Credit Default Swap (CDS)

Credit default swaps (CDS) are the most widely used type of credit derivative and a powerful force in the
world markets. The first CDS contract was introduced by JP Morgan in 1997 and by mid-2007; the value
of the market had ballooned to an estimated $45 trillion, according to the International Swaps and
Derivatives Association - over twice the size of the U.S. stock market.

A specific kind of counterparty agreement which allows the transfer of third party credit risk from one
party to the other. One party in the swap is a lender and faces credit risk from a third party, and the
counterparty in the credit default swap agrees to insure this risk in exchange of regular periodic
payments (essentially an insurance premium). If the third party defaults, the party providing insurance
will have to purchase from the insured party the defaulted asset. In turn, the insurer pays the insured
the remaining interest on the debt, as well as the principal.

Corporate Defaulting

Corporate defaulting is when a company defaults in any of its payment obligation.

Hedge Funds

Hedge funds are which take short positions and long positions simultaneously. Long position is when
you purchase stocks in anticipation of stocks going up and short when one sells stocks in anticipation
that they will go down. They in this process hedge their position and minimize their losses. They also
deal in derivatives and variety of investment alternatives like stocks/Commodities/debts etc.

What is ASBA:

ASBA means "Application Supported by Blocked Amount", enables investors to apply

for IPOs / FPOs and rights issues without making a payment. Instead, the amount is
blocked in investors ‟own account and only an amount proportionate to the shares
allotted goes out when allotment is finalized.
It is a supplementary process of applying in initial public offers (IPO), right issues and
follow on public offers (FPO) made through book building route and co-exists with the
current process of using cheque as a mode of payment and submitting applications.
Bank is providing this value added service free of costs for issues with book building at
BSE.

Eligibility of Investors:-

From 01st January, 2010

All category of investors other than QIBs are eligible to apply for public/rights issues
using ASBA facility with certain terms and conditions 

　
1. An application can have up to three bid options & it can be revised also.

The lien will be marked on the highest value of the three bids.

2. Bids at cut-off price allowed only if total application Amt is less than or equal to Rs.
1,00,000 for investor category of Individual, Employee, Share holders,

3. One account can be blocked for maximum five applications in an IPO.

4. Revision and cancellation of bids for retail individual investors are permitted till the
issue closure date and time. However for investors other than Retail, the revision is not
permitted on the last day beyond 4 P.M.

Over-The-Counter Exchange Of India 

An electronic stock exchange based in India that is comprised of small- and medium-sized firms
looking to gain access to the capital markets.There is no central place of exchange and all trading
is done through electronic networks. Over The Counter Exchange of India

The OTC Exchange of India (OTCEI) incorporated under the provisions of the Companies Act
1956, is a public limited company. It allows listing of small and medium sized companies. The
minimum issued share capital required of a company that wants to be listed on OTCEI is Rs.3
million and the maximum Rs.250 million.

Companies engaged in investment, leasing, finance, hire purchase, amusement parks etc.,
and companies listed on any other recognized stock exchange in India are not eligible for listing
on OTCEI.  listing is granted only if the issue is fully subscribed to by the public and
sponsor.

OTCEI is promoted by the Unit Trust of India, the Industrial Credit and Investment Corporation
of India, the Industrial Development Bank of India, the Industrial Finance Corporation of India
and others .

Benefits:

 The OTCEI has set up a national, automated screen based and ringless stock market. It
helps companies raise  finance from capital market in a cost effective manner and
provides a convenient and effective avenue of capital market investment for investors at
large.
 While the other recognised stock exchanges  require that in order to have its securities
listed the company should have an issued capital of not less than Rs. 3 crores out of
which normally 25% is to be offered to the public, the minimum issued equity share
capital of a company for eligibility for listing on the OTCEI is Rs 30 lacs.
 Listing on OTCEI is advantageous to companies because of the high liquidity of these
securities, which is a result of compulsory market making, improved access and speed of
transactions resulting from the extensive network of electronically interlinked
counters.arial
  Companies can obtain a fair price of their securities by negotiating the same with the
sponsors (who are members of the OTCEI) and save unnecessary issue expenses by
placing their securities with the sponsors who will in turn off load the securities to the
public. This mechanism is now popularly known as a bought out deal.
 OTCEI's wide computerized net work is be spread all over India and will make
investment easier. All deals will be entered into through remote terminals which will be
connected to the mainframe computer of the OTCEI. The exchange will enable
transactions to be completed quickly and investors can settle the deals across the counter
within a few days. The exchange will also provide liquidity to investors as every scrip
listed on the OTCEI will have at least two makers who will continuously give two way
quotes. 

OTCEI in 1993, became the first Exchange in the country to open Investor Grievance Cells
(IGCs) at four Metros - Chennai, Delhi, Kolkata and Mumbai. The IGCs handle complaints/
queries from investors against brokers and/or companies listed on the OTCEI.

Efficient Market Hypothesis

Strong form of Efficient Market Hypothesis (EMH): This means that the market value of stock
represents the intrinsic value of the company. In other words any change in the value of the
company is represented as and when it takes in the market price of the stock. That is any change
is reflected instantaneously in its market price. Information relating to the company gets
available instantaneously to all the stock holders and prospective investors.
 
Semi strong form of EMH: India is considered to be an example in this category as the stock
prices represents the value of the company but not completely. Also it takes time for any
information to reach to9 the investors.
 
Weak form of EMH: I hope now we can understand that in weak form of market there is
significant deviation from the market price and value of the company. Also the information is not
available easily to all the investors. In other words some people have an advantage of having
significant information i.e. information pertaining to the company is distributed asymmetrically.

Forward Trading

An illegal activity in which a trader takes a position in an equity in advance of an action which he/she
knows his/her brokerage will take that will move the equity's price in a predictable fashion. Also called
front running.

Insider trading
It the trading of a company’s stock or other securities  by individuals with potential access to
non-public information about the company. In most countries, trading by corporate insiders such
as officers, key employees, directors, and large shareholders may be legal, if this trading is done
in a way that does not take advantage of non-public information. However, the term is frequently
used to refer to a practice in which an insider or a related party trades based on material  non-
public information obtained during the performance of the insider's duties at the corporation, or
otherwise in breach of a fiduciary or other relationship of trust and confidence or where the non-
public information was misappropriated from the company. This is illegal and attracts
punishment.
Material non public information" means any information such as:

1. Company's future investments and business plans

2. Company's unpublished profit & loss statements
3. Mergers & acquisition plans
4. Undeclared Dividends, etc

which, when released, has the potential to change the market value of shares on the stock
exchange

Technical analysis tool which helps in taking buy/sell decision.

 
The Doji is a powerful Candlestick formation, signifying indecision between bulls and bears. A
Doji is quite often found at the bottom and top of trends and thus is considered as a sign of
possible trend  reversal of price direction, but the Doji can be viewed as a continuation pattern as
well.

A Doji is formed when the opening price and the closing price are equal. A long-legged
Doji, often called a "Rickshaw Man" is the same as a Doji, except the upper and lower
shadows are much longer than the regular Doji formation.

In Doji pattern After the open, bulls push prices higher only for prices to be rejected and pushed
lower by the bears. However, bears are unable to keep prices lower, and bulls then push prices
back to the opening price.

Of course, a Doji could be formed by prices moving lower first and then higher second,
nevertheless, either way, the market closes back where the day started.

Short covering

The act of purchasing securities in order to close an open short position. This is done by buying
the same type and number of securities that were sold short. Most often, traders cover their shorts
whenever they speculate that the securities will rise. In order to make a profit, a short seller must
cover the shorts by purchasing the security below the original selling price.

Put call ratio analysis

The put-call ratio is a popular tool specifically designed to help individual investors gauge the
overall sentiment  (mood) of the market. The ratio is calculated by dividing the number of
traded put options  by the number of traded call options . As this ratio increases, it can be
interpreted to mean that investors are putting their money into put options rather than call
options. An increase in traded put options signals that investors are either starting to speculate
that the market will move lower, or starting to hedge  their portfolios in case of a sell-off.

Why should you pay attention to this? An increasing ratio is a clear indication that investors
are starting to move toward instruments that gain when prices decline rather than when they rise.
Since the number of call options is found in the denominator of the ratio, a reduction in the
number of traded calls will result in an increase in the value of the ratio. This is significant
because the market is indicating that it is starting to dampen its bullish outlook.

The put-call ratio is primarily used by traders as a contrarian indicator when the values reach
relatively extreme levels. This means that many traders will consider a large ratio a sign of a
buying opportunity because they believe that the market holds an unjustly bearish outlook and
that it will soon adjust, when those with short positions start looking for places tocover . There is
no magic number that indicates that the market has created a bottom or a top, but generally
traders will anticipate this by looking for spikes in the ratio or for when the ratio reaches levels
that are outside of the normal trading range.