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ERPM

Unit 1

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2

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Securities

Includes shares, scrips, stocks, bonds,debentures or other marketable securities ofany incorporated company or other body

corporate or Government

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Investment

Process of employment of funds either toearn income or capital appreciation

Factors Return

Risk

Liquidity

Hedge against inflation

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Investment process

Investment policy

Analysis market, industry, company

Valuation risk, return, real worth, marketprice

Portfolio construction

Portfolio evaluation appraisal, revision

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Alternatives

Variable income securities

Fixed income securities

Preference shares

Debentures

Bonds

Gilt edged securities

IVP/KVP Money market securities

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Financial market

Organised

UnorganisedCapital market Money market

Industrial securities Commercial papers Money lenders

Government securities Certificate of deposit Indigenous bankers

Long term loan Treasury bills

Call money

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Capital market

For financial assets with long or indefinitematurity

LT securities

Maturity period >1 year

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Capital market structure

Marketable securities

Government

PSU bonds

Mutual fund Corporate

Non-marketablesecurities

Bank deposits

Deposits with companies Loans and advances

Post office certificate anddeposits

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Corporate securities

New issue market original players

Promoters / directors

Associates / friends

Collaborators

Employees

FIs

FFIs NRIs

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Corporate securities

Intermediaries

Brokers

Jobbers

Dealers

Badla financiers

Arbitrageurs

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Corporate securities

New issue market for issue

Merchant Bankers

Brokers

Sub-brokers

Underwriters

Ad agency

Collecting bankers

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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

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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

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Long-term loans market

Term loans ICICI, IFCI

Mortgages market

Equitable only document Legal title is transferred

Financial guarantees market Finance against guarantee of a reputed person

Deferred payment for import / export

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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

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Money market

Short-term financial assets < 1 year

Treasury bills

ST borrowing by Government

Commercial papers

Unsecured promisory note issued by companies

Certificate of deposit

Marketable receipts of funds banks 10+5lakhs

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Money market

Call money market

Very short period 1 to 14 days repayable atthe option of both the parties

Short term loan market WC needs

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Financial Intermediation

Banks and non-bank intermediaries channelthe funds

Mobilises funds capital formation

Reduce information cost

Reduce transaction cost

Raise long-term loans

Liquidity

Pools risk

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Intermediaries

FI agriculture / industrial growth

UTI

IFCI, IDBI, SIDBI, NABARD, EIM Bank

Mutual funds savings

VC entrepreneurs

Credit rating agencies

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Weakness in the system

Co-ordination

Monopoly

Dominance of development banks

Inactive and erratic capital market

Imprudent financial practice

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Capital market institutions

SEBI

RoC

RBI

SE

Licensing authorities

Pollution Control Authorities

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SCRA, 1956

Sec 28A

Call for periodical returns from SE

Prescribe documents to be maintained

Call upon the SE or any member to furnishexplanation or information

Approve byelaws of SE

Licensing of dealers in securities Compel a public company to list its shares

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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

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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 SEregarding voting rights

Regulation of spot delivery contracts Hear appeals of companies against non-

listing

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Market Indicators

Stock Exchange Indices

BSE

NSE

International markets indicators

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Stock indices

Calculation

Price-weighted

Equal Weighted

Value weighted

Eg: Nifty reflects price movements of 50 stocks

Sensex- 30 stocks

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Assignment : 2

Date of Submission : 02-08-2011

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

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Discuss

Relation between

Stock market

Bullion market

Exchange rate

Oil market