Instruments in Capital Markets

The changes in the regulatory framework of the capital market and fiscal policies have resulted in newer kinds of financial instruments (securities) being introduced in the market.

The variations in all the instruments depend on the tenure, the nature of security, the interest rate, the collateral security offered and the trading features, etc.

Debentures

These are issued by companies and regulated under the SEBI guideline. The rights of investors as debenture holders are governed by the Companies Act, which prohibits the issue of debentures with voting rights.
There are many types of Debentures like Participating debentures, Convertible debentures with options, Third party convertible debentures and many more.


Bonds

Indian Development Financial Institutions (DFIs) in India, like IDBI, ICICI and IFCI have been raising capital for their operations by issuing bonds like Income Bonds, Tax-free bonds, Capital Bonds etc.
In addition to the interest rates and maturity profiles of these instruments, the issuer institutions have been including a put/call option.


Preference Shares

Owners of preference shares enjoy a preferential treatment with regard to corporate actions like dividend. They also have a higher right of repayment in case of winding up of a company.
The various types of Preference Shares are:
• Cumulative and non-cumulative
• Participating
• Cumulative & Redeemable fully convertible to preference shares
• Cumulative & Redeemable fully convertible to equity shares.


Equity Shares

These represent the proportionate ownership of the company. This right is expressed in the form of participation in the profits of the company. Some hybrid securities like equity shares with detachable warrants are also available.

Some other Variants are Derivatives and Hedging.


Dematerialisation of securities occurs when securities issued in physical form are destroyed and an equivalent number of securities are credited into the beneficiary owner's account.
India has adopted dematerialisation route to depository. In a depository system, the investors stand to gain by way of efficient settlements, lower costs and lower risks of theft or forgery, etc....................

Morgan Stabilising by Liquefying!!

Morgan Stanley, eager to secure more stable sources of funding in volatile times especially in US and India, said on Wednesday its brokerage division sold $3 billion in certificates of deposit (bonds, futures etc.) during the past week as part of its broader plan to build up deposits.

Morgan Stanley listed itself as a R-Bank (Retail) so as to get rid of bankruptcy kind situation leading to downfall of Lehmann Brothers.

Morgan Stanley has listed itself as a Federal Bank-regulated enterprise trying to hold on the acquisitions and crude options listed at a good enough prices (crude hit 36 months low on Monday).
MS would now be entering low risk and low gain schemes by collaborating with a Swiss Bank unit to introduce new saving accounts and global currency accouts and increase international banking.

MS has to reprimand on the subprime and speculative approach which came as a consequence of extra money invested in high risk and volatile market!!

But liquefying isn't that easy, as the market price of stock dipped to 52 week low by witnessing a cut off of nearly 70% in price in the last 12 months...Such selling will not fetch profits to that extent as expected................