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INDIAN SECURITIES MARKET
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Games 2010
Sources of Data:
InvestorWords.com
SHERA - The Mascot
EquityMaster.com
Economic Times
The Economist
Rediff Money
Jawahar Lal Nehru
Stadium - INDIA’s MoneyControl.com
PRIDE
Financial Express
Page 2 Fin-Xpress
SEBI regulates the stock market to protect the investing community from various kinds of malpractices, frauds, defaults
Principally there are two segments in securities market:
Primary Market: It is the segment in which new issues are made (New issues Market)
Secondary Market: It is the segment in which the shares already issued in primary market are subsequently traded (Stock Market)
BSE (30 Stock Index) and NSE (50 Stock Index) are the most prominent and happening stock markets in India
Securities one can invest or trade in:
Equity Shares: An ownership in the company and privilege the share owner to have a profit share in the firm
Preference Shares: These owners are given more preference over common share holders in the case a firm gets
liquidated. They pay a fixed dividend before any dividends are paid to common share holders
Rights Issue/Rights Shares: Firms issue these shares if they are facing difficulties in raising money through traditional
means or to avoid interest charges on loans. Provides existing share holders of the firm to buy specifies no. of new shares,
at a specified cost within specified time
Bonus Shares: If the firm converts free reserves or share premium account to equity capital, these shares are issued to
the existing shareholders
Investing in Shares:
Mode-1: Bidding for shares issued as IPOs from Primary or opening a trading account with broker in Secondary Markets
Mode-2: Buying on margin (Borrowing money to purchase stock)
Mode-3: Derivatives trading (Futures, Options)
Debentures: Kind of unsecured loan (long term) raised by firms to finance their operations. A Debenture holder is privileged to receive
fixed amount of interest at the end of every operating cycle. In case of a bankruptcy, these holders are treated as general creditors
Page 3 Fin-Xpress
Government Securities: are Sovereign securities issued by RBI, on behalf of GOI, in lieu of central governments market borrowing
programme. It includes Central & state Government Securities, Treasury Bills
Derivative products: These are instruments whose value stems from some underlying asset such as commodities or equities, or from
an indicator such as interest rate. Ex: swaps, futures, options
Forward Contracts: It is a customized, tailor-made contracts between two parties
Future Contracts: It is an agreement between two parties to buy & sell at future date. These are standardized and
exchange traded contracts
Options: It is a contract which gives the holder the right to exercise the option and not the obligation
Call Option: Holder has right to buy and not the obligation
Put Option: Holder has right to sell and not the obligation
Warrants: Holder has the right to purchase securities (usually equity) from the issuer at a specific price within a certain
time frame. The main difference between warrants and call options is that warrants are issued and guaranteed by the
company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is
often measured in years, while the lifetime of a typical option is measured in months
Participants in Derivatives:
Hedgers: They use the derivatives to reduce or eliminate the risk
Speculators: They wish to bet on future movements in the price of as asset
Arbitragers: They aim at profits by taking advantage of difference in prices in same products among different markets
Units of Mutual Funds: These are the units arising out of a collective
investment by a pool of investors, who pool their money together with
a predetermined investment objective, it will have a fund manager
who is responsible for investing gathered money into specific stocks
or bonds
Page 4 Fin-Xpress
Moving on to the performance of sectoral indices in India -Metal stocks were the top gainers this week, with the BSE-Metal Index rising by 5.2%. It
was followed by the BSE-Realty and BSE-Capital Goods indices, which recorded weekly gains of 4.9% and 3.7% respectively. BSE-Power Index and
BSE-Auto index made up the top 5 performers of the week. Stocks from the oil & gas and FMCG space were the sole losers this week, with the BSE-Oil
& Gas and BSE-FMCG indices ending the week with losses of 0.4% and 0.2% respectively. Small and midsized stocks ended with gains as the BSE-
Smallcap and BSE-Midcap indices ended higher by 1.3% and 1.2% respectively. BSE-PSU was also amongst the laggards with a gain of 1.5%.