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1) The document discusses various topics related to stock market operations including financial markets, initial public offerings, listing of securities, stock indexes like SENSEX, trading on stock exchanges, commercial papers, right issues, distinguishing between money markets and capital markets, powers of SEBI, roles of brokers, the Bombay Stock Exchange, calculating right issue value, functions of stock exchanges, advantages of dematerialization, risk minimization methods, and a case study on the impact of COVID-19 on stock markets. 2) Key terms and concepts covered include what constitutes a financial market, the process of initial public offerings and right issues, how securities are listed, defining indexes like SENSEX, the role of brokers, establishing

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141 views5 pages

SMO Script PDF

1) The document discusses various topics related to stock market operations including financial markets, initial public offerings, listing of securities, stock indexes like SENSEX, trading on stock exchanges, commercial papers, right issues, distinguishing between money markets and capital markets, powers of SEBI, roles of brokers, the Bombay Stock Exchange, calculating right issue value, functions of stock exchanges, advantages of dematerialization, risk minimization methods, and a case study on the impact of COVID-19 on stock markets. 2) Key terms and concepts covered include what constitutes a financial market, the process of initial public offerings and right issues, how securities are listed, defining indexes like SENSEX, the role of brokers, establishing

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『SHREYAS NAIDU』
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KARNATAK UNIVERSITY DHARAWAD

B.com first semester Valuation script ( NEP ) Stock market operations


B.com examination ( Mar- April 2022 )

Section – A
a. What is financial market ?
A financial market is an institution or arrangement that facilitates the Exchange
of financial instruments.
b. What is initial public offer ?
Initial public offer means first sale of shares by private of company.
OR
The public or initial issuers of shares For the first time.
c. What is listing of securities ?
The steps that are required to register and to place an record the securities of
corporate entity with the appropriate being the recognized stock exchange.
d. Give the meaning of SENSEX ?
Bombay stock exchange sensitive index is called SENSEX.
e. What do you mean by trading on stock exchange ?
Trading on stock exchange means buying and selling shares in companies
in an effort to make money on daily changes in price.
f. What is commercial paper ?
It is a short-term money market instrument issued by eligible corporate for
raising funds to meet working capital needs.
OR
short-term unsecured promissory notes issued by companies is called
commercial paper.
g. What is right issue ?
When an existing company wants to raise additional capital, securities are first
offered to the existing shareholders on preferential basis it is called right issue
.
2. Distinguish between Money market and Capital market
MONEY MARKET CAPITAL MARKET
1.Provides for the requirements of 1.Provides for the requirements of fixed
working capital. capital.
2.Provides short-term finance. 2.Provides long term finance.
3.It is acts as a link between depositor 3.It is acts as a link between investors and
and borrower. entrepreneurs.
4.It is a secondary function. 4.It is a primary function.
5.Low credit and low market risk. 5.High credit and market risk.
6.Low liquidity. 6.High liquidity.
7.Price fluctuations are very high. 7.Price fluctuation is low.
8.RBI is supreme authority in money 8. It is monitored by SEBI.
market.
3. Mention the powers of SEBI.
1. Approval of byelaws of the exchanges for regulation and control of contract.
2. Licensing of dealers in securities in certain areas.
3. Compel a public company to list its shares.
4. Furnishing of annual report by recognized stock exchange.
5. Issuing directions to stock exchanges in general.
6. Suspension of business of a recognized stock exchange.
7. Grant of recognition to stock exchanges.
8. Withdrawal of recognition of stock exchanges.
4). The functions of brokers in share market.
1. Buying and selling shares, stock and other securities on behalf of investors.
2. Analyzing and interpreting financial report.
3. Advising clients on investment strategies.
4. Managing the investment portfolio of investors.
5. Following the latest trends and news in the stock market.
5. THE BOMBAY STOCK EXCHANGE
The Bombay stock exchange established in Mumbai 1875 under the name of “native
share and stock brokers Association” of Bombay. it is first stock exchange in the
country. It was established as a voluntary non profit organization. It is oldest stock
exchange in Asia. It is the oldest market and had been recognized permanently. Now
its business had set up in 100 cities. It is a great surprise that the BSE membership
fees in 1857 was just Re. 1 ( one rupees only ). Now its membership fees is Rs. 2
crores. The exchange, while providing an efficient mechanism, also protects the
interest of the investors and ensures redressal of their grievances in 29-10-1996.SEBI
allows the BSE to use its BOLT system Nation wide today BOLT is spread over 330 cities
with 15471 trade work stations.

6. Calculation of value of right.


a.) Calculation of average price.
Market price of 5 equity shares at Rs. 180 shares ( 180 X 5 ) = 900
Add : Issue price of one equity share Face value 100
Add 20% Premium 20 = 120
The price of 6 shares ( 05+01 ) 1020
b.) Calculation of avg price.
AVG price = Total price
No. of shares
1020
06
= 170
c.) Calculation of value of right.
Market price of each shares 180
Less: Average price of each shares 170
Value of right 10
OR
Value of right = Right shares X(market price–issue of price of right shares)
Total shares
01 X ( 180 – 120 )
05 + 01
01 X 60
06
= 10
SEC- C
7. Explain the functions of stock exchange.
1. Providing a trading place for securities.
2. Regulated trade practice.
3. Ready market.
4. Listing of securities.
5. Distribution of new securities.
6. Capital formation.
7. Mobilization of savings.
8. Evaluation of securities.
9. Economic barometer.
10. speculation.
11.Public debt.
8. Advantages of dematerialization.
1. Easy and convenient.
2. A fund transfer.
3. Safe and secure.
4. Nomination facility.
5. Paperless.
6. Avail loan facility.
7. Easily traceable.
8. Ease in receiving corporate benefits.
9. Multiple purpose.
10.

9. Methods to minimise risk in stock market.


1. Follow the trend of the market.
2. Portfolio diversification.
3. Span and exposure margin.
4. Stop loss.
5. Exposure margin.
10. Calculate matrix weighted index and index point.
Company No.of MPS Market value MPS Market value MPS Market
shares FEB- capitalization FEB- capitalization FEB- value
1(Rs) 02(Rs) 03(Rs) capitalization
A 800 200 1,60,000 200 1,76,000 230 1,84,000
B 500 120 60,000 125 62,500 100 50,000
C 300 80 24,000 90 27,000 80 24,000
D 200 100 20,000 110 22,000 90 18,000
Average 2,64,0000 2,87,000 2,76,000
To calculate index point should be taken base value is FEB 01 price

INDEX POINT = Average market capitalization X 100


Base value

FEB 01 2,64,000 X 100


2,64,000

100 points

FEB 02 2,87,500 X 100


2,64,000

108 point

FEB 03 2,76,000 X 100


2,64,000
104.5 points

11. CASE STUDY.


. After the outbreak of the COVID-19, the stock market came under fear as BSE
sensex and NSE Nifty fell by 38%.
. It leads to a 27.31% loss of the total stock market.
. It effects on capital market and money market.
. Due to this pandemic there was a decrease in the amount of investment in the
transport sector.
. Due to this pandemic there was a decrease in the amount of investment in the
tourism sector.
. The price of the shares has been huge reduced.

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