Welcome to the Indian Capital Market

7/29/2019 Welcome to the Indian Capital Market

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WELCOME TO THE INDIAN CAPITAL MARKET


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Capital Market

A market for borrowing and lending long-

term capital funds required by business

enterprises

The dealings in the capital are done through

the securities like shares, debentures etc. The

capital market is thus called securities market


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Features of Capital market

1. Mobilization of savings and acceleration of

capital formation

2. Promotion of industrial growth

3. Raising long term capital

4. Proper channelization of funds


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Capital market instruments

Equity shares

Preference shares

Government bondsCorporate bonds/ debentures

Perpetual bonds


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Functions of capital market

Allocation

function

Other function such asindicative, savings&investment, transfer

and merger.

Liquidity

functions


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Security prices

It depend upon a large number of factors:

1. Yield of securities

2. Extent of funds available from public savings

3. Level of demand for funds

4. Flow of funds from the banking system

5. Price situation in general

6. Attitude towards liquidity on the part ofinvestors


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Participants of capital market

1. Governments

2. Pubic sector undertakings

3. Insurance companies

4. Mutual funds

5. Non-banking financial institutions6. Commercial banks

7. Provident and pension funds

8. Financial institutions

9. Corporate10. Retail investors

11. Others: FFI, NRI , HNI ,Investment funds


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Evolution and growth

1.Infrastructurestage

2.New issuesstage

3.The SEBI stage4.New financial

services

5.committees


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The gilt-edged market

The industrial securitiesmarket

Classification of Indian capital market


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1.The gilt-edged market

The marketable debt issued by the government or

semi government bodies, which represents a claim

on the government, is known as a government

security or gilt-edged security.


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FEATURES OF GOVERNMENT

SECURITIESIssued at face value

No default risk as the securities carry sovereignguarantee.

Ample liquidity as the investor can sell the securityin the secondary market

Interest payment on a half yearly basis on facevalue

No tax deducted at source


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Can be held in Demat form.

Rate of interest and tenor of the security is fixed at

the time of issuance and is not subject to change.

Redeemed at face value on maturity

Maturity ranges from of 2-30 years.

Securities qualify as SLR investments.


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The dated Government securities market in

India has two segments:

Primary Market:

The Primary Market consists of the issuers of the

securities, viz., Central and Sate Government andbuyers include Commercial Banks, Primary Dealers,

Financial Institutions, Insurance Companies & Co-

operative Banks. RBI also has a scheme of non-

competitive bidding for small investors.


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Secondary Market:

The Secondary Market includes Commercial banks,

Financial Institutions, Insurance Companies,Provident Funds, Trusts, Mutual Funds, Primary

Dealers and Reserve Bank of India. Even Corporate

and Individuals can invest in Government Securities.

The eligibility criteria is specified in the relative

Government notification


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2. The industrial securities market

The industrial securities market is composed offollowing segments:

1. Primary market:

A market where new securities are bought andsold for the first time

2. Secondary market:

A market which deals in securities that havebeen already issued by companies. It is alsocalled the stock exchange or the share market


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Types of issues in Primary market

Initial public offer (IPO) (in case of an unlisted

company),

Follow-on public offer (FPO),

Rights offer such that securities are offered to

existing shareholders,

Preferential issue, Composite issue


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New financial institutions

1. Venture fund institutions

2. Mutual funds

3. Factoring institutions

4. Credit rating institutions5. Over-the-counter exchange of india(OCTEI)

6. National stock exchange of india limited(NSEI)

7. National clearance and depository systems(NCDS)

8. National securities depositories limited

9. Stock holdings corporations of india limited(SHCIL)


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New financial instruments

1. Commercial paper

2. Certificate of deposit

3. Secured premium notes(SPN) with attachedwarrant

4. Non-convertibledebenture( NCD) withdetachable equitywarrants

5. Zero coupon bonds

6. Zero interest fullyconvertibledebenture(FCD)

7. Deep discount bonds

8. Stock invest

9. Equity shares withdetachable warrants

10. Equitypre shares11. Preference shares with

warrants attached

12. Euro issues

13. Non-voting right shares

14. Other innovativeinstruments.


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Major issues in Indian capital market

1. Vanishing companies

2. Lack of commitment

3. Stock scams4. Malaises

5. Lack of professional expertise

6. The defaults committed by brokers7. Multiplicity of investor complaints


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Documents

Welcome to the Indian Capital Market