A PROJECT ON

“FINANCAL MARKETING”
SUBMITTED BY: OMKAR NAVALE

Roll No. 332

Submitted to,

UNIVERSITY OF MUMBAI
BACHELOR OF COMMERCE (FINANCIAL MARKETING)

Semester VI
(2018-2019)

Project Guidance by Professor: DEVENDRA VYAS

Uttari Bharat Sabha’s

RAMANAND ARYA D.A.V. COLLEGE

DATAR COLONY BHANDUP (E), MUMBAI- 400042.

1
 A PROJECT ON “FINANCIAL MARKETING”

BACHELOR OF COMMERCE (FINANCIAL MARKETING)

Semester VI

University of Mumbai

(2018-2019)

Submitted

In Partial Fulfillment of the requirements

For the Award of Degree of Bachelor of Commerce

(Finance and Marketing)

By OMKAR NAVALE

Roll No. 332

Uttari Bharat SaBha’S

RAMANAND ARYA D.A.V. COLLEGE

DATAR COLONY BHANDUP (E), MUMBAI-400042

2
 DECLARATION
I, Mr.OMKAR NAVALE the Student of Bachelor of Commerce (Financial Marketing)
Semester VI (2018-2019) hereby declare that have completed the

Project on “FINANCIAL MARKETING” The information submitted is true and original to

the best of my knowledge

SIGNATURE OF THE STUDENT

GAJANAN MORE

ROLL NO.331

3
 ACKNOWLEDEMENT
I owe a great many thanks to a great many people who helped and supported me
doing the writing of this book. My deepest thanks to lecturer, Prof. DEVENDRA
VYAS Guide of the project for guiding &correcting various documents of mine with
attention care. He has taken pains to through my project and make necessary
corrections as and when needed.

I extended my thanks to the principal Dr. Ajay Bhamare of Ramanand Arya D.A.V.
College of Commerce &Science for extending support. My deep sense of gratitude to
Principal Dr. Ajay Bhamare ofRamanand Arya D.A.V College of Commerce & Science
for support & guidance. Thanks and appreciation to the helpful people at Ramanand
Arya D.A.V College of Commerce & Science, for the support.

I would also thanks my institution and faculty without whom this project has been a
distant reality. I also extended my heartfelt thanks to my family and well-wishers.

4
 EXECUTIVE SUMMARY
India’s investment climate continues to send mixed signals, as the BhartiyaJanata
Party (BJP), led by Prime Minister NarendraModi, actively courts investment, but
implementation of economic reforms to attract investors does not meet rhetoric. The
economy as a whole performed well in 2016, growing over 7% with a stable rupee and
political stability throughout the country. Non-performing assets continue to hold back
banks’ profits and limit their lending. However, stable, relatively low inflation, weak
credit demand, and strong management from India’s central bank, the Reserve Bank of
India, have mitigated the negative impact on credit. Employment, while difficult to
measure given the large informal economy, appears to lag growth, while a
demographic boom means India must generate over ten million new jobs every year.

India has opened foreign direct investment (FDI) by particular sector, sometimes all at
once and sometimes gradually reducing the FDI limitations. In 2016 the government
opened FDI in private security and approved pharmaceutical projects to 74%, and
increased investment in defense to 49% under the automatic route. With government
clearance, defense and pharmaceutical investments can exceed the capped limit. It also
allowed 100% FDI in food products, marketplace model e-commerce, broadcasting,
airports on land already zoned for that use, and air transport services. In 2016, FDI
into India jumped 18% to a record $46.4 billion, though Foreign Portfolio Investments
(FPI) saw a net outflow of $2 billion. Multinational companies made large investment
into the electronics, solar energy, automobile, defense, and railways sectors. Finance
Minister ArunJaitley, in his annual budget speech, formally proposed abolishing the
Foreign Investment Promotion Board, which screens FDI, in an effort to ease
investment.

On the legislative front, Parliament passed a constitutional amendment to replace the

fractured, state-level tax code with a nationwide goods and services tax (GST). It also
replaced myriad existing laws on the reorganization of companies, insolvency, and
asset restructuring into one unified law via the Securitization and Reconstruction of
Financial Assets and Enforcement of Security Interest Act. These steps should reduce
the time taken to dissolve a company, and speed up the process of debt recovery for
investors.

The Modi government undertook further reforms in 2016 to formalize the large
inform

5
 economy, and digitize the economy. In addition to the GST overhaul, which will result in
greater tax registration and digital tax reporting, the government demonetized its INR 500
and INR 1000 notes, worth 86% of the currency in circulation, causing a shock to the economy
in November-December 2016. Through demonetization, the government aimed to better track
undeclared earnings (known as “black money” in India) for tax purposes, and increase the
usage of digital payments which lags other major emerging economies.

India announced its intention to abrogate all bilateral investment treaties (BITs) negotiated
on the basis of its 1993 model BIT. Some BITs have already lapsed and the rest will do so in
2017. India intends to renegotiate them on the basis of its new December 2015 model BIT
which requires that foreign investors exhaust all domestic judicial remedies for up to five
years, before entering into international arbitration, unless the claim is not judicable by
Indian courts. This shift is an attempt to see investment disputes are resolved in domestic
courts, as India has lost a number of recent disputes in international arbitration.

The United States currently does not have a BIT with India. In 2017, the government expects to
implement its GST on July 1, which will transform the tax code and could lead to significant
structural changes in the economy. Investors will also monitor how the government screens
FDI following the abolition of the Foreign Investment Promotion Board (FIPB). Investors will
also pay close attention to further liberalization of FDI – the government has discussed
expansions of the food and insurance investment policies, while industry awaits changes to FDI
policy in multi-brand retail.

6
 INDEX
Chapter Topic Page No.
No.
1 INTRODUCTION OF FINANCIAL MARKETING
CONCEPT & OBJECTIVES OF FINANCAIL MARKETING
GUIDELINES FOR BANKS DEALING IN FINANCE
TYPES OF FINANCIAL MARKET

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 CHAPTER 1
INTRODUCTION OF
FINANCIAL MAKETING
Financial markets are places where people and companies come to buy and sell
assets like stocks, bonds (debt), commodities and other products.

People have traded on financial markets for hundreds of years and they grew
out of a very real practical need – to help people buy and sell things more
efficiently, and to help companies that needed money to raise it more quickly.

Over the years, markets have grown bigger and faster. More people than ever
before are now able to get access to these markets. Once they were the preserve
of big banks, finance houses and very wealthy individuals, but no longer.

8
 CHAPTER 2
CLASSIFICATION OF FINANCIAL MARKETS
There are 2 broad classifications of financial markets. (a) the organized markets
and (b) the unorganized market. Furthermore, these 2 broad categories are
further sub-classified into various heads. Read further to gain absolute in-depth
knowledge of the various kinds/ classifications of financial markets.

I. ORGANIZED MARKET
The organized market consists of standard rules and regulations which govern
the functioning of financial dealings. Moreover, the financial organizations
which follow the rules and regulations of apex institutions while dealing with
their financial functions belong to the organized financial market. Therefore,
there is a high degree of institutionalization and instrumentalization. Moreover,
these markets are often also subject to high supervision and strict control of the
RBI or any other regulatory body.

They are further subclassified into capital market and money market.

1. Capital Market
The capital market is a market that deals with financial assets. These financial
assets have a long maturity period or an indefinite maturity period. Moreover,
the capital market deals with any long-term securities which have a maturity
period of above one year. In simple words, the capital market is a financial
market that deals with:

 financial assets with long or indefinite maturity period; and

 long-term (wherein the maturity period is beyond 1 year) securities
Furthermore, the capital market is further sub-classified into 3 broad
categories Industrial securities market, government securities market and long-
term loans market.
a. Industrial securities market
It is a market for industrial securities only. It deals with industrial securities like
equity shares, preference shares, debentures, bonds, etc. Moreover, it is a market
where industrial organizations raise their capital by issuing investment
instruments to the public.

Furthermore, this market is of 2 types, primary market and secondary market.

(i) Primary Market – is also another name for ‘new issue market’ or ‘new
financial claims’. The primary market or the new issues market deals with those
financial securities that are issued to the investing public for the first time.
Moreover, the borrowers in the primary market exchange new financial
securities for long-term funds. And thus primary market helps in the formation
of capital.

There are 3 ways in which the company can raise capital in the new issues
market. The company can either choose the public issue, the rights issue or the
private placements. In addition, the public issue is common when new
companies want to raise capital for the first time. However, if an existing
company wants to raise further capital, it first offers to the existing
shareholders. This is the rights issue. Finally, private placements are the way
of selling securities privately to small groups of investors.

(ii) Secondary Market – is also another name for the stock exchange. The
secondary market is a market for the secondary sale of securities. In simple
words, securities which were already a part of the primary market are a part of
this market. However, the secondary market facilitates the buying and selling of
secondary securities. Moreover, these securities are often a part of the stock
exchange trades. This market provides for a continuous and regular market for
the buying and selling of secondary securities.

b. Government securities market

This securities market indulges in the trading of government securities.
Moreover, there are 2 types of government securities: long-term and short-term.
Therefore, the long-term government securities are a part of the capital market
and the short-term government securities are a part of the money market. Some
examples of government securities that are a part of this market are securities
issued by the:
 Central government
 State government
 Port trust
 Semi-government authorities
Furthermore, these government securities may be in the form of:

 promissory note
 stock certificates
 bearer bonds
c. Long-term loans market
In this market, development banks and commercial banks play a major role in
supplying loans. These banks comprise the long-term loans market wherein they
lend long-term loans to corporates. They are further classified into 3 types.

(i) Term Loan Market – is responsible for providing term loans to corporate
customers either directly or indirectly. Furthermore, they either provide long-
term loans or medium-term loans to the customers.

(ii) A market for Mortgages – is a market that supplies mortgage loans mainly
to only individual customers. However, such is loan is often given against the
security of an immovable property.

(iii) A market for Financial Guarantees – is a market where finances are

provided with the guarantee of a reputed person.
 2. Money Market
The money market is a market that deals with financial assets. These financial
assets have a short maturity period or a definite maturity period. Moreover, the
money market deals with any short-term securities which have a maturity
period of under one year. In simple words, the money market is a financial
market that deals with:

 financial assets with short or definite maturity period; and

 short-term (wherein the maturity period is below 1 year) securities
Furthermore, the capital market is further sub-classified into 4 broad categories.

a. Call money market – is a market for extremely short period loans.

These loans mature within 1 to 14 days. Therefore, they are highly
liquid in nature. Moreover, these loans are repayable on demand,
either at the option of the lender of the borrower.

b.

b. Commercial bill market – is a market for bills of exchange arising out of

trade transactions that are genuine in nature. However, the bill market is
underdeveloped in India. Although the RBI is taking many steps to develop a
proper bill market, it seems to be difficult to establish one in India.

c. Treasury bill market – is a market for treasury bills which has a very short-
term maturity period. In addition, a treasury bill is a promissory note that is
issued by the Government. However, there are 2 types of treasury bills: (i) the
ordinary and (ii) the ad hoc treasury bills.

d. Short-term loan market – is a market where short-term loans are provided

to corporate customers. Because these loans facilitate the meeting of the firm’s
working capital requirements.
II. UNORGANIZED MARKET
There are many money lenders and indigenous bankers who lend money to the
public. These money lenders do not fall under the supervision of any specific
apex institute. And hence, they do not have to follow strict principles, rules and
regulations. Many private finance companies and chit funds do not fall under the
control of the RBI. Such institutions comprise of the unorganized financial
markets.
 CHAPTER 3
THE FINANCIAL MARKETS

OBJECTIVES

Students will be able to:

• Understand the trade-off between risk and reward in investing

• Identify and define the three major financial asset classes

• Explain what factors cause financial market fluctuations and crises

List the three dates in the past century before 2007 when the US stock market
declined dramatically

• Explain why governments and companies have issued bonds historically and
today

• Describe what drove the history of the delivery of information to investors

VOCABULARY

Asset – Something of value to an individual or a company. The major financial

asset classes are stocks, bonds and commodities.

Bear Market – A market that is declining in value.

Bonds – A financial instrument that is a promise to repay borrowed money.

Bonds are issued at a fixed rate of interest, and with a set maturity date. Bonds
traded in the financial markets include treasuries, municipal bonds, corporate
bonds and asset backed securities, such as those backed by a package of
mortgage loans.
 Bubble – An extended period of extreme overvaluation. During a bubble,
investors are driven by contagious optimism and by the fear of missing out while
others make millions. A bubble can occur to the stock, bond, commodity or real
estate markets, or to the economy of one country or region. Bull Market – A
market that is rising in value.

Commodities – Any raw material, such as oil, silver, gold, wheat or pork bellies.
Commodities can be sold for physical delivery, or traded as “futures” on a
commodities exchange, where investors or farmers or companies buy or sell a
raw material for delivery at a certain price on a set date in the future. Financial
futures, such as foreign exchange and interest rates, are also traded on
commodity exchanges.

Commodity Exchange – A place which offers a regulated market in everything

from the future price of pork bellies to stock indexes. The Chicago Mercantile
Exchange Group (CME) is a futures exchange where interest rates, foreign
exchange and stock indices, among other things, are traded. Credit –The ability
of a person(s) or organization(s) to borrow money.

Diversification – Investing in more than one type of asset to reduce investment

risk. For example, a diverse portfolio includes different stocks from a variety of
industries.

Dividend – A payment made to shareholders from a company’s earnings, usually

quarterly. The company’s board of directors usually set the amount of the
dividend.

Dow Jones Industrial Average – An index that measures the performance of a

basket of 30 stocks, used widely to track the performance of the stock market.
The first Dow Jones Industrial Average, created in 1896, consisted of only 12
stocks, 11 of which are still in business today.

Earnings per share –The profits allocated to each outstanding share of stock.
This figure is determined by dividing the company’s net income by the number of
shares outstanding.
Futures – A financial instrument that represents a legally binding agreement to
buy or sell a specified quantity of a commodity at a set price and location on a
predetermined date.

Insider Trading – The illegal manipulation or communication of information by

insiders to get an investing edge.

Liquidity – The ability of an asset to be changed into cash quickly and without a
price decrease.

Stocks – A share of ownership in a company. Stock Exchange – A marketplace

where stocks are bought and sold.

Ticker – A scrolling print or electronic display of current stock prices. Volatility –

The rate at which the price of a stock, bond or commodity changes (fluctuates)
in value. This may also be applied to an entire exchange, or the market in
general.

Yield – For a bond, the yield is the income from the interest rate on the bond
divided by its face
 CHAPTER 4

Functions of financial markets

 Intermediary functions: The intermediary functions of financial
markets include the following
 Transfer of resources: Financial markets facilitate the transfer of
real economic resources from lenders to ultimate borrowers.
 Enhancing income: Financial markets allow lenders to earn interest
or dividend on their surplus invisible funds, thus contributing to the
enhancement of the individual and the national income.
 Productive usage: Financial markets allow for the productive use of
the funds borrowed. The enhancing the income and the gross national
production.
 Capital formation: Financial markets provide a channel through
which new savings flow to aid capital formation of a country.
 Price determination: Financial markets allow for the determination
of price of the traded financial assets through the interaction of buyers
and sellers. They provide a sign for the allocation of funds in the
economy based on the demand and to the supply through the
mechanism called price discovery process.
 Sale mechanism: Financial markets provide a mechanism for selling
of a financial asset by an investor so as to offer the benefit of
marketability and liquidity of such assets.
 Information: The activities of the participants in the financial market
result in the generation and the consequent dissemination of
information to the various segments of the market. So as to reduce the
cost of transaction of financial assets.
  Financial Functions

Providing the borrower with funds so as to enable them to carry out their
investment plans.

Providing the lenders with earning assets so as to enable them to earn

wealth by deploying the assets in production debentures.

Providing liquidity in the market so as to facilitate trading of funds.

Providing liquidity to commercial bank

Facilitating credit creation

 Promoting savings
 Promoting investment
 Facilitating balanced economic growth
 Improving trading floors