Capital Inflows and Share Market

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<ul><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 1/126</p><p>Capital Markets</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 2/126</p><p>Apna Sapna Money-Money</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 3/126</p><p>EEB 3</p><p>Money doesn't</p><p>create man but</p><p>it is the manwho created</p><p>money.</p><p>-Warren Buffet</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 4/126</p><p>Indian Economy A Snapshot</p><p> We are large</p><p> We are young</p><p> We are a difficult and a complex market</p><p> One of the fastest growing in the world</p><p> Services sector contributing over 60% to GDP</p><p> Where forces of competition are at work</p><p> Innovation driving enterprises</p><p> Economic reforms well on course entering second phase</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 5/126</p><p>Sustained GDP Growth</p><p>High GDP Growth</p><p>Growth Gap Over The World</p><p>DemographicsHalf the population below 25 yrs</p><p>ConsumerismRetail credit, low interest rates,</p><p>changing aspirations</p><p>InfrastructureDevelopment of roads, ports,</p><p>telecom</p><p>ReformsFDI</p><p>Global</p><p>competitiveness</p><p>Exports</p><p>Outsourcing</p><p>Indian Equities</p><p>Long term prospects are intact</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 6/126</p><p>Agenda</p><p> Understanding the Financial Market</p><p> Stock Exchanges</p><p> Equity investments/Stock index/IPOs/Bonds</p><p> Trading/Speculation</p><p> Bonus/Rights/ ADRs/GDRs</p><p> Pricing of shares Options and futures</p><p> Basic Terms and how the Securities market functions</p><p> Stock analysis</p><p> Investing philosophies</p><p> What moves the Stock markets The year for the markets</p><p> Impact of FII inflow.</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 7/126</p><p>Financial System</p><p>7</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 8/126</p><p>Why Financial Intermediaries</p><p> Pooling and allocation of funds</p><p> Lower transaction costs</p><p> Risk Management Saving and investment function</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 9/126</p><p> Need for regulation of FM- since it pools</p><p>funds of common investors. How is the</p><p>regulation done:</p><p> Restrictions on entry</p><p> Disclosure norms</p><p> Restriction on assets and activities</p><p> Deposit insurance</p><p> Limits on competition</p><p> Restriction on interest rates</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 10/126</p><p>Overview</p><p>Financial Market</p><p>Money Market Capital Market Debt M Forex M</p><p>Primary Market</p><p>Secondary Market</p><p>Commercial PaperC of Deposit</p><p>Treasury Bills</p><p>G-sec</p><p>Call/Notice</p><p>Repo</p><p>G-Sec (Central/State)</p><p>Bonds: Govt./ Corporate</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 11/126</p><p>Money Markets</p><p> Commercial Paper</p><p> Short term unsecured Promissory note</p><p> Issued by Corporates and FIs Tenor 15 days to 1 year</p><p> Certificate of Deposit</p><p> Issued by banks in 5 lac denominations</p><p> Tenor 30 days to 3 years</p><p> Treasury Bills</p><p> Issued by RBI at a discount of face value</p><p> Tenor 14/90/182 and 364 days</p><p>Markets for Debt instruments with a maturity upto 1 year</p><p>Allows banks to manage liquidity</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 12/126</p><p>Primary and Secondary market</p><p>A market where Company/issuer</p><p>Raises capital directly from the</p><p>Investor.</p><p>The sale proceeds are realized</p><p>Directly by the issuer</p><p>A market where listed securities</p><p>Are traded.</p><p>PRIMARY SECONDARY</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 13/126</p><p> Primary Market Issuances</p><p> Issues by Indian Co. in India</p><p> Types/ offer document/ Requirements/Categoriesof investors/pricing of an issue/IPO / intermediaries</p><p>in the issue/ Role of SEBI</p><p> Issues by Foreign Co. in India</p><p> IDRs/ Co. eligibility for IDRs</p><p> IPO Grading</p><p> Business Prospects//Financial</p><p>Position/Management Quality/ Corp Governance/Compliance and litigation history</p><p>ASBA</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 14/126</p><p> Secondary Market</p><p> Difference with P market</p><p> Role of SEBI MIRSD</p><p> MRD</p><p> DNPD</p><p> Products in the Secondary Market</p><p> Role of a broker</p><p> Risk Management system @ SEBI</p><p> Categorization of shares</p><p> VaR based margining system</p><p> Mark to Market</p><p> Upfront Collection of Margins</p><p> Index based circuit breakers </p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 15/126</p><p> Dematerialization</p><p> Conversion from physical form</p><p> Maintained by Depository</p><p> NSDL</p><p> CDSL</p><p> Depositories appoint DPs</p><p> 711 registered DPs( 266 NSDL/ 445 CDSL) Min NW of 100 Cr for establishing Depository.</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 16/126</p><p> Adv of Depositories/ Dematerialization</p><p> Safe and convenient</p><p> Immediate transfer No stamp duty</p><p> No risk of bad delivery</p><p> Nomination facilityAutomatic credit of bonus shares</p><p> Other info Rematerialization / Pledging possibility/</p><p>charges in opening Demat A/c</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 17/126</p><p> CRAs</p><p> Function/ denotation</p><p> Registered CARE</p><p> ICRA</p><p> CRISIL</p><p> Fitch Ratings India</p><p> Brickworks Ratings India</p><p> Delisting of shares</p><p> Compulsory Delisting</p><p> Voluntary Delisting</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 18/126</p><p> Buyback of shares</p><p> Conditions ( &gt; 10% needs approval)</p><p> Why</p><p> Surplus idle cash</p><p> Price stabilization</p><p> Expected bright future</p><p> Takeover/ Acquisition/ Mergers</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 19/126</p><p>Stock exchanges :A serious business</p><p> What are stock exchanges all about ? Change agents/facilitators</p><p> Transformation from the small businesses to</p><p>corporate houses (breaking ownership)</p><p> Ownership and convertibility</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 20/126</p><p>Stock exchanges :A serious business</p><p> How old are Stock exchanges as</p><p>institutions ? 1460,Antwerp,Belgium</p><p> 1602,Amsterdam Stock Exchange</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 21/126</p><p>Stock exchanges :A serious business</p><p> What are the broad characteristics of</p><p>Stock exchanges in India ? Traditionally an association of Brokers</p><p> 23 recognized SEs(4 national,19 regional) BSE/NSE/OTCEI/ISE</p><p> BSE-1870</p><p> OTCEI:1990 focus on enterprising promoters (IT)</p><p> Structure of BSE (Creation of NSE)</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 22/126</p><p>Stock exchanges :A serious business</p><p> Demutualization or Corporatization of</p><p>Stock Exchanges ? Ownership</p><p> Management Membership</p><p> Corporate model</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 23/126</p><p>Stock exchanges :A serious business</p><p> What is the Interconnected stock</p><p>Exchange of India ? Impact of technology,connectivity,online trading</p><p> Shift of trading to NSE &amp; BSE Created in 1999 by 14 Regional SEs</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 24/126</p><p>Stock exchanges :A serious business</p><p> What are the obligations of the companies</p><p>vis--vis the Stock Exchanges ? Rules as laid down by SEBI</p><p> Quarterly/annual reports/board meeting/dates ofAGMs/Price sensitive information/Bonus/rights</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 25/126</p><p>Stock exchanges :A serious business</p><p> What is a securities market ? Where securities are bought and sold</p><p> Entire system (people/institutions/organizations that</p><p>enable the trading process)</p><p>Security Ownership or creditor ship</p><p>Transferability</p><p>Securities Market</p><p>Capital Market Money Market</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 26/126</p><p>Product offerings in SEs</p><p> Capital Market Equities</p><p> Indices</p><p> Mutual funds</p><p> ETFs</p><p> IPOs</p><p> Security lending and borrowing scheme</p><p> Derivatives</p><p> Equity/Currency/Interest</p><p> Debt Market Retail Debt Market</p><p> Wholesale Debt Market</p><p> Corporate Bnds</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 27/126</p><p> About Equities:(Trading) Trading(NEAT/BOLT)</p><p> Market Timing Market Segments(Rolling Settlement/Limited</p><p>Physical market/Institutional Segment/Qualified</p><p>Foreign Investor/Block trading)</p><p> Securities available for trading Shares</p><p> Debentures(PCD/FCD/OCD/NCD/Warrants/Bonds</p><p> ETFs</p><p> Circuit Breakers</p><p> 10%: one hour halt</p><p> 15%: two hour halt</p><p> 20% : trading suspended for the day</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 28/126</p><p> About Trading(Risk Management)</p><p> Value at Risk Margin(Scrips graded)</p><p> Mark to market</p><p> Penalty for margin violation</p><p> About Trading(Clearing and settlement)</p><p> T+2</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 29/126</p><p>Indices</p><p> Why need for an Index</p><p> Functions of the index</p><p> Track performance</p><p> For comparison of returns</p><p> Enable risk management</p><p>Application in CAPM</p><p> Major Indices</p><p> Broad market wide/Sectoral/Thematic</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 30/126</p><p>Indices</p><p> How is sensex calculated</p><p> Some Index Concepts</p><p> Impact Cost</p><p> Beta</p><p> Total Returns Index</p><p> Investible Weight Factors( free float)</p><p> Concept of Index Funds</p><p> Concept of ETFs</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 31/126</p><p>Capital for Growth</p><p>Ways for a Co. to raise capital</p><p>Bank</p><p>Consortium of Banks</p><p>Venture Capitalist</p><p>Bonds</p><p>Debentures</p><p>Primary Market</p><p>Public Issue</p><p>Rights Issue</p><p>Private Placement</p><p>Debt Ownership rights</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 32/126</p><p>Stock exchanges :A serious business</p><p> What is a capital market ? Institutions engaged in providing long term capital:</p><p>primary market/secondary market/term lending</p><p>institutions/banks/Bonds/investors</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 33/126</p><p>Stock exchanges :A serious business</p><p> What is money market ? Market for short term funds:Primary</p><p>market/secondary market/GOI(G-secs and T Bills)</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 34/126</p><p>Stock exchanges :A serious business</p><p> What are primary and secondary markets ?</p><p>Co. who make the security issues</p><p>And the public</p><p>Buyers and sellers of securities</p><p>Primary Secondary</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 35/126</p><p>Equity investments :your share of ownership</p><p> What are Stocks and Securities ? Generic terms for instruments of ownership and</p><p>lending</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 36/126</p><p>Equity investments :your share of ownership</p><p> What are Ordinary shares ? Fractional ownership</p><p> Dividends out of operating surplus</p><p> Last to receive claims (life and liquidation of</p><p>business)</p><p> Voting right</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 37/126</p><p>Equity investments :your share of ownership</p><p> What are Preference Shares ? Preference over ordinary shares</p><p> Usually rate of dividend is fixed at time of issue</p><p> Participative and non participative</p><p> Cumulative and non cumulative</p><p> Redeemable or irredeemable</p><p> Convertible preference shares</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 38/126</p><p>Equity investments :your share of ownership</p><p> What are Non voting Shares ? Savings shares</p><p> Usually earn higher dividends</p><p> Golden shares</p><p> Preferred by promoters</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 39/126</p><p>Equity investments :your share of ownership</p><p> Shares issued at par and shares issued at</p><p>a Premium ? Face value</p><p> Earlier fixed at 10 and 100 rs.dispensed in 19999 Can be any integer</p><p> Norms for issuing shares at premium</p><p> Shares at discount</p><p> Authorized and subscribed capital</p><p> Buyback of shares possible(1999)</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 40/126</p><p>Equity investments :your share of ownership</p><p> Implication of different par values to investors ? Dividends linked to face value</p><p>Par</p><p>value</p><p>Premium M.P Dividend</p><p>declared</p><p>Dividen</p><p>d (%)</p><p>10 30 500 5 50%</p><p>10 30 500 5 1%</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 41/126</p><p>Equity investments :your share of ownership</p><p> Reading daily stock quotation in a financial daily ?</p><p>Company Pr.close open high Low</p><p>Wipro 1554 1555 1584 1530</p><p>close volume value trades P/E</p><p>1552.45 142397 220540 6504 39.5</p><p>M-Cap 52 W H/L Dividend(%)</p><p>36172 1861/791 1045% </p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 42/126</p><p>Stock index: A barometer of the stock</p><p>markets</p><p> What are Stock indices and how are they</p><p>calculated ? A number tracking the movement of the market</p><p>against a benchmark index.</p><p> Calculated by tracking the constituent members</p><p> Base year:Sensex 1st april 1979:NSE 1st april 1995</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 43/126</p><p>Calculation of the index</p><p>Stock index calculation</p><p>Index value=Index on previous dayTotal M-Cap Of current date</p><p>Total M-Cap of previous day</p><p>M.Cap = No. of O/S * M.P * free float index</p><p>M-Cap weighted</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 44/126</p><p>Stock index: A barometer of the stock</p><p>markets</p><p> What is free float index? Shares readily available for trading</p><p> Excludes promoters holdings,govt holding,FI holding</p><p> eg</p><p>O/S shares 100</p><p>Promoters 30</p><p>Govt 20</p><p>FI/MF 15</p><p>Free float 35</p><p>Free float index .35%</p><p>Companies are mandated to submit periodically constitution</p><p>Of O/S shares</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 45/126</p><p>Sensex The Barometer of Capital Market</p><p> In 1986,BSE came out with the first Stock index</p><p> A basket of 30 Companies was taken</p><p> The base year of Sensex is 1978-79 and the base value is 100</p><p> Was calculated based on Full Market Capitalization methodology In Sept 2003, Free float Market Capitalization methodology wasintroduced.</p><p> Regular adjustments for Bonus, Rights and Newly issued Capital.</p><p>The BSE set up in 1875 with 318 persons becoming members</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 46/126</p><p>Companies part of Sensex</p><p> Bajaj Auto (1996) Maruti Udyog Ltd (2004)</p><p> Mahindra &amp; Mahindra Ltd (2007)</p><p> Hero Honda Motors Ltd (2002)</p><p> SBI (1996)</p><p> ICICI Bank Ltd (2002)</p><p> HDFC Ltd (2002)</p><p> HDFC Bank Ltd (2003)</p><p> Infosys Technologies (1998)</p><p> Satyam Computers (2000)</p><p> Tata Consultancy Services (2005)</p><p> Wipro Ltd (2003)</p><p> Ranbaxy Lab (1996)</p><p> Cipla Ltd (2001)</p><p> Novartis ( 1998)</p><p> BHEL (1996) Larsen &amp; Toubro Ltd (2004)</p><p> DLF (2007)</p><p> BSES (1996)</p><p> Tata Power Co Ltd (2003)</p><p> National Thermal Power Corp</p><p>(2005) Guj Ambuja Cement (1996)</p><p> Reliance Petroleum (2000)</p><p> HPCL (1996)</p><p> ONGC Ltd (2003 )</p><p> Reliance Communications (2006)</p><p> Bharati Tele ventures (2003)</p><p>Auto Banks Tech Pharma Infra</p><p>4 4 4 3 12 </p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 47/126</p><p>SensexScrip Selection Criteria</p><p> Listed History</p><p> Listing of at least 3 months</p><p> Trading Frequency</p><p> Scrip should have been traded on each day in the last 3 months</p><p> Final Rank Scrip should figure in the final rank of 100 companies basis market cap</p><p> Market Cap Weight age</p><p> Scrip weightage should be at least 0.5 % of the index</p><p> Industry Representation</p><p> Balance representation of companies</p><p> Track Record</p><p> The company should have an acceptable track record</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 48/126</p><p>IPOs and Public Issues</p><p> What are IPOs ?</p><p> First time issue of a security in the primary market</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 49/126</p><p>IPOs and Public Issues</p><p> How are IPOs priced by companies ? Time lag between commencing business and issuing</p><p>shares: thus a premium</p><p> Pricing difficult and based on a number of factors</p><p>Pricing</p><p>Fixed Price Book building method</p><p>Investors aware of the price offer investors unaware of the offer price</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 50/126</p><p>IPOs and Public Issues</p><p>Public issue of 10,000,000 equity shares of Rs.10 par value at a price of</p><p>Rs.24 (premium of Rs.14 ) each aggregating to Rs.2400 million</p><p>Public issue of 72,243,300 equity shares of Rs.10 par value at a price of</p><p>Rs ( *) each aggregating Rs. (*) million</p><p>Floor price: Rs.115 per share</p><p>Fixed Price IPO</p><p>Book Building IPO</p><p>Price Band</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 51/126</p><p>IPOs and Public Issues</p><p> How does it affect an investor when acompany tries to price its public issue ashigh as possible ?</p><p> Issued at the average market price for a similarproduct or company</p><p>Par value 10</p><p>Premium 90</p><p>Issued price 100Dividend 3</p><p>Cost of equity ??</p><p>Investor expectation 16%</p><p>Par value 10</p><p>Premium 90</p><p>Issued price 100</p><p>Returns generated by Co. 9%</p><p>Investor expectation 16%</p><p>M.P of share will drop to 56.25</p><p>(9/.16)</p></li><li><p>7/28/2019 Capital Inflows and Share Market</p><p> 52/126</p><p>IPOs and Public Issues</p><p> What is prospectus/offer document ? Co. intending to issue shares files a prospectus with</p><p>th...</p></li></ul>