14784493 Indian Capital Market

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  • 1.Indian Capital Market

2. Organized Indian Financial SystemMoney MarketInstrument Capital MarketInstrument ForexMarket CapitalMarket MoneyMarket CreditMarket Primary Market Financial InstrumentsFinancial Markets Financial IntermediariesSecondary MarketRegulators 3. Money Market Vs Capital Market

  • It is for short term
  • Supplies funds for WC
  • Instruments are T-bill, CM, etc
  • Each single instrument is of large amount
  • Central bank and Commercial banks are major.
  • It is for long term
  • Supplies funds for fixed capital requirement
  • Instruments are shares, debentures, etc.
  • Each single instrument is of small amount
  • Development bank and insurance companies are major.

4. Conti..

  • These instruments do not have secondary market.
  • Transactions are on over phone and no formal place
  • Transaction without the help of broker.
  • These instruments have secondary market.
  • Transactions are at formal place. Eg stock market.
  • Transaction have to be conducted with the help of broker.

5. 6. 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.

7. Role of Capital Markets

  • Mobilization of Savings & acceleration of Capital Formation
  • Promotion of Industrial Growth
  • Raising of long term Capital
  • Ready & Continuous Markets
  • Proper Channelisation of Funds
  • Provision of a variety of Services

8. Functions of a capital market

  • Disseminate information efficiently
  • Enable quick valuation of financial instruments both equity and debt
  • Provide insurance against market risk or price risk
  • Enable wider participation
  • Provide operational efficiency through
  • -simplified transaction procedure
  • - lowering settlement timings and
  • - lowering transaction costs

9.

  • Develop integration among
  • -real sector and financial sector
  • -equity and debt instruments
  • -long term and short term funds
  • -Private sector and government sector and
  • -Domestic funds and external funds
  • Direct the flow of funds into efficient channels through
  • -investment
  • -disinvestment
  • -reinvestment

10. 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

11. Indian Capital Market -Historical perspective

  • Stock Market was for a privileged few
  • Archaic systems - Out cry method
  • Lack of Transparency - High tones costs
  • No use of Technology
  • Outdated banking system
  • Volumes - less than Rs. 300 cr per day
  • No settlement guarantee mechanism - High risks

12. 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
  • 2001- Major Stocks move to Rolling Sett
  • 2003- T+2 settlements in all stocks
  • 2003 - Demutualisation of Exchanges

13. 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
  • Investor awareness programs
  • Rolling settlements
  • Inter-action between banking and exchanges

14. CAPITAL MARKET REFORMS IN INDIA

  • The 1990s have witnessed the emergence of the securities market as a major source of finance for trade and industry in India.
  • A growing number of companies have been accessing the securities market rather than depending on loans from financial institutions / banks.
  • The corporate sector is increasingly depending on external sources for meeting its funding requirements.

15. Reforms / Initiatives post 2000

  • Corporatisation of exchange memberships
  • Banning of Badla / ALBM
  • Introduction of Derivative products - Index / Stock Futures & Options
  • Reforms/Changes in the margining system
  • STP - electronic contracts
  • Margin Lending
  • Securities Lending

16. MARKET STRUCTURE(JULY 31, 2005)

    • 22 Stock Exchanges,
    • Over 10000 Electronic Terminals at over 400 locations all over India.
    • 9108 Stock Brokers and 14582 Sub brokers
    • 9644 Listed Companies
    • 2 Depositories and 483 Depository Participants
    • 128 Merchant Bankers, 59 Underwriters
    • 34 DebentureTrustees,96 PortfolioManagers
    • 83 Registrars & Transfer Agents, 59 Bankers to Issue
    • 4 Credit Rating Agencies

17. Indian Capital Market Market Instruments Intermediaries Primary Secondary Equity Debt Hybrid Regulator

  • Brokers
  • Investment Bankers
  • Stock Exchanges
  • Underwriters

SEBI Players Corporate Intermediaries CRA Banks/FI FDI /FII Individual 18. 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

19. Growth Pattern of the Indian Stock Market Sl.No. As on 31st December 1946 1961 1971 1975 1980 1985 1991 1995 1No. of Stock Exchanges 77 88 9 14 20 22 2 No. ofListed Cos. 11251203 1599 1552 2265 4344 6229 8593 3No. of Stock Issues ofListed Cos.1506 2111 2838 3230 3697 6174 8967 11784 4Capital of Listed Cos. (Cr. Rs.) 270 753 1812 2614 3973 9723 32041 59583 5Market value of Capital of Listed Cos. (Cr. Rs.)971 1292 2675 3273 6750 25302 110279 478121 6Capital per Listed Cos. (4/2) (Lakh Rs.) 24 63 113 168 175 224 514 693 7 Market Value of Capital per Listed Cos. (Lakh Rs.) (5/2)86 107 167 211 298 582 1770 5564 8Appreciated valueof Capital per Listed Cos. (Lak Rs.) 358 170 148 126 170 260 344 803 20. Primary Market

  • Market for new issues/fresh capital (IPOs)
  • New issues mkt.
  • Participants
  • issuer
  • investors
  • intermediaries

21. Mobilization of funds

  • Prospectus
  • Right issues and
  • Private placement

22. Free pricing regime

  • Before 1992,Regulator of new issues was CCI (Controller of Capital Issues)
  • Approval from CCI for raising funds in primary mkt.
  • Timing, quantum ,and pricing of the issue were decided by the controller
  • New co.s can issue shares only at par
  • Existing companies with substantial reserves could issue shares at premium
  • Fixed price mechanism resulted in under pricing of many issues
  • After 1992, promoter and merchant banker together decide the price of the issue.

23. Fixed price mechanism of new issue

  • CCI regime
  • To offer share at a fixed price