Financial Markets and Services

 C+G+I+E-M
 ADR-: American Depositary Receipt
o In American depositary receipt (ADR) is a negotiable certificate
issued by a U.S. bank representing a specified number of shares in
a foreign (i.e. non-U.S.) stock that is traded on a U.S. exchange.
ADRs are denominated in U.S. dollars with the underlying security
held by a U.S. financial institution overseas.
 GDR-: Global Depositary Receipt
o GDR or Global Depository Receipt is used to offer Indian shares in
any other country other than the US. For example, Infosys wants to
list its shares in Australia. Hence, Infosys deposits a large number
of its shares with a bank located in Australia where it wants to list
indirectly.
 IDR-: Indian Depositary Receipts
o An IDR is a depository receipt denominated in Indian rupees
issued by a domestic depository in India.

 Fiscal Deficit-: A fiscal deficit occurs when a government's total

expenditures exceed the revenue that it generates, excluding money from
borrowings.

 Primary Deficit-: Amount by which a government's total expenditure

exceeds its total revenue, excluding interest payments on debt.

 Revenue Deficit-: A revenue deficit occurs when the net income

generated, revenues less expenditures, falls short of the projected net
income. This happens when the actual amount of revenue received and/or
the actual amount of expenditures do not correspond with budgeted
revenue and expenditure figures.

 NRO-: NRO stands for Non-Resident Ordinary account. It refers to the

savings or Fixed Deposit account of a Non-resident Indian in a bank in
India. This is a Rupee account. Interest earned in this account is taxable.
The account can be jointly held with a resident Indian.

 NRE-: Primarily there are two reasons for opening such account: NRI
wants to repatriate overseas earned money back to India and/or NRI
wants to keep India based earnings in India. NRI has the option of

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 opening a Non Resident Rupee (NRE) account and/or a Non Resident
Ordinary Rupee (NRO) account.

 Time Value of Money-: The time value of money (TVM) is the concept
that money available at the present time is worth more than the identical
sum in the future due to its potential earning capacity.

 NPV-: Net present value (NPV) is the difference between the present
value of cash inflows and the present value of cash outflows over a period
of time. NPV is used in capital budgeting to analyze the profitability of a
projected investment or project.

 IRR-: Internal rate of return (IRR) is a metric used in capital budgeting to

estimate the profitability of potential investments. Internal rate of return
is a discount rate that makes the net present value (NPV) of all cash flows
from a particular project equal to zero. IRR calculations rely on the same
formula as NPV does.

 PV-: Present value (PV) is the current worth of a future sum of money or
stream of cash flows given a specified rate of return.

 FV-: Future value (FV) is the value of a current asset at a specified date
in the future based on an assumed rate of growth.

 Credit Creation-: Credit creation is a situation in which banks make more

loans to consumers and businesses, with the result that the amount of
money in circulating (being passed from one person to another) increases.
In other words it refers to the unique power of the banks to multiply loans
and advance and hence deposits.

 SLR-: Statutory liquidity ratio (SLR) is the Indian government term for
the reserve requirement that the commercial banks in India are required to
maintain in the form of cash, gold reserves, government approved
securities before providing credit to the customers. 19.5%

 CRR-: The CRR or the Cash Reserve Ratio is the share of a bank's total
deposit to be maintained with the latter in the form liquid cash. This is
mandated by the RBI. 4%

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  NDTL-: NDTL is sum of demand and time liabilities (deposits) of banks
with public and other banks wherein assets with other banks is subtracted
to get net liability of other banks. Deposits of banks are its liability and
consist of demand and time deposits of public and other banks.

 T-Bills-: T-bills, are short-term debt instruments issued by the U.S

Treasury. T-bills are issued for a term of one year of less. T-bills are
considered the world's safest debt as they are backed by the full faith and
credit of the United States government.

 Call Money Market-: Call money is money loaned by a bank that must be
repaid on demand. Unlike a term loan, which has a set maturity and
payment schedule, call money does not have to follow a fixed schedule,
nor does the lender have to provide any notice of repayment. Brokerages
use call money as a short-term source of funding to maintain margin
accounts for the benefit of their customers who wish to leverage their
investments. The funds can move quickly between lenders and brokerage
firms.

 Yield Curve-: A yield curve is a line that plots the interest rates, at a set
point in time, of bonds having equal credit quality but differing maturity
dates. The most frequently reported yield curve compares the three-
month, two-year, five-year and 30-year

 Interest rates and bond prices are inversely related.

 Yield to Call-: Yield to call is the yield of a bond or note if you were to
buy and hold the security until the call date, but this yield is valid only if
the security is called prior to maturity. The calculation of yield to call is
based on the coupon rate, the length of time to the call date and the
market price.

 Yield to Put-: A put bond is a bond that allows the bondholder to force
the issuer to repurchase the security at specified dates before maturity.
The repurchase price is set at the time of issue and is usually at par value.
A put bond can also be called a puttable bond or a retraction bond.

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  Perpetual Bond-: A perpetual bond is a fixed income security with no
maturity date. One major drawback to these types of bonds is that they
are not redeemable. PV= Coupun/yield %

 Zero Coupon Bond-: Zero-coupon bonds have only one coupon payment,
so we have to use a different calculation.

 Current Yield-: The current yield is an investment’s annual income

divided by its current price. It represents the return you would expect if
you held a bond for a year.

 Crowding Out Effect-: A situation when increased interest rates lead to a

reduction in private investment spending such that it dampens the initial
increase of total investment spending is called crowding out effect.

 G-Sec-: Government Securities are mostly interest bearing dated

securities issued by RBI on behalf of the Government of India. GOI uses
these funds to meet its expenditure commitments.

 Bonds-: A bond is a fixed income investment in which an investor loans

money to an entity (typically corporate or governmental) which borrows
the funds for a defined period of time at a variable or fixed interest rate.

 MIBOR-: MIBOR is the acronym for Mumbai Interbank Offer Rate, the
yardstick of the Indian call money market. It is the rate at which banks
borrow unsecured funds from one another in the interbank market.

 LIBOR-: Libor stands for London interbank offered rate. The interest rate
at which banks offer to lend funds (wholesale money) to one another in
the international interbank market.

 Expansionary Monetary Policy-: A policy by monetary authorities to

expand money supply and boost economic activity, mainly by keeping
interest rates low to encourage borrowing by companies, individuals and
banks.

 Contractionary Monetary Policy-: Contractionary monetary policy is a

form of economic policy used to fight inflation which involves decreasing

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 the money supply in order to increase the cost of borrowing which in turn
decreases GDP and dampens inflation.

 Mark to Market-: Mark to market (MTM) is a measure of the fair value of

accounts that can change over time, such as assets and liabilities. Mark to
market aims to provide a realistic appraisal of an institution's or
company's current financial situation.

 Duration of Bonds-: Duration is a measure of the sensitivity of the price,

the value of principal, of a fixed-income investment to a change in
interest rates. Duration is expressed as a number of years.

 Modified Duration-: Modified duration is a formula that expresses the

measurable change in the value of a security in response to a change in
interest rates. Modified duration follows the concept that interest rates
and bond prices move in opposite directions. This formula is used to
determine the effect that a 100-basis-point (1%) change in interest rates
will have on the price of a bond. Calculated as:

 Macleay Duration-: The Macaulay duration is the weighted average term

to maturity of the cash flows from a bond. The weight of each cash flow
is determined by dividing the present value of the cash flow by the price.

 Credit Rating of Bonds-: Investment grade. A bond is considered

investment grade or IG if its credit rating is BBB- or higher by Standard
& Poor's or Baa3 or higher by Moody's. Generally they are bonds that are
judged by the rating agency as likely enough to meet payment obligations
that banks are allowed to invest in them

 Individual Credit Rating (CIBIL)-: Credit Information Bureau India

Ltd.(CIBIL) is a credit information company licensed by the Reserve
Bank of India. CIBIL collects and maintains records of an individual's
payments pertaining to loans and credit cards. These records are
submitted to CIBIL by banks and other lenders, on a monthly basis.
Range 300-900.

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  Book Building-: Book building is a systematic process of generating,
capturing, and recording investor demand for shares during an initial
public offering (IPO), or other securities during their issuance process, in
order to support efficient price discovery. Or Book building is the process
by which an underwriter attempts to determine at what price to offer an
initial public offering (IPO) based on demand from institutional investors.
An underwriter builds a book by accepting orders from fund managers,
indicating the number of shares they desire and the price they are willing
to pay.
 ASBA-: ASBA (Applications Supported by Blocked Amount) is a
process developed by the India's Stock Market Regulator SEBI for
applying to IPO. In ASBA, an IPO applicant's account doesn't get debited
until shares are allotted to them.

 Green Shoe Option-: A greenshoe is a clause contained in the

underwriting agreement of an initial public offering (IPO) that allows
underwriters to buy up to an additional 15% of company shares at the
offering price. A stabilizing agent is appointed to maintain the price
fluctuations till 30 days.

 Right Issue-: A rights offering (issue) is an issue of rights to a company's

existing shareholders that entitles them to buy additional shares directly
from the company in proportion to their existing holdings, within a fixed
time period.

 Forward Contracts-: A forward contract is a customized contract between

two parties to buy or sell an asset at a specified price on a future date. A
forward contract can be used for hedging or speculation, although its non-
standardized nature makes it particularly apt for hedging.

 Future Contracts-: A futures contract is a legal agreement, generally

made on the trading floor of a futures exchange, to buy or sell a particular
commodity or financial instrument at a predetermined price at a specified
time in the future.

 Bonus Share-: A bonus issue, also known as a scrip issue or a

capitalization issue, is an offer of free additional shares to existing
shareholders. A company may decide to distribute further shares as an

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 alternative to increasing the dividend pay-out. For example, a company
may give one bonus share for every five shares held.

 Stock Split-: A stock split is a corporate action in which a company

divides its existing shares into multiple shares to boost the liquidity of the
shares.

 Reverse Stock Split-: A reverse stock split is a corporate action in which

a company reduces the total number of its outstanding shares. A reverse
stock split involves the company dividing its current shares by a number
such as 5 or 10, which would then be called a 1-for-5 or 1-for-10 split,
respectively.

 Prospectus-: A Prospectus is a formal legal document that is required by

and filed with the regulator that provides details about an investment
offering for sale to the public.
 Red-herring prospectus: a prospectus that contains most of the
information that will be presented in the final prospectus but often does
not mention a price and/or the number of securities. It can be distributed
to potential investors after the registration statement for a securities
offering has been filed with the securities commission. The name is
derived from the red legend printed across the body of the prospectus
illustrating that the registration has been filed but is not yet effective. A
red-herring prospectus is alternatively known as a preliminary prospectus.
 Pink-herring prospectus: a prospectus that is issued without disclosure of
the number of securities being offered or, in an initial public offering, the
estimated or indicative price range. It is a preliminary prospectus that
precedes the filing of a red-herring prospectus.
 Free-writing prospectus: any sort of written, electronic, or graphic
statement that describes an offer in terms of its issuer or securities. It
includes a legend stating that the investor can have a copy of the
prospectus at the website of relevant securities commission. Typically,
the issuer must file this prospectus with the securities commission no
later than the first date it is obtained. In the case of inexperienced issuers,
the securities commission may require that a preliminary prospectus is
filed before the filing of a free-writing prospectus.
 Abridged prospectus: a shorter version of the prospectus that includes all
the most key elements of the typical prospectus. An abridged prospectus
contains information very similar to the typical prospectus but in a
concise and compact form. Both versions of the prospectus must comply

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 with the disclosure requirements prescribed by the relevant securities
commission.
 Reconfirmation prospectus: a prospectus that a shell company must
prepare and submit for the approval of relevant securities and exchange
authorities (the SEC) prior to considering a reverse merger. This
prospectus contains detailed information about the private company
merging into the shell. It is handed over to purchasers in the shell's initial
public offering (IPO) who must reconfirm their investment after perusing
the prospectus before the merger can be finalized. At least 80 percent of
purchasers must reconfirm so that the merger transaction can be effected.
Purchasers who do not confirm will receive their investment back (of
course, less expenses).
 Shelf prospectus: a prospectus that describes a set of unissued, but
registered securities. It is used in situations where securities are issued in
consecutive stages over a period of time because the size of issue is too
large (and funds to be raised are enormous, making the filing of
prospectus each time very expensive). Later on, an issuer will only need
to file the so-called information memorandum with the relevant securities
commission.
 Deemed prospectus: a prospectus that is deemed to have been made by
the issuer, though it is actually offered to the public by a third party or the
so-called issue house (Indian terminology). The issuer saves the
underwriting expenses in selling its securities.

 Capital Asset Pricing Model-:

 BETA-: Beta is a measure of the volatility, or systematic risk, of a

security or a portfolio in comparison to the market as a whole. Beta is
used in the capital asset pricing model (CAPM), which calculates the
expected return of an asset based on its beta and expected market returns.

 Standard Deviation-: In finance, standard deviation is applied to the

annual rate of return of an investment to measure the investment's

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 volatility. Standard deviation is also known as historical volatility and is
used by investors as a gauge for the amount of expected volatility.

 Sharp Ratio-: The Sharpe ratio is the average return earned in excess of
the risk-free rate per unit of volatility or total risk.Sharpe ratio = (Mean
portfolio return − Risk-free rate)/Standard deviation of portfolio return.

o
Treynor’s Ratio-: The Treynor ratio, also known as the reward-to-volatility
ratio, is a metric for returns that exceed those that might have been gained on a
risk-less investment, per each unit of market risk.(Average Return of a Portfolio
– Average Return of the Risk-Free Rate)/Beta of the Portfolio.
 Jean sons Alpha-: The Jensen's measure is a risk-adjusted performance
measure that represents the average return on a portfolio or investment,
above or below that predicted by the capital asset pricing model (CAPM),
given the portfolio's or investment's beta and the average market return.
This metric is also commonly referred to as Jensen's alpha, or simply
alpha.
 R(i) = the realized return of the portfolio or investment
 R(m) = the realized return of the appropriate market index
 R(f) = the risk-free rate of return for the time period
 B = the beta of the portfolio of investment with respect to the chosen
market index
 Using these variables, the formula for Jensen's alpha is:
 Alpha = R(i) - (R(f) + B x (R(m) - R(f)))

 Dividends-: A dividend is a distribution of a portion of a company's

earnings, decided by the board of directors, paid to a class of its
shareholders. Dividends can be issued as cash payments, as shares of
stock, or other property.

 (Equity) Taxation-: STCG- 15% LTCG- 10% Exemption 1 Lakh.

Grandfather Clause. The date at which the stock price will be considered
is 31st Jan 2018. For eg X Ltd. Shares at ₹100 bought on 28th Jan 2017,

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 Sold on 31st march 2018 @ ₹185 ON 31st Jan Share price was 140 so the
profit on which tax will be charged is not 85 but on 45.

 Derivatives-: A derivative is a financial security with a value that is

reliant upon or derived from an underlying asset or group of assets. Its
price is determined by fluctuations in the underlying asset.

 European Option-: A European option is an option that can only be

exercised at the end of its life, at its maturity.

 American Option-: An American option is an option that can be exercised

anytime during its life. American options allow option holders to exercise
the option at any time prior to and including its maturity date.

 Call Option-: Call option is a derivative contract between two parties. The
buyer of the call option earns a right (it is not an obligation) to exercise
his option to buy a particular asset from the call option seller for a
stipulated period of time.

 Put Option-: Put option is a derivative contract between two parties. The
buyer of the put option earns a right (it is not an obligation) to exercise
his option to sell a particular asset to the put option seller for a stipulated
period of time.

Call & Put Buyer Seller

Breakeven Strike Price + Premium Strike Price + Premium
Profit Infinite Premium
Loss Premium Infinite

 Trade Finance-: Trade finance includes lending, the issuance of letters of

credit, factoring, export credit and insurance. Companies involved with
trade finance include importers and exporters, banks and financiers,
insurers and export credit agencies, and service providers.

 Letter of Credit-: LC is a bank service ensuring payment of the amount

indicated in the letter of credit to the Seller as per the Buyer's instructions

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 against the shipment of goods, performance of other conditions stipulated
in the letter of credit and submittal of relevant documents.
 Irrevocable LC. This LC cannot be cancelled or modified without consent
of the beneficiary (Seller). This LC reflects absolute liability of the Bank
(issuer) to the other party.
 Revocable LC. This LC type can be cancelled or modified by the Bank
(issuer) at the customer's instructions without prior agreement of the
beneficiary (Seller). The Bank will not have any liabilities to the
beneficiary after revocation of the LC.
 Stand-by LC. This LC is closer to the bank guarantee and gives more
flexible collaboration opportunity to Seller and Buyer. The Bank will
honour the LC when the Buyer fails to fulfill payment liabilities to Seller.
 Confirmed LC. In addition to the Bank guarantee of the LC issuer, this
LC type is confirmed by the Seller's bank or any other bank. Irrespective
to the payment by the Bank issuing the LC (issuer), the Bank confirming
the LC is liable for performance of obligations.
 Unconfirmed LC. Only the Bank issuing the LC will be liable for
payment of this LC.
 Transferable LC. This LC enables the Seller to assign part of the letter of
credit to other party(ies). This LC is especially beneficial in those cases
when the Seller is not a sole manufacturer of the goods and purchases
some parts from other parties, as it eliminates the necessity of opening
several LC's for other parties.
 Back-to-Back LC. This LC type considers issuing the second LC on the
basis of the first letter of credit. LC is opened in favor of intermediary as
per the Buyer's instructions and on the basis of this LC and instructions of
the intermediary a new LC is opened in favor of Seller of the goods.
 Payment at Sight LC. According to this LC, payment is made to the seller
immediately (maximum within 7 days) after the required documents have
been submitted.
 Deferred Payment LC. According to this LC the payment to the seller is
not made when the documents are submitted, but instead at a later period
defined in the letter of credit. In most cases the payment in favor of Seller
under this LC is made upon receipt of goods by the Buyer.
 Red Clause LC. The seller can request an advance for an agreed amount
of the LC before shipment of goods and submittal of required documents.
This red clause is so termed because it is usually printed in red on the
document to draw attention to "advance payment" term of the credit.

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  Incoterms-: The International Chamber of Commerce publishes
Incoterms, aka international commercial terms, and traders commonly use
them to help understand one another in domestic and international trade.

 FOB-: Free on board is a trade term that indicates whether the seller or
the buyer is liable for goods that are damaged or destroyed during
shipping. "FOB shipping point" or "FOB origin" means the buyer is at
risk once the seller ships the goods.

 CIS-: A Collective Investment Scheme (CIS), as its name suggests, is an

investment scheme wherein several individuals come together to pool
their money for investing in a particular asset(s) and for sharing the
returns arising from that investment as per the agreement reached
between them prior to pooling in the money.

 SWIFT-: A SWIFT code — sometimes also called a SWIFT number — is

a standard format for Business Identifier Codes (BIC). It's used to
identify banks and financial institutions globally. These codes are used
when transferring money between banks, in particular for international
wire transfers or SEPA payments.
 FIRC-: A Foreign Inward Remittance Certificate (FIRC) is a document
that acts as a testimonial that all incoming international transfers ended
up in the account where they were supposed to go. It's kind of like a
receipt in that it's used as proof that an individual or a business has
received a transfer from outside of India.

 EEFC-: Exchange earners’ foreign currency account (EEFC) is an

account maintained in foreign currency with an authorised dealer i.e. a
bank dealing in foreign exchange. It is a facility provided to the foreign
exchange earners, including exporters, to credit 100% of their foreign
exchange earnings to the account, so that the account holders do not have
to convert foreign exchange into rupees and vice versa, thereby
minimising the transaction costs.

 Bill Discounting-: While discounting a bill, the Bank buys the bill (i.e.
Bill of Exchange or Promissory Note) before it is due and credits the
value of the bill after a discount charge to the customer's account. The
transaction is practically an advance against the security of the bill and

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 the discount represents the interest on the advance from the date of
purchase of the bill until it is due for payment.

 Usance-: In international trade, usance is the allowable period of time,

permitted by custom, between the date of the bill and its payment. The
usance of a bill varies between countries, often ranging from two weeks
to two months. It is also the interest charged on borrowed funds.

 Packing Credit-: Packing credit is basically a loan provided to exporters

or sellers to finance the goods' procurement before shipment. The bank
will make the funds available to a letter of credit issued favouring the
seller and a confirmed order for selling the goods or services.

 Mutual Funds-: A mutual fund is a professionally-managed investment

scheme, usually run by an asset management company that brings
together a group of people and invests their money in stocks, bonds and
other securities.

 Open Ended-: Open-end mutual fund shares are bought and sold on
demand at their net asset value, or NAV, which is based on the value of
the fund’s underlying securities and is generally calculated at the close of
every trading day. Investors buy shares directly from a fund.

 Close Ended-: Closed-end funds have a fixed number of shares and are
traded among investors on an exchange. Like stocks, their share prices
are determined according to supply and demand, and they often trade at a
wide discount or premium to their net asset value.

 ETF-: Exchange-traded funds also trade like stocks on an exchange, but

their market prices hew more closely to their net asset value than closed-
end funds. Premiums and discounts usually stay within 1 percent of
NAV, with the exception of some smaller ETFs that trade infrequently.

 ELSS-: Equity-linked savings scheme popularly known as ELSS are

open-ended, diversified equity schemes offered by mutual funds in India.
They offer tax benefits under the new Section 80C of Income Tax Act
1961.

 Mutual Fund Taxability-:

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 Short-term Long-term
Equity funds Less than 12 months 12 months and more
Balanced funds Less than 12 months 12 months and more
Debt funds Less than 36 months 36 months and more

Taxation on different types of mutual funds

Short-term capital Long-term capital gains
gains (STCG) tax (LTCG) tax
Equity mutual 15% 10% on LTCG in excess
funds of Rs. 1 Lakh
Balanced 15% 10% on LTCG in excess
mutual funds of Rs. 1 Lakh
Debt mutual As per tax slab 20% after indexation
funds

 MWP Act.-: Married Women's Property Act 1874 (MWP Act) was
created to protect the properties owned by women from relatives,
creditors and even from their own husbands. The Section 6 of the MWP
Act covers life insurance plans. Any married man can take a life
insurance policy under MWP Act. The policy can be taken only on one’s
own name, i.e., the life assured has to be the proposer himself. Any type
of plan can be endorsed to be covered under MWP Act.

o The beneficiaries can be:

 The wife alone
 The child/ children alone (both natural and adopted)
 Wife and children together or any of them

 Dividend Stripping-: Dividend stripping is a strategy to reduce the tax

burden, by which an investor gets tax free dividend by investing in
securities (including units), shortly before the record date and exiting
after the record date at a lower price, thereby incurring a short-term
capital loss.
 Buying or acquiring ay securities or units within a period of three months
prior to the record date.
 Selling or transferring such securities within a period of three months
after such date, or such units within a period of nine months after such
date;
 The dividend or income on such securities or unit received or receivable
by such person during the intervening period is exempt from tax.

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  Bonus Stripping-: Section 94(8) has been inserted with effect form
assessment year 2005-06 to curb the practice of creation of losses via
Bonus Stripping. Briefly, it says that the loss, if any, arising to a person
on account of purchase and sale of original units shall be ignored for the
purpose of computing his income chargeable to tax if the following
conditions are satisfied:
 The person buys or acquires any units within a period of 3 months prior
to the record date,
 He is allotted additional units (bonus units) without any payment on the
basis of holding of such units on such date,
 He sells or transfers all or any of the units excluding bonus units within a
period of 9 months after such date,
 On the date of sale or transfer he continues to hold all or any (atleast one)
of the additional units (bonus units).

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  Round Tripping-: The term ‘round-tripping’ is self-explanatory. It
denotes a trip where a person or thing returns to the place from where the
journey began. In the context of black money, it leaves the country
through various channels such as inflated invoices, payments to shell
companies overseas, the hawala route and so on. After cooling its heels
overseas for a while, this money returns in a freshly laundered form; thus
completing a round-trip. This route is far from simple or straightforward.
Those indulging in this game are past masters who make the money flow
through multiple layers consisting of many entities and companies.

 Phantom Sales-: A phantom stock plan is an employee benefit plan that

gives selected employees (senior management) many of the benefits of
stock ownership without actually giving them any company stock. This is
sometimes referred to as shadow stock. Rather than getting physical
stock, the employee receives pretend stock. Even though it's not real, the
phantom stock follows the price movement of the company's actual stock,
paying out any resulting profits.

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  Circular Trading-: Circular trading is a fraudulent scheme where sell
orders are entered by a broker who knows that offsetting buy orders for
the exact same number of shares at the same time and at the same price,
have either been or will be entered.

 Shell Companies-: A shell corporation is a corporation without active

business operations or significant assets. These types of corporations are
not all necessarily illegal, but they are sometimes used illegitimately,
such as to disguise business ownership from law enforcement or the
public.

 Smurfing Layering-: A commonly used money laundering method,

smurfing involves the use of multiple individuals and/or multiple
transactions for making cash deposits, buying monetary instruments or
bank drafts in amounts under the reporting threshold. The individuals
hired to conduct the transactions are referred to as “smurfs.”

 TBML-: TBML is the process by which criminals use a legitimate trade

to disguise their criminal proceeds from their unscrupulous sources. The
crime involves a number of schemes in order to complicate the
documentation of legitimate trade transactions; such actions may include
moving illicit goods, falsifying documents, misrepresenting financial
transactions, and under- or over-invoicing the value of goods.

 Offer For Sale-: Offer for sale (OFS) is a simpler method of share sale
through the exchange platform for listed companies. The mechanism was
first introduced by India’s securities market regulator Sebi, in 2012, to
make it easier for promoters of publicly-traded companies to cut their
holdings and comply with the minimum public shareholding norms by
June 2013. The method was largely adopted by listed companies, both
state-run and private, to adhere to the Sebi order. Later, the government
started using this route to divest its shareholding in public sector
enterprises.

 ICRA-: Was originally named Investment Information and Credit Rating

Agency of India Limited ICRA’s credit ratings are symbolic
representations of its current opinion on the relative credit risks
associated with the rated debt obligations/issues. These ratings are

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 assigned on an Indian (that is, national or local) credit rating scale for
Indian Rupee denominated debt obligations.

 CARE-: It is the newest company launched in 1993 short for Credit

Analysis and Research Limited. It was set up as a committee for the
credit raters in India. It has completed over 7500 rating assignments
since its formulation.

 Insider Trading-: Insider trading is defined as a malpractice wherein trade

of a company's securities is undertaken by people who by virtue of their
work have access to the otherwise non public information which can be
crucial for making investment decisions.

 Operators-: Market operator activity is a teamwork between different

individuals or different investment institutions conspiring and working
together to inflate or deflate the value of a stock.

 Frontrunner-: Front-running is when a broker enters into an equity trade

with foreknowledge of a block transaction which will influence the price
of the equity, resulting in an economic gain for the broker. It also occurs
when a broker buys shares for their account ahead of a firm's strong buy
recommendation to clients. Front-Running is also known as
tailgating. Front-running is a prohibited practice for brokers.

 Estate Planning-: Estate planning is the act of preparing for the transfer of
a person's wealth and assets after his or her death. Assets, life insurance,
pensions, real estate, cars, personal belongings, and debts are all part of
one's estate.

 Tax Adjustment-: Set off of Capital Losses: The Income Tax does not
allow Loss under the head Capital Gains to be set off against any income
from other heads – this can be only set off within the ‘Capital Gains’
head. Long Term Capital Loss can be set off only against Long Term
Capital Gains. Short Term Capital Losses are allowed to be set off against
both Long Term Gains and Short Term Gains. Carry Forward of Losses:
Fortunately, if you are not able to set off your entire capital loss in the
same year, both Short Term and Long Term loss can be carried forward
for 8 Assessment Years immediately following the Assessment Year in
which the loss was first computed. If Capital Losses have arisen from a

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 business, such losses are allowed to be carried forward and carrying on of
this business is not compulsory.

 Private Equity-: Private equity is capital that is not listed on a public

exchange. Private equity is composed of funds and investors that directly
invest in private companies, or that engage in buyouts of public
companies, resulting in the delisting of public equity. Institutional and
retail investors provide the capital for private equity, and the capital can
be utilized to fund new technology, make acquisitions, expand working
capital, and to bolster and solidify a balance sheet.

 Venture Capitalist-: A venture capitalist is an investor who either

provides capital to startup ventures or supports small companies that wish
to expand but do not have access to equities markets. Venture capitalists
are willing to invest in such companies because they can earn a massive
return on their investments if these companies are a success.

 Cash Flow Discounting-: In finance, discounted cash flow (DCF) analysis

is a method of valuing a project, company, or asset using the concepts of
the time value of money. All future cash flows are estimated and
discounted by using cost of capital to give their present values (PVs).
 Harshad Mehta-: https://youtu.be/d_xqhSD44gY

 Ketan Parekh-: https://youtu.be/AFxyTWg_gqY

 Jignesh Shah-: https://youtu.be/YOR10FjSvgM

 Satyam-: https://youtu.be/-ZGIN1wLux4

 Sahara-: https://youtu.be/83f4oTN10M4

 AML-: Anti money laundering (AML) refers to a set of procedures, laws

and regulations designed to stop the practice of generating income
through illegal actions.

 Bulk Deal-: A bulk deal is a trade where total quantity of shares bought or
sold is more than 0.5% of the number of shares of a listed company. Bulk
deals happen during normal trading window provided by the broker.The
broker who manages the bulk deal trade has to provide the details of the

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 transaction to the stock exchanges whenever they happen. Unlike block
deals, bulk deal orders are visible to everyone.

 Block Deal-: It is a transaction of a minimum quantity of 500,000 shares

or a minimum value of Rs 5 crore between two parties, wherein they
agree to buy or sell shares at an agreed price among themselves. The deal
takes place through a separate trading window and they happen at the
beginning of trading hours for duration of 35 minutes i.e. from 9.15 am to
9.50 am. Every trade has to result in delivery. Rules set by the Securities
and Exchange Board of India state that the price of a share or dared at the
window should range within +1% to -1% of the current market price or
the previous day's closing price. Block deals are not visible to the regular
market as they happen in a separate window.
The block deal orders are notified to exchanges and are disclosed on the
bourse's website with details such as name of the company, client,
quantity of shares and the average price at this the deal took place.

 Retail Individual Investor (RII)

o Resident Indian Individuals, NRIs and HUFs who apply for less
than Rs 2 lakhs in an IPO falls under RII category.
o Not less than 35% of the Offer is reserved for RII category.
o NRI's or HUG's who apply with less than Rs 2,00,000 can apply in
RII category.
 Non-institutional bidders (NII)
o Resident Indian individuals, Eligible NRIs, HUFs, companies,
corporate bodies, scientific institutions, societies and trusts who
apply for than Rs 2 lakhs of IPO shares falls under NII category.
o NII need not to register with SEBI.
o Not less than 15% of the Offer is reserved for NII category.
o High Net-worth Individual (HNI) who applies for over Rs 2 Lakhs
in an IPO falls under this category.
 Qualified Institutional Bidders (QIB's)
o Public financial institutions, commercial banks, mutual funds and
Foreign Portfolio Investors ect can apply in QIB category. SEBI
registration is required for institutions to apply under this category.
o 50% of the Offer Size is reserved for QIB's
 Anchor Investor
o An anchor investor in a public issue refers to a qualified
institutional buyer (QIB) making an application for a value of Rs
10 crore or more through the book-building process. An anchor

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 investor can attract investors to public offers before they hit the
market to boost their confidence.

 RTGS-: Real time gross settlement is the continuous process of settling

payments on an individual order basis without netting debits with credits
across the books of a central bank

 NEFT-: National Electronic Funds Transfer (NEFT) is a nation-wide

payment system. Under this Scheme, individuals can electronically
transfer funds from any bank branch to any individual having an account
with any other bank branch in the country participating in the Scheme.
NEFT transactions are settled in batches.

 PIPE-: A private investment in public equity, often called a PIPE deal,

involves the selling of publicly traded common shares or some form of
preferred stock or convertible security to private investors. It is an
allocation of shares in a public company not through a public offering in
a stock exchange

 Leverage Buy Out-: A leveraged buyout (LBO) is the acquisition of

another company using a significant amount of borrowed money to meet
the cost of acquisition. The assets of the company being acquired are
often used as collateral for the loans, along with the assets of the
acquiring company.

 Micro Finance-: Microfinance, also known as microcredit, is a financial

service that offers loans, savings and insurance to entrepreneurs and small
business owners who don't have access to traditional sources of capital,
like banks or investors.

 Gold Loan-: Loan against gold is a very simple concept. By pledging

your gold ornaments, coins, biscuits, bars etc. the lender provides you
with liquidity at a predetermined rate of interest. Loans are sanctioned
after scrutiny of basic documents and satisfactory evaluation of the gold
pledged.

 NBFC-: Non-banking financial companies (NBFCs) are financial

institutions that offer various banking services, but do not have a banking
license. Generally, these institutions are not allowed to take deposits from

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 the public, which keeps them outside the scope of traditional oversight
required under banking regulations. Cant Issue Cheque Books

Asset Based Company(AFC)

The main business of these companies is to finance the assets such as machines,
automobiles, generators, material equipments, industrial machines etc.

Investment Company (IC)

The main business of these companies is to deal in securities.

Loan Companies (LC)

The main business of such companies is to make loans and advances (not for
assets but for other purposes such as working capital finance etc. )

Infrastructure Finance Company (IFC)

A company which has net owned funds of at least Rs. 300 Crore and has
deployed 75% of its total assets in Infrastructure loans is called IFC provided it
has credit rating of A or above and has a CRAR of 15%.

Infrastructure Debt Fund (IDF-NBFC)

A debt fund means an investment pool in which core holdings are fixed income
investments. The Infrastructure Debt Funds are meant to infuse funds into the
infrastructure sector. The importance of these funds lies in the fact that the
infrastructure funding is not only different but also difficult in comparison to
other types of funding because of its huge requirement, long gestation period
and long term requirements.

Non-Banking Financial Company – Micro Finance Institution (NBFC-MFI)

NBFC-MFI is a non-deposit taking NBFC which has at least 85% of its assets in
the form of microfinance. Such microfinance should be in the form of loan
given to those who have annual income of Rs. 60,000 in rural areas and Rs.
120,000 in urban areas. Such loans should not exceed Rs. 50000 and its tenure
should not be less than 24 months. Further, the loan has to be given without
collateral. Loan repayment is done on weekly, fortnightly or monthly
installments at the choice of the borrower.

Non-Banking Financial Company – Factors (NBFC-Factors)

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Factoring business refers to the acquisition of receivables by way of assignment
of such receivables or financing, there against either by way of loans or
advances or by creation of security interest over such receivables but does not
include normal lending by a bank against the security of receivables etc.

 ESOP-: An employee stock ownership plan (ESOP) is a qualified

defined-contribution employee benefit (ERISA) plan designed to invest
primarily in the stock of the sponsoring employer. ESOPs are "qualified"
in the sense that the ESOP's sponsoring company, the selling shareholder
and participants receive various tax benefits.

 ESPP-: An employee stock purchase plan (ESPP) is a company-run

program in which participating employees can purchase company shares
at a discounted price. Employees contribute to the plan through payroll
deductions which build up between the offering date and the purchase
date.

 RSU-: Restricted stock units (RSUs) are issued to an employee through

a vesting plan and distribution schedule after achieving required
performance milestones or upon remaining with their employer for a
particular length of time. RSUs give an employee interest in company
stock but have no tangible value until vesting is complete. The restricted
stock units are assigned a fair market value when they vest. Upon vesting,
they are considered income, and a portion of the shares are withheld to
pay income taxes. The employee receives the remaining shares and can
sell them at their discretion.

 In the Money-: In the money means that a call option's strike price is
below the market price of the underlying asset or that the strike price of a
put option is above the market price of the underlying asset. Being in the
money does not mean you will profit, it just means the option is worth
exercising.

 At the Money-: At the money is a situation where an option's strike price

is identical to the price of the underlying security. Both call and put
options are simultaneously at the money.

 Out of the Money-: Out of the money (OTM) is term used to describe a
call option with a strike price that is higher than the market price of the
underlying asset, or a put option with a strike price that is lower than the

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 market price of the underlying asset. An out of the money option has no
intrinsic value, but only possesses extrinsic or time value.

 Gross exposure margin-: It is payable on daily outstanding scripwise

positions. The exchange asks brokers to make certain security available to
it in the form of cash, bank guarantee or shares to safeguard against any
default of payment against positions taken on a particular day. Gross
exposure margin is normally paid in advance of transactions.

 Initial margin-:At end of every trading day, brokers are required to collect
margin payable against open positions either on the buy side or on the sell
side from its clients. Daily margins are collected to safeguard against
eventualities that might occur between two trading days. In the derivative
segment, both the buyer and seller have to deposit initial margin before
the opening of the day of the Futures transaction. The margin is normally
calculated taking into consideration changes in daily price of the
underlying (say the index) over a specified historical period (say past one
year).

 Special margin-: Special margins are imposed on stocks which witness

abnormal movement in price or volume. It is a surveillance measure
intended to check speculative activity in particular scrip. At the BSE, the
margin is levied at 25% or 50%. This largely depends on the sharpness in
the movement of share price or volumes, client wise net outstanding
purchase or sale position or on both sides.

 Mark-to-market margin-: Mark to market margin is the amount of

difference that a buyer or seller has to pay when the market price falls
below the transaction price or rises above the transaction price. The
margin is calculated on the basis of difference between a particular day’s
close and the previous day’s close. It is mostly applicable in the F&O
segment.

 Volatility margin-: The volatility margin is imposed to check abnormal

intra-day fluctuations in any scrip. The objective is to ensure that buyers
and sellers honour their commitments even if there are wild swings in
share prices. Volatility margin is generally calculated by working out the
difference between the highest price and the lowest price over a 45-day
transaction cycle and comparing it to the lowest price. The margin is
paid in cash or in demat forms of shares.

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  Ad Hoc Margin-: The Sebi-prescribed Ad-hoc margins are imposed on
brokers with very large position overall or in specific low price stocks
which are illiquid.

 Circuit Breaker-: Circuit breakers are pre-defined values in percentage

terms, which trigger an automatic check when there is a runaway move in
any security or index on either direction. The values are calculated from
the previous closing level of the security or the index.

 Bank Guarantee-: A bank guarantee is a promise from a bank or other

lending institution that if a particular borrower defaults on a loan, the
bank will cover the loss. Note that a bank guarantee is not the same as a
letter of credit.

 Merchant Banker-: A merchant bank is a company that deals mostly in

international finance, business loans for companies and underwriting.
These banks are experts in international trade, which makes them
specialists in dealing with multinational corporations.

 LoU-: Letter of Undertaking is a form of a guarantee issued by a banking

entity to a person concerned for availing short term credit from the
overseas branch of an Indian bank. These letters of undertaking (LoUs)
are not issued against general retail transactions and instead are used for
business or trade transactions.

 Absolute Valuation-: An absolute value is a business valuation method

that uses discounted cash flow (DCF) analysis to determine a company's
financial worth.

 Vostro A/c-: A vostro account is an account a correspondent bank holds

on behalf of another bank.

 Nostro A/c-: Nostro account refers to an account that a bank holds in a

foreign currency in another bank.

 Fundamental Analysis-: Fundamental analysis is a method of evaluating a

security in an attempt to measure its intrinsic value, by examining related
economic, financial and other qualitative and quantitative factors.

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  Technical Analysis-: Technical analysis is a trading tool employed to
evaluate securities and identify trading opportunities by analyzing
statistics gathered from trading activity, such as price movement and
volume.

 Buy Side-: Buy-side is a term used in investment firms to refer to

advising institutions concerned with buying investment services. Private
equity funds, mutual funds, life insurance companies, unit trusts, hedge
funds, and pension funds are the most common types of buy side entities.

 Sell Side-: Sell side refers to the part of the financial industry that is
involved in the creation, promotion and sale of stocks, bonds, foreign
exchange and other financial instruments. Sell Side includes firms like
Investment Banking, Commercial Banking, Stock Brokers, Market
makers and other Corporates.

 EIC Framework (Top Down Approach)-: Top-down investing is an

investment approach that involves looking at the overall picture of the
economy and then breaking down the various components into finer
details. After looking at the big-picture conditions around the world,
analysts examine different industrial sectors to select those that are
forecast to outperform the market. From this point, they further analyse
stocks of specific companies to choose potentially successful ones as
investments.

 EIC Framework (Bottom Up Approach)-: Bottom-up investing is an

investment approach that focuses on the analysis of individual stocks and
deemphasizes the significance of economic cycles and market cycles. In
bottom-up investing, the investor focuses his attention on a specific
company, rather than on the industry in which that company operates or
on the economy as a whole. This approach assumes individual companies
can do well even in an industry that is not performing.

 Free Float Market Capitalisation-: In free float market capitalisation, the

value of the company is calculated by excluding shares held by the
promoters. These excluded shares are the free float shares.

 Creeping Acquisition-: Creeping acquisitions refer to the purchase of

company shares by its investors (usually, promoters or shareholders with

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 significant holdings) over a number of small transactions, so as to
increase the investors' stake in the company by an economically
significant amount without requiring any disclosure.

 Bullet Strategy-: If an investor knows that he or she will need a certain

amount of capital at a given point in time in the future, then a bullet
investment strategy might be the best way to go. This strategy suggests
that an investor stagger purchase dates on bonds that all mature at the
same time.

 Barbell Strategy-: Barbell is an investment strategy applicable primarily

to a fixed-income portfolio, in which half the portfolio is made up of
long-term bonds and the other half of very short-term bonds. The
“barbell” term is derived from the fact that this investing strategy looks
like a barbell, heavily weighted at both ends and with nothing in between.

 Laddering Strategy-: This investment strategy allows an investor to

stagger bond investments over time with different dates of maturity. An
investor gains more flexibility by spreading out investment capital over a
number of different bonds at different times and at different interest rates.
This prevents a single lump sum of money being stuck in a bond over a
long period, thereby limiting potential income and not allowing an
investor to take advantage of potential rises in interest rates.

 Price Band-: A price band is a value-setting method in which a seller

indicates an upper and lower cost limit, between which buyers are able to
place bids. The price band's floor and cap provide guidance to the buyers.

 Tick Size-: A tick size is the minimum price movement of a trading

instrument. The price movements of different trading instruments vary
with the tick size representing the minimum incremental price movement
that can be experienced on an exchange.

 CBLO-: A collateralized borrowing and lending obligation (CBLO) is a

money market instrument that represents an obligation between a
borrower and a lender as to the terms and conditions of a loan.

 Margin Standing Facility-: Marginal Standing Facility is a liquidity

support arrangement provided by RBI to commercial banks if the latter

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 doesn’t have the required eligible securities above the SLR limit. 2% to
2.5% borrowings of NDTL.

 Pro Rata Allotment-: Pro rata is the term used to describe a proportionate
allocation. It is a method of assigning an amount to a fraction according
to its share of the whole. While a pro rata calculation can be used to
determine the appropriate portions of any given whole, it is most
commonly used in business finance.

 Depository-: A depository is a facility such as a building, office or

warehouse where something is deposited for storage or safeguarding. It
can refer to an organization, bank or an institution that holds and assists
in the trading of securities.

 Clearing House-: A clearing house is an intermediary between buyers and

sellers of financial instruments. Further, it is an agency or separate
corporation of a futures exchange responsible for settling trading
accounts, clearing trades, collecting and maintaining margin monies,
regulating delivery, and reporting trading data. Clearing houses act as
third parties to all futures and options contracts, as buyers to every
clearing member seller, and as sellers to every clearing member buyer.

*Will & Succession-: To be referred from notes given by sir on moodle.

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