Sunitha (1)

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A Debenture

is a long-term Debt Instrument issued by governments and big institutionsfor the purpose of raising funds. The Debenture has some similarities

with Bonds but the terms and conditions of securitization of Debentures

are different from that of a Bond. A Debenture is regarded as an

unsecured investment because there are no pledges (guarantee) or liens

available on particular assets. Nonetheless, a Debenture is backed by all

the assets which have not been pledged otherwise.

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E.g., Types of bonds : U.S. government securities,

municipal bonds, corporate bonds, mortgage and

asset-backed securities, federal agency securities and

foreign government bonds.

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Bonds:

When the government wants to raise money, they canissue bonds and borrow money from the people. When

corporations want to raise large amounts of capital (issue

money), they can issue stocks or bonds. If they issue

bonds they borrow money from investors, like government

entities do. If they issue stocks they sell shares of

ownership in their company, common stock.

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In either case, once the bonds or

stocks are sold to the public, the

government or corporation gets its

money and has an obligation to

whoever owns the bonds or stocks itissued.After this the stocks or bonds

are securities that trade in the open

market. Stocks trade in the stock

market and bonds trade in the bond

market. How simple can you get?

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So, when you or I buy stocks or bonds, we are

simply buying them in the market through a

broker who charges us a commission for his

services. The government or corporation

already got their money. We are simply buyingbonds or shares of stock a previous owner told

his broker to sell. When we want to sell we

simply do it through our broker as well. That's

why having a stock market and a bond market

is so important.

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Shares:

All business enterprises need funds to meet their short term and long term business goals. Such

capital (big amounts) can only be raised when

large number of investors are available and

interested to invest in business. Institutions like

BSE (Stock Exchange) give a common platform

to a ³Business Man´ and an ³Investor´ where abusiness man can sell its stock and an investor

can but the same stock. Institutions like BSE give

the flexibility of buying and selling of stock as and

when required. Stock (shares) are nothing but

µownership of business broken-up into a largenumber of small units. Each unit of stock can be

easily bought and sold independently. And this

buying and selling of stock takes place in stock

exchanges like BSE and NSE.

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A derivative is a financial instrument - or more simply, an

agreement between two people or two parties - that has a

value determined by the price of something else (called theunderlying).[1] It is a financial contract with a value linked to

the expected future price movements of the asset it is

linked to - such as a share, or a currency. There are many

kinds of derivatives, with the most notable being swaps,

futures, and options.

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Referring to derivatives as stand-alone

assets would be a misconception,

since a derivative is incapable of

having value of its own. However,

some more commonplace derivatives,such as swaps, futures, and options,

(which have a theoretical face value

that can be calculated using formulas,

such as Black-Scholes), have been

traded on markets before their expiration date as if they were assets

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Dividends

A taxable payment declared by a company's board of

directors and given to its shareholders out of the

company's current or retained earnings, usually

quarterly. Dividends are usually given as cash (cash

dividend), but they can also take the for m of stock

(stock dividend) or other property. Dividends provide an

incentive to own stock in stable companies even if theyare not experiencing much growth. Companies are not

required to pay dividends. The companies that offer

dividends are most often companies that have progressed

beyond the growth phase, and no longer benefit

sufficiently by reinvesting their profits, so they usually

choose to pay them out to their shareholders. also called

payout

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Stock Markets:

In simple terms a stock market is a private or public

market for the trading of company stock and derivatives of

company stock at an agreed price; both of these aresecurities listed on a stock exchange as well as those

only traded privately.

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The expression 'stock market' refers to the system that

enables the trading of company stocks (collective shares),

other securities, and derivatives. Bonds are still traditionally

traded in an informal, over-the-counter market known as thebond market. Commodities are traded in commodities

markets, and derivatives are traded in a variety of markets

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Primary Markets:

Market in which buyers and sellers negotiate and transact

business directly, without any intermediary such as resellers.

Financial market in which newly issued securities are offered to

the public.

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Secondary market:

The market in which existing securities are tradedamong investors through an intermediary. Organized

exchanges such as the New York Stock Exchange

facilitate the trading of securities in the secondary

market.

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Secondary Market:

Market for buying and sellingsecurities of the listed companies.

Securities are traded after being

initially offered to the public in the

primary market and listed on the

stock exchange.

The stock exchanges are the

exclusive centers for trading of

securities.

It is a sensitive barometer and

reflects the trends in the economy

through fluctuations in the prices of various securities.

Listing on stock exchanges

enables the shareholders to

monitor the movement of the share

prices in an effective manner.

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Major stock exchanges of the world

HKSE ± Hong Kong stock exchange

AMEX ± American stock exchange SWX- Swiss exchange

SGX ± Singapore exchange

BSE ± Bombay stock exchange

FSE ± Frankfurt stock exchange

LSE ± London stock exchange

NASDAQ ± National association of securities

dealers automated quotation

J ASDAQ ± Japan association of securities


KOSDAQ - Korean securities dealers

automated quotation MESDAQ- Malaysian exchange of securities


NYSE ± New York stock exchange

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Stock Mar ket Index

A stock market index is a number that indicates relative level of

prices or value of securities in a market, on a particular day

The index also acts as a barometer for market behavior.

If the index value goes down, it means the market is bearish

(selling, therefore not optimistic of an upward trend) and if it

goes up then it is bullish (buying, in the expectation of a rise

based on positive news/performance).

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Major indices in Indian mar kets

Following are major indices of BSE

BSE SENSEX

MIDCAP

SMALLCAP

BSE-100BSE-500

Other Sectoral indices

Following are major indices of NSE

S&P

CNX NIFTYCNX NIFTY JUNIOR

CNX IT

BANK NIFTY

CNX 100

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Shares: Financial instrument signifying ownership of the

enterprise with specified rights &responsibilities, invariably

proportionate to the number of ³shares´ held.

Equity Shares: An equity share, commonly referred to as

ordinary share, represents the form of fractional ownership in a

business venture.

Preference shares: Owners of these kinds of shares are

entitled to a fixed dividend or dividend calculated at a fixed rate

to be paid regularly before dividend can be paid in respect of

equity share. They also enjoy priority over the equity

shareholders in payment of surplus. But in the event of

liquidation, their claims rank below the claims of the company¶screditors, bondholders/debenture holders.

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Bonds: A bond or a debt security is generally issued

by a company, municipality or government agency. A

bond investor lends money to the issuer and in

exchange, the issuer promises to repay the loan

amount on a specified maturity date. The issuer usually pays the bond holder periodic interest

payments over the life of the loan.

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