Equity MarketEquity MarketBy Hitesh Mali/ M.N.JayprakashBy Hitesh Mali/ M.N.JayprakashVice President of Motilal OswalVice President of Motilal Oswal

What is Equity?What is Equity?

FeaturesFeatures

Entitled to a portion of the company’s Entitled to a portion of the company’s

profits share and claim on assetsprofits share and claim on assets

TradabilityTradability

Limited LiabilityLimited Liability

Equity is Based onEquity is Based on Indian Growth StoryIndian Growth Story Indian Stock MarketIndian Stock Market

Demate AccountsDemate Accounts NSDL (National Securities Depositories NSDL (National Securities Depositories

Ltd)Ltd) Investors Accounts – 11966928Investors Accounts – 11966928 Dp Service Center - 13969Dp Service Center - 13969

CDSL (Central Depositories Securities CDSL (Central Depositories Securities

Ltd)Ltd) Investors Accounts – 7862627Investors Accounts – 7862627 Dp Service Center - 10675Dp Service Center - 10675

Low participation is also a Growth Low participation is also a Growth Opportunity in EquityOpportunity in Equity

Equity - 11728Equity - 11728

Insurance - 19502Insurance - 19502

Mutual Fund – Mutual Fund –

22192219

FY 2010FY 2010

Equity - 65000Equity - 65000

Insurance - 53860Insurance - 53860

Mutual Fund – Mutual Fund –

1148211482

FY 2020FY 2020

The Big Opportunity in EquityThe Big Opportunity in Equity

CountryCountry InvestorsInvestors PopulatioPopulationn

%%

ChinaChina 152152 1,3251,325 11%11%

KoreaKorea 4.64.6 4747 10%10%

IndiaIndia 1616 1,1901,190 1%1%

Asset Classes in IndiaAsset Classes in India

Bank Deposit/FD

Equity

Gold Silver Real Estate

Player In Market

Regional Broker

Discount Broker Advisories

Bank Broker

Intermediaries Comes in Various Shapes & SizeIntermediaries Comes in Various Shapes & Size

IntermediaryIntermediary AdvantagesAdvantages DisadvantageDisadvantagess

11. Agent. Agent 80% to 80% to 90%90%

Personalized service, Personalized service, comes & picks up comes & picks up your form as & when your form as & when you wish low cost you wish low cost service providerservice provider

Cannot advice across Cannot advice across multiple asset classesmultiple asset classes

2. Internet2. Internet Ease of transacting Ease of transacting anytime, anywhere in anytime, anywhere in the globethe globe

No personal touchNo personal touch

3. Pure Advisor3. Pure Advisor No blas towards No blas towards products since he/she products since he/she does not sell themdoes not sell them

For execution, you For execution, you have to approach have to approach someone elsesomeone else

44. Financial . Financial PlannerPlanner

Well trained to after Well trained to after you advice across you advice across multiple asset classesmultiple asset classes

If your portfolio size is If your portfolio size is small, you may not be small, you may not be able to afford himable to afford him

5. 5. Brokerage Brokerage House /BankHouse /Bank

Large organization Large organization with strong research with strong research capabilities ability to capabilities ability to advice across assetsadvice across assets

Lacks personal touch Lacks personal touch relationship relationship managers could managers could change very ofternchange very oftern

Wealth Creation CycleWealth Creation Cycle

ResearchResearch Advisory Distribution

OperationTechnologyProcess Excellent

Employment Customer

Evolution from Broker to Financial Evolution from Broker to Financial PlannerPlanner

Position from a one stop financial Position from a one stop financial

service destinationservice destination

Focus on grater wallet shareFocus on grater wallet share

Standalone brokers may become Standalone brokers may become

defunct in the next decadedefunct in the next decade

Why we need Stock Market???Why we need Stock Market???

Stock Market

Capital Requirement of a Company

Long term

Requirement of capital Providers

Long term/Short/Medium

Common player for buyers & Sellers

Sources of new capital

for companies

Investor can convert their stock into cash

Ministry of FinanceMinistry of Finance

IRDA

Insurance

SEBI

Stock Exchange/ Broker/ Advisors

RBI

Banks/ NBFC

What are Market Activities???What are Market Activities???NSDL

DP DP

Brokers

Sellers

Broker

Buyers Sellers

CC

Derivatives????

Future Option

Unlimited profits & Unlimited Loses

Call Put

Buyer

Limited Loses & Unlimited gains

Seller

Limited gains & Unlimited Loses

Buyer

Limited losses & Unlimited gains Seller

Unlimited gains & Limited loses

InvestorsInvestors TraderTrader

1. Long term1. Long term 1. Short term1. Short term

2. Follows 2. Follows Fundamental AnalysisFundamental Analysis

3. Follows Technical 3. Follows Technical AnalysisAnalysis

3. Stay invested as 3. Stay invested as long as home is long as home is continuingcontinuing

3. Trades with sharp 3. Trades with sharp loses & price Targetloses & price Target

Debt Market Debt Market - By Abhiroop Mukhrajee- By Abhiroop Mukhrajee

Fund Manager Motilal OswalFund Manager Motilal Oswal

Case for Government BorrowingCase for Government Borrowing

Fund required to run operations of Fund required to run operations of

governmentgovernment

Salaries of government employeesSalaries of government employees

Day to day activitiesDay to day activities

Capital expenditureCapital expenditure

Types of Debt SecuritiesTypes of Debt Securities Government SecuritiesGovernment Securities

Long term market borrowing of the governmentLong term market borrowing of the government Largest segment of the debt marketLargest segment of the debt market Issued by RBI & Subscribed banks, primary Issued by RBI & Subscribed banks, primary

dealers & Institutionsdealers & Institutions

Corporate BondsCorporate Bonds All listed debt securities issued by banks, PSU All listed debt securities issued by banks, PSU

undertakings, Municipal Corporations, Bodies undertakings, Municipal Corporations, Bodies

Corporate & CompaniesCorporate & Companies Issued by the above entities mostly through Issued by the above entities mostly through

private placement routeprivate placement route

Bond Price DynamicsBond Price Dynamics

Bond market prices are inversely related to the Bond market prices are inversely related to the

market yields, when market yields go up, bond market yields, when market yields go up, bond

market price falls & Vice Versamarket price falls & Vice Versa

The sensitivity of bond’s market price to change The sensitivity of bond’s market price to change

in yield is given by its modified duration, higher in yield is given by its modified duration, higher

the duration of the bond, more sensitivity it is to the duration of the bond, more sensitivity it is to

yield changes, vice versayield changes, vice versa

Factors Affecting Interest RatesFactors Affecting Interest Rates

Macro & Micro economic scenariosMacro & Micro economic scenarios Inflation expectationsInflation expectations Money supply in the systemMoney supply in the system Monetary & Fiscal policiesMonetary & Fiscal policies Global economic conditionsGlobal economic conditions Crude oil pricesCrude oil prices Currency situationCurrency situation

Structure of Debt MarketStructure of Debt Market

Government MarketGovernment Market

Money MarketMoney Market

Corporate BondsCorporate Bonds

DerivativesDerivatives

Government Bonds

Central GovernmentState Government

G-Sec

10 yr

T-Bill

90,182, 364 days

CMB

90,182, 364 days

FRB

Upto 10yr

State Development

Loan

10yr

Money MarketMoney Market

Call MoneyCall Money

CBLOCBLO

REPOREPO

Certificate of Certificate of

DepositsDeposits

Commercial PapersCommercial Papers

Corporate Bonds

Corporate Bonds

Commercial Papers

Certificate of Deposits

DerivativesDerivatives

Derived from another Security or overnight Derived from another Security or overnight

ratesrates Interest rate swapsInterest rate swaps Traded in OTC marketTraded in OTC market Used mainly as tool of hedging against interest Used mainly as tool of hedging against interest

rate risksrate risks Tenures – 3m, 6m, 1yr, 3yr, 5yr, 7yr & 10yrTenures – 3m, 6m, 1yr, 3yr, 5yr, 7yr & 10yr 1 to 5 yr segments are the most actively traded1 to 5 yr segments are the most actively traded

TradingTrading Done by telephonic negotiation between Done by telephonic negotiation between

counterparties (OTC Market)counterparties (OTC Market) Order Matching Reported on the Negotiated Order Matching Reported on the Negotiated

Dealing SystemDealing System

Risk involved in Debt MarketRisk involved in Debt Market Credit risk or Issuer riskCredit risk or Issuer risk

It is the risk that the issuer will not pay the It is the risk that the issuer will not pay the coupon income and/or the maturity amount on coupon income and/or the maturity amount on the specified dates.the specified dates.

Interest rate riskInterest rate risk

Interest rate risk affects investors in bonds who Interest rate risk affects investors in bonds who do not plan to hold till maturitydo not plan to hold till maturity

www.ccilindia.com – – Debt Debt MarketMarket

www.nseindia.com – – Equity Equity MarketMarket

Thank YouThank You Krunal & RaxitKrunal & Raxit