STOCK AND COMMODITY MARKETS

1. STOCK AND COMMODITY MARKETS

2. OBJECTIVE: The objective is to provide students with a conceptual framework of stock markets and Commodity Markets, functionaries in these markets and their mode of trading. • Unit: 1 AN OVERVIEW OF CAPITAL AND COMMODITIES MARKETS: Primary Market, Secondary Market (Stock Market), Depositories, Private placements of shares / Buy back of shares, Issue mechanism. Meaning of Commodities and Commodities Market, differences between stock market and commodities market. • Unit: 2 STOCK MARKET: History, Membership, Organization, Governing body, Functions of stock Exchange, on line trading, role of SEBI, Recognized Stock Exchanges in India (brief discussion of NSE and BSE). Derivatives on stocks: Meaning, types (in brief).

3. Unit:3 TRADING IN STOCK MARKET: Patterns of Trading & Settlement – Speculations – Types of Speculations – Activities of Brokers – Broker Charges – Settlement Procedure, National Securities Depository Ltd.(NSDL), Central Securities Depository Ltd.(CSDL) (in brief). • Unit: 4 COMMODITIES MARKET: History, Membership, Objectives, Functions of commodities exchange, Organization and role of commodity exchange, Governing Body, Types of Transactions to be dealt in Commodity Market – physical market, Futures market - Differences between Physical & Future Market, options on commodities exchanges. • Unit: 5 TRADING IN COMMODITY MARKETS: Patterns of Trading & Settlement, Efficiency of Commodity Markets - Size of volumes of Commodities

4. 1. AN OVERVIEW OF CAPITAL AND COMMODITIES MARKETS: Financial Markets: Financial market refers to institutional arrangement for dealing in financial assets and credit instruments of different types such as currency, cheques, shares debentures bills of exchange etc. It is a place or mechanism which facilitates the transfer of resources from one entity to another. Features of financial market • Market involves large volume of transaction on daily basis. • There are various segments in financial market like stock market, forex market, money market etc. • Market in highly volatile in nature. Prices of instrument will change every day every minute. There is no stability in market. • Since market is highly volatile there is scope for speculation or making quick profit. • Market is dominated by intermediaries and private dealers. • Indian financial market is well integrated/ connected with world market.

5. Function of financial markets • It facilitates price discovery for various instrument of companies and other financial institutions it helps the company to know the value of asset. • Facilitatecreation and allocation of credit. • It provides liquidityfor asset helps in conversion of asset into cash and vice versa. • To provideplatformfor sellers and buyers of fund to meet for exchange process. • Serves as intermediaries for mobilizing savings. • Assist process of economic growth. • Catersfinancial needs or provides long term fund for the company. Organized Financial Market consists of : • Capital market • Money market

6. Capital Market: capital market refers to institutional arrangement for facilitating the borrowing and lending of long term funds. It includes shares debentures bonds and securities Importance/ Role/significance of Capital Markets • It helps in Productive use of economy’s savings. • It Provides incentives for saving. • It Facilitates capital formation. • Increases production and productivity. • It also helps in Stabilizes value of securities Functions of capital Market (CM) • Capital market facilitates Large –Scale nation wide mobilisation of savings and financial resources. • Capital market facilitates acceleration of capital formation. • CM helps in analysing foreign capital for the quicker economic development of a country. • Capital markets ensure effective allocation of the mobilised financial resources among projects which yield highest returns. • It ensures ready and continuous market for long-term funds.

7. Capital market organized in two categories: Primary or New issue:Market Primary market is the place where securities which are issued to the public for first time. Companies raise capital through issue of instruments through primary market. New companies and existing companies raise capital through primary market. Features: • It Is Related With New Issues for long term capital • Securities are sold first time in this market • It is also called new issue market(NIM) • Securities are directly issued to investor • It facilitates capital formation in the economy. • Funds generated in this market are utilized for the purchase of fixed assets. • It does not include long term loans from financial institutions.

8. Securities are issued by companies for setting new business and for expanding or modernizing existing business. • It is the process of going public i.e., converting private capital into public capital. • It Has No Particular. (Institutions which deals with issue of shares forms market.) • It comes before Secondary Market Functions of Primary Market • The main function of new issue market is to facilitate transfer resources from savers to the users. • It plays an important role in mobilizing the funds from the savers and transferring them to the borrowers. • Origination- In primary market, origination means to investigate, evaluate and procedure new project proposals. It is done with the help of merchant bankers. (study of economic, financial, legal, technical aspects to ensure the soundness of the project). • Underwriting: In primary market, to ensure success of new issue, there is a need for underwriting firms. Minimum subscription is guaranteed by underwriters. If the issue is completely subscribed, no liability would be left for the underwriters. If by chance any part of the issue remains unsold, afterwards the underwriter has no option, rather than buying all the unsubscribed shares. • It facilitates distribution of shares to geographically dispersed investors. The sale of the securities to the supreme or highest investors is termed as distribution. Distribution Job is given to brokers and dealers.

9. Secondary market: It is a market for secondary sale of securities, such shares quoted in the stock exchange market. It provides continuous and regular market for buying and selling. It is also called as stock market. Features • It Creates Liquidity • It deals in previously issued securities • It Comes After Primary Market • It Has A Particular Place. (dealings happens in Stock exchange on the floor of market Continuous and ready market for securities.) • It Encourage New Investments • It merely transfer existing securities between buyers and sellers • Secondary market do not directly contribute to capital formation.

10. Functions of Secondary market: • Liquidity of securities as securities can be converted into cash readily • Marketability of securities as it facilitates buying and selling of securities. • Safety of funds belonging to investors. • Provides long term funds. • Flow of funds to profitable projects. • Motivation for improved performance by companies to get competitive edge. • Promotion of investment opportunities. • Reflection of business cycle. • Promotes marketing of new issues by companies.

12. Difference between Capital Market & Money Market.

13. MONEY MARKET: It is a market for dealing financial assets and securities which have a maturity period of up to one year. It is a market for short term funds. Importance of Money Market • It helps in development of Trade and Industry. • It support development of Capital market. • Enables smooth functioning of commercial banks. • Effective functioning of central bank. • Formulation of suitable Monetary policy. • Non inflammatory source of Finance to government. Money market instruments 1) Call money Market: money at call and short notice-it is a market for extremely short period of time like one day to fourteen days.

14. Features • Issued for short period from 1 day to 14 days. • It is highly liquid. • Interest rates vary from day to day and even hour to hour according to demand and supply. • Its used for adjusting cash reserve and day to day transactions. • Call money is repayable on demand at the option of either the lender or the borrower. 2) Commercial Bills Market: is a market for bills of exchange arising out of trade transaction bills of exchange is short term negotiable instrument between debtor and creditor the creditor can discount the bill of exchange to commercial bank before the due date and can avail 90 to 95 percentage of money. 3)Treasury bill Market: Types It is a market for Treasury bill. Treasury bills or T bills are kind of finance bills which are in the nature of promissory note issued by the government under discount for fixed period not exceeding 1 year containing a promise to pay the amount stated on the instrument.

15. Features • It has short term maturity.. • It is a promissory note or a finance bill issued by Government. • It is highly liquid as its repayment is guaranteed. • It is issued in maturity period of 91 days,182 days and 364 days 4)Commercial papers: It is unsecured promissory notes which are issued by well reputed companies with minimum face value of 5 lakhs. Short-term unsecured promissory notes issued by companies. Features • It is promissory note issued by a company. • Buyers are banks, insurance companies, and other firms. • Minimum face value of cp is 5 lakhs. • It is used for seasonal requirement and working capital management.

16. 5) Certificate deposits: a certificate issued by a bank to a person depositing money for a specified length of time at a specified rate of interest. Features • It is short term borrowings by banks. • Rate for interest is higher than normal fixed deposits. • It is transferable from one person to another before maturity Functions of money market • It increases supply of funds and makes it available to borrowers • It helps in making funds available at cheaper rates; • Through quick transfer of funds from one place to another, an organised money market helps in avoiding regional deficiency or over-supply of funds. • By enhancing liquidity, the money market plays a important role in economic growth of the country; • By providing profitable avenues for parking short-term surplus funds, the money market enhances profits of banks, financial institutions, and corporates.

17. Depositories Depository: is an organization like a central bank where the request of a shareholder his securities are held in electronic form through the medium of a depository participant. The Depositories Act defines a depository as a company formed and registered under the Companies Act, 1956 and which has been granted a certificate of registration under subsection (1A) of section 12 of Securities and Exchange Board of India Act, 1992. Depository System: It is a system whereby the transfer and settlement of scrips take place through the modern system which eliminates paper work, facilitates automatic and transparent trading in scrips, shortens the settlement period. It is also known as scrip less trading system. Objectives of a Depository A depository enables the capital market to achieve the following objectives:  Reduce the time for transferred of securities  Avoid the risk of settlement of securities.  Enhance liquidity and efficiency.  Reduce cost of transaction for the investor.  Create a system for the central handling of all securities.  Promote the country’s competitiveness by complying with global standards.

18. Advantages of Depository services • Reduction of paper work. • Elimination of all risk associated with physical certificates • No stamp duty • Minimized chances of fraud, theft of securities • This electronic media will shorter settlement time. • Quicker transfer of funds and securities • The distribution of dividends, interest and other benefits will be speedier. • Provides more acceptability and liquidity of shares • Faster payment in case of sale of shares. Disadvantages • Lack of control • Need for greater supervision • Complexity of the system

19. Four Constituents of Depository System The Depository— A depository is a provider(firm) for holding and transacting securities in electronic form(by means of book entry). A depository functions are somewhat similar to a commercial bank. At present there are two depositories in India. (I) National securities depositories system(NSDL). (II) central depositories services limited (CDSL). A Depository Participant (DP) is an agent of the depository and provides depository services to investors. To avail the services of the depository, the investors has to open an account with a DP. Both the depository and participant has to be registered with SEBI. The Beneficial Owner— Beneficial Owner is a person in whose name a demat account is opened with CDSL for the purpose of holding securities in the electronic form and whose name is recorded with CDSL. He is the real owner of the securities. He has all the rights and liabilities associated with the securities.

20. The Issuer: The Issuer is the company which issues the security. It maintains a register for recording the names of the registered owners of securities. The issuer sends a list of shareholders who opt for the depository system to the depositories. Issuing companies and their Registrars and Share Transfer Agents: 1. "Registrar to an Issue" means the person appointed by a body corporate or any person or group of persons to carry on the following collecting applications from investors in respect of an issue. 2. Keeping a proper record of applications and monies received from investors or paid to the seller of the securities. 3. Assisting body corporate or person or groupt6mnh of persons Clearing Corporations or Clearing Houses of Stock Exchanges A clearing corporation is a financial institution which provides the services as clearing and settlement for commodities and financial derivatives and securities transactions. Banking System: It maintains current accounts for participants and executes fund transactions relating to securities transactions for participants. Investor: They may be individuals or corporates who have acquired shares either in primary market or in secondary market.

21. Functions of depositories • Dematerialization. i.e. converting physical certificates in to their electronic form. • Rematerialization. i.e. converting securities in Demat form in to physical certificates. • Electronic settlement of trades in stock exchanges connected to NSDL. • Pledging of the dematerialized securities against loan. • Allocation in electronic form in case of initial public offering • Receipt of non-cash corporate benefits such as bonus, in electronic form. • To maintain record of holdings in the electronic form. • Effective transmission of securities. • Freezing of Demat account to avoid debits from the account.

22. Why do we need Depository? Time consuming (processing time by co.) Bad deliveries due to signature difference. Mistakes in completion of transfer deeds Tearing of certificates Fake certificates Cost of transfer : stamp duty Postal delays and charges etc

23. Depository is a place where financial securities are held in dematerialised form. It is responsible for maintenance of ownership records and facilitation of trading in dematerialised securities. However, a Depository Participant (DP) is described as an Agent (law) of the depository. They are the intermediaries between the depository and the investors. The relationship between the DPs and the depository is governed by an agreement made between the two under the Depositories Act. In a strictly legal sense, a DP is an entity who is registered as such with SEBI under the sub section 1A of Section 12 of the SEBI Act. As per the provisions of this Act, a DP can offer depository-related services only after obtaining a certificate of registration from SEBI. There are two depositories which are functional in India – National Securities Depository Ltd (NSDL) and Central Securities Depository Ltd (CDSL). Various Depository Participants linked to each one of them in India. All the details in form of electronic records of equity and debt are kept there.

24. Meaning of Demat Account Demat account or dematerialised account is an account that holds the shares and securities of an individual in an electronic form. When an individual indulges in trading or investing in shares or securities all the transactions are done through the DA. To put it another way, just like the banks hold the money of the individuals. Similarly, the DA holds the shares and securities of the individual in the account. How Demat Account Works? Demat account is a service that is provided by depositories like NSDL and CDSL via intermediaries or depository participants or brokers like Sharekhan, etc. Investors make an account with depository participants and indulge in the transaction of shares and securities. The DA consists of a unique id that is given to every individual who opensan account. NSDL and CDSL are the main authorities who hold all the demat accounts. The depository participants act as a middleman. The DA shall hold your purchases and you can view it anytime in your portfolio. In addition, with every transaction, the DA get continuously updated every time you conduct a transaction.

25. There are a lot of benefits that a trader will have while opening a demat account and they are as follows:- • In your demat account your dematerialized shares will be held in a secure electronic environment. • The pace at which your shares and securities will be transferred is going to be faster and more convenient than the physical form. • If you have a demat account then there are no charges on stamp duty while your securities are transferred. • There has been a significant reduction in paper work involved while opening a demat account. • The best thing is that you can even buy or sell a single share when you have a demat account. • In a dematerialized account the risks involving physical shares like loss of certificates in transit or fire is negated. • Easy Transfer of Securities • Lower Transaction Cost • No Tension of Losing Physical Share Certificates • Share Splits and Bonus Shares Automatically Credit to account • Hassle Free and Convenience

26. What is Dematerialization? • Dematerialization is the process by which physical share certificates of an investor are taken back by the company/registrar and destroyed. Then an equivalent number of securities in the electronic form are credited to the investors account with his Depository Participant. Process of dematerialization The following are the steps involved in the process of dematerialization: 1. The investor is required to fill up the Demat Request Form (DRF) available with the DP and submit it along with the physical certificates which need to be dematerialized. Odd lot shares can also be dematerialized. 2. Depository participant (DP) intimates the Depository of the request from his approved user hardware system. 3. Depository participant submits the certificates to the Registrar. 4. Registrar confirms the dematerialization request from depository. 5. After dematerializing certificates, Registrar updates the accounts and informs depository of the completion of dematerialization. 6. Depository updates its accounts and informs the depository participant. 7. Depository participant updates the account and informs the investor.

27. The difference is in the name itself. Custodian/Registar means custody and Depository means where you deposit! So custodian will have your shares or holdings but legally those will be kept in a safe-keeping account with a Depository.

28. Rematerialisation: Rematerialisation is the process by which a client can get his electronic holdings converted into physical certificates. A client can rematerialise his dematerialised holdings at any point of time. The rematerialisation process is completed within 30 days. The securities sent for rematerialisation cannot be traded. Procedure of rematerialisationThe client has to submit the rematerialisation request to the DP with whom he has an account. The DP enters the request in its system which blocks the client's holdings to that extent automatically. The DP releases the request to NSDL and sends the request form to the Issuer/ R&T agent. The Issuer/ R&T agent then prints the certificates, dispatches the same to the client and simultaneously electronically confirms the acceptance of the request to NSDL. Thereafter, the clients blocked balance are debited. 'Registrar And Transfer Agents' Definition: Registrar or transfer agents are the trusts or institutions that register and maintain detailed records of the transactions of investors for the convenience of mutual fund houses.

30. PRIMARY MARKET PLAYERS OF PRIMARY MARKET • Merchant bankers: MB’s are those who render a wide range of services such as corporate counselling, project counselling, loan syndication, issue management, underwriting of public issue, acting as mangers, consultants or advisors to an issue etc. they play a significant role in the marketing of corporate securities. • Registrars: are intermediaries who undertake all activities connected with the new issue management such as collecting applications from investors, keeping all records with regard to applications received, money received etc. and also assisting the companies in the allotment of shares and helping to dispatch all letters certificates to investors. • Collecting and Coordinating Bankers: Collecting bankers collect the money in the form of cash, cheques, etc., for the subscriptions and the coordinating bankers correlate the collection information on subscriptions and convey the same to the underwriters and merchant bankers. A collecting banker may double up as coordinating bankers too. • Underwriters and Brokers: Underwriters subscribe to a certain amount of capital in the issue. They have to fill the gap, if any, due to the failure of subscription as planned, buy back by their own. Brokers place the new issue in the market through their wide network and through sub-brokers.

31. 5. Transfer agents: The transfer are those who maintain the record of holders of securities on their own behalf or on behalf of the firm and deal with all activities connected with the transfer/redemption of such company’s securities. 6. Debenture Trustees: The debenture trustees are those who act as trustees for securing any issue of debentures of a body corporate under a trust deed executed by a company for the benefit of the debenture holder. 7. Portfolio managers: The portfolio managers are those who advise or direct or undertake the management or administration of a portfolio of securities or funds the client on behalf of the client as per the agreement with the client. 8. Printers, advertising agencies and mailing agencies: related to printing, advertising and mailing without which the day-to-day operations in a primary market cannot function.

32. TYPES OF ISSUES IN PRIMARY MARKET What is an Initial Public Offering - IPO The process of offering shares in a private corporation to the public for the first time is called an initial public offering (IPO). Growing companies that need capital will frequently use IPOs to raise money, while more established firms may use an IPO to allow the owners to exit some or all their ownership by selling shares to the public. An initial public offering, or IPO, is the very first sale of stock issued by a company to the public. Prior to an IPO the company is considered private, with a relatively small number of shareholders made up primarily of early investors (such as the founders, their families and friends) and professional investors (such as venture capitalists or angel investors). ADVANTAGES OF GOING PUBLIC • Availability Of Cash/Long-term Capital: the financial benefit in the form of raising capital is the most distinct advantage. Capital can be used to fund research and development (R&D), fund capital expenditure, or even used to pay off existing debt. • Increased Market Value: an increased public awareness of the company because IPOs often generate publicity by making their products known to a new group of potential customers. Subsequently, this may lead to an increase in market share for the company. • Exit Strategy: An IPO also may be used by founding individuals as anexit strategy. Many venture capitalists have used IPOs to cash in on successful companies that they helped start-up.

33. d) Enhanced Net Worth And Borrowing Ability: Creating multiple financing opportunities: equity, convertible debt, cheaper bank loans, etc • Prestige/Reputation: it s also good to have the company in the market, this kind of “  name” , brings the company a possibility to have better conditions in banks, suppliers and other third party • Ability To Attract And Keep Key Personnel: Attracting and retaining better management and employees through liquid equity participation. • Mergers/Acquisitions: Facilitating acquisitions (potentially in return for shares of stock) DISADVANTAGES: • Expenses: Issuing costs, Auditing costs and market information costs  for instance. Most of this costs increase due to improve the communication to the investors. i.e. being in the market is a responsibility that the companies have to lead in accordance with ethic and transparent information and to do that they have to incur in many new and higher costs • Ongoing Expenses: Listing a company on the stock exchange, therefore, requires huge upfront payments to investment bankers as well as regular expenses to other specialists that need to be incurred periodically over the company’s lifetime. • Loss Of Control: Loss of control and stronger agency problems due to new shareholders, who obtain voting rights and can effectively control company decisions via the board of directors

34. Loss Of Privacy: The more information, a company gives out about itself, the more competitors can find out about the inner workings and the strategy being followed. • Pressure For Short-term Performance: Some long-term strategies require short-term decline in performance. For instance, if a company is investing for future growth, the results may not show up immediately. Going public therefore creates a scenario wherein the company also becomes short-sighted in its bid to keep the investors happy. • Market Risk: Risk that required funding will not be raised if the market does not accept the IPO price, sending the stock price lower right after the offering • Meaningful time, effort and attention required of management What is Follow On Public Offer (FPO) A follow-on public offer (FPO) is the issuance of shares to investors by a public company that is currently listed on a stock market exchange. An FPO is a stock issue of additional shares made by a company that is already publicly listed and has gone through the IPO process. FPOs are popular methods for companies to raise additional equity capital in capital markets through an issue of stock. Typically there are two types of Follow-on Public Offers (FPO) that are released in the market. Those are: Dilutive Non-Dilutive

35. Dilutive FPO: A dilutive Follow-on Public Offering (FPO) takes place when a company wants to raise additional funding from the public market. When this occurs, the company releases more shares (additional shares), but the value of the company remains effectively the same. Non-Dilutive FPO: A non-dilutive follow-on offering (FPO) occurs when company's founders, the board of directors, or other larger shareholders sell their privately held shares on the open market. This type of FPO is called non-dilutive FPO, as no additional shares of the company are sold. What is a Rights Issue? (Through letter of offer) A rights issue is an offering of rights to the existing shareholders of a company that gives them an opportunity to buy additional shares directly from the company at a discounted price rather than buying them in the secondary market. The number of additional shares that can be bought depends on the existing holdings of the shareowners. Advantages: • Companies generally offer rights when they need to raise money. Examples include when there is a need to pay off debt, purchase equipment, or acquire another company. • Benefits of a rights offering are that the issuing company can bypass underwriting fees, brokerage fees and other expenses

36. 3. Management of applications and allotment is easier because the company has to handle only a limited number. 4. Existing shareholders pattern is not disturbed. 5. Existing shareholders earn the first right to share in the prosperity of the company if it is doing well. Disadvantages: • This method can be used only by the existing companies and not by the new companies. • The issuing company, in an attempt to raise capital, • Additional required filings and procedures associated with the rights offering are too costly and time-consuming. Preferential Issue: It is the fresh issue of securities and shares by listed company. It is called as preferential as the shareholders with preferential shares get the preference when it comes to dividend disbursement. Private Placements: are, in the simplest terms, a way for businesses to raise capital by selling securities to private investors. Rather than making shares in a company available to the general public (as with an initial public offering).  A private placement makes shares available to only a limited number of suitable individuals.  Doesn’t require underwriters or registration with the Securities Exchange Board of India.  While often used by small companies, private placement is equally beneficial to companies of all sizes because they require less time and expense than a public offering

37. Advantages: • There is economy expenses because the company does not have to incur costs relating to underwriting commission, application and allotment of shares, publicity. • Staying private allows your company to choose its own investors, unlike a public offering which is open to the general public. • It saves the company’s money and time required to make public offering. • With a private placement you can take more time to arrive at the agreed upon return. • Those shares which do not arose public interest can be sold through private placements. • Stock exchange requirement concerning contents of prospectus and its publicity are less in case of private placements. • Finally, the options for the type and amount of funding give you more flexibility and get capital much faster than searching for venture capitalists, or waiting for your share to sell on the public market. Disadvantages: • Fear of issue getting concentrated in few hands • Artificial scarcity of these securities may be created for jacking up their prices temporarily thus misleading investors. • Placement of shares does not generate confidence in the minds of investing public.

38. What is a Buyback of Shares? A buyback, also known as a share repurchase, is when a company buys its own outstanding shares to reduce the number of shares available on the open market. Companies buy back shares for a number of reasons, such as to increase the value of remaining shares available by reducing the supply. Buy back of shares means repurchase of its own shares by a company at a price decided by it (may be market price or at a premium over market price). There could be numerous reasons for it which vary from company to company such as: • If there are surplus funds lying in the hands of company and it doesn't have great investment opportunities, then it might use the funds to buy back its shares. • A company may also go for buybacks with an aim of projecting better valuation of their stocks when they think it is undervalued in the market. • Some companies may also use it as a tool to change their capital structure i.e. debt-equity ratio in specific. By buying back the shares from open market, a company may increase its reliance on the debt financing rather than equity financing. Moreover interest payment on debt is tax deductible. So after tax cost of debt is quite lesser than shareholders return on equity. • Buying back of shares lead to reduction in cost of capital, as there would be less number of shares on which dividend is to be paid.

39. Sometimes it might be possible that price of share falls in the market due to market fluctuations (although company's performance is still same), then in this situation company can buy back its shares at a lower price and later on, after sometime, can reissue them at higher price. • It would help in improving financial ratios such as EPS. OBJECTIVES: • To return surplus cash to shareholders • To increase the underlying shares value • To support the share price during periods of temporary weakness • To maintain a target capital structure • To improve earnings per share • To provide additional exit route to shareholders when shares are under valued

40. ADVANTAGES: • It is viable proposition to investors to sell back shares instead of going through the secondary market. • It will improve return on capital and net profitability, increase the earning per share and provide higher price to investors. • It offers flexibility to the companies to reorganize their capital structure. • Buy back is an instrument to ward off hostile takeover bids. (A hostile takeover is the acquisition of a target company by another acquiring company that is accomplished by going directly to the company's shareholders or fighting to replace management to get the acquisition approved). • Buy back of shares helps to revive the capital market. The operation of demand and supply factor boost prices of shares.

41. COMMODITY MARKET A commodity market is a place where buyers and sellers can trade any homogenous good in bulk. Grain, precious metals, electricity, oil, beef, orange juice and natural gas are traditional examples of commodities, but foreign currencies, bandwidth, and certain financial instruments are also part of today's commodity markets. Commodities are split into two types: hard and soft commodities. Hard commodities are typically natural resources that must be mined or extracted (such as gold, rubber and oil), whereas soft commodities are agricultural products or livestock (such as corn, wheat, coffee, sugar, soybeans and pork). Difference between Stock Market and Commodities commodity market, • In stock market, stocks and mutual funds are traded where as in the commodity market commodities like gold, coal, rice etc are traded. • Ownership in companies is traded in the stock market while ownership, of raw, unprocessed goods is traded in the commodity market. • It is in the stock market that shares of different companies are trade, where as in the commodity market, commodities of various categories are traded. • In commodity market, there is a possibility of taking physical delivery of commodities, but stock market deals only in financial assets which are intangible and invisible.

42. 5. Commodity derivatives are considered to be more riskier than stock market derivatives. 6. Volatility is more in commodity market as compared to stock market. 7. Commodity supply is not fixed whereas stock supply is almost fixed. 8. In commodity market, commodities of various categories ranging from alpine to elephant are traded but in stock market the shares of different companies are traded.

43. Sensex also called BSE 30, is the market index consisting of 30 well-established and financially sound companies listed on Bombay Stock Exchange (BSE). • 30 companies are selected on the basis of the free float market capitalization. • NIFTY: • Nifty, also called NIFTY 50, is the market index consisting of 50 well-established and financially sound companies listed on National Stock Exchange of India (NSE). • The base year is taken as 1995 and the base value is set to 1000. • What is an Odd Lot • An odd lot is an order amount for a security that is less than the normal unit of trading for that particular asset. Odd lots are considered to be anything less than the standard 100 shares for stocks. OR An odd lot is an order amount for a security that is less than the normal unit of trading for that particular asset. Odd lots are considered to be anything less than the standard 100 shares for stocks.(an incomplete set or random mixture of things) (a transaction involving an unusually small number of shares.)

44. For example, let's assume John wants to buy a share of Disney stock for each year of his son's life as a birthday present for his 12th birthday. John calls his broker with a buy order for 12 shares of Disney stock, which is an odd lot. This makes John an odd-lotter. Typically, individual investors are the most likely to be odd-lotters. Because it takes much more work to fill an order for an odd lot, John's broker may charge a higher commission. The broker may have to purchase a round lot (100 shares) and then break the shares up to provide John with his 12 shares. Market lot: A lot is a fixed quantity of units and depends on the financial security traded. For stocks, a lot is the number of shares that is purchased or sold in one transaction. ... In the stock market a lot of 100 shares is known as a round lot