business

1. Indian Capital Market

2. Organized Indian Financial System
Money Market
Instrument
Capital Market
Instrument
Capital
Market
Money
Market
Primary Market
Financial
Instruments
Financial
Markets
Financial
Intermediaries
Secondary Market
Regulators

3. CAPITAL MARKET
 The market where investment instruments like
bonds and equities are traded is known as the
capital market.
 The primal role of this market is to make
investment from investors who have surplus
funds to the ones who are running a deficit.

4. Nature of capital market
The nature of capital market is brought out by
the following facts:
 It Has Two Segments
 It Deals In Long-Term Securities
 It Performs Trade-off Function
 It Creates Dispersion In Business Ownership
 It Helps In Capital Formation
 It Helps In Creating Liquidity

5. Money Market Vs Capital Market
• It is for short term
• Supplies funds for WC
• Instruments are T-bill,
CM, etc
• Each single instrument
is of large amount
• Central bank and
Commercial banks are
major.
• It is for long term
• Supplies funds for fixed
capital requirement
• Instruments are shares,
debentures, etc.
• Each single instrument
is of small amount
• Development bank and
insurance companies
are major.

6. Conti..
• These instruments
do not have
secondary market.
• Transactions are on
over phone and no
formal place
• Transaction without
the help of broker.
• These instruments
have secondary
market.
• Transactions are at
formal place. Eg
stock market.
• Transaction have to
be conducted with
the help of broker.

8. Why Capital Markets Exist
• Capital markets facilitate the transfer of
capital (i.e. financial) assets from one owner to
another.
• They provide liquidity.
– Liquidity refers to how easily an asset can
be transferred without loss of value.
• A side benefit of capital markets is that the
transaction price provides a measure of the
value of the asset.

9. Role or objectives of Capital
Markets
• Mobilization of Savings
• It facilitates Capital Formation
• Promotion of Industrial Growth
• Raising of long term Capital
• Ready & Continuous Markets
• It facilitates increased production & productivity.
• Provision of a variety of Services

11. Types of capital market
There are two types of capital market:
 Primary market,
 Secondary market

12. Primary Market
 It is that market in which shares,
debentures and other securities are sold for
the first time for collecting long-term
capital.
 This market is concerned with new issues.
Therefore, the primary market is also called
NEW ISSUE MARKET.

13.  In this market, the flow of funds is from savers
to borrowers (industries), hence, it helps directly
in the capital formation of the country.
 The money collected from this market is
generally used by the companies to modernize
the plant, machinery and buildings, for
extending business, and for setting up new
business unit.

14. Features of Primary Market
 It Is Related With New Issues
 It Has No Particular Place
 It Has Various Methods Of floating new issues:
 It comes before Secondary Market

15. Methods Of floating new issues:
 Following are the methods of raising capital in the
primary market:
i) Right Issue
-Cheap way of raising finance
-issuing shares to existing shareholders
ii) Public Issue
selling of shares to the public by issue of prospectus.
there are two types of public issue
a) Initial Public Offer(IPO)-
when a company issue shares for the first time.
b) Offer For Sale –instead of offering shares directly to the
public by the company itself, it offers through intermediaries
such as merchant banks or stock brockers, etc

16. iii) Private placement
• It is the issue of securities of a company direct to one investor or a
small group of investors. Generally the investors are the financial
institutions or other existing companies or selected private persons
such as friends and relatives of promoters.

17. Secondary Market
 The secondary market is that market in
which the buying and selling of the
previously issued securities is done.
 The transactions of the secondary market
are generally done through the medium of
stock exchange.
 The chief purpose of the secondary market
is to create liquidity in securities.

18.  If an individual has bought some
security and he now wants to sell it, he
can do so through the medium of stock
exchange to sell or purchase through
the medium of stock exchange requires
the services of the broker presently.
.

19. Features of Secondary Market
• It Creates Liquidity
• It Comes After Primary Market
• It Has A Particular Place
• It Encourage New Investments

20. STOCK EXCHANGES
• If an individual has some financial security and he wills to sell
it, he can approach the Stock Exchange Companies which will
help him to sell or purchase his security by the means of a
Broker. ( sharekhan, hedge Equities Ltd, kotak securities…etc.

21. Functions of Stock exchanges
• Ensuring ready market for securities
• It helps to evaluate various securities.
• Encourages capital formation
• Provides safety and security of investments
well defined rules and regulations in transactions.
• Facilitate public borrowings
enables govt to raise fund easily and quickly.
• Provides wider marketability of securites
• Provides employment.

22. Structure of Stock exchanges in India
• There are 23 stock exchanges in India.
• In India we have Bombay stock exchange ,
National stock exchange and the rest 21 are
Regional stock exchanges.

23. Stock Exchanges in INDIA
• Mangalore Stock Exchange
• Hyderabad Stock Exchange
• Uttar Pradesh Stock
Exchange
• Coimbatore Stock Exchange
• Cochin Stock Exchange
• Bangalore Stock Exchange
• Saurashtra Kutch Stock
Exchange
• Pune Stock Exchange
• National Stock Exchange
• OTC Exchange of India
• Calcutta Stock Exchange
• Inter-connected Stock
Exchange (NEW)
• Madras Stock Exchange
• Bombay Stock Exchange
• Madhya Pradesh Stock
Exchange
• Vadodara Stock Exchange
• The Ahmedabad Stock
Exchange
• Magadh Stock Exchange
• Gauhati Stock Exchange
• Bhubaneswar Stock
Exchange
• Jaipur Stock Exchange
• Delhi Stock Exchange Assoc
• Ludhiana Stock Exchange

24. The Bombay Stock Exchange (BSE)
• also known as Stock exchange of mumbai.
• No 8 in world rankings
• The corporate office is situated at Dalal street ,
mumbai
• The number of shares traded in the bse is in the
range of 40 to 50 million.

25. National Stock exchange (NSE)
• Established in 1992
• Indias leading stock exchange covering various cities and
towns.
• Second largest in the world in terms of transactions.

26. CAPITAL MARKET REFORMS IN
INDIA
• The 1990s have witnessed the
emergence of the securities market as a
major source of finance for trade and
industry in India.
• A growing number of companies have
been accessing the securities market
rather than depending on loans from
financial institutions / banks.
• The corporate sector is increasingly
depending on external sources for

27. MARKET STRUCTURE
(JULY 31, 2005)
• 22 Stock Exchanges,
• Over 10000 Electronic Terminals at over 400 locations all
over India.
• 9108 Stock Brokers and 14582 Sub brokers
• 9644 Listed Companies
• 2 Depositories and 483 Depository Participants
• 128 Merchant Bankers, 59 Underwriters
• 34 Debenture Trustees, 96 Portfolio Managers
• 83 Registrars & Transfer Agents, 59 Bankers to Issue
• 4 Credit Rating Agencies

28. Book Building-A new issue
mechanism in India
• mechanism through which an offer
price for IPOs based on investor’s
demand is determined .
• Auction of shares
• Under this method the company
does not price the securities in
advance. Instead it offers the
investors an opportunity to bid
collectively.

29. The role of the stock exchange
• Corporate governance
• Creates investment opportunities for small
investors
• Government raises capital for development
projects
• Barometer of the economy

30. Functions Of SEBI
• Regulates Capital Market.
• Checks Trading of securities.
• Checks the malpractices in securities market.
• It enhances investor's knowledge on market by providing
education.
• It regulates the stockbrokers and sub-brokers.
• To promote Research and Investigation

31. Functions Of RBI
Monetary Authority:
Issuer of currency:
Regulator and supervisor of the financial system:
Authority On Foreign Exchange:
Developmental role:
Related Functions:

32. WHY STOCK PRICE RISES?
The price of every stock increases or decreases for the
following possible reasons:
• News about company.
• News about the country.
• Exchange rate regime.
• Depends on demand and supply for that stock.

33. DRAWBACKS OF INDIAN STOCK MARKET:
•Unethical practices.
•Big irrational greed, excessive speculation.
•Lack of protection to interests of the genuine and small
investors .
•Trading is extremely thin and restricted.
•Structural and organisational imbalance in the growth of the
stock market.
•Volatility of the market has increased over the years.

34. Indian Capital Market
deficiencies
• Lack of transparency
• Physical settlement
• Variety of manipulative practices
• Institutional deficiencies
• Insider trading