Green shoe option A provision contained in an underwriting agreement that gives the underwriter the right to sell investors

more shares than originally planned by the issuer. This would normally be done if the demand for a security issue proves higher than expected. Legally referred to as an over-allotment option. A greenshoe option can provide additional price stability to a security issue because the underwriter has the ability to increase supply and smooth out price fluctuations if demand surges. A greenshoe option (sometimes green shoe, but must[1] legally be called an "overallotment option" in a prospectus) allows underwriters to short sell shares in a registered securities offering at the offering price. The greenshoe can vary in size and is customarily not more than 15% of the original number of shares offered. The greenshoe option is popular because it is one of few SEC-permitted, risk-free means for an underwriter to stabilize the price of a new issue post-pricing. Issuers will sometimes not include a greenshoe option in a transaction when they have a specific objective for the proceeds of the offering and wish to avoid the possibility of raising more money than planned. The term comes from the first company, Green Shoe Manufacturing (now called Stride Rite Corporation),[2] to permit underwriters to use this practice in an offering.

The greenshoe option provides stability and liquidity to a public offering. For example, a company intends to sell one million shares of its stock in a public offering through an investment bankingfirm (or group of firms, known as the syndicate) which the company has chosen to be the offering's underwriters. Stock offered for public trading for the first time is called an initial public offering or IPO. Stock that is already trading publicly, when a company is selling more of its non-publicly traded stock, is called a follow-on or secondary offering.

How to calculate BSE Sensex and NSE Nifty? Sensex is calculated using the Free-float Market Capitalization methodology. Instead of using a companys outstanding shares it uses its float, or shares that are readily available for trading. All major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the free-float methodology.

It is calculated taking into consideration prices of 30 largest and most actively traded stocks of the BSE listed companies. These shares make more than 50% of the total market capitalization in the BSE market. The formula for calculating the SENSEX = (Sum of free flow market cap of 30 biggest stocks of BSE)*Index Value in 1978-79/Market Cap Value in 1978-79. Note: The base value (index value) of the Sensex is 100 on April 1, 1979, and the base year of BSE-SENSEX is 1978-79. Example: Suppose the Index consists of only 2 stocks: Stock A and Stock B. Stock A has 1000 shares out of which 200 are held by the promoters and only 800 shares are available for trading to the general public. These 800 shares are the socalled free-floating shares. Similarly, Stock B has 2,000 shares out of which 1000 are held by promoters and 1000 are available for trading (free-floating). Assume price of Stock A is Rs.100. The total market capitalisation of Stock A is Rs 1,00,000 (1,000 x 100) and its free-float market capitalisation is Rs 80,000 (800 x 100). Assume price of Stock B is Rs.200. The total market capitalisation of Stock B is Rs 4,00,000 (2,000 x 200) and its free-float market capitalisation is Rs 2,00,000 (1000 x 200). Then sum of free float market cap of these 2 companies (A & B) = (800*100+1000*200) = 80000+200000 = Rs. 280000 Assume Market Cap during the year 1978-79 was Rs.50,000 Apply formula Then SENSEX = 280000*100/50,000 = 560. Use same method for calculating NSE Nifty Base year is 1995 and base value (index value) is 1000. NIFTY is calculated based on 50 stocks. The formula for calculating the Nifty = (Sum of free flow market cap of 50 biggest stocks of NSE)*Index Value in 1995/Market Cap Value in 1995.

CALCULATION OF NSE AND BSE INDEXES

CALCULATION OF NSE AND BSE INDEXES

We have two major stock exchanges in India. They are NSE (National Stock Exchange) and BSE (Bombay Stock Exchange). I would like to share calculation of NSE and BSE indexes from this article. Because they are the main indicators to the investors, stock market analyst etc., The tools (MACD, ROC, PIVOT POINT, EMA) which are used to calculate or predict stock market movements. They are also requiring index values of NSE or BSE.

Bombay Stock Exchange OR Sensex (Sensitive Index) Bombay Stock Exchange (BSE) is an oldest stock exchange in Asia. It was started in 1875 as The Negative Share and Stock Brokers Association. There is a story behind to BSE i: e, since 1850s Four Gujarati and One Parsi or parsee(which indicates Parsis derived from a group of Persian Zoroastrians who came to India during 10th century AD) stockbrokers have met in Town Hall of Mumbai. This is an informal meeting among them. Time gone, no of brokers were increased then they would like to convert this meeting as a formal one. So they had found a place in 1874 at DALAL STREET and they made their office in DS. It is become an official organisation in 1875, called The Negative Share and Stock Brokers Association. BSE was acknowledged by Indian government in 1956 under Securities Contracts Regulation Act (SCRA). An electronic trading system was introduced by BSE in 1995 i: e, BOLT (BSE On line Trading) which has a capacity to make 8 million orders per day. Base value of SENSEX is 100 and base year is 1978 1979. The calculation of BSE was started from 1986. Earlier it was calculated by using total market capitalisation. Since 2003, it was calculated by using free float market capitalisation. SENSEX is calculated for every 15 seconds. Besides, BSE has listed more than 5033 companies. BSE is the first exchange in India to receive ISO 9001: 2000 certification. It is also the first Exchange in India and second in the world to receive Information Security Management System Standard BS 7799-22002 certification for its BOLT. National Stock Exchange OR NSE OR NIFTY The National Stock Exchange was promoted by leading financial institutions with the command of government of India. NSE was incorporated in November 1992 as a tax paying company. In April 1993, it was approved as a stock exchange by securities exchange board of India. NSE was started operations in the Wholesale Debt Market segment in June 1994. The Equities trading was started from November 1994 and Derivatives trading was stared fromJune 2000. Index value of NIFTY is calculated by using 50 largest companies from 24 different sectors. Base value of NIFTY is 1000 and base year is 1995. NSE is also calculated for every 15 seconds. Criterias to select 50 or 30 Companies among NSE / BSE list of Companies BSE Listed Companies as on 05 10 2011 is 5,085. NSE Listed Companies as on 05 10 2011 is 1,552. A company must have one year history as a BSE listed company. A company should be among top 100 in BSE listed companies. A company should be a market leader in the particular sector. Each company should more than 0.5% of total market capitalization of Sensex. A company should have well past record. Company should be traded in each and every day of last one year (Except market holidays). After sort listing, we go to the calculation of BSE/NSE indexes. Before that we must know what is market capitalization. I would to share that too.

Market capitalization: Market capitalization is total worth of a company (i.e. outstanding shares of a company). Outstanding shares are nothing but the shares which are not hold by the company or the shares which are hold by public, investors, employees etc.
Formula:

Market Capitalization = No of Shares Outstanding * Market price per share Total Market Capitalization = Market capitalization of NSE 50 / BSE 30 companies.

Free Float Market Capitalization This is directly opposite to the Market capitalization. i.e. Except the Locked Shares (which includes promoter holdings, government holdings).

Free float Market Capitalization = Share Price * (Shares Outstanding Locked shares) OR Free float market capitalization =No. of outstanding share * market price of share Total Free float Market Capitalization = Free float Market capitalization of NSE 50 / BSE 30 companies.

For Example: 1.XYZ: Imagine XYZ one of the company (which is among NSE 50 or BSE 30). XYZ has 1000 shares among that government is holding 300 shares, promoter holding is 500 shares, and 200 shares are available in market and price of a share is Rs. 10. The calculation would be, Market capitalization of the company is 1000 X 10 = 10,000. Free float market capitalization of company is 200 X 10= 2,000. 2.ZYX: ZYX has 2000 shares among that government is holding 500 shares, promoter holding is 500 shares, and 1000 shares are available in market and price of a share is Rs. 20. The calculation would be, Market capitalization of the company is 2000 X 20 = 40,000.

Free float market capitalization of company is 1000 X 20= 20,000. Total Market Capitalization Total Market Capitalization = Market capitalization of NSE 50 / BSE 30 companies. Total Market Capitalization = XYZ + ZYX + + ADD UP TO NSE 50 OR BSE 30. EXAMPLE Total Market Capitalization = 10,000 (XYZ) + 40,000 (ZYX) + + ADD UP TO NSE 50 OR BSE 30. Therefore, Total Market Capitalization = 50,000 Total Free float Market Capitalization = Free float Market capitalization of NSE 50 / BSE 30 companies. Total Free float Market Capitalization = XYZ + ZYX + + ADD UP TO NSE 50 OR BSE 30. Total Free float Market Capitalization = 2,000 (XYZ) + 20,000 (ZYX) ++ ADD UP TO NSE 50 OR BSE 30. Therefore, Total Free float Market Capitalization = 22,000. Now let us calculate index value of NSE / BSE Formula for SENSEX calculation:

SENSEX = (sum of free float market cap of 30 major companies of BSE) * Index value in 1978-79 / Market cap value in 1978-79.

Assume market capitalization is 2000. Now, as per formula: SENSEX = 100000 X 100 / 2000 = 5000 Value of Sensex is 5000. Formula for Nifty calculation:

NIFTY = (Sum of free flow market cap of 50 major stocks of NSE) * Index value in 1995 / market cap value in 1995.

Assuming the market capitalization value during 1995 is 20,000. NIFTY = 100000 x 1000 / 100000 = 1000. Value of Nifty is 1000.

Investopedia explains 'Price Band'

Price bands can also be used in international trade. A country can set an upper and lower price that it will allow a good to be sold at in the market. If the price of an imported good is below the lower price threshold, the country could tax the good until it falls within the price band.

Definition of 'Price Band'

A value-setting method in which a seller indicates an upper and lower cost range, between which buyers are able to place bids. The price band's floor and cap provides guidance to the buyers. This type of auction pricing technique is often used with initial public offerings (IPOs).

Definition of 'Bear'
An investor who believes that a particular security or market is headed downward. Bears attempt to profit from a decline in prices. Bears are generally pessimistic about the state of a given market.

Investopedia explains 'Bear'

For example, if an investor were bearish on the S&P 500 they would attempt to profit from a decline in the broad market index. Bearish sentiment can be applied to all types of markets including commodity markets, stock markets and the bond market. Although you often hear that the stock market is constantly in a state of flux as the bears and their optimistic counterparts, "bulls", are trying to take control, do remember that over the last 100 years or so the U.S. stock market has increased an average 11% a year. This means that every single long-term market bear has lost money.

Definition of 'Bull Market'

A financial market of a group of securities in which prices are rising or are expected to rise. The term "bull market" is most often used to refer to the stock market, but can be applied to anything that is traded, such as bonds, currencies and commodities.

Investopedia explains 'Bull Market'

Bull markets are characterized by optimism, investor confidence and expectations that strong results will continue. It's difficult to predict consistently when the trends in the market will change. Part of the difficulty is that psychological effects and speculation may sometimes play a large role in the markets.

What are Bear?

Bear : An operator who expects the share price to fall Bear Market : A weak and falling market where buyers are absent

What are Bulls?

Bull : An operator who expects the share price to rise and takes position in the market to sell at a later date. Bull Market : A rising market where buyers far outnumber the sellers A bull market is one where prices are rising, whereas a bear market is one where prices are falling. The two terms are also used to describe types of investors. A stock market bull is someone who has a very optimistic view of the market; they may be stock-holders or maybe investors who aggressively buy and sell stocks quickly. A bear investor, on the other hand, is pessimistic about the market and may make more conservative stock choices. Sometimes, the terms are used to refer to specific funds or stocks. Bear market funds, for example, are those that are falling and faring poorly. Investors sometimes refer to bull stocks to describe securities that are aggressively rising and making their investors money. Knowing what is meant by the bear and bull market can help you understand whether the market is currently rising or falling. There is no need to get frightened by a bear market indicator; however, as experts agree that the market is cyclical. When prices start falling, they will eventually rise too.
What Drives Bear and Bull Markets?

The stock market is affected by many economic factors. High employment levels, strong economy, and stable social and economic conditions generally build investor confidence and encourage investors to put their money in the stock market. Often, this can bolster bull markets. Also, new technologies and companies that encourage investors to put their money in stocks can create bull markets. For example, in the 1990s, the dot com craze encouraged many investors to put their money in stocks that they felt would keep increasing. In some cases, a bullish market is simply self-

perpetuating. Since the market is doing well, it only encourages investors to invest more money or to start investing. On the other hand, discouraging economic or social political changes in a society can push the market down. Sudden instability or unemployment -- or even fears of unemployment caused by wars and other problems -- can start to make investors more conservative and therefore lead to bear markets. Of course, again this becomes a self-perpetuating trend. As the economy slows down, companies begin downsizing. Increased unemployment makes people far less willing to gamble on the stock market. Sometimes, a panic caused by dire predictions about the market can also create bearish conditions. How To Predict Bear and Bull Markets? The easiest way to predict both types of markets is to realize that what goes up must come down. That is, if the market is rising, then you know that at some point it will start to fall again. Similarly, if the market is currently falling, you can be certain that eventually it will pick up again. There are no precise ways to predict either bull or bear markets, although general social economic situations can help you to determine what will happen. A country which wages a war will experience bullish market conditions as government contracts create more jobs and boost investor confidence if their expectation is to win. Sudden international crises push the market downward and create bearish conditions. News is very often a good indicator of where investors are headed. The reports will inform about loss of investor confidence as well as sudden economic downturns that may affect the market. If you notice from stock market research that several indexes have changed by 15% to 20%, you can be sure that market direction is changing. When you notice such changes, it is time to sit up and take notice. You may be headed for a bullish or bearish market.
A "stag" is an investor who buys and sells stocks rapidly, usually to make profits quickly.

Investopedia explains 'Book Building' An underwriter "builds a book" by accepting orders from fund managers indicating the number of shares they desire and the price they are willing to pay.

Definition of 'Book Building' The process by which an underwriter attempts to determine at what price to offer an IPO based on demand from institutional investors. Book building refers to the process of generating, capturing, and recording investor demand for shares during an Initial Public Offering (IPO), or other securities during their issuance process, in order to support efficient price discovery.[1] Usually, the issuer appoints a major investment bank to act as a major securities underwriter or bookrunner. The book is the off-market collation of investor demand by the bookrunner and is confidential to the bookrunner, issuer, and underwriter. Where shares are acquired, or transferred via a bookbuild, the transfer occurs off-market, and the transfer is not guaranteed by an exchanges clearing house. Where an underwriter has been appointed, the underwriter bears the risk of non-payment by an acquirer or non-delivery by the seller. Book building is a common practice in developed countries and has recently been making inroads into emerging markets as well. Bids may be submitted on-line, but the book is maintained off-market by the bookrunner and bids are confidential to the bookrunner. Unlike a public issue, the book building route will see minimum number of applications and large order size per application. The price at which new shares are issued is determined after the book is closed at the discretion of the bookrunner in consultation with the issuer. Generally, bidding is by invitation only to high-networth clients of the bookrunner and, if any, lead manager, or co-manager. Generally, securities laws require additional disclosure requirements to be met if the issue is to be offered to all investors. Consequently, participation in a book build may be limited to certain classes of investors. If retail clients are invited to bid, retail bidders are generally required to bid at the final price, which is unknown at the time of the bid, due to the impracticability of collecting multiple price point bids from each retail client. Although bidding is by invitation, the issuer and bookrunner retain discretion to give some bidders a greater allocation of their bids than other investors. Typically, large institutional bidders receive preference over smaller retail bidders, by receiving a greater allocation as a proportion of their initial bid. All bookbuilding is conducted off -market and most stock exchanges have rules that require that on-market trading be halted during the bookbuilding process.