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Asset Management - Coggle Diagram

- - - - Governed by a central board of directors for 4 yrs.
        
        The Reserve Bank of India performs the supervisory function under the guidance of the Board for Financial Supervision (BFS).
        
        BFS's primary objective is undertake consolidated supervision of the financial sectors.
      - Key Functions of the RBI
        
        Monetary Authority: Formulates, implements and monitors policy. Obj: maintaining price stability & growth.
        
        Regulator and supervisor of the financial system: Prescribes broad parameters of banking operations. Obj: maintain public confidence, protect depositors' interest.
        
        Manager of Foreign Exchange: Manages the Foreign Exchange Mgmt. Obj: facilitate external trade and payment
        
        Issuer of currency: Issues and exchanges or destroys currency and coins. Obj: Provide supplies of currency notes and coins.
        
        Developmental role: support national objectives
        
        Regulator and Supervisor of Payment and Settlement Systems: Safe and efficient modes of payment systems Obj: maintain public confidence on payment system.
        
        Related Functions: Banker to the Government or the central and the state governments;. Obj: To maintains banking accounts of all scheduled banks
    - - Basic functions is to protect the interests of investors in securities and to promote the development of, and to regulate the securities market
        
        Board consists of a Chairman, 2 members.
      - Key Functions of the SEBI
        
        Regulate the business in stock exchanges
        
        register and regulate intermediaries who may be associated with securities markets like Stockbrokers, Registrars, Depositories, Credit Rating Agencies, Foreign Institutional Investors, Mutual Funds, Underwriters, Advisers etc.
        
        Promote and regulate self-regulatory organisations/education/trainings of securities markets
        
        Prohibit fraud and unfair transactions.
        
        Regulate shares acquisition and takeover of companies
        
        Keeping information, inspection, inquiries, audits associated with the securities market. Similarly for
  - - - For primary market: The Issuer, Underwriter, Lead Manager, Registrar & Banker to the issue
        
        Lead Managers: They design and finalize the offer document, prospectus, advertising and fulfil all formalities.
        
        Underwriters: investment bankers make all preliminary arrangements though IPO. Underwriting is an insurance to protect the issuer from undersubscription.
        
        Registrars: Specialize in processing the bids of investors in the IPO as per the guidelines. They collect funds, allocates shares & process refunds.
      - For secondary market : Exchange, Stockbroker & Sub-broker, Clearing Corporation, Depository & Depository Participant & Bank
  - - - Several entities, like the
        
        Clearing corporation - responsible for post-trade activities such as risk management and clearing and settlement of trades,
        
        Clearing members - responsible for settling their obligations, making available funds for designated accounts with clearing bank/ depositories.
        
        Custodians - is clearing members settle trades on behalf of trading members when assigned,
        
        Clearing banks - is a key link between the clearing members and Clearing Corporation to effect settlement of funds. Every clearing member is required to open a dedicated clearing account
- - - - 3 categories agricultural commodities: sensitive, broad and narrow.
        
        Sensitive commodity: Prone to Government/External interventions. Interventions may be stock limits, import/export restrictions, trade barriers or price manipulation.
        
        Broad Commodity: average deliverable supply.
        
        Narrow Commodity: Nor Sensitive or Broad commodity.
      - Non-Agricultural commodity derivatives
        
        All long and short positions, contracts considered.
        
        Client level position equivalent to level limit or 5% of market-wide open interest.
        
        Member level position 10 times of value of client level position limits or 20% of the market-wide open interest,
  - - - Foreign investment: RB permitted foreign investment in almost all sectors for many without any Govt. approval. Indian companies are allowed to raise external commercial borrowings.
  - - - Call Money: uncollateralized lending and borrowing of funds for overnight.
        Repo or ready forward contact - Borrowing funds by selling securities with an agreement to repurchase.
        Reverse of the repo: lending of funds against buying of securities with an agreement to resell the said securities
    - - RBI conduct auction. Like T-bills, Cash Management Bills (CMBs) are also issued at a discount and redeemed at face value on maturity. Public Debt Office (PDO) of RBI is the registry and central depository for G-Secs.
    - - Retail Debt Market : Participants retail investors i.e. individuals, trusts, provident and pension funds etc.
      - Wholesale Debt Market: Participants banks, mutual funds and insurance companies, foreign investors etc.
  - - - NSE
        
        Index is created by selecting a group of stocks
        Index is calculated with reference to a base period and a base index value.
        
        Price Index Calculation:
        Market Capitalization = Shares outstanding Price
        Free Float Market Capitalization = Shares outstanding Price IWF(Investable Weight Factor)
        Index Value = Current Market Value / Base Market Capital Base Index Value (1000)
        
        Total Return Index (TRI) Calculation:
        Price indices do not consider the return from dividend payments of stocks. Dividends received included in the index movement to get TRI.
        𝑻𝑹 𝑰𝒏𝒅𝒆𝒙 = 𝑃𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝑇𝑅 𝑖𝑛𝑑𝑒𝑥 ∗ [1+((𝑇𝑜𝑑𝑎𝑦‘𝑠 𝑃𝑅 𝐼𝑛𝑑𝑒𝑥+𝐼𝑛𝑑𝑒𝑥𝑒𝑑 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑)/𝑃𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝑃𝑅 𝐼𝑛𝑑𝑒𝑥 − 1)]
      - BSE
        
        Index Methodology: Eligibility factors,
        Listing History, Trading Days & Multiple Share Classes
        
        Index Construction: Ranked based
        
        Average six month float-adjusted & Total market capitalization selects 75.
        
        Above result combined and sorted based on their annualized traded value. cumulative annualized traded > 98 includes.
        
        Remaining companies sorted by average six-month float-adjusted. Co. weight of less than 0.5% are excluded.
        
        Index Calculation: using the "Free-float Market Capitalization"
        Shares outstanding or the share count depends on the specific market and the laws and accounting principles that apply.
        Investable Weight Factor (IWF) = (available float shares)/(total shares outstanding)
    - - Types of traders
        
        Investors - buy shares for long term.
        
        Speculator - are who gain from the volatility in the short term,
        
        Arbitrageur - Trade in same stock in two different markets
      - Rights of Shareholders
        
        General Meetings (AGM): Right to vote favoring or against resolutions proposed at such AGM.
        
        Dividends: right to be paid dividends within 30 days of declare in AGM.
        
        Share Transfer: right to freely transfer
        
        Amending Key Documents: Specific amendments define the business nature and functioning require approval before 75 days.
        
        Convene Meeting:
        
        Minority Shareholders: Any unprofessional conduct or mismanagement is suspected can complain to the Company Law Board with 100 shareholders.
    - - Categorized in to
        
        Promoter Group - Normally, a majority of the board of directors are from the promoter group. An increase in promoter shareholding is an indication of the increased confidence of the promoter in the business growth.
        
        Public Group: Public shareholders are more diversified. Promoters have little scope to take unwarranted decisions that can hurt the business.
    - - Types:
        
        Forwards - buy or sell an underlying asset on a future date certain mutually agreed, pre-decided price.
        
        Swaps - A series of forward contracts created to manage interest rate volatility allow future cash flows.
      - Futures - A forward contract that is traded through a recognized exchange is called a Future. Carrying cost or the cost of carry in case of equity derivatives is the interest paid on the borrowed amount less income earned in the form of dividend.
        Future Price = Spot price (1+cost of financing – holding period return) ^ (time to expiration/365)
      - Options - give the buyer the right to buy or sell a mutually agreed quantity of an underlying on or before a certain date at a pre-determined price. option buyer is not obliged to honor the contract, whereas option seller of an option has an obligation but not the right to buy or sell the underlying asset.