INVESTMENT MARKET

OUTLINE Forms Importance Functions Constituents Conclusions

FORMS OF INVESTMENTS

Market

Shares Debentures Bullions ForexMutual Funds Fixed Deposits

IMPORTANCE

Market for Banks, FI’s, NRI and Other resident Individuals.

Necessary for economic development of a country. Plays an important role in smooth flow of funds to

deficit units. Funds is used for productive purposes. Hedging, Speculations is also one of its activity.

FUNTIONS

Financial Risk Management Research Intermediary

FINANCIAL FUNCTIONS

Lending Funds For Investments. Development of Assets in productive

ventures Maintaining Liquidity in the market. Securitization of Assets to cover risk.

RISK MANAGEMENT Risk analysis is compared with Returns. Risk is usually measured in Beta Factor. Check Loss and Capital investments. Research of Past, Present and Future.

INTERMEDIARY FUNCTIONS Transfer of real economic resources from lender to

ultimate borrowers Lending of Surplus Funds National Income Contribution Increased Standard of Living and Per Capita Income An aid for capital formation of the country

CONSTITUENTS DEBT MARKET EQUITY MARKET MONEY MARKET GOVERNMENT SECURITIES MARKET FOREIGN EXCHANGE MARKET

EQUITY MARKET Issue and Trading of Shares. Trading takes place on Stock Market (BSE

and NSE) Vital area of a market economy Ownership is Widespread It is divided into Primary and Secondary

Market

PRIMARY MARKET A market that issues new securities on an

exchange. Also known as "new issue market" (NIM). Companies, governments or public sector

institutions can obtain funding through the sale of a new stock or bond issue.

METHODS OF ISSUING SECURITIES IN THE PRIMARY MARKET

Initial public offering Rights issue (for existing companies) Preferential issue.

SECONDARY MARKET Purchase of securities or assets from other investors New York Stock Exchange and the NASDAQ are

secondary markets. In any secondary market trade, the cash proceeds go

to an investor rather than to the underlying company/entity directly.

SECONDARY MARKET FUNCTION Price accuracy can reduce the agency costs of

management, and make hostile takeover a less risky proposition and thus move capital into the hands of better managers.

Accurate share price aids the efficient allocation of debt finance whether debt offerings or institutional borrowing.

MONEY MARKET Borrowing and lending for short periods;

Ranging from 3 months to a year Money market trades in short-term financial

instruments commonly called “paper” Commercial Paper, Commercial Deposits,

Repo’s, Treasury Bills, Promissory Notes.

MONEY MARKET FUNCTION Require higher initial deposits than bank savings

accounts Initial Margin $1000 to $5000 Face value of Instrument is one dollar per share

price. Interest is paid on daily basis Check writing services with the account.

ADVANTAGES Relative safety and the ability to know your

return ahead of time. You'll generally earn more than in a savings

account, and you won't be at the mercy of the stock market.

Plus, in the U.S. the Federal Deposit Insurance Corporation guarantees your investment up to $100,000.

DISADVANTAGES Returns are paltry compared to many other

investments. Furthermore, your money is tied up for the

length of the CD and you won't be able to get it out without paying a harsh penalty.

MONEY MARKET - DIVISION Call Money Market

Bill Market

Discount Market

Acceptance Market

CALL MONEY MARKET INTRODUCTION CALL MONEY MARKET OPERATIONS

IN INDIA  PARTICIPANTS PRUDENTIAL NORMS OF RBI  CALL RATES

BILL MARKET INTRODUCTION BILLS OF EXCHANGE

DISCOUNT MARKET Bill discounting is a major activity with some

of the smaller Banks. Purchasing and discounting of bills of

exchange is another short term method of profitable instrument of banks funds

Bills of exchange can be discounted on rebate before its due date. The rebate or discount is earning of the bank.

ACCEPTANCE MARKET A market that deals with bankers acceptances is called

as Acceptance Market. A banker’s acceptance constitutes the draft issued by a

bank and undertaking to payment of the money specified on the draft on demand.

The bank has to make payment either to the order of a specified party or to the bearer, the sum specified in the instrument.

Banker’s acceptances are the result of commercial transactions on both in the domestic as well as foreign market.

CONCLUSION The money market specializes in debt securities that mature in

less than one year. Money market securities are very liquid, and are considered

very safe. As a result, they offer a lower return than other securities.

The easiest way for individuals to gain access to the money market is through a money market mutual fund.

T-bills are short-term government securities that mature in one year or less from their issue date.

T-bills are considered to be one of the safest investments - they don't provide a great return.

A certificate of deposit (CD) is a time deposit with a bank.