Get comprehensive Miscellaneous Class 10 Notes covering important concepts, definitions, formulas, and solved examples. These notes are designed as per the latest CBSE Class 10 syllabus to help students prepare effectively for exams.
Miscellaneous Class 10 Notes
Corporate Actions
What are Corporate Actions?
The corporate actions are decisions made by a company which directly affect shareholders or security. These actions can be mandatory, voluntary, or mandatory with choice depending on whether shareholders need to respond.
Corporate actions are typically agreed upon by a company’s Board of Directors and authorised by the shareholders. This is an important change in company financial structure, strategy or shareholder value. Some examples are dividends, stock splits, rights issues, bonus issues, etc.
What is meant by ‘dividend’ declared by companies?
A dividend is a form of income for shareholders basically paid twice a year. A dividend is therefore a source of income for the shareholder. The first paid dividend is known as the interim dividend, paid during the financial year, and the second dividend is known as the final dividend, basically paid at the end of the financial year.
What is meant by dividend yield?
Dividend yield gives the relationship between the current price of a stock and the dividend paid by its issuing company during the last 12 months. It is calculated by aggregating the past year’s dividend and dividing it by the current stock price.
Example:
- ABC Co.
- Share price: Rs.360
- Annual dividend: Rs.10
- Dividend yield: 2.77% (10/360)
A high dividend yield is considered to be evidence that a stock is underpriced, whereas a low dividend yield is considered evidence that the stock is overpriced.
What is a Stock Split?
A stock split is a corporate action which splits the existing shares of a particular face value into smaller denominations so that the number of shares increases; however, the market capitalisation, or the value of shares held by the investors post-split, remains the same as that before the split.
Why do companies announce stock splits?
If the total value of the share does not change, then the company can decide on a stock split; this is done to make it more affordable and attractive to a wider range of investors. When the stock price becomes very high, then the small investors will not buy the stock, but if the company splits the share, then the price per share will reduce, and it will be easier for people to invest.
A buyback of shares means that the company repurchases its own shares from the market. Sometimes a company wants to reinvest in itself, which helps to improve earnings per share and potentially boost the stock price, and this can be done with the stock split only. According to the SEBI (Buy Back of Securities) Regulation, 1998, companies in India can buy back the shares through three main routes: proportionally from existing shareholders via an offer document, directly from the open market using the book building process or from shareholders holding lots of shares.
Index
What is the Nifty index?
CNX Nifty (Nifty) is a scientifically developed, 50-stock index, reflecting accurately the market movement of the Indian markets. It is maintained by India Index Services & Products Ltd. (IISL), which is a group company of NSE. Nifty is the barometer of the Indian markets.
Clearing & Settlement and Redressal
What is a clearing corporation?
A clearing corporation plays an important role for the smooth functioning of financial markets. Its most important role is to clear and settle transactions, which means that the exchange between parties after a trade is executed correctly and successfully. It also provides a financial guarantee for all trades, meaning it takes on the risk of default and ensures that both sides of a transaction are honoured. The Clearing Corporation also performs risk management functions such as monitoring credit exposure. In India, the National Securities Clearing Corporation Limited (NSCCL) fulfils this role for trades conducted on the National Stock Exchange (NSE).
What is Rolling Settlement?
Rolling settlement is a system used in stock markets to ensure timely and orderly completion of trades. In this system, all the trades executed on a particular day are referred to as T (Trade Day) and settled after a fixed number of working days known as T + n. In India the current standard is T + 2, which means that the settlement of funds and securities takes place after two working days.
What are pay-in and pay-out?
Pay-in day is the day when the securities sold are delivered to the exchange by the sellers and funds for the securities purchased are made available to the exchange by the buyers. At present the pay-in and pay-out happen on the 2nd working day after the trade is executed on the stock exchange.
What is an auction?
On account of non-delivery of securities by the trading member on the pay-in day, the securities are put up for auction by the Exchange. This ensures that the buying trading member receives the securities. The Exchange purchases the requisite quantity in the auction market and gives them to the buying trading member.
What is a book closure/record date?
Book closure and record date help a company determine exactly the shareholders of a company as of a given date. Book closure refers to the closing of the register of the names of investors in the records of a company. Companies announce book closure dates from time to time.
What is a no-delivery period?
Whenever a company announces a book closure or record date, the exchange sets up a no-delivery period for that security. During this period only trading is permitted in the security. However, these trades are settled only after the no-delivery period is over. This is done to ensure that the investor’s entitlement for the corporate benefit is clearly determined.
What is an ex-dividend date?
The date on or after which a security begins trading without the dividend included in the price, i.e., buyers of the shares will no longer be entitled to the dividend which has been declared recently by the company in case they buy on or after the ex-dividend date.
What is an ex-date?
The first day of the no-delivery period is the ex-date. If there are any corporate benefits such as rights, bonuses, or dividends announced for which the book closure/record date is fixed, the buyer of the shares on or after the ex-date will not be eligible for the benefits.
What resources are available to the investor/client for redressing his grievances?
You can lodge a complaint with the Investor Grievances Cell (IGC) of the Exchange against brokers on certain trade disputes or non-receipt of payment/securities.
What is arbitration?
Arbitration is an alternative dispute resolution mechanism provided by a stock exchange for resolving disputes between the trading members and their clients in respect of trades done on the exchange.
What is an Investor Protection Fund?
Investor Protection Fund is maintained by NSE to make good investor claims, which may arise out of non-settlement of obligations by the trading member, who has been declared a defaulter, in respect of trades executed on the Exchange.
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