INVESTMENT

&
SPECULATION
BY -

DEEPALI MISHRA (C-4)

SALONI DEWAN (C-25)

SARITA GUPTA (A- )
SHRISHTI CHATURVDI ( A- )

INVESTMENT
Investment is a financial operation that,
upon thorough analysis, promises safety of
principal and a satisfactory return.

SPECULATION
Speculation is a financial action that does
not provide safety of initial investment
along with the return on the principal
sum.

Basis
Planning Horizon

Investor
Longer planning
horizon
Risk Disposition
Not willing to
assume more than
moderate risk
Return Expectation Modest rate of
return
Basis for decision
Fundamental
factors,careful
evaluation of the
prospects of the
firm
Leverage
Uses his own funds
& eschews

Speculator
Shorter planning
horizon
Willing to assume
high risk
High rate of return
Hearsay,technical
charts,market
psychology

Resorts to
borrowing

INVESTMENT & GAMBLING

Gambling is quite the opposite of investment. Typical examples are
horse races, card games, lotteries, etc.
It consists in taking high risks not only for high returns, but also for
thrill and excitement and the time horizon is very short when
compared with speculation and investment.
It is unplanned and non scientific
In gambling artificial and unnecessary risks are created fro
increasing returns
But an investment is carefully planned, evaluated
Allocate funds to various investment
Concentrates on safety
Expecting moderate and continuous return for increasing the
returns.

THE INVESTMENT PROCESS

The process of investment includes five stages:
1.

Investment Policy.

2.

Security Analyses.

3.

Valuation.

4.

Portfolio Construction.

5.

Portfolio Evaluation.

KEY PARTICIPANTS
IN INVESTMENT PROCESS
Government
Federal, state and local projects & operations
Typically net demanders of funds

Business
Investments in production of goods and services
Typically net demanders of funds

Individuals
Some need for loans (house, auto)
Typically net suppliers of funds
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Copyright 2005 Pearson AddisonWesley. All rights reserved.

THE INVESTMENT PROCESS

1-9

Copyright 2005 Pearson AddisonWesley. All rights reserved.

ROLE OF SEBI INVESTORS PROTECTION

Sebi is the regulator for the Security market in India.
In 1988 the Securities and Exchange Board of India
(SEBI) was established by the Government of India
through an executive resolution, and was subsequently
upgraded as a fully autonomous body on April 12, 1992
the Securities and Exchange Board Of India was
constituted. It was constitute in accordance with the
provisions of the Securities and Exchange Board Of India.

 The basic functions of the Securities and Exchange Board

of India is
..to protect the interests of investors in
securities and to promote the development of, and
to regulate the securities market and for matters
connected therewith or incidental thereto

THE BASIC OBJECTIVE OF THE

BOARD ARE IDENTIFIED AS
The primary objective of SEBI is to promote healthy and
orderly growth -of the securities market and secure investor
protection. The objectives of SEBI are as follows:
To protect the interest of investors, so that, there is a
steady flow of savings into the capital market.
To regulate the securities market and ensure fair practices.
To promote efficient services by brokers, merchant
bankers, and other intermediaries, so that, they become
competitive and professional.

FUNCTIONS OF SEBI
The SEBI Act, 1992 has entrusted with two functions, they
are
Regulatory functions and
Developmental functions

REGULATORY FUNCTIONS
Regulation of stock exchange and self regulatory
organizations.
Registration and regulation of stock brokers, sub-brokers,
Registrars to all issues, merchant bankers, underwriters,
portfolio managers etc.
Registration and regulation of the working of collective
investment schemes including mutual funds.
Prohibition of fraudulent and unfair trade practices relating
to securities market.
Prohibition of insider trading.
Regulating substantial acquisition of shares and takeover
of companies.

DEVELOPMENTAL FUNCTION
Promoting investors education.
Training of intermediaries.
Conducting research and publishing information useful
to all market participants.
Promotion of fair practices.
Promotion of self regulatory organizations

ORGANIZATION OF SEBI
The SEBI Act provides for the establishment of a Statutory Board
consisting of six members. The chairman and two members are to be
appointed by the Central Government, one member to be appointed by
the Reserve Bank and two members having experience of securities
market to be appointed by the Central Government.
SEBI has divided the activities into four operational departments. They
are primary market department, issue management and intermediarys
department, secondary market department and institutional department.
Each department is headed by an Executive Director.

WHY INVESTOR PROTECTION IS

IMPORTANT
Investors are the backbone of the securities market.
They determine the level of activity in the securities
market and the level of activity in the economy.
Many investors may not possess adequate
expertise/knowledge to take informed investment
decisions.
May not be aware of the complete risk-return profile of
the different investment options. may not be fully aware
of the precautions they should take while dealing with
market intermediaries and dealing in different securities.
They may not be familiar with the market mechanism
and the practices as well as their rights and obligations.

SCAMS IN STOCK MARKET

Securities Scam Harshad Mehta (1991-92).
Floating Companies Scam C R Bhansali (1992-96) .
Satyam Ramalinga Raju (2009) Around 12,000
Crores.
Fake Stamp Fraud Abdul Karim Telgi - Around 30,000
Crores .
DSQ Software Dinesh Dalmiya (2001) - Around 600
Crores

STEP TAKEN BY SEBI TO MAKE

INVESTOR AWARE
Security Market Awareness Campaign(SMAC)
was started with a motto An educated investor is
a Protected investor.
Invest with Knowledge was the message spread
by this campaign.
Workshops Advertisements Educative material
All India Radio Information provided through AIR
Programs frequently.

SEBI GUIDELINES FOR INVESTOR

PROTECTION
Specify the manner in which the matters relating to issue of
capital, transfer of securities and other matters shall be disclosed
by the companies.
No company can make an issue of securities unless a draft
prospectus has been filed with SEBI.
The offer document, through which the securities are issued, is to
be prepared strictly as per the requirements of SEBI Guidelines.
No company shall make an issue of securities unless it has made
an application for listing of securities at a stock exchange.
No company can make public issue unless all existing shares must
be fully paid.

RIGHTS OF INVESTOR
To receive the share certificates, on allotment or
transfer as the case may be, in due time.
To receive copies of the Directors report,
Balance Sheet and P&L A/c and the Auditors
report.
To participate and vote in General Meeting either
personally or through proxies.
To receive dividend in due time once approved in
General Meeting.
To receive corporate benefits like rights, bonus,
etc once approved.
To proceed against the company by way of civil or

STEPS TAKEN WHILE INVESTING

Before making any investment, one must ensure to:

1. Obtain written documents explaining the investment

2. Read and understand such documents
3. Verify the legitimacy of the investment
4. Find out the costs and benefits associated with the investment
5. Assess the risk-return profile of the investment
6. Know the liquidity and safety aspects of the investment
7. Ascertain if it is appropriate for your specific goals
8. Compare these details with other investment opportunities
available
9. Examine if it fits in with other investments you are considering or
you have already made
10. Deal only through an authorized intermediary

THANK YOU