ii. Rights issue
A company announces a rights issue when it is in need of fresh capital and wants to raise it from the existing shareholders of the company. Rights shares are allotted to the existing shareholders at a discount to the existing market price.
Example
You are holding 1000 shares of the company ABC and the current market price of shares is Rs. 50. The company comes out with a rights issue of 1:5 at Rs. 40. It means that you are entitled to receive 1 share for every 5 shares held by you and you will have to pay Rs. 40 per share for that. Thus you are entitled to a total of 200 shares (1*1000/5) at a total additional cost of Rs. 8000 (Rs. 40*200).

As a shareholder, you have the right to renounce the rights if you do not wish to invest more in the company, as you are uncertain of the company’s future growth potential.

iii. Stock splits
Shares have a par value or face value. When the face value of shares is sub divided into smaller denomination, it is called stock split. A company generally resorts to stock split when the existing market price of its shares rises to significant levels. Stock split leads to adjustment in price of the shares and also increases the number of shares available in the stock market. This adds to liquidity and allows investors to buy shares at lower prices.
Example
Par value of shares of Company ABC is Rs. 10 and the current market price is Rs. 3000. The company decides to go for stock split in the ratio of 10:1. It means each share of Rs. 10 will be split into 10 shares of Rs. 1 each. The base price of the scrip will be adjusted to Rs. 300 on Ex-date (Rs. 3000/10). The number of shares available for trading will also increase ten times and hence more liquidity will be infused in market.

If however suppose the share price rises to Rs. 160 and you have short sold, you will have to square up your position and incur a loss of Rs. 1000 as per the above example…

You can sell short in the stock market. As transactions are netted only at the end of the day, you have time till the end of the day to square up your position, which means to buy back shares sold by you. Short selling will get impetus once the securities borrowing and lending mechanism as approved by SEBI comes into force as in that case, you need not square up your position. You may borrow shares from lenders by paying certain fees, give deliveries to the exchange for shares sold by you and buy back when market moves as per your expectation. Once you buy back, you can deliver shares back to the lenders and make a cool profit in the bargain. Short selling has recently been allowed for institutional investors such as foreign institutional investors ((FIIs), banks etc.

Risks of undertaking short selling
• The price of the scrip may move up leading to you having to incur loss for buying back at higher levels.
• If the price moves up sharply and hits the upper price band (it means that there are no sellers and only buyers) and you are not able to square off, your position will be auctioned/closed out leading to significant losses and penalties imposed by stock exchanges.
• Short selling requires quick decisions and ability to cut losses when market moves against you. It is not a good strategy for those who are not willing to take risks.

Short selling as a trading strategy is good for those who are constantly monitoring the market and those who can take risk. Traders who have a pulse of the share market and who are able to identify an early trend can benefit from short selling.

The uniqueness of precious metal index is that companies need to be engaged in the gold mining sub sector or platinum and precious metals sub sector to constitute a part of the index. Securities also need to be listed in U.S. Capital Stock market and liquidity of stock has to be pretty high to avoid inclusion of penny stocks and low cap companies in the precious metals index. The index thus avoids the possibility of any manipulation. Well capitalized stocks make sure that index is a healthy reflection of the state of affairs of this sector.

Dow Jones precious metals index was published in April 2002 and has given a annualized return of 18.83% since inception. There are 13 companies constituting the metals index and the highest and lowest weightage of a constituent is 21% and 0.17% respectively based on market capitalization.

Barric Gold Corporation is the biggest constituent of the Dow jones precious metals index. 10 out of 13 constituents belong to the god mining industry and the remaining 3 companies to platinum and precious metals industry. With the base value of 100 for the year 2000, index is calculated every 5 minutes during trading hours in the market. This almost real time measurement of index helps you keep a tab on your investment and see its value in a wonderful manner. The free float adjustment factor makes sure that the available stocks for trading are given due importance while calculating the contribution to weightage of the metals index.

Dow jones metals and precious metals index is the property of Dow jones company Inc. and is a great way to see your investments in precious metals go up as the index values rise. While it is true that the performance of the metals index has not been great during last one year, the overall returns have been exceptional. So you can benefit from law of averages and reap the benefits when the precious metals sector sees some great action.

Dow jones US realestate index is simple and transparent. It is so as constituents of the realestate index are individually traded in the US capital market and prices are available on a real time basis. In fact the index is calculated almost real time and is a good measure of how the sector is performing. The index has come under severe pressure due to global meltdown in the real estate and heavy losses suffered by a large number of seemingly well managed banks and institutions. Nevertheless, there is no denying the fact that index remains as well entrenched as ever.

Dow jones real estate index was first launched in the year 1991 and has since then grown from strength to strength. A large number of exchange traded funds today track the performance of real estate index and follow the same. The market valuations of commercial properties as well as housing sectors are accurately reflected by the realestate index of dow jones. The index has a world wide following and is widely used by hedge funds and other high net worth investors for meeting their investment objective.

Dow jones US realestate index is of great interest to analysts, high net worth individuals, sector specific mutual funds and investment advisors and other classes of investors. A large number of hedge funds and private equity funds track and invest in the dow jones US realestate index. The real estate market seems to have hit a major roadblock in recent times due to uncertainty and failure of a few hedge funds, however the long terms trends remain bullish. This is good news for those investing in dow jones realestate index funds as stocks of companies and trusts are available at a lower PE multiples now. There is a good potential for rise in the realestate sector from these levels and that is heartening to note.