capitalmarket-130315074508-phpapp01

Embed Size (px)

Citation preview

  • 8/13/2019 capitalmarket-130315074508-phpapp01

    1/23

    SUBMITTED TO:Dr. M. KAMESHWAR RAOASSISTANT PROFESSOR

    DEPARTMENT OF MANAGEMENT STUDIES

    Prepared By:Puneet Sharma

    Vinay PatidarViyappu TharunSiddharth KhandelwalRishu Singh

  • 8/13/2019 capitalmarket-130315074508-phpapp01

    2/23

    Introduction to Capital market/

    Financial marketCapital Market is one of the significant aspect of every financial market.

    Hence it is necessary to study its correct meaning. Broadly speaking the

    capital market is a market for financial assets which have a long or indefinite

    maturity.

    Unlike money market instruments the capital market instruments become mature for the

    period above one year. It is an institutional arrangement to borrow and lend money

    for a longer period of time. It consists of financial institutions like IDBI, ICICI, UTI, LIC, etc.

    These institutions play the role of lenders in the capital market. Business units and

    corporate are the borrowers in the capital market. Capital market involves variousinstruments which can be used for financial transactions. Capital market provides long

    term debt and equity finance for the government and the corporate sector. Capital

    market can be classified into primary and secondary markets. The primary market is a

    market for new shares, where as in the secondary market the existing securities are

    traded. Capital market institutions provide rupee loans, foreign exchange loans,

    consultancy services and underwriting.

  • 8/13/2019 capitalmarket-130315074508-phpapp01

    3/23

    Difference between Money Markets

    and Capital Markets

    Money market is a place where banks deal in short term loans in the form of commercial bills and treasury

    bills. But capital market is a place where brokers deal in long term debt and equity capital in the form of

    debenture, shares and public deposits.

    In money market maturity date of repayment may after one hour to 90 days. But in capital market, loans

    are given for 5 to 20 years and if issue of shares by co. , its amount will repay at winding of company . But

    investors have right to sell it to other investors if they need the money.

    Rate of interest in money market is controlled by RBI or central bank of any country. But capital markets

    interest and dividendrate depends on demand and supply of securities and stock markets sensex

    conditions. Stock market regulator is in the hand of SEBI.

    Main dealer of money market s are commercial banks like SBI, ICICI Bank, UTI and LIC and other financial

    institutions. Main dealers are all the public and private ltd. Co. and more than 30 million investors. It is

    increasing trend due to opening of online capital market.

    In USA, money market is famous with dealing of money fund and bankers acceptance instruments. But

    capital market in USA is famous with New York stock exchange and stock regulator is Security exchange

    commission (SEC).

    http://www.svtuition.org/2009/12/what-is-dividend.htmlhttp://www.svtuition.org/2009/12/what-is-dividend.html
  • 8/13/2019 capitalmarket-130315074508-phpapp01

    4/23

    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 can immensely contribute for speedy economic growth and

    development.

    These markets channel the wealth of savers to those who can put it to

    long-term productive use, such as companies or governments making

    long-term investments

    Let us get acquainted with the important functions and role of the capital

    market.

  • 8/13/2019 capitalmarket-130315074508-phpapp01

    5/23

    Mobilization Of Saving

    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.

  • 8/13/2019 capitalmarket-130315074508-phpapp01

    6/23

    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

  • 8/13/2019 capitalmarket-130315074508-phpapp01

    7/23

    Capital market raises resources for longer periods of time. Thus it provides aninvestment 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.

    Provision of Investment Avenue

  • 8/13/2019 capitalmarket-130315074508-phpapp01

    8/23

    Capital market enhances production and productivity in the national economy.

    As it makes funds available for long period of time, the financial requirements of business houses aremet 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.

    Speed up Economic Growth and

    Development

  • 8/13/2019 capitalmarket-130315074508-phpapp01

    9/23

    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.

  • 8/13/2019 capitalmarket-130315074508-phpapp01

    10/23

    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 themanufacturing sector

    in a large spectrum.

  • 8/13/2019 capitalmarket-130315074508-phpapp01

    11/23

    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. Basically capital market transactions are related to the

    stock exchanges. Thus marketability in the capital market becomes easy.

    f di i l k

  • 8/13/2019 capitalmarket-130315074508-phpapp01

    12/23

    Structure of Indian Capital Market

    with Diagram

    Broadly speaking the capital market is classified in to two categories. They are the

    Primary market (New Issues Market) and the Secondary market (Old (Existing) Issues

    Market). This classification is done on the basis of the nature of the instrument

    brought in the market. However on the basis of the types of institutions involved in

    capital market, it can be classified into various categories such as the Government

    Securities market or Gilt-edged market, Industrial Securities market, DevelopmentFinancial Institutions (DFIs) and Financial intermediaries. All of these components have

    specific features to mention. The structure of the Indian capital market has its distinct

    features. These different segments of the capital market help to develop the

    institution of capital market in many dimensions. The primary market helps to raise

    fresh capital in the market. In the secondary market, the buying and selling (trading) of

    capital market instruments takes place. The following chart will help us inunderstanding the organizational structure of the Indian Capital market.

  • 8/13/2019 capitalmarket-130315074508-phpapp01

    13/23

  • 8/13/2019 capitalmarket-130315074508-phpapp01

    14/23

    Government Securities Market

    This is also known as the Gilt-edged market. This refers to the market for

    government and semi-government securities backed by the Reserve Bank

    of India (RBI)

  • 8/13/2019 capitalmarket-130315074508-phpapp01

    15/23

    Industrial Securities Market

    This is a market for industrial securities i.e. market for shares and debentures of

    the existing and new corporate firms. Buying and selling of such instruments take

    place in this market. This market is further classified into two types such as the

    New Issues Market (Primary) and the Old (Existing) Issues Market (secondary). In

    primary market fresh capital is raised by companies by issuing new shares, bonds,

    units of mutual funds and debentures. However in the secondary market alreadyexisting i.e old shares and debentures are traded. This trading takes place through

    the registered stock exchanges. In India we have three prominent stock exchanges.

    They are the Bombay Stock Exchange (BSE), the National Stock Exchange (NSE) and

    Over The Counter Exchange of India (OTCEI).

  • 8/13/2019 capitalmarket-130315074508-phpapp01

    16/23

    Development Financial Institutions

    (DFIs) This is yet another important segment of Indian capital market. This

    comprises various financial institutions. These can be special purpose

    institutions like IFCI, ICICI, SFCs, IDBI, IIBI, UTI, etc. These financial

    institutions provide long term finance for those purposes for which they

    are set up.

    International Financial Institutes

  • 8/13/2019 capitalmarket-130315074508-phpapp01

    17/23

    Financial Intermediaries

    The fourth important segment of the Indian capital market is the financial

    intermediaries. This comprises various merchant banking institutions, mutual

    funds, leasing finance companies, venture capital companies and other financial

    institutions.

  • 8/13/2019 capitalmarket-130315074508-phpapp01

    18/23

    SEBI Regulates Indian Capital Market

    For the smooth functioning of the capital market a proper coordination

    among above organizations and segments is a prerequisite. In order to

    regulate, promote and direct the progress of the Indian Capital Market,

    the government has set up 'Securities and Exchange Board of India'

    (SEBI). SEBI is the supreme authority governing and regulating the Capital

    Market of India.

    R t D l t i C it l

  • 8/13/2019 capitalmarket-130315074508-phpapp01

    19/23

    Recent Developments in Capital

    Market of India

    The Indian capital market has witnessed major reforms in the decade of

    1990s and there after. It is on the verge of the growth.

    Thus, the Government of India

    and SEBI has taken a number

    of measures in order to

    improve the working of the

    Indian stock exchanges and

    to make it more progressive

    and vibrant.

  • 8/13/2019 capitalmarket-130315074508-phpapp01

    20/23

    Reforms in Capital Market of IndiaThe majorreforms undertaken in capital market of India includes:-

    Establishment of SEBI: The Securities and Exchange Board of India (SEBI) was established in 1988. It got

    a legal status in 1992. SEBI was primarily set up to regulate the activities of the merchant banks, tocontrol the operations of mutual funds, to work as a promoter of the stock exchange activities and to act

    as a regulatory authority of new issue activities of companies. The SEBI was set up with the fundamental

    objective, "to protect the interest of investors in securities market and for matters connected therewith

    or incidental thereto."

    The main functions of SEBI are:-To regulate the business of the stock market and other securities

    market.

    To promote and regulate the self regulatory organizations.

    To prohibit fraudulent and unfair trade practices in securities market.

    To promote awareness among investors and training of intermediaries about safety of market.

    To prohibit insider trading in securities market.

    To regulate huge acquisition of shares and takeover of companies.

    Establishment of Creditors Rating Agencies: Three creditors rating agencies viz. The Credit Rating

    Information Services of India Limited (CRISIL - 1988), the Investment Information and Credit Rating

    Agency of India Limited (ICRA - 1991) and Credit Analysis and Research Limited (CARE) were set up in

    order to assess the financial health of different financial institutions and agencies related to the stock

    market activities. It is a guide for the investors also in evaluating the risk of their investments.

    Increasing of Merchant Banking Activities : Many Indian and foreign commercial banks have

  • 8/13/2019 capitalmarket-130315074508-phpapp01

    21/23

    Increasing of Merchant Banking Activities: Many Indian and foreign commercial banks have

    set up their merchant banking divisions in the last few years. These divisions provide

    financial services such as underwriting facilities, issue organising, consultancy services, etc. It

    has proved as a helping hand to factors related to the capital market.

    Candid Performance of Indian Economy: In the last few years, Indian economy is growing at

    a good speed. It has attracted a huge inflow of Foreign Institutional Investments (FII). Themassive entry of FIIs in the Indian capital market has given good appreciation for the Indian

    investors in recent times. Similarly many new companies are emerging on the horizon of the

    Indian capital market to raise capital for their expansions.

    Rising Electronic Transactions: Due to technological development in the last few years. The

    physical transaction with more paper work is reduced. Now paperless transactions are

    increasing at a rapid rate. It saves money, time and energy of investors. Thus it has madeinvesting safer and hassle free encouraging more people to join the capital market.

    Growing Mutual Fund Industry: The growing of mutual funds in India has certainly helped

    the capital market to grow. Public sector banks, foreign banks, financial institutions and joint

    mutual funds between the Indian and foreign firms have launched many new funds. A big

    diversification in terms of schemes, maturity, etc. has taken place in mutual funds in India. Ithas given a wide choice for the common investors to enter the capital market.

    Growing Stock Exchanges: The numbers of various Stock Exchanges in India are increasing.

    Initially the BSEwas the main exchange, but now after the setting up of the NSEand

    the OTCEI, stock exchanges have spread across the country. Recently a new Inter-connected

    Stock Exchange of India has joined the existing stock exchanges.

  • 8/13/2019 capitalmarket-130315074508-phpapp01

    22/23

    Investor's Protection: Under the purview of the SEBI the Central Government of India hasset up the Investors Education and Protection Fund (IEPF) in 2001. It works in educating and

    guiding investors. It tries to protect the interest of the small investors from frauds and

    malpractices in the capital market.

    Growth of Derivative Transactions: Since June 2000, the NSE has introduced the derivatives

    trading in the equities. In November 2001 it also introduced the future and options

    transactions. These innovative products have given variety for the investment leading to theexpansion of the capital market.

    Insurance Sector Reforms: Indian insurance sector has also witnessed massive reforms in

    last few years. The Insurance Regulatory and Development Authority (IRDA) was set up in

    2000. It paved the entry of the private insurance firms in India. As many insurance

    companies invest their money in the capital market, it has expanded.

    Commodity Trading: Along with the trading of ordinary securities, the trading in

    commodities is also recently encouraged. The Multi Commodity Exchange (MCX) is set up.

    The volume of such transactions is growing at a splendid rate.

  • 8/13/2019 capitalmarket-130315074508-phpapp01

    23/23

    Sources

    www.blogspot.com

    www.wikipwdia.org

    www.slideshare.net

    www.sliderocket.com

    www.hubspot.com

    www.rbi.org

    www.google.com/images

    http://www.blogspot.com/http://www.wikipwdia.org/http://www.slideshare.net/http://www.sliderocket.com/http://www.hubspot.com/http://www.rbi.org/http://www.google.com/imageshttp://www.google.com/imageshttp://www.rbi.org/http://www.hubspot.com/http://www.sliderocket.com/http://www.slideshare.net/http://www.wikipwdia.org/http://www.blogspot.com/