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Equity
Basics




IIFL Training Team
Ways of raising capital
 Equity
  – Owned Funds
  – Owner receives profit in the form of dividend


 Debt
  – Borrowed Funds
  – Borrower pays interest
  – Secured or unsecured




                                   IIFL Training Team
Debt Equity Ratio
Debt Equity Ratio = Debt
                    Equity




                         IIFL Training Team
Preference Capital
Preferential shareholders enjoy a
  preferential right
over equity shareholders with regards to:

 Receipt of dividend

 Receipt of residual funds after liquidation




                                        IIFL Training Team
Debentures
 A ‘Debenture’ is a legal contract
  where the company will pay the
  lender the initial amount
  (principal) and interest (rate of
  interest predefined at the
  beginning) after a pre defined
  period of time (maturity date)

 Types of Debentures
   – Convertible
   – Non Convertible



                          IIFL Training Team
Venture capital
 Capital typically provided by investors
  for financing of new, growing or
  struggling businesses. High risk
  investments. Potential for above
  average returns

 Pooled investment vehicle




                           IIFL Training Team
Limited company
 Liability limited to capital invested

 Protects personal assets of shareholders

 Types of limited companies
   – Private limited
   – Public limited




                           IIFL Training Team
Segments of the capital market
 Primary market

 Secondary market




                     IIFL Training Team
Primary market

 Primary market provides opportunity to
  issuers of securities; Government as well
  as corporate, to raise resources to meet
  their requirements of investment

 They may issue the securities at face
  value, or at a discount/premium and
  these securities may take a variety of
  forms such as equity, debt or hybrid



                          IIFL Training Team
Secondary market

 Secondary market refers to a
  market where securities are
  traded after being initially
  offered to the public in the
  primary market and/or listed on
  the Stock Exchange

 Provides liquidity to investors

 Majority of the trading is done in
  the secondary market


                           IIFL Training Team
Initial Public Offering (IPO)

 Initial Public Offering (IPO) is when an
  unlisted company makes either a fresh
  issue of securities or an offer for sale of
  its existing securities or both for the first
  time to the public

 This paves way for listing and trading of
  the issuer’s securities




                            IIFL Training Team
Pricing of an issue
 Fixed Price

 Price discovery through Book Building Process




                         IIFL Training Team
Book building process

 Book building is basically a process used in
  IPOs for efficient price discovery

 Floor price and Cap price

 It is a mechanism where, during the period
  for which the IPO is open, bids are collected
  from investors at various prices, within the
  price band

 The offer price is determined after the bid
  closing date

                              IIFL Training Team
Index
 Number which measures the change in a set of values
  over a period of time

 Stock index represents the change in value of a set of
  stocks which constitute the index

 A good stock market index is one which captures the
  behavior of the overall equity market

 It has to be well diversified yet highly liquid

                           IIFL Training Team
Importance of a market index
A market index is very important for its use as

 a barometer for market behavior

 as a benchmark portfolio performance

 an underlying for index futures and options




                                     IIFL Training Team
Circuit breakers
 An index based market-wide circuit breaker system
  applies at three stages of the index movement either way
  at 10%, 15% and 20%

 The breakers are triggered by movement of either S&P
  CNX Nifty or Sensex, whichever is breached earlier




                        IIFL Training Team
Circuit breakers
As an additional measure of safety, individual scrip-wise price bands has
been fixed as below:

 Daily price bands of 2% (either way) on a set of specified securities

 Daily price bands of 5% (either way) on a set of specified securities

 Daily price bands of 10% (either way) on another set of specified securities

 Price bands of 20% (either way) on all remaining securities (including
  debentures, warrants, preference shares etc. which are traded on CM
  segment of NSE)

 No price bands are applicable on scrips on which derivative products are
  available or on scrips included in indices



                                  IIFL Training Team
Market timings
 Trading on the equities segment takes place on all days of
  the week (except Saturdays and Sundays and holidays
  declared by the exchange in advance)

 The market timings of the equities segment are:

   – Normal market open : 09:00 hours
   – Normal market close : 15:30 hours
   – The closing session is held between 15.50 hours and 16.00 hours in NSE and 15.40
     hours and 16.00 hours in BSE



                                   IIFL Training Team
Order management

 Entering Order

 Order Modification

 Order Cancellation




                       IIFL Training Team
Entering order

 Active Order

 Passive Order

 Order Book

 Symbol



                     IIFL Training Team
Types of order conditions

 Time Conditions

 Price Conditions

 Quantity Conditions




                        IIFL Training Team
Time conditions

 DAY

 IOC - An Immediate or Cancel




                        IIFL Training Team
Price conditions

 Limit Price/Order

 Market Price/Order

 Stop Loss (SL) Price/Order




                          IIFL Training Team
Quantity conditions
 Disclosed Quantity (DQ)




                            IIFL Training Team
Clearing and settlement
 Stock Markets follow a system of settling trades on T+2
  basis, which means transactions done on Monday, are to
  be settled by Wednesday by way of giving securities or
  funds.

 Providing of securities or funds to Exchange / Clearing
  Corporation is called ‘Pay-In’.

 Receiving securities or funds from Exchange / Clearing
  corporation is called ‘Pay-Out’.



                          IIFL Training Team
Clearing and settlement
 Sometimes trades don’t get settled because of short or bad
  delivery or company objection

 In such cases ,trade is settled through auction of securities

 If a trade remains unsettled even after auction, then
  Exchange carries ‘Close Out’




                             IIFL Training Team
Our brokerage rates
                         Broking Services
Brokerage (Cash)
Intra-day                                                     0.05%
Delivery:(Normal) settlement                                  0.50%
Trade to Trade and Z group scrip                              0.75%


Brokerage(Futures)                                            0.05%
Brokerage(Options)                                  1% of Premium
Minimum                                             Rs. 100/- per lot


Minimum per share brokerage                                  Rs.0.05
Minimum Initial Margin                                    Rs.10,000


                               IIFL Training Team
Regulatory charges
 Trading Cash (NSE & BSE)     : 0.0037% on turnover
 Delivery (NSE & BSE) : 0.0037% on turnover
 Futures               : 0.0037% on turnover
 Options               : 0.0568% on premium




                         IIFL Training Team
Stamp Duty
 Trading Cash (NSE & BSE)     : 0.002% on
  turnover
 Delivery (NSE & BSE) : 0.01% on turnover
 Futures               : 0.002% on turnover
 Options               : 0.002% on premium




                        IIFL Training Team
Service Tax and STT
 Service Tax is 10.30% on brokerage

 Securities Transaction Tax
   – For trading transactions in cash– 0.025% (Charged to seller only)
   – For delivery transactions                – 0.125% (Charged to buyer and seller)
   – For trading transactions in ‘F n O’
        Intra day                   – 0.017 % (Charged to seller)
        For exercise                    – 0.125 % (Charged to seller)




                                      IIFL Training Team
Trader Terminal
 Investors get the facility to buy and sell
  stocks in NSE and BSE and Futures and
  Options through NSE

 Trader Terminal is for the dedicated day
  traders, who churn their portfolio on
  minor movements in the market,
  sometimes several times a day

 The Trader Terminal offers…..
   – lightning fast order execution
   – Monitoring of marked to market positions on a minute-
     to-minute basis
   – Intra-day charts, market gossip, price and volume
     information and much more




                                      IIFL Training Team
Thank You




 IIFL Training Team

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Equity basics

  • 2. Ways of raising capital  Equity – Owned Funds – Owner receives profit in the form of dividend  Debt – Borrowed Funds – Borrower pays interest – Secured or unsecured IIFL Training Team
  • 3. Debt Equity Ratio Debt Equity Ratio = Debt Equity IIFL Training Team
  • 4. Preference Capital Preferential shareholders enjoy a preferential right over equity shareholders with regards to:  Receipt of dividend  Receipt of residual funds after liquidation IIFL Training Team
  • 5. Debentures  A ‘Debenture’ is a legal contract where the company will pay the lender the initial amount (principal) and interest (rate of interest predefined at the beginning) after a pre defined period of time (maturity date)  Types of Debentures – Convertible – Non Convertible IIFL Training Team
  • 6. Venture capital  Capital typically provided by investors for financing of new, growing or struggling businesses. High risk investments. Potential for above average returns  Pooled investment vehicle IIFL Training Team
  • 7. Limited company  Liability limited to capital invested  Protects personal assets of shareholders  Types of limited companies – Private limited – Public limited IIFL Training Team
  • 8. Segments of the capital market  Primary market  Secondary market IIFL Training Team
  • 9. Primary market  Primary market provides opportunity to issuers of securities; Government as well as corporate, to raise resources to meet their requirements of investment  They may issue the securities at face value, or at a discount/premium and these securities may take a variety of forms such as equity, debt or hybrid IIFL Training Team
  • 10. Secondary market  Secondary market refers to a market where securities are traded after being initially offered to the public in the primary market and/or listed on the Stock Exchange  Provides liquidity to investors  Majority of the trading is done in the secondary market IIFL Training Team
  • 11. Initial Public Offering (IPO)  Initial Public Offering (IPO) is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public  This paves way for listing and trading of the issuer’s securities IIFL Training Team
  • 12. Pricing of an issue  Fixed Price  Price discovery through Book Building Process IIFL Training Team
  • 13. Book building process  Book building is basically a process used in IPOs for efficient price discovery  Floor price and Cap price  It is a mechanism where, during the period for which the IPO is open, bids are collected from investors at various prices, within the price band  The offer price is determined after the bid closing date IIFL Training Team
  • 14. Index  Number which measures the change in a set of values over a period of time  Stock index represents the change in value of a set of stocks which constitute the index  A good stock market index is one which captures the behavior of the overall equity market  It has to be well diversified yet highly liquid IIFL Training Team
  • 15. Importance of a market index A market index is very important for its use as  a barometer for market behavior  as a benchmark portfolio performance  an underlying for index futures and options IIFL Training Team
  • 16. Circuit breakers  An index based market-wide circuit breaker system applies at three stages of the index movement either way at 10%, 15% and 20%  The breakers are triggered by movement of either S&P CNX Nifty or Sensex, whichever is breached earlier IIFL Training Team
  • 17. Circuit breakers As an additional measure of safety, individual scrip-wise price bands has been fixed as below:  Daily price bands of 2% (either way) on a set of specified securities  Daily price bands of 5% (either way) on a set of specified securities  Daily price bands of 10% (either way) on another set of specified securities  Price bands of 20% (either way) on all remaining securities (including debentures, warrants, preference shares etc. which are traded on CM segment of NSE)  No price bands are applicable on scrips on which derivative products are available or on scrips included in indices IIFL Training Team
  • 18. Market timings  Trading on the equities segment takes place on all days of the week (except Saturdays and Sundays and holidays declared by the exchange in advance)  The market timings of the equities segment are: – Normal market open : 09:00 hours – Normal market close : 15:30 hours – The closing session is held between 15.50 hours and 16.00 hours in NSE and 15.40 hours and 16.00 hours in BSE IIFL Training Team
  • 19. Order management  Entering Order  Order Modification  Order Cancellation IIFL Training Team
  • 20. Entering order  Active Order  Passive Order  Order Book  Symbol IIFL Training Team
  • 21. Types of order conditions  Time Conditions  Price Conditions  Quantity Conditions IIFL Training Team
  • 22. Time conditions  DAY  IOC - An Immediate or Cancel IIFL Training Team
  • 23. Price conditions  Limit Price/Order  Market Price/Order  Stop Loss (SL) Price/Order IIFL Training Team
  • 24. Quantity conditions  Disclosed Quantity (DQ) IIFL Training Team
  • 25. Clearing and settlement  Stock Markets follow a system of settling trades on T+2 basis, which means transactions done on Monday, are to be settled by Wednesday by way of giving securities or funds.  Providing of securities or funds to Exchange / Clearing Corporation is called ‘Pay-In’.  Receiving securities or funds from Exchange / Clearing corporation is called ‘Pay-Out’. IIFL Training Team
  • 26. Clearing and settlement  Sometimes trades don’t get settled because of short or bad delivery or company objection  In such cases ,trade is settled through auction of securities  If a trade remains unsettled even after auction, then Exchange carries ‘Close Out’ IIFL Training Team
  • 27. Our brokerage rates Broking Services Brokerage (Cash) Intra-day 0.05% Delivery:(Normal) settlement 0.50% Trade to Trade and Z group scrip 0.75% Brokerage(Futures) 0.05% Brokerage(Options) 1% of Premium Minimum Rs. 100/- per lot Minimum per share brokerage Rs.0.05 Minimum Initial Margin Rs.10,000 IIFL Training Team
  • 28. Regulatory charges  Trading Cash (NSE & BSE) : 0.0037% on turnover  Delivery (NSE & BSE) : 0.0037% on turnover  Futures : 0.0037% on turnover  Options : 0.0568% on premium IIFL Training Team
  • 29. Stamp Duty  Trading Cash (NSE & BSE) : 0.002% on turnover  Delivery (NSE & BSE) : 0.01% on turnover  Futures : 0.002% on turnover  Options : 0.002% on premium IIFL Training Team
  • 30. Service Tax and STT  Service Tax is 10.30% on brokerage  Securities Transaction Tax – For trading transactions in cash– 0.025% (Charged to seller only) – For delivery transactions – 0.125% (Charged to buyer and seller) – For trading transactions in ‘F n O’  Intra day – 0.017 % (Charged to seller)  For exercise – 0.125 % (Charged to seller) IIFL Training Team
  • 31. Trader Terminal  Investors get the facility to buy and sell stocks in NSE and BSE and Futures and Options through NSE  Trader Terminal is for the dedicated day traders, who churn their portfolio on minor movements in the market, sometimes several times a day  The Trader Terminal offers….. – lightning fast order execution – Monitoring of marked to market positions on a minute- to-minute basis – Intra-day charts, market gossip, price and volume information and much more IIFL Training Team
  • 32. Thank You IIFL Training Team