Chapter: Business Science : Banking Financial Services Management : Mergers, Diversification and Performance Evaluation

Diversification of banks

Diversification of banks

A portfolio strategy designed to reduce exposure to risk by combining a variety of investments, such as stocks, bonds, and real estate, which are unlikely to all move in the same direction. The goal of diversification is to reduce the risk in a portfolio. Volatility is limited by the fact that not all asset classes or industries or individual companies move up and down in value at the same time or at the same rate. Diversification reduces both the upside and downside potential and allows for more consistent performance under a wide range of economic conditions.

Benefits of diversification

Lower cost of capital

Economic gain

Increases managerial efficiency

Increase in market power

Reduce earnings volatility

3.1Securities market/capital market

According to khan it is a market for a long term funds.it focus is on financing of fixed investments in contrast to money market which is the institutional source of working capital finance.

NSE

BSE

SEBI

Regulators

Department of economic affair(DEA)

Department of company affair(DCA)

RBI

SEBI

TYPES OF SECURITIES MARKET

Primary market/new issue market

Secondary market/ Stock exchange Functions of SE

Trading procedure in stock exchanges

Finding a broker

• provide information

• Supply investment literature

• Availability of competent representatives

Opening a n account with broker

Placing the order

Mkt order

Limit order

Stop loss order

Stop order

Cancel order/immediate order

Discretionary order

Open order

Fixed price order

Other order

Day order

Good till cancelled (gtc)

Not held order

Participate but do not initiate(PNI)

All or none order(AON)

Fill or kill order(FOK)

Immediate or cancel order(IOC) Making the contract

Preparing contract note Settlement of transactions

Ready delivery contracts

for ward delivery contracts