Home Stock News   Finance Institution   List of Stock Exchange  

About Us
Contact Us



 :: Home ::  
Stock Exchange FAQ

1. What is a Primary Market?
Primary Market is usually referred to buying of shares in an Initial Public Offering. The shares are bought by applying for the shares in the respective application form. Then once the shares are alloted these share transactions are then done in the secondary market or stock exchanges.

2. What is an IPO?
An IPO or Initial Public Offering is referred to the issue of shares to the public by the promoters of a company for the first time. The shares are made available to the investors at the face value of the share or with a premium as per the perceived market value of the share by the promoters. The IPO can be in the form of a fixed price portion or in the form of Book Building portion.

3. What is a Secondary Market?

Secondary Market is referred to those transactions where one investor buys shares from another investor at the prevailing market price or at whatever price both the buyer and seller agree upon. The secondary market or the stock exchanges are regulated by the regulatory authority. In India, the secondary and primary markets are governed by the Security and Exchange Board of India (SEBI).

4. How to apply for a called IPO?
You need to obtain an IPO Application Form through a Share Broker or your Investment Consultant or they are available at the collecting banks. Then fill up the form, remit the amount after calculating the number of shares applied for in the bank that is designated as collecting center for that particular Initial Public Offer. If you have a demat account, then you can apply for the shares directly through your demat account or there is an option of physical delivery of share certificates. Some IPOs offer only Demat form of shares and many other IPOs offer both Demat as well as regular Shares. Care should be taken to provide all the details specified in the application form, because the application form has the chance of gettting rejected due to not providing of the complete details.

5. What is book building?
Book Building is a public offer of equity shares of a company. Book building is so called because it refers to the collection of bids from investors, which is based on an price range. The issue price is fixed after the bid closing date.

(i) How is the book built process done?
A company that is planning an intial public offer (IPO) appoints a merchant banker as a book runner. The company issues a prospectus which does not mention the price, but gives other details about the company with regards to issue size, the business the company is in, the promoters and future plans among other disclosures.
Then a particular period is fixed as the bid period. The book runner builds an order book, that is, collates the bids from various investors, which shows the demand for the shares. For example, a bidder may quote that he wants 10,000 shares at Rs 500 while another may bid for 15,000 shares at Rs 600. Prospective investors can revise their bids at any time during the bid period.
(ii) On what basis is the final price decided?
On closure of the book, the quantum of shares ordered and the respective prices offered are known. The price discovery is a function of demand at various prices, and involves negotiations between those involved in the issue. The book runner and the company conclude the pricing and decide the allocation to each syndicate member.

6. What factors to see in an IPO for applying?
An investor has to look for many important things in an IPO to ascertain the risk factors before deciding to buy the shares of a company. Few of them are listed below:

Promoters Track Record for consistant performance over the previous years and their experience in running this particular business.

Risk Factors listed in the Offer Document.

Risk Factors specific to this particular venture, nature of the market, government policies assoiated with this particular industry or field and the performance of that particular sector in the previous years and any available forecasts for this industry for the near future.

Listing in as many Stock Exchanges in India, allows for easy liquidity.

Transparent and regular reporting of the company's performance and investor friendly policies adopted by the promoters.

The registrars, bankers to the issue.

7. How can I get a DEMAT Account?
Demat Accounts are offered by many Banks, and the Dematerialsed Stock is held by the National Securities Depository Ltd.,. You have to obtain an application form from your banker, fill up the form and complete the required the formalities to get a demat account. The bank where the demat account is opened charges depending on the transactions done on the account.

This is the amount of dividend declared by a company (usually expressed as a percentage of it's face value) calculated on a rupees-per-share basis. Normally profit making companies that have completed their capex or do not need funds to maintain their existing facilities, pay higher dividends.

Share Capital is the issued equity share capital of a company which may be more than the subscribed share capital of the company. It does not include preference share capital. In India, few companies use preference share capital.

10. What is a DEMAT Account?
Demat Account or Dematerialised Account, is a way of holding your portfolio in electronic form or dematerialised form. Demat form of your shares can be traded online, the transactions are conclued much faster, which prevents theft, misuse or forging of your original share certificates or other documents and allows an investor to buy or sell shares in any quantity ( i.e. even a single share of a particular company). Demat account allows for faster refund of your money, in case your application is not accepted.

                                                                                                                              More Info


Home About us contact Us        

Dseindia.com A Venture of India 1999- 2014 MegriSoft Limited. All Rights Reserved