Term Paper

On

Financial Market in India

(Investment Analysis and Portfolio Management)

Subject Guide: Submitted By:

Dr. Narayan Baser Aayushi Punjabi
(20185001)
Table of Contents
Introduction 4
Scope of the India Financial Market 4
Types of Financial Market 5
• Money Markets 5
• Capital Markets 5
• Primary Market 6
• Secondary Market 6
Features of the Financial Market in India 6
Functions of financial markets 7
• Intermediary functions 7
• Financial Functions 8
Potential of the India Financial Market 9

2
Introduction

Financial Markets talks about the primary market, FDIs, alternative investment options, banking and insurance
and the pension sectors, asset management segment as well. With all these elements in the India Financial
market, it happens to be one of the oldest across the globe and is definitely the fastest growing and best among
all the financial markets of the emerging economies. The history of Indian capital markets spans back 200 years,
around the end of the 18th century. It was at this time that India was under the rule of the East India Company.
The capital market of India initially developed around Mumbai; with around 200 to 250 securities brokers
participating in active trade during the second half of the 19th century.

Scope of the India Financial Market

The Indian stock markets till date have remained stagnant due to the rigid economic controls. It was only in
1991, after the liberalisation process that the India securities market witnessed a flurry of IPOs serially. The
market saw many new companies spanning across different industry segments and business began to flourish.

The launch of the NSE (National Stock Exchange) and the OTCEI (Over the Counter Exchange of India) in the
mid 1990s helped in regulating a smooth and transparent form of securities trading.

The regulatory body for the Indian capital markets was the SEBI (Securities and Exchange Board of India). The
capital markets in India experienced turbulence after which the SEBI came into prominence. The market
loopholes had to be bridged by taking drastic measures.

Types of Financial Market

https://www.bankexamstoday.com/2015/10/financial-markets-in-india-types-and.html

3
 1. Money Market.
1. Call Money.
2. Treasury Bill.
3. Commercial Paper.
4. Certificate of Deposit.
5. Trade bill.
2. Capital Market.
1. Securities Market
1. Primary Market : IPOs, Book Building, Private Placements.
2. Secondary Market : Equity Market, Debt Market, Commodity Market,
Futures and Options Market. (Secondary Market can be basically divided
into two – spot market and forward market. Forward market has two
divisions – futures and options/derivatives. Again, there are two types of
options – put option and call option.)
2. Non-Securities Market
1. Mutual Funds.
2. Fixed Deposits, Savings Deposits, Post Office savings.
3. Insurance.

• Money Markets

Investors looking for short-term trading often invest in money market securities. Private investors with money
to invest for a limited time might put their money into certificates of deposit, U.S. Treasury bills, municipal
notes, or federal funds.
Short maturity times make money markets a conservative investment. Consequently, the return on the
investment in a money market is lower than other types of investments.
The major players of money market

 Reserve Bank of India

 SBI DFHI Ltd (Amalgamation of Discount & Finance House in India and SBI in 2004)
 Acceptance Houses
 Commercial Banks, Co-operative Banks and Primary Dealers are allowed to borrow and lend.
 Specified All-India Financial Institutions, Mutual Funds, and certain specified entities are allowed to
access to Call/Notice money market only as lenders
 Individuals, firms, companies, corporate bodies, trusts and institutions can purchase the treasury bills,
CPs and CDs.

4
• Capital Markets

A capital market involves both private individuals and corporate institutions trading financial securities.
Companies and organisations often need operating capital. To fund these financial needs, an organisation can
sell its own company stocks and bonds to investors through a capital market. The stock market is an example of
a capital market where publicly traded companies make company shares available for investors to purchase.

• Primary Market

A primary market is a place where companies bring a new issue of shares for being subscribed by the general
public for raising funds to fulfil their long-term capital requirement like expanding the existing business or
purchasing new entity. It plays a catalytic role in the mobilisation of savings in the economy.
Various types of an issue made by the corporation are a Public issue, Offer for Sale, Right Issue, Bonus Issue,
Issue of IDR, etc.

• Secondary Market

The secondary market is a type of capital market where existing shares, debentures, bonds, options, commercial
papers, treasury bills, etc. of the corporates are traded amongst investors. The secondary market can either be an
auction market where trading of securities is done through the stock exchange or a dealer market, popularly
known as Over The Counter where trading is done without using the platform of the stock exchange.

Features of the Financial Market in India

• India Financial Indices - BSE 30 Index, various sector indexes, stock quotes, Sensex charts, bond prices,
foreign exchange, Rupee & Dollar Chart
• Indian Financial market news
• Stock News - Bombay Stock Exchange, BSE Sensex 30 index, S&P CNX-Nifty, company information, issues
on market capitalisation, corporate earning statements
• Fixed Income - Corporate Bond Prices, Corporate Debt details, Debt trading activities, Interest Rates, Money
Market, Government Securities, Public Sector Debt, External Debt Service
• Foreign Investment - Foreign Debt Database composed by BIS, IMF, OECD,& World Bank, Investments in
India & Abroad
• Global Equity Indexes - Dow Jones Global indexes, Morgan Stanley Equity Indexes
• Currency Indexes - FX & Gold Chart Plotter, J. P. Morgan Currency Indexes
• National and Global Market Relations
5
 • Mutual Funds
• Insurance
• Loans
• Forex and Bullion

Functions of financial markets

• Intermediary functions
The intermediary functions of financial markets include the following:

◦ Transfer of resources: Financial markets facilitate the transfer of real economic resources from
lenders to ultimate borrowers.
◦ Enhancing income: Financial markets allow lenders to earn interest or dividend on their surplus
invisible funds, thus contributing to the enhancement of the individual and the national income.
◦ Productive usage: Financial markets allow for the productive use of the funds borrowed. The
enhancing the income and the gross national production.
◦ Capital formation: Financial markets provide a channel through which new savings flow to aid
capital formation of a country.
◦ Price determination: Financial markets allow for the determination of price of the traded financial
assets through the interaction of buyers and sellers. They provide a sign for the allocation of
funds in the economy based on the demand and to the supply through the mechanism called price
discovery process.
◦ Sale mechanism: Financial markets provide a mechanism for selling of a financial asset by an
investor so as to offer the benefit of marketability and liquidity of such assets.
◦ Information: The activities of the participants in the financial market result in the generation and the
consequent dissemination of information to the various segments of the market. So as to reduce
the cost of transaction of financial assets.

• Financial Functions

◦ Providing the borrower with funds so as to enable them to carry out their investment plans.
◦ Providing the lenders with earning assets so as to enable them to earn wealth by deploying the assets
in production debentures.
◦ Providing liquidity in the market so as to facilitate trading of funds.
◦ Providing liquidity to commercial bank
◦ Facilitating credit creation
◦ Promoting savings
◦ Promoting investment
◦ Facilitating balanced economic growth
◦ Improving trading floors

6
Potential of the India Financial Market

India Financial Market helps in promoting the savings of the economy - helping to adopt an effective channel to
transmit various financial policies. The Indian financial sector is well-developed, competitive, efficient and
integrated to face all shocks. In the India financial market there are various types of financial products whose
prices are determined by the numerous buyers and sellers in the market. The other determinant factor of the
prices of the financial products is the market forces of demand and supply. The various other types of Indian
markets help in the functioning of the wide India financial sector.

7
Biblography

https://keydifferences.com/difference-between-primary-market-and-secondary-market.html

https://en.wikipedia.org/wiki/Financial_market

https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/financial-markets/