SVKM’s NMIMS

Anil Surendra Modi School of Commerce

Programme: B.Sc. (Finance) Batch: 2020 – 2023 Semester: I

Academic Year: 2020 – 2021
Subject: Financial Markets and Institutions Marks: 50
Date: Timing: Duration:

Final Examination

Instructions:
1. All questions are compulsory.
2. Figures to the right indicate full marks.
3. Normal calculators are allowed. Scientific and Financial calculators are strictly not
allowed.

Q1. Answer the following questions. All sub-questions are compulsory.

a) Read the following extract taken from the prospectus of a recently concluded IPO in
India and answer the sub-questions following it.

i. Explain the difference between Fresh Issue and Offer for Sale. 2 marks
ii. Instead of the given price band, could the company have declared a price band
of Rs. 135 to Rs. Rs. 170 per equity share? Why? 2 marks
iii. Explain any two points of difference between book building and fixed price
issues. 2 marks
iv. Instead of the given maximum number of lots for retail investors, could the
company have allowed retail investors to subscribe to a maximum of 14 lots?
Why? 2 marks
v. What will the post-issue free float shareholding % of this company? 2 marks
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 b) i) On Nov 26, 2020, Mr. Das strongly believes that the price of Bajaj Finance Ltd. will
fall sharply intraday. So, he shorts 100 shares of Bajaj Finance Ltd. at Rs. 4,700 each,
i.e., he first sells the shares at Rs. 4,700 each with an aim to buy them later during the
day at say Rs. 4,500 per share. However, since it is monthly F&O expiry day, stock
prices are expected to be volatile. In a worst scenario, Mr. Das does not wish to make
a loss of more than 3% on the sale price. Advise the type of order that Mr. Das should
place with his broker to limit his losses. 3 marks

ii) Explain any two points of differences between market order and limit order.
2 marks

c) Mr. Sharma is the fund manager of a leading debt fund in India. He is evaluating two
money market instruments on the basis of their effective yields. The credit rating of
both these instruments is similar. Calculate the effective yields of both these
instruments and advise Mr. Sharma which instrument should be considered for
investment if he is indifferent to the tenures of the instruments. 5 marks
Particulars CP CD
Name of issuer Shri Metalliks Ltd. Janseva Bank Ltd.
Credit rating A1+ A1+
Tenure (days) 91 120
Face value 100 100
Price 97.5 96

Q2. Answer the following questions. All sub-questions are compulsory.

a) Mr. Kulkarni is an aggressive investor and likes to take risk for higher returns in the
financial market. He is considering few mutual fund schemes for investment and seeks
your advice on the following matters.
i. Mr. Kulkarni wants to invest Rs. 25,000 in one of the multi-cap funds in the
industry. He is considering Axis Multicap Fund (NAV = Rs. 45 p.u.) and ICICI
Prudential Multicap Fund (NAV = Rs. 250 p.u.) for investment. He is of the view
that since the NAV of Axis Multicap Fund is lower than that of ICICI Prudential
Multicap Fund, the former fund may offer better returns in the future. Advise with
reasons and a short illustration whether this view of Mr. Kulkarni is correct.
5 marks
ii. In the large-cap category of mutual funds, Mr. Kulkarni is considering Aditya
Birla Sun Life Frontline Equity Fund (Morningstar Gold rating) and Mirae Asset
Largecap Fund (Morningstar Bronze rating) for investment. He believes that
investing in a fund solely based on its rating will offer better returns in the future.
Hence, he has decided to invest in Aditya Birla Sun Life Frontline Equity Fund
since it has the top rating in the category. Advise with reasons whether this
decision of Mr. Kulkarni is correct. Should he consider any other factors
alongwith rating while choosing a fund for investment? 5 marks

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 b) New Fund Offer of Reliable Mutual Fund (a 5-years close ended fund) opened on
September 18, 2020 and closed on September 30, 2020. On October 01, 2020,
25,00,000 units @ Rs.10 each were allotted and redemptions would be done only on
maturity.
The MF scheme made the following investments on October 01, 2020:
(1) 100,000 equity shares of Rs. 10 each @ Rs. 150 per share
(2) 7% G-secs (at par) at Rs.80,00,000
(3) 9% Debentures (listed) of face value Rs.10,00,000 (purchased from debt
market @ discount of 10%)
(4) Balance was held in cash
Consider the following information at the end of financial year 2020 – 21:
(1) Market value of equity shares appreciated by 20%
(2) Government securities & listed debentures were at face value.
(3) Interest on all kinds of debt securities for the period of investment was
received as and when due.
(4) Operating expenses paid during the year amounted to Rs. 5,00,000 and
outstanding custodian and audit fees were Rs. 400,000.
Based on the above information, answer the following questions:
i. Calculate the NAV of scheme at end of financial year 2020 – 21. 4 marks
ii. What is the type of Mutual Fund scheme floated above? Explain with reasons
the level of risk for an investor as compared to an equity scheme? 1 mark

Q3. Answer the following questions. Attempt any 3 out of 4 sub-questions.

a) Write a short note on “Payment Banks.” 5 marks
b) Explain the different ways of classifying Financial Markets. 5 marks
c) Explain the difference between Financial and Commodity Derivatives. 5 marks
d) Explain the objectives of implementing CRM in business strategy. 5 marks

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