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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 investment = US$ 44.15 bn
Number of registered FIIs =956
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FIIs shying away?This year so far, FIIs havesold equities worthRs13,693 crore in India
They had bought Rs17,288 crore in the sameperiod last year
The rapid fall in the rupee
has seriously skewed the
math.There are markets whichare going up, such asBrazil and Taiwan Whyshould an investorleave them and come
here?
DNA 28-05-08
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JULY2009
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Dooms day is not far off Nouriel Roubini, professor of economics
at New York Universitys Stern School ofBusiness, calls it the worst financialcrisis since the Great Depression. Andhe paints a frightening picture: whenthe dust settles, credit losses will beclose to $2 trillion about two years
worth of Indias GDP and the failureof hundreds of small banks all over theUS (by his estimate, 67 per cent of theassets on small banks books are
hou
sing loans).
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THANK YOU