Debts Market

Equity ,Debts and Commodities

Equity ,Debts and Commodities

Saturday, August 29, 2014

Securities Market

Equity

Equity share

Preference

share

Derivative

Forward

Future

Option

Swap

Debt

Debentures

Bonds

Commodity

Metal

Energy

Agri

Forex

Domestic Forex Internat

ional Forex


Equity Market / Share Market


Derivatives Market


Financial Instruments which derive their value from some underlying assets. The underlying assets could be equities (shares), debt (bonds, T-bills, and notes), currencies, and even indices of these various assets, such as the Nifty 50 Index.


INTRODUCTION

Derivatives

Forward

Future

Option

swapSaturday, August 29, 2014

FORWARD A forward is a contract between two parties to buy or sell an asset at a certain future date for a certain price that is pre-decided on the date of the contract. The contracts are traded over the counter


FUTURE A futures contract is an agreement between two parties to buy or sell an asset at a certain time in future at a certain price. These are basically exchange traded, standardized contracts.


OPTION Options give the buyer (holder) a right but not an obligation to buy or sell an asset in future. Options are of two types - calls and puts.“Call option” gives one the right to buy, “Put option” gives one the right to sell.


SWAPSSwaps are private agreements between two parties to exchange cash flows in the future according to a prearranged formulaInterest rate swaps, Currency swaps


Debt Market


It is a market meant for trading (i.e. buying or selling) fixed income instruments. Fixed income instruments could be securities issued by Central and State Governments, Municipal Corporations, Govt. Bodies or by private entities like financial institutions, banks, corporates, etc.


INTRODUCTION

• The debts market in India comprises of two main segments, the government security market and the corporate security market.

• The market for governments securities is the most dominant part of the debt market in the term of outstanding securities, market capitalization, trading volume and number of participants .


Debt

Government securities

Central Govt.

State Govt.

Public sector Bonds

Govt. agencies/ Statutory Bodies

Public sector units

Private sector Bonds

Corporate

Banks

Financial institutions Saturday, August 29, 2014

Issuer Instruments Maturity Investors

Central Government

Dated Securities

2-30 years RBI, Banks, Insurance co, PF, MF, PDs.

Central Government

T-Bills 91/182/364 days

RBI, Banks, Insurance co, PF, MF, PDs, Individuals.

State Government

Dated Securities

5-13 years RBI, Banks, Insurance co, PF, MF, PDs, Individuals.

PSUs Bonds, Structured Obligations

5-10 years Banks, Insurance co, PF, MF, PDs, Individuals, Corporates.

Corporates Debentures 1-12 years Banks, MF, Individuals, Corporates.

Corporates, PDs

Commercial Paper

7days -1 year Banks, MF, Individuals, Corporates, FII, financial Institutions

Banks Certificates of Deposits

7days -1 year1-3year(FIs)

Banks, Individuals, Corporates, FII, FI, Trusts, Association, NRI

Banks Banks Bonds 1-10 years Individuals, Corporates, Trusts, Association, NRI

Municipal corporation

Municipal Bonds

0-7 years Banks, Individuals, Corporates, FI, Trusts, Association, NRI

Source : NSE PublicationsSaturday, August 29, 2014

Government Securities(G-Secs)


The Government securities comprise dated securities issued by the Government of India and state governments as also, treasury bills issued by the Government of India. Reserve Bank of India manages and services these securities through its public debt offices located in various places as an agent of the Government.


INTRODUCTION

Provident funds, by their very nature, need to invest in risk free securities that also provide them a reasonable return. Government securities, also called the gilt edged securities or G-secs, are not only free from default risk but also provide reasonable returns and, therefore, offer the most suitable investment opportunity to provident funds.


WHY G-SECS

Treasury bills (T-bills) offer short-term investment opportunities, generally up to one year. They are thus useful in managing short-term liquidity. At present, the 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.


TREASURY BILLS (T-BILLS)

Treasury bills are available for a minimum amount of Rs.25,000 and in multiples of Rs. 25,000. Treasury bills are issued at a discount and are redeemed at par. Treasury bills are also issued under the Market Stabilization Scheme (MSS).


INVESTMENTS

AUCTIONS

Type of T-bills

Day of AuctionDay of

Payment

91-day WednesdayFollowing

Friday

182-day Wednesday of non-reporting weekFollowing

Friday

364-day Wednesday of reporting weekFollowing

FridaySaturday, August 29, 2014

While 91-day T-bills are auctioned every week on Wednesdays, 182-day and 364-day T-bills are auctioned every alternate week on Wednesdays. The Reserve Bank of India issues a quarterly calendar of T-bill auctions.T-bills auctions are held on the Negotiated Dealing System (NDS) and the members electronically submit their bids on the system. Non-competitive bids are routed through the respective custodians or any bank or PD which is an NDS member.

• Government paper with tenor beyond one year is known as dated security. At present, there are Central Government dated securities with a tenor up to 30 years in the market.

• Dated securities are sold through auction.

• Subscriptions can be for a minimum amount of Rs.10,000 and in multiples of Rs.10,000.


DATED SECURITY

• These are securities issued by the state governments and are also known as State Development Loans (SDLs). The issues are also managed and serviced by the Reserve Bank of India.

• The tenor of state government securities is normally ten years.

• Its available for a minimum amount of Rs.10,000 and in multiples of Rs.10,000.


STATE GOVERNMENT SECURITIES

WHY INVEST IN G-SECS

• A wide range of maturities from 91 days to as long as 30 years.

• Sold easily in the secondary market to meet cash requirements.

• G-Secs can also be used as collateral to borrow funds in the repo market.

• Zero default risk being sovereign paper

• Dated securities are sold through auction.• all types of government paper can also be

purchased from the secondary market• Investor can place a single bid of up to Rs.

two crore (face value) (minimum Rs. 10,000/-) through their custodian (bank/PD).

• Primary Dealers – PNB Gilts, SBI-DFHI, STCI-PD, ICICI Securities PD,


SUMMARY

Certificate of Deposit

Monday, April 10, 2023

Certificate of Deposit (CD) is a negotiable money market instrument and issued in dematerialised form or as a Usance Promissory Note against funds deposited at a bank or other eligible financial institution for a specified time period. Guidelines for issue of CDs are presently governed by various directives issued by the Reserve Bank of India (RBI), as amended from time to time. The guidelines for issue of CDs, incorporating all the amendments issued till date, are given below for ready reference.


INTRODUCTION

• CDs can be issued by – Scheduled commercial banks {excluding Regional Rural

Banks and Local Area Banks}; and – Select All-India Financial Institutions (FIs) that have

been permitted by RBI to raise short-term resources within the umbrella limit fixed by RBI.

• Banks have the freedom to issue CDs depending on their funding requirements.

• An FI can issue CD within the overall umbrella limit.


ELIGIBILITY & LIMITS

• Minimum amount of a CD should be Rs.1 lakh, i.e., the minimum deposit that could be accepted from a single subscriber should not be less than Rs.1 lakh, and in multiples of Rs. 1 lakh thereafter.

• CDs can be issued to individuals, corporations, companies (including banks and PDs), trusts, funds, associations, etc. Non-Resident Indians (NRIs) may also subscribe to CDs, but only on non-repatriable basis, which should be clearly stated on the Certificate. Such CDs cannot be endorsed to another NRI in the secondary market.


ISSUE AND DENOMINATIONS

• The maturity period of CDs issued by banks should not be less than 7 days and not more than one year, from the date of issue.

• The FIs can issue CDs for a period not less than 1 year and not exceeding 3 years from the date of issue.

• All OTC trades in CDs shall necessarily be cleared and settled under DVP I mechanism through the authorised clearing houses {National Securities Clearing Corporation Limited (NSCCL), Indian Clearing Corporation Limited (ICCL) and MCX Stock Exchange Clearing Corporation Limited (CCL)} of the stock exchanges.


MATURITY & SETTLEMENT

Commercial Paper


• Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note.

• It was introduced in India in 1990 with a view to enabling highly rated corporate borrowers to diversify their sources of short-term borrowings and to provide an additional instrument to investors.

• Corporates, primary dealers (PDs) and the All-India Financial Institutions (FIs) are eligible to issue CP.


OVERVIEW

• CP can be issued for maturities between a minimum of 7 days and a maximum of up to one year from the date of issue. However, the maturity date of the CP should not go beyond the date up to which the credit rating of the issuer is valid.

• CP can be issued in denominations of Rs.5 lakh or multiples thereof.

• CP may be issued on a single date or in parts on different dates provided that in the latter case, each CP shall have the same maturity date. Further, every issue of CP, including renewal, shall be treated as a fresh issue.


MATURITY & DENOMINATION

Initially the investor in CP is required to pay only the discounted value of the CP by means of a crossed account payee cheque to the account of the issuer through Issuing and Paying Agent (IPA). On maturity of CP,(a) when the CP is held in physical form, the holder of the CP shall present the instrument for payment to the issuer through the IPA.

(b) when the CP is held in demat form, the holder of the CP will have to get it redeemed through the depository and receive payment from the IPA.


REDEMPTION

Debts Market

Economy & Finance