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Investment Management:

Investment M anagement Meaning: It is the part of saving of an individual that is in the form of funds to be used in future terms. It is the allocation of monetary resource to assets that expected to yield some gain or positive return over a period of time.

Importance of Investment:

Importance of Investment Longer life expectancy Increasing rates of taxation Interest rates Inflation Income Investment channels

Factors favourable for investment:

Factors favourable for investment Legal safeguards Stable currency Existence of financial institutions to encourage savings Form of business organization

Features of investment program :

Features of investment program Safety of principal Liquidity Income stability Appreciation and purchasing power stability Legality and freedom from care tangibility

Speculation :

Speculation M eaning of speculation: It’s the involvement of funds of high risk as it includes: Risk Capital gain Time examples of speculation: lottery ticket, gambling

Investment Vs. Speculation:

Investment Vs. Speculation Investment Investment is employment of fund It is the waiting for the reward It used for current consumption to be used in future It is a long tem commitment Speculation It involves high risk fund Due to risk reward is not fully considered Current consumption cannot be used in future Its short term commitment



Forms of investment :

Forms of investment Small savings schemes Post office schemes N ational saving schemes Saving deposit Fixed deposit Recurring deposit Savings certificate Indiravikas patra Kisan vikas patra

Bank Deposits:

Bank Deposits Savings bank account Current account Recurring deposit Fixed deposit Mutual fund

Company deposits:

Company deposits Company deposits: It is the fixed deposit investment schemes offered by various companies like private and public. It includes N ame of the company Date of the incorporation Type of business Details of the company Name and address Profit and dividend description

Equity Shares:

Equity Shares Equity Shares: Equity Shares are common shares enjoyed by the investor and it has a equal rights to be used by the shareholder. Characteristics of Equity shares: Voting rights Ownership rights Par value Rights shares Tax benefit

Advantages of Equity investment:

Advantages of Equity investment Easy transferable Liability Profit potentiality Purchasing power Risk No repayment Immunity Better corporate governance Easy exit

Disadvantages of Equity investment:

Disadvantages of Equity investment Loss decision making power Loss of control Regulatory compliance Higher outgo Life long obligation

Govt Securities:

Govt Securities Govt Securities: Issued only by the central government, state government and semi government authorities. Ex: Gold bond, national defense bond, special rupee securities. Characteristics of Govt Securities: Issuing authority Stock market Commercial bank Rate of interest Financial institution underwriting

Mutual Fund:

Mutual Fund Mutual Fund: It is a concept based on sharing of risk and reward. The securities are subject to market risk. Types of Mutual Fund: Open ended mutual fund Closed ended mutual fund Units: I t is the mobilization of savings from the house hold sector and re investing in different channels. Ex: UTI Objectives of units: Safety Growth in dividend liquidity

Insurance :

Insurance Insurance: Insurance is the protection against the risk. It is the element of investment. It has tax benefit.

Gold and silver:

Gold and silver Gold: Gold is the valuable asset in our daily economy of life and it is used in various forms for the purpose of investment. Its value increased or decreased depends upon the economic condition. Ex: Gold coins Gold Bar and jewels. Silver: silver may be in the form of weight by the kilo gram. Silver may be less then the price of gold.

Real Estate:

Real Estate Real Estate: Land and house property is called as real estate. This investment taken by large number of people for hedging the inflation rates. Principles of investing in real estate: price Supply of land Tax Land has collateral value


UNIT-III New issue market The new issue market plays a crusial role in channelising the surplus funds or savings in to investing units for productive purpose, which ultimately helps in economic development and growth. It refers to the set-up which helps the industry to raise the funds by issuing different types of securities. These securities are issued directly to the investors (both individuals as well as institutional) through the mechanism called primary market or new issue market. The securities take birth in this market.



Slide 23:

1. Origination: It refers to the work of investigation, analysis and processing of new project proposals. Origination starts before an issue is actually floated in the market. It includes a careful study of the technical, economic and financial viability to ensure the soundness of the project and provides advisory services.

Slide 24:

2. Underwriting: It is an agreement whereby the underwriter promises to subscribe to a specified number of shares or debentures in the event of public not subscribing to the issue. Thus it is a guarantee for the marketability of shares. Underwriters may be institutional and non-institutional.

Slide 25:

3. Distribution : It is the function of sale of securities to ultimate investors. Brokers and agents who maintain regular and direct contract with the ultimate investors, perform this service.


METHODS OF FLOATING NEW ISSUES The various methods which are used in the floating of securities in the new issue market are: Public issues Offer for sale Placement Right issues

Public issues or Initial public offering (IPO):

Public issues or Initial public offering (IPO) The issuing company directly offers to the general public/institutions a fixed number of securities at a stated price or price band through a document called prospectus. This is the most common method followed by companies to raise capital through issue of the securities.

Offer of sale:

Offer of sale It consists in outright sale of securities through the intermediary of issue houses or share brokers. It consists of two stages: the first stage is a direct sale by the issuing company to the issue house and brokers at an agreed price. In the second stage, the intermediaries resell the above securities to the ultimate investors. The issue houses purchase the securities at a negotiated price and resell at a higher price. The difference in the purchase and sale price is called turn or spread.

Right Issue:

Right Issue When a listed company proposes to issue securities to its existing shareholders, whose names appear in the register of members on record date, in the proportion to their existing holding, through an offer document, such issues are called ‘Right Issue’. This mode of raising capital is the best suited when the dilution of controlling interest is not intended.




MEANING The secondary market consists of stock exchanges where existing securities are bought and sold. The securities of a government are traded in gilt-edged market. DEFINITION “Stock exchange or securities market comprises of all the places where buyers and sellers of their representatives undertake tranctions involving the sle of securities.” –Hastings.


DEFINITION “The organised securities exchanges are market places open only to members most whom are brokers acting for buyers and sellers of the stocks and bonds permitted in the market.”-Guthmann and Dougall. “An association, organisation or bodyof individuals whether incorporated or not, established for the purpose of assisting,regulating and controlling businessin buying or dealing in securities.:-The Securities Contracts (Regulation)Act,1956.



Characterstics of securities:

Characterstics of securities Important characterstics In association of individuals. Control by governing body. Abiding by rules and regulations. Listed securities .




LISTING OF SECURITIES Meaning: Listing means the admission of the security of a public limited company on a recognised stock exchange for trading. Objectives of listing: To provide marketability, liquidity and transferability to the securities To ensure fair dealings in securities To safeguard the interest of the investors and the general investing public.

Advantages of listing of securities:

Advantages of listing of securities Broadens and diversifies shareholdings Complies with statutory provisions Ensures a savings in the cost of raising new capital.

Procedures for listing of securities:

Procedures for listing of securities Attaching listing application and documents Scrutiny of listing application Listing agreement

Stock Brokers:

Stock Brokers Meaning: Brokers are the main players in the secondary market. They act in varying capacities such as principle, agent and speculator or oterwise jobber, tarawaniwals, commission brokers, sub-brokers and authorised clerks.

Functions of Stock Brokers:

Functions of Stock Brokers

Mechanics of Security trading in Stock Exchange:

Mechanics of Security trading in Stock Exchange Choosing a broker Opening an account with broker Placing orders Execution of orders Preparation of contract notes Settlement of traansaction

Investment Risk:

Investment Risk Meaning: Risk is the oppsit of the safety otherwise the possibility of loss or injury. The degree or probability of such laws.

Classification of Risk:

Classification of Risk Classification of Risk Market Interest Rate Purchasing Risk Risk power risk Business Risk Financial Risk Default or Insolvency Risk Internal Busines External Business Risk Risk

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