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Secondary market


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Secondary market

  1. 1. Secondary Market
  2. 2. Meaning of Secondary Market Refers to a market where securities are traded Securities are already listed in Stock Exchange Provides an efficient platform for trading of his securities
  3. 3. Difference between Primary Market & Secondary Market Primary Market Secondary Market• Securities are offered to • Already existing public for subscription securities are traded • Purpose of Raising • Purpose of capital Capital or fund appreciation
  4. 4. Stock ExchangeProvide a trading platform by SEBI Where transaction done in securities
  5. 5. Demutualization of Stock Market Refers to the legal structure of an exchange Ownership, management and the trading rights at the exchange are segregated from one another
  6. 6. Demutualised Stock Exchanges in India National Stock Over the Exchange Counter (NSE) Exchange of India (OTCEI)
  7. 7. Stock Trading
  8. 8. Screen Based Trading System (SBTS) Introduced by NSE Where a member can punch quantities and price of security in computerTransaction is executed as soon as a matching sale or buy order from a counter party is found
  9. 9. National Exchange for Automated Trading (NEAT) A satellite communication technology for trading It’s a state of the art client server based application Has a uptime record of 99.7% Uniform response time of less than one second
  10. 10. Contract Note A confirmation of trades done on particular day On behalf of the client by a trading memberEnforceable relationship between the client and the trading member For the propose of purchase / sale and settlement of trades It should be in Prescribed Form
  11. 11. Benefits of trading in Stock Exchanges • Best prices prevailing at the time in the market1. • Lack of any counter party risk which is assumed by2. the clearing corporation • Access to investor grievance and redressal3. mechanism of stock exchange • Protection up to prescribed limit4.
  12. 12. How to know if the Broker / Sub Broker is Registered? By verifying the registration certificate issued by SEBI Broker registration number begins with the letter ‘INB’ A sub broker with the letters ‘INS’
  13. 13. Precautions of investing in the Stock Markets Make sure your broker is registered with SEBI and the Exchanges Ensure that you receive contract notes for all your transactions Invest in a manner that matches their risk tolerance Do not be misled by market rumors, luring advertisement or ‘hot tips’ Take informed decisions by studying the fundamentals of the company
  14. 14. Instruments of Secondary Market Secondary Market Shares Bonds ZeroEquity Rights Bonus Preference Convertible Treasury CouponShares Shares Shares Shares Bond Bills Bonds Cumulative Cumulative Convertible Preference Preference Share Shares
  15. 15. Shares Equity Shares• Represent the form of fractional ownership in a business venture Rights Shares• Issue of new securities to existing shareholders Bonus Shares • Issued by the companies to their shareholder free of cost based
  16. 16. Preference Shares Entitled to get fixed dividend before equity shareholders Priority of getting surplus before equity shareholder At the time of liquidation their claims below to equity shareholders
  17. 17. Types of Preference SharesCumulative • Dividend accumulates if remainedPreference unpaid SharesCumulative • Dividend payable on the sameConvertible accumulates, if not paidPreference • Converted into equity capital of the Shares company
  18. 18. BondNegotiable certificate evidencing Normally Unsecured indebtedness Issued by a Company, Municipality or Government Agency
  19. 19. Types of Bond • Issued at discount and repaid at faceZero Coupon Bond value • No periodic interest is paid • Giving the option to the investorConvertible Bond • Convert the bond into equity at fixed conversion price • Issued by government Treasury Bills • Short term bearer discount security
  20. 20. Equity Investment Provides portfolio with growthReach on long term investment goals Equities are high risk investment
  21. 21. Dividend A company returns A percentage of to its shareholdersthe face value of a from its annul share profits
  22. 22. Factors affected the price of stock Stock Specific Market Specific
  23. 23. Stock Specific Factor Level of Technology Financial & Marketing Health Skills Management Future Earning Capacity PeopleExpectation about the Company
  24. 24. Market Specific Factor Generally short term factor Depends upon on the environment rather than performance Its include Budget, War Economic Growth & Crises etc.
  25. 25. Growth Stock Whose potential for growth in sales Growing faster thanEarning are other excellent companies in market
  26. 26. Value Stock Investor look toStock which buy stokes that may have arehidden value undervalued
  27. 27. Portfolio Purpose ofCombination of different achieving an investment assets investor’s goal
  28. 28. Diversification It’s A Risk Mixes a Reduce theManagement wide variety risk in Technique of portfolio investments with in portfolio
  29. 29. Debt InstrumentsRepresents a contract whereby one party lends money to another
  30. 30. Debt Instruments Bond Debenture Issued by the Issued bycentral and state private government corporate sector Public sector organization
  31. 31. Features of Debt Instruments • The date on which borrower has agreed Maturity to repay the principal • Refers to the periodic interest Coupon payment that are made by borrower to lender • The amount that Principal has been borrowed
  32. 32. Segment of Debt Market • Comprises the Centre, State andGovernment state sponsored securities Securities • They are not tax –freePublic Sector • They are tax –freeUnits Bonds Corporate • Comprise of commercial paper Securities and bonds
  33. 33. Participants of Debt Market Financial Banks Institutions Provident Mutual Funds Funds Insurance Corporate Companies