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14784493 Indian Capital Market
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14784493 Indian Capital Market

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  • 1. Indian Capital Market
  • 2. Organized Indian Financial System Money Market Instrument Capital Market Instrument Forex Market Capital Market Money Market Credit Market Primary Market Financial Instruments Financial Markets Financial Intermediaries Secondary Market Regulators
  • 3. Money Market Vs Capital Market
    • It is for short term
    • Supplies funds for WC
    • Instruments are T-bill, CM, etc
    • Each single instrument is of large amount
    • Central bank and Commercial banks are major.
    • It is for long term
    • Supplies funds for fixed capital requirement
    • Instruments are shares, debentures, etc.
    • Each single instrument is of small amount
    • Development bank and insurance companies are major.
  • 4. Conti..
    • These instruments do not have secondary market.
    • Transactions are on over phone and no formal place
    • Transaction without the help of broker.
    • These instruments have secondary market.
    • Transactions are at formal place. Eg stock market.
    • Transaction have to be conducted with the help of broker.
  • 5.  
  • 6. Why Capital Markets Exist
    • Capital markets facilitate the transfer of capital ( i.e. financial) assets from one owner to another.
    • They provide liquidity.
      • Liquidity refers to how easily an asset can be transferred without loss of value.
    • A side benefit of capital markets is that the transaction price provides a measure of the value of the asset.
  • 7. Role of Capital Markets
    • Mobilization of Savings & acceleration of Capital Formation
    • Promotion of Industrial Growth
    • Raising of long term Capital
    • Ready & Continuous Markets
    • Proper Channelisation of Funds
    • Provision of a variety of Services
  • 8. Functions of a capital market
    • Disseminate information efficiently
    • Enable quick valuation of financial instruments –both equity and debt
    • Provide insurance against market risk or price risk
    • Enable wider participation
    • Provide operational efficiency through
    • -simplified transaction procedure
    • - lowering settlement timings and
    • - lowering transaction costs
  • 9.
    • Develop integration among
    • -real sector and financial sector
    • -equity and debt instruments
    • -long term and short term funds
    • -Private sector and government sector and
    • -Domestic funds and external funds
    • Direct the flow of funds into efficient channels through
    • -investment
    • -disinvestment
    • -reinvestment
  • 10. Factors contributing to growth of Indian Capital Market
    • Establishment of Development banks & Industrial financial institution.
    • Legislative measures
    • Growing public confidence
    • Increasing awareness of investment opportunities
    • Growth of underwriting business
    • Setting up of SEBI
    • Mutual Funds
    • Credit Rating Agencies
  • 11. Indian Capital Market - Historical perspective
    • Stock Market was for a privileged few
    • Archaic systems - Out cry method
    • Lack of Transparency - High tones costs
    • No use of Technology
    • Outdated banking system
    • Volumes - less than Rs. 300 cr per day
    • No settlement guarantee mechanism - High risks
  • 12. 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
  • 13. Capital Markets - Reforms
    • Each scam has brought in reforms - 1992 / 2001
    • Screen based Trading through NSE
    • Capital adequacy norms stipulated
    • Dematerialization of Shares - risks of fraudulent paper eliminated
    • Entry of Foreign Investors
    • Investor awareness programs
    • Rolling settlements
    • Inter-action between banking and exchanges
  • 14. CAPITAL MARKET REFORMS IN INDIA
    • The 1990s have witnessed the emergence of the securities market as a major source of finance for trade and industry in India.
    • A growing number of companies have been accessing the securities market rather than depending on loans from financial institutions / banks.
    • The corporate sector is increasingly depending on external sources for meeting its funding requirements.
  • 15. Reforms / Initiatives post 2000
    • Corporatisation of exchange memberships
    • Banning of Badla / ALBM
    • Introduction of Derivative products - Index / Stock Futures & Options
    • Reforms/Changes in the margining system
    • STP - electronic contracts
    • Margin Lending
    • Securities Lending
  • 16. MARKET STRUCTURE (JULY 31, 2005)
      • 22 Stock Exchanges,
      • Over 10000 Electronic Terminals at over 400 locations all over India.
      • 9108 Stock Brokers and 14582 Sub brokers
      • 9644 Listed Companies
      • 2 Depositories and 483 Depository Participants
      • 128 Merchant Bankers, 59 Underwriters
      • 34 Debenture Trustees, 96 Portfolio Managers
      • 83 Registrars & Transfer Agents, 59 Bankers to Issue
      • 4 Credit Rating Agencies
  • 17. Indian Capital Market Market Instruments Intermediaries Primary Secondary Equity Debt Hybrid Regulator
    • Brokers
    • Investment Bankers
    • Stock Exchanges
    • Underwriters
    SEBI Players Corporate Intermediaries CRA Banks/FI FDI /FII Individual
  • 18. Stock Exchanges in INDIA
    • 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
  • 19. Growth Pattern of the Indian Stock Market Sl.No. As on 31st December 1946 1961 1971 1975 1980 1985 1991 1995 1 No. of Stock Exchanges 7 7 8 8 9 14 20 22 2 No. of Listed Cos. 1125 1203 1599 1552 2265 4344 6229 8593 3 No. of Stock Issues of Listed Cos. 1506 2111 2838 3230 3697 6174 8967 11784 4 Capital of Listed Cos. (Cr. Rs.) 270 753 1812 2614 3973 9723 32041 59583 5 Market value of Capital of Listed Cos. (Cr. Rs.) 971 1292 2675 3273 6750 25302 110279 478121 6 Capital per Listed Cos. (4/2) (Lakh Rs.) 24 63 113 168 175 224 514 693 7 Market Value of Capital per Listed Cos. (Lakh Rs.) (5/2) 86 107 167 211 298 582 1770 5564 8 Appreciated value of Capital per Listed Cos. (Lak Rs.) 358 170 148 126 170 260 344 803
  • 20. Primary Market
    • Market for new issues/fresh capital (IPO’s)
    • New issues mkt.
    • Participants
    • issuer
    • investors
    • intermediaries
  • 21. Mobilization of funds
    • Prospectus
    • Right issues and
    • Private placement
  • 22. Free pricing regime
    • Before 1992,Regulator of new issues was CCI (Controller of Capital Issues)
    • Approval from CCI for raising funds in primary mkt.
    • Timing, quantum ,and pricing of the issue were decided by the controller
    • New co.s can issue shares only at par
    • Existing companies with substantial reserves could issue shares at premium
    • Fixed price mechanism resulted in under pricing of many issues
    • After 1992, promoter and merchant banker together decide the price of the issue.
  • 23. Fixed price mechanism of new issue
    • CCI regime
    • To offer share at a fixed price
    • Firm and merchant banker decide an offer price
    • Investor opinion wasn’t considered while setting offer price
    • Long time lag among the date of pricing, the date the issue opens ,and the date when trading commences
    • Raises possibility of price fluctuations in intervening period
  • 24. Book Building-A new issue mechanism in India
    • mechanism through which an offer price for IPOs based on investor’s demand is determined .
    • Auction of shares
  • 25. Book building process
    • Appointment of book runner i.e. merchant banker
    • Preparation and submission of draft documents to SEBI and obtaining of an acknowledgement card.
    • A specified price band (range) is to be determined by issuer and book runner
    • Different price levels are invited from syndicate members .Adv. Should mention opening and closing dates for the bids
    • Issuer arrives at a final cut-off rate & final allocation in consultation with book runner and lead manager
  • 26. Contd…..
    • 6.Issuer and book runner may impose restrictions on number of shares that can be allotted to each client
    • 7. Final prospectus is filed with the (ROC) along with procurement agreement
    • 8.Placement portion opens for subscription
    • 9.Placement portion closes a day before the opening of public issue portion
  • 27. Book building options
    • 75% book building
    • Issue can be categorized into
    • -placement portion
    • - Public portion (net offer to the public)
    • 100% book building
  • 28. Limitations of book building method
    • No road shows done
    • Still dependent on good faith
    • No. of investors invited to apply are limited
    • Lack of transparency
    • Not proved to be good price discovery mechanism
    • Lag time of more than 60 days between issue pricing and listing
    • Issuer may have to sell cheap due to collective bargaining
    • High institution holding may affect stock’s liquidity
    • Volatility may increase due to bulk offloading
  • 29. Distinction between Primary and Secondary Market
    • Functional differences
    • Organizational differences
    • Nature of contributions to industrial finance
  • 30. Secondary Market Secondary/Stock market!!!!
  • 31. JARGON OF EQUITY MARKET:
    • SECURITY
    • BOND
    • STOCK
    • 1)COMMON STOCKS
    • 2)PREFERRED STOCKS
    • SHARE
    • MUTUAL FUNDS.
    • PAR VALUE vs. MARKET VALUE
    • BULLISH vs. BEARISH
  • 32. How does the stock market function?
    • Stock exchanges
    • Brokers
    • Registrars
    • Depositories and their participants
    • Securities and Exchange Board of India (SEBI)
    • Financial Regulators
    • SEBI
    • RBI
    • Ministry of finance
  • 33. The role of the stock exchange
    • Corporate governance
    • Creates investment opportunities for small investors
    • Government raises capital for development projects
    • Barometer of the economy
  • 34. Functions Of SEBI
    • Regulates Capital Market.
    • Checks Trading of securities.
    • Checks the malpractices in securities market.
    • It enhances investor's knowledge on market by providing education.
    • It regulates the stockbrokers and sub-brokers.
    • To promote Research and Investigation
  • 35. Functions Of RBI Monetary Authority: Issuer of currency: Regulator and supervisor of the financial system: Authority On Foreign Exchange: Developmental role: Related Functions:
  • 36.
    • WHY STOCK PRICE RISES?
    • The price of every stock increases or decreases for the following possible reasons:
    • News about company.
    • News about the country.
    • Exchange rate regime.
    • Depends on demand and supply for that stock.
  • 37.
    • DRAWBACKS OF INDIAN STOCK MARKET:
    • Unethical practices.
    • Big irrational greed, excessive speculation.
    • Lack of protection to interests of the genuine and small
    • investors .
    • Trading is extremely thin and restricted.
    • Structural and organisational imbalance in the growth of the
    • stock market.
    • Volatility of the market has increased over the years.
  • 38. HOW TO MAKE MONEY FROM CAITAL MARKET?
    • patience, profound knowledge.
    • Best guess.
    • Diversification .
    • Portfolio
    • management.
  • 39. Indian Capital Market deficiencies
    • Lack of transparency
    • Physical settlement
    • Variety of manipulative practices
    • Institutional deficiencies
    • Insider trading
  • 40. Thank YOU