ERPM

Unit 1

Securities

Includes shares, scrips, stocks, bonds, debentures or other marketable securities of any incorporated company or other body corporate or Government

Investment

Process of employment of funds either to earn income or capital appreciation Factors

Return Risk Liquidity Hedge against inflation

Investment process

Investment policy Analysis market, industry, company Valuation risk, return, real worth, market price Portfolio construction Portfolio evaluation appraisal, revision

Alternatives

Variable income securities Fixed income securities

Preference shares Debentures Bonds Gilt edged securities IVP/KVP Money market securities

Financial market
Organised

Capital market
Industrial securities

Money market
Commercial papers

Unorganised

Money lenders

Government securities

Certificate of deposit

Indigenous bankers

Long term loan

Treasury bills Call money

Capital market

For financial assets with long or indefinite maturity LT securities Maturity period >1 year

Capital market structure

Marketable securities

Government PSU bonds Mutual fund Corporate

Non-marketable securities

Bank deposits Deposits with companies Loans and advances Post office certificate and deposits

10

Corporate securities

New issue market original players

Promoters / directors Associates / friends Collaborators Employees FIs FFIs NRIs

11

Corporate securities

Intermediaries

Brokers Jobbers Dealers Badla financiers Arbitrageurs

12

Corporate securities

New issue market for issue

Merchant Bankers Brokers Sub-brokers Underwriters Ad agency Collecting bankers

13

Industrial securities

Equity / ordinary shares Preference shares Debentures / bonds Primary market

Public issue, rights issue, private placement

Secondary market

Secondary sale, quoted in Stock Exchanges

14

Government securities

Gilt edged securities Denomination normally Rs.100 Half-yearly interest payment Tax exemption Commercial banks hold this for SLR Sold through RBI Treasury bills are sold through auctions

15

Long-term loans market

Term loans

ICICI, IFCI
Equitable only document Legal title is transferred Finance against guarantee of a reputed person Deferred payment for import / export

Mortgages market

Financial guarantees market

16

Capital market

Capital formation Economic growth Productive use of economys savings Incentives for saving Avenue for financial assets Facilitates increase in production Gives direction to flow of funds Source for technological up gradation Serves as a link between those who save and invest

17

Money market

Short-term financial assets < 1 year Treasury bills

ST borrowing by Government Unsecured promisory note issued by companies Marketable receipts of funds banks 10 +5lakhs

Commercial papers

Certificate of deposit

18

Money market

Call money market

Very short period 1 to 14 days repayable at the option of both the parties WC needs

Short term loan market

19

Financial Intermediation

Banks and non-bank intermediaries channel the funds Mobilises funds capital formation Reduce information cost Reduce transaction cost Raise long-term loans Liquidity Pools risk
20

Intermediaries

FI agriculture / industrial growth UTI IFCI, IDBI, SIDBI, NABARD, EIM Bank Mutual funds savings VC entrepreneurs Credit rating agencies

21

Weakness in the system

Co-ordination Monopoly Dominance of development banks Inactive and erratic capital market Imprudent financial practice

22

Capital market institutions

SEBI RoC RBI SE Licensing authorities Pollution Control Authorities

23

24

25

SCRA, 1956

Sec 28A

Call for periodical returns from SE Prescribe documents to be maintained Call upon the SE or any member to furnish explanation or information Approve byelaws of SE Licensing of dealers in securities Compel a public company to list its shares

26

SCRA

Sec 29 A (1992)

Amendment of rules Furnishing of annual reports of SE Directions to SE Suspending governing body of SE Prohibit contracts in certain cases

27

SCRA

Sec 29A (1994)

Submission of application for recognition of SE Grant of recognition of SE Withdrawal of recognition of SE Make / amend the rules / articles of a SE regarding voting rights Regulation of spot delivery contracts Hear appeals of companies against nonlisting
28

Market Indicators

Stock Exchange Indices

BSE NSE

International markets indicators

29

Stock indices

Calculation
Price-weighted Equal Weighted Value weighted Eg: Nifty reflects price movements of 50 stocks Sensex- 30 stocks

30

Assignment : 2 Date of Submission : 02-08-2011

Find out the different stock market indices in different countries and method of calculation.

32

Discuss

Relation between

Stock market Bullion market Exchange rate Oil market

33