Study Points

Causes of Fluctuation :-
Following are the important causes which influence the price of shares ans securities in the stock exchange :

1. Demand and Supply :-
Demand and supply forces play a very effective role in fluctuating the prices. If there are more buyers of a particular security than sellers its price will rise. If the buyers are few but supply is greater than price will fall.

2. Political Condition :-
Stock exchange is a very sensitive market. Political disturbance and will also affect the prices of shares in the stock exchange.

3. Confidence of Public :-
If a government or any company looses the confidence of the public, then the prices of its securities and shares fall.

4. Reputation of the Firm :-
If the company enjoys good reputation in earning profit, its shares demand and price increases.

5. Bank Rate :-
When bank rate is low people borrow the money from the banks and purchase the securities. On the other hand when bank rate is high people purchase less securities.

6. Inflation and Deflation :-
In case of inflation prices of securities will rise. While in deflation price of shares and securities fall.

7. Directors Resign :-
In case of resignation of any director public looses the confidence and the price of company shares falls.

8. Experts Opinion :-
Stock exchange market experts opinion in press about the market also affects the price of various companies shares.

9. Speculators Activities :-
The policy of the speculators also influence the prices of shares. They sometimes begins to purchase the securities of a particular companies, to increase its prices.

10. Change in Fashion and Wealth :-
A sudden change in fashion and wealth influences the shares prices of the particular company. Because change in fashion will affect the profit of the company.

11. Strikes and New Taxes :-
Strikes of labour and new taxes also affect the business of stock exchange. It reduces the prices of shares.

12. Influence of Others Stock Exchange :-
If the price of one company shares increases in one stock exchange it will also affect the price of that company shares in other stock exchange.

13. Artificial Buying :-
Sometimes underwriters begin to purchase the number of shares to create the demand. So the prices of the concerned company will rise due to artificial buying.

14. Over Production :-
If a company faces the problem of over production then it may not declare a sufficient profit to the shareholders. So the prices of the shares will fall in the stock exchange.

15. Insurance Company Influence :-
Insurance companies are very influential in changing the prices of various securities. These are considered the greatest purchaser of the securities. If the insurance company sells the shares of any company then the prices of the shares will fall. If it purchases the shares of any company then their price will rise.

Definition Of Debenture:-
A debenture is an acknowledgement of debts and written promise by the company to repay the loans according to the terms laid down in the document. It is issued to money lenders under the seal of the company. It represents the loan of the company. Even public company can collect money for financing its business by selling debentures in the market.

So it is one of the sources to raise capital or make up the deficiency in the capital account. It may be issued at any time before winding up.

Types of Debentures

The following are the important types of the debentures of the Joint Stock Company.

1. Simple Debentures:-
These are also called Naked Debentures. These kind of debentures are issued without security. The holders of these debentures are considered insecure creditors at the time of winding up of the company. So these are not popular in these days.

2. Mortgage Debentures:-
The debentures which are secured on the permanent asset of the company such as Plant, Machinery, Land and Buildings are known as Mortgage Debentures. These are two kinds of Mortgage Debentures i.e.

( a ) First mortgage debentures.
( b ) Second mortgage debentures.
First Mortgage Debentures holders have first right to claim on the property of the company.
Second Mortgage Debentures holders have second right to claim on the assets of the company.

3. Bearer Debentures:-
There are payable to bearer the documents are negotiable instruments and are transferable by simple delivery. Interest is generally payable against the presentation of coupons attached to the debentures.

4. Registered Debentures:-
The names and addresses of registered debentures holders are recorded in the registered of the company.Transfer and transmission of these must be registered in the books of the company as in the case of shares. Interest is paid to the registered holders in the same manners as distribution of dividend.

5. Redeemable Debenture:-
The amount of these debentures are repayable after a stated period. Tease are issued subject to the condition that the company shall redeem them on specified date. These debentures are very common now a day.

6. Irredeemable Debentures ( Perpetual Debenture ) :-
The amount of such loan repayable on the happening of specified contingencies. Generally no lime is fixes within which the company is bound to redeem them.

7. Floating Debenture:-
Such type of debentures are secured by a floating charges on all the assets of the company. These assets may be bills receivable, stocks and Book Debts. it creates a charge upon them in favor of debentures holder are against other creditors in case of failure on the part of the company.

8. Convertible Debentures:-
These debentures may be converted into preference or ordinary shares of company. This option given to such debenture holder for the period stated in the conditions of the issue . So this provision protects the investors.

9. Equipment Trust Debentures:-
These debentures are issued for specific purposes. Funds are raised by such debentures to purchase certain equipment for the running life of the business.

10. Income Debentures:-
The holders of these types of debentures are entitled to receive interest at fixed rate only out of current year profit. If company gains no profit, no interest ill be payable . So these debentures are not popular now a days.

11. Legal Debentures:-
Where the title of property of the company may be transferred by deed to money lenders are security for the loan, they are known as legal debentures.

Definition:-
Stock exchange market refers to an organized market where govt. Securities and shares, bonds and debentures of bonafide trading units are regularly transacted. Its business is carried on within a particular building in which a person can easily convert his shares into cash or new securities. This encourages public to invest in securities by providing a continues market. The term stock exchange referred by some people to Satta Market. Therefore some writer says, " It is a place to get rich quick while other regards as a place of gambling.
The securities of public companies can be transacted in the exchange only if they have been approved by the committee of the stock exchange.
A company desiring its shares to be approved must first satisfy very rigid rules concerning the prospectus. It must also agree to abide by the regulations of the stock exchange about any aspects of its conduct.

Main Features of Stock Exchange Market

1. Specialized Market:-
Stock exchange is a specialized market for the purchase and sale of industrial and financial securities.

2. Rigid Rules:-
There are large number of buyers and sellers who conduct their activities according to rigid rules.

3. Basis of Formation:-
Its activities are controlled by the company ordinance in our country. It can be formed as company limited guarantee or company limited by shares.

4. Bonafide Members:-
Its dealing are carried on within a particular place in which bonafide members are only allowed to participate in the transactions.

5.Rapid Communication:-
The dealers of the stock exchange are in position to communicate rapidly.

6. Management:-
Its management activities conducted by the committee of the management.

7. Approved Securities:-
Only approved and recognized securities of the public limited company and government institution are allowed to bring for dealing in the stock exchange market.

8. Face Value:-
The shares securities and debentures which are brought for dealing in the stock exchange bear definite face value.