5

Investment Opportunities

The three important characteristics of any financial asset are:

• Return—the potential return possible from an asset.
• Risk—the variability in returns of an asset from the chances of its value going down/up.
• Liquidity—the ease with which an asset can be converted into cash.

Investors tend to look at these three characteristics while deciding on their individual preference pattern of investment. Each financial asset will have a certain level of each of these characteristics. These, in some way, determine the type of financial asset.

Based on the preferred risk, return, and liquidity, each investor selects investments that matches his investment objective. The investment pattern of the household sector in India gives a glimpse of the investment preference. The savings pattern of the household sector in India can be differentiated in terms of currency; fixed/savings instruments such as deposits, insurance/provident funds and small savings; and securities market investment through mutual funds, government securities, and other direct corporate investments. A list of the most sought after investment avenues in India is listed in Table 5.1.

INVESTMENT AVENUES

There are a large number of investment avenues for savers in India. Some of them are marketable and liquid, while others are non-marketable. Some of them are highly risky while some others are almost riskless. The investor has to choose proper avenues from among them, depending on his specific need, risk preference, and return expectation.

Investment avenues can be broadly categorised under the following heads:

1. Corporate securities
   • Equity shares
   • Debentures/Bonds
   • Warrants
   • Preference shares
   • GDRs/ADRs
   • Derivatives
2. Deposits in banks and non-banking companies
3. Post office deposits and certificates
4. Life insurance policies
5. Provident fund schemes
6. Government and semi-government securities
7. Mutual fund schemes
8. Real assets

CORPORATE SECURITIES

Joint stock companies in the private sector issue corporate securities. These include equity shares, preference shares, and debentures. Equity shares have variable dividend and hence belong to the high risk-high return category; preference shares and debentures have fixed returns with lower risk.

The classification of corporate securities that can be chosen as investment avenues can be depicted as shown below.

Equity Shares

By investing in shares, investors basically buy the ownership right to that company. When the company makes profits, shareholders receive their share of the profits in the form of dividends. In addition, when a company performs well and the future expectation from the company is very high, the price of the company’s shares goes up in the market. This allows shareholders to sell shares at a profit, leading to capital gains.

Shares have a better track record for appreciating and beating inflation than any other type of investment over time. However, stock markets are volatile by nature and are very risky. The stock market has lured many investors who have developed different kinds of tools to identify the past pattern of price movements and predict, to some extent, the future position of the securities. Investors can opt for corporate securities as investment in the stock market since there is a possibility to get dividends and capital gain returns.

Investors can invest in shares either through primary market offerings or in the secondary market.

The primary market has shown abnormal returns to investors who subscribed for the public issue and were allotted shares. The average initial returns (the difference between the first listed price and the issue price) for an investor in the public issues could be nearly 35 per cent in the Indian market. A sample return computation is given in the Appendix.

The investor, however, has to bear in mind that the shares of a blue chip company, though issued at a premium, could have a far greater demand in the market for various reasons. When there is an oversubscription on the issue, many small investors might not get an allotment of the shares. Hence, demand for the shares goes up immediately when the shares are traded in the secondary market.

Rights Issue of Equity

When a company wants to raise capital by issuing additional securities, it may give current shareholders the opportunity, ahead of the general public, to buy the new issue in proportion to the number of shares already owned. This privilege is called a right. These additional shares are usually offered below the current market price and have to be exercised within a specified period.

This method of raising finance is similar to a private placement, with the existing shareholders being the counterparties in the exchange. This method substantially reduces the cost of financing for the company.

For an investor, the rights issue enables a sure allotment of shares at a rate lower than the market price. This assures initial returns to the holders of shares.

Preference Shares

Preference shares refer to a form of shares that lie in between pure equity and debt. They have the characteristic of ownership rights while retaining the privilege of a consistent return on investment. The claims of these holders carry higher priority than that of ordinary shareholders but lower than that of debt holders. These are issued to the general public only after a public issue of ordinary shares.

• These shares may or may not carry voting rights.
• The amount of dividend, though fixed beforehand, is paid only in the event of a profit subsequent to the payment of fixed obligations such as interest and tax.
• Investment in preference shares can be made either through private placement or a public issue.

Preference shares also get traded in the market and give liquidity to investors. Though trading in preference shares is not quite frequent, investors can opt for this type of investment when their risk preference is very low.

Debentures and Bonds

These are essentially long-term debt instruments. Many types of debentures and bonds have been structured to suit investors with different time needs. Though having a higher risk as compared to bank fixed deposits, bonds and debentures do offer higher returns.

Debenture investment requires scanning the market and choosing specific securities that will cater to the investment objectives of the investors. Investors also need to look into the following.

• The credit rating of the issuing companies—rating by independent agencies such as ICRA, CRISIL, and CARE indicate the levels of safety of debt instruments.
• The method of compounding by the companies—securities that offer more frequent compounding such as daily, monthly, quarterly, would result in higher returns. When all other parameters of risk, safety, liquidity, and so on are the same, the choice of a security should depend on frequent compounding of interest.

Depository Receipts (GDRs/ADRs)

Global Depositary Receipts are instruments in the form of a depositary receipt or certificate created by the overseas depositary bank outside India and issued to non-resident investors against ordinary shares or Foreign Currency Convertible Bonds (FCCBs) of an issuing company. A GDR issued in America is an American Depositary Receipt (ADR).

Indian companies are permitted to raise foreign currency resources through the issue of Foreign Currency Convertible Bonds and/or issue of ordinary equity shares through GDRs/ADRs to foreign investors —institutional investors or individuals (including NRIs) residing abroad. Applications for necessary permission have to be made to the Government of India, Ministry of Finance, Department of Economic Affairs, New Delhi.

GDRs are designated in dollars and are not subject to any ceilings on investment. There is no restriction on the number of euro issues that can be floated by a company or a group of companies in a financial year. The proceeds of the GDRs can be used for financing capital goods imports; capital expenditure including domestic purchase/installation of plant, equipment, and building; and investment in software development, prepayment or scheduled repayment of earlier external borrowings; and equity investment in joint ventures/ Wholly Owned Subsidiaries (WOSs) in India. Companies may retain the proceeds abroad or may remit the funds into India in anticipation of the approved end uses.

Among the Indian companies, Reliance Industries Limited was the first company to raise funds through a GDR issue. Besides GDRs, ADRs are also popular in the capital market. There are three levels of ADRs, depending on their adherence to the Generally Accepted Accounting Principles (GAAP).

• For a Level I ADR programme, the receipts issued in the US are registered with the Securities Exchange Commission (SEC), but the underlying shares held in the depositary bank are not registered with the SEC. They must partially adhere to Generally Accepted Accounting Principles used in the USA.
• Level II ADRs are those in which both the ADRs and the underlying shares (that already trade in the foreign company’s domestic market) are registered with the SEC. They must also partially adhere to GAAP.
• Level III ADRs must adhere fully to GAAP and the underlying shares held at the depositary bank are new shares, not those already trading in the foreign company’s domestic currency market.

Sponsored ADR is an ADR created by a non-US company working directly with a depositary bank. An unsponsored ADR is usually one created by a bank without the participation or consent of the non-US company. An unsponsored ADR can trade only in the over-the-counter market.

As investors seek to diversify their equity holdings, the option of ADRs and GDRs is very lucrative. While investing in such securities, investors have to identify the capitalisation and risk characteristics of the instrument and the company’s performance in its home country (underlying asset). Some points the investors ought to know while investing in a depository receipt are given below.

• These are special instruments created from ordinary shares to generate funds abroad.
• GDR issues are marketed by investment banks that manage the road shows, that is, presentations made to potential investors. An indication of the investor response is obtained during the road shows. The issuer fixes the range of the issue price and finalises the issue price after assessing investor response at the road shows.
• The cost of floating an ADR or GDR issue is quite high and is only justifiable if the amount of finance to be raised is quite large.
• The shares of a company are deposited with a bank which will issue GDRs and ADRs of equivalent value in a foreign currency (normally US dollars).
• The holder of a GDR does not have voting rights.
• The proceeds are collected in foreign currency, thus enabling the issuer to utilise the same for meeting the foreign exchange component of project cost, repayment of foreign currency loans, meeting overseas commitments, and for other similar purposes.
• Dividends however, are paid in Indian rupees due to which the foreign exchange risk or currency risk is placed totally on the investor.
• The GDRs are usually listed at the Luxembourg Stock Exchange and are also traded at two other places besides the place of listing, for example, on the OTC market in London and on the private placement market in USA.
• An investor who wants to cancel an allotted GDR may do so by advising the depositary to request the custodian to release the underlying shares and relinquishing the GDRs in lieu of shares held by the custodian. The GDR can be cancelled only after a cooling period of 45 days. The depositary will then instruct the custodian about the cancellation of the GDR and release of the corresponding shares, collect the sales proceeds, and remit the same abroad.

The returns of an ADR may be slightly different from the return of its underlying asset due to a small market cost for a GDR/ADR, a legal constraint placed on a GDR/ADR. The investor has to keep a track of depository receipt’s performance by computing the volatility of returns from the receipts and from the underlying assets and computing the correlation between the two returns. In most successful instruments, the correlation would be nearly. 90 and the high-return, low-risk depository instrument will be the right choice for an investor.

A comparison of the annualised volatility between a depository receipt and its underlying asset is given in Table 5.2.

 

Analysing the depository receipt’s performance needs monitoring of the FCCB/GDR/ADR market price as well as of the underlying asset price in the home country. There is hence a need to distinguish between the depository receipt and its underlying asset. This distinction is important since the specific risk of a depository receipt and its underlying asset is not linked. If investors hold both a depository receipt and its underlying asset in the same portfolio, then a small amount of specific risk will exist between the two assets.

The FCCBs/GDRs/ADRs issued by Indian companies to non-residents have free convertibility. These shares can be transferred (on conversion of GDRs/ADRs into shares) in favour of residents. The nonresident holder of GDRs/ADRs should approach the overseas depository bank with a request to the domestic custodian bank to get the corresponding underlying shares released in favour of the non-resident investor. Thus the GDR and ADR are two-way fungible. The instance for transfer could be based on a sale contract or transfer in the books of accounts between the parties.

Warrants

A warrant is a certificate giving its holder the right to purchase securities at a stipulated price within a specified time limit or perpetually. Sometimes a warrant is offered with debt securities as an inducement to buy the shares at a latter date. The warrant acts as a value addition because the holder of the warrant has the right but not the obligation of investing in the equity at the indicated rate. It can be defined as a long-term call option issued by a company on its shares.

A warrant holder is not entitled to any dividends, neither does he have a voting right. But the exercise price of a warrant gets adjusted for the stock dividends or stock splits. On the expiry date, the holder exercises an option to buy the shares at the predetermined price. This enables the investor to decide whether or not to buy the shares or liquidate the debt from the company. If the market price is higher than the exercise price, it will be profitable for the investor to exercise the warrant. On the other hand, if the market price falls below the exercise price, the warrant holder would prefer to liquidate the debt of the firm.

Derivatives

The introduction of derivative products has been one of the most significant developments in the Indian capital market. Derivatives are helpful risk-management tools that an investor has to look at for reducing the risk inherent in an investment portfolio. The first derivative product that has been offered in the Indian market is the index futures. Besides index futures, other derivative instruments such as index options, stock options, and index options, have been introduced in the market.

Time	Instrument Introduced
June 2000	Index Futures
June 2001	Index Options
July 2001	Stock Options
November 2001	Stock Futures

 

Stock futures are traded in the market regularly and, in terms of turnover, have exceeded that of other derivative instruments. The distribution of turnover among various derivative products (February 2004) is given in Table 5.3.

 

Table 5.3 Derivative Turnover in NSE (February 2004)

Derivative	Turnover (Rs. Crores)	(%)
Futures on Indices	86,359	31.65
Options on Individual Securities	161,464	59.18
Options on Indices	6,545	2.40
Options on individual Securities	18,472	6.77
Interest Rate Futures	0	0
Total	272,839	100.00

 

The liquidity in the futures market is concentrated in very few shares. For illustrative purposes, the trading position in the derivative markets in February 2004 is given in the Table 5.4.

 

 

Theoretically, the difference between the futures and spot price should reflect the cost of carrying the position to the future or essentially the interest. Therefore, when futures are trading at a premium, it is an indication that participants are bullish on the underlying security and vice versa.

Derivative trading is a speculative activity. However, investors have to utilise the derivative market since the opportunity of reducing the risk in price movements is possible through investments in derivative products.

DEPOSITS

Among non-corporate investments, the most popular are deposits with banks such as savings accounts and fixed deposits. Savings deposits carry low interest rates whereas fixed deposits carry higher interest rates, varying with the period of maturity. Interest is payable quarterly or half-yearly or annually. Fixed deposits may also be recurring deposits wherein savings are deposited at regular intervals. Some banks have reinvestment plans whereby savings are re-deposited at regular intervals or reinvested as the interest gets accrued. The principal and accumulated interests in such investment plans are paid on maturity.

Savings Bank Account with Commercial Banks

A safe, liquid, and convenient investment option, a savings bank account gives an interest of 3.5 per cent per annum. This is an ideal investment avenue for setting aside funds for emergencies or unexpected expenses. Investors may prefer to keep an average balance equal to three months of their living expenses.

Bank Fixed Deposits

A safe, liquid, and convenient investment option, bank fixed deposits give interest rates as indicated below.

Duration	Interest (Per cent Per annum)
30 days-1 year	5.50–10.50
Over 1 year to 2 years	9.00–11.00
Over 2 years to 5 years	9.50–11.50
Above 5 years	10.50–11.50

 

A bank fixed deposit is recommended for those looking for preservation of capital along with current income in the short term. However, over the long-term the returns may not keep pace with inflation.

Company Fixed Deposits

Many companies have come up with fixed deposit schemes to mobilise money for their needs. The company fixed deposit market is a risky market and ought to be looked at with caution. RBI has issued various regulations to monitor the company fixed deposit market. However, credit rating services are available to rate the risk of company fixed deposit schemes.

The maturity period varies from three to five years. Fixed deposits in companies have a high risk since they are unsecured, but they promise higher returns than bank deposits.

Fixed deposit in non-banking financial companies (NBFCs) is another investment avenue open to savers. NBFCs include leasing companies, hire purchase companies, investment companies, chit funds, and so on. Deposits in NBFCs carry higher returns with higher risk compared to bank deposits. Table 5.5 lists some of the fixed deposit schemes (2003) offered by corporate houses.

 

POST OFFICE DEPOSITS AND CERTIFICATES

The investment avenues provided by post offices are non-marketable. However, most of the savings schemes in post offices enjoy tax concessions. Post offices accept savings deposits as well as fixed deposits from the public. There is also a recurring deposit scheme that is an instrument of regular monthly savings.

National Savings Certificates (NSC) are also marketed by post office to investors. The interest on the amount invested is compounded half-yearly and is payable along with the principal at the time of maturity, which is six years from the date of issue.

There are a variety of post office savings certificates that cater to specific savings and investment requirements of investors and is a risk free, high yielding investment opportunity. Interest on these instruments is exempt from income tax. Some of these deposits are also exempt from wealth tax.

LIFE INSURANCE POLICIES

Insurance companies offer many investment schemes to investors. These schemes promote savings and additionally provide insurance cover. LIC is the largest life insurance company in India. Some of its schemes include life policies, convertible whole life assurance policies, endowment assurance policies, Jeevan Saathi, Money Back Plan, Jeevan Dhara, and Marriage Endowment Plan. Insurance policies, while catering to the risk compensation to be faced in the future by investors, also have the advantage of earning a reasonable interest on their investment insurance premiums. Life insurance policies are also eligible for exemption from income tax.

PROVIDENT FUND SCHEME

Provident fund schemes are deposit schemes, applicable to employees in the public and private sectors. There are three kinds of provident funds applicable to different sectors of employment, namely, Statutory Provident Fund, Recognised Provident Fund, and Unrecognised Provident Fund.

In addition to these, there is a voluntary provident fund scheme that is open to any investor, employed or not. This is known as the Public Provident Fund (PPF). Any member of the public can join the PPF which is operated by the State Bank of India. While investing in a PPF account the investor has to keep the following points in mind.

• Compounded interest rate is tax free.
• The one disadvantage of PPF is lack of liquidity.
• Partial withdrawals are allowed from the sixth year onwards. Loan facility is available from the third year.

EQUITY LINKED SAVINGS SCHEMES (ELSSs)

Investing in ELSSs gets investors a tax rebate of the amount invested. ELSSs are basically growth mutual funds with a lock-in period of three years. ELSSs have a risk higher than PPF and NSCs, but have the potential of giving higher returns.

PENSION PLAN

Certain notified retirement/pension funds entitle investors to a tax rebate. UTI, LIC, and ICICI are some financial institutions that offer retirement plans to investors.

GOVERNMENT AND SEMI-GOVERNMENT SECURITIES

Government and semi-government bodies such as the public sector undertakings borrow money from the public through the issue of government securities and public sector bonds. These are less risky avenues of investment because of the credibility of the government and government undertakings.

The government issues securities in the money market and in the capital market. Money market instruments are traded in the Wholesale Debt Market (WDM) trades and retail segments. Instruments traded in the money market are short-term instruments such as treasury bills and repos.

Table 5.6 gives the trading of a few government securities in the money market.

 

 

The government also introduced the privatisation programme in many corporate enterprises and these securities are traded in the secondary market. These are the semi-government securities. PSU stocks have performed well during the years 2003–04 in the capital market. Select PSU stocks that are traded in the market and their performance over a period of time is given in Table 5.7.

 

MUTUAL FUND SCHEMES

The Unit Trust of India is the first mutual fund in the country. A number of commercial banks and financial institutions have also set up mutual funds. Mutual funds have been set up in the private sector also. These mutual funds offer various investment schemes to investors.

The number of mutual funds that have cropped up in recent years is quite large and though, on an average, the mutual fund industry has not been showing good returns, select funds have performed consistently, assuring the investor better returns and lower risk options. Select mutual fund performance (close-ended schemes) is given in Table 5.8.

 

Table 5.8 Performance of Some Mutual Funds (Close-ended)

Mutual Fund	Net Asset Value (Rs)
Birla Tax98	69.92
Franklin Taxshield 95	46.09
Morgan Stanley (Growth)	22.50
SBI Magnum ELSS-96	15.09
Sundaram Tax S aver 9 8	32.03
UTI Master Equity 1999	26.71
Tata Ind Navratna	11.76
Prudential ICICI Premier	13.88
Cholamandalam MIP (Regular)	10.35

 

The data on open-ended mutual funds is given in Table 5.9.

 

REAL ASSETS

Investments in real assets are also made when the expected returns are very attractive. Real estate, gold, silver, currency, and other investments such as art are also treated as investments since the expectation from holding of such assets is associated with higher returns.

Real Estate

Buying property is an equally strenuous investment decision. Real estate investment is often linked with the future development plans of the location. Certain important points that can be kept in mind before venturing into real estate investment are given below.

• Check on the property developer. Not all developers are good. There are some who cheat people by selling plots of land without procuring the necessary approval.
• All buildings are to be developed as per the rules and regulations laid out by concerned authorities. These could be the municipal corporation, development authority, regional planning authority, or town planning department. A crosscheck with the concerned authority is essential.
• The land must be checked for its ownership. Taking an advocate’s service on title checking for a small fee helps the investor.
• A legal opinion on the ‘agreement to sell’ prior to entering into a deal is also desirable.
• It is always best to see the property personally before deciding on buying it.
• All related payments to the developers should only be made by cheque (account payee) for future verification.
• It is a good financial practice to take a loan to buy a property. The tax deduction on the loan interest makes it very attractive for investors.

There are a variety of home loans available in India, offered by various financial institutions such as banks and housing finance companies. These loans include home purchase loan, existing home improvement loan, home construction loan, home extension loans, home conversion loans, land purchase loans, bridge loans, balance transfer loans, refinance loans, stamp duty loans, and loans to NRIs for investment in immovable property in India.

It is important to check the value while deciding to purchase a movable/immovable property other than buildings. Besides making a personal assessment from the market, the assistance of government-approved valuers may also be sought. A valuation report indicating the value of the each of the major assets and also the basis and manner of valuation can be obtained from an approved valuer against the payment of a fee. In case of a plantation, a valuation report may also be obtained from recognised private valuers.

Bullion Investment

The bullion market offers investment opportunity in the form of gold, silver, and other metals. Specific categories of metals are traded in the metals exchange. The bullion market presents an opportunity for an investor by offering returns and end value in future. It has been observed that on several occasions, when the stock market failed, the gold market provided a return on investments. The changing pattern of prices in the bullion market also makes this market risky for investors. Gold and silver prices are not consistent and keep changing according to the changing local/global demands in the market. The fluctuating prices, however, have been compensated by real returns for many investors who have followed a buy and hold strategy in the bullion market. The bullion market quotations are given in Table 5.10.

 

INVESTMENT OPPORTUNITIES FOR FOREIGN CITIZENS OF INDIAN ORIGIN

There are vast investment opportunities in India for foreign citizens of Indian origin. However, different procedures have been laid down depending on whether they invest their money in the form of foreign currency remitted from abroad through normal banking channels or from funds withdrawn from the NRE/FCNR accounts, or from local funds in rupees.

Foreign Direct Investment

Foreign direct investment (FDI) is permitted in the following forms of investments.

1. Through financial collaborations.
2. Through joint ventures and technical collaborations.
3. Through capital markets via euro issues.
4. Through private placements or preferential allotments.

The inflow into India as foreign direct investment is not permitted in the following industrial sectors.

1. Arms and ammunition
2. Atomic energy
3. Railway transport
4. Coal and lignite
5. Mining of iron, manganese, chrome, gypsum, sulphur, gold, diamonds, copper, and zinc.

Portfolio Investment

Another opportunity for investors is to make an investment in India through the portfolio process, that is, through investment in the shares and securities that are traded in the Indian market. This investment will come under the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997.

A foreign investor has to consider several asset classes for making an investment decision in Indian capital market. An asset class contains securities whose price movements are highly correlated, but relatively uncorrelated with price movements of other asset classes. The following list of asset classes can be used by a foreign investor who considers the portfolio route.

• Large capitalisation growth stocks
• Large capitalisation value stocks
• Small capitalisation growth stocks
• Small capitalisation value stocks
• Money market funds
• Highly credit rated bonds
• High-yield bonds
• Real estate
• Gold and other metals

Each asset class has a given level of historical return and an associated risk. By selecting a mix of the asset classes, an international investor can select a desired level of portfolio risk and return.

SOURCES OF INVESTMENT INFORMATION

A lookout for new investment opportunities helps investors to beat the market. There are many sources from which investors can gather the required information. Most often, investment information is available from three categories—the institutions floating the specific securities, financial markets, financial service intermediaries, and media.

Institutions Floating Financial Securities

Corporate houses, government bodies, and mutual funds are the main source of investment information. Many of these enterprises have their own websites and post investment related information on the site.

Financial Markets

Stock exchanges and regulatory bodies also provide useful information to investors to make their investment decisions. With respect to the secondary market, the Securities Exchange Board of India uses various modes to promote investor education and takes great efforts to achieve an investor-freindly secondary market in India. The Reserve Bank of India also provides useful information relating to the prevalent interest rates and on non-banking financial intermediaries that mobilise money through deposit schemes.

Financial Service Intermediaries

These are intermediaries who promote securities among the public. Many of these intermediaries are agencies of specific instruments especially tax-savings instruments. These intermediaries offer to share their commission from the concerned organisation with the individual investors. Thus, investors get an additional advantage while investing through intermediaries.

Media

Press sources such as financial newspapers, financial magazines, Internet websites, and so on provide investment information to the public. Besides information on securities, these sources also provide, to some extent, analysis of information and in certain instances suggest suitable investment decisions to be made by the investors.

Investment advices especially in media tend to behave erratically and might result in “herd behaviour” in the market. Herd behaviour does not lead to profitable investment decisions, especially to small investors who would benefit a lot by understanding and analysing information on their own.

SUMMARY

Investment opportunities for investors exist in different types of securities, each having their own risk-return pattern. The grouping of investible financial assets can be as follows: corporate securities, deposits in banks and non-banking companies, post office deposits and certificates, life insurance policies, provident fund schemes, government and semi-government securities, mutual fund schemes, and real assets.

The best investment opportunity for an investor would depend on his own risk-return expectation and subject to the prevailing market and economic environment. Indian markets also encourage foreign investment, especially non-resident investment flows into India.

The main sources of investment information for investors are the institutions floating the instrument, financial markets financial service intermediaries, and media.

There are abundant investment opportunities in the Indian market. It is for the investor to use the available information and analyse it to make meaningful investment decisions. There are numerous tools and techniques available to investors for choosing securities for investment.

CONCEPTS

• Equity share	• Debenture
• Convertible debenture	• Warrant
• Zero coupon bonds	• Credit rates
• Global Depository Receipt	• American Depository Receipt

SHORT QUESTIONS

Explain the features of:

Equity shares

Debentures

Warrants

Convertible debentures

Preference shares

GDRs

ESSAY QUESTIONS

1. Explain the innovations in debt instruments.
2. Explain the characteristics of corporate securities.
3. Evaluate the merits and demerits of financial assets from the viewpoint of an investor.

APPENDIX I

EXCESS RETURNS FROM THE PRIMARY MARKET (2002)

Return on the First Traded Price	Company
5.33	Adlabs Films Ltd.
5.00	Aksh Optifibre Ltd.
30.00	Arraycom (India) Ltd.
48.50	Aztec Software & Tech. Services Ltd.
81.00	Balalji Telefilms Ltd.
22.22	Baron Infotech Ltd.
44.50	Beeyu Overseas Ltd.
21.24	Bharti Tele-ventures Ltd.
112.50	Biopac Corporation India Ltd.
10.00	Cerebra Integrated Tech. Ltd.
121.60	Chettinand Cewment Corporation Ltd.
810.00	Cinevista Communication Ltd.
73.60	Comp-u-Learn Tech India Ltd.
26.67	Datum Technology s (I) Ltd.
66.67	DC W Ltd.
36.36	D-Link (India) Ltd.
54.70	Globsyn Technologies Ltd.
4.17	Hifunda. com Ltd.
37.18	Indian Overseas Bank Ltd.
25.00	Infobahn Technologies Ltd.
35.00	Krisn Information Technology Ltd
19.79	Logix Microsystem Ltd.
1.05	Model Financial Corporation Ltd.
6.00	Oasis Infotech Ltd.
0.40	Online Media Solutions Ltd.
0.90	Opto Circuits (I) Ltd.
46.50	Orpine System Ltd.
20.65	Pritish Nandy Communication Ltd.
37.99	Tabassum International Ltd.
62.22	Average Return

APPENDIX II

ADRS LISTED AT NASDAQ