This document provides an overview of equities (stocks) including: - Equities represent ownership in a company after debts are paid off and include benefits like capital gains, dividends, and voting rights. - Common types of equities include warrants, preferred stocks, and convertible bonds. - Corporate actions like stock splits, dividends, and secondary offerings impact stock holders. - Technical analysts examine factors like price, volume, market capitalization to evaluate stocks. - Markets can be segmented by sector, company size, geography and other criteria for analysis.

1. Lecture No 39
Equities
CMT LEVEL - I

2. Learning Objectives
- Equities Securities
- Primary Data Types
- Benefits of Equities
- Effect of Corporate
Action on Investors
- Classify Sectors ,
Capitalizations & Segment
the markets
CMT LEVEL - I

3. Equities
• Equity is typically referred to as shareholder equity which
represents the amount of money that would be returned to a
company’s shareholders if all of the assets were liquidated and
all of the company's debt was paid off.
• We can think of equity as a degree of ownership in any asset
after subtracting all debts associated with that asset.
• Equity represents the shareholders’ stake in the company.
• The calculation of equity is a company's total assets minus its
total liabilities.

4. Equities
•Both Equities & debt have claims on the liquidation
value of a company should become bankrupt or
otherwise insolvent.
• Investors buy or sell stocks on formal exchange or
Over the counter.
• Shareholders’ Equity=Total Assets−Total Liabilities
• Assets=Liabilities + Shareholder Equity

5. Benefits for Investors
Capital Gain or
Appreciation
Income (Dividend)
Voting Right/ Voice
in Management of
Company

6. Other Form of Equities
Warrants
Preferred
Stocks
Convertible
Bonds

7. Warrants
• A stock warrant gives the holder the right to purchase
a company's stock at a specific price and at a specific
date.
•A stock warrant is issued directly by the company
concerned;
•when an investor exercises a stock warrant, the shares
that fulfill the obligation are not received from another
investor but directly from the company.

8. Preferred Stocks
• Preference shares, more commonly referred to as
preferred stock, are shares of a company’s stock with
dividends that are paid out to shareholders before
common stock dividends are issued.
•If the company enters bankruptcy, preferred stock holders
are entitled to be paid from company assets before
common stockholders.
•Most preference shares have a fixed dividend, while
common stocks generally do not.
•Preferred stock shareholders also typically do not hold any
voting rights, but common shareholders usually do.

9. Convertible Bonds
• A convertible bond pays fixed-income interest
payments, but can be converted into a predetermined
number of common stock shares.
•The conversion from the bond to stock happens at
specific times during the bond's life and is usually at
the discretion of the bondholder.
•A convertible bond offers investors a type of hybrid
security that has features of a bond, such as interest
payments, while also having the option to own the
underlying stock.

10. What Does A Technical Analyst Needs?
Price Volume Ask/Bid
Size Time
52 Week
High/Low
Market
Capitalization

11. What Does A Technical Analyst Needs?
• Price – Open , High , Low & Close refer to those actual
traded price for any given time interval
• Volume – No. of Shares changing hands in a specific
trade or summed over an interval.
• Bid/Ask – Current price buyer willing to pay & seller
are willing to accept .
• Size – No. of Shares the maker of a bid or ask will
trade.
• Time – The time trade tookplace.

12. What Does A Technical Analyst Needs?
• 52 week High/Low – The
highest /Lowest traded over
the past year.
• Market Capitalization –
Value of all publicly available
shares of a stock in a
company. It is the product of
price multiplied by the no. of
shares outstanding .

13. Corporate Action
Ex-
dividends
Splits
Secondary
Offerings
Restricted
Shares

14. Ex Dividends
• Ex – Dividends - Ex-dividend describes a stock that is
trading without the value of the next dividend
payment.
•The ex-dividend date or "ex-date" is the day the stock
starts trading without the value of its next dividend
payment.
•A buyer who purchases a stock on or after its ex-
dividend date is not entitled to the declared dividend –
it is owned by whoever owned the stock the day
before the ex-dividend date.

15. Stocks Splits
•A stock split is a corporate action in which a company
divides its existing shares into multiple shares to boost the
liquidity of the shares.
•Although the number of shares outstanding increases by a
specific multiple, the total dollar value of the shares
remains the same compared to pre-split amounts, because
the split does not add any real value.
•The most common split ratios are 2-for-1 or 3-for-1, which
means that the stockholder will have two or three shares,
respectively, for every share held earlier.

16. Secondary Offerings
•A stock split is a corporate action in which a company
divides its existing shares into multiple shares to boost the
liquidity of the shares.
•Although the number of shares outstanding increases by a
specific multiple, the total dollar value of the shares
remains the same compared to pre-split amounts, because
the split does not add any real value.
•The most common split ratios are 2-for-1 or 3-for-1, which
means that the stockholder will have two or three shares,
respectively, for every share held earlier.

17. Restricted Shares
• Restricted shares and stock options are both forms of equity
compensation that are awarded to employees.
• Restricted shares represent actual ownership of stock but come with
conditions on the timing of their sale.
• They are most common in established companies that want to motivate
employees by giving them an equity stake.
• when restricted shares are given to an employee, it is on condition that
the employee will continue working at the company for a number of
years .
• This might be an earnings goal or another financial target.
• Such shares are often granted in stages, each with its own vesting date or
milestone attached.

18. Segment the Markets for Analysis
• Research said that the price performance of individual stocks depends
heavily on the performance of its sector.
Sectors &
Industries
Banks , Oil & Gas , Pharma , Telecom , FMCG Etc.
Capitalization Large , Medium , Small & Micro
Geography Country , S& P 500 , Nifty , Kospi , DAX ,
NASDAQ
Others Growth , Value , Defensive & Aggressive .