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Equity Investments
 

Equity Investments

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SIMPLE POINT TO UNDERSTAND EQUITY MARKET

SIMPLE POINT TO UNDERSTAND EQUITY MARKET

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    Equity Investments Equity Investments Presentation Transcript

    • EQUITY INVESTMENTS Presented by HONEY POULOSE
    •  
    • USE OF MONEY # Unit of accounts : For calculating the value of assets # Medium of exchange: For catering his basic needs # Store of value: For transactional demand and precautionary demand
    • BOOKMAN LOW OF MONEY “ Wealth in the form of money will not multiply ”
    • WEALTH IS CREATED BY CIRCULATTION OF MONEY MORE WE CIRCULATE MORE WE CREATE BOOKMAN LOW OF MONEY
    • BOOKMAN LOW OF MONEY “ For a better life, Earn money wisely Saved money regularly Invest them smartly”
    • SELECTION OF INVESTMENTS RATE OF RETURN RISK LIQUIDITY TAXES CONVENIENTS
    • INVESTMENT VEHICLES
    • PLAN YOUR INVESTMENT Step 1 # Creating investment objectives & destinations and understanding threats & hurdles of the objectives Step 2 # Selecting the type of investments and ratios Step 3 # Active or passive portfolio working plans Step 4 # selection of securities Step 5 # portfolio management Step 6 # portfolio analysis
    • INVESTMENT SRATEGY ROAD MAP
    • CAPITAL MARKET
    • PUBLIC LIMITED COMPANIES WORKING CAPITAL BONDS PREVILAGE SHARES EQUITY SHARES BONUS SHARES PREFERENCE SHARES CAPITAL MARKET
    • AIM : Regulating capital flow from higher part to lower part distribution of wealth generated in the nation to the public Triggering economic growth of a nation CAPITAL MARKET
    • Total Assets Equity Company borrowing. Must repay 100% at fixed point in future + rate of interest (fixed or floating). Bonds are issued by companies to investors. Owners’ investment, + / - accumulated profits. No repayment date for owner’s investment. Owner will receive dividends. DIFFERENCE BETWEEN DEBTS AND EQUITY Debt
    • DIFFERENCE BETWEEN DEBTS AND EQUITY Companies Governments, supra-national agencies, e.g. World Bank, Mortgage Backed, Asset Backed, Companies Who issues? High risk, high return Low risk, consistent return Long-term expected return Equities considered an inflation hedge as companies can increase prices if costs rise Inflation negative for bonds as it makes the final values worth less in real terms Inflation Much higher risks than bonds as no maturity date at which investment is returned, therefore, value set by market Risk if held to maturity is default, otherwise will receive nominal bond value back. Bond investors have first call on company assets Risk Dividend + / - capital appreciation Interest + / - capital appreciation Return No Yes Maturity Equities Bonds
    • Bonds are priced according to how much investors are prepared to pay for an interest payment stream over a time period (interest rate) , and depending on the confidence that the final sum will be returned (credit DIFFERENCE BETWEEN DEBTS AND EQUITY Down Up Economy will fall so interest rates will fall. Investors prepared to pay more for bond coupon (less demand for money) c) Bird Flu outbreak Up Down Government likely to increase interest rate so better value in new bonds b) Booming economy (GDP + 8%) Up Down Future value of bond worth less in real terms a) Rising inflation (+2%) Bond interest rate Bond price Result Scenario
    • INTREST RATE 2001-2006
    • LIC RETURNS 1994-2005
    • OPPURTUNITIES IN EQUITY INVESTMENT CAPITAL APPRECIATION DERIVATIVE INCOME OVERCOME INFLATION LIQUIDITY CONVENIENCE
    • CAPITAL APRECIATION 2004-05
    • PREVILAGE ISSUES EQUITIES BONUS ISSUES PREFERENCE ISSUES TYPES OF SHARES
    • BONDS AND SHARES Dividend with fixed rates Cumulative dividends available Will get preference in profit distribution Aim: Distribute shares to persons other than public Features PREFERENCE ISSUES
    • BONDS AND SHARES Profit/loss sharing ownerships Eligible for dividend,capital appreciation,bonus,rights Risk, profit, rate of income high Aim: Capitalize money from public Features EQUITIES
    • BONDS AND SHARES RIGHT ISSUES Aim : Capitalize more money with out issuing new shares Features Available only to existing share holders Offer with respect to existing share holdings Available with offer price or face value Eligible for dividend, capital appreciation,bonus shares
    • BONUS ISSUES Aim : Add profit to the share capital of the company Features : Distribution of profit in the form of equities Offer with respect to existing share holdings Eligible for dividend , capital appreciation BONDS AND SHARES
    • TYPES OF CAPITAL MARKETS Capital market Share market Debts Derivatives Primary market Secondary market IPOs,Bonds, Public issues,Privilege issues,Private placements Trading of equities and bonds
    • PROCESS OF CAPITAL MARKET PRIMARYMARKET SECONDARY MARKET Finding a broker Taking demat account Giving order Fixed price order Stop loss order Market order Internet trading Public issues Book building issues Right issues Private placements ADR GDR
    • Limited company Fundamental analysis Technical analysis Intrinsic value Management value Industry value Annual report Share ratios Economy analysis Industry analysis Company analysis Technical analysis
    • SHARE ANALISIS
    • INTRINSIC VALUE : Expected capital gains+expected dividends-risks Objective : to analyze the market value of share is good to buy or not
      • MANAGEMENT VALUES:
      • Integrity, group strength and weakness
      • Performance history , Planning and implementation policies
      • Unity, age,crisis management
      • Diversification policies
      • Vision and values
      • d
      • Promoters and directors and number of employees
      FUNDAMENTAL ANALISIS
      • ANNUAL REPORTS
      • Directors reports
      • Auditors reports
      • Account statements
      • Share capital
      • Reserves and play backs
      • Fixed and current assets
      • Provisions and operating expenses
      • Interest expense and depreciation
      • Investments and taxation
      FUNDAMENTAL ANALISIS
      • INDUSTRY CYCLE ANALYSIS
      • Entrepreneurship stage
      • Growth stage
      • Stabilization stage
      • Sunset stage
      • Research and developments of new products
      • COMPNY STRENGTHS
      • Pocket depths
      • Investment policies
      • Competitiveness
      • Aggressiveness
      FUNDAMENTAL ANALISIS
      • ECONOMY ANALISIS
      • GDP and inflation
      • Interest rates
      • Exports , imports and foreign reserves
      • Government revenues,expenses, deficit
      • Income rates and investment rates
      • Population
      • Per capita income
      • Monsoon
      TECHNICAL ANALISIS
      • INDUSTRY ANALISIS
      • Industry strengths, weakness , survival capacity
      • Sales and profit history
      • Stability of the industry
      • Government policies
      • Labor environment
      • Product life cycle
      • Demand supply analysis
      • Raw material availability
      • Entry level
      TECHNICAL ANALISIS
      • COMPANY ANALYSIS
      • Product market analysis
      • Product category
      • Market share, market potential,export potential
      • Consumer strengths and segmentation
      • Profits, price,credit policies,competition, expenses
      • Sales networks, retails,sales force performance,
      • Plant age,technology,brand image,R&D wing
      TECHNICAL ANALISIS
    • COMPARISON RATIOS
    • BOOK VALUE : Book value =share capital +reserves/number of shares Indicate net value of shares by company EARNING PER SHARE E P S =net profit/number of shares It indicate actual earning /return of a share ( dividend+reserve capital or capital gain ) PRICE EARNING RATIO P/E= Market price/EPS Indicate break even time for the particular shares COMPARISON RATIOS
    • YEILD Yield =dividend/market price*100 Indicate the percentage return of dividend return RETURN ON EQUITY ROE= Total share capital+ reserves/net profit Indicate profit making ability of a particular company from available funds COMPARISON RATIOS
    • SENSEX
      • SENSITIVE INDEX- what it mean ?
      • Benchmark index for Indian stokes
      • Reflects the price movements of the shares
      • Reflects the expectation of income gain or loss of equity investments
      • Reflects the confidence or risk taking ability of Indian equity investment
      • Reflects the performance and trends of Indian companies
      • Thermometer for Indian economy
      • Power full tool for investment analysis of Indian equity investment
    • What is the Sensex made of ?
      • Thirty stocks
      • Most actively traded stokes in the country
      • Represent thirteen industrial sectors of the country
      • Stokes should have traded every working day for last one year
      • Should include in top 150 company listed by average number of trades (buying and selling ) and value of trades( actual volume in rupees )
      • Must have listed on BSE for last one year
      • Who select these thirty stocks?
      • They selected by the index committee
      • Academicians
      • Fund managers
      • Finance journalists
      • Independent governing board members
      • Delegates form other financial sectors
    • BSE –BOMBAY STOCK EXCHANGE
      • Oldest index in the country
      • Most popular index
      • 13 sectors and 30 stokes
      • MEMBER STOCKS OF SENSEX
      • BAJAJ AUTO LTD -AUTOMOBILE
      • HERO HONDA MOTORS LTD - AOUTO MOBILE
      • MARUTHY UDYOG LTD - AOUTO MOBILE
      • TATA AUTOMOBILES -AUTOMOBILE
      • BHARTHI TELE VENTURS LTD -TELECOME
      • CIPLA LTD PHARMA
      • RANBAXY PHARMA
      • DR REDDYS LABORATARIES LTD PHARMA
      • GRASIM INDUSTRIES LTD CEMENT
      • GUJARATH ABBUJA CEMENTS CEMENT
      • ACC CEMENTS COMPANY PVT LTD- CEMENT
      • HDFC FINANCE
      • HDFC BANK FINANCE
      • ICICI BANK- FINANCE
      • SBI _ FINANCE
      • HINDALCO- ALUMINIUM
      • HINDUSTAN LEVER – DIVERSIFIED
      • INFOSIS – IT
      • SATHYAM COMPUTERS IT
      • TATA CONSULTANCY IT
      • WIPRO IT
      • LARSEN & TURBO ENGENEERING
      • NTPC POWER
      • RELIANCE POWER POWER
      • ONGC OIL
      • RELEINCE INDUSTRIES OIL
      • TATA STEEL – STEEL
      • TATA TEA - TEA AND COFEE
      MEMBER STOCKS OF SENSEX
      • NSE NATIONAL STOCK EXCHANGE
      • More advanced index
      • 24 sectors and 50 stocks
    • LEADING STOCK EXCHANGES
    • Market is Expensive
    • TRENDS 0F INDIAN SENSEX Strong Market Rally Source: Merrill Lynch Research
    • WEALTH BY SHARE INVESTMENTS BIILGATES 5000CR$ MICROSOFT WAREN BOOFAY 3500CR $ BARKSHARE FATHWA ASIM PREMJI 60000CR WIPRO MUKESH AMBANI 4700CR RELIENCE SUNIL MITHAL 3OOOCR BHARATHI TELECOME Presented by HONEY POULOSE