Capital Market Awareness

What is a Stock Market ? Bombay Stock Exchange (BSE)

First and Oldest Stock Exchange in Asia –

Founded as The Native Stocks & Share Brokers Association in 1875

Largest number of listed companies - 5,249

7th largest exchange in Asia in terms of Market Capitalization

8th Largest Exchange in World – number of trades in Equity Shares

New Platform for trading in equities of SMEs

2

BSE Market Offerings Cash Market

Derivatives

Currency Derivatives

Interest Rate Derivatives

Debt Market segment

ETFs/Mutual Funds

BSE SME Platform

How the Capital Market Operates

Settlement System: T+2 Settlement System

Day Time Description of activity

T9:15 a.m. – 3:30

p.m.Trade Day

T+1

By 11:00 a.m.

Confirmation of all trades (including custodial

trades) Facility of an exceptional window for late

confirmations would be made available by the

exchanges

By 1:30 p.m.Processing and downloading of obligation files to

brokers / custodians

T+2By 11:00 a.m. Pay-in of securities and funds

By 1:30 p.m. Pay-out of securities and funds

www.lkwindia.com www.gurukshetra.com

How the Capital Market Operates

e-trading

BOLT on-line Trading System at BSE

Benefits :

Lower Transaction Costs

Increased Liquidity & Transparency

Greater Competition

Time Efficient & Automated

De-materialization (Demat)

Shares held in electronic format (Non-Physical)

Facilitates electronic settlement of trades

Maintained & monitored by Depository Participant (DP)

e-trading Screen

1 6

Capital Market Regulator - SEBI

Capital Market Watchdog

Established under SEBI Act, 1992

Promotes Investor Education

Monitors Insider Trading

Regulates Stock Exchanges

Working of all Intermediaries, Stock Brokers

Prohibits Fraudulent and Unfair Trade Practices

Asset Class Offerings Equity

Direct Equity Equity Mutual Funds

Debt Bank FDs Corporate FDs Debt Mutual Funds Government Instruments (PPF, NSC, Post Office Savings)

Gold ETFs Fund of Funds

100 = 20 .…. How ?

Now that Rs. 100 has become 20, how will one make Rs. 20 work optimally ???

Illustration Amount

Base Income 100

Less : Direct Tax 30

Post Direct Tax Income 70

Non - Discretionary Expenses 35

Indirect Taxes 5

Net Income 30

Net Investible Income 20

Demon of Inflation

1200.00

300.00

50.00

40.00

22.20

48.35

2008

830.85LPG Cylinder

2620.27Zodiac Men’s shirt

259.12Petrol (per litre)

224.00Masala Dosa

52.00Hamam Soap

104.0018.90Colgate toothpaste (100 gm tube)

2017?Item 19878.05

3.05

3.50

7.99

56.15

225.00

7.85

14.00

25.48

137.85

510.00

1997

You Have to Invest to Beat Inflation

FD Returns = 9% Interest is taxable

Clearly, ONLY Low Risk Clearly, ONLY Low Risk FDs will erode your FDs will erode your

capitalcapital

More than ~70% of Investors Funds find More than ~70% of Investors Funds find their way to FD’stheir way to FD’s

Equity v/s Debt – Performance RecoEquity v/s Debt – Performance Recordrd

EquityRs. 790 in July 2014 at a CAGR Return of 18.3%

After Tax

DebtRs. 236 in July 2014 at a

CAGR Return of 6.2% After Tax**

Investment of Rs. 100 invested in March 2003 would have been

** assumed investor is in Highest Tax Bracket

BEATING INFLATION – Equity Investing BEATING INFLATION – Equity Investing High Risk

Two year Bull Run in a 7-8 years7-8 years

Pulls up overall average returns

* Minimum period of remaining invested is 7-10 years

Returns Difference – Over the Returns Difference – Over the Longer TermLonger Term

HUGE

Scheme Category / Benchmark Indices

CAGR % Returns (13th August, 2014)

1 year2

years3

years5

years7

years10

years

Large Cap Funds 54% 27% 15% 16% 15% 23%

Mid Cap Funds 87% 36% 23% 24% 19% 21%

Balanced Funds 60% 27% 17% 19% 15% 22%

Ways of Participating in the Equity Market

Direct Equity

Through Mutual Funds

Selecting a Stock

Management

Business Model

Numbers

Story behind the Numbers

Industry Outlook

Annual Report

Investing v/s Trading Time Frame v/s Immediate

Level of Market Expertise

Long Term v/s Speculative

Delivery v/s Square Off

Returns v/s Zero Sum Game

Capital Markets – Road Ahead

Current Participation – 2%; Year 2025 – 10-15% participation

Indian Equity Market - Strong Potential for Growth

Investment Cycle has to re-start

Sheer Size of Indian Economy

Changing Demographics in India

InvestingInvesting in Mutual in Mutual Funds Funds

What are Mutual Funds

Pool of Money

Professionally Managed

Governed by AMFI and SEBI

Sponsor / Trustee, AMC

Mutual Fund Terms AMC

Corpus

AUM

NAV & Units

Fund Factsheet

Expense Ratio

NFO

Types of Mutual Fund Schemes Equity Mutual Fund Schemes

Large Cap / Multi Cap / Mid & Small cap / Sectoral Funds

Debt Mutual Fund Schemes

Liquid / Ultra Short Term / Dynamic Bond / Income / Gilt

Balanced Funds

Gold Fund of Funds

Tax Saving Schemes

Advantages of Investing through MFs Wide choice of products

Relatively easier to invest – in terms of operations

Less Volatile

Possible to invest small sums

Facilitates disciplined investing

Mutual Fund Taxation

LTCG = Long Term Capital Gains, STCG = Short Term Capital Gains; ** With effect from 11th July, 2014

Ways of Investing in Mutual Funds

Systematic Investment Plan

Systematic Transfer Plan

Systematic Withdrawal Plan

Lumpsum

KYC & Procedures

Mutual Fund Investment Options Growth

Dividend

Dividend Re-investment

MF Portfolio Creation – Key Parameters

Goals & Objectives

Risk Appetite

Allocation & Diversification

Consistent Performance Track Record

Fund Manager Performance Record

AMC Experience & Total Corpus

Measuring MF Performance Benchmarking

Peer Group Performance Comparison

Understanding Strategies

Statistical Measures

Equity - Sharpe Ratio

Debt - Duration, Credit Quality

Financial Planning Financial Planning using using

Asset AllocationAsset Allocation

What is Financial Planning

Achieving Financial Goals

An Individual has to deal with

Investments

Insurance

Taxes

Retirement

Financial Planning Concerns

Do I need to look at my PF everyday

Equity is very risky !!!!

FD is the best

I must take a money back

insurance policy

It is too late / It is too early to plan

my finances

Is it only for wealthy people

I have a very small amount to

invest

Steps in Financial Planning Financial Goals

Buying a house Children's Education Children’s Marriage

Insurance Planning

Tax Planning

Retirement Planning

Estate Planning

Risk Profiling / Questionnaire

Risk profiling is a process for finding

Optimal Level of Investment Risk

Assessing Risk required

Risk Appetite

Risk Tolerance Levels

Financial Products

Equity Markets

Insurance Policies

Mutual Funds (Equity & Debt)

Fixed Deposits

Commodities

Small Saving Schemes

Real Estate

Financial Planning Life Cycle Stages

Wealth Creation

Wealth Consolidation

Wealth Protection

Power of Compounding

Monthly SIP Amount (`)

Expected Rate of Return

Estimated Corpus over 10

years

2,0002,000 15%15% Rs. 5.5 lakhRs. 5.5 lakh

3,5003,500 15%15% Rs. 9.8 lakh Rs. 9.8 lakh

5,0005,000 15%15% Rs. 13.9 lakh Rs. 13.9 lakh

Bull Cycle once in 7-8 years pulls up Bull Cycle once in 7-8 years pulls up Average ReturnsAverage Returns

Three Pillars of Investing Safety

Liquidity

Returns

Right Approach to Financial Planning

Prepare Comprehensive Financial Plan

List down all Assets

List down all Liabilities

Set Achievable Financial Goals

Asset Allocation- Importance

EQUITY if : Relatively High Risk Appetite Relatively longer time frame

for achieving goals Higher Investible Amount High Risk – High Reward

DEBT if : Non-Discretionary Nature of

Goals Diversification of Risks Low Risk – Low Returns Potential to provide Regular

Income

GOLD if : Asset Class of the Last

Resort Optimizes Portfolio

Returns Traditional Hedge

CASH if : Foreseeable Near Term

Goal Contingency Funds

Re-balancing Asset Allocation Allocate based on Economic & Market

conditions

Provide Weightages based on Outlook

Create Asset Class Boundaries

Rebalance based on

Breaching Boundaries

Changing Outlook

Portfolio Monitoring Periodically Monitor

Adopt well defined strategy

Review Annually

Returns Consistency

Join - GURUKSHETRA Page on Facebook

Benefits for Students

Education & Career Counseling Tips

Financial Discussion Forums

Explore Job Opportunities

Get Guidance from Finance Experts

Interact with Students like yourself from

different parts of India

Come – Join by sending a Friend Request on

Facebook to Gurukshetra

ALL STUDENTS ARE WELCOME

THANK YOU !!!!

FINANCIAL PLANNING IS FINANCIAL PLANNING IS A FULL TIME ACTIVITYA FULL TIME ACTIVITY

THERE IS NO SHORT THERE IS NO SHORT CUT TO MAKING CUT TO MAKING

MONEYMONEY