Professional Documents
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The capital market is the market for securities, where companies and
governments can raise long term funds. Selling stock and selling bonds
are two ways to generate capital and long term funds. Thus bond markets
and stock markets are considered capital markets. The capital markets
consist of the primary market, where new issues are distributed to
investors, and the secondary market, where existing securities are traded
.The Indian Equity Markets and the Indian Debt markets together form the
Indian Capital markets
For a developing economy like India, debt markets are crucial sources of
capital funds. The debt market in India is amongst the largest in Asia. It
includes government securities, public sector undertakings, other
government bodies, financial institutions, banks and companies.
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Capital Market
This is the market for new long term capital. The primary market is
the market where the securities are sold for the first time. Therefore
it is also called the New Issue Market (NIM).
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Capital Market
An IPO is the first sale of stock by a company to the public. In this market
company can raise money by issuing equity. If the company has never
issued equity to the public, it's known as an IPO. Mostly public companies
go for IPO. But large privately-owned companies may also go for an IPO to
become publicly traded. In an IPO the company offloads a certain
percentage of its total shares to the public at a certain` price In an IPO,
the issuer obtains the assistance of an underwriting firm, which helps it
determine what type of security to issue (common or preferred), best
offering price and time to bring it to market.. Most IPO’S these days do not
have a fixed offer price. Instead they follow a method called BOOK
BUILDIN PROCESS, where the offer price is placed in a band or a range
with the highest and the lowest value (refer to the newspaper clipping on
the page). The public can bid for the shares at any price in the band
specified. Once the bids come in, the company evaluates all the bids and
decides on an offer price in that range. After the offer price is fixed, the
company allots its shares to the people who had applied for its shares or
returns them their money in case of non allotment of shares.
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Capital Market
A public offering will allow a company to raise capital to use for various
corporate purposes such as working capital, acquisitions, research and
development, marketing, and expanding plant and equipment.
Liquidity
Once shares of a company are issue through an IPO & traded on a public
exchange, those shares have a market value and can be resold. This
allows a company to attract and retain employees by offering stock
incentive packages to those employees. Moreover, it also provides
investors in the company the option to trade their shares thus enhancing
investor confidence.
Increased Prestige
Public companies often are better known and more visible than private
companies, this enables them to obtain a larger market for their goods or
services. Public companies are able to have access to larger pools of
capital as well as different types of capital.
Valuation
Public trading of a company's shares sets a value for the company that is
set by the public market and not through more subjective standards set
by a private valuator. This is helpful for a company that is looking for a
merger or acquisition. It also allows the shareholders to know the value of
the shares.
Increased wealth
The founders of the company often have the sense of increased wealth as
a result of the IPO. Prior to the IPO these shares were illiquid and had a
more subjective price. These shares now have an ascertainable price and
after any lockup period these shares may be sold to the public, subject to
limitations of law.
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Disclosure
Regulatory Review
The Company will be open to review by the SEBI to ensure that the
company is making the appropriate filings with all relevant disclosures.
If the shares of the company's stock fall, the company may lose market
confidence, decreased valuation of the company may affect lines of
credits, secondary offering pricing, the company's ability to maintain
employees, and the personal wealth of insiders and investors.
Vulnerability
If a large portion of the company's shares are sold to the public, the
company may become a target for a takeover, causing insiders to lose
control. A takeover bid may be the result of shareholders being upset with
management or corporate raiders looking for an opportunity. Defending a
hostile bid can be both expensive and time consuming.
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Promoters
Industry Outlook
Business Plans
Financials
Why does the company require the money? Is the company floating
more equity than required? What is the debt component? Keep a track on
the profits, growth and margins of the previous years. A steady growth
rate is the quality of a fundamentally sound company. Check the
assumptions the promoters are making and whether these assumptions or
expectations sound feasible.
Risk Factors
The offer documents will list our specific risk factors such as the
company’s liabilities, court cases or other litigations. Examine how these
factors will affect the operations of the company.
Key Names
Every IPO will have lead managers and merchant bankers. You can
figure out the track record of the merchant banker through the SEBI
website.
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Pricing
Listing
You should have access to the brokers of the stock exchanges where
the company will be listing itself.
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Secondary market:-
Secondary market is the market for buying and selling securities of the
existing companies. Under this, securities are traded after being initially
offered to the public in the primary market and/or listed on the stock
exchange. The stock exchanges are the exclusive centres for trading of
securities. It is a sensitive barometer and reflects the trends in the
economy through fluctuations in the prices of various securities. It been
defined as, "a body of individuals, whether incorporated or not,
constituted for the purpose of assisting, regulating and controlling the
business of buying, selling and dealing in securities". There are 23 stock
exchanges in India. Listing on stock exchanges enables the shareholders
to monitor the movement of the share prices in an effective manner. This
assist them to take prudent decisions on whether to retain their holdings
or sell off or even accumulate further. However, to list the securities on a
stock exchange, the issuing company has to go through set norms and
procedures.
The stock exchanges are the exclusive centres for trading of securities.
Though the area of operation/jurisdiction of an exchange is specified at
the time of its recognition, they have been allowed recently to set up
trading terminals anywhere in the country. The three newly set up
exchanges (OTCEI, NSE and ICSE) were permitted since their
inception to have nation wide trading. The trading platforms of a
few exchanges are now accessible from many locations. Further,
with extensive use of information technology, the trading platforms
of a few exchanges are also accessible from anywhere through
the Internet and mobile devices. This made a huge difference in a
geographically vast country like India.
Most of the stock exchanges in the country are organised as” Mutuals”
which was considered beneficial in terms of tax benefits and matters
of compliance. The trading members, who provide brokering services,
also own,control and manage the exchanges. This is not an effective
model for self -regulatory organisations as the regulatory and
public interest of the exchange conflicts with private interests.
Efforts are on to demutualise the exchanges whereby ownership,
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(c) Membership:
(d) Listing:
A company seeking listing satisfies the exchange that at least 10% of the
securities, subject to a minimum of 20 lakh securities, were offered to
public for subscription, and the size of the net offer to the public
(i.e. the offer price multiplied by the number of securities
offered to the public, excluding reservations, firm allotment and
promoters' contribution) was not less than Rs. 100 crore, and the issue
is made only through book building method with allocation of 60%
of the issue size to the qualified institutional buyers. In the
alternative, it is required to offer at least 25% of the securities to
public.
listing agreement entered into between the company and the concerned
exchange. The listing agreement prescribes a number of requirements to
be continuously complied with by the issuers for continued listing
and such compliance is monitored by the exchanges. It also
stipulates the disclosures to be made by the companies and the
corporate governance practices to be followed by them. SEBI has
been issuing guidelines/circulars prescribing certain norms to be
included in the listing agreement and to be complied with by the
companies.
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certain exceptions;
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(i) Charges:
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1. Central Government:-
Reserve Bank Of India (RBI), the central bank of the country, acts as
investment banker to the government, raises funds for the government
through bond and T-bill issues, and also participates in the market through
open- market operations, in the course of conduct of monetary policy.
3. Primary dealers:-
Public Sector Units are large issuers of debt securities, for raising
funds to meet the long term and working capital needs.
6. Corporate treasuries:-
Corporate treasuries issue short and long term paper to meet the
financial requirements of the corporate sector.
7. Banks:-
8. Mutual funds :-
Provident funds are large investors in the bond markets, as the prudential
regulations governing the deployment of the funds they mobilise,
mandate investments pre-dominantly in treasury and PSU bonds.
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Government Securities:-
In this, successful bids are decided In this, successful bids are filled up
by filling up the notified amount in terms of prices that are bid by
from the lowest bid upwards. participants from the highest price
downward.
For example, the G-sec 10.3% For example, in March 2001, RBI
2010 derives its name from the auctioned the 11.43% 2015
cut-off yield at the auction, which security. This was a G-sec, which
in this case was 10.3%, which also had been earlier issued and trading
becomes the coupon payable on in the market. The auction was for
the bond. an additional issue of this existing
security. The coupon rate and the
dates of payment of coupons and
redemption are already known.
In both these kinds of auctions, the winning bids are those that exhaust
the amount on offer, beginning at the highest quoted price (or lowest
quoted yield). In the Indian markets, discriminatory price auction as well
as uniform price auction is used for all bond issuances. Whether an
auction will be Dutch or French is announced in the notification of the
auction.
If all the successful bidders have to pay the cut-off price of Rs. 111.2, the
auction is called a Dutch auction, or a uniform price auction. If the
successful bidders have to pay the prices they have actually bid, the
auction fills up the notified amounts, in various prices at which each of
the successful bidders bid. This is called a French auction, or a
discriminatory price auction. Each successful bidder pays the actual price
bid by him.
BID TYPE
RBI announces the auction of G-sec through a press notification, and invites bids.
Front office takes a view about Bank's participation in the auction, taking into
consideration the market factors, Bank's
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of 56 and the existing portfolio.
Accordingly, proposal is placed before the Investment Committee
Capital Market
Y
Bids are submitted through NDS_OM platform giving details of the quantum and
expected price/yield of securities. Report is generated.
Result of the auction is declared by RBI on the same day evening on NDS.
If bid is accepted either partially or fully, the same is entered and authorized in bank
system.
Corporate Bonds :-
The corporate bond market has been in existence in India for a long time.
However, despite a long history, the size of the public issue segment of
the corporate bond market in India has remained quite insignificant.
Secondary Market :-
Like in the case of equity secondary market, the secondary debt
market involves buying and selling of debt instruments which are already
issued in the primary market or listed on the exchanges.
The yields of the bonds have increased as the green shoots of recovery
in the global economy has led to an increase in risk taking behaviour
among the investors who are selling bonds to enter other asset classes
which are relatively more risky and offers higher yields. The S&P’s
decision to lower ratings outlook on US sovereign debt to negative from
stable led to sell off in the US treasuries.
Similarly in India, the rally in equity markets since the election results
on 18th May might have led to some sell off in the bond markets
which have pushed the Indian 10 yr bond yields to 6.70% levels from
6.22% in Mid May, in line with the sharp rise in the US 10 yr bonds .
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The bond interest rate is also affected by the RBI policy stance. If
the RBI goes for an expansionary monetary policy , then the bond
coupon rate will come down , as there will be ample liquidity in the
system which easily would meet the demand for the same. It is a
reverse situation when the RBI goes for a contractionary monetary
policy. This is because then the money supply in the economy would
be less as compared to the demand for the same and the
consequence would be hardening of the bond coupon rate.
3 L &T 18 NTPC
10 SBI 25 DLF
11 ONGC 26 Wipro
12 BHEL 27 Hindalco
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The 30 companies that make up the Sensex are selected and reviewed
from time to time by an “index committee”. This “index committee” is
made up of academicians, mutual fund managers, finance journalists,
independent governing board members and other participants in the
financial markets.
3 L &T 28 Wipro
6 ITC 31 Unitech
11 BHEL 36 SAIL
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Depending on the value of the market cap, the company will either be a
“mid-cap” or “large-cap” or “small-cap” company
According the BSE, any shares that DO NOT fall under the following
criteria, can be considered to be open market shares:
Locked-in shares and shares which would not be sold in the open market
in normal course.
A company has to submit a complete report about “who has how many of
the company’s shares” to the BSE. On the basis of this, the BSE will decide
the “free-float factor” of the company. The “free-float factor” is a very
valuable number. If you multiply the "free-float factor" with the “market
cap” of that company, you will get the “free-float market cap” ,which is
the value of the shares of the company in the open market
NSE respectively:-
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(c) Number of trades: -The scrip should be among the top 150
companies listed by average number of trades per day for the last one
year.
First: Find out the “free-float market cap” of all the 30 companies that
make up the Sensex.
Second: Add all the “free-float market cap’s” of all the 30 companies.
Third: Make all this relative to the Sensex base. The value you get is the
Sensex value. To understand the third step let us take an example .
Example:-Suppose, the free float market cap of all the 30 companies was
Rs. 100,000,000 at the end of one trading day and the value of sensex is
12500. The market cap at the end of next trading day becomes
Rs.120,000,000, then the sensex value at the end of that day is –
Thus the sensex value at the end of next trading day is 15000.
Please note that every time one of the 30 companies has a “stock split” or
a "bonus" etc. appropriate changes are made in the “market cap”
calculations.
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8.
Price Earnings ratio = Market price per share
Earnings Per Share
Who are the participants in the capital market ?
ANS:- The following are the market participants in the capital market :-
(i)Financial Institutions
(j)Insurance companies
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Pension Fund
Mutual fund
Financial Institution
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FDI tends to be much more stable than FII inflows. Moreover, FDI brings
not just capital but also better management and governance practices
and, often, technology transfer. The know-how thus transferred along with
FDI is often more crucial than the capital per se. No such benefit accrues
in the case of FII inflows, although the search by FIIs for credible
investment options has tended to improve accounting and governance
practices among listed Indian companies.
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The following graph shows the FDI & FII inflows in India during the last 5
years
The capital market is the market for securities, where companies and
governments can raise long term funds. Selling stock and selling bonds
are two ways to generate capital and long term funds. It provides a new
avenue to corporate and government to raise funds for long term.
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Capital market also indicate the state of the economy. It is said to be the
face of the economy. This is so because when capital market is stable ,
investments flow into capital market from within as well as outside the
country , which indicates that the future prospects of the economy are
good.
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The corporate earnings for the April – June quarter for the current
fiscal has been good. The companies like TCS, Infosys,Maruti Suzuki,
Bharti Airtel, ACC, ITC, Wipro,HDFC,Binani cement, IDEA, Marico Canara
Bank, Piramal Health, India cements , Ultra Tech, L&T, Coca- Cola, Yes
Bank, Dr. Reddy’s Laboratories, Oriental Bank of Commerce, Ranbaxy,
Fortis, Shree Cement ,etc have registered growth in net profit compared
to the corresponding quarter a year ago. Thus we see companies from
Infrastructure sector, Financial Services, Pharmaceutical sector, IT Sector,
Automobile sector, etc. doing well . This across the sector growth indicates
that the Indian economy is on the path of recovery which has been
positively reflected in the stock market( rise in sensex & nifty) in the last
two weeks. (July 13-July 24).
b)Environmental Factors :-
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The Indian Met Department (IMD) on 24th June stated that India would
receive only 93 % rainfall of Long Period Average (LPA). This piece of news
directly had an impact on Indian capital market with BSE Sensex falling by
0.5 % on the 25th June . The major losers were automakers and consumer
goods firms since the below normal monsoon forecast triggered concerns
that demand in the crucial rural heartland would take a hit. This is
because a deficient monsoon could seriously squeeze rural incomes,
reduce the demand for everything from motorbikes to soaps and
worsen a slowing economy.
A case in the point was declaration of core industries growth figure. The
six Core Infrastructure Industries – Coal, Crude oil, refining, finished steel,
power & cement –grew 6.5% in June , the figure came on the 23 rd of July
and had a positive impact on the capital market with the sensex and
nifty rising by 388 points & 125 points respectively.
d)Global Cues :-
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For any economy to achieve and sustain growth it has to have political
stability and pro- growth government policies. This is because when there
is political stability there is stability and consistency in government’s
attitude which is communicated through various government policies.
The vice- versa is the case when there is no political stability .So capital
market also reacts to the nature of government , attitude of government,
and various policies of the government.
The above statement can be substantiated by the fact the when the
mandate came in UPA government’s favour ( Without the baggage of left
party) on May 16 2009, the stock markets on Monday , 18th May had a
bullish rally with sensex closing 800 point higher over the previous day’s
close. The reason was political stability. Also without the baggage of left
party government can go ahead with reforms.
When the national income of the country increases and per capita
income of people increases it is said that the economy is growing . Higher
income also means higher expenditure and higher savings.This augurs
well for the economy as higher expenditure means higher demand and
higher savings means higher investment. Thus when an economy is
growing at a good pace capital market of the country attracts more
money from investors, both from within and outside the country and vice
-versa. So we can say that growth prospects of an economy does have an
impact on capital markets.
Europe , they may stay away from investment and wait for the right time
to come.
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FUNDAMENTAL ANALYSIS :-
The investor while buying stock has the primary purpose of gain. If
he invests for a short period of time it is speculative but when he holds it
for a fairly long period of time the anticipation is that he would receive
some return on his investment. Fundamental analysis is a method of
finding out the future price of a stock, which an investor wishes to buy.
The method for forecasting the future behavior of investments and the
rate of return on them is clearly through an analysis of the broad
economic forces in which they operate. The kind of industry to which they
belong and the analysis of the company's internal working through
statements like income statement, balance sheet and statement of
changes of income. The fundamental analysis involves
Fundamental Technical
Analysis (a) Company Analysis
Analysis
(C) Economic
Company Economic
Analysis.
Analysis Analysis
Industrial
(a) Company Analysis:-
Analysis
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i) Correct,
ii) Complete,
iv) Comparable.
(b)Industry Analysis:-
The industry has been defined as homogeneous groups of people doing a
similar kind of activity or similar work. In India, the broad classification of
industry is made according to stock exchange list, which is published. This
gives a distinct classification to industry to industry in different forms such
as:
Engineering,
Textiles,
Cement,
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Retail,
Sugar,
Information Technology,
Telecommunications,
FMCG,
Miscellaneous.
The industrial life cycle has a pioneering stage when the new inventions
and technological developments take place. During this time the investor
will notice great increase in the activity of the firm. Production will rise and
in relation to production, there will be a great demand for the product. At
this stage, the profits are also very high as the technology is new. Taking a
look at the profit many new firms enter into the same field till the market
becomes competitive. The market competitive pressures keep on
increasing with the entry of new-firms and the prices keep on declining
and then ultimately profits fall. At this stage all firms compete with each
other and only a few efficient firms are left to run the business and most
of the other firms are wiped out in the pioneering stage itself.
The efficient firms, which have been in the market now, find that it is time
to stabilize them. Although competition is there, the, number of firms
have gone down during pioneering stage itself and there are a large
number of firms left to run the business in the industry. This is the time
when each one has to show competitive strength and superiority. The
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investor will find that this is the best time to make an investment. At the
pioneering stage it was difficult to find out which of the firm to invest in,
but having waited for the stability period there has been a dynamic
selection process and a few of the large number of firms are left in the
industry. This is the period of security and safety and this is also called
period of maturity for the firm. This stage lasts from five years to fifty
years of a firm depending on the potential and productivity and also the
capability to meet the change in competition and rapid change in
customer habit.
3. STAGNATION STAGE: -
During the stagnation stage the investor will find that although there
is increase in sales of an organization, this is not in relation to the profits
earned by the company. Profits are also there but the growth in the firm is
lower than it was in the expansion stage. The industry finds that it is at a
loss of power and cannot expand. During this stage most of the firms who
have realized the competitive nature of the industry , begin to change
their course of action and start on a new venture . Investor should make a
continuous evaluation of their investments. In firms in which investors
have received profits for large number of years and have reached
stagnation stage, they should sell off their investment in those firms and
find better avenues in those firms where the expansion stage has set in,
many be in another industry.
1. POPULATION: -
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3. CAPITAL FORMATION: -
The natural resources are to a large extent are responsible for a country's
economic development and overall improvement in the condition of
corporate growth. In India, technological discoveries recycling of
materials, nuclear and solar energy and new synthetics should give the
investor an opportunity to invest in untapped or recently tapped resources
which would also produce higher investment opportunity.
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TECHNICAL ANALYSIS
Technical analysis is simply the study of prices as reflected on price
charts. Technical analysis assumes that current prices should represent all
known information about the markets. Prices not only reflect intrinsic
facts, they also represent human emotion and the pervasive mass
psychology and mood of the moment. Prices are, in the end, a function of
supply and demand. However, on a moment to moment basis, human
emotions,fear, greed, panic, hysteria, elation, etc. also dramatically affect
prices. Markets may move based upon people’s expectations, not
necessarily facts. A market "technician" attempts to disregard the
emotional component of trading by making his decisions based upon chart
formations, assuming that prices reflect both facts and emotion. Analysts
use their technical research to decide whether the current market is a
BULL MARKET or a BEAR MARKET.
A stock chart is a simple two-axis (X-Y) plotted graph of price and time.
Each individual equity, market and index listed on a public exchange has a
chart that illustrates this movement of price over time. Individual data
plots for charts can be made using the CLOSING price for each day. The
plots are connected together in a single line, creating the graph. Also, a
combination of the OPENING, CLOSING, HIGH and/or LOW prices for that
market session can be used for the data plots. This second type of data is
called a PRICE BAR. Individual price bars are then overlaid onto the graph,
creating a dense visual display of stock movement. Stock charts can be
drawn in two different ways. An ARITHMETIC chart has equal vertical
distances between each unit of price. A LOGARITHMIC chart is a
percentage growth chart.
2. TRENDS
The stock chart is used to identify the current trend. A trend reflects the
average rate of change in a stock's price over time. Trends exist in all time
frames and all markets. Trends can be classified in three ways: UP, DOWN
or RANGEBOUND. In an uptrend, a stock rallies often with intermediate
periods of consolidation or movement against the trend. In doing so, it
draws a series of higher highs and higher lows on the stock chart. In an
uptrend, there will be a POSITIVE rate of price change over time. In a
downtrend, a stock declines often with intermediate periods of
consolidation or movement against the trend. In doing so, it draws a
series of lower highs and lower lows on the stock chart. In a downtrend,
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there will be a NEGATIVE rate of price change over time. Range bound
price swings back and forth for long periods between easily seen upper
and lower limits. There is no apparent direction to the price movement on
the stock chart and there will be LITTLE or NO rate of price change.
Trends tend to persist over time. A stock in an uptrend will continue to rise
until some change in value or a condition occurs. Declining stocks will
continue to fall until some change in value or conditions occur. Chart
readers try to locate TOPS and BOTTOMS, which are those points where a
rally or a decline ends. Taking a position near a top or a bottom can be
very profitable. Trends can be measured using TRENDLINES. Very often a
straight line can be drawn UNDER three or more pullbacks from rallies or
OVER pullbacks from declines. When price bars return to that trend line,
they tend to find SUPPORT or RESISTANCE and bounce off the line in the
opposite direction.
3. VOLUME:-
Charts allow investors and traders to look at past and present price action
in order to make reasonable predictions and wise choices. It is a highly
visual medium. This one fact separates it from the colder world of value-
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based analysis. The stock chart activates both left-brain and right-brain
functions of logic and creativity. So it's no surprise that over the last
century two forms of analysis have developed that focus along these lines
of critical examination. The oldest form of interpreting charts is PATTERN
ANALYSIS. This method gained popularity through both the writings of
Charles Dow and Technical Analysis of Stock Trends, a classic book written
on the subject just after World War II. The newer form of interpretation is
INDICATOR ANALYSIS, a math-oriented examination in which the basic
elements of price and volume are run through a series of calculations in
order to predict where price will go next. Pattern analysis gains its power
from the tendency of charts to repeat the same bar formations over and
over again. These patterns have been categorized over the years as
having a bullish or bearish bias. Some well-known ones include HEAD and
SHOULDERS, TRIANGLES, RECTANGLES, DOUBLE TOPS, DOUBLE BOTTOMS
and FLAGS. Also, chart landscape features such as GAPS and TRENDLINES
are said to have great significance on the future course of price action.
Indicator analysis uses math calculations to measure the relationship of
current price to past price action. Almost all indicators can be categorized
as TREND-FOLLOWING or OSCILLATORS. Popular trend-following indicators
include MOVING AVERAGES, ON BALANCE VOLUME and MACD. Common
oscillators include STOCHASTICS, RSI and RATE OF CHANGE. Trend-
following indicators react much more slowly than oscillators. They look
deeply into the rear view mirror to locate the future. Oscillators react very
quickly to short-term changes in price, flipping back and forth between
OVERBOUGHT and OVERSOLD levels. Both patterns and indicators
measure market psychology. The core of investors and traders that make
up the market each day tend to act with a herd mentality as price rises
and falls. This "crowd" tends to develop known characteristics that repeat
themselves over and over again. Chart interpretation using these two
important analysis tools uncovers growing stress within the crowd that
should eventually translate into price change.
5. MOVING AVERAGES
The most popular technical indicator for studying stock charts is the
MOVING AVERAGE. This versatile tool has many important uses for
investors and traders. Take the sum of any number of previous CLOSE
prices and then divide it by that same number. This creates an average
price for that stock in that period of time. A moving average can be
displayed by re-computing this result daily and plotting it in the same
graphic pane as the price bars. In other words, if price starts to move
sharply upward or downward, it will take some time for the moving
average to "catch up". Plotting moving averages in stock charts reveals
how well current price is behaving as compared to the past. The power of
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the moving average line comes from its direct interaction with the price
bars. Current price will always be above or below any moving average
computation. When it is above, conditions are "bullish". When below,
conditions are "bearish". Additionally, moving averages will slope upward
or downward over time. This adds another visual dimension to a stock
analysis. Moving averages define STOCK TRENDS. They can be computed
for any period of time. Investors and traders find them most helpful when
they provide input about the SHORT-TERM, INTERMEDIATE and LONG-TERM
trends. For this reason, using multiple moving averages that reflect these
characteristics assist important decision making. Commons moving
average settings for daily stock charts are 20 days for short term, 50 days
for intermediate and 200 days for long-term. One of the most common
buy or sell signals in all chart analysis is the MOVING AVERAGE
CROSSOVER. These occur when two moving averages representing
different trends. For example, when a short-term average crosses BELOW
a long-term one, a SELL signal is generated. Conversely, when a short-
term crosses ABOVE the long-term, a BUY signal is generated. Moving
averages can be "speeded up" through the application of further math
calculations. Common averages are known as SIMPLE or SMA. These tend
to be very slow. By giving more weight to the current changes in price
rather than those many bars ago, a faster EXPONENTIAL or EMA moving
average can be created. Many technicians favor the EMA over the SMA.
Fortunately all common stock chart programs, online and offline do the
difficult moving average calculations but plot price perfectly.
jumps in to buy or sell. When a level is penetrated but does not attract a
crowd of buyers or sellers, it often falls back below the old support or
resistance. This failure is known as a FALSE BREAKOUT. Support and
resistance come in all varieties and strengths. They most often manifest
as horizontal price levels. But trend lines at various angles represent
support and resistance as well. The length of time that a support or
resistance level exists determines the strength or weakness of that level.
The strength or weakness determines how much buying or selling interest
will be required to break the level. Also, the greater volume traded at any
level, the stronger that level will be. Support and resistance exist in all
time frames and all markets. Levels in longer time frames are stronger
than those in shorter time frames. The ideas of Charles Dow, the first
editor of the Wall Street Journal, form the basis of technical analysis today.
The behavior patterns that he observed apply to markets throughout the
world.
Before going to equity analysis let’s see some of the basic investment or
rather investing principles:-
Everything Changes
Search Worldwide
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Capital Market
3. Warrants:
A warrant is a security issued by a company granting the holder of the
warrant the right to purchase a specified number of, shares at a specified
price any time prior to an expiry date. Warrants may be issued with
debentures or equity shares. The specific rights are already set out in the
warrant. An amount equivalent to at least twenty five percent of the price
fixed shall become payable for the warrant on the date of their allotment.
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The Securities and Exchange Board of India (SEBI) introduced the QIP
process in 2006, to prevent listed companies in India from developing an
excessive dependence on foreign capital. The complications associated
with raising capital in the domestic markets had led many companies to
look at tapping the overseas markets via Foreign Currency Convertible
Bonds (FCCB) and Global Depository Receipts (GDR) to fulfil their needs.
To keep a check on this process and to give a push to the domestic
markets, QIPs were launched.
The QIP guidelines of the securities and Exchange Board of India (SEBI)
cover any issue of equity shares / fully convertible debentures (FCDs) /
partly convertible debentures (PCDs) ,(nonconvertible debentures (NCDs)
with warrants or any securities (other than warrants)), which are
convertible into or exchangeable with equity shares at a later date
(hereinafter referred to as “specified securities”) made to Qualified
Institutional Buyers (QIBs) by a listed company.
Shareholders’ Resolution
Investors in a QIP :-
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Capital Market
(c) Right to appoint any nominee director on the board of the issuer.
Provided that a QIB who does not hold any shares in the issuer and
who has acquired the aforesaid rights in the capacity of a lender
shall not be deemed to be a person related to promoter/s.
Pricing of a QIP
"Relevant date" for the purpose of this clause means the date of the
meeting in which the Board of the company or the Committee of Directors
duly authorised by the Board of the company decides to open the
proposed issue.
"Stock exchange" for the purpose of this clause means any of the
recognised stock exchanges in which the equity shares of the issuer of the
same class are listed and in which the highest trading volume in such
shares has been recorded during the (two weeks) immediately preceding
the relevant date.
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Capital Market
Apart from preferential allotment, this is the only other method of private
placement. However, it scores over other methods, as it does not involve
many of the common procedural requirements such as the submission of
pre-issue filings to the market
5. Preferential Issue:-
The preferential issue of equity shares/ Fully Convertible Debentures
(FCDs)/ Partly Convertible Debentures (PCDs) or any other financial
instruments which would be converted into or exchanged with equity
shares at a later date, by listed companies whose equity share capital is
listed on any stock exchange, to any select group of persons under
Section 81(1A) of the Companies Act 1956 on private placement basis are
governed by the Securities and Exchange Board of India (SEBI) ,
Disclosure and Investor protection (DIP) guidelines,2000
I) The average of the weekly high and low of the closing prices of the
related shares quoted on the stock exchange during the six months
preceding the relevant date;
OR
II) The average of the weekly high and low of the closing prices of the
related shares quoted on a stock exchange during the two weeks
preceding the relevant date.
a) The price at which shares were issued by the company in its IPO or the
value per share arrived at in a scheme of arrangement under sections 391
to 394 of the Companies Act, 1956, pursuant to which the shares of the
company were listed, as the case may be. OR
b) The average of the weekly high and low of the closing prices of the
related shares quoted on the stock exchange during the period shares
have been listed preceding the relevant date. OR
c) The average of the weekly high and low of the closing prices of the
related shares quoted on a stock exchange during the two weeks
preceding the relevant date.”
"Relevant date" above means the date thirty days prior to the date
on which the meeting of general body of shareholders is held, in terms of
Section 81(1A) of the Companies Act, 1956 to consider the proposed
issue.
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Capital Market
Bibliography:-
Both ADR & GDR are depository receipts and represent a claim on the
underlying shares . The only difference is the location where they are
traded. If the depository receipt is traded in the United States Of
America (USA), it is called an American Depository Receipt or an ADR. If
the depository receipt is traded in a country other than USA, it is called
as a Global Depository Receipt or a GDR .
Recently we had an ADR issue by Tata Steel & Suzlon and a GDR
issue of Tata Power.
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http://in.reuters.com
http://www.raagvamdatt.com
Abbreviations
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