What is meant by Secondary market?

The secondary market is where securities are traded after being initially offered to
the public in the primary market. It includes equity and debt markets.

What is the role of the Secondary Market?

It provides a platform for investors to trade securities efficiently. It also helps in

monitoring and controlling company management through price discovery.

What is the difference between the Primary Market and the Secondary Market?

The primary market is for new securities issued to raise capital, while the secondary
market is for trading existing securities among investors.

What is the role of a Stock Exchange in buying and selling shares?

Stock exchanges provide a trading platform under SEBI's supervision, where buyers
and sellers can transact in securities electronically.

What is Demutualisation of stock exchanges?

Demutualisation separates the ownership, management, and trading rights of an

exchange.
How does an investor get access to internet-based trading facility?

Investors can access internet-based trading through brokers who offer this service,
allowing them to trade from anywhere with internet access.

What is a Contract Note?

A contract note is a confirmation of trades done on a particular day, creating a legally

enforceable relationship between the client and the trading member.

What details are required to be mentioned on the contract note issued by the stock
broker?

It should include the broker's name, SEBI registration number, trade details,
brokerage, taxes, and the broker's signature.

What is the maximum brokerage that a broker can charge?

The maximum brokerage is 2.5% of the transaction value.

What Do's and Don'ts should an investor bear in mind when investing in the stock
markets?

Ensure the broker is SEBI registered, enter into an agreement with the broker, read
the Risk Disclosure Document, insist on a contract note, and verify transactions on
the NSE website.

What are the products dealt in the Secondary Markets?

The main products are shares (equity shares, rights shares, bonus shares,
preference shares) and bonds (zero-coupon bonds, convertible bonds, treasury
bills).

Why should one invest in equities in particular?

Equities have the potential to increase in value over time and have historically
outperformed other investments in the long term.

What is meant by the terms Growth Stock/Value Stock?

Growth stocks are from companies with excellent growth potential, while value
stocks are undervalued by the market but have hidden value.

How can one acquire equity shares?

You can buy shares in the primary market through IPOs or in the secondary market
through a SEBI registered broker.

What is Bid and Ask price?

The bid price is what buyers are willing to pay, and the ask price is what sellers are
asking for. The difference is the bid-ask spread.

What is a Portfolio?
A portfolio is a mix of different investment assets like shares, bonds, mutual funds,
etc., aimed at achieving an investor's goals.
Chapter 3 of the "Introduction to Financial Markets" book focuses on the Primary
Market. Here are detailed answers to some of the key questions in simple language:

What is the role of the Primary Market? The primary market is where new securities
are sold for the first time. It allows companies and governments to raise funds by
issuing new securities, such as stocks and bonds, to investors. This market helps
issuers meet their investment needs or pay off obligations.

What do you mean by the term Premium and Discount in a Security Market?

Premium: When a security is sold for more than its face value, it is said to be issued
at a premium.
Discount: When a security is sold for less than its face value, it is said to be issued at
a discount.

Why do companies need to issue shares to the public? Companies issue shares to
the public to raise capital. This is often necessary because the initial capital from the
promoters and loans from banks may not be enough to sustain or grow the business.
By issuing shares, companies invite the public to invest in their equity, thus raising
the needed funds.

What are the different kinds of issues?

Public Issue: An offer to the public to subscribe to the share capital of a company.
Rights Issue: Shares are offered to existing shareholders at a special price.
Preferential Issue (Private Placement): Shares are issued to a select group of
investors.

What is an Initial Public Offering (IPO)? An IPO is when an unlisted company offers
its shares to the public for the first time. This allows the company to be listed on a
stock exchange and its shares to be traded publicly.
What is the main difference between offer of shares through book building and offer
of shares through normal public issue?

Book Building: The price at which shares will be allotted is not known in advance.
Investors bid for shares at or above a floor price, and the final price is determined
after the bidding process.
Normal Public Issue: The price is fixed and known to investors before they
subscribe.

What is Cut-Off Price? In a book building issue, the cut-off price is the final price at
which shares are allotted. It is determined after considering the bids received during
the book building process.

Chapter 5 of the document focuses on Derivatives. Here is a detailed explanation of

the key concepts and questions related to derivatives in simple language:

What are Derivatives?

Derivatives are financial instruments whose value is derived from the value of an
underlying asset, such as stocks, bonds, commodities, or currencies. They are used
for various purposes, including hedging risks, speculation, and arbitrage.

Types of Derivatives:
Futures: A futures contract is an agreement to buy or sell an asset at a
predetermined price at a specified time in the future. Both parties are obligated to
fulfill the contract.
Options: An options contract gives the buyer the right, but not the obligation, to buy
or sell an asset at a predetermined price before or at the expiration date. There are
two types of options: call options (right to buy) and put options (right to sell).
Key Questions and Answers:
What is the difference between futures and options?

Futures: Both parties are obligated to execute the contract at the specified date and
price.
Options: The buyer has the right but not the obligation to execute the contract. The
seller, however, is obligated if the buyer chooses to exercise the opti
Chapter 6 of the document titled "Introduction to Financial Markets" covers the topic
of Depository. Here are the detailed answers to the questions in simple language:

How is a depository similar to a bank?

A depository is like a bank, but instead of holding money, it holds securities (like
shares, bonds, etc.) in electronic form. Just as a bank facilitates the transfer of
money between accounts, a depository facilitates the transfer of securities between
accounts without handling physical certificates.

Which are the depositories in India?

There are two main depositories in India: the National Securities Depository Limited
(NSDL) and the Central Depository Services (India) Limited (CDSL).

What are the benefits of participation in a depository?

Chapter 7 of the document focuses on Mutual Funds. Here are detailed answers to
some of the questions in simple language:

What is a Mutual Fund? A Mutual Fund is a company that pools money from many
investors and invests it in a variety of securities like stocks, bonds, and other assets.
Each investor owns shares, which represent a portion of the holdings of the fund.

What are the benefits of investing in Mutual Funds?

Small Investments: You can start investing with a small amount of money.
Professional Management: Experts manage the fund, making investment decisions
on your behalf.
Diversification: Your money is spread across various investments, reducing risk.
Regulations: Mutual funds are regulated by SEBI, ensuring investor protection.

What is NAV? NAV or Net Asset Value is the total value of the fund's assets minus its
liabilities, divided by the number of units outstanding. It represents the per-unit value
of the fund.

Are there any risks involved in investing in Mutual Funds? Yes, mutual funds do not
guarantee returns. Their performance depends on the market and the assets they
invest in. Factors like market risk, company performance, and economic changes
can affect the fund's value.

What is an ETF? An Exchange-Traded Fund (ETF) is like a mutual fund but trades
like a stock on an exchange. It represents a basket of stocks that reflect an index,
such as the Nifty. ETFs offer the diversification of a mutual fund with the flexibility of
stock trading.
The benefits include:
Immediate transfer of securities.
No stamp duty on transfer of securities.
Elimination of risks associated with physical certificates, such as bad delivery or fake
securities.
Reduction in paperwork involved in the transfer of securities.
Reduction in transaction costs.
Ease of nomination facility.
Change in address recorded with the Depository Participant (DP) gets registered
electronically with all companies in which the investor holds securities, eliminating
the need to correspond with each company separately.
What are the risks associated with trading derivatives?

Derivatives can be highly volatile and carry significant risk. The potential for large
gains is matched by the potential for large losses. It is essential to understand the
market and the specific derivative being traded.

How do you access a derivative trading terminal?

To trade derivatives, you need to open an account with a brokerage firm that offers
derivative trading services. The brokerage will provide you with access to their
trading platform, where you can execute trades.

Is an option a more suitable product than a future?

It depends on the trader's objectives and risk tolerance. Options provide more
flexibility and limited risk (only the premium paid), while futures involve higher risk as
both parties are obligated to fulfill the contract.

What are commodity derivatives?

Commodity derivatives are contracts where the underlying asset is a commodity,

such as gold, oil, or agricultural products. They are used to hedge against price
fluctuations in the commodity market.

Who are the participants in the commodity derivatives market?

The main participants are hedgers (who want to protect against price changes),
speculators (who aim to profit from price movements), and arbitrageurs (who exploit
price differences in different markets).

What is the floor price in case of book building? The floor price is the minimum price
at which investors can bid for shares in a book building issue.

Who decides the Price Band? The company, in consultation with Merchant Bankers,
decides the price band for a book building issue.

What is an 'Abridged Prospectus'? An abridged prospectus is a shorter version of the

full prospectus, containing all the essential information about the public issue. It
accompanies the application form for the public issue.