Security Analysis

and Portfolio
Management
MBA
Speculator and Investor

Investor Speculator
Time horizon Plans for a longer time horizon Plans for a very short
period
Risk Assumes moderate risk Willing to undertake high
risk
Return Likes to have moderate rate of return associated with
limited risk Likes to have high returns for assuming high risk
Decision Considers Fundamental factors and evaluates the
performance of the company regularly Considers inside
information,heresays and market behaviour
Funds Uses his own funds and borrowed funds Uses borrowed
funds to supplement his personal resources
Participants of securitys market

 Issuer
Corporate entities issue equity shares and debentures,while financial
institutions and public sector enterprises issue equity shares as well as
bonds
The RBI issues government dated securities,treasury bills and bonds
Mutual fund companys issue mutual fund entitys
Buyer

 The buyer segment comprises of domestic institutional

investors,corporate entities,banks,pension funds,mutual funds,retail
investors and foreign institutional investors who are registered with
the securitys exchange board of india
 Market intermediarys
A wide range of market intermediarys participate in the primary and
secondary markets.Merchant bankers,clearing and settling
houses,credit rating agencies,depositories,debenture trustees
Regulators

 The smooth functioning of any market lies in the hands of the

regulators
 It involves a huge inflow and outflow of funds
 Investors interest have to be protected
Types of securitys

 Equity shares->They are referred to as common stock or ordinary

shares
 Advantages of equity shares
 Capital appreciation
 Limited liability
 Free tradability
 Tax advantages
 Non voting shares
They carry no voting rights
Right shares
Shares offered to existing shareholders at a price by the company are
called right shares
Bonus shares
A bonus share is the distribution of shares in addition to cash dividend
to existing shareholders
Preference stock

 Cumulative preference shares

The cumulative total of all unpaid preferred dividends must be paid
before dividends are paid on common equity
 Redemable preference shares
 Fully convertible debentures
 Partly convertible debentures
 Non convertible debentures
Debenture

 Debenture includes debenture stock,bonds and other securities of

the company
 Types of debentures
 Secured or unsecured debentures A secured debenture is secured
by a lien on the companys specific assets
 Fully convertible debentures This type of debenture is converted into
equity shares of the company
Sources of investment information

 International Affairs
 National Affairs
 Industry Information
 Company Information
 Stock Market Information NSE website BSE website
Risk of investment options

Securities Risk Return Liquidity Tax Benefits

Equity High Low to high volatility Liquidity depends on
performance
Mutual Funds Low to High risk Moderate Cannot withdraw for certain
period Not available
Money Market securities Less risky Short term return Highly liquid
Derivatives Hedge against risk Medium to Low returns Low liquidity
Fixed income securities

 Preference shares
 Debentures
 Bonds
 Government Securities
Money Market Securities

 Treasury bills
A treasury bill is an instrument of short term borrowing by the
government of India.Treasury bills are generally 91 days 182 days
 Commercial papers
Commercial paper is a short term negotiable instrument with a fixed
maturity period
 Certificate of deosit
Deposits

 Bank deposits
 NBFC deposits
Postal savings

 National Savings certificates

 Kisan Vikas patra
 Monthly Income scheme
 Senior citizen scheme
 Public Provident fund account
Life Insurance policies

 Endowment policy
 Unit linked endowment
 Full endowment
 Low-cost endowment
 Whole Life policy
 Term Life policy
 Money Back policy
Functions of primary market

 Types of issues
 Public issues
Initial Public offering An issue made by a company in the capital
Markets is called an initial public offering
Follow on Public offering
Fast Track issue
 Preferential issues
 Rights issues
Stock Market Indices

 They help us recognise the broad trends in the market

 They can be used as a benchmark for evaluating the investors
portfolio
 They function as a status report on the general economy as various
economic policys have an impact on the stock market
Important stock indices are:-
NSE50
Bse sensex
Nifty50
Securitys Exchange Board of India

 To protect the interest of investors in the securitys market

 To promote the development of the securitys market
 To regulate the securities market
Functions of SEBI
Regulating the business of stock exchanges and other securities market
Registering and regulating the work of stockbrokers,subbrokers,share
transfer agents,bankers to the issue,trustees of trust deeds,registrars to
an issue,merchant bankers,underwriters,portfolio managers
Prohibiting insider trading in securitys market
Continued..

 Promoting investor education and training of intermediaries in the

securitys market