The document discusses various concepts related to financial markets. It defines a financial market as a place where financial assets are created and traded. It describes different types of markets like the money market, capital market, fixed income market, and equity market. It provides details about various money market instruments, bonds, debentures, and government securities. It also discusses concepts related to equity markets, mutual funds, and different investment risks and how to manage them.

2. S K Kumawat
MDC,Mumbai

3. MARKET
• An actual or nominal place where forces of demand and supply
operate, and where buyers and sellers interact (directly or through
intermediaries) to trade goods, services, or contracts or
instruments, for money or barter.
FINANCIAL MARKET
• Financial Market is a place where Financial Assets are created and
traded (purchase & sale)

4. WHAT IS FINANCIAL MARKET?
Haves
(Households,
Corporates)
Have nots
(Corporates
and
Govt.)
Financial
Intermediary
(Banks / FIs,
Insc. Cos.MF
Capital Markets)
Cash
Securities

5. SECURITIES MARKET
SECURITY- Any certificate or instrument(by whatever name called),
issued to an investor by an issuer for a consideration. This include
shares, bonds, debentures or other marketable securities of a like
nature.
Money Market
Capital Market
Fixed Income Market
Equity Market

6. MONEY MARKET
•Short term( 1day to 1 year)
• Easy liquidity
•Discounted instruments
• Unsecured
• Moderate income
• Appropriate to park money for short period
• Rates depend on demand and supply
mechanism
•Regulated by RBI

7. SOME MONEY MARKET INSTRUMENTS:
Treasury Bills
Certificate of Deposit
Commercial Paper

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CAPITAL MARKET
• It is a market for securities( debt or equity), where business
enterprises & governments can raise long term funds.
• In this market money is provided for more than 1 year.
• Consists of primary & secondary markets.
• In primary market new bonds & stocks are sold to investors.
• Secondary market deals with transactions of existing security
– usually on a securities exchange
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DEBT VS. EQUITY
• Both has a concept of face value.
• Concept of coupon & maturity are with debt only, not in equity.
• Equity investment gives ownership to the investor, especially
ordinary equity. Debt investment does not give any ownership in
the investee company.
• Debt investments are for a predefined period unless it is a
perpetual instrument.
• Mostly debt instruments give a fixed income over its tenure
whereas equity income can vary over a period of time.
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10. BONDS & DEBENTURES
These Bonds/Debentures are issued by:
• Govt. Agencies like Electricity Boards, Transport Corporations, State level
power generation/transmission corporation, Municipal Bodies etc.
• Public Sector Enterprises like PFC, REC, NTPC
• Public & Private Sector Banks
• All India Financial Institutions like IDFC,NABARD, EXIM etc.
• Reputed Private Sector Companies like ACC, TATA Motors etc
• Housing Finance Companies like HDFC, LICHFL etc.
• NBFCs like Mahindra & Mahindra Finance Ltd., Tata Motors Finance Ltd,
Citicorp Finance Ltd, Sundaram Finance Ltd, Bajaj Auto Ltd etc.
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GOVERNMENT SECURITIES :CENTRAL/ STATE GOVT.
• Issued by Govt. of India/ State Govts
• Fixed or Flaoting coupon payable semi annually.
• Zero coupon also issued.
• Risk free investment- no default risk.
• Subject to interest rate risk.
• Tenor may range 1 years to 30 years
• Bullet repayment
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12. EQUITY MARKET
(1) Primary Market-
For Raising Fresh Capital
IPO/ FPO, PRIVATE PLACEMENTS
Right issue: Offered to the existing shareholders only.
(2) Secondary Market:
Deals with Existing Securities

13. EQUITY INVESTMENTS
• Equity investments provide superior returns in the long
term
• Equity is high risk with high return on investment
• Equity research allows the fund manager to take informed
decisions

14. TYPES OF INVESTMENT RISKS & HOW TO MANAGE THEM
1. Default Risk
2. Liquidity Risk
3. Inflation Risk
4. Interest Rate Risk
5. Market Risk-
6. Reinvestment Risk

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HOW TO MANAGE EQUITY INVESTMENT RISKS
• Invest from medium to long term
• Start small
• Stick to large-caps first e.g. Sensex, Nifty
• Develop an exit strategy
• Stick to your circle of competence
• Opt for quality management
• Don’t invest in high debt companies
• Buy at right valuations
• IPO- Should be selected after proper Research
• Portfolio to be diversified to reduce risk

16. MUTUAL FUND INVESTMENT CONCEPT
• A Mutual Fund is a trust that pools the savings of a
number of investors who share a common financial goal.
• The money thus collected is then invested in capital
market instruments such as shares, debentures and
other securities.
• Mutual funds have a fund manager who invests the
money on behalf of the investors by buying / selling
stocks, bonds etc.

17. MUTUAL FUND INVESTMENT CONCEPT
• The income earned through these investments and the
capital appreciation realised are shared by its unit holders in
proportion to the number of units owned by them.
• Thus, a Mutual Fund is the most suitable investment for a
common man.
• It offers an opportunity to invest in a diversified,
professionally managed basket of securities at a relatively
low cost

18. ADVANTAGES OF MUTUAL FUND INVESTMENT
• Small Investment
• Diversified Portfolio
• Professional Management
• Liquidity
• Low Cost
• Transparency
• Well Regulated

19. Performance of Sensex- Equities are not risky in long run
(Annualised Return)

20. (Annualised Return)

21. Annualised Return
Yea
rs
Year end Sensex 1 Year 3Years 5Years 7Years 10Years 15Years 20Years 25Years 30 Years
42 31.03.2021 49509 19% 11% 13% 12% 10% 10% 14% 11% 13%
43 31.03.2022 58810 19% 15% 12% 11% 13% 11% 15% 12% 11%
Prob. of Loss 13/43 7/41 2/39 3/37 1/34 0/29 0/24 0/19 0/14
Prob. of Loss (%) 30.23 17.10 5.12 8.10 2.94 00 00 00 00
Range of Return -47% to
267%
-15% to
62%
-5% to
53%
-2% to
43%
-2 % to
35%
6% to
27%
7% to
20%
9% to
19%
13% to
18%

22. Other Investment Options
• 3. Gold
• 4. Real Estate

23. Return on Gold during last 20 years
Date Price( 10gm) CAGR Date Price(10gm) CAGR
28.4.1998 4025 - 27.4.2009 14792 26.15
18.4.1999 4255 5.71 15.5.2010 18177 22.88
06.5.2000 4355 3.0 06.5.2011 22000 21.03
26.4.2001 4025 -7.58 24.4.2012 29055 32.07
16.5.2002 4827 19.93 13.5.2013 26890 -7.45
06.5.2003 5310 10.01 02.5.2014 29480 9.36
23.4.2004 5713 7.59 21.4.2015 26950 -8.58
11.5.2005 6113 7.00 09.5.2016 30330 12.54
30.4.2006 9520 55.73 28.4.2017 29620 -2.34
20.4.2007 9352 -1.76 28.4.2018 32050 8.20
08.05.2008 11726 25.38 28.4.2019 32990 2.93
28.4.2020 47150 42.92
28.4 .2021 45480 -3.54
28.04.2022 51264 12.72
28.4.2023 60820 18.64

24. Gold Vs Sensex during past
CAGR of Gold since April 1998 to April 2022 i.e. for the last 24 years
• Gold in April 1998=4025
• Gold in April 2023=60820
=11.47%
CAGR of Equity Investment since 1998 i.e. for last 24 years
Sensex in April 1998=3740
Sensex in April 2023=60649
=11.79%

25. Time Value of Money
Year/Inflation Rate 4% 5% 6% 7%
5 .822 .784 .747 .713
10 .676 .614 .558 .508
15 .555 .481 .417 .362
20 .456 .377 .312 .258
25 .375 .295 .233 .184
30 .308 .231 .174 .131

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SOME MARKET TERMINOLOGY
• Top line, Bottom line, Net worth.
• Market capitalization- Market capitalization is equal to the share
price multiplied by the number of shares outstanding
• Dividend payout-It is the amount of dividends paid to
stockholders relative to the amount of total net income of a
company.
• Dividend yield ratio- It is a stock's dividend as a percentage of the
stock price.
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EARNING PER SHARE (EPS)
• It is the amount of net earnings that is allocated to each share of
outstanding common stock.
• Steadily increasing EPS indicates growing earnings of the company or
that its financial condition is improving. It is a indicator of higher future
prices.
PRICE EARNING RATIO(PE RATIO)
• The most common measure of how expensive a stock is.
• Arrived at by dividing Current Mkt.Price(CMP) of the stock by EPS
LONG POSITION
SHORT POSITION
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28. Thank You