3. Role of Capital
Market
• It facilitates capital formation
in the economy.
• It establish direct link between FDEs
(Fund deficit entities)and FSEs(Fund
surplus entities).
• It basically supply funds to business
houses.
4. Portfolio
It is a Combination of different investment
assets mixed and matched for the purpose of
achieving investors goal .
PORTFOLIO MANAGEMENT STEPS ARE-
• Learn the basic principle of finance.
P/E ratio analysis
EIC Analysis
• Set portfolio objective.
• Formulate investment Strategy.
• Have a game plan for Portfolio revision.
• Evaluate Performance.
5. Constituents of Capital Market-
• Primary Market
• Secondary Market
on investment are in form of-
• Capital yield
• Dividend Yield
Secondary Market Products-
Shares
Bond
9. Book Building
Book Building is basically a capital issuance
process used in Initial Public Offer (IPO) which
aids price and demand discovery. It is a process
used for marketing a public offer of equity shares
of a company.
10. Process
• The Issuer who is planning an IPO nominates a lead merchant
banker as a 'book runner'.
• specifies the number of securities to be issued and the price band
for orders.
• appoints syndicate members
• Investors place their order with a syndicate member through the
process of biding
• A Book should remain open for a minimum of 5 days
• Bids cannot be entered less than the floor price.
• Bids can be revised by the bidder before the issue closes.
• On the close of the book building period the 'book runner evaluates
the bids
• The book runner and the company conclude the final price
• Allocation of securities is made to the successful bidders.
• Book Building is a good concept and represents a capital market
which is in the process of maturing.
11. Bid and Ask Price
Price Mechanism or Market-Based Mechanism refers to a wide
variety of ways to match up buyers and sellers. An example of a price
mechanism uses announced bid and ask prices. Generally speaking,
when two parties wish to engage in a trade, the purchaser will
announce a price he is willing to pay (the bid price) and seller will
announce a price he is willing to accept (the ask price). The main
advantage of such a method is that conditions are laid out in advance
and transactions can proceed with no further permission or
authorization from any participant. When any bid and ask price are
compatible, a transaction occurs, in most cases automatically.
12. Products in the Secondary
Markets
Shares: Bond:
• Equity Share Zero Coupon Bond
• Rights Issue/ Rights Shares Convertible Bond
• Bonus Share Treasury Bills
• Preference shares
• Cumulative Preference Shares:
• Cumulative Convertible Preference Shares:
• Sweat Equity
13. 1) Growth Stocks
2) Value Stocks
Short selling.
• The selling of a security that the seller does not own, or
any sale that is completed by the delivery of a security
borrowed by the seller
• The buyer (Speculator) of a security such as a stock,
commodity or currency, buy with the expectation that the
asset will rise in value
14. Rolling settlement
• India has T+2 rolling settlement as
opposed to T+3 in NYSE.
• Clearing Settlement
• Mark to Margin
15. Market Phase
• Bull Phase
• Bear Phase
• Open
• Close
Trading
• Basket Trading
• Index Trading
• Buyback Trading
17. PORTFOLIO
• In finance, a portfolio is an appropriate mix or
collection of investments held by institutions or a
private individual.
• Holding a portfolio is part of an investment and
risk-limiting strategy called diversification. By
owning several assets, certain types of risk (in
particular specific risk) can be reduced.
19. Portfolio Formation
Many strategies have been developed to form a
portfolio.
• equally-weighted portfolio
• capitalization-weighted portfolio
• price-weighted portfolio
• optimal portfolio (for which the Sharpe ratio
is highest)
21. PORTFOLIO MANAGEMENT
• Portfolio management involves deciding
what assets to include in the portfolio, given
the goals of the portfolio owner and changing
economic conditions.
• Selection involves deciding
- what assets to purchase,
- how many to purchase,
- when to purchase them,
- and what assets to divest.
22. Types of portfolio management
ACTIVE PASSIVE
PORTFOLIO PORTFOLIO
MANAGEMENT MANAGEMENT
23. Process of Portfolio Management
Risk Profile and Objectives Analysis
Risk Profile and Objectives Analysis
Investment Policy Statement
Investment Policy Statement
Diversification
Diversification
Portfolio Rebalancing
Portfolio Rebalancing
Results Report
Results Report
Results Report
Results Report
24. Portfolio Analysis
• Analyzing elements of a firm's product mix to
determine the optimum allocation of its
resources. Two most common measures
used in a portfolio analysis are market growth
rate and relative market share.
25. MODELS
•
The Jensen Index.
•
The Treynor Index.
•
The Sharpe Diagonal (or Index) model.
•
Capital Asset Pricing Model (CAPM)
•
Value at risk model.
26. Strategy - portfolio analysis - ge matrix
• The business portfolio is the collection of businesses and
products that make up the company.
• The company must:
(1) Analyse its current business portfolio and decide which
businesses should receive more or less investment, and
(2) Develop growth strategies for adding new products and
businesses to the portfolio, whilst at the same time deciding
when products and businesses should no longer be retained.
• The two best-known portfolio planning methods are the
Boston Consulting Group Portfolio Matrix and the
McKinsey / General Electric Matrix ..
27. The diagram illustrates some of the possible elements that determine market
attractiveness and competitive strength by applying the McKinsey/GE Matrix to the UK
retailing market:
29. GET INFORMED
GET INFORMED
picking
12 steps to better stock
GET EDUCATED
GET EDUCATED
DEFINE OBJECTIVES
DEFINE OBJECTIVES
UNDERSTAND RISK TOLERANCE
UNDERSTAND RISK TOLERANCE
TRACK SUCCESS
TRACK SUCCESS
FIND A FIT
FIND A FIT
WHAT INVESTORS DO
WHAT INVESTORS DO
DO RESEARCH WORK
DO RESEARCH WORK
DISCIPLINE
DISCIPLINE
CONFUSED?
CONFUSED?
MANAGEMENT
MANAGEMENT
NEVER END PROCESS
NEVER END PROCESS
31. Review of Portfolio
• When something goes wrong that you realise it
hadn't been running as smoothly as you thought
it was. This gives Review to Portfolio
• Investors subject their investment portfolio to a
regular MOT.
• It includes:-
– Goals
– Asset Allocation
– Performance Check
– Shopping for funds
33. Rebalance of Portfolio
• If our money is in several different kinds of
investment, the first thing we need to do is
check the balance is right.
• There are, very roughly, three types of
investor –
– risk-averse,
– medium-risk and
– adventurous.
35. 5 Steps to Reviewing and Rebalancing
Your Portfolio
Reinvest Dividends
Reinvest Dividends
Review each Investment
Review each Investment
Review Portfolio for Deviations from Target
Review Portfolio for Deviations from Target
Allocation
Allocation
Buy and Sell Shares to Regain Target Allocation
Buy and Sell Shares to Regain Target Allocation
Sit Back and Watch Until it is Time to Rebalance
Sit Back and Watch Until it is Time to Rebalance
Again
Again
