IMPORTANT POINTS

FROM EACH
CHAPTERS

Presented by:
NISHANT KUMAR
ASSISTANT PROFESSOR
DEPTT. OF COMM. & MGMT.
CHAPTER 1: INVESTMENT BASICS
 Low risk taker investor- bank deposits/fixed deposits.
 High risk taker investor- equity market.
 Financial asset giving best return in long run- equity
market.
 Equity market also beats inflation in long run.
 IPF(Investor protection fund)- to settle disputes of
investor and protecting their rights in long run.
# Following needs to be considered by an investor,
while investing:
 Assess risk-return profile of the investment.
 Liquidity and safety aspects of the investments.
 Written documents of the investments.
 Dematerialization- converting physical shares into
electronic form.
 Short term investments- bank deposits/fixed deposits.
 Long term investments- bonds/ PPF/Mutual fund.
 Treasury bills: they are short term debt instruments less
than one year to maturity issued at a discount.
 Commercial paper: these are an unsecured promissory
note with less than 270 days.
 Corporates raise resources directly from the investors
through the Primary Market, whereas in the Secondary
Markets, investors buy and sell securities from one another.

Interest rate is affected by:

 (a) Government borrowings
 (b) Supply of money
 (c) Inflation rate
CHAPTER 2: SECURITIES
 Regulators of share market-
 DEA- Department of economic affairs.
 DCA- Department of company affairs.
 RBI- Reserve bank of india
 SEBI-Securities & Exchange Board of India
 Participants of share/securities market:
investor/ mutual fund houses/ merchant bankers/ brokers,
government etc.
 Securities market is a place where buyers and
sellers can acquire shares/A place where various
financial products such as shares, debentures, bonds,
etc. are available for buying and selling
 Index :A basket of shares

(b) An indicator of market movement.

(c) An indicator of the economic conditions of the
country.
 NIFTY Index is used in

(a) Derivatives
(b) Index Funds
(c) Exchange Traded Funds (ETFs)

Listing of securities means - admission of securities

of an issuer to trading privileges on a stock exchange
through a formal agreement
CHAPTER 3: PRIMARY MARKET
 IPO: Initial Public Offer
Companies going public for the first time, shares issued to
public.
In IPO, investors bid for shares at the floor price and after the
closure of the process, the price is determined.
Issue price is not known in advance to the investors.
Rights issue: fresh issue of shares only for existing
shareholders.
Preferential issue: fresh issue of shares for selected group
of persons.
 Primary market- Primary Markets refer to the
mobilization of funds from the public by corporate
through the issue of shares / debentures.

 Equity shares can be acquired from primary market or

secondary market.

 ADR’S –(American Depository Receipts) -An ADR is a

U.S. dollar denominated form of equity ownership in a
non-U.S. company.

 ADR represents the foreign shares of the company held

on deposit by a custodian bank in the company's home
country.
 ADRs cannot be used in public or private markets inside
or outside US.
 ADRs do not eliminate the currency risk associated with
an investment in a non-U.S. company.
 Book Building exercise- it is a mechanism of price
discovery, the investors and participants are willing to pay.
 NSE’s advantage of online price discovery:
 (a ) A fair, efficient & transparent method for collecting bids
using latest electronic systems.
 (b) Costs involved in the issue are far less than those in a
normal IPO.
 (c) The system reduces the time taken for completion of the
issue process.
 The price band in book building is decided by ___the issuing
company in consultancy with Merchant Bankers_.
CHAPTER 4: SECONDARY MARKET
Equity market:
 Equity shares have mostly _outperformed_ all other forms

of investments in the long term.

 T+2 settlement cycle in a stock exchange means, the

trade is settled _2_ days after the trade.

 The Best Buy order is the order with the --Highest buy
order.
 The Best Sell order is the order with the __Lowest sell
price.
 Demutualisation of stock exchanges refer to __the legal
structure of an exchange whereby the ownership, the
management and the trading rights at the exchange are
segregated from one another.

 Only equity shareholder has voting rights in a company

 These are the ways by which companies can raise foreign
funds :
 (a) American Depository Share

 (b) Global Depository Receipts

 (c) Euro Issues

 Debt instrument: Debt instrument represents a contract

whereby one party lends money to

another on pre-determined terms with regards to rate and
periodicity of interest.
 The safer the debt instrument, the lower is the rate of

interest.
 Bonds- issued by central/state government entities.

 Zero coupon bond : no coupon payments and issued at a

steep discount over it’s face value.

 Debentures : issued by private entities.

Preference shares:
 They have prior claim on assets income of the company.
 May posssess the right to participate in surplus profits of the
company.
CHAPTER 5: DERIVATIVES
 ‘Bid’ price refers to buyer’s price.

 Ask' means the ---- Seller’s price.

 Forwards: A forward contract is a customized contract
between two entities, where settlement takes place on a
specific date in the future. No stock exchange is involved.
 Futures: A futures contract is an agreement between two
parties to buy or sell an asset at a certain time in the
future at a certain price.
stock exchange is involved.
 Options: An Option is a contract which gives the right,
but not an obligation, to buy or sell the underlying asset.
 Call option: it gives the buyer the right but not the
obligation to buy a given quantity of the underlying asset.
 Put option: it gives the buyer the right, but not the
obligation to sell a given quantity of underlying asset.
CHAPTER 6: DEPOSITORY

Depository- like a bank where shares are being kept.

 Advantages of depository:
(a) Reduction in the share transfer time to the buyer.
(b) Risk of stolen, fake, forged shares.
(c) Stamp duty on transfer of shares in dematerialized form.
CHAPTER 7: MUTUAL FUNDS
 A mutual fund is a fund that pools money from many
investors and invests the money in securities such as
stocks, bonds, and short-term debt.
 NAV or Net Asset Value of the fund is the cumulative
market value of the assets of the fund net of its
liabilities.
 NAV per unit is simply the net value of assets divided
by the number of units outstanding.
 MF leads to diversification of holdings.
 It is being managed by fund managers.
 Exchange traded funds (ETF’s)
An ETF represents a basket of stocks that reflect an index
such as the Nifty.
An ETF's price changes throughout the day, fluctuating with
supply and demand.
By owning an ETF, you get the diversification of an index fund
plus the flexibility of a stock.
 Index funds : invests only in stocks comprising an index
and aim to give returns as similar to index returns i.e. track
nifty 50 or specific index in the market.
 Sectoral fund invests in particular sector e.g. banking
mutual fund invests in banking sector.
 Balanced fund invests in equity and debt market in equal
proportion.
 Gilt funds invests particularly in government securities.
 Open ended funds do not have a fixed date of
redemption.
 Money market mutual funds invests in treasury bills,
certificate of deposits, commercial papers etc.
CHAPTER 8: MISCELLANEOUS
 Stock split: A stock split is a corporate action which
splits the existing shares of a
particular face value into smaller denominations so
that the number of shares increase. It leads to
 (a) No change in market capitalization
 (b) Increase in the number of outstanding shares
 (c) Decrease in the face value of the share of the
company
 Index refers to:
(a) A basket of shares
(b) An indicator of market movement.
(c) An indicator of the economic conditions of the country.
 ISIN---International Securities Identification Number
 NCDEX--National Commodities and Derivatives Exchange.
 Rate of return which accounts for intra-year compounding –
Effective rate of return.
 The benchmark stock market index of India is NSE Nifty
50_.
RATIO ANALYSIS
 EPS( Earnings per Share)= Net Profit(profit after tax) /
no. of ordinary shares outstanding.
 Market Capitalization:- no. of shares issued x current
market price.
 Dividend yield= annual dividend / market value of share.
 Capital employed = fixed assets + current assets –
current liabilities.
 Authorized capital is the maximum capital that a
company is
authorized to raise.
 Issued capital is that part of the authorized capital which
is offered by the company for being subscribed by
members of the public or anybody.
 Subscribed capital is that part of the issued capital
which is
DIFFERENT INDICES OF THE
WORLD
 India : NSE, BSE
 America: NYSE

 Japan: NIKKEI

 China: Shanghai stock exchange

 UK: FTSE

 Germany: DAX, Frankfurt stock exchange

CHAPTER 9 &10 CONTAINS NUMERICALS

NUMERICALS DONE IN CLASS WOULD BE SUFFICIENT.

THANK YOU