Investment Management Unit- 1 Investment Setting

Investment alternatives Marketable securities A security that can be bought and sold in a secondary financial market. Non-marketable securities: are investments that cannot be transferred from one party to another. 23-10-2017 V.Prabakaran, AP/MBA - Investment Management

Marketable securities Non Marketable securities Money market instruments: Repos and Reverse Repos T-bills & Dated securities Commercial papers Certificate of deposit Capital market instruments: Equity shares Preference shares Bonds Debentures Mutual funds Others Real Assets Art Antiques Real Estate Bank Deposit Post office Deposit National Savings Certificates Indira vikas patra Kisan vikas patra Insurance Policies NBFC’s Deposit Provident fund schemes Public provident fund scheme Employee provident fund scheme 23-10-2017 V.Prabakaran, AP/MBA - Investment Management

Money Market Money market is for a maximum tenor of up to one year. Classified into Overnight market -  The tenor of transactions is one working day. Notice money market – The tenor of the transactions is from 2 days to 14 days. Term money market – The tenor of the transactions is from 15 days to one year. The money market is regulated by the Reserve Bank of India. All the money market transactions should be reported on the electronic platform called the Negotiated Dealing System (NDS). 23-10-2017 V.Prabakaran, AP/MBA - Investment Management

Money market instruments Repo market Borrowing funds by selling securities with an agreement to repurchase the said securities on a mutually agreed future date at an agreed price which includes interest for the funds borrowed. Reverse Repo market The reverse of the repo transaction is called ‘reverse repo’ Buying of securities 23-10-2017 V.Prabakaran, AP/MBA - Investment Management

Money market instruments T-bills/Treasury bills: To meet short term financial requirements of the government Are zero coupon bonds issued at discount to face value and are redeemed at par. No tax deducted at source Minimum default risk Government of India issues three types of treasury bills through auctions, namely, 91-day, 182-day and 364-day. There are no treasury bills issued by State Governments. Maximum tenure of these securities is one year Treasury bills are available for a minimum amount of Rs.25,000 and in multiples of Rs. 25,000. 23-10-2017 V.Prabakaran, AP/MBA - Investment Management

Money market instruments Dated Securities: Government paper with tenor beyond one year is known as dated security. Securities generally carry a fixed interest rate and have a fixed maturity period Issued and redeemed at face value, interest paid on half yearly routine Rate of interest and tenure is fixed at the issuance and does not change till maturity. At present, there are Central Government dated securities with a tenor up to 30 years in the market. sold through auctions Subscriptions can be for a minimum amount of Rs.10,000 and in multiples of Rs.10,000. Auctions are conducted electronically on PDO-NDS(Negotiated dealing system). 23-10-2017 V.Prabakaran, AP/MBA - Investment Management

Money market instruments Commercial papers Issued by companies & commercial banks in the form of a promissory note to raise funds for short term. Issued at discount to face value and redeemed at par on maturity Maturity period- minimum 15days to maximum one yr. Corporate houses that obtain an investment grade rating alone can issue. Certificate of deposit a certificate issued by a bank to a person depositing money for a specified length of time at a specified rate of interest. CDs may be issued at a discount on face value too. 23-10-2017 V.Prabakaran, AP/MBA - Investment Management

Represent ownership capital of the company Equity Shares Represent ownership capital of the company Stock market classification of shares: Growth shares – Higher rate of growth in profitability Income shares – belongs to company that have stable operations and limited growth opportunities Defensive shares-unaffected by market movements Cyclical shares – business cycle affects the cyclical shares Speculative shares-lot of speculative trading involved 23-10-2017 V.Prabakaran, AP/MBA - Investment Management

Bonds or Fixed Income Securities A marketable legal contract that promises to pay its investors a stated rate of interest and to repay the principal amount at the maturity date. Types: Bearer Bonds: Interest paid to holder of the bank Deep Discount Bonds Issued at discount to face value with long maturities around 10 yrs. Mortgage Bonds: A mortgage bond is a secured bond issued by a company. With a mortgage bond, the company pledges specific assets as a collateral for the bond. 23-10-2017 V.Prabakaran, AP/MBA - Investment Management

Are general creditors of the firm. Debentures: A debenture is an unsecured bond issued by a company without providing any specific asset as collateral. Are general creditors of the firm. Only well-established and creditworthy companies are able to issue debentures. 23-10-2017 V.Prabakaran, AP/MBA - Investment Management

Mutual funds A mutual fund is a type of investment fund that pools money from many investors to purchase securities. professionally managed Open-End vs Closed end schemes Equity schemes Growth schemes Index schemes Sector schemes Balanced Schemes Debt schemes Income schemes Money market schemes 23-10-2017 V.Prabakaran, AP/MBA - Investment Management

Time share in a holiday resort New and used residential property Real Assets: Gold and silver Art: Paintings Real Estate Commercial property Suburban land Time share in a holiday resort New and used residential property Agricultural land 23-10-2017 V.Prabakaran, AP/MBA - Investment Management

Non Marketable securities Bank Deposit Post office Deposit National Savings Certificates – In denominatons of 100,500,1k..Interest compounded half yearly Indira vikas patra - interest compounded annually and is taxable and is like a bearer bond Kisan vikas patra – In denominations of 1k,5k,10k, interest compounded annually and is taxable Insurance Policies NBFC’s Deposit – Investment in leasing companies, chit funds,etc Provident fund schemes Public provident fund scheme (PPF) Employee provident fund scheme (EPF) 23-10-2017 V.Prabakaran, AP/MBA - Investment Management

Thank you …!!! 23-10-2017 V.Prabakaran, AP/MBA - Investment Management