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Institute Of Management Technology

Ghaziabad

Inside this issue:


RISCON Series-3: 2

Fin-Xpress
INDIAN SECURITIES MARKET

Markets this Week 4


October 3, 2010
Words of the Week 4
News of the Week 5-6
CAN YOU SOLVE IT? 7

Commonwealth
Games 2010

Sources of Data:
 InvestorWords.com
SHERA - The Mascot
 EquityMaster.com

 Economic Times

 Trak.In Business Blog

 Wall Street Journal

 The Economist

 Rediff Money
Jawahar Lal Nehru
Stadium - INDIA’s  MoneyControl.com
PRIDE
 Financial Express
Page 2 Fin-Xpress

INDIAN SECURITIES MARKET :


SERIES - 3
A brief overview
The four important elements of securities market are :

 Investors: Households or Institutions who place


surplus funds in Financial claims or Financial
securities to gain benefits like interest, dividend,
capital appreciation and bonus

 Issuers: Corporates & Government which


acquire funds at a cost by issuing securities to
the investors

 Intermediaries: Are those who act as conduits


between the investors & issuers

 Regulators: These bodies regulates the


functioning of securities markets

SEBI regulates the stock market to protect the investing community from various kinds of malpractices, frauds, defaults
Principally there are two segments in securities market:

 Primary Market: It is the segment in which new issues are made (New issues Market)

 Secondary Market: It is the segment in which the shares already issued in primary market are subsequently traded (Stock Market)

BSE (30 Stock Index) and NSE (50 Stock Index) are the most prominent and happening stock markets in India
Securities one can invest or trade in:

 Shares: They represent units of ownership in a corporation.

 Equity Shares: An ownership in the company and privilege the share owner to have a profit share in the firm
 Preference Shares: These owners are given more preference over common share holders in the case a firm gets
liquidated. They pay a fixed dividend before any dividends are paid to common share holders
 Rights Issue/Rights Shares: Firms issue these shares if they are facing difficulties in raising money through traditional
means or to avoid interest charges on loans. Provides existing share holders of the firm to buy specifies no. of new shares,
at a specified cost within specified time
 Bonus Shares: If the firm converts free reserves or share premium account to equity capital, these shares are issued to
the existing shareholders
Investing in Shares:
Mode-1: Bidding for shares issued as IPOs from Primary or opening a trading account with broker in Secondary Markets
Mode-2: Buying on margin (Borrowing money to purchase stock)
Mode-3: Derivatives trading (Futures, Options)

 Debentures: Kind of unsecured loan (long term) raised by firms to finance their operations. A Debenture holder is privileged to receive
fixed amount of interest at the end of every operating cycle. In case of a bankruptcy, these holders are treated as general creditors
Page 3 Fin-Xpress

INDIAN SECURITIES MARKET :


SERIES - 3
A brief overview
 Bonds: Money which you lend to the govt. or company. The owner of bond is entitled to receive the par value of instrument at specified
maturity date, sometimes this term is used interchangeably with Debentures
 Zero Coupon Bond: These are issued at a discount and repaid at face value, with no periodic interest
 Convertible Bond: Provides the investor with an option of converting bond into equity at a fixed conversion price
 Treasury Bills: Short-term (usually 1-year) bearer discount security issued by govt. for financing their cash requirements

 Government Securities: are Sovereign securities issued by RBI, on behalf of GOI, in lieu of central governments market borrowing
programme. It includes Central & state Government Securities, Treasury Bills

 Derivative products: These are instruments whose value stems from some underlying asset such as commodities or equities, or from
an indicator such as interest rate. Ex: swaps, futures, options
 Forward Contracts: It is a customized, tailor-made contracts between two parties
 Future Contracts: It is an agreement between two parties to buy & sell at future date. These are standardized and
exchange traded contracts
 Options: It is a contract which gives the holder the right to exercise the option and not the obligation
 Call Option: Holder has right to buy and not the obligation
 Put Option: Holder has right to sell and not the obligation
 Warrants: Holder has the right to purchase securities (usually equity) from the issuer at a specific price within a certain
time frame. The main difference between warrants and call options is that warrants are issued and guaranteed by the
company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is
often measured in years, while the lifetime of a typical option is measured in months
Participants in Derivatives:
 Hedgers: They use the derivatives to reduce or eliminate the risk
 Speculators: They wish to bet on future movements in the price of as asset
 Arbitragers: They aim at profits by taking advantage of difference in prices in same products among different markets

 Units of Mutual Funds: These are the units arising out of a collective
investment by a pool of investors, who pool their money together with
a predetermined investment objective, it will have a fund manager
who is responsible for investing gathered money into specific stocks
or bonds
Page 4 Fin-Xpress

Markets This Week


Key global markets ended the week on a mixed note. China was the big-
gest gainer, up 2.5%, while France was the biggest loser with a loss of
1.8% on concerns after data showed the pace of growth in the Eurozone's
services and manufacturing sectors slowed more than expected. Among
the other Asian markets, India, Hong Kong and Singapore closed the week
up 2%, 1.1% and 0.2% respectively. Japan was the only Asian market to
end the week in the red, down 1.1%. All the European markets were in the
red during the week. UK and Germany were down 0.9% and 1.1% respec-
tively. In the Americas, Brazil was up 1.8% while US was down 0.7%. It
may be noted that the close for all except India has been taken for Sep-
tember 30. India's closing for October 1 has been considered.

Moving on to the performance of sectoral indices in India -Metal stocks were the top gainers this week, with the BSE-Metal Index rising by 5.2%. It
was followed by the BSE-Realty and BSE-Capital Goods indices, which recorded weekly gains of 4.9% and 3.7% respectively. BSE-Power Index and
BSE-Auto index made up the top 5 performers of the week. Stocks from the oil & gas and FMCG space were the sole losers this week, with the BSE-Oil
& Gas and BSE-FMCG indices ending the week with losses of 0.4% and 0.2% respectively. Small and midsized stocks ended with gains as the BSE-
Smallcap and BSE-Midcap indices ended higher by 1.3% and 1.2% respectively. BSE-PSU was also amongst the laggards with a gain of 1.5%.

Words of the Week


Blue Chip Swap Chinese Wall PacMan Defense Sweetheart Deal Zombie Debt
When a domestic investor The ethical barrier created A defensive tactic used by a A merger, a sale or an A type of bad debt that is
purchases a foreign asset between different divisions targeted firm in a hostile agreement in which one so old a person may have
and then transfers that of a financial (or other) takeover situation. In a Pac- party in the deal presents forgotten he or she owed it
asset to a domestic bank institution to avoid conflict Man defense, the target the other party with very in the first place. The debt
branch located offshore. of interest. A Chinese Wall firm turns around and tries attractive terms and condi- has likely been given up on
Then, the funds from the is said to exist, for example, to acquire the other compa- tions. The terms of a sweet- by the company to which it
foreign asset are trans- between the corporate- ny that has made the hostile heart deal are usually so was owed. Zombie debt can
ferred into a bank account advisory area and the bro- takeover attempt. This term lucrative that it is difficult haunt a debtor if a debt
in the domestic country. kering department of a has been accredited to to justify turning the offer collector buys the debt for
The domestic investor financial services firm to Bruce Wasserstein, chair- down. a low price from the com-
usually has a partner separate those giving cor- man of Wasserstein & Co. pany in attempt to recover
transferring assets to the porate advice on takeovers the owed funds
foreign branch on his or from those advising clients
her behalf. about buying shares.
Page 5 Fin-Xpress

News of the Week


Ayodhya : Ruling Will Divide India, the world's second-biggest Public sector lender Punjab National
producer, mirrored and intensified the Bank (PNB) on Thursday become the first
Indian Sacred Site rally to an all time record last month, as bank to hike the base rate (below which
prices zoomed up nearly 70 percent in a it cannot lend) by 0.5 per cent to 8.5 per
year. cent, after the introduction of the base
rates system of lending rates in July,
Dwindling stocks from last year and a 2010, setting the tone for other banks to
harvest delay due to heavy rains in the follow. Though State Bank of India (SBI)
first half of September also supported also reviewed its base rate on Thursday,
prices. nuggets in an innovative process. it retained the rate at 7.5 per cent, for
now.
Sensex hits 33-month high, However, both SBI and PNB have revised
21k not too far the deposit rates upwards by 0.75 per
An Indian court ruled on Thursday that a cent and 0.5 per cent respectively,
sacred site claimed by both Hindus and across different maturities, in the wake
Muslims should be divided, in a complex of slack availability of funds for lending.
The hikes will be effective from Friday
decision that will test whether India has
moved beyond the violent religious for both the banks.
passions that bedeviled the nation in the
1990s.
Auto Makers Post Record
Sales in September
The court said no action would be taken
for three months, and the Muslim side
said it would appeal to the Supreme India’s benchmark indices raced to their
Court of India. One Hindu group also said highest in 33 months, showing signs of
it would appeal to the top court, a sign of further gains, after a key political risk in
how the judgment didn't fully satisfy the Ayodhya court verdict passed off
either side. peacefully and raised economic growth
forecast.
Most auto makers in India continued to
The gained for the fifth straight week at post record vehicle sales in September.
Cotton rally hits apparel 20,445, up 1.9%, on Friday. It has gained Vehicle sales in India generally rise
makers; some duck better 10% this month and is at its highest during Hindu and Muslim festivals, when
since January 2008. The NSE gained it's considered auspicious to buy new
1.9% at 6,143.40. Gainers outnumbered products.
losers 1,993:984.
Maruti Suzuki India Ltd saw total sales
climb 27% to 108,006 vehicles in
September from 83,306 a year earlier.
SBI, PNB increase base rate Hyundai Motor India Ltd. posted its
to 8.5% highest-ever local sales of 31,751
vehicles in September, up 14% from
27,803 a year earlier. Exports, however,
declined 24% to 19,690. General Motors
A spurt in has spelt misery for Indian as
India said its sales rose 13% to 8,617
overseas buyers resist price hikes which
units, helped by higher demand for its
could see Indian exports, worth $23.5
small cars Chevrolet Beat and Chevrolet
billion, falling as much as 10 percent in
Spark. Ford India more than doubled
the year-ending March. sales in the month to 8,380 vehicles
Global apparel markets, still limping to from 3,405. The demand for its small car
recovery from a recession, saw New Figo, launched in March, helped the
York cotton hitting a 15-year high. company report strong numbers.
Page 6 Fin-Xpress

News of the Week continued...


IDBI Bank to finance MSMEs India Court Stays Vedanta of 2011. Joining the 28 airline network
will help Air India increase its global
with SIDBI Unit's Plant Closure connectivity. India's loss-making national
Vedanta Resources PLC has received a carrier will also be able to improve load
temporary relief in India Friday as its factors and passenger yields by flying
unit, Sterlite Industries (India) Ltd., said customers from member airlines on its
the country's top court has stayed a own network.
lower court order to close its sole
copper smelter. Vedanta has fallen afoul
Motilal Oswal PE takes 20%
IDBI Bank on Friday announced a number in Mrs Bector’s
of new initiatives, products and services
on its 7th Foundation Day, including joint-
financing of micro, small and medium
enterprises (MSMEs) with Small
Industries Development Bank of India
(SIDBI).
Initially, the co-financ ing facility would
be rolled out in ten centres, namely, of environmental laws in India for the
Ahmedabad, Bangalore, Chennai, second time in less than two months. In
Coimbatore, Delhi, Indore, Jaipur, August, the ministry of environment
Lucknow, Ludhiana and Rajkot and rejected a proposal by the company to
subsequently, would be extended across mine bauxite in the remote eastern
the country. Indian hills of Niyamgiri, saying the
project would damage the region's
Hind Motors to roll out ecology and endanger the survival of In a style reminiscent of iconic
l o c a l t r i b e s . technology entrepreneurs who founded
Ambassador variants after new businesses in suburban garages,
Mrs Bector first set up a cakes and
26-yr gap Air India Says on Track to creams business in the garage of her
After being silent for more than quarter Join Star Alliance Ludhiana home.
of a century, the Ambassador is all set to In just over three decades, Mrs Bector’s
Air India said Friday it is on track to join
ignite India’s roads once again with five- little hobby has grown into a multicrore
Star Alliance, the world's biggest
six new variants entering the market, diversified food products group that
network of airlines, by the first quarter
says the managing director of Hindustan makes Cremica biscuits, ketchup and
Motors Manoj Jha condiments and includes flagship
While the launch of the variants will be company Mrs Bector’s Food Specialties
staggered, the first one will be ready by that is now firmly on the radar of private
April 2011 he added. “We are now equity investors.
focusing more on individual user Earlier this week, Motilal Oswal PE picked
customer rather than going only for up 20% share in the Ludhiana-based
institutional and commercial customers. company by buying out the complete
This will start happening in the first
stake held by earlier investor, Mauritius
quarter of FY12 and will continue for the based Jade Dragon, a unit of Goldman
next 12-15 months time with different
Sachs.
variants.”
Page 7 A Fin-Niche
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