capital market -an overview
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8/7/2019 Capital market -An Overview
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CAPITAL MARKET - OVERVIEW
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³ Market is a place where buyers and sellers come into contactto 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.
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Types of capital market
There are two types of capital market:Primary market
Secondary market
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DIFFERENCE BETWEEN PRIMARY &
SECONDARY MARKET
In the primary market,
securities are offered
to public for subscription for the
purpose of raising
capital or fund.
For example
-Punjab & Sind Bank
-MOIL
Secondary market is an
equity trading avenue in
which already
existing/pre- issued
securities are traded
amongst investors.
For example
-TCS
- SAIL
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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
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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.
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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
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ISSUE TYPE OFFER PRICE DEMAND PAYMENT
Fixed PriceIssuesPrice at which thesecurities are
offered and would
be allotted is made
known in advance
to the investors
Demand for the
securities
offered is
known only
after the
closure of the issue
100 % advance payment isrequired to be made by the
investors at the time of
application.
BookBuildingIssues
A 20 % price band
is offered by the
issuer within which
investors are
allowed to bid andthe final price is
determined by the
issuer only after
closure of the
bidding.
Demand for
the
securities
offered , and
at variousprices, is
available on
a real time
basis..
10 % advance payment is
required to be made by the
QIBs along with the
application, while other
categories of investors haveto pay 100 % advance along
with the application.
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Features of IPO
Kept open for minimum three days andmaximum twenty one days
Under written by financial institution
Prospectus tell about the information like
Status of the company
Performance
Promoters
Capacity
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SEBI Guidelines for an IPO
The promoter company should have three yearsconsistent 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 intelligentdecision regarding investment
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Secondary Market
The secondary market is that market inwhich the buying and selling of the
previously issued securities is done.
The transactions of the secondary marketare generally done through the medium of
stock exchange.
The main purpose of the secondary
market is to create liquidity in securities.
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If an individual has bought some securityand 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.
..
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Features of Secondary Market
It has a Place
It Encourages to create Liquidity
It Comes After Primary Market
It Has A Particular New Investments
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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
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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
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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
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SCREEN BASED SYSTEM
The kind of screen based system adopted in India is referred to asthe 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
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BUYINGAND SELLING OF SHARES
Locating a Broker
Placement of Order
Execution of Order
Internet Trading
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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
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What is a Depository?
A depository is an organisation which holds securities (likeshares, 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)
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SELECTION OF STOCKS ± NAÏVE
INVESTORS PERSPECTIVE
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Executive Summary
The purpose of this study is ³Selection of stocks ±
naive investor¶s perspective´.
Generally there are various methodologies to be
followed for selecting the stock in order to invest andearn 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.
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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
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Problem
Generally naïve investors are having the problem to
choose the valuable stocks
The reason is that lack of knowledge about the marketand 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
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Research Methodology
Research Design: Descriptive research
Secondary data: www.nseindia.com
Past three years data have beencollected for this research
Tools used: Correlation, Percentage,
Beta
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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
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Bank Nifty
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Bank Nifty wave pattern
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Bank Nifty Stocks Wave pattern
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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 1088.3Apr - 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
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Beta calculation
Date
BANK NIFTY - Closing
Point
SBIN - Closing
Price (Rs) SBIN Returns
BANK NIFTY
Returns
Beta
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
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CNX Realty and NIFTY Midcap
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Nifty Midcap Stocks Wave pattern
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Suggested stock for Midcap
Date
NIFTY MIDCAP
Closing Point
TITAN-Closing Price
(Quarter wise)
Jan mar08 2649.83 1185.1
Apr Jun08 2430.6 1126.2Jul Sep08 2021.6 1155.52
Oct Dec08 1246.4 911.14
Jan mar09 1141.9 824.8
Apr Jun09 1818.9 964.54
Jul Sep09 2355.78 1225.2
Oct Dec09 2509 1345.4
Jan mar10 2582.6 1681.46
Apr Jun10 2752.9 2146.3
Jul Sep10 2872.05 2885.62Oct Dec10 2974.85 3555.46
Correlation 0.720223624
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CNX Realty Stocks
DLF Unitech Ltd
IBREALEST DB Realty
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Overall Suggestions
SBIN For long term Investor to buy
TITAN We can hold this stock . Because
there is a consistent growth in their wavepattern
DB Realty For short term investors to
buy
Importance of 52 week high/Low
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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
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Bibliography
www.nseindia.com
www.bseindia.com
www.moneycontrol.com www.money.rediff.com
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Thank You