Business Club

Indian Financial Markets

BIZ 101 Lecture II

Contents

• Financial Markets

• Shares and Stocks

• Regulatory Environment in India• SEBI• RBI

Financial Markets

• A Market is a place where buyers and sellers come together to exchange something

• Financial Markets are where financial Instruments/products are exchanged.

• A Financial Market is known by type of product traded in it

Different Financial Markets

FINANCIAL MARKET

MoneyMarket

Debt Market

Forex Market

CapitalMarket

Money Market

• Markets for short term• Borrowing• Lending

• Primarily used by Banks• Typical Financial Instruments

• Bankers Acceptance• Certificate of Deposit (CD)• Treasury Bills• Repo’s

Debt Market

• Debt • Contract• One Party lends to another Party• Predetermined

• Interest Rates and Term• Participants

• Banks• Financial Institutions• Mutual Funds• Insurance Companies etc.

• Instruments• Government Securities (G-Secs)• Public Sector Units Bonds• Corporate Securities

Foreign Exchange Market

• Foreign Goods• Payments in Foreign Currency• Forex Market

• Participants• Government

• Payments for Imports• Repayment of Loans

• Importers• Exchange Rates – One Currency in terms of

other (Eg. 1 US Dollar = 45 Rupees)• Bid Rate• Offer Rate

Capital Market

• Long Term Funds• Raised by

• Government • Corporates

• Trading Instruments used• Shares• Derivatives• Units of Mutual Funds

Financial Markets

• Primary Market• Instruments issued for first time• Used by

• Government/Corporates/PSU’s• IPO

• Initial Public Offering• Secondary Market

• Trading of already issued • Stocks • Bonds

• Stock Exchange

Investment Basics

• Using savings to get returns in future is known as Investment

• Why should I invest??• I want to earn return on my idle money• A good bank balance before I retire• I intend to own a Mansion and Ferrari

• When should I invest• As soon as possible

Where to invest???

• Physical Assets• Real Estate ,Gold/jewellery• Requires huge capital

• Financial Assets• Savings Bank Account• Fixed Deposits • Post office• Government Bonds• Provident Funds

But ..All these are fixed return instruments

Lets learn to take some risks and earn more

Welcome to the Exciting world of Stocks !!

Stock and Shares

• Stock • Capital raised by corporations• Through issue and distribution of shares

• Share• Signifies ownership in the company• A company might have thousands of

Shareholders• Which company issued shares for the

first time in the world???• The Dutch East India Company in 1602

Stock Exchange

• Place where the shares are traded• BSE • NSE

• BSE – Bombay Stock Exchange• Oldest Stock Exchange in Asia• Sensex – Sensitive Index

• Index of 30 Actively traded Companies• NSE – National Stock Exchange

• Incorporated in 1992• Nifty

• Index of 50 Actively traded Companies

A Few Jargons!!!

• Types of Shares• Common/Equity• Preferred

• Face Value • Market Value

• Market Capitalization

• Dividend

A few more Jargons!!!

• Stock Broker

• Mutual Funds

• Annual Report

• Prospectus

• Liquidity

Regulatory Environment in India

• Pre 1991• Tight Control of Government

• Post 1991• Liberalization• Opening of the Economy• Need for Supervision

• Regulation• Regulatory Bodies

Regulatory Environment in India

• RBI – Reserve Bank of India• Established in 1935• Bankers Bank• Regulates Indian Financial Markets

• SEBI –Securities and Exchange Board of India• Incorporated in 1992• Regulation of Securities Market• Protecting the interests of Investors

So want something more???

Hmm….• Stay tuned to BIZ 101 Lecture Series

• What’s more in Store??• Mutual Funds• Stock Valuation • Derivatives• Supply Chain Management

Sources

• www.wikipedia.org• www.rbi.org.in• www.sebi.gov.in• www.nseindia.com• www.bseindia.com• www.moneycontrol.com

• And, !!!

Contact Us

• Atul Bansal – MBA Second Yearatulb@iitk.ac.in

• Gaurav Sharma – MBA Second Yearsharmag@iitk.ac.in

• Pratyush – B Tech Final Yearpraty@iitk.ac.in

Thank you !!