Asset Classes

I. Understanding of stocks and stock market

Stocks are an important and high rewarding asset class to invest. To understand about this exciting asset class let us go back and recollect the illustration that we saw in chapter 2 of module 1. It was an illustration about Anubhav starting a company to manufacture textiles. In that example we saw that initially he had only little money and his friends brought in part of the amount required for which Anubhav allotted shares to them to represent their contribution.

Out of Rs.50 lakhs required to start his business, Anubhav brought in Rs.15 lakhs and his friends brought in Rs.7.5 lakhs each. To allot them shares in his company, Anubhav fixes Rs.10 as par value which is generally called face value and he divides the Rs.7.5 lakhs brought in by each of his friends by par value of Rs.10 and arrives at a number 75,000 and this is the number of shares allotted to his friends for the money they brought in.

With the above example in mind, now let us understand the terms such as stocks and shares. The money brought in by Anubhav's friends and the money pumped in by Anubhav are the stocks or equity capital of his company. When Anubhav divides this equity capital by par value of Rs.10/- each into small denominations, the resultant is known as “Shares”.

Further, in this example we saw that, after few years, when Anubhav needed more money for expansion of his business he decided to raise money from public. When he raises money from public he should also provide an exit route for them. And the number of shareholders or investors in the company have become more. And now since the number of investors are large and they would like to exit and reenter as per their requirement anytime and also new investors would be interested in investing in this company shares, there arises a necessity of a dedicated platform wherein the activity of exchange of shares or buying and selling of shares can be carried on. This necessity gave birth to the concept of “Stock Market”.

Stock market is a place where investors in company shares like Anubhav's company and other companies meet electronically to transact in buying and selling of shares of all such companies. All the transactions done so, are connected electronically to a server and the organization which owns and operates such server facilitating the activity of buying and selling of shares of various companies is called a “Stock Exchange”. So, it is understood that all companies which raises money from public are required to list their shares in stock exchanges to provide an entry and exit route for the investors.

In India National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) are the two major stock exchanges that exists. There are regional stocks exchanges as well like Madras Stock Exchange and Calcutta Stock Exchange etc. However, with the introduction of electronic based trading in stocks and large transactions are done in NSE and BSE, the regional stock exchanges are gradually being phased out due to lack of business.

II. Regulators

Securities and Exchange Board of India (SEBI)

Remember, whenever public money is involved it attracts more regulations. Hence, raising money from public, then listing those shares in stock exchanges and trading in those shares are all regulated by a regulator entity called “Securities and Exchange Board of India (SEBI)”. The main objectives of SEBI is to safeguard the interest of investors and to promote and ensure smooth functioning of securities market. To achieve this, SEBI needs to regulate all the entities and intermediaries involved in securities market. The issuer of the securities, investors in the securities and the intermediaries between issuer and investor are regulated by SEBI. (We will see about the intermediaries in separate heading in this chapter).

SEBI is however, monitored by Ministry of Finance under its division capital markets under Department of Economic Affairs. This division also monitors intermediaries such as depositories.

III. Types of markets

Stock market comprises of two types – Primary and Secondary

a. Primary market

Primary market is where companies come out with public issues for the first time called Initial Public Offerings (IPO). In our illustration about Anubhav, when he raised money from public for the first time his company has made its initial public offer. And do you remember at what price he issued the shares? He offered the shares at Rs.60/- per share which is the sum of face value of Rs.10 and premium of Rs.50/-. Earlier, companies fix the issue price as Anubhav did. But, to curb overpricing of initial offers by promoters, SEBI in the year 1995 introduced the concept of book-Building, wherein the issuing company and merchant banker fixes the price band and allows the public to discover the issue price. The lowest price of the price band is called floor price and the upper price limit of the price band is called cap price. Based on the application received, the cut-off price is declared as discovered price and shares are allotted at that price.

Listed companies too will come out with fresh public offers which is called “Follow-on Public Offers” or “Further Public Offer”.

aa. Intermediaries in primary market

Just as in secondary market where investors and issuers cannot transact directly, in primary market too there are intermediaries such as Merchant Bankers or Lead Managers and Registrar and Transfer Agents.

ab. Merchant Bankers

When a company decides to raise money from public, as a first step, it appoints Merchant Banker who is also called “Lead Managers”. Merchant Banker assess the company's financial, legal compliance and submits due diligence report to SEBI the regulator. Merchant banker also assists the issuer to fix the price band for the issue and prepare Draft Red Herring Prospectus (DHRP). DHRP is a document that contains the full details of the public offer and the company. They also play the role of underwriters to the issue. Additionally, they also indulge in advertising and marketing the issue.

ac. Registrar and Transfer Agents

The issuing company appoints “Registrar” to the issue who takes care of the processing of IPO applications and allotment of shares to the investors. The registrar maintains the record of all shareholders and on allotment it takes care of moving the shares to the respective demat account of the applicants.

ad. Process of Initial Public Offering (IPO)

The issuer company appoints merchant banker who submits due diligence report to SEBI seeking the approval for the IPO. On receiving the approval of SEBI, the issuer along with merchant banker fixes the date of issue. The issue is kept open for subscription usually for three to five days.

The bidding can be done on the special window of the stock exchange. Investors can bid through their stock broker. Funding towards subscription to IPO can be done through a process called “Application Supported by Blocked Account (ASBA)”. It is a process in which the IPO applicant's bank account will be debited with appropriate money only on allotment of shares in IPO. However, till such allotment process is over, the banker of the applicant will block the amount and releases it on completion of allotment process.

On the closure of the issue period, the bids received are processed and allotment is made at a discovered price.

Final step is listing the shares in stock exchanges. This day is called listing day. Depending on the demand and supply of the stock on listing day, it may get listed either at premium or at discount to discovered or cut off price.

b. Secondary market

Once the company issues shares to public for the first time or any fresh shares and gets its shares listed in stock exchanges it means it is entering the secondary market. Secondary market is a place where shares of companies are traded between public investors without any intervention of the issuer company. However, there are financial intermediaries who facilitate the trades. But before moving on to intermediaries, first let us know the segments of market and participants of market.

IV. Segments of Market

Securities market in India is divided into three segments, namely “Capital Market or Cash Market”(CM), “Derivatives or Futures and Options Market” (F&O) and “Wholesale Debt Market”(WDM).

a. Capital market or cash market segment

Under capital or cash market segment of NSE various types of securities such as equity shares, preference shares, debentures, warrants, exchange traded funds as well as retail government are traded. When an investor wants to normally buy or sell any shares he will be transacting in this segment of the, market under “EQ” series.

There are sub segments in NSE such “block deal segment”, “trade for trade segment”, “institutional segment” and “qualified foreign investor segment”. As a retail investor it is important to know about trade for trade segment. The stocks that are traded in this segment are allowed to trade under “BE” series. The settlement of stocks traded in this series are compulsorily to be settled against physical delivery of stock and funds. Netting of transaction is not allowed. Shifting of stocks to and from this segment is decided by the stock exchange in consultation with the regulator SEBI.

b. Derivatives segment

Under derivatives segment contracts of shares that are traded in cash market are traded. For example, shares of ITC is traded in cash market. In derivatives market, a contract to buy and sell ITC in future date and price is traded. The future price of this contract is derived from cash market price of ITC. Since, the prices of various financial instruments contract that are traded, is derived from its underlying in cash or spot market, it is known as derivatives market. We will see in detail about this in separate module.

c. Wholesale debt market segment

Wholesale debt market segment is where all fixed income securities are traded. Debt instruments such as corporate bonds and debentures, government securities and treasury bills and public sector bonds are traded. We will see about this segment in a separate chapter.

V. Market Participants

Earlier worldwide, investors in stocks were individuals such as wealthy businessmen, with long family histories and emotional ties to particular corporations. But now markets are more institutionalized and apart from retail and high net worth individuals, institutions such as banks, insurance companies, pension funds, hedge funds and mutual funds invest in capital market. After globalization, international investors participate in large and they play major role.

Market participants can be broadly classified as institutional vs retail. Institutional participants are further classified as domestic and foreign. Insurance companies, banks, mutual funds, hedge funds and pension funds are some of the institutions that participate in securities market. Retail participation can be from resident Indians or non-resident Indians. Whether they are institutional or retail they may be investors or traders or speculators or arbitrageurs. However, majorly institutions will be an investor and rarely they trade for short term gains. The following chart gives a clear picture of the market participants.

Investors are the ones who buy the stock with a view to hold it for long term. Whereas, speculators are the ones who buy and sell for short term gains. They also look for gains within a day and they are called intraday traders or day traders. Generally speculators do not look for value of the company as their view is of very short term. However, speculators are very important market maker in the process.

VI. Intermediaries

The whole financial system that facilitates buying and selling of stocks involves following intermediaries each one catering to different aspect of investment/ trading procedures. All the intermediaries involved are inter-dependent complimenting each others' functions. The whole act of buying and selling shares involves two parts. The intermediary that is involved in first part is called a “Stock Broker” and the intermediaries involved in second part are called “Clearing House” and “Depositories”.

a. Stock Brokers

We saw in previous paragraphs that stock market is an electronic form of place to transact in stocks and the entity which owns and operates the server to which electronic transactions are connected is called stock exchange. The stock exchanges offer membership to corporate entity or persons to act as an intermediary between issuer of securities and the investors. This intermediary or members of stock exchange are called “Trading Members” or “Stock Brokers”. Investors willing to transact in shares are required to open an account called “Trading Account” with such broker and it is not possible for investors to directly approach the stock exchange to buy and sell shares. All transactions in shares like buying and selling and funding of the transaction and withdrawal of money are recorded in his trading account.

b. Clearing House - Clearing and Settlement

The transactions done by investors through stock brokers are cleared and settled by an independent entity called “Clearing House or Clearing Corporation”. Currently, in India two such entities are existing. They are “National Securities Clearing Corporation Ltd (NSCCL)” and “Indian Clearing Corporation Ltd (ICCL)”. While NSCCL is a wholly owned subsidiary of NSE, ICCL is the subsidiary of BSE.

The trades done by investors are matched and settled by the “Clearing Corporation”. The clearing and settlement entities play the role of identifying and matching the buyer and seller of securities and also carries on the debit and credit process of securities for investors and traders. In case of default on the part of the investors to deliver stocks which they have sold NSCCL and ICCL conducts auction and settles the trades. It means they buy the stock from auction market and delivers it to the buyer.

Most of the trading members are also clearing members and they are called “Trading Member-Clearing Member (TM-CM). They clear and settle their own proprietary trades, their clients' trades as well as trades of other TM's & Custodial Participants Professional Clearing Members (PCM) are clearing members who are not a trading member. Typically, banks and custodians become clearing members and they clear and settle the trades of other trading members and custodial participants. Self Clearing Members (SCM) are also trading members who clear and settle their own proprietary trades and their client's trades and not the trades of other trading members.

c. Depository and Depository Participants

When we purchase a house, we get physical property documents on completion of registration in our name. Similarly, earlier till the year 1995, when shares were bought, investors were given a physical document called “share certificate”. Only in the year 1996, Depositories Act was introduced under which all buying and selling of shares was started to be settled in “demat format”. The physical shares held by investors were converted to demat form by a process called “dematerialization”. The digital form of place where shares are stored are called “Demat Account”. To understand this, demat account can be likened to a bank account. In a bank account you keep your money and in demat account you will store all the shares and other investment assets you buy. And just as you give a cheque with details of the payee, whenever, you sell the stock, you have to just fill-up a slip called “Delivery Instruction Slip” and give it to the depository participant with whom you have opened a demat account.

Depository is an institution which holds the shares and other investment assets of investors in electronic form called dematerialized form. Depository participants are agents of “Depositories”. Just as stock brokers who are members of stock exchange and through whom we can buy and sell shares, depository participants are agents of depositories who provide the facility of demat account. Hence, investors need to open a demat account with a depository participant to store digitally the stocks and other investment assets he buys.

Currently, there are two depositories in India, namely, The National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Almost all stock brokers and banks act as depository participants and provide demat services.

VII. How does trade and settlement of trades takes place?

Having learned about the intermediaries involved in stock market, now let us see the cycle of trade and settlement of stock transaction. Trade and settlement process involves two parts. At first part you will be involved in the process by placing the order. Next part involves other intermediaries we discussed above. We will see the process step-by-step.

First Part

• Open a trading account with a stock broker
• Open a demat account with depository participant. Most of the stock brokers also act as a depository participant. In that case demat account is opened simultaneously with trading account.
• Fund your trading account adequately as per your investment need
• If you are a self trader, then download and install the trading software your broker provides and punch in the trades on your own.
• Or visit or contact your stock broker and place the orders with him
• Like you, many others will be placing their orders on their own from their computer or mobile or through their stock broker. In the below image, you can see the various bid and ask price punched by traders from different locations. The best price will be visible at the top. Once your price matches with the other parties price, trade will be executed.

The below image shows the top five best bid and ask price of State Bank of India shares.

• Upon execution of your trade, you will receive the E-contract note with details of the trades done by you at the end of the day.

Now if you had made a purchase you should receive the shares in your demat account and if you had sold the shares, then you should receive the money in your bank account or credit should be reflected in your trading account. This will not happen immediately because whole process of clearing and settlement of all trades will take two days to be completed. And this will be carried out by the clearing houses and depository participants. This is explained below as second part.

Second Part

The trades executed as explained above will be cleared and settled by the clearing corporation on T+2 settlement basis. “T” stands for “Trading Day” and +2 stands for next two working days of clearing corporation. Suppose you have bought a share on Tuesday, then you will receive the shares in your demat account on Thursday ie., trading day being Tuesday plus 2 days which ends on Thursday. If there is a holiday on Wednesday, then you will receive the shares in your demat account only on Friday. Similarly, if you had sold a share you will receive the funds in your account only on T+2 working days.

The clearing and settlement process is depicted in the below flow chart.

• Suppose you buy 100 shares of SBI @ 310 someone would have sold 100 shares of SBI @ 310, then the clearing member will identify these trades and matches the buyer and seller.
• Your purchase cost of Rs.31,000/- (100*310) (for convenience purpose let us exclude brokerage and other charges in this example) will be debited from your trading account and moved to your stock broker-clearing member's clearing bank account.
• Then the money will be moved to clearing corporation's account.
• Clearing corporation will move the money to clearing bank account of the stock broker of the seller who have sold SBI to you.
• From the seller's stock broker's clearing bank account, the money will be moved to the seller's bank account or credited to his trading account.

Now you should receive the stock that you have purchased.

• The seller of the stock will give delivery instruction to his depository participant to move the stocks to his brokers pool account.
• From brokers pool account, the stock will be moved to clearing corporation account.
• And then from clearing corporation account, it will be moved to your broker's pool account.
• From your broker's pool account the stock will be moved to your demat account by the end of the T+2 working day.

This is how the trading and clearing and settlement of all trades takes place.

VIII. Corporate Actions

Corporate actions are any initiative taken up by public companies which has an impact on capital of the company viz., equity stock capital or debt capital. Traders use announcement of corporate actions to gain short term profits. Whereas investors gauges the financial health of the company by its corporate actions and decides their investment in the company. The major corporate actions are dividends, stock split, buy back, rights, bonus and offer for sale.

Before moving into details of each corporate actions, let us understand various terms and procedures that are followed in respect to corporate actions. As we all know, any corporate decision is taken in the board of directors meeting. Dividends are generally, announced in company's annual general meeting (AGM). To effect the corporate actions, ex-date, record and payout date are determined after announcement of corporate actions.

Record date is the date which the company considers to determine the shareholders who are eligible to participate or receive the benefits of the particular corporation. For example, the shareholders who hold the shares in their demat account as on the record date will be eligible to receive the benefit of corporate action.

Ex-date usually will be 2 days prior to record date. This is because as per our settlement of trades cycle which is done on T+2 basis, the investor who buys the shares today will receive it in his demat account only after 2 days. So, the investor who wants to receive the benefits of corporate actions should buy the stock before the ex-date. On ex-date, the stock goes ex and the price of the stock gets adjusted as per the ratio of corporate actions determined by the company.

Cum-date and Cum-price are the days before the ex-date and the price of the stock before the ex-date.

Payout date or corporate action date is the date on which the benefits of corporate action is actually made available to the shareholders. When we say payout it is especially applicable in case of dividend payout.

a. Dividends

Part of the profit of the company is shared with existing equity shareholders and preference shareholders. Dividends are declared annually in general and also interim dividends are declared in case the company operates at high profit levels and on specific years such as golden jubilee year and so on. Dividend payout depends on the policy of the company. Even during the year of loss, the company may pay dividends to its shareholders out of its reserves.

Dividend is announced as percentage of its face value. Suppose a company announces dividend as 120% and the face value is Rs. 2/-, then 120% of Rs. 2/- is Rs.2.40. So, it can also be said, the company is paying dividend of Rs.2.40 per share.

Post dividend the market price of the stock reduces to the extent of dividend paid. In this example suppose the market price before dividend ie., cum-dividend price is Rs.100/- then it will get reduced to Rs. 97.60 on ex-dividend date as the Rs.2.40 is paid as dividend and it is no more part of the company's value.

b. Stock Split

Stock split means reducing the face value of the shares. A stock split only increases the number of shares and does not reduce the market capitalization or the value of the shares.

Example

Company “A”'s current market price is Rs. 1500/- and issued shares is Rs. 10 lakhs. An investor holds 10 shares and value of his holding is Rs. 15,000/- (10*1500) and market capitalization of that scrip is Rs. 150 crores (1500*10, 00, 000). If the face value of the stock is split in the ratio of 1:10 (ie. Face value reduced to Re.1 from Rs.10), the investor holding 10 shares will get 10 shares for every 1 share and his holding becomes totally 100 shares (10*10) post split. Also the market price gets reduced by 10 times to Rs. 150 (1500/10), keeping the value of the investor holding unchanged as Rs. 15, 000/- (150*100). The market capitalization also remains same as Rs. 150 crores (150*1, 00, 00, 000).

Company “A”
Face Value Rs.10/-
Issued Share Capital Rs.10 Lakhs
Market price of the stock Rs.1500/- per share
Market Capitalization Rs.150 crores (Market Price Rs.1500*Issued Capital Rs.10 Lakhs)
Proposed Split of Face Value From Rs.10/- to Re.1/-
Gaurav's holding 10 shares

In a stock split since the market price of the stock reduces, it becomes affordable to small investors to buy the stock and thereby increases the liquidity of the stock.

c. Buy Back of Shares

Buy back is also called share repurchase. Buy back means the company buys back the shares from existing shareholders in a proportionate basis or it buys back from open market over an extended period of time. Buy back will reduce the number of outstanding shares and increases shareholders wealth.

Companies buy back their shares for many reasons. Some of the reasons are:

• To enhance promoters holdings to prevent hostile takeovers
• To reward the shareholders. The companies having surplus cash would reward their shareholders by buying back the shares at higher price against the prevailing market price.
• To gain investors confidence, especially when the shares are undervalued or during sluggish market.
• To improve the share holders' value. As the capital stands reduced post buy back, the return on capital improves (returns ratios will be dealt in detail in separate module)
• Sometimes, the company may buy back its shares with the idea of delisting from stock exchanges.

Buy back indicates the promoters confidence in their company. On announcement of buy back, usually the share price of the stock increases as more and more investors will start buying the shares to gain from the price difference between the prevailing market price and the buy back price.

d. Rights Issue

Apart from IPO and FPO, a company can raise funds through a rights issue. A rights issue means issuing shares to the existing shareholders in proportion to their holdings. Ratio of shares to be issued on rights basis and the price at which it will be offered are decided by the company. Usually, it is issued at discount to market price. We will see an illustration in which the company “A” announces a rights issue in the ratio as 3:5 at a price of Rs.45.

Illustration

Company = “A”
Cum-Rights price = Rs.85
Face value = Rs.5/-
Proposed ratio of rights issue = 3:5 (3 shares for every 5 shares held by the investor)
Rights issue price = Rs.45 (Face value of Rs.5 plus premium Rs.40)

As with any other corporate action such as split or bonus, the market price of the stock falls post rights issue. Now let us see the calculation to arrive at the ex-rights price ie. when the market price of the stock gets adjusted after rights issue.

The formulae will be = (5*cum rights price) + (3*45) / (3+5)
= (5*85) + (3*45) / (3+5)
= 425 + 135 / 8
= 70

Assuming Gaurav holds 100 shares in the company, as per the ratio of 3:5 he is eligible to apply for 3 shares for every 5 shares he holds in the company. Post rights issue he will hold 160 shares including 60 shares received on rights issue (100*3/5). Cost and market value of Gaurav's holdings post rights issue will be as follows:

Assumed purchase cost of 100 shares @ 95 = Rs.9500
Cost of 60 shares got on rights issue @ 45 = Rs.2700
Total cost of 160 shares post rights issue = Rs.12200
Market value of 160 shares post rights issue @ 70 (ex-price) = Rs.11200

In this example, the market value of Gaurav's investment in the company stock has fallen on post rights issue. The share price should increase after going ex rights, otherwise it will result in loss for the investor. Hence, investors should be diligent in deciding whether to participate in rights issue or not.

The existing shareholders are communicated by the company with the details of number of shares offered to them. It is to be noted here that it is not compulsory for the investors to accept the shares offered on rights basis. If the shareholder is not willing to take part in the rights issue, he can very well ignore the offer.

e. Bonus

Bonus issue means offering shares to existing shareholders free of cost as bonus. A company issues bonus shares to its existing shareholders to reward them. The company issues bonus shares out of its free cash reserves.

The company decides a ratio in which to offer bonus shares. Suppose the company fixes the ratio as 3:5, then it means for every five shares an investor holds three shares are given free to him. Suppose an investor has 100 shares, then he will get 60 shares as bonus. And his total number of shares becomes 160.

When a company issues bonus shares, only the number of outstanding shares will increase but the market capitalization remains the same. Similarly, for the shareholder, the number of shares he holds will increase but the total value of his investment remains the same. This is because based on the ratio fixed by the company, the market price of the stock decreases to that extent.

In the above example let us assume the market price of the stock is Rs. 550 before bonus (cum-bonus), then the value of 100 shares is Rs. 55, 000/-. Post bonus the market price of the stock gets adjusted and comes down to Rs.343. 75 (ex-bonus price). But the value of 160 (100+60) shares of the investor stands same at Rs. 55, 000/- (160*343. 75).

The computation of ex-bonus price is as below:

Cum bonus price * 5/(3+5)

= 550*5/8 = 343. 75

A bonus issue generally indicates the company's confidence in its future cash flow and growth. And as the share price reduces post bonus issue, it encourages small investors to participate and invest in the shares of the company.

f. Offer for Sale

Offer for sale is the method by which the promoters of listed companies reduce their holdings by selling their stake to public through stock exchange platform. Other shareholders who hold more than 10% of shares in the company are also allowed to offload their stake through OFS.

As per SEBI norms, a listed company should maintain a minimum of 25% of public shareholding. Hence, promoters of listed companies in which public shareholding is less than this threshold put up their shares on the block for sale in order to comply with this norm. OFS is one of the several other ways to comply with this norm.

In an offer for sale (OFS), the company fixes “Floor Price”. Investors willing to bid should do it at a price above the floor price, because bids below floor price will not be accepted. Generally, floor price is fixed at a discount to prevailing market price. And usually, the offer is open for only one day.

Based on the bids received, discovery price will be announced at the end of the day and shares will be allocated at cut-off price. Retail investors will be allocated at discount. Just like a normal purchase of shares, investors will receive the contract note on the same day evening and will get the shares into their demat account on T+2 days. In case of non-allotment, money will be credited to trading account on T+1 day.

Key points to remember

• Stock market is a place where investors meet electronically to transact in buying and selling of shares of all companies.
• Stock exchange is an entity which facilitates investors to buy and sell shares through electronic platform. There are two major stock exchange in India NSE and BSE.
• Market is divided into three segments viz., capital or cash market, derivatives market and wholesale debt market.
• Market participants are both retail and institutional and they can be an investor or speculator or trader.
• SEBI is the watchdog and regulator for stock market.
• Intermediaries that operates are stock brokers, depository and depository participants, clearing corporation and clearing members.
• All trades are cleared and settled on T+2 basis ie. trading day plus 2 working days.
• Primary market and secondary market are two types of markets. Companies that raises money from public for the first time or issues fresh shares comprises the primary market. Whereas, secondary market is where the already listed shares are traded.
• Major corporate actions are dividend payouts, bonus issues, stock split, rights issues, buy back of shares and offer for sale.
• All the corporate action has impact on its share price. While purchasing shares under rights issue, investors need to be cautious and decide diligently.
• If investors wants to receive the benefits of corporate action, he has to buy the stock before ex-date.

Roundup

Stocks and shares means equity capital of company. Investors willing to invest in company shares that are publicly traded can be done only through members of stock exchange who are called stock brokers. There are other intermediaries that operate at various stages of trade and settlement. All the participants and intermediaries are strictly regulated by regulator SEBI. Primary market is where the companies raising money from public for the first time or with fresh issue deals in. Shareholders are rewarded with dividends and bonus issues. All corporate actions has impact on its share price.