(IMT) INSTITUTE OF MANAGEMENT TECHNOLOGY Centre for Distance Learning
(Recognized by Distance Education Council)
SYNOPSIS
ON SHARE MARKET AN OVERVIEW Submitted By Harsimarn Kaur
Enrollment No. 42101688 To (IMT) INSTITUTE OF MANAGEMENT TECHNOLOGY
Centre for Distance Learning (Recognized by Distance Education Council)
PROFORMA FOR SYNOPSIS OF PROJECT WORK
Name:
Harsimran kaur
Enrollment No.: 42101688 Address for correspondence: House no. 80,
Sheetal Apartments, Sector – 14, Rohini, Delhi-110085. Mobile no.:
9313216953 Phone No. : 011-27315411 Major Area of Specialization :
Finance Questionnaire Attached – yes Resume of Project Guide Attached –
Yes Consent Letter of Project Guide – Yes Phone no. Project Guide :
9312211526 Date of Submission :
STATEMENT ABOUT THE PROBLEM The objective of the project is to find the
sales potential of Demat Account in Delhi and NCR regions. The research
will help what the current trends are in the market and the competitors
product offering are relates to share market and recommendations to
To study the Mutual funds industry in detail- This will done by managing
The Various client relationship and educating them about the various
benefits that Mutual fund offer as compared to bank FD‟s, National saving
certificate etc. this also involves studying in depth about the various
investor‟s
preference in mutual funds by way of questionnaire And Personal visits to
d analyze the future aspirations of
relative importance the Share Market parameter associated with the Demat
Account.
IPAL with
that Of the other on the bases of Alpha, beta, stander Deviation, Sharp
ratio and Tenor ratio
WHY IS THIS PARTICULAR TOPIC CHOSEN The purpose of the undergone study is
to study the Demat Account services of the different bank & other
securities companies & evaluates the competitive position of Standard
chartered so as to suggest way to increase its market share. The main
problem faced by the company was that it had a very less customer base.
The company‟s own product had very less market as compare to it‟s third
party selling. The company does a third party selling for all the
investment products. The study thus focuses on following dimensions:
1. To identify the critical factors that influences the buying behavior
of Investors. 2. To know the investor acceptance of the services of
Standard chartered 3. bank in Delhi & NCR regions. 4. According to
current scenario it is a very relevant Topic. 5. To assess the problem
volume of future sales . 6. Many big company are dealing in this market.
WHAT CONTRIBUTION WOULD THE PROJECT MAKE For the purpose of the research
it is absolutely imperative for me to find out what the investor want
from their company. It is also necessary to find out the Investor‟s
profile i.e. his/her age, monthly income, occupation and sex and also the
current company with which he/she is investing. This will require me to
get a details questionnaire filled by the concern person. All the
analysis in the report will be drawn out of this questionnaire. For
carrying out the competitor analysis Further help will be taken from
company websites and journals. This research will provide Standard
chartered bank with information like current Market share of Securities
Company and also a detailed analysis of the services Offered by stock &
securities broker and stock & Securities Company and what are the most
important criteria for selecting a particular securities company. The
company can also get data on prospective customer by designing its
product offering and marketing strategy in a way so as to attract more
clients in the near future.
OBJECTIVE AND SCOPE OF THE STUDY
The study is the part of academic curriculum of 3 years MBA therefore the
primary objective of this study is to fulfill the requirement for the
award of MBA degree of (IMT) INSTITUTE OF MANAGEMENT TECHNOLOGY.
The present study was carried out with the objective to know Scope of
share market and its various catchments areas of Punjab current
securities company. So as to know strength and weakness of share schemes
of securities company, So that strengths can be increased and weaknesses
ke people know about
collect various suggestions from the consumers to make share market
Mutual funds industry in detail- This will
done by
managing the Various client relationship and educating them about the
various benefits that Mutual fund offer as compared to bank FD‟s,
National saving certificate etc. this also involves studying in depth
about the various schemes offered by PRINCIPAL of Securities Management
Company. 1. To study about the investment Procedure in Mutual funds. 2.
To study the investor‟s preference in mutual funds by way of
Questionnaire and Personal visits to clients.
METHODOLOGY
Research is a systemic and objective process of gathering recording and
analyzing data for aid of making decision regarding a particular problem.
1. RESEARCH DESIGN The research design is a master plan specifying the
methods and procedures for collecting and analyzing the needed
information the research design of my dissertation is DESCRIPTIVE
RESEARCH Descriptive research includes surveys and facts findings
inquiries of different kinds. 2. DATA COLLECTION PRIMARY DATA primary
data is gathered through a survey with the help of questionnaire.
SECONDARY DATA secondary data sources includes
• • •
Books Journals various websites
3 RESEARCH INSTRUMENTS QUESTIONNAIRE 4 SAMPLE DESIGN
• •
target population people of industries . sample size 100 people .
•
sampling technique convenience and judgmental .
Type of Research Research methodology is a way to systematic solve the
research problem. It is a procedure, which is followed step by step to
solve a particular research problem. There are basically four types of
researches
HYPOTHESIS TESTING RESEARCH
Hypothesis Testing Research. To test a hypothesis of casual relationship
between variables. The present project is Descriptive in nature. It is
done to poetry accurately the characteristic of a particular individual
situation or a group. The major purpose is descriptive research is the
description of the state of the affairs as it exits at presents. The main
characteristics of this method are that the researcher has no control
over the variables; he can only report what has happened or what is
happening.
CHAPTERISATION SCHEME
1. Introduction 2. Literature Support 3. Process/ Methodology of Study 4.
Analysis and Interpretation 5. Conclusion 6. Recommendation 7. Appendices
Bibliography
QUESTIONNAIRE
Name: …………………………… Occupation:………………………….. Investment Presently
Held:Please list the value the assets in your total investments portfolio
(in Rs): Stocks:_________ Bonds:_____________ Options:____________ Real
estate:____________ Mutual Funds:_______________ Govt.
Securities:_____________ Bank Deposits:_____________
1.Over the next 3-5 years, do you expect your annual income to change?
Increase Decrease Remain the same 2.Do you invest in Mutual Funds? Yes No
Earlier, now stopped 3.What is your experience in the market? Less than a
year 1-4 years 4.What is your Trading Preference? Speculation Investment
Both More than 4 years
5.What is your Average investment period? Less than 3 months 3 to 9
months 9 months to 2 years More than 2 years 6.Factors influencing the
investment decisions? Advice from Broker Current news Reviews in
Financial Magazines Advice from Friends Self Evaluation Others 7.How much
Risks are you willing to take? High Low Moderate
8.What is your preference in Mutual Funds? Equity Income Money Market
Funds ELSS Balanced Funds SIP Others 9.How much Appreciation do you
expect from your investments? Up to 15% 15-25% 25-35% More than 35%
10.How much loss are you willing to take? Less than 5% 5-10% more than
10% 11.Which type of Mutual funds do you prefer? Open ended schemes
Closed ended schemes 12.Do you get influenced by the name of Company
promoting Mutual Funds? Yes NO 13.Do you get influence by the name of
returns given by a fund or by the current NAV of a funds? By NAV By
Returns Both 14.After how many years do you expect to redeem your
investment? 0-2 Years 3-5 Years 6-10 Years 11-15 Years Over15 Years
15.How many people are financially dependent upon you? More than 4
persons Three people Two people One people I only need to take care of
myself
TITLE OF THE PROJECT
SHARE MARKET AN OVERVIEW
CONTENTS
1. Introduction 2. Literature Support 3. Process/ Methodology of Study 4.
Data Collection 5. Analysis and Interpretation 6. Conclusion 7.
Recommendation 8. Appendices Bibliography
LIST OF GRAPHS & CHARTS Sl. No. 1. Graph no. 4.1 Graph Title Page no. 68
On which Basis of choose loan
Occupation of the people
2.
4.2
69
.
LIST OF TABLE Sl. No. 1. Table no. 4.1 Graph Title Page no. 67
Company share price
2
4.2
On which Basis of choose loan
Occupation of the people
67
3
4.3
68
PREFACE
The introduction and application of the concept of customer services
entered in a welcoming way in India only after independence. The share
market in India has come a long way during the last two centuries. Its
growth was faster and the coverage wider since and major position of
securities sector was entrusted to the public sector. This process
continued and embraced few private banks in 1980. The transfer of
ownership of banks from the public to private was aimed at entrusting the
banks with greater responsibilities for the economic development of India
by taking securities services to the masses and taking special care of
the weaker section of the society and the priority sector of the economy.
Though the number of securities company magnitude and the variety of
their operations has grown considerably during the period of near about
three decades, but it appears that the securities sector has entered into
serious among customers.
For overcoming this problem, securities industry should seek
introspection and adopt refined management techniques. It has been
endeavor of this study to analyze the present state of various company
keeping in view the primary data has been collected regarding the present
state of invest schemes in various company by using a questionnaire.
ACKNOWLEDGMENT
“People must have guidance in doing their work know where to turn For
help guidance”
It is said that “No learning is possible without any proper guidance and
no research is possible without any proper guidance , some contribution
is performed by various individual This project work, which is my step in
the field of professinalisation, has been successfully accomplished only
because of time support of my well-wisher. I would like to pay my sincere
and thank to those, who directed me at every step in my project work. I
express my gratitude to my esteemed guide, for their valuable assistance
and encouragement, which enable me to carry on the project successfully.
They gave me wonderful opportunity to work on the project. There time-to-
time guidance and incessant support helped me to broaden my outlook on
the project. I am highly obliged for their support throughout the
internship. I also had the privilege of meeting many company officials
including marketing chief manager and discussing particular aspect of
various investment options. The project also involved constant
interaction with my friends in the college. A vote of thank also goes to
them. At last this acknowledgement can only be completed after being to
my parent and Almighty God.
DECLARATION
I Harsimran Kaur Enrollment No: 42101688 of class MBA of (IMT) INSTITUTE
OF MANAGEMENT TECHNOLOGY here by declare the project entitled “SHARE
MARKET AN OVERVIEW” is an original work and same has not been submitted
to any other institution for awards of any other degree partially or
wholly.
(Signature of Candidate)
1. Introduction
Basics of Indian Share Market Share Share is nothing but the Ownership of
the company divided into small parts and each part is called as Share or
Stock. A person carrying a share of a company holds that part of
ownership in that company. A person holding maximum shares has maximum
ownership like directors, chairman etc. Share Market A Share market is
the place where buying and selling of shares takes place. Now days due to
internet and advanced technology there is no need to be physical present
in exchanges like NSE and BSE but the buying and selling of shares takes
place from anywhere in India and also from foreign country. One should
need the demat account, computer and internet connection and he/she can
start trading. Share market and its analysis Financial markets like NSE
(National Stock Exchange) and BSE (Bombay Stock Exchange) are countries
economic barometer (a guide to economic growth). Stock markets like NSE
and BSE are the stock exchanges where the trading of a company's stock
takes place. First let us understand the Working of a share (stock)
market To learn about how you can earn on the stock market, one has to
understand
how it works. When a person want to buy/sell shares in the share market
then he has to first place the order with a broker or can do themselves
using online trading systems (this will be discussed later). When you
place the buy order, the message is transferred to the exchange [either
NSE {National Stock Exchange} or BSE {Bombay Stock Exchange}] and the
order stays in the queue of exchange's other orders and gets executed if
the price of that share comes to that value. Once you get the
confirmation of this transcation,the shares purchased, will be sent to
your demat account.The shares will be in electronic format in demat
account. Rolling Settlement Cycle: (RSC) RSC means when you will get your
shares in your demat account. In a rolling settlement, each trading
day(T) is considered as a trading period and trades executed during the
trading day(T) are settled on a T+2 basis i.e. trading day plus two
working days. So on forth working day you can see the shares in your
demat account What is Demat account and why it is required? Securities
and Exchange Board of India (SEBI) is a board (corporate body) appointed
by the Government of India in 1992 with its head office at Mumbai. Its
one of the function is helping the business in stock exchanges and any
other securities markets. In another word it is the regulator for stock
exchanges. # Demat (short form of Dematerialization) is the process by
which an investor can get shares (also called as physical certificates)
converted into electronic form maintained in an account with the
Depository Participant (DP). # DP could be organizations involved in the
business of providing financial
services like banks, brokers, financial institutions etc. DP‟s are like
agents of Depository. # Depository is an organization responsible to
maintain investor's securities (securities can be shares or any other
form of investments) in the electronic form. In India there are two such
organizations called NSDL (National Securities Depository Ltd.) and CDSL
(Central Depository Services India Ltd.) # Investor‟s wishing to open
Demat account has to go DP and open the account. # Opening the Demat
account is as simple as opening the bank account with any bank. As you
need bank account to save your money, make cheque payments etc, likewise
you need to open a demat account if you want to buy and sell stocks in
share market. # All shares what you possess will show in your demat
account, so you don't have to possess any physical certificates. They are
all held electronically in your demat account. As you buy and sell the
shares accordingly your shares will get adjusted in your demat account.
Is a demat account a must? YES. The market regulator, the Securities and
Exchange Board of India (SEBI), has made it compulsory to open the demat
account if you want to buy and sell shares in share market. So a demat
account is a must for trading and investing in share market.
How to open a Demat account? You have to approach a DP to open a Demat
account. Most banks are DP participants so you may approach them or else
you can contact us. To have latest list of registered DP please visit
websites www.nsdl.co.in and www.cdslindia.com. A broker and a DP are two
different people. A broker is a member of the stock exchange, who buys
and sells shares on his behalf and also on behalf of his customers.
Following are the documents required to open Demat account When you
approach any DP, you will be guided through the formalities for opening a
demat account. The DP will ask to provide some documents as proof of your
identity and address. Below is a list but you may not require all of
them. PAN card, Voter‟s ID, Passport, Ration card, Driver‟s license,
Photo credit card Employee ID card, IT returns, Electricity/ Landline
phone bill etc.
Do you need any shares to open a Demat account? NO. You need not have to
have any shares to open a demat account. A demat account can be opened
with no balance of shares. And there is no minimum balance to be
maintained either. You can have a zero balance (shares) in your account.
How much it cost to open a Demat account? The charges for demat account
opening, annual account maintenance fees and transaction charges varies
between various DP‟s. To have latest charges please visit websites of
www.nsdl.co.in and www.cdslindia.com or else you need to contact the
specific broker.
Finally After successfully opening the demat account you are ready to do
buy and sell shares in share market exchanges like BSE and NSE. Important
points to remember while opening online account ♦ Do multiple enquiries
and try get low brokerage trading account. ♦ Also discuss about the
margin they provide for day trading. ♦ Discuss about fund transfer. The
fund transfer should be reliable and easy. Fund transfer from your bank
account to trading account and visa versa. Some online share trading
account has integrated savings account which makes easy for you to
transfer funds from your saving account to trading account. ♦ Very
important is about service they provide, the research calls, intraday or
daily trading tips. ♦ Also enquire about their services charges and any
other hidden fees if any. ♦ And also see how reliable and easy is to
contact them in case if any
emergency. Emergency like buying and selling of shares on immediate basis
or in case of any technical or other problems at your side while doing
trading yourself. Investing!! What's that Judging by the fact that you've
taken the trouble to navigate to this page my guess is that you don't
need much convincing about the wisdom of investing. However, I hope that
your quest for knowledge/information about the art/science of investing
ends here. Read on. Knowledge is power. It is common knowledge that money
has to be invested wisely. If you are a novice at investing, terms such
as stocks, bonds, futures, options, Open interest, yield, P/E ratio may
sound Greek and Latin. Relax. It takes years to understand the art of
investing. You're not alone in the quest to crack the jargon. To start
with, take your investment decisions with as many facts as you can
assimilate. But, understand that you can never know everything. Learning
to live with the anxiety of the unknown is part of investing. Being
enthusiastic about getting started is the first step, though daunting at
the first instance. That's why my investment course begins with a dose of
encouragement: With enough time and a little discipline, you are all but
guaranteed to make the right moves in the market. Patience and the
willingness to invest your savings across a portfolio of securities
tailored to suit your age and risk profile will propel your revenues and
cushion you against any major losses. Investing is not about putting all
your money into the "Next big thing," hoping to make a killing. Investing
isn't gambling or speculation; it's about taking reasonable risks to reap
steady rewards. Investing is a method of purchasing assets in order to
gain profit in the form of reasonably predictable income (dividends,
interest, or rentals) and appreciation over the long term.
Why should you invest? Simply put, you should invest so that your money
grows and shields you against rising inflation. The rate of return on
investments should be greater than the rate of inflation, leaving you
with a nice surplus over a period of time. Whether your money is invested
in stocks, bonds, mutual funds or certificates of deposit (CD), the end
result is to create wealth for retirement, marriage, college fees,
vacations, better standard of living or to just pass on the money to the
next generation or maybe have some fun in your life and do things you had
always dreamed of doing with a little extra cash in your pocket. Also,
it's exciting to review your investment returns and to see how they are
accumulating at a faster rate than your salary. When to Invest? The
sooner the better. By investing into the market right away you allow your
investments more time to grow, whereby the concept of compounding
interest swells your income by accumulating your earnings and dividends.
Considering the unpredictability of the markets, research and history
indicates these three golden rules for all investors 1. Invest early 2.
Invest regularly 3. Invest for long term and not short term While it‟s
tempting to wait for the “best time” to invest, especially in a rising
market, remember that the risk of waiting may be much greater than the
potential rewards of participating. Trust in the power of compounding.
Compounding is
growth via reinvestment of returns earned on your savings. Compounding
has a snowballing effect because you earn income not only on the original
investment but also on the reinvestment of dividend/interest accumulated
over the years. The power of compounding is one of the most compelling
reasons for investing as soon as possible. The earlier you start
investing and continue to do so consistently the more money you will
make. The longer you leave your money invested and the higher the
interest rates, the faster your money will grow. That's why stocks are
the best long-term investment tool. The general upward momentum of the
economy mitigates the stock market volatility and the risk of losses.
That‟s the reasoning behind investing for long term rather than short
term. How much to invest? There is no statutory amount that an investor
needs to invest in order to generate adequate returns from his savings.
The amount that you invest will eventually depend on factors such as: 1
Your risk profile 2. Your Time horizon 3. Savings made Remember that no
amount is too small to make a beginning. Whatever amount of money you can
spare to begin with is good enough. You can keep increasing the amount
you invest over a period of time as you keep growing in confidence and
understanding of the investment options available and So instead of just
dreaming about those wads of money do something concrete about it and
start investing soon as you can with whatever amount of money you can
spare. Investment is a term with several closely-related meanings in
finance and economics. It refers to the accumulation of some kind of
asset in hopes of getting a future return from it.
Assets such as equity shares or bonds held for their financial return
(interest, dividends or capital appreciation), rather than for their use
in the organization‟s operations. Return on Investments The money you
earn or lose on your investment, expressed as a percentage of your
original investment. In Simple words, It is the amount received as a
result of investing in particular ventures. Collective Investments
Schemes Funds which manage money for a number of investors and pool it
together. This enables investors to benefit from a larger number of
individual investments and cost Short-Term Investments efficiencies.
Short-Term Investments are generally investments with maturities of less
than one Capital Investments year.
Investments into the fixed capital (capital assets), including costs for
the new construction, expansion, reconstruction and technical reequipment
of the operating enterprises, purchase of machinery, equipment, tools,
accessories, project and investigation works and other costs and
expenditures.
There are two ways for investors to get shares from the primary and
secondary markets. In primary markets, securities are bought by way of
public issue directly from the company. In Secondary market share are
traded between two investors.
In finance a share is a unit of account for various financial instruments
including stocks, mutual funds, limited partnerships, and REIT's. In
British English, the usage of the word share alone to refer solely to
stocks is so common that it almost replaces the word stock itself. In
simple Words, a share or stock is a document issued by a company, which
entitles its holder to be one of the owners of the company. A share is
issued by a company or can be purchased from the stock market. By owning
a share you can earn a portion and selling shares you get capital gain.
So, your return is the dividend plus the capital gain. However, you also
run a risk of making a capital loss if you have sold the share at a price
below your buying price. A company's stock price reflects what investors
think about the stock, not necessarily what the company is "worth." For
example, companies that are growing quickly often trade at a higher price
than the company might currently be "worth." Stock prices are also
affected by all forms of company and market news. Publicly traded
companies are required to report quarterly on their financial status and
earnings. Market forces and general investor opinions can also affect
share price.
Quick Facts on Stocks and Shares
,
Owning a stock or a share means you are a partial owner of the company,
and you get voting rights in certain company issues Over the long run,
stocks have historically averaged about 10% annual returns However,
stocks offer no guarantee of any returns and can lose value even in the
long run
Investments in stocks can generate returns through dividends, even if the
price How does one trade in shares ? Every transaction in the stock
exchange is carried out through licensed members called brokers. To trade
in shares, you have to approach a broker However, since most stock
exchange brokers deal in very high volumes, they generally do not
entertain small investors. These brokers have a network of sub-brokers
who provide them with orders. The general investors should identify a
sub-broker for regular trading in shares and palce his order for purchase
and sale through the sub-broker. The sub/broker will transmit the order
to his broker who will then execute it .
What are active Shares ? Shares in which there are frequent and day-to-
day dealings, as distinguished from partly active shares in which
dealings are not so frequent. Most shares of leading companies would be
active, particularly those which are sensitive to economic and political
events and are, therefore, subject to sudden price movements. Some market
analysts would define active shares as those which are bought and sold at
least three times a week.
Demat refers to a dematerialised account. Though the company is under
obligation to offer the securities in both physical and demat mode, you
have the choice to receive the securities in either mode. If you wish to
have securities in demat mode, you need to indicate the name of the
depository and also of the depository participant with whom you have
depository account in your application.
It is, however desirable that you hold securities in demat form as
physical
securities
carry
the
risk
of
being
fake,
forged
or
stolen.
Just as you have to open an account with a bank if you want to save your
money, make cheque payments etc, Nowadays, you need to open a demat
account if you want to buy or sell stocks. So it is just like a bank
account where actual money is replaced by shares. You have to approach
the DPs (remember, they are like bank branches), to open your demat
account. Let's say your portfolio of shares looks like this: 150 of
Infosys, 50 of Wipro, 200 of HLL and 100 of ACC. All these will show in
your demat account. So you don't have to possess any physical
certificates showing that you own these shares. They are all held
electronically in your account. As you buy and sell the shares, they are
adjusted in your account. Just like a bank passbook or statement, the DP
will provide you with periodic statements of holdings and transactions.
Is a demat account a must? Nowadays, practically all trades have to be
settled in dematerialised form. Although the market regulator, the
Securities and Exchange Board of India (SEBI), has allowed trades of upto
500 shares to be settled in physical form, nobody wants physical shares
any more. So a demat account is a must for trading and investing. Most
banks are also DP participants, as are many brokers. You can choose your
very own DP. To get a list, visit the NSDL and CDSL websites and see who
the registered DPs are. A broker is separate from a DP. A broker is a
member of the stock exchange, who buys and sells shares on his behalf and
on behalf of his clients.
2. Literature Support
A stock option is a specific type of option with a stock as the
underlying instrument (the security that the value of the option is based
on). Thus it is a contract to buy (known as a "call" contract) or sell
(known as a "put" contract) shares of stock, at a predetermined or
calculable (from a formula in the contract) price. It is Having the
Rights to purchase a corporation's stock at a specified price. Infact
There are two definitions of stock options. 1. The right to purchase or
sell a stock at a specified price within a stated period. Options are a
popular investment medium, offering an opportunity to hedge positions in
other securities, to speculate on stocks with relatively little
investment, and to capitalize on changes in the market value of options
contracts themselves through a variety of options strategies.
2. A widely used form of employee incentive and compensation.In some
Companies, Stock options constitute part of remuneration. Employee stock
options are stock options for the company's own stock that are often
offered to upper-level employees as part of the executive compensation
package. An employee stock option is identical to a call option on the
company's stock, with some extra restrictions.
Performance Stock Options are Options that vest if pre-determined
performance measures are achieved. The performance goal (revenue growth,
stock-price increases…) must be reached for the options to be exercisable
or for the vesting to be accelerated
You can buy any stock and sell any stock and it doesn‟t take much to get
started. All you need is a brokerage account. A broker that I use is
Scottrade http://www.scottrade.com/ and you can start an account with
them for $500 and their commissions are only $7, so they are not
expensive at all. Once you have setup a brokerage account you then need
to choose an investment method and then research different companies and
then buy stock in .the ones that you feel will go up because they are
good sound companies. So as you can see there are several benefits to
online stock trading but let‟s recap. With online stock trading all you
need is $500 to open a brokerage account, the brokerage commissions are
low at Scottrade they‟re only $7 and you can buy and sell your stocks
from your home computer anytime that the stock market is open. Well now
that you know that you can do online stock trading with a minimal
investment you should get started today and then start learning about the
stock market and choose the stocks you want to invest in. What is NET
ASSET VALUE ? The Term Net Asset Value (NAV) is used by investment
companies to measure net assets. It is calculated by subtracting
liabilities from the value of a fund's securities and other items of
value and dividing this by the number of outstanding shares. Net asset
value is popularly used in newspaper mutual fund tables to designate the
price per share for the fund. The value of a collective investment fund
based on the market price of securities held in its portfolio. Units in
open ended funds are valued using this measure. Closed ended investment
trusts have a net asset value but have a separate market value. NAV per
share is calculated by dividing this figure by the number of ordinary
shares. Investments trusts can trade at net asset value or their price
can be at a premium or discount to NAV. Value or purchase price of a
share of stock in a mutual fund. NAV is calculated each day by taking the
closing market value of all securities owned plus all other .assets such
as cash, subtracting all liabilities, then dividing the result (total net
assets) by the total number of shares outstanding.
Calculating NAVs - Calculating mutual fund net asset values is easy.
Simply take the current market value of the fund's net assets (securities
held by the fund .minus any liabilities) and divide by the number of
shares outstanding. So if a . fund had net assets of Rs.50 lakh and there
are one lakh shares of the fund, then the price per share (or NAV) is
Rs.50.00. These days, you can't retire without using the returns from
investments. You can't count on your social security checks to cover your
expenses when you retire. It's barely enough for people who are receiving
it now to have food, shelter and utilities. That doesn't account for any
care you may need or in the even that you need to take advantage of such
funds much earlier in life. It is important to have your own financial
plan. There are many kinds of investments you can make that will make
your life much easier down the road. The following are brief descriptions
for beginning investors to familiarize themselves with different kinds of
investment options: 401K Plans The easiest and most popular kind of
investment is a 401K plan. This is due to the fact that most jobs offer
this savings program where the money can be automatically deducted from
your payroll check and you never realize it is missing. Life Insurance
Life Insurance policies are another kind of investment that is fairly
popular. It is a way to ensure income for your family when you die. It
allows you a sense of security and provides a valuable tax deduction.
Stocks Stocks are a unique kind of investment because they allow you to
take partial ownership in a company. Because of this, the returns are
potentially bigger and they have a history of being a wise way to invest
your money. Bonds A bond is basically a promise note from the government
or a private company. You agree to give them a set amount of money as a
loan and they keep it for a set number of years with a predetermined
amount of interest. This is typically a safe bet and one that is a good
investment for a first time investor because there is little risk of
losing your money.
Mutual Funds Mutual funds are a kind of investment that are based on the
gains and losses of a shareholder. Basically one person manages the money
of several or many investors and invests in a list of various stocks to
lessen the effect of any losses that may occur. Money Market Funds A good
short-term investment is a Money Market Fund. With this kind of
investment you can earn interest as an independent shareholder. Annuities
If you are interested in tax-deferred income, then annuities may be the
right kind of investment for you. This is an agreement between you and
the insurer. It works to produce income for you and protect your earning
potential. Brokered Certificates of Deposit (CDs) CDs are a kind of
investment where you deposit money for a set amount of time. The good
thing about CDs is that you can take the money out at any time without
paying a penalty fee. We all know life isn't predictable, so this is a
nice feature to .have in your option. Real Estate Real Estate is a
tangible kind of investment. It includes your land and anything
permanently attached to your piece of property. This may include your
home, rental properties, your company or empty pieces of land. Real
estate is typically a smart and can make you a lot of money over time The
Securities and Exchange Board of India (SEBI), the capital market
watchdog, Thursday cracked down on some of the top brokerage firms and
banks for their alleged involvement in an initial public offering (IPO)
scam. SEBI conducted investigations in respect of all the IPOs from
January 2003 to December 2005.
The findings of investigations, prima facie, revealed violations of
serious nature by several key operators, their financiers, concerned
depository participants and the depositories. In its order, SEBI has
barred brokerage firms like Karvy Stockbroking and
IndiaBulls from the market. It has also directed HDFC Bank and IDBI Bank
not to open new demat accounts for share transactions. SEBI's Order
fallout: 24 entities banned from primary and secondary market, including
Indiabulls, Karvy Securities • Quasi-judicial proceedings against Karvy
DP and Pratik DP, banned from the market • 12 DPs can‟t open fresh demat
accounts, including HDFC Bank, IDBI Bank, Central Bank, ING Vysya Bank,
IL&FS and Motilal Oswal; 15 more under scrutiny, including ICICI Bank,
Citibank, Stanchart
• 85 Financiers barred from the market. SEBI said certain entities had
cornered shares reserved for retail applicants in the name of fictitious
entities in the initial public offerings of Yes Bank and Infrastructure
Development Finance Company (IDFC).
Each of the fictitious application was of small value so as to be
eligible for allotment under the retail category, it added.
After the allotment, these fictitious beneficiaries transferred these
shares to their principals who in turn transferred the shares to their
financiers.
The financiers in turn sold most of these shares on the first day of
listing, thereby realizing the windfall gain of the price difference
between IPO price and the listing price. Generally, most shares have a
face value (i.e. the value as in a balance sheet) of Rs.10 though not
always offered to the public at this price. Companies can offer a share
with a face value of Rs.10 to the public at a higher price. The
difference between the offer price and the face value is called the
premium. As per the SEBI guidelines, new companies can offer shares to
the public at a premium provided : 1.The promoter company has a 3 years
consistent record of profitable working. 2.The promoter takes up at least
50 per cent of the shares in the issue. 3.All parties applying to the
issue should be offered the same instrument at the
same terms, especially regarding the premium. 4.The propectus should
provide justification for the propose premium. On the other hand,
exisiting companies can make a premium issue without the above
restrictions. A company‟s aim is to raise money and simultaneously serve
the equity capital. As far as accounting is concerned, premium is
credited to reserves and surplus and it does not increase the equity.
Therefore, a company which raises Rs.100 crores by way of shares at say
Rs.90 premium per share increases its equity by only Rs.10 crores, which
is easier to service with an investment of Rs.100 crores. Thus the
companies seek to make premium issues. As well shall see later, a premium
issue can increase the book value without decreasing the EPS. In a
buoyant stock market when good shares trade at very high prices,
companies realize that it‟s easy to command a high premium.
Many people confuse trading with investing. They are not the same. The
biggest difference between them is the length of time you hold onto the
assets. An investor is more interested in the long-term appreciation of
his assets, counting on that historical rise in market equity. He‟s not
generally concerned about short-term fluctuations in prices, because
he‟ll ride them out over the long haul. An investor relies mostly on
Fundamental Analysis, which is the analytical method of predicting long-
term prospects of a particular asset. Most investors adopt a “buy and
hold” approach to assets, which simply means they buy shares of some
company and hold onto them for a long time. This approach can be
dangerous, even devastating, in an extremely volatile market such as
today‟s BSE or NSE Indexs Show. Let‟s consider someone who bought shares
of XYZ Company at their peak value
of around Rs.650 per share at the beginning of the year 2000. Two years
later, those shares are worth Rs.100 each. If that investor had spent Rs.
65,000/-, his net loss would be Rs.55000/- ! I don‟t know about you, but
losing Fifty Five Thousand Rupees would be a relatively big loss for me.
Many investors suffer such losses regularly, hoping that in five or ten
or fifteen years the market will rebound, and they‟ll recoup their losses
and achieve an overall gain. What most investors need to remember is
this: investing is not about weathering storms with your “beloved”
company – it‟s about making money. Traders, on the other hand, are
attempting to profit on just those short-term price fluctuations. The
amount of time an active trader holds onto an asset is very short: in
many cases minutes, or sometimes seconds. If you can catch just two index
points on an average day, you can make a comfortable living as an Trader.
To help make their decisions, Traders rely on Technical Analysis, a form
of marketing analysis that attempts to predict short-term price
fluctuations. The stock markets are at all time highs and just like the
last time around when the market was at its previous high every one
thinks that nothing can go wrong and there is just one way where the
market can go which is UP. Nothing could be farther from the truth and
this will be clear from the way the market behaves in the next few
months. Here are a few tips that would hopefully save you from losing a
lot of cash in the current frenzy. Time and again investors have burnt
their fingers in the markets and here are some tips to you so that you do
not end up burning your fingers in this market. The number one tip at
this point would be to sell if you have stocks and not to
buy them if you have cash. The golden principle in the markets is “Buy
when everyone else sells and sell when everyone else buys”. Simple enough
right? Not really. Why? Because of peer pressure pure and simple. When
everyone else around you seems to be having a ball at the markets you
would feel like a fool if you didn‟t participate now. OK so you can‟t
resist buying at this time then at least do yourself a favor and stay
away from unknown Penny Stock and hot tips that your barber gave you.
True that the stock has tripled in the last fifteen days but that was
before people like your barber started buying the stock. Chances are that
the Promoter of the company have started buying into the stock and have
spread rumors like acquisition or a big export order to fool investors
and sell out to them at a later date. Another tip that would serve useful
is to value a stock based on its future growth and not its past
performance. For instance many investors say that I will not buy stocks
of X company because it has doubled in the last year. Well it may have
doubled in the last year but that should not be the thing you should be
telling yourself. Rather you should ask yourself why has this doubled in
the last year and can it do so again? There should be a solid answer to
your question like the launch of a new product or reduction in the prices
of raw material. And indeed if the answer is in the positive then by all
means go ahead and buy that stock regardless of what has happened in the
last year. Another tip would be to remember what you are buying. Quite
simply investors often forget that when buying a stock they are simply
buying ownership in the companies. Most of you would know that nothing
spectacular would happen in the company that you work for, in a month,
they are not going to double their revenues and certainly not double your
salary every month. Then why expect anything different from the companies
that you are investing in. Why expect the prices to double in a month or
two. Give time to your investments; don‟t reduce it
to a gamble. Only when you invest in fundamentally sound companies and
then give the investments sufficient time to grow will you see some
healthy returns on your investments. Ideally a minimum horizon of one
year is a good time. Hope these tips will prove helpful and you will make
a lot more in the stock markets than you have already been making. Happy
Investing! 1. You can tell if a Stock is cheap or expensive by the Price
to Earnings Ratio. False: PE ratios are easy to calculate, that is why
they are listed in newspapers etc. But you cannot compare PE‟s on
companies from different industries, as the variables those companies and
industries have are different. Even comparing within an industry, PE‟s
don‟t tell you about many financial fundamentals and nothing about a
stock‟s value. 2. To make Money in the Stock Market, you must assume High
Risks. False: Tips to Lower your Risk: ·: Do not put more than 10% of
your money into any one stock ·:Do not own more than 2-3 stocks in any
industry Buy your stocks over time, not all at once· Buy stocks with
consistent and predictable earnings growth ·:Buy stocks with growth rates
greater than the total of inflation and interest rates ·: Use stop-loss
orders to limit your risk 3. Buy Stocks on the Way Down and Sell on the
Way Up. False: People believe that a falling stock is cheap and a rising
stock is too expensive. But on the way down, you have no idea how much
further it may fall. If a stock is rising, especially if it has broken
previous highs, there are no unhappy owners who want to dump it. If the
stock is fairly valued, it should continue to rise. 4. You can Hedge
Inflation with Stocks. False: When interest rates rise, people start to
pull money out of the market and into bonds, so that pushes prices down.
Plus the cost of business goes up, so corporate earnings go down, along
with the stock prices.
5. Young People can afford to take High Risk. False: The only thing true
about this is that young people have time on their side if they lose all
their money. But young people have little disposable income to risk
losing. If they follow the tips above, they can make money over many
years. Young people have the time to be patient. Traditionally, saving
has been viewed as quite different from investing. In most savings
alternatives, the initial amount of capital or cash remains constant,
earning guaranteed rates of interest. The capital value of investments
can go up or down. Returns are not guaranteed. However, creation of money
market funds and deregulation of the banking industry have resulted in a
variety of savings options that earn variable rates of return. Savings
provide funds for emergencies and for making specific purchases in the
relatively near future (generally within two years). The primary goal is
to store funds and keep them safe. This is why savings are generally
placed in interestbearing accounts that are safe (such as those insured
or guaranteed by the federal government) and liquid (those in the form of
cash or easily changed into cash on short notice with minimal or no
loss). However, these generally have low yields. Because of the
opportunities for earning a higher return with a relatively small pool of
funds, some financial experts suggest that savers consider slightly
higher risk (but liquid) alternatives for at least part of their savings.
Saved money is insurance. It is insurance against risk, against losing
your job, against having a major unexpected repair bill or medical
expense in the family. It is the backbone of you and your family‟s
financial well-being. Saved money grants you financial security. And the
more you save, the more financial secure and independent you will be. The
goal of investing is generally to increase net worth and work toward
longterm goals. Investing involves risk. Risk of your stocks losing
money, or even
going bankrupt (Enron, MCI, the airlines, etc. etc.). Risk of interest
rates rising, and bond prices falling. Risks of your broker swindled you,
or coerced you though his sales pitch to buy speculative investments.
Risks of the economy. Risks of a particular industry. Risk of losing your
principal. Risk of losing it all, and then some (such as with margin
calls). Trying to win in the stock market without a trading plan is like
trying to build a house without blueprints - costly mistakes are
inevitable. Why do you need a Trading Plan? 1 - During trading hours,
emotions will turn smart people into idiots. Therefore, you have to avoid
having to make decisions during those hours. For every action you take
during trading hours, the reason should not be greed or fear. The reason
should be because it is in the plan. With a good plan, your task becomes
one of patience and discipline. 2 - Consistent results require consistent
actions - consistent actions can only be achieved through a detailed
plan. What should be in your trading plan? 1 - Your strategy to enter and
exit trades You have to describe the conditions that have to be met
before you enter a trade. You also have to describe the conditions under
which you will close a position. These conditions may include technical
analysis, fundamental analysis, or a combination of both. They may also
include market conditions, public sentiment, etc... 2 - Your Money
management rules to keep losses small - the goal of money management is
to ensure your survival by avoiding risks that could take you out of
business. Your money management rules should include the following: -
Maximum amount at risk for each trade. Maximum amount at risk for all
your opened - Maximum daily and weekly amount lost before you stop
trading 3 - Your daily routine - after the market closes, before it
opens, etc... 4 - Activities you carry out during the weekend. positions.
5 - I also like to include reminders that I read every day I will follow
a trading plan to guide my trading - therefore my job will be one of
patience and discipline. I will always keep my trading plan simple. - I
will take actions according to my trading plan, not because of greed,
fear, or hope. - I will not deceive myself when I deviate from my trading
plan. Instead I will admit the error and correct it. I will have a
winning attitude. - Take responsibility for all your actions – don‟t
blame the market or world events. - Trade to trade well and for the love
of trading, not to trade often and not for the money. Don‟t be influenced
by the opinions of others. - Never think that taking money from the
market is easy. - Don‟t try to guess the future – trading is a game of
probabilities. - Use your head and stay calm – don‟t get excited or
depressed. Handle trading as a serious intellectual pursuit. - Don‟t
count how much money you have made or lost while you are in a trade –
focus on trading well. A trading plan will not guarantee you success in
the stock market but not having one will pretty much guarantee failure.
PRIMARYMARKET Market for new issues of securities, as distinguished from
the Secondary Market, where previously issued securities are bought and
sold.
A market is primary if the proceeds of sales go to the issuer of the
securities sold. This is part of the financial market where enterprises
issue their new shares and bonds. It is characterised by being the only
moment when the enterprise receives money in exchange for selling its
financial assets. SECONDARY MARKET
The market where securities are traded after they are initially offered
in the
primary market. Most trading is done in the secondary market. To explain
further, it is Trading in previously issued financial instruments. An
organized market for used securities. Examples are the New York Stock
Exchange (NYSE), Bombay Stock Exchange (BSE),National Stock Exchange NSE,
bond markets, over-the-counter markets, residential mortgage loans,
governmental guaranteed loans etc.
A stock broker is a person or a firm that trades on its clients behalf,
you tell them what you want to invest in and they will issue the buy or
sell order. Some stock brokers also give out financial advice that you a
charged for. It wasn‟t too long ago and investing was very expensive
because you had to go through a full service broker which would give you
advice on what to do and would charge you a hefty fee for it. Now there
are a plethora of discount stock brokers such as Scottrade
http://www.scottrade.com now you can trade stocks for a low fee such as
$7 total. I can think of three different types of stock brokers. 1. Full
Service Broker - A full-service broker can provide a bunch of services
such as investment research advice, tax planning and retirement planning.
2. Discount Broker – A discount broker let‟s you buy and sell stocks at a
low rate but doesn‟t provide any investment advice.
3. Direct-Access Broker- A direct access broker lets you trade directly
with the electronic communication networks (ECN‟s) so you can trade
faster. Active traders such as day traders tend to use Direct Access
Brokers So as you can tell there a few options for a stock broker and you
really need to pick which one suits you needs. Reed Floren runs a stock
market forum where you can find answers to all your stock market
questions register for your free membership at this stock market forum
In order to understand what stocks are and how stock markets work, we
need to dive into history--specifically, the history of what has come to
be known as the corporation, or sometimes the limited liability company
(LLC). Corporations in one form or another have been around ever since
one guy convinced a few others to pool their resources for mutual
benefit. The first corporate charters were created in Britain as early as
the sixteenth century, but these were generally what we might think of
today as a public corporation owned by the government, like the postal
service. Privately owned corporations came into being gradually during
the early 19th century in the United States , United Kingdom and western
Europe as the governments of those countries started allowing anyone to
create corporations. In order for a corporation to do business, it needs
to get money from somewhere. Typically, one or more people contribute an
initial investment to get the company off the ground. These entrepreneurs
may commit some of their own money, but if they don't have enough, they
will need to persuade other people, such as venture capital investors or
banks, to invest in their business. They can do this in two ways: by
issuing bonds, which are basically a way of selling debt (or taking out a
loan, depending on your perspective), or by issuing stock, that is,
shares in the ownership of the company. Long ago stock owners realized
that it would be convenient if there were a central place they could go
to trade stock with one another, and the public stock exchange was born.
Eventually, today's stock markets grew out of these public places. Stocks
A corporation is generally entitled to create as many shares as it
pleases. Each share is a small piece of ownership. The more shares you
own, the more of the company you own, and the more control you have over
the company's operations. Companies sometimes issue different classes of
shares, which have different privileges associated with them.
So a corporation creates some shares, and sells them to an investor for
an agreed upon price, the corporation now has money. In return, the
investor has a degree of ownership in the corporation, and can exercise
some control over it. The corporation can continue to issue new shares,
as long as it can persuade people to buy them. If the company makes a
profit, it may decide to plow the money back into the business or use
some of it to pay dividends on the shares.
Public Markets How each stock market works is dependent on its internal
organization and government regulation. The NYSE (New York Stock
Exchange) is a non-profit corporation, while the NASDAQ (National
Association of Securities Dealers Automated Quotation) and the TSE
(Toronto Stock Exchange) are for-profit businesses, earning money by
providing trading services. Most companies that go public have been
around for at least a little while. Going public gives the company an
opportunity for a potentially huge capital infusion, since millions of
investors can now easily purchase shares. It also exposes the corporation
to stricter regulatory control by government regulators. When a
corporation decides to go public, after filing the necessary paperwork
with the government and with the exchange it has chosen, it makes an
initial public offering (IPO). The company will decide how many shares to
issue on the public market and the price it wants to sell them for. When
all the shares in the IPO are sold, the company can use the proceeds to
invest in the business.
There are two classic market types used to characterize the general
direction of the market. Bull markets are when the market is generally
rising, typically the result of a strong economy. A bull market is
typified by generally rising stock prices, high economic growth, and
strong investor confidence in the economy. Bear markets are the opposite.
A bear market is typified by falling stock prices, bad economic news, and
low investor confidence in the economy. A bull market is a financial
market where prices of instruments (e.g., stocks)
are, on average, trending higher. The bull market tends to be associated
with rising investor confidence and expectations of further capital
gains. A market in which prices are rising. A market participant who
believes prices will move higher is called a "bull". A news item is
considered bullish if it is expected to result in higher prices.An
advancing trend in stock prices that usually occurs for a time period of
months or years. Bull markets are generally characterized by high trading
volume. Simply put, bull markets are movements in the stock market in
which prices are rising and the consensus is that prices will continue
moving upward. During this time, economic production is high, jobs are
plentiful and inflation is low. Bear markets are the opposite--stock
prices are falling, and the view is that they will continue falling. The
economy will slow down, coupled with a rise in unemployment and
inflation. A key to successful investing during a bull market is to take
advantage of the rising prices. For most, this means buying securities
early, watching them rise in value and then selling them when they reach
a high. However, as simple as it sounds, this practice involves timing
the market. Since no one knows exactly when the market will begin its
climb or reach its peak, virtually no one can time the market perfectly.
Investors often attempt to buy securities as they demonstrate a strong
and steady rise and sell them as the market begins a strong move
downward. Portfolios with larger percentages of stocks can work well when
the market is moving upward. Investors who believe in watching the market
will buy and sell accordingly to change their portfolios.Speculators and
risk-takers can fare relatively well in bull markets. They believe they
can make profits from rising prices, so they buy stocks, options, futures
and currencies they believe will gain value. Growth is what most bull
investors seek. What is a Bear Market?
The opposite of a bull market is a bear market when prices are falling in
a financial market for a prolonged period of time. A bear market tends to
be accompanied by widespread pessimism.A bear market is slang for when
stock
prices have decreased for an extended period of time. If an investor is
"bearish" they are referred to as a bear because they believe a
particular company, industry, sector, or market in general is going to go
down. Different investment avenues are available to investors. Mutual
funds also offer good investment opportunities to the investors. Like all
investments, Mutual Funds also carry certain risks. The investors should
compare the risks and expected yields after adjustment of tax on various
instruments while taking Mutual Fund investment decisions. The investors
may seek advice from experts and consultants including agents and
distributors of mutual funds schemes while making investment decisions.
Mutual Funds are portfolio of stock market shares and other financial
instruments built with funds collected from (usually) small investors
whose primary concern is security of investment. These funds are run by
government trusts, banks, and now private financial institutions as well.
These funds can be OPEN – FUNDED or CLOSED – ENDED. There are different
kinds of mutual funds to cater to varied investment objectives: Growth
Funds, Income Funds, Balanced Funds, and Liquid Assets Funds, also known
as Money Market Funds. What is known in the United States and India as
mutual funds is called a Unit Trust in Britain . This site is an attempt
to make aware Basics of Mutual Funds from an Invester Point of View. The
Information provided here is for learning purpose only If you've ever
owned stocks or held certain other types of investments, you might
already be familiar with the concept of dividends. Even those people who
have made investments that paid dividends may still be a little confused
as to exactly what dividends are, however… after all, just because a
person has received a dividend payment doesn't mean that they fully
appreciate where the payment is coming from and what its purpose is. If
you have ever found yourself wondering exactly what dividends are and why
they're issued, then the information below might just be what you've been
looking for.
Defining the Dividend Dividends are payments made by companies to their
stockholders in order to share a portion of the profits from a particular
quarter or year. The amount that any particular stockholder receives is
dependent upon how many shares of stock they own and how much the total
amount being divided up among the stockholders amounts to. This means
that after a particularly profitable quarter a company might set aside a
lump sum to be divided up amongst all of their stockholders, though each
individual share might be worth only a very small amount potentially
fractions of a cent, depending upon the total number of shares issued and
the total amount being divided. Individuals who own large amounts of
stock receive much more from the dividends than those who own only a
little, but the total per-share amount is usually the same. When
Dividends Are Paid How often dividends are paid can vary from one company
to the next, but in general they are paid whenever the company reports a
profit. Since most companies are required to report their profits or
losses quarterly, this means that most of them have the potential to pay
dividends up to four times each year. Some companies pay dividends more
often than this, however, and others may pay only once per year. The more
time there is between dividend payments can indicate financial and profit
problems within a company, but if the company simply chooses to pay all
of their dividends at once it may also lead to higher pershare payments
on those dividends. Why Dividends Are Paid
Dividends are paid by companies as a method of sharing their profitable
times with the stockholders that have faith in the company, as well as a
way of luring other investors into purchasing stock in the company that
is paying the dividends. The more a particular company pays in dividend
payments, the more likely it is to sell additional common stock… after
all, if the company is well-known for high dividend payments then more
people will want to get in on the action. This can actually lead to
increases in stock price and additional profit for the company which can
result in even more dividend payments.
In order to get the most out of the dividends that you receive on your
investments, it is generally recommended that you reinvest the dividends
into the companies that pay them. While this may seem as though you're
simply giving them their money back, you're receiving additional shares
of the company's stock in exchange for the dividend. This will increase
future dividend payments (since they're based upon how much stock that
you own), and can set you up to make a lot more money than the actual
dividend payment was for since increases in stock prices will affect the
newly-purchased stock as well.
INTRODUCTION ABOUT MUTUAL FUNDS:
Mutual fund is a trust that pools money from a group of investors
(sharing common financial goals) and invest the money thus collected into
asset that match the stated investment objectives of the scheme. Since
the stated investment objectives of a mutual fund scheme generally forms
the basis for an investor‟s decision to contribute money to the pool, a
mutual fund can not deviate from its stated objectives at any point of
time. Every Mutual Fund is managed by a fund manager, who using his
investment management skills and necessary research works ensures much
better return than what an investor can manage on his own. The capital
appreciation and other incomes earned from these investments are passed
on the investors (also known as unit holders) in proportion of the number
of units they own.
Concept of Mutual Fund
Many investor with common financial objectives pool their money
↓
Investors, on a proportionate basis, get mutual fund units for the sum
contributed to the pool The money collected from investors is invested
into shares, debentures and other securities by the fund manger
↓
↓ ↓
The fund manager realizes gains or losses, and collects dividend or
interest income
Any capital gains or losses from such investments are passed on to the
investors proportion of the number of units held by them
When an investor subscribes for the units of a mutual fund, he becomes
part of the assets of the mutual fund in the same proportion as his
contribution amount put up with the corpus (the total amount of the
mutual fund). Mutual Fund investor is also known as a fund shareholder or
a unit holder. Any change in the value of the investments made into
capital market instruments (such as shares, debentures etc) is reflected
in the Net Asset Value (NAV) of the scheme. NAV is defined as the market
value of the Mutual Fund scheme‟s assets net of its liabilities. NAV of a
scheme is calculated by dividing the market value of scheme‟s assets by
the total number of units issued to the investors.
For example: A. If the market value of the assets of a fund is Rs.1,00,
000/B. The total number of units issued to the investors is equal to
Rs.10,000/C. Then the NAV of this scheme= (A)/(B), i.e. 1,00,000/10,000
or 10.00 D. Now if an investor „X‟ owns 5 units of this scheme E. Then
his total contribution to the fund is Rs.50/- (i.e. Number of units held
multiplied by the NAV of the scheme)
EQUITY FUNDS
Equity funds are considered to be the most risky funds as compared to
other fund types, but they also provide higher returns than other funds.
It is advisable that an investor looking to invest in an equity fund
should invest for a long term i.e. for 3 years or more. There are
different types of equity fund each falling into different risk bracket.
In order of decreasing risk level, there are following types of equity
funds:
Aggressive Growth Funds: - In aggressive Growth Funds, fund managers
aspire for maximum capital appreciation and invest in less researched
shares of speculative nature. Because of these speculative investments
Aggressive Mutual Funs become more volatile and thus, are prone to higher
risk than other equity funds.
Growth Funds:- Growth Funds also invest for capital appreciation (with
time
horizon of 3e to 5 years) but they are different from Aggressive Growth
Funds in the sense that they invest in companies that are outperform the
market in the future. Without entirely adopting speculative strategies,
Growth Funds invest in those companies that are expected to post above
average earnings in future. SPECIALITY FUND:- Speciality Funds have
stated criteria for investments and their portfolio comprises of only
those companies that meet their criteria. Criteria for some specialty
funds could be to invest/not to invest in particular region/companies.
Speciality funds are concentrated and thus, are comparatively riskier
than diversified funds. There are following types of Speciality Funds:
•
Sector Funds: - Equity Funds that invest in a particular sector/industry
of the market are known as Sector Funds. The exposure of these funds is
limited to a particular sector (say Information Technology, Auto,
Banking, Pharmaceuticals or Fast Moving Consumer Goods)
Why they are more risky than equity funds that invest in multiple
sectors.
Foreign Securities Funds:- Foreign Securities Equities Funds have the
option to invest in one or more foreign companies. Foreign securities
funds achieve international diversification and hence they are less risky
than sector funds. However, foreign securities funds are exposed to
foreign exchange rate risk and country risk.
Mid-Cap or Small-Cap Funds: - Funds that invest in companies having lower
market capitalization than large capitalization companies are called Mid-
Cap or Small-Cap Funds. Market capitalization of Mid-Cap companies is
less than that of big, blue chip companies (less than Rs.2500/-crores but
more than Rs.500/crores) and Small-Cap companies have market
capitalization of less than Rs.500/-crores. Market Capitalization of a
company can be calculated by multiplying the market price of the
company‟s share by the total number of its outstanding share in the
market. The share of Mid-Cap or Small-Cap Companies is not as liquid as
of Large-Cap Companies which gives rise to volatility in share prices of
these companies and consequently, investment gets risky.
Option Income Funds:- While not yet available in India, Option Income
Funds
write options on a large fraction of their portfolio. Proper use of
options can help to reduce volatility, which is otherwise considered as a
risky instrument. These funds in big, high dividend yielding companies,
and then sell options against their stock.
Diversified Equity Funds:- Except for a small potion of investment in
liquid
money market, diversified equity funds invest mainly in equities without
any concentration on a particular sector(s). These funds are well
diversified and
reduce sector-specific risk. However, like all other funds diversified
equity funds too are exposed to equity market risk. One prominent type of
diversified equity fund in India is Equity Linked Savings Scheme (ELSS).
As per the mandate, a minimum of 90% of investments by ELSS should be in
equities at all times. ELSS investors are eligible to claim deduction
from taxable income (up to Rs.1 lakh) at the time of filling the income
tax return. ELSS usually has a lock-in period and in case of any
redemption by the investor before the expiry of the lock-in period makes
him liable to pay income on such income(s) for which he may have received
any tax exemption(s) in the past.
Equity Index Funds:- Equity Index Funds have the objective to match the
performance of a specific stock market index. The portfolio of these
funds comprises of the companies that form the index and is constituted
in the same proportion as the index. Equity index funds that follows
broad indices (like S & P CNX Nifty, Sensex) are less risky than equity
index funds that follow narrow sectoral indices (like BSEBANKEX or CNX
bank Index etc.). Narrow indices are less diversified and therefore, are
more risky.
Value Funds:- Value Funds invest in those companies that have sound
fundamentals and whose share prices are currently under-valued. The
portfolio of these comprises of shares that are trading at a low Prices
to Earning Ratio (Market Price per Share/ Earning per share) and a low
market to Book Value (Fundamental Value) Ratio. Value Funds may select
companies from diversified sectors and are exposed to lower risk level as
compared to growth funds or specialty funds. Value Stocks are generally
from cynical industries (such as cement, steel, sugar etc.) which make
them volatile in the short-term. Therefore, it is advisable to invest in
Value funds with a long-term time horizon as risk in the long term, to a
extent, is reduced.
Equity Income or Dividend Yield Funds:- The objective of Equity Income or
Dividend Yield Equity Funds is to generate high recurring income and
steady capital appreciation for investors by investing in those companies
which issues high dividends (such as power or Utility companies whose
share prices fluctuate comparatively lesser than other companies‟ share
pries). Equity Income or Dividend Yield Equity funds are generally
exposed to the lowest risk level as compared to other equity funds. .
Sale Price: - Sale price is the price you pay when you invest in a
scheme. Also
called Offer Price. It may include a sales load.
Repurchase Price: - Repurchase Price is the price at which a close-ended
scheme repurchases its units and it may include a back-end load. This is
also called Bid Price.
Redemption Scheme: - Redemption scheme is the price at which open-ended
schemes repurchase their units and close-ended schemes redeem their units
on maturity. Such prices are NAV related.
Sales Load: - Sales Load is a charge collected by a scheme when it sells
the
units. Also called, “Front-End” load. Schemes that do not charge a load
are called „No Load‟ scheme.
Repurchase or „Back-end‟ Load; - Is a charge collected by a scheme when
it buys back the units from the unit-holders.
SPONSER: - Sponsor is the person who acting or in combination with
another
corporate establishes a mutual fund. Sponsor must contribute at least 40%
of the net worth of the Investment Manager and meet the eligibility
criteria prescribed under the Securities and Exchange Board of India
(Mutual Funds) Regulation, 1996. The Sponsor is not responsible or liable
for the any loss or shortfall resulting from the operation of the Schemes
beyond the initial contribution made by it towards setting up of the
Mutual fund. The board of trustee manages the MF and the sponsor executes
the trust deeds in favour of the trustees. It is the job of the MF
trustees to see the schemes floated and managed by the AMC appointed by
the trustees are in accordance with the trust deed and SEBI guidelines.
The Sponsor appoints the Trustees, Custodian and the like the company
promoter, the sponsor takes big-picture decisions related to the Mutual
funds, leaving money management and other such nitty-gritty to the other
constituents, whom it appoints. The sponsor should inspire confidence in
you as a manager and, preferably, be profitable. Financial muscle, so
long as it is complemented by good fund management, helps, as money is
the not an impediment for the Mutual Fund –it can hire the best talent,
invest in technology offer high service standards to the investors.
TRUST: -
The Mutual Fund is constituted as a trust in accordance with the
provisions of the Indian Trust Act, 1882 by the Sponsor. The trust deed
is registered under the Indian Registration Act, 1908.
TRUSTEE – ASSET MANAGEMENT COMPANY (AMC):The AMC is appointed by the
Trustee as the Investment Manager of the Mutual Fund. The AMC is required
to be approved by the Securities and Exchange Board of India (SEBI) to
act as an asset management company of the Mutual Fund. At least 50% of
the directors of the AMC are independent directors who are not associated
with the Sponsor in any manner. The AMC does the research, the managers
the corpus of the fund. It launches the various scheme of the fund,
manages them, and then liquidates them at the end of their term. The
people in the AMC who should matter the most to you are those who take
investment decisions. There is the head of the fund house, generally
referred to as the Chief Executive Officer (CEO). Under him comes the
Chief Investment Officer (CIO), who shapes the fund‟s investment
philosophy, and fund mangers, who manages its schemes. They are assisted
by a team of analysts, who track markets, sectors and companies. Although
these people are employed by the AMC, it‟s you, the unit holders, who pay
their salaries, partly of wholly. Each scheme pays the AMC an annual
„fund management fee‟, which is linked to the scheme size and results in
a corresponding drop in your return. If a scheme‟s corpus is up to
Rs.100crores it pays 1.25% of its corpus a year; on over Rs.100 crores,
the fee is 1% of the corpus. So if a fund house has two schemes, with a
corpus of Rs.100 crores and Rs.200 crores respectively, the AMC will earn
Rs.3.25 crore (1.25+2) as a fund management fee that year.
Regulatory requirements for the AMC: -
Only SEBI registered AMC can be appointed as investment managers of
mutual funds.
indulge in any other business, other than that of asset management. At
least half of the members of the Board of an AMC have to be independent.
The 4th schedule of SEBI Regulations spells out rights and obligations of
both trustees and AMCs.
investment management agreement and SEBI regulations. The actions of its
employees and associates have to be as mandated by the trustees. AMCs
have to submit detailed quarterly reports on the working and performance
of the mutual fund. AMCs have to make the necessary statutory disclosures
o portfolio, NAV and price to the investors.
investments by employees and Board members in all cases where the
investment exceeds Rs.1 lakh.
Over the last few years, high equity may have skewed asset allocation
towards equities. The retail investor should re-examine his asset
allocation to see that it is more balanced in light of improving bond
returns. If the equity component of the portfolio is low, a SIP
(Systematic Investment Plan ) mode of investment with a 3 to year horizon
is the right strategy.
3. Process/ Methodology of Study
Research Methodology in a way is systematic representation of research or
any other problem. It is a written game plan for conducting research. It
tends to describe the step taken by a researcher in studying the research
problem along with a logical background. It tends to describe methodology
for solution of the problem that has been taken for the purpose of study
this project focuses on the methodology for technique used for the
collection, classification & tabulation of the data. This plan throws
light on the research problem, the objective of study & limitation of the
study. Therefore, in order to solve a problem, it is necessary to design
a research methodology for problem as the same way differs from problem
to problem.
Type of Research Research methodology is a way to systematic solve the
research problem. It is a procedure, which is followed step by step to
solve a particular research problem. There are basically four types of
researches
HYPOTHESIS TESTING RESEARCH
Explorative Research To gain familiarity with the phenomenon or to
achieve an insight into it.
Descriptive Research To poetry accurately the characteristic of the
particular individual situation or a group.
Diagnostic Research To determine the frequency with which something
occurs or with which it is associate with something else.
Hypothesis Testing Research. To test a hypothesis of casual relationship
between variables. The present project is Descriptive in nature. It is
done to poetry accurately the characteristic of a particular individual
situation or a group. The major purpose is descriptive research is the
description of the state of the affairs as it exits at presents. The main
characteristics of this method are that the researcher has no
control over the variables; he can only report what has happened or what
is happening.
Statement of research problem A research problem, refers to some
difficulty which a researcher experiences in the context of either a
theoretical or practical situation and wants to obtain a solution for the
same. Here the research problem is mutual funds (special reference with
PNB).
Statement of research objectives It aims at getting an insight in to
Retail loan. It also aims at familiarized with the customer during the
market survey help me a lot in understanding the practical aspect of the
loan as a whole .
To give level of information to the customer. To give satisfaction
regarding services offered by bank To make out which bank provide
services with best resources
To know the awareness among the common man about loan which they want to
take.
RESEARCH DESIGN AND METHODOLOGY
Research is a systemic and objective process of gathering recording and
anayzing data for aid of making decision regarding a particular problem.
RESEARCH DESIGN The research design is a master plan specifying the
methods and procedures for collecting and analyzing the needed
information the research design of my dissertation is DESCRIPTIVE
RESEARCH Descriptive research includes surveys and facts findings
inquiries of different kinds. RESEARCH INSTRUMENTS QUESTIONNAIRE SAMPLE
DESIGN
• • •
target population people of industries sample size 100 people sampling
technique convenience and judgmental
4. DATA COLLECTION
DATA COLLECTION PRIMARY DATA primary data is gathered through a survey
with the help of questionnaire. SECONDARY DATA secondary data sources
includes
• • •
Books Journals various websites
company share price
Company Price % Ch VIDEOIND 222.85 13.87 SATYAMCOMP 318.75 7.47 PATNI
190.85 7.43 GAMMONIND 148.00 7.13 JPASSOCIAT 118.90 7.02 Company % Ch LT
1215.30 50.25 KSK 222.00 -6.74 HCC 71.90 -6.68 JSWSTEEL 454.65 -5.32
BAJAJFINSV 364.10 -5.18 Price
Table no. 4.1
On which Basis of choose loan
Rate of interest EMI Total Amt. any Other Table no. 4.2
42% 25% 31% 2%
50% 40% 30% 20% 10% 0% Rate of interest EMI Total Amt. any Other
Graphs no. 4.1
Occupation of the people
businessman traders contracer any other
45% 32% 18% 15% Table no.4.3
50% 40% 30% 20% 10% 0% businessman traders contracer any other
Graphs no. 4.2
5. Analysis and Interpretation
Analysis is a method of evaluating future security prices and market
directions based on statistical analysis of variables such as trading
volume, price changes, etc., to identify patterns A stock market term -
The attempt to look for numerical trends in a random function. The stock
market used to be filled with technical analysts deciding what to buy and
sell, until it was decided that their success rate is no better than
chance. Now technical stock analysis is virtually non-existent. The
Readers Submitted Examples page has more on this topic. Research and
examination of the market and securities as it relates to their supply
and demand in the marketplace. The technician uses charts and computer
programs to identify and project price trends. The analysis includes
studying price movements and trading volumes to determine patterns such
as Head and Shoulder Formations and W Formations. Other indicators
include support and resistance levels, and moving averages. In contrast
to fundamental analysis, technical analysis does not consider a
corporation's financial data. Technical analysts study trading histories
to identify price trends in particular stocks, mutual funds, commodities,
or options in specific market sectors or in the overall financial
markets. They use their findings to predict probable, often short-term,
trading patterns in the investments that they study. The speed (and
advocates would say the accuracy) with which the analysts do their work
depends on the development of increasingly sophisticated computer
programs. Technical Analysis supposes markets have memory.If so, past
prices, or the current price momentum, can give an idea of the future
price evolution. Technical Analysis is a tool to detect if a trend (and
thus the investor's behavior) will persist or break. It gives some
results but can be deceptive as it
relies mostly on graphic signals that are often intertwined, unclear or
belated. It might become a source of representiveness heuristic (spotting
patterns where there are none) Technical analysis has become increasingly
popular over the past several years, as more and more people believe that
the historical performance of a stock is a strong indication of future
performance. The use of past performance should come as no surprise.
People using fundamental analysis have always looked at the past
performance of companies by comparing fiscal data from previous quarters
and years to determine future growth. The difference lies in the
technical analyst's belief that securities move according to very
predictable trends and patterns. These trends continue until something
happens to change the trend, and until this change occurs, price levels
are predictable. There are many instances of investors successfully
trading a security using only their knowledge of the security's chart,
without even understanding what the company does. However, although
technical analysis is a terrific tool, most agree it is much more
effective when used in combination with fundamental analysis. Fundamental
Analysis
Fundamental analysis looks at a share‟s market price in light of the
company‟s underlying business proposition and financial situation. It
involves making both quantitative and qualitative judgements about a
company. Fundamental analysis can be contrasted with 'technical
analysis‟, which seeks to make judgements about the performance of a
share based solely on its historic price behavior and without reference
to the underlying business, the sector it's in, or the economy as a
whole. This is done by tracking and charting the companies stock price,
volume of shares traded day to day, both on the company itself and also
on its competitors. In this way investors hope to build up a picture of
future price movements.
MISTAKE ONE Lack of Knowledge and No Plan It amazes us that some people
expect to trade the stock market successfully without any effort. Yet if
they want to take up golf, for example, they will happily take some
lessons or at least read a book before heading out onto the course. The
stock market is not the place for the ill informed. But learning what you
need is straightforward – you just need someone to show you the way. The
opposite extreme of this is those traders who spend their life looking
for the Holy Grail of trading! Been there, done that! The truth is, there
is no Holy Grail. But the good news is that you don't need it. Our
trading system is highly successful, easy to learn and low risk.
MISTAKE TWO Unrealistic Expectations Many novice traders expect to make a
gazillion dollars by next Thursday. Or they start to write out their
resignation letter before they have even placed their first trade! Now,
don't get us wrong. The stock market can be a great way to replace your
current income and for creating wealth but it does require time. Not a
lot, but some. So don't tell your boss where to put his job, just yet!
Other beginners think that trading can be 100% accurate all the time. Of
course this is unrealistic. But the best thing is that with our methods
you only need to get 50-60% of your trades "right" to be successful and
highly profitable. MISTAKE THREE
Listening to Others When traders first start out they often feel like
they know nothing and that everyone else has the answers. So they listen
to all the news reports and so called "experts" and get totally confused.
And they take "tips" from their buddy, who got it from some cab driver…
We will show you how you can get to know everything you need to know and
so never have to listen to anyone else, ever again! MISTAKE FOUR Getting
in the Way By this we mean letting your ego or your emotions get in the
way of doing what you know you need to do. When you first start to trade
it is very difficult to control your emotions. Fear and greed can be
overwhelming. Lack of discipline; lack of patience and over confidence
are just some of the other problems that we all face. It is critical you
understand how to control this side of trading. There is also one other
key that almost no one seems to talk about. But more on this another
time! MISTAKE FIVE Poor Money Management It never ceases to amaze us how
many traders don't understand the critical nature of money management and
the related area of risk management. This is a critical aspect of
trading. If you don't get this right you not only won't be successful,
you won't survive! Fortunately, it is not complex to address and the
simple steps we can show you will ensure that you don't "blow up" and
that you get to keep your profits.
MISTAKE SIX Only Trading Market in One Direction Most new traders only
learn how to trade a rising market. And very few traders know really good
strategies for trading in a falling market. If you don't learn to trade
"both" sides of the market, you are drastically limiting the number of
trades you can take. And this limits the amount of money you can make. We
can show you a simple strategy that allows you to profit when stocks
fall. MISTAKE SEVEN Overtrading Most traders new to trading feel they
have to be in the market all the time to make any real money. And they
see trading opportunities when they're not even there (we‟ve been there
too). We can show you simple techniques that ensure you only "pull the
trigger" when you should. And how trading less can actually make you
more!
6. Conclusion
After going through my whole study I came to the conclusion that
different Company of India either private or public both provides
investment scheme With the objective to generate income. They have many
financial schemes regarding Commercial investment There are many people
who are satisfies with the Scheme. The procedure of Investing from this
company is simple and easy and also costumer friendly. I also come to
know that many industrialist, traders, and new entrepreneur were aware of
these schemes.
Advantages of MUTUAL FUNDS:Portfolio Diversification:- Mutual Funds
invest in a well-diversified portfolio of
securities which enables investor to hold a diversified investment
portfolio (whether the amount of investment is big or small).
Professional Management:- Fund manager undergoes through various
research works and has better investment management skills which ensure
higher returns to the investor that what he can manage his own. Less
Risk:- Investors acquire a diversified portfolio of securities even with
a small investment in a Mutual Fund. The risk in a diversified portfolio
is lesser than investing in merely 2 or 3 securities.
Low Transaction Costs:- Due to the economies of scale (benefits of larger
volumes), mutual funds pay lesser transaction costs. These benefits are
passed on to the investors.
Liquidity: - An investor may not be able to sell some of the shares held
by him
very easily and quickly, whereas units of a mutual fund are far more
liquid.
Choice of Scheme: - Mutual Funds provide investors with various schemes
with different investment objectives. Investors have the option of
investing in a scheme having a correlation between its investment
objectives and their own financial goals. These schemes further have
different plans/options.
Transparency: - Funds provide investors with updated information
pertaining
to the markets and the schemes. All material facts are disclosed to
investors as required by the regulator.
Flexibility: - Investors also benefit from the convenience and
flexibility offered
by Mutual Funds. Investors can switch their holdings from a debt scheme
to an equity scheme and vice-versa. Option of systematic (at regular
intervals) investment and withdrawal is also offered to the investors in
most open-end schemes.
Safety:- Mutual Fund industry is a part of a well-regulated investment
where the
interests of the investors are protected by the regulator. All funds are
registered with SEBI and complete transparency is forced.
insufficient to give the real picture scope of the share market.
responsible for any wrong inference drawn due to the incorrect filling of
the questionnaire by the respondents.
limited to the reliability of method of
investigations, measurement and analysis of data.
7. Recommendation
Securities Company needs to provide such type of facilities as much as
possible because these students can be the future customers of the
company for other services also. As for as branches are concern they are
not providing much attention on promoting these facilities as compare to
top management of the company so proper steps must be taken for that.
Visiting schools and colleges for promotion purpose is only practicing in
Delhi region it should be on national basis. In case of any kind o delay
in service proper feed back system should be there. More efficient staff
should be appointed so that they can easily provides all the cooperation
required by the customer. Unnecessary formalities should be removed and
should try to reduced the large documentation process while sanctioned
investing. Interior space should be extended so that people will freely
move during rush hour. News paper and magazines should kept for
customers, so that they feel relaxed until their transactions are over.
Proper water and toilet should be provided and that should be well
noticed to everybody. As study reveals that securities company schemes
are the best as compare to there sector it should be capitalized as much
as possible.
8. Appendices Bibliography
Presentation by Trainers