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Capital Markets – A boon for a “Savvy” Investor

Capital Markets – A boon for a “Savvy” Investor. A Presentation by Amit Kumar Gupta. Understanding the term “ Capital” Broad Overview of Capital Markets Risk- Types of Risk Understanding Risk – Return Dynamics Equity Markets Debt Markets

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Capital Markets – A boon for a “Savvy” Investor

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  1. Capital Markets – A boon for a “Savvy” Investor A Presentation by Amit Kumar Gupta

  2. Understanding the term “ Capital” • Broad Overview of Capital Markets • Risk- Types of Risk • Understanding Risk – Return Dynamics • Equity Markets • Debt Markets • Bond Markets – Relationship between Price and Interest Rates • Macro economic factors (GDP, Currency rate, Inflation etc..) and their impact on Capital Markets • Introduction to Financial Planning –(How to be a smart investor and not a silly investor) Agenda

  3. Financial Context- The money needed to “operate” a “company/business” • In terms of Accounting language “capital” generates the “financing” ability to “ build/operate” an asset • Types of Capital – Equity and Debt • Raising Capital has a cost which is called cost of capital(WACC) Capital

  4. Capital Markets – • Equity Markets : 1) Stock Indices 2) Private Placement to Institutions 3) Private Equity/Venture Capitalist • Debt Markets: 1)Banking Products( Time and Demand Deposits) 2)Certificate of Deposits 3)Commercial Papers 4)Debentures(Secured/Unsecured) 5)Bonds Broad Overview of Capital Markets

  5. Business Risk • Market Risk • Political Risk • Operational Risk • Credit Risk Also classified as: 1)Diversifiable 2)Non-Diversifiable Risk – Types of Risk

  6. Let’s take an example and understand: Understanding Risk – Return Dynamics

  7. Important as an investor to understand- • Equity Markets are more risky as explained above • But they generate more returns and possess greater volatility • Debt Products are more stable and less risky • An investor got to choose the rightful mix of debt and equity Understanding Risk – Return Dynamics

  8. A Company raises money through selling shares offering a stake in the company to the subscribers based on the shares they hold • The company has to be listed in a stock exchange for its shares to be traded(Rules governed by SEBI) • Listing is done in Primary Market(Also known as Initial Public Offering) • Once the listing is done shares are traded in Secondary market • A retail investor can invest in shares and earn money through 1)Rise in value of share (Capital Appreciation) 2)Dividend Income (Dividend declared by the company) PS-Investors have no guarantee of a return on share investments Equity Markets

  9. Stocks can be analyzed in two ways : 1)Technical Analysis- Charts , Patterns 2)Fundamental Analysis- Financials of the company • Important metrics to be monitored 1)P/E , P/B 2)PEG 3)PV/EBIDTA 4)ROE 5)ROA 6)Interest Coverage 7)Profit Margin 8)Capital Structure PS- Information readily available in public domain Equity Markets

  10. Investing in one type of company/sector risky and can generate volatile returns • Product called Mutual Fund to help you out • Mutual funds collect money from investors and invest them in variety of companies thereby diversifying risk and optimizing returns • Mutual funds category(Only Equity mentioned here) 1)Large Cap Fund 2)Mid Cap Fund 3)Sectoral Fund 4)Small Cap Fund Equity Markets

  11. Debt is an investment option which gives a fixed return( called rate of interest/coupon etc…) • Companies raise debt through 1)Loan(from financial institutions/banks) 2)Investors(from debentures) • Banks mobilize capital through : 1)Deposits(Time and Demand) 2) Money Market Debt Mutual Funds offer superior returns than Deposits and benefit of Indexation Debt Markets

  12. Indexation explained below: Debt Markets

  13. Bond Markets – Relationship between Bond price and Interest Rates

  14. GDP • Inflation • Fiscal and Monetary Policy • Political Uncertainty • Fiscal Deficit • World economic scenario • Exchange Rate • Current Account/Capital Account Macro economic factors

  15. Be a Savvy investor not a Silly one • Diversify your savings into a wide array of products to reduce risk • Invest in a product based on your need, your risk appetite, your age and your current Asset/Liability situation • Keep yourself updated on the economic and political environment of the country • Be flexible to churn your portfolio as and when needed • Choose objective when putting money in stock markets- (Trading or investing) Introduction to Financial Planning

  16. Questions & Answers

  17. Thank You!!!

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