INDIAN CAPITAL MARKET

Problems in Indian Capital Markets before 1992

Multiplicity of administration

Poor disclosure in prospectus

Investors faced problems of delays (Refund, Transfers etc.)

No concept of capital adequacy

No inspections of stock exchanges undertaken

Problems in Indian Capital Markets before 1992

Stock Exchanges management dominated by brokers

Poor disclosures by Mutual Funds (NAV not published, No valuation Norms)

No prohibition of insider trading, or fraudulent and unfair trade practices.

Primary markets not in the main stream of the financial systems

REFORMS IN INDIAN CAPITAL MARKET

Reforms in Indian Capital Market Companies free to raise funds from securities

markets after filing prospectus with SEBI

SEBI introduces regulation for primary & other secondary market intermediaries

Listed Co’s to furnish annual statement to the exchanges

Book Building introduced for institutional investors

SEBI introduces regulations governing substantial acquisition of shares and takeovers.

Reforms in Indian Capital Market NSE establishment as a stock exchange with

national wide electronic trading

BSE introduces screen based trading

Capital adequacy requirement for brokers

System of mark to market margins introduced

Stock Lending schemes introduced

NSCCL setup by NSE

Reforms in Indian Capital Market SEBI strengthen surveillance mechanisms and

have a separate surveillance departments with all stock exchanges

Depositories act introduces for Electronic transfer of shares.

Permission to access in international capital markets by Indian companies through Euro issues

FDI allowed in stock broking ,AMC’s, Merchant Bankers , NBFC’s.

FII’s allowed to access Indian capital markets on registration with SEBI

Regulatory Framework of Indian Capital Markets

Regulatory Framework

SEBI

RBI DCA Stock Exchange

SEBI

Setup in 1992 , as a statutory body Registering & regulating intermediaries Investor protection through regulating Indian

capital markets Boost up the development of Indian Capital

Markets Registering & regulating service providers,

Mutual funds, collective investment schemes, venture capital funds, takeovers etc.

Power to inspect book, records, suspend registered entities and cancel registration

RBI

Regulatory involvement in Indian Capital Markets

Limited to the Debt Management Foreign Exchange Control Liquidity support to market participants Regulate primary dealers in the Government

securities markets Securities transactions that involve foreign

exchange transaction need prior permission of RBI

Important role in NSE debt Markets

DCA(Dept of Company Affairs)

Administered by Controller of capital issue(CCI)

Part of Ministry of Finance

In 1992 ,Liberalize capital issuance and pricing

Public & Private Companies were governed by companies act 1956, which continued to be administered by DCA.

Specify certain aspects concerning capital issuance and securities trading.

Stock Exchanges

Two major exchanges (NSE,BSE) in India.

Automated Trading System developed for fast & transparent execution of trades

Listing of securities in exchanges

Introduced risk management systems

Committees of stock exchange set up to handle matters of discipline , default and investor-broker disputes

Major crash in Indian Capital Markets

28 April 1992• Sensex fall by 570 points (12.77%)• Harshad Mehta securities scam

18 May 2006• Nifty crash by 496.50 points(8.70%)• Heavy selling by FII’s due to

weakness in global markets

21 JAN 2008• Sensex crash by 1408 points • Due to recession in US

Major Rallies in Indian Capital Markets

18 May 2009• Sensex Rise by 2111 points

(20.00%)• Victory of UPA in election