How to ensure profits in the money market
Money markets refer to an organized exchange where people borrow and lend large sums of money for a period equal to or less than one year. Investors choose money markets because of their safety and liquidity features. Some of the important money market instruments in India include commercial paper, treasury bills, certificates of deposit, government securities with a maturity of less than one year, and money market mutual funds or liquid funds. Money market securities management falls within the ambit of an investment banker.
An investment banking career in the finance and investment industry is a highly favored role, as it comes with the requirement of advanced qualifications and a high remuneration package. You can undergo money market training through the Certified Investment Banking Operations Professional course at Imarticus Learning Pvt. Ltd.
Some of the money market instruments available in India include the following:
Commercial paper (CP)
It is a short-term unsecured promissory note issued by reputed corporates with a good credit rating. Commercial paper has been in India since January 1990. Typically, corporations meet working capital requirements and short-term liquidity requirements through the issue of commercial paper. They are short-term discounted bonds. Other banks, insurance companies, and corporates buy CPs to park their short-term liquidity.
The company issuing a CP should not have a net worth or working capital lower than Rs. 4 crores. CPs have rated instruments with maturities of less than one year.
These are short-term instruments issued by the Central Bank on behalf of the government to meet the government’s short-term financing requirements. Treasury bills are discounted instruments that pay the total face value on the instrument's maturity. The investors include banks, insurance companies, corporates, and foreign institutional investors. The tenor varies from 14 days to 364 days.
These instruments, sold by auction, form a part of the authorized investments under the Statutory Liquidity Ratios of the commercial banks. RBI uses this method to introduce additional liquidity into the market or withdraw surplus liquidity from the market.
Certificates of deposit (CDs)
These are negotiable instruments used by commercial banks in return for the placement of a large deposit with the bank. This is payable to the bearer. It reduces the administrative expenses of both the bank and the depositor and can even be sold in the secondary market.
Investors in CDs include large corporations, institutions, and high-net-worth individuals. The tenor varies from 3 months to one year, with the minimum investment being Rs. 1 crore. This is also a discounted instrument.
Money market mutual funds or liquid funds
These are mutual funds that invest in all or any of the above instruments. The pool is securitized and sold to a large number of retail investors.
What Is Investment Banking?
Investment banking is a special division of banking relating to creating capital for companies, governments, and other entities. Investment banking includes underwriting the new debt and equity securities, aiding in the sale of the securities, and facilitating mergers, acquisitions, reorganizations, and broker trades in all the above-mentioned securities for corporations and other entities. Investment bankers help plan and manage the financial aspects of large projects for corporations, governments, and other entities.
You will be exposed to the gamut of all these investment banking activities when you do a course on investment banking at Imarticus Learning Private Ltd.
Eligibility to Do an Investment Banking Course
- A graduate degree in commerce; a Bachelor of Commerce is an essential requirement.
- An MBA in Finance and Investments will also be useful as a stepping stone to an investment banking career.
- Lastly, doing the Certified Investment Banking Operations Professional course – which comes with a 100% job assurance program – will be the final step to launching your career as an investment banking professional.
Career Path of an Investment Banking Professional
- Analyst: This is the first step in an investment banking career. As an analyst, you will be responsible for updating the deal books periodically, performing industry analysis, and complementing the decision-making process. Extensive presentation skills are required to create presentations for different clients.
- Investment banking associates: They oversee the junior analysts’ work and guide them in the deal process. They are responsible for the deal execution and act as the client and investor liaison. This requires knowledge, skills, and practical experience to execute deals.
- Vice-president: A vice-president leads multiple analysts and associates. They are responsible for sourcing deals from the market in the equity, debt, and money market space and are responsible for the profit and loss accounts.
- Managing directors: They are responsible for the entire investment banking division’s performance and accountable to the bank’s board of directors for the profit and loss and the success of the Investment Banking division.
As an investment banking professional, you will be responsible for complex transactions involving equity and debt financing and money market instruments. You will be responsible for keeping both parties to the transactions, the clients and the investors, happy with the kind of returns generated and the safety of the instruments structured. As you need to be thoroughly knowledgeable and skilled, doing an investment banking course and getting money market training will stand you in good stead in your investment banking career.
Visit Imarticus Learning Pvt. Ltd. to kickstart your investment banking career. Get in touch with us through chat support. You can also visit our training centers in Mumbai, Pune, Thane, Bengaluru, Chennai, Delhi, or Gurgaon for more information.