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  • 1. Copyright 2009 by National Stock Exchange of India Ltd. (NSE)Exchange Plaza, Bandra Kurla Complex,Bandra (East), Mumbai 400 051 INDIAAll content included in this book, such as text, graphics, logos, images, data compilationetc. are the property of NSE. This book or any part thereof should not be copied,reproduced, duplicated, sold, resold or exploited for any commercial purposes.Furthermore, the book in its entirety or any part cannot be stored in a retrieval system ortransmitted in any form or by any means, electronic, mechanical, photocopying, recordingor otherwise.

2. CONTENTS1. INVESTMENT BASICS....................................................................................................... 6 What is Investment?...................................................................................................................6 Why should one invest? .............................................................................................................6 When to start Investing?...........................................................................................................6 What care should one take while investing?......................................................................7 What is meant by Interest?......................................................................................................7 What factors determine interest rates?...............................................................................7 What are various options available for investment?......................................................8 What are various Short-term financial options available for investment?.............8 What are various Long-term financial o ptions available for investment?..............9 What is meant by a Stock Exchange?................................................................................10 What is an Equity/Share?......................................................................................................10 What is a Debt Instrument?.................................................................................................11 What is a Derivative?................................................................................................................11 What is a Mutual Fund?............................................................................................................11 What is an Index?.......................................................................................................................12 What is a Depository? ...............................................................................................................12 What is Dematerialization?.....................................................................................................122. SECURITIES ...........................................................................................................................13 What is meant by Securities?..............................................................................................13 What is the function of Securities Market?.......................................................................13 Which are the securities one can invest in?.....................................................................13 2.1R EGULATOR ................................................................................................................................14 Why does Securities Market need Regulators?...............................................................14 Who regulates the Securities Market?................................................................................14 What is SEBI and what is its role?.......................................................................................14 2.2PARTICIPANTS ............................................................................................................................15 Who are the participants in the Securities Market?......................................................15 Is it necessary to transact through an intermediary?..................................................15 What are the segments of Securities Market?................................................................153. PRIMARY MARKET............................................................................................................16 What is the role of the Primary Market? .........................................................................16 What is meant by Face Value of a share/debenture? ..................................................16 What do you mean by the term Premium and Discount in a Security Market?.16 3.1ISSUE OF SHARES ......................................................................................................................17 Why do companies need to issue shares to the public? .............................................17 What are the different kinds of issues? .............................................................................17 What is meant by Issue price?..............................................................................................18 What is meant by Market Capitalisation?..........................................................................18 What is the difference between public issue and private placement?...................19 What is an Initial Public Offer (IPO)?..................................................................................19 1 3. Who decides the price of an issue? .....................................................................................19What does price discovery through Book Building Process mean?......................19What is the main difference between offer of shares through book building andoffer of shares through normal public issue?..................................................................20What is Cut-Off Price?...............................................................................................................20What is the floor price in case of book building? ...........................................................20What is a Price Band in a book built IPO?........................................................................20Who decides the Price Band?.................................................................................................21What is minimum number of days for which a bid should remain open duringbook building?..............................................................................................................................21Can open outcry system be used for book building?...................................................21Can the individual investor use the book building facility to make anapplication?...................................................................................................................................21How does one know if shares are allotted in an IPO/offer for sale ? What is thetimeframe for getting refund if shares not allotted?....................................................21How long does it take to get the shares listed after issue?.......................................21What is the role of a Registrar to an issue?...................................................................22Does NSE provide any facility for IPO?..............................................................................22What is a Prospectus?...............................................................................................................22What does Draft Offer document mean?........................................................................23What is an Abridged Prospectus?.......................................................................................23Who prepares the Prospectus/Offer Documents?......................................................23What does one mean by Lock-in?......................................................................................24What is meant by Listing of Securities? ..........................................................................24What is a Listing Agreement?..............................................................................................24What does Delisting of securities mean? ........................................................................24What is SEBIs Role in an Issue?..........................................................................................24Does it mean that SEBI recommends an issue? ............................................................25Does SEBI tag make ones money safe?...........................................................................25 3.2FOREIGN CAPITAL ISSUANCE ..................................................................................................25Can companies in India raise foreign currency resources?.......................................25What is an American Depository Receipt?........................................................................25What is an ADS? .........................................................................................................................26What is meant by Global Depository Receipts?..............................................................264.SECONDARY MARKET.....................................................................................................27 4.1INTRODUCTION ...........................................................................................................................27What is meant by Secondary market?...............................................................................27What is the role of the Secondary Market?......................................................................27What is the difference between the Primary Market and the Secondary Market?...............................................................................................................