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VALUATION OF INVESTMENTS
AND

MODEL PORTFOLIO OF
NON-SLR INVESTMENTS TO
MAXIMISE WEALTH

Submitted By
SUKHADA P TIRODKAR
MMS 2010-2011
ALLANA INSTITUDE OF MANAGEMENT AND RESEARCH

Project Done At
IDBI BANK, DAHISAR BRANCH
Mumbai

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Table of Contents

Sr. No.

Contents
INTRODUCTION

Page No.

3
INVESTMENT PRODUCTS

2
EQUITY
I

6
STOCKS

II

6
NIFTY
SENSEX
MUTUAL FUNDS

III

9
COMMODITY

IV

14
GOLD

15
REAL ESTATE

VI

17
BONDS

VII

18
COMMERCIAL PAPERS

VIII

22
PREFERENCE SHARES

IX

25
CERTIFICATES OF DEPOSITS

27
VENTURE CAPITAL

XI

28
GUIDELINES OF RBI

30
ASSET CLASS INVESTMENT ANALYSIS

46
PORTFOLIO

37
CONCLUSION

64
REFERENCES

65
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Introduction
The term "investment" is used differently in economics and in finance. Economists refer to a
real investment (such as a machine or a house), while financial economists refer to a financial
asset, such as money that is put into a bank or the market, which may then be used to buy a
real asset.
Investment is the commitment of money or capital to purchase financial instruments or other
assets in order to gain profitable returns in form of interest, income, or appreciation of the
value of the instrument.
In finance, investment is the commitment of funds by buying securities or other monetary or
paper (financial) assets in the money markets, or in fairly liquid real assets, such as gold or
collectibles. Valuation is the method for assessing whether a potential investment is worth its
price. Returns on investments will follow the risk-return spectrum. The risk-return spectrum
is the relationship between the amount of return gained on an investment and the amount of
risk undertaken in that investment.
Knowing what an asset is worth and what determines that value, is a perspective for
intelligent decision making, in deciding on the appropriate price to pay or receive in a
takeover, and in making investment, financing and dividend choices when running a business.
Valuation plays a key role in many areas of finance, corporate finance, mergers and
acquisitions and portfolio management. Valuation is a process of determining current worth
of an asset or a company. How much would an investor be willing to pay for an assets for its
return generating potential? Investment is involved in many areas of the economy, such as
business management, finance, households, firms, or governments.
When we talk to any investment advisor, terms like asset class, diversification, etc keep
cropping up. It is very important for a lay investor to understand these terms to make an
informed decision. In this article we will discuss the basics of Asset class.
Asset class is defined as a group of securities that exhibit similar characteristics, behave
similarly in the marketplace, and are subject to the same laws and regulations. The three main

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asset classes are equities (stocks), fixed-income (fixed deposits, bonds, etc) and cash and cash
equivalents (like money market instruments).
In addition to the three main asset classes, some investment professionals also add real estate
and commodities (gold, silver, etc), and possibly other types of investments, to the asset
class mix.
Whatever the asset class lineup, each one is expected to reflect different risk and return
investment characteristics, and will perform differently in any given market environment.
Further breakup of asset classes depending on the nature of investment can be done as
under :- equity into growth stocks, value stocks, based on market capitalizations (small cap,
mid cap, large cap), debt instruments into government bonds, corporate bonds, small savings,
public provident funds, etc.

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Four broad classes of assets

Stocks or equities

Fixed Income or bonds

Money market or cash equivalents

Real estate or other tangible assets

These are the classes of assets that are available to build a portfolio.
You might notice that all stocks are lumped together, when individual stocks (or mutual funds
for that matter) can be quite different. For example, a small-cap stock is not going to act the
same way as General Electric.
However, stocks are grouped together because they will, as a group, react more alike than any
of the other three classes. The same thing is true for the other three classes.
The purpose of having all four asset classes represented in your portfolio is to take advantage
of the different strengths of each class.
The whole theory of asset allocation is based on diversifying your portfolio by asset class.
Many people xxx use Real Estate Investment Trusts and other more liquid investments to
satisfy the real estate leg of the asset class tool.

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1.EQUITY
Equity asset class investments refer to investment in share of a company. The investor
expects regular return from equity in the form of Dividends and long term return in the form
of Capital Gains due to appreciation in share price. If you are getting a risk adjusted return
from Equity investments consistently, then you are meeting the objective of taking higher
risk. Return from equity investments depends on the time horizon of holding and risk
appetite. Thus equity investment is one of the best investments avenues for investors having
higher risk taking ability and long term holding capacity.
Following are the instruments available in the market as Equity Investment Options:
Investment in shares of companies :
Investing directly in listed stocks.

2. STOCKS
Nifty
S&P CNX Nifty is a well diversified 50 stock index accounting for 21 different sectors of the
economy. It is used for a variety of purposes such as benchmarking fund portfolios, index
based derivatives and index funds.
S&P CNX Nifty is owned and managed by India Index Services and Products Ltd. (IISL),
which is a joint venture between NSE and CRISIL. IISL is Indias first specialized company
focused upon the index as a core product. IISL has a Marketing and licensing agreement with
Standard & Poors (S&P), who are world leaders in index services.
S&P CNX Nifty is computed using market capitalization weighted method, wherein the level
of the index reflects the total market value of all the stocks in the index relative to a particular
base period. The method also takes into account constituent changes in the index and
importantly corporate actions such as stock splits, rights, etc without affecting the index
value. The base period selected for S&P CNX Nifty index is the close of prices on November
3, 1995, which marks the completion of one year of operations of NSE's Capital Market
Segment. The base value of the index has been set at 1000 and a base capital of Rs.2.06
trillion.
The traded value for the last six months of all Nifty stocks is approximately 44.89% of the
traded value of all stocks on the NSE. It is a simplified tool that helps investors, to understand
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what is happening in the stock market and by extension, the economy. This is because; the 50
companies which are listed under it are almost running the economy. They are the one who
are responsible for smooth running of the Indian economy. If the value of these stocks are
down then the market is down. . If the Nifty Index performs well, it is a signal that companies
in India are performing well and consequently that the country is doing well.
An upbeat economy is usually reflected in a strong performance of the Nifty Index. It is
calculated as a weighted average, so changes in the share price of larger companies have
more effect. The base is defined as 1000 at the price level of November 3, 1995
The Nifty Index is internationally respected and recognized as a pioneering effort in
providing simpler understanding of stock market complexities. Nifty forms the benchmark
for all investors details related to stocks.
Criteria for inclusion of Stock in Nifty50

Average market capitalization of Rs.5,000 million or more during the last six months.

Liquidity: Cost of transaction (impact cost) of less than 0.75% for more than 90% of
trades, over six months.

At least 12% floating stock (not held by promoters of the company or their associates)

Sensex
SENSEX, first compiled in 1986, was calculated on a "Market Capitalization-Weighted"
methodology of 30 component stocks representing large, well-established and financially
sound companies across key sectors. The base year of SENSEX was taken as 1978-79.
SENSEX today is widely reported in both domestic and international markets through print
as well as electronic media.
Sensex is scientifically designed and is based on globally accepted construction and review
methodology. Since September 1, 2003, SENSEX is being calculated on a free-float market
capitalization methodology. The "free-float market capitalization-weighted" methodology is a
widely followed index construction methodology on which majority of global equity indices
are based; all major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the
free-float methodology.
The general criteria for selection of constituents in SENSEX are as follows :-

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Market capitalization: The company should have a market capitalization in the Top
100 market capitalizations of the BSE. Also the market capitalization of each
company should be more than 0.5% of the total market capitalization of the Index.

Trading frequency: The company to be included should have been traded on each and
every trading day for the last one year. Exceptions can be made for extreme reasons
like share suspension etc.

Number of trades: The scrip should be among the top 150 companies listed by
average number of trades per day for the last one year.

Industry representation: The companies should be leaders in their industry group.

Listed history: The companies should have a listing history of at least one year on
BSE.

Track record: In the opinion of the index committee, the company should have an
acceptable track record.

Advantages of investing into equity markets and shares are

Capital appreciation
The prices of shares of some companies can appreciate much more in value than the other
companies. Capital appreciation of value of shares can be much more than the appreciation in
value of commodities like that of gold or silver
Bonus shares
When a person invests in shares of good company, the company may issue bonus shares. This
will increase capital holding of the investor. This can also increase the amount of dividend
that a person earns from these bonus shares in future.
Dividend earnings
Since many good growing companies are listed, they provide dividends. As a result of which
the investor earns dividend. Some companies provide more than six percent dividend each
year. The capital appreciation and other benefits for the investors alongwith dividends can
thus rewarding for the investors.
Long term benefits and return on investments.

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There are no other investments over a long term outlook that gives a high returns like equity
markets does.
Liquid assets
Listed shares can be easily liquidated due to availability of active market..

Equity Mutual Funds

Pooled Investment vehicle. E.g. Diversified Equity Mutual Funds, Balanced Fund, Sector
Fund, etc

3. MUTUAL FUNDS
A mutual fund is just the connecting bridge or a financial intermediary that allows a group of
investors to pool their money together with a predetermined investment objective. The
mutual fund will have a fund manager who is responsible for investing the gathered money
into specific securities. When you invest in a mutual fund, you are buying units or portions of
the mutual fund and thus on investing becomes a shareholder or unit holder of the fund.
Mutual funds are considered as one of the best available investments as compare to others
they are very cost efficient and also easy to invest in, thus by pooling money together in a
mutual fund, investors can purchase stocks or bonds with much lower trading costs than if
they tried to do it on their own. But the biggest advantage to mutual funds is diversification,
by minimizing risk & maximizing returns.
Diversification is nothing but spreading out your money across available or different types of
investments. By choosing to diversify respective investment holdings reduces risk
tremendously up to certain extent.
The most basic level of diversification is to buy multiple stocks rather than just one stock.
Mutual funds are set up to buy many stocks. Beyond that, you can diversify even more by
purchasing different kinds of stocks, then adding bonds, then international, and so on. It could
take you weeks to buy all these investments, but if you purchased a few mutual funds you
could be done in a few hours because mutual funds automatically diversify in a
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predetermined category of investments (i.e. - growth companies, emerging or mid size

companies, low-grade corporate bonds, etc).
The mutual fund issues shares of stock (just like any other corporation) to investors in
exchange for cash.

There are three ways in which the total returns provided by mutual funds can be enjoyed by
investors:
1. Income is earned from dividends on stocks and interest on bonds. A fund pays out
nearly all income it receives over the year to fund owners in the form of a distribution.
2. If the fund sells securities that have increased in price, the fund has a capital gain.
Most funds also pass on these gains to investors in a distribution.
If fund holdings increase in price but are not sold by the fund manager, the fund shares increase in
price. You can then sell your mutual fund shares for a profit. Funds will also usually give you a
choice either to receive a check for distributions or to reinvest the earnings and get more shares
Diagram describes broadly the working of a mutual fund:

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The value of the shares of mutual fund is readily determined. Each day, the accounting staff
of a fund simply adds up the value of all the securities in the portfolio, adds in other assets,
deducts liabilities, and comes up with a net overall value. It is then a simple matter to divide
the net assets by the number of shares outstanding. This is called the net asset value, and is
the price at which investors buy and sell shares from the fund. The net asset value is listed in
the financial section of many major newspapers.

There are many entities involved and the diagram below illustrates the organizational set up
of a mutual fund.

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Advantages of Investing in Mutual Funds

Putting your money to work in mutual funds provides distinct advantages over other forms of
investments.
Diversification
Diversification involves spreading your money around among several different kinds of
investments in order to reduce the risk of concentrating in a single security .When your
investments are diversified, you dont take a major hit if any one investment performs poorly.
Thus, the savvy investor avoids concentrating all her investments in the stock of a single
company, or even a single industry.
Low entry cost
You can get started in mutual fund investing with relatively little money a benefit when
finances are tight, but youre mentally ready to roll with an investment experience.
Professional management
Mutual funds hire smart investment experts to manage your money, and they have access to
extensive research into companies, economic conditions, and market trends. Most people
would have a hard time keeping track of a large number of investments in many different
businesses; staying on top of that financial activity is part of the daily routine for the research
staff of a mutual fund.
Liquidity
Liquidity refers to the ease with which you can buy or sell an investment. Buying or selling a
particular stock or bond, especially one held by relatively few people, may be difficult. If you
need cash in an emergency, this obstacle to turning your investment into legal tender can
cause inconvenience and may cost you money. By contrast, mutual fund shares can be cashed
in quickly at any time by redeeming them with the managing company, usually at little or no
cost.
Shareholder services
Many mutual fund companies offer a range of useful, sometimes valuable services to their
customers. These may include:
Ability to invest, withdraw, or move money via mail, telephone, or the Internet
Automatic investment via payroll deduction
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Record-keeping for filing your income tax return

4. COMMODITY
A market that transacts business with commodities of all nature referred as commodity
markets. Commodity market was initially meant only for agricultural products and that too in
the local market. Commodity markets deal in the trade of commodities like gold, cotton,
crude oil, etc. Many items both perishable, non perishable, finished goods, raw materials and
semi finished goods will be traded in this market at the international level. Commodity
market does not necessarily require you to buy or sell the commodities but you can even
exchange them.
Commodity market works on certain principles. Firstly the trading has to be done only for
standard products. Secondly the transaction takes place through a future contract. According
to this contract the commodities will be sold or bought on a future date. However the price at
which they are sold will be the price agreed during the contract. Similarly commodity
marketing also makes use of another type of contract called spot contract. In this contract the
goods are to be transferred as soon as the contract is made. Some of the commodities
investing market are commodity food market, commodity petroleum market and commodity
fund investing.
Commodity investing was initially received well only by a few sectors. Commodities
investing were first restricted to the trade and exchange of commodities meant for regular and
day to day use. However the awareness in the subsequent stages has brought all sectors into
the manifold of commodity investing and has enabled speedy movements, transfer and
transaction of goods and services.
The following are the benefits of investing in commodities market
Reduced Risks
As an investor your chances of risks are very less if you choose to invest in commodity.
Therefore the gains from commodity investing will be helpful for you to balance other losses
due to other financial instruments in your portfolio. The chances of risks are lower because
commodity investing primarily deals with diverse items. Moreover when the contracts are

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entered for a future date at the current time you can exercise reasonable care and see to it that
the chances of risks are reduced or nil.

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Helps to Fix Price Easily

The performance of commodity market can be monitored by analyzing the performance of
bond and share market because in most cases a commodity market will perform well when
the others don't perform and vice versa. It is therefore possible to easily predict the prices and
make the contracts by considering the ups and downs in other markets.
Diversifies your Portfolio
The presence of commodities investment itself shows that your portfolio is widely
diversified. It is a well known fact that commodities investment is extremely opposite to the
other popular financial instruments namely stocks and bonds. Since you have already
invested in commodities you will also think of choosing other financial instruments that
resemble commodities investment to make sure that they give you the required profit in
combination. This means your portfolio will perform well over the year and you can
concentrate on the relevant financial instruments seasonally and pertaining to the market
performance.
When you wish to engage in commodity trading you must be able to anticipate and calculate
the expected prices and other financial outcomes. One must do a technical analysis of the
commodities market to achieve this. Commercial price index is an important concept that
plays a role in making these decisions. Index refers to the average taken in terms of specific
commodities / sectors like oil and gold. These indexes represent the trend and the direction in
which the demand and supply curve is moving for that particular product.
Commodity market has grown to a large extent. There are numerous opportunities and scope
for growth in the field. You must have a sound knowledge about the various commodities
traded and the fluctuation in their prices for investing in commodity is not an easy task.

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5.GOLD
Of all the precious metals, gold is the most popular as an investment. Investors generally buy
gold as a hedge or safe haven against any economic, political, social or currency-based crises.
These crises include investment market declines, burgeoning national debt, currency failure,
inflation, war and social unrest. Speculators also buy gold early in bear market and aim to sell
it before a bear market ends, in an attempt to avoid higher risk.
Investing in gold takes some time and research. The precious metal is considered a safe haven
in difficult economic times. Gold can be purchased several ways, including gold coins and
bars, mining stocks and mutual funds.
Investing in gold has a sense of security, they are real. Gold is not just name for companies,
they are tangible objects that you can hold and feel the value of. Therein lies their power.
Investing in companies is a whole different story. With 'normal' stock investments, your
money isn't in something real. It's just a number, an idea: insecure. Numbers on your
computer screen, money invested into nothing solid. Ideas to be played around with.
The concept is very different: instead of putting your money into a company - an idea - you're
buying gold and silver with your money - something real.
Gold cannot be 'made', as opposed to company products. This simplifies the supply and
demand way of thinking, because there is a fixed supply. Apart from the high use of gold in
jewellery, gold is also used in dentistry, (for gold crowns) embroidery, (to make threads with),
electronics, (in connectors on wires) and as a coating on satellites and astronauts' helmets.

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Benefits of investing in Gold.

Diversity
Gold can help diversify your portfolio. It is an excellent way to improve the overall
performance of an investment account, and gold offers stability. Although gold prices change,
the metal has never been worth zero, and its price often rises when the rupee is falling.
The Economy
When the economy falters and investors lose their faith in the stock market, gold benefits.
Low interest rates, and mistrust in the banking and financial sector often steer people toward
gold because of its potential for appreciation and its safety.
Demand
Gold is in demand in a down economy, and when demand goes up, gold prices rise.
Inflation
Gold is considered to be anti inflationary investment as gold prices tend to rise in times of
inflation. While investors may flee stocks and other markets in such periods, gold historically.
Does not face the same selling pressure and panic.

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6.REAL ESTATE
Real estate that generates income or is otherwise intended for investment purposes rather than
as a primary residence. It is common for investors to own multiple pieces of real estate, one
of which serves as a primary residence, while the others are used to generate rental income
and profits through price appreciation.
Common examples of investment properties are apartment buildings and rental houses, in
which the owners do not live in the residential units, but use them to generate ongoing rental
income from tenants. Those who invest in real estate also expect to generate capital gains as
property values increase over time.
Expected rate of returns for real estate will differ from city to city.

LIQUID
Cash in hand or balance in your savings account can be considered as liquid. Liquid means
readily available to spend or invest or for any purpose. Liquid asset class has its own
advantage and importance also. Expected returns on Liquid are very less. Liquid Mutual
Funds are also available in the market which will give you returns of about 4 to 5%.
Some Liquid Asset class options:
Savings Account
Cash
Liquid Fund

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7.BONDS
A Bond is a debt security which is instruments, promissory notes executed by or on behalf of
the issuer, who sells them to investors to raise funds A bond is a formal contract to repay
borrowed money with interest at fixed intervals. Thus a bond is like a loan: the issuer is the
borrower (debtor), the holder is the lender (creditor), and the coupon is the interest. Bonds
and stocks are both securities, but the major difference between the two is that stockholders
have an equity stake in the company, whereas bondholders have a creditor stake in the
company.
Bonds are basically loans to companies or governments. Corporations, governments, and
their agencies issue bonds to raise money for a given project or to maintain cashflow.
A bond carries the promise that the original amount you paid (the principal) will be repaid to
you at a specific time (the maturity date). You are also typically promised a specific amount
of interest, to be paid to you regularly over the life of the bond. Since bonds provide regular
income through "coupons" or a fixed interest rate, they are known as fixed-income
investments.
Bonds rated AAA, AA, and A by Standard & Poor's are considered "investment grade" and
have relatively low risk; bonds rated BBB are medium grade; bonds rated lower than BBB
have a higher risk of default. The highest risk bonds are called "junk bonds" and usually offer
higher interest rates to compensate for their default risk
Bonds are fixed income instruments which are issued for the purpose of raising capital. Both
private entities, such as companies, financial institutions, and the central or state government
and other government institutions use this instrument as a means of garnering funds.

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Bonds issued by the Government carry the lowest level of risk but could deliver fair returns.
Over and above the scheduled interest payments as and when applicable, the holder of a bond
is entitled to receive the par value of the instrument at the specified maturity date
The interest rate that the issuer of a bond must pay is influenced by a variety of factors, such
as current market interest rates, the length of the term and the creditworthiness of the issuer.
These factors are likely to change over time, so the market price of a bond will vary after it is
issued. This price is expressed as a percentage of nominal value. Bonds are not necessarily
issued at par (100% of face value, corresponding to a price of 100), but bond prices converge
to par when they approach maturity (if the market expects the maturity payment to be made
in full and on time) as this is the price the issuer will pay to redeem the bond. This is referred
to as "Pull to Par". At other times, prices can be above par (bond is priced at greater than
100), which is called trading at a premium, or below par (bond is priced at less than 100),
which is called trading at a discount.
Relationship of YTM with bond.
Bond selling at

Relationship

DISCOUNT

COUPON RATE<CURRENT YIELD<YTM

PREMIUM

COUPON RATE>CURRENT YIELD>YTM

PAR VALUE

COUPON RATE=CURRENT YIELD=YTM

The price-yield relationship is not a straight line, but rather convex (This is convexity)
1. As yields decline, prices increase at an increasing rate
2. As yield increase, prices fall at a declining rate

Some of the important features of the bonds are

a)

The credit risk such that higher the risk, higher is the return expected.
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b)

Inflation, present and future which reduces the purchasing power of investment.

c)

The time to maturity of the security the longer the maturity greater is the uncertainty
about the first two factors.

d)

The demand and supply of debt securities in market from time to time

e)

The return is in the form of interest that the security pays in the form of coupon as
well the difference between the purchase price and the face value.

f)

The investors benefit as they preserve and increase their invested capital and also
ensure the receipt of regular interest income.

g)

The prices of Debt securities display a lower average volatility as compared to the
prices of other financial securities and ensure the greater safety of accompanying
investments.

h)

Debt securities enable wide-based and efficient portfolio diversification and thus
assist in portfolio risk-mitigation.

i)

Almost all debt instruments have a rating assigned to them by a Rating Agency which
enables the investor to choose his degree of risk and corresponding returns.

Non SLR Bonds

Securities having SLR status, as specified by RBI, are eligible securities for investment by
banks to meet their SLR commitments under Sec 24 (2-A) of the B. R. Act, 1949. As the
name suggest, investment in Non-SLR bonds cannot be considered eligible for SLR
requirement. These include PSU bonds, Corporate bonds and even certain Government
securities like Oil Bonds, Food Bonds, Fertilizer Bonds, etc.
Public Sector Undertaking Bonds (PSU Bonds) : These are Medium or long term debt
instruments issued by Public Sector Undertakings (PSUs). The term usually denotes bonds
issued by the central PSUs (i.e. PSUs funded by and under the administrative control of the
Government of India). Most of the PSU Bonds are sold on Private Placement Basis to the
targeted investors at market determined interest rates. Often investment bankers are roped in
as arrangers to this issue. PSU Bonds are issued in demat form. In order to attract the
investors and increase liquidity, issuers get their bonds rated by rating agencies like CRISIL,
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ICRA, CARE, etc. Some of the issues may be guaranteed by Central / State Government
enabling them to get a better rating.
Corporate Bond : Corporate Bonds are issued by public sector undertakings and private
corporations for a wide range of tenors but normally upto 15 years. However, some Banks
and Companies like Reliance have also issued Perpetual Bonds.
Compared to government bonds, corporate bonds generally have a higher risk of default. This
risk depends, of course, upon the particular corporation issuing the bond, its rating, the
current market conditions and the sector in which the Company is operating. Corporate bond
holders are compensated for this risk by receiving a higher yield than government bonds.
Some corporate bonds have an embedded call option that allows the issuer to redeem the debt
before its maturity date. Some even carry a put-option for the benefit of the investors. Other
bonds, known as convertible bonds, allow investors to convert the bond into equity.
Financial Institutions and Banks : They form a major source of bonds and hybrid
instruments. In F.Y. 2007-08, more than 80 per cent of the non-gsec issues were from this
category and mostly on private placement basis. As this category is generally well-regulated
and the issues carry good ratings, they are a popular form of investments for Mutual funds
and other large investors.

Pie chart showing the percentage share of different types of bonds in market
capitalization

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govt. securities
PSU bonds
state loans
tresury bills
Fin. Inst. & bank bonds
corporate bonds
others

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8.COMMERCIAL PAPERS
It was introduced in India in 1990 with a view to enabling highly rated corporate borrowers/
to diversify their sources of short-term borrowings and to provide an additional instrument to
investors.
The intention of the RBI was to develop a sound money market through a variety of short
term instruments. CP enabled the companies to diversify their sources of funding and gave
the investors an opportunity to place their short term funds in a liquid asset.
Commercial Papers are a short-term unsecured promissory note issued at a discount to face
value by reputed corporate with high credit ratings and strong financial background.
Commercial paper is a financial instrument that matures before nine months (270 days), and
is only used to fund operating expenses or current assets (e.g., inventories and receivables)
and not used for financing fixed assets, such as land, buildings, or machinery.
Commercial paper is an unsecured promissory note with a fixed maturity of 1 to 270 days.
CP can be issued in denominations of Rs.5 lakh or multiples thereof. Amount invested by a
single investor should not be less than Rs.5 lakh (face value).
CPs are generally open to all investors individuals, banks, corporate. FIIs are allowed to
invest their short-term funds in such instruments too. Only a scheduled bank can act as an
IPA for issuance of CP.
CP favors both borrowers and investors. CP is considered as optimal combination of liquidity
and returns in short-term market. To borrowers, it implies low cost of funds, and for investors
it implies liquidity, marketability, and returns.
They are backed by the liquidity and earning power of the issuer, but are not backed by any
assets, an d hence they are unsecured. They also require less paper work.
Issue price of CP is decided by merchant bankers/IPA on behalf of corporate client. Once the
issue price and maturity are decided, the IPA places the CP with the investors.

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Issue price is calculated as:

P= F / [1+ (I+N)/(100*365)]

Where,
F = Face/Maturity value
P = Issue price of CP
I = Effective interest p.a.
N = Usance period (No.of days)
CPs are issued at a discount to face value and are redeemable at par on maturity. The discount
actually is the effective interest rate.
Face value/(1+Discount rate x No. of days/365)
Rate of return :- the rate of return on a commercial paper is computed by using the following
formula
D = [(Par value Purchase value)/Par value]

x [360 / Days to Maturity]

The following are the cost involved in issuing of CPs 1. Stamp duty

0.2%

If

placed

through

banks

1.0% - If placed through merchant bankers

2. Rating fees*

0.10% (subject to a minimum of Rs.100,000)

(for a rating from CARE)

3. Issuing and paying agent fee

0.1%

(All charges are on per annum basis and are subject to changes from time to time)
* CARE charges a rating fee of 0.10% of the amount of issue subject to a minimum of Rs.100000 and
a maximum of Rs.3000000. For issues above Rs.500 crore, the maximum fee would be Rs.40 lakh

Current scenario of Commercial papers

The market for commercial paper (CP) has been active. Corporates seem to prefer CP to bank
credit partly for greater ease but mainly for lower cost. In 2009-10 growth in CP was 71 per
cent.

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CP is not a new instrument. It entered the market in 1990 but was properly regulated from
October 2000. It is an unsecured money market instrument and has been issued mostly by
companies with minimum P-2 credit rating.
Until 2007 the market for CP was rather limited. That was because the money market was
short of liquidity and the banks consequently were offering attractive rates on deposits. The
total outstanding CP at the end of March 2007 was Rs.19,012 crores.
The world financial crisis changed the complexion of the Indian financial market also.
Interest rates were cut drastically by the RBI. The repo rate was down from 9 per cent to 4
per cent.
However, the prime lending rates of banks hardly moved from 12 per cent though priority
borrowers did get credit at lower rates.
Corporates discovered that the cost of short term funds raised through CP route was lower
than the rate on credit from banks. The outstanding amount against CP jumped to Rs.75,506
crores by March 2010 after crossing a peak of over Rs. 1,00,000 crores in the last quarter of
2009.
CP was a good short term security not only for investors like mutual funds, individual
investors, companies, etc but also for banks. In March 2010 more than 40 per cent of the
outstanding CP was held by banks.
That was because banks were saddled with excess liquidity. Deposits were increasing faster
than credit and some of the excess money found its way either to the reverse repo window of
the RBI or to the money market for CP.
A change is now under way.
First, the system of PLR will change from June 1 this year.
Banks will charge a base rate to high rated borrowers which may narrow down rate
differences between credit and CP.
Second, with the growth in industry, demand for credit will jump and excess liquidity will be
wiped out. Both mean that CP will be more costly to the corporates and less attractive to the
investors, slowing down its market growth.
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9.PREFERENCE SHARES
Raising capital by issue of shares is a most important method of raising funds. A share is
unit of measure of a shareholder's interest in the total capital of the company. Share capital of
a company is divided into a large number of equal parts and each part known is a share.
According to Companies Act, a company can issue two types of shares -preference and equity
Preference shares. Sec. 85(1) of the Companies Act defines preference shares as those shares
which carry preferential rights as the payment of dividend at a fixed rate and as to repayment
of capital in case of winding up of the company. Thus, both the preferential rights viz.
(a)

preference in payment of dividend and

(b)

preference in repayment of capital in case of winding up of the company, must attach

to preference shares.

The rate of dividend on these shares is fixed and the dividend on these shares must be paid
before any dividend is paid to ordinary shares. Directors, however, may decide not to pay any
dividend to any class of shareholders even if there are sufficient profits. But, if any how, they
decide to pay the dividend, preference shareholders will get the priority to pay the ordinary
shareholders.
Advantages:1. You are assured of a dividend.
A preference shareholder is entitled to a dividend every year.
Even if the company doesn't have the money to pay dividends on preference shares in a
particular year, the dividend is then added to the next year's dividend. If the company can't
pay it the next year as well, the dividend keeps getting added until the company can pay.
These are known as cumulative preference shares.
Some preference shares are non-cumulative -- if the company can't pay the dividend for one
particular year, the dividend for that year lapses.

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2. They get priority over ordinary shares

Ordinary shareholders get a dividend only after the cumulative preference shareholders get
theirs.
Preference shareholders are given a preference over the rest. That's why it is called a
preference share.
3. Preference shares are safer
In case the company is wound up and its assets (land, buildings, offices, machinery, furniture,
etc) are being sold, the money that comes from this sale is given to the shareholders. After all,
shareholders invest in a business and own a portion of it.
Preference shareholders' get the money first. This saves them from capital losses as well as
enjoys minimum risk. Their accounts are settled before that of the ordinary shareholders, who
are the last to get paid.

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10.CERTIFICATES OF DEPOSITS
CDs are the instruments issued by the banks in the form of usance promissory notes. A
Certificate of Deposit can also be referred to as a money market instrument, a receipt for
funds deposited in a financial institution for a specific time for a specific interest rate.
This scheme was introduced in July 1989, to enable the banking system to mobilize bulk
deposits from the market, which they can have at competitive rates of interest.

The major features are:

1. CRR/SLR is applicable on the issue price in case of banks.
2. Investors can be Individuals (other than minors), corporations, companies, trusts,
funds, associations etc.
3. Maturity period includes minimum 15 days and maximum to 12 Months.
4. In case of FIs minimum 1 year and maximum 3 years.
5. Amount to be invested involve minimum Rs.1 lakh, beyond which in multiple of
Rs. 1 lakh
6. Interest rate Market related. Fixed or floating.
7. Pre-mature cancellation not allowed.
8. If payment day is holiday, to be paid on next preceding business day
9. Issued at a discount to face value
10. Duplicate can be issued after giving a public notice & obtaining indemnity
11. Like savings accounts, CDs earn compound interest. This means that as your
funds get interest added to them, the next interest is taken on the total amount of your
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original funds plus interest previously earned. This means that, although the interest
percentage remains constant, the amount of interest added increases each time.

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11.VENTURE CAPITAL
Venture capital refers to money that is invested in companies during the early stages of their
development. Such funds may come from wealthy individuals, government-backed Small
Business Investment Companies (SBICs), or professionally managed venture capital firms.
Since investing in an unproven business venture is highly speculative, venture capitalists
generally target companies that they believe offer significant potential for growth, and
therefore an opportunity to earn a high rate of return in a relatively short period of time. In
exchange for providing capital, as well as a source of management assistance and industry
contacts for growing firms, the investors usually require a percentage of equity ownership in
the company, some measure of control over its strategic direction, and payment of assorted
fees.
Venture capital investments are generally made in cash in exchange for shares in the invested
company.
Most venture capital funds have a fixed life of 8-10 years, with the possibility of a few years
of extensions to allowed for better realisation from the Fund. The investing cycle for most
funds is generally three to five years, after which the fund will focus on realizing the
investment and return to the contributors.
With venture capital financing, the venture capitalist acquires an agreed proportion of the
equity of the company in return for the funding. Equity finance offers the significant
advantage of having no interest charges. It is "patient" capital that seeks a return through
long-term capital gain rather than immediate and regular interest payments, as in the case of
debt financing. Given the nature of equity financing, venture capital investors are therefore
exposed to the risk of the company failing. As a result the venture capitalist must look to
invest in companies which have the ability to grow very successfully and provide higher than
average returns to compensate for the risk.
When venture capitalists invest in a business they typically require a seat on the company's
board of directors. They tend to take a minority share in the company and usually do not take
day-to-day control. Rather, professional venture capitalists act as mentors and aim to provide

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support and advice on a range of management, sales and technical issues to assist the
company to develop its full potential.

Differentiating characteristics of various asset classes

Characteristics

Cash and Fixed

Deposits

Property

Equities and Mutual

Funds

Returns

Lower

Medium

Higher

Time Frame

No minimum

At least three years

At least five years

Risk

Lower

Medium

Higher

Income Focussed

Yes

Yes

No

Growth Focussed

No

Yes

Yes

Liquidity

High

Low

High

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GUIDELINES OF RBI

The RBI has issued guidelines for the valuation of investments. These guidelines require
banks to classify their entire portfolio of approved securities under three categories: held for
trading, available for sale and held to maturity. For disclosure and valuation purposes,
the investments are further classified under six groupsgovernment securities, other
approved securities, shares, debentures and bonds, investments in subsidiaries, and joint
ventures and other investments.
There are guidelines for the amount and nature of investments that can be made in the held
to maturity category. Securities in the held to maturity category would have to be valued
at cost and any premium paid over face value would be amortized over the period of maturity
of the instrument. Investment under the held for trading category cannot be held for more
than 90 days.
Investments in the available for sale and held for trading categories are required to be
marked to market based on market quotes or on the basis of the yield curve provided by the
Fixed Income Money Market Dealers Association of India and Primary Dealers Association
of India. Any depreciation on the revaluation of investments of each of the six groups in the
held for trading and available for sale category would have to be recognized in the
income account. Net gain on revaluation of investments shall not be recognized in the income
account. Banks would be able to shift investments from one category to another only with the
approval of the board of directors/committee thereof. Shifting to/from held to maturity
category is permitted once a year.
Non SLR investments
(i) Appraisal
Banks have made significant investment in privately placed unrated bonds and, in certain
cases, in bonds issued by corporates who are not their borrowers. While assessing such
investment proposals on private placement basis, in the absence of standardized and
mandated disclosures, including credit rating, banks may not be in a position to conduct

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proper due diligence to take an investment decision. Thus, there could be deficiencies in the
appraisal of privately placed issues.

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(ii) Disclosure requirements in offer documents

The risk arising from inadequate disclosure in offer documents should be recognized and
banks should prescribe minimum disclosure standards as a policy with Board approval. In
this connection, RBI had constituted a Technical Group comprising officials drawn from
treasury departments of a few banks and experts on corporate finance to study, inter alia, the
methods of acquiring, by banks, of non-SLR investments in general and private placement
route, in particular, and to suggest measures for regulating these investments. The Group had
designed a format containing the minimum disclosure requirements as well as certain
conditionalities regarding documentation and creation of charge for private placement issues,
which may serve as a 'best practice model' for the banks. The details of the Groups
recommendations are given in the Annexure III and banks should have a suitable format of
disclosure requirements on the lines of the recommendations of the Technical Group with the
approval of their Board.
(iii) Internal assessment
With a view to ensuring that the investments by banks in issues through private placement,
both of the borrower customers and non-borrower customers, do not give rise to systemic
concerns, it is necessary that banks should ensure that their investment policies duly approved
by the Board of Directors are formulated after taking into account the following aspects:
(a) The Boards of banks should lay down policy and prudential limits on investments in
bonds and debentures including cap and on private placement basis, sub limits for PSU
bonds, corporate bonds, guaranteed bonds, issuer ceiling, etc.
(b) Investment proposals should be subjected to the same degree of credit risk analysis as any
loan proposal. Banks should make their own internal credit analysis and rating even in
respect of rated issues and should not entirely rely on the ratings of external agencies. The
appraisal should be more stringent in respect of investments in instruments issued by nonborrower customers.
(c) Strengthen their internal rating systems which should also include building up of a system
of regular (quarterly or half-yearly) tracking of the financial position of the issuer with a view
to ensuring continuous monitoring of the rating migration of the issuers/issues.
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(d) As a matter of prudence, banks should stipulate entry-level minimum ratings/quality

standards and industry-wise, maturity-wise, duration-wise, issuer-wise etc. limits to mitigate
the adverse impacts of concentration and the risk of illiquidity.
(e) The banks should put in place proper risk management systems for capturing and
analyzing the risk in respect of these investments and taking remedial measures in time.
(iv) Some banks / FIs have not exercised due precaution by reference to the list of defaulters
circulated / published by RBI while investing in bonds, debentures, etc., of companies. Banks
may, therefore, exercise due caution, while taking any investment decision to subscribe to
bonds, debentures, shares etc., and refer to the Defaulters List to ensure that investments are
not made in companies / entities who are defaulters to banks / FIs. Some oft he companies
may be undergoing adverse financial position, turning their accounts to substandard category
due to recession in their industry segment, like textiles. Despite restructuring facility provided
under RBI guidelines, the banks have been reported to be reluctant to extend further finance,
though considered warranted on merits of the case. Banks may not refuse proposals for such
investments in companies whose directors name(s) find place in the Defaulter Companies
List circulated by RBI, at periodical intervals and particularly in respect of those loan
accounts, which have been restructured under extant RBI guidelines, provided the proposal is
viable and satisfies all parameters for such credit extension.
Prudential guidelines on investment in Non-SLR securities
1 Coverage
These guidelines cover banks investments in non-SLR securities issued by corporates, banks,
FIs and State and Central Government sponsored institutions, etc including, capital gains
bonds, bonds eligible for priority sector status. The guidelines will apply to investments both
in the primary market as well as the secondary market.
2 The guidelines on listing and rating pertaining to Non - SLR securities are not applicable to
banks investments in:

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(a) Securities directly issued by the Central and State Governments, which are not reckoned
for SLR purposes.
(b) Equity shares
(c) Units of equity oriented mutual fund schemes, viz. those schemes where any part of the
corpus can be invested in equity
(d) Equity/debt instruments/Units issued by Venture capital funds
(e) Commercial Paper
(f) Certificates of Deposit
3 Definitions of a few terms used in these guidelines have been furnished in Annexure IV
with a view to ensure uniformity in approach while implementing the guidelines.
Regulatory requirements
1 Banks should not invest in Non-SLR securities of original maturity of less than one-year,
other than Commercial Paper and Certificates of Deposits, which are covered under RBI
guidelines.
2 Banks should undertake usual due diligence in respect of investments in non-SLR
securities. Present RBI regulations preclude banks from extending credit facilities for certain
purposes. Banks should ensure that such activities are not financed by way of funds raised
through the non- SLR securities.
Listing and rating requirements
1 Banks must not invest in unrated non-SLR securities. However, the banks may invest in
unrated bonds of companies engaged in infrastructure activities, within the ceiling of10 per
cent for unlisted non-SLR securities as prescribed vide paragraph 1.2.10 below.
2 The Securities Exchange Board of India (SEBI) vide their circular dated September 30,
2003(amended vide circular dated May 11, 2009) have stipulated requirements that listed
companies are required to comply with, for making issue of debt securities on private
placement basis and listed on a stock exchange. According to this circular, any listed
company, making issue of debt securities on a private placement basis and listed on a stock
exchange, has to make full disclosures (initial and continuing) in the manner prescribed in
Schedule II of the Companies Act 1956, SEBI (Disclosure and Investor Protection)
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Guidelines,2000 and the Listing Agreement with the exchanges. Furthermore, the debt
securities shall carry a credit rating of not less than investment grade from a Credit Rating
Agency registered with the SEBI.

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3. Accordingly, while making fresh investments in non-SLR debt securities, banks should
ensure that such investment are made only in listed debt securities of companies which
comply with the requirements of the SEBI circular dated September 30, 2003(amended vide
circular dated May 11, 2009), except to the extent indicated in paragraph 1.2.10 and 1.2.11
below.
Fixing of prudential limits
1 Banks investment in unlisted non-SLR securities should not exceed 10 per cent of its total
investment in non-SLR securities as on March 31, of the previous year, and such investment
should comply with the disclosure requirements as prescribed by the SEBI for listed
companies.
2 Banks investment in unlisted non-SLR securities may exceed the limit of 10 per cent, by
an additional 10 per cent, provided the investment is on account of investment in
securitization papers issued for infrastructure projects, and bonds/debentures issued by
Securitization Companies (SCs) and Reconstruction Companies (RCs) set up under the
Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002 (SARFEASI Act) and registered with RBI. In other words, investments exclusively
in securities specified in this paragraph could be up to the maximum permitted limit of 20 per
cent of non-SLR investment.
3. Investment in the following will not be reckoned as unlisted non-SLR securities for
computing compliance with the prudential limits prescribed in the above guidelines
(i) Security Receipts issued by SCs / RCs registered with RBI.
(ii) Investment in Asset Backed Securities (ABS) and Mortgage Backed Securities (MBS),
which are rated at or above the minimum investment grade. However, there will be close
monitoring of exposures to ABS on a bank specific basis based on monthly reports to be
submitted to RBI as per proforma being separately advised by the Department of Banking
Supervision.
(iii) Investments in unlisted convertible debentures. However, investments in these
instruments would be treated as Capital Market Exposure.
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4. The investments in RIDF / SIDBI Deposits may not be reckoned as part of the numerator
as well as denominator for computing compliance with the prudential limit of 10 per cent of
its total non-SLR securities as on March 31, of the previous year.
5. With effect from January 1, 2005, only investment in units of such mutual fund schemes,
which have an exposure to unlisted securities of less than 10 per cent of the corpus of the
fund, will be treated on par with listed securities for the purpose of compliance with the
prudential limits prescribed in the above guidelines. While computing the exposure to the
unlisted securities for compliance with the norm of less than 10 percent of the corpus of the
mutual fund scheme, Treasury Bills, Collateralized Borrowing and Lending Obligations
(CBLO), Repo/Reverse Repo and Bank Fixed Deposits may not be included in the numerator.
6. For the purpose of the prudential limits prescribed in the guidelines, the denominator viz.,
'non-SLR investments', would include investment under the following four categories in
Schedule 8 to the balance sheet viz., 'shares', 'bonds& debentures',

'subsidiaries/joint

ventures' and 'others'.

7. Banks whose investment in unlisted non-SLR securities are within the prudential limit of
10 per cent of its total non-SLR securities as on March 31, of the previous year may make
fresh investment in such securities and up to the prudential limits.
Role of Boards
Boards of banks should review the following aspects of non-SLR investment at least at
quarterly intervals:
a) Total business (investment and divestment) during the reporting period.
b) Compliance with the prudential limits prescribed by the Board for non-SLR
investment.
c) Compliance with the prudential guidelines issued by RBI on non-SLR securities.
d) Rating migration of the issuers/ issues held in the banks books and consequent diminution
in the portfolio quality.
e) Extent of non-performing investments in the non-SLR category.

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Disclosures
1. In order to help in the creation of a central database on private placement of debt, a copy of
all offer documents should be filed with the Credit Information Bureau (India) Ltd. (CIBIL)
by the investing banks. Further, any default relating to interest/ installment in respect of any
privately placed debt should also be reported to CIBIL by the investing banks along with a
copy of the offer document.
2. Banks should disclose the details of the issuer composition of non-SLR investments and
the non-performing non-SLR investments in the Notes on Accounts of the balance sheet, as
indicated in Annexure V.
Trading and settlement in debt securities
As per the SEBI guidelines, all trades with the exception of the spot transactions, in a listed
debt security, shall be executed only on the trading platform of a stock exchange. In addition
to complying with the SEBI guidelines, banks should ensure that all spot transactions in listed
and unlisted debt securities are reported on the NDS and settled through the CCIL from a date
to be notified by RBI.
Classification
i) The entire investment portfolio of the banks (including SLR securities and non-SLR
securities) should be classified under three categories
viz. Held to Maturity,
Available for Sale and
Held for Trading.
However, in the balance sheet, the investments will continue to be disclosed as
per the existing six classifications: viz
a) Government securities,
b) Other approved securities,
c) Shares,
d) Debentures & Bonds,
e) Subsidiaries/ joint ventures and
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f) Others (CP, Mutual Fund Units, etc.).

ii) Banks should decide the category of the investment at the time of acquisition and the
decision should be recorded on the investment proposals.
1 Held to Maturity
i) The securities acquired by the banks with the intention to hold them up to maturity will be
classified under Held to Maturity (HTM).
ii) Banks are allowed to include investments included under HTM category upto 25 per cent
of their total investments. The following investments are required to be classified under HTM
but are not accounted for the purpose of ceiling of 25 per cent specified for this category:
(a)

Re-capitalization bonds received from the Government of India towards their

recapitalization requirement and held in their investment portfolio. This will not
include re-capitalization bonds of other banks acquired for investment purposes.

(b)

Investment in subsidiaries and joint ventures (A Joint Venture would be one in which
the bank, along with its subsidiaries, holds more than 25 percent of the equity).

(c)

The investments in debentures/bonds, which are deemed to be in the nature of

advance. [Refer sub-paragraph (vii) below]

iii) Banks are, however, allowed since September 2, 2004 to exceed the limit of 25 percent of
total investment under HTM category provided:
(a)

the excess comprises only of SLR securities, and

(b)

the total SLR securities held in the HTM is not more than 25 percent of their DTL as
on the last Friday of the second preceding fortnight.

iv) The non-SLR securities, held as part of HTM as on September 2, 2004 may remain in
that category. No fresh non-SLR securities, are permitted to be included in HTM, except the
following:

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(a)

Fresh re-capitalization bonds, received from the Government of India, towards their
re-capitalization requirement and held in their investment portfolio. This will not
include re-capitalization bonds of other banks acquired for investment purposes.

(b)

Fresh investment in the equity of subsidiaries and joint ventures.

(c)

RIDF / SIDBI deposits

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v) To sum up, banks may hold the following securities under HTM:
(a)

SLR Securities upto 25 percent of their DTL as on the last Friday of the second
preceding fortnight.

(b)

Non-SLR securities included under HTM as on September 2, 2004.

(c)

Fresh re-capitalization bonds received from the Government of India towards their recapitalization requirement and held in Investment portfolio.

(d)

Fresh investment in the equity of subsidiaries and joint ventures

(e)

RIDF/SIDBI deposits.

(vi) Profit on sale of investments in this category should be first taken to the Profit & Loss
Account, and thereafter be appropriated to the Capital Reserve Account. Loss on sale will
be recognized in the Profit & Loss Account.
(vii) The debentures/ bonds must be treated in the nature of an advance when:
The debenture/bond is issued as part of the proposal for project finance and the tenure of the
debenture is for a period of three years and above
Or
The debenture/bond is issued as part of the proposal for working capital finance and the
tenure of the debenture/ bond is less than a period of one year
And
the bank has a significant stake i.e.10% or more in the issue
And
the issue is part of a private placement, i.e. the borrower has approached the bank/FI and not
part of a public issue where the bank/FI has subscribed in response to an invitation. Since, no
fresh non-SLR securities are permitted to be included in the HTM, these investments should
not be held under HTM category and they should be subjected to mark- to-market discipline.
They would be subjected to prudential norms for identification of non-performing investment
and provisioning as applicable to investments.

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Available for Sale & Held for Trading

i)

The securities acquired by the banks with the intention to trade by taking advantage of
the short-term price/interest rate movements will be classified under Held for Trading
(HFT).

ii)

The securities which do not fall within the above two categories will be classified
under Available for Sale (AFS).

iii)

The banks will have the freedom to decide on the extent of holdings under HFT and
AFS. This will be decided by them after considering various aspects such as basis of
intent, trading strategies, risk management capabilities, tax planning, manpower skills,
capital position.

iv)

The investments classified under HFT would be those from which the bank expects to
make a gain by the movement in the interest rates/market rates. These securities are to
be sold within 90 days.

v)

Profit or loss on sale of investments in both the categories will be taken to the Profit
& Loss Account.

Shifting among categories

i) Banks may shift investments to/from HTM with the approval of the Board of Directors
once a year. Such shifting will normally be allowed at the beginning of the accounting year.
No further shifting to/from HTM will be allowed during the remaining part of that accounting
year.
ii) Banks may shift investments from AFS to HFT with the approval of their Board of
Directors/ ALCO/ Investment Committee. In case of exigencies, such shifting may be done
with the approval of the Chief Executive of the bank/Head of the ALCO, but should be
ratified by the Board of Directors/ ALCO.
iii) Shifting of investments from HFT to AFS is generally not allowed. However, it will be
permitted only under exceptional circumstances like not being able to sell the security within
90 days due to tight liquidity conditions, or extreme volatility, or market becoming
unidirectional. Such transfer is permitted only with the approval of the Board of Directors/
ALCO/ Investment Committee.
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iv) Transfer of scrip from one category to another, under all circumstances, should be done at
the acquisition cost/ book value/ market value on the date of transfer, whichever is the least,
and the depreciation, if any, on such transfer should be fully provided for. Banks may apply
the values as on the date of transfer and in case, there are practical difficulties in applying the
values as on the date of transfer, banks have the option of applying the values as on the
previous working day, for arriving at the depreciation requirement on shifting of securities.
3. Valuation
3.1 Held to Maturity
i) Investments classified under HTM need not be marked to market and will be carried at
acquisition cost, unless it is more than the face value, in which case the premium should be
amortized over the period remaining to maturity. The banks should reflect the amortized
amount in Schedule 13 Interest Earned : Item II Income on Investments, as a deduction.
However, the deduction need not be disclosed separately. The book value of the security
should continue to be reduced to the extent of the amount amortized during the relevant
accounting period.
ii) Banks should recognize any diminution, other than temporary, in the value of their
investments in subsidiaries/ joint ventures, which are included under HTM and provide
therefore. Such diminution should be determined and provided for each investment
individually.
3.2 Available for Sale
The individual scrip in the Available for Sale category will be marked to market at quarterly
or at more frequent intervals. Domestic Securities under this category shall be valued scripwise and depreciation/ appreciation shall be aggregated for each classification referred to in
item 2(i) above and foreign investments under this category shall be valued scrip-wise and
depreciation/ appreciation shall be aggregated for five classifications (viz. Government
securities (including local authorities), Shares, Debentures & Bonds, Subsidiaries and/or joint
ventures abroad and Other investments (to be specified)). Further, the investment in a
particular classification, both in domestic and foreign securities, may be aggregated for the
purpose of arriving at net depreciation/appreciation of investments under that category.Net
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AIAIMS

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depreciation, if any, shall be provided for. Net appreciation, if any, should be ignored. Net
depreciation required to be provided for in any one classification should not be reduced on
account of net appreciation in any other classification. The banks may continue to report the
foreign securities under three categories (Government securities (including local authorities),
Subsidiaries and/or joint ventures abroad and Other investments (to be specified)) in the
balance sheet. The book value of the individual securities would not undergo any change after
the marking of market.
3.3 Held for Trading
The individual scrip in the Held for Trading category will be marked to market at monthly or
at more frequent intervals and provided for as in the case of those in the Available for Sale
category. Consequently, the book value of the individual securities in this category would also
not undergo any change after marking to market.
Unquoted Non-SLR securities
1 Debentures/ Bonds
All debentures/ bonds other than debentures/bonds, which are in the nature of advance,
should be valued on the YTM basis. Such debentures/ bonds may be of different companies
having different ratings. These will be valued with appropriate mark-up over the YTM rates
for Central Government securities as put out by PDAI/ FIMMDA periodically. The mark-up
will be graded according to the ratings assigned to the debentures/ bonds by the rating
agencies subject to the following: (a) The rate used for the YTM for rated debentures/ bonds should be at least 50 basis points
above the rate applicable to a Government of India loan of equivalent maturity.
NOTE:
The special securities, which are directly issued by Government of India to the beneficiary
entities, which do not carry SLR status, may be valued at a spread of 25 basis points above
the corresponding yield on Government of India securities, with effect from the financial year
2008 - 09. At present, such special securities comprise: Oil Bonds, Fertilizer Bonds, bonds
issued to the State Bank of India (during the recent rights issue), Unit Trust of India,

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Industrial Finance Corporation of India Ltd., Food Corporation of India, Industrial

Investment Bank of India Ltd., the erstwhile Industrial Development Bank of India and the
erstwhile Shipping Development Finance Corporation.
(b) The rate used for the YTM for unrated debentures/ bonds should not be less than the rate
applicable to rated debentures/ bonds of equivalent maturity. The mark-up for the unrated
debentures/ bonds should appropriately reflect the credit risk borne by the bank.
(c) Where the debenture/ bonds is quoted and there have been transactions within 15 days
prior to the valuation date, the value adopted should not be higher than the rate at which the
transaction is recorded on the stock exchange.
2. Preference Shares
The valuation of preference shares should be on YTM basis. The preference shares will be
issued by companies with different ratings. These will be valued with appropriate mark-up
over the YTM rates for Central Government securities put out by the PDAI/FIMMDA
periodically. The mark-up will be graded according to the ratings assigned to the preference
shares by the rating agencies subject to the following:
a) The YTM rate should not be lower than the coupon rate/ YTM for a GOI loan of
equivalent maturity.
b) The rate used for the YTM for unrated preference shares should not be less than the rate
applicable to rated preference shares of equivalent maturity. The mark-up for the unrated
preference shares should appropriately reflect the credit risk borne by the bank.
c) Investments in preference shares as part of the project finance may be valued at par for a
period of two years after commencement of production or five years after subscription
whichever is earlier.
d) Where investment in preference shares is as part of rehabilitation, the YTM rate should not
be lower than 1.5% above the coupon rate/ YTM for GOI loan of equivalent maturity.
e) Where preference dividends are in arrears, no credit should be taken for accrued dividends
and the value determined on YTM should be discounted by at least 15% if arrears are for one
year, and more if arrears are for more than one year. The depreciation/provision requirement
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arrived at in the above manner in respect of nonperforming shares where dividends are in
arrears shall not be allowed to be set-off against appreciation on other performing preference
shares.
f) The preference share should not be valued above its redemption value.
g) When a preference share has been traded on stock exchange within 15 days prior to the
valuation date, the value should not be higher than the price at which the share was traded.
3. Equity Shares
The equity shares in the bank's portfolio should be marked to market preferably on a daily
basis, but at least on a weekly basis. Equity shares for which current quotations are not
available or where the shares are not quoted on the stock exchanges, should be valued at
break-up value (without considering revaluation reserves, if any) which is to be ascertained
from the companys latest balance sheet (which should not be more than one year prior to the
date of valuation). In case the latest balance sheet is not available the shares are to be valued
at Re.1 per company.
4. Mutual Funds Units (MF Units)
Investment in quoted MF Units should be valued as per Stock Exchange quotations.
Investment in un-quoted MF Units is to be valued on the basis of the latest re-purchase price
declared by the MF in respect of each particular Scheme. In case of funds with a lock-in
period, where repurchase price/ market quote is not available, Units could be valued at Net
Asset Value (NAV). If NAV is not available, then these could be valued at cost, till the end of
the lock-in period. Wherever the re-purchase price is not available, the Units could be valued
at the NAV of the respective scheme.
5. Commercial Paper
Commercial paper should be valued at the carrying cost.
6. Investment in securities issued by SC/RC
When banks / FIs invest in the SRs / Pass-Through Certificates (PTCs) issued by SCs / RCs,
in respect of the financial assets sold by them to the SCs / RCs, the sale shall be recognized in
books of the banks / FIs at the lower of:

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the redemption value of the SRs /PTCs, and

the net book value (NBV) (i.e. Book value less provisions held), of the financial asset.
The above investment should be carried in the books of the bank / FI at the price as
determined above until its sale or realization, and on such sale or realization, the loss or gain
must be dealt with as under:
(i) if the sale to SC /RC is at a price below the NBV, the shortfall should be debited to the
profit and loss account of that year.

(ii) If the sale is for a value higher than the NBV, the excess provision will not be reversed
but will be utilized to meet the shortfall / loss on account of sale of other financial assets to
SC / RC. All instruments received by banks / FIs from SC / RC as sale consideration for
financial assets sold to them and also other instruments issued by SC / RC in which banks /
FIs invest will be in the nature of non-SLR securities. Accordingly, the valuation,
classification and other norms applicable to investment in non-SLR instruments prescribed by
RBI from time to time would be applicable to banks / FIs investment in debentures / bonds /
security receipts / PTCs issued by SC / RC. However, if any of the above instruments issued
by SC / RC is limited to the actual realization of the financial assets assigned to the
instruments in the concerned scheme the bank / FI shall reckon the Net Asset Value (NAV),
obtained from SC / RC from time to time, for valuation of such investments
Valuation and classification of banks investment in VCFs
1 The quoted equity shares / bonds/ units of VCFs in the bank's portfolio should be held
under AFS and marked to market preferably on a daily basis, but at least on a weekly basis, in
line with valuation norms for other equity shares as per existing instructions.
2 Banks investments in unquoted shares/bonds/units of VCFs made after August 23, 2006
(i.e issuance of guidelines on valuation, classification of investments in VCFs) will be
classified under HTM for initial period of three years and will be valued at cost during this
period. For the investments made before issuance of these guidelines, the classification would
be done as per the existing norms.

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3 For this purpose, the period of three years will be reckoned separately for each
disbursement made by the bank to VCF as and when the committed capital is called up.
However, to ensure conformity with the existing norms for transferring securities from HTM,
transfer of all securities which have completed three years as mentioned above will be
effected at the beginning of the next accounting year in one lot to coincide with the annual
transfer of investments from HTM category.

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SUKHADA TIRODKAR

4 After three years, the unquoted units/shares/bonds should be transferred to AFS category
and valued as under:
i) Units: In the case of investments in the form of units, the valuation will be done at the
NAV shown by the VCF in its financial statements. Depreciation, if any, on the units based on
NAV has to be provided at the time of shifting the investments to AFS category from HTM
category as also on subsequent valuations which should be done at quarterly or more frequent
intervals based on the financial statements received from the VCF. At least once in a year, the
units should be valued based on the audited results. However, if the audited balance sheet/
financial statements showing NAV figures are not available continuously for more than 18
months as on the date of valuation, the investments are to be valued at Rupee 1.00 per VCF.
ii) Equity: In the case of investments in the form of shares, the valuation can be done at the
required frequency based on the break-up value (without considering revaluation reserves,
if any) which is to be ascertained from the companys (VCFs) latest balance sheet (which
should not be more than 18 months prior to the date of valuation). Depreciation, if any on the
shares has to be provided at the time of shifting the investments to AFS category as also on
subsequent valuations which should be done at quarterly or more frequent intervals. If the
latest balance sheet available is more than 18 months old, the shares are to be valued at
Rupee.1.00 per company.
(iii) Bonds: The investment in the bonds of VCFs, if any, should be valued as per prudential
norms for classification, valuation and operation of investment port- folio by banks issued by
RBI from time to time.
In the previous part information related to investments securities have been covered.
As well as about the valuation criteria of various classes according to guidelines given by
RBI.
Further in the second part analysis of some of these asset class has been done in order to give
an overview of returns generated through them.

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Asset class investments analysis

Stocks analysis
Here NSE and BSE these are the benchmarks against which other company stocks are
compared and analyzed.

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Movement of NIFTY
Date

Nifty

Change

ROR
(%)

31 Mar 2000
31 Mar 2001
31 Mar 2002
31 Mar 2003
31 Mar 2004
31 Mar 2005
31 Mar 2006
31 Mar 2007
31 Mar 2008
31 Mar 2009
31 Mar 2010

1528.45
1148.20
1129.55
978.20
1771.90
2035.65
3402.55
3821.55
4734.50
3020.95
5249.10

-380.25
-18.65
-151.35
793.7
263.75
1366.9
419
912.95
-1713.55
2228.15

-24.87
-1.62
-13.39
81.13
14.88
67.15
12.31
23.88
-36.19
73.75

One year return

As on 31 Mar As on 31
2009
Mar 2010

Change

ROR
(%)

3020.95

2228.15

73.75

Three years return

As on 31 Mar 2007

5249.10

As on 31 Change
Mar 2010

3821.55
5249.10

1427.55

Five years return

As on 31 Mar
2005

As on 31 Change
Mar 2010

2035.65

5249.10

Ten years return

As on 31 Mar 2000

3213.45

As on 31 Change
Mar 2010

1528.45
5249.10

3720.65

NIFTY
100

80

58

ROR (%)
(CAGR)
11.14
(AVG)
20.48

ROR (%)
(CAGR)
20.86
(AVG)
28.18
ROR(%)
(CAGR)
13.13
(AVG)
19.7

ROR

40

AIAIMS

SUKHADA TIRODKAR

20

0
2000-2001
-20

2002-2003

SUKHADA
TIRODKAR
2004-2005 2005-2006 2006-2007

2003-2004

2007-2008

2001-2002

-40

-60

Movement of SENSEX
Date
Sensex
31 Mar 2000
5001.28
31 mar 2001
31 Mar 2002
31 Mar 2003
31 Mar 2004
31 Mar 2005
31 Mar 2006
31 Mar 2007
31 Mar 2008
31 Mar 2009
31 Mar 2010

YEAR

3604.38
3469.35
3048.72
5590.60
6492.82
11307.04
13072.10
15644.44
9708.5
17527.77

Change

ROR (%)

-1396.9
-135.03
-420.63
2541.88
902.22
4814.22
1765.06
2572.34
-5935.94
7819.27

-27.93
-3.75
-12.12

83.37
16.13
74.15
15.61
19.67
-37.94
80.54

One year return

As on 31 Mar As on 31 Mar Change
2009
2010

ROR
(%)

9708.5

80.54

17527.77

7819.27

Three years return

As on 31 Mar As on 31 Mar Change
2007
2010
13072.10

17527.77

4455.67

Five years return

As on 31 Mar As on 31 Mar Change
2005
2010
6492.82

17527.77

11034.95

ROR(%)
(CAGR)
10.25
(AVG)
20.76
ROR(%)
(CAGR)
21.97
(AVG)
30.40

Ten years return

As on 31 Mar As on 31 Mar Change
2000
2010
5001.28

17527.77

12526.49

59

ROR(%)
(CAGR)
13.36
(AVG)
20.77

2008-2009

2009-2010

AIAIMS

SUKHADA TIRODKAR
SUKHADA TIRODKAR

SENSEX
100

80

60

ROR

40

20

0
2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

-20

-40

-60

YEAR

60

2006-2007

2007-2008

2008-2009

2009-2010

AIAIMS

SUKHADA TIRODKAR
SUKHADA TIRODKAR
Movement of GOLD
Date
Gold

Change

ROR (%)

31 Mar 2000
31 Mar 2001
31 Mar 2002

279.08
257.95
302.65

-21.13
44.7

-7.57
17.32

31 Mar 2003
31 Mar 2004
31 Mar 2005

337.45
426.45
428.3

34.8
89
1.85

11.49
26.37
0.44

31 Mar 2006

583.65

155.35

36.25

31 Mar 2007

661.50

77.85

13.34

31 Mar 2008

916.88

255.38

38.60

31 Mar 2009

915.84

-1.04

-0.11

31 Mar 2010

1113.25

197.41

21.55

One year return

As on 31 Mar As on 31 Mar Change
2009
2010

ROR (%)

915.84

21.55

1113.25

197.41

Three years return

As on 31 Mar 2007 As on 31 Mar Change
2010
661.50
1113.25
451.75
Five years return
As on 31 Mar
2005

As on 31 Mar Change
2010

428.3

1113.25

Ten years return

As on 31 Mar
2000

As on 31 Mar Change
2010

279.08

1113.25

684.95

834.17

61

ROR (%)
(CAGR)
18.93
(AVG)
20.01
ROR
(%)
(CAGR)
21.05
(AVG)
21.93
ROR (%)
(CAGR)
14.83
(AVG)
15.77

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SUKHADA TIRODKAR

GOLD
50

40

PRICE

30

20

10

0
2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

-10

YEAR

62

2006-2007

2007-2008

2008-2009

2009-2010

AIAIMS

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SUKHADA TIRODKAR
Movement of commodity (crude oil)
Date
Index
Change
31 Mar 2000
26.90
31 Mar 2001
26.29
-0.61
31 Mar 2002
26.31
0.02
31 Mar 2003
31.04
4.73
31 Mar 2004
35.76
4.72
31 Mar 2005
55.40
19.64
31 Mar 2006
66.63
11.23
31 Mar 2007
65.87
-0.76
31 Mar 2008
101.58
35.71
31 Mar 2009
49.66
-51.92
31 Mar 2010
83.76
34.1

One year return

As on 31 Mar As on 31 Mar Change
2009
2010
49.66
83.76
34.1
Three years return
As on 31 Mar As on 31 Mar Change
2007
2010
65.87

83.76

17.89

Five years return

As on 31 Mar As on 31 Mar Change
2005
2010
55.40

83.76

28.36

Ten years return

As on 31 Mar As on 31 Mar Change
2000
2010
26.90

83.76

56.86

63

ROR (%)
-2.26
0.08
17.98
15.20
54.92
20.27
-1.14
54.21
-51.11
68.66

ROR (%)
68.66
ROR (%)
(CAGR)
8.25
(AVG)
23.92
ROR (%)
(CAGR)
8.61
(AVG)
18.17
ROR (%)
(CAGR)
12.02
(AVG)
17.68

AIAIMS

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SUKHADA TIRODKAR
CRUDE OIL

100

80

60

40

20

ROR
0
2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

-20

-40

-60

YEAR

64

2006-2007

2007-2008

2008-2009

2009-2010

AIAIMS

SUKHADA TIRODKAR
SUKHADA TIRODKAR

For G- Sec
Date
31 Mar 2000
31 Mar 2001
31 Mar 2002
31 Mar 2003
31 Mar 2004
31 Mar 2005
31 Mar 2006
31 Mar 2007
31 Mar 2008
31 Mar 2009
31 Mar 2010

Index
10.786
10.170
7.433
6.153
5.159
6.691
7.546
7.976
7.959
7.010
7.832

65

Change

ROR (%)

-0.616
-2.737
-1.28
-0.994
1.532
0.855
0.43
-0.017
-0.949
0.822

-5.71
-26.91
-17.22
-16.15
29.69
12.77
5.69
-0.213
-11.92
11.73

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SUKHADA TIRODKAR

Facts
From the above analysis of various investment products we could see a large jump in returns
of most of it as in 2010 as compared to its previous year of 2009. This is because of the effect
of recession that we had. We can assume that the scenario now will stabilize as compared to
initial period.
As we wanted an overview of commodity class movement, therefore we considered gold and
crude oil index taking as base to understand commodity index.
LMEX is calculated once a day on the basis of closing prices of six(copper, aluminum, lead,
tin, zinc, and nickel) primary metals
In LMEX steel is excluded , as steel itself has vast diversification.
Stock market has been a profitable but extremely variable investment. Before investing in
stocks one has to ardently study that particular companys prospectus, market position, etc.
G-Sec , treasury bills, CPs , CDs and other money market instruments reap good returns but
with a waiting period , specially for those having high patience , or those who are not eager
enough to make quick bucks.
Other cash equivalents are the best options for investors who completely avoids risk.

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No.
of
years
Investme 1.
nt
product

Sensex
Nifty
Gold
Money
market
Equity
diversifie
d
Crude oil
LME

10

Standard
Deviation
()

Rate of Standard
return
deviation
(R)
()

Rate of Standard
return
deviation
(R)
()

Rate of Standard
return
deviation
(R)
()

13.37
17.09
1.82

80.54
73.75
21.55

14.06
14.21
5.18

10.25
11.14
18.93

15.29
12.93
4.96

21.97
20.86
21.05

18.9
12.5
4.63

Rate
of
return
(R)
13.36
13.13
14.83

4.41

3.75

9.76

6.35

11.64

6.34

5.18

1.6

59.48

11.18

17.84
21.66

68.66
89.34

17.59
18.71

8.25
-2.77

20.33
13.90
14.96

8.61
12.3

NA
10.85

12.02

The table above shows the standard deviation and the rate of returns for the various
investment products.
The reason why we look back over such a long period to measure average rates of return is
that annual rates of return for common stocks fluctuate so much that averages taken over
short period are meaningless. Our only hope of gaining insights from historical rates of return
is to look at a very long period.
The risk of a well diversified portfolio depends on market risk of securities involved in the
portfolio. Diversification is a good thing for the investor. This reduces risk factor as well
provide sufficient profits.

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On the basis of above table three type of portfolio prepared under two categories.
1. Risk factor under this category there can be three types of investors.
Low risk taker
Medium risk taker
High risk taker

2. Time factor this category includes investors who invest

in order to have returns in

specified period of time.

Short term 0 to 3 years
Middle term 3 years to 5 years
Long term 5 years and above

The distribution of these products in each category is been done on basis of previous analysis
shown , as well as on assumptions related to the ability of individual investor and the
performance of that particular product in market. However this cannot be considered as a sole
base or benchmark on basis of which investments had to be done. Further individual investor
has to analyze his or her own requirements, financial circumstances, and his ability of taking
risks.

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1. RISK FACTOR

Low risk taker

These are the investors that are often concerned about security of capital they have
accumulated (e.g. for retirement)
They are typically looking for reliable source of income and may invest a small portion of
their portfolio in stocks. The fixed income portions are generally focused on bonds such as
government bonds, treasury bills, cash alternatives, etc.
For these investors stocks make up a small part of investment in portfolio with the goal of
enough returns to outpace inflation. A larger portion needs to be invested in securities other
than stocks.

Asset class
Equity (stocks)

Asset allocation
20%

Bonds ( money market)

35%

Other ( cash equivalents , commodities , etc)

45%

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Medium risk taker

These investor could invest a greater percentage of their investment in stocks as compared to
low risk investors. These investors can have a fair balance between bonds and equities. This
is to achieve more return potential with minimal risk.
The portfolio should consist somewhat equal distribution in equity (stocks) and the rest
securities, still maintaining a large portion in income securities.
These investors will often seek potential for long term appreciation while minimizing the
overall risk.

Asset class
Equity (stocks)

Asset allocation
55%

Bonds ( money market)

17%

Other ( cash equivalents , commodities , etc)

28%

Equity
Bonds ( money market)
Other ( cash equivalents
, commodities , etc)

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High risk taker.

An investor under this category will invest maximum, about 80% to stocks. Such portfolio
seeks to provide capital appreciation or growth. Additionally with a 20% allocation to rest of
the securities which also targets some current income. This investor has no interest to invest
in cash equivalents in order to achieve potential for greater returns.
The investor over here wants high returns therefore for this purpose stocks are viable
options. Whereas investing in other securities such as money market instruments, bonds (GSec), cash equivalents do provide returns but minimal.
Market risk stems from the fact that there are other economy wide perils that threatens all
businesses. That is why stocks have a tendency to move together. And that is why investors
are exposed to market uncertainties, no matter how many stocks they hold.
Asset class
Equity (stocks)

Asset allocation
80%

Bonds ( money market)

10%

Other ( cash equivalents , commodities , etc)

10%

Equity
Bonds ( money market)
Other ( cash equivalents
, commodities , etc)

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2. TIME FACTOR
Short term investment.
If you need to make money quickly, consider short term investments which allows you to
invest an amount of money at a high yield interest rate, and gain access to the return sooner
rather than later.
This investor cannot take any chances with their money and must invest it in guaranteed
securities such as a high-interest savings account or certificates of deposit. Gold is another
commodity which has good returns. Investors should invest in gold when the price of gold is
low. Stocks are not the safest short term instruments.
In short term investments it is best to invest the entire amount into one particular investment.

Asset class
Equity (stocks)

Asset allocation
0%

Bonds ( money market, CDs)

60%

Other ( cash equivalents , gold , etc)

40%

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Medium term
This type can be a conservative mix of stocks and bonds.
Over here investments could be in similar criteria as per moderate risk taker. One can have a
balanced portfolio in this term.
Managed funds provide the right amount of control , deposits account, cash deposits account,
FDs are other instruments in which investment could be done to reap benefits in short
duration without subject to maximum market risk.
Can also include income funds which invest in securities of fixed income such as
G-secs, bonds and corporate debentures.

Asset class
Equity (stocks)

Asset allocation
45%

Bonds ( money market, CDs)

40%

Other ( cash equivalents , gold , etc)

15%

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Long term investment

Investors having longer investment horizon should be willing to accept the additional risks
and fluctuations in their portfolio for the potential of higher long-term returns.
This time horizon can include most risky investments although one must keep in mind that
equities can have very long periods of low returns so it is advisable to have a component of
fixed income i.e. 75% stocks and 25% bonds. This ratio can be adjusted if necessary as per
self requirements.
Real estate can also act as one of the investment security with respect to long terms. Since the
prices are still going up, the value of apartment buildings have the best chance of appreciating
while everything else goes down.
Asset class
Equity (stocks)

Asset allocation
70%

Bonds ( money market, CDs)

10%

Other ( cash equivalents , real estate , etc)

20%

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Conclusion
If you are a risk taker with long time horizon allocate 60% to stocks, 30% to bonds and 10%
to cash equivalents.
If you have a long time horizon but you are averse to risk, allocate 60% to bonds, 25% to
stocks, and 15% to cash equivalents.
If you have a short term horizon and risk taker, allocate 55% to bonds, 30% to cash
equivalents, others and 15 % to stocks.
If you have short term frame and you are averse to risk, allocate 55% to cash equivalents,
40% to bonds and 5% to stocks.
Returns to investors have varied according to the risks they have borne.
Further apart from the above analysis as an investor the investment decision you make should
be made with respect to your individual circumstances, your risk taking ability and after
reading the appropriate prospectuses.

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References :Websites
www.google.com
www.moneycontrol.com
www.wikippedia.com
www.bloomberg.com

Books
1. Financial analysis by Prasanna Chandra
2. Stock market book by Dalal street

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