Pillar#1C2: Shares / SENSEX / Mutual Fund/ etc.

Table of Contents
16 🐮📈🐻Equity Instruments ( इक्विटी)................................................................................................. 226
16.11.1 👩🏻‍💼📦 Private equity (PE) funds and Venture Capital Funds............................................................................. 226
16.11.2 🐲 Share Types: Preference Shares vs ordinary shares.......................................................................................227
16.11.3 🐲 Shares for Employees / VIPs / Special investors : ESOP, Equity Warrents ................................................229
16.11.4 🐲 Share types depending on risk / quality.......................................................................................................... 229
16.11.5 ⚖️🗃 Share types: Floating vs Restricted Stocks.................................................................................................229

16.12 🧮 Account types.................................................................................................................................. 230

16.12.1 🐾 Goodwill –while buying another company/brand........................................................................................230
16.13 🐾 Ratios / Numbers to compare the companies................................................................................230
🐾
16.13.1 Valuation of companies.................................................................................................................................... 230
🦄
16.13.2 Valuation →Startups → Unicorn Startup .................................................................................................... 231
16.13.3 Valuation → Listed Companies (Small Cap/Mid Cap/Large Cap)..................................................................231
16.13.4 Reliance - first company to hit 20 lakh cr Market Cap (2024-Feb)..................................................................231
16.13.5 🍺🫧Market Froth & Asset bubble in Small-cap & Mid-cap ( बाजारू झाग और सं पत्ति गुब्बारा).......................................231
🌷
16.13.6 Tulip Mania (किसी निवेश के पीछे सामूहिक पागलपन)...........................................................................................................232
16.13.7 📈📉Volatility / ViX (कीमतों में अस्थिरता)......................................................................................................................232

16.13.8 🐾 Price-to-Earnings (P/E) Ratio and EPS (Earnings per Share)...................................................232

🐾
16.13.9 Leverage Ratio, Debt to Equity Ratio, ROCE, etc..........................................................................................232
🐾
16.13.10 Net Worth = Total Assets −(minus) Total Liabilities................................................................................. 233
16.13.11 🔩
EBITDA, Depreciation, Amortization......................................................................................................... 233

16.14 ⚖️🗃 Methods of Issuing Shares.........................................................................................................233

16.14.1 Share price............................................................................................................................................................... 233
16.14.2 Sharemarket- company related documents......................................................................................................... 233
16.14.3 IPO vs FPO.............................................................................................................................................................. 233
16.14.4 Underwriter / Lead managers............................................................................................................................... 234
16.14.5 Terms: IPO, FPO, QIP........................................................................................................................................... 234
16.14.6 Share-selling: Offer for sale (OFS) and share pledging...................................................................................... 235
16.14.7 Share-selling: Open Offer......................................................................................................................................235
🍃
16.14.8 Share Selling: Equity dilution...........................................................................................................................235
🍃
16.14.9 Share Swaping and De-listing..........................................................................................................................235
🍃
16.14.10 Bonus Shares.................................................................................................................................................... 236
🍃
16.14.11 Share Splitting.................................................................................................................................................. 237
🍃
16.14.12 Share buyback by the Company.....................................................................................................................237
16.14.13 ⚖️🗃 🤵 IPO → Special Purpose Acquisition Company (SPAC)..................................................................238
16.14.14 ⚖️🗃 🌐 ADR/GDR: DESHI Shares in Videshi soil.......................................................................................... 238
16.14.15 🗃🌐 Direct listing of Indian Companies in foreign stock exchanges (2023) ..............................................239
16.14.16 🔗🥏 Initial Coin Offering (ICO)....................................................................................................................... 239

16.15 📈 Stock Exchanges / Secondary Market: meaning & examples........................................................239

16.15.1 📈🌈
Social Stock Exchange.................................................................................................................................240
16.15.2 📈🌈
Social Stock Exchange: zero-coupon, zero-principal instrument...........................................................240
16.15.3 📈🤩
Secondary Market: Significance? (द्वितीयक बाजार का महत्व)..................................................................................240
16.15.4 🗃💾
DEMAT Account and Depositories........................................................................................................... 240
🛒 💻 👨‍💼
16.15.5 ( : ) DEMAT → ASBA Reforms in IPO/Primary Market.....................................................................241
16.15.6 UPI-ASBA in Secondary Market 2024-Jan Reform by SEBI............................................................................. 241
16.15.6.1 🗃🔢 ISIN Number........................................................................................................................................ 242

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 16.15.7 📧 CAS system (=monthly statement of transactions)......................................................................................242
16.16 🤝 Central Counterparties (CCPs), Novation & ESMA controversy ................................................242
16.16.1 🤝 CCP Examples in India..................................................................................................................................... 243
16.16.2 🤝🐅 CCP Regulation in India: Who regulates CCP in India?......................................................................... 243
16.17 🙋🏻‍♂️🛒 Investors ke Types.......................................................................................................................243
16.17.1 Types of Investors: Depending on Buying Capacity.......................................................................................... 243
16.17.2 🙋🏻‍♂️🛒
Types of Investors: Depending on Buying Behaviour.............................................................................. 243
🤑
16.17.3 Disposition effect: मुनाफ़ा तुरंत लेके भागूँगा, लेकिन नुक़सान सहके बैठा रहूँगा।................................................................................244
16.17.4 Style of Trading / Investing based on duration and risk.................................................................................... 244
16.17.5 Trader Types: Retail vs Proprietary Traders........................................................................................................ 245

16.18 📈 SENSEX & other Notable Indices (उल्लेखनीय सं के तक/ सूचकांक).................................................................245

16.18.1 SENSEX Goes up and down when?......................................................................................................................245
16.18.2 🌬🌪 🤷🏾‍♂️⚖️👨‍⚖️
: Force Majeure (अभेद्य शक्ति)............................................................................................................... 246

16.19 🐮📈🐻 Sharemarket: 2020- Impact of Corona.................................................................................. 246

16.19.1 🐮📈🐻Sharemarket- 2022: IPO Bubble Burst: Case of Paytm ( )....................................................246
फू ट गया ग़ुब्बारा
16.19.2 🐻📈🐂Sharemarket: 2021-22 observation by 📙ES23...................................................................................... 246
16.19.3 🐻📈🐂Sharemarket: 2023-24- India performed better than many nations says 📕ES24:...........................247
16.19.4 🐂 📈 India becomes 4th-largest equity (Share) market (2024-Jan)................................................................247
16.20 👟 Market Theories...............................................................................................................................247
16.21 👟👠 Efficient Market Hypothesis /theory (EMH)............................................................................................... 247
16.21.1 👟👠 Random walk theory.................................................................................................................................... 248
16.22 🐆Alpha and Beta Values....................................................................................................................248
🐆
16.22.1 Beta Value to monitor price volatility or risk of an asset..............................................................................248
16.22.2 Alpha value to compare performance of Mutual Funds....................................................................................249
16.22.3 🚩👶🏻
FAQ: Alpha vs Beta similarity / correlation / difference .........................................................................249
⚱️
16.22.4 Types of Analysis – fundamental vs Technical.............................................................................................. 249
⚱️
16.22.5 DEMAT Portfolio: Meaning, Types, Portfolio Diversification.....................................................................249

16.23 🗃😼Securities and Exchange Board of India (SEBI).........................................................................250

16.23.1 🗃⚖️📜Securities Market Code............................................................................................................................ 251
16.24 🗃💪 SEBI Investor charter (निवेशक अधिकार पत्र)........................................................................................251
16.24.1 🗃😼: 🏃 SEBI: why protect investors & ⏫investors participation?................................................................252
16.24.2 💼🏃: measures to ⏫ retail investors participation- 25% public holding in Govt Companies....................252
16.25 🗃😼: 🏃 SEBI Reforms to boost investors’ confidence?....................................................................252
16.25.1 🪓Circuit breaker.................................................................................................................................................... 252
16.25.2 🤝⏰T+1 day Settlement instead of T+2 day...................................................................................................... 253
16.25.3 🤝⏰⏰ T+1 hour & T+0 hour (instantaneous) settlement.............................................................................253
16.25.4 🛒 (💻:👨‍💼:😈) Illegal Trading: Dabba-trading, Insider Trading, Front Running...........................................253
16.25.5 🛒 (💻⏱:👨‍💼) Algo Trading & Co-Location........................................................................................................254
16.25.6 🧯Investor Protection Fund (IPF)........................................................................................................................254
16.25.7 🧯 Settlement guarantee fund (SGF)....................................................................................................................254
16.26 🆘📡 Server Crash Protection..............................................................................................................254
16.26.1 🆘 📡 SEBI’s BCP Plan & DRS Sites..................................................................................................................... 254
16.26.2 📡 SEBI → LAMA - IT monitoring system/framework....................................................................................255
16.26.3 🆘 📡 IRRA Portal: Investor Risk Reduction Access (IRRA)............................................................................255
16.26.4 🐻📉Adani Hindenburg, Flash Crash, Short-Selling (2023)...........................................................255

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 16.26.5 📉Short selling (make profit from falling share price).......................................................................................256
16.26.6 🧛‍♀️Finfluencers:....................................................................................................................................................... 256
16.27 🛒 (🔪🗃) Online Trading Platforms → G-Sec.................................................................................. 256
16.27.1 🐯🛒 (🔪🗃: 🧔👨‍💼) G-Sec Trading- Retail investors’ RDG @RBI....................................................................256
16.28 🐯🛒 (🔪🗃: 🧔👨‍💼) G-Sec Trading: RBI's NDS-OM, OTC.................................................................256
16.28.1 📞 Bid-Ask Spread.................................................................................................................................................. 257
16.28.2 📞 Arbitrage: Making profit due to difference in to markets/location. ...........................................................257
16.28.3 🎌 Yen carry trade & fall of Indian Sharemarket. (2024)................................................................................... 258
16.29 → Investment Funds → Mutual fund (MF) for aam-aadmi..................................................258
16.29.1 📦 🤹🏻‍♂️ 👴🏻 MF → Hybrid mutual funds................................................................................................................258
16.29.2 🚎✋ MF: Open ended vs Close ended................................................................................................................ 259
16.29.3 ↩️ ↩️ MF: Lumpsum (One-off) vs SIP................................................................................................................259
16.29.4 📦 🤹🏻‍♂️ 👴🏻 Mutual fund → ESG, Shariya Mutual Funds..................................................................................... 259
16.29.5 📦 🤹🏻‍♂️ 👴🏻 Mutual fund → SIP, ELSS, ULIP......................................................................................................... 259
16.29.6 📦 🤹🏻‍♂️ 👴🏻 Mutual fund → 🎛 Mutual fund risk-o-meter...................................................................................259
16.29.7 📦 🤹🏻‍♂️ 👴🏻 Mutual Fund: Backstop Entity- SEBI proposal for stressed MF.......................................................260
16.29.8 🛒 (🔪🗃: 🧔👨‍💼) Bond Buying Institution in 💼Budget-2021..........................................................................260
16.30 📦 🤹🏻‍♂️ 🤵🏻 Investment Funds → Hedge Fund (हेज फण्ड) for rich-aadmi................................................260
16.30.1 📦 🤹🏻‍♂️ 🤵🏻 Investment Funds: “Accredited Investor”.......................................................................................... 260
16.30.2 📦 🤵🏻 🏬 🛩 Investment Funds → REITs / InvITs: for rich-aadmi.................................................................260
16.30.3 📦 🤹🏻‍♂️ 🤴🏻 Investment Funds → Sovereign Wealth Fund ( )................................................................261
सं प्रभु धन कोष

16.31 📦 🏛 Investment Funds → CPSE-Exchange Traded Funds (ETF: ईटीएफ).........................................261

16.31.1 ( 🦁🔪)📦: (🏛🛒🤝) Bharat Bond (Debt) ETF (2019).......................................................................................262
16.31.2 ( 🦁🔪)📦: (🏛🛒🤝) CPSE-ETF vs Mutual Fund.............................................................................................. 262
16.32 😴 Index-ETF: a type of Passive Fund................................................................................................. 262
16.33 🌸🐂 Bitcoin ETF approved in USA (2024)........................................................................................ 263
16.33.1 🌸🐂 Bitcoin ETF: Pros.......................................................................................................................................... 263
16.33.2 🌸🐂 Bitcoin ETF: Cons........................................................................................................................................ 264
16.33.3 🇺🇸✋ Overseas ETF: temp-ban on Indian MF by SEBI (2024)......................................................................... 264
16.33.4 🏅 Gold-ETF........................................................................................................................................................... 265
16.34 📦 Investment Funds → Alternative Investment Funds (AIF).........................................................265
16.34.1 ( 🦁📦):(🏗🏠) Govt’s AIF for Real Estate Sector (2019)................................................................................... 265
16.35 🗃 ⏱ Forward / Future Contracts & Call / Put Option......................................................................265
16.36 🌱🌴✋ Over-financialisation & Sachetisation...................................................................................266
16.36.1 🌱🌴✋ 📕
Sachetisation of F&O Market not good - says ES24:.......................................................................266
16.36.2 Sectors of economy: real sector vs financial sector............................................................................................. 267
16.36.3 🎈🎈 Over-financialization / Excess market capitalisation is dangerous says ES24: .................................267 📕
16.37 🗃 🔗 Derivatives & Swaps (व्युत्पन्न प्रतिभूतियां और अदला-बदली).........................................................................268
16.37.1 🗃🔗: 🚛🤝🚚 Bilateral Netting of Qualified Financial Contracts Act 2020...................................................268
16.38 👻🔗📦 Participatory notes (P-Notes: पार्टिसिपेटरी नोट्स)...........................................................................268
16.38.1 ( 🔪 👨‍💼🏦
) Credit Default Swap (CDS).................................................................................................................. 270
16.38.2 Currency Swap........................................................................................................................................................ 270

16.39 🍋 Tax on Investment / financial assets...............................................................................................270

16.39.1 🍋😍 Tax relief given on ( निम्न चीजो पे टैक्स में रियायत/छू ट दी जाती है)...................................................................................... 271

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 16.39.2 🍋🥵 Tax relief NOT given on ............................................................................................................................. 271
16.40 🌽🧶🏦🤝 Commodity Market, FMC, SEBI merger..........................................................................272
16.40.1 💍🎖🏦🤝Commodity Market: Gold exchanges & 💼Budget-2021................................................................272
16.40.2 💍🎖🏦🤝Commodity Market: Electronic Gold Receipts (EGRs)...................................................................272
16.40.3 💍🎖🏦🤝Commodity Market: India’s first bullion exchange (2022)............................................................273
16.41 🕵🏻‍♀️ FSDC: Financial Stability & Development Council (2010)...........................................................273
16.42 🕵🏻‍♀️ Bodies with similar sounding names: FSB, FATF.........................................................................273
16.42.1 📊 Financial Sector Assessment Program (FSAP)by WB & IMF.....................................................................274
16.42.2 🏫👩🏻‍🏫NISM- capacity building for financial market professionals - 👛Budget-2023.....................................274
16.43 Pillar 1C3: Corporate Governance......................................................................................................274
16.44 🏙🤵 Company types............................................................................................................................274
👶
16.44.1 Company types based on incorporation.........................................................................................................274
16.44.2 🏙🤵
Company types based on number of members........................................................................................ 274
16.44.3 🏙🤵
Company types based on Ownership......................................................................................................... 276
16.44.4 🏙🤵
Company Types: Misc................................................................................................................................. 276
16.44.5 🏙🤵
Corporate Governance → Small Companies given compliance relief ..................................................277
16.44.6 🏙🤵
Commercial Organizations: Other Types.................................................................................................. 277
16.44.7 → Corporate Governance → LLP settlement Scheme 2020...................................................................277

16.45 🔨 Statutory bodies in Ministry of Corporate Affairs (MCA)............................................................277

16.45.1 🔨 👨‍⚖️
Competition Commission of India (भारतीय प्रतिस्पर्धा आयोग)............................................................................. 277
16.45.2 Google pe Penalty by CCI......................................................................................................................................277
16.45.3 🔨 👨‍⚖️
Insolvency and Bankruptcy Board of India (IBBI)..................................................................................277
👛
16.45.4 Unclaimed shares and dividends of IEPF & Budget-2023............................................................................278
16.45.5 🔨👨‍⚖️
Ministry of Corporate Affairs also associated with:................................................................................. 278
👛
16.45.6 Companies Act: EoD- Central Data Processing Centre in Budget-2023.....................................................279
16.45.7 🤼‍♀️👬
Corporate Governance (कॉर्पोरेट शासन)............................................................................................................. 279
16.45.8 ( 💰 🏥🚽 )CSR: Corporate Social Responsibility (कॉर्पोरेट सामाजिक जिम्मेदारी)................................................................280
👬
16.45.9 NSE Prime regulation for corporate governance (2022)..............................................................................280

16.46 👊🐤 Takeover related terms...............................................................................................................280

16.46.1 👊🐤 Leverage Buy-Out (LBO)............................................................................................................................. 280
16.46.2 👊🐤🐍 Poison Pill against Takeover by Twitter................................................................................................ 280
16.46.3 🤞 De-Merger When a company subdivided into multiple companies...........................................................281
16.46.4 ✍️🎷 Mock Questions for Mains..........................................................................................................................281

16 🐮📈🐻E QUITY INSTRUMENTS (इक्विटी)

 Equity holders are called owners / proprietors of the company.
 If company makes profit → they get dividend. They’ve last claim during liquidation.
16.11.1 👩🏻‍💼📦
Private equity (PE) funds and Venture Capital Funds
• Private equity is a type of investment fund where wealthy individuals park their money into
private unlisted companies.
• Unlisted companies = whose shares are not traded in the stock exchange like BSE/NSE) e.g.
Byjus, Parle (1929).
• Venture capital fund (VCF) is a subtype of PE fund - which invests in startup companies.

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 Keywords Features
Venture Capital VCF are professional firms helping startup companies with seed capital.
Funds (could be debt / equity / hybrid) (स्टार्टअप कं पनियों को शुरुआती पूंजी दिलवाते हैं)
Rich person helping startup companies out of his hobby, passion, profit
Angel Investors motive or time pass. e.g Ratan Tata in Urban Ladder app. (could be debt /
ऐंजल निवेशक equity / hybrid).
📑
Related topic: Pillar#2: Angel Tax in Budget/blackmoney
Corporate Invests in startup company with goal of acquiring the company or its
Strategic technology at later date. स्टार्टअप कं पनी में निवेश करता है ताकि भविष्य में उसकी टेक्नोलॉजी पर
Investor कब्जा कर सके
🔠❓ What does ‘Venture Capital’ mean? (Asked in UPSC-Pre-2014)
A. A short-term capital provided to industries
B. A long-term start-up capital provided to new entrepreneurs
C. Funds provided to industries at times of incurring losses
D. Funds provided for replacement and renovation of industries
🔠❓ An individual investor who invests in the e-project usually during an early stage is (UPSC-
IES-2020) A) corporate strategic investor B) founder capital C) angel investor D) venture capital

🐲
16.11.2 Share Types: Preference Shares vs ordinary shares
e.g. Jio 10% fixed dividend Preference Share on face value of ₹100. That means person is entitled to a
FIXED ₹10 dividend (if company makes profit.)
Preference Share Ordinary Share
Parameter
अधिमान्य शेयर: साधारण शेयर:
Dividend payout’s rate Dividend payout’s rate fluctuates
Rate of dividend is fixed e.g. NIRMA depending on how much money LEFT
10%. AFTER giving dividend to pref.share

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 Preference Share Ordinary Share
Parameter
अधिमान्य शेयर: साधारण शेयर:
holders
if company makes ZERO No. जब मुनाफा हुआ ही नहीं तो
profit, does this investor have तंबुरे का डिविडेंड मिलेगा!!? कु छ No.
a right to get dividend? नहीं मिलेगा
they’ll get money
Rights upon liquidation of the they’ll get money AFTER
BEFORE ordinary
company pref.shareholders
shareholders
Do not enjoy voting Yes have voting rights in company
Voting rights
rights. decisions.
Preferred stocks can be
Convertibility converted into ordinary Equity stocks cannot be converted.
shares
It is not mandatory for A registered companies must issue equity
Issuance company to issue shares. (More Refer to Pillar1C2:
preference shares. Company Types)
Risk to investor? lower higher
💡NOTE: preference shares have many sub-types e.g. (cumulative vs non cumulative), (redeemable
vs non-redeemable) but we will not PHD.

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16.11.3 🐲 Shares for Employees / VIPs / Special investors : ESOP, Equity Warrents

Shares sold @discount to directors & employees for their value addition to company
Sweet [Amount is regulated under Companies Act]
Equity 🙋🏼‍♀️FAQ: How is Sweet Equity similar / different than ESOP/Equity Warrant
Ans. NOTIMP. 1 liner GK. थोड़ा-पढ़ो-आगे-बढ़ो.
🎓✋ - 1)What is this? NOT IMPORTANT.
- 2) How different from Sweet Equity? NOT IMPORTANT.
Sweat
Equity 🚩👶🏻FAQ: I’m a commerce graduate / hot-shot MBA-walla and I’ve 500 jaat ke
कु छ काम Counter arguments. Ans. Good. Plz Keep it with yourself. This course for teaching
नहीं परीक्षा में some basic one liners for MCQ. We are not preparing for your semester exams.

16.11.4 🐲 Share types depending on risk / quality

Shares whose market price remain excessively low compared to its face value. Such
Penny stocks pathetic companies give zero or little dividend.
फालतू कं पनी का 🚩👶🏻
FAQ: I’m a commerce graduate / sharemarket ka hot-shot trader and I’ve
500 jaat ke Counter arguments. Ans. Good. Plz Keep it with yourself.
Blue Chip Shares of a nationally recognized, well-established and financially sound company
stocks with a history of generating good return for the investor. E.g. Reliance, TCS,
दमदार कं पनी का
Multi- When company’s share price climbs rapidly of time. e.g. IRCTC (2021) from ₹300
bagger Share to ₹1000 = 233% return on investment (ROI) within January to October 2021
Cyclical / When price of a company’s shares depend on the particular business cycle. e.g.
Seasonal automobile shares will generally rise during Navratri till Diwali shopping season.
Shares
🚩👶🏻FAQ: tell me Similarity and difference between Blue chip vs Multibagger? ANS. Notimp.
🚩👶🏻FAQ: Share vs stock- what is the difference? This academic-pedantry NOTIMP4EXAM.
16.11.5 ⚖️🗃 Share types: Floating vs Restricted Stocks
Q. are the shares available for buying/selling in secondary market?

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16.12 🧮A CCOUNT TYPES
Account Meaning/subtypes
Personal - 1) Natural person account e.g. Mark Zuckerberg
Account - 2) Artificial legal person’s account (=company’s account) e.g. Meta (Facebook).
- 1) Tangible Real Accounts e.g. buildings, vehicles, machines
Real Account
- 2) Intangible Real Accounts e.g. Goodwill, Patent, Copyright, Trademark, etc.
- 1) Gain/Income account e.g. revenue from goods sold, income earned from
Nominal
investments,
Account
- 2) Loss/Expense account e.g. salaries, rent, cost of raw material.

16.12.1 🐾 Goodwill –while buying another company/brand

Item Price in Million $ (Not real. Just e.g.)
Company Whitehat’s assets (building, machine, software
250
copyrights etc.
Byjus buys Whitehat at price 300
Difference = Goodwill acquired by Byjus = 50
- Goodwill is an ‘intangible asset’ for the buyer company (Byjus in above example.)
- Goodwill represents Whitehat's reputation, customer base, brand, or other intangible factors- for
which Byjus paid 50 million extra, BEYOND the fair-market value of Whitehat’s assets.
MCQ. Goodwill Account is a/an _ _ _ (UPSC EPFO-2023)
(a) Personal Account (b) Real Account c) Nominal Account (d) Expense Account

16.13 🐾R ATIOS / NUMBERS TO COMPARE THE COMPANIES

Note: If I’ve not covered a particular ratio e.g. Price to Book Ratio (PB) = means I feel it is poor cost
benefit for the exam.

16.13.1 🐾 Valuation of companies

Term Valuation of Listed Company Valuation of (unlisted) Startup company
It is the total value of a listed It is the process of estimating the total value of a
Meaning
company’s shares. Startup company.
Formula Current share price (X Complex formula involving company’s financial
multiply with) total number of performance, its assets and liabilities, and its future

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 shares. growth potential.
See Apple Company in Byjus @ $22 Billion (2022-Oct)
Example
previous section @$12 Billion (2023-Aug)
16.13.2 Valuation →Startups → 🦄
Unicorn Startup
Means the startup has valuation of 1 billion U.S. dollars or more. e.g. Unacademy, Byjus, etc.
16.13.3 Valuation → Listed Companies (Small Cap/Mid Cap/Large Cap)
Market capitalisation = {Total number of share multiplied with current price of every share.}
Market cap can change every day, depending on the price movement in sharemarket.
Apple Company (A) Total No. Of Shares (B) Price of 1 share Market Cap = A x B
2023-Jan 15.63 billion units $125 $1.9 trillion
2023-Sept 15.63 billion units $171 $2.6 trillion
In India, shares are classified based on market capitalization as follows:
Type Small Cap Mid Cap Large Cap
between 5000-
Market Capitalisation^^ less than ₹5000 cr more than 20,000 cr
20,000 cr
(General understanding) (=₹50 billion) (=₹200 billion)
(=50-200 billion)
Market Capitalisation top-100 companies based
below 250 rank 101–250 rank
(exact SEBI Rule) on Market cap
Reliance, Infosys, TCS etc
Examples VIP Suitcase Castrol
giants
Risk to shareholder High Medium Low
Liquidity of shares (how Low. Difficult to find high. Easily u can re-sell to
medium
easy to re-sell & Exit) buyer exit.
^^ Note: This crores rupee number varies from year to year depending on how much share prices
changed. We’ll not waste time memorising EXACT number.
16.13.4 Reliance - first company to hit 20 lakh cr Market Cap (2024-Feb)
self-explanatory from the topic heading itself.
16.13.5 🍺🫧 Market Froth & Asset bubble in Small-cap & Mid-cap (बाजारू झाग और सं पत्ति गुब्बारा)
• During market froth, investors begin to ignore fundamentals (e.g. a company’s profit-loss
balance sheet) and buy its shares rapidly → demand rise → share price increases in a rapid-
unsustainable manner.
• This ultimately results in an asset bubble that can lead to a collapse, e.g. Dotcom bubble in
the USA (2001) and the Subprime crisis (2007–08).
• 2024: SEBI felt that small-cap and mid-cap companies were experiencing market froth →
SEBI issued some technical directives on mutual funds to reduce their investments/exposure
in small cap and cap.

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 🌷
16.13.6 Tulip Mania (किसी निवेश के पीछे सामूहिक पागलपन)
 mid-1600s: Tulip flower was introduced in Holland/Netherlands.
 some people started buying Tulips in high quantity, with the hopes of re-selling it to customers at
much higher price. But ultimately this bubble collapsed.
 Today, if price of an asset (share, real-estate, Bitcoin) start climbing unreasonably high →
Columnist describe it as ‘Tulip Mania’.

16.13.7 📈 📉Volatility / ViX (कीमतों में अस्थिरता)

 If the prices of a share changes rapidly in a short time span → we say it has “high volatility”. e.g.
Adani after Hindenburg report.
 Mathematically expressed thru an indicator called “ViX”
16.13.8 🐾P RICE-TO-EARNINGS (P/E) RATIO AND EPS (EARNINGS PER SHARE)

Note: real formulas/ real interpretations are more complex. this is for basic understanding for MCQ.
16.13.9 🐾 Leverage Ratio, Debt to Equity Ratio, ROCE, etc

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 Year 2022 Tata Motors Maruti
Debt:Equity 2 (means Tata borrowed 2x times more money than the 0 (debt-free
ratio amount of share capital it has) company)
Note: real formulas/ real interpretations are more complex. this is for basic understanding for MCQ.

16.13.10 🐾 Net Worth = Total Assets −(minus) Total Liabilities

Amount Mukesh Reliance Anil Ambani’s Reliance Capital Ltd. Company
Total Assets (A) ₹16 Trillion ₹63,000 crore
Total Liabilities (L) ₹ 6 Trillion ₹83,000 crore
NET Worth = A - L 16-6=10 POSITIVE NEGATIVE 20,000 cr. Case going on in IBC
code
🙋🏼‍♀️FAQ: can we say NET-worth represents profit/loss of the company? Ans. It is more refined than
that. Because company may be profitable for present year. But IF its liabilities are too big then it may
have NEGATIVE net-worth. But we’ll not do PHD. थोड़ा-पढ़ो-आगे-बढ़ो.
16.13.11 🔩 EBITDA, Depreciation, Amortization
EBITDA It shows Company’s Earnings Before loan Interest repayment, Taxes payment,
Depreciation, and Amortization. Higher number is better.
Depreciation Represents wear and tear, repairs, or decrease in the value of physical assets like
machinery and buildings. भौतिक सं पत्तियों का घिसाव / मूल्यह्रास
Amortisation Represents decrease in the value of intangible assets like patents and copyrights.
अमूर्त सं पत्तियों का घिसाव / मूल्यह्रास
16.14 ⚖️🗃 M ETHODS OF ISSUING SHARES
16.14.1 Share price
• Share have printed price on the certificate called Face Value or Par Value (सममूल्य).
• If they’re sold at higher price than face value, it’s called “trading at a Premium Value”
• if sold lower than face value, it's called "trading at a discount".

16.14.2 Sharemarket- company related documents

Guidance Guidance report contains company’s estimate of its future growth.
Company releases this report for investors/shareholders/analysts.
Prospectus it is the document containing all the info about the IPO-wali company.
16.14.3 IPO vs FPO

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🙋🏼‍♀️FAQ: When FPO is issued, is it primary market or secondary market? Ans. It is ultimately a
Petipack/brand new share = primary market. However, this pedantry NOTIMP4EXAM.
16.14.4 Underwriter / Lead managers
• Underwriter is a merchant banker/investment banker (ref Pillar-1B1)
• He undertakes the responsibility of issuing IPO/FPOs on behalf of the company promoters.
• If IPO not fully subscribed, then underwriter will buy unsold shares.
• Lead Manager = synonym for underwriter. (there is internal difference, but boycott PHD).
16.14.5 Terms: IPO, FPO, QIP
IPO and FPO  Explained in video using above chart.
Rights issue Company issues additional shares (FPO) but gives first right to existing
(अधिकार निर्गम): shareholders to buy them, if they refuse then offered to outsiders.
Qualified Institutional Placement (QIP): When company issues the shares
QIP only to qualified institutional buyers (QIBs) e.g. mutual funds, pension funds,
insurance companies etc
Private If Zee offers to sell its shares only to Ambani. But not to others retail investors.
Placement

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16.14.6 Share-selling: Offer for sale (OFS) and share pledging

🙋🏼‍♀️FAQ: How is OFS different than IPO/FPO? Ans. Motives are different. IPO/FPO is when owner
wants money for the company by selling fresh shares. OFS is when owner wants money for himself
by selling his own shares. But this pedantry is NOTIMP.
16.14.7 Share-selling: Open Offer

🙋🏼‍♀️FAQ: now I'm confused between OFS vs Open offer? Ans. Khichdi mtt karo. Their objectives are
different. Observe the photos carefully.
16.14.8 🍃Share Selling: Equity dilution

16.14.9 🍃Share Swaping and De-listing

Terms in news after HDFC (NBFC) got merged into HDFC (Bank), in 2023.

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16.14.10 🍃 Bonus Shares

Total Qty Price Total Value in ur DEMAT account

Before 1 Share ₹100 x 1 No. ₹ 100.00
3 extra ₹ 400.00?? NO. this will NOT
After Bonus Share ₹100 x 4 No.
Shares happen reason given below:
• After bonus shares → total number of shares in DEMAT account will increase.
• But the bonus shares are assumed to be purchased at ₹0 by the shareholder.
• So average price will decrease- in secondary markete.g.

bonus bonus bonus

share original Average Price per share
share1 share2 share3
purchase price of Shareholder ₹100 ₹0 ₹0 ₹0 ₹25

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16.14.11 🍃Share Splitting

Qty Price Total Value in ur DEMAT

Before 1 Share ₹3000 x 1 No. ₹ 3000.00
₹ 3000.00 (Total Value of Asset
After Share split (1:2) 2 share ₹1500 x 2 No.
NOT increased. It’s unchanged.)
Note: Share splitting depends on marzi/ discretion of company’s board of directors. It is not done on
1-1 investor’s complaint/request. I have given an example only for illustration.
🙋🏼‍♀️
FAQ: I have 500 doubts in Bonus share vs Share split! Ans. Remember them as single photo-
frame without doing compare-contrast. IF you've time to waste then do self-PHD from this article.

16.14.12 🍃Share buyback by the Company

Total Share liabilities of TCS BEFORE AFTER Share buyback

Amount ₹ 12 lakh crores 12,00,000 - 18,000 = ₹11.82 lakh cr

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16.14.13 ⚖️🗃 🤵 IPO → Special Purpose Acquisition Company (SPAC)
Faded topic. Removing from handout.
16.14.14 ⚖️🗃 🌐 ADR/GDR: DESHI Shares in Videshi soil

Figure 1: बिना अमरीकी SEBI मे पंजीकरण किए, उनके शेयरबाजार से पैसा उठाऊँ , तो कै से?
- A non-American company wants to mobilize money from American share market but does not
want to go through the lengthy & complex process of registration with the American
sharemarket regulator.
- Then such non-American company gives its shares to an American bank.
- Based on those (non-American) shares, the American bank will issue American Depositary
Receipts (ADR: अमरीकी निपेक्षागार रसीद) & sell them to American investors. Denomination: USD.
- Global Depositary Receipt (GDR): Same as above, but when single bank issues receipts for
investors in multiple countries. Denomination: usually USD or Euro.
Deposits his company’s shares in That bank issues -- in local
Share issuing company →
a bank of → market in – currency

Issues ADR (in $) in American

Non-American company → American Bank →
Sharemarket

Issues Bharat / Indian depositary

Non-Indian company → Indian Bank → receipt (IDR) (in ₹) in Indian
Sharemarket

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16.14.15 🗃 🌐 Direct listing of Indian Companies in foreign stock exchanges (2023)

Note: This topic is still developing. It is allowed via Gift-City (Gujarat). (Ref: Pillar#3A)

16.14.16 🔗🥏 Initial Coin Offering (ICO)

Figure 2: Cryptocurrency मे पागल हुई पब्लिक को फिरसे बेवकू फ बनाऊ, तो कै से?

 Company wants investors’ money for launching new cryptocurrency, or service/app related to an
existing cryptocurrency.
 Then, it’ll issue Initial Coin Offering (ICO) → Investor subscribes to it, and receives ‘tokens’
(and not SHARES). Investors can use the ‘tokens’ to buy companies coins/services or may sell it
to a third party.
 RBI has cautioned Indians not to invest in such instruments, because of the dangers which we
already learned in the Handout Pillar#1A-1: Bitcoins.
16.15 📈S TOCK EXCHANGES / SECONDARY MARKET: MEANING & EXAMPLES

Shares are issued through IPO @Primary market. Then, they can be resold at secondary market,
commonly known as Share market or Stock Exchange or Bourses.
 World’s Oldest: Amsterdam Stock exchange, Netherlands (1602)
 Asia’s Oldest: Bombay Stock Exchange (BSE: 1875)
 India’s stock exchanges chronology: BSE → A’bad → Kolkata → NSE (early 90s)
 Just like Banks have Core Banking Solutions for e-banking, Stock exchanges have their electronic
platforms for trading. E.g. BOLT (BSE's On-line Trading System), NEAT (National Exchange for
Automated Trading). They communicate using VSAT (Very Small Aperture Terminal) Satellite.
 Stock exchanges can have separate platform/website for trading in Debt (Bonds etc) and trading
in equities (shares).

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🔠 MCQ. Consider the following statements: (Pre'24-Set-C-Q52)
1. In India, NBFCs can access the Liquidity Adjustment Facility (LAF) window of RBI.
2. In India, Foreign Institutional Investors can hold the G-Secs.
3. In India, Stock Exchanges can offer separate trading platforms for debts.
Codes: (a) 1 and 2 only (b) 3 only (c) 1, 2 and 3 (d) 2 and 3 only

16.15.1 📈🌈 Social Stock Exchange

 It is a market for buying/selling shares/bonds/mutual fund for projects/organizations related to
hunger/malnutrition, poverty, gender equality, LGBT welfare, rural sports, Slum Area
Development, affordable housing. Etc.
 Budget-2019: we’ll set up a Social Stock Exchange under SEBI’s regulation. It’ll help social
enterprises and voluntary organizations to raise capital as share/bond/mutual funds for
eradicating hunger, malnutrition, poverty, gender equality,LGBTQIA+ communities, rural
sports, slum area development, affordable housing
 Then SEBI setup Ishaat Hussain panel to study it. Then SEBI setup Harsh Bhanwala panel to
study is further. They’ve given recommendations but NOTIMP
 📕ES24: so far 51 non- profit organisations (NPOs) and non-government organisations (NGOs)
raise funds from the public through the stock exchange mechanism worth ₹12 crores. for social
projects in education, livelihood generation, skill development, etc.
 To be listed on SSE, NGOs/NPOs must disclose their past and present audit reports, must have
minimum 3 years experience etc.

16.15.2 📈🌈Social Stock Exchange: zero-coupon, zero-principal instrument

 Refer to “debt instrument” section of the handout.
16.15.3 📈🤩 Secondary Market: Significance? (द्वितीयक बाजार का महत्व)
 ⏬ Cost of Transactions . You don't have to search around for buyers/sellers manually. सब लोग एक
जगह पे मिल जाते है। एक दूसरे को ढूंढने मे रिक्शा का खर्चा/लागत बच जाता है।
 Providing Liquidity to Financial Assets. तरलता बढती है क्योकि खरीदार मिल जाता है।
 Facilitating Price Discovery of shares / bonds. औकात पता चल जाती है कं पनी की।
 Investor sells securities in secondary market→ ₹₹ could be re-invested to a new company’s IPO
in primary market → Contributes to Economic Growth. (पुरानी घटिया कं पनी में से निवेश की रकम निकाल
कर नई और बहेतर कं पनी में निवेश हो सकता है )
16.15.4 🗃💾 DEMAT Account and Depositories

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 If shares and bonds are traded in paper-form, then transactions are slow & prone to the risk of
😰
theft, forgery and fire. कागजी स्वरूप में शेर से रखे जाएं तो चोरी होने का जालसाजी का आग लगने का डर
 Depositary is an organization that holds the securities (like shares/bonds etc.) in electronic
(=DEMATERIALIZED) form. Then facilitates its trading online.
 Upon client’s request, Depository can ‘rematerialize’ it as well (i.e. giving physical/hard copy of
share/bond etc) to client.
 Customer must open a “Demat” account in a depository-partner (DP). DP can be Bank/NBFC.
 SEBI regulates them under the Depositories Act 1996. Notable examples:
- Central Depository services Limited (CDSL: owned by BSE, HDFC, Canara Bank etc.)
- National Securities Depository Limited (NSDL: owned by SBI, IDBI, UTI, NSE etc.)
NSDL also has RBI license to operate Payment Bank
2024-March: India has 9.2 crore registered investors. Nearly 20% Indian households now
channelling their household savings into financial markets”- said Economic Survey 2024.
16.15.5 🛒 (💻:👨‍💼) DEMAT → ASBA Reforms in IPO/Primary Market

 Scamster Rupal Panchal (2005) opened multiple fake DEMAT accounts to increase the chances
of getting share allocations in IPO.
 Then she’d sell such shares in stock-exchange for higher prices.
 Subsequently, SEBI made PAN Card (issued by Income Tax Dept) compulsory for opening
DEMAT Accounts. SEBI also introduced ASBA (Application Supported by Blocked Amount)- it
allows the underwriter to block the amount in IPO-investor-applicant’s bank account, but only
IF shares allotted to the applicant, his bank money will be deducted. ASBA-Benefits:
o only serious investors with sufficient bank balance can apply.
o investor continues to earn bank interest on his blocked amount until the process of IPO-
share allotment is over.
16.15.6 UPI-ASBA in Secondary Market 2024-Jan Reform by SEBI

What does above chart mean? Ans. watch lecture video.

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16.15.6.1 🗃🔢 ISIN Number
 International Securities Identification Number (ISIN) is a Unique 12 characters, consisting of
both letters and numbers. प्रतिभूतियों का अंतरराष्ट्रीय पहचान सं ख्यांक
 It’s a serial code to identify securities e.g. Reliance Industries Limited Shares ISIN:
INE002A01018; Infosys Shares: INE009A01021.
📧
16.15.7 CAS system (=monthly statement of transactions)
• A Consolidated Account Statement (CAS)= document showing investor’s monthly
transactions across all mutual funds/shares/bonds etc. held in in dematerialised (demat)
mode.
• CAS is emailed to the investors by the depositories (NSDL or CDSL)
• CAS helps investor to (1) get alerted about any fraudulent transactions without his
knowledge (2) total value of his investment.

16.16 🤝 CENTRAL COUNTERPARTIES (CCPS), NOVATION & ESMA CONTROVERSY

Problem

Solution

- CENTRAL COUNTERPARTIES (CCPS) act as intermediary between the buyers and sellers in
financial market. E.g. G-Sec, T-bill, shares, bonds, derivatives, forex, commodities
- They act as a central counter-party to every trade i.e. CCP becomes seller to the buyer, and
simultaneously CCP becomes buyer to the seller. This process is called “novation”. (HOW? Ans.
Observe the chart carefully.)
- so, if one of the party does not honour the agreement → CCP will take care of it. Thus, CCP
prevents system failure.
- 😭Controversy? Indian CCPs also deal with international financial trades e.g. in Europe. But,
European Securities and Markets Authority (ESMA) is planning to cancel their license/
registration/ entry. What exactly is the matter? NOTIMP4Exam. Enough to know in 1 line ke

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 Indian CCPs facing some problem in Europe.
16.16.1 🤝 CCP Examples in India
The Clearing Corporation of India (CCIL), Indian Clearing Corporation Ltd (ICCL), NSE Clearing
Ltd (NSCCL), Multi Commodity Exchange Clearing (MCXCCL), India International Clearing
Corporation (IFSC) and NSE IFSC Clearing Corporation Ltd (NICCL).
16.16.2 🤝🐅 CCP Regulation in India: Who regulates CCP in India?
Matter Regulator
Money transfer between buyer
RBI using powers of Payment and Settlement Systems Act, 2007
and seller
Foreign currency transactions RBI using powers of Foreign Exchange Management Act, 1999
SEBI using powers of SEBI Act, 1992 and Securities Contract
Shares, Bonds, Commodities
(Regulation) Act, 1956 (SCRA)

16.17 🙋🏻‍♂️🛒 I NVESTORS KE TYPES

16.17.1 Types of Investors: Depending on Buying Capacity

1. 👨‍💼 Qualified Institutional Buyers (QIB अर्हता प्राप्त सं स्थागत निवेशक): Investors with expertise and
financial muscle to make large investments in capital markets. E.g. Mutual Funds, Insurance
Company, Foreign Venture Capital Funds etc. SEBI has separate registration norms for them.
a. Anchor investors: They’re sub-type of QIBs who are offered shares before IPO-launch.
This gives confidence to other investors to subscribe the given IPO.
2. 🙆‍♂️Retail investor: An individual investor who is not a QIB. (आम/खुदरा निवेशक)
Underwriter will keep quota for each category of investors, as per SEBI norms.
16.17.2 🙋🏻‍♂️🛒 Types of Investors: Depending on Buying Behaviour

1. Jobbers (आढ़ती): Full time engaged in buying / selling securities using money from their own
pockets. (Whereas brokers / commission agents buy/sell using money/shares of their clients).
2. STAG (Male Deer): He buys newly issued securities from primary market & sells them in
secondary market for quick profit. प्राथमिक बाजार से खरीद के द्वितीयक बाजार में मोटे मुनाफे पर बेचने की इच्छा रखता

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3. 🐮Bull (तेजड़िया ): Optimistic speculator who hopes share prices will rise⏫, so purchases (to sell
them later at much higher price). Just like a bull tends to throw his victim up in the air, the bull
speculator stimulates the price to rise.
4. 🐻Bear (मं दड़िया ) – A pessimistic speculator who fears prices will fall ⏬ so, he sells. A bear usually
presses its victim down to ground. Similarly, bear speculator tends to force down the prices of
securities.
🔠❓MCQ. In the parlance of financial investment, ‘Bear’ denotes [UPSC-CDS-2012]
(a) an investor, who feels that the price of a particular security is going to fall.
(b) an investor, who expects the price of a particular share to rise.
(c) a shareholder, who has an interest in a company, financially or otherwise.
(d) any lender, whether by making a loan or buying a bond.
🤑
16.17.3 Disposition effect: मुनाफ़ा तुरंत लेके भागूँ गा, लेकिन नुक़सान सहके बैठा रहूँगा।
• if investor is in profit, he will sell immediately, but if he is in loss, then he will continue to
hold for a long time, even if it results into more losses. Observe table
• SEBI used this term to describe the behavior of Indian investors in IPO.

16.17.4 Style of Trading / Investing based on duration and risk

Margin Trading when a person is buying more shares, than he can afford to. usually done by
borrowing money from the broker. Risky because is the investment fails
then person will get into huge debt.
Day trading / Individuals buy and sell shares over the Internet over a period of a single
Intra-day trading day's trading, with the speculative intention of profiting from small price
fluctuations.
Swing Trader He’s buying a share for just few days or weeks then sells it for profit.
Long term investor He’s buying for himself and he holds the share for more than 1 year.
Block Deal When large value order placed e.g. ₹5cr or more. This is usually done by
institutional investors such as Mutual Fund, Insurance companies etc.
Contra Trading / - investor will do opposite of what everyone else is going. - e.g. in Corona-
investing lockdown, if everyone is buying Pharma shares and ignoring PVR-cinema

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 shares → then contra trader will begin investing in PVR-cinema shares
(with the hope that after Corona unlock down → cinema industry will
boom and contra-investor will make great profit)
Further subtypes with various animal / bird names can be found on Investopedia but with poor cost :
benefit in exam. # 🕰थोड़ा-पढ़ो-आगे-बढ़ो
16.17.5 Trader Types: Retail vs Proprietary Traders
Retail Mutual Fund Proprietary Traders
Objective Profit Commission Profit
Capital Self Clients’ Self
Jaypee Capital, Edelweiss Capital =
if you're doing it in solo-mode registered as company, and doing it
e.g. Tata-MF, Birla-MF
with small amount of money. in systematic manner with large
employees & large amt of money.

16.18 📈 SENSEX & OTHER NOTABLE INDICES (उल्लेखनीय सं के तक/ सूचकांक)

 SENSEX?: Sensitive Index/ सं वेदी सूचकांक. It’s the weighted average of Free Float Market
Capitalization (FFMC) of 30 companies, selected by Bombay Stock Exchange (BSE)’s officials
 NIFTY? National Stock Exchange (NSE)’s index of 50 companies.
 Nikkei? Tokyo Stock Exchange index of 225 companies.
🔠❓ MCQ. Which of the following statements is/ are correct? [UPSC-CDS-2012-I]
1. NIFTY is based upon 50 firms in India.
2. NIFTY is governed and regulated by the Reserve Bank of India.
3. NIFTY is the stock index of Bombay Stock Exchange.
Answer Codes: (a) Only 1 (b) Only 2 (c) Only 3 (d) 1 and 3
16.18.1 SENSEX Goes up and down when?
📈 SENSEX – when does it go up 📉 Goes down when
💦 RBI’s soft /easy monetary policy → cheap 💧 Tight monetary policy (More in 📑
loan & credit cards → consumers to spend Pillar#1A2)
more → more profit to company → more सं कु चन वादी मौद्रिक नीति के दौरान सेंसेक्स नीचे गिरेगा
dividend : investor thinks “better I buy more
shares to get more dividend”: Bullish
Peace, Economic boom / prosperity, Political ⚔️ War, recession, political instability →
Stability (शांति, आर्थिक समृद्धि, राजनीतिक स्थिरता) Bearish market. (युद्ध, मं दी, राजनीतिक अस्थिरता)
When govt. hikes foreign direct investment When govt reduces FDI limit
limits
Merger-Acquisition, New product launched, CEO/MD arrest/FIR, Courts slapping fine,
Environmental clearance given to factory media exposing scandal… (कोई कांड हो जाए)
If bond yield goes down in a manner where If bond yield goes up in a manner where share

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 📈 SENSEX – when does it go up 📉 Goes down when
bond investor thinks it’s better to pullout investor thinks it’s better to pullout money
money from bonds to buy shares. from Sharemarket & shift to bonds.
What is Bond Yield? Ans. Ref Pillar#1A2 What is Bond Yield? Ans. Ref Pillar#1A2

16.18.2 🌬🌪:🤷🏾‍♂️⚖️👨‍⚖️ Force Majeure (अभेद्य शक्ति)

Figure 3: Corona के चलते बिजनेस प्रोजेक्ट पूरा नही किया, तो क्या जेल मे भेज दोगे, या फांसी पे लटका दोगे? कु छ नहीं उखाड़ सकते मेरा!
 French word for ‘superior force’. It refers to unexpected external circumstances (अप्रत्याशित बाहरी
परिस्थितियाँ) that prevent a party to a contract from meeting their obligations. e.g. Acts of God
(natural disasters, epidemics), war, terror attacks.
 In such cases, courts may not punish party for dishonoring contract. (करारनामे के दायत्वि को न निभाना)
 E.g. Corona (COVID-19) Virus → Singapore Govt put restrictions on entry of Chinese →
Singapore construction firms facing labour crunch (श्रमिकों की कमी) → invoked ‘Force Majeure’ to
clients, “we can’t finish building your homes/offices in time.” Coronavirus: >55million people
infected across the world (as of 2020-Oct).

16.19 🐮📈🐻 S HAREMARKET: 2020- IMPACT OF CORONA

2020- Initial months of lockdown, ⏬⏬ due panic among investors, Force Majure but then
⏫⏫ because (शुरु-शुरु के महीनों में गिरावट किं तु बाद में बहुत तेजी आई क्योंकि…)
1. Cheap Loans / Expansionary Monetary Policy → Some of that money may have entered the
share market through to large investors. (विस्तार वादी मौद्रिक नीति)
2. 'work from home' + RBI loan Moratorium- may have encouraged many service sector employees
to invest ₹ in the sharemarket. (तालाबं दी के दौरान लोन की किस्त नहीं चुकानी थी तो कु छ ने वह रकम शेयर बाजार में
निवेश की होगी)
3. Unprecedented demand and profit for IT and Pharma sector- Encouraged the investors to park
their money in such shares at very high price. (तालाबं दी के दौरान सूचना प्रौद्योगिकी और औषधीय कं पनियों में
अप्रत्याशित तेजी)
4. Youtubers/Reddit/Social media influencers giving online share trading Tips.

16.19.1 🐮📈🐻 Sharemarket- 2022: IPO Bubble Burst: Case of Paytm (फू ट गया ग़ुब्बारा)
Shifted to Mains.

16.19.2 🐻📈🐂 Sharemarket: 2021-22 observation by ES23 📙

Indian share market fell / remained volatile 2022-23 due to
 Exit of the foreign portfolio investors because of the USA fed-tapering. (More ref: Pillar1A2:
monetary policy lecture.)
 Russia-Ukraine war → 1) imported inflation 2) weakening of Indian and global economy.
 But the fall/shock in the Indian sharemarket was less compared to China, Japan, South Korea etc.
 2023-Feb: Market fell because of Adani – Hindenburg controversy. (Explained in other section)

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विदेशी निवेशक अमेरिकी फे ड टेपरिंग के चलते भारत से भाग रहे हैं. तथा रुस-यूक्रे न युद्ध के चलते महंगाई में बढ़ोतरी और वैश्विक
अर्थव्यवस्था में मं दी की स्थिति। इन सबके बीच भारत का शेयर बाजार गिर रहा है। किं तु हमारे शेयर बाजार में गिरावट, चीन जापान
दक्षिण कोरिया इत्यादि के शेयर बाजारो मुकाबले कम रही है। एसा आर्थिक सर्वेक्षण ने पाया।
16.19.3 🐻📈🐂Sharemarket: 2023-24- India performed better than many nations says 📕ES24:

16.19.4 🐂📈 India becomes 4th-largest equity (Share) market (2024-Jan)

• 2024-Jan: Ranking of Combined value of shares listed on a country’s stock exchanges: 1)
U.S., 2) China, 3) Japan, 4) India ($4.33 trillion) 5) HongKong ($4.29 trillion)
• Reason for India climbing to 4th place? 1) Chinese regulators getting strict, so foreign
investors shifting money out of China towards Indian Sharemarket. 2) Stable political
environment in India 3) Strong GDP growth.
16.20 👟 MARKET THEORIES
16.21 👟👠 Efficient Market Hypothesis /theory (EMH)
- financial markets are efficient in processing information and pricing securities. So one investor
CANNOT always KEEP earning more profits than the average trend in market.
- Gist: शेयर बाजार में जो होना है, वह होकर रहना है. तुम कम्पनी का चार्ट/बेलेंश-शीट पढ़कर तंबूरा कु छ नहीं उखाड़ सकते। भले
आपका एक दाव सही लग जाए, लेकिन दो-तीन गलत भी लग जाएं गे तो. फिर नफा मोटा नहीं सामान्य(एवरेज) ही हो जाएगा.

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- However, some experts disagree with it. We’ll not debate. थोड़ा-पढ़ो-आगे-बढ़ो.
16.21.1 👟👠 Random walk theory
• Share prices move unpredictably.
• Therefore, company’s past shares prices/charts shouldn’t be used to predict future prices.
• So, it is impossible to beat/defeat the share-market.

16.22 🐆A LPHA AND BETA VALUES

🐆
16.22.1 Beta Value to monitor price volatility or risk of an asset
Indicator to monitor price-volatility/risk of an asset.

Value Meaning
This company’s share moves faster than sharemarket in both directions.
High Reward: if SENSEX moves upward at 1x speed, this company will move at may be
β>1 1.5x speed.
High Risk: If SENSEX falling at 1x speed, this company will fall at 1.5x speed.
Usually Tech/Startup/small-cap companies show this behaviour.

β<1 This company moves slower than SENSEX. Low risk, Low return.

β=1 This company’s share moves parallel to SENSEX.

uncorrelated to the market. Mona-Lisa Painting: its value changes independently of
β=0
SENSEX movement.
negatively correlated to the market. This asset moves in the opposite direction of the
β less
SENSEX. e.g. Bond/Gold. If SENSEX goes up, people will shift money from gold/bonds
than 0
to shares so gold/bond will fall. (However, this is not always true in real life.)
MCQ. In the context of finance, the term ‘beta’ refers to _ _ (Prelims 23-SET-A-Q073]
(a) the process of simultaneous buying and selling of an asset from different platforms
(b) an investment strategy of a portfolio manager to balance risk versus reward
(c) a type of systemic risk that arises where perfect hedging is not possible
(d) a numeric value that measures the fluctuations of a stock to changes in the overall stock market

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16.22.2 Alpha value to compare performance of Mutual Funds

This indicator used mainly to compare a Mutual Fund / Hedge Fund manager’s performance against
a benchmark e.g. SENSEX
Value Meaning
This MF gives better profit than SENSEX.e.g. if HDFC-MF has 2% Alpha. Means when
Alpha > 0
SENSEX claimed 10%, then HDFC-MF gave 12% return.
Alpha = 0 This MF performing same as SENSEX
Alpha < 0 This MF gives less return than SENSEX

16.22.3 🚩👶🏻 FAQ: Alpha vs Beta similarity / correlation / difference

Term Alpha Beta
Mainly to compare performance of Mutual
Usage Mainly to find volatility/risk of a share.
Funds.
Beyond that we’ll NOT PHD. UPSC is only asking one liner from here. We’ll not spend more time.

16.22.4 ⚱️Types of Analysis – fundamental vs Technical

Fundamental Analysis Technical Analysis
Share price related charts-graphs & mathematical-
indicators e.g. Simple-moving-average of the share
Company’s profit, loss,
Investor price for last 200 days (200-day SMA).
balance sheet, new
studies what? More examples of indicators (listNOTIMP): Relative
products-launch etc.
Strength Index (RSI), Stochastic Oscillator, Moving
average convergence divergence (MACD) etc.
Long term Investor (longer Intraday Trader (buy/sell within a single day)
Suitable for
than 1 year) Swing Trader (buy/sell for few days or weeks)

⚱️
16.22.5 DEMAT Portfolio: Meaning, Types, Portfolio Diversification
Portfolio means the collection of assets held by an investor.
In financial market, “Portfolio” means the list of shares/bonds/ETF you’re keeping in your DEMAT
account.

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16.23 🗃😼S ECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

 HQ- Mumbai भारतीय प्रतिभूति और विनिमय बोर्ड,

 (1988) Formed by an executive order → (1992) Became Statutory Body → powers increased
through amendments in 1999 & 2014. Now it can order search and seizure, attachment of
properties, arrest and detention. (खोज अभिग्रहण, सं पत्तियों की जब्ती/कु र्की, गिरफ्तारी और निरोध)
 SEBI Board Composition: Chairman + 1 officer from RBI + 2 officers from Union Government
+ 5 members appointed by Union Government.
 Chairman: upto 5 years / 65 age. Reappointment possible.
 2022: Madhabi Puri Buch-first woman chairperson in history of SEBI. She replaced Ajay Tyagi
(Ex-IAS). Selection was done by Financial Sector Regulatory Appointments Search Committee
(FSRASC) headed by the Cabinet Secretary (IAS).

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 Regulates Process of issuing securities (Bonds, Shares, IPO, ETF, ReIT, INVITs, etc.) using the
Securities Contracts Regulation Act, 1956 [SCRA: प्रतिभूति सं विदा विनियमन]
 Regulates Places (Depositories, Stock exchanges, Commodity Exchanges etc.)
 Regulates Persons (Investors, Brokers, Fund Managers, Public Limited companies etc.)
 Regulates any Collective Investment Scheme (CIS) of ₹100 cr/> [In the aftermath of SAHARA
scam & Chit Fund scams. सामूहिक निवेश योजनाए ]
 Further appeal: Securities Appellate Tribunal (SAT) → Supreme Court.
○ Same SAT also hears appeals against the orders passed by Insurance Regulatory
Development Authority of India (IRDAI) and Pension Fund Regulatory and
Development Authority (PFRDA).(More in Pillar#1D) 📑
 SEBI has “SCORES” online portal for investor-complaint. 2024- version 2.0 launched to give
justice within 21 days of complaint.
 SEBI has Securities Market Trainers (SMARTs) Program for investor education (निवेशक प्रशिक्षण)
 Saarthi app: Sebi’s app for investor awareness. (निवेशकों में जागृति के लिए सेबी का नया एप)

16.23.1 🗃⚖️📜Securities Market Code

 💼Budget-2021: we’ll create a single new law named "Securities Markets Code" by merging older
acts 1) SEBI Act, 1992, 2) Depositories Act, 1996, 3) Securities Contracts (Regulation) Act, 1956
4) Government Securities Act, 2007. (पुराने विभिन्न कानूनों का एकीकरण विलीनीकरण करके "प्रतिभूति बाजार सं हिता"
नामक नया कानून बनेगा)
 Benefits? Same as the bullet points written in conclusion of “SEBI Investor Charter.”

16.24 🗃💪 SEBI I NVESTOR CHARTER (निवेशक अधिकार पत्र)

 (Definition) A citizens’ charter (नागरिक अधिकारपत्र) is a document of commitments made by a
government agency to the citizens in respect of the services being provided to them. e.g. if "X"
problem is not solved in "Y" days then complain to "Z" officer on ABC Phone number / email
address etc.
💼
 (Origin) Budget-2021: we’ll create an "investor charter" (निवेशक अधिकार पत्र) for financial
investors across all financial products (Share, Bond, derivatives, Commodities market etc).
 SEBI notified this in 2021-November.
o This charter applies on Entities/actors e.g. investors, mutual funds, stock brokers, stock
exchanges, depositories, underwriters, real estate investment trusts (REITs),
infrastructure investment trusts (InvITS), & other collective investment schemes,
o This charter applies on Events e.g. initial public offerings (IPO), FPO, etc.
 More details shifted to Mains-Handout. #RAFTAAR.

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16.24.1 🗃😼: 🏃 SEBI: why protect investors & ⏫investors participation?

Figure 4: पूं जी बाजार की जड़ो को गहरा करना है तो सिर्फ अमीरों का नही, गरीबो की बचत का पैसा भी जाना चाहिए!
 Share market scams erode publics’ hard-earned savings → alcoholism, depression, suicide and
other social ills. (जनता की बचत का पैसा घपले में बर्बाद तो जनता में शराब, अवसाद, आत्महत्या और अन्य सामाजिक बुराई)
 Duped investors will shy away from share market & they may invest in gold / real estate = not
very beneficial to economy as it our import-bill, creates black money opportunities.
 If households don’t participate in capital market → companies will have to approach the banks
to get more loans. But banks’ lending capacity is limited by CRR, SLR, PSL, NPA, PCA.(REF in
📑Pillar#1B2)
 If more retail investors participate in capital market = “Deepening of the capital market” →
factory expansion, job creation, and economic growth. (खुदरा निवेशक की मदद से पूंजी बाजार की जड़ों की ओर
गहरा करना- ताकि रोजगार सृजन और आर्थिक वृद्धि में मदद मिले)
16.24.2 💼🏃 ⏫
: measures to retail investors participation- 25% public holding in Govt Companies
 Budget 2019: For all the listed government companies, we will strive for minimum 25% public
shareholding. (आम जनता को भी सरकारी कं पनियों के शेयर खरीदने का मौका मिले)
 SEBI to raise minimum public shareholding in listed private sector companies to 35%.
 👻ATMANIRBHAR: minimum shareholding related norms deferred under Corona crisis.
16.25 🗃😼: 🏃 SEBI R EFORMS TO BOOST INVESTORS’ CONFIDENCE?

16.25.1 🪓Circuit breaker

 Harshad Mehta (1992), Ketan Parekh (2001) arranged money from banks, used it for rigging the
share prices to make windfall gains during Bull-runs by other investors. Once the prices crashed,
small investors suffered. बैंकों से गबन बं द करके पैसा लाए जिससे कं पनियों के शेयर जमकर खरीद के उसकी मांग और दामों
को बढ़ाया ताकि लालच में अन्य निवेशक भी उन कं पनियों के शेयर ऊँ ची कीमतों में खरीदने लगे अंत में यह लोग अपने शेयर बेच कर
भाग गए
 To prevent such scams, SEBI introduced Circuit Breaker System, wherein if fluctuation in the
share prices is more than “x%” than previous day, then stock exchange must stop trading for “y”
minutes.

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16.25.2 🤝⏰ T+1 day Settlement instead of T+2 day
 Badla System/Carry forward system: Buying of shares using borrowed money & making
promises to carry forward the settlement for upto 72 days. scamsters misused (इसकी टोपी उसके सर पे:
सौदा आज करते लेकिन पैसों का भुगतान/शेयर की डिलीवरी ७२ दिनो बाद होती- और इस समय के दौरान वही घपलेबाज उन्ही शेयर
बेचने की टोपी दूसरों को पहेनाते रहेता)
 so SEBI discontinued Badla System (in 2001) & introduced (T+2) rolling settlement system i.e.
after trade is conducted, the parties must settle it within two working days (= buyer pays money,
seller deliver shares/bonds/securities). -> 2022: T+1 settlement started.
16.25.3 🤝⏰ ⏰ T+1 hour & T+0 hour (instantaneous) settlement
Term Meaning SEBI aims to launch from
T+1 hour Within 1 hour, Payment-delivery concluded. March 2024
T+0 hour also called instant/instantaneous settlement. October 2024

🛒 💻 👨💼 😈
16.25.4 ( : ‍ : ) Illegal Trading: Dabba-trading, Insider Trading, Front Running
 Dabba Trading / Bucketing / Box Trading: While share trade occurs at stock exchange linked
with DEMAT accounts, the Dabba Trades occur in the unofficial books/ledgers of an
unscrupulous broker. He may or may not execute those orders in actual DEMAT account.
Investor prone to scam, govt deprived of taxes. So, SEBI declared it illegal.
 Insider Trading (भेदिया लेनदेन): Whenever company launches new products, wins unique patents,
⏫
or undergoes merger/acquisition- its share prices may . If a person associated with company
uses such confidential information for buying/selling shares to make windfall gains. Such insider
trading is illegal.
 Front Running (illegal) : e.g. LIC Mutual Fund manager Yogesh knew that LIC-MF was going to
invest heavily in X company. So he bought the shares of that X company in advance in his
personal account (to make profit when price rises after LIC-MF starts buying). SEBI banned him.

🚩👶🏻 FAQ by Zhande-walle Babushone: what is the difference between insider trading and front
running?? Can we say front running is a some type of insider trading?. Ans. It is notimp. Remember
them as one-liners, instead of comparing "A" vs "B". Move to next topic. थोड़ा-पढ़ो-आगे-बढ़ो.

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16.25.5 🛒 (💻⏱:👨‍💼) Algo Trading & Co-Location

What does this mean? Explained in the video.

🧯
16.25.6 Investor Protection Fund (IPF)
 SEBI requires Stock exchanges (BSE, NSE etc) and commodity exchanges (NSEL, MCX etc) to
setup Investor Protection Fund (IPF: निवेशक सुरक्षा कोष).
 IPF covers investors’ ‘non-speculative’ type of losses. e.g. if the other party is not delivering
shares because of some court case. IPF also promotes investor education and awareness.
 max. protection per investor is ₹25 lakh.
🚩👶🏻 FAQ if we’ve Central Counterparties (CCPs) then why is this fund required? Ans. ok ask SEBI
to shut it down. 1-linerGK hai. accept and move to next topic.

16.25.7 🧯
Settlement guarantee fund (SGF)
• Objective similar to the investor protection fund. But we'll not PHD.
• Stock exchanges, clearing corporations and brokers required to towards it.
16.26 🆘📡 S ERVER CRASH PROTECTION
16.26.1 🆘 📡 SEBI’s BCP Plan & DRS Sites

• SEBI has designed business continuity plan (BCP) for market infrastructure institutions
(MIIs) — i.e. (1) stock exchanges, (2) depositories, (3) clearing corporations.
• MII need to have a disaster recovery site (DRS). So when there is disruption in their server at
the primary site (PR) → they’ll move data/operations to the server at DRS site.

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 • 2024-March: Bombay Stock Exchanges (BSE) and the National Stock Exchanges (NSE)
carried out mock drill / special trading sessions for this.
📡
16.26.2 SEBI → LAMA - IT monitoring system/framework
• LAMA system helps Stock Exchanges, Depositories etc. to check their IT-system integrity on
real-time basis.
• LAMA = Log Analytics and Monitoring Application. (Full form not imp)
16.26.3 🆘📡 IRRA Portal: Investor Risk Reduction Access (IRRA)
• is a platform that will act as a ‘safety net’ for investors during technical glitches/server errors.
• Helps Investor to cancel/close the trade to protect his money during server errors.
• Boss? jointly developed by all the stock exchanges – BSE, NSE, NCDEX, MCX and
Metropolitan Stock Exchange of India (MSE)

16.26.4 🐻📉A DANI HINDENBURG, FLASH CRASH, SHORT-SELLING (2023)

 Hindenburg Research firm (USA) alleged that Adani was doing stock manipulation, accounting
fraud, money laundering, taking too much loans beyond the capacity to repay etc. (HOW
exactly? Ans. Notimp after observing PYQ.)
 then investors panicked and started exiting Adani shares at loss.
 Shareprice fell from ₹3500 (2023-Jan) to ₹1500 (2023-Feb). Flash Crash = term to describe
sudden (and huge) fall in share price. e.g. Adani after Hindenburg report (2023)

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 Adani’s supporters argue that Hindenburg spreading negative news to make the share price fall,
to make profit thru short selling of Adani shares. (How? Explained in the next section:)
 SC had setup Justice A M Sapre panel to investigate Adani share crash and other regulatory
aspects for stock markets. Its recommendations = Refer to Mains-handout.
📉
16.26.5 Short selling (make profit from falling share price)
 Short selling occurs when an investor borrows a share (निवेशक शेयर उधार लेता है)
 then sells it in the market (फिर बाजार में बेच देता है)
 with hope to buy it back later for lesser price. (इस उम्मीद में कि बाद में उसे सस्ते दाम में वापस खरीद लेगा ताकि उसे
मुनाफा हो जाए.)
 See the graphics given below. & watch video lecture for better understanding:

🧛
16.26.6 ‍♀️Finfluencers:
 Finfluencer is an influenzer, who gives advice on financial investments via social media.
 Sometimes they give wrong advice on behest of share market scamsters. SEBI punishes them.
16.27 🛒 (🔪🗃) O NLINE TRADING PLATFORMS → G-SEC

16.27.1 🐯🛒 🔪🗃 🧔👨💼
( : ‍ ) G-Sec Trading- Retail investors’ RDG @RBI
 RBI launched “Retail Direct Scheme” in 2021.
 Under this scheme, RBI permits “Retail Direct Gilt (RDG) account” for retail investors on its E-
Kuber online platform. (आम निवेशक रिज़र्व बैंक में आरडीजी नामक खाता खोल पाएं गे)
 Both Resident Indians & non-resident Indians (NRIs) can open this account. (गैर निवासी भारतीय भी)
 Then Retail investors can directly buy Treasury Bills (T-Bill), G-Secs (of Union Government),
State Development Loans (SDL are ‘G-secs’ of State Govts) and Sovereign Gold Bonds, from RBI
directly. (आम निवेशक सीधा रिज़र्व बैंक से इन प्रतिभूतियों को खरीद सकता है.)
 Application fees to open the account = ₹ ZERO. Note: Retail investors can also invest in
G-Sec/T-bill indirectly via Mutual Funds It is not banned. But if retail investors want to buy
directly from RBI- then they've to goto RBI's RDG/e-kuber.
 2024: RBI said it'll launch a mobile app for this.
 🤩Benefit? 1) Earlier retail investors bought G-sec “indirectly” through mutual funds wherein
mutual fund manager (MF) charged commission/fees. Now retail investor can buy directly so
does not have to pay such commission/fees to MF managers. (बिचौलियों को दलाली/कमीशन नहीं देना होगा)
 🤩2) Deepening of G-Sec market through ⏫retail participation (बाजार की जड़ों को गहरा करेगा)
16.28 🐯🛒 (🔪🗃: 🧔👨‍💼) G-S EC TRADING: RBI'S NDS-OM, OTC
 RBI owns and regulates Negotiated Dealing System (NDS) for trading in G-Sec.
 Clearing Corporation of India Limited (CCIL a company founded by SBI, IDBI, ICICI, LIC etc)
maintains this system.
 NDS system for recording the transactions of G-Sec buy-sell. NDS has following components:
i.e. buyer/seller call each other on the telephone, make the deal about buying
Telephonic and selling and then inform the reserve bank's NDS system (ke we've done this
deal).
Over-The- Buyer physically walks into the seller's office (or vice versa) and conducts the

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 transaction. Later they report transactions to RBI's NDS System (ke we've done
Counter (OTC) this deal). (ऑफ़िस में रूबरू मिलके ख़रीद-बिक्री करेंगे, बाद में रिज़र्व बैंक को सूचित करेंगे कि हमने ये
किया था)
Negotiated Dealing System-Order Matching system (NDS-OM): electronic,
computer screen based, anonymous, order driven trading system for dealing in
NDS-OM G-sec's secondary market.
Buyer-seller places orders online without knowing names/phone numbers of
each other. (ख़रीददार और विक्रे ता एक दूसरे की असली नाम पहचान नहीं जान पाएं गे)
🚩👶🏻FAQ: Then what is E-Kuber?
 Ans. E-Kuber is the core banking solution (CBS: REF Pillar1A1) platform of RBI to digitally
handle all operations of RBI e.g. NEFT-RTGS, Repo, MSF, CRR, PSLC certificate trading, G-Sec,
Sovereign Gold Bond, Retail Direct Scheme (RDG) etc.
 You may think of E-kuber as a Windows Operating system, & NDS as a sub-component/excel-
software inside of it that handles G-Sec buying-selling database management/account keeping.
🔠❓MCQ. Find correct statement(s): (Asked in Prelims-2021)
1. Retail investors through demat account can invest in ‘Treasury Bills’ and ‘Government of India
Debt Bonds’ in primary market. [आम निवेशक डीमैट खाते द्वारा प्राथमिक बाजार में सरकारी प्रतिभूतियों में निवेश कर
सकता है]
2. The ‘Negotiated Dealing System-Order Matching’ is a govt securities trading platform of the
Reserve Bank of India. [NDS-OM सरकारी प्रतिभूतियों में खरीद बिक्री करने के लिए रिजर्व बैंक द्वारा बनाया गया मं च है]
3. The ‘Central Depository Services Ltd.’ is jointly promoted by the Reserve Bank of India and the
Bombay Stock Exchange. [CDSL को रिजर्व बैंक और बॉम्बे स्टॉक एक्सचेंज द्वारा सं युक्त रूप से बनाया गया था]
Codes: a) 1 Only b) 1 and 2 c) 3 Only d) 2 and 3

16.28.1 📞 Bid-Ask Spread

Jetha wants to buy at Bhide wants to sell at
Player Spread / Gap
(Bidding price) (Asking price)
WIPRO Share 600 800 ₹200
In above situation, the deal can’t happen because the Bid-Ask Spread is high.
- Either buyer or the seller will have to make price-compromise, only then deal can happen.
- If bid-ask spread is HIGH = liquidity of the asset decreases. Because it becomes difficult to sell
such asset. (खरीददार की बोली/कीमत और बेचने के भाव में जितना अंतर ज्यादा होता है तो उस सं पत्ति की तरलता कम होने
लगती है क्योंकि उसको बेचना मुश्किल हो जाता है)

16.28.2 📞 Arbitrage: Making profit due to difference in to markets/location.

Location Delhi Mumbai Arbitrage
Gold Price (10gm) 60,900 60,800 ₹100
- In above example, a dealer can buy the gold from Mumbai and sell to Delhi and he will make a
profit (arbitrage) of ₹100.
- nowadays the arbitrage in financial assets (share/bond etc) is very low because of the online

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 trading.
16.28.3 🎌 Yen carry trade & fall of Indian Sharemarket. (2024)

• Yen carry trade involves borrowing in a low-interest currency (yen) to invest in higher-
yielding assets (e.g. Indian sharemarket).
• 2024: Japan’s central bank → ⇑ loan interest rate → profit margins ⇓ ⇓ for Yen-carry
traders → So foreign investors started fleeing.
• Result? Heavy fall in the stock exchanges. Japan’s Nikkei 225 Index (-12%), Indian Sensex
(~3%), South Korea’s Kospi (8%) etc.
• More doubts/want2Ph.D? then watch https://youtu.be/vd3kgnArQGY?
si=pJtOAMrj4eg17hAx
16.29 📦 🤹🏻‍♂️👴🏻 I NVESTMENT FUNDS → MUTUAL FUND (MF) FOR AAM-AADMI

Figure 5: swag से करेंगे 'middle-class' का 'स्वागत'। Observe colors in logo, meant for attracting ordinary crowd
 Mutual Fund is an Asset Management Company (AMC-NBFC) that pools savings of (retail)
investors and gives them “Units”.
 MF Manager parks this money in securities & builds his ‘portfolio’.
 Whatever dividend/ interest is generated from the portfolio, it is distribute among investors in
the proportion of their units.
 Investor pays Entry Load (= fees for joining), Exit Load (= fees while quitting). SEBI regulates
these fees.
 Due to low deposit rates in banks, people invested money in mutual funds however post-IL&FS
crisis, corona crisis, charm declining because mutual funds are subject to such market risks.
 ⚾️📻⚾️🎙✋ “Side pocketing”: SEBI ‘s technical guidelines to help MFs to separate their IL&FS
type stressed/toxic assets from their standard assets. Helps protecting the investors. How?
NOTIMP.
16.29.1 📦 🤹🏻‍♂️ 👴🏻 MF → Hybrid mutual funds
Type of MF Invests money in
Equity-MF Shares.

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 Debt-MF Bonds, G-Sec, T-Bill etc. Short-term and long-term Bonds instruments
Hybrid-MF Shares and Bonds both types.
Multi-asset Shares, Bond & Gold.

16.29.2 🚎✋ MF: Open ended vs Close ended

Type Open ended Close ended
unlimited, everyone fixed e.g. 50 cr fund. Manager will not accept more
size of the fund
welcome. money once it is filled.
client can there is closing date, after which MF- manager will not
whenever he wants
subscribe accept money.
maturity none. Fixed maturity period e.g. 5 years

16.29.3 ↩️ ↩️ MF: Lumpsum (One-off) vs SIP

Type One-time / one-off /lump-sump Systematic Investment Plan (SIP)
client contributes only 1 time . (बस एक ही बार पैसा जमा regular basis e.g. Monthly (नियमित रूप से बार बार
₹→ करता है) पैसा जमा करता है )

16.29.4 📦 🤹🏻 👴🏻
‍♂️ Mutual fund → ESG, Shariya Mutual Funds
 ESG Mutual Funds= These mutual funds will invest clients’ money in companies that have good
performance on Environmental, Social, And Governance (ESG) aspects.
 Shariya Mutual Fund= These mutual funds will invest clients’ money in companies that are
compliant with Islamic Shariya law. E.g. They will not invest in alcohol, pork, gambling etc
related companies.

16.29.5 📦 🤹🏻 👴🏻
‍♂️ Mutual fund → SIP, ELSS, ULIP
 Traditional Mutual Fund = client invests entire amount at once. एक साथ पूरी रकम जमा करानी होती है
 Systematic Investment Plan (SIP)= Mutual fund wherein client deposits small-small fixed
amounts at fixed interval e.g. month basis etc. ग्राहक छोटी-छोटी किस्तों में रकम जमा करवाता है
 Equity Linked Savings Scheme (ELSS)= It is a sub-type of mutual fund where money is locked in
for 3 years and invested in equities (shares). It’s eligible for certain benefits in Income Tax.
 Unit linked insurance policy (ULIP)= client invest money in a scheme wherein → (1) some ₹₹
goes into Mutual Fund (2) some ₹₹ goes into insurance policy ( 📑Ref: HDT-Pillar#1D)
16.29.6 📦 🤹🏻 👴🏻 🎛
‍♂️ Mutual fund → Mutual fund risk-o-meter
 SEBI requires mutual fund company to disclose how much risk is present in their scheme, on a
monthly basis, thru a digital dashboard called 'risk-o-meter'. (कितने जोखिम पूर्ण तरीके से निवेश कर रहा है)
 It shows 6 categories of risk: low, low to moderate, moderate, moderately high, high, (#)very
high risk. (#) SEBI added this new category 'very high risk' in 2020-Oct.
 This helps the investor to make decision- which Mutual fund he wants to joins depending on his

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 risk appetite. (उस हिसाब से निवेशक तय करें उसे कौन से सलामती पूर्ण या जोखिमपूर्ण म्यूचुअल फं ड में जाना है.)

16.29.7 📦 🤹🏻 👴🏻
‍♂️ Mutual Fund: Backstop Entity- SEBI proposal for stressed MF
NOT YET formed. And outdated for 2024-25. So deleting it. #RAFTAAR for Prelims.
16.29.8 ( 🛒 🔪🗃 🧔👨💼
: ‍ ) Bond Buying Institution in Budget-2021 💼
NOT YET formed. And outdated for 2024-25. So deleting it. #RAFTAAR for Prelims.
16.30 📦 🤹🏻‍♂️🤵🏻 I NVESTMENT FUNDS → HEDGE FUND (हेज फण्ड) FOR RICH-AADMI

Figure 6: Swag से नही करेंगे 'middle-class' का 'स्वागत'। Observe ‘premium’ logo-designs to attract rich people
 Special type of Mutual Fund meant for HNI (High Net Worth Individual) who wants high risk
high return. SEBI norms: Minimum investment per person is ₹1 crore. (सिर्फ अमीरों के लिए है)
 Hedge Fund manager will invest their money in Junk Bonds, Risky assets; he’ll do risky trading
activities such as Arbitrage, Leverage, Short Selling, Future&Options(F&O) trading, Derivatives
Trading etc. to generate maximum return. (how is that done in real life, what do these words
mean? = UPSC-CSE not for recruitment of HF managers.)

16.30.1 📦 🤹🏻 🤵🏻
‍♂️ Investment Funds: “Accredited Investor”
Deleting from handout. I’m not finding it exam-worthy anymore.

16.30.2 📦 🤵🏻 🏬 🛩 Investment Funds → REITs / InvITs: for rich-aadmi

REITs: Real Estate Investment Trusts - InvITs: Infrastructure Investment
(भू-भवन-सं पत्ति निवेश न्यास ) Trusts-(अधिसं रचना)
HNI / institutions: Min. ₹2 lakh
₹10 lakh. ₹1 lakh
₹50,000 . (Note: these numbers keep
Who can invest? (SEBI reduced minimum limits in
changing. DON'T worry. It's enough
2019 to attract more investors)
to know- these are for rich people.)
In airport, highway, thermal plants,
in real estate projects that are soon to
Manager parks gas grid etc. He’ll earn from toll
complete. He’ll earn income from rent /
the money in? collection at highways, services fees at
sale.
airports etc.
Example Blackstone-Embassy group IRB, India-grid

✅Benefits of REITs and InvITs-

 Stressed developer gets new finance to finish the project while HNI gets new opportunity to
invest his money, and he may also sell the units to third party via stock exchange.
 SEBI permitted these instruments in 2014. Later SEBI relaxed technical norms related to capital,
leverage, issue size but they are not important for us. हर तकनीकी नियम अपने लिए काम का नहीं

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16.30.3 📦 🤹🏻 🤴🏻
‍♂️ Investment Funds → Sovereign Wealth Fund (सं प्रभु धन कोष)
 State owned investment fund, wherein central bank, finance ministry and other public sector
financial intermediaries park their surplus fund. →money used for investment.
 E.g. 2020-Jun: Abu Dhabi Investment Authority (ADIA) bought 1.16% of Reliance Jio for
₹5600+cr. Singapore's GIC sovereign wealth fund, Qatar Investment Authority (QIA) also active
in Indian market.
 What is National Investment & Infrastructure Fund (NIIF) Ans. Ref: Pillar#5: Infrastructure
16.31 📦🏛I NVESTMENT FUNDS → CPSE-EXCHANGE TRADED FUNDS (ETF: ईटीएफ)
 Disinvestment (विनिवेश): government sells it shares from Central Public Sector Enterprises
(CPSE: कें द्रीय सार्वजनिक क्षेत्र के उद्यम) but does not reduce its shareholding below 51%.
 If Govt’s shareholding reduced below 51%, then it is called Privatization (निजीकरण), although
NITI prefers the term ‘Strategic Disinvestment’. (More in Pill#2)
 2014: Govt wanted to disinvest 10 CPSE (ONGC, GAIL ltd etc). If govt tried to sell individual
company- shares, it would be more time consuming, and govt may not get good prices for each
company.
 So, Govt gave CPSE-shares to a fund manager Goldman Sachs - who created new securities out
of it, called “Exchange Traded Funds (ETF)”, and made a “New Fund Offer (NFO)” to the public
to subscribe to these securities at ₹ 10 per unit.
 If an investor holds the ETF → he will get returns from the dividend generated by those CPSE-
companies in the backend. He may also sell these ETF to a third party via stock exchange, hence
called Exchange Traded Funds.

Figure 7: how do exchange traded funds (ETF) work?

 BHARAT-22: Another CPSE-ETF when Govt wanted to disinvest shares from 22 companies
including CPSE, PSBs and UTI using ICICI Prudential as fund manager (2017-18). However,
PSB-NPA problem → poor dividends → BHARAT-22 not giving good returns, so, investors
response was initially lukewarm.

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 Later govt announced, “We’ll give the ELSS-walla income tax benefits to CPSE-ETF-investors as
well” to attract investors.
16.31.1 (🦁🔪)📦: (🏛🛒🤝) Bharat Bond (Debt) ETF (2019)
 Fund Manager (Edelweiss Asset Management ltd) → He’ll issue Bharat Bond-ETF.
 Maturity: 3 yrs and 10 years. Unit Size: ₹1000 each. So even middle-class investors buy these
Bond-ETFs.
 Fund managers will invest this ₹₹ into a basket of bonds issued by Central Public Sector
Enterprises, Central Public Financial Institutions (CPFIs such as public sector bank and
insurance companies) and other Government organizations.
 ETF will be tradable at the stock exchange.
👍 Bharat bond ETF: Benefits?
 For Government companies = Easier and more efficient to borrow ₹₹ instead of individually
launching their bonds in the market. एक एक सरकारी कं पनी अलग से बांड जारी करती तो शायद निवेशक सब को नहीं
मिल पाते
 For Investors = Safety, assured return on bonds, irrespective of Government company’s profit.
 ⏫retail participation → deepening capital market. (खुदरा निवेशक की मदद से पूंजी बाजार की जड़ों की ओर
गहरा करना)
16.31.2 (🦁🔪)📦: (🏛🛒🤝) CPSE-ETF vs Mutual Fund
Table 1: Sad that I’ve to spoonfeed this much
Mutual Fund CPSE-ETF
Objective = invest clients’ money in Objective different than Mutual Fund
shares/bonds (1) help Government for its disinvestment
(2) help Government company to borrow money
(Bharat-Bond ETF)
fund managers may buy/sell variety of He’s not doing that. His objective given above.
shares and bonds of Government
companies and private sector companies
for best returns through out the scheme.
a fund manager may also change the His portfolio (list of govt companies’ shares/bonds)
composition of the portfolio for example if is fixed. It’ll not change.
Infosys shares are not performing well →
he may sell them and fill up the box with
Wipro shares for better dividend.
manager charges higher fees lower fees.
16.32 😴I NDEX-ETF: A TYPE OF PASSIVE FUND
They collect client money and invests in the companies in a proportion to the stock-exchange weight
assigned to those companies.
Fund Index-ETF Mutual Fund
Managed Passively. Manager will Actively. Manager will apply the brain before

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 Fund Index-ETF Mutual Fund
mechanically invest money into an investing clients money. e.g. a mutual fund
external indicator/index/asset manager will decide whether to invest in
without applying Brain. e.g. Index- Adani or reliance after checking their balance
ETF (see next section). sheet and future expected profits.
Fees charged
less more
by Manager
Liquidity higher/easier lower/slower
Can be resold Yes
difficult for close-ended MF with fixed
in secondary
maturity period e.g. 3 years.
market?

MCQ. Find wrong about Exchange Traded Fund (ETF) (CDS-2018-I)

(a) It is a marketable security. (b) It experiences price changes throughout the day.
(c) It typically has lower liquidity and higher fees than mutual fund shares.
(d) An ETF does not have its net asset value calculated once at the end of every

🚩👶🏻 FAQ explain me terms mentioned in all of the above options in above MCQ!? Ans. Poor cost-
benefit / self-study from google.

16.33 🌸🐂 B ITCOIN ETF APPROVED IN USA (2024)

• How does it work? Ans. Explained in video lecture. I am not typing the entire movie script
here, otherwise handout will become very long.
• 2024: USA’s share market regulator i.e. Securities and Exchange Commission (SEC)
approved Bitcoin ETF. (India has not yet approved.)

16.33.1 🌸🐂 Bitcoin ETF: Pros

• Bitcoin ETF provide no anonymity to investor = easier for the Government to demand tax
from his profits/income.

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 • Bitcoin-ETF helps bypassing the dangers/complexities of buying Bitcoin directly from
unknown websites/apps.
• Normal bitcoin wallet = If password is forgotten then difficult to recover.
• Whereas the Bitcoin-ETF = easier to retrieve lost passwords.
• They reduce volatility In prices. (because when mutual fund, insurance companies and other
institutional investors invest put money in it, they will not randomly run away for smallest
negative news. So the prices will remain stable.)

16.33.2 🌸🐂Bitcoin ETF: Cons

• investor will have to pay the fees to the stock exchange for every buying and selling.

🚩👶🏻 FAQ: (1) can we say Bitcoin-ETF is an example of passive funds? Ans. Yes but waste of time
preparing a Mendeleev’s periodic chemistry table ki kaunsa fund is example of active/passive.
🚩👶🏻 FAQ:(2) can we also say XYZ is also a pros/cons of Bitcoin-ETF? Ans. AskChatGPT, my
syllabus-finisher-bus can’t wait for you. थोड़ा-पढ़ो-आगे-बढ़ो.
16.33.3 🇺🇸✋ Overseas ETF: temp-ban on Indian MF by SEBI (2024)

• Unrestricted outflow of money from Indian economy can cause crisis in ₹-$ currency
exchange. So RBI has legal powers to impose restrictions under FEMA Act (Foreign
Exchange Management Act 1999)(Ref: Pillar#3)
• e.g. RBI ordered- Indian Mutual funds (MF) cannot invest more than $1 billion in overseas
exchange traded funds (ETF).

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 • 2024-Apr: Indian MF reached 95% of this quota/ceiling. So SEBI ordered MFs to temporary
stop accepting more money from investors.
16.33.4 🏅 Gold-ETF
• Investors give money → manager buys gold for safekeeping and trades it depending on
price movements → returns are divided among the unit-holders.
• In between, the investor may sell his Gold-ETF to third party via Stock Exchange therefore
they’re also Exchange Traded Funds.
• WATCH VIDEO FOR MORE. IF I GIVE charts for it, handout will become very long.
16.34 📦I NVESTMENT FUNDS → ALTERNATIVE INVESTMENT FUNDS (AIF)

It’s a technical classification by SEBI (वैकल्पिक निवेश कोष)

- AIF Category I: They generate positive spillover effects on the economy. Example: Venture
Capital Funds, Angel investors fund, SME Funds, social venture fund, Infrastructure funds. SEBI
keeps relaxed / lighter norms on them. जो कि अर्थतंत्र में सकारात्मक असर उत्पन्न करते हैं
- AIF Category II: Neither in Cat-1 nor in Cat-3 E.g. Private Equity or Debt Fund. जो ना तो ऊपर की
श्रेणी में है ना नीचे की श्रेणी में है
- AIF Category III: They undertake excessive risk to generate high returns in short period of time.
E.g. Hedge Funds, PIPE Funds. SEBI norms are stricter/heavier on them, because otherwise they
may destabilize the capital market. जो कि अर्थतंत्र में जोखिम बढ़ाते हैं, नकारात्मक असर उत्पन्न करते हैं
16.34.1 ( 🦁📦 🏗🏠
):( ) Govt’s AIF for Real Estate Sector (2019)

🗃⏱F
Outdated for 2024-25 so deleting.
16.35 ORWARD / FUTURE CONTRACTS & CALL / PUT OPTION

Figure 8: भविष्य मे खरीदने का सोदा तो किया, लेकिन दाम गिर जाए, तो खुद को बचाऊँ तो कै से?
- A Forward / Future contract is a customized contract between two parties where settlement takes
on a future date at a price/quantity agreed upon today. E.g. on 1/5/2025 I shall sell you 100 nos. of
Infosys shares at ₹1000 each.
- In such contracts, there is a risk of other party not honoring commitment if he’s getting better
deal elsewhere in the future. So, for protecting (=hedging) themselves, they (=buyer or seller)
may buy “Option” from a third party by paying fees. नुकसानी से बचने के लिए बीमा लिया जाए
- Option is a type of insurance for executing the forward/future contract in a manner beneficial to

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 them e.g. I’ll sell you for ₹1000 on X date, & you must buy, but if I’m getting another buyer who
is willing to pay ₹1500 then I may not sell you & you can’t compel me. Such ‘insurance options’
are further subdivided into Call Option and Put Option, their internal difference & real-life
mechanism not imp. for UPSC. (Still if u want to learn more, watch my Youtube Video:
https://youtu.be/-2XHMvCiyQo?si=_aBi1-c6pGNxB4rl)
- Hedging = Act of purchasing such options/insurance to prevent your losses.
🔠❓Which one of the following terms is used in Economics to denote a technique for avoiding a
risk by making a counteracting transaction? [UPSC-CDS-2016-I]
(a) Dumping (b) Hedging (c) Discounting (d) Deflating
16.36 🌱🌴✋ O VER-FINANCIALISATION & SACHETISATION

9 out of 10 investors loose money in this future-option (F&O) market- says SEBI.
16.36.1 🌱🌴✋ Sachetisation of F&O Market not good - says 📕ES24:

Sachetisation refers to the process of making products available in smaller/ more affordable packets
so even poor people can buy it. (सेचेटीकरण = किसी उत्पाद को छोटे पैके ट में उपलब्ध कराना, ताकि ग़रीब भी ख़रीद सके ।)
Product minimum size to buy satchetization happened?
clinic plus shampoo ₹1 sachet Yes, poor can afford to buy.
Mutual Fund ₹100 Yes
No. SEBI doesn’t want poors to
Hedge Fund ₹1 cr loose money in high risk. That’s
why higher requirement.

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 Discount-Brokers (e.g. Zerodha)
allow poors to open account even
Future Option (FnO) Market Yes.
if they’ve annual income of barely
₹1.20 lakhs.
📕ES24: There is a need to reconsider/reduce the sachetisation of F&O trade. Because
• Huge losses can occur in minutes if market predictions fail.
• SEBI reports 9 out of 10 F&O traders lose money. Yet Poor people are participating without
understanding. They just gamble based on random tips from online finfluencers.
• Want2Phd? https://youtu.be/-2XHMvCiyQo?si=_aBi1-c6pGNxB4rl
16.36.2 Sectors of economy: real sector vs financial sector

🔠 MCQ. Which are real sector in the economy ? (Pre’2022)

(1) Farmers harvesting their crops (2) Textile mills converting raw cotton into fabrics
(3) A commercial bank lending money to a trading company
(4) A corporate body issuing Rupee Denominated Bonds overseas
Codes: (a) 1 and 2 only (b) 2, 3 and 4 only (c) 1, 3 and 4 only (d) 1, 2, 3 and 4
16.36.3 🎈🎈 Over-financialization / Excess market capitalisation is dangerous says 📕ES24:

• It refers to a situation where the financial sector (banks, stock markets, financial services,
etc.) becomes disproportionately large relative to the real economy (=GDP = production of
goods and services).

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 • India’s market capitalisation (as a % of GDP) far higher than that of other emerging market
economies like China and Brazil.
Financial Year 2018–19 2024-Mar 2024-May
India’s Market Capitalisation 140% of GDP
77% 124%
to GDP Ratio (%) ₹415 lakh crore ($5 trillion dollars).
This is not necessarily a sign of economic advancement or sophistication.
• These Financial assets (shares/bonds/bankers’ loans) are ultimately claims on real goods and
services in one way or another.
• So, if financial-sectors’ claims on the real sectors’ are excessively high, it is a harbinger of
market instability rather than market resilience.
• It can create following problems:
• massive economic crisis e.g. Asian crisis of 1997–98, Subprime crisis of 2007–08 → Reduced
capacity for sustainable long-term growth.
• increased inequality bcoz sharemarket players will make unreasonably high amount of
money than normal people in normal jobs.
• Excessive financial speculation (e.g. future options trading where 9 out 10 ppl loose money.)
16.37 🗃🔗D ERIVATIVES & SWAPS (व्युत्पन्न प्रतिभूतियां और अदला-बदली)
 A derivative is a contract whose value is derived from the value of another underlying asset
which could be a share, bond, commodity or currency. इस प्रतिभूति का मूल्य किसी और सं पत्ति से उद्भवित होकर
आता है
 They’re usually generated by the process of ‘securitization’. E.g. NHB taking loan papers from
banks, using them to generate new Mortgage Backed Securities. (प्रतिभूतिकरण की प्रक्रिया से इसे बनाते हैं)
 SWAP: is derivative instrument to swap one financial asset with another financial asset (usually)
to reduce the risk e.g. Currency Swap Agreement between two countries to protect themselves
📑
against dollar volatility (more in Pillar#3).
 Similarly, there are Credit Default Swap (CDS) agreement against the risk of default, Interest
swap agreement to protect against volatility in interest rates. But their mechanisms NOT IMP.

16.37.1 🗃🔗 🚛🤝🚚
: Bilateral Netting of Qualified Financial Contracts Act 2020
DELETED from handout because outdated/faded topic.

16.38 👻🔗📦 P ARTICIPATORY NOTES (P-NOTES: पार्टिसिपेटरी नोट्स)

 A foreigner wishes to invest his money in India but does not want to go through the hassles of
registering with SEBI, getting PAN card number, opening a DEMAT account etc. So, he will
approach a SEBI registered foreign institutional investor (FII) / foreign portfolio investor (FPI)
such as Morgan Stanley, Citigroup or Goldman Sachs. He’ll pay them & instruct them to
purchase particular shares and bonds and store them in their Demat account.
 Then FII will give him P-Notes, and he’ll receive interest and dividend accordingly.
 He may also sell those P-notes to a third party. (किसी अन्य व्यक्ति को भी बेच सकता है)

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 P-Notes are Offshore Derivative Instruments that derive the value from the underlying Indian
shares and bonds. (अपतटीय व्युत्पन्न उपकरण)

बिना SEBI पंजीकरण के भारतीय पूं जी बाजार मे निवेश करू, तो कै से?

😱P-Notes are harmful for Indian economy because:
 P-note investors are not directly registered with SEBI. Identity of the actual investor, source of
funds remain disguised= chances of Tax evasion, money laundering, terror finance (इसके निवेशक ने
स्वयं सेबी में पं जीकरण नहीं करवाया वह पैसा किधर से लेकर आया यह सब जानकारी नहीं मिल पाती, कर चोरी, काले धन को वैध
बनाना,आतंकी वित्तपोषण)
 If P-Note owner sells his P-Notes to another foreign investor, Government of India may be
deprived of taxes. (Compared to a scenario where Indian share owner is selling his shares to
another Indian investor at profit, then government gets securities transaction tax and capital
gains tax on his profit, & he can’t dodge it because DEMAT accounts linked with PAN card.
More on PAN card@Pillar#2 → BlackMoney)
Therefore, SEBI tightening the control P-Notes e.g. “X” category of FPIs can’t issue P-Notes. “Y”
category of FPI can issue P-Notes but they’ll have to deposit $1,000 to SEBI etc.
Table 2: Sad that even for such simple things I’ve to create such spoonfeeding-tables just to prevent FAQs from weak students
P-Notes Foreign investor wants to invest in Indian share/bond market without
registering with SEBI. He wants to buy Indian companies’ shares/bonds in
India. फिरंगी आदमी भारत की कं पनी में निवेश करना चाहता है लेकिन सेबी से पंजीकरण नहीं
करवाना चाहता
Bharat-DR Foreign Company wants to Indian to invest in its foreign/firangi-shares,
without registering with SEBI. फिरंगी कं पनी अपनी कं पनी के शेयर्स भारतीयों को बेचना
चाहती है लेकिन सेबी से पंजीकरण नहीं करवाना चाहती

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 ADR/GDR Non-American Company wants to American people to invest in its shares
without registering with American SEBI. गैर-अमेरिकी कं पनी अपनी कं पनी के शेयर
अमरीकी जनता को बेचना चाहती है लेकिन अमेरिका के शेयरबाजार नियं त्रक से पंजीकरण नहीं
करवाना चाहती.
GDR- similar concept, refer to respective segment.
Masala/Panda/ Foreign company/org wants to borrow money, in a particular currency from
Kangaroo Bonds a particular country. Refer to respective segment
etc
🔠❓______ is issued by registered foreign portfolio investors to overseas investors who want to be
part of the Indian stock market without registering themselves directly? (Pre-2019)
(a) Certificate of Deposit (b) Commercial Paper (c) Promissory Note (d) Participatory Note

16.38.1 🔪(👨‍💼🏦) Credit Default Swap (CDS)

 CDS is an instrument to protect the lender/bond investors from the loan default by the borrower
 PS: LIC is not 'insurer' in this case. I’ve used its logo only for easier visualisation.
 Topic was in news, due to some scam involving a Swiss Bank “Credit Suisse”
16.38.2 Currency Swap
e.g. Central Bank of Japan and Indian RBI signed agreement to help each other upto $75 billion in
dollar currency, during currency-exchange/balance of payment related crisis (Ref: Pillar#3 for more.)

🔠 MCQ. Which of these are financial instruments?(Pre'24-Set-C-Q54)

1. Exchange-Traded Funds (ETF) 2. Motor vehicles 3. Currency swap
Codes: (a) 1 only (b) 2 and 3 only (c) 1, 2 and 3 (d) 1 and 3 only

16.39 🍋T AX ON INVESTMENT / FINANCIAL ASSETS

 Normally, whenever we make investment, it is subjected to variety of taxes such as income tax,
capital gains tax, securities transaction tax, commodities transaction tax, stamp duty etc.
depending on the type of investment/transaction. (Ref: Pillar#2A-Taxation for more)
 However, in following investments, government provide some relief in the taxes. How
much/when? NOTIMP.
Rajiv Gandhi Equity Savings Scheme= Govt gives income tax benefit to
RGESS
people who invest in the share market for the first time. Discontinued by
Started in 2012
Budget-2017 (मध्यमवर्ग का नया निवेशक पहली बार शेयर बाजार में निवेश करें तो आयकर में राहत)

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16.39.1 🍋😍 Tax relief given on (निम्न चीजो पे टैक्स में रियायत/छू ट दी जाती है)
CATEGORY Examples

Bank FD (sp.type) - - 5-Year Tax Saving Fixed Deposit (FD) with Banks

- Public Provident Fund (PPF)

- Employee Provident Fund (EPF)
Small Savings /
- Sukanya Samriddhi Yojana (SSY)- Fixed bank deposit in the name of
social security
daughter
More in Pillar1D
- National Savings Certificate (NSC)
- Senior Citizen Savings Scheme (SCSS)

Pension/Insurance Unit Linked Insurance Plans (ULIPs),

Pillar1D - National Pension System (NPS), EPFO
Share market Equity-Linked Savings Scheme (ELSS)
Tax-Free bonds by some (NOT ALL, only Some) of the Govt
companies/statutory bodies such as
- National Highways Authority of India (NHAI),
Bonds - Indian Railway Finance Corp (IRFC),
- Power Finance Corporation (PFC),
- Housing and Urban Development Corporation (HUDCO),
- India Infrastructure Finance Company Limited (IIFCL) etc.
Election donation, PM-CARES fund (ref Pillar2), Army Welfare Fund,
Donations
Zero Coupon Zero Principal (ZCZP) Bonds etc.
Location based Investments made from GIFT City (Gujarat). (Ref: Pillar#3A: Intl. Trade)
Above list is NOT exhaustive/complete. There could be some more tax-free instruments also. But we
are not here for Chartered Accountant exam.

16.39.2 🍋🥵 Tax relief NOT given on

Now, if the name of an instrument is not mentioned in above list → then good chance, it is
subjected to some tax for example
 Bank Savings Account pe interest income.
 Sovereign Green Bond (Yes government has NOT given any tax benefit on it, YET)
 Municipal Bonds, G-Sec, T-Bill;
 Shares, Company Bonds; Futures, Options, P-Notes
 Mutual Fund, REITS, InVITS, ETF.; Bitcoins and Cryptocurrency (30% Tax)
 Property, Mona-Lisa Painting, Gold-Silver etc precious metals, Diamonds, Racehorses etc.

🔠❓MCQ. [CSP23-SET-A-Q021] Consider the following statements :

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- Statement-I : Interest income from the deposits in Infrastructure Investment Trusts (InvITs)
distributed to their investors is exempted from tax, but the dividend is taxable.
- Statement-II : InvITs are recognized as borrowers under the 'Securitization and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002'.
(a) Both I & II are correct & II is the correct explanation for I
(b) Both I & II are correct & II is not the correct explanation for I
(c) I is correct but II is wrong (d) I is wrong but II is correct
🔠❓MCQ. Find correct about “Inflation-Indexed Bonds (IIBs)” in India (Prelims-2022)
1. Government can reduce the coupon rates on its borrowing by way of IIBs.
2. IIBs provide protection to the investors from uncertainty regarding inflation.
3. The interest received as well as capital gains on IIBs are not taxable.
Codes: (a) 1 and 2 only (b) 2 and 3 only (c) 1 and 3 only (d) 1, 2 and 3
16.40 🌽🧶🏦🤝 C OMMODITY MARKET, FMC, SEBI MERGER
- A commodity market / exchange (वस्तु बाजार) is a place where buyers & sellers trade goods in bulk
- food grains, cotton, precious metals or energy resources (coal, oil gas)
- “Commodity Futures”: Type of contract for future delivery and settlement of commodity e.g.
“on 1/5/2021, I shall deliver you 500 quintals of wheat at X price”.
- Commodity exchanges were under a statutory regulator Forward Market Commission (FMC)
under the Ministry of Consumer Affairs and Public Distribution.
- But Jignesh Shah generated fake receipts without any commodities in the warehouses & traded at
NSEL-commodity exchange. FMC failed to prevent scam. (एक कांड हो गया था)
- So first FMC transferred to Finance Ministry and FMC ultimately merged with SEBI (2015).
16.40.1 💍🎖🏦🤝 Commodity Market: Gold exchanges & Budget-2021 💼
 Gold exchange is a special type of commodity market devoted only to Gold trading.
 💼Budget-2021: We will undertake reforms in the regulation of gold exchange markets in India.
1) SEBI will be the regulator
 2) Warehousing Development and Regulatory Authority (WDRA- Statutory body under Dept of
Food and Public Distribution) Will be responsible for Warehousing/Vaulting, Assaying,
Logistics of gold exchanges. (भं डारण, गुणवत्ता परीक्षण, रसद के मामलों की जिम्मेदारी)

16.40.2 💍🎖🏦🤝 Commodity Market: Electronic Gold Receipts (EGRs)

स्वर्ण कं पनियां “डब्लूडीआरए” नाम की वैधानिक सं स्था द्वारा पंजीकृ त गोदामों में सोने की ईट/बिस्किट जमा करेंगे, उसकी “इलेक्ट्रॉनिक
स्वर्ण रसीदें” सेबी द्वारा पंजीकृ त इलेक्ट्रॉनिक गोल्ड एक्सचेंज पर बेची जाएगी। ग्राहक/निवेशक ऑनलाइन तरीके से उसे खरीद पाएगा
- Stage1: Gold companies deposit their gold in the warehouses authorized by Warehousing
Development and Regulatory Authority (WDRA, it is a statutory body under Ministry of
Consumer Affairs, Food & Public Distribution.)
- Stage2: Warehouse manager generates Electronic Gold Receipts (EGRs).
- Stage3: EGR are listed on the SEBI regulated electronic gold exchanges. → Buyer can buy the
gold electronically and be assured of the quality. Later he may even sell this EGR to another

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 investor or he may goto warehouse to collect physical gold.
🤩Benefits: 1) Assured quality. 2) Tax evasion is difficult due to online transactions monitored by
SEBI. इसे ग्राहक को स्वर्ण की गुणवत्ता के बारे में सुनिश्चित होगी। कर चोरी मुश्किल होगी क्योंकि ऑनलाइन खातों की निगरानी होगी.

16.40.3 💍🎖🏦🤝Commodity Market: India’s first bullion exchange (2022)

India International Bullion Exchange (IIBX) is India’s first bullion exchange @ GIFT City, Gujarat.
 Bullion refers to physical gold and silver of high purity stored as coins, biscuits or bricks (ingots).
 A bullion market/exchange is a place where large quantity of gold and silver is traded for 24/7
basis. (बुलियन मार्के ट ऐसा स्थान है जहां बड़ी मात्रा में सोने और चांदी का दिनरात अविरल कारोबार होता है।)
16.41 🕵🏻‍♀️ FSDC: F INANCIAL STABILITY & DEVELOPMENT COUNCIL (2010)

Figure 9: अभी भी इतने सारे "कांड" क्यो हो रहे है, गवर्नर साहब?- वित्तमं त्री @FSDC meeting.
 Functions? Supervision of the economy & large financial conglomerates, coordination among
the financial regulators, financial literacy and financial inclusion. (वित्तीय स्थिरता और विकास परिषद)
 Chairman – Finance Minister. Other members : Minister of State (Finance),
 heads of all other financial sector regulatory bodies (e.g., RBI, SEBI, IRDAI, PFRDA
and IFSCA-ref Pill3 gift city),
 Secretaries (IAS) of the departments of (i) Economic Affairs, (ii) Expenditure, (iii)
Financial Services, (iv) Revenue, (v) Ministry of Corporate Affairs and (v) Ministry
of Electronics and Information Technology
 Chief Economic Adviser (CEA)
 Secretariat assistance by: FinMin → Dept. of Economic Affairs (आर्थिक मामलों का विभाग)
🔠❓ 'Financial Stability and Development Council': find correct statement(s): (Pre-2016)
1. It is an organ of NITI Aayog.
2. It is headed by the Union Finance Minister
3. It monitors macro-prudential supervision of the economy.
Answer Codes: (a) 1 and 2 only (b) 3 only (c) 2 and 3 only (d) 1, 2 and 3
16.42 🕵🏻‍♀️B ODIES WITH SIMILAR SOUNDING NAMES: FSB, FATF

FSB - Financial Stability Board is a brainchild of G20. (वित्तीय स्थिरता बोर्ड)

(2009) - Functions? Financial monitoring at global level, Coordination between national
HQ: financial regulators bodies. (अलग-अलग देशों के वित्तीय नियं त्रक के बीच तालमेल)
BASEL
- India has 3 seats in FSB: 1) Secretary of Department of Economic Affairs (IAS) 2)
Dy. Governor of RBI 3) SEBI chairman

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 FATF - Financial Action Task Force (वित्तीय कार्रवाई कार्यदल) is a brainchild of G7.
(1989) - India member in 2010. Function? Combating Money laundering and terror
HQ: Paris
finance. (More 📑Pill#2) (धन शोधन और आतंकी वित्तपोषण से लड़ना)
- International Organization of Securities Commissions (IOSCO) is the
IOSCO international body of world's securities regulators. SEBI is a member.
- Famous for its IOSCO Guidelines for Investors Protection & risk prevention
📊
16.42.1 Financial Sector Assessment Program (FSAP)by WB & IMF
• is the quinquennial (5–5 years) survey jointly conducted by the IMF and the World Bank.
• 2011–12: first FSAP survey for India conducted.
• This survey covers following areas: (i)Basel-III reforms, (ii) Compensation, (iii) Over-the-
Counter (OTC) derivatives, (iv)Resolution, and (v) Non-Banking Financial Intermediation
📕
(NBFI). [Note: This is given in ES24 so i pasted, else i don't waste pages like this.]

16.42.2 🏫👩🏻‍🏫NISM- capacity building for financial market professionals - 👛Budget-2023

 National Institute of Securities Markets (NISM) is an educational institute set up by SEBI. HQ:
Mumbai, Foundation Year-2006
 👛Budget-2023: NISM to conduct more training courses for financial Market
 NISM will give them degrees, diplomas and certificates for finishing such courses
16.43 PILLAR 1C3: CORPORATE GOVERNANCE
16.44 🏙🤵 COMPANY TYPES
👶Company types based on incorporation
16.44.1
🤴Chartered Setup by a charter given by a king / queen. E.g. East India Company in
Companies 1600. (चार्टर्ड कं पनिया)

⚖️Statutory Setup by special acts of Parliament or State legislature. E.g. RBI, LIC,
Companies SBI. (वैधानिक कं पनिया)

✒️Registered Registered under the Companies Act, 1956 (and later 2013)
Companies e.g. Tata Motors, Infosys. (पंजीकृ त कं पनिया)

16.44.2 🏙🤵 Company types based on number of members

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 Private ltd. Public Limited Company (Companies Act 2013)
Members Min. 2 to Min. 7 to Max. unlimited number (depending on how many
Max. 200 shares issued & purchased by the people)
can they Can’t  A public ltd. company can invite public at large, to subscribe
invite public to its shares and bonds.
at large, to  If their shares are listed on a stock exchange (BSE, NSE etc),
buy shares
it’s a ‘Listed Public Limited Company’ (e.g. Reliance), else
/bonds?
it’s an ‘Unlisted Public Limited Company’ (e.g. India Post
क्या सामान्य जनता
को विज्ञापन देकर Payment Bank : IPPB)
अपने शेयर-बांड
बेच सकते है?
Directors 2-15  Min 3 to Max 15. out of them one must be Indian Resident,
(Min-Max) 1 must be Woman and 1/3rd of the directors must be
independent directors.
 Independent directors are persons without any pecuniary
interest in company, they are supposed to protect minority
shareholders’ interests. (अल्पसं ख्यक शेयरधारकों के हितों की रक्षा करने
के लिए स्वतंत्र डायरेक्टर)
Term limit N/A Their directors have age limit, term limit.
Corporate Norms Companies Act requires them
Governance either not  to hold specific number of annual meetings of board of
Norms applicable directors, norms for quorum, mechanism for e-voting,
or relaxed.  have to appoint Company Secretary,
UPSC-  Implement mechanism for protecting whistleblowers
CSE≠CA And so on…

FAQ: How can pvt limited company have shareholding?

 Ans. They can ask friends and family, venture capital funds, angel investors and other type of
investors to invest in the company. They cannot put an advertisement in the newspaper that we
are inviting the public at large to buy our shares. IF they want to invite public at large, → they
need to convert registration from private limited company to public limited company.
 Companies usually start as originally as private limited companies. e.g. Infosys (private ltd) in
early 80s → when their business grows and they want more capital they will convert into public
limited companies. → they will issue shares for the first time for the public at large → so we
call it Initial Public Offer (IPO) e.g. same infosys (public ltd) in early 90s launched IPO..
 In future same public ltd. company may also require more capital so again they will issue more
shares for the the second time, third time etc. → then we call it Follow on Public Offer (FPO)

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16.44.3 🏙🤵 Company types based on Ownership
🧔 Government / Public Sector / सार्वजनिक क्षेत्र 🤵 Private Sector / निजी क्षेत्र की
When Government owns 51%/> shares. When private parties own 51%>. E.g. Reliance,
Examples: Steel Authority of India (SAIL), Tata, Adani
India Post Payment Bank (IPPB)
Holding Company / नियंत्रक कं पनी Subsidiary Company / नियंत्रित कं पनी
A company that owns majority shares in A company that is controlled by a parent
another company. E.g. Tata Sons ltd. holds holding company. E.g TCS, Tata Steel, Tata
majority shares of Tata Consultancy Services Sky are subsidiary co of Tata Sons.
(TSC), Tata Steel, Tata Sky etc.

16.44.4 🏙🤵Company Types: Misc.

Under  One Person Company: special type of private ltd company having only
Companies Act 💼
one member. Budget-2021: One Person Companies (OPCs)- Legal
reforms in Companies Act to [1) allow NRIs to easily register OPC in
India [2) OPC can be converted to other types of companies any time
 Not for Profit Company: e.g. GSTN, NPCi etc. their profit is re-invested
in business expansion. They get certain tax benefits & relief in how
frequently they’ve to submit data to MCA. (लाभ-रहित कं पनी, जो कं पनी मुनाफे के
लिए नहीं बनाई गई)
 Dormant Companies: A) setup to start business in future B) setup to store
intellectual property C) not filled annual returns for two consecutive
years. (निष्क्रिय/सुप्त कं पनी)
👬🤝Under  Limited Liability Partnership (LLP) Company is formed by minimum 2 or

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 LLP Act 2008 more partners.
सीमित देयता  Individual partners are shielded from joint liability created by another
भागीदारी अधिनियम partner's wrongful business decisions or misconduct. E.g. Vajiram and
Ravi IAS Study Centre LLP
 LLP’s registration fees, auditing/reporting norms, tax liabilities, winding
up process etc. are more flexible than a (public or pvt) ltd. company
registered under Companies Act. उनके लिए नियमो में रियायत/आसानी होती है।
Under Indian  A Partnership firm is formed by minimum 2 or more partners.
Partnership  Each partner is liable jointly with all the other partners for losses,
Act 1932 wrongful biz. decisions and misconduct.
16.44.5 🏙🤵 Corporate Governance → Small Companies given compliance relief
 💼Budget-2021: Companies with paid up capital not more than ₹2cr & annual turnover not
more than ₹20cr = treated as ‘Small Companies’.
 They’ll be given relief in Companies Act related compliance e.g. how frequently they’ve to submit
accounts and ownership related documents to the Ministry of Corporate Affairs etc.
16.44.6 🏙🤵 Commercial Organizations: Other Types
PSU, CPSE Ref: Pillar2: Disinvestment
MSME Ref: Pillar1D: financial inclusion, Pillar4B
Startups Ref: Pillar4B
16.44.7 👬🤝🧔 Corporate Governance → LLP settlement Scheme 2020
Faded topic. Deleting from handout
16.45 🔨S TATUTORY BODIES IN MINISTRY OF CORPORATE AFFAIRS (MCA)
16.45.1 🔨 👨⚖️
‍ Competition Commission of India (भारतीय प्रतिस्पर्धा आयोग)
 Competition among companies= consumer gets goods and services at the most competitive /
affordable prices. कं पनियों के बीच स्पर्धा होगी तभी तो ग्राहक को अच्छी सेवा और किफायती दाम में चीजे मिलेंगीं
 Therefore, government must prevent cartelization (price fixing or production fixing by a group
of Companies), prevent monopoly (single company commanding the production / supply),
protect consumers’ interests and ensure freedom of trade.
 1970: Monopolies and Restrictive Trade Practices (MRTP) Act.
 Later MRTP Act replaced with Competition Act, 2002- which has a statutory regulator
Competition Commission of India (CCI: 1 Chairman + 6 Members)
 In past, CCI has imposed penalties on cement companies, real estate companies. It is also
investigating Airtel, and other telecom companies for alleged cartelization.
 Competition (Amendment) Bill, 2022 to increase CCI’s powers further. But mostly technical so
I’m avoiding it for Poor cost:benefit.
 Appeals against CCI are heard by National Company Law Appellate Tribunal (NCLAT)
16.45.2 Google pe Penalty by CCI
Refer to Pillar4B: service sector.
16.45.3 🔨 👨⚖️ ‍ Insolvency and Bankruptcy Board of India (IBBI)
This too is a statutory body under the Ministry of Corporate Affairs (MCA). Read Pillar#1B-2: NPA

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 Table 3: Bodies under Companies Act 2013
Features National Company National Financial Investor Serious Fraud
Law Tribunal Reporting Education & Investigation
(NCLT) Authority (NFRA) Protection Fund Office (SFIO)

राष्ट्रीय कम्पनी विधि राष्ट्रीय वित्तीय प्रतिवेदन निवेशक एवं शिक्षा रक्षण गंभीर धोखाधडी अन्वेषण
अधिकरण प्राधिकरण कोष कार्यालय
Members Judicial + technical. Chairman + Boss: Corp. Affairs Civil servants &
They’ve benches members Secretary (IAS). financial experts
@Delhi, Kolkata, Plus, members
Jaipur etc. from RBI, SEBI,
financial experts
Appeal NCLAT (Appellate NFRAA (Appellate Regular Courts Regular Courts
tribunal) Authority)
Cases Hear the cases Sets standards for They use Investigate white-
related to Companies Auditors & (CA), in unclaimed money collar (financial)
Act, Board room listed companies from shares/bonds frauds. Powers to
battles, Merger- and large unlisted for financial search, seize,
Acquisition, companies. If literacy and arrest.
Corporate malpractices-> awareness Once SFIO gets
Insolvency & investigate and case, other
Bankruptcy (I&B) debar them, Powers agencies (like CBI)
of civil court. can’t proceed.

16.45.4 Unclaimed shares and dividends of IEPF & 👛Budget-2023

Figure 10: Image source: Agnipath (2012)

Investor Education & Protection Fund Authority (IEPF) is a statutory body in Companies Act, 2013.
 Secretary (IAS) of Ministry of Corporate Affairs is the ex-officio chairman of this IEPF body.
 IEPF looks after the unclaimed shares, bonds, dividends, interest etc.
 IEPF uses such money for investor awareness.
 👛Budget-2023: if a person wants to ‘reclaim’ the unclaimed shares and unpaid dividends from
IEPF → we’ll setup an IT portal to help him file such application.
16.45.5 🔨👨⚖️
‍ Ministry of Corporate Affairs also associated with:
Chartered Accountants Regulates the CA profession through a
Act 1949 Statutory body: Institute of Chartered Accountants of India (ICAI).
ICAI also has IPA status under I&B Code.

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 Company Secretaries Act, Statutory Body: Institute of Company Secretaries of India (ICSI).
1980 Also has IPA status. REF (More in Pillar#1B2) 📑
Cost and Works Statutory Body: Institute of Cost Accountants of India (ICAI). Also
Accountants Act, 1959 has IPA status. What does it mean? REF (More in Pillar#1B2) 📑
Legislative  1860: Societies Registration Act- for registration of literary,
Responsibilities of MCA scientific and charitable societies. E.g. Sahitya Akademi,
National School of Drama etc. जो मुनाफे के लिए नहीं लेकिन कला साहित्य
विज्ञान के प्रसार के लिए बने
 1932: Partnership Act
 Companies Act 1956 → 2013.
 2008: Limited Liability Partnership Act
E-governance initiatives  INC-29 online form to registration of new company. Later it
of MCA was replaced with Simplified Proforma for Incorporating
Companies (SPICe) online form.
 MCA-21 portal, where companies can file online documents
related to Companies Act compliance. MCA21 Version 3.0=
this latest Version 3.0 portal will have additional modules for e-
scrutiny, e-Adjudication, e-Consultation and Compliance
Management.
Officers Indian Corporate Law service (ICLS) via UPSC CSE-exam

16.45.6 Companies Act: EoD- Central Data Processing Centre in Budget-2023 👛

 In the past, Ministry of corporate affairs had launched many E-governance initiatives that helps
the company to register and upload documents. Example MCA21, SPICe, SPICe+ etc. How do
they work? What exactly do they do? NOT.IMP
 👛Budget-2023: well - setup Central Data Processing Centre for faster processing of various
forms filled by Companies under the Companies Act. How Exactly? Not.IMP
 🤩Benefit? Ease of doing business for the companies.
16.45.7 🤼‍♀️👬 Corporate Governance (कॉर्पोरेट शासन)

Figure 11: तुम मेरे पापा के दोस्त हो? - Cyrus Mistry

Shifted to Mains-QEP. Basically deals with how to ensure that company is run without any
scams/scandals.
 Companies Act has various provisions for it. E.g.
 Term limits on board of directors,
 provision for independent directors to protect minority shareholders,
 Reservation for women directors.
 How many companies can one Chartered Accountant audit?
 Protection for whistleblower, company secretary etc.

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 SEBI can also issue some directives. E.g. splitting CMD post.
 Notable committee for improving corporate governance in India: Uday Kotak (2017).
What does above things mean? Ans. shifted to Mains Handout.
16.45.8 ( 💰 🏥🚽 )CSR: Corporate Social Responsibility (कॉर्पोरेट सामाजिक जिम्मेदारी)
कं पनी ने अपने मुनाफे का कु छ हिस्सा समाज कल्याण में लगाना होगा
• Mandated under Companies Act 2013: Last 3 years' avg. profit → spend 2% of that on CSR
(education, environment, public health, sanitation, disaster management etc.)
• Applicable on both public ltd and private ltd. with very huge profit / turnover / networth
(what’s the difference between these terms, what’s the exact figure? Ans. NOTIMP.)
• Ministry of Corporate Affairs (MCA) gives National CSR Awards to companies.
🔠 MCQ. Find correct about CSR :(Pre'24-Set-C-Q60)
1. CSR rules specify that expenditures that benefit the company directly or its employees will not be
considered as CSR activities.
2. CSR rules do not specify minimum spending on CSR activities.
Codes: (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2
16.45.9 👬 NSE Prime regulation for corporate governance (2022)
- National Stock Exchange has developed this voluntary framework.
- It has a set of higher standards of corporate gov. for Companies listed on NSE stock exchange.
MCQ: ‘NSE Prime', sometimes mentioned in news, denotes: (UPSC-EPFO-2023)
(a) A high standard corporate governance initiative (b) Long-duration Sovereign Green Bonds
(c) Concessions and tax-holidays for hi-tech startup companies
(d) Special privileges for certain categories of Non-Banking Financial Institutions
16.46 👊🐤 T AKEOVER RELATED TERMS
- Sometimes in news because of the Elon musk purchase of Twitter (“X”). - We will not DO to the
actual B.Com/MBA aspect of it. - We will get a very vague only, with some examples.
Friendly Takeover Hostile Takeover
When board of director approve where a person takes control of another company (the target
selling the company to another company) without the consent of the target company’s
company. board of directors.
e.g. Ranbaxy sold to Sunpharma e.g. How Elon Musk acquired Twitter (“X”)

16.46.1 👊🐤 Leverage Buy-Out (LBO)

- e.g. Elon Musk borrows money to takeover/acquire majority shareholding in Twitter (“X”).
- Note: in real life, it is more complex, but we will not prepare MBA/B.Com here.
16.46.2 👊🐤🐍 Poison Pill against Takeover by Twitter
- it is a strategy adopted by a Company (Twitter) to defend itself against hostile takeover (By Elon
Musk). Generally involves giving extra shares to existing shareholder to make % shareholding
composition unfavorable to new buyer who is trying to take over (Musk). HOW?NOTIMP

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16.46.3 🤞 De-Merger When a company subdivided into multiple companies.
BEFORE AFTER De-merger
1) ITC (Hotel, Cigarettes, FMCG^^) 1) ITC ( Cigarettes, FMCG) 2) ITC (Hotel)
1) TATA Motors planning to divide into (1) truck (2) cars & EV
^^ FMCG = Fast Moving Consumer Goods e.g. soap, shampoo, toothpaste, potato-chips etc.
16.46.4 ✍️🎷 Mock Questions for Mains
Mostly around measures for deepening the capital market, corporate governance, sovereign gold
bond etc instruments, investor’s charter etc. This handout deals with ONLY Prelims #RAFTAAR.

📑Next Handout: 1D: Insurance, Pension, Financial Inclusion

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