2. What is a Stock Market ?
Bombay Stock Exchange (BSE)
First and Oldest Stock Exchange in Asia –
Founded as The Native Stocks & Share Brokers Association in 1875
Largest number of listed companies - 5,249
7th
largest exchange in Asia in terms of Market Capitalization
8th
Largest Exchange in World – number of trades in Equity
Shares
New Platform for trading in equities of SMEs
2
4. How the Capital Market Operates
Settlement System: T+2 Settlement System
Day Time Description of activity
T 9:15 a.m. – 3:30 p.m. Trade Day
T+1
By 11:00 a.m.
Confirmation of all trades (including custodial trades) Facility
of an exceptional window for late confirmations would be
made available by the exchanges
By 1:30 p.m.
Processing and downloading of obligation files to brokers /
custodians
T+2
By 11:00 a.m. Pay-in of securities and funds
By 1:30 p.m. Pay-out of securities and funds
5. www.lkwindia.com www.gurukshetra.com
How the Capital Market Operates
e-trading
BOLT on-line Trading
System at BSE
Benefits :
Lower Transaction Costs
Increased Liquidity &
Transparency
Greater Competition
Time Efficient & Automated
De-materialization (Demat)
Shares held in electronic
format (Non-Physical)
Facilitates electronic
settlement of trades
Maintained & monitored
by Depository Participant
(DP)
7. Capital Market Regulator - SEBI
Capital Market Watchdog
Established under SEBI Act, 1992
Promotes Investor Education
Monitors Insider Trading
Regulates
Stock Exchanges
Working of all Intermediaries, Stock Brokers
Prohibits Fraudulent and Unfair Trade Practices
8. Asset Class Offerings
Equity
Direct Equity
Equity Mutual Funds
Debt
Bank FDs
Corporate FDs
Debt Mutual Funds
Government Instruments (PPF, NSC, Post Office Savings)
Gold
ETFs
Fund of Funds
9. 100 = 20 .…. How ?
Now that Rs. 100 has become 20, how will one make Rs. 20 work
optimally ???
Illustration Amount
Base Income 100
Less : Direct Tax 30
Post Direct Tax Income 70
Non - Discretionary Expenses 35
Indirect Taxes 5
Net Income 30
Net Investible Income 20
11. You Have to Invest to Beat Inflation
FD Returns = 9%
Interest is taxable
Clearly, ONLY Low Risk FDsClearly, ONLY Low Risk FDs
will erode your capitalwill erode your capital
More than ~70% of Investors Funds find their wayMore than ~70% of Investors Funds find their way
to FD’sto FD’s
12. Equity v/s Debt – Performance RecoEquity v/s Debt – Performance Recordrd
Equity
Rs. 813 in August 2014 at a CAGR
Return of 20.1% After Tax
Debt
Rs. 236 in August 2014 at a CAGR
Return of 6.2% After Tax**
Investment of Rs. 100 invested in March 2003 would have been
** assumed investor is in Highest Tax Bracket
13. BEATING INFLATION – Equity InvestingBEATING INFLATION – Equity Investing
High Risk
Two year Bull Run in a 7-8 years7-8 years
Pulls up overall average returns
* Minimum period of remaining invested is 7-10 years
Returns Difference – Over the Longer TermReturns Difference – Over the Longer Term
HUGE
Scheme Category /
Benchmark Indices
CAGR % Returns (10th
October, 2014)
1 year 2 years 3 years 5 years 7 years 10 years
Large Cap Funds 53% 24% 22% 16% 13% 22%
Mid Cap Funds 94% 37% 33% 23% 20% 24%
Balanced Funds 64% 25% 23% 18% 15% 22%
15. Selecting a Stock
Management
Business Model
Numbers
Story behind the Numbers
Industry Outlook
Annual Report
16. Investing v/s Trading
Time Frame v/s Immediate
Level of Market Expertise
Long Term v/s Speculative
Delivery v/s Square Off
Returns v/s Zero Sum Game
17. Capital Markets – Road Ahead
Current Participation – 2%; Year 2025 – 10-15%
participation
Indian Equity Market - Strong Potential for Growth
Investment Cycle has to re-start
Sheer Size of Indian Economy
Changing Demographics in India
19. What are Mutual Funds
Pool of Money
Professionally Managed
Governed by AMFI and SEBI
Sponsor / Trustee, AMC
20. Mutual Fund Terms
AMC
Corpus
AUM
NAV & Units
Fund Factsheet
Expense Ratio
NFO
21. Types of Mutual Fund Schemes
Equity Mutual Fund Schemes
Large Cap / Multi Cap / Mid & Small cap / Sectoral Funds
Debt Mutual Fund Schemes
Liquid / Ultra Short Term / Dynamic Bond / Income / Gilt
Balanced Funds
Gold Fund of Funds
Tax Saving Schemes
22. Advantages of Investing through MFs
Wide choice of products
Relatively easier to invest – in terms of operations
Less Volatile
Possible to invest small sums
Facilitates disciplined investing
23. Mutual Fund Taxation
LTCG = Long Term Capital Gains, STCG = Short Term Capital Gains; ** With effect from 11th
July, 2014
24. Ways of Investing in Mutual Funds
Systematic Investment Plan
Systematic Transfer Plan
Systematic Withdrawal Plan
Lumpsum
KYC & Procedures
25. No need to time the market
Buy more for less when the markets are down and less for more when
the markets are up
Rupee Cost Averaging
The above investment simulation, is purely for illustrative purpose only and shall not be deemed as guarantee/promise of minimum returns and safeguard of capital or to depict performance
of any mutual fund scheme. SIP does not assure a profit or guarantee protection against loss in a declining market.
36. Power of Compounding
Monthly SIP
Amount (`)
Expected Rate of
Return
Estimated
Corpus over 10 years
2,0002,000 15%15% Rs. 5.6 lakhRs. 5.6 lakh
3,5003,500 15%15% Rs. 9.8 lakhRs. 9.8 lakh
5,0005,000 15%15% Rs. 13.9 lakhRs. 13.9 lakh
Bull Cycle once in 7-8 years pulls up Average ReturnsBull Cycle once in 7-8 years pulls up Average Returns
37. Power of Compounding
What you save
every day
How much it could
earn every year
...and after... You will have*
Rs. 30 10% 25 years Rs. 1,18,640
Rs. 30 12% 25 years Rs. 1,86,151
Rs. 30 15% 25 years Rs. 3,60,463
*(Compounded Annually)
Let us assume that instead of spending on coffee at the nearest café which
costs Rs. 30, you decide to forego the coffee and invest the amount, here is
what it could add up to after 25 years...
Clearly, the table shows that the longer you leave your money invested
and the higher the rate of return, the faster your wealth will grow.
39. Right Approach to Financial Planning
Prepare Comprehensive Financial Plan
List down all Assets
List down all Liabilities
Set Achievable Financial Goals
40. Asset Allocation- Importance
EQUITY if :
Relatively High Risk Appetite
Relatively longer time frame for
achieving goals
Higher Investible Amount
High Risk – High Reward
DEBT if :
Non-Discretionary Nature of
Goals
Diversification of Risks
Low Risk – Low Returns
Potential to provide Regular
Income
GOLD if :
Asset Class of the Last
Resort
Optimizes Portfolio Returns
Traditional Hedge
CASH if :
Foreseeable Near Term Goal
Contingency Funds
41. Re-balancing Asset Allocation
Allocate based on Economic & Market conditions
Provide Weightages based on Outlook
Create Asset Class Boundaries
Rebalance based on
Breaching Boundaries
Changing Outlook
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44. THANK YOU !!!!
FINANCIAL PLANNING IS AFINANCIAL PLANNING IS A
FULL TIME ACTIVITYFULL TIME ACTIVITY
THERE IS NO SHORT CUTTHERE IS NO SHORT CUT
TO MAKING MONEYTO MAKING MONEY