Indian capital market b.v.raghunandan

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explains the Indian capital market with emphasis on stock exchanges in India

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ChapterV-Stock Exchange

PG Department of Economics,St.Aloysius College,Mangalore

Capital Market- B.V.Raghunandan, SVS College, Bantwal

Capital Market: Meaning

The capital market is the market for securities, where companies and governments can raise long-term funds. It is a market in which money is lent for periods longer than a year. The capital market includes the stock market and the bond- wikipedia

Players in the Capital Market

GovernmentsPublic Sector UndertakingsInsurance CompaniesMutual FundsNon-Banking Financial CompaniesProvident Funds and Pension Funds

Commercial BanksFinancial InstitutionsCorporatesRetail InvestorsOthers: FFI,HNI,NRI, Investment Trusts,

Capital Market Instruments

Equity SharesPreference SharesGovernment BondsCorporate Bonds / Debentures Perpetual Bonds

Classification of Markets

Primary Markets

Secondary Markets

Secondary Market for Corporate Securities:Stock Exchange

Stock Exchange is, an organised market for second-hand corporate and government securities

A More Inclusive Definition

Stock Exchange is a regulated market for second-hand corporate securities, government securities, commodities, and foreign exchange

Characteristics of Stock Exchange

Organised MarketSecurities MarketSecondary marketPart of Capital MarketListed Securities

Restricted MembershipDealing only by MembersStandardised PracticesFacilitatorSpeculation

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Role and Functions of a Stock Exchange

Ready MarketLiquidity for SecuritiesEvaluationPrice StabilityCapital FormationPromoting Saving HabitsInvestor ProtectionCorporate Governance

Public FinanceGrowth of Joint Stock CompaniesEnabling Book-Building RouteCapital MobilityForeign FundsIndex CompilationTechnical AnalysisEconomic Development

Members of a Stock Exchange: Jobber & His Characteristics

DealerSpecialistStability in the MarketDealing with BrokersJobbers Profit

Equalising QuantitySpeculationTwo-way QuotesMatching Demand and SupplyCompany Sponsorship

Brokers & Their Characteristics

AgentGeneralistConduit between Jobber and the PublicIncome in the form of Commission

Types of Dealings

Dealings in Cash Market

Dealings in Futures & Options Market

Cash Market

Rolling Settlement

T+2 Settlement

Trading Day

Pay-In Day

Pay-Out Day

Futures & Options Marker

Meant for Risk Management Arising Out of Dealings in Cash MarketExchange TradedBig Investors and Institutions Take PositionsFor Protecting the Value of HoldingProviding for the Risks Arising Out of Trading

Futures: Characteristics

Standardised FeaturesCounter-Party is the Clearing HouseMargin RequirementTime SpreadThree Contracts for Settlement

Futures: Trading Mechanism

Trading StrategiesUses: -Hedging -Speculation -ArbitrageTypes of Futures: Stock Future and Index Future

Option

A contract to buy or sell without an obligationEuropean Option and American OptionCall Option and Put OptionUses of Options: -Hedging -Speculation -Arbitrage

Advantages of Option

No Big Investment

No Margin as in Futures

No Obligation

No Marked-to-Market

More Gain than Risk

Premium paid alone is the Disadvantage

Listing of Shares: Procedure

Initial Public OfferSize of Public Offer: Not Less than 25% of Issued Capital & Post Issue Paid Up Capital is not less than Rs.10 CroreFiling Application: MA, AA, Prospectus, Directors Report, Specimen Copies of Share Certificates and Debenture Certificates-Wide Distribution of Shares: 5 for Each Rs.1 Lakh cap-Dividend & Bonus in the Past 10 years-Brief History of the Company-Management Pattern

Listing Procedure .Continued

Payment of Listing Fees

Signing Listing Agreement

Screening the Application

Listing the Shares

SEBI: Functions

Regulation of Securities MarketRegistration of FIsRegistration of Collective Investment SchemeEducation & TrainingProhibition of Insider TradingProhibition of Unfair Trade Practices

Regulation of M&ARegistration of FIIRegistration & Regulation of SEsConducting Research

Powers of SEBI

Levying FeesApproving Bye-laws of SEsOrdering Amendment of Bylaws of SEBIInspectionCompulsory ListingPower of Punishment

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