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FINANCIAL MARKETS
The Stock Market In India
Primary And Secondary Markets
OTC Markets
New Issues Market
Underwriting
OTC markets
(`Billion)
Major Holders
Primary Total
As on December 6, 2013 Banks State Govts.
Dealers
1 2 3 4
14-day 764.0 770.2
It is a bill of exchange.
It is used for financing a transaction in goods that takes some
time to complete.
It shows the liability to make payment on a fixed date when
goods are bought on credit.
According to the Indian Negotiable Instrument Act, 1881, it is
a written instrument containing an unconditional order, signed
by the maker, directing a certain person to pay a certain sum of
money only to, or to the order of, a certain person, or to the
bearer of the instrument.
Commercial Bills Market
Classification:
1. Demand bill Payable immediately at sight or on
presentment to the drawee.
2. Usance or time bill Payable at a specified later date.
3. Documentary bills The drafts are accompanied by documents of
title to goods, such as railway receipts.
4. Inland bills a) be drawn or made in India, and must be payable
in India, or b) be drawn upon any person resident in India.
5. Foreign bills a) Drawn outside India and may be payable in and
by a party outside India, or may be payable in India or drawn on a
party resident in India, or b) Drawn in India and made payable
outside India.
Commercial Paper
The rate of interest paid on call loans is known as the call rate.
Highly variable from day to day, and often from hour to hour.
It varies from centre to centre.
Sensitive to changes in demand and supply of call loans.
.
Government security
A Government security is a tradable instrument issued by the
Central Government or the State Governments.
It acknowledges the Governments debt obligation.
Such securities are short term (usually called treasury bills, with
original maturities of less than one year) or long term (usually called
Government bonds or dated securities with original maturity of one
year or more).
In India, the Central Government issues both, treasury bills and
bonds or dated securities while the State Governments issue only
bonds or dated securities, which are called the State Development
Loans (SDLs). Government securities carry practically no risk of
default and, hence, are called risk-free gilt-edged instruments.
Government of India also issues savings instruments (Savings
Bonds, National Saving Certificates (NSCs), etc.) or special
securities (oil bonds, Food Corporation of India bonds, fertiliser
bonds, power bonds, etc.).
Government security
They are normally issued in the denomination of Rs. 100 or
Rs.1,000.
Interest rates on these securities are relatively lower because of their
being liquid and safe and is exempt from tax subject to a limit.
Financial Derivatives
Contracts which are written between two parties (counter parties) and whose
value is derived from the value of underlying assets.
Types of derivatives:
1. Forwards
2. Futures
3. Options
4. Swaps : Agreements b/w two parties to exchange assets or sets of financial
obligations or a series of cash flows for a specified period of time at
predetermined intervals.
5. Warrants and Convertibles
Warrant is a contract/ option entered into by the issuing company giving the holder
the right to purchase or subscribe to the stated number of equity shares of that
company within a predetermined specified period of time at a predetermined price.
Convertible bonds/ debentures and convertible preference shares can be fully or
partially converted into equity of the issuing company on specified terms with
regard to the timing, the price and the ratio of conversion.
Foreign Exchange Market