Business Club

BIZ 101 Lecture II

Indian Financial Markets

Contents

• Financial Markets

• Shares and Stocks

• Regulatory Environment in India

• SEBI
• RBI
Financial Markets

• A Market is a place where buyers and

sellers come together to exchange
something
• Financial Markets are where financial
Instruments/products are exchanged.
• A Financial Market is known by type of
product traded in it
Different Financial Markets

FINANCIAL MARKET

Money Debt Forex Capital

Market Market Market Market
Money Market

• Markets for short term

• Borrowing
• Lending
• Primarily used by Banks
• Typical Financial Instruments
• Bankers Acceptance
• Certificate of Deposit (CD)
• Treasury Bills
• Repo’s
Debt Market

• Debt
• Contract
• One Party lends to another Party
• Predetermined
• Interest Rates and Term
• Participants
• Banks
• Financial Institutions
• Mutual Funds
• Insurance Companies etc.
• Instruments
• Government Securities (G-Secs)
• Public Sector Units Bonds
• Corporate Securities
Foreign Exchange Market

• Foreign Goods
• Payments in Foreign Currency
• Forex Market
• Participants
• Government
• Payments for Imports
• Repayment of Loans
• Importers
• Exchange Rates – One Currency in terms of
other (Eg. 1 US Dollar = 45 Rupees)
• Bid Rate
• Offer Rate
Capital Market

• Long Term Funds

• Raised by
• Government
• Corporates
• Trading Instruments used
• Shares
• Derivatives
• Units of Mutual Funds
Financial Markets

• Primary Market
• Instruments issued for first time
• Used by
• Government/Corporates/PSU’s
• IPO
• Initial Public Offering
• Secondary Market
• Trading of already issued
• Stocks
• Bonds
• Stock Exchange
Investment Basics

• Using savings to get returns in future

is known as Investment
• Why should I invest??
• I want to earn return on my idle money
• A good bank balance before I retire
• I intend to own a Mansion and Ferrari
• When should I invest
• As soon as possible
Where to invest???

• Physical Assets
• Real Estate ,Gold/jewellery
• Requires huge capital
• Financial Assets
• Savings Bank Account
• Fixed Deposits
• Post office
• Government Bonds
• Provident Funds
But ..
All these are fixed return instruments

Lets learn to take some risks and earn

more

Welcome to the Exciting world of Stocks !!

 Stock and Shares

• Stock
• Capital raised by corporations
• Through issue and distribution of shares
• Share
• Signifies ownership in the company
• A company might have thousands of
Shareholders
• Which company issued shares for the
first time in the world???
• The Dutch East India Company in 1602
Stock Exchange

• Place where the shares are traded

• BSE
• NSE
• BSE – Bombay Stock Exchange
• Oldest Stock Exchange in Asia
• Sensex – Sensitive Index
• Index of 30 Actively traded Companies
• NSE – National Stock Exchange
• Incorporated in 1992
• Nifty
• Index of 50 Actively traded Companies
A Few Jargons!!!

• Types of Shares
• Common/Equity
• Preferred

• Face Value

• Market Value

• Market Capitalization

• Dividend
A few more Jargons!!!

• Stock Broker

• Mutual Funds

• Annual Report

• Prospectus

• Liquidity
Regulatory Environment in India

• Pre 1991
• Tight Control of Government
• Post 1991
• Liberalization
• Opening of the Economy
• Need for Supervision
• Regulation
• Regulatory Bodies
Regulatory Environment in India

• RBI – Reserve Bank of India

• Established in 1935
• Bankers Bank
• Regulates Indian Financial Markets
• SEBI –Securities and Exchange Board
of India
• Incorporated in 1992
• Regulation of Securities Market
• Protecting the interests of Investors
So want something more???

Hmm….
• Stay tuned to BIZ 101 Lecture Series

• What’s more in Store??

• Mutual Funds
• Stock Valuation
• Derivatives
• Supply Chain Management
Sources

• www.wikipedia.org
• www.rbi.org.in
• www.sebi.gov.in
• www.nseindia.com
• www.bseindia.com
• www.moneycontrol.com

• And, !!!
Contact Us

• Atul Bansal – MBA Second Year

atulb@iitk.ac.in
• Gaurav Sharma – MBA Second Year
sharmag@iitk.ac.in
• Pratyush – B Tech Final Year
praty@iitk.ac.in
Thank you !!