market
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
28 May 2010
please tell me about market,and also tell me all about Primery,secendry, capital, money, market
08 August 2010
Capital Market in India
The capital market has 3 components - the equity market, the debt market, and the derivative market. It consists of all those connected with issuing and trading in equity shares and also medium and long term debt instruments, namely, bonds and debentures. It is well accepted that tenures less than one year are considered as short term; while tenures more than one year and up to three years may be taken as medium term while more than three years can be considered as long term.
Both equity and debt market have 2 segments - the primary market dealing with new issues of equity and debt instruments and the secondary market which facilitates trading in equity and debt instruments thereby imparting liquidity to the instruments and making it possible for people with different liquidity preferences to participate in the market.
The capital market operations are regulated by the Securities and Exchange Board of India [SEBI]
Primary Market
The primary market provides a channel for sale of new securities. This market provides opportunity to issuers of securities, the government as well as corporate, to raise resources to meet their requirements of investments and/or discharge their obligations.
They may issue securities at face value, discount, or premium. They may also issue the securities in the domestic market and/or the international market.
Different kinds of issues:
1. Initial Public Offering [IPO] - An initial public offering is when an unlisted company makes either a fresh issue of securities of an offer for sale of its existing securities or both for the first time to the public.
2. Further Issue - A follow on public offering is known as further issue. This is offered through an offer document when an already listed organization makes either a fresh issue of securities to the public or an offer for sale to the public.
3. Rights Issue - Here, a listed organization proposes to issue fresh securities to its existing shareholders as on a record date. The rights are offered in a particular ratio to the number of securities held prior to the issue. This route is best suited for organizations who would like to raise capital without diluting the stake of its existing shareholders.
4. Preferential Issue - This is an issue of either shares or convertible securities by listed organizations to a select group of people under Section 81 of the Companies Act,1956. This issue is neither a Rights issue nor Public issue and is a faster way for any organization to raise capital.
Secondary Market
The secondary market facilitates trading in equity and long term debt instruments, and therefore imparts liquidity and price discovery. It is an equity-trading venue in which the already existing or pre-issued securities are traded among investors. This market could be either the auction-market or the dealer market. While stock exchange is the part of the auction market, OTC is a part of the dealer market.
Concepts of secondary market:
1. Corporate Action - Declaration of dividends, issue of bonus shares, and splitting shares into smaller denominations are called corporate actions. They impact the market price of shares as they alter the intrinsic value of the shares.
2. Buyback of Shares - Buyback is a method for an organization to invest by buying shares from other investors in the market. It is done by the organization for the purpose of improving the liquidity in its shares and enhancing the shareholders’ wealth. As per SEBI regulations, the organization is permitted to buy back its shares from:
* Existing shareholders proportionately through an offer document
* Open market through stock exchanges using the book-building process
* Shareholders holding odd lot shares
3. Index - Index shows how a specified portfolio of share prices is moving to give an indication of the market trends. It is a basket of securities and the average price movement of the basket of securities indicates the index movement, whether upwards or downwards. S& P CNX Nifty (Nifty), is a scientifically developed, 50stock index, reflecting accurately the market movement of the Indian markets.
4. Sensex - Sensex is an index based on shares traded on the BSE. The Sensex and Nifty are the barometers of the Indian markets. The indices are composite in nature in that they cover a large segment of industries.
Derivatives
Derivative is a product whose value is derived from the value of one or more basic variables, called underlying. The underlying asset can be equity, index, foreign exchange (Forex), commodity, or any other asset.
Types of derivatives:
Various types of derivatives relating to shares are:
* Forwards - This is a customized contract between two entities, where settlement takes place on a specific date in the future at today’s pre-agreed price.
* Futures - It is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price.
* Options - An option is a contract which gives the right, but not an obligation, to buy or sell the underlying at a stated date and a stated price.
* Warrants - Options generally have lives of up to one year. Most of the options on exchanges have maximum maturity of nine months. Longer dated options are called warrants and these are generally traded over-the-counter
Interest rate derivatives:
Swaps involve exchange of one stream of interest payments for another stream of interest payments. For example, an organization that has taken a loan at fixed interest rate may like to convert it to a floating rate loan. The organization can enter into a swap transaction with a bank to get interest at fixed rate and pay interest on the same notional capital, the amount of the loan at floating rate. Banks offer interest rate swaps to its customers.
Commodity derivatives:
A commodity exchange is an organization, such as stock exchange, organizing futures trading in commodities. The main commodity exchanges in India are the NCDEX and MCX both of which offer on line trading facility. These markets trade contracts for which the underlying asset is commodity. It can be an agricultural commodity such as wheat, soybeans, rapeseed, cotton, or precious metals like gold and silver.
The capital market has 3 components - the equity market, the debt market, and the derivative market. It consists of all those connected with issuing and trading in equity shares and also medium and long term debt instruments, namely, bonds and debentures. It is well accepted that tenures less than one year are considered as short term; while tenures more than one year and up to three years may be taken as medium term while more than three years can be considered as long term.
Both equity and debt market have 2 segments - the primary market dealing with new issues of equity and debt instruments and the secondary market which facilitates trading in equity and debt instruments thereby imparting liquidity to the instruments and making it possible for people with different liquidity preferences to participate in the market.
The capital market operations are regulated by the Securities and Exchange Board of India [SEBI]
Primary Market
The primary market provides a channel for sale of new securities. This market provides opportunity to issuers of securities, the government as well as corporate, to raise resources to meet their requirements of investments and/or discharge their obligations.
They may issue securities at face value, discount, or premium. They may also issue the securities in the domestic market and/or the international market.
Different kinds of issues:
1. Initial Public Offering [IPO] - An initial public offering is when an unlisted company makes either a fresh issue of securities of an offer for sale of its existing securities or both for the first time to the public.
2. Further Issue - A follow on public offering is known as further issue. This is offered through an offer document when an already listed organization makes either a fresh issue of securities to the public or an offer for sale to the public.
3. Rights Issue - Here, a listed organization proposes to issue fresh securities to its existing shareholders as on a record date. The rights are offered in a particular ratio to the number of securities held prior to the issue. This route is best suited for organizations who would like to raise capital without diluting the stake of its existing shareholders.
4. Preferential Issue - This is an issue of either shares or convertible securities by listed organizations to a select group of people under Section 81 of the Companies Act,1956. This issue is neither a Rights issue nor Public issue and is a faster way for any organization to raise capital.
Secondary Market
The secondary market facilitates trading in equity and long term debt instruments, and therefore imparts liquidity and price discovery. It is an equity-trading venue in which the already existing or pre-issued securities are traded among investors. This market could be either the auction-market or the dealer market. While stock exchange is the part of the auction market, OTC is a part of the dealer market.
Concepts of secondary market:
1. Corporate Action - Declaration of dividends, issue of bonus shares, and splitting shares into smaller denominations are called corporate actions. They impact the market price of shares as they alter the intrinsic value of the shares.
2. Buyback of Shares - Buyback is a method for an organization to invest by buying shares from other investors in the market. It is done by the organization for the purpose of improving the liquidity in its shares and enhancing the shareholders’ wealth. As per SEBI regulations, the organization is permitted to buy back its shares from:
* Existing shareholders proportionately through an offer document
* Open market through stock exchanges using the book-building process
* Shareholders holding odd lot shares
3. Index - Index shows how a specified portfolio of share prices is moving to give an indication of the market trends. It is a basket of securities and the average price movement of the basket of securities indicates the index movement, whether upwards or downwards. S& P CNX Nifty (Nifty), is a scientifically developed, 50stock index, reflecting accurately the market movement of the Indian markets.
4. Sensex - Sensex is an index based on shares traded on the BSE. The Sensex and Nifty are the barometers of the Indian markets. The indices are composite in nature in that they cover a large segment of industries.
Derivatives
Derivative is a product whose value is derived from the value of one or more basic variables, called underlying. The underlying asset can be equity, index, foreign exchange (Forex), commodity, or any other asset.
Types of derivatives:
Various types of derivatives relating to shares are:
* Forwards - This is a customized contract between two entities, where settlement takes place on a specific date in the future at today’s pre-agreed price.
* Futures - It is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price.
* Options - An option is a contract which gives the right, but not an obligation, to buy or sell the underlying at a stated date and a stated price.
* Warrants - Options generally have lives of up to one year. Most of the options on exchanges have maximum maturity of nine months. Longer dated options are called warrants and these are generally traded over-the-counter
Interest rate derivatives:
Swaps involve exchange of one stream of interest payments for another stream of interest payments. For example, an organization that has taken a loan at fixed interest rate may like to convert it to a floating rate loan. The organization can enter into a swap transaction with a bank to get interest at fixed rate and pay interest on the same notional capital, the amount of the loan at floating rate. Banks offer interest rate swaps to its customers.
Commodity derivatives:
A commodity exchange is an organization, such as stock exchange, organizing futures trading in commodities. The main commodity exchanges in India are the NCDEX and MCX both of which offer on line trading facility. These markets trade contracts for which the underlying asset is commodity. It can be an agricultural commodity such as wheat, soybeans, rapeseed, cotton, or precious metals like gold and silver.
08 August 2010
MONEY MARKET
It is a centre in which financial institutions join together for the purpose of dealing in financial or monetary assets, which may be of short term maturity or long term maturity. The short term means, generally a period upto one year and the term near substitutes to money, denotes any financial asset which can be quickly converted into money with minimum transaction cost.
Terms relating to Money Market
Money Market Refers to the market for short-term requirement and deployment of funds.
Call Money Money lent for one day
Notice Money Money lent for a period exceeding one day
Term Money Money lend for 15 days or more in Inter-bank market
Held till maturity Securities which are not meant for sale and shall be kept till maturity
Held for trading Securities acquired by the banks with the intention to trade by taking advantage of the short-term price/ interest rate movements will be classified under held for trading.
Available for sale The securities which do not fall within the above two categories i.e. HTM or HFT will be classified under available for sale.
Yield to maturity Expected rate of return on an existing security purchased from the market
Coupon Rate Specified interest rate on a fixed maturity security fixed at the time of issue.
Treasury operations Trading in government securities in the market. An investor Bank can purchase these securities in the primary market. Trading takes place in the secondary market.
Gilt Edged security Government security that is a claim on the government and is a secure financial instrument which guarantees certainty of both capital and interest. These securities are free of default risk or credit risk, which leads to low market risk and high liquidity.
It is a centre in which financial institutions join together for the purpose of dealing in financial or monetary assets, which may be of short term maturity or long term maturity. The short term means, generally a period upto one year and the term near substitutes to money, denotes any financial asset which can be quickly converted into money with minimum transaction cost.
Terms relating to Money Market
Money Market Refers to the market for short-term requirement and deployment of funds.
Call Money Money lent for one day
Notice Money Money lent for a period exceeding one day
Term Money Money lend for 15 days or more in Inter-bank market
Held till maturity Securities which are not meant for sale and shall be kept till maturity
Held for trading Securities acquired by the banks with the intention to trade by taking advantage of the short-term price/ interest rate movements will be classified under held for trading.
Available for sale The securities which do not fall within the above two categories i.e. HTM or HFT will be classified under available for sale.
Yield to maturity Expected rate of return on an existing security purchased from the market
Coupon Rate Specified interest rate on a fixed maturity security fixed at the time of issue.
Treasury operations Trading in government securities in the market. An investor Bank can purchase these securities in the primary market. Trading takes place in the secondary market.
Gilt Edged security Government security that is a claim on the government and is a secure financial instrument which guarantees certainty of both capital and interest. These securities are free of default risk or credit risk, which leads to low market risk and high liquidity.
08 August 2010
Types of Money Market instruments in India -
Money market instruments take care of the borrowers' short-term needs and render the required liquidity to the lenders. The varied types of India money market instruments are treasury bills, repurchase agreements, commercial papers, certificate of deposit, and banker's acceptance.
* Treasury Bills (T-Bills) - Treasury bills were first issued by the Indian government in 1917. Treasury bills are short-term financial instruments that are issued by the Central Bank of the country. It is one of the safest money market instruments as it is void of market risks, though the return on investments is not that huge. Treasury bills are circulated by the primary as well as the secondary markets. The maturity periods for treasury bills are respectively 3-month, 6-month and 1-year. The price with which treasury bills are issued comes separate from that of the face value, and the face value is achieved upon maturity. On maturity, one gets the interest on the buy value as well. To be specific, the buy value is determined by a bidding process, that too in auctions.
* Repurchase Agreements - Repurchase agreements are also called repos. Repos are short-term loans that buyers and sellers agree upon for selling and repurchasing. Repo transactions are allowed only among RBI-approved securities like state and central government securities, T-bills, PSU bonds, FI bonds and corporate bonds. Repurchase agreements, on the other hand, are sold off by sellers, held back with a promise to purchase them back at a certain price and that too would happen on a specific date. The same is the procedure with that of the buyer, who purchases the securities and other instruments and promises to sell them back to the seller at the same time.
* Commercial Papers - Commercial papers are usually known as promissory notes which are unsecured and are generally issued by companies and financial institutions, at a discounted rate from their face value. The fixed maturity for commercial papers is 1 to 270 days. The purposes with which they are issued are - for financing of inventories, accounts receivables, and settling short-term liabilities or loans. The return on commercial papers is always higher than that of T-bills. Companies which have a strong credit rating, usually issue CPs as they are not backed by collateral securities. Corporations issue CPs for raising working capital and they participate in active trade in the secondary market. It was in 1990 that Commercial papers were first issued in the Indian money market.
* Certificate of Deposit - A certificate of deposit is a borrowing note for the short-term just similar to that of a promissory note. The bearer of a certificate of deposit receives interest. The maturity date, fixed rate of interest and a fixed value - are the three components of a certificate of deposit. The term is generally between 3 months to 5 years. The funds cannot be withdrawn instantaneously on demand, but has the facility of being liquidated, if a certain amount of penalty is paid. The risk associated with certificate of deposit is higher and so is the return (compared to T-bills). It was in 1989 that the certificate of deposit was first brought into the Indian money market.
* Banker's Acceptance - A banker's acceptance is also a short-term investment plan that comes from a company or a firm backed by a guarantee from the bank. This guarantee states that the buyer will pay the seller at a future date. One who draws the bill should have a sound credit rating. 90 days is the usual term for these instruments. The term for these instruments can also vary between 30 and 180 days. It is used as time draft to finance imports, exports.
Money market instruments take care of the borrowers' short-term needs and render the required liquidity to the lenders. The varied types of India money market instruments are treasury bills, repurchase agreements, commercial papers, certificate of deposit, and banker's acceptance.
* Treasury Bills (T-Bills) - Treasury bills were first issued by the Indian government in 1917. Treasury bills are short-term financial instruments that are issued by the Central Bank of the country. It is one of the safest money market instruments as it is void of market risks, though the return on investments is not that huge. Treasury bills are circulated by the primary as well as the secondary markets. The maturity periods for treasury bills are respectively 3-month, 6-month and 1-year. The price with which treasury bills are issued comes separate from that of the face value, and the face value is achieved upon maturity. On maturity, one gets the interest on the buy value as well. To be specific, the buy value is determined by a bidding process, that too in auctions.
* Repurchase Agreements - Repurchase agreements are also called repos. Repos are short-term loans that buyers and sellers agree upon for selling and repurchasing. Repo transactions are allowed only among RBI-approved securities like state and central government securities, T-bills, PSU bonds, FI bonds and corporate bonds. Repurchase agreements, on the other hand, are sold off by sellers, held back with a promise to purchase them back at a certain price and that too would happen on a specific date. The same is the procedure with that of the buyer, who purchases the securities and other instruments and promises to sell them back to the seller at the same time.
* Commercial Papers - Commercial papers are usually known as promissory notes which are unsecured and are generally issued by companies and financial institutions, at a discounted rate from their face value. The fixed maturity for commercial papers is 1 to 270 days. The purposes with which they are issued are - for financing of inventories, accounts receivables, and settling short-term liabilities or loans. The return on commercial papers is always higher than that of T-bills. Companies which have a strong credit rating, usually issue CPs as they are not backed by collateral securities. Corporations issue CPs for raising working capital and they participate in active trade in the secondary market. It was in 1990 that Commercial papers were first issued in the Indian money market.
* Certificate of Deposit - A certificate of deposit is a borrowing note for the short-term just similar to that of a promissory note. The bearer of a certificate of deposit receives interest. The maturity date, fixed rate of interest and a fixed value - are the three components of a certificate of deposit. The term is generally between 3 months to 5 years. The funds cannot be withdrawn instantaneously on demand, but has the facility of being liquidated, if a certain amount of penalty is paid. The risk associated with certificate of deposit is higher and so is the return (compared to T-bills). It was in 1989 that the certificate of deposit was first brought into the Indian money market.
* Banker's Acceptance - A banker's acceptance is also a short-term investment plan that comes from a company or a firm backed by a guarantee from the bank. This guarantee states that the buyer will pay the seller at a future date. One who draws the bill should have a sound credit rating. 90 days is the usual term for these instruments. The term for these instruments can also vary between 30 and 180 days. It is used as time draft to finance imports, exports.
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