Primary Markets

Topics: Investment, Bond, Mutual fund Pages: 3 (754 words) Published: September 14, 2011
Free Pricing Regime
* Before 1992, Regulator of new issues was CCI (Controller of Capital Issues) * Approval from CCI for raising funds in Primary markets was essential. * Timing, Quantum and Pricing of the issue was decided by the controller. * New Companies could issue shares only at par and the existing companies with substantial reserves could issue shares at premium. * Fixed Price mechanism results in under pricing of many issues. Thus after 1992, promoter and the merchant banker together decide the price of the issue.

Mutual Funds
A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. It is a diversified portfolio of financial instruments like equities, debentures / bonds or other instruments in which the funds can be deployed. Unit holders in proportion to their investment share income.

How Mutual Funds Work?
* A large number of people with money to invest buy shares in a mutual fund. * They pool their money for buying power.
* The fund manager invests the money in a collection of stocks, bonds or other securities. * If the manager is successful in selecting good companies that grow, the fund will increase in value. * Investors receive periodic distributions

Advantages of Mutual Funds.
* Diversification: The best mutual funds design their portfolios so individual investments will react differently to the same economic conditions. For example, economic conditions like a rise in interest rates may cause certain securities in a diversified portfolio to decrease in value. Other securities in the portfolio will respond to the same economic conditions by increasing in value. When a portfolio is balanced in this way, the value of the overall portfolio should gradually increase over time, even if some securities lose value. * Professional Management: Most mutual funds pay topflight professionals to manage their investments. These managers decide what securities the...
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