INDIAN|FINANCIAL|MARKET|BASICS|TUTORIALS

INDIAN MARKETS REGAINS

noreply@blogger.com (Unknown) — Wed, 04 Nov 2009 18:00:00 +0000

The 30-share BSE index .BSESN closed up 3.29 percent, or 507.19 points, at 15,912.13, after falling 8.4 percent over the previous six sessions. Twenty-seven of its components gained.

The Indian markets rose sharply in today's trades

The Indian markets closed today with the biggest gains in Asia

Stocks post biggest rise in 3-½ mths after falling 6 days

Software services companies rose on expectations of bettergrowth outlook.

TCS Q2 2010 results

noreply@blogger.com (Unknown) — Mon, 26 Oct 2009 18:11:00 +0000

Tata Consultancy Services(TCS) India’s largest software company by revenues has announced its Q2 2010 results today.

It was really a good performance by TCS in the second quarter of 2010 fiscal.

The net profit of TCS in Q2 2010 stands at whopping Rs1,642 crores.

The net profit was by 7.1% Q-o-Q and 29.2% Y-o-Y.

The net revenues of the company in the second quarter stood at Rs 7,435 crores which was up by 3.1% Q-o-Q and 6.9% Y-o-Y.

The company has beat the street estimates by a huge margin.

CEO Mr. N.Chandrasekaran said ” TCS has delivered a sterling performance during the quarter”

The company has announced 150% of the quarterly component of the variable pay in this quarter to all the Indian employees in its payroll. TCS plans to add 8000 people to its current payroll in the coming quarter.

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TCS down by 50%

noreply@blogger.com (Unknown) — Wed, 17 Jun 2009 03:41:00 +0000

TCS stocks went down 50% on Jun 16 !

What has caused the 5o% drop in price?

The 1:1 bonus share issue has caused this proce correction.

India's top technology outsourcer Tata Consultancy Services (TCS) announced its results for the quarter ended March 31, 2009.The net profit rose 7 percent to Rs.1333crore and the board of directors has recommended a final dividend of Rs.14 per share for FY09 and 1:1 bonus share.

This is the second bonus issue by the company since it went public five years ago. The last time that the company came out with a bonus issue was in April 2006, which was also a one-for-one issue.

Tata Consultancy Services (TCS) has fixed Jun 17 as record date for bonus issue.
Since bonus share has been declared there has to be a correction in price right?
the correction factor for ratio A:B is (A+B)/B
Since the ratio here is 1:1 it would be (1+1)/1=2.

So the stock price after bonus will be
Previous close price/ correction factor = 778.60/2 = 389.3
Hence the 50% drop!

Genral Motor Bankruptcy Facts

noreply@blogger.com (Unknown) — Tue, 02 Jun 2009 18:01:00 +0000

GM Facts:
General Motors was founded in 1908 by William C. Durant.
Durant founded GM with only $2,000 in capital
First V-8 Engine (1914, a 70 horsepower engine for the Cadillac)
First room air conditioner (1929)
First barrier impact and rollover tests (1934).
First fully automatic transmission (the Hydra-Matic in 1939).
First to put turn signals as standard-equipments on its cars (1939)
First company to make $1 billion a year (in 1955)
First hydrogen fuel cell car (the 1966 Electrovan).
First Anti-lock Brake System (ABS) in 1972.
First Electronic Fuel Injection (1979)

GM's bankruptcy
GM lost $31 billion in 2008, taking its total losses to $82 billion in the past four years.
GM lost its ranking as the top global automaker by vehicle sales for the first time in 2008 when it was outsold by Toyota Motor Corp.
Lehman Brothers Holdings Inc.'s Sept. 15 bankruptcy filing is the nation's largest with $691.1 billion in assets, and it likely served as a catalyst for GM and Chrysler's downfall, as it hastened the erosion of credit markets, making it impossible for GM to borrow money
GM's bankruptcy filing is the fourth-largest in U.S. history and the largest for an industrial company. The company has $172.81 billion in debt and $82.29 billion in assets.
The government will take 60 percent ownership stake in the new GM. The Canadian government would take 12.5 percent, with the United Auto Workers getting a 17.5 percent share and unsecured bondholders receiving 10 percent.
GM shares fell as low as 27 cents their lowest price in the company's 100-year history
Existing GM shareholders are expected to be wiped out.

What does one mean by ‘Lock-in’?

noreply@blogger.com (Unknown) — Tue, 15 Jul 2008 15:44:00 +0000

'Lock-in' indicates a freeze on the sale of shares for a certain period of time. SEBI guidelines have stipulated lock-in requirements on shares of promoters mainly to ensure that the promoters or main persons, who are controlling the company, shall continue to hold some minimum percentage in the company after the public issue.

What does ‘Delisting of securities’ mean?

noreply@blogger.com (Unknown) — Tue, 15 Jul 2008 15:43:00 +0000

The term 'Delisting of securities' means permanent removal of securities of a listed company from a stock exchange. As a consequence of delisting, the securities of that company would no longer be traded at that stock exchange.

What is a ‘Listing Agreement’?

noreply@blogger.com (Unknown) — Tue, 15 Jul 2008 15:42:00 +0000

At the time of listing securities of a company on a stock exchange, the company is required to enter into a listing agreement with the exchange.The listing agreement specifies the terms and conditions of listing and the disclosures that shall be made by a company on a continuous basis to the exchange.

What is a Price Band in a book built IPO?

noreply@blogger.com (Unknown) — Tue, 15 Jul 2008 15:41:00 +0000

The prospectus may contain either the floor price for the securities or a price band within which the investors can bid. The spread between the floor and the cap of the price band shall not be more than 20%. In other words, it means that the cap should not be more than 120% of the floor price. The
price band can have a revision and such a revision in the price band shall be widely disseminated by informing the stock exchanges, by issuing a press release and also indicating the change on the relevant website and the terminals of the trading members participating in the book building process.
In case the price band is revised, the bidding period shall be extended for a further period of three days, subject to the total bidding period not exceeding ten days.

What is the floor price in case of book building?

noreply@blogger.com (Unknown) — Tue, 15 Jul 2008 15:40:00 +0000

Floor price is the minimum price at which bids can be made.

What is Cut-Off Price?

noreply@blogger.com (Unknown) — Tue, 15 Jul 2008 15:40:00 +0000

In a Book building issue, the issuer is required to indicate either the price band or a floor price in the prospectus. The actual discovered issue price can be any price in the price band or any price above the floor price. This issue price is called "Cut-Off Price". The issuer and lead manager decides this after considering the book and the investors' appetite for the stock.

What is the main difference between offer of shares through book building and offer of shares through normal public issue?

noreply@blogger.com (Unknown) — Tue, 15 Jul 2008 15:39:00 +0000

Price at which securities will be allotted is not known in case of offer of shares through Book Building while in case of offer of shares through normalpublic issue, price is known in advance to investor.
Under Book Building, investors bid for shares at the floor price or above and after the closure of the book building process the price is determined for allotment of shares.In case of Book Building, the demand can be known everyday as the book is being built. But in case of the public issue the demand is known at the close of the issue.

Who decides the price of an issue?

noreply@blogger.com (Unknown) — Tue, 15 Jul 2008 15:38:00 +0000

There is no price formula stipulated by SEBI. SEBI does not play any role in price fixation. The company and merchant banker are however required to give full disclosures of the parameters which they had considered while deciding the issue price. There are two types of issues, one where company and Lead Merchant Banker fix a price (called fixed price) and other, where the company and the Lead Manager (LM) stipulate a floor price or a price band and leave it to market forces to determine the final price (price discovery through book building process).

What is meant by Issue price?

noreply@blogger.com (Unknown) — Tue, 15 Jul 2008 15:35:00 +0000

The price at which a company's shares are offered initially in the primary market is called as the Issue price. When they begin to be traded, the
market price may be above or below the issue price.

Types of issues

noreply@blogger.com (Unknown) — Tue, 15 Jul 2008 15:35:00 +0000

Initial Public Offering (IPO) is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both
for the first time to the public. This paves way for listing and trading of the issuer's securities.
A follow on public offering (Further Issue) is when an already listed company makes either a fresh issue of securities to the public or an offer for
sale to the public, through an offer document.
Rights Issue is when a listed company which proposes to issue fresh securities to its existing shareholders as on a record date. The rights are
normally offered in a particular ratio to the number of securities held prior to the issue. This route is best suited for companies who would like to raise
capital without diluting stake of its existing shareholders.
A Preferential issue is an issue of shares or of convertible securities by listed companies to a select group of persons under Section 81 of the
Companies Act, 1956 which is neither a rights issue nor a public issue. This is a faster way for a company to raise equity capital. The issuer company
has to comply with the Companies Act and the requirements contained inthe Chapter pertaining to preferential allotment in SEBI guidelines which
inter-alia include pricing, disclosures in notice etc.

What do you mean by the term Premium and Discount in a Security Market?

noreply@blogger.com (Unknown) — Tue, 15 Jul 2008 15:33:00 +0000

Securities are generally issued in denominations of 5, 10 or 100. This is known as the Face Value or Par Value of the security as discussed earlier.
When a security is sold above its face value, it is said to be issued at a Premium and if it is sold at less than its face value, then it is said to be
issued at a Discount.

What is meant by Face Value of a share/debenture?

noreply@blogger.com (Unknown) — Tue, 15 Jul 2008 15:32:00 +0000

For shares, it is the original cost of the stock shown on the certificate or you own only the face value of the company shares.
for bonds, it is the amount paid to the holder at maturity. Also known as par value or simply par.
For an equity share, the face value is usually a very small amount (Rs. 5, Rs. 10) and which may quoted higher in the market, at Rs. 100 or Rs. 1000 or any

other price.
For a debt security, face value is the amount repaid to the investor when the bond matures (usually, Government securities and
corporate bonds have a face value of Rs. 100). The price at which the security trades depends on the fluctuations in the interest rates in the economy.

What is Dematerialization?

noreply@blogger.com (Unknown) — Tue, 15 Jul 2008 15:28:00 +0000

Dematerialization is the process by which physical certificates of an investor are converted to an equivalent number of securities in electronic form and
credited to the investor's account with his Depository Participant (DP).This means holding the securities in electronic format and not in paper format.

What is a Depository?

noreply@blogger.com (Unknown) — Tue, 15 Jul 2008 15:25:00 +0000

A depository is like a bank wherein the deposits are securities (viz. shares,debentures, bonds, government securities, units etc.) in electronic form.
It is an entity which holds securities of investors in electronic form at the request of the investors through a registered Depository participant. It also
provides services related to transactions in securities based on instructions given by the investors to depository participant.
At present two Depositories viz. National Securities Depository Limited (NSDL) and Central Depository Services (I) Limited (CDSL) are registered with SEBI.

LIABILITIES

noreply@blogger.com (Unknown) — Thu, 29 May 2008 14:09:00 +0000

A liability is an obligation of arising from past transactions or events, the settlement of which may result in the transfer or use of assets.It can also be the debt or loss incurred.

ASSETS

noreply@blogger.com (Unknown) — Thu, 29 May 2008 14:08:00 +0000

Assets are those owned by an individual or an institution which can be converted into cash.

Examples are cash,equipments,land,car etc..

Bonus Shares

noreply@blogger.com (Unknown) — Thu, 29 May 2008 14:05:00 +0000

shares given to current shareholders, based upon the number of shares that a shareholder owns. While this increases the number of shares owned, it does not increase the total value.such shares are issued to the equity shareholders in proportion to their holdings of equity share capital of the company, a shareholder continues to retain his / her ownership of the company.

What is a Basis Point

noreply@blogger.com (Unknown) — Thu, 29 May 2008 14:04:00 +0000

you must have heard these commonly used jargon in describing interest rates BASIS POINTS.

A basis point is one percent or one hundred pips.

Another example of a financial rates variation is when the interest rate is pushed higher by one percent (1%). In basis points, such a movement is called 100 basis points. Therefore a 0.5% increase or decrease is a 50 basis point move.

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)

noreply@blogger.com (Unknown) — Sat, 17 May 2008 09:57:00 +0000

EBITDA is calculated as follows:

EBITDA= Revenue - Expenses (excluding Interest, Taxes, Depreciation and Amortization)

EBITDA can be used to analyze and compare profitability between companies and industries because it eliminates the effects of financing and accounting decisions.The companies often change the items included in their EBITDA calculation from one reporting period to the next.As the items in EBITDA changes we may not get the real profit or loss incurred so this factor will be useful to check the companies actual performance.

Amortization

noreply@blogger.com (Unknown) — Sat, 17 May 2008 09:56:00 +0000

The paying off of debt in regular installments over a period of time.The deduction of capital expenses over a specific period of time (usually over the particular asset's life). This method measures the consumption of the value of intangible assets, such as a patent or a copyright.

Earnings Before Interest and Tax(EBIT)

noreply@blogger.com (Unknown) — Sat, 17 May 2008 09:55:00 +0000

Earnings Before Interest and Tax calculated as revenue minus expenses, excluding tax and interest. EBIT is also referred to as "operating earnings", "operating profit" and "operating income".

EBIT=Revenue-Operating expenses

EBIT=Revenue- Expenses (excluding Interest and Taxes)

EBIT is all profits before taking into account interest payments and income taxes. EBIT nulls the effects of the different capital structures and tax rates used by different companies. By excluding both taxes and interest expenses, the figure indicates the company's ability to make profit and thus makes it easier for comparisions.