Capital Market Structure in India

8/3/2019 Capital Market Structure in India

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ACKNOWLEDGEMENT

We the Student of Nirmala Memorial Foundation College

FYBMS ‘B’ had a great pleasure in presenting our effort of developing a complete project in a very satisfactory and

appreciable manner. Our effort has being a success due to

the co-operation of our team-mates, our librarian and our

family matters.

We also owe to our PRINCIPLE MADHU NAIR from depth

of gratitude.



UNIVERSITY OF MUMBAI

NIRMALA MEMORIAL FOUNDATION COLLEGE OFCOMMERCE AND SCIENCE

CLASS – FYBMS (B) - 12

TOPIC- A STUDY ON INDIAN CAPITAL MARKET

STRUTURE OF INDIA

__________ ____________

DATE

SIGNATURE



CAPITAL MARKET STRUCTURE IN INDIA

*INTRODUCTION:

~ Capital market is the market for leading and borrowing of

medium and long term funds.

~ The demand for long-term funds comes from industry,

trade, agriculture and government (central and state).

~ The supply for funds comes from individual savers,

corporate savings, banks, insurance companies, specialized

financial institutions and government.

~ Capital market has three different categories:-

i) Government securities market:

It is also called Gilt-edged market.



^ It deals in interest bearing and dated government

securities.

^ This market is regulated by the RBI.

ii) Corporate Debt Market

This market deals in :

^ Binds floated by public sector units, nationalised banksand financial institutions.

^ Debentures floated by corporates.

iii) The Equity Market:

^ Corporates raise preference / equity share capital in this

market.

^ These shares can be sold / purchased and thus provide

liquidity to markets.

STRUCTURE OF CAPITAL MARKET IN INDIA



i) GILD-EDGED MARKET:



~ This market deals in government and semi government

securities and so it is also called ‘Government securities

market’.

~ This market deals with securities such as bonds issued

by Central / State Government and these securities carry

fixed interest rates.

~ RBI plays a very important role in this market.

ii) CORPORATE / INDUSTRIAL SECURITIES

MARKET;

~ The Corporate Security Market provides long – term

funds to the companies.

~ It deals with shares and debentures of old and new

companies.



iii) DEVELOPMENT FINANCIAL

INSTITUTIONS:

~ Developmental financial institutions were established to

provide medium term / long term loans to the industrial

sector.

~ These institutions include Industrial Finance Corporation

of India (IFCI), Industrial Development Bank of India(ICICI), Industrial Development Bank of India (IDBI),

Industrial Investment Bank of India (IIBI), The Export and

Import Bank of India (EXIM BANK), State Finance

Corporations (SFCs), state Industrial Corporations

(SIDCs), etc.

~ The long term loans obtained from these institutions can be used for expansion and modernisation

~ These institutions also subscribe to shares and

debentures of new /old companies and underwrite new

issues.

~ These institutions raise funds by way of term deposits,

Certificates of deposits and borrowings.

~ Long term loans can be classified into: Term Loans

Market



iv) FINANCIAL INTERMEDIARIES :

~ They comprise of merchant banks, mutual funds, leasing

companies, venture capital companies, etc.

aspects.

~ Leasing companies provide funds for purchasing plantand machinery.

~ Mutual funds mobilise savings of the people and invest

them in stock markets.

~ Venture capital companies provide financial support to

new ideas and technology.

~ Merchant banks manage and underwrite new issues, and

advise corporate on various financial



DEVELOPMENT OF THE CAPITAL MARKET IN

INDIA

The Indian capital market has developed very muchsince independence period .The change has been

because government has taken various important

steps to make the market stronger and develop it to

meet the demand of growing capital for fast

industrialization and development of the economy

.Following are the measures taken by government.

Factors contributing to growth of

Indian Capital Market.

1. Legislative measures



2. Establishment of Development banks & Expansion of

public

3. Public Investments

4. Increasing awareness of investment opportunities

5. Growth of underwriting business

6. Capital market reforms

Significance, Role or Functions of Capital Market

Like the money market capital market is also very

important. It plays a significant role in the national

economy. A developed, dynamic and vibrant capital market

http://kalyan-city.blogspot.com/2010/09/money-market-concept-meaning.html

http://kalyan-city.blogspot.com/2010/09/money-market-concept-meaning.html



can immensely contribute for speedy economic growth and

development.

Let us get acquainted with the important functions and role

of the capital market.

1. Legislative measures : The Companies Act, the

securities contract act and capital issue act has given

power to the government to regulate the activites of

the capital market to protect the interest of the

investor, efficient use of the resources etc

2. Mobilization of Savings : Capital market is an

important source for mobilizing idle savings from the

economy. It mobilizes funds from people for further

investments in the productive channels of an economy.

In that sense it activate the ideal monetary resources

and puts them in proper investments.

3. Capital Formation : Capital market helps in capital

formation. Capital formation is net addition to the

existing stock of capital in the economy. Through

mobilization of ideal resources it generates savings;

the mobilized savings are made available to various



segments such as agriculture, industry, etc. This helps

in increasing capital formation.

4. Provision of Investment Avenue : Capital market

raises resources for longer periods of time. Thus it

provides an investment avenue for people who wish to

invest resources for a long period of time. It provides

suitable interest rate returns also to investors.

Instruments such as bonds, equities, units of mutual

funds, insurance policies, etc. definitely provides

diverse investment avenue for the public.

5. Speed up Economic Growth and Development :

Capital market enhances production and productivity

in the national economy. As it makes funds availablefor long period of time, the financial requirements of

business houses are met by the capital market. It helps

in research and development. This helps in, increasing

production and productivity in economy by generation

of employment and development of infrastructure.

6. Proper Regulation of Funds : Capital markets not

only helps in fund mobilization, but it also helps in

proper allocation of these resources. It can have



regulation over the resources so that it can direct funds

in a qualitative manner.

7. Service Provision : As an important financial set up

capital market provides various types of services. It

includes long term and medium term loans to industry,

underwriting services, consultancy services, export

finance, etc. These services help the manufacturing

sector in a large spectrum.

8. Continuous Availability of Funds : Capital market is

place where the investment avenue is continuously

available for long term investment. This is a liquid

market as it makes fund available on continues basis.

Both buyers and seller can easily buy and sell

securities as they are continuously available. Basicallycapital market transactions are related to the stock

exchanges. Thus marketability in the capital market

becomes easy.

These are the important functions of the capital market.



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Capital Market Structure in India