finnacle session 1

8/8/2019 Finnacle Session 1

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FINNACLE Club

Indian Financial Markets



Contents

Financial Markets

Shares and Stocks

R egulatory Environment in India

SEBI

R BI



Financial Markets

A Market is a place where buyers andsellers come together to exchange

something Financial Markets are where financial

Instruments/products are exchanged.

A Financial Market is known by type of product traded in it



Different Financial Markets

FINANCIAL MARKET

MoneyMarket

DebtMarket

ForexMarket

CapitalMarket



Money Market

Markets for short term

Borrowing

Lending Primarily used by Banks

Typical Financial Instruments

Bankers Acceptance Certificate of Deposit (CD)

Treasury Bills

R epo¶s



Debt Market

Debt Contract

One Party lends to another Party

Predetermined Interest R ates and Term

Participants Banks

Financial Institutions

Mutual Funds

Insurance Companies etc.

Instruments Government Securities (G-Secs)

Public Sector Units Bonds

Corporate Securities



Foreign Exchange Market

Foreign Goods Payments in Foreign Currency

Forex Market

Participants Government

Payments for Imports

R epayment of Loans

Importers Exchange R ates ± One Currency in terms of

other (Eg. 1 US Dollar = 45 R upees) Bid R ate

Offer R ate



Financial Markets

Primary Market

Instruments issued for first time

Used by

Government/Corporates/PSU¶s

IPO

Initial Public Offering

Secondary Market

Trading of already issued

Stocks

Bonds

Stock Exchange



The primary market provides thechannel for creation of new securities.

Primary market provides opportunityto issuers of securities; Government aswell as corporate, to raise resources tomeet their requirements of investment.

They may issue the securities at facevalue, or at a discount/premium andthese securities may take a variety of

forms such as equity, debt etc.



Classification of Issues



Initial Public Offering (IPO) is when an

unlisted company makes a fresh issue of securities

for the first time to the public. This paves way forlisting and trading of the issuers securities.

A follow on public offering (Further Issue) is

when an already listed company makes either afresh issue of securities to the public or an offer for

sale to the public, through an offer document.According to RBI the lending limit for one investorin IPOs is Rs. 10 lacs.

Initial Public Offer



Fixed Price

Price discovery through BookBuilding Process.

PRICING OF AN ISSUE



Book Building is basically a process used inIPOs for efficient price discovery.

It is a mechanism where, during the period forwhich the IPO is open, bids are collected frominvestors at various prices, which are above orequal to the floor price. The offer price is

determined after the bid closing date.

BOOK BUILDING PROCESS



Rights Issue is when a listed company which proposes

to issue fresh securities to its existing shareholders as on arecord date.

The rights are normally offered in a particular ratio to thenumber of securities held prior to the issue and generally

issued at a price lower than t

he currently traded marketprice of the share

RIGHTS ISSUE



Secondary market refers to a market where securities

are traded after being initially offered to the public in theprimary market and/or listed on the Stock Exchange.Majority of the trading is done in the secondary market.

Secondary market comprises of equity markets and the

debt markets.

SECONDARY MARKET



The different types of derivatives includeforwards, futures, options, swaps etc.

Forward contract is a contract to trade in aparticular asset at a particular price on a pre-specified date.

Futures are standardized forward contracts thatare traded on an exchange and where the counter-party is the exchange itself.

DERIVATIVES TRADING



Options are contracts where one party has theright but not the obligation to trade or engage ina transaction in a particular asset / underlying /

variable at a particular price (called strike price)on a pre-determined date/dates or in a particulartime interval.

Interest rate swaps are normally agreementswhere one side pays the counterparty aparticular interest rate (floating) and the otherside pays an interest rate (fixed or floatingbased on some other benchmark)



NSE, promoted by leading financial institutions,was incorporated in 1992 as a corporate entity.

Trading in Equities and Debt Marketcommenced in 1994.

It is the largest exchange in the country interms of volume of trading.

It enjoys leadership position among exchangesin India.

NATIONAL STOCK EXCHANGE (NSE)



The Stock Exchange, Mumbai, popularly knownas "BSE" was established in 1875 as "The

Native Share and Stock Brokers Association´

It is the oldest stock exchange in Asia.

It has evolved over the years into its present

status as the premier Stock Exchange in thecountry.

It is the first Stock Exchange in the Country toget recognition from the Govt. of India under

the Securities Contracts (R egulation) Act, 1956.

THE STOCK EXCHANGE, MUMBAI (BSE)



.

S&P CNX NIFTY

CNX IT

BANK NIFTYCNX 100

S&P CNX DEFTY

S&P CNX 500

CNX MIDCAP

NIFTY MIDCAP 50

MARKET POSITION



Stock Exchange

Place where the shares are traded

BSE

NSE

BSE ± Bombay Stock Exchange

Oldest Stock Exchange in Asia

Sensex ± Sensitive Index

Index of 30 Actively traded Companies

NSE ± National Stock Exchange

Incorporated in 1992

Nifty

Index of 50 Actively traded Companies



A Few Jargons!!!

Types of Shares Common/Equity Preferred

Face Value

Market Value

Market Capitalization

Dividend



A few more Jargons!!!

Stock Broker

Mutual Funds

Annual R eport

Prospectus

Liquidity



Thank you !!

finnacle session 1

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