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STOCK
MARKET
FINANCING MONEY
DEBT FINANCING:
Loan from a finance company
Bonds

EQUITY FINACING
Issuing stocks
Difference between
Debt/Equity
Debt investment :
Guaranteed the return of your money (the
principal) along with promised interest
payments.

Equity investment:
Become an owner
Assume the risk of the company not being
successful
Risk
Debt :
Fixed return irrespective of companys health.
Preference on repayment during bankruptcy.
Mostly works close ended.

Equity:
Return essentially dependent on companys
health.
Works on perpetual life principle.
Mostly open ended, though can be both.
Second preference in case of bankruptcy.

WHY GO PUBLIC?
Because of the increased scrutiny, public companies
can usually get better rates when they issue equity.
As long as there is market demand, a public
company can always issue more stock. Thus,
mergers and acquisitions are easier to do because
stock can be issued as part of the deal.
Trading in the open markets means liquidity. This
makes it possible to implement things like
employee stock ownership plans, which help to
attract top talent.
STOCK MARKET
Primary market:
The primary market is where securities are created
(by means of an IPO)

Secondary Market
Where investors trade previously-issued securities
without the involvement of the issuing-companies.
The secondary market is what people are referring
to when they talk about "the stock market."
How does share buy/sell
1.Underwriting process


2.Launch of an IPO


3.Listing and trading


Underwriting Process
Hire a merchant banker
e.g- Morgan Stanley, Meryll
Lynch, Goldman Sachs

The red herring prospectus

The launch of an IPO and listing
Trading
Once it get listed in stock market and ready for
trade it
Trading follows Auction Market paradigm.
Price depends on demand:
If more people want to buy a stock (demand) than
sell it (supply), then the price moves up. Conversely,
if more people wanted to sell a stock than buy it,
there would be greater supply than demand, and
the price would fall.

Important points to note
Trading of a companys stock does not involve
the company.
Companys value cannot be equated to stock
price. The value of a company is its market
capitalization.
Market capitalization
= Stock price Number of stock outstanding
The Animals
The Bulls A bull market is when
everything in the economy is great,
people are finding jobs, GDP is
growing, and stocks are rising

Employment, increments and greater
disposable income creates greater
demand for investment options and
hence raising the price of shares
directly or indirectly.
The Animals
The Bears A bear market is when the economy is
bad, recession is looming, and stock prices are
falling. Bear markets make it tough for investors
to pick profitable stocks. One solution to this is to
make money when stocks are falling using a
technique called short selling. Another strategy is
to wait on the sidelines until you feel that the
bear market is nearing its end, only starting to
buy in anticipation of a bull market.


The indices
SENSEX is India's first Index
compiled in 1986. It is a basket of
30 constituent stocks representing
a sample of large, liquid and
representative companies.

The base year of BSE-SENSEX is
1978-79 and the base value is
100.
Indices
S&P CNX Nifty is a 50 stock index accounting
for 23 sectors of the economy. It is used for
purposes such as benchmarking fund
portfolios; index based derivatives and index
funds.

The base period selected for Nifty is the close
of prices on November 3, 1995 and base
value is 1000.
Indices contd..
Nifty is calculated on the "Full Market
Capitalization" methodology.
SENSEX is the only Broad market index in
India that is constructed on the "Free-Float
Market Cap methodology. This is the globally
accepted methodology that is followed by
most of the leading index providers.

HEDGING
Hedging against investment risk means
strategically using instruments in the market to
offset the risk of any adverse price
movements.

Hedging techniques involve using complicated
financial instruments known as derivatives, the
two most common of which are Options and
Futures.
TEN LARGEST STOCK EXCHANGES IN WORLD
(IN BILLION US $) AS ON 31/12/2011
SEBI
Established in 1988
Became a fully autonomous body in 1992
with the passing of SEBI Act
A statutory and autonomous regulatory board
with defined responsibilities, to cover both
development & regulation of the market, and
independent powers
Functions of SEBI
To protect the interests of investors in
securities;
To promote the development of Securities
Market;
To regulate the securities market and
For matters connected therewith or incidental
thereto.

Bibliography
http://www.bseindia.com/
http://www.nse-india.com/
http://www.sebi.gov.in/