Unit I of stock market analysis galgotia's University

Stock market analysis

1. Financial Market Primary Secondary Market Equity Debt Market G-Sec Capital Market Money Market Forex Market Securitization Market Factor Market Working Capital Finance Project Finance Retail Loans Pension funds Financial Derivatives Infrastructure Development Funds

2. Types of Financial Market….. Capital Market:- Equity Preference Debentures Bond etc. Money Market:- Treasury Bills. Certificates of Deposits (CDs). Commercial Paper. Call Money Market LIBOR (London Interbank Offer Rate) MIBOR (Mumbai Interbank Offer Rate)

3. Constituents of Capital Market in India

4. Types of Financial Market Spot / Cash Market Future Market Standardized Market-----Exchange Customize Market--------OTC

5. Financial Institutions Intermediaries Non- intermediaries (RBI, SEBI) Depository Non- Depository Regulatory Pool funds Others

6. Intermediaries Banks Non-Banking Financial Intermediaries (NBFI) e.g. Venture Capital Funds, Hire and Leasing Companies Non-Banking Financial Corporation (NBFC) e.g. Micro-Finance Companies, Bajaj Financial Services, Sahara India etc. Mutual Fund Houses Insurance Companies

7. Role and Importance of financial market Safety of deposit Return on deposit Return on investment Providing resources to fund seeker Allocating financial resources to efficient use The financial system transfer resources across time, sectors, and regions. The financial system pools and subdivides funds depending upon the need of the individual saver or investor. Diversified product for investment and fund mobilisation : Debt, Equity, Long term, Short term.

8. Role and Importance of financial market…………. Meeting point for all kind of players------Institution as well as Retail Provide service related to Currency, Commodity etc. Provide liquidity by secondary market. OTC Market provide liquidity to customize product Provide information to investor----Credit Rating Agency, Media etc.

9. Factors affecting Financial Market Policy rate GDP growth rate Liquidity in the economy Liquidity of the market Availability of Information Budget Alternative investment avenue

10. Parties of Stock Market Statutory Stock Exchange Stock Brokers Depositories Regulators Clearing House Players Mutual Funds Pension Funds Insurance Companies FIIs FPIs Banks Indian Residents

11. IPO IPO. The first sale of stock by a company to the public. The most common reason for a company to initiate an IPO is in order to raise more capital.

12. FPO An issuing of shares to investors by a public company that is already listed on an exchange. An FPO is essentially a stock issue of supplementary shares made by a company that is already publicly listed and has gone through the IPO process.

13. PRIVATE PLACEMENT A company makes the offer of sale to individuals and institution privately without the issue of a prospectus.

14. RIGHT ISSUE When an existing company issue shares to its existing shareholders in proportion to the number of share held by them, it is known as Rights Issue.

15. BONUS ISSUE Bonus shares are the shares allotted by capitalization of the reserves or surplus of a company.

16. STOCK OPTION A company can encourage its employees to take up shares and subscribe to it is called stock option or Employee Stock Option Scheme (ESOPS). SEBI has issued guidelines in this respect.

17. Employee Stock Option (ESO) ESOs carry the right, but not the obligation, to buy a certain number of shares in the company at a predetermined price. An employee stock option is slightly different from a regular exchange-traded option because it is not traded on an exchange.

18. O F F E R F O R S A L E A company sells the securities through the intermediaries such as issue houses, and stock brokers.

19. Primary Market provides the channel for sale of new securities to raise resources to meet their requirements issue the securities in domestic market and/or international market.

20. Ups and Down of IPO Ups Bring a huge influx of cash to the company and also generate money for the owners. An IPO brings new money that the company can use to grow its business without incurring as much debt, to better compensate investors and employees, and provide stock options or other kinds of compensation.  Being a publicly-held company can also make it easier to raise capital in the future, if need be, and can make a company more appealing to vendors and customers. Downs A public company's finances must be made available for government and public perusal; the company must also answer to the SEBI (SEC). Preparation for an IPO is expensive and time-consuming. Pricing IPO is a very challenging tasks.

21. Classification of issue of shares Issues Further Public Offering Fresh Issue Initial Public Offering Offer for Sale Public Fresh Issue Offer for Sale Rights Private Place m ent

22. Terminology Nominal or stated amount assigned by issuer Face value When security sold above its face value Premium When security sold at less than face value Disc o u n t

23. Initial Public Offering (IPO) Made by Unlisted Companies Either Fresh issues of securities An offer for sale of its existing securities Both for the first time to the public

24. Advantage of IPO No Cost of capital Huge amount can be raised Brand Value Correct V alu a tion

25. Disadvantage of IPO Disclosure of information Decision’s take time Cost of IPO

26. Parties to IPO R e g i st r ar Underwriter Lead Manager Merchant Banker

27. Who decides the price of an issue? When issuer & Lead Merchant Banker fix a price Fixed Price When the company and Lead Manager stipulate the price and leave it to market forces Price discovery through Book Building

28. Further Public Offering When an already listed company makes Either fresh issue of securities to the public Or an offer for sale to the public Through offer document

29. Rights Issue When listed company issue fresh securities To existing shareholder Suites for companies who would like to raise capital

30. Private Placement / Preferential Issue 1 . Issue of shares or convertible securities by listed companies 2 . Which is neither right issue nor a public issue 3 . Faster way for company to raise equity capital

31. Issue Price Price at which company shares are offered Initially in primary market

32. Market Capitalization Market value of a quoted company 1 . MC = Market Price * No. of Shares 2 .

33. Difference between Public Issue & Private Placement is s ue w h en Public Issue When issue made for general public and any investor at large. A s per co m p a n i es act, 1956, an becomes public res u lt it a l l o t m ent to 50 persons or more. Private Placement Issue is made to a select set of people. An allotment is made to less than 50 persons.

34. Book Building

35. Cut –Off Price Any price which above the floor price Decided by Issuer & Lead Manager After considering the book & investors appetite for the stock

36. Floor Price It is the minimum price at which bids can be made

37. Price Band Price decided by The Company consultant with The Merchant Banker Cap should not be more than 120% of the floor price The prospectus may contain Either the floor price for the securities Price Band within which the investor can bid

38. Documents in IPO Prospectus Draft Offer Document Abridged P r o s pectus

39. Draft Offer Document Offer document in draft stage Filled with SEBI At least 2 days prior to the filling of the offer document with ROC

40. Abridged Prospectus Shorter version of the prospectus Contains all the salient features of a prospectus Applications form of public issues.

41. Lock in Freeze on the sale of shares for a certain period of time Ensure that company should continue to hold some minimum percentage After public issue

42. Listing of Securities Admission of securities of an issuer to trading Dealing on a stock exchange through a formal agreement Provide liquidity and marketability to securities Provide mechanism for effective control & supervision of trading

43. Listing Agreement Specifies the terms & conditions of listing 1 . Disclosures shall be made by a company on continuous basis to the exchange 2 .

44. Delisting of Securities Permanent removal of securities of a listed company From the stock exchange Securities of that company no longer be traded on that stock exchange

45. Foreign Capital Issuance ADR:- An American depositary receipt ( ADR ) is a negotiable certificate issued by a U.S. bank representing a specified number of shares (or one share) in a foreign stock traded on a U.S. exchange. GDR:- A global depositary receipt ( GDR ) is a bank certificate issued in more than one country for shares in a foreign company. The shares are held by a foreign branch of an international bank. The shares trade as domestic shares but are offered for sale globally through the various bank branches.

46. 'Foreign Currency Convertible Bond - FCCB A foreign currency convertible bond (FCCB) is a type of convertible bond issued in a currency different than the issuer's domestic currency. In other words, the money being raised by the issuing company is in the form of a foreign currency. A convertible bond is a mix between a debt and equity instrument. It acts like a bond by making regular coupon and principal payments, but these bonds also give the bondholder the option to convert the bond into stock.

47. 'Foreign Currency Convertible Bond - FCCB A foreign currency convertible bond (FCCB) is a type of convertible bond issued in a currency different than the issuer's domestic currency. In other words, the money being raised by the issuing company is in the form of a foreign currency. A convertible bond is a mix between a debt and equity instrument. It acts like a bond by making regular coupon and principal payments, but these bonds also give the bondholder the option to convert the bond into stock.