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01CHAPTERINVESTMENTBASICS

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Purpose of session.

5)Interest

6)

factors determine r

7) options

4)When to start Investi

3)What is a Debt

Instrument?

4) Derivative

1)What is meant by

Stock Exchange ?2)what is an Equity

/ share ?

5) What is a Mutual fund?5) Index

6) Depository

7) Dematerialization

Summary

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THINKING OF INVESTMENT?

Session - 2 3

Mr. Bechara

Mr. Sahara

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WHAT IS AN 'EQUITY'/ SHARE?

Total equity capital of a company is divided

into equal units of small denominations, each

called a share.

The holders of such shares are members of

the company and have voting rights.

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'DEBT INSTRUMENT'

Debt instrument represents a contract

whereby one party lends money to another on pre-determined terms with regards to rate and

periodicity of interest, repayment of principalamount by the borrower to the lender.

In the Indian securities markets, the term *bond'isused for debt instruments issued by the Central andState governments and public sector organizationsand the term debenture'is used for instrumentsissued by private corporate sector.

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Mutual Fund

It is a pool of money, collected from investors,and invested according to certain investmentobjectives

A mutual funds business is to invest the fundsthus collected, according to the wishes of theinvestors who created the pool.

e.g.: Money market mutual fund seeks

investors to invest predominantly in MoneyMarket Instruments

Mr. Bechara

Mr. Sahara

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DERIVATIVE

Derivative is a product whose value is derived fromthe value of one or more basic variables, calledunderlying. The underlying asset can be

o Equity.o Index.

o Foreign exchange (forex)o Commodity or any other asset. Derivative products initially emerged as hedging

devices against fluctuations in commodity pricesand commodity-linked derivatives remained thesole form of such products for almost three

hundred years. The financial derivatives came into spotlight in

post-1970 period due to growing instability in thefinancial markets.

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?

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A STOCK EXCHANGE

The Securities Contract (Regulation)Act, 1956 [SCRA] defines 'StockExchange' as any body of individuals,whether incorporated or not, constituted

for the purpose of assisting, regulatingor controlling the business of buying,selling or dealing in securities.

Stock exchange could be a regionalstock exchange whose area of

operation/jurisdiction is specified at thetime of its recognition.

NSE was incorporated as a nationalstock exchange.

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DEPOSITORY

A depository is like a bank wherein the

deposits are securities.

(viz. shares, debentures, bonds,government securities, units etc.) in

electronic form.

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DEMATERIALIZATION

Dematerialization is the process by which

physical certificates of an investor areconverted to an equivalent number of

securities in electronic form and credited

to the investor's account with hisDepository Participant(DP).

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AN INDEX

An Index shows how a specified portfolio

of share prices are moving in order to givean indication of market trends.

It is a basket of securities and the average

price movement of the basket of securities

indicates the index movement

whether upwards or downwards.