LIQUIDITY INCOME CAPITAL GAIN OR GROWTH SECURITY OF PRINCIPLE HEDGING INFLATION.
TAX ADVANTAGE.
INVEST EARLY INVEST REGULARLY INVEST FOR LONG TERM.
Obtain written Documents explaining the investment. Read and understand such documents. Verify the Legitimacy of Investment. Find out the cost and benefits associated with the investment. Assess the Risk Return profile of the Investment. Know the Liquidity and safety aspects of the Investment. Ascertain if it is appropriate for your specific goals. Compare these detail with other Investment Opportunities Available. Deal only through an Authorized Intermediary. Seek all clarification about the intermediary and the Investment.
RISK OF BUSINESS FAILURE MARKET RISK PRICE LEVEL RISK INTEREST RATE RISK FINANCIAL RISK POLITICAL RISK EXPECTED RATE OF RETURN RISK
Reducing overall Risk by Business trend analysis. Reducing overall Risk by Diversification.
NEWSPAPERS MAGZINES AND OTHER PUBLICATIONS BROKERAGE FIRMS INVESTMENT SERVICES CORPORATION REPORTS THE INCOME STATEMENT
PHYSICAL ASSETS FINANCIAL ASSETS
SCRA 1956 includes:SHARES BONDS SCRIPS STOCKS AND OTHER MARKETABLE INSTRUMENTS.
Department of Economic affairs. Department of Companys Affairs. Reserve Bank of India. SEBI.
Issuers of securities. Intermediaries Investors
PRIMARY MARKET
SECONDARY MARKET
INITIAL PUBLIC OFFERINGS. FURTHER ISSUE. RIGHTS ISSUE. PREFERENTIAL ISSUE. ISSUES
PUBLIC RIGHTS
PREFERENTIAL
IPO
FPO
SHARES
BONDS
EQUITY SHARES RIGHTS SHARES BONUS SHARES PREFERANCE SHARES CUMULATIVE PREFERANCE SHARES CUMMULATIVE CONVERTIBLE PREFERANCE SHARES
ZERO COUPAN BONDS. CONVERTIBLE BONDS. TREASURY BILLS.
BLUE CHIP SHARES. GROWTH SHARES. INCOME SHARES. CYCLICAL SHARES. SPECULATIVE SHARES
GOVT. SECURITIES. GOVT. RELIEF BONDS. GOVT. AGENCY SECURITIES. PSU BONDS. DEBENTURES OF PRIVATE SECTOR CO'S. PREFERENCE SCHEMES.
Average Return on equities in India?If we take the Nifty Index returns for the past 15 years , Indian Stock market has returned on an Average 16% in term of increase in share price or capital appreciation annually. Besides that on Average stocks have paid 1.5% dividend annually.
Investme Return nt options yield Equity shares Low
Capital Risk appreciati liquidity on High High
Marketabi Tax lity shelter Fairly high Sec 80 L benefit Nil
Convenie nce High
Non High convertible debentures
Negligible
Low
Average
High
Equity schemes Debt schemes Bank deposits Public
Low
High
High
High
Sec 80 L benefits No tax on dividends Sec 80 L benefit Sec 88
Very high
High
Low
Low
High
Very high
Moderate
Nil
Negligible
High
Very high
Nil
High
Nil
Average
Very high
Savings & Investing through Savings Institutions
INTRODUCTION Savings represent the portion of that is not spent on
consumption & comes from earned income. Savings can be invested directly in the form of stocks
,bonds & real estate. Also indirectly via financial institutions which invests the money in mortgages , loans or securities on the investors behalf. Direct investment involves greater rates of return along with high volume of risk & is preferred by clients who are willing to assume more risk. Small savers wanting a fixes rate of return on a cost of low risk chooses mainly the indirect investments.
Savings InstitutionsSavings institutions are financial intermediaries that raise funds mainly through deposits and use the funds to provide loans, home mortgages, and to invest in securities. SAVING INSTITUTIONS
Depository InstitutionsCommercial banks Savings & loan associations Credit unions Mutual savings banks
Non Depository InstitutionsMoney market mutual funds Cash management A/C Life insurance co's s Private pension funds
Depository InstitutionsThese institutions issue a secondary or indirect security for an individuals money i.e. called a DEPOSIT A/c. These deposits are highly liquid & can be withdrawn at any time at the depositors option. They are safe because most deposits are insured by an agency.
Commercial Banks These are the institutions that perform a wide variety of
financial services, differentiating them from more specialized savings banks. Also called departments stores of financial institutions. The traditional commercial bank is a brick and mortar institution with tellers, safe deposit boxes, vaults and ATMs. CITY bank, J.P. Morgan Chase.
Functions: They provide services such as accepting deposits, giving business loans
and auto loans, mortgage lending, and basic investment products like savings accounts and certificates of deposit. They act as trustee, make available strongboxes for safekeeping valuables. They also offer discount brokerage services & also administer the nationwide credit card system. They also establish & service checking accounts including clearing checks for the general public. They also do activities like underwriting acting as an intermediary between an issuer of securities and the investing public, facilitating mergers and other corporate reorganizations, and also acting as a broker for institutional clients.
Savings & Loan AssociationThese are the financial institutions that specializes in accepting savings deposits & making primarily residential mortgage loans. Also known as Building & Loan association or Thrift, Cooperative banks (new England) & Homestead association (Louisiana). By law, they must have at least 65% of their lending in mortgages and other consumer loans making them particularly vulnerable to housing downturns such as the U.S. has experienced since 2007. As home financing institutions they give primary attention to single family residences.
Characteristics : It is generally a locally owned and privately managed home
financing institution. It receives individuals' savings and uses these funds to make long-term amortized loans to home purchasers. It makes loans for the construction, purchase, repair, or refinancing of houses. It is state or federally chartered. The management of the association is determined by those that held deposits and in some instances had loans based on the amount of deposit with the association.
Functions : They accept savings deposits & make mortgage loans along
with consumer & customer loans. They provide trustees services, credit cards & checking A/cs and also clear checks. To encourage savings and investment by common people and to give them access to a financial intermediary that provide loans for the purchase of large ticket items, usually homes.
Credit Unions They are voluntary co-operative associations designed to make
loans to members for any reasonable purpose. It means that the members who have the a/cs in credit union are the owners of it. In India they are in operation since year 1907. According to world council presently India has 20 million credit unions. They dont deal with outsiders & usually consists of the employees of some enterprise. They specializes in making consumer loans to their members using the same members savings deposits to finance the loan. Indian Head Credit Union, Indian River Federal Credit Union.
Characteristics: Only a member of a Credit Union can deposit money or
borrow money from it. Board of Directors are elected by and from the membership itself through one person one vote system. They provide superior member service and are being committed to helping the members in improving their financial health. They are considered to be non profit. Credit unions typically pay higher interest rates on deposits and charge lower interest on loans than banks. They see themselves as on higher moral ground than banks i.e. they feel that they are community-oriented and serve people not profit They have higher customer satisfaction rate with the quality of service.
Functions: Provide unsecured personal loans, business loans and
mortgages. Providing superior member service and helping members to improve their financial health. Providing services intended to support community development or sustainable international development on a local level. Credit unions offer many of the same financial services as banks using a different terminology; common services include: share accounts (saving A/cs), share draft accounts (checking A/c), credit cards, share term certificates (CDs), and online banking. Provide a broader range of loan and savings products at a much cheaper cost to their members.
Mutual Savings BankIt is a financial institution chartered by a central or regional government, without capital stock, that is owned by its members who subscribe to a common fund & from this fund claims, loans, etc. are paid. Profits after these deductions are shared between the members. Mutual savings banks were designed to stimulate savings by individuals.
Characteristics: The members own the business.
They have no stockholders. Profits beyond the upkeep of the bank belongs to the depositors of the
mutual savings bank. Mutual savings banks prioritize security & as a result is conservative in their investments.
Functions: To protect deposits, make limited, secure investments, and provide depositors with interest. To provide a safe place for individual members to save and to invest those savings in mortgages, loans, stocks, bonds and other securities and to share in any profits or losses that result.
Non Depository Institutions They are financial intermediaries that do not accept
deposits but do pool the payments of many people in the form of premiums or contributions and either invest it or provide credit to others. These institutions receive the public's money because they offer other services than just the payment of interest. They spread the financial risk of individuals over a large group, or provide investment services for greater returns or for a future income.
Money Market Mutual Funds It is an open-end mutual fund which invests only in money
markets. The main goal is the preservation of principal, accompanied by modest dividends. The funds net asset value remains a constant $1 per share to simplify A/cing but the interest does fluctuate. The biggest risk involved in investing in money market funds is the risk that inflation will outpace the funds returns, thereby eroding the purchasing power of the investors money.
Characteristics: These funds invest in short term (one day to one year) debt
obligations such as treasury bills, CDs & commercial paper. They are very liquid investments. They are used by financial institutions to store money that is not currently invested. The risk is extremely low. Money market accounts earn a higher rate than do other savings accounts. Pay a higher interest rate than the savings accounts offered by other institution. They have higher minimum deposit requirements than do other savings accounts.
Functions: Money market accounts functions much like other bank
deposits. The depositor is paid interest on the deposit, while the banking institution loans the money out to borrowers, charging them interest rates higher than that paid to the depositor. They provide check-writing privileges and a designated number of withdrawals per month with no fee or penalty.
Cash Management A/CThese are the combination of monthly statement for checking , credit cards, mutual funds & brokerage statements all into one for reducing the monthly paperwork for the consumers.
Life Insurance Companies Life Insurance companies protect their customers from the
financial distress that can be caused by unforeseen events, such as accidents or premature death. They pool the small premiums of the insured to pay the larger claims to those who have losses. The premium payments are regular while the losses are irregular, both in timing and amount. An insurance company can profit because it can accurately estimate the payment of claims over a large group by using statistics and it can invest its surplus for greater returns which helps to lower premiums to be competitive.
STOCK EXCHANGESIt is an organization that provides buying and selling facilities for traders and investors in stocks and other securities. In India there are 21 stock exchanges in total. 2 National Stock Exchanges namely BSE and NSE where actual trading takes place. 19 Regional Stock Exchanges where in the present scenario trading is equal to nil.
It is the oldest stock exchange in Asia established in the year 1875 As of December , 2011, it is 6th largest in Asia and 14th largest in the world. There are over 5112 listed Indian Companies and over 8196 scrips on BSE. The Bombay Stock Exchange developed the BSE SENSEX in 1986, giving the BSE a means to measure overall performance of the exchange. In 2000 the BSE used this index to open its derivatives market, trading SENSEX futures contracts. The development of SENSEX options along with equity derivatives followed in 2001 and 2002, expanding the BSE's trading platform. Historically an open outcry floor trading exchange, the Bombay Stock Exchange switched to an electronic trading system in 1995. This automated, screen-based trading platform called BSE On-line trading (BOLT) currently has a capacity of 8 million orders per day. The BSE has also introduced the world's first centralized exchangebased internet trading system, BSEWEBx.co.in to enable investors anywhere in the world to trade on the BSE platform.
NSE was incorporated in the year 1992 but started capital market operations in 1994. It was promoted by leading Financial Institutions at the behest of the Government Of India. It is the 16th largest stock exchange in the world by market capitalisation and largest in India by daily turnover and number of trades, for both equities and derivative trading. The NSE's key index is the S&P CNX Nifty known as the NSE NIFTY (National Stock Exchange Fifty), an index of fifty major stocks weighted by market capitalisation. It is the first national, anonymous, electronic limit order book (LOB) exchange to trade securities in India. It is also the first exchange to propose an investor grievance cell and an investor protection fund . It is the first exchange that, in 1996, proposed exchange traded derivatives, particularly on an equity index, in India. After four years of policy and regulatory debate and formulation, the NSE was permitted to start trading equity derivatives. It is the first and the only exchange to trade GOLD ETFs (exchange traded funds) in India.
To start trading in stock market an individual needs a bank account , trading account and demat account. Demat account is opened with the bank or the broker to save your shares electronically rather than possessing physical certificates. FORMALITIES FOR OPENING A DEMAT ACCOUNT AND A TRADING ACCOUNT are: Photocopy of Pan Card Address Proof A prescribed account opening form Photo ID Proof Bank Account Proof.
There is no space for emotions. There is always a border. Diversify your investments so as to reduce risk. Stop Losses and Book Profits. Try to analyze the market and the share before investing. Try to invest for long term not short term
INTRADAY TRADING
Buy and Sell the shares on the same day. Comparitively less brokerage charges
DELIVERY BASED TRADING
Buy and Sell the shares on some other day. Comparitively more brokerage charges.
Brokers always charge brokerage and various taxes on every buying and selling transaction, rates of which are as follows: Brokerage on the delivery transactions: .50% on transaction amount. Brokerage on the intraday transactions: .05% on the transaction amount. STT: 0.1% on the delivery trading. .025% on the intraday trading (only on selling side) Service Tax: 10.30% of the brokerage amount. Stamp Duty: 0.1% on the delivery trading. 0.01% on the intraday trading. Exchange Charges: 0.035% of the transaction amount for both types of trading.
A Derivative is a product whose value is derived from the value of an underlying asset The underlying asset can be an equity , forex , commodity or any other asset. The primary objective of an investor to use the derivative is to maximize his returns and minimize the risk which is also called as Hedging. In Indian stock exchange only two products of derivatives are available: Futures Options Call option Put option
In futures trading , there is usually a contract which is essentially an agreement between two parties to buy or sell an underlying asset at a certain time in future at a certain price. A future contract has a STANDARDISED DATE AND MONTH OF DELIVERY , QUANTITY AND PRICE. While trading in a futures contract one has to pay the MARGIN MONEY first which may be around 20% or less than this. In futures trading, a futures contract may be offset prior to maturity by entering into equal and opposite transaction. In India the expiration date for all contracts in futures trading is the last Thursday of the respective month. Three series of futures contracts are one month , two month and three month expiry cycles.
Options are basically contracts , which give to the buyer a facility which is similar to buy or sell certain asset (underlying) but the buyer of an option has the LIMITED RISK AND UNLIMITED PROFIT. CALL OPTION It gives buyer the right to buy the underlying asset at the strike price specified in the option. The profit or loss that the buyer makes on the option depends on the spot price of the underlying . Higher the spot price more is the profit. Maximum loss is the premium paid for buying the option. PUT OPTION It gives the buyer the right to sell the underlying asset at the strike price specified in the option. Profit and Loss depends on the spot price on the expiration date. Lower the spot price more is the profit. Maximum loss is the premium paid for buying the option.
CALLS
Chart
OI 28,000
Chng in OI -
Volume -
IV -
LTP -
Net Chng -
Bid Qty 300
Bid Price 2,663.50
Ask Price 2,675.80
Ask Qty 450
Strike Price 2700.00
100
-
-
-
-
-
5,000
2,535.00
2,588.00
5,000
2800.00
-
-
-
-
-
-
5,000
2,435.00
2,488.00
5,000
2900.00
16,000
-
-
-
-
-
5,000
2,341.70
2,386.10
1,000
3000.00
50
-
-
-
-
-
6,000
2,237.50
2,290.60
6,000
3100.00
50
-
-
-
-
-
6,000
2,137.50
2,190.60
6,000
3200.00
45,900
-
-
-
-
-
150
2,060.65
2,074.30
200
3300.00
50
-
-
-
-
-
6,000
1,937.95
1,968.00
50
3400.00
23,050
-
6
166.21
1,878.90
3.90
1,000
1,843.00
1,869.80
250
3500.00
-
-
-
-
-
-
1,000
1,746.50
1,790.65
5,000
3600.00
-
-
-
-
-
-
1,000
1,646.50
1,690.65
5,000
3700.00
1,100
-
-
-
-
-
300
1,560.30
1,571.00
500
3800.00
-
-
-
-
-
-
1,000
1,446.50
1,490.65
5,000
3900.00
304,800
-100
12
110.68
1,375.10
-18.90
100
1,366.55
1,373.40
450
4000.00
2,950
-
-
-
-
-
5,000
1,249.65
1,290.65
11,000
4100.00
63,000
-
-
-
-
-
100
1,158.40
1,184.30
50
4200.00
44,750
-
-
-
-
-
50
1,055.95
1,070.00
400
4300.00
14,150
-
-
-
-
-
200
953.20
983.25
50
4400.00
199,450
-50
41
63.14
875.00
-23.80
100
870.00
874.00
500
4500.00
71,250
-150
23
-
768.00
-27.00
150
765.60
773.00
150
4600.00
PUTS
Bid Qty 1,900 4,950 5,000 1,000 2,750
Bid Price 0.20 0.25 0.10 0.10 0.35
Ask Price 0.45 2.80 0.50 0.60 0.50 0.20 0.85 0.50
Ask Qty 500 5,000 1,400 50 50 200 5,000 58,000
Net Chng -0.05 -
LTP 0.25 0.50
IV 138.16 110.37
Volume 1 60
Chng in OI -
OI 3,100 34,850 50 50 3,200 1,100 401,850
Chart
1,000 5,000 600
0.20 0.25 0.25
0.45 0.45 0.45
1,000 1,400 900
-
-
-
-
-
71,800 71,950 115,900
1,000
0.25
0.55
900
-
-
-
-
-
176,750
15,000
0.50
0.55
16,150
-0.05
0.55
79.02
230
-500
1,136,550
400
0.55
0.60
8,000
-0.05
0.55
72.96
100
-
236,300
20,000
0.55
0.60
4,150
-0.05
0.60
67.63
737
4,100
1,076,450
5,000
0.55
0.65
10,000
-
-
-
-
-
325,000
5,000
0.55
0.65
10,600
-
-
-
-
-
949,000
3,450
0.60
0.65
15,450
-0.10
0.65
50.68
471
-13,250
1,347,550
A MUTUAL FUND is a pool of the savings of a number of investors who share a common financial goal.The money thus collected is then invested in the capital market instruments such as shares , debentures and other securities.The profit earned through these investments is shared by its investors in proportion to their investment . THUS A MUTUAL FUND IS SUITABLE INVESTMENT FOR AN INDIVIDUAL AS IT OFFERS AN OPPORTUNITY TO INVEST IN A DIVERSIFIED PROFESSIONALLY MANAGED BASKET OF SECURITIES AT A RELATIVELY LOW COST.INVESTORS POOL THEIR MONEY WITH
RETURNS WHICH IS PASSED BACK TO
ASSET MANAGEMANT COMPANY WHICH INVEST IN
SECURITIES AND OTHER INSTRUMENTS THAT GENERATES
Commodity trading in India is regulated by FORWARDS MARKET COMMISSION headquartered at Mumbai.It is a statutory body set up in 1953 under Forwards Contracts (Regulation) Act ,1952. COMMODITY DERIVAITVES: Commodity Futures is a derivative instrument in which , the underlying asset is a particular commodity. For every commodity futures contract , there is an expiry date and a fixed quantity (LOT SIZE) Currently only futures trading is permitted in India. OBJECTIVES AND BENEFITS OF COMMODITY FUTURES: HEDGING : Price risk management by risk mitigation. SPECUATION : Take advantage of favourable price movements. LIQUIDITY : Ease of entry and exit of markets.
MCX is a commodity exchange which was established in 2003 and is based in Mumbai. With a growing share of 72% , MCX continues to be Indias no. 1 commodity exchange. Opens at 10 A.M. and closes at 11.55P.M.(Mon Fri) and 10 A.M. to 2.00 P.M. (Sat). Commodities which are traded in MCX: METAL BULLION FIBER ENERGY SPICES PLANTATIONS PULSES PETROCHEMICALS OILS AND OIL SEEDS
NCDEX was incorporated on April 23, 2003 under The Companies Act, 1956 It has commended its operations on Dec 15, 2003. It is located in Mumbai and offers facilities In more than 550 centres in India. COMMODITIES WHICH ARE TRADED IN NCDEX: Agri-based commodities Bullion Ferrous Metal Energy Products Polymers