Indian stock market perform well than Chinese stock market

China’s growth rate is much greater than India, but its stock market not performing as same as the Indian stock market, there are lots of reason behind this.
1. Lack of Transparency:
In china Govt. has sole control on the all medium of information there for current status of the market not available to the investors, where in India this information available to every investor easily.
2. Socialistic pattern of investment:
It’s true that after 1970 China implemented some policy of open economy but still China is a socialist country and most of the economy depend on the public sector.
3. Violation of the copyright act:
In China the violation of the copyright act is the serious concern, which demotivate the investor as they are not able to protect goodwill of their product in the market.
4. Wrong data presented by the Govt. Agency:
As china is the socialist country true picture of the economy not available in the market therefore the investor are not ready to take the risk of investment in the stock market.
5. Major dependence on the Foreign Company:
In China most of the investment in the manufacturing sector done by the foreign investor .this is also create a problem of heavy dependence on the foreign company.
6. Unequal distribution of the income:
Growth of the Economy in China is not equal in all part of the country. Here poor become poor and rich become richer day by day which create social unrest in the country.
In India large portion of the investment are made by the Private investor here public as well as private investor are made the investment side by side .In India 2/3 of the total market investment made by the Indian industrialist or by the Indian Govt. dependence on the foreign investment is 1/3 of the total.
After Satyam scam the credibility of the Indian stock market reduce among the foreign investor.
Question arises for the credibility of the SEBI, but only the Satyam scam is not the best criteria to judge the performance of the SEBI.

Hedge Fund

An Aggressive managed portfolio that use advanced I investment strategy to get more return than the general investment are called hedge fund investment .Hedge means the protection ,hedge investment help to get the shelter from the current market fall. Hedge investment or the hedge is give birth to the FRA (Future rate of agreement).FRA is the policy to transfer the agreement to the future to get the advantage of the general rise of the interest rate .Hedge funds investment is generally differ from the mutual fund investment as the mutual fund investment need to follow some rules and guideline for investment but the hedge fund are free from any rules and regulation for the investment. Hedge fund investment generally for the rich people as the investment are highly risk able .In the US there is a criteria for hedge investment that the investor has at least 1 million net worth of assets .Hedge fund generally need to protect the risk of interest but actually this means of investment for getting higher return .
Magegment fees are calculated on the NAV of the fund on the per annum basis but paid on the monthly or quarter basis and charged as 1% to 4 %.
Performance fees are charges on the net profit of the fund investment as there is no profit no need to pay the charges.
Main Risk:
Volatility: Hedge fund are highly elastic than other investment.
Lack of transparency: Hedge funds not follow the rules and regulation there for there is no governing body to check the performance of the hedge fund which means transparency of the investment is very low.
Lack of regulation: There are no specific rules or regulation for the hedge fund investment as a result the hedge fund manager decision is the last decision for the investment.

Buy Back Of Equity Shares

Buy back of shares means reducing the total number of shares from the market.
Buy back of shares help to increase the goodwill of the company as well as help to increase the market value of shares .Buy back of shares require a large lump sum amount of liquid cash .Buy back help dispose the excess cash reserve of the company to protect the ownership of the company or to consolidate the ownership in the few of hands.Buy back has some condition also .In the different countries there are different rules need to follow when any company goes for the buyback policy .Company need to inform there shares holder in the general meeting that company goes for buyback process.Company need to get clearance from the governing body of that country.company not able to issue fresh equity three months after the buy back process.
Company purchase there own shares from the market at a premium amount ,but these condition not exist after a some time because the market price of the shares increase up to the shares price to get the advantage of the increase amount benefit.

Prime Objective to buy back are:
1.To reduce the outstanding equity capital:
To reduce the outstanding equity capital as a consequence of which the floating stock in the market reduced.Buy back help to minimize the total amount of equity capital from the market,which help to stabilize the market price of the share.

2.To increase the return on the remaining portion of the shares :
Buy back help to reduce the volume of equity capital in the market and the remaining equity holder get the higher return than before .Suppose the net profit of the company is 15 million dollar and the total number of equity share holder are 100000 holding total 1 million shares but after the buyback of share the total number of shares reduce to 50000 that means 15 million dollar distributed among the 50000 shares definitely the unit holder getting better return than before .
3.When the company has surplus cash and run out of favorable investment opportunity:
Buyback is only possible when the company has sufficient liquid assets in their reserve and the investment rate of return is less than the cost of equity than the company goes for the buyback policy.
4.Support the shares price:
Buy back help to increase the market value of the shares and to reduce the fluctuation in the shares price of that company.

Bonds are not totally risk free investment

Bonds are less risky than the equity but it doesn’t meant its risk averse bonds investment are default risk as well as the interest rate risk.

If the market down and recession than there is no option to save the investment by any means .

1.Default Risk:

Suppose any company become bankrupt than the investor lost there whole investment.is the some part paid in the future than also the investor loss the current market value of the rupee.

2.Interest rate risk:

Interest rate risk will arise with changing in the interest rate in the market.Bonds are not held till maturity ,in that case the investor get the low amount of there investment that means price loss.If the hold the bonds till maturity than the suffer from the capital loss if the market price of the bonds reduce.

Change in the price fluctuation caused by the interest rate elasticity of bonds .Increase in the interest rate has increase the interest income as well as the reinvestment of that income gives the higher income .Increase in the interest rate reduce the market value of the bonds menace the investor get lower return by resumption of the bonds .It menace that increase in the interest rate has positive reinvestment effect but negative price effect.On the other hand reduce in the interest rate ,reduce the reinvestment income but the resumption value of the bonds increase due to reduce in market interest rate,that means the reduce in the interest rate has negative effect on the reinvestment but positive price effect.

To protect the investment from the elasticity of interest rate change ,Bond immunization is the right way.

Bonds immunization not depend on redemption value(yield to maturity) of the bonds ,it depends on the duration of the bonds.

If a liability needs to be paid after a particular time period then the investor needs to go for the Bond immunization which is exactly of the same duration as liability period and here the interest rates are on compound basis.

Bonds immunization helps to protect from the fluctuating interest rate market.

Guide line before investing in the security market

The main motto to invest in the security market to get the better return than the general fixed deposit or the bank deposit .Security market is provide the good return but here the risk of investment is much higher than the other investment option. To reduce the risk factor some precaution needed.
Security analyst has taken some basic step to educe the risk .

1. Quality of Management:
Quality of the management help to achieve the company goal which help to get the better return and also help to increase the turnover of the company. In every company there is saturation point but the good management with new innovation are able to get the primary level again .

2. Overall growth prospect:
If you want to purchase any company shares than check the past performance of that company .
Its liquidity, financial result ,assets combination etc.
As I past performance is not always good to judge the future of any company but still it help to decide the primary level of investment.

3. Quality of Earning:
Quality of earning menace the financial result of the company from last few years ,also check the turnover ration which help to get the financial structure of the company.

4. Clear information of the corporate strategy:
This means to check the transparency of the company. If the company regularly provide the financial result ant the financial position information also provide the assets and debt information of the company which help to get the clear picture of that company it also help to make the right future prediction of that company. This help to get the information that where the fund investment and how much it invested.

5. Liquidity position:
Investment in the security is very risky so when anyone go for the investment in security market than its better to check the liquidity position of that company which help to get knowledge that if there is any financial problem arises than the investor get back there capital investment.

6. Position in the market place:
Market position help get the financial strength as well as the goodwill of th company ,Goodwill of the company some time major difference in the investment and the price of the security.
7. industry prospect:
Industry prospect means the growth strategy relation with the Govt and the society .Some time the Govt. promote some industry and on the other hand Govt. impose some extra duty on some other industry to reduce the import or to increase the export extra.

8. Relation with the investors.
Relation with the investors means the company provide all the material fact financial information in the regular interval to the investor .They paid the dividend and the interest as time period decided in the agreement and also company informed the investor the new business strategy which effect the earning of the investor.

Different types of bonds

Bonds are easily converted intro the liquid cash in comparison to other source of the invest . In financial market depends on the pure debt reduce with the introduction of the different means of bonds. Main category of bonds are:

Secured and Unsecured bonds:

Secured bonds are backed by the assets that means the secured bond holder has the right sell the property related to the bond to get the amount back .Unsecured bonds doesn't arise any right of the holder of bonds on the assets o the company.

Convertible and non convertible bonds:

Convertible bonds are those which converted in the equity shares after the maturity period. Non convertible bonds carry interest on the investment portion its not transfer into equity shares.

Bonds market innovation:

Now a days the pure debt rarely used to collect the funds as this arise financial burden second one that the debt fund collected by any industry need to follow many rules and regulation as well as the restriction by the Industrial governing body that debt capital collected up to limited amount.

In the financial market there is new way of fund raising system invented which reduce the dependence on the pure debt.

1.Zero interest rate Fully convertible bonds:

Here the interest rate is 0 and the bonds converted into the equity shares after the maturity period .

Example: Suppose the market value of the bonds is rs10 after maturity rs 100 bonds converted into the 2 equity shares of rs35 each with premium rsrs30 on each.

2.Detachable Equity cu pons:

Here the bonds holder get the detachable equity cu pons which they transfer into the equity shares aft6er maturity or they are able to sale the detachable portion in the market.

3.Secured Premium Notes:

Here the investors get the flexibility ,that after a 4 or 7 years the investors are able to go for the equity transfer with pay the remaining amount or go for the nonconvertible portion with getting interest as well as capital appreciation .

4.Triple option convertible bonds:

Here the investor get the fully transfer option at the maturity of the bonds or go for non transferable option or get third one transfer the half portion into the equity shares and remaining in nonconvertible portion get the interest on that.

5.floating rate bonds:

This bonds interest rate changes with change in the market interest rate therefore these bonds are called floating rate bonds.

6.Extendibles Bonds:

Extensible bonds are those bonds,where the maturity periods are more than one here the issuer extend the maturity period with the changing market condition. If the interest rate arises than the holder can increase the maturity periods on the other hands if the interest rate reduce than the holder has right to sell the bonds.

7.Foreign currency bonds:

In this bonds the issuer country collect money from the homeland bonds holder and issue the foreign bonds this bonds help to the holder to get the benefits of the higher interest rate of the foreign country .

These bonds are know as Bulldog in UK and Samurai in Japan.

8.Govt. Bonds:

Govt. collect the debt amount to fulfill the gap of the fiscal deficit ,demand for the Govt. bonds is now a days increase as this is the safes means of investment.

9.Inflation rate bonds:

Now a days the European and the American market arise the funds by issuing the inflation bonds the market value of these bonds increase with the inflation,and the interest rate also provide a good source of income.

A New Way to Collect The Debt Fund(Convertible Debt Bonds)

Convertible debt is one of the hybrid investment where one can invest in the debt bonds and these debt bonds transfer to equity shares on the later period.
Debt bonds help to get the debt for long period of time as well as it not arise any liquidity crunch situation among the company to return the cash on the maturity of the debt bonds.
US and the Japan are the two largest debt bonds market in the world.
What are the basic need that a company use convertible bonds or convertible debt bonds,company wants to get the finance with lowest cost and debt bonds fulfill that also it help to arrange debt finance for long period of time.

According to the transfer norms convertible bods divided in the different categories:
1.Issuer terms based:
I used this terms as these bonds are converted into the equity on the maturity but the conversion depends on the will of the issuer. If the issuing company does want to transfer the debt bonds than its pay the amount on cash to the holder with interest on it.

2.Conversion on the third party shares:
Generally this is not a convertible bonds as because the issuer company issue any third party shares to the holder in place of its own shares . This type of convertible bonds issued by the newly opend company .

3.Mandatory convertible:
This is the actual convertible bonds where the issuer company transfer there convertible portion on equity shares after the maturity period.
4.Cash payments:
Here the issuer company paid the amount as per the current market value of the bonds with the interest amount or paid more amount than the actual market rate .

5.Issue of the old or new dividend based bonds:
Here the issuing company has right to issue the shares based on old or new dividend rates.
6.Partial convertible bonds:
The issuer company transfer a fraction amount to the bonds to the share and paid the remaining amount as cash with interest on it.

7.Issue of the holding company shares:
Here the issuing company transfer the bonds on the holding company shares ,these issue help to get the AAA rated company shares by the investor .
8.Reverse convertible:
Reverse convertible is actually one type of extension of the maturity period by the issuing company on the maturity date of the old bonds.

Uses:
1.Long term borrowing:
Issuing company arrange the finance for a long time ,because the convertible debenture maturity period some time more than 5five financial years.
2.Low cost of borrowing:
The cost of borrowing is less than the debt borrow ,here the interest rate calculated on the bonds but paid on the maturity as well as the company no need to pay the liquid cash on the maturity period ,they only transfer the amount on shares.
3.Voting Right transfer:
voting right transfer only when the equity shares given on the conversion but if the preference shares issue than the no voting right transfer to the holder of the shares.

4.Help to collect the huge amount by debt:
There is certain condition that a company cannot raise fund by debt after a certain amount but the convertible debt bonds help to get extra amount from the market.
5.Tax advantage:
Tax calculated on the net profit of any company but the interest on the convertible bonds deducted before the tax deduction.