Security Analysis &
Portfolio
Management
Concept of
Investment
Meaning of Investment
Investment can be defined allocating money to assets
with the hope that in the future it would provide some
benefit such as generation of income.
Investment involves making of a sacrifice in the present
with the hope of deriving future benefits.
Investment refers to the purchasing of securities or other
financial assets from the capital market.
Why to Invest ?
Financial Investment ensures all your dreams turn
real and you enjoy life to the fullest without
actually worrying about the future.
Financial investment ensures you save for rainy
days. Careful investment makes your future
secure.
Financial investment controls an individual’s
spending pattern. It decides how and what amount
one should spend so that he has sufficient money
for future.
Characteristics of Investment
Rate of
return
Convenience Risk
Tax Marketability
shelter
Objectives of Investment
Maximization of Return
Minimization of Risk
Tax Minimization
Liquidity
• Portfolio Evaluation 5.
• Portfolio Construction 4.
• Valuation 3.
• Security Analysis 2.
• Framing Investment Policy 1.
The Investment Process
Investment Avenues
Concept of Securities
Market
Meaning of Security
A security is a fungible, negotiable financial
instrument that holds some type of monetary
value. It represents an ownership position in a
publicly-traded corporation, a creditor
relationship with a governmental body or a
corporation, or rights to ownership as represented
by an option.
Meaning of Securities Market
A securities market is used in an economy to
attract new capital, transfer real assets
in financial assets, determine price which will
balance demand and supply and provide
a means to invest money both short and long
term.
Structure of Securities Market
Participants in the Securities Market
Regulators
Stock Exchanges
Listed Securities
Depositories
Brokers
Foreign Institutional Investors
Merchant Bankers
Primary Dealers
Mutual Funds
Participants in the Securities
Market (contd.)
Custodians
Registrars
Underwriters
Bankers to an Issue
Credit Rating Agencies
Types of Securities traded in
Securities Market
Equity Shares
Preference Shares
Debentures
Bonds
Primary Market
&
Secondary Market
Primary Market
The Primary Market, also known as a New Issue Market, is
where new securities are issued – it is part of the capital
market.
The primary market creates new securities and offers them for
sale to the public.
In order to raise capital in the form of equity, a company can
sell its shares to members of the public. When shares are sold
directly to the public, this is done via the primary market route.
The sale of securities in the primary market is usually done
through an investment bank.
Functions of Primary Market
Organisation of New Issue- The organisation of new issues
requires investigation of viability and prospects of new projects.
An important element of the organisation of new shares is the
knowledge about adequacy and structure of financial
arrangements.
Underwriting- The term underwriting means guaranteeing
purchase of a specified amount of new issue at a fixed price. The
purchase may be for sale to the public, for only one’s portfolio or
for both the purposes.
Distribution- Distribution of new issues means the sale of the
stock to the public. There are three main ways of selling the new
issue to the public.
Mechanism of Floating New Issues
Public Issue
Right Issue
Private Placement
Preferential Allotment
Secondary Market
Secondary market is the market where previously issued
securities, such as stocks and bonds, are traded among
investors.
It is also the market where investors buy securities from other
investors, and not from the issuing organization.
The sale proceeds from the secondary market go to the
investor, and not the issuing company.
The buying and selling of existing shares and bonds occur in
the secondary market through a stock exchange.
Stock Exchange
Organized and regulated financial market where
securities are bought and sold at prices governed by the
forces of demand and supply.
According to Securities Contract (Regulation) Act, 1956
“ Stock exchange means any body of individuals whether
incorporated or not, constituted for the purpose of
assisting, regulating or controlling the business of
buying and selling in securities.”
Functions of Stock Exchange
Ensures Liquidity of Capital
Continuous Market for securities
Mobilizing Surplus Savings
Safety in Dealings
Listing of Securities
Stock Exchanges in India
National Stock Exchange (NSE) - The National Stock
Exchange of India Limited (NSE) is the leading stock
exchange of India, located in Mumbai. The NSE was
established in 1992 as the first demutualized electronic
exchange in the country. NSE was the first exchange in
the country to provide a modern, fully automated screen-
based electronic trading system which offered easy trading
facility to the investors spread across the length and
breadth of the country.
Stock Exchanges in India
Bombay Stock Exchange (BSE)- The Bombay Stock
Exchange (BSE) is an Indian stock exchange located
at Dalal Street, Mumbai (formerly Bombay). Established
in 1875, the BSE (formerly known as Bombay Stock
Exchange Ltd.) is Asia’s first stock exchange. It claims to
be the world's fastest stock exchange,
Concept of Portfolio
Management
Portfolio Management
It is also referred to as Investment Management.
Portfolio management is the art and science of making decisions
about investment mix and policy, matching investments to
objectives, asset allocation for individuals and institutions, and
balancing risk against performance. Portfolio management is all
about determining strengths, weaknesses, opportunities and
threats in the choice of debt vs. equity, domestic vs. international,
growth vs. safety, and many other trade-offs encountered in the
attempt to maximize return at a given appetite for risk.
Process of Portfolio Management
Security Analysis
Portfolio Construction
Portfolio Selection
Portfolio Revision
Portfolio Evaluation
