FINANCIAL MARKET

& IT’S INSTRUMENTS

RAJESH PAUL
IILM-BUSINESS SCHOOL
KOLKATA
• FINANCIAL MARKET

GENERALLY, A MARKET IS A PLACE USED FOR

BUYING & SELLING GOODS.
IN MODERN WORLD,TRANSACTIONS CAN BE
DONE VIRTUALLY,NO NEED TO GATHER IN A
PLACE.
THE MECHANISM OR SYSTEM THROUGH
WHICH FINANCIAL ASSETS ARE CREATED AND
TRANSFERRED IS KNOW AS FINANCIAL
MARKET.
• TYPES OF MARKET
• MONEY MARKET
MONEY MARKET IS A MARKET WHARE TRANSACTIONS
ARE TAKEN PLACE THROUGH CASH OR “CASH
EQUIVALENT” INSTRUMENTS.
CAPITAL FOR BUSINESS IS AVALABLE IN FORM OF CASH
& “NEAR-CASH” INSTRUMENTS.
A WELL ORGANISED MARKET WHICH GIVES SHORT TERM
LOAN OR FINANCIAL SUPPORT TO TRADE, INDUSTRIES &
COMMERCE.
“CASH EQUIVALENT” OR “NEAR-CASH” MEANS THE
FINANCIAL ASSETS THAT CAN BE CONVERTED INTO CASH
WITH MINIMUM CONVERSION CHARGES, WITHOUT
LOSING ITS VALUE.
 FEATURES OF
•

MONEY MARKET
IT CAN BE ORGANISED OR UNORGANISED.
LOANS & ADVANCES ARE GIVEN FOR SHORT TIME
PERIOD.
TRANSACTIONS ARE DONE THROUGH CASH OR CASH
SUBSTITUTE.
IT’S A WHOLE SALE MARKET.
BANKS & OTHER FINANCIAL INSTITUTIONS ARE THE MAIN
PLAYERS IN THAT MARKET.
TIME PERIOD OF THAT MARKET RANGE UPTO ONE YEAR.
• INSTRUMENTS OF
MONEY MARKET
CASH
CHAQUE
BILLS OF EXCHANGE
COMMERCIAL PAPERS
TREASURY BILLS
CERTIFICATE OF DEPOSITS
PROMISARY NOTES
• PLAYERS OF MOMEY
MARKET
RBI
STATE BANK OF INDIA
OTHER NATIONALISED BANKS
FOREIGN EXCHANGE BANKS
CO-OPARETIVE BANKS
MORTGAGE BANKS
MARCHENTS
SHROFFS
• CALL MONEY MARKET
CALL MONEY MARKET IS THAT PART OF
MONEY MARKET WHARE BANKS DEAL IN
DAILY SURPLAS FUND.
IT EXHISTS FOR A MAXIMUM PERIOD OF
FIFTEEN DAYES.
FUNDS LENT, HAVE TO BE REFUNDED AT THE
DEMAND OF LENDER.
MARKET LEQUIDITY IS VERY HIGH.
THE RATE OF INTEREST{CALL RATE}
FLUCTUATES.
• OTHERS MONEY
MARKET
TREASURY BILL MARKET:MARKET FOR TREASURY BILLS(T-BILLS),AN
INSTRUMENT OF SHORT TERM BORROWING( FOR 91 & 364 DAYS) BY GOVT.

MARKET FOR COMMERCIAL PAPER:A MONEY MARKET WHARE

CPs ARE TRADED.
– CPs ARE:SHORT TERM DEBT INSTRUMENTS ISSUED BY CORPORATES.
– MOST POPULAR BEING THE 90 DAYS.
– THESE ARE RATED BY AGENCIES LIKE “CRISIL”, “ICRA” ETC

MARKET FOR CERTIFICATE OF DEPOSITS:A SHORT TERM

MARKET WHARE DEPOSIT CERTIFICATE ARE TRADED.
– CD’S ARE:A SHORT TERM RECIEPTS ISSUSED BY BANKS
– IT’S TRANFERABLE RECIEPTS
– ATTRACT STAMP DUTY.
• CAPITAL MARKET
IT’S A ORGANISED MARKET WHICH SUPPLIES
LONG TERM CAPITAL TO BUSINESSES.
IT’S A MARKET WHARE TRANSACTIONS ARE
DONE THROUGH SHARES OR DEBT
INSTRUMENTS.
IT’S A COLLECTION OF LARGE & MEDIUM
FINANCE COMPANIES WHICH PROVIDE LONG
TERM FINANCE TO INSTITUTIONS IN A
SYSTEMETIC WAY.
FEATURES OF CAPITAL
•

MARKET
IT PROVIDES LONG TERM CAPITAL.
IT EXHISTS FOR A LONG TIME.
IT’S A REGULATED MARKET.
IT’S FOR BUYING FIXED ASSETS.
ONLY PROVIDES LONG TERM LOAN BUT NOT
FOR CREATING DEPOSITS.
CAPITAL IS AVALABLE IN FORM OF EQUITY &
DEBT INSTRUMENTS.
 PLAYERS OF
•

CAPITAL MARKET
INVESTMENT AGENCIES & SOCIETIES:
INVESTMENT TRUST,UNIT TRUST,PROVIDENT FUND
SOCIETY ETC.
INSURANCE COMPANIES:
LIC,GIC & PRIVATE INSURANCE COMPANIES.
FINANCIAL INSTITUTIONS:
IFC,SFCs,IDBI,ICICI ETC.
SHARE MARKET:
BSE,NSE,CSE,OVER-THE-COUNTER[OTC] EXCHANGE OF
INDIA.
• PRIMARY & SECONDARY
MARKET
PRIMARY MARKET IS A TYPE OF CAPITAL MARKET
WHARE EQUITY & DEBT INSTRUMENTS ARE TRADED
FOR THE FRIST TIME.
SECONDARY MARKET IS A TYPE OF CAPITAL MARKET
WHARE THE INSTRUMENTS THAT ARE TRADED IN
PRIMARY MARKET FOR THE FRIST TIME,CAN BE
PURCHASED OR SOLD AGAIN.
PRIMARY MARKET IS USUALLY KNOWN AS NEW
ISSUE MARKET(NIM).
SECONDARY MARKET IS KNOWN AS SHARE
MARKET.
• SHARE MARKET
NO RISK,NO GAIN…..
IT’S THE SHARE MARKET,
THAT MAY WARD-OFF YOUR FINANCIAL
PAIN….
BE VARY CAUTIOUS & PEITTY WATCHFUL…
A DEMON MAY COME WITH BEAR ,KILLING
THE BULL….
BSE & NSE ARE ALWAYS THERE TO STAY….
SENSEX & NIFTY SHOW WAY OF THE MARKET TO PLAY…..
DON’T GIVE UP EVEN IF LOSS COMES AS A DEFEAT….
HOLD,BYE OR SELL CAREFULLY TO BOOK THE ULTIMATE PROF
SHARE MARKET IS A SECONDARY CAPITAL MARKET
WHARE SHARES ARE DEALT IN.
INDIA HAS 23 STOCK MARKETS, 4 ARE NATIONAL & 19 ARE
REGIONAL.
BOMBAY STOCK EXCHANGE & NATIONAL STOCK
EXCHANGE ARE TWO LEADING STOCK MARKETS IN
INDIA.
IN INDIA STOCK MARKETS ARE REGULATED BY SECURITY
EXCHANGE BOARD OF INDIA(SEBI),COMPANY ACT
1956,MINISTRY OF FINANCE .
HEALTH OF STOCK MARKET CAN BE MEASURED WITH
STOCK INDEX.
• SHARE INDEX
AN INDEX IS A NUMBER THAT REPRESENTS CHANGE IN A
SET OF VALUES BETWEEN A BASE TIME PERIOD &
ANOTHER TIME.
SIMILARLY,SHARE INDEX REFLECTS THE CHANGE IN THE
VALUES OF SET STOCKS OVER THE BASE YEAR.
WHICH YEAR WILL BE THE “BASE YEAR” & HOW MANY
STOCKS WILL COMPRISE OF “SET OF STOCKS” MAY VARY.
“SENSEX” BASE YEAR IS 1978-79 WHAREAS “NIFTY” BASE
YEAR IS 1995.
“SENSEX” & “S&P CNX NIFTY” COMPRISE OF 30 & 50
STOCKS RESPECTIVELY.
OBJECTIVES OF INDEX
•

TO REFLECT MARKET DIRECTION.

TO INDICATE REGULAR FLUCUATIONS OF PRICE OF SCRIPS.
TO TRACK VARIOUS “INDEX FUNDS” “INDEX FUTURES” & “ INDEX OPTIONS.”
TO SHOW MARKET VOLATALITY.
REFLECTS ECOMONIC CONDITIONS OF A COUNTRY.
SHOWS OVARALL PERFORMANCE OF COMPANIES.
PROVIDES SECTOR WISE PERFORMANCE THROUGH “SECTORIAL INDEX” LIKE “BSE
BANKEX”.
TO DRAW COMPARISON OF RETURNS BETWEEN SHARES & OTHER FORMS OF
INVESTMENT LIKE GOLD,DEBT.
 •REASONS FOR
FLUCTUATION
AVALABALITY OF CAPITAL IN MARKET.
LEQUIDITY CONDITIONS.
CONFIDENCE OF PEOPLE OVER MARKET.
INVESTMENT CONDITIONS OF FII & DFI.
CONDITIONS OF GLOBAL MARKET.
POLICY OF LIBARALIZATION OF DOMESTIC & FOREIGN COUNTRY.
EXCHANGE RATE FLUCTUATION.
ECOMONIC CONDITIONS OF DOMESTIC & OTHER COUNTRIES.
PERFORMANCE OF DOMESTIC COMPANIES.
GLOBAL & DOMISTIC CUES.
POLICIES TAKEN BY INCUMBENT GOVT.OF COUNTRY.
FUTURE PROSPECTS OF A COUNTRY.
CONDITION OF BOP.
COUNTRIES INDICES
•

COUNTRY INDEX
BRAZIL BOVESPA
CHINA SSEC
FRANCE CAC40
GARMANY DAX
HONG KONG HANG SENG
JAPAN NIKKEI 225
MALAYSIA KLSE
MAXICO BOLSA
RUSSIA RITC
SINGAPORE STRAIT TIMES
USA NASDAQ
SOUTH KOREA KOSPI
• STOCK EXCHANGE

BOMBAY STOCK EXCHANGE

 •

BSE IS A LIMITED CO. AS PER COMPANY ACT 1956.

IT’S ASIA’S OLDEST & INDIA’S 1ST STOCK EXCHANGE.
ESTABLISHED IN 1975,PEVIOUSLY KNOWN AS “THE NATIVE
SHARE & STOCK BROKERS’ ASSOCIATION”.
BEING 1ST IN TERMS OF LISTING IN THE WORLD,MORE
THAN 4700 COMPANIES ARE LISTED.
IT’S INIDA’S 1ST& WORLD 2ND STOCK EXCHANGE THAT
OBTAINED ISO 9001:2000 CERTIFICATE.
MIGRATED FROM “OPEN OUTCRY” TO “SCREEN BASED
TRADING” IN 1995.
INTRODUCED BENCHMARK INDEX “SENSETIVE INDEX”
POPUALRLY KNOWN AS “SENSEX” IN 1986.
 • SENSEX
INTRODUCED IN 1986 FOR FRIST TIME.
AN INDEX THAT SHOWS MARKET TREND.
BASE YEAR:1978-79,BASE VALUE:100.
CONSISTS OF 30 SELECTED STOCKS.
CALCULATED BY “FREE-FLOAT MARKET
CAPITALIZATION METHOD”.
BENCHMARK INDEX OF BOMBAY STOCK EXCHANGE.
DOLLAR VERSION OF SENSEX IS KNOWN AS “DOLLEX-
30”.
 SENSEX-SCRIP
•

SELECTION CRITERIA
LISTED HISTORY:THE SCRIP SHOULD HAVE LISTING
HISTORY OF AT LEAST 3 MONTHS.
TRADING FREQUENCY:IT MUST HAVE BEEN TRADED EACH
& EVERY TRADING DAYS OF LAST 3 MONTHS.
TRACK RECORD:IN THE OPINION OF BSE INDEX
COMMITTEE.
INDUSTRY & SECTOR REPRESENTATION:BALANCED
REPRESENTATION OF VARIOUS SECTORS.
FINAL RANK:THE SCRIP SHOULD FIGURE IN TOP 100
COMPANIES LISTED BY FINAL RANK.
MARKET CAPITALIZATION WEIGHTAGE:WEIGHTAGE OF
EACH SCRIP SELECTED IN SENSEX BASED ON 3 MONTHS
AVERAGE FREE-FLOT MARKET CAPITALIZATION, SHOULD
BE AT LEAST 0.5% OF INDEX.
• SENSEX CALCULATION
IT’S CALCULATED THROUGH “FREE-FLOAT MARKET
CAPITALIZATION METHOD”.
MARKET CAPITALIZATION=MARKET PRICE OF SHARE
*NUMBER OF SHARES.
FREE-FLOT MARKET CAPITALIZATION(FFMC)=MARKET
CAPITALIZATION*FREE-FLOT FACTOR.
SENSEX=FFMC\INDEX DIVISOR.
INDEX DIVISOR IS LINK TO ORIGINAL BASE PERIOD
VALUE OF SENSEX.
 • OTHER INDICES
OF BSE
INDEX BASE BASE REMARK
PERIOD VALUE
BSE-100 1983-84 100 CONSIDERS 100 SELECTED COMPANIES’ STOCK

BSE-200 1989-90 100 CONSIDERS 200 SELECTED COMPANIES’ STOCK

BSE-500 1.2.99 1000 CONSIDERS 500 SELECTED COMPANIES’ STOCK

BSE-TECK 2.4.01 1000 CONSIDERS TMT(TECHNOLOGY,MEDIA,TELECOM)

SECTORS’ STOCK
BSE-MID 02-03 1000 CONSIDERS MIDCAP FIRMS’ STOCKS
CAP
BSE- 02-03 1000 CONSIDERS SMALL CAP FIRMS’ STOCKS
SMALL
CAP
BSE-IPO 3.5.04 1000 TRACKS PRIMARY MARKET CONDITION

*STOCK SELECTION HAS SPECIFIC CRITERIA.

 • SECTORIAL
INDICES
Index Base Period Base Index Date of Launch Remark
Value
BSE Auto 01 February, 1999 1000 23 August, 2004 Auto Sector’s Index
BSE BANKEX 01 January, 2002 1000 23 June, 2003 Bank Sector’s Index
BSE Capital Goods 01 February, 1999 1000 09 August, 1999 Capital Goods Sector’s Index

BSE Consumer Durables 01 February, 1999 1000 09 August, 1999 Consumer Durable Sector’s Index

BSE FMCG 01 February, 1999 1000 09 August, 1999 FMCG Sector’s Index

BSE Healthcare 01 February, 1999 1000 09 August, 1999 Healthcare Sector’s index

BSE IT 01 February, 1999 1000 09 August, 1999 IT sector’s Index

BSE Metal 01 February, 1999 1000 23 August, 2004 Metal Sector’s Index
BSE Oil & Gas 01 February, 1999 1000 23 August, 2004 Oil & Gas Sector’s index
BSE Power Index 03 January, 2005 1000 09 November, 2007 Power Sector’s Index
BSE Realty 2005 1000 09 July, 2007 Reality Sector’s Index

BSE PSU INDEX 01 February,1999 1000 04 June,2001 Public Sector Unit’s Index
• VARIOUS COMPANIES
BASED ON MARKET
CAPITAL
LARGE CAP COMPANY: MARKET CAPITALIZATION (MC)
IS >$10 BILLION.
MID CAP COMPANY: MC IS BETWEEN $2 & $10 BILLION.
SMALL CAP COMPANY: MC IS BETWEEN $300 MILLION &
$2 BILLION.
MICRO CAP COMPANY: MC IS BETWEEN $50 & $300
MILLION.
NANO CAP COMPANY: MC IS BELOW $ 50 MILLION.
● MC=MARKET VALUE OF SHARE * NUMBER OF SHARES OUTSTANDING.
• NATIONAL STOCK
EXCHANGE

NSE
A TAX-PAYING COMPANY LIKE OTHER STOCK EXCHANGES.
PROMOTED BY IDBI,ICICI,IFCI,ALL INSURANCE
CORPORATIONS,SOME SELECTED NATIONALISED BANKS.
INCORPORATED IN 1992 BASED ON “PHERWANI COMMITTEE”.
EQUITY & DEBT MARKET COMMENCED IN 1994.
IN 2000 DERIVATIVE SEGMENTS STARTED.
TRADING IS DONE THROUGH ULTRA MODERN TECHNOLOGY.
TRADING CAN BE DONE FROM ANYWHARE THROUGH CLIENT
SERVER BASED APPLICATION.
 • S&P CNX NIFTY
AN INDEX OF NSE,GENERALLY KNOWN AS NIFTY 50.
DIVERSIFIED 50 STOCKS OF 21 SCTORS ARE
CONSIDERED.
CONSIDERS SELECTED 50 MOST LIQUID STOCKS IN
INDIA.
MANAGED BY “INDIA INDEX SERVICES & PRODUCTS
LTD”(IISL).
IISL HAS MARKETING & LICENSING AGREEMENT WITH
“STANDARD & POOR’S”(S&P).
S&P IS A WORLD LEADER IN INDEX SERVICES.
CNX NIFTY JUNIOR
•

THE NEXT RUNG OF SECURITIES AFTER

NIFTY 50.
CONSISTS OF 50 SELECTED STOCKS.
“S&P CNX NIFTY” & “CNX NIFTY JUNIOR”
MAKE UP 100 MOST LIQUID STOKS IN
INDIA.
TWO INDICES ARE ALWAYES DISJOINT
SETS.
 • S&P CNX 500

FRIST BOARD BASED INDEX IN CAPITAL

MARKET TO COMPARE PROTFOLIO RETURN
VIS-À-VIS MARKET RETURN.
REPRESENTS 95.11% MARKET
CAPITALIZATION AS ON 31.3.09.
S&P CNX 500 COMPANIES DISAGREEGATED
INTO 72 INDUSTRY INDICES VIZ S&P CNX
INDUSTRY INDICES.
CONSISTS OF 500 SELECTED STOCKS FROM
NSE UNIVERSE.
OTHER NSE INDICES
•

CNX 100:
A COMBINATION OF 100 DIVERSIFTED STOCKS OF 35 SECTORS OF ECONOMY.

A COMBINATION OF NIFTY 50 & NIFTY JUNIOR.

S&P CNX DEFTY:

DOLLER VERSION OF NIFTY 50.

MEANT FOR FOREIGN INVESTORS.

NIFTY MIDCAP 50 & CNX MIDCAP:

PRIMARY OBJECTIVE IS TO CAPTURE MOVEMENT OF MIDCAP FIRMS.

S&P ESG INDIA:

TRACK COMPANIES ENVIRONMENT,SOCIAL & CORPORATE GOVERNING(ESG) IN QUANTITATIVE FACTORS.

S&P CNX 500 SHARIAH & S&P CNX NIFTY SHARIAH:

DERIVES FROM S&P CNX NIFTY & S&P CNX 500 INDICES.

DON’T CONSIDER BUSINESSES THAT OFFER SERVICES & PRODUCTS UNACCEPTABLE ACCORDING TO “SHARIAH LAW”

●
 • NSE SECTORIAL
INDICES
INDEX BASE BASE REMARK
PERIOD VALUE
CNX IT 1.1.96 100 COMPANIES EARNING MUST BE MORE
THAN 50% FROM IT SERVICES.
CNX BANK 1.1.00 1000 12 BANKING STOCKS TRADED IN NSE.
CNX FMCG DEC,95 1000 15 FMCG STOCKS TRADED IN NSE.
CNX PSE DEC,94 1000 20 PSE STOCKS TRADED IN NSE.
CNX MNC DEC,94 1000 50 LISTED FOREIGN COMPANIES.
CNX ENERGY 1.1.01 1000 TRACKS ENERGY SECTOR’S
PERFORMANCE.
CNX PHARMA 1.1.01 1000 PHARMA SECTOR’S PERFORMANCE.
CNX 1.1.04 1000 25 STOKS FROM INFRA SECTORS.
INFRASTUCTURE
CNX PSU BANK 1.1.04 1000 PUBLIC SECTOR BANK PERFORMANCE.

CNX REALITY 29.12.06 1000 REAL ESTATE’S PERFORMANCE.

CNX SERVICE MAY,99 1000 30 STOKS FROM SERVICE SECTORS.
SECTOR
OVER THE COUNTER
•

EXCHANGE OF INDIA
SPONSORED BY UTI,ICICI,IDBI,SBI,IFCI,GIC,CAN BANK
FINANCIAL SERVICES IN 1992.
INTRODUCED FRIST SCREEN-BASED TRADING IN INDIA.
TRADINGS EXECUTED OVER THE
COUNTERS,NETWORKED BY WEB LINKS.
HAS NO PARTICULAR MARKET PLACE OR STOCK
EXCHANGE FLOORS.
BYERS & SELLARS CAN NEGOTIATE THE PRICES.
A COMPANY HAS TO BE SPONSERED BY “OTCEI”
MEMBERS FOR BEING ELIGIBLE FOR LISTING.
 INTER CONNECTED
•

STOCK EXCHANGE OF INDIA.

CONNECTS ALL THE REGIONAL STOCK
EXCHANGES(RSEs).
PROMOTED BY 14 RSEs IN 1998.
USES OPTIMALLY THE EXHISTING INFRASTRUCTURE
OF RSEs.
HELPS TO WIDEN THE MARKET OF RSEs.
NOT VERY SUCCESSFUL BECAUSE OF MARKET
DOMINATION OF NSE & BSE.
• DERIVATIVE
MARKET
 • DERIVATIVES
A CONTRACT WHOSE VALUE IS DETERMINED FROM
UNDERLYING FINANCIAL ASSETS,INTEREST
RATES,CURRENCY EXCHANGE RATE OR STOCK INDICES.
ALSO A CONTRACT THAT SPECIFIES RIGHTS & OBLIGATIONS
BETWEEN ISSUER & HOLDER TO RECEIVE OR DELIVER
FUTURE CASH BASED ON FUTUTE EVENTS.
UNDERLYING ASSETS ARE KNOWN AS DERIVATIVE SECURITY.
CAN BE THREE TYPES-FORWARDS,FUTURES,OPTIONS.
USED TO HEDGE FUTURE FLUCTUATION OF FINANCIAL
ASSETS.
 • FORWARDS
CONTRACT OF COMMITMENT BETWEEN TWO PARTIES TO
EXCHANGE A SPECIFIC AMOUNT OF MONEY FOR A
PARTICULAR GOOD OR SERVICE AT A SPECIFIED FUTURE
TIME.
NOT A STANDARDISED CONTRACT LIKE FUTURE,OPTION.
IT’S A PRIVATELY NEGOTIATED & CAN BE CUSTOMISED.
KNOWN AS OVER-THE –COUNTER DERIVATIVE.
NOT TRADED IN ORGANISED STOCK EXCHANGE BUT
PRIVATELY.
NO REGULATION TO LOOK AFTER THESE CONTRACTS.
 • FUTURES

MUCH LIKE FORWARDS, IT’S AN AGREEMENT BETWEEN TWO

PARTIES TO BYE OR SELL CERTAIN COMMODITY AT CERTAIN
PRICE.
IT’S VALUE DEPEND ON UNDERLYING ASSETS THAT CAN BE
COMMODITY OR FINANCIAL ASSET.
IT’S WELL-REGULATED,TRADED ONLY IN ORGANISED STOCK
EXCHANGES.
HAS SPECIFIC UPPER & LOWER PRICE LIMIT.
PRICE SATTLEMENT IS EXECUTED BY CLEARING HOUSES.
GOLD FUTURE,PEPPER FUTURE ARE COMMODITY FUTUTE.
INDEX FUTURE IS A FINANCIAL FUTURE.
 • OPTIONS
A CONTRACT THAT GIVES A RIGHT OF CHOICE TO THE PARTIES EITHER
TO BUY OR SELL THE UNDERLYING ASSETS AT A CERTAIN PRICE ON OR
BEFORE A SPECIFIED DATE SUBJECT TO CERTAIN CONDITIONS.
TWO TYPES OF OPTIONS-CALL OPTION & PUT OPTION.
IT CAN BE TRADED IN OVER-THE-COUNTER OR IN EXCHANGE.
BASED ON MATURITY:AMERICAN STYLE OPTION,EUROPEAN STYLE
OPTION.
AMERICAN STYLE OPTION CAN BE PERFORMED AT ANY TIME UPTO &
INCLUDING MATURITY DATE.
EUROPEAN STYLE OPTION CAN BE PERFORMED ON THE MATURITY DATE
ONLY.
 • CALL OPTION
IT GIVES BUYER A RIGHT NOT AN OBLIGATION TO BUY
THE UNDERLYING ASSETS AT A CERTAIN PRICE ON
CERTAIN TIME.
ON MATURITY DATE IF BUYER WANTS TO BUY,SELLER
WILL HAVE TO EXECUTE THE CONTRACT.
CALL OPTION HEDGES THE FUTURE RISK OF THE
BUYER.
e.g. RELIANCE SHARE PUT IN OPTION,WHOSE
EXECUTED PRICE Rs.280 AFTER 3 MONTHS.SHARE
PREMIUM Rs.10,SO TOTAL Rs. 290 TO BE PAID TO
SELLER BY THE BUYER FOR EXECUTION OF THE
CONTRACT.HENCE,BUYER WANTS TO EXECUTE IT
ONLY WHEN THE MARKET PRICE OF THE SHARE WILL
BE > Rs.290 OR =Rs.290.
 • PUT OPTION
AN OPTION THAT GIVES RIGHT NOT AN OBLIGATION
TO SELL THE UNDERLYING ASSETS AT A CERTAIN
PRICE PRIOR TO,OR ON THE MATURITY DATE.
ON MATURITY,IF SELLER WANTS TO SELL BUYER
WILL HAVE TO BUY.
e.g. “CIPLA” SHARE PUTS IN OPTION,EXECUTED
PRICE IS Rs.850,PRIMIUM TO BE PAID BY SELLER TO
IS Rs.50.SELLER WILL SELL ONLY WHEN CURRENT
MARKET PRICE LESS THAN (850-50)=Rs.800.SO IF
MARKET PRICE IS Rs.780,SELLER WILL EARN
PROFIT=(850-780+50)=Rs.20.
 REGULATARY
•

BODIES & LAWS

SECURITY BOARD OF EXCHANGE(SEBI).
RESEARVE BANK OF INDIA.
COMPANY LAW BOARD.
MINISTRY OF FINANCE.
ASSOCIATION OF MUTUAL FUND OF INDIA.
(AMFI)
INSURANCE REGULATARY DEVELOPMENT
AUTHORITY.(IRDA)
COMPANY LAW
SECURITY CONTRACT LAW
 • REFERENCES
“SECURITY ANALYSIS & PROTFOLIO MANAGEMENT”-BY
S.KEVIN
WWW.BSEINDIA.COM
WWW.NSEINDIA.COM
WWW.INVESTOPEDIA.COM
WWW.FINANCE.INDIABIZCLUB.COM
WWW.SHAREMARKETBASICS.COM
WWW.REDIFF.COM
“INDIAN FINANCIAL SYSTEM & FINANCIAL MARKET
OPERATIONS”-SUSHIL MUKHERJEE.
BUSINESS OUTLOOK
BUSINESS WORLD
• THANK YOU