Indian capital market

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Indian capital market and it's segments are primary & secondary market

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Indian capital market

  1. 1. INDIAN CAPITAL MARKET R.JOTHIRAM, MBA
  2. 2. CAPITA L MARKE T
  3. 3. Indian Capital Market Market Instruments Intermediaries Primary Secondary Equity DebtHybrid Regulator •Brokers •Investment Bankers •Stock Exchanges •Underwriters SEBI Players Corporate IntermediariesCRA Banks/FI FDI /FIIIndividual
  4. 4. According to P.K Dhar “This is not a market for capital goods; rather it is a market for raising and advancing money capital for investment purposes”
  5. 5. Capital Market is the part of financial system which is concerned with raising capital funds by dealing in Shares, Bonds, and other long- term investments. The market where Investment instruments like bonds, equities and mortgages are traded is known as the capital market.
  6. 6.  It Has Two Segments  It Deals In Long-Term Securities  It Performs Trade-off Function  It Creates Dispersion In Business Ownership  It Helps In Capital Formation  It Helps In Creating Liquidity
  7. 7. Mobilization of Savings Capital Formation Provision of Investment Avenue Speed up Economic Growth and Development Proper Regulation of Funds
  8. 8. • Allocation function - the current savings for a period are allocated amongst the various users and uses. - also allocates and rations funds by a system of incentives and penalities. • Liquidity function -Provides a means where by buyers and sellers can exchange securities at mutually satisfactory prices. -allows better securities for the securities that are traded
  9. 9. Indicative function - Showing not only the progress, but also the economy as a whole through share price movements Savings and Investment function - Provides a means of quickly converting long- term investment into liquid funds, thereby generating confidence among investors and speeding up the process of saving and investment.
  10. 10. Transfer function - facilitates the transfer of existing assets among individual economic units or groups Merger function - encourages voluntary take-over mechanism to put the management of inefficient companies into more competent hands
  11. 11. Equity Shares Preference Shares Government Bonds Corporate Bonds / Debentures
  12. 12. 1. COMMERCIAL BANKS. 2. INSURANCE COMPANIES. 3. BUSINESS CORPORATIONS. 4. RETREMENT FUNDS.
  13. 13. 1. TREASURY DEPARTMENTS. 2. CORPORATIONS. 3. SECURITIES DEALERS.
  14. 14. There are two types of capital market: Primary market, Secondary market
  15. 15. It is that market in which shares, debentures and other securities are sold for the first time for collecting long-term capital. This market is concerned with new issues. Therefore, the primary market is also called NEW ISSUE MARKET.
  16. 16. Market for new issues/fresh capital (IPO’s) New issues mkt. Participants issuer investors intermediaries
  17. 17. 1.New long term capital 2.securities sold first time In market 3.security are issued directly to investor 4.security issued for new business or expanding existing business 5.it is purpose of going public
  18. 18. Origination: It refers to the work of investigation, analysis and processing of new project proposals. It starts before an issue is actually floated in the market. Underwriting: It is an agreement whereby the underwriter promises to subscribe to a specified number of shares or debentures or a specified amount of stock in the event of public not subscribing to the issue. Distribution: It is the function of sale of securities to ultimate investors. This service is performed by brokers and agents who maintain a regular and direct contact with the ultimate investors.
  19. 19. 1. Draft Prospectus 2. Fulfillment of Entry Norms 3. Appointment of Underwriters 4. Appointment of Bankers 5. Initiating Allotment Procedure 6. Brokers to the issue 7. Filing of Documents 8. Printing of Prospectus And Application Forms 9. Listing the Issue 10. Publication in Newspapers 11. Allotment of shares 12. Underwriters liability 13. Optional Listing
  20. 20. 1.Initial Public Offer 2.Right Issue Method 3.Bonus Issue method 4.Book-building method 5.Employees Stock Option Scheme 6.Offer for sale method 7.Private Placement method
  21. 21. Public issue made by a corporate entity for the first time Often prompted by venture capitalists who wish to realize a cash return on their investment. Founders of the firm may wish to go through an IPO to establish a value for their company. There exists greater price uncertainty with an IPO than with other new public stock issues
  22. 22. Where the shares of an existing company are offered to the existing shareholders , it takes the form of ‘right issue’. Under this method, the existing company issues shares to its existing shareholders in proportions to the number of shares already held by them
  23. 23. A method of marketing the securities of a company by converting its accumulated reserves and surplus profits, it takes the form of ‘bonus issue method’.
  24. 24. A method of marketing the shares of a company whereby the quantum and the bid price of the securities to be issued will be decided on the basis of the bids received from the prospective shareholders by the lead merchant bankers is known as book building method
  25. 25. A method of marketing the securities of a company whereby its employees are encouraged to take up shares and subscribe to it is known as ‘Stock Option’. Help to retain the most productive employees in an industry , which is known for its constant churning of personnel
  26. 26. Marketing of securities takes place in bulk quantity to intermediaries  Advantage o Saves company from the hassles involved in selling the shares  Disadvantage o Expensive for the investors
  27. 27. Issuer makes the offer of sale to individuals and institutions privately without the issue of prospectus  Advantage o Less expensive o Less troublesome for the issuer o Used when stock market is dull and public issue is doubtful
  28. 28. Where the shares of an existing company are offered to the existing shareholders , it takes the form of ‘right issue’. Under this method, the existing company issues shares to its existing shareholders in proportions to the number of shares already held by them
  29. 29. A method of marketing the securities of a company by converting its accumulated reserves and surplus profits, it takes the form of ‘bonus issue method’.
  30. 30. 1.Merchant banker 2.Underwriters 3.Banker to an issue 4.Registers to an issue 5.Debenture trustees 6.Brokers to issue 7.Portfolio consultant
  31. 31. Definition “security exchanges are market place where securities that have been listed thereon may be bought or sold for either investment or speculation” - Pyle It is also called secondary market
  32. 32. Stock Exchange is a market in which securities are brought and sold and it is an essential component of a developed capital market . “Stock exchange means anybody of individual whether incorporated or not ,constituted for the purpose of assisting ,regulating or controlling the business of buying ,selling or dealing in securities “. (Securities Contract (Regulation) Act ,1956)
  33. 33. 1.It deal Previously issued security 2.Buying and selling security through broker 3.security exchanged from existing investor to new investor 4.Securitites are marketability and liquidity 5.Unlisted Securities or not permitted to be dealt in the market. 6.The Stock Exchange to regulate its day-to-day operations. 7.Individuals alone can buy and sell securities.
  34. 34. Ensure liquidity of capital Continuous market for security Evaluation of securities Mobilizing of surplus saving Help in raising new capital Safety in dealing Listing of securities Platform for public dept Clearing house of business information
  35. 35. Raising capital for businesses Mobilizing savings for investment Facilitating company growth Redistribution of wealth Corporate governance Creating investment opportunities for small investors Government capital-raising for development projects Barometer of the economy
  36. 36. 1.Stock broker commission broker jobber floor broker security dealer 2.financial intermediaries; commercial banks, Development financial institutions, Insurance company, Mutual fund, Non banking financial institutions 3.Individual investors
  37. 37. 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

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