Financial Markets

COURSE MANUAL
Post Graduate Diploma in Management (Financial Markets)

(PGD-FM) (One Year, Full Time Programme)

Approved by All India Council of Technical Education (AICTE)

National Institute of Financial Management
(An Autonomous Institute of Ministry of Finance, Government of India)
&
National Stock Exchange of India Limited

2013 - 14

SYLLABUS
Quadmester-1
S.No. Paper Paper Code Covered
by
Page
No.
1. Financial Institutions & Markets PGDM(FM) 101 NIFM 1-2
2. Capital Market Operations PGDM(FM) 102 NSE 3-5
3. Quantitative Methods for Financial Markets PGDM(FM) 103

NIFM 6-7
4. Accounting and Taxation for Mangers PGDM(FM) 104 NIFM 8-9
5. Economics for Financial Markets PGDM(FM) 105 NIFM 10-11
6. Introduction to Financial Planning PGDM(FM) 106 NIFM

12-13

Quadmester-2
by
Page
No.
1. Corporate Finance including Merger &
Acquisitions
PGDM(FM) 201

NIFM

14-16
2. Equity Derivative Market Operations PGDM(FM) 202 NSE 17-18
3. Corporate and Capital Market Laws PGDM(FM) 203 NSE 19
4. Commodities Market Operations PGDM(FM) 204 NSE 20-21
5. Financial Reporting Standards PGDM(FM) 205 NIFM 22-23
6. Ethics and Values PGDM(FM) 206 NIFM 24-25

Quadmester-3
by
Page
No.
1. Computer Application in Finance PGDM(FM) 301 NIFM 26-27
2. Bank Management PGDM(FM)) 302 NIFM 28-29
3. Financial Valuation and Modelling PGDM(FM) 303 NSE 30-31
4. Options Trading Strategies PGDM(FM) 304 NSE 32
5. Equity Research PGDM(FM) 305 NSE 33-34
6. Foreign Exchange & Currency Market PGDM(FM) 306 NIFM 35-37

Quadmester-4
by
Page
No.
1. Behavioural Finance PGDM(FM) 401 NIFM 38-40
2. Technical Analysis PGDM(FM) 402 NSE 41-42
3. Mutual Funds & Fixed Income Securities PGDM(FM) 403 NSE 43-44
4. Wealth Management PGDM(FM) 404 NSE 45-46
5. Investment Banking PGDM(FM) 405 NSE 47-49
6.

Summer Internship & Viva

PGDM(FM) 406 NIFM/
NSE
50
7. International attachment ( Presentation ) _____ ____ ____

1

FINANCIAL INSTITUTIONS & MARKETS
Course Code: PGDM(FM) 101
OBJECTIVES
To provide an overall understanding of Indian Financial System. It aims at discussing the
different components of Indian Financial Systems viz., Financial Institution, Financial
Markets and Financial Instruments.

CONTENTS
Module 1: Financial System and Economic Development
Financial system & economic development,
Interest rate - components & dynamics,
Financial Intermediation,
Regulation - aspects and institutional framework in India,
Financial Sector Reforms.

Module 2: Money Market
CCIL, Money market,
Government securities market,
Money market instruments - call money and notice money, treasury bills (TBs),
Commercial papers (CPs),
Certificate of deposits (CDs),
Commercial bills, repos,
Regulation - aspects and institutional framework in India.

Module 3: Capital Market
Capital Market - primary market, secondary market,
Trends in trading,
Volume and capitalization: BSE and NSE trading platforms,
Screen based trading: trading clearing & settlement,
Credit rating,

2

Merchant banking,
CMR Regulation - aspects and institutional framework in India.

Module 4: Foreign Exchange and Derivative Market
Foreign Exchange Market - concept, organization and dynamics,
Financial Derivatives - derivative markets in India,
derivative instruments; trading of derivatives,
Regulation - aspects and institutional framework in India.

Module 5: Select Financial Instruments & Financial Services
Global Depository Receipt & American Depository Receipt,
Fixed income instruments,
Mutual funds,
Insurance,
Pension,
Warrants and Convertibles,
Issuance and listing of securities - Follow on issues,
Rights issue,
Book Building,
Security Contract & Regulatory Act.
Suggested Readings:
Khan MY: Indian Financial System, Tata McGraw Hill, and New Delhi, 2000 .
Bhole, L M: Financial Institutions and Markets: Structure Growth and
Innovations.2nd edition: New Delhi: Tata McGraw Hill, 1992.
Srivastava, R M: Financial Institutions in Indian Financial Institutions. 3rd revision
ed. Mumbai: Himalaya Publishing House, 1996.

3

CAPITAL MARKET OPERATIONS
OBJECTIVES
This course is designed to help the students in understanding the capital market trading,
clearing, settlement and risk management processes of NSE. The students will also learn
the eligibility criteria for membership of NSE, important regulatory aspects and
valuation concepts.
CONTENTS
Module 1: Indian Securities Market an Overview
Introduction,
market segments, primary market, secondary market,
products and participants,
derivatives market, reforms, research,
Corporate and government securities market.
NSE membership - stock brokers, sub-brokers, broker-clients relationship,
trading mechanism, code of ethics etc.
Module 2: Trading
Introduction,
NEAT system, market types, corporate hierarchy,
local databases,
market phases,
order management, trade management, auction,
limited physical market,
RETDEBT market (RDM), trading,
Information downloaded to trading members and internet broking.

Module 3: Clearing and Settlement
Introduction,
key terminologies,

4

transaction cycle, settlement process,
settlement agencies, risks in settlement, securities settlement, funds settlement,
shortages handling,
risk containment measures,
international securities,
identification number,
demat and electronic transfer of securities,
investor protection fund,
clearing software data and reports download, file transfer protocol.

Module 4: Legal Framework and Fundamental Valuation Concept
Introduction to various Acts governing securities Market
Securities Contracts (Regulation) Act, 1956,
Securities Contracts (Regulation) Rules, 1957,
Securities and Exchange Board of India Act, 1992,
SEBI (Stock Brokers & Sub-Brokers) Regulations, 1992,
SEBI (Prohibition of Insider Trading) Regulations, 1992,
SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities
Markets) Regulations, 2003,
The Depositories Act, 1996,
Indian Contract Act, 1872,
The Companies Act, 1956,
Income Tax Act, 1961,
Money Laundering Act, 2002.
Fundamental Valuation Concepts
Elementary statistical concepts,
understanding financial statements,
Time value of money and equity research.

5

Market Simulation Lab - NLT
Students will develop financial market skills such as trading, investment, portfolio
management etc. through practice on NSE Learn to Trade (NLT), an internet based
market simulation software.
P.S.: Students must read daily news papers like The Economic Times, Financial Express
etc., watch business channels e.g. CNBC, NDTV Profit, ET Now etc. and get updates from
websites of SEBI, NSE etc.
Suggested Readings:
Capital Market (Dealers) Module, Workbook from NSE

6

QUANTITATIVE METHODS FOR FINANCIAL MARKETS

OBJECTIVES
The paper is expected to review various quantitative techniques used in financial
markets. It aims at developing usage of quantitative skills in financial markets and
attempts to make participants comfortable in usage of these techniques with the help
of observed data and forecast. It helps wherever possible to predict / forecast prices or
returns and interest rates.

CONTENTS
Module 1: Useful Mathematical Functions:
Graphing and solving linear functions;
Simultaneous equations;
Simple Polynomials;
Discrete and Continuous Compounding;
Discounting - link to interest;
logarithmic and exponential functions;
Interpretation within a business context.

Module 2: Descriptive and Inferential Statistics
Descriptive Statistics: data presentation;
Frequency distributions;
Measures of Central Tendency;
Dispersion;
Summaries of data and usefulness of trends, patterns and exceptions.

Module 3: Probability and Sampling Technique
The concept of probability;
Discrete and continuous random variables;
Theory of distributions;

7

Expected values;
Probability Density Function: Links to business data; Population - samples;
Probalistic and Non Probalistic Sampling.

Module 4: Hypothesis Testing
Hypothesis testing - Parametric and Non-Parametric approach;
Confidence intervals - interpretation;
Usefulness in business context.

Module 5: Parametric Data Analysis
Regression analysis;
Correlation, Scatter diagrams;
OLS techniques;
Interpretation of results;
Multiple regression;
Strengths of evidence - statistical testing;
Link to decision - making in a business context.
Suggested Readings:
Cochran, William G.: Sampling Techniques, 3rd Edition, Paperback, Wiley.
Dominick Salvatore & Derrick Reagle: Schaum's Outline of Statistics and Econometrics,
2
nd
Revised Edition, McGraw Hill Companies.

8

ACCOUNTING AND TAXATION FOR MANAGERS
OBJECTIVES
To provide the participants a thorough grounding of Commercial Accounting concepts
and Financial Statements with analysis of Financial Statements & Taxation practices
related to Capital Gains.

CONTENTS
Module 1: The Foundation
I Conceptual Framework of Financial Accounting
Users of Accounting Information and their Information Needs;
Basic Concepts and Conventions & Assumptions;
Accounting Equation and the rules of Debit and Credit.
II Corporate Financial Statements:
Legal Requirement relating to preparation of Financial Statements of Companies
a. Profit &Loss Account
Features of Profit and Loss Account and its preparation;
Understanding the various items of Profit and Loss Account and their
treatment.
b. Balance Sheet
Features of Balance Sheet;
Understanding the various items of Balance Sheet and their treatment;
Notes to Accounts and Accounting Policies.
c. Cash Flow Statement
Understanding, Construction and interpretation of Cash Flow Statement.

Module 2: Annual Reports

9

Contents of Annual Report
Auditors' Report;
Directors' Report;
Corporate Governance Report;
Segment Reporting;
Value Reporting.
Cases: Any two annual reports shall be discussed.
Module 3: Analysis of Financial Statements
Common-size Financial Statement;
Ratio Analysis; Liquidity Ratios, Solvency Ratios, Activity Ratios & Profitability
Ratios;
Ratios Useful for Shareholders and Investors;
Du-Pont Analysis;
Altmans Z score.

Module 4: Taxation
Overview of IT Act;
Securities Transaction Tax (STT);
Capital Gains (Short Term Capital Gain and Long Term Capital Gain);
Services Tax;
Income from Business and Profession.

Suggested Readings:
Dr. T.P. Ghosh: Accounting for Managers, Taxman Publication
D.S. Rawat: Student Guide to Accounting Standards, Taxman Publication
Ambrish Gupta: Financial Accounting for Management, Pearson Publication
Vinod Singhania: A Student Guide to Income Tax, Taxman Publication

10

ECONOMICS FOR FINANCIAL MARKETS
OBJECTIVES
This paper focuses on a few simple but powerful economic concepts that enable us to
explain features of financial markets. The paper also demonstrates the process of
important link between the financial system and the performance of the aggregate
economy.

CONTENTS
Module 1: Economics for Financial Markets Introduction
Why Study Money, Banking, and Financial Markets;
An Overview of the Financial System;
Understanding Interest Rates and its behavior;
The Risk and Term Structure of Interest Rates;
The Stock Market, the Theory of Rational Expectations, and the Efficient

Module 2: Monetary Theory
The Demand for Money
The Keynesian Framework and the ISLM Model
Monetary and Fiscal Policy in the ISLM Model
Aggregate Demand and Supply Analysis
Transmission Mechanisms of Monetary Policy: The Evidence
Money and Inflation

Module 3: Central Banking and the Conduct of Monetary Policy
Structure of Central Banks
Multiple Deposit Creation and the Money Supply Process
Determinants of the Money Supply
Tools of Monetary Policy
Conduct of Monetary Policy: Goals and Targets

11

Module 4: Models of Securities Prices in Financial Markets
Single-Period Models
Multiperiod Models
Continuous-Time Models
Fundamentals of Equilibrium Models
CAPM
Multifactor Models

Suggested Readings:
Mishkin, Frederic S.(2004). The economics of money, banking, and financial markets. 7th
ed.Pearson The Addison-Wesley series in economics.
Campbell, J., A. Lo, and G. MacKinlay. (1996). The Econometrics of Financial Markets.
Princeton, NJ: Princeton University Press.
Dothan, U. (1990). Prices in Financial Markets. New York: Oxford University Press.
Fama, E. (1976). Foundations of Finance. New York: Basic Books.

12

INTRODUCTION TO FINANCIAL PLANNING
OBJECTIVES
This paper serves individuals who are, or will be, actively developing their own personal
financial plans.
CONTENTS
Module 1: Foundations of Financial Planning
Understanding the Financial Planning Process
Your Financial Statements and Plans
Personal Financial Planning The Process
Setting Financial Planning Objectives
Managing Your Taxes
Module 2: Managing Basic Assets
Managing Your Cash and Savings
Making Housing and Automobile Decisions
Managing Credit: Borrowing on Open Account, Using consumer Loans
Using Insurance Effectively: Basic Insurance Principles, Life Insurance and Social Security,
Health Insurance, Property and Liability Insurance
Module 3: Managing Assets
Basic Investment Principles
Investing in Stocks and Bonds
Making Securities Transactions
Investing in Mutual Funds
Investing in Fixed-Income Securities
Income Tax Planning
Module 4: Retirement and Estate Planning
Meeting Retirement Goals
Preserving Your Estate

13

Estate Planning Principles
Planning for Death Taxes
Will Substitutes in the Estate Plan
Planning for Business Interests
Suggested Readings:
J. Gitman, Lawrence and D. Joehnk Michael. Personal Financial Planning. Harcourt Brace
College Publishers, The Dryden Press.
G. Victor Hallman and Jerry S. Rosenbloom. Personal Financial Planning.

14

CORPORATE FINANCE INCLUDING MERGERS & ACQUISITION
OBJECTIVES
Corporate Finance aims to provide a conceptual foundation to the theoretical aspects of corporate
finance. The end goal is to provide students with the tools necessary to conduct accurate financial
analysis as well as to analyze financial scenarios using financial theory.
Furthermore, Mergers and Acquisitions discuss the organic and inorganic growth choices as
pursued by the firms.
The course will sensitize the students about the need for corporate restructuring for achieving fast
growth and maximize shareholders value in the context of ever increasing competition thrown up
by liberalization and globalization of Indian economy.
It is expected that after pursuing this course the students will be able to develop competencies in
identifying opportunities/areas for mergers, demergers, amalgamations and takeovers etc.,
carrying out valuations involved therein, building up strategies for them and evaluating the post
restructuring performance of the enterprise.

CONTENTS
Part A: Corporate Finance
Module 1. Foundation of Finance
Goals and Functions of finance
Applications of Time Value of Money
Module 2. Risk and Return
Finding the Risk and Return of Securities Ex-post and Ex ante
Risk and Return on a Portfolio - 2 Security Case and 3 -Security Case: Capital
Assets Pricing Model
Module 3. Cost of Capital and Valuation of Securities
Finding the Cost of Capital for various sources of finance
Weighted Cost of Capital: Book Value and market Value Proportions
Equity and Bond Valuation
Module 4. Capital Budgeting: Techniques and Applications
Determination of Relevant Cash Flows
Capital Budgeting Techniques and their application

15

Capital Budgeting under conflicting situations
Capital Rationing
Investment Decision under Risk and Uncertainty
Module 5. Capital Structure & Dividend Policy
Operating, Financial and Total Leverage FBIT-FPS Analysis
Capital Structure Theories
MM Hypothesis with and without taxes
Capital Structure Decision Making
Module 6. Dividend Policy
Dividend Policy - Theories, Mechanics and Practices of Dividend Payment
Dividend Policy in India: Some Recent Evidence
Module 7. Working Capital Management - An Overview:
Nature of Working Capital
Planning of Working Capital
Computation of Working Capital and Management the Constituents of
Working Capital
Cash, Inventory and Receivables
Part B. Mergers and Acquisitions
Module 8. Introduction to Corporate Restructuring
Introduction, Scope & Types: : Expansion, Downsizing and Restructuring
Objectives & Motivations of Mergers, Takeovers, Acquisitions & Demergers
Module 9. Strategy, Diversification, Types & Characteristics
Analytical & framework for Generic & Corporate Strategies
Economic Rationales for major types of mergers
Managerial, Financial& Organizational Synergy
Due Diligence Process & Value chain analysis
Module 10. Valuation- The Financial Methodology
Valuation Models; Valuation of listed and unlisted companies, Modes of
valuation
Fixing price for acquisition.

16

Determination of share exchange ratio on merger, Share Swaps
Module 11. Restructuring Techniques and Procedures
Techniques of and Procedure for organizing takeover bids
Search for acquisition of Target Company
Procedure for Takeovers and Acquisitions
Code of conduct, SEBI Takeover Regulations
Module 12. Downsizing & Antitakeover strategies
Forms of Demergers & Reverse
Mergers, Divestitures
Equity carve out; Master Limited Partnerships
Leveraged buyout and Management buyout
Defensive & Anti-takeover strategies & Cost of Such strategies
Suggested Readings:
Barley Mayers: Corporate Finance.
Khan-Jain: Financial Management.
Godbole, Prasad & G, 'Mergers, Acquisitions and Corporate Restructuring "Vikas Publishing
House Pvt. Ltd, 2009 written as Godbole: MACR.

17

EQUITY DERIVATIVE MARKET OPERATIONS
OBJECTIVES
This course is designed to help the students in understanding the basics of the derivatives market
products in speculating, hedging and arbitraging. Students will also learn the process involved in
trading, clearing, settlement and risk management of equity derivatives in addition to the
regulatory, accounting and taxation issues.

CONTENTS
Module 1: Introduction to Derivatives
Derivatives - types, history, participants and economic functions.
Understanding interest rates and stock indices - Indices construction, economic significance,
application etc.
Futures contracts, mechanism and pricing - forward contracts, introduction to futures,
terminologies, pricing etc.

Module 2: Pricing, Applications of Futures and Options
Understanding Beta,
Numerical illustration of applications of stock futures.
Options contracts,
mechanism and applications - option terminology,
comparison between futures and options,
options payoffs,
Application of options.
Pricing of options contracts and Greek letters - variables affecting option pricing, The Black
Scholes Merton model for option pricing (BSO), the Greeks.

Module 3: Trading, Clearing and Settlement
Futures and options trading system,
the trader workstation,
futures and options market instruments,
Criteria for stocks and index eligibility for trading, charges.

18

Clearing and settlement - clearing entities, clearing mechanism, settlement procedure, risk
management and margining system.
Module 4: Regulatory Framework and Accounting
Securities Contracts (Regulation) Act, 1956,
Securities and Exchange Board of India Act, 1992,
Regulation for derivatives trading,
Adjustments for corporate actions.
Accounting for futures,
accounting for options,
Taxation of derivative transaction in securities.

Students will develop financial market skills such as trading, investment, portfolio management etc.
through practice on NSE Learn to Trade (NLT), an internet based market simulation software.
P.S.: Students must read daily news papers like The Economic Times, Financial Express etc., watch
business channels e.g. CNBC, NDTV Profit, ET Now etc. and get updates from websites of SEBI, NSE
etc.

Suggested Readings:
Derivative Market (Dealers) Module, Workbook from NSE

19

CORPORATE AND CAPITAL MARKET LAWS
OBJECTIVES
This course is designed to help the students in understanding the legal environment in which the
financial market operates.

CONTENTS
Module1. Companies Act, 1956, SCRA, 1956 and and Depositories Act, 1996

Companies Act 1956 - Incorporation of a Company, Prospectus, Allotment and Issue
of Shares, Share Capital and Debentures, Management and Administration, Winding
up.

Securities Contract Act, 1956 Definitions, Listing of Securities, Penalties and
Procedures. Depositories Act, 1996 Definitions, Rights of Obligations of
Depositories, Participants, Issuers and Beneficial owners, Enquiry and Inspection,
Penalty.
Module2. SEBI Regulations Act, 1952, Circulars, Rules, Regulations and Bye-laws
Definitions, registration of stock brokers and sub brokers, registration of trading and
clearing members, general obligations and responsibilities, inspection and
procedure for action in case of default.
Circulars, rules, regulations and bye-laws - NSE, NSCCL, SEBI and MoF circulars as
enforced from time to time, NSE rules, regulations and bye-laws, NSCCL rules,
regulations and bye-laws.

Module3. SEBI Rules and Regulations

SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities
Market) Regulations, 2003.

SEBI (Prohibition of Insider Trading) Regulations, 1992, SEBI (Portfolio Managers)
Regulations, 1993,
SEBI (Underwriters) Regulations, 1993.
Module4. SEBI Rules and Regulations

SEBI (Ombudsman) Regulations, 2003, Compliance with the provision of listing
agreement, Compliance with book building guidelines for raising funds through
public issue, Compliance with SEBI(DIP) guidelines for raising funds through public
issue
Suggested Readings:
Corporate & Capital Markets Laws Module, Workbook from NSE

20

COMMODITIES MARKET OPERATIONS
OBJECTIVES
This course is designed to help the students in understanding of commodities market, products,
financial derivatives, pricing mechanism etc. They will be able to understand the trading, clearing
and settlement operations using NCDEX platform. Students will also learn regulatory framework
and taxation aspects.

CONTENTS
Module 1: Introduction to Commodity Derivatives
Introduction to derivatives, products, participants and functions, derivatives markets,
Difference between commodity and financial derivatives.
Evolution of commodity exchanges,
Global commodity derivatives exchanges, latest developments.
The NCDEX platform structure, exchange membership,
risk management,
Clearing and settlement system and commodities traded on the NCDEX platform.

Module 2: Application of Commodity Futures
Instruments available for trading - forward contracts,
introduction to futures and options,
payoff for F&O,
Using futures versus options.
Pricing commodity futures - investment assets versus consumption assets, the cost of carry
model, the futures basis.
Using commodity futures for hedging, speculation and arbitrage.

Module 3: Trading, Clearing and Settlement
Trading - futures trading system,
entities in the trading system,
commodity futures trading cycle, order types and trading, parameters,
Margins for trading in futures, charges, hedge limits.

21

Clearing and settlement - clearing, settlement, risk management,
Margining at NCDEX and Standard Portfolio Analysis of Risk (SPAN).

Module 4: Regulatory Framework of Commodity Derivatives
Rules governing commodity derivatives exchanges, participants,
Investor grievances and arbitration.
Implications of Sales Tax, Value Added Tax (VAT) and obligations.
Electronic Spot Exchange - NCDEX Spot Exchange Ltd. (NSPOT).

etc.

Suggested Readings:
Commodities Market Module, Workbook from NSE

22

FINANCIAL REPORTING STANDARDS

OBJECTIVES
India has been preparing for IFRs conversions in the times to come. IFRSs as a Financial Reporting
Standards are revolutionary nature and based on principles despite the criticism and carve outs
they draw across the globe. Approximately 130 nations and reporting jurisdictions permit or
require IFRSs for domestic listed companies. This paper on Financial Reporting Standards
strengthen the knowledge of recognition of assets, liability, equity and income & expense in Indian
Accounting Standards vis-a-vis IFRSs.
CONTENTS
Module1. A review of National Accounting Standards, International Accounting Standards
and US GAP
General Accounting Standards
o Disclosure of Accounting Policy AS1 - IAS1
Revenue Recognition
o Revenue Recognition AS9 - IAS18
Module2. Asset Related Accounting Standards
o Accounting for fixed assets AS10 - IAS16
o Depreciation Accounting AS6 - IAS16
o Accounting for leases - AS19 - IAS17
o Accounting for intangible assets AS26 IAS38

Module 3. Disclosure Related Accounting Standards
o Cash Flow Statements AS3 IAS7
o Segment Reporting AS17 IAS14
o Related party disclosure AS20 IAS33
o Discontinuing operation AS24-IAS35

Module 4. Investment Related Accounting Standards
o Accounting for Investments AS13 IAS39 & IAS40
o Accounting for amalgamation AS14 IAS22
o Consolidated Financial Statements AS21 IAS27
o Accounting for investments in associates in consolidated Financial
Statements AS23 IAS28
o Financial Reporting of Interest in Joint Venture AS27 IAS31

23

Module 5. Financial Instrument Standards
o Financial Instruments: Recognition and Measurement AS30 - IAS39
o Financial Instruments: Presentation AS-31 IAS32
o Financial Instruments: Disclosures AS-32 IFRS -7
Module 6. Other Accounting Standards
o Accounting for the effects of changes in foreign exchange rates AS11
IAS21
o Accounting for taxes on income AS22 IAS 12
o Interim Financial Reporting AS25 IAS34
o New Accounting Standards

Suggested Readings:
Accounting Standard by Shri D.S. Rawat (Taxman Publication)
T.P. Ghosh: Indian Accounting Standards and IFRSs, Taxman
Compendium of the Accounting Standard - ICAI

24

ETHICS AND VALUES

OBJECTIVES
Because the most of business frauds and scandals world over have been committed by the
business graduates and todays business graduates will become tomorrows businessmen. It has,
therefore, been increasingly realized world over including India to teach business ethics to the
business graduates during the course of their study itself. It is with this realization that ethics and
values have been offered a core subject in PGP (FM) course offered jointly by the NSE and the
NIFM.
The course aims at:
Making the learners know what makes one ethical, in general, and in business, in particular.
Understanding the ethical ways of conducting business for its long term survival.
Appreciating the benefits of conducting business following the ethical ways and
disadvantages of business using the unethical means.
Convincing the learners only the business conducted in an ethical and fair manner survives
and thrives today, tomorrow, and tomorrow.
CONTENTS
Module1. Ethical Foundation
Meaning and Objectives of Ethics
Ethics and Morality
Moral Standards
Moral Development
Ethical Dilemmas
Module2. Theories of Ethics
Teleological Theories:
(i) Theory of Utilitarianism
(ii) Theory of Justice and Fairness
(iii) Theory of Virtue

25

Deontological Theories:
(i) Duty Theory
(ii)Rights Theory
(iii)Kantian Theory of Duty
Module3. Professional Ethics
Meaning, Objectives and Need for Professional Ethics
Difference between Professional Ethics and Personal Ethics
Professional Ethos
Code of Professional Ethics
Practising the Code of Ethics
Module4. Basics of Values
Meaning of Values
Value Deterioration in Contemporary India
Types of Values
Formation of Values
Values for a Good Life
Module5. Human Values
Different Meanings of Human Values
Self-Exploration for Self-Improvement
Love
Humility
Happiness
Equanimity and Equipoise
Tolerance and Endurance
Spirituality at Work Place
Suggested Readings:
S. K. Chakraborty (Ed): Human Values for Managers, Wheeler Publishing, New Delhi
A. N. Tripathy: Human Values, New Age International Publishers, New Delhi
S. K. Chakraborty: Ethics in Management (Vedantic Perspective), Oxford University Press, New
Delhi.

26

COMPUTER APPLICATION IN FINANCE

OBJECTIVES
Whether one works for a Fortune 500 Corporation, a small company, a government agency, or a
non-profit organization, if (s)he reads this paper the chances are that (s)he uses Microsoft Excel in
his daily work. Their job probably involves summarizing, reporting, and analysing data; it might also
involve building analytical models to help their employer in increasing profits, reducing cost or just
managing operations more efficiently. This paper is meant to develop the skills of computer
applications in the Finance.
CONTENTS
Module 1: Microsoft Excel Using VBA
Introduction to VBA
Elements of VBA language and syntax
Designing a good program
Entering data and formulas to the worksheet under VBA
Range validation
Working with worksheet contents
Selecting ranges and formatting cells using VBA
Assigning values to cells and ranges using VBA
Concatenating strings
Using external functions through add-ins like Solver, Financial Analysis ToolPak, etc
Embedded macro buttons
Testing and debugging VBA code

27

Module 2: Financial Econometrics Using MS Excel
The Simple Linear Regression Model
Interval Estimation and Hypothesis Testing
Prediction, Goodness-of-Fit and Modeling Issues
The Multiple Linear Regression
Heteroskedasticity
Dynamic Models, Autocorrelation, and Forecasting
Random Regressors and Moment-Based Estimation
Nonstationary Time-Series Data and Cointegration
VEC and VAR Models: An Introduction to Macroeconometrics
Time-Varying Volatility and ARCH Models: An Introduction to Financial Econometrics

Module 3: Financial Model Using MS Excel
The Black Scholes Formula in the spreadsheet
Introduction to Monte Carlo Simulations
Calculating Greeks in Monte Carlo Simulations
CAPM using spreadsheet
Multi-period model using speadsheet

Suggested Readings:
Vijay Gupta, 2002, Financial Analysis Using Excel, Vol. 6, VJ Books Inc. Canada
Curtis D. Frye, 2007, Step By Step MS Office Excel, PHI Pvt. Ltd

28

BANK MANAGEMENT
OBJECTIVES
Banking Sector is not only the integral part of any financial system; rather it acts on the back bone
of the system. Studying this paper will make the participants well versed with Banking System in
India, its regulation, operation exposure and risk management techniques.

CONTENTS
Module1: An Overview of Banks and NBFCs.
Indian Banking System, Role of RBI
Regulatory system for Banks and NBFCs
{{{{
Module 2: Banking Sector Reforms,
Banks Balance Sheet
Liabilities Management
Cost of funds and Transfer Pricing
Negotiable Instrument s Act, Banking Regulation Act

Module 3: Loan Policy of Banks, Exposure Norms
Credit Appraisal, Assessment of Credit requirements 0 Project Finance,
Credit Rating, Pricing of Loans, PLR
Credit Delivery
Non Fund Business LIC, Guarantee,
Credit Supervision and Monitoring
Leasing and Hire Purchase
Case Study

Module 4: Prudential Norms on Income Recognition and Asset
Classification

29

Restructuring of Loans,
Industrial Rehabilitation,
Management of NPAs,
Recovery Management in Banks,
Legal and Non Legal Measures.
DRT Act 1993, SARFAESI Act 2002.
Exercises and Problems

Module 5: Investment Management in Banks, SLR l Non SLR, securities
Dealing Room Operations,
Integrated Treasury Operations 0 Asset Liability Management 0 Case Study on ALM

Module 6: International Banking,
Foreign Exchange and Euro Markets, 0 Bourse Programme in Forex,
Trade Finance
Derivatives,
Foreign Currency Funding Options

Module 7: NBFCs - Types,
RBI guidelines for NBFCs,
Role of NBFCs in financing projects

Suggested Readings:
Rose, Peter S, Commercial Bank Management
Heffernan, Shelagh : Modem Banking

30

FINANCIAL VALUATION AND MODELLING
OBJECTIVES
This course is designed to help the students learn the application of MS-Excel in the financial
modelling.

CONTENTS
Module 1: Excel as a tool in Financial Modelling
Excel concepts - Basic commands.
Functions - maths, logical, look up, date, text and financial.
Chart, diagram, picture, background, auto format, conditional formatting, style, filter,
sort.
Formulas and macros.
What if analysis, pivot table, pivot chart, scenario, goal seek, problem solver tool,
advanced filter.

Module 2: Financial Modelling Basic Concepts
Introduction,
Advanced functions of MS-Excel as a tool in financial modelling.
Components of a financial model, building the template,
filling in the historical data,
identifying assumptions and drivers,
forecasting various schedules and financial statement,
building the supporting schedules,
various approaches to valuation,
key ratios, financial ratios and company analysis,
Building cases and sensitivity analysis: - looking at the probabilistic analysis of the best
and worst case scenario.

Module 3: Cash Ratios and Non Cash Valuations
Cash Ratio - Structured model with a menu & accounting statements,
Calculating key financial ratios,

31

Deriving an international cash flow.
Non Cash Flow Valuations - Accounting methods,
Dividend discount models,
Market-based methods EPS and multiples,
Fundamentals EV/EBITDA, EV/Sales, etc, Peer groups.

Module 4: Forecasting Methods and Initial Valuations
Review of forecasting methods,
relationship between company and financial strategy,
identifying and forecasting key drivers,
linkages and modelling problems,
Deriving free cash flow.
Cost of capital and initial valuation
alternative theories bonds and arbitrage pricing theory, capital asset pricing model
constituents,
asset and equity betas,
mathematical derivation,
methods of adding terminal value,
producing an equity valuation,
comparison to existing share price,

etc.
Note: The curriculum is under revision by NSE due to constant changes in financial market and will
be provided before the corresponding semester starts.

Suggested Readings:
Financial Valuation and Modeling, Workbook from NSE

32

OPTIONS TRADING STRATEGIES
OBJECTIVES
This course is designed to help the students learn about the various option strategies, risks and
payoff associated with different strategies.

CONTENTS
Module 1: Introduction to Options
Option terminology, options payoffs, payoff profile of buyer and seller of long and short
asset, long call and short call, long put and short put

Module 2: Options Strategies Basic
Long call, short call, synthetic long call, long put and short put. Covered call, long
combo, protective call and covered put.

Module 3: Options Strategies Intermediate
Long and short straddle, long and short strangle, collar

Module 4: Options Strategies Advance
Bull call and put spread, bear call and put spread, long and short call butterfly, long and
short call condor

etc.

Suggested Readings:
Options Trading Strategies Module, Workbook from NSE

33

EQUITY RESEARCH
OBJECTIVES
This course is designed to give the students a practical orientation towards the principles of
investment, pricing, valuation and portfolio management.

CONTENTS
Module 1: Introduction to Equity Research, and Economic Analysis
Equity Research an Introduction Overview,
Market participants,
Types of research,
Role of an analyst,
Stocks and industry classification.
Time value of money, future and present value,
Risk and return, types of risks, measurement,
Beta, risk return trade off,
Quantitative and qualitative aspects,
Concept of intrinsic value.
Economic analysis - economic indicators, gross domestic product, inflation, interest
rates, credit policies, foreign direct investment, FIIs etc.

Module 2: Industry and Company Analysis
Industry analysis, life cycle of an industry,
SWOT analysis,
Characteristics of industry analysis,
Michael Porters five forces model.
Company analysis - non financial aspect,
The management - general analysis of company, SWOT analysis, quality-price matrix.
Company analysis financial, analysis of financial statements.
Ratio analysis Activity, Solvency and Valuation Ratios and leverage analysis.

34

Module 3: Valuation of Stocks and Firms
Valuation concepts,
Time value of shares,
Share models, discount rate,
Multiplier approach to share valuation, regression analysis, preferred stock.
Valuation of firms,
Weighted average cost, cost of debt, cost of preferred stock, cost of equity, CAPM
approach,
Discounted cash flow approach,
Discounted cash flow corporate valuation model,
Relative corporate valuation model,
Advantages and disadvantages of relative valuation.

Module 4: Report Writing and Presentation
Equity Research Report Writing Information memorandum,
Format structure and content,
Source of information and its validity,
Desk research,
Independent appraisal of management information,
Expert / legal opinion

etc.

Suggested Readings:
Equity Research Module, Workbook from NSE

35

FOREIGN EXCHANGE & CURRENCY MARKET

OBJECTIVES
This course is designed to help the students in understanding the basic concepts of Foreign
Exchange market & currency derivatives, products and their applications as a risk management
tool.

CONTENTS
Module 1: Foreign Exchange Management
Forex Market-Wholesale and Domestic;
Quotations- Direct, Indirect and Cross Currency;
Various Kinds of Transactions and their settlement dates;
Forward Rates;
Swaps;
Quotes for various kinds of Merchant Transactions;
Early Delivery;
Extension or Cancellation of Forward Contracts.
Module 2: Exchange Rate Determination and Forecasting
Purchasing power parity and interest rate parity;
Relationship between PPP and IPP;
Reasons for Deviation from PPP and IPP;
Models of Exchange rate forecasting;
The Demand and Supply Approach;
The Monetary Approach;
The Portfolio balance Approach.

36

Module 3: Foreign Exchange Exposure
Financial Accounting and Foreign Exchange-Currency Translation Methods;
AS-8 and FAS 52;
Transaction exposure;
Managing Transaction and Translation Exposure;
Designing a Hedging Strategy;
Measuring & Managing Economic Exposure.
Module 4: Basics of Equity Derivatives
Introduction;
Definitions of basic derivatives;
Put options & call options applications of derivatives and derivatives as a risk management
tool.
Module 5: Trading Futures and Options on Stock Exchanges
Trading Futures - Pay-off of futures;
Theoretical models for future pricing.
Trading Options option payouts;
Option strategies;
Determination of option prices and factors affecting option prices.
Derivatives trading on NSE using daily newspapers to track F&O;
Settlement of F&O;
Accounting and taxation.
Module 6: Introduction to Currency Markets
Introduction to currency markets;
Exchange rates;
factors affecting currency futures;
Strategies using currency futures;
Hedging, speculation, arbitrage.
NSE's currency derivatives segment.

37

Module 7: Trading, Clearing, Settlement and Risk Management in Currency Futures
NSE membership categories;
Eligibility and criteria;
Future contract specifications;
Trading system, placing orders, client broker relationship.
Clearing, settlement and risk management system through margins of different kinds;
Clearing entities and settlement mechanism.

Market Simulation Lab
Market simulation lab sessions using technical analysis software such as Metastock for timing
the currency futures trading decisions.

P.S.: Students must read daily news papers like The Economic Times, Financial Express etc.,
watch business channels e.g. CNBC, NDTV Profit, ET Now etc. and get updates from websites of
SEBI, NSE etc.

Suggested Readings:
International Finance, PG Apte
Multinational Financial Management, Alan C. Shapiro
Currency Derivatives: A Beginners Module, Workbook from NSE

38

BEHAVIOURAL FINANCE

OBJECTIVES
Behavioural finance, studies the effects of social, cognitive, and emotional factors on the economic
decisions of individuals and institutions and the consequences for market prices, returns, and the
resource allocation. The fields are primarily concerned with the bounds of rationality of economic
agents. Behavioural models typically integrate insights from psychology with neo-classical
economic theory; in so doing, these behavioural models cover a range of concepts, methods, and
fields.

CONTENTS
INTRODUCTION
Finance Theory as an Engine not a Camera, Rebuilding on New Foundations, Challenging the
Classical Assumptions of Finance, Modeling Behavioral Aspects of Finance.
Module 1: FOUNDATIONS
Financial Decision Making.
o The Expected Utility Rule, Expected Utility Theory: Simple But Untrue?,
Frames for Actions, Contingencies and Outcomes.
Discounting.
o The Discounted Utility Model, How and Why Discount Rates Vary, How
Investment Decisions are Made When Discount Factors Decline over
Time.
Learning.
o Rational Learning, Over Inference and the Law of Small Numbers,
Disagreement, & Tastes.
Bubbles.
o Bubbles: Past, Present and Future, The 1929 StockMarket Crash, Should
Government Burst the Bubble?

39

Module 2: ASSET PRICING
Noise Traders
o Can Investors Get Emotional?
Overconfidence and Optimism
o Do Investors Trade Too Much?
Asset Pricing under Prospect Theory
o The Basics of Prospect Theory, Does Prospect Theory Work?, The
Cumulative Probability Version of Prospect Theory, Does Cumulative
Prospect Theory Work?
Overreaction and/or under reaction.
Momentum.
Herding.
Insider Trading.
o Insider Trading Here for Better or Worse, Insider Trading, Stock Options
and the Construction of Earnings, Insider Trading and its Consequence for
Outsiders.
Equity Premium Puzzle.
o The Puzzle, Loss Aversion in a ReferenceDependent Utility Model.
Module 3: CORPORATE FINANCE
Incorporation.
o Companies: Where did They Come from and Where will They Go?,
Agency, Monitoring and Incorporation.
The Market for Information, Noise and Deception.
o The Boundaries of the Market for Corporate Information, What Do
Analysts Do?, Valuing Investment Advice.

40

Dividends.
o The Irrelevance of Dividends to Value, A Prospect Theory Explanation of
Dividend Payments, Who Pays Dividends and Why?
Entrepreneurship.
Module 4: THE PROFESSIONS
Analysts Conflicts of Interest.
Accounting Reform.

Suggested Readings:
Behavioural Finance (2009), William Forbes, John Wiley & Sons
Value Investing And Behavioral Finance 1st Edition, Parag Parikh, Tata McGraw-Hill
Education (2009)

41

TECHNICAL ANALYSIS
OBJECTIVES
This course is designed to help the students to develop the practical skills for utilizing tools and
techniques of technical analysis for timing the investment and trading decisions in stock,
commodity and currency market.

CONTENTS

Module 1: Introduction to Technical Analysis
Technical analysis, basic assumptions, strengths and weakness. Dow theory, the charts,
candlestick charts analysis with one two and three candles like hammer, hanging man,
shooting star, bearish and bullish harami etc. Pattern Study - Support and resistance, head
and shoulders, double top and double bottom and Gap theory.
Module 2: Major Indicators and Oscillators
Stochastics, RSI, Williams %R, MFI, Bollinger bands, Moving Averages, MACD, Other
Investments
Module 3: Major Theories in TA
Dow Theory and Eliot Wave Theory
Module 4: Risk Management, Trading Phycology and Trading Strategies
Risk Management Need, techniques, uses of stop loss, qualities of successful traders,
golden rules of traders, do's and don'ts in trading, rules to stop losing money, choosing the
right market to trade, importance of discipline in trading. Day trading, advantages of day
trading, risks associated with trading, strategies for day trading, momentum trading
strategies.

42


P.S.: Students must read daily news papers like The Economic Times, Financial Express etc.,
watch business channels e.g. CNBC, NDTV Profit, ET Now etc. and get updates from
websites of SEBI, NSE etc.

Suggested Readings:
Technical Analysis, Workbook from NSE

43

MUTUAL FUNDS & FIXED INCOME SECURITIES

OBJECTIVES
This course is designed to help the students in understanding the basic and advance concepts of
mutual funds. In addition it will help them in understanding the fundamental features of debt
instruments, trading on the NSE-WDM Segment, regulatory & procedural aspects and concepts in
valuation of bonds.

CONTENTS
Module 1: Mutual Fund Products and Features

Mutual Funds, benefits, risks of investing, NAV, entry/exit load, types, fund offer document.
Different type of mutual fund products, features, exchange traded funds (ETF) and gold
ETFs. investments by mutual fund schemes, valuation of investments by mutual fund
schemes, mutual fund accounting, novel portfolio structures in mutual fund schemes,
quantitative evaluation of mutual fund schemes, cut-off time regularations & time
stamping, investment in mutual funds through NSE, non-residential investment in Indian
MF schemes, investment by Indians in international MF schemes, SID, SAI, KIM & fact
sheets
Module 2: Debt Market and Trading in Wholesale Debt Market (WDM)
Debt instruments: fundamental features, Indian debt markets: a profile, central
government securities: bonds, central government securities: t-bills, state government
bonds, bond market indices and benchmarks. Call money markets, corporate debt: bonds,
commercial paper & certificate of deposits, repos, trading mechanism in the NSE-WDM.
Module 3: Valuation of Bonds
Valuation of bonds, yield curve and term structure of interest rates bootstrapping,
alternative methodologies to estimate the yield curve, NSE ZCYC (Nelson Seigel Model),
duration, fixed income derivatives interest rate futures, swaps and guidelines.

44

Module 4: Regulatory framework and taxation of Mutual Funds and Debt
Regulations governing equity market and mutual funds. Introduction to techniques of
analysis in stock market and mutual funds like ratio analysis. An introduction to income tax,
capital gains having direct relevance for investment / trading in stock market and mutual
funds. G-Sec Act 2006; SEBI (Issue and Listing of Debt Securities) Regulations 2008 and
Market Practices and Procedures.
Suggested Readings:
Mutual Funds: A Beginners Module, Workbook from NSE
Mutual Funds (Advanced) Module, Workbook from NSE
FIMMDA-NSE Debt Market (Basic) Module, Workbook from NSE

45

WEALTH MANAGEMENT

OBJECTIVES
This course is designed to help the students in managing the wealth of clients through investments
in equity, debt and alternative products, keeping in mind the risk profile and taxation aspects while
allocating assets.

CONTENTS
Module 1: Introduction to Wealth Management
Financial planning to wealth management, wealth cycle, risk profiling and asset allocation,
contract and documentation, client data collection, client data analysis, life cycle,
systematic approach to investing, financial plan, financial blood-test report (FBR), financial
planning in India. Economic cycles and indicaters, interest rate views, currency exchange
rate, the deficits.
Module 2: Investment and Risk Management using Equity & Debt
Role of equity, active and passive exposures, returns from passive exposure to S&P CNX
Nifty, sector exposure and diversification, fundamental and technical analysis, fundamental
valuation approaches, investment and speculation, leveraging. Role of debt, deposits and
debt securities, valuation of debt securities, yields and interest rate risk, interest rate and
debt investments, credit exposure and debt investments, concentration risk, passive
investments in debt
Module 3: Investment and Risk Management with alternate assets
Gold - Role of gold, gold investment routes, rupee returns from gold. Risk assessment, life
insurance, health insurance, general insurance, safeguards in insurance. Derivativesfutures
& options, mutual fund, venture capital / private equity funds, hedge funds, structured
products, portfolio management services (PMS). Role of real estate, real estate investment

46

routes and real estate indices. Estate planning assets & liabilities, nomination, inheritance
law, will, trust.

Module 4: Risk profiling, asset allocation and evaluation of investment
Risk profiling, why asset allocation?, strategic asset allocation, tactical asset allocation, fixed
asset allocation, flexible asset allocation, asset allocation returns in equity and debt asset
allocation returns in equity, debt and gold, allocation to speculation, diversification in
perspective. Risk-return framework, risk, risk adjusted returns, selectively-invest
classification scheme for investment products
Module 5: Taxation of Investment Products
Previous year and assessment year, gross total income, income tax slabs, advance tax, tax
deducted at source (TDS), exempted income, deductions from income, long term and short
term capital gain / loss, speculation profit / loss, capital gains tax exemption, under section
54EC, capital gains tax exemption under section 54F, setting off & carry forward. dividend
tax / tax on income distributed by mutual fund, securities transaction tax (STT), capital gains
taxation, taxation of fixed deposits and fixed maturity plans, dividend and growth options in
mutual fund schemes, wealth tax.
Suggested Readings:
Wealth Management Module, Workbook from NSE

47

INVESTMENT BANKING

OBJECTIVES
This course is designed to help the students in understanding the role and responsibilities of an
Investment Banker, products, services for the individual as well as corporate while managing the
risks.

CONTENTS
Module 1: Financial Markets Overview
Structure of financial market
Types of markets
Types of financial instruments & their importance
Role of Investment Banks
Module 2: Analyzing Financial Statement for I-Banking
Concept of the three financial Statements
Understanding the line items of financial statements
Understanding the relationship between financial statements
Module 3: Financial Statement Analysis
Common sizing of financial statements
Ratio analysis
Time series analysis
Cross sectional analysis
Module 4: Financial Modelling
Introduction to financial modelling
Preparing for modelling
Building an earning projection model
Review exercise

48

Module 5: Relative Valuation Analysis
Introduction to valuation
Why do we value companies?
Difference between book value and market value
Valuation methodologies: relative & fundamental valuation
Module 6: Trading Comparable
Choosing appropriate peer group
Calculating equity value and enterprise value (EV)
Calculating fully diluted shares outstanding (options & convertibles)
Adjusting the EV
Normalizing Income statement
Calculating last twelve months (LTM)
Module 7: Case Study on Trading Comps
Practice on full trading comps
Interpretation and analysis of trading multiples
Module8: Transaction Comparable
Choosing appropriate peer group
Discuss strategic rationale
Different kind of deal considerations
Control premiums, synergies
Calculating equity value and EV
Module 9: Case Study on Transactions Comps
Practice on full transaction comps
Interpretation and analysis of transactions multiples

49

Module 10: Absolute Valuation Analysis
Introduction to Discounted cash flow
Dividend Discount Model
Free cash to Firm (FCFF) & Free Cash Flow to Equity (FCFE)
Discount Rate (Cost of Debt, Cost of Equity & Cost of Capital)
Forecasting
Revenue drivers
Cost drivers
Practice complete DCF model
Pitch book building process
Introduction to Pitchbooks
Building Company Profiles
Building case studies
Building industry thematic

P.S.: Students must read daily news papers like The Economic Times, Financial Express
etc., watch business channels e.g. CNBC, NDTV Profit, ET Now etc. and get updates
from websites of SEBI, NSE etc.

Note: The curriculum is under revision by NSE due to constant changes in financial
market and will be provided before the corresponding semester starts.

Suggested Readings:

Investment Banking, Workbook from NSE

50

SUMMER INTERNSHIP & VIVA

The participants are required to undergo a two month (8 weeks) summer internship at various
corporate houses. The participants are required to submit a project report on their summer internship
which will be evaluated to enable them to earn a required credit.

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COURSE MANUAL

Post Graduate Diploma in Management (Financial Markets)

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