Capital Makt

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    Capital market plays a

    catalytic roleA vibrant capital market

    is a function of economic

    growth The capital market

    consists primarily of thedebt and equity markets.Historically, it contributed

    significantly to mobilisingfunds to meet public andprivate companiesfinancing requirements

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    Capital Market an engine for

    growth Economic growth by mobilising savings

    of economic sectors and directing sametowards channels of productive uses

    Issue of primary securities

    Issue of secondary securities

    Secondary MarketTransactions tofacilitate liquidity

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    INVESTORS IN CAPITAL

    MARKET Individual Corporate Governments Foreign Companies Banks

    Provident Funds FinancialInstitutions

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    INTERMEDIARIES IN

    CAPITAL MARKET Stock exchanges Banks

    Investment trustand companies

    Development banks Mutual funds

    Non banking financialinstitutions International

    Financial Investorsand Institutions.

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    MARKET STRUCTURE

    22 Stock Exchanges, 15 Subsidiaries

    Over 10000 Electronic Terminals at over 400 locations all over

    India

    9394S

    tock Brokers and2

    3148Sub

    b

    rokers 5892 Listed Companies

    2 Depositories and 494 Depository Participants

    138 Merchant Bankers

    55 Underwriters

    32 Debenture Trustees

    139 Portfolio Managers

    83 Registrars & Transfer Agents

    60 Bankers to an Issue

    4 Credit Rating Agencies

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    MARKET STRUCTURE

    Venture Capital Funds

    39 Foreign

    80 Domestic

    38 Mutual Funds and 479 Schemes

    Asset Base: US $ 44.94 bln

    928 Foreign institutional investors

    Cumulative FII investment - US$ 44.17 bln

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    ROLE OF CAPITAL

    MARKET Capital formation

    Economic growth

    Development of backward areas Generates employment

    Long term capital to industrial sector

    Generation of foreign capital Developing role of financial insititutions

    Investment opportunities

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    Who Owns How Much?

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    Capital Market It is an important constituent of

    financial system.

    It is a market for long term funds bothequity & debt

    Funds are raised within the country aswell as outside the country

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    All Over AgainCapital MarketCapital Market-- The market for relatively long-term

    (greater than one year original maturity) financial

    instruments.Primary MarketPrimary Market-- A market where new securities are

    bought and sold for the first time (a new issuesmarket).

    Secondary MarketSecondary Market-- A market for existing (used)securities rather than new issues.

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    Fund raising can be classified as

    Public Issue by prospectus

    Private Placement Right Issue

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    Private Placement

    Eliminates the underwriting function of the investmentbanker.

    The dominant private placement lender in this group is thelife-insurance category (pension funds and bank trustdepartments are very active as well).

    Private (or Direct) PlacementPrivate (or Direct) Placement -- The sale of an

    entire issue of unregistered securities (usually

    bonds) directly to one purchaser or a group ofpurchasers (usually financial intermediaries).

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    Secondary MarketA market for outstanding securities

    An equity instrument provides an alltime market

    Debt instrument is traded till maturity

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    Two parts Secondary market for corporates &

    financial intermediaries through-

    Recognised Stock Exchanges

    NSE

    OTCEI

    Participants- Regd brokers bothindividuals and institutions,operatedthrough sub brokers & sub dealers

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    Nature of Fund raising in Primary market

    Domestic

    Equities, Debt Instruments

    ExternalEquity GDR,ADR

    Debt Inst ECB

    Other External BorrowingsFDI - Equity & Debt

    FII - portfolio invst

    NRI - short,medium term deposits

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    Sarbanes-Oxley

    Act of2

    002

    SarbanesSarbanes--Oxley Act of 2002 (SOX)Oxley Act of 2002 (SOX)

    Addresses, among other issues, corporate

    governance, auditing and accounting,

    executive compensation, and enhanced andtimely disclosure of corporate information.

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    Are Banks really the

    Big players in CapitalMarket in India ?

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    Banks in India have statutory

    / regulatory restrictions

    As per regulatory norms, banks areallowed to take exposure to thecapital market up to 40 per cent oftheir networth. It includes thebanks direct investment in equity,

    its proprietary holding, investmentin equity mutual funds, andadvances to brokers.

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    Sensitive Sector Exposure Total exposure of SCBs to the

    sensitive sectors constituted 20.4

    per cent of aggregate bank loansand advances (comprising 18.7 percent to real estate, 1.5 per cent tothe capital market and 0.1 per centto commodities) as compared with18.8 per cent last year.

    Source Trend & Progress Of Banking RBI Publication

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    Source Trend & Progress of Banking

    RBI publication

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    Nexus between Broker/s &

    Bank To avoid any nexus emerging between

    inter-connected stock broking entities

    and banks, the RBI has authorisedboards of each bank to fix, withinoverall ceiling of 40% of their net worthas on March 31 of previous year, a sub-

    ceiling for total advances to stockbrokers and to any single stock brokingentity and its associates.

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    Margin requirement for Bankguarantee for capital Market

    operations The guidelines prescribe a uniform

    margin of 50% to be applied on all

    advances/financing of IPOs/issue ofguarantees for capital marketoperations and a minimum cash marginof 25% (within the margin of 50%) tobe maintained in respect of guaranteesissued by banks for capital marketoperations.

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    Looking to pledge

    securities with a bank? You will now get only up to Rs 20 lakh

    loans against shares from the entire

    banking system. However, these shareswould have to be held in thedematerialised form. For shares held inthe physical form you would only get Rs10 lakh. Thanks to RBI's revisedguidelines on banks capital marketexposure. These guidelines are witheffect from April 1, 2007.

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    Equity Investors Money

    Misused In the recent market downslide, small

    investors are the worst affected. To add

    to their woes, unscrupulous brokersuse this opportunity to misuse theirclients' money. There are many cases of

    brokers using investor money for intra-day trading without prior knowledge ofthe investor. Equity investors must bemade aware of such unfair practices.

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    Who is actually swinging

    the balance? The Sensex had peaked at 18,845

    (before correcting to 18,419.04 in

    subsequent trading sessions). Boostedby robust flows from foreigninstitutional investors (FIIs), of $7billion (Rs 28,846 crore) betweenSeptember 19 and October 11, 2007 thebenchmark index pole vaulted from15,500 to close to 18,850 thats ajump of 22 per cent in just 16 tradingsessions.

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    FII INVESTMENT IN INDIA Simple and speedy registration process

    Minimum registration formalities

    956 FIIs registered as on Aug 2006

    3000 sub accounts registered as on Aug-2006

    FII are from across jurisdiction & include pension

    funds & university endowments etc. like CALPERS &

    Harvard University

    Cumulative net FII Investment- US$ 44.17

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    FII INVES

    TMENT

    (1.0)

    (0.5)

    0.0

    0.5

    1.0

    1.5

    2.0

    2.5

    93 93 94 94 95 95 96 96 97 97 98 98 99 99 00 00 01 01 02 02 03 03 04 04 05 05 06

    0

    5

    10

    15

    20

    25

    30

    35

    40

    45

    Monthly FII investment (LHS) Cumulative FII investment (RHS)

    (US$bn) (US$bn)

    Cumulative FII i