Financial institution and markets Dec 2024

Description

Financial Institutions and Markets

December 2024 Examination

 

 

Q1. Mr.Arun Mehra has recently started his career at an investment management firm, where he is responsible for handling capital market instruments. To assess his understanding of the capital market, his manager has tasked him with preparing a comprehensive write up on the role and significance of the capital market in the financial system. As an MBA student, outline the key points that Mr.Mehra should include in his report, focusing on how the capital market contributes to economic development, investment opportunities, and overall financial stability of a country. (10 Marks)

Ans 1.

Introduction
The capital market plays a pivotal role in the economic growth and financial stability of a country. It is a marketplace where long-term securities such as stocks, bonds, and other financial instruments are traded. By facilitating the transfer of funds between savers and businesses or governments that need investment capital, it aids in the optimal allocation of resources, ensuring that capital is directed toward productive sectors of the economy. For an investment management professional like Mr. Arun Mehra, understanding the functions and significance of the capital market is essential for navigating this complex environment. The capital market is not just a

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Q2. “The case of Paytm, particularly around its Initial Public Offering (IPO) and subsequent stock market performance, has sparked discussions about the role of regulators and whether they adequately protected investors.”. Discuss the above case study and your own words and breakdown of how regulatory shortcomings were perceived in the Paytm case with rest to Oversight of IPO Valuation, Disclosure Requirements and other aspects.  (10 Marks)

Ans 2.

Introduction

The Initial Public Offering (IPO) of Paytm, one of India’s largest digital payments platforms, was highly anticipated, raising significant public interest and investor enthusiasm. However, the post-IPO performance of Paytm’s shares disappointed many, as the stock price plummeted following its debut on the stock market in November 2021. This event sparked widespread discussions regarding the regulatory oversight of IPO valuations, the adequacy of disclosures made by the company, and whether regulators effectively protected investors in the process. While the Securities and Exchange Board of India (SEBI) sets stringent guidelines for IPOs, the Paytm case raised concerns about gaps in regulatory mechanisms, particularly around ensuring fair valuations and full transparency. This

 

3a. You are an investment advisor at a financial firm that primarily deals with institutional and retail clients. One of your clients, a large corporation, is looking for a safe and reliable short- term investment option to park its surplus funds for the next few months. The client has heard about Treasury Bills (T-Bills) and has asked you to prepare a detailed report on this investment option. Prepare the report on the same. (5 Marks)

Ans 3a.

Introduction
Treasury Bills (T-Bills) are short-term government securities issued by the Reserve Bank of India (RBI) on behalf of the government. They are widely regarded as one of the safest investment options due to the backing of the government. For corporations looking to park surplus funds for a short period, T-Bills offer a reliable, low-risk option with assured returns. This report provides a detailed overview of T-Bills, including their features, benefits, and suitability as a short-term

 

 

3b. You have recently been appointed as a financial strategist at “Future Finance Ltd.,” a new financial institution planning to enter the Indian money market. You are required to highlight the issues pertaining in Indian money market. (5 Marks)

Ans 3b.

Introduction

The Indian money market plays a crucial role in providing short-term liquidity to financial institutions, corporations, and governments. It includes instruments like Treasury Bills, commercial papers, and certificates of deposit. However, despite its significance, the Indian money market faces several issues that impact its efficiency and effectiveness. As Future Finance Ltd. plans to enter this market, it is essential to understand these challenges and develop strategies to mitigate