IFM Unit 4 Notes

Products in the Secondary Markets:
Shares:
Equity Shares: An equity share, commonly referred to as ordinary share,
represents the form of fractional ownership in a business venture.
Rights Issue/ Rights Shares: The issue of new securities to existing
shareholders at a ratio to those already held, at a price.
Bonus Shares: Shares issued by the companies to their shareholders free
of cost based on the number of shares the shareholder owns.
Preference shares: Owners of these kind of shares are entitled to a fixed
dividend or dividend calculated at a fixed rate to be paid regularly
dividend can be paid in respect of equity share and enjoy priority over the
equity shareholders in payment of surplus.
Cumulative Preference Shares: A type of preference shares on which
dividend accumulates if remained unpaid .
Cumulative Convertible Preference Shares: After a specified date, the
cumulative preference shares will be converted into equity capital of the
company.
BONDS: A debt security is generally issued by a company, municipality or
government agency.
The various types of Bonds are as follows:
Zero Coupon Bond: Bond issued at a discount and repaid at a face value.
No periodic interest is paid. The difference between the issue price and
redemption price represents the return to the holder.
Convertible Bond: A bond giving the investor the option to convert the
bond into equity at a fixed conversion price.
Treasury Bills: Short-term (up to one year) bearer discount security issued
by government as a means of financing their cash requirements.
Equity Investment: When you buy a share of a company you become a
shareholder. Shares are also known as Equities.
Why should one invest in equities in particular?
Equities are considered the most rewarding, when compared to other
investment options if held over a long duration. some shares with a longer
tenure of investment have yielded far superior returns than any other
investment.
The average annual return of the Indian stock market : 16%
Which are the factors that influence the price of a stock?
(1)stock specific: The stock-specific factor is related to people’s
expectations about the company, its future earnings capacity,
financial health etc.
(2)market specific: This factor depends on the environment rather than
the performance of any particular company. Events favourable to an
economy, political or regulatory environment like high economic
growth, friendly budget, stable government etc. unfavourable
events like war, economic crisis, communal riots, minority
government etc. depress the market. The effect of market-specific
factor is generally short-term.
Price of a stock in the long run gets stabilized based on the stockspecific
factors.
Growth Stocks:: Companies whose potential for growth in sales and

earnings are excellent, are growing faster than other companies in the
market or other stocks in the same industry are called the Growth Stocks.
Value stocks: These companies may have been beaten down in price
because of some bad event, or may be in an industry that’s not fancied by
most investors.
How can one acquire equity shares?
through fresh public issues (IPOs) or from secondary market or through
SEBI registered intermediaries.
What is Bid and Ask price?
Bid Price: The ‘Bid’ is the buyer’s price. Bid is the rate/price at which there
is a ready buyer for the stock, which you intend to sell.
Ask Price: It is the seller’s price. The ‘Ask’ is the rate/ price at which there
is seller ready to sell his stock. The seller will sell his stock if he gets the
quoted “Ask’ price.
What is a Portfolio?
A Portfolio is a combination of different investment assets mixed and
matched for the purpose of achieving an investor’s goal.
for most investors a portfolio has come to signify an investment in
financial instruments like shares, debentures, fixed deposits, mutual fund
units.
What is Diversification? It is a risk management technique that mixes a
wide variety of investments within a portfolio. It is designed to minimize
the impact of any one security on overall portfolio performance.
What are the advantages of having a diversified portfolio?
If you spread your investments across various types of assets and
markets, you’ll reduce the risk of your entire portfolio getting affected by
the adverse returns of any single asset class..
What is a ‘Debt Instrument’?

Debt instrument represents a contract whereby one party lends money to
another on predetermined terms with regards to rate and periodicity of
interest, repayment of principal amount by the borrower to the lender.
Each debt instrument has three features: Maturity, coupon and principal.
Maturity: Maturity of a bond refers to the date, on which the bond
matures, which is the date on which the borrower has agreed to repay the
principal.
The term to maturity of a bond can be calculated on any date, as the
distance between such a date and the date of maturity.
Coupon: Coupon refers to the periodic interest payments that are made by
the borrower to the lender .
Principal: Principal is the amount that has been borrowed, and is also
called the par value or face value of the bond.
Segments in the Debt Market in India:
There are three main segments in the debt markets in India, viz., (1)
Government Securities, (2) Public Sector Units (PSU) bonds, and (3)
Corporate securities.
Who are the Participants in the Debt Market?
The investors in the debt markets are mainly banks, financial institutions,
mutual funds, provident funds, insurance companies and corporates.
Are bonds rated for their credit quality?
Yes. Credit rating agencies in India are CRISIL, CARE, ICRA and Fitch.
How can one acquire securities in the debt market?
From Primary market and from secondary market through Stock
exchanges.

IFM Unit 4 Notes

Uploaded by

Copyright:

Available Formats

IFM Unit 4 Notes

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

IFM Unit 4 Notes

Uploaded by

Copyright:

Available Formats

Products in the Secondary Markets:

Growth Stocks:: Companies whose potential for growth in sales and

What is a ‘Debt Instrument’?

You might also like