Share market basics

What is IPO (Initial Public Offer)? When a company starts, it starts with Promoters funds, the Promoter gets the fund from (Savings, Friends, Family, etc), in the next stage if the Promoters needs more fund they can raise it through Angel Investors, Venture Capital or Private Equity Firm. After this, if the company needs more funds for the expansion of the business or for paying debt, they can go for IPO (Initial Public Offer). Through the IPO, company raises equity funds by offering their shares to the public, people who participates in IPO and buy the shares of the company becomes the owners of the company, also known as "Shareholder's of the Company" means the company do not have to return the funds to its investors, because now they have became the owner of the company. For example: (If a Investor buys 10% shares of the company, then now he is 10% owner of the company.) Why IPO For expansion of the business. To pare Debt. Exit to previous Investors. Who can particip...

RIGHTS ISSUE OF SHARES. When a company issue or offer its shares to their existing shareholders it is known as Rights issue of shares.    Rights issue of shares is directly related to equity shareholders. Rights issue is a type equity fund raising. After the IPO (Initial Public Offer) if the company want's to raise funds they can raise it through taking debt,  Rights issue of shares or by FPO (Follow on Public Offer). But Before raising funds through FPO the company must offer the Shares to their existing equity share holders at discounted rate. For example (The market price of the share is Rs.1000 and the company offers it at Rs.900 to its existing shareholders then it is giving 10% discount .) It is the right of the shareholders, that's why it is known as Rights issue of shares. If the company fails to raise the required funds through Rights issue of shares, then it can go for FPO. Who can participate in Rights issue of shares? Only the existing equity sharehold...

BONUS SHARES Bonus shares are the shares which are given by the companies to their existing shareholders without asking for any additional cost, based upon the number of stocks the shareholders own. To get the bonus shares the investor or shareholder must have the company's share in their Demat account, on a record date declared by the company. Means to get the benefit of bonus share the share holder must have the shares in their Demat account which are bought on the record date, only those shareholders who holds shares of that record date gets the bonus shares. Issue of Bonus shares. Bonus shares are issued on the basis of ratio. For example: 3:1 (In this case the shareholders will get 3 free shares on each share, means if a shareholder owns 1000 shares of   XYZ company he will get additional 3000 shares of that company without paying any additional cost, so now he is the owner of 4000 shares.) Effect of Bonus shares on share price. If you're thinking that after getting th...

FIXED INCOME SECURITIES: Fixed-income securities are financial claims with promised cash flows of known fixed amount paid at fixed dates. It is a form of debt. These are investment where the cash flows are according to a predetermined amount of interest. BENEFITS OF FIXED INCOME SECURITIES: The benefits of holding FIXED INCOME SECURITIES as a part of a balanced portfolio that are timeless. Fixed income securities can provide following key benefits to investment portfolios: Capital stability - Fixed income securities are an important source of capital stability issued by investment grade entities such as sovereign governments, corporations & financial institutions. Fixed income source - Coupon income drives the majority of returns on fixed income assets, & also provides an additional buffer to declines in capital values should interest rates rise. Liquidity - Secondary markets exist for fixed income securities , & provide the ability for investors to readily liquidate or...

Difference between Equities and Derivatives. ( Difference between Equities and Derivatives in hindi) EQUITIES: Equity is typically referred to as shareholder equity (also known as shareholders' equity), or owners equity (for privately held companies), which represents the amount of money that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company's debt was paid off. DERIVATIVES: Derivatives is defined as “a financial contract whose value is derived from the value of an underlying asset or simply underlying” Derivatives have no direct value in and of themselves -- their value is based on the expected future price movements of their underlying asset. The most common types of derivatives are futures, options, forwards and swaps. STEPS TO INVEST IN EQUITIES: The Trading procedure involves the following steps: 1. Selection of a broker: The buying and selling of securities can only be done through SEBI registered bro...

INTRODUCTION TO DERIVATIVES: Derivatives is defined as “a financial contract whose value is derived from the value of an underlying asset or simply underlying” Derivatives have no direct value in and of themselves -- their value is based on the expected future price movements of their underlying asset. The most common types of derivatives are futures, options, forwards and swaps. (DERIVATIVES IN HINDI) FUNCTIONS OF DERIVATIVES MARKET. Management of risk Management of different types of risk through various strategies like hedging, arbitraging, spreading etc is one of the important services provided by the derivatives to control, avoid and manage such risk. Price discovery Price discovery means revealing information about future cash market prices through future market. Derivatives provide such mechanism. Liquidity and reduce transaction cost In derivatives trading no immediate full amount of the transaction is required because of margin trading. Hence it enhances liquidity and redu...