CAPITAL MARKET - OVERVIEW

“ Market is a place where buyers and sellers come into contact

to exchange goods or services”
*The essential features *
1) Existence of buyers and sellers
2) Existence of price
3) Allocation of resources
4) Existence of regulatory mechanism.
Types of capital market

There are two types of capital market:

 Primary market
 Secondary market
DIFFERENCE BETWEEN PRIMARY &
SECONDARY MARKET

• In the primary market, • Secondary market is an

securities are offered equity trading avenue in
to public for which already
subscription for the existing/pre- issued
purpose of raising securities are traded
capital or fund. amongst investors.

• For example • For example

-Punjab & Sind Bank -TCS
-MOIL - SAIL
Primary Market

 It is that market in which shares, debentures

and other securities are sold for the first time
for collecting long-term capital.

 This market is concerned with new issues.

Therefore, the primary market is also called
NEW ISSUE MARKET
 In this market, the flow of funds is from savers to borrowers (industries),
hence, it helps directly in the capital formation of the country

.
 The money collected from this market is generally used by the
companies to modernize the plant, machinery and buildings, for
extending business, and for setting up new business unit.
Features of Primary Market
 It Is Related With New Issues
 It Has No Particular Place
 It Has Various Methods Of Float Capital: Following are the
methods of raising capital in the primary market:
i) Public Issue
ii) Offer For Sale
iii) Private Placement
iv) Right Issue
v) Electronic-Initial Public Offer
 It comes before Secondary Market
ISSUE TYPE OFFER PRICE DEMAND PAYMENT

Fixed Price Price at which the Demand for 100 % advance payment is
Issues securities are the required to be made by the
offered and would securities investors at the time of
be allotted is made offered is application.
known in advance known only
to the investors after the
closure of
the issue
Book A 20 % price band Demand for 10 % advance payment is
Building is offered by the the required to be made by the
Issues issuer within which securities QIBs along with the
investors are offered , and application, while other
allowed to bid and at various categories of investors have
the final price is prices, is to pay 100 % advance along
determined by the available on with the application.
issuer only after a real time
closure of the basis..
bidding.
 Features of IPO

• Kept open for minimum three days and

maximum twenty one days
• Under written by financial institution
• Prospectus tell about the information like
 Status of the company
 Performance
 Promoters
 Capacity
 SEBI Guidelines for an IPO

• The promoter company should have three years

consistent record of profitable working
• The promoters take up at least fifty percent of
shares in issue
• All parties applying to the issue should be
offered the same instrument at the same term,
specially regarding the premium
• Prospectus discloses the material information,
which insure investors can take to intelligent
decision regarding investment
Secondary Market
The secondary market is that market in
which the buying and selling of the
previously issued securities is done.
The transactions of the secondary market
are generally done through the medium of
stock exchange.
The main purpose of the secondary
market is to create liquidity in securities.
If an individual has bought some security
and he now wants to sell it, he can do so
through the medium .
of stock exchange to
sell or purchase through the medium of
stock exchange requires the services of
the broker presently, there are 24 stock
exchange in India.
Features of Secondary Market

• It has a Place
• It Encourages to create Liquidity
• It Comes After Primary Market
• It Has A Particular New Investments
 Stock Exchange

 Centres for trading of securities

 Total 24 stock exchanges in India-

22 are regional stock exchanges

 2 are primary stock exchanges

-National Stock Exchange

-Bombay Stock Exchange
 National Stock Exchange
• Set up in June 1994

• Provides fully automated screen-based trading system

across the country.

• Has S&P NSE 50 Index( Nifty).

• Apart from the Nifty, there are various indices are

available in the sectoral wise like Midcap, IT, Infra, Etc
 Bombay Stock Exchange

• Established in1987.

• BSE Index- BSE Sensex comprising of 30 stocks

• Apart from the sensex, there are various indices

are available in the sectoral wise like Midcap, IT,
Infra, Etc
SEBI and its Objectives

1. Tries to develop the securities market.

2. Promotes Investors’ Interest.
3. Makes rules and regulations for the securities market.

Important Functions of SEBI

1) Regulating the business in stock exchanges and any other securities

markets

2) Registering and regulating the working of the depositories [participants],

custodians of securities, foreign institutional investors, credit rating agencies

3) Registering and regulating the working of venture capital funds and collective
investment schemes, including mutual funds;

4) ) Prohibiting fraudulent and unfair trade practices relating to securities

markets
 SCREEN BASED SYSTEM

The kind of screen based system adopted in India is referred to as

the open electronic order (ELOB) market system.

ELOB
• Buyers and sellers place their orders on the computer
• Computer instantly tries to match mutually compatible orders
on a price-time priority
 BUYING AND SELLING OF SHARES

• Locating a Broker

• Placement of Order

• Execution of Order

• Internet Trading
 SETTLEMENT

• Security transactions are settled through electronic

delivery facilitated by depositories

• Presently, the settlement of all trades is a rolling

settlement on a T+2 basis
 What is a Depository?

A depository is an organisation which holds securities (like

shares, debentures, bonds, government securities, mutual fund
units etc.) of investors in electronic form at the request of the
investors through a registered Depository Participant

Depository Companies In India:

1) NSDL (National Securities Depository Ltd)

2) CDSL (Central Depository Services Ltd)

 
SELECTION OF STOCKS – NAÏVE
INVESTORS PERSPECTIVE
Executive Summary

• The purpose of this study is “Selection of stocks –

naive investor’s perspective”.
• Generally there are various methodologies to be
followed for selecting the stock in order to invest and
earn more
• Now the basic question is that whether these
methodologies are successful or not.
• Researcher has given suggestions to the naive
investors so that they can choose valuable stocks in
order to earn more and reduce the risk.

23
Domain Knowledge

• Knowledge on selecting the suitable

stock based on the historical price
movement
• Importance of the wave pattern
• Understand the basic fundamentals
about the particular stock
• Understand the expectations of the
investors

24
Problem

• Generally naïve investors are having the problem to

choose the valuable stocks

• The reason is that lack of knowledge about the market

and lack of education

• This is the problem given by Angel Broking Ltd in order

to identify the valuable stocks and give proper
guidance to the investors to buy or sell

25
Research Methodology

• Research Design: Descriptive research

• Secondary data: www.nseindia.com
• Past three years data have been
collected for this research
• Tools used: Correlation, Percentage,
Beta

26
Data Analysis & Interpretation

• There are 3 indices chosen for this study. They

are Bank Nifty, Nifty Midcap 50, and CNX
Realty

• From these each index, five companies have

chosen for the study based on the M Cap

27
Bank Nifty

28
Bank Nifty wave pattern

29
Bank Nifty Stocks Wave pattern

30
Correlation

Date BANK NIFTY - Closing Point SBIN - Closing Price (Rs)

Jan - mar'08 8189.9 2087.02
Apr - Jun'08 6413.47 1541.04
Jul - Sep'08 5878.55 1415.6
Oct - Dec'08 4604.8 1249.15
Jan - mar'09 4160.72 1088.3
Apr - Jun'09 6628.6 1500.76
Jul - Sep'09 7929.5 1806.58
Oct - Dec'09 8838.35 2259.84
Jan - mar'10 8944.63 2050.91
Apr - Jun'10 9566.22 2242.21
Jul - Sep'10 11091.23 2729.34
Oct - Dec'10 12024.93 3045.07
     
  Correlation 0.985970944

31
Beta calculation

BANK NIFTY - Closing SBIN - Closing BANK NIFTY Beta

Date Point Price (Rs) SBIN Returns Returns SBIN
Jan - mar'08 8189.9 2087.02      
Apr - Jun'08 6413.47 1541.04 -26.16074594 -21.69049683 0.798017
Jul - Sep'08 5878.55 1415.6 -8.139957431 -8.340570705  
Oct - Dec'08 4604.8 1249.15 -11.75826505 -21.66775821  
Jan - mar'09 4160.72 1088.3 -12.87675619 -9.643849896  
Apr - Jun'09 6628.6 1500.76 37.89947625 59.31377262  
Jul - Sep'09 7929.5 1806.58 20.37767531 19.62556196  
Oct - Dec'09 8838.35 2259.84 25.08939543 11.46163062  
Jan - mar'10 8944.63 2050.91 -9.245344803 1.20248689  
Apr - Jun'10 9566.22 2242.21 9.327566787 6.94930925  
Jul - Sep'10 11091.23 2729.34 21.72544053 15.94161539  
Oct - Dec'10 12024.93 3045.07 11.56799812 8.418362977  

32
CNX Realty and NIFTY Midcap

33
Nifty Midcap Stocks Wave pattern

34
Suggested stock for Midcap

NIFTY MIDCAP – TITAN-Closing Price

Date Closing Point (Quarter wise)
Jan – mar’08 2649.83 1185.1
Apr – Jun’08 2430.6 1126.2
Jul – Sep’08 2021.6 1155.52
Oct – Dec’08 1246.4 911.14
Jan – mar’09 1141.9 824.8
Apr – Jun’09 1818.9 964.54
Jul – Sep’09 2355.78 1225.2
Oct – Dec’09 2509 1345.4
Jan – mar’10 2582.6 1681.46
Apr – Jun’10 2752.9 2146.3
Jul – Sep’10 2872.05 2885.62
Oct – Dec’10 2974.85 3555.46
     
  Correlation 0.720223624

35
CNX Realty Stocks

DLF Unitech Ltd

IBREALEST DB Realty

36
Overall Suggestions

• SBIN  For long term Investor to buy

• TITAN We can hold this stock .
Because there is a consistent growth in
their wave pattern
• DB Realty For short term investors to
buy
• Importance of 52 week high/Low

37
Conclusion

• This research gives proper guidance to choose suitable

stocks for the naïve investors as per their investment
plan

• From the Broking company perspective, this study will

be used to suggest valuable stocks for their customers
so that they can retain the customers and stimulate
them to invest more and earn more with low risk

38
Bibliography

• www.nseindia.com
• www.bseindia.com
• www.moneycontrol.com
• www.money.rediff.com

39
Thank You