Business environment

PRESENTATION

INDEX
Sr. No.

Particulars Nifty B.S.E Sensex F.D.I. F.I.I. Franchisee Import & Export Capital Markets Mutual Funds Foreign Exchange

Slide #

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

INDEX ( Contd )
11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Open End Fund Closed End Fund Active Fund Passive Fund Equity Fund Right Share Bond share N.A.V Primary Market Secondary Market

NIFTY-50
NIFTY means National Index for Fifty Nifty Fifty was an informal term used to refer to 50 Popular large cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks. The stocks were often described as "one-decision", as they were viewed as extremely stable, even over long periods of time. The most common characteristic by the constituents were solid earnings growth for which these stocks were assigned extraordinary high price-earnings ratios. Fifty times earnings was not uncommon.

LIST OF NIFTY-50 COMPANIES

ABB Ltd. Electrical equipment ACC Ltd. Cement and cement products Ambuja Cements Ltd. Cement and Cement Products Bajaj Auto Ltd. Automobiles - 2 and 3 Wheelers Bharat Heavy Electricals Ltd. Electrical Equipment Bharat Petroleum Corporation Ltd. Refineries Bharti Airtel Ltd. Telecommunication - Services Cipla Ltd. Pharmaceuticals Dr. Reddy's Laboratories Ltd. Pharmaceuticals GAIL (India) Ltd. Gas Glaxosmithkline Pharmaceuticals Ltd. Pharmaceuticals Grasim Industries Ltd. Cement and Cement Products HCL Technologies Ltd. Computers - Software HDFC Bank Ltd. Banks Hero Honda Motors Ltd. Automobiles - 2 and 3 Wheelers Hindalco Industries Ltd. Aluminium Hindustan Petroleum Corporation Ltd. Refineries Hindustan Unilever Ltd. Diversified Housing Development Finance Corporation Ltd. Finance Housing I T C Ltd. Cigarettes ICICI Bank Ltd. Banks Infosys Technologies Ltd. Computers - Software Larsen & Toubro Ltd. Engineering Mahanagar Telephone Nigam Ltd. Telecommunication - Services Mahindra & Mahindra Ltd. Automobiles - 4 wheelers Maruti Udyog Ltd. Automobiles - 4 wheelers NTPC Ltd. Power National Aluminium Co. Ltd. Aluminium Oil & Natural Gas Corporation Ltd. Oil Exploration/Production Punjab National Bank Banks Ranbaxy Laboratories Ltd. Pharmaceuticals Reliance Communications Ltd. Telecommunication Services Reliance Energy Ltd. Power Reliance Industries Ltd. Refineries Reliance Petroleum Ltd. Refineries Satyam Computer Services Ltd. Computers - Software Siemens Ltd. Electrical Equipment State Bank of India Banks Steel Authority of India Ltd. Steel and Steel Products Sterlite Industries (India) Ltd. Metals Sun Pharmaceutical Industries Ltd. Pharmaceuticals Suzlon Energy Ltd. Electrical Equipment Tata Consultancy Services Ltd. Computers - Software Tata Motors Ltd. Automobiles - 4 Wheelers Tata Power Co. Ltd. Power Tata Steel Ltd. Steel and Steel Products Unitech Ltd. Construction Videsh Sanchar Nigam Ltd. Telecommunication Services Wipro Ltd. Computers - Software Zee Entertainment Enterprises Ltd. Media & Entertainment

BOMBAY STOCK EXCHANGE

The Bombay Stock Exchange (BSE) (Hindi : Bombay hare B za r) is the oldest stock exchange in Asia and has the largest number of listed companies in the world, with 4990 listed as of August 2010.It is located at Dalal Street, Mumbai. On Aug, 2010, the equity market capitalization of the companies listed on the BSE was US$1.78 trillion, making it the 4th largest stock exchange in Asia and the 11th largest in the world. With over 4,996 Indian companies listed & over 7700 scrips on the stock exchange,[5] it has a significant trading volume. The BSE SENSEX (SENSitive indEX), also called the "BSE 30", is a widely used market index in India and Asia. Though many other exchanges exist, BSE and the National Stock Exchange of India account for most of the trading in shares in India.

CONTD..
The BSE Sensex or Bombay Stock Exchange Sensitivity Index is a value-weighted index composed of 30 stocks that started January 1, 1986. The Sensex is regarded as the pulse of the domestic stock markets in India. It consists of the 30 largest and most actively traded stocks, representative of various sectors, on the Bombay Stock Exchange. These companies account for around fifty per cent of the market capitalisation of the BSE. The base value of the sensex is 100 on April 1, 1979, and the base year of BSE-SENSEX is 1978-79. The index is calculated based on a free-float capitalization method; a variation of the market cap method. Instead of using a company's outstanding shares it uses its float, or shares that are readily available for trading. The free-float method, therefore, does not include restricted stocks, such as those held by promoters, government and strategic investors.

CONTD..
Initially, the index was calculated based on the full market capitalization method. However this was shifted to the free float method from September 1, 2003. The Calculation of Sensex involves dividing the free float market capitalization of 30 companies in the index by a number called Index divisor. The Divisor is the only link to original base period value of the Sensex. It keeps the index comparable over time and is the adjustment point for all Index adjustments arising out of corporate actions, replacement of scrips, etc. The index has increased by over ten times from June 1990 to the present. Using information from April 1979 onwards, the long-run rate of return on the BSE Sensex works out to be 18.6% per annum, which translates to roughly 9% per annum after compensating for inflation.

F.D.I.
Foreign direct investment (FDI) or foreign investment refers to long term participation by country A into country B. It usually involves participation in management, joint-venture, transfer of technologyand expertise. There are two types of FDI: inward foreign direct investment and outward foreign direct investment, resulting in a net FDI inflow (positive or negative) and "stock of foreign direct investment", which is the cumulative number for a given period. Direct investment excludes investment through purchase of shares.[1] FDI is a measure of foreign ownership of productive assets, such as factories, mines and land. Increasing foreign investment can be used as one measure of growing economic globalization. The figure below shows net inflows of foreign direct investment in the United States. The largest flows of foreign investment occur between the industrialized countries (North America, Western Europe and Japan). But flows to nonindustrialized countries are increasing sharply.

F.I.I.
Institutional investors are organizations which pool large sums of money and invest those sums in securities, real property and other investment assets. They can also include operating companies which decide to invest its profits to some degree in these types of assets. Types of typical investors include banks, insurance companies, retirement or pension funds, hedge funds, investment advisors and mutual funds. Their role in the economy is to act as highly specialized investors on behalf of others. For instance - an ordinary person will have a pension from his employer. The employer gives that person's pension contributions to a fund. The fund will buy shares in a company, or some other financial product. Funds are useful because they will hold a broad portfolio of investments in many companies. This spreads risk, so if one company fails, it will be only a small part of the whole fund's investment.

Franchisee
 Franchising is the practice of using another firm's successful business model. The word 'franchise' is of anglo-french derivation - from francmeaning free.  For the franchisor, the franchise is an alternative to building 'chain stores' to distribute goods and avoid investment and liability over a chain. The franchisor's success is the success of the franchisees. The franchisee is said to have a greater incentive than a direct employee because he or she has a direct stake in the business.  However, except in the US, and now in China (2007) where there are explicit Federal laws covering franchise, most of the world recognizes 'franchise' but rarely makes legal provisions for it. Businesses for which franchising works best have the following characteristics:
Businesses with a good track record of profitability. Businesses which are easily duplicated.

CONTD..
As practiced in retailing, franchising offers franchisees the advantage of starting up quickly based on a proven trademark, and the tooling and infrastructure as opposed to developing them. Although there are franchises around products Chanel and other cosmetics, to name the prominent by and large, the franchises revolve around service firms. At the sub-$80,000 level, they are, by far, the largest number of franchises.[2]These allow a business, combined with family time and a location not far from home. Some franchises are available for a few thousand dollars. The following US-listing tabulates[3] the early 2010 ranking of major franchises along with the number of sub-franchisees (or partners) from data available for 2004.[4] It will also be seen from the names of the franchise that the US is a leader in franchising innovations, a position it has held since the 1930s when it took the major form of fast-food restaurants, food inns and, slightly later, the motels during the first depression. Franchising is a business model used in more than 70 industries that generates more than $1 trillion in U.S. sales annually (2001 study).[citation needed] Franchised businesses operated 767,483 establishments in the United States in 2001, counting both establishments owned by franchisees and those owned by franchisors

Import
The term "import" is derived from the conceptual meaning as to bring in the goods and services into the port of a country. The buyer of such goods and services is referred to an "importer" who is based in the country of import whereas the overseas based seller is referred to as an "exporter . Thus an import is any good or service brought in from one country to another country in a legitimate fashion, typically for use in trade. An import in the receiving country is an export to the sending country.

Export
The term export is derived from the conceptual meaning as to ship the goods and services out of the port of a country. The seller of such goods and services is referred to as an "exporter" who is based in the country of export whereas the overseas based buyer is referred to as an "importer". In International Trade, "exports" refers to selling goods and services produced in home country to other markets An export in the sending country is an import to the receiving country.

Capital Markets
 A capital market is a market for securities, where business enterprises and governments can raise long-term funds. It is defined as a market in which money is provided for periods longer than a year, as the raising of short-term funds takes place on other markets.  The capital market includes
  The stock market The bond market

 Financial regulators oversee the capital markets in their designated jurisdictions to ensure that investors are protected against fraud, among other duties.  Capital markets may be classified as
  Primary markets- In primary markets, new stock or bond issues are sold to investors via a mechanism known as underwriting. Secondary markets- In the secondary markets, existing securities are sold and bought among investors or traders, usually on a securities exchange, over-thecounter, or elsewhere.

Mutual Funds
A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests typically in investment securities. The mutual fund will have a fund manager that trades (buys and sells) the fund's investments in accordance with the fund's investment objective Most funds are overseen by a board of directors or trustees which is charged with ensuring the fund is managed appropriately by its investment adviser and other service organizations and vendors, all in the best interests of the fund's investors.

Foreign Exchange
The foreign exchange market (forex, FX, or currency market) is a worldwide decentralized over-the-counter financial market for the trading of currencies. Financial centres around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends. The foreign exchange market determines the relative values of different currencies. The primary purpose of the foreign exchange is to assist international trade and investment, by allowing businesses to convert one currency to another currency. For example, it permits a US business to import British goods and pay Pound Sterling, even though the business's income is in US dollars. It also supports speculation, and facilitates the carry trade, in which investors borrow low-yielding currencies and lend (invest in) high-yielding currencies, and which (it has been claimed) may lead to loss of competitiveness in some countries. In a typical foreign exchange transaction, a party purchases a quantity of one currency by paying a quantity of another currency. The modern foreign exchange market began forming during the 1970s when countries gradually switched to floating exchange rates from the previous exchange rate regime, which remained fixed as per the Bretton Woods system.

Open End Fund

An open-end(ed) fund is a collective investment scheme which can issue and redeem shares at any time. An investor will generally purchase shares in the fund directly from the fund itself rather than from the existing shareholders. The price at which shares in an open-ended fund are issued or can be redeemed will vary in proportion to the net asset value of the fund, and therefore directly reflects the fund's performance.

Closed End Fund

A closed-end fund (or closedended fund) is a collective investment scheme with a limited number of shares. It is called a closed-end fund (CEF) because new shares are rarely issued once the fund has launched, and because shares are not normally redeemable for cash or securities until the fund liquidates.

CONTD..
Open End Fund Closed End Fund
There may be a percentage charge The price of a share in a closed-end levied on purchase or sale of shares fund is determined partially by the or units called an initial charge or value of the investments in the fund, 'front-end load'. This charge may and partially by the premium (or represent profit for the fund manager discount) placed on it by the market. or cover the cost or distributing the The total value of all the securities in fund by paying commission to the the fund divided by the number of adviser or broker that arranged the shares in the fund is called the net purchase. These fees are commonly asset value (NAV) per share. The referred to as 12b-1 fees in U.S. Not market price of a fund share is often all fund have initial charges; if there higher or lower than the per share are no such charges levied, the fund NAV: when the fund's share price is is "no-load". higher than per share NAV it is said to be selling at a premium; when it is lower, at a discount to the per share NAV.

Active Fund

Passive Fund

Equity Fund
Equity fund is a fund that invests in equities more commonly known as stocks. Stock funds are contrasted with bond funds and money funds. Fund assets are typically mainly in stock, with some amount of cash, which is generally quite small, as opposed to bonds, notes, or other securities. It may be a mutual fund or exchange-traded fund. The objective of an equity fund is long-term growth through capital gains, although

Right Shares
Right shares are the shares which are offered by the company to the existing share holders. Simply stated the existing shareholders have a right to subscribe for the shares which are offered by the company after initial allotment until some special right is reserved for any other person by special resolution in this respect.

Bond Share
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest (the coupon) and/or to repay the principal at a later date, termed maturity. A bond is a formal contract to repay borrowed money with interest at fixed intervals

CONTD..
Right Shares
Section 81 i.e Further issue of capital of companies act 1956 deals with this and it states that where at any time after the expiry of two years from the formation of a company or at any time after the expiry of one year from the allotment of shares in that company made for the first time after its formation, whichever is earlier, it is proposed to increase the subscribed capital of the company by allotment of further shares.

Bond Share
Thus a bond is like a loan: the issuer is the borrower (debtor), the holder is the lender (creditor), and the coupon is the interest. Bonds provide the borrower with external funds to finance longterm investments, or, in the case of government bonds, to finance current expenditure. Certificates of deposit (CDs) or commercial paper are considered to be money market instruments and not bonds. Bonds must be repaid at fixed intervals over a period of time.

N.A.V
Net asset value (NAV) is a term used to describe the value of an entity's assets less the value of its liabilities. The term is most commonly used in relation to openended or mutual funds due to the fact that shares of such funds registered with the U.S. Securities and Exchange Commission are redeemed at their net asset value. However, the term may also be used as a synonym for book value or the equity value of a business. Net asset value may represent the value of the total equity, or it may be divided by the number of shares outstanding held by investors and, thereby, represent the net asset value per share.

Primary Market
The primary market is that part of the capital markets that deals with the issue of new securities. Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. This is typically done through a syndicate of securities dealers. The process of selling new issues to investors is called underwriting. In the case of a new stock issue, this sale is an initial public offering (IPO). Dealers earn a commission that is built into the price of the security offering, though it can be found in the prospectus. Primary markets creates long term instruments through which corporate entities borrow from capital market.

Secondary Market
The secondary market, also known as the aftermarket, is the financial market where previously issued securities and financial instruments such as stock, bonds, options and futures are bought and sold. The term "secondary market" is also used to refer to the market for any used goods or assets, or an alternative use for an existing product or asset where the customer base is the second market For example, corn has been traditionally used primarily for food production and feedstock, but a "second" or "third" market has developed for use in ethanol production.