Green shoe option A provision contained in an underwriting agreement that gives the underwriter the right to sell investors

more shares than originally planned by the issuer. This would normally be done if the demand for a security issue proves higher than expected. Legally referred to as an over-allotment option. A greenshoe option can provide additional price stability to a security issue because the underwriter has the ability to increase supply and smooth out price fluctuations if demand surges. A greenshoe option (sometimes green shoe, but must[1] legally be called an "overallotment option" in a prospectus) allows underwriters to short sell shares in a registered securities offering at the offering price. The greenshoe can vary in size and is customarily not more than 15% of the original number of shares offered. The greenshoe option is popular because it is one of few SEC-permitted, risk-free means for an underwriter to stabilize the price of a new issue post-pricing. Issuers will sometimes not include a greenshoe option in a transaction when they have a specific objective for the proceeds of the offering and wish to avoid the possibility of raising more money than planned. The term comes from the first company, Green Shoe Manufacturing (now called Stride Rite Corporation),[2] to permit underwriters to use this practice in an offering.

The greenshoe option provides stability and liquidity to a public offering. For example, a company intends to sell one million shares of its stock in a public offering through an investment bankingfirm (or group of firms, known as the syndicate) which the company has chosen to be the offering's underwriters. Stock offered for public trading for the first time is called an initial public offering or IPO. Stock that is already trading publicly, when a company is selling more of its non-publicly traded stock, is called a follow-on or secondary offering.

How to calculate BSE Sensex and NSE Nifty? Sensex is calculated using the “Free-float Market Capitalization” methodology. Instead of using a company’s outstanding shares it uses its float, or shares that are readily available for trading. All major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the free-float methodology.

Assume price of Stock B is Rs.000 = 560. They are also requiring index values of NSE or BSE. and the base year of BSE-SENSEX is 1978-79. Stock A has 1000 shares out of which 200 are held by the promoters and only 800 shares are available for trading to the general public. ROC. .000 shares out of which 1000 are held by promoters and 1000 are available for trading (free-floating). Stock B has 2. Assume price of Stock A is Rs.50. The total market capitalisation of Stock B is Rs 4. The total market capitalisation of Stock A is Rs 1.000 (1. The formula for calculating the SENSEX = (Sum of free flow market cap of 30 biggest stocks of BSE)*Index Value in 1978-79/Market Cap Value in 1978-79. I would like to share calculation of NSE and BSE indexes from this article.It is calculated taking into consideration prices of 30 largest and most actively traded stocks of the BSE listed companies. Note: The base value (index value) of the Sensex is 100 on April 1.00. The tools (MACD.100.000 x 200) and its free-float market capitalisation is Rs 2.00. These 800 shares are the socalled „free-floating‟ shares.000 (2. Similarly.000 (1000 x 200). The formula for calculating the Nifty = (Sum of free flow market cap of 50 biggest stocks of NSE)*Index Value in 1995/Market Cap Value in 1995.  NIFTY is calculated based on 50 stocks. stock market analyst etc. Use same method for calculating NSE Nifty  Base year is 1995 and base value (index value) is 1000. Example: Suppose the Index consists of only 2 stocks: Stock A and Stock B.000 x 100) and its free-float market capitalisation is Rs 80.000 (800 x 100). Because they are the main indicators to the investors.000 Apply formula Then SENSEX = 280000*100/50. EMA) which are used to calculate or predict stock market movements.00. 280000 Assume Market Cap during the year 1978-79 was Rs.. PIVOT POINT. They are NSE (National Stock Exchange) and BSE (Bombay Stock Exchange). These shares make more than 50% of the total market capitalization in the BSE market. CALCULATION OF NSE AND BSE INDEXES CALCULATION OF NSE AND BSE INDEXES We have two major stock exchanges in India. 1979. Then sum of free float market cap of these 2 companies (A & B) = (800*100+1000*200) = 80000+200000 = Rs.200.

NSE was incorporated in November 1992 as a tax paying company. This is an informal meeting among them. no of brokers were increased then they would like to convert this meeting as a formal one. BSE was acknowledged by Indian government in 1956 under Securities Contracts Regulation Act (SCRA). There is a story behind to BSE i: e. A company must have one year history as a BSE listed company. It was started in 1875 as “The Negative Share and Stock Brokers Association”.085. A company should be among top 100 in BSE listed companies. I would to share that too. The Equities trading was started from November 1994 and Derivatives trading was stared fromJune 2000. SENSEX is calculated for every 15 seconds. Time gone. It is become an official organisation in 1875. An electronic trading system was introduced by BSE in 1995 i: e. NSE is also calculated for every 15 seconds. since 1850’s Four Gujarati and One Parsi or parsee(which indicates Parsis derived from a group of Persian Zoroastrians who came to India during 10th century AD) stockbrokers have met in Town Hall of Mumbai. After sort listing. Since 2003.Bombay Stock Exchange OR Sensex (Sensitive Index) Bombay Stock Exchange (BSE) is an oldest stock exchange in Asia. A company should have well past record. BOLT – (BSE On line Trading) which has a capacity to make 8 million orders per day. Index value of NIFTY is calculated by using 50 largest companies from 24 different sectors. . A company should be a market leader in the particular sector. It is also the first Exchange in India and second in the world to receive Information Security Management System Standard BS 7799-22002 certification for its BOLT. Base value of NIFTY is 1000 and base year is 1995. BSE has listed more than 5033 companies. National Stock Exchange OR NSE OR NIFTY The National Stock Exchange was promoted by leading financial institutions with the command of government of India. Before that we must know what is market capitalization. The calculation of BSE was started from 1986. Besides. Criteria’s to select 50 or 30 Companies among NSE / BSE list of Companies · · ü ü ü ü ü ü BSE Listed Companies as on 05 – 10 – 2011 is 5. called “The Negative Share and Stock Brokers Association”. Base value of SENSEX is 100 and base year is 1978 – 1979. it was approved as a stock exchange by securities exchange board of India.552. In April 1993. So they had found a place in 1874 at DALAL STREET and they made their office in DS. Company should be traded in each and every day of last one year (Except market holidays). NSE Listed Companies as on 05 – 10 – 2011 is 1. it was calculated by using free float market capitalisation. NSE was started operations in the Wholesale Debt Market segment in June 1994. Earlier it was calculated by using total market capitalisation. Each company should more than 0. BSE is the first exchange in India to receive ISO 9001: 2000 certification.5% of total market capitalization of Sensex. we go to the calculation of BSE/NSE indexes.

XYZ: Imagine XYZ one of the company (which is among NSE 50 or BSE 30). government holdings). · Market capitalization of the company is 2000 X 20 = 40. 20. XYZ has 1000 shares among that government is holding 300 shares. 10.000. The calculation would be. promoter holding is 500 shares. employees etc. . and 200 shares are available in market and price of a share is Rs. Free float market capitalization of company is 200 X 10= 2.e. i.Market capitalization: Market capitalization is total worth of a company (i. Free Float Market Capitalization This is directly opposite to the Market capitalization. Formula: Market Capitalization = No of Shares Outstanding * Market price per share Total Market Capitalization = Market capitalization of NSE 50 / BSE 30 companies. The calculation would be. Except the Locked Shares (which includes promoter holdings. · · Market capitalization of the company is 1000 X 10 = 10. Outstanding shares are nothing but the shares which are not hold by the company or the shares which are hold by public.000. outstanding shares of a company). For Example: 1. 2.ZYX: ZYX has 2000 shares among that government is holding 500 shares.000. Free float Market Capitalization = Share Price * (Shares Outstanding – Locked shares) OR Free float market capitalization =No. promoter holding is 500 shares. and 1000 shares are available in market and price of a share is Rs. investors.e. of outstanding share * market price of share Total Free float Market Capitalization = Free float Market capitalization of NSE 50 / BSE 30 companies.

Assuming the market capitalization value during 1995 is 20. EXAMPLE Total Market Capitalization = 10.· Free float market capitalization of company is 1000 X 20= 20.000 (ZYX) + … + ADD UP TO NSE 50 OR BSE 30. Total Market Capitalization = XYZ + ZYX + … + ADD UP TO NSE 50 OR BSE 30. Formula for Nifty calculation: NIFTY = (Sum of free flow market cap of 50 major stocks of NSE) * Index value in 1995 / market cap value in 1995. Now. .000 Total Free float Market Capitalization = Free float Market capitalization of NSE 50 / BSE 30 companies. as per formula: SENSEX = 100000 X 100 / 2000 = 5000 Value of Sensex is 5000. Therefore. Total Free float Market Capitalization = 2. Now let us calculate index value of NSE / BSE Formula for SENSEX calculation: SENSEX = (sum of free float market cap of 30 major companies of BSE) * Index value in 1978-79 / Market cap value in 1978-79.000 (XYZ) + 20. Total Free float Market Capitalization = 22. NIFTY = 100000 x 1000 / 100000 = 1000.000 (ZYX) +…+ ADD UP TO NSE 50 OR BSE 30. Assume market capitalization is 2000. Total Free float Market Capitalization = XYZ + ZYX + …+ ADD UP TO NSE 50 OR BSE 30. Total Market Capitalization = 50. Total Market Capitalization Total Market Capitalization = Market capitalization of NSE 50 / BSE 30 companies.000.000.000. Therefore.000 (XYZ) + 40. Value of Nifty is 1000.

Definition of 'Price Band' A value-setting method in which a seller indicates an upper and lower cost range. the country could tax the good until it falls within the price band. Investopedia explains 'Bear' For example. Although you often hear that the stock market is constantly in a state of flux as the bears and their optimistic counterparts. If the price of an imported good is below the lower price threshold.S. Definition of 'Bear' An investor who believes that a particular security or market is headed downward. Investopedia explains 'Bull Market' Bull markets are characterized by optimism. Part of the difficulty is that psychological effects and speculation may sometimes play a large role in the markets. between which buyers are able to place bids. A country can set an upper and lower price that it will allow a good to be sold at in the market. Definition of 'Bull Market' A financial market of a group of securities in which prices are rising or are expected to rise. Bearish sentiment can be applied to all types of markets including commodity markets. This type of auction pricing technique is often used with initial public offerings (IPOs). such as bonds. stock market has increased an average 11% a year. This means that every single long-term market bear has lost money. investor confidence and expectations that strong results will continue. The price band's floor and cap provides guidance to the buyers. "bulls". currencies and commodities. . The term "bull market" is most often used to refer to the stock market. stock markets and the bond market.Investopedia explains 'Price Band' Price bands can also be used in international trade. are trying to take control. It's difficult to predict consistently when the trends in the market will change. but can be applied to anything that is traded. Bears attempt to profit from a decline in prices. Bears are generally pessimistic about the state of a given market. if an investor were bearish on the S&P 500 they would attempt to profit from a decline in the broad market index. do remember that over the last 100 years or so the U.

the terms are used to refer to specific funds or stocks. Knowing what is meant by the bear and bull market can help you understand whether the market is currently rising or falling. is pessimistic about the market and may make more conservative stock choices. they may be stock-holders or maybe investors who aggressively buy and sell stocks quickly. The two terms are also used to describe types of investors. this can bolster bull markets. Investors sometimes refer to bull stocks to describe securities that are aggressively rising and making their investors money. Sometimes. A bear investor. for example. High employment levels. whereas a bear market is one where prices are falling. Bull Market : A rising market where buyers far outnumber the sellers A bull market is one where prices are rising. as experts agree that the market is cyclical.What are Bear? Bear : An operator who expects the share price to fall Bear Market : A weak and falling market where buyers are absent What are Bulls? Bull : An operator who expects the share price to rise and takes position in the market to sell at a later date. Also. For example. new technologies and companies that encourage investors to put their money in stocks can create bull markets. There is no need to get frightened by a bear market indicator. Often. a bullish market is simply self- . In some cases. Bear market funds. strong economy. What Drives Bear and Bull Markets? The stock market is affected by many economic factors. in the 1990s. are those that are falling and faring poorly. When prices start falling. on the other hand. the dot com craze encouraged many investors to put their money in stocks that they felt would keep increasing. A stock market bull is someone who has a very optimistic view of the market. they will eventually rise too. however. and stable social and economic conditions generally build investor confidence and encourage investors to put their money in the stock market.

Since the market is doing well. Increased unemployment makes people far less willing to gamble on the stock market.or even fears of unemployment caused by wars and other problems -. discouraging economic or social political changes in a society can push the market down. As the economy slows down. if the market is rising. There are no precise ways to predict either bull or bear markets. . You may be headed for a bullish or bearish market. a panic caused by dire predictions about the market can also create bearish conditions. The reports will inform about loss of investor confidence as well as sudden economic downturns that may affect the market. That is. although general social economic situations can help you to determine what will happen. Of course. A "stag" is an investor who buys and sells stocks rapidly. If you notice from stock market research that several indexes have changed by 15% to 20%.can start to make investors more conservative and therefore lead to bear markets. you can be certain that eventually it will pick up again. again this becomes a self-perpetuating trend. News is very often a good indicator of where investors are headed. it only encourages investors to invest more money or to start investing. usually to make profits quickly. it is time to sit up and take notice. Sudden international crises push the market downward and create bearish conditions. Sometimes. you can be sure that market direction is changing. companies begin downsizing. On the other hand. Sudden instability or unemployment -. When you notice such changes. if the market is currently falling.perpetuating. A country which wages a war will experience bullish market conditions as government contracts create more jobs and boost investor confidence if their expectation is to win. Investopedia explains 'Book Building' An underwriter "builds a book" by accepting orders from fund managers indicating the number of shares they desire and the price they are willing to pay. How To Predict Bear and Bull Markets? The easiest way to predict both types of markets is to realize that what goes up must come down. Similarly. then you know that at some point it will start to fall again.

which is unknown at the time of the bid. or other securities during their issuance process.[1] Usually. in order to support efficient price discovery. or transferred via a bookbuild. retail bidders are generally required to bid at the final price.Definition of 'Book Building' The process by which an underwriter attempts to determine at what price to offer an IPO based on demand from institutional investors. The “book” is the off-market collation of investor demand by the bookrunner and is confidential to the bookrunner. by receiving a greater allocation as a proportion of their initial bid. Although bidding is by invitation. capturing. The price at which new shares are issued is determined after the book is closed at the discretion of the bookrunner in consultation with the issuer. but the book is maintained off-market by the bookrunner and bids are confidential to the bookrunner. due to the impracticability of collecting multiple price point bids from each retail client. Where an underwriter has been appointed. . lead manager. the underwriter bears the risk of non-payment by an acquirer or non-delivery by the seller. All bookbuilding is conducted „off -market‟ and most stock exchanges have rules that require that on-market trading be halted during the bookbuilding process. and recording investor demand for shares during an Initial Public Offering (IPO). if any. bidding is by invitation only to high-networth clients of the bookrunner and. Unlike a public issue. and the transfer is not guaranteed by an exchange‟s clearing house. securities laws require additional disclosure requirements to be met if the issue is to be offered to all investors. Generally. the issuer and bookrunner retain discretion to give some bidders a greater allocation of their bids than other investors. and underwriter. Bids may be submitted on-line. participation in a book build may be limited to certain classes of investors. the issuer appoints a major investment bank to act as a major securities underwriter or bookrunner. Generally. If retail clients are invited to bid. the transfer occurs off-market. Consequently. Book building is a common practice in developed countries and has recently been making inroads into emerging markets as well. Typically. Where shares are acquired. issuer. large institutional bidders receive preference over smaller retail bidders. or co-manager. Book building refers to the process of generating. the book building route will see minimum number of applications and large order size per application.