Cover
Halftitle Page
Title Page
Copyright Page
Dedication
Contents
Preface
Acronyms/Abbreviations
Chapter 1 Investment – An Overview
Meaning
Definition
Economic Investment
Financial Investment
Investment Practice
Features of Investment
Savings Vs Investment
Investment Vs Speculation
Factors and Constraints of Investment
Investment Objectives
Rules of Stock Investment
Sources of Investment Information
Type of Information
Sources of Information
Financial Newspapers & Journals
Periodical Indexes
Financial Handbooks & Manuals
Financial Ratios
Electronic Databases
Indian Journals and Dailies
Summary
Review Questions
Further Readings
Online Resources
Chapter 2 Financial Securities – An Overview
Meaning
Features of Financial Instruments
Types of Financial Instruments
Preference Shares
Equity Shares
Capital
Par Value and Book Value
Cash Dividends
Stock Dividends
Non-Voting Equity Shares
Convertible Cumulative Preference Shares (CCPS)
Company Fixed Deposits
Warrants
Debentures and Bonds
Global Debt Instruments
Income Bonds
Asset Backed Securities
Junk Bonds
Masala Bonds
Indexed Bonds
Zero Coupon Bonds (ZCBs)/ Zero Coupon Convertible Debentures
Floating Rate Bonds (FRBs)
Secured Premium Notes (SPNs)
Euro Convertible Bonds
Importance of Bonds and Debentures
Advantages to the Company
Advantages to Investors
Drawbacks of bonus and Debentures
Summary
Review Questions
Further Readings
Online Resources
Chapter 3 New Issues Market (NIM)
Meaning
NIM and Secondary Market—An Interface
Services of NIM
Investigative Services
Advisory Services
Guarantee Services
Distribution Services
NIM Vs Secondary Market
Methods of Marketing Securities
Pure Prospectus Method
Offer for Sale Method
Private Placement Method
Initial Public Offer (IPO) Method
Rights Issue Method
Bonus Issue Method
Rights Issue Vs Bonus Issue
Book-building Method
Stock Option or Employees Stock Option Scheme (ESOS)
Bought-out Deals
Bought-out Deals Vs Private Placements
Intermediaries in NIM
Merchant Bankers or Lead Managers
Underwriters
Bankers
Brokers
Registrars and Share Transfer Agents
Debenture Trustees
Summary
Review Questions
Further Readings
Online Resources
Chapter 4 Stock Exchange and Trading
Genesis
Meaning
Definition
Functions/ Services/ Features/ Role
Stock Exchange and Commodity Exchange Distinguished
Stock Exchange Traders
Market-Makers
Broker-dealer
Mechanics of Settlement
Settlement Cycle at NSE
New Settlement System
Counter Party Default
Settlement Guarantee Mechanism
Depository
The Need
Systems of Stock Trading
Auction Trading System
Dealer Trading System
Hybrid Trading System
Margin Trading System
Margins
Interconnected Stock Exchange of India (ISE)
Indonext
Features
Steps in Stock Trading
Trading of Securities
For Specified Securities
Non-specified Securities
Odd-lot Securities
Stock Exchange Dealings
Type
Speculative Dealings
Short Selling and Securities Lending
Short Selling
Securities Lending
Stock Broking
Share Prices—Factors
Badla System
Participatory Notes
Meaning
Features
Significance
Hedge Funds
Weaknesses
Summary
Review Questions
Further Readings
Online Resources
Chapter 5 Listing and De-Listing
Listing
Corporate Obligation
Legal Binding
Security Listing
Listed Company
Stock Exchange
Recognized Stock Exchange
Characteristics
Legal Provisions
Steps
Legal Significance
Listing and Corporate Governance
Particulars to be Furnished
Listing Agreement
Meaning
Features
Stock Exchange Powers
Benefits
Consequences of Non-Listing
Suspension or Withdrawal
De–listing
Meaning
Legal Position
Compulsory De–Listing
Meaning
Causes
Issues
Safeguards
Voluntary De–listing
Meaning
Causes
Circumstances
Issues
Safeguards
Procedures
Norms for De–Listing
Minimum Percentage of Equity Capital
SEBI’s Takeover Regulations — Regulation 21(3)
Financial or Business Aspects
De–Listing Procedures
Panel
Relisting
New Norms
Summary
Review Questions
Further Readings
Online Resources
Chapter 6 Bombay Stock Exchange (BSE)
Origin and Establishment
Services
Achievements
Awards and Accolades
Awards Won in the Year 2014
Awards Won in the Year 2013
Summary
Review Questions
Further Readings
Online Resources
Chapter 7 OTCEI, NSDL, STCE, Indian Stock Exchanges
OTCEI
Genesis
Over-The-Counter
OTCEI Vs Other Stock Exchanges
Need and Objectives
Features
Benefits
Securities Traded
Players
Functions
Methods of Offering New Issues
Primary Issue
Secondary Issue
Book-building
Bought-out Deals
Trading Mechanism
For Listed Securities
Steps in Trading
For Permitted Securities
Bad Delivery
Settlement Procedure
For Listed Securities
For Permitted Securities
Day-wise Settlement Procedure
Slow Growth of OTCEI — Causes
National Securities Depository Limited (NSDL)
Genesis
Promoters or Shareholders
Objectives
Basic Services
Special Services
Depository System—Business Partners
Benefits of Depository System
Securities Trading Corporation of India Limited (STCI)
Genesis
RBI Support
Current Activities
Money Market
Participants
Features
Money Market Instruments
Call/Notice Money
Features
Treasury Bills
Term Money
Certificates of Deposits (CD)
Inter-Corporate Deposit (ICD)
Commercial Papers (CPs)
Ready Forward Contracts (Repos)
Commercial Bills
Indian Stock Exchanges
The National Stock Exchange of India Limited (NSE)
Genesis
Objectives
Trading Mechanism
Settlement
Counter Guarantee
Price Bands
Listing Requirement
Trading
Wholesale Debt Market
Electronic Trade Monitoring System
Corporate Structure
The Board
Executive Committee
The Promoters
The Committees
The Products
Major Indices
Derivatives
Computer-To-Computer Link (CTCL) Facility
Internet Based Trading
Mutual Fund Service System (MFSS)
Salient Features of MFSS
Exchange Traded Funds (ETF)
Index Funds
Working Capital Funding
Direct Payout to Investors
Reference Rates—FIMMDA-NSE MIBID MIBOR
NSE Zero-Coupon Yield Curve (ZCYC)
NSE VaR for Government Securities
Constituent SGL Account
Book-Building at NSE
Summary
Review Questions
Further Readings
Online Resources
Chapter 8 SEBI – Functions and Working
Origin
Genesis
Features of the SEBI Bill
Objectives
Management
Powers and Functions
Under the SEBI Act
Under the SCRA
Power to Make Rules
Power to Make Regulations
Penalties
Power to Adjudicate
Regulatory Role
Role and Relevance
Credible Regulatory Structure
Market Surveillance
Disclosure Standards
Best Governing Practices
Building Investor Confidence
Global Outlook
Improving Operational Efficiency
Screen Based Trading
Summary
Review Questions
Further Readings
Online Resources
Chapter 9 Mutual Funds
Genesis
Definition
Features/Role/Benefits
Products/Schemes
Operational Classification
Return-Based Classification
Investment-Based Classification
Mutual Funds in India
Managing Mutual Funds in India
The Sponsor
The Trustees
The Custodians
Asset Management Company (AMC)
Portfolio Management Process in Mutual Funds
Setting Investment Goal
Identifying Specific Securities
Portfolio Designing
Portfolio Revision
Operational Efficiency of Mutual Funds
Net Return
Net Asset Value (NAV)
Load
Disclosures
Voting Right to Investors
Investors’ Protection
Evaluating Mutual Funds
Treynor Model
Sharpe Model
Mutual Fund Holders’ Account
Causes for Poor Performance of Mutual Funds
Association of Mutual Funds Industry (AMFI)
Policy Developments Relating to Mutual Funds
Summary
Review Questions
Further Readings
Online Resources
Chapter 10 Risk and Return
Genesis
Certainty
Uncertainty
Risk
Risky Projects - Chart
Types of Risk
Sources of Risk
Return
Measurement of Return – Approaches
Risk-Return Relationship
Historical Return
Historical Risk
Expected Rate of Return (ERR) and Expected Risk (ER)
Summary
Review Questions
Further Readings
Online Resources
Chapter 11 Time Value of Money (TVM)
Meaning
Objectives
Importance
TVM as a Losing Proposition
TVM as a Gaining Proposition
Time Preference for Money (TPM)
Meaning
Reasons
Dimensions of TVM
Discounting Technique
Compounding Technique
Use of Time Value Tables
Solving Problems on Time Value of Money
Computing Values Under Compounding Technique
Computing Values Under Compounding Technique
Effective Rate of Interest (ERI)
Implicit Rate of Interest (IRI)
Computing Values Under Discounting Techniques
True Rate of Interest (TRI)
Doubling Period (DP)
Summary
Review Questions
Further Readings
Online Resources
Chapter 12 Time Value of Money & Resource Allocation
Genesis
Borrowing
Lending
Financial Markets
Meaning
Benefits
Types of Investments
Market Interest Rates and Prices
Meaning
Features
Shifting Resources Across Time
Present Value/Present Wealth
Calculating PV – Methods
Future Value
Real Asset Investing
Investment & Financial Exchange Line
Working of Real-Asset Investment
NPV (Wealth)
Features of NPV
Internal Rate of Return (IRR)
Calculation of IRR
NPV Vs IRR
Multiple Investments and the Financial Exchange Line
Simple Real Investment by a Corporation
Conclusion
Multi-Period Finance
Compound Interest
Multi-Period Cash Flow
NPV Vs IRR
Interest Rates, Interest Rate Futures and Yields
Spot Rates
Yield to Maturity (YTM)
Influence of YTM
Forward Interest Rates
Nominal Forward Rate (NFR)
Calculating Spot Rate With Forward Rate
Interest Rate Futures
Forward Price
Forward Market
Financial Risk
Financial Futures Market
Hedge
Alternative Method
Conclusion
Bond Duration
Calculation
Miscellaneous Illustrations
Summary
Review Questions
Further Readings
Online Resources
Chapter 13 Valuation of Financial Securities
Meaning of Financial Security
Definition of 'Valuation'
Types of Valuation
Valuation of Bonds
Required Rate of Return, Bond Rate of Interest and Bond Value – Relationship
Methods of Valuation
Valuation of Preferred Stock
Valuation of Equity Share
Summary
Review Questions
Further Readings
Online Resources
Chapter 14 Derivatives and Stock Index Futures
Genesis
Derivatives
Meaning
Growth of Derivatives Market – Factors
Limitations of Derivatives Market
Functions of Derivatives Market
Categories of Derivatives
Forward Rate Agreement (FRA)
Futures and Options—Participants
General Functions of Dealers
Benefits of Derivatives
Risks in Derivatives Market
Derivatives and Financial System
Capital Standards for Derivatives
Regulating Derivatives Market
Advent of Derivatives Market in India
Stock Index Futures
Genesis
Derivatives Contract
Futures Contract
Stock Index
Stock Index Futures (SIF)
Features Of SIF
Pricing SIF
Benefits of SIF
Hedging Using SIF
Speculation Using SIF
Summary
Review Questions
Further Readings
Online Resources
Chapter 15 Fundamental Analysis
Meaning
Features
Analytical Framework
Global Economic Analysis
National Economic Analysis
National Industry Analysis
Company Analysis
Summary
Review Questions
Further Readings
Online Resources
Chapter 16 Technical Analysis
Technical Analysis
Mechanism
Importance
Criticisms
Fundamental Vs Technical Analysis
Techniques
Arguments in Favour of Technical Analysis
Arguments Against Technical Analysis
Indicators & Oscillators of Technical Analysis
Charting Techniques
Utility of Charts
Chart Patterns
Types of Chart
Summary
Review Questions
Further Readings
Online Resources
Chapter 17 Portfolio Management – An Overview
Portfolio
Meaning
Types of Portfolio
Portfolio Management
Meaning
Definition
Need
Types
Objectives/Features/Importance
Portfolio Management Vs Wealth Management
Portfolio Manager
Meaning
Types
Functions
Strategies
Registration
Capital Adequacy
Minimum Business
Agreement
Reports to be Furnished
Disclosure Document
Funds Management
SEBI Regulations
Application for Grant of Certificate
Conformance to Requirements
Furnishing of Further Information, etc.
Consideration of Application
Capital Adequacy Requirement
Procedure for Registration
Renewal of Certificate
Procedure Where Registration is Not Granted
Effect of Refusal to Grant Certificate
Payment of Fees
No Person to Act as Portfolio Manager Without Certificate
Conditions for Grant or Renewal of Certificate to Portfolio Manager
Period of Validity of the Certificate
Fees
General Obligations
Contract with Clients
Contents
Disclosures
General Responsibilities
Independent Management
Acting in Fiduciary Position
Transaction within Limits
Not Deriving any Personal Benefit
Not Lending Securities
Proper Handling of Complaints
Investment of Clients’ Funds
Acting as per Agreement
Withdrawal of Funds and Securities
Investing in Money Market Instruments
Not Indulging in Speculation
Undertaking Client-Wise Dealings
Adopting Prevailing Price
Safekeeping of Funds and Securities
Acting as Agent
Securities Lending
Conformance to Rule
Maintenance of Books of Accounts
Books of Accounts
Intimation to the SEBI
Furnishing Statements of Accounts
Submission of Half-yearly Results
Accounts and Audit
Reports to be Furnished
Report on Steps Taken on Auditor’s Report
Disclosures to the Board
Appointment of Compliance Officer
Inspection and Disciplinary Proceedings
Right of Inspection by the Board
Notice Before Inspection
Obligations of Portfolio Manager on Inspection
Submission of Report
Action on Inspection or Investigation Report
Appointment of Auditor
Procedure for Action in Case of Default
Liability for Action in Case of Default
Penalties (Since Deleted)
Suspension of Registration
Cancellation of Registration
Order of Suspension and Cancellation
Manner of Holding Enquiry
Show-Cause Notice and Order
Effect of Suspension and Cancellation
Publication of Order of Suspension
Appeal to the Securities Appellate Tribunal
Code of Conduct (Regulation 13)
Model Disclosure Document
Minimum Disclosure
Portfolio Management Framework
Planning the Portfolio
Selection of Portfolio
Evaluation of Portfolio
Revision of Portfolio
Portfolio Performance
Treynor’s Portfolio Performance Measure
Graphical Presentation
Jensen’s Portfolio Performance Measure
Graphical Presentation
Fama’s Portfolio Performance Measure
Revision of Portfolio
Summary
Review Questions
Further Readings
Online Resources
Chapter 18 Portfolio Theory
Portfolio Analysis
Portfolio Theory
Objectives/Importance
Markowitz Portfolio Analysis
Features
Indifference Curve Analysis
Meaning
Analysis - How Risk-Averse Investor could Increase Utility
Investor Risk Preference Model
Further Northwest Principle/Risk-Aversion Model
Assumption of Non-Satiation
Assumption of Risk Aversion
Further Northeast Model
Further North Model
Random Walk Theory (RWT)
Statement
Mechanism
Assumptions
Exceptions
RWT Vs Other Theories
Role of Luck
Practical Implications
Summary
Review Questions
Further Readings
Online Resources
Chapter 19 Efficient Market Hypothesis (EMH)
Statement
Assumptions
No Outperformance Possible
Presence of Rational Investors
Three Levels
Weak Form
Semi-Strong Form
Strong Form
The Elliott Wave Principle
Elliott Wave – Basic 5 Sequence
Elliott Wave – Corrective Wave
Efficient (Market) Portfolio (EP)
Meaning
EP Set (Two Securities Case)
Efficient Frontier (EF)
Principle of Dominance
Summary
Review Questions
Further Readings
Online Resources
Chapter 20 CAPM and APM
Capital Asset Pricing Model (CAPM)
Meaning
Risk-Free and Risky Securities
Risk-Averse Investor
Risk-Friendly Investor
Objectives of CAPM
Assumptions of CAPM
Validity of CAPM
Criticisms of CAPM
Components of CAPM
Value Additivity and the CAPM
Capital Market Line
Risk-Return Trade-Off Theory
Determining Market Risk-Return Trade-Off
Components Risk-Return Trade-Off
Slope of CML (CMLS)
Separation Theorem
Security Market Line (SML)
Company Cost of Capital
Implications of CAPM
Limitations of CAPM
Arbitrage Pricing Model (APM)
Arbitrage
Types of Return
CAPM Vs APM
Summary
Review Questions
Further Readings
Online Resources
Chapter 21 Wealth Management - An Overview
Genesis
Wealth Management – An Emerging Sector
Concept of Wealth Management
Key Challenge Areas
Need for Wealth Management
Wealth Management - Components
Wealth Management - Major Steps
Financial Planning
Portfolio Strategy Definition / Asset Allocation
Portfolio Management
Strategy Review and Alignment
Private Wealth Management Services
Wealth Management Services
Wealth Management Services - Benefits
Wealth Management Services - Limitations
Summary
Review Questions
Further Readings
Online Resources
Chapter 22 Portfolio Return & Risk
Portfolio
Portfolio Theory
Diversification
Portfolio Diversification
Portfolio Return
Portfolio Risk (For Two Securities, A and B and for Single Period)
Correlation & Portfolio Variance
Components of Portfolio Risk
Summary
Review Questions
Further Readings
Online Resources
Chapter 23 Sharpe Index Model
Genesis
Assumptions
Statement of Sharpe’s Single Index Model
Sharpe’s Single Index Model – Graphical Presentation
Components of Return
Single Index Model - Risk Characteristics Line
Portfolio Selection Model
Excess Return-Beta Ratio
Sharpe Optimal Portfolio
Construction of Optimal Portfolio
Number of Inputs Needed for a Portfolio Analysis
Summary
Review Questions
Further Readings
Online Resources
Chapter 24 Alternative Investments
Genesis
Meaning
Definition
Features
Alternative Investment Assets
Private Equity
Start-Ups
Venture Capital
Real Assets
Private placement
Hedge Funds
Fund-of-Funds
Real Estate Investment Trusts (REITs)
Exchange Traded Funds (ETFs)
Crowd-Funding
Summary
Review Questions
Further Readings
Online Resources
Glossary
Index
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