Investment Assets and Indian Market Regulations

. 1.6 TYPE OF INVESTMENTS You have a lot of options for where to put your money as an investor. It is critical to carefully consider the various types of investments. Within each bucket, there are numerous investment options. Here are six types of investments to consider for long-term growth, along with information about each. We won’t discuss cash equivalents, such as money markets, certificates of deposit, or savings accounts, because those types of investment accounts are more concerned with keeping your money safe than with growing it. Stocks A stock is a financial investment in a particular organization. When you buy a stock, you are purchasing a share — a small portion of the organization’s earnings and assets. Organizations sell shares of stock in their businesses to raise cash; investors can then buy and sell those shares among themselves. Bonds Bonds are loans made to organizations or governments. When you buy a bond, you are giving the bond issuer permission to borrow your money and pay you back with interest. Bonds are considered less risky than stocks, but they may provide lower returns. As with any loan, the primary risk is that the issuer will default. Government bonds issued by the United States are backed by the country’s “full faith and credit,” effectively eliminating that risk. Mutual funds If picking and choosing individual bonds and stocks doesn’t appeal to you, you are not alone. In fact, there is an investment specifically designed for people like you: the mutual fund. ETFs are short for exchange-traded funds. ETFs are index funds that track a benchmark index and attempt to replicate its performance. They, like index funds, are less expensive than mutual funds because they are not actively managed. The major difference between index funds and ETFs is how ETFs are purchased. They trade on an exchange like stocks, so you can buy and sell ETFs at any time, and their prices fluctuate throughout the day....2.4 SECONDARY MARKETS The secondary market is the segment in which outstanding issues are traded and thus provide liquidity. Investors, who seek both profitability  and liquidity, need both primary and secondary markets. There is thus a direct and complementary interface between the primary and secondary markets. Secondary market exists both for short- term (money market) securities and long-term securities. It exists for debt, equity and a variety of hybrid securities. While the secondary market activities in money market securities are conducted over phone or through market makers, the trading is more organized for long-term securities and conducted through stock exchanges. Buying and selling securities in secondary market is fairly simple. Investors have to open an account with a member of stock exchange and then place orders through the member. Members of stock exchanges, called stock brokers, are intermediary between buyers and sellers. Buying and selling securities through members of stock exchange is beneficial, legally and functionally. Entry of major institutions like ICICI, Kotak Mahindra, into brokerage services and development in technology including intenet based broking service have improved the quality 33An Overview of service. Many of these brokerage houses offer a number of facilities to the investors at no extra cost. Clearing corporation enables the members to settle the transactions entered among themselves on behalf of their client-investors. It operates something similar to cheque clearing service offered by RBI for the banks. Earlier when securities are traded in physical form, a large number of securities have to be exchanged between members and clearing corporation had a major work on this part. Depository service is another major development in the Indian stock market. It allows investors to hold securities in electronic form (like you are holding cash in your bank account) and transfers electronically when they sell the shares. The operation is fairly simple. Investors have to open a depository account with a member of depository service provider (we have two depository service providers in India - National Securities Depository Ltd and Central Depository Services (India) Limited). Transfer agents maintains the members register of the companies. On the instructions of the company, they transfer the shares from the existing members to new member. When an investor buys a share in a physical mode and intend to transfer the share in her/his name, s/he has to send the transfer deed along. 2.6 DIFFERENT STOCK MARKETS National Stock Exchange of India (NSE):It is the leading stock exchange in India in terms of market capitalization and trading volumes. NSE was founded in 1992 and is headquartered in Mumbai, India. NSE offers a platform for trading in equities, equity derivatives, debt instruments, currencies, and exchange-traded funds (ETFs). The exchange operates on an electronic trading platform, which enables investors to trade securities from anywhere in India through a network of brokers. NSE has played a significant role in the development of the Indian capital markets, introducing new products and services, and adopting best practices in technology and regulation. Bombay Stock Exchange (BSE) :It is one of the oldest and the first stock exchanges in Asia, established in 1875 in Mumbai, India. BSE offers a platform for trading in equities, equity derivatives, debt instruments, currencies, and mutual funds. Metropolitan Stock Exchange of India (MSEI): It is a stock exchange in India that was founded in 2008 and received recognition as a stock exchange in 2012. It is headquartered in Mumbai, India. MSEI offers a platform for trading in equities, equity derivatives, and currency derivatives. Indian Commodity Exchange Limited (ICEX): It is a national-level commodity futures exchange in India that was launched in 2009. The exchange offers a platform for trading in a wide range of commodities, including precious metals, base metals, energy, and agricultural commodities. National Commodity and Derivatives Exchange Limited (NCDEX): It is a national-level commodity futures exchange in India that was launched in 2003. The exchange offers a platform for trading in a wide range of commodities, including agricultural commodities, metals, energy, and other raw materials. NCDEX uses an electronic trading platform, which enables investors to trade commodities from anywhere in India through a network of brokers. Multi Commodity Exchange of India Ltd. (MCX):It is India’s largest commodity derivatives exchange, with a market share of over 90%. MCX facilitates online trading of a wide range of commodities, including metals, energy, agricultural commodities, and bullion. Gold: MCX is a major platform for trading in gold futures, with contracts for different delivery months. The gold traded on MCX is 24 karat, and the minimum contract size is one kilogram. Crude oil: MCX also offers trading in crude oil futures, with contracts for different delivery months. The crude oil traded on MCX is of the WTI (West Texas Intermediate) variety, and the minimum contract size is 100 barrels. Copper: MCX is a leading platform for trading in copper futures, with contracts for different delivery months. Copper is a widely used metal in construction and manufacturing, and its price movements are closely watched by traders and investors. 2.7 SECURITIES EXCHANGE BOARD OF INDIA (SEBI) SEBI (Securities and Exchange Board of India) is the regulatory body for the securities market in India. It is responsible for regulating and supervising the securities market in India and ensuring its proper functioning. SEBI issues various guidelines from time to time to ensure that the market operates in a fair and transparent manner. Some of the important SEBI guidelines are: 1. Insider Trading: SEBI has issued guidelines to prevent insider trading in the stock market. Insider trading refers to the practice of buying or selling securities by people who have access to non-public information about the organization. 2. Takeover Code: SEBI has also issued guidelines for the takeover of companies. The takeover code provides a framework for the acquisition of shares and control of companies. 3.Listing Agreement: SEBI has mandated certain rules for companies that are listed on the stock exchanges. These rules are included in the Listing Agreement and cover areas such as financial reporting, shareholder communication, and corporate governance. 4 Mutual Funds: SEBI has also issued guidelines for mutual funds. These guidelines cover areas such as investment restrictions, disclosure requirements, and management fees.