Do you know about it?

Can you tell me about the financial cycle of the business?

Earlier when the companies did not have the access to the primary market they had to borrow funds to raise the necessary money. But, after the popularization of the securities market (specially after 1980’s) the Initial Public Offering of equity shares or IPO has become the favourite method for financing. However, before a company approaches the securities market in order to raise money, it has to go through various stages of financing.

When an entrepreneur wishes to start a business, he raises money in the form of ‘seed capital’. For this he may offer certain shares in the business to the people who have contributed for this initial capital. Since at this stage the capital required is limited the entrepreneurs prefer the seed capital to be raised in the personal capacity. In general, at this stage the business entity is known as sole proprietorship or a partnership as the business is closely held and by a single person or a small group of persons.

When the business expands, the need for finance increases.

When the business is reasonably established the Venture Capitalists start to take interest in the entity and they look for the investment opportunities. In the return of money invested the venture capitalists usually are given shares or warrants. The company could remain a Private Limited Company at this stage as it is still closely held and owned by a few people. There should be at least two shareholders in a private limited company. The venture capitalists are those people who look for higher profit and are prepared to take higher risk for it.

Now if the business expands further the need for finance rises to the level where the company has to go to public in order to realise their expansion or diversification plans. At this juncture they take the IPO route.

How do shares come into being?

Any business is owned either by a single promoter or joint promoters with an unlimited liability, or a group of people (both promoters and non-promoters) with a limited liability. Limited liability means, in case of bankruptcy of the company, the owner's liability will be limited to the extent of their individual contribution towards capital. These three forms of the business organizations are called proprietorship, partnership firm and limited company respectively. Since each owner has his own share of contribution towards the owner's capital (also called equity), each of them is given his legal entitlement to share the ownership of the company in the form of document. These documents are rightly called shares and the owners are shareholders. A limited company is either called a public limited or a private limited company depending on its turnover and number of members in its board. Among public limited companies, the companies with their shares widely held are listed in the stock exchanges, and the shares of only these limited com panies are traded.

“T rifles make perfection and perfection is no trifle”

Michaelangelo,

1475 - 1564

Italian Artist

Do you know about Share?

What are the basics of Investment?

The money you earn is partly spent and the rest saved, for meeting the future expenses. If you keep your savings idle its nominal value remains the same but real value decreases by prevailing inflation. This can be defined by the following formula: Instead of keeping the savings idle, you park it somewhere to get a return on this capital in the future. This is called an investment. There are various avenues for investment.You may invest in the bank deposits, postal deposits,real estate, jewelry, paintings, life insurance, tax savings schemes likes PPF/NSC or stock market related instruments called securities like shares, debentures, bonds, etc. However, the return from each investment option depends on the associated risk. The riskier the investment, the higher will be the return. For instance, stock market related investments are risky, but makes you earn more returns than other modes of investment.

What are the benefits of investing in the stock market?

Stock Market investments offer you benefits like easy liquidity, flexibility of amounts invested/disinvested, reasonable returns and a regulatory framework to safeguard your rights. Shares are the most popular form of stock market investments due to their higher potential for capital growth.

Real rate of return = Nominal rate of return - InflationIn the long run it is empirically found that investment in equities gives maximum return.

What is a share?

A Share or stock is a document issued by a company,which entitles its holder to be one of the owners of the company. A share is directly issued by a company through IPO or can be purchased from the stock market. By owning a share you can earn a portion of the company's profit called dividend. Also, by buying and selling the shares you get capital gain. So, your return is the dividend plus the capital gain. However, you also run a risk of making a capital loss if you have sold the share at a price below your buying price.


What is a company?

A company basically means a group of persons associated together for achieving some objectives. The term company means a company formed and registered under the Indian Companies Act 1956.As company is a voluntary association of persons its capital is divisible into parts which are known as shares with limited liabilities. A company exists only in contemplation of law and it has no physical existence.“A stock broker isOne who invests other people’s money until its all gone”Woody Allen,American FilmMakerPRESENT VALUE OF RS 1 LAKH (INVESTED IN 1992)Mode of Investment Value of Rs1 Lakh RemarksBank Fixed Deposit Rs. 3,79,535 Calculated on the basis of prevailing average different bank rates in 1992-97 (11 per cent), in 1997-2002 (11.5 per cent) and in 2002- 08 (5.5 per cent) SBI-MF Magnum Rs. 4,89,300 Mutual Fund Scheme started in 1993 Tax Gain (1993)

Gold Rs. 2,61,000 In January 1992, the price of gold was Rs.4,200 per 10 gram and in January 2008 the price of gold isRs.11,000 per 10 gram Property Rs. 5,00,000 In 1992, the rate of real to Rs.7,14,000 estate in Nariman Point Mumbai was Rs.7,000 per sqft and in January 2008 the rate of same property was Rs.35,000 to 50,000 per sqftSensex Rs.10,30,346 In January 15, 1992 Sensex was at 2020 and on January 07, 2008 Sensex was at 20813(Values are calculated on the basis of prevalent average rate in case of property and gold while value for the mutual funds is calculated on the basis of returns/dividend given by the bank)

What is a company's legal identity?

A company is considered as a juristic person with a perpetual succession and a common seal. Its life does not depend upon the life of its members, who can change from time to time. On registration, a company acquires a personality distinct from its members.A company can sue and be sued in its own name. It can institute and defend suits and other legal proceedings in its own name.A company has limited liability. The privilege of limited liability for business debts is one of the principal advantages of doing business in the corporate form. In a company limited by shares, liability of the members is limited to the unpaid value of the shares, whereas in a company limited by guarantee, liability of members is limited to such amount as the member may undertake to contribute to the assets of company in the event of it being wound up.

market nov 4

Equities likely to make cautious start amid mixed global cues

Local equities are likely to make a cautious start on Tuesday on the back of mixed cues from global markets. Wall Street ended higher overnight in a choppy session, while Asian markets were trading mostly lower this morning. Movement of local bourses will depend upon the performance of the global markets as the day progresses. Initially, there might be a bit of hesitation among investors; however, if Asian markets can recover and Europe starts well, it should be a tremendous help to the local markets. There arenâ??t any major triggers that the markets can look forward to and therefore it would mainly look at world-wide equities for cues. Stock and sector specific action may be seen depending upon the news flows.
Domestic markets, on Friday, missed out on an opportunity to end its four-day losing streak despite receiving decent support from world-wide equities. After making a promising start and showing steadiness until noon, the markets lost ground in the second half of trade to finally end in the negative territory. The day saw the S&P CNX Nifty plunge below another psychological level of 4,750 and 30-share BSE Sensex below the 16,000 mark. Broader indices, too, found it difficult to hold on to the gains as traders followed the rule implying 'buy on dips and sell on upmoves'. A major damage was done by telecommunication stocks after Bharti Airtel reported a lower-than-expected earnings and DoTâ??s decision to freeze all 2G spectrum allocation pending the enquiry by central agencies in alleged irregularities in distribution of 2G licenses in 2007. The oil & gas counter, led by heavy-weight Reliance Industries, too was equally responsible for hampering confidence in the market. Auto and banking shares tussled hard throughout the session, but found no success in helping markets retain early gains. Finally, the 30-share BSE Sensex dropped 156.44 points or 0.97% to end at 15,896.28, while the S&P CNX Nifty plunged 38.85 points or 0.82% to settle at 4711.70.


Markets likely to make flat to positive opening

Domestic markets are likely to make a flat to positive opening on Wednesday as most Asian equities were trading in the green, but persistent concerns over the route markets would adopt in near-term may keep gains under check. With local equities ending lower for six consecutive sessions, it would take some time to get the confidence back into the markets, especially among smaller investors. However, bottom-fishing in shares with strong fundamentals and reasonable valuations will continue to happen. Foreign investors turning out to be net buyers despite a major fall in markets yesterday gives an indication that they continue to invest in potential shares without much hesitation.

Maxwell Ind launches Eminence brands in India

Earlier, Maxwell Industries had inked a pact with the French company for manufacturing, distributing and selling the men's & women's innerwear, pijamas and socks under the brand name 'Eminence'.
Maxwell Industries, incorporated in 1991, is a leading manufacturer of high quality 100% cotton yarn for hosiery/weaving industries in India.

Indian stocks

Led by strong gains in realty and metal stocks, the Indian markets rose sharply in today's trades and in the meanwhile recouped a large part of yesterday's losses. On the BSE, there were more than two stocks that gained for every stock that closed in the negative.
The BSE-Sensex and the NSE-Nifty closed with gains of around 500 points (3.3%) and 150 points (3.4%) respectively. Stocks from the small cap spaces also followed suit, as the BSE-Midcap and BSE-Smallcap indices gained by 3.5% and 2.2% respectively. The rupee was trading at 47.07 to the US dollar at the time of writing.
The Indian markets closed today with the biggest gains in Asia. These were distantly followed by Hong Kong and Singapore where stocks ended with gains of around 1.8% and 1% respectively. European markets have also opened on a positive note.
Buying in gold continues as well, with the yellow metal nearing almost 1,100 per ounce in the international markets. This follows the Indian central bank RBI's recent buying of 200 tonnes of gold from the IMF. This underscores gold's increasing status as an official reserve and has fuelled speculation that other governments, including China's, may be ready to diversify their reserves.
The BSE-IT index was amongst the leading gainers today as it closed up by around 4%. Major gainers here included the likes of Infosys, TCS and Wipro. Gains in the latter two stocks were aided by reports that these companies are eying a large outsourcing deal with the leading American retailer, Target. The deal could possibly involve the acquisition of the Indian captive technology centre of Target with a bundled offshoring transaction worth US$ 300-400 m.
A deal like this could be revolutionary for the Indian IT sector that is eyeing retail as one of the next big opportunities for offshore outsourcing. As a matter of fact, few years ago, many foreign retailers started with their Indian captive operations as there were not many IT service providers who could understand their core operations better. This seems to be changing now, and for the better for the Indian IT sector!

Market 2nd Nov

A dreadful week for stocks(Round-Up)

All major markets the world over fell like a set of bowling pins this week. India too was not spared, and in fact headed the list of losers. The BSE Sensex fell 5.4% during the week. A host of reasons led this fall. Weakness in commodity prices, poor results by some large companies, skepticism about the recovery being only liquidity driven, fears about the stimulus packages being withdrawn, rising inflation, and expectations of an impending exit by the government of its loose fiscal stimulus were some overshadowing factors.
Markets in the rest of the world had a similar story to tell. Apart from India, Germany (down 5.7%), Brazil (down 5.4%), and France (down 5.3%) led the fall. The US ended the week lower

by 2.6%, while China fell by 3.6%. Some disappointing results from large companies like PetroChina and National Australian Bank weighed down on Asian markets, further fueling concerns that markets may have gotten ahead of fundamentals and that stocks may have risen faster than the pace at which earnings will perhaps rise going forward.

CAG sets up high profile team to audit RIL this month

Government auditor Comptroller and Auditor General (CAG) has reportedly set up a high-level team for auditing Reliance Industries' (RIL) expenses on eastern offshore KG D-6 fields to be started from this month.
Apart from RILâ??s offshore KG D-6 fields, the CAG has also been asked to do special audit of Cairn India's Rajasthan block and British energy firm BG Group- operated Panna/Mukta and Tapti fields.
The special high profile audit team will comprise P K Mishra, principal director, A K Awasthi, additional deputy director, and Dharamendra Kumar, director.
The scope of the audit will be above the normal course of audit by CAG. The main objective of the audit would be to detect fraud, if any, by the operator (RIL) allegedly in collusion with oil regulator DGH and Ministry of Petroleum and Natural Gas.