Ch 1 capital mkt


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Ch 1 capital mkt

  1. 1. Ch. 1 Capital Market 10%MeaningImportance of Indian C.M.Structure of Indian C.M.Recent Trends in Indian C.MMayur Patel(NIM BBA College)
  2. 2. Bombay Stock Exchange-BSE2 Stock Exchange & Portfolio Management(SEPM) BY-Mayur Patel
  3. 3. 3 Stock Exchange & Portfolio Management(SEPM) BY-Mayur Patel
  4. 4. Meaning of Capital Market  A capital market is a market for securities (debt or equity), where business enterprises (companies) and governments can raise long-term funds.  It is defined as a market in which money is provided for periods longer than a year, as the raising of short-term funds takes place on other markets (e.g., the money market).  Capital Market basically means a market in which financial securities are traded between individuals or institutions.  Capital markets may be classified as primary markets and secondary markets. In primary markets, new stock or bond issues are sold to investors. In the secondary markets, existing securities are sold and bought among investors or traders, usually on a securities exchange, over- the-counter, or elsewhere.4 Stock Exchange & Portfolio Management(SEPM) BY-Mayur Patel
  6. 6. 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 Stock Exchange & Portfolio6 Management(SEPM) BY-Mayur Patel
  7. 7. Importance/Significance/ Role of Indian Capital Market  Mobilization of Savings & acceleration of Capital Formation  Promotion of Industrial Growth  Raising of long term Capital  Ready & Continuous Markets  Proper Channelisation of Funds  Use of updated technology is possible7 Stock Exchange & Portfolio Management(SEPM) BY-Mayur Patel
  8. 8. CLASSIFICATION OF FINANCIAL MARKETS Classificati on of financial markets Organized Markets Unorganiz ed Markets Money lenders, In Capital Money digenous Market Market bankers, et c Call Money Market, Industrial Govt. Long term Commercial bills Securities Securities Loan Treasury Bills markets Market Market Short term loan market Market for Primary Secondary Term Loan Financial Market for Market market market Guarantee Mortgages s Stock Exchange & Portfolio8 Management(SEPM) BY-Mayur Patel
  9. 9. ORGANIZED MARKET  Standardized rules and regulations governing their financial dealings.  A high degree of institutionalization and instrumentalisation.  Subject to strict supervision and the control by the RBI or other regulatory bodies.  Can be further divided into two: A) Capital market B) Money market A) CAPITAL MKT: Is a market for financial assets which have a long or indefinite maturity. Generally deals with long term securities. Divided into three: 1)Industrial securities market 2) Government securities market 3) Long term loans market Stock Exchange & Portfolio9 Management(SEPM) BY-Mayur Patel
  10. 10. CAPITAL MARKET 1) Industrial securities market:  A market for industrial securities namely, equity shares, preference shares, debentures or bonds.  further can be divided in Two: a) Primary market: - Public issues, Rights issues, Private placement b) Secondary market: 2) Govt securities market:  Called Gilt edged securities market.  Its a market where Govt securities are traded.  - Short term(traded in money market) and long term(traded here).  Securities issued by the Central Government, State Govt., Semi-govt authorities like City Corp., Port trusts, etc. Improvement Trusts, State Electricity Boards  Issued in denominations of 100s Stock Exchange & Portfolio Commercial Banks for SLR requirement,  Major participants:10 Management(SEPM) BY-Mayur Patel  Secondary market very narrow
  11. 11. CAPITAL MARKET 3) Long- term Loans Market  MAJOR PARTICIPANTS : Development Banks and commercial banks  Can be further divided into three: i) Term- loans market To supply long term and medium term loans to corporate customers Institutions like IDBI, ICICI, IFCI ii) Mortgages Market Is a loan against security of immovable property like real estate. Transfer of interest in a specific immovable property to secure a loan is called mortgage Stock Exchange & Portfolio11 Management(SEPM) BY-Mayur Patel
  12. 12. CAPITAL MARKET  iii) Financial Guarantee Market:  Finance provided against guarantee of a reputed person in financial circle  Guarantee: A contract to discharge the liability of third party in case of his default  Acts as a security from the creditors point of view.  Financial guarantee in India relates to  Deferred payments for imports and exports  Medium and long term loans raised abroad  Loans advanced by banks and other FIs  Guarantees provided by commercial banks, development banks, Governments and other specialized institutions like ECGC(Export Credit Guarantee Corp.) and DICGC (Deposit Insurance and Credit Guarantee Corp.) Stock Exchange & Portfolio12 Management(SEPM) BY-Mayur Patel
  13. 13. Reforms in Indian Capital Market Since 1992  Capital Issues (Control) Act of 1947 repealed and the office of Controller of Capital Issues abolished; control over price and premium of shares removed. Companies now free to raise funds from securities markets after filing prospectus with the Securities and Exchange Board of India (SEBI).  The power to regulate stock exchanges delegated to SEBI by the Government.  SEBI introduces regulations for primary and other secondary market intermediaries, bringing them within the regulatory framework.13 Stock Exchange & Portfolio Management(SEPM) BY-Mayur Patel
  14. 14. Reforms in Indian Capital Market Since 1992  SEBI introduces a code of advertisement for public issues to ensure fair and truthful disclosures.  Disclosure norms further strengthened by introducing cash flow statements.  New issue procedures introduced—book building for institutional investors—aimed at reducing costs of issue.  SEBI reconstitutes the governing boards of the stock exchanges and introduces capital adequacy norms for broker accounts.  Private mutual funds permitted and several such Stock Exchange & Portfolio set up. All mutual funds allowed to funds already14 Management(SEPM) BY-Mayur Patel apply for firm allotment in public issues—also aimed
  15. 15. Reforms in Indian Capital Market Since 1992  Over-the-Counter Exchange of India formed.  National Stock Exchange (NSE) establishment as a stock exchange with nationwide electronic trading.  Bombay Stock Exchange (BSE) introduces screen-based trading; 15 stock exchanges now have screened-based trading. BSE granted permission to expand its trading network to other centers.  Capital adequacy requirement for brokers enforced.  System of mark-to-market margins introducedin the stock exchanges.  Stock lending scheme introduced.  Transparency brought out in short selling. Stock Exchange & Portfolio15 Management(SEPM) BY-Mayur Patel
  16. 16. Reforms in Indian Capital Market Since 1992  National Securities Clearing Corporation, Ltd. set up by NSE.  SEBI strengthens surveillance mechanisms and directs all stock exchanges to have separate surveillance departments.  SEBI strengthens enforcement of its regulations.  The Depositories Act enacted to facilitate the electronic book entry transfer of securities through depositories.  Guidelines for Offshore Venture Capital Funds announced. SEBI regulations for venture capital funds Stock Exchange & Portfolio16 become effective. Management(SEPM) BY-Mayur Patel
  17. 17. Recent Trends in Indian Capital Market  Introduction of Derivative products - Index / Stock Futures & Options  Margin Lending  Securities Lending  Institutionalization –major role – MF/FI/FII/VCF/ - pressure on the company to perform/disclosure.  Globalization – opening of market to overseas player - E.g. FDI/portfolio management for FII/NRI etc. Indian corporate also access overseas market. Stock Exchange & Portfolio17 Management(SEPM) BY-Mayur Patel
  18. 18. Recent Trends in Indian Capital Market  Four products rolled out- Index / Stock - Futures & Options  Margining System - VAR based / Market wide limits  Client level computation of positions & margining  Emergence of institutions – SEBI/NSE/NSDL/CDSL/CCIL etc.  Modernization – use of technology for trading/clearing/settlement etc. Role of IT for clearing, settlement, monitoring etc Stock Exchange & Portfolio18 Management(SEPM) BY-Mayur Patel
  19. 19. Recent Trends in Indian Capital Market  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 Stock Exchange & Portfolio19 Management(SEPM) BY-Mayur Patel