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SECURITIES Definition:- According to the Securities Contract Regulation Act 1956, securities include shares, scrip's, stocks, bonds, debentures and other marketable like securities of any incorporated company or other body corporate, or government.

Classification of Securities : 

Classification of Securities On the basis of return Fixed income securities e.g. bonds, debentures and preference shares Variable income securities e.g. Equities Source of Issue Government Semi-government Corporate


EQUITY SHARES The share capital of a company is divided into number of small units of equal value is termed as ”SHARES” SHARE CERTIFICATE is a certificate under common seal of the company specifying the number of shares held by any member. Various forms of Equity shares – Sweat Equity Non-voting share Right shares & Bonus shares

Rights according to section 85 (2) of the Companies Act 1956 :- : 

Rights according to section 85 (2) of the Companies Act 1956 :- Rights to……….. vote at the General body meetings of the company. control the management of the company. share the profits in the firms of dividend & bonus shares. during winding up of the company pre-emption in the issue of new capital. suit if there is any discrepancies in the rights set aside. receive a copy of the statutory report, copies of annual accounts along with audited reports. approach central government to call an annual meeting if the company fails to call such meetings Approach Company Law Board for calling an extraordinary general meeting.

Advantages of Equity share holders : 

Advantages of Equity share holders Equity share holder of a limited company is liable to the company’s debt’s only to the extend of the share in the paid up capital Main advantages are……… Capital appreciation Limited liability Free tradeabity Tax advantages Hedge against inflation


SWEAT EQUITY New instrument came in force from 1998 with a newly inserted section 79A of the Companies Act 1956. Sweat equities can be issued ….. At a discount to employees and directors As a consideration other than cash for contributions


NON-VOTING SHARES Came in force in 1994 under board guidelines Special Features No voting rights to the shareholders Carry additional dividends Right to participate in the bonus issue Maximum 25% of voting stock can be issued 20% more dividend Automatic voting rights if dividend not paid for 2 years


RIGHT SHARES New Shares issued to the existing share holders as a matter of legal rights. Regulated under the provisions of Companies Act & SEBI Time period for issue of rights shares. Can be forfeited by the share holders through a special resolution. Renounce in the favor of shareholder’s nominee. May be partly paid. Minimum subscription limit is prescribed.


BONUS SHARES Indication of higher future profits. Main aim to capitalize the free reserves Conditions:- Issued only to existing share holders Fully paid-up shareholders Distributed in addition to cash dividend Issued without any payment of cash


PREFERENCE SHARES Resembles features of bonds & equity. No voting rights Dividends paid at the discretion of the Board of Directors. Forms of Preference shares:- Cumulative preference shares Non- cumulative preference shares Convertible preference shares – as quasi-equity shares Redeemable preference shares Irredeemable preference shares


DEBENTURES According to Companies Act 1956 “Debenture includes debenture stock, bonds and any other securities of company, whether constituting a charge on the assets of the company or not”. Characteristics:- Certificate of indebtedness specifying date of redemption & interest rate Fixed rate of interest / coupon rate Redemption (creation of sinking fund) Indenture – trust deed between the company & debenture trustee

Types of debentures : 

Types of debentures Classified on the basis of Security & convertibility Secured or Unsecured (property involvement) Fully convertible – carries low interest rate Partly convertible Non-convertible


BONDS Long term debt instrument ,promises to pay a fixed annual sum as interest for specified period of time Features:- Face value, issued at par or discount Fixed / floating interest rate Specified maturity date Stated redemption value Traded in the stock market

Types of Bonds : 

Types of Bonds Secured bonds & unsecured bonds Perpetual bonds & redeemable bonds Fixed interest rate bonds & floating interest rate bonds Deep discount bonds – issued by IDBI & ICICI Capital indexed bonds Zero coupon bonds – traced in U.S security market

Zero coupon bonds : 

Zero coupon bonds E.g. Present value=Face value of the bond (1+R)n A bond matures in 20 years time with the face value of Rs.50,000 would be sold for Rs.5185 to give a return of 12 %.


WARRANTS Is a bearer document of title to buy specified number of equity shares at a specified price.


INVESTMENT INFORMATION International Affairs National Affairs Industry information Company information Stock market information

Investment Avenues : 

Investment Avenues Financial Securities Traditional non-security investments

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Negotiable Securities Variable income Securities Fixed income Securities Equity Shares Growth shares Income shares Defensive shares Cyclical shares Speculative shares Preference shares Debentures Bonds Post-office Savings Certificates Govt. securities (gilt edged) Money market securities Treasury bills Commercial Papers iii. Certificate of deposits

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Non-Negotiable Securities Deposits Tax sheltered Savings schemes Life insurance Bank deposits Post office deposits NBFC deposits Public Provident Fund scheme National savings scheme National savings certificates.

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Mutual Fund Open ended schemes Close ended schemes Growth schemes Income schemes Balanced schemes Money market schemes Tax savings schemes Index schemes

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Investment Process : 

Investment Process Investment policy Analysis Valuation Portfolio construction Portfolio Evaluation Investible funds Objectives Knowledge Market Industry Company Intrinsic value (book value of shares) Future value Diversification Debt& equity diversification Industry diversification Company diversification Selection & Allocation Appraisal Revision

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