Stock Market

& It’s Operations

Investment
Investment

 A sacrifice of current money or other

resources for future benefits.

 The application of money for earning more

money.
Characteristics of Investment

 Time Horizon
 Risk disposition
 Return expectations
 Basis for decisions
 Leverage
Objectives

 Rate of Return
 Risk
 Safety Of Principal
 Marketability
 Tax Shelter
 Hedge Against Inflation
 Convenience
 safety
Investment v/s Speculation
 Time Horizon  Time Horizon
Plans for a longer time Plans for a shorter
horizon. Its holding period. Holding period
period may be from varies from few days to
one year to few years. months
 Risk Disposition
 Risk Disposition
Assumes moderate Willing to undertake high
risk. risk.
 Return Expectations
 Return Expectations
Likes to have returns
Likes to have moderate for assuming high risk.
rate of return
associated with limited
risk.
Investment v/s Speculation
 Basis for decision  Basis for decision
Considers fundamental considers inside
factors and evaluate information technical
the performance of the charts and hearsays.
company regularly.
 Leverage
 Leverage
Investors uses their Investors use borrowed
own funds and avoids funds to supplement
borrowed funds their personal
resources
 Gambling
 Meaning of Gamble
It is a perform of an act involving an element
of risk.

Gambling refers to taking risk without

demanding compensation in the form of
increased expected return.
Characteristics Of Gambling
 It is a repetitive activity.
 Gambler plays with persistent , optimism and

attitude of winning.
 Gambler never stops while he is winning.
 Gambler takes more risk than he can afford.
 Gambler enjoys great thrill from gambling.
Investment V/S
 Risk Disposition
Investor always
take low risk by keep
diversifying his portfolio.
 Time horizon
Investor keeps the
portfolio for longer
period.
 Risk return trade off
Negative outcome are
expected
Gambling
 Risk Disposition
Gambler always ready
to take higher risk.
 Time horizon
Gambler makes the
position in socks For
normally intraday
purpose.
 Risk return trade off
Highest level of return at
a given level of risk
Investment V/S Gambling
 Chance Factor  Chance Factor
Investor makes careful It depends on chance.
analyses of different The results are
investment determined by roll of
opportunities studies dice or the turn of
risk and return card.
involved and
accordingly decides
portfolio
 Type of risk involved
 Type of risk involved

Artificial risk
Commercial risk
Individual inv
 They are large in
numbers.
 Investable resources are
comparatively smaller.
 They generally lack the
skill to carry out
extensive evaluation and
analysis before investing.
institutional inv
 Fewer in numbers.
 These are organizations with
surplus funds who engage in
investment activities.
 They engage professional
fund managers to carry out
extensive analysis and
evaluation of different
investment.
Investment Avenues
 INVESMENT AVENUES

NON
MARKETABLE
EQUITY SHARES
FIN ASSETS

BONDS MONEY MARKET

INSTRUMENTS

MUTUAL FUND LIFE INSURANCE

SCHEMES POLICIES

FIN
DERIVAT PRECIOUS
REAL ASSETS
IVES OBJECTS
 Non Marketable Financial Assets

 Bank deposits

 Post office deposits

 Company deposits

 Provident fund deposits

 NON MARKETABLE FINANCIAL ASSETS

Bank Deposits
 Saving deposits

 Fixed deposits

Post office deposit

 Post office saving account

 Post office time deposits

 Monthly income scheme of the post office

 Kisan vikas patra

 National saving certificates

 Post office savings account

 Its similar to a savings account of a bank.

 The interest rate is 3.5%pm
 Minimum Rs 20 for ordinary account and Rs. 250
for a cheque book facility along with.
 Maximum Rs. 50,000 for a single account an
rs.1,00,000 for a joint account.
 Interest rate is tax exempt.
 Post office time deposits

 Its similar to fixed deposits of banks.

 Deposits can be made in multiples of rs.50 without
any limit.
 The interest rate is slightly higher than those of
bank deposits.
 The interest is calculated half yearly and paid
annually.
 No withdrawal is permitted upto six months.
 It can be pleged.
Monthly income saving scheme of the post
office(MISPO)
 The term of the scheme is 6 years.
 The minimum amount of investment is rs.1000. the
maximum investment can be rs. 300000 in a single
account and 6 lacs in a joint account.
 The interest rate is 8% paid on monthly and a
bonus of 10% is payable on maturity.
 There is no tax deduction at source.
 Kisan vikas patra

 The minimum amount of investment is rs.1000.

 There is no maximum limit.
 The investment doubles in 8 years and 7 months.
 There is no tax deduction at source.
 It can be pledged
 There is withdrawal facility after 2years and 6
months.
 National savings certificate

 It comes in denominations of rs.100,rs.500,rs

1000.rs 5000 and rs.10000.
 It has a term of 6 years. over this period rs. 100
becomes rs160
 The investment in NSC can be deducted before
computing the taxable income under section 80c.
 There is no tax deduction at source.
 It can be pledged.
 Company deposits

 Fixed deposits mobilized from manufacturing

companies are regulated by company law board.
 Fixed deposits mobilized by finance companies are
regulated by the reserve bank of India
 For a manufacturing companies the term of deposits
can be one to three years.
 For finance companies it can vary between 25 months
to five years.
 The interest rates are higher than those on bank fixed
deposits.
 No income tax is deducted at source if the interest
income is up to rs.5000 in a financial year.
 Public provident fund deposits

 Employee provident fund scheme

 Public provident fund scheme

 Equity shares

 Blue chip shares

 Growth shares
 Income shares
 Cyclical shares
 Speculative shares
 Bonds
 Deep discount bond.

 Education benefit bond.

 Index bond.

 Retirement benefits bond.

 Money Market Instruments

 Treasury bills

 Commercial papers

 Certificate of deposits

Life insurance
Life insurance is a contract for payment of a sum
of money to a person assured(or to the person
entitled to receive the same) on the happening of
event insured.
 Protection against risk of death

 Easy payments

 Liquidity

 Tax relief

 Real Estate
 Residential property

 Agricultural land

 Commercial property

 Resort

 Second house
 Precious objects
 Gold and silver

 Precious stones

 Art objects

 Financial Derivatives
 Options

 Futures

 Swap

 forwards
Financial
Markets
Meaning of financial Markets

Financial markets can be referred to as those centers

and arrangements which facilitate buying and selling
of financial assets, claims and services etc.
Examples,
 Issue of equity shares.

 Granting of loan by term lending institutions.

 Deposit of money into the bank.

 Purchase of debentures.

 Sale of shares etc.

Financial Assets
Financial assets are one which is used for
production or consumption or for further
creation of assets.
Eg, Abhi buys equity shares and these shares
are financial assets since they earn income in
future.
Segments of Financial Markets
Segments of Financial Markets

Capital Market Money Market

Capital Market
Capital market is
that segment
of the market
where securities
with maturities of
more than
one year are
bought and sold
Money Market
Money Market is
the market
for short term
financial assets
with maturities of
one year or less.
TypesTypes
Of OfFinancial Markets
Financial Markets

Primary Market Secondary Market

 Primary market
primary Market deals with those securities
which are issued to the public for the first
time. It is also known as New Issue Market.

 Secondary Market
Secondary Market deals with securities which
are already been issued and are traded in
stock exchanges.
Participants In financial Markets
 INVESTORS
 ISSUERS
 FINANCIAL INTERMEDIARIES
 BANKS
 NBFC’S
 BROKERS