- The stock exchange may impose a ‘daily margin’ at a prescribed percentage
on a particular security. The daily margin amount may vary directly with the
speculation. This margin money stands as insurance against default risk. The
daily margin’ may be imposed on a bull or a bear. - To reduce the indiscriminate carrying forward of transactions, the stock
exchange may impose carry-over margin. - The stock exchange may directly control the settlement price, so that there
will be reduction in default risk. - The carry-forward transactions take place with reference to the shares in the
specified list. The stock-exchange may shift a share from specified list to
cash list to eliminate carry-forward transactions in that particular share.
Since the cash transactions to be taken place within 48 hours, the risk of
default will come down - The Stock exchange may fix outer limits of price for a share
- It may levy a ceiling limit on the volume of transactions
- It may raise the Forwardation and backwardation charges
- It may impose a time limit to carry forward the transactions
- The very trading in a security may also be suspended, either on a temporary or
permanent basis.
Value Based Investing
The Shareholder expects benefits in the form of dividends. The quantum of dividend
depends on the performance of a firm. The performance of a firm will be influenced by
various economic factors. Therefore to take a decision to invest in shares, one has to
evaluate the performance of a firm with reference to various economic factors.
If we use the concept of Time Value of Money by applying the Discounted Cash Flow
Technique, the Present Value of the expected returns must be more than Present Value of
the investment.
The problem is that dividends do not remain constant from period to period. The
dividend per share (DPS) varies directly with the income of the firm.
A relative analysis has to be made between the earnings per share (P/E) and the market
price of share. The earnings per share to be taken into account is based on average
payment of dividend for the past fixed period. It should be compared with the current
growth rate in dividend per share. This should also be compared with the existing market