivatives Introduction to derivatives. Futures history can be traced back to middle ages where markets were meant to address the needs of the farmers and the merchants. The Chicago Board Of Trade (CBOT) was established in 1848 to bring farmers and merchants together. Initially, its main task was to standardize the quantities and qualities of the grains that were traded. Definitions According to JOHN C. HUL A derivatives can be defined as a financial instrument whose value depends on (or derives from) the values of other, more basic underlying variables.
DERIVATIVES option future forward A forward contract is one to one bi-party contract, to be performed in the future, at the terms decided today (E.g. forward currency market in India).
Tremendous flexibility.
Poor liquidity .
Operational mechanism.
Contract specifications.
Counterparty risk.
Liquidation profile. A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. There is a multilateral contract between the buyer and seller for a underlying asset which may be financial instrument or physical commodities.
These contracts, being standardized and traded on the exchanges are very liquid in nature.
In future market, clearing corporation/ house provides the settlement guarantee.
Trading in Future contract.
There are two parties in the contract i.e. Hitesh and Kishore where , Hitesh has purchased the one month contract of XYZ futures with the price of Rs.1650.The lot size of XYZ is 300 shares. The initial margin is 10% of total contract is paid by the both parties to Brokers.
Case 1:-
Hitesh as a buyer is bullish and kishore as seller is bearish in the market.
Stock Rises to Rs.2200.
Unlimited profit for the buyer (Hitesh) = Rs.1, 65,000 [(2200-1650*3oo)] and notional profit for the buyer is 500. Case 2:-
Hitesh as a buyer is bearish and kishore as seller is bullish in the market.
Stock falls to Rs.1400.
Unlimited profit for the seller = Rs.75,000. [(1650-1400*300)] and notional profit for the seller is 250.
An option is a contract giving the buyer the right, but not the obligation, to buy or sell an underlying asset (a stock or index) at a specific price on or before a specified date.
Maturity of options contracts.
Weekly options.
Monthly options. What do u mean by ..? Option seller Option buyer Call option Put option American option European option Strike Price/ Exercise Price Expiration Date Exercise Date Option Premium
Index Futures
Stock Futures
Index Option
Stock Option
Product No. of contracts Turnover(rs. Crore) Index Futures 609260 17601.96 Stock Futures 820825 26725.67 Index Options 2273360 68868.77 Stock Options 149532 5035.86 F&O Total 3852977 118232.26 The total number of futures contracts or option contracts that have not yet been exercised (squared off), expired, or fulfilled by delivery.
OPEN INTEREST CAN PREDICT THE TREND IN FUTURES AND OPTIONS
Each trade completed on the exchange has an impact upon the level of open interest for that day.
For example, if both parties to the trade are initiating a new position, open interest will increase by one contract.
If both traders are closing an existing or old position open interest will decline by one contract.
The third and final possibility is one old trader passing off his position to a new trader. In this case the open interest will not change.
Price Open Interest Interpretation Rising Rising
Market is Strong Falling Rising
Market is Weak MUTUAL FUND IS A TRUST THAT POOLS TOGETHER THE SAVINGS OF A NUMBER OF INVESTORS WHO SHARES A COMMON GOAL
STARTED IN- 1963
UNIT TRUST OF INDIA
WITH THE INITIATIVE OF GOVT OF INDIA AND RBI MUTUAL FUNDS INVESTOR FUND MANAGER SECURITIES RETURNS POOL THEIR MONEY WITH INVET IN GENERATS PASSED BACK TO DIVERSIFICATION
REGULATORY OVERSIGHT
LIQUIDITY
LOW COST
COVENIENCE
RUPEEWALA CAPITAL SERVICES
ACTIVITY DAY TRADIND ROLLING SETTLEMENT TRADIBG T CLEARING CUSTODIAL CONFIRMATION T+1 WORKING DAYS DELIVERY GENERATION T+1 WORKING DAYS SETTLEMENT SECURITIES & FUNDS PAY IN T+2 WORKING DAYS SECURITIES & FUNDS PAY OUT
T+2 WORKING DAYS TECHNICAL ANALYSIS: A method of evaluating future security prices and market directions based on statistical analysis of variables such as trading volume, price changes, etc., to identify patterns.
FUNDAMENTAL ANALYSIS: It believes that a securitys price is determined by the supply and demand for underlying securities based in its economic fundamentals such as expected return and risk. TECHNICAL
Based on share price and volumes, past data
Technician believes the reaction is slow
FUNDAMENTAL
Based on external and internal factors(economic fundamental, politics, )
Fundamental believes price adjust quickly
The term is used most commonly in India to refer to outside companies investing in the financial markets of India. International institutional investors must register with the Securities and Exchange Board of India to participate in the market. One of the major market regulations pertaining to FIIs involves placing limits on FII ownership in Indian companies. Earlier FIIs were allowed to invest in government bonds & corporate papers $5billion & $15billion respectively. To make India as attractive investment destination government in month of september2010 has raised capital of investment by FIIS in countries debt & bond market from $5billion to $10 billion and from $15billion to $30billion respectively
India has already attracted over $17billion in investment in various bonds & securities market. A hike in ceiling was necessary as FIIS are already closed to touching existing cap of $20billion in investment