capital market -an overview

8/7/2019 Capital market -An Overview

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CAPITAL MARKET - OVERVIEW



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.



Types of capital market

There are two types of capital market:Primary market

Secondary market



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



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



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.



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



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.



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



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



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.



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.

..



Features of Secondary Market

It has a Place

It Encourages to create Liquidity

It Comes After Primary Market

It Has A Particular New Investments



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



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



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



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



BUYINGAND SELLING OF SHARES

Locating a Broker

Placement of Order

Execution of Order

Internet Trading



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



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)



SELECTION OF STOCKS ± NAÏVE

INVESTORS PERSPECTIVE



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

capital market -an overview

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