SEBI

We have till now seen three categories of market players.

1. The guys who issue securities (companies)

2. The guys who invest in these securities (both retail and institutional investors)

3. The guys who facilitate the trade (brokers)

SEBI or Securities and Exchange Board of India is the market regulator who defines the rules of the game. It first drafts policies and procedures, then monitors the actions of the market participants and then passes rulings and judgments.

Over the past few years, SEBI has played an active role in responding to the needs of the markets and pushing in a lot of regulatory improvements. Nevertheless, not all people share this view..

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Brokers

Both BSE and NSE have an elaborate eligibility criteria for persons who are desirous of becoming members of the stock exchanges. Apart from basic educational qualifications, the members need to fulfil minimum networth criteria and need to pay applicable fees each year.

On obtaining memberships from the stock exchanges, these guys become eligible to take and execute orders from individuals and institutions. The world of stock-broking has seen a sea change over the past few years. Historically known for its non-transparent methods and gross inefficiencies, stock broking today is a lot better. Almost all trading today happens over the net and the broking charges have dropped significantly.

Brokers continue to play an important role in the capital markets as order aggregators and franchisees who help individuals like you and me to participate in this game.

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Retail investors

Having seen different categories of institutional investors, lets shift focus to retail investors now.

Retail investors are guys like you and me. We buy and sell securities in much smaller quantities than the institutional guys. Our pockets restrict us..

While we are pretty helpless individually in influencing markets; We are a significant force together. Typically, institutional investors are much more sophisticated when it comes to investing. They research more, have access to more information, have access to high-quality analysts and probably are better placed to feel the pulse of the market.

Given these structural disadvantages, retail investors are the guys who typically lose out when it comes to timing the market. We buy high and sell low. To avoid this, we are better off catching the trend rather than trying to time our entry/ exit into the market. Buy, if you think a stock will go up in the long term and sell if you think a stock will go down in the long term.

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Don't put all your eggs in the same basket*

One of most common methods to attain the benefits of diversification in portfolios is to invest in "Indexes" rather than in individual stocks. OEX is one such index. Its a subset of the S&P 500 index and consists of the top 100 blue-chip stocks from diverse industry groups. OEX is the ticker symbol for S&P 100 index.

While most sites give you information just on what to trade, www.oexoptions.com also strives to teach you how to trade. It provides a number of useful resources to traders such as pre-market alerts, signals on possible market movements for the day, charting indicators, investments lessons, day trading tips and even mentoring support.

If you are looking for some fundas on option trading, trend projections, understanding resistance and supports better.. do check out www.oexoptions.com. Before making a full time commitment, you could try the 15 day free trial provided by www.oexoptions.com

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Funds

This is probably the last category we would see under the "investor" category.

Funds are basically pooled vehicles. They are collective investment outfits. They collect cash from individual investors, pool them and then use it to make further investments in stocks, bonds and other financial instruments. Given their quantum of operations they enjoy economies of scale. So they would be in a position to afford quality personnel to manage the funds, able to extract better terms on transaction costs, able to better diversify etc.

There are various types of funds:
Mutual funds - Collecting cash from individual investors for onward investments

Pension funds - The pension contributed by millions of individuals forms the corpus for this fund. The fund managers then use this cash for making investments.

Hedge funds - In simple terms this is like a mutual fund for really large and wealthy investors. These guys cough up the cash and regulatoryly the hedge fund has more flexibility with respect to choosing its investment vehicles

Sovereign fund - This is a fund which is owned by government or a state owned entity. They may choose to invest in specific sectors or be sector agnostic.

Private Equity fund/ Venture capital fund - A team of investors join to create this fund. The fund then looks for various investment opportunities with respect to start up companies/ unlisted companies or even listed entities.

There may be a thousand other types of funds. Don't get bogged down by the jargon. They all do the same things - collect cash from willing investors and invest in appropriate opportunities. Who gives the cash and where they invest, define their personalities.

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The institutional investors

These are typically organizations which have access to large pool of cash. These guys use the money to invest in stock markets/ companies.

Given the sheer volumes they deal with, they have the ability to move the markets. For example, if LIC (Life Insurance Corporation) purchases 10 lakh shares of Tata Motors in the market, the price of Tata Motors tends to move up (the economics funda of demand being greater than supply).

Apart from mere volumes, the one other reason why they generally influence markets is because of "signalling" effect. These guys are sophisticated investors (at least they are supposed to be). So, their actions are very closely watched and interpreted by almost all the market participants and thus serves as a signal (either positive or negative).

Institutional investors include - Banks, insurance companies, pension funds, hedge funds, mutual funds, sovereign funds etc...

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Investment Banker

Here comes the next breed. The one who has drawn so much flak in the recent past. Anyways, what do these guys do?

Simply put, an investment banker is your best friend when it comes to dealing with capital markets. He helps you raise cash from the capital markets... (hmmm here comes a new term.. what is it?)

A vegetable market is a place wherein vegetables are traded. Similarly, a capital market is a place wherein instruments which helps you raise capital are traded. So capital markets include stock (equity) and bond markets (debt).

ok.. lets come back to our Investment Banker.

When a company wants to raise cash in the capital markets, either debt or equity, the I-Banker (as he is fondly called) comes to your rescue. He helps you manage the whole process. Not just that, he does a whole lot of other things too... He is often called the corporate broker. So he deals with corporate marriages (mergers), divorces (sell offs) or dating (Joint ventures). Many a times he also keeps track of players in the capital markets and gives his expert opinions on them to willing listeners.

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