1. Equity Shares:-Equity shares holders are the owners on the company. They bear the risk and enjoy the rewards of ownership by dividend, Buyback etc.
By purchasing equity share investor received equity certificate as a proof of ownership in the company to there holders. But not now this process is stop when electronic trading start.
“OLD EQUITY SHARE CERTIFICATE”
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2. Debentures/Bonds/Notes:-These financial instruments are issued for raising long term debt from the market. There are two types debentures in nature.
(a) Secured Debentures (Collateral support)
(b) Unsecured Debentures
o There are variety of debentures/bonds:-
(a)Fully convertible debentures:-Debentures are fully convertible into ordinary shares of the issuing company. The date and price of conversion from debentures to shares given by company at a time of issue.
(b)Partly convertible debentures:-Partly converted into ordinary shares of the issuing company under a specified terms and conditions at a time of issue. The remaining/Partly debentures are redeemed by the company as a specified date
(c)Non-Convertible debentures:-They are pure debt instruments without conversion.
o When company raise funds for short term (Those instruments whose time period are not exceed 1 year). These instruments include T-Bills, Commercial papers etc. Instruments are issued by both company or governments.
3. Foreign currency bonds:-Foreign currency bonds are those bonds which are issued by a company in a currency but it is different from it’s home currency. Example If Infosys issued bond in Indian stock market but they issued USD bonds.
4. External bonds / Masala bonds:-External bonds are also called EURO bonds. Bonds which are issued in a currency but different from a country currency issued.Example-A company issued USD bonds in a Dubai (Dirham is a currency of dubai).
Whereas masala bonds are those bonds when company issue home country currency bonds in another country.
5. Warrants and convertible warrants; -Warrants are the options which give rights to the investor to buy equity shares of the issuer company after a specified time period and at a pre-determined price.
6. Indices: -In the stock market index track the market movement of some stocks by using their prices of shares chosen as a sample. Most Leading index are weighted by market capitalization.
o Index help us to compared stock return with other assets example- gold & debt it serves as a benchmark which reflect who economy perform, any sector of an economy in a country.
o It shows a real time sentiment in the market.
o Some of the common indices in India are: -
(1) Nifty 100 (Top 100 stock which have high market cap)
(2) Nifty 500
(3) S&P BSE 500
o There are some sector index are also present in exchange: -
(1) Nifty Bank
(2) Nifty IT
7. Mutual Fund Units: -MF are the investment pool that gather money from investor and invest that money in portfolio with a common objective of funds example Diversification, Liquidity, Growth or Dividend etc.
Each investor’s share is represented by the units and the value of the units are called Net Asset value (NAV) which change continuously to reflect changes in the value of the portfolio created by the fund. There are two type of MF:-
(a)Open-ended scheme: -These types of schemes are mostly used by the investor as they provide options to buy and sell units of funds at any time and they also listed on stock market. These schemes do not have any fixed maturity period.
(b)Close-ended scheme: -These funds have targeted how much funds they have collect from the market (investor) after a specific amt. they close their scheme and there is no another buyer can entry after closing of scheme.
8. Exchange Traded Funds (ETF): -ETF like a mutual fund which collect funds from investor to track an index or commodity (e.g. gold) or a basket of assets. ETF units are listed and traded in demat form a stock exchange and their price changes continuously to reflect commodity prices.
9. Preference shares: -Preference shares they are like special kind of shares which have some benefits over common/ordinary equity shares at the time divided or at a time of company windup. They have some feature of equity and debt instruments. These type of shares holders did not have right to vote in a company meeting.
10. Indian Depository Receipts (IDRs), Global Depository Receipts (GDRs), American Depository Receipts (ADRs): -
o Depository receipts are financial instruments that represent shares of a foreign company. The process of issuing a depositary receipt is as follow: -
o The company give the equity share to bank after receiving of shares bank place them in a custodian account and issue certificate (depositary receipts) against the shares to overseas market.
o There are two types of DRs: -
(a)Sponsored depositary receipts: -Sponsored depositary receipts listed on the stock exchange.
(b) Unsponsored depositary receipts:-Unsponsored depositary receipts did not list on the stock exchange. They are traded under OTC.
o DRs are two-way fungibility means the shares buy in the local market and converted into DR and traded into foreign market or vice-versa. They have 1 year lock in on the conversion of IDRs into shares.
(1)Indian Depositary Receipts:-The DR issued by non-Indian company and traded in Indian stock exchange.
(2)American Depositary Receipts:-The DR issued by non-US company and traded in US stock market e.g. Infosys, HDFC Bank etc.
(3)Global Depositary Receipts:-These DR are allowed to trade in more than one country. GDR get wider invester base from the international market. Investors of international get an opportunity to invest in the shares which is listed in there local country stock exchange.
11.Foreign Currency Convertible Bonds (FCCBs):-FCCB are foreign currency optional convertible bonds issued by companies in international market. The payment of interest and repayment of principal on these bonds is paid in foreign currency. Once conversion is done the payment of interest paid in domestic country currency of company and risk of currency conversion lying with investors.
12.Equity Linked Debentures & Commodity Linked Debentures:-Equity linked debentures these instruments interest rate/return depend on the underlying equity shares return such as Nifty 50, S&Psensex or individual stocks.
o Whereas commodity linked debentures just like ELDs CLDs are floating rate debt instrument whose interest based on the return of underfyling commodity assets. Example- Gold, silver or any precious metals.
13.Mortgage Backed Securities(MBS) Ans Asset Backed Securities(ABS):-MBS & ABS are debt instruments issued by the company against the receivables, cash flows assets. If company is not able to pay interest or repayment of loan then these assets are sold to recovery the debt amount.
14.REITs/InviTs:-
o Real Estate Investment Trust (REITs) investment that pool from the investers and invest in infrastructure project like building etc. There revenue come from rent and sale there project that revenue distribute as divided to investers.
o Infrastructure Investment Trusts (INVITs) these fund pooled money from investors for project like road, power plants etc. There revenue come from toll tax or lease income and that revenue distribute among investors.
o REITs 80% of the assets should be kept in the form of real estate asset. Whereas INVITs have to keep 90% of their assets as revenue generated infrastructure project.
15.Commodities: -Commodities are basic materials or goods e.g. gold bars which are interchangeable with other goods but jeweller of gold is not a commodity. This is because an investor has indifferent to different mind about the jewelers whether the jeweler is of same weight but they have different / many designs in same weight and bar of gold are same in quantity and quality.
o Precious Metals:-Precious metals such as gold & silver are viewed as investment that increase the value of money time to time. They have minimal storage cost.
o Commodity ETFs:-Commodity ETF are the exchange traded fund that pooled investment in physical commodities. The value of unit moves in the line with the commodity price. Storage handled by the fund therefore there is no storage obligation.
16.Managed Futures Contract: -Futures contracts involve buying/selling assets at a set price on a future date, allowing investors to profit from price changes without owning the product. Managed futures are portfolios of futures contracts managed by professionals, enabling investors to access commodities without owning them directly.
17.Warehouse Receipts: -Warehouse receipt is a document that shows proof of ownership of goods that are stored in a warehouse. Most of the case these receipts are negotiable and the title of underlying assets transferred by transfer the receipts to another person.
