WELCOME TO LAKSHMISHREE

Basics of Financial Markets

Definition:Knowledge of the basic fundamentals of the Financial Markets

Session Objective:To know about and understand the basics of the Financial

markets

Topics

• What is an Investment? • Investment Options• The Risk & Return• Why Equity?• What is a share?• How is Equity traded?• What is a stock exchange?• Regulation of Securities Market

•Money earned is partly spent and the rest saved for meeting future expenses.

•Investing money to get return on it in the future is Investment.

•Inflation: Rise in the general level of prices of goods and services in an economy over a period of time.

Investment

Investment Options

Physical Assets Financial Assets

Gold/ Jewellery Fixed Deposits

Real Estate Small Savings Instruments (NSC)

Public Provident Fund

Pension Fund

Insurance

Bonds/ Debentures

Shares/ Equity

Saving Deposit Fixed Deposit Insurance, MF, NSC,PPF

Equity Commodity Gold0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

3%

7%

10%

20%

16%

4.5%

Rate of Return (Average)

The Risk & Return

Investment Type Risk Return

Gold/ Jewellery Low Moderate

Real Estate Low Moderate

Fixed Deposits Low Low

Small Savings Instrument Low Low

Public Provident Fund Low Low

Pension Fund Low Low

Mutual fund Moderate* Moderate*

Commodities High High

Equity Market High High

Why Equity?

LONG TERM BENEFIT AND HIGH RETURN ON INVESTMENT

LIQUIDITY

DIVIDEND EARNING

BONUS SHARES

DIVERSIFIED FUND

HIGH RETURN

CAPITAL GAIN TAXADVANTAGE

LOW INVESTMENT

Equity/Share

Total equity capital of a company is divided into equal units of small denominations, each called a share.

The holders of such shares are members of the company and have voting rights.

Equity/Share

Total equity capital of a company is divided into equal units of small denominations, each called a share.

The holders of such shares are members of the company and have voting rights.

How is Equity Traded ?

Company wants to raise Capital

Issues Initial Public Offering (IPO) in Primary Market.

Shares Issued in IPO are then Traded in Secondary Market.

Lets understand how it is Traded……

STOCK EXCHANGE

A common platform where buyers and sellers transact in stocks and shares.

The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) are the two leading Exchanges.

There are 23 other regional Exchanges.

Regulation of Securities Market

The responsibility for regulating the securities market is shared by

Department of Economic Affairs (DEA)

Department of Company Affairs(DCA)

Reserve Bank of India (RBI) &

Securities and Exchange Board of India (SEBI).

Regulation of Stock Exchange

The Securities and Exchange Board of India (SEBI) is the regulatory authority in India

ROLE :- Protecting the interests of

investors in securities Promoting the development of

the securities market Regulating the securities market.

Depository

A depository is like a bank wherein the deposits are securities in electronic form.

Two main Depositories in India: Central Depository Services Limited (CDSL) National Securities Depository Limited (NSDL).

Advantage of Depository Immediate transfer of securities

No stamp duty on transfer of securities

Elimination of risks associated with physical certificates such as bad delivery, fake securities, etc.

Reduction in paperwork involved in transfer of securities

Reduction in transaction cost

Depository Participant(DP): A depository participant is an agent appointed by the depository to provide its services to investors Eg:- Banks, Financial Institutions and SEBI Registered Trading Members can become DPs.

Lakshmishree. Is a Depository Participant registered with CDSL.

USP’s of Lakshmishree as a DP

Lowest Transaction charges in the Country.

Minimum Rs 11/- for transfer from Demat to Pool or any other Demat.

No charges if shares kept in Pool Account.

No separate Demat A/c required.

Shares kept in Pool Account can be used as Margin for trading.

Life time Demat account at 562/- only

BROKER

A broker is an intermediary of the Stock Exchange.

Only registered members can operate in the stock market.

One can trade by executing a deal only through a registered broker or through a SEBI-registered sub-broker.

Trading on the Exchange

To Buy & Sell Shares, the customer needs

Demat Account

Trading Account

Demat Account

Demat is an abbreviation of Dematerialization.

Securities like shares, debentures are converted from the "material" (paper documents) into electronic data.

Trading Account

Trading Account is an account required for Buying & Selling Shares.

Trading accounts needs to opened with a Broker .

Each account holder is assigned unique client code .

Experienced Investor - Regularly Invests money into various Investment products

Trader - Continuously buys and sells securities

First Time Investor – Wishes to Invests in financial Instruments & earn profits but has not yet started Investing.

Types of Customers

Types of Trades

Intra Day Trade:- Both Buying and selling is done on the same day .

Delivery Based Trading :- Buy today Sell anytime

BTST :- Buy Today Sell Tomorrow

Bullish and Bearish trend

When the market goes up it is called a bullish trend

When the market goes down it is called a bearish trend.

Corporate Actions…

Corporate Action: “Any event initiated by a corporation which impacts its shareholders”

Some examples are dividends, stock splits, rights issues, bonus issues etc.

•Dividend: Dividend is the distribution of part of a company's earnings to shareholders

Stock Split: It is a corporate action which splits the existing shares of a particular face value into smaller denominations so that the number of shares increase. The total value however remains the same.

Stock Split:- brings the share price down to a more "attractive" level. Increases stock liquidity due to greater affordability

Buy back of shares: a method for company to invest in itself by buying shares from other investors in the market. Buyback:- Improves liquidity Enhances shareholders’ wealth

Corporate actions… continued

Learnings

The three things I learnt from this session are:

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I will apply these learnings to my work by :

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