- IPO is issued by co. who wants to get publicly listed. These companies hence become publicly listed and traded companies. IPO stands for Initial Public Offering. This means the company is inviting the willing Demat Account holders to participate in the Public Offering of the companies shares.
- After the IPO launch the company follows the procedure of Launch, Subscription period, randomly selecting the bidders in case the IPO is oversubscribed, allotment of shares, refunds to the Demat Account holders who did not get the shares and Listing at the stock exchanges.
- Registrar Of companies or ROC works under the department of MCA (Ministry of Corporate Affairs). The MCA works on behalf of the government to administer and keep an eye on every movement of the companies registered in Indian. The companies should be private or listed or LLPs. The registrar of companies is given the duty of handling every matter regarding company registration as well as post company reporting. There are different registrars per state. Hence almost every state has its own registrar.
- Today there are 25 registrars in India. In some states due to the huge number of companies there are two registrars assigned to the working. These are Maharashtra and Tamil Nadu.
- It is the value offered by co. for its share during the process of IPO launch. This price is the amount at which the willing DEMAT account holders could bid for the shares. They can bid the shares at the issue price in the open market. Also issue price is decided as per the company’s valuations and the market capital limit given by the registrar.
- It is the price at which any share is recorded in the books of the company. Also the dividend is given in percentage ratio of face value.
Over subscription and Under Subscription
- Over subscription is a phenomenon occurring while an IPO is subscribed more than the actual amount prescribed by the registrar. It means that the company receives more bids from the public than prescribed in its prospectus. Under subscription is the exact opposite of over subscription.
- It is the value at which share is publicly listed. The company presents the issue price of shares. The listing price is decided on the basis of the subscription rate of the share and the grey market premium for the same. More the grey market premium, more will be the listing price.
- Also over subscription of any share leads to heavy increase in share listing price. The reason is simple demand and supply rules applied to it.
- It shows the cash position of a company. It is presented in the form of a statement in the annual and quarterly reports of the company. Some companies even publish monthly reports of cash flow statements as well. It is important to measure the liquid flow of the company and it also indicates the company’s capability of expanding on its own money without debt. Hence it serves as a weapon in times of difficulty and saves the company from debt.
- The lead managers help the companies who are launching their IPOs. The managers help the company in various processes and also present its documentation to SEBI and stock exchanges. The managers play an important role in approving the company’s IPO listing procedure and aiding the same.
- The person or entity with major shareholding of the company becomes a promoter of the company. They may or may not be the founders of the company, they can also be the financiers of the company. In major cases nowadays the promoters are investing firms and the initial founders of the company.
- Later on when a company goes public many entities may dilute their shareholding and this brings new promoters into the company. Promoters of the company have influence over the business activities of the company.
- Financial ratios explain the company’s current situation with a 360 degree financial image of it. When a combination of ratios is put together it becomes easy to spot the flaws in a company’s balance sheet. The ratios help in analysing a company, in making a report about the company and determining whether the company is good or not to invest into. Hence it allows an individual to make an informed decision on the company’s present and based on the historical data one can also assume the future possibilities as well.
The ratios have been divided into various subgroups. They are :
- Profitability Ratios
- Liquidity Ratios
- Solvency Ratios
- Valuation Ratios
PRICE ACTION METHOD
- It is one of the most successful methods of trading, This method involves tracking the actual price movements of the share every second and taking trading decisions based on the momentum of price changes of the share. Also in this method the support and resistance levels play a very major role.
- Algo trading is an AI based software programming. Its use is to mark up the entry points and exit points in the stocks which are selected on basis of few parameters. These parameters are considered by the company or individual before coding (or preparing) their Algorithms. In layman terms Algo trading is automatic buying and selling of securities through a pre-decided strategy.
PLOUGHING BACK OF PROFIT
- When a company earns extra or additional profits it saves that in the form of reserves and surplus. Later on at time of expansion the company uses the same money of profits so that it does not have to take debt from outside parties.Hence the profits earned by the company used for the company’s future development procedure is known as ploughing back of profit.
OFFER FOR SALE
- It is a term associated with the IPO launch of a company. The company dilutes the holding of its promoters to issue the shares to the general public. This is called offer for sale. In this scenario the shareholding of promoters decreases and the public holding arises in the company.
- Fresh issue means new shares issued to the public. It does not dilute any shares of promoters directly but does affect their shareholding of the company indirectly. The reason is increased shares of the company.
- For example prior the promoters had 100 shares of the company. Now with a fresh issue of 20 shares, the promoters hold the same 100 shares but the public also holds a part of the company. Hence the percentage of holding by promoters in the company decreases from 100% to 83.33%.
- Stock split means increasing the shares of the company in the market. This occurs by decreasing the share price and increasing the share holding.
- For instance with a stock split ratio of 2:1, any person holding 1 share of a company is now entitled to 2 shares of the same company. However this does not affect the portfolio value. This results in division of price of share on basis of the stock split ratio. Hence in this case if the stock split is for 2:1, the share price of 10 Rs. per shares previously will now go down to 5 Rs. per share. This results in the same holding by the person in his portfolio of Rs. 10 in any case.
- Mutual fund is an amalgamation of funds from various small and big investors. It is a pool of money that gets invested into stocks and bonds as per the nature of the fund. The investor gets a percentage part as per his investment and receives units of such fund. Like stocks every fund has its own price per unit. In stocks the increase or decrease in value of share is decided by stock price. While in mutual funds such price is known as NAV (Net asset Value).
BONDS AND DEBENTURES
- Bond is an obligating instrument of the lender towards the borrower. In other words, a bond is a proof of obligation from the lender towards paying the amount back to the borrower. It is a certificate by a lender proving his or her indebtedness towards the borrower. The person holding bonds is that company’s bondholder.
- Debenture is an unsecured type of financial instrument. It is also a fundraising instrument like bonds but they do not have any security or collateral of the issuer. It depends on the faith of the debenture holder towards the company. The debenture holders are the creditors of the company.
- Stock exchange is a place where traders and stock brokers come together. They share this platform to perform exchange of financial products like bonds, funds, shares etc. legally. The exchange helps in safe and trustable transfer of securities.
- The stock Exchanges for India are NSE and BSE.
- The market indices are an indication about the direction and sentiment of the market. In India there are three major Market indices.
- Nifty50 is an indicator of the best 50 companies in accordance to all the parameters be it volume or market share or performance etc. It represents the best 50 stocks across all the sectors.
- Bank Nifty is a benchmark for the 12 top banks in the country. It represents the stock market price of all those banks and imbibes a value of its own on basis of the percentage distribution among the banks. This helps the people to determine the value of the banking industry in the Indian market.
- SENSEX is also known as S&P Bombay Stock Exchange Sensitive Index. It is an index containing the socks that are ranked top 30 in the market. It is an index created by BSE but isn’t available for trading in the market.
- It is a point which is used in algo trading. While trading a share, the trader puts a stop loss point for the share, This means that a price is placed as a selling point for the share. Such price level is decided on basis of the support and resistance level of the share. This price level is generally the lows or highs of that share for a major period of time. Hence to avoid more risk or to utilize opportunity of earning profit stop loss is used by the traders.
FII AND DII
- FII or Foreign institutional investor is an investment fund or individual investor who invests in countries other than he is registered in. It includes investment banks, insurance companies, Large corporates or MNCs, hedge funds, pension funds etc.
- FII is a well known term for Indian stock market and it refers to outside or foreign investing in Indian markets. In India limits have been placed on FII investment in any company.
- DII are domestic Institutional investors which handles the work of balancing the entire Indian stock market.
- In most of the cases whenever FII is in Buying position DII is in selling position. Hence FII keeps on buying at intervals and DII keeps on selling at intervals. Both parties gain due to the fluctuations in the market.