Agenda:

Introduction - Students and Professor

Going through the Syllabus

Introduction to Indian Financial System
Structure and Components: Indian financial system in India,
Role of Financial System in Economic Development.
 List of different banks : https://rbi.org.in/scripts/banklinks.aspx

NABARD
Role:
> Credit to Agricultural and Rural sectors
> Assistance to Govt agencies : Data for policy making
> Research and Training to banks, cooperatives on rural development

Small Industries Development Bank of India (SIDBI):

> Primary institution for
> Promoting
> Developing
> Funding

> To SMEs
> To MSMEs : Micro, Small and Medium Enterprises

> Indirect support to Banks - through Refinancing : Loans to banks so that they can lend to borrowers

MUDRA Bank:
> MUDRA (Micro Units Development and Refinance Agency Ltd.)
> Micro units :
> An NBFC , subsidiary of SIDBI
> Rural and Urban areas
> non-corporate (informal sector) : Unorganised Sectors
> Max Limit : Rs.10 L
> small manufacturing units, shopkeepers, etc
> MUDRA would be in charge of refinancing all Last Mile Financiers (E.g. Banks, Micro Financial Institutions, Non-Ba
> manufacturing, trading, and services.
> No collateral is taken
> Project plan is required- show how revenue and profits will be generated

Non-Banking Financial Companies (NBFCs):

> company governed by the Companies Act, 1956/2013
> loans and advances, the acquisition of shares/bonds/debentures issued by the government or a local authority, o
> not with agriculture, industrial activity, or the purchase or sale of any goods
> Private sector institutions make up the majority
> Examples : Bajaj finance, Mahindra Finance, L&T Finance etc….these are examples of NBFCs in loans business

Primary dealers (PDs):

> RBI Registered
 > buy and sell government securities
> buying Govt securities > from Government > Primary market
> Selling in secondary market

Primary Market >> Securities are created, Primary entity(issuing entity) i.e Government or Companies are invo
Secondary Market >> Securities are traded….primary entity is not involved
>> These markets are there in both Equity as well Debt market

Credit Information Companies (CIC):

> non-profit organisation
> Financial data is taken from : Banks, NBFCs etc….which are members of CICs
> CICs tell banks whether or not a potential borrower is creditworthy based on his payment history.
> Individual as well as enterprises
> Credit Information Companies (Regulation) Act 2005.
> 4 CICs in India:
> CIBIL
> Equifax
> Experian
> High Mark Credit Information Services

Payment Banks
> amount of deposits that payment banks can receive from individuals : Rs.1L
> Only those companies that are truly engaged in targeting the poor : Can apply for PB licenses
> Major beneficiaries : migrant workers, self-employed individuals, low-income households
> low-cost savings accounts and remittance services
> Purpose : Financial Inclusion, Bring the cash economy to formal banking economy
> Cannot issue Loans and credit cards
> Only demand deposits will be accepted

Small Finance Banks:

> Purpose : Financial Inclusion
> Basic banking activities : acceptance of deposits and lending
> for unserved and underserved sections
> e.g sections like :
small business units, small and marginal farmers, micro and small industries and unorganized sector enti

Components of the Financial System:

Financial institutions
 1 Central Banks
regulate, oversight and look after the management of all other banks
An individual does not have direct contact with a central bank instead

2 Retail and Commercial Banks

checking (Current) 4and savings accounts

3 Internet Banks
Digital banks- These are online-only platforms affiliated with traditional banks.
Neo banks- These banks are not affiliated with any bank but themselves. These are pure digit

4 Credit Unions
These unions help a specific population based on their field of membership e.g. Teachers Unio

5 Insurance Companies
Transfer of risk
Insured is passing the risk to Insurer (Insurance company)

Financial Markets 

Money Market – deals in short-term credit (< 1 yr).

Capital Market –handles medium-term & long-term credit. (> 1 yr).

Money Market
Organised Commercial banks [under Banking regulation act 1949 & consist of both private & p

Unorganised >Debt market/Bonds : call money, Bill market [Commercial bill, T-Bill], Certificate o
 hey can lend to borrowers

o Financial Institutions, Non-Banking Finance Companies, Societies, Trusts, Companies, Co-operative Societies, Small Banks, Scheduled Com

rnment or a local authority, or other marketable securities of a similar nature, leasing, hire-purchase, insurance, and chit business

of NBFCs in loans business

rnment or Companies are involved in primary market

yment history.

s and unorganized sector entities.

aditional banks.
emselves. These are pure digital native banks

membership e.g. Teachers Union, Military personnel

9 & consist of both private & public], RRBs, Cooperative Banks

mercial bill, T-Bill], Certificate of Deposit [CD] & Commercial Paper [CP].
s, Small Banks, Scheduled Commercial Banks, and Regional Rural Banks)

nce, and chit business

Agenda:
Structure of IFS - Relook
Financial Markets
Introduction, Functions,
Money Market (Organized and Unorganized markets),
Capital Market (Primary & Secondary Market),
Exchanges,
OTC,
Bond Markets,
Derivatives Markets,
Foreign Exchange Markets

Revision of IFSM Material 1

> All concepts shared in the file

IFSM Material 2
> Components of IFS

Financial Markets
2 types on the basis of duration:
1 Money Market
2 Capital Market

2 types on the basis of issuer involvement:

Issuer : Entity isssuing securities > Bonds, Shares

1 Primary Issuer is involved

> Examples of primary market transactions:
IPO, Bonus Issue, Right shares issue, Govt bonds issue, Corporate Bonds
FPO - Follow on Public Offer(Issue of shares by already listed company)

2 SecondaryIssuer is not involved in transactions >> used for trading

> Examples of Secondary market transactions:

> Transactions on Stock Exchanges : Terms and transactions are decided
> Transactions outside Exchanges : OTC (Over The Counter) - Terms and
Exchanges:
Equity: NSE National 2 major exchanges
BSE Bombay

Commodity

Currency
 bonds issue, Corporate Bonds issue, Share Split, Reverse Split
es by already listed company)

s and transactions are decided by Stock Exchange

ver The Counter) - Terms and conditions are decided by Parties involved in transactions
Agenda:
Financial Markets
Introduction, Functions,
Money Market (Organized and Unorganized markets),
Capital Market (Primary & Secondary Market),
Exchanges,
OTC,
Bond Markets,
Derivatives Markets,
Foreign Exchange Markets

Stock exchanges

Indexes / Indices:
Nifty NSE Fifty / National Stock Exchange Fifty >>>Top 50 companies India

Sensex BSE >>> Top30 companies in India

Nifty Index of top 50 companies in India

Top 50 : Market Capitalisation Mcap >>all top 50 large cap companies

Market capitalisation : valuation of the capital in market >> company value on the basis o
> Market price * Number of shares open in the market

Index : Weightage is given to Market capitalisation : higher market capitalisation >>higher weightage

Other indexes :
> apart from Sensex and Nifty - other indices:
> Types of indexes:
1 Sectoral E.g Metals, Banks, Pharma, IT, FMCG etc
2 Market capitalisation: E.g. Midcap Index, Small cap index, Nifty 50

Market capitalisation:
https://view.officeapps.live.com/op/view.aspx?src=https%3A%2F%2Fwww.amfiindia.c
Types of Securities / Asset Class:

1 Equity Ownership - Shares, Preference Shares

ESOP (Employees Stock Options / Employees Stock Ownership Plan)

2 Debt Bonds (Binding to pay fixed interest), FD, Savings account, Debentures, Govt bonds, co
3 Commodities 1)Precious Metals (Gold, Silver, Platinum etc), 2)Base Metals (Iron, Copper, Zinc, Alumi

4 Forex / Foreign Currency USD, EUR, GBP, JPY, INR etc

5 Crypto currency >> We cannot use it for buying or selling goods /services in all countries
6 Digital asset NFT
7 Real Estate Residential (Flats, Apartments bungalows etc), Commercial (Shops, Malls, Offices etc),
REIT :
> Real Estate Investment Trust : Like a MF in real estate : Commercial prope
> 3 REIT : Embassy, Brookfield, Mindspace
> Monthly rent is paid in the form of Dividend …..Mandatory by regulation

8 Alternate Assets Paintings, Wine, Coins, Collectibles (Stamps, Photos etc), Antiques (ancient articles, fur

MF Pool of investment
Vehicles of investment in securities or asset classes…not a core security
Equity MF, Debt MF, Commodity MF, Real estate MF, Hybrid MF etc

NPS (National Pension Scheme) >> Combination of Debt and Equity

Derivatives Contracts which derive value from underlying asset

Equity Derivatives : Underlying assets are Shares / Equity
Commodity Derivatives : Underlying asset is a commodity
Currency Derivatives

Types of derivatives:
Forwards E.g Farmer and Bread maker entering into a contract…
>>OTC (Counterparty risk/ Default risk)

Futures Standardised Forwards

>>Through Exchanges…Clearing House ensures the co

Options >>There is no obligation to execute the contract

>>Through Exchanges…Clearing House ensures the co
 Swaps >>OTC
>>Traded between institutional players
>> Exchange of Cash flows
> e.g Interest Rate Swaps, Currency Swaps etc

Exchanges:
> Market place - Electronic Market place for trading
> Stock Exchanges >>NSE, BSE >> SCRA, 1956 : regulating the stock exchange
> Commodity Exchange >>NCDEX, MCX (Biggest Commodity Exchange in India), NSE, BSE
> Currency Exchange >>For currency trading

>> for investors, different accounts are to be opened with Brokers with different exchanges…

Foreign Exchange Market :

>> It is 24 hours market
>> There is no location of this market
>> It’s a Global market
>> Electronic network of computers for trading
>> Important currencies traded : USD (US Dollars), EUR (Euro), GBP (Great Britain Pounds), JPY (Japanese Yen), INR(
>> Trading is always done in pairs : e.g. USD-GBP, or EUR-JPY etc
 >>>Top 50 companies India >> Sensex + Next 20 companies

>>> Top30 companies in India

p companies

>> company value on the basis of market price

talisation >>higher weightage

s, Banks, Pharma, IT, FMCG etc

ap Index, Small cap index, Nifty 500

ttps%3A%2F%2Fwww.amfiindia.com%2FThemes%2FTheme1%2Fdownloads%2FAverageMarketCapitalizationoflistedcompaniesduringthe
 wnership Plan)

ount, Debentures, Govt bonds, corporate bonds, T Bills etc KVP, NSC, PPF
Metals (Iron, Copper, Zinc, Aluminium, Lead etc) 3) Precious Stones (Diamond, Ruby etc), 4)Energy (Natural Gas, Crude oil, Electricity, Coa

ces in all countries

mercial (Shops, Malls, Offices etc), Industrial (Warehouses, Plants etc)

in real estate : Commercial properties are used to give retail investors a fractional ownership….It can be traded using Demat account

end …..Mandatory by regulation

etc), Antiques (ancient articles, furniture etc)

not a core security

, Hybrid MF etc

Shares / Equity
is a commodity

d maker entering into a contract…After 3 months, wheat will be exchanged for money at Rs.500 / kg
y risk/ Default risk)

es…Clearing House ensures the contract is executed

tion to execute the contract

es…Clearing House ensures the contract is executed
nstitutional players

waps, Currency Swaps etc

ulating the stock exchange

nge in India), NSE, BSE

different exchanges…

Pounds), JPY (Japanese Yen), INR(Indian Rupee)

onoflistedcompaniesduringthesixmonthsended30June2022.xlsx&wdOrigin=BROWSELINK
Gas, Crude oil, Electricity, Coal etc), 5) Agricultural (Food grains, Cotton, Spices, Sugar, Tea, Coffee beans etc

ded using Demat account

Agenda:
Capital Market Pg.6 - IFSM Material 2
(I)   Industrial securities market
(II)   Government securities market and
(III)   Long term loans market

FINANCIAL INSTRUMENTS
(i)   Primary or direct securities.
(ii)   Secondary or indirect securities.

FINANCIAL SERVICES
1. Asset based/fund based services.
2 .Fee based/advisory services

FINANCIAL MARKETS : Features and Functions

(i) Money Market (ii)Capital Market

(i)   Call money market
(ii)   Commercial bills market
(iii)   Treasury bils market
>> Int rate moves hour to hour or day to day…highly sensitive to deman
>> Discounting of the bills by seller to another …Trading
>> Treasury Bill : a promissory note or a finance bill issued by the Govern
https://www.treasurydirect.gov/indiv/products/prod_tbills_glance.htm#
https://www.rbi.org.in/Scripts/FAQView.aspx?Id=79
> three tenors, namely, 91 day, 182 day and 364 day.
>zero coupon securities
> issued at a discount and redeemed at the face value at maturity
> Maturity value and Face value are same
> two types : Regular(Public,Banks and other FI) and Ad hoc(only RBI)

(iv)   Short term loan market. > Cash credit and overdraft
> Cash credit : industrialists and Seprate account is created : around 1 ye
> Overdraft : temporary requirement and in same account i.e current ac

Liquid
2 meanings:
1 Easy conversion into cash
2 Easy transactions (High frequency of transactions or Higher number of participants)

Bid price >> Buyer is quoting Bid price >> Always lower than Ask price
Offer price/Ask Price >> Seller is quoting Offer price
If the spread between Bid Price and Ask price is High, is it liquid or illiquid market?
>> Illiquid market

If market interest rates increase, the price of (already existing) bonds will increase or decrease?
>> Inverse relation between Interest rates and bond price

Financial Instruments:
Primary or direct securities. >> e.g.shares and debentures issued directly to the public…By
Secondary or indirect securities >> by intermediaries e.g. MF issuing securities which invest b

Again these securities may be classified on the basis of duration as follows:

(i)   Short - term securities : 1 yr
(ii)   Medium term securities : 1 to 5 yrs
(iii)   Long - term securities. : more than 5 yrs

FINANCIAL SERVICES
https://www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognised=yes

Registered Intermediaries : 36

within the financial services industry the main sectors are banks, financial institutions, and no

Types of FS:
1.     Asset based/fund based services.
2.     Fee based/advisory services.

1 Asset Based:
1.   Equipment Leasing/ Lease Financing
2.   Hire Purchase and Consumer Credit : Ownership is transferred after maturity
3. VENTURE CAPITAL : Funding provided at the stage of Business Idea : Angel Inves
4. Insurance : transfering of risk by Insured to Insurer by taking premium as compe
5. Factoring
 ay…highly sensitive to demand and supply in market
ther …Trading
nance bill issued by the Government, short - term ' maturity
ducts/prod_tbills_glance.htm#:~:text=You%20can%20buy%20bills%20from,sell%20it%20before%20it%20matures.

nd 364 day.

e face value at maturity

her FI) and Ad hoc(only RBI)

ccount is created : around 1 year

in same account i.e current account

mber of participants)

lower than Ask price

sued directly to the public…By original or ultimate Issuers
uing securities which invest back in original securities

s, financial institutions, and non-banking financial companies

s transferred after maturity

of Business Idea : Angel Investing, Venture capital : After establishing the product or service in market…for expansion
by taking premium as compensation
Agenda:
Revision
Financial Services..continued

A] Asset Based FS:

5. Factoring:
> The factor is an entity or institution
> It can be bank or separate entity
> This entity provides two services: 1) provides resources to finance(to fund) receivables as w
> E.g ONGC is raw material supplier to Asian Paints….ONGC has receivables from Asian Paints
Entity 1: Seller ONGC will receive which service of factor as mentioned above?...Both th
Entity 2: Buyer No change for buyer
Entity 3: Factor Difference between the Original value of Receivable and discounted am

> two purpose satisfied by the factor : 1) Provide liquidity, 2) Recovery or collection

Factoring servirces helps in Cash sales. True or False? >> False

B] FEE BASED ADVISORY SERVICES:

1 Merchant Banking
> Service which can be provided by Banks, NBFCs, Brokers
> Merchant bankers provide following services:
1 Loan Syndication >> Grouping of loans…creatin
2 portfolio management, >> Managing the portfolio of
3 corporate counselling >> Counselling to companies
4 project counselling
5 debenture trusteeship >> Debenture : Debt security
6 mergers acquisitions. >> Valuation services - valuin

> They can charge fees on the basis of capital raised e.g. 5% of capital raised

2 Credit Rating
> An opinion
> of the rating agency
> on the relative ability and willingness
> of the issuer of debt instrument
> to meet the debt service obligations
(Servicing of Debt : paying back the principal and interest….its an obligati

> useful to investors, corporates (borrowers), banks and financial institutions

 > For Investor : its an indicator expressing the underlying credit quality of a (debt) i
> Regular tracking of the financials of the companies for which rating is provided
> E.g.CRISIL, CARE, ICRA
> They get the fees from the companies for which they are providing Credit Rating,

3 Stock Broking:
> Stock brokers are regulated by SEBI
> prior to SEBI, Ministry of Finance under SCRA(Securities Contracts Regulation Act
> SRO : No regulator governing the organisation
> Stock broker is : Member of Stock Exchange
> Sub broker is : registered with Stock Broker
> Any broker who is the member of BSE, means is the member of NSE.. True or fals
> Role of Stock Broker:
> Buy, Sell and Deal in Securities…Equity, REIT, Bonds which are listed on
> SGB : Sovereign Gold Bonds : Listed on stock exchange- these also can
> Register with SEBI…SEBI provides the license
> Who is paying fees? Trader or investor : in the form of Brokerage, for other servic

Financial Markets:

Money market :
> For short term funds
> lesser than 1 year

> Importance/ Functions:

1 Economic development
>>PROVISION OF FUNDS
> to both public and private institutions
> providing financial help to trade, commerce and industry
> Money market is liquid

2 Profitable investment
>> Income generation opportunity for Financial institutions
> excess reserves of the banks are invested in near money ass

3 Borrowings by the government

>> Borrowing for short term requirements in the form of T-B

4 Importance for central bank

> central bank can implement the monetary policy successfu
 > It is only through the money market that the central bank c

> RBI is monitoring the economy through Capital market? Tru

5 Mobilisation of funds
> transferring funds from one sector to another
> Circulation of money in the economy should be smooth for

6 Savings and investment

> Liquid money market helps retail investors as well as corpor
> short term parking of funds is possible using vibrant money
ance(to fund) receivables as well as it 2) facilitates the collection of receivables
receivables from Asian Paints
as mentioned above?...Both the services…benfit of immediate cash and handing over the recovery responsibility

Receivable and discounted amount : Discounting commission is the profit for Factor

covery or collection

>> Grouping of loans…creating a pool of small loans

>> Managing the portfolio of different assets like Equity, Debt, Commodity etc
>> Counselling to companies - Market research, Consultancy on Raising capital , risk analysis etc

>> Debenture : Debt security, e.g. Reliance wants to issue debentures : Reliance will appoint a trustee to manage the entire Debenture is
>> Valuation services - valuing the acquiring and to be acquired company, Swap ratio : ratio of shares to be received in exchange of share

e.g. 5% of capital raised

pal and interest….its an obligation)

and financial institutions

ying credit quality of a (debt) issue programme
for which rating is provided

ey are providing Credit Rating, other fees to provide this credit rating research to entitities

ities Contracts Regulation Act) and they were Self regulatory organisations (SRO)

e member of NSE.. True or false?...False..register separately with all exchanges

REIT, Bonds which are listed on stock exchange

tock exchange- these also can be traded using Stock broker

of Brokerage, for other services like consultation, trading tools etc

de, commerce and industry

nity for Financial institutions - banks

are invested in near money assets.

quirements in the form of T-Bills

the monetary policy successfully if Money Market is liquid and vibrant

market that the central bank can control the banking system

y through Capital market? True or false? - False

ector to another
conomy should be smooth for development

tail investors as well as corporate investors to invest for short term

possible using vibrant money market
anage the entire Debenture issue
received in exchange of shares held in aquired company
Agenda
Syllabus and topics covered till now

Financial Markets: https://groww.in/blog/list-of-stock-exchanges-in-india

Exchanges https://www.sebi.gov.in/stock-exchanges.html
OTC, Bond Markets, Derivatives Markets, Foreign Exchange Markets

Syllabus and topics covered till now

Exchanges: >> Markets where securities are traded

> Part of Secondary market

Stock Exchanges
> There are more exchanges than BSE and NSE
> Almost all companies are getting listed on BSE and NSE
> Both BSE and NSE are at Mumbai
> BSE
> established in 1875
> Asia's first stock exchange
> NSE
> established in 1992..
> First exchange in India to provide decentralised electronic trading platform for investors

> India International Exchange INX: >> BSE Subsidiary

> Founded in 2017
> india's first international stock exchange
> It operates out of Gujarat International Finance Tech -City (GIFT city)
> Subsidiary of BSE

> MSE (Metropolitan Stock Exchange):

> Modern clearing house
> Clearing house : Role is to ensure settlement of the transactions happening on exchanges
> Mumbai

> NSE IFSC Exchange :

> NSE Subsidiary
> International Exchange
> It operates out of Gujarat International Finance Tech -City (GIFT city)

> Functions:
1 Determining fair price :
> Reasonable and tradeable price matching to the value
> This is done by ecnouraging fair competition in the market and participants decid
 2 Facilitating Industrial Advancement:
> By providing the mechanism to trade securities in secondary market and increasi

3 Protecting the interest of investors:

> Ensuring clearing / settlement of the transations..thus reducing Credit default cha
> Setting the rules for contracts and trading which the companies have to abide by
> Regular reporting is taken from coroporates..e.g. Annual Report, Quarterly Repor

4 Secondary market for Other securities:

> apart from shares, bonds like SGB can be traded
> REIT - Real Estate Investment Trust--units can be traded on Stock exchange
> Investors can trade in commodities on NSE and BSE as well

5 Avoid the dependency of corporates on Loans:

> By making it easy to trade in secondary market, corporates are free to issue secu

Commodity Exchanges
> MCX :
> Multi Commodity Exchange
> It has highest market share in commodity trading in India
> Bullion : Gold and Silver (Part of precious metals)
> First listed commodity exchange in India
> Started operations in 2003
> MCX trades only DERIVATIVE contracts

> NCDEX:
> National Commodity Derivatives Exchange
> The major portion of NCDEX is in Agricultural Commodities

> ICEX:
> Indian Commodity Exchange
> Only exchange which offers derivative trading in Diamond Contracts

> List of Exchanges in India:

> SEBI link : https://www.sebi.gov.in/stock-exchanges.html

> This link provides the segments traded in different exchanges

> Segments : Asset classes in which the trading can be done on the exchange
 > Cash market (Spot Market) vs Derivatives market:
> In cash market : Full cash payment is required for Contract Value
> In Derivatives market : Margin amount is required for trading in contracts (Small % of the contract valu

> 28 Exchanges have been granted Exit

Foreign Exchanges
> 24 hour market
> there is no location
> it’s an electronic network of institutions trading in forex
> decentralized global marketplace for foreign currency trading.
> Biggest market in world

> Features of Forex market in India:

1 Low transaction cost:
> Commission paid in currency trading : the spread (difference) between selling price and buy

2 High Leverage:
> Higher margin
> Higher profits and higher losses

3 Extremely Transparent
> All the data is publicly available

4 FOREX Market Accessibility

> Trade from anywhere anytime

> Types Of Foreign Exchange Market in India

> Spot market : Cash market

> transactions require immediate payment at the current exchange rate
> Spot rate i.e market rate is used for transactions

> Derivatives market : Forwards, Futures, Options

 > Futures market:
> require future payment and distribution at a previously negotiated exchange rat
> Exchange or market decides the terms and conditions of the contract

> Forward market:

> Same as futures but non standardised contract
> Parties to the transaction decide the terms and conditions

https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/77577.pdf
https://www.geeksforgeeks.org/role-of-foreign-exchange-market-in-india/
> Participants :
1 Banks,
2 dealers,
3 commercial companies,
4 investment management firms,
5 hedge funds
6 Retail traders

> Biggest participant in Forex:

Banks

> Foreign Exchange Dealers Association of India (FEDAI)

> made up of Banks in majority
> Established in 1958

> Main Functions of Foreign Exchange Market:

1 The function of Transfer:
> convert one currency into another or to make buying power transfers between n
2 The function of Credit:
> provides importers with short-term loans in order to promote the flow of goods a

Eg. 1 USD = Rs.80

If Rupee depreciates :
Then 1 USD = Rs.70 or Rs.90? >> It will be 1 USD = Rs.90

Exporter : If rupee depreciates, its profit as exporter will get more Rupees for given amount o
Importer : Loss if rupee depreciates
3 Function of Hedging:
Forex market helps in hedging for Forex loss in above transactions
ock-exchanges-in-india
exchanges.html

ding platform for investors

ns happening on exchanges

market and participants deciding the price on the basis of Demand and Supply
econdary market and increasing participation of investors

hus reducing Credit default chances

e companies have to abide by
nnual Report, Quarterly Report, Declarations from Board of Directors

aded on Stock exchange

porates are free to issue securities to investors

s (Small % of the contract value)

between selling price and buying price

ously negotiated exchange rate (Strike price)
ons of the contract

ng power transfers between nations.

o promote the flow of goods and services between countries.

re Rupees for given amount of Dollars

Agenda
Revision
Bond Markets

Debt Market / Bond Market:

>> Binding to give fixed interest on the investment, so the name Bond
>> For an investor in bond, interest amount on the investment will be fluctuating or same?....
>> Coupon rate gives interest on Face value…face value remains same…coupon rate rem

Options to buy or sell bonds:

1 RBIretail direct:
> Platform for buying Government Securities by Individual Investors.
https://rbiretaildirect.org.in/#/FaqRbiRetailDirect
> open Gilt Securities Account – “Retail Direct Gilt (RDG)” with RBI
> Process of investing in bonds:
> place non competitive bids
> in Primary issuance
> of all Central Government securities (including Treasury Bills an
> as well as securities issued by various State Governments.

>Trades executed by Retail Direct Investors will flow to CCIL for settlement.
> T+1 : Trade date + 1 day : Settlement Date (Working days)
CCIL:
Clearing Corporation of India Ltd
> Ensuring the performance of contracts or transactions
> They ensure the clearing and settlement
> e.g Stock market, Commodity market, Bond market

NDS OM :
> Order Management System for secondary market transactions of Government Bonds

How the bonds can be traded:

One of many websites: https://www.indiabonds.com/?utm_source=google&utm_medium=search&utm_campaign=Core&
https://www.indiabonds.com/news-and-insight/how-to-invest-in-bonds/

> Coupon Rate: > Interest rate

> It is the return available on Face Value

> Yield Rate: > Actual rate of return on the investment

E.g Bond face value is Rs.100 coupon rate is 10%. The bond is available at Rs.110. What is the yield
>> Interest : Rs.10
 >> Yield : Rs.10 but yield rate: 10/110 9.09%

Benefits of investing in bonds

1 Stable and regular income
> Price volatility will be there depending on market interest rate movement
> Volatility will be lesser as compared to equity market

2 Portfolio diversification
> Diversification with other types of assets

3 Liquidity
> Bond liquidation is possible in secondary market instead of waiting till maturity

4 No TDS
5 Higher Interest rates
Higher int rates for individual investors as compared to institutions
Higher int rates as compared to traditional or bank deposits

6 Interest Payout frequency

Investor has multiple options to choose bonds which provide interest at a frequency suitable to th
> Quarterly, Semi annually, annually

7 Transparent Pricing
8 Low Minimum investment
Few bonds are available at low investment amount

9 Listed on exchange
Public Issue of Bonds in India are required to be listed on exchanges

10 Advantage during bankruptcy

First preference during bankruptcy to receive the funds invested as bond holders are lenders or cr
Most of the times, bonds are with collateral

Types of Bonds: https://www.angelone.in/knowledge-center/share-market/bond-market#:~

1. Convertible bond
> a right or an obligation to convert the bond into shares of the issuing company
> Sub types:
1 Regular convertible bonds:
> No compulsion..its a right given to investor to convert bonds into shares
> As there is no compulsion, interest rates are higher than Mandatory convertible bonds
 2 Mandatory convertible bonds:
> Opposite of above

3 Reverse convertible bonds:

> Company has a right to convert bonds to equity
> upon maturity at a predetermined conversion price

Advantages:
> For investor : Right to enjoy the benefits of Equity holding and participate in growth

> For issuer : Benefit of generating capital without diluting equity in the initial phase

2. Government Bonds
> Mostly long duration bonds
> 5 to 40 years duration
> From central and state govt
> Now the retail investors are also welcome to invest in Govt bonds
> Considered as safest bonds as backed by Indian Govt

> Types of Govt Bonds:

1 Fixed Rate Bonds
2. Fluctuating Rate Bonds >> These rates are charged as a specified spread above
>> e.g. Repo Rate + 2.5%
…2.5% is the spread which depends on bank cost, profi

> Examples of benchmark rates : Repo( most widely us

3. SGB > Sovereign Gold Bonds :

> The issuer by issuing the bond invest in gold
> bond prices move in accordance with Gold price movement
> Regular interest is also paid by govt on these bonds e.g. 2.5%
> These bonds can be traded in secondary market using Demat account

4. Inflation Indexed Bonds:

> principal and interest earned on such bonds are in accordance with the infl
> indexed in accordance with the consumer price index (or CPI) or wholesale

5. 7.75% GOI Savings Bond: >> Govt of India Bonds

> launched in 2018
> Issued at Rs.1000 or multiples of Rs.1000
> If the price of this bond is Rs.1200, the interest rate in the market or economy is low
> Current int rate is lower than 7.75% i.e original coupon rate of the bond
6. Bonds with Call or Put Option:
> Call option : issuer keeps the option to call back the bonds before maturity
> this is used by issuer if they feel the interest rate will reduce, so

> Bonds with call option are risky to investors

7. Zero-Coupon Bonds
> Bonds issued at discount to face value and maturity is at the face value
> the discount given is the returns to the investor
> e.g. Rs.1000 bond issued at Rs.990
will be fluctuating or same?....
ue remains same…coupon rate remains same…so int amount remains same..

es by Individual Investors.

rect Gilt (RDG)” with RBI

urities (including Treasury Bills and Sovereign Gold bonds)

various State Governments.

s will flow to CCIL for settlement. Settlement would happen on T+1 day
te (Working days)

ransactions of Government Bonds

um=search&utm_campaign=Core&utm_term=Competition&utm_content=Ad1&gclid=Cj0KCQjwhY-aBhCUARIsALNIC04dJtoS_xHNaYFjmE3

vailable at Rs.110. What is the yield rate?

 movement

aiting till maturity

terest at a frequency suitable to them

d as bond holders are lenders or creditors to companies

er/share-market/bond-market#:~:text=On%20the%20basis%20of%20buyers,traded%20in%20the%20secondary%20market.

datory convertible bonds

 participate in growth

y in the initial phase

harged as a specified spread above the benchmark rate

which depends on bank cost, profit margin, credit standing of borrower

mark rates : Repo( most widely used benchmark), CRR, SLR etc

old price movement

hese bonds e.g. 2.5%
market using Demat account

nds are in accordance with the inflation.

er price index (or CPI) or wholesale price index (or WPI).

f India Bonds

e in the market or economy is lower than 7.75% or more than that?

riginal coupon rate of the bond
all back the bonds before maturity
eel the interest rate will reduce, so that issuer can reissue new bonds with lower rate

nd maturity is at the face value

RIsALNIC04dJtoS_xHNaYFjmE37eUv6ykSR3H4mvFESsInEXxLUX85HbSA1yI0aAl_AEALw_wcB
dary%20market.
Agenda
Revision
Bond Markets

Revision

Coupon rate : Rate of Interest on Face value

Yield rate : Return on Investment done in the bond

SGB : Sovereign Gold Bond :

Sovereign : Govt

BPS Basis points

1% means 100 basis points

E.g 4% RBI Repo rate increased by 50 basis points. How much is the new Repo rate?
4.50%

RBI Bond Floating Rate Savings Bonds 2020 (Taxable)

https://www.hdfcsec.com/rbi-bond

Bonds: https://www.angelone.in/knowledge-center/share-market/bond-market#:~:text=On%20the%

Concept of Risk:
Types of risks:
1 Default Risk / Credit Risk > Risk of default in receiving back the investment
> Lower in Equity
> High in Debt i.e Bonds

2 Volatility Risk > Risk of movement in prices of the security…it can

> High in Equity
> Low in Debt/bond….Long term bond : high volati
 3 Liquidity Risk > Risk of not being able to liquidate / sell the secur
> Low in Equity market (penny stock or low liquid s
> High liquidity risk in Bonds or Debt

4 Reinvestment Risk > Risk of not finding the proper investment after m
> Comparatively easier in Equity
> Higher in Bonds/ Detb

Types of bonds: https://www.angelone.in/knowledge-center/share-market/bond-market#:~:text=O

the new Repo rate?

d-market#:~:text=On%20the%20basis%20of%20buyers,traded%20in%20the%20secondary%20market.

eceiving back the investment

in prices of the security…it can go below the investment price also

….Long term bond : high volatility risk, short term bond: low volatility risk
ble to liquidate / sell the security
et (penny stock or low liquid stock : high risk)
n Bonds or Debt

the proper investment after maturity or redemption of first investment

er in Equity

market/bond-market#:~:text=On%20the%20basis%20of%20buyers,traded%20in%20the%20secondary%20market.
Agenda:
OTC Exchange
FINANCIAL MARKETS : Features and Functions Page 15 - IFSM Material 2
(i) Money Market (ii)Capital Market

OTCEI : Over The Counter Exchange of India

> electronic stock exchange based in India
> consists of small- and medium-sized firms aiming to gain access to overseas capital markets,
> no central place of exchange, and all trading occurs through electronic networks.

> purpose of the OTCEI is for smaller companies to raise capital,

> which they cannot do at the national exchanges due to their inability to meet the exchange requirem
> specific capitalization rules that make it suited for small- to medium-sized companies while preventing
> key players : Dealers:
> brokers, market makers, custodians, and transfer agents.
> Market makers : they create the market by initiating the transactions in market and maintai
> Custodians : institutions which maintain the custody of securities (Shares, Commodities etc)
> Registrars & Transfer agents (RTA): Record maintenance of transactions, Correct transfer an

> The OTCEI is based in Mumbai, India, and operates solely over a computer network
> recognized by India's Securities Contract Regulation Act - SCRA https://www.sebi.gov.in/acts

> Started in 1990

> The OTCEI has rules that are not as rigid as the national exchanges,

> Features:
1 Stock restrictions:
Stocks listed on other exchanges are not listed on OTCEI and vice versa
2 Minimum limit:
Issued equity capital should be min Rs.30L
3 Large company restrictions:
Issued equity capital of more than 25 crore rupees are not allowed to be listed.
4 Member Base Capital Requirement:
Maintain base capital of 4 lakh rupees

> Stipulations/ Rules:

1 Sponsorship from members of OTCEI
2 Should have two market makers
3 Cannot delist before 3 years after listing

FINANCIAL MARKETs:
FUNCTIONS OF CAPITAL MARKET
1.   Helps in capital formation.
> in mobilisation of savings and channel them into productive investments for the d
2. Act as link between savers and investors
> It is a conduit through which surplus units lend their surplus funds to deficit units
> Saver : Surplus Units
> Borrowers : Deficit Units
3. Helps in increasing national income
> Helps in development of commerce, industry and government
4.   Facilitates buying and selling.
> Surplus units : buy secruities
> Deficit units : sell secruities
5. Channelizes funds from unproductive to productive resources
6.   Minimises speculative activities.
> Instead of speculation, funds are being used for productive purposes
7. Brings stability in value of stocks.
> developed capital market comprising expert banking and non - banking intermed
 eas capital markets,

meet the exchange requirements.

d companies while preventing larger companies from being listed.

actions in market and maintain supply and demand

ties (Shares, Commodities etc)…Validating and Storing documents -facilitating daily clearing transactions
ansactions, Correct transfer and allotment of shares

https://www.sebi.gov.in/acts/contractact.pdf

wed to be listed.
oductive investments for the development of commerce and industry

r surplus funds to deficit units.

oductive purposes

g and non - banking intermediaries bring stability

10/11/2022
Shrishti Shivangi
Krishna

Shraddha
Shejal
Tanuja
Holidays
24 oct to 30 Oct
Topic Status

Foreign Exchange Markets

Technical Anlaysis for stocks Done

CIBIL Login
Score
Report
Disputes

Demat Login
Order types
REIT

Career Options
Qualifications
Name in attendance sheet but not in class:
19.9.22
Ayush Mewani
Syed Ayan
Kumar Sandeep
Amar
Digvijay
Shreeja
Madhusudan
Swapnali
Shreya

4.10.22
Dhanesh

10/10/2022
Shrishti
Prachi
Ayush
Bonds
https://www.angelone.in/knowledge-center/share-market/bond-market#:~:text=On%20the%20basis%20of%20bu
https://www.nseindia.com/market-data/bonds-traded-in-capital-market

https://www.hdfcsec.com/rbi-bond
%20the%20basis%20of%20buyers,traded%20in%20the%20secondary%20market.