UNIT 2

Primary Market
The primary market is that part of the capital markets that deals with the issuance of new securities.
Companies, governments or public sector institutions can obtain funding through the sale of a new stock
or bond issue. This is typically done through a syndicate of securities dealers. The process of selling new
issues to investors is called underwriting. In the case of a new stock issue, this sale is an initial public
offering (IPO)
MODES OF ISSUING SECURITIES:
1) Initial
Public
Offer
4) Preferential Issue

[IPO]

2)

Follow

on

Offer

[FPO]

3) Rights

Issue

InitialPublicOffer(IPO):
When an unlisted company makes either a fresh issue of securities or an offer for sale of its existing
securities or both, for the first time to the public, the issue is called as an Initial Public Offer.
FollowOnPublicOffer(FPO):
When an already listed company makes either a fresh issue of securities to the public or an offer for sale
of existing shares to the public, through an offer document, it is referred to as Follow on Offer (FPO).
RightsIssue:
When a listed company proposes to issue fresh securities to its existing shareholders, as on a record
date, it is called as a rights issue. The rights are normally offered in a particular ratio to the number of
securities held prior to the issue. This route is best suited for companies who would like to raise capital
without diluting stake of its existing shareholders.
APreferentialissue:
A Preferential Issue is an issue of shares or of convertible securities by listed companies to a select group
of persons under Section 81 of the Companies Act, 1956, that is neither a rights issue nor a public issue.
This is a faster way for a company to raise equity capital. The issuer company has to comply with the
Companies Act and the requirements contained in the chapter, pertaining to preferential allotment in SEBI
guidelines, which inter-alia include pricing, disclosures in notice etc.

GREENSHOE OPTION
Greenshoe option is a special provision in an IPO prospectus, which allows underwriters to sell
investors more shares than originally planned by the issuer. This would normally be done if the
demand for a security issue proves higher than expected. Legally referred to as an over-allotment
option. In simple context. A greenshoe option (sometimesgreen shoe, but must[1] legally be called
an "over-allotment option" in a prospectus) allows underwriters to short sell shares in a

registered securities offering at the offering price. The greenshoe can vary in size and is customarily
not more than 15% of the original number of shares offered.
The greenshoe option is popular because it is one of few SEC-permitted, risk-free means for
an underwriter to stabilize the price of a new issue post-pricing. Issuers will sometimes not include a
greenshoe option in a transaction when they have a specific objective for the proceeds of the
offering and wish to avoid the possibility of raising more money than planned.
The term comes from the first company, Green Shoe Manufacturing (now called Stride Rite
Corporation), to permit underwriters to use this practice in an IPO.[2] The option was used by the
underwriters of the Alibaba Group IPO in September 2014, making it the largest in history.

Online IPO
IPO Online is an internet based platform which enables the investor to submit applications in the public issues (whether it is
under Book Building/Fixed Price) through our website www.smctradeonline.com saving the trouble of submitting application
in paper form to the bidding / collection centers & removing any time constraint. Also, get detailed information & news
on IPO Online, Open Issues, Closed issues, Forthcoming Issues Issues and a lot more.
Investment through Online IPO has following benefits:

24*7 available
Invest at Your Convenience
No Paperwork Involved
Apply with just few clicks
Track your previous order history
Secured payment transfer through HDFC, ICICI & Axis Bank
To start investment through Online IPO, all you need to do is to open an online trading account with SMC. People, who are
interested only in IPO online account account , can register with us by filling up a one time registration form, by paying
minimal charges, to avail this facility

UNIT 3
SHCIL
Stock Holding Corporation of India Ltd (SHCIL), Indias largest[2] custodian and depository
participant based in Mumbai,Maharashtra.[3] It was established in 1986 under the Government of

India as public limited company. It is owned by the India's leading Banks and Financial Institutions
such as, SU-UTI, IFCI Ltd., LIC, GIC, NIA, NIC, UIC, and TOICL.[4] SHCIL is known for itsonline
trading portal with investors and traders.
It is also responsible for e-stamping system around India.[1]
Stock Holding Corporation of India (SHCIL), the country's first and one of the largest security
custodians to financial institutions, will be merged with state-owned lender IDBI Bank, subject to
approvals from regulators and other SHCIL stakeholders. The decision was held on October 31,
2012 and merger will come into force effective Quarter 1 of Calendar Year 2014.

UNIT 4
The secondary market, also called the aftermarket, is the financial market in which previously
issued financial instruments such asstock, bonds, options, and futures are bought and sold.
[1]

Another frequent usage of "secondary market" is to refer to loans which are sold by a mortgage

bank to investors such as Fannie Mae and Freddie Mac.

The term "secondary market" is also used to refer to the market for any used goods or assets, or an
alternative use for an existing product or asset where the customer base is the second market (for
example, corn has been traditionally used primarily for food production and feedstock, but a
"second" or "third" market has developed for use in ethanol production).
With primary issuances of securities or financial instruments, or the primary market, investors
purchase these securities directly fromissuers such as corporations issuing shares in
an IPO or private placement, or directly from the federal government in the case oftreasuries. After
the initial issuance, investors can purchase from other investors in the secondary market.

Function[edit]
In the secondary market, securities are sold by and transferred from one investor or speculator to
another. It is therefore important that the secondary market be highly liquid (originally, the only way
to create this liquidity was for investors and speculators to meet at a fixed place regularly; this is
how stock exchanges originated, see History of the Stock Exchange). As a general rule, the greater
the number of investors that participate in a given marketplace, and the greater the centralization of

that marketplace, the more liquid the market.

Fundamentally, secondary markets mesh the investor's preference for liquidity (i.e., the investor's
desire not to tie up his or her money for a long period of time, in case the investor needs it to deal
with unforeseen circumstances) with the capital user's preference to be able to use the capital for an
extended period of time.

DRAWBACKS OF INDIAN STOCK MARKET

Presently, the fluctuations in the Indian market are attributed heavily to cross border
capital flows in the form of FDI, FII and to reaction of Indian market to global market cues. In
this context, understanding the relationship and influence of various exchanges on each
other
is very important. This study that compares global exchanges which are from different
geopoliticosocio-economic areas. With the cross border movements of capital like never before in
the form of FDI and FII, coupled with the easing of restrictions bringing various stock
exchanges
at par in terms of system and regulations, it can be assumed reasonably that a particular
stock
exchange will have some impact on other exchanges.

If you are referring to the current problem with the stock market, it has to do with the
financial collapse of the sub-prime mortgages that came through Fanny Mae and Freddie
Mac.
These mortgages were bundled and sold as securities and were bought by many
investment houses thereby allowing the crisis to reach deep into the financial system
beyond the bank that lent the money to the people who were unable to pay the money back.
In response to this shock to the market, many investment houses went out of business,
suddenly finding that their assets had no value. Additionally, the credit market tightened up
considerably in response to the bad credit that was dominating the news. Suddenly, people
who had good credit could not borrow money either because all lending institutions were
afraid to lend anyone money, even bank to bank lending was tightened.
The stock market is a reflection of the future, it is highly sensitive to any movement by the

federal reserve, or numbers in the job market or consumer spending.

The stock market is a measure of the health of the economy. When things are bad, the
bears, or the sellers dominate the market. If everyone sells or dumps their stock, bonds,
etc, the market goes down because the value of the investments go down. That is how the
market loses so many points in a single day.
Literally the value of the investment instrument has been lowered by the fact that no one
wants to own it.
The major problem of stock market is highly fluctuating stock prices which are much beyond
the the possible changes in real worth of companies representing the stock.For example,
the stock index of the Mumbai Stock Exchange (Sensex) increased six folds in four years to
reach a level of 21,000 in 1998, just before the crash, and then dropped to 8,000.
Fluctuations like these in collective real worth of all the companies represented by Sensex
is just impossible.
When the going is good and stock prices are on the rise, the politicians and business
leaders encourage the public sentiments and expectations to push up the stock prices to
very high levels. They do this to serve their own selfish ends. Politicians claim that the
economy is doing very well and bask in the glory of their success. Business leader make
huge profits by unloading their shares to the gullible public at very high prices.
But a price rise like this cannot be sustained for ever and then it suddenly crashes like an
overinflated balloon bursts just with the touch of a small pinprick. When this happens, lot of
common people loose money and the sentiments of people turns from overoptimism to
over-pessimism. This is what happened during the Great Crash of 1929, and also in 1998
leading to current crisis.

OTC Exchange Of India (OTCEI)

The OTC Exchange Of India (OTCEI), also known as the Over-the-Counter Exchange of India, is
based in Mumbai,Maharashtra. It is India's first exchange for small companies,[3] as well as the first
screen-based nationwide stock exchange in India. [4] OTCEI was set up to access high-technology
enterprising promoters in raising finance for new product development in a cost-effective manner

and to provide a transparent and efficient trading system to investors. [5]

OTCEI is promoted by the Unit Trust of India, the Industrial Credit and Investment Corporation of
India, the Industrial Development Bank of India, the Industrial Finance Corporation of India, and
other institutions, and is a recognised stock exchange under the SCR Act.
The OTC Exchange Of India was founded in 1990 under the Companies Act 1956 and was
recognized by the Securities Contracts Regulation Act, 1956 as a stock exchange.[6]

Causes for Failure Of OTCEI

The OTCEI has failed because of two major reasons. One, none of the participants in the
OTCEI market have made any significant gains. Issuers have found that marketing their
issues on the OTCEI is not easy. Neither does listing give them any publicity. Some of
the prospective issuers have, therefore, chosen the path of inflating their capital and
seeking listing on a regular stock exchange. Investors have hardly had any worthwhile
returns from OTCEI shares, with a few exceptions. The OTCEI Composite Index, which
had peaked at around 380 in October 1994, is currently just around 100.
The intermediaries, be they members or dealers, have also failed to make any major
gains, while the responsibilities cast on them in terms of sponsorships and market
making with low spreads have proved to be exacting. Most of them enrolled themselves
to become stockbrokers as the dealership was available quite easily and rather cheaply,
compared to the membership of other stock exchanges.
Secondly, the procedure of trading and settlement on the OTCEI is quite cumbersome,
with registration requirements proving to be a deterrent for investors and the T+3
continuous settlement programme casting, as pointed out by Dave Committee, an
onerous responsibility on the support systems such as custodians, clearing houses and
banks apart from the back offices of dealers.

Regional Stock Exchanges (RSE)

DEFINITION OF 'REGIONAL STOCK EXCHANGE'

A place outside of a country's primary financial center where equity in publiclyheld companies is traded. Companies that cannot meet the strict listing
requirements of national exchanges may qualify to trade on regional exchanges.
Companies can choose to list on more than one exchange if they meet the
criteria for registration.
There are 23 stock exchanges in India. Among them two are national level stock exchanges namely
Bombay Stock Exchang (BSE) and National Stock Exchange of India (NSE). The rest 21 are Regional
Stock Exchanges (RSE).
List of Regional Stock Exchanges in India
Ahmedabad
Bangalore
Bhubaneshwar
Calcutta
Cochin
Coimbatore
Delhi
Guwahati
Hyderabad
Jaipur
Ludhiana
Madhya Pradesh
Madras
Magadh
Mangalore
Meerut
OTC Exchange Of India
Pune
Saurashtra Kutch
UttarPradesh
Vadodara
The Regional Stock Exchanges started clustering from the year 1894, when the first RSE, the
Ahmedabad Stock Exchange (ASE) was established. In the year 1908, the second in the series, Calcutta
Stock Exchange (CSE) came into exixtance.
During the early sixties, there were only few recognized RSEs in India namely Calcutta, Madras,
Ahmedabad, Delhi, Hyderabad and Indore. The number remained unchanged for the next two decades.
1980s was the turning point and many RSEs was incorporated. The latest is Coimbatore Stock Exchange
and Meerut Stock Exchange.

DEFINITION of 'Barometer Stock'

A security whose performance is considered to be an indicator of the performance of its
particular sector or industry, or the market as a whole. Barometer stock acts as a gauge for
the overall market or sector. Analysts often look to barometer stocks to predict the direction
in which an industry or market is likely to be headed in the short term.

Some of the stock market indices are: Sensex, NIFTY, BSE-200, CRISIL-500 The indices
give a broad outline of the market movement and represent the market.Stock market
indices are the barometers of the stock market. They mirror the stock market behavior. With
some 7000 companies listed on BSE, it is not possible to look at the prices of every stock to
find out whether the market movement is upward or downward.
2. The investor can use the indices to allocate funds rationally among stocks. To earn
returns on par with the market returns, he can choose the stocks that reflect the market
movement. Indices function as a status report on the general economy. Impact of various
economic policies are reflected on stock market. Index can be used as a bench mark for
evaluating the investors portfolio. Indices help to recognise the broad trends in the
market.Usefulness of indices
The indices are different from each other to a certain extent. Some times the Sensex may
move up by 100 points but NSE nifty may move only 40 points. The main factors that
differentiate one index from other are given below.(I) No. of component stock(II) The
composition of stocks(III) The weights(IV) Base yearDifference between the indices
10. The BSE SENSITIVE index has been long known as the barometer of the daily
temperature of Indian bourses. In 1978-79 stock market contained only private sector
companies and they were mostly geared to commodity production. Hence a sample 30 was
drawn from them. With the passage of time more and more companies private as well as
public came into the market. Even though the no. of scrips in the Sensex basket remained
the same 30, representatives were given to new industrial sectors such as services telecom,
auto sector etc.The BSE SENSITIVE index

NEAT

Trading System

NSE operates on the 'National Exchange for Automated Trading' (NEAT) system, a fully automated screen based
trading system, which adopts the principle of an order driven market. NSE consciously opted in favour of an order
driven system as opposed to a quote driven system. This has helped reduce jobbing spreads not only on NSE but in
other exchanges as well, thus reducing transaction costs.

Market Types

The NEAT system has four types of market. They are:

Normal Market
All orders which are of regular lot size or multiples thereof are traded in the Normal Market. For shares that are
traded in the compulsory dematerialised mode the market lot of these shares is one. Normal market consists of
various book types wherein orders are segregated as Regular lot orders, Special Term orders, Negotiated Trade
Orders and Stop Loss orders depending on their order attributes.
Odd Lot Market
All orders whose order size is less than the regular lot size are traded in the odd-lot market. An order is called an
odd lot order if the order size is less than regular lot size. These orders do not have any special terms attributes
attached to them. In an odd-lot market, both the price and quantity of both the orders (buy and sell) should
exactly match for the trade to take place. Currently the odd lot market facility is used for the Limited Physical
Market as per the SEBI directives.
Auction Market
In the Auction Market, auctions are initiated by the Exchange on behalf of trading members for settlement related
reasons. There are 3 participants in this market.

Initiator - the party who initiates the auction process is called an initiator
Competitor - the party who enters orders on the same side as of the initiator
Solicitor - the party who enters orders on the opposite side as of the initiator

Corporate hierarchy
The trading member has the facility of defining a hierarchy amongst its users of the
NEAT system. This hierarchy comprises:
The users of the trading system can logon as either of the user type. The significance
of each type is explained below:
Corporate Manager: - The corporate manager is a term assigned to a user placed at
the highest level in a trading firm. Such a user receives at the End of the Day Reports
for all branches of the trading member. The facility to set Branch Order Value Limits
and User Order Value Limits is available to the corporate manager.
Branch Manager: - The branch manager is a term assigned to a user who is placed

under the corporate manager. The branch manager receives at End of the Day reports
for all the dealers under that branch. The branch manager can set user order value
limit for each of his branch.
Dealer: - Dealers are users at the lower most level of the hierarchy. A dealer can view
and perform order and trade related activities only for himself and does not have
access to information about other dealers under the same branch or other branches.
Logging on to the neat system
On starting NEAT application, the logon screen appears with the following details:
User ID
Trading
Member
ID
Password
New Password
In order to sign in to the system, the User must specify a valid User ID, Trading
Member ID and the corresponding password. A valid combination of User ID, Trading
Member ID and the password is needed to access the system. Press [Tab] key to move
to the next field. [Shift+Tab] keys can be used to move to the previous field(s). After
entering IDs and password, press the [Enter] key to complete the logon procedure.

UNIT 5
A mutual fund is a financial intermediary that pools the savings of investors
for collective investment in a diversified portfolio of securities. A fund is
mutual as all of its returns, minus its expenses, are shared by the funds
investors.
The Securities and Exchange Board of India (Mutual Funds) Regulations,
1996 defines a mutual fund as a a fund estab-lished in the form of a trust to
raise money through the sale of units to the public or a section of the public
under one or more schemes for investing in securities, including money
market instruments.
According to the above definition, a mutual fund in India can raise
resources through sale of units to the public. It can be set up in the form of
a Trust under the Indian Trust Act. The definition has been further
extended by allowing mutual funds to diversify their activities in the
following areas:

Portfolio management services

Management of offshore funds

Providing advice to offshore funds

Management of pension or provident funds

Management of venture capital funds

Management of money market funds

Management of real estate funds

A mutual fund serves as a link between the investor and the securities
market by mobilising savings from the investors and investing them in the
securities market to generate returns. Thus, a mutual fund is akin to
portfolio management services (PMS). Although, both are conceptually
same, they are different from each other. Portfolio management services are
offered to high net worth individuals; taking into account their risk profile,
their investments are managed separately. In the case of mutual funds,
savings of small investors are pooled under a scheme and the returns are
distributed in the same proportion in which the investments are made by
the investors/unit-holders.
Mutual fund is a collective savings scheme. Mutual funds play an important
role in mobilising the savings of small investors and channelising the same
for productive ventures in the Indian economy.
Benefits of Mutual Funds
An investor can invest directly in individual securities or indirectly through
a financial intermediary. Globally, mutual funds have established
themselves as the means of investment for the retail investor.
1. Professional management: An average investor lacks the knowledge of
capital market operations and does not have large resources to reap the
benefits of investment. Hence, he requires the help of an expert. It, is not
only expensive to hire the services of an expert but it is more difficult to
identify a real expert. Mutual funds are managed by professional
managers who have the requisite skills and experience to analyse the
performance and prospects of companies. They make possible an
organised investment strategy, which is hardly possible for an individual
investor.
2. Portfolio diversification: An investor undertakes risk if he invests all
his funds in a single scrip. Mutual funds invest in a number of companies
across various industries and sectors. This diversification reduces the
riskiness of the investments.
3. Reduction in transaction costs: Compared to direct investing in the
capital market, investing through the funds is relatively less expensive
as the benefit of economies of scale is passed on to the investors.

4. Liquidity: Often, investors cannot sell the securities held easily, while in
case of mutual funds, they can easily encash their investment by selling
their units to the fund if it is an open-ended scheme or selling them on a
stock exchange if it is a close-ended scheme.
5. Convenience: Investing in mutual fund reduces paperwork, saves
time and makes investment easy.
6. Flexibility: Mutual funds offer a family of schemes, and investors have
the option of transferring their holdings from one scheme to the other.
7. Tax benefits Mutual fund investors now enjoy income-tax benefits.
Dividends received from mutual funds debt schemes are tax exempt to
the overall limit of Rs 9,000 allowed under section 80L of the Income Tax
Act.
8. Transparency Mutual funds transparently declare their
portfolio every month. Thus an investor knows where his/her money is
being deployed and in case they are not happy with the portfolio they can
withdraw at a short notice.
9. Stability to the stock market Mutual funds have a large amount of
funds which provide them economies of scale by which they can absorb
any losses in the stock market and continue investing in the stock
market. In addition, mutual funds increase liquidity in the money and
capital market.
10.
Equity research Mutual funds can afford information and data
required for investments as they have large amount of funds and equity
research teams available with them.