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Types of Financial market in India

Capital Market Money Market Derivatives market Foreign Exchange market Commodity Market Insurance Market Mutual Fund Market

What is Capital Market?


A capital market is simply any market where a government or a

company can raise money (capital) to fund their operations and long term investment. Selling bonds and selling stock are two ways to generate capital, thus BOND MARKET and STOCK MARKET are considered capital markets.
Capital Market is characterized as the provider of long-term financing.

The instruments used for this long-term financing are equity instruments, insurance instruments, derivative instruments and bonds.
Other examples of capital market instruments include equity, floating

rate bonds, convertible bonds, asset backed securities, mortgage backed securities, and interest rate swaps.

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.

Indian Capital Market - Historical perspective


Stock Market was for a privileged few
Lack of Transparency - High tones costs No use of Technology Outdated banking system Volumes - less than Rs. 300 cr per day

Indian Capital markets Chronology


1994-Equity Trading commences on NSE
1995-All Trading goes Electronic 1996- Depository comes in to existence

1999- FIIs Participation- Globalisation


2000- over 80% trades in Demat form 2003- T+2 settlements in all stocks

Factors contributing to growth of Indian Capital Market

Establishment of Development banks & Industrial financial institution. Legislative measures Growing public confidence Increasing awareness of investment opportunities Growth of underwriting business Setting up of SEBI Mutual Funds Credit Rating Agencies

Capital Markets - Reforms


Each scam has brought in reforms - 1992 / 2001 Screen based Trading through NSE Capital adequacy norms stipulated Dematerialization of Shares - risks of fraudulent paper eliminated Entry of Foreign Investors Introduction of Derivative products - Index / Stock Futures &

Options

Margin Lending

Capital Market v/s Money Market


Extends beyond one year Term loans and financial leases, corporate equities, and bonds. Upto One year or less. Federal agency securities, commercial paper

Fixed Capital Requirement.


Instruments have Primary as well as secondary market Formal place for transactions e.g.. Stock market

Working Capital Requirement.


Instruments have only Primary market No Formal place for transactions

Indian Capital Market

Market

Instruments

Intermediaries Regulator
SEBI

Primary

Secondary

Brokers Investment Bankers Stock Exchanges Underwriters

Equity

Debt

Players

CRA

Corporate

Intermediaries

Individual

Banks/FI

FDI /FII

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

Instruments in Secondary Market Debenture


Equity

Giltz securities
Derivatives Hedge funds FCCB

What is a Share or a Stock?


In financial markets, a share is a unit of account for various financial

instruments including stocks (ordinary or preferential).


In simple Words, a share or stock is a document issued by a company,

which entitles its holder to be one of the owners of the company. A share is issued by a company or can be purchased from the stock market.
The common feature of all these is equity participation & limited in the

case of preference shares .

IPO & Its Important Terminology


Investment Bankers & Underwriters Registrar

Issue of Prospectus
Price Band

Allotment
Listing

Book building process Appointment of book runner i.e. merchant banker


Preparation and submission of draft documents to SEBI and obtaining of an acknowledgement card. A specified price band (range) is to be determined by issuer and book runner Different price levels are invited from syndicate members .Adv. Should mention opening and closing dates for the bids Issuer arrives at a final cut-off rate & final allocation in consultation with book runner and lead manager Issuer and book runner may impose restrictions on number of shares that can be allotted to each client Final prospectus is filed with the (ROC) along with procurement agreement Placement portion opens for subscription Placement portion closes a day before the opening of public issue portion

The role of the stock exchange


Creates investment opportunities for small investors

Government raises capital for development projects

Barometer of the economy

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