INFLATION AFFECT THE STOCK MARKET, HOW?

What is inflation?
in simple terms inflation mean persistent rise in general price level.
normally inflation creates due to excess supply of money in the market. whenever this situation arise in India central bank (RBI) raise the interest rate.

this interest rate is the rate at which commercial bank borrow the money from reserve bank of India. if commercial bank get money at high rate of interest of course it will affect their margin so they also will charge high rate of interest to their borrowers(public and corporate sector). apart from this RBI may increase the CRR and SLR rate. due to this monitory policy corporate sector and companies will discourage to take loan from commercial bank and they will borrow lees fund to avoid interest burden.
of course this will affect the industry's growth rate because they will face working capital shortage and will spent less on their capital expenditure.

it will create the unemployment situation and due to inflation the purchasing power of people will decrease and they will spend less money, theofor turnover of companies will be less just because of less demand.

companies profit will increase and at the end of the final year may be they will not pay any dividend to stockholders. if this situation is continue then no body want to hold share and they will sale in the market.
now this point in stock market the demand of share will be less beacuse many people are saling their stock. supply will be more and thorfor price will be fall. in this way share market may fall.

Brijesh Mishra
brijeshmishra49@gmail.com

FACTORS RESPONSIBLE FOR THE GROWTH OF CAPITAL MARKET

there had been considerable growth in the capital market in India . the following are the factors responsible for the growth of capital markets in India:

1. growth of stock exchange in India: the origin of capital market in India started from 1875 by the establishment of Bombay stock exchange (BSE). formerly called as the native share and stock broker's association. at present there are 24 stock exchange in India. BSE in the oldest stock exchange and NSE is the largest stock exchange in India. NSE established in 1994 and in terms of volume its thirds largest stock exchange in the world. the stock market in India facilitates -

* listing of securities
* trading in securities


2. growth of financial institutions: a no of fi are operating their business in India such as UTI.LIC,GIC, EXIM bank,SIDBI, IFCI,IDBI etc. it contributed imp role for development of capital market -

*provides medium to large term funds
*refinancing commercial banks
*equity participation of shares issued by public companies
*provides merchant banking facilities

3.growth of mutual funds: mutual fund company collect the fund from savers people and then invest in primary and secondary market in diversified pattern. number of company are providing mutual fund service like UTI mutual fund, icici mutual fund etc.

* the first mutual fund to be set up in India was the unit trust of India in 1964.

in 1993 the government of India changed its policy to allow the entry of private corporate firms and foreign institutional investor into the mutual fund segment.

4. growth of merchant banking services in India: they provides no of services to corporate sector
* advice to project finance
*merger and acquisition
loan syndication
*financial restructuring
advise regarding the capital issue
*portfolio management


5. development of venture capital funds: v c mean financial investment in a highly risky project made in the hope of earning a high rate of return. the economic liberalization in India post 1991 appears to have a boost to the venture capital movement in India. which in turn to provide medium and long term funds to those firm from the primary market and by way of loans from financial institutions and banks.


6. development of credit rating agency: the development of credit rating agencies gave a boost to capital market in India. CRISIL the first credit rating agency in India was set up in 1987 . at present there are others credit rating agency such as CARE and ICRA.
credit rating agency provides rating to credit instrument issued to corporate firms.
investor rely on credit rating and invest in the companies and thus firm can obtain medium and long term funds

7. setting up SEBI: sebi perform the important functions like
*regulates the working of mutual fund
* regulated the working of stock broker and sun broker
*regulate the merchant banking services
* protection of investor interest etc.

8. national securities clearing corporations: it was set up in 1996 to guarantee all trades on national stock exchange . NSCC interpose between the parties to the trade at the nse. example. when A and B make a trade then NSCC interpose between them. in other words if A was supposed to buy from B then NsCC buys from B and then still to A . if either A or B default the NSCC still meet the obligation for the other round of the trade. thus every trad takes place in freed from the risk of counter party defaulting. this in turn avoids payment crisis on the NSE.

9. corporate governance: in 1999 sebi had set up a committee under the chairmanship of Mr K.M. birla to draft the code on corporate governance. the birla committee drafted a code on corporate governance which calls for proper governance on the part of board of director and good management on the part of management of listed companies. the purpose of corporate governance is to protect of the stockholders with special reference to shareholders and other investors.

others are

* growth of entrepreneurs
*growing public confidence
*growth of MNC in India etc


Brijesh Mishra
brijeshmishra49@gmail.com

ROLE OF SEBI

SEBI is the security exchange board of India established in 1992. there was a long felt to monitor the working of securities market in order to protect the interest of investor. accordingly the government of India set up a body called securities and exchange board of India in April 1988.

however the real beginning of SEBI started in 1992 when the SEBI act 1992 was passed in 1992 and assented by the president of India.

objective of SEBI:

1. objectives towards the investor - to protect their interest.

2. objective towards capital issuers - to create a good environment for raising funds.

3. objectives towards intermediaries - to generate professionalism i their activities.



ROLE AND FUNCTION OF SEBI:

1. protection of investor;s interest

2. guidelines of capital issue

3.regulates of working of mutual funds:

4. regulates merchant banking services:

5. regulated stock brokers activities:

6.portfolio management :

7. restriction on insider trading:

8. regulates take - over and merger:

9. research and publicity :

10. materialization of shares:

11. rolling settlements:

12. conduct the inspection, inquiry and audits of stock exchange and intermediary and self regulatory organization in securities market.

13. prohibits fraudulent and unfair trade practices relating ti securities market.

14. promotes the investor education and also training of intermediaries in securities market.



Brijesh Mishra
brijeshmishra49@gmail.com

FOREIGN EXCHANGE MARKET IN INDIA

foreign exchange market also called forex market. its a market where one currency are quoted in terms of other currency . as we know no one even USA can not live without exporting or importing. and currently US dollar in the dominant currency in the world so according to India point of view its convert the INR (Indian rupees ) in terms of US dollar to make the payment of foreign exporters.


for example if 1USD = 50 INR that mean Indian currency are quoted in dollar if you want buy 1 USD you have to 50 Indian rupees.
forex market in the largest market in the world.

in India foreign exchange market are classifying into:

1. wholesale market
2. retail market

again wholesale market are divided into-

1. giant transaction layer
2. other transaction layer

1. giant transaction layer: in this layer major commercial banks are deal for their customer as well as for them selves.
they keep inventory of many currency in order to make profit in future if their price go up. but currency rate are subject to fluctuation so they keep track record on market. sometime thay also called money makers.

2. other transaction layer: like wise giant transaction layer it involves small commercial banks but their transaction are very small compare to giant transaction layer. sometime they also called interbank segment



2. reatil market: retail market includes tourist from abroad , traveler cheque and money receive from abroad. their amount are very small compare to wholesale market



STRUCTURE OF FOREIGN EXCHANGE MARKET IN INDIA

divided in 3 segment


1. first include reserve bank of India and financial institution like icici bank , idbi or ifci. they are also called authorized dealer.

2. second segment include commercial bank and financial institution this are also called interbank segment.

3 third layer includes commercial banks and corporate sector .


Brijesh Mishra

brijeshmishra49@gmail.com

CAPITAL MARKET IN INDIA

What is Capital Market ?
capital market involves lending and borrowing funds for medium term to long term periods. its usually more than one year.

the participants of capital market includes commercial banks. government , mutual fund, corporate and financial institution.

in India capital market is classify in to 2 parts:

1. primary capital market
2. secondary capital market


1.primary capital market : primary capital market is also called new issuer market.
whenever companies need fund it issue IPO - initial public offer to public for raising funds. across the country people subscribe the share and its regulated by security exchange board of India.
the main distinction of primary market is that whenever companies issued the funds its totally fresh issue.

2.secondary market: in the secondary market securities are resale between investor in order to make profit. in short in organized stock exchange the investor traded their security or share.
so BSE and NSE are come under secondary market.

the instrument used in capital market are as follows:

1. equity share capital: its security or share subscribed by the public. whenever company issue the ipo its mean dilution of control , bcoz share holder get voting right. the other right are - claim on residual income, right issue, bonus issue etc.

2. preference share capital: its fund raised by company from public for definite period.investorr get dividend at fixed interest rate. preference shareholder claim the dividend before equity share holder.

3.debentures: its debt issued by company to public.
.
4. public deposit

5.global depository receipt and American depository receipt.

6. foreign currency convertible bond

7. euro loan etc.

8. euro bond

9.qualified institutional placement etc.
this are the instrument company used to raise the fund from capital market.
if any body confused regarding any instrument plz ask without any hesitate.


Brijesh Mishra
brijeshmishra49@gmail.com

MONEY MARKET IN INDIA

What is Money Market?

money market is the market in which commercial banks, financial institutions , corporate and government borrow the money for short term period i.e. less than one year.

so money market involves lending and borrowing funds for short term periods.
money market is the investment for commercial banks who have excess funds for short term periods.

to reduce the short term deficit government issued the g-sec i.e. government security or treasury bill.

instrument used in money market -

varous instrument used in money market:

1. call money: Call money is also refereed as inter bank.

A short-term money market, which allows for large financial institutions, such as banks, mutual funds and corporations to borrow and lend money at inter bank rates. The loans in the call money market are very short, usually lasting no longer than a week and are often used to help banks meet reserve requirements.

While known as an inter bank market, many of the players are not banks. Mutual funds, large corporations and insurance companies are able to participate in this market. Many countries, such as India, are beginning to push for a purification of the call money market, but adding regulations that allow only banks to participate.



2. treasury bill: whenever government need fund for short term duration issued the government security to the public.
types of treasury bill:
1. 91 days
2. 182 days


3. commercial paper: it issued at discount price and redeemed at face value. for e.g. you will get 1000 commercial paper at rupees 900 and redeemed at 1000 at maturity period. but any body can not issued commercial paper.
SEBI has prescribed some guideline.
company:
1. minimum tangible net worth should be at least 4 crore
2. company should be listed in any stock exchange.
3. a good credit rating agency by crisil(credit rating information services of India ) or any such other good credit rating agency.
4. maximum limits is 100% of its working capital.

company which satisfy the above condition can issued the commercial paper in money market.


4. certificate of deposit: started in 1989 by reserve bank of India.
issued at discount price and redeemed at face value.normally financial institution like icici, idbi and ifci issued the certificate of deposit subject to RBI's approval.

5. bill of exchange: it can be domestic bill of exchange or international bill of exchange.



Brijesh Mishra
brijeshmishra49@gmail.com

INDIA IS LEADING CHINA ONLY IN TERMS OF POPULATION.

India and china this are the worlds two fastest growing country, and it is estimating by 2050 this two country will be superpower.
china is largest country in terms of population , around 20 - 21 % population live in china. India is the second largest country in terms of population and around 17-18% worlds population live in India. so if we will combine both country around 40% worlds population live in this two country.
in 2007-08 India grew more than 9% p.a. and china grew around 13% p.a.
in 2007-08 the total GDP of china is more than 3.1 trillion USD and India's GDP was more than 1.3 trillion USD.

but many economist argue that India is leading china only in terms of population.
Indian population are growing more than 2% p.a. but at some extent china government has controlled on their population.

i would like to take one recent example.
we know about worli - bandra sea link in mumbai. it took around 15 years to construct this bridge. but china constructed 4-5 bridge within same period. even Indian government and Chinese government used same technology. but as we know this happened just because of political factor and we understand at what extent it influence.

some strong points of china-
1. china is the [b]fourth largest economy [/b]in terms of GDP.
2. one of the major thing is their technology. they produce goods on ecommies of scale and theorfor their cost of production is very less compare to other developing country. and clearly we can see their impact on Indian market.
3. due to largest population country , availability of [b]cheap labour.[/b]
4. majority labour come under [b]organised sector[/b].
5. china is one of the [b]leading country[/b] in terms of [b]foreign direct investment[/b].
6.[b]rich reserve[/b] of natural resource like coal and mine.
7. largest [b]consumer base[/b] country.
8. [b]favorable government policy[/b].
9. in India largest people can speak in English compare to any other country in the world , but now chines government has understood their importance and they are concentrating on this issue. it can harm Indian BPO sector.
10. [b]manufacturing sector[/b] is this back bone of chines economy.


some weakness point of India:

1. although India also have cheap labour but majority worker come under unorganized sector .
2. indian population is growing year by year but their economy , employment and other resources are not growing proportionally.
3. always deficit in balance of payment because around 35 % imports are crude oil. it affect the indian creditworthiness.
4. Indian current account is convertible but capital account is not convertible so this create some restriction for financial institutional investor (FII) if they want to invest in India. and this FII very importance for any country because it creates capital inflow in domestic country.
5. every year indian government spent around 4% of GDP's fund on education. government has started many programme like mid day meal scheme and serva sikhsha abhiyan, but if we talk about quality developing countries like sri lanka, bangladesh and thailand beat india.
6. much fund has borrowed from international organization like world bank and IMF.
7. government are not stable , every five year their is equal chance for BJP party and congress party. if new government come in central they will change some policies which affect the FII and foreign direct investment.
8. according to world bank in India around 60% of population spend less than 20 Rupees a day.
9.around 20 to 22% of India's population live below the poverty line.


but still India is able to grow more than 9% p.a. and it comes after china. it is expected that by 2050 India and china this two country will replace USA, UK < japan and other developed countries because in India 60 % of population are cone under age group 15 to 50 years but if we talk about china majority people come 65+ years age group like wise in japan majority people come 70+ age group and it is expected that by 2050 japan's population will shrink to 94 million compare to 127 million in 2007


Brijesh Mishra
brijeshmishra49@gmail.com