equity presentation

7/27/2019 Equity Presentation

http://slidepdf.com/reader/full/equity-presentation 1/70

EQUITIES



Topics

STOCK MARKETS

INDIAN STOCK MARKETS

INVESTMENT IN STOCKS



WHAT IS AN EQUITY

/ SHARE ?

HOW SHARES ARE

TRADED

Is this how you feel???



WHAT IS an EQUITY, SHARE or STOCK ?



STOCKS Stocks or Shares represent the ownership of a

company in proportion to stocks or shares held

Stock represents a claim on the company'sAssets , Earnings and have Voting Rights

Holding a company's stock means that you are

one of the many owners



FEATURES

Entitled to a portion of the company’s profitsand have a claim on assets Claim on profit – Dividend, if paid out

Claim on Asset – Residual claim if business is liquidated

Limited liability Liability limited to amount paid to buy stocks

Tradability Stock are tradable at recognised stock exchanges through itsmembers (Stock Brokers)



WHY we NEED STOCK MARKETS?



Requirements

of CapitalProviders:???

SHORT TERM /

MEDIUM TERM /

LONG TERM

Capital

Requirement

of a Company:

LONG TERM

STOCK

EXCHANGE

Sources of

New Capital

forcompanies

Investors

can convert

their stock

into cash

A common place for buyer

and sellers



WHY DOES a COMPANY ISSUE STOCKS ?



Why would the Promoters share the profits with

thousands of people when they could keep profits to

themselves?

The reason is that company needs to raise money.

Companies can either borrow it, DEBT FINANCING

or raise it by selling part of the company, EQUITYFINANCING



WHAT is the

DIFFERENCE BETWEEN

BANKING SYSTEM

and CAPITAL

MARKETS?



Equity Issuance

In practice a company offers its shares toseveral interested participants; institutions andindividuals

When a company issues its equity for the firsttime (through Initial Public Offer) it decides onoffer price

Post listing, at stock exchanges marketparticipants decide the price.



WHAT is an IPO?



AN EXAMPLE

The Aditya Birla-owned Idea Cellular, entered thecapital market on Feb 12 with an initial publicoffering (IPO) aggregating Rs. 2,125 crore of equity shares of Rs. 10 each for cash at a

premium to be decided through the 100 per centbook-building process

The price band for the issue was fixed betweenRs 65 and Rs 75 per equity share

Shares were issued at Rs.75 and listed at NSEand BSE now trading at Rs.90 per share



Listing of Securities

A security is said to be ‘listed’ when, at a

stock exchange, it is added to the list of

securities in which trading is permitted



WHAT are the ADVANTAGES of LISTING?



FOR CAPITAL PROVIDERS :

• Ready marketability and liquidity

• Ensure proper supervision and control in

dealing• Protect the interest of shareholders

FOR COMPANIES :

• Cost-effective access to capital• The highest visibility and the fairest

pricing



WHAT are PRIMARY MARKETS and

SECONDARY MARKETS?



Primary and Secondary Market

The primary market is where securities arecreated (by means of an IPO)

In the secondary market, investors tradepreviously-issued securities without theinvolvement of the issuing-companies

When we talk about markets we refer tosecondary market



WHAT is the REGULATORY STRUCTURE ?



Ministry of Finance

S E B I

Stock Exchange

Broker

Advisor



WHAT are MARKET ACTIVITIES?



Market Place

The purpose of a stock market is to facilitate the exchangeof securities between buyers and sellers

Interactive ,Information driven and Volume driven

Stocks are held and traded in Demat form

Tech savvy & Screen based trading

Expanding product range

Advanced settlement and regulatory mechanism in place

Major Stock Exchanges are

• BSE

• NSE



Market Activities

Normal working hours 9.15 am to 3.30 pm,

Monday to Friday

Buying and Selling of stocks during this

period moves price up or down

When we talk about markets are up or downwe refer to market indices



HOW SENSEX and NIFTY INDICES are

CALCULATED?



Some Indices -BSE

Sensex Seen as barometer of Indian Capital Market

Comprises of 30 high market cap / liquid stocks

Free Float based calculationBSE-100

Broad based index of 100 stocks

Stocks inclusion based on market activity and

industry representation.



Some Indices - NSE

S&P CNX Nifty

Index of well diversified 50 stocks

Benchmark for index funds and index based

derivatives Market Cap based calculation

CNX IT: Index of IT companies

BANK NIFTY: Index of Banking Companies



HOW EQUITY SHARES are TRADED?



BUYER

SELLER

BROKER

BROKER

STOCK

EXCHANGE

Bank A/c DEMAT

Bank A/c DEMAT

Cash

Shares



The process is not that Easy !

Market liquidity may not be there

Large spread in Bid and Ask

Impact cost

Required quantity is not available to buy / sell

Buyer has bought the shares but delivery is

not available or vice-versa



BID and ASK for TAJGVK

Order Book

Buy Qty Buy Price Sell Price Sell Qty

100 183.3 184.4 22

100 183.25 184.45 50

50 183.2 184.5 26

100 183.15 184.75 1

300 183 184.9 5

7522 Total Buy Qty Total Sell Qty 5839



Depository

Shares held in Demutualization form.

Transferred in electronics forms.

Two types of depositories.

NSDL

CDSL



DP With POA and without POA.

DP with POA means investors gives right to

its trading member to settle their trades on

behalf of him.

DP without POA means Investors have togive DIC slips at time when he sold his

scrips.

Please refer to Statement -1.



Share transfer process

Off- Market Transfer- Transaction take place

between same depository.

Inter depository Transfer – Transaction takes

place between two different depository.



LEDGER & BILLING

Ledger – Statement of a/c which reveals the

daily transaction of the clients.

Billing – Confirmation of all trades relating

gross purchase and gross sale from

exchange. Timing between 4:30 to 5:30.

Please refer statement -2



Auction and Short Delivery

Auction- Initiated by exchange on behalf of Trading Member.

Suppose Mr. A place buy order for 1000 share of TISCO at

11:22:01 for Rs 450 per share and Mr. B places a sell order for

2000 share of Tisco at 11:22:05 for 455 per share. Assume that

no other order were available in the system . Mr. B sold extra

1000 share and he have no delivery .

Auction Takes Place on T+ 3 days

Close Out on T+ 5 Days



Auction Calculated:

The closing price of TISCO on 21st March= 455

Last traded price of TISCO = 450

The Previous day close price on 23rd March = 465.

The difference between the closing price on 21st March and Previous close price is Rs 10.

Suppose price band of auction is (-/+ 15%).

= 465 * 1.15 = 535

Penalty paid by MR. B



Short Delivery

Suppose Mr. A place buy order for 1000 share of TISCO at

11:22:01 for Rs 450 per share and Mr. B places a sell order for

500 share of Tisco at 11:22:05 for 455 per share. Assume that no

other order were available in the system . Mr. B sold extra 1000

share and he have no delivery .

Auction Takes Place on T+ 3 days

Close Out on T+ 5 Days



Investor v/s Trader



Investors Vs Traders

Investor For Long Term

FollowsFundamentals

Stays invested aslong as theme iscontinuing

Trader For short term

Follows Technical

Trades with Stop

Loss and Price Target



An Example

Rakesh purchased 1000 shares of Satyam @

475 per share for long term and at the same

time 1000 shares of satyam are bought by

Rajiv @ 475 per share and sold it next week@ Rs 490 and booked the profit of Rs.15000

Rakesh is an investor while is Rajiv a Trader



DIFFERENT ANALYSIS USED in STOCKS

BEFORE TAKING a POSITION



A. Fundamental Analysis

B. Technical Analysis

&

Information



HOW FUNDAMENTAL ANALYSIS isDIFFERENT from

TECHNICAL ANALYSIS

P d G id



Product GridInvestors are advised by dedicated relationship managers through various

advisory products

Market Analysis Technical Analysis Fundamental

Research

Thematic Research

Regular Inquire Company &

Sector reports

Yearly Wealth Creation

report

Budget Coverage

Quarterly Results Preview IndiaStrategy

Monthly MOSt Momentum MOSt

Value

MOSt

MutualWeekly Futures Weekly

Guide

Daily MOSt Commodity Morning Calls

Derivative Strategy

Market Dairy Pivot Points

MOSt Market

Action

MOSt MorningResearch

Market

Hours Market Information &Intraday Calls



DO you know COMMONLY USED TERMS in the

STOCK MARKETS



Bull market

Bear market

Large Cap Shares

Mid Cap Shares

Blue Chip Shares



Market Capitalization or Market cap

Floating share x Market price per share

Earnings per share

Equity earnings / Number of Outstanding shares

Price to Earnings ratio (P/E)

Market price per share / Earnings per share

Return on Equity Equity earnings / Networth



WHAT is the ROLE of a BROKER ?

WHAT is BROKING BUSINESS?



Why Broker ?

A stock broker sells or buys stock on behalf

of its clients

A transaction on a stock exchange must be

made between two members of the exchange A typical person may not simply walk into the

Bombay Stock Exchange, and ask to trade

stock. Such a transaction must be donethrough a broker



Transaction Network

Equity share trading is regulated through a exchange. Theexchange takes care of smooth trading and timelysettlement of outstanding dues.

All these done through proper network. The exchange havea network of Brokers ,Sub-brokers and a clearingcorporation.

The brokers and sub – brokers under takes the timelydelivery and settlement of funds and share.

The clearing corporation undertakes the transaction of brokers on behalf of the exchange.

Stock exchange ------ Brokers----------- buyer/seller(clear and settle) - (Execute orders)- (Purchase& sale of securities)



WHAT is the REVENUE MODEL for a

TRADITIONAL STOCK BROKER ?

B k Fi A d B k



Brokerage Firms And Brokerage

Revenue for a broker is charges and

commission, known as brokerage for executing

buy/sell order submitted by the clients

Eg: If 1000 shares of Reliance @ 1200 arebought by a client and the brokeragecharges are 0.50 %, then the brokerage

income from this transaction is (1000 x1200 x0.50%) Rs 6000/-



WHAT are the COST COMPONENT of

a CLIENT in a SHARE TRANSACTION



Charges Income Source for

Brokerage Broker

Stamp Duty State Govt.

Transaction Charges Exchange

Contribution to Investor Protection

Fund

Exchange ( For Investors)

Service Tax Central Govt. ( On Brokerage)

Securities Transaction Tax (STT) Central Govt.



TRADING DELIVERY F&O

Non-

Brokerage

0.006% 0.014% 0.0041%

STT 0.025% 0.125% 0.017%

(only SELL)

Service Tax 12.24% 12.24% 12.24%

Diff T f B k



Different Types of Brokerages

Cash Market

Intraday (0.01%-0.10%)

Delivery (0.10%-0.50%) Derivatives Market

Intraday (0.01%-0.10%)

Carry Forward ( “ )

C h M k I d



Cash Market-Intraday

The client wants to earn the price differentialin the same day. i.e. The position is entered

and squared off in the same trading session

The Brokerage rates are typically lower in

such kind of transaction, since there is no

share settlement

There is also a concept of single side and

double side brokerage – varies from region toregion

Benefit For Brokers



Benefit For Brokers

Intra day example

1000 share of Reliance bought @ 1100 and sold @1150 on the same day, brokerage rate is 0.05%

both sides Revenue is (1000 x 1100 x 0.05%) Rs 550 one

sided and (1000 x 1150 x 0.05%) Rs 575 = Rs 1125

1000 share of Reliance bought @ 1100 and sold @

1150 on the same day, brokerage rate is 0.07% oneside

Revenue is (1000 x 1100 x 0.07%) Rs. 770

C P b h li



Cost Pay by the client

Revenue is (1000 x 1100 x 0.05%) Rs 550 onesided and (1000 x 1150 x 0.05%) Rs 575 = Rs1125.Charged on Total turnover.

Services tax is 12.24% charged on total brokerage

=67.32Transaction charge 0.004 %Charged on totalturnover= 44.

STT is 0.025% charged on total turnover = 275

Stamp duty is 0.0024% charged on total turnover =26.4

Total Cost of Purchase = 1100962.72

C h M k D li



Cash Market-Delivery

The client purchases or sells in a single

trading session which results in actual

delivery of stocks

The Brokerage rates are higher in such kindof transaction, since there is share settlement

D li E l



Delivery Example

If 1000 shares of Reliance @ 1200 are bought by a client andthe brokerage charges are 0.50 %, then the brokerageincome from this transaction is (1000 x 1200 x0.50%) Rs6000/-

If 1000 shares of Reliance @ 1200 are bought by a client and

the brokerage charges are 0.20 %, then the brokerageincome from this transaction is (1000 x 1200 x0.20%) Rs2400/-

Brokerage income has come down significantly because of pricing

Therefore negotiating correct pricing is one of the mostimportant part of converting broking accounts

D i i I d



Derivatives – Intraday

The client wants to earn the price differential in thesame day. i.e. The position is entered and squaredoff in the same trading session

The Brokerage rates are typically lower in such kindof transaction, since there is minimum value of Rs200 000 per transaction

Brokerage rates vary between 0.01% to 0.10% onthe value of transactions

There is also a concept of single side and double

side brokerage – varies from region to region

I t d E l



Intraday Example

A client enters into a contract to buy one lotof Reliance March Futures(150 shares lot)@ 1250 brokerage 0.03% and sells @ 1280brokerage 0.03%

Revenue is (150 x 1250 x 0.03%) Rs 57 and (150 x 1280 x 0.03%) Rs 58 so, total is Rs115

Similarly if the selling is done on the next daywith the same brokerage rate then also therevenue will remain the same

Deri ti es C rr For rd



Derivatives-Carry Forward

The position is entered and squared off in

different trading session

The Brokerage rates are typically very much

similar to intraday brokerage rates, since inF&O exchanges have not yet started

settlement by stock deliveries

Brokerage rates vary between 0.01% to0.10% on the value of transactions



THANK YOU

equity presentation

Documents