Investment

 

Investment is the commitment of money of money  or capital to purchase financial instruments or other 

assets in order to gain profitable returns in the form of interest of  interest,, income {dividend}, or  [1] to saving or deferring consumption. consumption. appreciation of the value of the instrument. It is related to  as  business business management and finance Investment is involved in many areas of the  the  economy, economy, such as  no matter for households, firms, or governments. An investment involves the choice by an individual or an organization such as a pension fund, after some analysis or though thought, t, to place or   property,, commodity, commodity, stock , bond,  bond, financial lend money in a vehicle, instrument or asset, such as as property derivatives (e.g. futures or options or options), or the foreign asset denominated in foreign currency, that has certain level of risk and provides the possibility of generating returns over a period of time. [2] Investment comes with the risk of the loss of the principal the  principal sum sum.. The investment that has not been thoroughly analyzed can be highly risky with respect to the investment owner because the speculation    possibility of losing money is not within the owner's control. The difference between be tween speculation and investment can be subtle. It depends on the investment owner's mind whether the purpose is for lending the resource to someone else for economic purpose or not. [3] In the case of investment, rather than store the good produced or its money equivalent, the investor chooses to use that good either to create a durable consumer or producer good, or to lend the original saved good to another in exchange for either interest or a share of the profits. In the first case, the individual creates durable consumer goods, hoping the services from the good will make his life better. In the second, the individual becomes an entrepreneur using the resource to  produce goods services for others oan thers in theinhope of aof profitable sale. In The third casethe describes a lender, and the and fourth describes investor a share the bu business. siness. each case, consumer  obtains a durable asset or investment, and accounts for that asset by recording an equivalent liability. As time passes, and both prices and interest rates change, the value of the asset and liability also change. h opes of getting a An asset is usually purchased, or equivalently a deposit is made in a bank, in hopes future return  return or interest from it. The word originates in the Latin "vestis", meaning garment, and refers to the act of putting things (money or other claims to resources) into others' pockets.[4]. The  basic meaning of the term being an asset held to have some recurring or capital gains. It is an asset that is expected to give returns without any work on the asset per se. The term "investment" is used differently in economics and in finance. Economists refer to a real investment (such as a machine or a house), while financial economists refer to a financial asset, such as money that is  put into a bank or the market, which may then be used to buy a real asset.

Contents [hide hide]] •

1 In economics or macroeconomics

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2 Investment related to business of a firm - b business usiness management

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3 In finance

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4 Real estate as the instrument of investment

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4.1 Residential real estate

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4.2 Commercial real estate

5 See also

 

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6 Notes

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7 External links

[edit] edit] In economics or macroeconomics macroeconomics, investment is the amount purchased per unit time of  In economic theory  theory or in macroeconomics, goods which are not consumed but are to be used for future production. Examples include railroad or factory railroad  or factory  construction. Investment in human capital includes costs of additional schooling or on-the-job training. Inventory investment  investment refers to the accumulation of goods inventories; it can be positive or negative, and it can be intended or unintended. In  inventories; In measures of  I ) is also a national income and output, output, gross investment (represented by the  the variable variable   I  ), given in the formula GDP = C + I + G + NX , component of Gross of Gross domestic product  product (GDP ), where C is consumption, G is government spending, and NX is net exports. Thus investment is everything that remains of total expenditure after consumption, government spending, and net exports are subtracted (i.e. I = GDP - C - G - NX ). ).  Non-residential fixed investment (such as new factories) and residential investment (new houses) combine with inventory investment to make up  I . Net investment deducts deducts  depreciation from gross investment. Net fixed investment is the value of the net increase in the capital stock per  year. Fixed investment, as expenditure over a period of time ("per year"), is not not  capital. capital. The time  — that is, accumulated dimension of investment makes it a flow. By contrast, capital is a stock  net investment to a point in time (such as December 31). Investment is often modeled as a function of o f Income and Interest rates, given by the relation I =  f (Y , r ). ). An increase in income encourages higher investment, whereas a higher interest rate may discourage investment as it becomes more costly to borrow money. Even if a firm chooses to use its own funds in an investment, the interest rate represents an opportunity cost  cost of investing those [5] funds rather than lending out that amount of money for interest interest..

[edit] edit] Investment related to business of a firm - business management The investment decision (also known as capital budgeting) is one of the fundamental decisions of   business management: Managers determine the investment value of the assets that a business enterprise has within its control or possession. These assets may be physical (such as buildings bu ildings or  machinery), intangible (such as  as  patents, patents, software, goodwill), or financial (see below). Assets are used to produce streams of revenue that often are associated with particular costs or outflows. All together, the manager must determine whether the net present value  value of the investment to the enterprise is positive using the marginal  marginal cost of capital that is associated with the particular area of business. securities  such as a company stock (an In terms of financial assets, these are often marketable securities equity investment) or bonds (a debt investment). At times the goal of the investment is for   producing future cash flows, while at others it may be b e for purposes of gaining access to more assets by establishing control or influence over the operation of a second company (the investee).

[edit] edit] In finance

 

In finance, finance, investment is the commitment of funds by buying securities or other monetary or  or capital markets, markets, or in fairly  fairly liquid real assets,  paper (financial) assets in the  the money markets  markets or capital such as gold or collectibles. Valuation Valuation  is the method for assessing whether a potential investment is worth its price. Returns on investments will follow the  the risk-return spectrum. spectrum. and  bonds  bonds (including Types of financial investments include shares, other  equity investment, investment, and   bonds denominated in foreign currencies). currencies). These financial assets are then expected to provide income or positive future cash flows, and may increase or decrease in value giving the investor  capital gains or losses. Trades in contingent claims or derivative securities do not necessarily have future positive expected cash flows, and so are not considered assets, or strictly speaking, securities or  investments. Nevertheless, since their cash flows are closely related to (or derived from) those of  specific securities, they are often studied as or treated as investments. Investments are often made indirectly through  through intermediaries, intermediaries, such as banks as banks,, mutual funds funds,,   pension funds, schemes, and  and investment clubs clubs.. funds, insurance companies, collective investment schemes, Though their legal and procedural proced ural details differ, an intermediary generally makes an investment using money from many individuals, each of whom receives a claim on the intermediary. Within   personal Within  personal finance finance,, money used to purchase shares, shares, put in a collective investment scheme or used to buy any asset where there is an element of capital risk is deemed an investment . Saving within personal finance refers to money put aside, normally on a regular basis. This distinction is important, as investment risk  risk can can cause a capital loss when an investment is sold, inflation.. unlike saving(s) where the more limited risk is cash devaluing due to inflation In many instances the terms saving and investment are used interchangeably, which confuses this distinction. For example many deposit accounts  accounts are labeled as investment accounts by banks for  marketing purposes. Whether an asset is a saving(s) or an investment depends on where the money is invested: if it is cash then it is savings, if its value can fluctuate then it is investment.

[edit edit]] Real estate as the t he instrument of investment purchase property   property for the purpose of holding or  In real estate, estate, investment money is used to purchase  leasing for income and there is an element of capital risk.

[edit] edit] Residential real estate The most common form of real estate investment as it includes property purchased as a primary residence. In many cases the buyer does doe s not have the full purchase price for a property and must engage a lender such as a bank, finance company or private lender. Different countries have their  individual normal lending levels, but usually they will fall into the range of 70-90% of the  purchase price. Against other types of real estate, residential real estate is the least risky.[citation needed ]

[edit] edit] Commercial real estate Commercial real estate consists of multifamily apartments, office buildings, retail space, hotels and motels, warehouses, and other commercial co mmercial properties. Due to the higher risk of commercial real estate, loan-to-value ratios allowed by banks and other lenders are lower and often fall in the range of 50-70%.[citation needed ]

[edit] edit] See also InvestorWords.com

 

investment investment wi thin definitions Hide links within definit ionsShow links within wit hin definitions definitio ns

Definitions (2) 1. In finance finance,, the purchase of a financial  financial  product or other item of value of value with an expectation of favorable future returns. returns. In general terms terms,, investment means the use money in the hope of making more money. 2. In business business,, the purchase by a producer of a physical good, such as durable equipment or inventory, inventory, in the hope of improving future business.

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Meaning he word "investment" can be defined in many ways according to d different ifferent theories and  principles. It is a term that can be used in a number of contexts. However, the different meanings of "investment" are more alike than dissimilar. Generally, investment is the application of money for earning more money. Investment also means savings or savings made through delayed consumption. According to economics, investment is the utilization of resources in order to increase income or   production output in the future. An amount deposited into a bank or machinery that is purchased in anticipation of earning income in the long run are both examples of investments. Although there is a general broad definition to the term investment, it carries slightly different meanings to different industrial sectors. According to economists, investment refers to any physical or tangible asset, for example, a  building or machinery and equipment. On the other hand, finance professionals define an investment as money utilized for buying financial assets, for example stocks, bonds, bullion, real properties, p roperties, and precious items.

 

o f investment refers to the buying of a financial product According to finance, the practice of p roduct or any valued item with an anticipation that positive returns will be received in the future. The most important feature of financial investments is that they carry high market liquidity. The method used for evaluating the value of a financial investment is known as valuation. v aluation. According to business theories, investment is that activity in which a manufacturer buys a  physical asset, for example, stock or production equipment, in expectation that this will help the  business to prosper in the long run.

Investment In India India is one of the top five economies in the world in terms of market potential and is placed above countries like France, Italy, Russia and the United Kingdom. India is also ranked as the third biggest economy in Asia in terms of gross domestic product. All these make investment in India a lucrative option for the investors across the world.  The investmen investmentt market in India offers lots of possibilities for the investors as the level of purchasing power is improving over time. The investors stand to gain in each and every areas of business in India. However the response from the outstation investors has been lukewarm compared to other countries like China. Investors in Europe consider the Indian investment market to be a favorable option in spite of the persistent political turmoil turmoil in this part of the world. There are certain factors that have been acting as deterrents for outstation investors in India like official problems, power cuts and infrastructural inadequacies.

It is expected that India would pretty soon be counted amongst the three best economies in the world and this suggests that there would be huge inflow of foreign funds in the Indian investment market. The recent boom in IT sector has played a crucial role in expanding the domain of Indian investment market. In order to gain benefits from investment in India it is imperative that the prospective investors do not think of any short-term profits as any financial gain could only be accrued from long-term investment. The organizations willing to invest in India need to undertake extensive research so as to understand the workings of the Indian investment market. It is highly necessary for the prospective investors to have an accurate understanding understand ing of the complications complications as well as the potential of the Indian market in order to be successful in long run.

 

Investment Types A particular investor normally determines the investment types after having formulated the investment decision, which is termed as capital budgeting bud geting in financial lexicon. With the  proliferation of financial markets there are more options for investment types.

According to the financial terminology investment means the following: Purchasing Securities in Money or Capital Markets • •

Buying Monetary or Paper Financial Assets in Money or Capital Cap ital Markets

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Investing in Liquid Assets like Gold, Real Estate and Collectibles

Investors assume that these forms of investment would furnish them with some revenue by way of positive cash flow. These assets can also affect the particular investor positively or negatively depending depend ing on the alterations in their respective values. Investments are often made through the intermediaries who use money taken from individuals to invest. Consequently the individuals are regarded as having claims on the particular  intermediary. It is common practice for the particular intermediaries to have separate legal procedures of their  own. Following are some intermediaries: •

Banks

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Mutual Funds

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Pension Funds

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Insurance Companies

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Collective Investment Schemes

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Investment Clubs

Investment in the domain of personal finance signifies funds employed in the purchasing of  shares, investing in collective investment plans or even purchasing an asset with an element of  capital risk. In the field of real estate, investments imply buying of property with the sole  purpose of generating income. Investment in residential real estate could be made in the form of buying housing property, while investments in commercial real estate is made by owning commercial property for corporate  purposes that are geared to generate some amount of revenue. •

Capital Investment

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Financial Market investment

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Stock Investment

 

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Share Market Investment

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Land Investment

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Retirement Investment

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Real Estate Investment

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Gold Investment

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Portfolio Investment Business Investment

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Equity Investment

Essential of Investmen Investmentt Essentials of investment refers to why investment, or the need for investment, is required. The investment strategy is a plan, which is created to guide an investor to choose the most appropriate investment portfolio that will help him achieve his financial goals within a particular period of time.

An investment strategy usually involves a set of methods, rules, and regulations regulations,, and is designed according to the exchange or compromise compromise of the investor's risks and returns. A number of investors like to increase their earnings through high-risk investments, whilst others prefer investing in assets with minimum risk involved. However, the majority of investors choose an investment strategy that lies in the middle. Investment strategies can be broadly categorized into the following types: •

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Active strategies: One of the principal active strategies is market timing (an investor is able to move into the market when it is on the low and sell the stocks when the market is on the high), which is applied for maximizing yields. Passive strategies: Frequently implemented for reducing transaction costs.

One of the most popular strategies is the buy and hold, which is basically a long term investment plan. The idea behind this is that stock markets yield a commendable commendab le rate of return in spite of stages of fluctuation or downfall. Indexing is a strictly passive variable of the buy and hold strategy and, in this case, an investor purchases a limited number of every share existing in the stock market index, for

 

example the Standard and Poor 500 Index, or more probably in an index fund, which is a form of a mutual fund. Additionally, as the market timing strategy is not applicable for small-scale investors, it is advisable to apply the buy and hold strategy. In case of real estate investment the retail and small-scale investors apply the buy and hold strategy, because the holding period is normally equal to the total span of the mortgage loan.

Investment Strategy Investment strategy is actually the plan, which is followed by an investor to make profits and to achieve financial stability. Based on this investment strategy the investor identifies the areas where the money can be invested safely. At the same time the returns from that money is also of equal importance. The investment strategy also helps the investor to reduce the risk factor from the investment portfolio. Now several investment options are available in the market. There are thousands of  people who are making money from these options. Again, there are also a large number of investors who are facing losses everyday. This means that if the investment is done in a proper manner, the profit can be made from every possible medium otherwise the result may be the opposite. But to make the investment successful, successful, an investor needs to do the homework properly. He or she needs to follow that market closely in which he or she wants to invest. There are several sources like the financial market news, several journals, internet and many more that can provide vital information information about the financial market. These information are very important to form a strategy. At the same time, the financial planners can also provide assistance to form an investment strategy, which suits the need of the investor. Before planning a strategy for investment, one needs to be sure about the aim of  his or her investment. One needs to decide about the desired returns and more importantly the amount of risk that he or she can bear. These factors are going to decide the suitable medium of investment for the investor.  The investment medium may be anything, the investment portfolio of the investor should be diversified. Investing in one single medium may increase the amount of  risk. In multi-investment, the risks related to one medium are covered through another one.  The two basic investment choices are the stock market and the bond market. The

 

stock market is full of different types of shares and options. All these shares are different from each other in many aspects like the amount of risk and the pace of  growth. Now, the investor needs to follow a certain investment strategy to invest in this market. The investor needs to choose some specific shares in which the money would be invested. At the same time, the investor should also buy some options to minimize the amount of risk involved in the shares. The bond market is not so complicated and so the strategies are very simple.

Investment Planning

 The basic idea behind any form of investment planning is to maximize future financial returns for future security. In formulating a financial plan, an individual investor must carefully consider his or her choices before making any decision. Investment planning involves considering many possible financial options that could be used to secure the desired financial future. Often groups of individuals get together for the purpose of investment planning. Investment plans require careful scrutiny scrutiny of the financial market. It is mostly the responsibility responsibi lity of the particular firm to make the decision on the matter of  management of money, which could be utilized in meeting long term asset investment plans or for gathering working capital.

An integral part of financial planning is the system a particular investor uses to decide how much and in what ways to invest. Another important task is to ascertain the source from where the money could be obtained.  Yet another important aspect of investment planning is analyzing the development and performance of investments in a particular span of time. This could help the investor by cutting down on the amount of uncertainty involved in the process. Investment planning also helps investors in channeling their funds in the right direction. An important reason for investment planning is planning for retirement. Investment calculators have proven to be a useful tool in helping people plan in advance for their retirement.

 

Investment Company An investment company is basically in charge of helping the clients to deal in various forms of investment like the securities market for example. The investment companies are normally engaged in trading securities but there are other variations of the investment company as well.  The real estate investment companies are a type of investment company which deals in mortgage services. These companies are suitable for those investors working on their own and are unable to commit too much time for their business activities. Of late these real estate investment companies have been attending to the individual needs of the investors.  The stock investment companies help their clients to deal in the stock market. The services provided by these companies enable the clients to deal in the stocks and derivatives of a certain company. The securities traded in the stock markets could be listed in an exchange and traded in private too.  The mortgage investment companies deal in the provision of mortgage services to respective clients, as and how they might require them. The mortgage investment companies are highly sought after in the United States of America because of the excellent quality of services they are reputed to provide. These companies also look after the individual needs of the investors.  The offshore investment companies provide the investors with the opportunity to invest in properties that are located in the specific country from where they are operating. The offshore investment companies companies give a lot of importance on collaterals as they play an important role in the context of reducing the level of risk involved in the transactions. transactions.  The capital investment companies offer services to both the individual as well as the organizational investors. investors. Some of these companies in the United States also serve clients from Canada. These companies provide their individual clients with mutual funds, personal investment management services and investment funds. To the organizational clients they provide mutual funds.

A study on the investment company list gives some idea about the booming investment industry of the world. The investment companies are those, which hold financial securities of the other  companies. An investment company is a trust, corporation or partnership that primarily invests the funds  pooled from the shareholders in the financial securities. An investment company may also be defined as a firm that uses its capitals in order to invest in other companies. There are two major  types of investment companies - open-end or mutual funds and the closed-end. In case of the

 

closed-end investment companies, the shares, which are enlisted in the stock exchange can be readily transferable in the open market and can ca n be bought and sold like other shares in the market. While an open-ended investment company co mpany is a limited investment company and the  prime objective of such companies is to manage the investment funds. In case of an open-end investment plan, the funds get bigger over time. There are a number of investment companies in the world that offer both the open-ended and closed-ended investment plans. Some of the investment companies of the world are - Apollo Investment Corp. Crown Financial Holdings Inc. Empire Financial Holding Company First Montauk Financial Mellon Financial Corporation, The Bear Stearns Companies Inc. W.P. Stewart & Co., Ltd. Here is a list of investment companies of world: •

A.B. Watley Group Inc.

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Affiliated Managers Group, Inc.

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Allied Capital Corporation

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Berkeley Technology, Limited (ADR)

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Calamos Asset Management, Inc

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Castle Holding Corp.

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Citigroup Capital XIV

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CME Group Inc.

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Cypress Sharpridge Investments, Inc.

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Diamond Hill Investment Group, Inc.

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Evercore Partners Inc.

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FBR Capital Markets Corporation

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First Albany Companies Inc.

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Franklin Resources, Inc.

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Gamco Investors Inc. Goldman Sachs Group, Inc. Gundaker/Jordan American Holdings, Inc.

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Hudson Holding Corp.

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International Securities Exchange Hldgs

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Investment Technology Group

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JMP Group Inc.

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Kirlin Holding Corp.

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Invesco PLC (ADR)

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Knobias, Inc.

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Lehman Brothers Holdings Inc.

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MCG Capital Corporation

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Merrill Lynch & Co., Inc.

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Morgan Stanley  Nasdaq Stock Market, Inc.

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 NYSE Euronext

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Och-Ziff Capital Management Group LLC

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Ryan Beck Holdings, Inc.

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Sagient Research Systems, Inc.

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SEI Investments Company

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Sovereign Exploration Associates Int Inc

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Stifel Financial Corp. TD Ameritrade Holding Corp.

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The Blackstone Group L.P.

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Thomas Weisel Partners Group, Inc.

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U.S. Global Investors, Inc.

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United States Natural Gas Fund, LP

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Van der Moolen Holdings N.V. (ADR)

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Vie Financial Group, Inc.

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Winmill & Co. Incorporated

 

Investment banks Investment banks are financial groups set up to help governments and large enterprises raise money by issuing and selling securities in the primary market. Their main objective ob jective is to assist  public and private corporations in raising capital.

These banking firms generally act as an intermediary between the issuer of securities and the investors. Investment bankers handle the distribution of previously issued financial securities and also maintain the market for securities that are already distributed. They are an important source of advice on acquisitions, acqu isitions, mergers and other types of financial transactions. There are very few banking firms that solely offer investment banking services - most provide additional services such as fixed income, trading of derivatives, equity securities, commodities and foreign exchange. With the advent of the Internet, banking services around the world have become easier. The  process of information exchange is now fast and a nd hassle-free. Online investment banking has made financial transactions easier than ever before, and online services such as investment plans and secure payment are changing the nature of the banking industry. A recent study on investment banking worldwide showed that revenue had increased to $52.8  billion in 2005, 14% higher than 2004. The US held a 51% share of the entire market in 2005, while Europe with the Middle East and Africa generated 31% and the Asian countries generated 18% of the total market share. To know more about investment banks, try the following links:

Investment Banks   •

America Bank Investment

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Canadian Bank Investment

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Top 10 Investment Bank 

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Fidelity Bank Investment

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Online Investment Bank 

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 National Bank Investment

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 New York Investment Bank 

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Royal Bank Investment

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Hsbc Bank Investment

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Atlanta Bank Investment

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Swiss Bank Investment

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Investment Banks In San Francisco

Investment Brokerage Investment brokerage refers to the services offered by the investment brokers. The principal

function of an investment broker is to match the buyers with the sellers of investments. Usually, a broker is a person or firm, which functions as an intermediary between the purchaser  and the seller. A broker who functions as a buyer or seller plays the role of a principal party for  the transaction. The function of a broker is different from that of an agent. An agent functions on the part of a principal.

 

An investment brokerage firm is a commercial entity, which functions like an investment  broker. It provides a comprehensive range of services related to investments to its clients with the help of the investment brokers. In some instances, investment brokers are also called as investment advisors or investment consultants. The services offered by investment brokerage include the following: •

Stock brokerage services

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Real estate brokerage services

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Foreign exchange brokerage services

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Insurance brokerage services

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Commodity brokerage services

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Consultation or advisory services

For the provision of different types of services, the investment broker charges a fee from the client, which is known as commission. This is usually expressed as a percentage. The investment brokerage firms offer valuable investment tips to the investors regarding various types of investments. With the help of  investment brokerage services, the clients are able to achieve their financial objectives quite easily. They help the investors to create a sound investment portfolio with the combination of different types of investments. They apply different types of investment strategies, which prove to be profitable for the investors and the investors are able to find which should be the most suitable investment option for them. The investment  brokerage services are also helpful for retired persons regarding their retirement planning and to increase their savings for contingency situations. Online investment brokerage services are also offered by a number of investment brokerage firms. Online investment proves to be a quick, convenient and cheap method of fund management. Top of Form partner-pub-6661

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There are a large number of investment instruments available today. To make our lives easier we would classify or group them under 4 main types of investment avenues. We shall name and briefly describe them. 1. Financial securities: These investment instruments are freely tradable and negotiable. These would include equity shares, preference shares, convertible debentures, non-convertible debentures, public sector bonds, savings certificates, gilt-edged securities and money market securities. 2. Non-securitized financial securities: These investment instruments are not tradable, transferable nor negotiable. And would include bank deposits, post office deposits, company fixed deposits, provident fund schemes, national savings schemes and life insurance. 3. Mutual fund schemes: If an investor does not directly want to invest in the markets, he/she could buy units/shares in a mutual fund scheme. These schemes are mainly growth (or equity) oriented, income (or debt) oriented or balanced (i.e. both growth and debt) schemes. 4. Real assets: Real assets are physical investments, which would include real estate, estate, gold & silver, precious stones, rare coins & stamps and art objects. Before choosing the avenue for investment the investor would probably want to evaluate and compare them. This would also help him in creating a well diversified portfolio, which is both maintainable and manageable.

To study the investment environment would be of  importance to the investor, as it would also encompass the demand supply match and mismatch.

 

Let us visualize the world and its economy. There are many countries with their many economies in this environment. We see the interaction between b etween countries at different stages in their  development. We see the many markets to enable this interaction between the various countries. Each of these markets has its regulator, the trading platform and its system, its agents (or   brokers), and the participants. Here it is a question of demand and supply of various commodities, products & services and trading instruments. And the analysis would encompass the demand-supply match/mismatch. In this global environment, we have India with its economy and its own many markets. Among these markets we have the securities market, with its regulator (SEBI), the trading  platform and its systems (stock exchanges), its agents (brokers) and its many participants (including corporate, financial institutions both domestic and foreign, mutual funds, insurance companies, banks and individual investors). Here again it is a question of demand and supply of 

 

various commodities, products & services and trading instruments. And the analysis would encompass the demand-supply match and mismatch. It would be advisable to note at this stage, that due to the liberalization process undertaken by India over the last 18 years, we are today in an environment where events that take place in other   parts of the world have a direct or indirect effect on our economy. This would further effect the specific market and finally would have an effect on the equity market. Let us visualize a scenario an industrial slowdown in the U.S. Amongst other its things, would have a direct bearingof(i.e. a reduction) on the demand of steel. To protect own this domestic steel industry, the U.S. government would temporarily introduce trade barriers on steel imports. This in turn would cause a reduced export of steel from India to the U.S., causing a temporary over supply of steel in the domestic market. The steel manufacturers would have to tackle the higher levels of inventory and its associated costs. In the domestic steel market, even if the demand were constant, the excess supply would cause a reduction in the price realization per  marketable ton of steel. This in turn would directly effect the incomes and profit margins of the steel manufacturers. Such a situation would temporarily cause a drop in the share prices of steel stocks in the equity market. This example is to describe to you how logical the sequence of events is and what the end result would be. However, this sequence does take a long duration of time to unfold, sometimes may even take years.