ACKNOWLEDGEMENT

We the Student of Nirmala Memorial Foundation College FYBMS B had a great pleasure in presenting our effort of developing a complete project in a very satisfactory and appreciable manner. Our effort has being a success due to the co-operation of our team-mates, our librarian and our family matters. We also owe to our PRINCIPLE MADHU NAIR from depth of gratitude.

UNIVERSITY OF MUMBAI

NIRMALA MEMORIAL FOUNDATION COLLEGE OF COMMERCE AND SCIENCE CLASS FYBMS (B) - 12 TOPIC- A STUDY ON INDIAN CAPITAL MARKET STRUTURE OF INDIA

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CAPITAL MARKET STRUCTURE IN INDIA

*INTRODUCTION:

~ Capital market is the market for leading and borrowing of medium and long term funds.

~ The demand for long-term funds comes from industry, trade, agriculture and government (central and state).

~ The supply for funds comes from individual savers, corporate savings, banks, insurance companies, specialized financial institutions and government.

~ Capital market has three different categories:-

i) Government securities market:

It is also called Gilt-edged market.

^ It deals in interest bearing and dated government securities. ^ This market is regulated by the RBI. ii) Corporate Debt Market

This market deals in :

^ Binds floated by public sector units, nationalised banks and financial institutions.

^ Debentures floated by corporates.

iii) The Equity Market: ^ Corporates raise preference / equity share capital in this market.

^ These shares can be sold / purchased and thus provide liquidity to markets.

STRUCTURE OF CAPITAL MARKET IN INDIA

i) GILD-EDGED MARKET:

~ This market deals in government and semi government securities and so it is also called Government securities market.

~ This market deals with securities such as bonds issued by Central / State Government and these securities carry fixed interest rates.

~ RBI plays a very important role in this market.

ii) CORPORATE / INDUSTRIAL SECURITIES MARKET;

~ The Corporate Security Market provides long term funds to the companies.

~ It deals with shares and debentures of old and new companies.

iii) DEVELOPMENT FINANCIAL

INSTITUTIONS:

~ Developmental financial institutions were established to provide medium term / long term loans to the industrial sector.

~ These institutions include Industrial Finance Corporation of India (IFCI), Industrial Development Bank of India (ICICI), Industrial Development Bank of India (IDBI), Industrial Investment Bank of India (IIBI), The Export and Import Bank of India (EXIM BANK), State Finance Corporations (SFCs), state Industrial Corporations (SIDCs), etc. ~ The long term loans obtained from these institutions can be used for expansion and modernisation ~ These institutions also subscribe to shares and debentures of new /old companies and underwrite new issues. ~ These institutions raise funds by way of term deposits, Certificates of deposits and borrowings.

~ Long term loans can be classified into: Term Loans Market

iv) FINANCIAL INTERMEDIARIES:

~ They comprise of merchant banks, mutual funds, leasing companies, venture capital companies, etc. aspects.

~ Leasing companies provide funds for purchasing plant and machinery.

~ Mutual funds mobilise savings of the people and invest them in stock markets.

~ Venture capital companies provide financial support to new ideas and technology. ~ Merchant banks manage and underwrite new issues, and advise corporate on various financial

DEVELOPMENT OF THE CAPITAL MARKET IN INDIA The Indian capital market has developed very much since independence period .The change has been because government has taken various important steps to make the market stronger and develop it to meet the demand of growing capital for fast industrialization and development of the economy .Following are the measures taken by government.

Factors contributing to growth of Indian Capital Market.

1.

Legislative measures

2.

Establishment of Development banks & Expansion of public Public Investments Increasing awareness of investment opportunities Growth of underwriting business Capital market reforms

3. 4. 5. 6.

Significance, Role or Functions of Capital Market Like the money market capital market is also very important. It plays a significant role in the national economy. A developed, dynamic and vibrant capital market

can immensely contribute for speedy economic growth and development.

Let us get acquainted with the important functions and role of the capital market. 1. Legislative measures : The Companies Act, the securities contract act and capital issue act has given power to the government to regulate the activites of the capital market to protect the interest of the investor, efficient use of the resources etc
2.

Mobilization of Savings : Capital market is an important source for mobilizing idle savings from the economy. It mobilizes funds from people for further investments in the productive channels of an economy. In that sense it activate the ideal monetary resources and puts them in proper investments. Capital Formation : Capital market helps in capital formation. Capital formation is net addition to the existing stock of capital in the economy. Through mobilization of ideal resources it generates savings; the mobilized savings are made available to various

3.

segments such as agriculture, industry, etc. This helps in increasing capital formation.

4.

Provision of Investment Avenue : Capital market raises resources for longer periods of time. Thus it provides an investment avenue for people who wish to invest resources for a long period of time. It provides suitable interest rate returns also to investors. Instruments such as bonds, equities, units of mutual funds, insurance policies, etc. definitely provides diverse investment avenue for the public. Speed up Economic Growth and Development : Capital market enhances production and productivity in the national economy. As it makes funds available for long period of time, the financial requirements of business houses are met by the capital market. It helps in research and development. This helps in, increasing production and productivity in economy by generation of employment and development of infrastructure.

5.

6.

Proper Regulation of Funds : Capital markets not only helps in fund mobilization, but it also helps in proper allocation of these resources. It can have

regulation over the resources so that it can direct funds in a qualitative manner.
7.

Service Provision : As an important financial set up capital market provides various types of services. It includes long term and medium term loans to industry, underwriting services, consultancy services, export finance, etc. These services help the manufacturing sector in a large spectrum. Continuous Availability of Funds : Capital market is place where the investment avenue is continuously available for long term investment. This is a liquid market as it makes fund available on continues basis. Both buyers and seller can easily buy and sell securities as they are continuously available. Basically capital market transactions are related to the stock exchanges. Thus marketability in the capital market becomes easy. These are the important functions of the capital market.

8.