Financial Markets: An Overview- B.V.Raghunandan, SVS College, Bantwal

Besant Women’s College,

Mangalore.

April 10, 2010

Genesis: Ownership• Nature of Organisation• Varied Securities• Nature of Securities decide the Claims of

the Investors on the Organisation• Only Corporate form of Organisation

needs the Financial Markets• Financial Markets decide the maturity of

the economy

Nature of Organisation

Nature of Organisation

Sole-Proprietorship(O

wnership not transferrable)

Partnership (Ownership not transferrable)

Corporate

(Transferrable Ownership)

Corporate

(Joint Stock Company)

Private Ltd (Restricted Transfer)

Public Ltd (Unrestricted Transfer)

Listed Companies (Ownership is

Tradable Commodity)

Unlisted Companies

(Unrestricted Transfer)

Government Company

Listed Company (Ownership is a

Tradable Commodity)

Unlisted Company

Ownership of a Listed Company

• Equity Shares: An indefinable concept• Also known as stock, ordinary share, or

common share• Represents a fraction of the ownership of

a joint stock company• The lowest denomination of ownership• Valuation is the most difficult aspect• Tradable commodity and hence needs a

market for trade

Beginning of the Story: Primary Market

• A public limited company issues the shares directly through IPO to the public

• Fixed price offer or through book-building• As per SEBI Regulations• Condition is compulsory listing of shares• Principle is wider holding of shares

Continuation of the Story: Secondary Market

• Stock Exchange/Stock Market• Organised Market• Ready Market for listed securities• Listed securities are equity shares of

public limited companies, equity shares of disinvested government companies, debt securities of government, local bodies, and corporates

Requirement for the Survival of an Organised Market

• Contrarian Thinking• Width• Depth• Volume• Matching Demand &

Supply• Regulation• Investor Protection• Speculation

Stock Exchange

• An organised market for second-hand corporate and other listed securities

Stock Market Players

• Retail Investors• Institutional Investors• Corporates• Jobbers• Brokers• HNI• FII• Banks

Equity Shares: the Queen of Investment

• Annual Income: Interim Dividend, Annual Dividend, Special Dividend

• Capital Appreciation (Market Price)

• Bonus Shares• Splitting of Shares• Sponsored ADR

• Buy-back of shares• M & A opportunities• Tax Benefit• Liquidity• Daily Evaluation• Easy Raising of

Finance• Annual Reports

Where to Begin……

• Get a PAN Card• Apply to a DP for opening a Demat A/c• Open a Trading A/c with a Broker• Watch the market for some time• As far as possible, buy in the depressed

market

Investment Strategies• Master your

behaviour• Get out of Sheep

Mentality• Make long-term/life-

time investment• Buy in depressed

markets• Sell in overheated

markets• Monday-Friday

Dangerous Investment Behaviours

• Investing borrowed money• Investing retirement corpus• Frequent buying and selling• Pyramiding (pledging the

shares to get money to invest more)

• Overexposure and Total Absence

• F & O Transactions• Too much engagement

THANK YOU