Capital markets are, in their essence, humanity's wager on its own future, an affirmation that progress is both possible and worth investing in. They are meant to serve as channels through which resources and capital flow to those who can capitalise on it and trigger value while ideally optimizing risk for the world at large.

Basics of Indian Markets

  • Retail Investors
  • Institutional Investors
  • Regulator: SEBI (big brother and hopefully a good big brother)
  • Depository participants (most banks and few stockbrokers) allow you to interact with NSDL and CDSL (depositories) and maintain your DEMAT account (dematerialization account).
  • Portfolio management starts at a minimum of 50 lakhs unlike mutual funds.
  • Hedging: a strategy used to protect against potentialloses (essentially a form of optionality/insurance); might limit potential gains.
  • Zerodha is a depository participant of the Central Depository Services Limited (CDSL).
  • Clearing corporation: ensure no defaults in debit/credit transactions.

Basics of Businesses

  • Angel invstors, venture capitalists (serieses), private equity, IPO
  • CAPEX: Capital Expenditure
  • Equity based raising: reduces equity share
  • Debt based raising: the interest problem, debt financing charges
  • Debt restructuring: negotiating with creditors to change the terms of the debt, such as extending the payment period, lowering interest rates, or reducing the principal amount owed.
  • Why go public?
    1. Raise funds
    2. Spread risk across larger group of investors
    3. Exit for early investors
    4. Reward employees
    5. Improve visibility
  • Underwriting: process by which a financial institution, typically a bank or insurance company, evaluates and takes on the risk of a financial transaction.
    1. In insurance, underwriting determines the policy terms and premiums.
    2. In investment banking, underwriters work with companies issuing stocks or bonds to evaluate the risk and help set the initial price for public offerings.
  • IPO: merchant banker \(\to\) SEBI and registration \(\to\) DRHP preparation \(\to\) Market the IPO \(\to\) Price Banding \(\to\) Book building \(\to\) Closure \(\to\) Listing day