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INVESTMENT & SPECULATIONBY - DEEPALI MISHRA (C-4) SALONI DEWAN (C-25)SARITA GUPTA (A- )SHRISHTI CHATURVDI ( A- )

INVESTMENTInvestment is a financial operation that, upon thorough analysis, promises safety of principal and a satisfactory return.

SPECULATIONSpeculation is a financial action that does not provide safety of initial investment along with the return on the principal sum.

BasisInvestorSpeculatorPlanning HorizonLonger planning horizonShorter planning horizonRisk DispositionNot willing to assume more than moderate riskWilling to assume high riskReturn ExpectationModest rate of returnHigh rate of returnBasis for decisionFundamental factors,careful evaluation of the prospects of the firmHearsay,technical charts,market psychologyLeverageUses his own funds & eschews borrowed fundsResorts to borrowingINVESTMENT & GAMBLINGGambling is quite the opposite of investment. Typical examples are horse races, card games, lotteries, etc. It consists in taking high risks not only for high returns, but also for thrill and excitement and the time horizon is very short when compared with speculation and investment.It is unplanned and non scientificIn gambling artificial and unnecessary risks are created fro increasing returnsBut an investment is carefully planned, evaluatedAllocate funds to various investmentConcentrates on safetyExpecting moderate and continuous return for increasing the returns.

The Investment ProcessThe process of investment includes five stages:

Investment Policy.

Security Analyses.

Valuation.

Portfolio Construction.

Portfolio Evaluation.

Copyright 2005 Pearson Addison-Wesley. All rights reserved.1-8Key Participants in Investment ProcessGovernmentFederal, state and local projects & operationsTypically net demanders of fundsBusinessInvestments in production of goods and servicesTypically net demanders of fundsIndividualsSome need for loans (house, auto)Typically net suppliers of fundsCopyright 2005 Pearson Addison-Wesley. All rights reserved.1-9 The Investment Process

ROLE OF SEBI INVESTORS PROTECTION Sebi is the regulator for the Security market in India.

In 1988 the Securities and Exchange Board of India (SEBI) was established by the Government of India through an executive resolution, and was subsequently upgraded as a fully autonomous body on April 12, 1992 the Securities and Exchange Board Of India was constituted. It was constitute in accordance with the provisions of the Securities and Exchange Board Of India. The basic functions of the Securities and Exchange Board of India is ..to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto The basic objective of the board are identified asThe primary objective of SEBI is to promote healthy and orderly growth -of the securities market and secure investor protection. The objectives of SEBI are as follows: To protect the interest of investors, so that, there is a steady flow of savings into the capital market. To regulate the securities market and ensure fair practices. To promote efficient services by brokers, merchant bankers, and other intermediaries, so that, they become competitive and professional.

Functions of sebiThe SEBI Act, 1992 has entrusted with two functions, they are Regulatory functions and Developmental functions

Regulatory functionsRegulation of stock exchange and self regulatory organizations. Registration and regulation of stock brokers, sub-brokers, Registrars to all issues, merchant bankers, underwriters, portfolio managers etc. Registration and regulation of the working of collective investment schemes including mutual funds. Prohibition of fraudulent and unfair trade practices relating to securities market. Prohibition of insider trading. Regulating substantial acquisition of shares and takeover of companies.

Developmental functionPromoting investors education. Training of intermediaries. Conducting research and publishing information useful to all market participants. Promotion of fair practices. Promotion of self regulatory organizations

Organization of sebiThe SEBI Act provides for the establishment of a Statutory Board consisting of six members. The chairman and two members are to be appointed by the Central Government, one member to be appointed by the Reserve Bank and two members having experience of securities market to be appointed by the Central Government. SEBI has divided the activities into four operational departments. They are primary market department, issue management and intermediarys department, secondary market department and institutional department. Each department is headed by an Executive Director. Why investor protection is importantInvestors are the backbone of the securities market. They determine the level of activity in the securities market and the level of activity in the economy. Many investors may not possess adequate expertise/knowledge to take informed investment decisions. May not be aware of the complete risk-return profile of the different investment options. may not be fully aware of the precautions they should take while dealing with market intermediaries and dealing in different securities. They may not be familiar with the market mechanism and the practices as well as their rights and obligations. ScamS in stock marketSecurities Scam Harshad Mehta (1991-92). Floating Companies Scam C R Bhansali (1992-96) . Satyam Ramalinga Raju (2009) Around 12,000 Crores. Fake Stamp Fraud Abdul Karim Telgi - Around 30,000 Crores . DSQ Software Dinesh Dalmiya (2001) - Around 600 Crores

Step taken by sebi to make investor awareSecurity Market Awareness Campaign(SMAC) was started with a motto An educated investor is a Protected investor. Invest with Knowledge was the message spread by this campaign. Workshops Advertisements Educative material All India Radio Information provided through AIR Programs frequently.

Sebi guidelines for investor protectionSpecify the manner in which the matters relating to issue of capital, transfer of securities and other matters shall be disclosed by the companies. No company can make an issue of securities unless a draft prospectus has been filed with SEBI. The offer document, through which the securities are issued, is to be prepared strictly as per the requirements of SEBI Guidelines. No company shall make an issue of securities unless it has made an application for listing of securities at a stock exchange. No company can make public issue unless all existing shares must be fully paid.

Rights of investorTo receive the share certificates, on allotment or transfer as the case may be, in due time. To receive copies of the Directors report, Balance Sheet and P&L A/c and the Auditors report. To participate and vote in General Meeting either personally or through proxies. To receive dividend in due time once approved in General Meeting. To receive corporate benefits like rights, bonus, etc once approved. To proceed against the company by way of civil or criminal proceedings. Steps taken while investingBefore making any investment, one must ensure to:

1. Obtain written documents explaining the investment2. Read and understand such documents3. Verify the legitimacy of the investment4. Find out the costs and benefits associated with the investment5. Assess the risk-return profile of the investment6. Know the liquidity and safety aspects of the investment7. Ascertain if it is appropriate for your specific goals8. Compare these details with other investment opportunities available 9. Examine if it fits in with other investments you are considering oryou have already made10. Deal only through an authorized intermediaryThank you