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Sensex, otherwise known as the S&P BSE Sensex index, is the benchmark index of the Bombay
Stock Exchange (BSE). It is composed of 30 of the largest and most actively-traded stocks on the
BSE, providing an accurate gauge of India's economy. Initially compiled in 1986, the Sensex is
the oldest stock index in India.
Neither HDFC Bank nor ICICI Bank have any full form. HDFC Bank and ICICI Bank both in themselves are
brand names and are not acronyms.
The parent companies at the time of formation of ICICI Bank and HDFC Bank were ICICI and HDFC
respectively and these parent companies have been created for specific purposes and is reflected in
their name (full form) as well.
ICICI: Industrial Credit and Investment Corporation of India
HDFC: Housing Development Finance Corporation
However, since the purpose of both the banks is not limited to the purpose of their parent companies
and from initiation, these banks stand as brands themselves without any full form
Stock valuation
Financial market
A financial market is a market in which people trade financial securities, commodities, and other
fungible items of value at low transaction costs and at prices that reflect supply and demand. Securities
include stocks and bonds, and commodities include precious metals or agricultural products.
The capital markets may also be divided into primary markets and secondary markets. Newly formed
(issued) securities are bought or sold in primary markets, such as during initial public offerings.
Secondary markets allow investors to buy and sell existing securities. The transactions in primary
markets exist between issuers and investors, while secondary market transactions exist among
investors.
Liquidity is a crucial aspect of securities that are traded in secondary markets. Liquidity refers to the
ease with which a security can be sold without a loss of value. Securities with an active secondary
market mean that there are many buyers and sellers at a given point in time. Investors benefit from
liquid securities because they can sell their assets whenever they want; an illiquid security may force the
seller to get rid of their asset at a large discount.
Raising capital
Financial markets attract funds from investors and channel them to corporationsthey thus
allow corporations to finance their operations and achieve growth. Money markets allow firms to
borrow funds on a short term basis, while capital markets allow corporations to gain long-term
funding to support expansion (known as maturity transformation).
Without financial markets, borrowers would have difficulty finding lenders themselves.
Intermediaries such as banks, Investment Banks, and Boutique Investment Banks can help in this
process. Banks take deposits from those who have money to save. They can then lend money
from this pool of deposited money to those who seek to borrow. Banks popularly lend money in
the form of loans and mortgages.
More complex transactions than a simple bank deposit require markets where lenders and their
agents can meet borrowers and their agents, and where existing borrowing or lending
commitments can be sold on to other parties. A good example of a financial market is a stock
exchange. A company can raise money by selling shares to investors and its existing shares can
be bought or sold.
The following table illustrates where financial markets fit in the relationship between lenders and
borrowers:
Interbank Individuals
Banks
Stock Exchange Companies
Individuals Insurance Companies
Money Market Central Government
Companies Pension Funds
Bond Market Municipalities
Mutual Funds
Foreign Exchange Public Corporations
Lenders
The lender temporarily gives money to somebody else, on the condition of getting back the
principal amount together with some interest/profit or charge.
Many individuals are not aware that they are lenders, but almost everybody does lend money in
many ways. A person lends money when he or she:
Companies
Companies tend to be lenders of capital. When companies have surplus cash that is not needed
for a short period of time, they may seek to make money from their cash surplus by lending it via
short term markets called money markets. Alternatively, such companies may decide to return
the cash surplus to their shareholders (e.g. via a share repurchase or dividend payment).
Borrowers
Individuals borrow money via bankers' loans for short term needs or longer term
mortgages to help finance a house purchase.
Companies borrow money to aid short term or long term cash flows. They also borrow to
fund modernization or future business expansion.
Governments often find their spending requirements exceed their tax revenues. To make
up this difference, they need to borrow. Governments also borrow on behalf of
nationalized industries, municipalities, local authorities and other public sector bodies. In
the UK, the total borrowing requirement is often referred to as the Public sector net cash
requirement (PSNCR).
Governments borrow by issuing bonds. In the UK, the government also borrows from
individuals by offering bank accounts and Premium Bonds. Government debt seems to be
permanent. Indeed, the debt seemingly expands rather than being paid off. One strategy used by
governments to reduce the value of the debt is to influence inflation.
Municipalities and local authorities may borrow in their own name as well as receiving funding
from national governments. In the UK, this would cover an authority like Hampshire County
Council.
Public Corporations typically include nationalized industries. These may include the postal
services, railway companies and utility companies.
Many borrowers have difficulty raising money locally. They need to borrow internationally with
the aid of Foreign exchange markets.
Borrowers having similar needs can form into a group of borrowers. They can also take an
organizational form like Mutual Funds. They can provide mortgage on weight basis. The main
advantage is that this lowers the cost of their borrowings.
Saving mobilization: Obtaining funds from the savers or surplus units such as household
individuals, business firms, public sector units, central government, state governments
etc. is an important role played by financial markets.
Investment: Financial markets play a crucial role in arranging to invest funds thus
collected in those units which are in need of the same.
National Growth: An important role played by financial market is that, they contribute
to a nation's growth by ensuring unfettered flow of surplus funds to deficit units. Flow of
funds for productive purposes is also made possible.
Entrepreneurship growth: Financial market contribute to the development of the
entrepreneurial claw by making available the necessary financial resources.
Industrial development: The different components of financial markets help an
accelerated growth of industrial and economic development of a country, thus
contributing to raising the standard of living and the society of well-being.
Primary market: Primary market is a market for new issues or new financial claims.
Hence its also called new issue market. The primary market deals with those securities
which are issued to the public for the first time.
Secondary market: Its a market for secondary sale of securities. In other words,
securities which have already passed through the new issue market are traded in this
market. Generally, such securities are quoted in the stock exchange and it provides a
continuous and regular market for buying and selling of securities.
Simply put, primary market is the market where the newly started company issued shares to the
public for the first time through IPO (initial public offering). Secondary market is the market
where the second hand securities are sold (securitCommodity Marketies).
Money market: Money market is a market for dealing with financial assets and securities
which have a maturity period of up to one year. In other words, its a market for purely short
term funds.
Capital market: A capital market is a market for financial assets which have a long or
indefinite maturity. Generally it deals with long term securities which have a maturity period of
above one year. Capital market may be further divided into: (a) industrial securities market (b)
Govt. securities market and (c) long term loans market.
Equity markets: A market where ownership of securities are issued and subscribed is
known as equity market. An example of a secondary equity market for shares is the
Bombay stock exchange.
Debt market: The market where funds are borrowed and lent is known as debt market.
Arrangements are made in such a way that the borrowers agree to pay the lender the
original amount of the loan plus some specified amount of interest.
Derivative markets: A market where financial instruments are derived and traded based on an
underlying asset such as commodities or stocks.
Financial service market: A market that comprises participants such as commercial banks
that provide various financial services like ATM. Credit cards. Credit rating, stock broking etc. is
known as financial service market. Individuals and firms use financial services markets, to
purchase services that enhance the working of debt and equity markets.
Depository markets: A depository market consists of depository institutions that accept
deposit from individuals and firms and uses these funds to participate in the debt market, by
giving loans or purchasing other debt instruments such as treasure bills.
Non-depository market: Non-depository market carry out various functions in financial
markets ranging from financial intermediary to selling, insurance etc. The various constituency
in non-depositary markets are mutual funds, insurance companies, pension funds, brokerage
firms etc
Investment theory
Investment theory encompasses the body of knowledge used to support the decision-making
process of choosing investments for various purposes.
It includes portfolio theory, the capital asset pricing model, arbitrage pricing theory, the efficient-
market hypothesis, and rational pricing.
It is near synonymous with "asset pricing theory", one major focus of Financial economics; see
Financial economics #Uncertainty.
Brent Blend Roughly two-thirds of all crude contracts around the world reference
Brent Blend, making it the most widely used marker of all. These days, Brent actually
refers to oil from four different fields in the North Sea: Brent, Forties, Oseberg and
Ekofisk. Crude from this region is light and sweet, making them ideal for the refining of
diesel fuel, gasoline and other high-demand products. And because the supply is water-
borne, its easy to transport to distant locations.
West Texas Intermediate (WTI) WTI refers to oil extracted from wells in the U.S.
and sent via pipeline to Cushing, Oklahoma. The fact that supplies are land-locked is one
of the drawbacks to West Texas crude its relatively expensive to ship to certain parts
of the globe. The product itself is very light and very sweet, making it ideal for gasoline
refining, in particular. WTI continues to be the main benchmark for oil consumed in the
United States. (Read, A Look at The U.S. Shale Oil Production Industry.)
Dubai/Oman This Middle Eastern crude is a useful reference for oil of a slightly lower
grade than WTI or Brent. A basket product consisting of crude from Dubai, Oman or
Abu Dhabi, its somewhat heavier and has higher sulfur content, putting it in the sour
category. Dubai/Oman is the main reference for Persian Gulf oil delivered to the Asian
market.
Marginal utility
In economics, utility is the satisfaction or benefit derived by consuming a product, thus the
marginal utility of a good or service is the change in the utility from increase or decrease in the
consumption of that good or service. Economists sometimes speak of a law of diminishing
marginal utility, meaning that the first unit of consumption of a good or service yields more
utility than the second and subsequent units, with a continuing reduction for greater amounts.
Therefore, the fall in marginal utility as consumption increases is known as diminishing marginal
utility. Mathematically:
MU1>MU2>MU3......>MUn
The marginal decision rule states that a good or service should be consumed at a quantity at
which the marginal utility is equal to the marginal cost.
Marginal cost
In economics, marginal cost is the change in the opportunity cost that arises when the quantity
produced is incremented by one unit, that is, it is the cost of producing one more unit of a good.[1] In
general terms, marginal cost at each level of production includes any additional costs required to
produce the next unit. For example, if producing additional vehicles requires building a new factory, the
marginal cost of the extra vehicles includes the cost of the new factory.
Opportunity cost
n microeconomic theory, the opportunity cost, also known as alternative cost, is the value (not a
benefit) of the choice of a best alternative cost while making a decision. A choice needs to be made
between several mutually exclusive alternatives. Assuming the best choice is made, it is the "cost"
incurred by not enjoying the benefit that would have been had by taking the second best available
choice.