INVESTMENT MARKET

OUTLINE
 Forms
 Importance
 Functions
 Constituents
 Conclusions
FORMS OF INVESTMENTS

Market

Shares Debentures Bullions Mutual Funds Fixed Deposits Forex

IMPORTANCE

 Market for Banks, FI’s, NRI and Other resident

Individuals.
 Necessary for economic development of a country.
 Plays an important role in smooth flow of funds to
deficit units.
 Funds is used for productive purposes.
 Hedging, Speculations is also one of its activity.
FUNTIONS

 Financial
 Risk Management
 Research
 Intermediary
FINANCIAL FUNCTIONS

 Lending Funds For Investments.

 Development of Assets in productive
ventures
 Maintaining Liquidity in the market.
 Securitization of Assets to cover risk.
RISK MANAGEMENT
 Risk analysis is compared with Returns.
 Risk is usually measured in Beta Factor.
 Check Loss and Capital investments.
 Research of Past, Present and Future.
INTERMEDIARY FUNCTIONS
 Transfer of real economic resources from lender to
ultimate borrowers
 Lending of Surplus Funds
 National Income Contribution
 Increased Standard of Living and Per Capita Income
 An aid for capital formation of the country
CONSTITUENTS
 DEBT MARKET
 EQUITY MARKET
 MONEY MARKET
 GOVERNMENT SECURITIES MARKET
 FOREIGN EXCHANGE MARKET
EQUITY MARKET
 Issue and Trading of Shares.
 Trading takes place on Stock Market (BSE
and NSE)
 Vital area of a market economy
 Ownership is Widespread
 It is divided into Primary and Secondary
Market
PRIMARY MARKET
 A market that issues new securities on an
exchange.
 Also known as "new issue market" (NIM).
 Companies, governments or public sector
institutions can obtain funding through the
sale of a new stock or bond issue.
METHODS OF ISSUING SECURITIES
IN THE PRIMARY MARKET

 Initial public offering

 Rights issue (for existing companies)
 Preferential issue.
SECONDARY MARKET
 Purchase of securities or assets from other investors
 New York Stock Exchange and the NASDAQ are
secondary markets.
 In any secondary market trade, the cash proceeds go
to an investor rather than to the underlying
company/entity directly.
SECONDARY MARKET
FUNCTION
 Price accuracy can reduce the agency costs of
management, and make hostile takeover a less risky
proposition and thus move capital into the hands of
better managers.
 Accurate share price aids the efficient allocation of debt
finance whether debt offerings or institutional
borrowing.
MONEY MARKET
 Borrowing and lending for short periods;
Ranging from 3 months to a year
 Money market trades in short-term financial
instruments commonly called “paper”
 Commercial Paper, Commercial Deposits,
Repo’s, Treasury Bills, Promissory Notes.
MONEY MARKET FUNCTION
 Require higher initial deposits than bank savings
accounts
 Initial Margin $1000 to $5000
 Face value of Instrument is one dollar per share
price.
 Interest is paid on daily basis
 Check writing services with the account.
ADVANTAGES
 Relative safety and the ability to know your
return ahead of time.
 You'll generally earn more than in a savings
account, and you won't be at the mercy of the
stock market.
 Plus, in the U.S. the Federal Deposit
Insurance Corporation guarantees your
investment up to $100,000.
DISADVANTAGES
 Returns are paltry compared to many other
investments.
 Furthermore, your money is tied up for the
length of the CD and you won't be able to get
it out without paying a harsh penalty.
MONEY MARKET - DIVISION
 Call Money Market

 Bill Market

 Discount Market

 Acceptance Market
CALL MONEY MARKET
 INTRODUCTION
 CALL MONEY MARKET OPERATIONS
IN INDIA 
 PARTICIPANTS
 PRUDENTIAL NORMS OF RBI 
 CALL RATES
BILL MARKET
 INTRODUCTION
 BILLS OF EXCHANGE
DISCOUNT MARKET
 Bill discounting is a major activity with some
of the smaller Banks.
 Purchasing and discounting of bills of
exchange is another short term method of
profitable instrument of banks funds
 Bills of exchange can be discounted on rebate
before its due date. The rebate or discount is
earning of the bank.
ACCEPTANCE MARKET
 A market that deals with bankers acceptances is called
as Acceptance Market.
 A banker’s acceptance constitutes the draft issued by a
bank and undertaking to payment of the money
specified on the draft on demand.
 The bank has to make payment either to the order of a
specified party or to the bearer, the sum specified in
the instrument.
 Banker’s acceptances are the result of commercial
transactions on both in the domestic as well as foreign
market.
CONCLUSION
 The money market specializes in debt securities that mature in
less than one year.
 Money market securities are very liquid, and are considered
very safe. As a result, they offer a lower return than other
securities.
 The easiest way for individuals to gain access to the money
market is through a money market mutual fund.
 T-bills are short-term government securities that mature in one
year or less from their issue date.
 T-bills are considered to be one of the safest investments - they
don't provide a great return.
 A certificate of deposit (CD) is a time deposit with a bank.