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Secondary Market

Meaning of Secondary Market


Refers to a market where securities are traded
Securities are already listed in Stock Exchange

Provides an efficient platform for trading of his securities

Difference between Primary Market & Secondary Market

Primary Market
Securities are offered to public for subscription Purpose of Raising Capital or fund

Secondary Market
Already existing securities are traded Purpose of capital appreciation

Stock Exchange

Provide a trading platform by SEBI

Where transaction done in securities

Demutualization of Stock Market

Refers to the legal structure of an exchange

Ownership, management and the trading rights at the exchange are segregated from one another

Demutualised Stock Exchanges in India

National Stock Exchange (NSE)

Over the Counter Exchange of India (OTCEI)

Stock Trading

Screen Based Trading System (SBTS)


Introduced by NSE

Where a member can punch quantities and price of security in computer

Transaction is executed as soon as a matching sale or buy order from a counter party is found

National Exchange for Automated Trading (NEAT)


A satellite communication technology for trading Its a state of the art client server based application Has a uptime record of 99.7% Uniform response time of less than one second

Contract Note
A confirmation of trades done on particular day On behalf of the client by a trading member Enforceable relationship between the client and the trading member For the propose of purchase / sale and settlement of trades

It should be in Prescribed Form

Benefits of trading in Stock Exchanges


1. 2.
3. 4. Best prices prevailing at the time in the market Lack of any counter party risk which is assumed by the clearing corporation Access to investor grievance and redressal mechanism of stock exchange Protection up to prescribed limit

How to know if the Broker / Sub Broker is Registered?


By verifying the registration certificate issued by SEBI

Broker registration number begins with the letter INB

A sub broker with the letters INS

Precautions of investing in the Stock Markets


Make sure your broker is registered with SEBI and the Exchanges Ensure that you receive contract notes for all your transactions Invest in a manner that matches their risk tolerance Do not be misled by market rumors, luring advertisement or hot tips Take informed decisions by studying the fundamentals of the company

Instruments of Secondary Market


Secondary Market

Shares

Bonds

Equity Shares

Rights Shares

Bonus Shares

Preference Shares

Zero Coupon Bonds

Convertible Bond

Treasury Bills

Cumulative Preference Share

Cumulative Convertible Preference Shares

Shares
Equity Shares
Represent the form of fractional ownership in a business venture

Rights Shares
Issue of new securities to existing shareholders

Bonus Shares
Issued by the companies to their shareholder free of cost based

Preference Shares

Entitled to get fixed dividend before equity shareholders Priority of getting surplus before equity shareholder At the time of liquidation their claims below to equity shareholders

Types of Preference Shares


Cumulative Preference Shares Cumulative Convertible Preference Shares

Dividend accumulates if remained unpaid

Dividend payable on the same accumulates, if not paid Converted into equity capital of the company

Bond
Negotiable certificate evidencing indebtedness

Normally Unsecured

Issued by a Company, Municipality or Government Agency

Types of Bond
Zero Coupon Bond
Issued at discount and repaid at face value No periodic interest is paid Giving the option to the investor Convert the bond into equity at fixed conversion price Issued by government Short term bearer discount security

Convertible Bond

Treasury Bills

Equity Investment
Provides portfolio with growth Reach on long term investment goals Equities are high risk investment

Dividend

A percentage of the face value of a share

A company returns to its shareholders from its annul profits

Factors affected the price of stock

Stock Specific Market Specific

Stock Specific Factor

Financial Health Management Future Earning Capacity People Expectation about the Company

Level of Technology & Marketing Skills

Market Specific Factor


Generally short term factor Depends upon on the environment rather than performance Its include Budget, War Economic Growth & Crises etc.

Growth Stock

Whose potential for growth in sales

Earning are excellent

Growing faster than other companies in market

Value Stock

Stock which may have hidden value

Investor look to buy stokes that are undervalued

Portfolio

Combination of different investment assets

Purpose of achieving an investors goal

Diversification

Its A Risk Management Technique

Mixes a wide variety of investments with in portfolio

Reduce the risk in portfolio

Debt Instruments

Represents a contract whereby one party lends money to another

Debt Instruments
Bond
Issued by the central and state government

Debenture
Issued by private corporate sector

Public sector organization

Features of Debt Instruments


The date on which borrower has agreed to repay the principal
Refers to the periodic interest payment that are made by borrower to lender

Maturity

Coupon

Principal

The amount that has been borrowed

Segment of Debt Market


Government Securities Public Sector Units Bonds Corporate Securities
Comprises the Centre, State and state sponsored securities They are not tax free

They are tax free

Comprise of commercial paper and bonds

Participants of Debt Market


Banks

Financial Institutions

Provident Funds

Mutual Funds

Corporate

Insurance Companies