30 companies making up the index are :
1. Associated Cement Companys Ltd.
2. Bajaj Auto Ltd.
3. Bharat Heavy Electricals Ltd.
4. Bharti Tele Ventures Ltd.
5. Cipla Ltd.
6. Dr Reddy’s Laboratories Ltd. (NYSE: RDY)
7. Grasim Industries Ltd.
8. Gujarat Ambuja Cements Ltd.
9. HDFC
10. HDFC Bank Ltd. (NYSE: HDB)
11. Hero Honda Motors Ltd.
12. Hindalco Industries Ltd.
13. Hindustan Lever Ltd.
14. ICICI Bank Ltd. (NYSE: IBN)
15. Infosys Technologies Ltd. (NASDAQ: INFY)
16. ITC Ltd.
17. Larsen & Toubro
18. Maruti Udyog Ltd.
19. National Thermal Power Corp. Ltd.
20. ONGC Ltd.
21. Ranbaxy Laboratories Ltd.
22. Reliance Energy Ltd.
23. Reliance Industries Ltd.
24. Satyam Computer Services Ltd. (NYSE: SAY)
25. State Bank of India
26. Tata Consultancy Services Limited
27. Tata Motors Ltd. (NYSE: TTM)
28. Tata Power Co. Ltd.
29. Tata Steel Ltd.
30. Wipro Ltd. (NYSE: WIT)
2008-03-05
BSE sensex
2008-03-04
Secondary markets
Secondary market refers to a market where securities are traded after being initially offered to the public in the primary market and/or listed on the Stock Exchange. Majority of the trading is done in the secondary market. Secondary market comprises of equity markets and the debt markets.
In equity markets, one can buy/sell shares of company through a stock broker.These shares can be equity shares, rights issue, bonus shares, etc..Now a days all shares are dematerialised and all trading is screen based. An investor needs to pay the broker a small brokerage for each transaction conducted by the client. This brokerage shouldn't exceed 2.5%.
Next coming to the factors influencing the price of a share are:
(1) stock specific: The stock-specific factor is related to people’s expectations about the company, its future earnings capacity, financial health and management, level of technology and marketing skills.
(1) stock specific: The stock-specific factor is related to people’s expectations about the company, its future earnings capacity, financial health and management, level of technology and marketing skills.
(2) market specific: The market specific factor is influenced by the investor’s sentiment towards the stock market as a whole. This factor depends on the environment rather than the performance of any particular company. Events favourable to an economy, political or regulatory environment like high economic growth, friendly budget, stable government etc. can fuel euphoria in the investors, resulting in a boom in the market. On the other hand, unfavourable events like war, economic crisis, communal riots, minority government etc. depress the market irrespective of certain companies performing well. However, the effect of market-specific factor is generally short-term. Despite ups and downs, price of a stock in the long run gets stabilized based on the stock- specific factors.
Other terminologies :
1. Contract Note
It is a confirmation of trades done on a particular day on behalf of the client by a trading member.It imposes a legally enforceable relationship between the client and the trading member with respect to purchase/sale and settlement of trades.
This contract note generally consists of :
- Name, address and SEBI Registration number of the Member broker
- Name of partner/proprietor/Authorised Signatory
- Contract number, date of issue of contract note, settlement number and time period for settlement.
- Order number and order time corresponding to the trades.
- Trade number and Trade time.
- Brokerage and Purchase/Sale rate.
- Signature of the Stock broker/Authorized Signatory.
2. Portfolio
A Portfolio is a combination of different investment assets mixed and matched for the purpose of achieving an investor's goal(s). For most investors a portfolio has come to signify an investment in financial instruments like shares, debentures, fixed deposits, mutual fund units. Its important to have a diversified portofolio so that risk is spread out across the portfolio and losses are limited.
3. Equity Shares
An equity share, commonly referred to as ordinary share, represents the form of fractional ownership in a business venture.
4. Rights Issue/ Rights Shares
The issue of new securities to existing shareholders at a ratio to those already held, at a price. For e.g. a 2:3 rights issue at Rs. 125, would entitle a shareholder to receive 2 shares for every 3 shares held at a price of Rs. 125 per share.
5. Bonus Shares
Shares issued by the companies to their shareholders free of cost based on the number of shares the shareholder owns.
2008-02-26
IPO : Initial Public Offer
What's a public issue?
Most companies are usually started privately by their promoter(s). However, the promoters’ capital may not be sufficient for setting up or running the business over a long term. So companies invite the public to contribute towards the equity and issue shares to individual investors. The way to invite share capital from the public is through a ‘Public Issue’. Simply stated, a public issue is an offer to the public to subscribe to the share capital of a company. Once this is done, the company allots shares to the applicants as per the prescribed rules and regulations laid down by SEBI.
One of the forms of public issue is IPO i.e., Initial Public Offer.
An Initial Public Offer (IPO) is the selling of securities to the public in the primary market. It is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public. This paves way for listing and trading of the issuer’s securities. The sale of securities can be either through book building or through normal public issue.
Diff b/w book building and normal public issue :
- In normal public issue, the company and Lead Merchant Banker fix a price (called fixed price).All investors should buy the shares at this price only.
- In book building issue the company and the Lead Manager (LM) stipulate a floor price or a price band and leave it to market forces to determine the final price.
- How book building issue works : It is a mechanism where, during the period for which the IPO is open, bids are collected from investors at various prices, which are above or equal to the floor price. The offer price is determined after the bid closing date. Thus this method is an efficient way of price discovery of an IPO.
Few terminologies involved :
1. Face value : it is the original cost of the stock shown on the certificate issued by the company. Its usually 2, 5 or 10.Rs.
2. Floor price : Floor price is the minimum price at which bids can be made.
3. Price band : In book building issue, the issuer fixes a price band b/w which investors can bid.
4. Cut-off price : This is the effective price at which stocks are finally issued after effectively finding the price by book building method of issue. Its also called Issue price.
5. Lock in : Indicates a freeze on the sale of shares for a certain period of time.Done to ensure that promoters continue to hold some percentage share of the company even after the public issue.
Other features of an IPO :
- The Book in a book building process should remain open for a minimum of 3 days.
- An investor should know in about 15 days time from the closure of issue, whether shares are allotted to him or not.
- If not allotted, he should recieve the refund in the same duration of time.
- It would take around 3 weeks after the closure of the book built issue for the stock to be listed in the exchange.
Lets take an example of an IPO and see how it works : RELIANCE POWER
- Largest IPO in India.
- Market capitalisation of over Rs.94000 crores ( current price * no. of shares)
- Issue price of Rs.450 for retail investors.
- Unfortunately listed at a discount of Rs.20 i.e., Rs.430. (happened coz investors' sentiments changed that the IPO was over valued)
- To compensate for losses, board has agreed upon bonus issue of 3:5 (for every 5 shares held, 3 bonus shares recieved).
- Therefore bringing down the value per share to Rs.269.
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