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DEBT MARKET INSTRUMENTS

IN INDIA

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Presented by:

Krishna 02

Anupam 07

Joy 11

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Definition

Debt instruments are contracts in which oneparty lends money to another on pre-determined terms with regard to rate of interest to be paid by the borrower to thelender, the periodicity of such interestpayment, and the repayment of the principal

amount borrowed.

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W hat they call

Indian securities markets: bond (issued by

Central/ State governments or PSUs)

Private corporate sector: debentures

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R egulatory bodies

RB I

SEB I

FIMMDA

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M arket Segments and Products inDebt market

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Financial Engineering

It refers to the development andimplementation of innovative financialinstruments and process and the formulationof creative solutions to problems in financing.

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Factors in Financial Engineering

1. Tax advantage2. Reduces transaction cost

3. R isk reallocation4. Increase liquidity5. Level and volatility of interest rates

6. Level and volatility of prices7. Accounting benefits8. Technological development and other

factors.

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Different types of bonds

Premium B onds

Convertible B ondsZero Interest B ondsMortgage B onds

Investment B onds

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Different types of bonds(contd..)

High yield bondsFixed Income B ondsDeep Discount B onds

Zero Coupon Convertible B onds

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Different types of bonds(contd..)

Coupon Striping (Strips)Debt for equity swapMezzanine debt

Floating rate bonds

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O ther Hybrid debt instruments

Multi option secured redeemable

convertible debenturesCallable bondsO ption tender bonds

Guaranteed debentures

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O ther Hybrid debt instruments(contd..)

Indexed B ondsInflation adjusted bondsCredit wrapping

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Money market instruments

Money

marketinstruments

TreasuryB ills

Call MoneyMarkey

CommercialPapers

Certificateof deposit

Repos

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Treasury B ills (T-B ills)

There are three types of T-bills

1. 91-day2. 182-day3. 364-day

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CALLMONEY M ARKET S

Refers to the market for short term funds

O vernight basis: Call money market

For the period of 2 days to 14 days: Notice

money market

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Commercial Paper (CPs)

Short term, unsecured, negotiable promissorynotes with fixed maturity

Issued by rated corporateIssued at a discount on face value.In denominations of R s. 5lakh or multiples

maturities between a minimum of 7 days anda maximum up to one year

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Certificate of Deposit (CDs)Short term deposit instrumentsIssued by banks and financial institutions toraise large sum of moneyIssued at a discount to the face valueDenominations of R s. 1lakh or multiplesMaturities between a minimum of 7 days anda maximum up to one yearR ates are usually higher than the term depositrates, due to the low transactions costs

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R epos

Collateralized borrowing and lendingSold temporarily promise to buy back at a

fixed future Date & fixed priceIn reverse repos securities are purchased in atemporary purchase with a promise to sell itbackW hen one is doing a repo, it is reverse repofor the other party.

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Secon ary mar et or e tinstruments

Secondary

market

W holesaleDebt Market

R etail DebtMarket

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W holesale Debt Market

W DM trading market is known as NEAT

Trading wide range of securities like allmentioned earlier

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W DM Participant wise Turnover for

July 2010Participants Shares (in %)

Indian B anks 17.74

Foreign B anks 23.7

Trading Members(Corporate)

50.61

Primary Dealers 5.03

Financial Institution 1.11

MFs 1.81

Total 100

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R etail Debt Market

Introduced to encourage all classes of investors

Participants:R

etail investorsTrading in existing capital market segmentR ETDEBT Market facility is available on the

NEAT system likeW

DM

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Sources

www.nseindia.comwww.bse.com

www.investopedia.comwww.wikipedia.comhttp://sawaal.ibibo.com/

http://www.nse-india.com/content/ncfm/FIMMDA.pdf

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Sources (contd..)

Debt Markets by Sandeep Gupta: SachinB

hadarkar

http://www.nse-

india.com/content/debt/debtup.pdf

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Thank You