This is the second blog in the series of SEBI Exam Study notes. In this series, we are covering some basic terms related to Securities Markets. You can read the part 1 here. As per the Exam Pattern of the SEBI 2018 Exam, Securities Market is the most important subject. It has 40 marks in Phase 1 of the Exam and 100 marks in Phase 2 Exam. Therefore, through this SEBI Exam Study notes series, we would help you get the basics of this subject covered.
SEBI Exam Study Notes – Basic Terms
Issuers are organizations that raise money by issuing securities. They may have short-term and long-term need for capital, and they issue securities based on their need, their ability to service the securities. Some of the common issuers in the Indian Securities Markets are Private Companies, Central, State and Local Governments, Banks, Public Sector companies, Mutual funds, etc. (source – NISM.ac.in)
2) Credit Rating Agencies in the Securities Markets
Credit rating agencies evaluate a debt security to provide a professional opinion about the ability of the issuer to meet the obligations for payment of interest and return of principal as indicated in the security. They use rating symbols to rank debt issues, which enable investors to assess the default risk in a security. (source – NISM.ac.in)
3) Investment Adviser
Investment adviser work with investors to help them make a choice of securities that they can buy, based on an assessment of their needs, time horizon return expectation and ability to bear the risk. They may also be involved in creating financial plans for investors, where they define the goals for which investors need to save money and propose appropriate investment strategies to meet the defined goals. (source – NISM.ac.in)
4) Time Value of Money
A rupee in hand today is more valuable than a rupee obtained in future. For example, let us compare receiving Rs.1000 today, and receiving it after 2 years. If today’s Rs.1000 is placed in a 2-year bank deposit earning simple interest of 8%, then it will be worth Rs.1080 (principal 1000 + interest 80) at the end of 2 years. This makes today’s Rs.1000 more valuable than the future Rs.1000. The value of currently available funds over funds received in the future is due to the return that can be earned by investing current funds. (source – NISM.ac.in)
5) Risk and Return
Risk – In the Securities Markets, Risk means the probability of Losing the part/entire investment or receiving unfavourable or no returns on an investment over a period of time due to the poor performance of the particular investment (Shares) in the market.
Return – Return refers to the benefit the investor will receive from investing in the security. The return will be in the form of interest, paid periodically to the investor, at a rate and frequency specified in the security. (source – NISM.ac.in)
That is all from us in this part 1 of the SEBI Exam Study notes. We hope you find the information provided above useful for your SEBI 2018 exam preparation. Do not forget to give the Securities Markets Mock tests from Oliveboard to practice whatever you have learned in the above SEBI Exam Study notes. All the best.