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Market indices are developed by individual stock exchanges to provide Representative sample of the market Birds eye view of the market activity Barometer of economy to reflect the growth Just as inflation rate and interest rate are used as single point representative of nations economy indices tell about the market activity.
index.
Outstanding Base Price Shares (Rs) (in lacs) A 500 120 B 800 150 C 600 110 Cumulative change Index Value
STOCK
INDIAN INDICES
Sensex of BSE of 30 stocks Nifty 50 of NSE: 50 stocks
FEATURES - NIFTY Base 1,000 on Nov 3, 1995 with market cap of Rs 2.06 trillion Real time basis and up to two decimal places Market cap based, from June 26, 2009 based on free float Represents about 52% of traded value, and 63% of market capitalisation Reviewed every 6 months with notice of 6 weeks
ADJUSTMENT OF INDEX
Index value is adjusted for Rights Issue, Debt and Warrants conversion, Public Issues, including ADRs/GDRs, Corporate Restructuring, Mergers and Acquisitions Index value does not require adjustment for Bonus, Share splits Base value is adjusted for addition/deletion in the index
gain/loss Dividend need to be adjusted for separately if total return is the criteria. Dividend is indexed and then added to value of index
ADJUSTMENT OF INDEX
Market cap on Cum date, Rs Index Value Number of existing shares of firm Market price of the share, Rs Existing Market cap of firm, Rs Number of new shares Price of new shares, Rs Market cap added, Rs New market cap of firm, Rs New Number of shares Theoretical price, Rs Market cap reduced, Rs New market cap of Index, Rs Old base cap of index, Rs New base cap of index, Rs RIGHTS 1:4 2,553.60b 1,160.15 13,70,12,320 181.45 24.86b 3,42,53,080 55.00 1.88b 26.74b 17,12,65,400 156.16 2,555.48b 2,201.09b 2,202.72b BONUS 1:2 2,227.00b 1,015.80 2,57,68,086 2,862.00 73.75b 1,28,84,043 73.75b 3,86,52,129 1,908.00 2,227.00b No adjustment No adjustment DEBT CONVERSION 1,852.20b 897.25 90,31,56,100 17.80 16.08b 23,64,62,800 17.80 4.21b 20.29b 1,13,96,18,900 17.80 1,856.41b 2,064.31b 2,069.00b MERGER 1,990.00b 924.10 19,91,67,287 1,704.20 339.42b 2,04,02,209 1,704.20 34.77b 374.19b 21,95,69,496 1,704.20 37.10b 1,987.67b 2,153.45b 2,150.92b
SECURITISATION
Securitisation is the process of conversion of cash flows
into marketable securities. It is a process by which illiquid assets, such as instalments of consumer loans, housing loans, auto loans, credit card receivables etc. are converted in to tradable securities, and sold to third parties. Process of converting loans, receivables into negotiable instruments.
SECURITISATION
It helps disintermediation, encourages price
competition and lowers interest cost. In USA over $ 2.3 trillion is outstanding as MBS (1999) and about 25% of auto loans and credit card receivables are funded through Securitisation.
BENEFITS OF SECURITISATION
Alternative source of fund: Originator can augment
resources for funding by securitising future receivables. May be cheaper as the rating done for the securitisation may be higher than the stand-alone rating of the originator. P & L Management Tool: Results in up front booking of profit, and therefore level of assets that can be securitised may be determined depending upon the profit desired. Sustained securitisation by NBFCs leads to improved ROCE and ROE as resources are enhanced with same capital. Balance Sheet Management Tool: For originator it is an off balance sheet transaction generating funds without addition to borrowing. NBFCs can continue to meet capital adequacy requirement and yet generate more funds.
pool of assets rather than the issuer. Securitisation results in transfer of risk and reward from originator to the investors. Secured lending is with recourse where lender has lien on general cash flows of the originator.
services have already been delivered, while securitising the future flows the product/services have not been delivered by the originator, e.g. securitisation of sales of future ticket by airline, giving rise to generation risk.
Securitisation vs. Bonds: Securitisation is done by Pass Through Certificates (PTCs). Originator collects receivable and passes to Issuer, who in turn services the investors. SECURITISATION BONDS Safety Measures (Provide cushion) Realisation
Loan to Value Seasoning of receivable Charge on assets