Secondary Market

Meaning of Secondary Market

Refers to a market where securities are traded

Securities are already listed in Stock Exchange

Provides an efficient platform for trading of his securities

Difference between Primary Market & Secondary Market

Primary Market • Securities are offered to

public for subscription • Purpose of Raising

Capital or fund

Secondary Market • Already existing securities are traded • Purpose of capital

appreciation

Stock Exchange

Provide a trading platform by SEBI

Where transaction done in securities

Demutualization of Stock Market

Refers to the legal structure of an exchange

Ownership, management and the trading rights at the exchange are segregated from one another

Demutualised Stock Exchanges in India

National

Stock

Exchange

(NSE)

Over

the Counter Exchange of

India

(OTCEI

)

Stock Trading

Screen Based Trading System (SBTS)

National Exchange for Automated Trading (NEAT)

A satellite communication technology for trading

It’s a state of the art client server based application

Has a uptime record of 99.7%

Uniform response time of less than one second

Contract Note

A confirmation of trades done on particular day

On behalf of the client by a trading member

Enforceable relationship between the client and the trading member

For the propose of purchase / sale and settlement of trades

It should be in Prescribed Form

Benefits of trading in Stock Exchanges

1.• Best prices prevailing at the time

in the market

2.• Lack of any counter party risk which is assumed by the clearing

corporation

3.• Access to investor grievance and

redressal mechanism of stock exchange

4. • Protection up to prescribed limit

How to know if the Broker / Sub Broker is Registered?

By verifying the registration certificate issued by SEBI

Broker registration number begins with the letter ‘INB’

A sub broker with the letters ‘INS’

Precautions of investing in the Stock Markets

Make sure your broker is registered with SEBI and the Exchanges

Ensure that you receive contract notes for all your transactions

Invest in a manner that matches their risk tolerance

Do not be misled by market rumors, luring advertisement or ‘hot tips’

Take informed decisions by studying the fundamentals of the company

Instruments of Secondary Market

Secondary Market

Shares

Equity Shares

Rights Shares

Bonus Shares

Preference

Shares

Cumulative Preference Share

Cumulative Convertible Preference Shares

Bonds

Zero Coupon Bonds

Convertible Bond

Treasury Bills

Shares

Equity Shares • Represent the form of fractional ownership in a

business venture

Rights Shares

• Issue of new securities to existing shareholders

Bonus Shares• Issued by the companies to their shareholder free

of cost based

Preference Shares

Entitled to get fixed dividend before equity shareholders

Priority of getting surplus before equity shareholder

At the time of liquidation their claims below to equity

shareholders

Types of Preference Shares

•Dividend accumulates if remained unpaid

Cumulative Preference

Shares

• Dividend payable on the same accumulates, if not paid

• Converted into equity capital of the company

Cumulative Convertible Preference

Shares

Bond

Negotiable certificate evidencing indebtedness Normally Unsecured

Issued by a Company, Municipality or

Government Agency

Types of Bond

Zero Coupon Bond• Issued at discount and repaid at

face value • No periodic interest is paid

Convertible Bond • Giving the option to the investor• Convert the bond into equity at

fixed conversion price

Treasury Bills • Issued by government • Short term bearer discount security

Equity Investment

Provides portfolio with growth

Reach on long term investment goals

Equities are high risk investment

Dividend

A percentage of the face value of a

share

A company returns to its shareholders

from its annul profits

Factors affected the price of stock

Stock Specific Market Specific

Stock Specific Factor

People Expectation about the Company

Future Earning Capacity

Financial Health Management

Level of Technology & Marketing Skills

Market Specific Factor

Generally short term factor

Depends upon on the environment rather than performance

Its include Budget, War Economic Growth & Crises etc.

Growth Stock

Whose potential for

growth in sales

Growing faster than

other companies in market

Earning are excellent

Value Stock

Stock which may have hidden value

Investor look to buy stokes that are undervalued

Portfolio

Combination of different

investment assets

Purpose of achieving an

investor’s goal

Diversification

It’s A Risk Management Technique

Mixes a wide variety of investments with in portfolio

Reduce the risk in portfolio

Debt Instruments

Represents a contract whereby one party

lends money to another

Debt Instruments

Bond

Issued by the central and state government

Public sector organization

Features of Debt Instruments

Maturity

• The date on which borrower has agreed

to repay

the princip

al

Coupon

• Refers to the

periodic

interest payment that

are made

by borrow

er to lender

Principal

• The amount

that has

been borrow

ed

Segment of Debt Market

Government Securities

• Comprises the Centre, State and state sponsored securities • They are not tax –free

Public Sector Units Bonds

• They are tax –free

Corporate Securities

• Comprise of commercial paper and bonds

Participants of Debt Market

Banks Provident Funds

Corporate

Insurance Companies

Mutual Funds

Financial Institutions