Course Name : Financial Markets and

Services
Course Code: FM-406

Prof. Sayanti Samanta

  
Ability to understand the basic concepts of Indian Financial
CO 1 System, Overview of Money Market, New Issues Market and
Secondary Market.
 

 
Ability to explain and establish the functions of Securities and
Exchange Board of India, Mutual Funds, scope and importance
CO 2 of Merchant Banking, Discounting, Factoring and Securitization,
Concepts of Credit Rating Agencies.
 
 

 
Ability to analyze trends in Mutual Funds, NAV and SIP,
CO 3
evaluating Leasing & Hire Purchase Finance.
 
 Financial System
• Meaning: The financial system is an organized
and regulated structure where an exchange of
funds takes place between the lender and the
borrower.
Functions of Financial System
 Financial Assets
• Meaning: Financial assets refer to assets that
arise from contractual agreements on
future cash flows or from owning equity
instruments of another entity.
Classification of Financial Assets
 Financial Intermediaries
Meaning: Financial intermediary is the
organization which acts as a link between the
investor and the borrower, to meet the
financial objectives of both the parties. 
Types of Financial Intermediaries
 Financial Markets
Financial Market refers to a marketplace,
where creation and trading of financial assets, such
as shares, debentures, bonds, derivatives, currencies,
etc. take place. It plays a crucial role in allocating
limited resources, in the country’s economy. 
Classification of Financial Markets
 Financial
Investors Borrowers
Markets
Financial Instruments
How an Index Works ???

• Suppose we created an index to track the price of a gallon of milk.

• let's say milk costs $2.00 a gallon.
• The starting index value is 1.
• When milk goes to $2.50, our index goes to 1.25, which reflects a
25% increase in the price of milk.
• If milk then goes to $2.25, the index goes to 1.15. The .10 change
reflects a 10% decrease in the price of milk.
• If you were a milk dealer, you might find a milk index useful.
Instead of going to the store each day to write down the prices of
each competitor's milk and averaging them together, the index
would provide that data for you.
 Derivatives and Hedging
• Gail, the owner of Healthy Hen Farms, is worried about the recent
fluctuations in chicken prices or volatility within the chicken market
due to reports of bird flu. Gail wants to protect her business against
another spell of bad news. So she meets with an investor who
enters into a futures contract with her to buy the birds at a future
date.
• The investor agrees to pay $30 per bird when the birds are ready
for slaughter in six months' time, regardless of the market price. If
at that time, the price is above $30, the investor will get the benefit
as they will be able to buy the birds for less than the market cost
and sell them on the market at a higher price for a profit. If the
price falls below $30, Gail will get the benefit because she will be
able to sell her birds for more than the current market price, or
more than what she would get for the birds in the open market.
•
• Concept: 
• Money market basically refers to a section of
the financial market where financial
instruments with high liquidity and short-term
maturities are traded.
• Money market has become a component of
the financial market for buying and selling of
securities of short-term maturities, of one
year or less, such as treasury bills and
commercial papers.
Money Market Instruments
Commercial Papers