1.

Survey of various
types of bank
accounts,rate of
interest offered.
Bank account:
1967 letter by the Midland Bank to a customer,
informing on the introduction of electronic data
processing and the introduction of account
numbers for current accounts
A bank account is a financial account maintained
by a financial institution for a customer. A bank
account can be a deposit account, a credit
card account, or any other type of account offered
by a financial institution, and represents the funds
that a customer has entrusted to the financial
institution and from which the customer can make
withdrawals. Alternatively, accounts may be loan
accounts in which case the customer owes money
to the financial institution.
The financial transactions which have occurred
within a given period of time on a bank account are
reported to the customer on a bank statement and
the balance of the accounts at any point in time is
1 | Page

the financial position of the customer with the

institution.
The laws of each country specify the manner in
which accounts may be opened and operated. They
may specify, for example, who may open an
account, how the signatories can identify
themselves, deposit and withdrawal limits and
many other matters.

Amount structure:
Bank accounts may have a positive,
or credit balance, where the financial institution
owes money to the customer; or a negative,
or debitbalance, where the customer owes the
financial institution money.[1]
Broadly, accounts opened with the purpose of
holding credit balances are referred to as deposit
accounts; whilst accounts opened with the purpose
of holding debit balances are referred to as loan
accounts. Some accounts can switch between
credit and debit balances.
Some accounts are categorized by the function
rather than nature of the balance they hold, such
as savings account, which routinely are in credit.
All financial institution have their own names for
the various accounts which they open for
customers. Financial institution have a variety of
2 | Page

fees for the maintenance of various accounts and

for the processing of certain transactions.
Types

Deposit

Transactional (Checking)

Personal

Savings Bank account (India)

Transaction deposit (USA)

Savings

Individual Savings Account (ISA) (UK)

Time deposit (Bond) / Fixed deposit

Current

Certificate of deposit (USA)

Tax-exempt special savings account

(TESSA) (UK)

Tax-Free Savings Account (Canada)

Money-market
Other types

3 | Page

Loan

Joint

Low-cost

Numbered

Negotiable Order of Withdrawal (NOW)

(USA)

Types of Bank Accounts in India

Current, Saving Bank, Recurring Deposit,
Fixed Deposit Accounts

4 | Page

TYPES OF BANK ACCOUNTS IN INDIA

(Deposit Accounts)
CURRENT
DEPOSITS /
ACCOUNTS
SAVING BANK /
Saving Fund
DEPOSITS /
ACCOUNTS
RECURRING
DEPOSITS /
ACCOUNTS
FIXED
DEPOSITS /
ACCOUNTS OR
TERM DEPOSITS

Traditionally banks in India have four

types of deposit accounts, namely
Current Accounts, Saving Banking
Accounts, Recurring Deposits and, Fixed
Deposits. However, in recent years, due
to ever increasing competition, some
banks have introduced new products,
which combine the features of above two
or more types of deposit accounts. These
are known by different names in different
banks, e.g 2-in-1 deposits, Smart
Deposits, Power Saving Deposits,
5|P
age
Automatic
Sweep Deposits etc. However,
these have not been very popular among
the public.

Mode of calculation of Interest on Short Deposits

and Fixed Deposits for periods less than
12 months :
Short Deposits
On deposits
repayable within
six months
(Short Deposits)

Interest should be paid for the

actual ___________ number of
days on the basis of 365 days in a
year

Fixed Deposits
On Deposits

Interest will be calculated for the

completed months and where the

6 | Page

repayable after
six months
(Fixed Deposits)
where the
terminal month
is complete or
incomplete

terminal month is incomplete- the

actual number of days on the basis
of 365 days in a year.

KYC ( Know Your Customer) for opening account is

applicable for these accounts hence proof of residence
and proof of identification will be required alongwith recent
photograph of the depositor/s
Need to open Savings Bank Accounts
It is desirable that the Term Deposit account holders also
maintain Savings Bank accounts with the Bank so as to
avoid delay in disbursement of interest on term deposits or
inconvenience to the depositor to call on the Branch to
collect interest.

7 | Page

****************************************************

2.planning a home
budget.
How to plan an effective budget
Planning your budget:
Use your financial records to ensure your budget
accurately matches your spending

8 | Page

A home budget is a spending plan that takes

into account your monthly income and
expenditure, so you have a clear idea of
where your cash is going.
If you have a financial goal such as ridding
yourself of debt, saving for a deposit on your first
home or putting money aside for your retirement
a budget plan will help you work towards this.
Whats a budget and why do I need one?
Provided you stick to it, a budget will help you to
keep on top of your outgoings, and make sure you
dont spend more than you earn each month.
Its important to revisit your budget plan on a
regular basis particularly if your employment or
living situation changes or you could find it no
longer works for you.
If you make sure your budget reflects your
everyday expenses and income as closely as
possible, youll be more likely to follow it.
1. Get organised and take your time
Set aside at least an hour before you begin
planning a home budget. Doing it in a rush is likely
to mean you make mistakes.
It's a good idea to gather together all the
paperwork youll need before getting started, so
get hold of:
9 | Page

a few months worth of bank statements

your recent credit card bills
copies of your household bills
details of your savings and pension
contributions

information on any other incomes you may

have
2. Add up your income
Next, you need to calculate your income. Make a
list of your regular earnings from employment
(after tax and National Insurance has been
deducted), as well as any income you have from
savings, investments, self-employment or rent from
any properties you own.
Make sure you dont focus only on monthly
incomes. Add any weekly, yearly or sporadic
earnings, such as dividends from shares, as well.
Whether youre using a spreadsheet, a notebook or
a specially designed computer programme to
create your budget, make sure you separate your
annual/irregular and monthly earnings into two or
more columns. Once youve done this, calculate
overall totals for each income stream, as well as a
yearly earnings figure.
Now might also be a good time to ensure youre
paying the correct amount of tax. For help with
10 | P a g e

this, see the Which? tax codes explained advice

guide and other useful articles in our tax section.
3. Work out how much youre spending
Now you need to work out how much youre
spending each month. Look at your bank
statements, household bills and credit card bills to
ensure you have a realistic idea of where your cash
is going and avoid guessing wherever possible.
The more accurate your figures are, the more
useful your budget will be.
Remember to account for occasional spending, not
just monthly expenditures. Think about the cost of
Christmas, birthdays, insurance policies, your MOT
and your annual holiday. Add costs like these into
your list of expenses ideally in a separate
yearly/occasional outgoings column.
A lot of people find it simpler to perform this task
using spreadsheets or personal finance software.
Check ourpersonal finance software reviews to see
what these programs could do for you.
Once youre sure youve included everything you
need to, add up your monthly and occasional
spending separately so you end up with two totals.
Next, calculate an overall figure that incorporates
all your yearly expenditure. If you divide this
number by 12 and look at the difference between
your result and your regular spending total, youll
11 | P a g e

see how much money you need to earmark each

month for irregular spending on things like car
insurance and gifts.
4. Compare whats coming in and going out
Now its time to look at your income and spending
totals alongside one another.
Subtract your annual and monthly expenditure
totals from your annual and monthly income
figures. You'll be left with the yearly and monthly
surpluses or shortfalls in your finances. A
shortfall will be indicated by a negative number.
Even if you find you have more money coming in
than going out, its still a good idea to draw up a
budget plan. This will allow you to ensure you keep
spending sensibly, and could help you find extra
opportunities to save for the future or pay off debts
more quickly.
Meanwhile, if you discover youre spending more
than you earn at the moment, making a budget is a
crucial task you shouldnt put off. If you fail to
address the situation, you could drift into debt and ultimately find yourself in a downward financial
spiral that's difficult to escape.
5. Draw up a budget you can stick to
Whatever your financial goals, now is the time to
draw up a plan that will help you achieve them.

12 | P a g e

Be as realistic as possible when budget planning. It

should consist of what you intend to spend each
month, and in some cases each year, on key
things. However, there will always be certain costs
that are impossible or very difficult to cut.
Small changes, such as not buying a takeaway
coffee every day, could make a big difference to
your budget over the long-term.
Changes such as switching your current account,
credit card or energy provider could also help to
balance your budget without the need for
cutbacks. You can find more ideas like these in
our 50 ways to save money guide.
Once youve drawn up your budget, its important
to keep an eye on how faithfully youre sticking to
it particularly in the first few months.

Personal budget:
A personal budget is a finance plan that allocates
future
personal income towards expenses, savings and de
bt repayment. Past spending and personal debt are
considered when creating a personal budget. There
are several methods and tools available for
creating, using and adjusting a personal budget.

13 | P a g e

For example, jobs are an income source, while bills

and rent payments are expenses.
Concepts:

Personal budgeting, while not particularly difficult,

tends to carry a negative connotation among many
consumers. Sticking to a few basic concepts helps
to avoid several common pitfalls of budgeting.

Purpose
A budget should have a purpose or defined goal
that is achieved within a certain time period.
Knowing the source and amount of income and the
amounts allocated to expense events are as
important as when those cash flow events occur.
Budgeting for irregular income
Special precautions need to be taken for families
operating on an irregular income. Households with
an irregular income should keep two common
major pitfalls in mind when planning their finances:
spending more than their average income, and
running out of money even when income is on
average.
14 | P a g e

Clearly, a household's need to estimate their

average (yearly) income is paramount; spending,
which will be relatively constant, needs to be
maintained below that amount. A budget being an
approximate estimation, room for error should
always be allowed so keeping expenses 5% or 10%
below the estimated income is a prudent approach.
When done correctly, households should end any
given year with about 5% of their income left over.
Of course, the better the estimates, the better the
results will be.
To avoid running out of money because expenses
occur before the money actually arrives (known as
a cash flow problem in business jargon) a "safety
cushion" of excess cash (to cover those months
when actual income is below estimations) should
be established. There is no easy way to develop a
safety cushion, so families frequently have to
spend less than they earn until they have
accumulated a cushion. This can be a challenging
task particularly when starting during a low spot in
the earning cycle, although this is how most
budgets begin. In general, households that start
out with expenses that are 5% or 10% below their
average income should slowly develop a cushion of
savings that can be accessed when earnings are
15 | P a g e

below average. Whether this rate of building a

cushion is fast enough for a given financial
situation depends on how variable income is, and
whether the budgeting process starts at a high or
low point during the earnings cycles.

Retirement: Money set aside into

an IRA or 401(k).

Long-term savings: Money set aside for car

purchases, major home fix-ups, or to pay down
substantial debt loads.

Irregular expenses: Vacations, major repair

bills, new appliances, etc.

Fun money: Money set aside for

entertainment purposes.

Housing as 25% of spendable income[edit]

Another allocation principle is that housing
expenses (mortgage or rent) should be limited to
25% of spendable income. This rule of
thumb especially applies to families moving to new
housing; if a house payment for a $300,000 house,
plus taxes, will result in a $2,000 monthly
mortgage bill, will it take up too large a portion of

16 | P a g e

the budget? (To calculate, find income level, tax

rate and mortgage interest rate.)
In housing markets with exceptionally high prices,
such as California, New York City, or Boston,
Massachusetts, in the early 2000s, this rule of
thumb may be difficult to follow. A high percentage
of income spent on housing will necessitate lower
percentages in other categories.
One of the critical factors that many people
overlook during the budgeting process is the
"supplier-replacement cost-cutting technique". This
is the process of scrutinizing each current
expenditure, comparison shopping and replacing
with a lower cost, equal quality alternative. The
newfound savings is then reapplied to debt,
savings accounts and enjoyment spending.
Following a budget:

Once a budget is constructed and the proper

amounts are allocated to their proper categories,
the focus for personal budgeting turns to following
the budget. As with allocation, there are various
methods available for following a budget.

17 | P a g e

Envelope Accounting or the Envelope System is

a method of budgeting where on a regular basis
(i.e. monthly, biweekly, etc.) a certain amount of
money is set aside for a specific purpose, or
category, in an envelope marked for that purpose.
Then anytime you make a purchase you look in the
envelope for the type of purchase being considered
to see if there are sufficient funds to make the
purchase. If the money is there, all is well.
Otherwise, you have three options: 1) you do not
make the purchase; 2) you wait until you can
allocate more money to that envelope; 3) you
sacrifice another category by moving money from
its associated envelope. The flip side is true as
well, if you do not spend everything in the
envelope this month then the next allocation adds
to what is already there resulting in more money
for the next month.
With envelope budgeting, the amount of money
left to spend in a given category can be calculated
at any time by counting the money in the
envelope. Optionally, each envelope can be
marked with the amount due each month (if a bill

18 | P a g e

is known ahead of time) and the due date for the

bill.
1
Tips:

Don't keep all your money in the one pot or bank

account. Use a checking account for your spending,
a savings account for your short-term savings, an
investment account for your mid-term savings, and
a retirement account (401k or IRA) for tax-deferred,
long-term savings. Following this rule will help you
to have the right money in the right place when
you need it, both in the present and the future.
Think back to your very first pay cheque paper
route money, babysitting income or a cheque from
a parttime job. Did it come with instructions?
Instructions seem to be included with the simplest
devices these days, and yet, with something as
important as our pay cheques, were left to figure it
out on our own. No one is born with money
management skills. By the time were adults, we
are expected to be able to manage our money
effectively; however few of us are taught how.
Therefore, many people experience the usual
emotions that occur when they dont know how to
do something well. These may include:
Frustration
Guilt
19 | P a g e

 Envy
Anger
Shame
Disappointment
Like driving a car or playing an instrument, the
skill of managing money must be learned
and its never too late to start! Doing so usually
pays immediate benefits. People might not earn
more money if they budget well, but they will be
able to use the money they do have wisely.
How Much Should You Save?
There is no magic number that tells you what you
should be saving each month. It depends on your
income level, your debt load, your life stage, if you
are employed, unemployed or retired as well as
your financial goals.

20 | P a g e

At first you may find it difficult to set savings aside.

If you have outstanding debts to pay or you arent
in the habit of saving, its important to get started.
Save a small amount from each pay cheque at first
and increase the amount as you are able to. Youll
be amazed at how quickly your savings can add up
once you just get started!

21 | P a g e

****************************************************

3.TO study and report on

shares and dividends.
Dividend :

A dividend is a payment made by a corporation to

its shareholders, usually as a distribution of profits.
[1]
When a corporation earns a profit or surplus, it
can re-invest it in the business (called retained
earnings), and pay a fraction of the profit as a
dividend to shareholders. Distribution to
shareholders can be in cash (usually a deposit into
a bank account) or, if the corporation has
a dividend reinvestment plan, the amount can be
paid by the issue of further shares or share
repurchase.[2][3]
A dividend is allocated as a fixed amount per
share, with shareholders receiving a dividend in
proportion to their shareholding. For the joint-stock
company, paying dividends is not an expense;
rather, it is the division of after tax profits among
shareholders. Retained earnings (profits that have
not been distributed as dividends) are shown in the
22 | P a g e

shareholders' equity section on the company's

balance sheet - the same as its issued share
capital. Public companies usually pay dividends on
a fixed schedule, but may declare a dividend at
any time, sometimes called a special dividend to
distinguish it from the fixed schedule
dividends. Cooperatives, on the other hand,
allocate dividends according to members' activity,
so their dividends are often considered to be a pretax expense.
The word "dividend" comes from the Latin word
"dividendum" ("thing to be divided").[4]

Forms of payment

Cash dividends are the most common form of

payment and are paid out in currency, usually
via electronic funds transfer or a printed
paper check. Such dividends are a form of
investment income and are usually taxable to the
recipient in the year they are paid. This is the most
common method of sharing corporate profits with
the shareholders of the company. For each share
owned, a declared amount of money is distributed.
Thus, if a person owns 100 shares and the cash
dividend is 50 cents per share, the holder of the
23 | P a g e

stock will be paid $50. Dividends paid are not

classified as an expense, but rather a deduction
of retained earnings. Dividends paid does not show
up on an income statement but does appear on
the balance sheet.
Stock or scrip dividends are those paid out in
the form of additional stock shares of the issuing
corporation, or another corporation (such as its
subsidiary corporation). They are usually issued in
proportion to shares owned (for example, for every
100 shares of stock owned, a 5% stock dividend
will yield 5 extra shares).
Nothing tangible will be gained if the stock
is split because the total number of shares
increases, lowering the price of each share, without
changing the market capitalization, or total value,
of the shares held. (See also Stock dilution.)
Stock dividend distributions are issues of new
shares made to limited partners by a partnership in
the form of additional shares. Nothing is split, these
shares increase the market capitalization and total
value of the company at the same time reducing
the original cost basis per share.

24 | P a g e

Stock dividends are not includable in the gross

income of the shareholder for US income tax
purposes. Because the shares are issued for
proceeds equal to the pre-existing market price of
the shares; there is no negative dilution in the
amount recoverable.[5][6][7]
Property dividends or dividends in
specie (Latin for "in kind") are those paid out in
the form of assets from the issuing corporation or
another corporation, such as a subsidiary
corporation. They are relatively rare and most
frequently are securities of other companies owned
by the issuer, however they can take other forms,
such as products and services.
Interim dividends are dividend payments made
before a company's Annual General Meeting (AGM)
and final financial statements. This declared
dividend usually accompanies the company's
interim financial statements.
Other dividends can be used in structured
finance. Financial assets with a known market
value can be distributed as dividends; warrants are
sometimes distributed in this way. For large
companies with subsidiaries, dividends can take
the form of shares in a subsidiary company. A
25 | P a g e

common technique for "spinning off" a company

from its parent is to distribute shares in the new
company to the old company's shareholders. The
new shares can then be traded independently.
Reliability of dividends

Two metrics are commonly used to examine a

firm's dividend policy.
Payout ratio is calculated by dividing the
company's dividend by the earnings per share. A
payout ratio greater than 1 means the company is
paying out more in dividends for the year than it
earned.
Dividend cover is calculated by dividing the
company's cash flow from operations by the
dividend. This ratio is apparently popular with
analysts of income trusts in Canada .Dividends are
payments made by a corporation to its shareholder
members. It is the portion of corporate profits paid
out to stockholders.
Dividend dates

A dividend that is declared must be approved by a

company's board of directors before it is paid.
For public companies, four dates are relevant
regarding dividends:[8]
26 | P a g e

Declaration date the day the board of

directors announces its intention to pay a dividend.
On that day, a liability is created and the company
records that liability on its books; it now owes the
money to the stockholders.
In-dividend date the last day, which is one
trading day before the ex-dividend date, where the
stock is said to be cum dividend ('with [including]
dividend'). In other words, existing holders of the
stock and anyone who buys it on this day will
receive the dividend, whereas any holders selling
the stock lose their right to the dividend. After this
date the stock becomes ex dividend.
Ex-dividend date the day on which shares
bought and sold no longer come attached with the
right to be paid the most recently declared
dividend. In the United States, it is typically 2
trading days before the record date. This is an
important date for any company that has many
stockholders, including those that trade on
exchanges, to enable reconciliation of who is
entitled to be paid the dividend. Existing holders of
the stock will receive the dividend even if they sell
the stock on or after that date, whereas anyone
who bought the stock will not receive the dividend.
27 | P a g e

It is relatively common for a stock's price to

decrease on the ex-dividend date by an amount
roughly equal to the dividend paid. This reflects the
decrease in the company's assets resulting from
the declaration of the dividend.
Book closure date when a company announces
a dividend, it will also announce a date on which
the company will ideally temporarily close its books
for fresh transfers of stock, which is also usually
the record date.
Record date shareholders registered in the
company's record as at the record date will be paid
the dividend. Shareholders who are not registered
as of this date will not receive the dividend.
Registration in most countries is essentially
automatic for shares purchased before the exdividend date.
Payment date the day on which the dividend
cheques will actually be mailed to shareholders or
credited to their bank account.

Dividend-reinvestment

Some companies have dividend reinvestment

plans, or DRIPs, not to be confused with scrips.
28 | P a g e

DRIPs allow shareholders to use dividends to

systematically buy small amounts of stock, usually
with no commission and sometimes at a slight
discount. In some cases, the shareholder might not
need to pay taxes on these re-invested dividends,
but in most cases they do.
Dividend taxation

Most countries impose a corporate tax on the

profits made by a company. A dividend paid by a
company is not an expense of the company, but is
income of the shareholder.
India
In India, companies declaring or distributing
dividend, are required to pay a Corporate Dividend
Tax in addition to the tax levied on their income.
The dividend received by the shareholders is then
exempt in their hands. However, dividend income
over and above Rs. 1000,000 shall attrack 10 per
cent dividend tax in the hands of the shareholder
with effect from April 2016.
Effect on stock price

After a stock goes ex-dividend (i.e. when a dividend

has just been paid, so there is no anticipation of
29 | P a g e

another imminent dividend payment), the stock

price should drop.
To calculate the amount of the drop, the traditional
method is to view the financial effects of the
dividend from the perspective of the company.
Since the company has paid say x in dividends
per share out of its cash account on the left hand
side of the balance sheet, the equity account on
the right side should decrease an equivalent
amount. This means that a x dividend should
result in a x drop in the share price.
A more accurate method of calculating this price is
to look at the share price and dividend from the
after-tax perspective of a share holder. The aftertax drop in the share price (or capital gain/loss)
should be equivalent to the after-tax dividend. For
example, if the tax of capital gains Tcg is 35%, and
the tax on dividends Td is 15%, then a 1 dividend
is equivalent to 0.85 of after tax money. To get the
same financial benefit from a capital loss, the after
tax capital loss value should equal 0.85. The pretax capital loss would be 0.85/(1-Tcg) = 0.85/(135%) = 0.85/65% = 1.30. In this case, a
dividend of 1 has led to a larger drop in the share

30 | P a g e

price of 1.30, because the tax rate on capital

losses is higher than the dividend tax rate.
Finally, security analysis that does not take
dividends into account may mute the decline in
share price, for example in the case of a Price
earnings ratio target that does not back out cash;
or amplify the decline, for example in the case
of Trend following.

Share (finance) :
In financial markets, a share is a unit of account for
various investments. It often means the stock of a
corporation, but is also used for collective
investments such as mutual funds, limited
partnerships, and real estate investment trusts.[1]
Corporations issue shares which are offered for
sale to raise share capital. The owner of shares in
the corporation is a shareholder (or stockholder) of
the corporation.[2] A share is an indivisible unit of
capital, expressing the ownership relationship
between the company and the shareholder. The
denominated value of a share is its face value, and
the total of the face value of issued shares
represent the capital of a company,[3] which may
not reflect the market value of those shares.
The income received from the ownership of shares
is a dividend. The process of purchasing and selling
31 | P a g e

shares often involves going through

a stockbroker as a middle man.[4]
Valuation
Shares are valued according to various principles in
different markets, but a basic premise is that a
share is worth the price at which a transaction
would be likely to occur were the shares to be sold.
The liquidity of markets is a major consideration as
to whether a share is able to be sold at any given
time. An actual sale transaction of shares between
buyer and seller is usually considered to provide
the best prima facie market indicator as to the
"true value" of shares at that particular time.
Terminology

Shares outstanding are those that are

authorized,by the government issued, and held
by third parties. The number of shares
outstanding times the share price gives
themarket capitalization of the company, which if
the trading price held constant would be
sufficient to purchase the company.

Treasury shares are authorized, issued, and

held by the company itself.

Issued shares is the sum of shares outstanding

and treasury shares.

32 | P a g e

Shares authorized include both issued (by the

board of directors or shareholders) and unissued
but authorized by the company's constitutional
documents.

Tax treatment
Tax treatment of dividends varies between tax
jurisdictions. For instance, in India, dividends
are tax free in the hands of the shareholder, but
the company paying the dividend has to pay
dividend distribution tax at 12.5%. There is also the
concept of a deemed dividend, which is not tax
free. Further, Indian tax laws include provisions to
stop dividend stripping.[5][citation needed]
Share certificates
Historically, investors were given share
certificates as evidence of their ownership of
shares. In modern times, certificates are not always
given and ownership may be recorded
electronically by a system such as CREST, a
securities depository.
While individuals for whom the stock market is
literally their life, such as with brokers and
investors (both major and minor, the latter often
tracking and trading in so-called penny stocks),
access to a ticker such as is provided on the
bottom of the television screen on businessoriented networks like CNBC and Fox Business
News is essential. Newspapers, prior to the
33 | P a g e

advent of business-oriented television networks,

were the primary means for the average citizen
of tracking stocks over a period of time. The
business sections of many newspapers included
comprehensive listings of stocks for the New York
Stock Exchange as well as for other major
exchanges. With the introduction of cable
television, however, and with the Internet, data
on stocks could be reliably attained far more
quickly than was the case with reliance on
newspapers. Newspapers, it is important to
remember, reflect information as available on a
very specific period of time. Once the newspaper
"goes to press," the information in the paper
cannot be modified to reflect changes in ongoing
events, including with respect to global stock
markets (e.g., the Hang Seng in Hong Kong, the
Nikkei in Tokyo, and the Shanghai Composite in
China). Newspapers simply cannot keep up with
the rapid rate of change that routinely takes
place in stock markets, although most
newspapers now have their own Internet sites
that do provide up-to-date information.
All of that said, newspapers are still useful for
students learning how to track individual stocks.
Those papers that still include stock market data
can be used to consult the peaks and valleys
common to many stocks, with the data charted
on a graph so as to provide for an informative
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"picture" of how that stock is doing over a period

of time. The student simply needs to pick the
stocks in which he or she is interested, locate
those stocks in the relevant market (e.g., New
York Stock Exchange, Nasdaq), note the current
price at which the stocks are selling, and the
time and date of that data. As suggested, a
graph can easily be drawn-up to reflect those
stocks' positions on a daily basis, which provides
insights into the stability of the stocks.
Tracking dividends is more complicated, because
100 percent of profits are not returned to
investors in the form of dividends. On the
contrary, profits often have to be reinvested into
the company in question, such as for
recapitalization of physical plants in the case of
manufacturers .
In short, stocks and dividends can still be tracked
utilizing newspapers, but the concept of a
"newspaper" is not what it used to be. Online
news sources affiliated with newspapers are
obviously not paper per se, but represent paper
in the modern era.
Who Can Invest In India?
India started permitting outside investments only
in the 1990s. Foreign investments are classified
into two categories: foreign direct investment (FDI)
and foreign portfolio investment (FPI). All
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investments in which an investor takes part in the

day-to-day management and operations of the
company, are treated as FDI, whereas investments
in shares without any control over management
and operations, are treated as FPI.
For making portfolio investment in India, one
should be registered either as a foreign
institutional investor (FII) or as one of the subaccounts of one of the registered FIIs. Both
registrations are granted by the market regulator,
SEBI. Foreign institutional investors mainly consist
of mutual funds, pension funds, endowments,
sovereign wealth funds, insurance companies,
banks, asset management companies etc. At
present, India does not allow foreign individuals to
invest directly into its stock market. However, highnet-worth individuals (those with a net worth of at
least $US50 million) can be registered as subaccounts of an FII.
Foreign institutional investors and their sub
accounts can invest directly into any of the stocks
listed on any of the stock exchanges. Most portfolio
investments consist of investment in securities in
the primary and secondary markets, including
shares, debentures and warrants of companies
listed or to be listed on a recognized stock
exchange in India. FIIs can also invest in unlisted
securities outside stock exchanges, subject to
approval of the price by the Reserve Bank of India.
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Finally, they can invest in units of mutual funds and

derivatives traded on any stock exchange.
An FII registered as a debt-only FII can invest 100%
of its investment into debt instruments. Other FIIs
must invest a minimum of 70% of their
investments in equity. The balance of 30% can be
invested in debt. FIIs must use special nonresident rupee bank accounts, in order to move
money in and out of India. The balances held in
such an account can be fully repatriated. (For
related reading, see Re-evaluating Emerging
Markets. )
Restrictions/Investment Ceilings
The government of India prescribes the FDI limit
and different ceilings have been prescribed for
different sectors. Over a period of time, the
government has been progressively increasing the
ceilings. FDI ceilings mostly fall in the range of 26100%.
By default, the maximum limit for portfolio
investment in a particular listed firm, is decided by
the FDI limit prescribed for the sector to which the
firm belongs. However, there are two additional
restrictions on portfolio investment. First, the
aggregate limit of investment by all FIIs, inclusive
of their sub-accounts in any particular firm, has
been fixed at 24% of the paid-up capital. However,
the same can be raised up to the sector cap, with
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the approval of the company's boards and

shareholders.
Secondly, investment by any single FII in any
particular firm should not exceed 10% of the paidup capital of the company. Regulations permit a
separate 10% ceiling on investment for each of the
sub-accounts of an FII, in any particular firm.
However, in case of foreign corporations or
individuals investing as a sub-account, the same
ceiling is only 5%. Regulations also impose limits
for investment in equity-based derivatives trading
on stock exchanges.
Investment Opportunities for Retail Foreign
Investors
Foreign entities and individuals can gain exposure
to Indian stocks through institutional investors.
Many India-focused mutual funds are becoming
popular among retail investors. Investments could
also be made through some of the offshore
instruments, like participatory notes (PNs) and
depositary receipts, such as American depositary
receipts (ADRs), global depositary receipts (GDRs),
and exchange traded funds (ETFs) and exchangetraded notes (ETNs). (To learn about these
investments, see 20 Investments You Should
Know.)
As per Indian regulations, participatory notes
representing underlying Indian stocks can be
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issued offshore by FIIs, only to regulated

entities. However, even small investors can invest
in American depositary receipts representing the
underlying stocks of some of the well-known Indian
firms, listed on the New York Stock Exchange and
Nasdaq. ADRs are denominated in dollars and
subject to the regulations of the U.S. Securities and
Exchange Commission (SEC). Likewise, global
depositary receipts are listed on European stock
exchanges. However, many promising Indian firms
are not yet using ADRs or GDRs to access offshore
investors.
Retail investors also have the option of investing in
ETFs and ETNs, based on Indian stocks. India ETFs
mostly make investments in indexes made up of
Indian stocks. Most of the stocks included in the
index are the ones already listed on NYSE and
Nasdaq. As of 2009, the two most prominent ETFs
based on Indian stocks are the Wisdom-Tree India
Earnings Fund (NYSE: EPI) and the PowerShares
India Portfolio Fund (NYSE:PIN). The most
prominent ETN is the MSCI India Index Exchange
Traded Note (NYSE:INP). Both ETFs and ETNs
provide good investment opportunity for outside
investors.
The Bottom Line
Emerging markets like India, are fast becoming
engines for future growth. Currently, only a very
low percentage of the household savings of Indians
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are invested in the domestic stock market, but with

GDP growing at 7-8% annually and a stable
financial market, we might see more money joining
the race. Maybe it's the right time for outside
investors to seriously think about joining the India
bandwagon.

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