04-05-2013, 12:37 PM
STUDY OF TOP FIVE COMPANIES IN FUTURE MARKET AS PER MARKET CAPITALIZATION
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INDUSTRY PROFILE
INTRODUCTION OF CAPITAL MARKET
The capital market is the market for securities, where companies and the government can raise long-term funds. The capital market includes the stock market and the market the capital markets consist of the primary market, where new issues are distributed to investors, and the secondary market, where existing securities are traded.
The history of the Indian capital markets and the stock market, in particular can be traced back to 1861 when the American Civil War began. Several companies were formed during this period and many banks came to the fore to handle the finances relating to these trades. With many of these registered under the British Companies Act, the Stock Exchange, Mumbai, came into existence in 1875.
The BSE building, icon of the Indian capital markets, is called P.J. Tower in his memory the next big boom and mass participation by retail investors happened in 1980, with the entry of Mr.Dhirubhai Ambani. Dhirubhai can be said to be the father of modern capital markets. The Reliance public issue and subsequent issues on various Reliance companies generated huge interest. The general public was so unfamiliar with share certificates that Dhirubhai is rumored to have distributed them to educate people.
Mr. V.P. Singh’s fiscal budget in 1984 was path breaking for it started the era of liberalization. The removal of estate duty and reduction of taxes led to a swell in the new issue market and there was a deluge of companies in 1985. Mr. Manmohan Singh as Finance Minister came with a reform agenda in 1991and this led to a resurgence of interest in the capital markets, only to be punctured by the Harshad Mehta scam in 1992.
The end- 1990s saw the emergence of Ketan Parekh and the information, communication and entertainment companies came into the limelight. This period also coincided with the dotcom bubble in t he US, with software companies being the most favored stocks. There was a melt down in software stock in early 2000.
Several systemic changes have taken place during the short history of modern capital markets. The setting up of the Securities and Exchange Board (SEBI) in 1992was a landmark development.
THE ORIGIN OF STOCK MARKETS
The origin of stock markets goes back a couple of centuries. The roots of stock markets are to be found at the beginnings of the Industrial Revolution that began in Europe about four centuries ago.
Many of the Pioneer merchants of the industrial age wanted to start huge Businesses, which no single merchant could raise alone. It therefore became inevitable for them to come together, pool their savings and start these businesses as partners or co-owners.
The contribution of each partner to the enterprise was to be represented by a unit of ownership. This was the precursor to what we call shares. And through this, ‘joint stock’ companies were born.
Initially, trading in shares began as informal “hawking” in the streets of London. As the volume of shares increased with more companies floating shares (giving people opportunities to buy their shares), the need for an organized marketplace for the exchange of these shares escalated.
As a result, these traders decided to be meeting at a coffeehouse, which they used as the marketplace. Eventually, they took over the coffeehouse and changed its name to ‘stock exchange’. This was in the year 1773, and the first stock exchange, the London Stock Exchange, was founded. Financial intermediaries (brokers, fund managers, investment advisers investment banks etc) and other instruments like bonds were then to follow suit as an inevitable consequence.
BULL MARKET AND BEAR MARKET
There are two classic market types used to characterize the general direction of the market. Bull markets are when the market is generally rising, typically the result of a strong economy. A bull market is typified by generally rising stock prices, high economic growth, and strong investor confidence in the economy. Bear markets are the opposite. A bear market is typified by falling stock prices, bad economic news, and low investor confidence in the economy
A bull market is a financial market where prices of instruments (e.g., stocks) are, on average, trending higher. The bull market tends to be associated with rising investor confidence and expectations of further capital gains.
It’s a market in which prices are rising. A market participant who believes prices will move higher is called a "bull". A news item is considered bullish if it is expected to result in higher prices. Here there is an advancing trend in stock prices that usually occurs for a time period of months or years. Bull markets are generally characterized by high trading volume.
COMPANY PROFILE : ANAND RATHI SECURITIES LTD.
INTRODUCTION OF ANAND RATHI
Anand Rathi (AR) is a leading full service securities firm providing the entire gamut of financial services. The firm, founded in 1994 by Mr. Anand Rathi, today has a pan India presence as well as an international presence through offices in Dubai and Bangkok.
AR provides a breadth of financial and advisory services including wealth management, investment banking, corporate advisory, brokerage & distribution of equities, commodities, mutual funds and insurance - all of which are supported by powerful research teams.
The firm's philosophy is entirely client centric, with a clear focus on providing long term value addition to clients, while maintaining the highest standards of excellence, ethics and professionalism. The entire firm activities are divided across distinct client groups: Individuals, Private Clients, Corporate and Institutions.
THEORETICAL ASPECTS OF CONCEPT
WHAT ARE FUTURE & OPTION?
1. A futures contract is just what it's called – a contract. It is not equity in a stock or commodity. It is a contract – a contract to make or take delivery of a product in the future, at a price set in the present
2. Index futures are the future contracts for which underlying is the cash market index.
3. For example: BSE may launch a future contract on "BSE Sensitive Index" and NSE may launch a future contract on "S&P CNX NIFTY".
4. Basis is defined as the difference between cash and futures prices:
Basis = Cash prices - Future prices.
5. Basis can be either positive or negative (in Index futures, basis generally is negative). Basis may change its sign several times during the life of the contract. Basis turns to zero at maturity of the futures contract i.e. both cash and future prices converge at maturity
6. In formalized trading of futures contracts on exchanges, standardized agreements specify price, quantity and the month of delivery. Futures markets have their roots in agriculture, but today futures and options on futures are traded on a wide range of products from wheat to natural gas to stock indexes, precious metals and currencies
7. Options on futures can be thought of like insurance. An option buyer (the insured) pays a premium to an option seller (the insurance company) for the right to buy or sell a futures contract at a specific price. However, just like with insurance, the option buyer may or may not exercise his right (use his insurance).